Category: Alliant Webinars

You must have compensation, earned income to be able to contribute to a traditional IRA. There is no age limit. There used to be an age limit, but if you’re still working, let’s say at age 80, you have earned income. You can contribute to a traditional IRA if you wanted to. Also, you have up to April 15th of 2027 to make a contribution into your IRA and have it counted in 2026. So it’s very important to know. Now there are certain contribution rules for you to be able to deduct it. You and your well for you be able to deduct it. There’s some income limits that you have to kind of be aware of. If both you and your spouse contribute to a 401k at work, for you to be able to deduct that traditional IRA, your income needs to be below $149,000. As a married couple, as a single person, your income needs to be below $91,000. If your income is above those amounts and you put money into a traditional IRA, you’re not going to be able to deduct that. So, be aware of that. Let’s talk about Roth IRA basics. When it comes to Roth IAS, there’s no deduction for contributions. Money still grows tax-free. 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 tax-free. It’s considered a qualified distribution. Now, contribution limits are the same as traditional IAS. 7500 for a single p uh 7500 for someone younger than 50, 8,600 if you’re over 50. You have to have earned income also to be able to contribute to a Roth IRA. There is no age limit either, but there is an income limit that says, hey, if you’re over this amount of income, you cannot contribute to a Roth IRA. As a single person, it’s $168,000. As a married couple, it’s $252,000. So, if your income is over these amounts, you cannot contribute to a traditional sorry, you cannot contribute to a Roth IRA. and there’s the phase out window. But if your income is below 153,000 and below 242,000 as a married couple, then you are able to contribute to a Roth IRA. There is something called a spousal IRA, Roth IRA contribution. [gasps] And well, we come across this as let’s say you’re a married couple and one person has already retired. They usually come in and say, “Well, I can’t contribute to a traditional tra traditional IRA or Roth because I have no earned income.” Well, it as long as your spouse is working and has earned income, then you are able to contribute to contribute to a traditional or a Roth. Now, here’s the thing. If your spouse is contributing into a 401k and even though you’re retired and your income, combined income is over $252,000, you’re not going to be able to deduct that traditional IRA contribution. And also, if you’re over certain income limits, you’re not going to be able to contribute to a Roth IRA. [clears throat] But be aware that if you’re under these limits and let’s say you’re not working or you’re retired, you might be able to contribute to a traditional or a Roth IRA for that year. Now, you might say, “Well, it’s $8,000.” Well, $8,000 if you continue to contribute to it over time, it will start compounding and start growing. And that’s what this chart is saying. If you’re coming in and see assuming a I think they use a 6% rate of return, contribute $8,000 for 10 years, you see the money start to grow and start to compound over time. So it does add up over time. Now make sure you’re taking advantage of your employer sponsored plans, 401ks, 403bs, 457s because pensions have kind of gone to the west side. Most corporations come in and say, “Hey, we have a 401k set up for you. You contribute to it. We’re going to match your contribution.” So, it’s a great and easy way for you to save for retirement. This year, if you’re under 50, it is 24,500 that you’re able to contribute to. If you’re over 50, you can do 32,500. Now, if you’re between the ages of 60 and 63, there’s a super catchup that allows you to do a total of $35,750. So, just make sure that if you’re between 60 and 63, I would call your 401k provider and say, “Hey, there’s a special contribution I’m able to do, and is the plan set up for me to make this extra contribution into the plan?” There’s also a new change for 2026. If you had an income over $150,000 last year starting in 26, any ketchup pro ketchup amounts that you put into the plan will automatically go into an after tax bucket or a Roth bucket. So just be aware of that because be prior you used to be able to put all that money in pre-tax. They changed the rule a little bit and says now, hey, if you’re over 50 and you’re maxing out your 401k, the the normal contribution, which is 24,500, will go in pre-tax, but everything above that will go into after tax bucket as long as your income was over 150,000 last year. So, it’s something new just to double check. Now remember, whenever you put money into the 401k, if it’s all pre-tax, at some point you’re going to have to take that money out. When you start taking that money out, it’s going to be taxed at whatever your current tax bracket is. So, this rule or this kind of this thinking was, hey, put money in pre-tax because when you retire, you could be in a lower tax bracket in retirement. that sometimes is the case, but is also I’ve seen it where it hasn’t been the case. So, just be aware of what is your current tax bracket today and what do you think your current tax bracket’s going to be in the future. Now, historically, if you look at tax rates, you could say we’re in a low tax environment going back I mean, just looking at this chart going back to the ‘ 50s, the top marginal income tax rate was 90%. Right now, we’re sitting at 37%. So, historically, you say, “Hey, we’re in a low tax bracket. What’s taxes going to do in the future? Are they going to go up, stay the same, go down? They’re either going to stay the same or they’re going to go up.” Now, there was this idea that taxes were going to go up this year because the tax cuts and jobs act was going to expire. Well, there was a bill that was signed last year that came in and permanently made the current the permanently made the Tax Cuts and Job Act permanent. Now, that just means there’s no expiration date. Congress could come in in 4 years, 8 years, and change the tax code, but Congress has to come in and do that. Do that. So, not only did they not prevent taxes from going up, but they also expanded some deductions for families and seniors. We we’re not going to go into a lot of these changes. Um, next week, we’ll talk more about taxes. Now, whenever you take money out of IAS, be aware of certain side effects. And what I’m what I mean by that is it’s not simply, hey, I’m taking money out of my IRA. I’m going to pay taxes and all is good. That’s where the IRS comes in and hids these has these kind of tax traps that you need to be aware of. So, whenever you take money out, be aware there’s something called a net investment income tax. If you’re a single person and you have income over 200,000 or you married couple and your income’s over 250,000, they could impose a net an investment income tax on passive income, which is dividends, interest, rental income. So again, it’s really important to understand when you take money out of IAS, if I take money out of my IAS, how much where is going to where is that going to move my bracket? You might be phased out of certain deductions or tax credits. Your Part B premium might increase because it’s all based on what your modified adjusted gross income is. You might see more of your social security subject to tax because you took more money out of your IAS than you expected. You might eliminate some financial aid. You might eliminate the ability to contribute to a Roth IRA. So, it’s really important to understand that when you start taking money out of IAS, traditional IAS, that’s going to be taxable to you in that year. And how does that affect your overall uh taxable bracket? Now, now the IRS comes in and says, “Hey, you can contribute to a traditional IRA or a 401k. put that money all in pre-tax. But at some point, we want you to start taking money out and it’s something called required minimum distributions. So even though you have this money in IRA and 401ks and you’re like, I don’t I don’t need it. I want to let it continue growing. Well, the IRS comes in and says, hold on. We’ve been giving you that benefit all these years. You need to start taking money out so we can start collecting taxes. Depending on when you were born, your RMD is either 73 or 75. If you decide, hey, I’m not going to take any money out, even though they required me to take money out, the IRS can come in come in and penalize you by 25%. So, what that means is if your RMD was $10,000 and you decide, I’m not going to take it out, they could come in and say, we’re going to charge a 25% penalty on that. So, it charge you a 25 24 $2,500 would be your penalty for not taking your R&D out.

Now, your R&D, your required minimum distribution is based on the life expectancy number, and they look at what the ending value was the year prior. So, hypothetically, let’s say you you turn 73 today and your RMD starts this year. They’re going to go back and say, “Your MD is going to be calculated on what the ending value was on December 31st of 2025.” They’re going to take that number, divide it by your life expectancy, which is 26.5 years. IRS comes in and says you’re going to live another 26.5 years, and that’s going to determine how much you have to take out. Now, when you look at this factor, the first year, it’s about 3.78% that you you’re required to take out. that percentage goes up each year because you’re getting older and the life expectancy number goes down. So you can see like you might start at less than 4% but once you reach age 90 it’s 8.2% that you’re required to take out in that year. Now some of the mistakes that I want you to avoid that we come across are these three mistakes. First mistake is you’re aggregating RMDs between different retirement accounts. So let’s say you have an IRA and you have a 401k. Those are different retirement accounts. So you might come in and say, “Hey, my RMD is 5,000 from my 401k, 5,000 from my IRA, so a total of 10,000. I’m going to take 10,000 from my IRA and call it good.” Well, I says, “Hey, wait a minute. You forgot to take money out of the 401k because it’s a different plan type. you’re required to take money out of that. So, just be aware 401ks and IAS are different plan types. Now, when it comes to you can have 10 different IAS and the IRS says, “Hey, those are all the same plan time plan type. We don’t care where you take that money from.” So, you take all of your RMD from one IRA. The second mistake that we come across is aggregating RMDs between spouses. So Bob and Sally, they each have to take out $10,000 from each of the IAS. Bob comes in and says, “Hey, I took 20,000 out of my IRA, so RVs are good. Don’t worry about taking any money out of your your IRA, Betty, or salary.” Well, the IRS says, “Wait a minute, wait a minute. These are retirement individual retirement accounts. Each individual has their own required minimum distribution. So Bob has to take his own and Sally has to take her own. The third mistake that we come across and this is more common mistake that we come across. I’m dealing with it right now with one of one of my clients um or a new client that I’m I’m bringing on board. He had an inherited IRA. He was in the Marines. He was in the last four years he’s lived in almost eight different locations. During that time, he did not take any money out of his inher out of his inherited IRA to meet his required minimum distribution responsibilities. And it’s one because he was just, you know, traveling all over the place being in the Marines and getting deployed and he just forgot to do it. Well, this is a very common mistake that happens. So, if you are subject to RMDs, make sure you’re taking that out. Now, how you get it fixed is you talk to your accountant and say, “Hey, I forgot taking out my RMDs.” They’re going to say, “Make your IRA current. Take up those distributions that you should have.” And we’ll just report it somehow and say, “Please excuse my mistake, my error, but I’ve rectified it and I’ve taken out what I needed to take out.” talk to your accountant about trying to avoid that penalty. But the third mistake is a common we see a lot. Maybe you had health issues and you just forgot to take it out. [sighs] Now, let’s talk about some different strategies when it comes to IRA distributions. You could come in and say, “Hey, I’ve retired. This money that I have in my IRA, I don’t need it. I’m just going to collect. I’m going to allow that to continue growing. So by doing so, you have that account that continues to grow. You’re not taking anything out, so it’s not being added to your taxable income. But and you maybe you’re avoiding some of those potential side effects right now. But the downside of doing that is think of it this way. Your IRA continues to grow. And if it continues to grow, what happens? your required minimum distribution when you’re required to take money out is much larger than if you started taking money out of the IRA at a slower pace. And who knows what taxes are going to be in the future. I mean, if you’re 10 years from R&D, I don’t know what taxes are going to look like. Taxes might be higher than they are today. So that means that you not only are required to take more money out, but the IRS comes in and takes more of your money because taxes are higher.

That’s where we also talk about Roth conversions. Roth conversions is when you have an IRA and you say, “Hey, I’m willing to pay the taxes on that money and convert it over to an account where basically it’s all going to live tax-free.” Now, in this example, Jill converts $100,000. 100,000 is added to her taxable income in that year, and based on her other income, she’s going to pay taxes on whatever her combined adjusted gross income is for that year on that 100,000. But now, she’s created a Roth IRA that as long as she keeps for 5 years and she’s over 59 12, everything within that continues to grow tax-free. Now, I’m not saying everybody should do a Roth conversion because we’ve definitely met with people where it does not make sense to do. But it’s a it’s a strategy to look at and say, “Does it make sense to do Roth conversions to help reduce some of the future tax liability that you have in the future?” Now, who can do Roth conversions? Well, anybody. There’s no age limits. There’s no income limits. And there’s no requirement to work. At one point, there was an income limit. If you made over $100,000, you were not able to do Roth conversions. But the IRS says, “Hey, I we kind of like that tax income. Let’s let everybody do Roth conversions and let them do it because we’re willing to collect those taxes now.” Now, 30 years down the road, they’re going to say, “Oh my gosh, what did we do?” Because there’s going to be so much money in these Roth IAS that’s all going to be taxfree. And then they’re going to be like, “Is there a way we can figure out how to tax it?” You know, hopefully that’s not the case. Everyone gets grandfathered in, but you know, that’s something to kind of think about. Roth conversions can also reduce future tax rates. Think about it. If you’re if all of your money is in Roth IAS and taxes go up down the road, well, all of your money is taxfree. None of it’s going to be subject to the higher tax rate. And also, you know, when it comes to taking money out of IAS, it’s added to your taxable income, which could cause your social security and Medicare Part B premiums to increase. But if all of your money is in Roth IAS, you don’t have to worry about having your Part B premiums increase or even having a lot of your social security be subject to tax. It just depend. Everybody’s situation a little bit different. Also, Roth IAS have no required minimum distributions, meaning you control when you want to take money out. You can let that money grow for the next 30, 40 years. You have the ability to let this money pass on to your beneficiaries all tax-free. So, a lot of flexibility when it comes to Roth IAS. Now, one thing that occurred that I still want to bring up, even though this is changed back in 2017 is that prior to 2017, you could do a Roth conversion and 6 months later and say, “Oh man, I shouldn’t have done that. That was a mistake. The market went down 20%.” And I I let’s just undo it. Well, now they’re coming in and saying the new rule they put in 2017 says, “Hey, if you do a Roth conversion, you’re stuck with it.” So if your tax bill is higher than expected or you phased yourself out of certain credits or the market dropped 20%. It doesn’t matter. You’ve done that conversion and it is done. You cannot undo it anymore. So when you do Roth conversions, kind of think about, hey, do I have a general idea what my tax bill is going to be? Do I have a plan to pay the taxes? And what’s the expectation? What’s the benefit of me doing the Roth conversions? If you have a general yes to each of these, then you know you’re on your way to maybe doing a Roth conversion. But trust me, not everyone should do Roth conversions. We’ve definitely met with people where it does not make sense to do. The other kind of Roth conversion that we run into is something called filling up the bucket or bracket. So, you have a certain amount of taxable income and let’s say you fill up the 22% bracket. You have another $50,000 before you go into the next higher tax bracket. You can come in and say, “Hey, let’s convert $50,000. I’m willing to pay 22% on that and but I’m not willing to go into a higher tax bracket.” That’s the filling up the bucket strategy. Sometimes people come in and say, “Hey, let’s go all the way up to 24 because I’m only paying 2% more in taxes, but I definitely don’t want to go from 24 to 32.” So, it’s up to you on how much you want to convert because at the end of the day, you are the one writing the check to IRS to pay the tax liability on the Roth conversion.

Other other times where it might be smart or beneficial to do Roth conversions is when you have low income years. Let’s say you retire at 65 and you’re going to delay social security until 70. Maybe you’re in a low tax bracket. Those are good years to do Roth conversions. Or maybe you’re self-employed and you’ve had kind of a crappy year. Low sales, low revenues. Maybe those are good years to do Roth conversions. or if you have a lot of medical expenses that you’re used to deduct that you’re able to itemize to lower your taxable income. Those are good years to do Roth conversions.

Okay, [sighs] let’s move on to talking about moving retirement money. Okay, you’ve retired, you have money in the 401k and you want to move it to your IRA. What is the best way to go about doing so? And there’s two ways that you can do this. You can do an indirect rollover or a direct rollover. An indirect rollover is where you come into the 401k and say, “Hey, I’m going to take all my money out and I’m going to put it into an IRA.” And they say, “Well, do you want a distribution?” You say, “Yes.” So, they cut you a check minus 20% in taxes and you get a check for the remaining amount. you have 60 days to put that check back into your IRA to have that money continue to be sheltered. Now, the 20% that they withheld for taxes, if you want all that to be sheltered, also you need to put that money back into the IRA also. Now, when you file your taxes, you’re going to get that those taxes back, but this is an indirect rollover. And it may not happen necessarily when you’re taking money from 401k to an IRA, but I see it happen when you have an IRA, let’s say, at a bank and you want to move that IRA to another bank. And you walk into XYZ bank and say, “Hey, I have an IRA. I’m going to move it to another IRA at the bank. Can you cut me a check?” and they cut you a check payable to you in the the amount and then you walk over to the other bank and you deposit it into an IRA and money’s in IRA. Well, that’s considered an indirect rollover. And when it comes to indirect rollovers, you can only do that once a year. So, if you took that money out of the ABC bank and deposit it in an XYZ bank and six months later you do the exact same thing, the IRS says, “Wait a minute, wait a minute. You can only do that once.” So, this second time that you try doing that, now we’re going to tax all of it and it’s added to your taxable income. So, be aware of indirect rollovers. The better route is direct rollovers. Direct rollers is you when you’re calling XYZ company and say, “Hey, I’m moving my money into an IRA at Y uh ABC and they say, “Okay, we’re going to cut you a check payable to ABC FBO your name.” As long as they do that, that’s considered a direct transfer. Same with the bank. If you went to XYZ bank and say, “Hey, I’m moving money my my my money to ABC.” make sure they cut a check to ABC FBO your name with that. There’s no 60-day rule rule. There’s no 20% withholding and you can do as many of these as you want because it’s considered a trustee to trustee transfer. So, this is just an example what a a check would look like. So, again, there’s two ways to do the rollovers. Indirect direct. always encourage you to do the direct because then you don’t have to worry about the taxes. You don’t have to worry about claiming any of that and you don’t you can do you don’t have to do worry about the one year one time rollover.

When it comes to IRA planning, it’s still really important to plan. IRA is just one piece of your overall puzzle. You still have to think about taxes. You still have to think about how money is going to pass on to the next generation. You know, your overall financial plan. So, the next piece we’re going to talk about is it’s not just what you own, but where you own it. Strategically allocating assets to certain accounts might be more beneficial than others. What do you mean by that? Let’s say you have 100,000 in an IRA. You have 100,000 in a nonir IRA account. You’re in a 24% tax bracket. And each 100,000 100,000 in the IRA and 100,000 in the nonretirement are invested in things that are producing about 4%. Interest one the IAS you have bonds that are paying 4% or CDs paying 4% and then you have dividends paying 4%. So, strategic allocation hypothetical says, hey, if you have 100,000 in your IRA invested in dividends, you’re taking that $4,000 of dividends, you’re being taxed at 24% rate. If you have 100,000 in a non-retirement earning 4% interest, and you’re taking that 4% interest, that interest is taxed at an ordinary income. So, in essence, your total tax bill on that $8,000 of distribution is $1,920. Now, if you flip the script script a little bit and say, “Hey, my IRA should own the CDs and my non-retirement should own the dividend stocks.” And the reason for this is with 100,000 in CDs in the IRA, you’re still getting 4%. It’s still being taxed at ordinary income, but dividends and capital gains are taxed at a different rate. So the 4% qualified dividends you’re receiving are taxed at a 15% rate verse 24%. So now your tax bill is a total of $1,560. So you’re saving almost $400 in taxes by simply having different investments in different buckets. So it’s again it’s really important where at certain assets lay when it comes to retirement planning.

All right, let’s talk about IRA planning and social security. Social Security is one of the biggest annuities you’ll ever own. It’s an income that you’ll receive for the rest of your life and it has cost of living adjustments to it. Now the question becomes, should you take your social security or should you take money out of your IRA and delay social security to a later point? These are the questions that you kind of have to think about when making the decision on social security. Now again, everybody’s situation is completely different when it comes to this and it is a personal choice if you want to delay social security or if you want to take it early. Social Security can be tax efficient because 85 the most tax of social security is 85%. There’s always going to be about 15% of social security benefits that’s going to be taxfree. This is an example of send planning that Kim and I do to help you understand should you be taking money out of your IRA or should you delay. Again, everybody’s situation is completely different. This was a lady came and she retired at 67 or she retired at 66. Her full retirement age was 66 and she asked the question of hey should I turn on social security or should I delay till 70? She’s single, no kids. And so we ran the first scenario, her taking social security at 66. And then we ran a second plan with her delaying social security till 70. And we laid them on top of each other. So you can see the dark blue represents her delaying social security till 70. The gray represents her just turning on social security. So her break even was 93 means that if she lives beyond 93 she starts to benefit delaying social security till 70. She’s like there there’s no way. I mean I’m probably going to live till about 87. I don’t see myself living beyond 93. So in her mind, it made sense to turn on social security early and start collecting that, you know, that social security amount versus using her own assets. But again, everybody’s situation is completely different. But we’re able to kind of represent that and create a plan that shows, hey, is there any benefits using IRA money versus delaying social security?

Okay. When it comes to IRA and estate planning, it’s still really important. IAS, you name the beneficiary on the account. Meaning, if something happens to you, you name who this IRA goes to. No matter what you have in your will. It doesn’t matter what you have in your will, the IRA company will say, “Hey, you listed your dad as the primary beneficiary. That’s who’s going to get it.” Even though in your will it says all your money goes to your son, doesn’t matter. So, it’s really important to come in and review beneficiaries that you have on your IAS. And there’s different types of beneficiaries. You have eligible designated beneficiaries, non-eligible designated beneficiaries, and non-desated beneficiaries. There’s three types of beneficiaries. The first one we’re going to talk about is non-desated beneficiaries. These are people, these are non-living beneficiaries. So if you come in and say, “Hey, I’m going to name a trust or I’m going to name the estate as my beneficiary.” This is what happens. Let’s say hypothetically you name your estate as the beneficiary on your IRA. Well, if something happens to you before you started taking distributions, this money goes to your estate. whoever the whoever is listed in the will. Let’s say you have your sister listed in the will because what’s what’s going to happen is money’s going to go to the state. Probate’s going to have to be open. The judge is going to look at the will and if the will says, “Hey, your sister inherits this these assets, which is fine. This money now goes to your sister, but now your sister has to take that money out over a 5year period. If she inherited this money after, let’s say you passed away, but you had been taking RMDs out and it went through the same process, probate goes to your sister, then your sister now is going to have to take money out based on your life expectancy, whatever that is. So again, it’s a much quicker distribution of those assets. So if your intention was, hey, my IRA is going to go to my sister name your sister as a primary beneficiary so she doesn’t have to worry about opening probate because if you named your sister as the primary beneficiary now a sudden she’s a non-eligible designated beneficiary so usually non-spouse beneficiaries

and these type of people once they inherit a IRA and you’re non-spouse house, you have to take that IRA out over a 10-year period. So, let’s say hypothetically my mom passes away. I’m the primary beneficiary on her IRA. I give I receive that IRA. I have to take it out over a 10-year period. You used to be able to stretch that IRA over my life expectancy, but not today. NE today says, “Hey, if you inherit an IRA, you have to take it out over a 10-year period, which, you know, depending on how much money is in the IRA, could you cause your taxes to increase?” Now, there are still some situations where you have the ability to stretch the IRA, and this means that you just take money out on your over your life expectancy. if you’re a disabled person, chronically ill, if the individual within 10 years of dece’s age. So quote, going back to my example that that if your sister inherits [clears throat] your IRA and she’s within 10 years of your age, she actually still gets to spread that out of her life expectancy as long as you name her as primary beneficiary. But if you named your estate, then she’s going to have to take that out over a 5-year period or based on her your life expectancy. So, make sure it’s properly named. If you name a minor child as primary beneficiary, they get to stretch that IRA until they reach the age of majority and then at that point, it flips over and they have to take it out over a 10-year period. So again, when we talk about beneficiaries, make sure you’re updating it. Let’s say you got divorced and you still have your ex as primary beneficiary. I don’t know if that’s [clears throat] what you want to happen. So if something happens to you, this money goes to your ex versus maybe the kids or someone else that you want this money to go to. So make sure you’re updating your beneficiaries on your IAS. You can name a trust as a beneficiary on your IRA, but they can be costly. But the biggest thing to name the trust is you want control. And what I mean by that is that if you have a son or daughter that they make a dollar, but they spend $1.50, you might want to come in and say, “Hey, if something happens to me, I’m going to put this money into a trust to control how much you spend each year.” So with trust, you have a little bit of controlling power from the grave or you know that that might be one reason why you set up a trust. So again, if you’re thinking about setting up a trust and you want to put your IRA within it, talk to an attorney to to figure out what is the best way to accomplish that. Let’s talk about spousal IRA beneficiaries. So married couple, one spouse passes away. You have two options. You have the option of, hey, I’m going to take that money and just put it into my name, treat it as my own, or I’m going to leave it as a beneficiary option, beneficiary IRA. So let’s first talk about the first one. Your husband passed away. He has an IRA. you have the ability to say, “Hey, I’m going to take this money and just put it into my own name and treat it as my own.” Now, if you do this, be aware that again, if you’re under 59 and a half, you’re going to be subject to that 10% early withdrawal penalty if you needed to take money out. So, if you are under 59 and a half, you might want to treat that IRA as a beneficiary IRA because if it stays as a beneficiary IRA, then you can still take money out of that IRA and avoid paying that 10% early withdrawal penalty. Another reason that you might want to remain as beneficiary is that your your spouse has, you know, let’s say 10 years difference between you. Let’s say that your spouse, you’re 75 and your spouse is 65. Your spouse that’s 65 passes away. Well, instead of taking that IRA and combining with your own, you leave it as a beneficiary and your RMDs on that IRA is going to be subject to RMD rules once they would have hit age 75. Or flip, let’s say flip the scenario. Let’s say that your husband that’s 75 passes away. You might want to take his IRA and move it into your own IRA because you’re not going to be subject to RMDs until you turn 75 versus him already subject to RMDs. So, there are some pluses and minus to keeping moving the money into your own name or leaving it as a beneficiary.

Okay, I know we talked about a lot and ultimately the the thing I want you to understand is that we are here to help you answer a lot of the financial questions that you might run into such as creating withdrawal strategy, doing Roth conversions, when should I take social security, all of these financial questions we can help you with. One thing I like to look at is something like this, and you might have seen this before. It’s climbing the mountain. Sometimes climbing the mountain, people say, “Hey, I’m working. I’m saving. I’m working. I’m saving. I’ve retired. I’ve reached the top of the mountain. Yay. We throw a party for you.” But sometimes going down the mountain is the most dangerous. And I would say that’s the same for retirement because there’s a lot of things that you don’t necessarily think about while you’re working that now you have to think about in retirement, such as, hey, is my Part B premium going to increase because of my income? Am I going to be paying more taxes? What about longevity or health care risk, inflation, the market declining? All of these things you never really think about until you’re in retirement. So, you have to watch out for some of these things. And some of the ways they would look at all these types of risks that you might be faced with in retirement is creating a financial plan. So, Richard and Deborah came and saw us. You know, Richard, Rich is going to retire at 67. Deborah’s going to retire at 65. Richard has some health issues. So, we have life expectancy of 85 for him. Deborah’s going to uh probably live beyond 95. They have assets in the 401k, savings, house is completely paid off. Their income while they’re working that we know what their social security looks like if they turn it on at 65, 67. Richard used to work for United, so he has the PBGC the they want to live on $5,000 a month of retirement. We built in health care, healthcare increases at a much higher inflation rate than normal stuff. Uh travel, they want to travel for the next 10 years after retire richer retires. And we’re looking at federal and state taxes. They are still contributing to the 401k, maxing it out and receiving a 3% match. So the first thing that we do is put these pieces together and we say, “Hey, based on the income you have coming in based on when you want to turn social security on, are you able to replace your income in retirement?” And that’s what this picture shows us. picture shows the blue is their income. Dark blue is social security. The teal is the PBGC. The yellow is withdrawals that they’re doing. The red is the required minimum distributions. And then when Richard passes away, we lose the social security benefit, but we’re still able to replace Deborah’s income throughout retirement up to age 95. We will then look at tax liability. while they’re working they’re in a 22% one retires they’re you know 22% they have this window where they really don’t pay any taxes and then taxes come back into the picture because of required minimum distributions they’re in a 12% tax liability but when Richard passes away Deborah’s going to be in a 22% so her taxes are going to increase so we said okay let’s consider doing Roth conversions when you completely retire and see if that makes sense and so we looked at doing filling up the tax bracket. We want to fill up tax bracket up to 12%. And stay within a 12% see what the benefit would be. The yellow represents what we can convert in those years and stay within a 12%. And ultimately we’re coming in and say by doing so there’s $112,000 that you are actually keeping in your pocket. That’s money otherwise if you didn’t do a Roth conversion that would be going to the IRS for them to spend any way they want. So, not only do we help you reduce your taxes, but we also increase your net worth. Well, let’s consider Richard delaying social security until 79. Is there any benefit of doing so? Well, break even based on this scenario of 79. We know Deborah’s going to live beyond 79. So, it probably does make sense to delay Richard till 79. Let Deborah continue taking her social security so that when when Richard passes away first, Deborah will always get the greatest social security benefit. Well, Richard wanted to consider retiring early. Let’s consider retiring at 62. Is that possible? Yeah, we’re able to to run this analysis and say yes. If you want to retire early at 62, you’re able to do so. All that’s happening is you’re leaving less money to the kids. So, it’s your choice. If you want to retire early, yes, you can do so. So, this is some of the planning that Kim and I do for members of the credit union to help you kind of visualize and understand your financial situation. and we come in and show you what’s bad, what’s good, what’s bad, what are things you can improve, what are things that we can help you reduce your tax liability, and maybe look at is there a way to maximize your rate of return, but also at the same time reduce your risk. So, [sighs and gasps] with that, I’m going to open up to questions. Um, I know I covered a lot of information. There’s a lot of information when it comes to IRA planning, but um, Kim and I have been doing this for over 20 years. each of us have been doing this for 20 years. It’s very rare that we come into something that we we don’t necessarily know about. Um I’m going to also put a poll out there. If you’d like to schedule a meeting with us, please let us know on the poll. Um and we’ll make sure we’re we’re going to reach out to everybody anyways next week. But um if you’d like to to re reach out to you, just just let us know. And so the first question Yeah. the first question, Malcolm, is what is the fee to do a plan? Yeah. So here at the credit union, again, Align Credit Union. We’re employed by the credit union. The credit union is a nonprofit. We do not charge a financial planning fee to do any of the planning. We just don’t. I mean, it’s part of the services that we provide. We’ve thought about charging a financial planning fee, but again with the credit union, we’ve decided not to. Now, at the end of the day, we’ll do all this planning for you, and it we’ll get to a point where it’s like, hey, if you want to hear specific recommendations from us, we’ll talk about those recommendations, and there might be a fee associated with implementing some of those recommendations. But we don’t know until we’ve gone through the financial planning process with you. You want to add anything else to that? Yeah, you know, we really look at it as going through that planning process as your opportunity to get to get to know us and see if you think we’re someone you could work with and trust with your life savings, that kind of a thing. But, uh, let’s see. Can you post the link to your blog again? Uh, I have that at the end. See, it’s at the beginning in the resources tab would be my guess.

And that is all the questions so far. Come on. You guys got more questions than that. [laughter] [clears throat]

Nothing. Huh? Nothing. Nothing. Nothing. Nothing. Nothing. Nothing. Okay. Hey, it’s okay. Yeah. Well, if you think of something when we reach out to you, um, you know, just Oh, here’s one. I have a question. Okay. Great. Pipe away.

Not sure Martha if you’re typing in a question. Can’t see that. Uh let’s see. Yeah, Kim. Yep. We’re going to talk next week. Yes, we are. Can you show the slide again with the 100K? Yeah. Know what they’re talking about? Yeah. I think it’s when it comes to like CDs and dividend stocks. Oh, the taxation on that in the two different accounts. Yeah, that’s what that’s what she’s talking about. Yeah.

All right. She said, “I can’t type fast enough.” No worries. No worries. Do you want to just run through this slide one more time, Malcolm? Maybe that would be helpful for everybody. Yeah. I think the the biggest thing to take away from this slide is just it’s kind of the breakdown of where assets are held. You know, again, certain assets create certain tax liability. So, for example, like CDs, CDs earn an interest. That interest is taxed at ordinary income where where you might own dividend stocks that as long as they’re qualified, they’re going to be taxed at a lower tax rate than maybe interest from CDs depending on what your tax liability is. So, this is just breaking down kind of running an example of understanding where assets might lay to be more tax efficient when it comes to your to your own situation.

Okay. Well, hopefully that answered your question, Martha, but anybody else, if you come up with any questions when we reach out to you, just jot it down and we’ll be happy to answer that when we talk um next week. So, I think that’s it. Anything else you’d like to say, Malcolm, or No, thanks. Thanks for attending and I look forward to talking to you next week in our tax planning webinar. All right. Thanks, everybody. Bye-bye.

So, good afternoon or actually good evening everyone. My name is Baptiste Brunner and I’m one of Alliance financial consultants based here in the great state of Texas. I’m part of a team of financial professionals with the credit union who just give regular educational webinars, help out our members, uh, you know, broaden your knowledge, help you understand more about the ins and outs of retirement. And again, I’d like to just start by thanking all of you for taking the time to learn about, you know, becoming rollover ready and finding out the options available to you with your workplace retirement plans and you maybe learn about which option might be best for you depending on your situation. And of course, as always, we will reserve time at the end to answer any questions you may have. And when that time comes, you may ask your questions in the chat section or the Q&A section. Go ahead and identify those now if you’d like, and I’ll be sure to get to them then.

And here’s a new disclaimer that we have. Um, just please don’t put any AI note takers in here. This is apparently proprietary. Uh, so please don’t do that. If you want to take photos, I can’t stop you from doing that, but just please don’t put any AI note takers in here.

And my next webinar that I have coming up will be on Thursday, August 6 at 2 p.m. You can be covering life insurance. Bunch of different types of life insurance out there. Everyone should have some form of life insurance. Whether it be your workplace plan, and if your workplace plan isn’t enough, maybe getting a term policy. Uh whole life and universal is a different story, but maybe that might be what’s best for you. But join us for this one. It’s a great webinar. And then for the next evening webinar, mark your calendars for this one, especially if it’s coming up soon. Becoming savvy on your social security. It’s going to be t Tuesday, August 18th at 6:00 in the evening, Central time, 7:00 Eastern. Go ahead and put this down in your calendar. This is a great webinar here.

And of course, our team at Alliant Retirement Investment Services. We’re focused on helping you understand the ins and outs of investing, you know, saving for retirement and much, much more. But go ahead and take a look at our website. That’s a ris.allcreditun.com

uh/events to check out our webinar schedule. It’s not just me giving these webinars. We have a team of 12 folks with the with the credit union who are doing these regularly. We have a podcast which we will be updating again soon. great topics there. And then website, our blog, resource center, a lot of information. And it’s a free service. It’s a free resource center available to you, our members. Excuse me.

Pardon me. I might need to do that a few times today. I have a frog in my throat today.

And many people may be telling you how easy it is to do a rollover. But what they may not be telling you or even be aware of for that matter is the many options and the rules governing the how, where, and when you can perform a rollover and the wrong choices or timing. They can create very, very costly taxes or penalties. So, I’m here today to explain to you some of your options and help you to understand the consequences of certain decisions. And when you’re officially retired or started work at your new job and you complete your rollover, assuming that that’s the path you decide to choose, my goal here today is for you to look back and say, “Wow, that was pretty easy.” You may have heard of something called the DO fiduciary rule, Department of Labor Fiduciary Rule. It was passed with the intent of protecting investors best interests when an adviser makes a recommendation on an IRA roll over from retirement plan. And when deciding to perform a rollover, there are many things that should be considered. And when you’re working with a financial adviser, you should ensure that they are serving in a fiduciary capacity, which means that they must put your interest first. And while it seems that all financial adviserss should act in a fiduciary capacity, unfortunately, not all do. And before the rules officially went into effect in 2018, the US Court of Appeals issued a decision to vacate the rules as a whole. However, I want to mention it because it could be reinstated and it is good for you to have an understanding of what a fiduciary is and also institutions can still hold their advisors to the fiduciary standard which many do. And as with most financial decisions, everyone’s situation is different. Yeah, the rollover decision needs to reflect how the sending 401k plan stacks up in comparison to the proposed IRA in terms of investment options, fees, expenses, and the services that you’ll receive in exchange for those fees.

Now, whenever I have something important to do, I make a checklist so I don’t forget any important steps. And today, I thought I’d share a checklist I made for my clients when they are thinking about their rollovers. And let’s go over these step by step. Pardon me. We’re going to go over these steps one by one. And unfortunately, because we do have a limited amount of time today, I can’t get as deep into the issues as I’d like, but I want you to be aware of these issues and either research them on your own or talk to someone about them so you can avoid any common rollover mistakes because some mistakes are quite costly in the form of either taxes, penalties, time, and they just can’t be fixed at that point. and you will have to live with the consequences for the next 30 plus years.

Okay. So, the first step to take is to determine what do you want to do with the money currently in your 401k or your other retirement plans. And this can make a difference in how much you roll over and where you roll it to.

How many of you have saved enough that you can fund retirement without tapping into your employer’s retirement plan? Or you have a pension which will support you in retirement and you’re you primarily want to use your retirement plan to leave an inheritance to loved ones. You know, if so, you may wish to consider a Roth conversion for part of the funds to provide potentially, you know, income taxfree withdrawals to your heirs. And we’ll review that option in a minute. But how many of you see your retirement plan as being a source of funds to help support your living expenses in retirement?

How many of you make or are considering making generous donations to charity? You know, cuz the use of your retirement plan may be a tax advantage way of doing that, which we will review in a little bit. And of course, everyone’s dream. But how many of you are going to go just go buy a big old boat and go fishing? Yeah. nice goal for retirement, but these funds may not be the best to use for that purpose due to the tax bill and a lump sum distribution. And as you can see, there are a number of goals to consider besides just deciding on a retirement date. And those goals should drive your retirement plan. And there are a number of different strategies you could utilize to achieve those goals. And that’s why we need to decide at the outset what you would like to do with your savings. And once that is decided, then you can move on to the next step, which is choosing a distribution option. And a distribution is the term the industry uses to indicate you are taking money or assets out of a retirement account. So let’s use that term here so you’ll be familiar with it when you see it in the paperwork. Now, there are three primary distribution options available to employees when they retire from a company.

One moment, please.

Now, let me just say as we go over these options, there are a few right and wrong answers here. There are a few right and wrong answers here. There are expensive and non-expensive answers though, simple and complex, but no right or wrong answers. It all goes back to what you want to do with your money. However, not following the rules for the option you choose could cost you in taxes, penalties, fees, and time. So, let’s avoid all that by reviewing the rules, and thinking through the consequences. All right, so what are our three options? You can roll over to an IRA. You can cash it out. You can leave it in your current employer’s plan. And we’re going to look at the pros and cons of each of these. So, your first option is to do nothing at all. You can leave it in your employer’s plan where it is now. If you have a good plan, that might be the way to go. But the investment fees in the plan may be lower than the fees for mutual funds and other investments with an IRA, too. There’s probably no advisory related fee as well. And if you’re 55 to 59 years old and may need to take a withdrawal from these assets, it may make sense to leave assets in the company plan because you can withdraw from your 401k at 55 if you’re retired early and you’re going to be able to avoid those early penalties. That’s just the separating from service. So you get to avoid that 10% penalty but at by 55 but before 59 and a half. And one of the benefits of leaving your savings in your employer’s plan is that assets in an Orisa sponsored retirement plan are shielded from creditors. Whereas IRA assets may not always be. It just depends on state laws. You know in California, Georgia, Maine, South Carolina, and Wyoming, neither an IRA nor a Roth IRA will be sheltered from creditors. But in Alabama, Mississippi, Montana, Nevada, and West Virginia, a Roth IRA will not be sheltered from creditors. However, within a retirement plan, you are limited to the investment options available by the plan. Your HR department, you know, if you have a 401k, Fidelity, Empower, Vanguard, doesn’t matter who, but your HR department picked the plan provider, i.e., let’s say use Fidelity here, and they selected 20 25 different investment options, and that’s all you have available to you. you know, 10, 12 different target date funds, a couple of index funds, maybe some cash funds, and some bonds, too, but that’s all you have available to you. It’s not that large of a selection. And another downside to leaving your savings in the company plan is that you will probably no longer have access to loans should you need to take a loan against your plan assets, nor can you make contributions to the plan. But if if you roll over to an IRA and have earned income, you still can. Now, another consideration is whether or not the plan document mandates a force distribution over a 5-year period for beneficiaries in the event that you pass. And you may want to stretch it out over their lifetime. But some plans may not give you that option.

And your second your second option is to cash out your savings, take the money, and run. Unfortunately, Uncle Sam would also love that as it would create an immediate income tax bill. But first, your company has to withhold 20% of your account balance for federal income tax. And depending on your tax situation, you may owe additional taxes or get a refund for a portion of that withholding at tax filing time. But next, if you are younger than 55, you’re going to be subject to a 10% penalty. And then to pile on the misery, this distribution will be counted as ordinary income and it could bump you into that next higher tax bracket. And if you’re in trouble with creditors, now you have some assets they can potentially attach to. But it’s the taxes that can really, really hurt. And of course, you’ll have to pay taxes. But cashing out now means paying them all right now and what is presumably presumably presumably one of your peak earning years. Folks, my apologies. Having a little stutter bug today. And your last option is to roll your savings into an IRA. Now, most of you probably are pretty familiar with IAS, but I just want to bring some points to your attention. Big advantage is that IAS offer you many more options than most 401k plans do. You don’t have to stick to mutual funds. You can buy those individual stocks, ETFs, and much more. In addition, you can now work directly with a financial adviser to help guide you through the rollover process and help you invest the funds within your retirement plan. And previously, you were restricted to the available investment options within the plan and obtaining the advice of a financial adviser regarding plan assets that was highly restricted. This rollover will be a significant part of your retirement planning and a financial adviser can help to prepare a comprehensive review of your financial situation and strategies for maximizing your standard of living in retirement. Possibly come up with maybe some good tax planning strategies, too. However, the downside to an IRA is that you are in control and you have a lot of options and options can be overwhelming. Now, unless you’ve done your homework or you have help from retirement specialists, of course. Speaking of which, we need to talk about the different types of IAS. And the two most commonly known are, of course, the traditional, like we’ve been talking about here, and then there’s also the Roth. A Roth IRA offers many of the advantages of traditional, but comes with a couple of tax lists. And by converting to a Roth IRA, you would have to pay taxes today, but you’ll never be taxed again on withdrawals and future earnings. And another advantage to Roth IAS is that you aren’t forced to start withdrawing money at 73 or 75 like you you would be with a traditional IRA when it comes to RMDs, those required minimum distributions because you’ve already paid the taxes on them. You’re free to choose when you want to withdraw funds. Downside is that you’ll have to pay taxes today on any of the amounts that you roll over to the Roth. And there’s also that fiveyear waiting period and you can’t start taking money from the account until 5 years have passed or until you’re 59 and a half. However, after 59 and a half, you can withdraw as much as you want of your contributions tax-free without any 5-year deadline. As you can see, it’s it’s complicated. And if you’re thinking of moving to a Roth, do your research and really talk to someone about it. And you can always call me. I’ll be glad to answer your questions. I’m going to offer that to you at the end of this here, too. Now, your next step is to consider the sources of funds in the plan. And if you were contributing a fixed percentage of your salary, your 401k plan over time, your schedule contribution may have exceeded the annual contribution limit. And many plans will allow these additional contributions to be made through what are called after tax contributions. And these after tax contributions may be a potential source of a rollover to a Roth IRA. You’ve already paid the taxes after all. And another reason to review the source of your funds is you may want to consolidate accounts so they’re easier to manage and you can save on fees.

Now the chart in the screen shows all the different types of retirement plans and how the funds in each type of plan can be rolled over. If you want to take a photo of this, go for it. Um I I don’t want to read through this entire slide cuz it is a lot for really just showing you that just about everything can be rolled into everything. and just keep it likeminded. So all traditional funds can about be rolled into any other type of traditional account. So if you have a 401k pre-tax, you can roll it into a traditional IRA into the next traditional 401k. If you have a pension, you can do the same thing with it. 403bs, same thing goes all the way around. But if you follow the chart, retiree with a 401k can roll over his account into an IRA. that retire retiree also has a SE IRA from his self-employment income. If you consolidate those 401ks and SE IAS into one account and you may also want to take this time to review all of your existing retirement accounts and consider consolidating them. You know, perhaps you have those old 401ks or an old SE or simple IRA from a previous job. Maybe have a thrift savings plan from an old government or military jobs. Those are all under the same umbrella to where they can be with um rolled over into one another.

Remember earlier when we talked about goals like giving to charity or leaving an inheritance and that requires some advanced planning strategies or suppose you have company stock in your plan. you may want to convert to a Roth IRA. And when you hear the term advanced planning techniques, you may think it’s just, you know, for the rich and famous, but not really, not in the slightest. Let’s take a look at some potential scenarios that may affect you.

Pardon me, folks.

Okay, so let’s take the case of Jane here. Jane recently retired at 66 as a teacher and her pension and social security payments are more than adequate to support her current standard of living in retirement. And Jane has been a diligent saver and has about half a million dollar in non-retirement assets which she plans to use to fund two nice vacations per year. And she has $250,000 in her 403b plan. And for those of you who are unfamiliar with the 403b, it’s the equivalent of a 401k plan. It’s just for public education institutions and nonprofits.

Now, when Jane reaches age 73, she’ll have to begin taking her IRSmandated required distri minimum distributions. Those are RMDs from her 403b or her IRA, assuming she performs that rollover. But these required minimum distributions are taxable to Jane at her ordinary income tax rate. And when Jane passes and her children inherit her IRA, they’ll have to continue taking her RMD and adding that RMD to their ordinary income tax every year. However, a Roth IRA does not have an RMD requirement while Jane is alive. Withdrawals after age 59 and a half are income tax-free, and withdrawals from an inherited Roth IRA will be income tax-free for her heirs. And if Jane does not require her retirement funds to support her standard of living in retirement and converts her 403b to a Roth IRA, she can now eliminate her RMD requirement and pass these assets to her children free of any future income tax, thereby allowing the assets to continue to grow tax-free throughout her children’s and even maybe her grandchildren’s lifetime. Let’s take a look at an example. While this can seem like a lot of information on the chart here, let me summarize it for you. All IRA owners who are age 73 or older, or 75 if you’re born after 1960, you must start taking RMDs from your IAS. And these distributions are taxable when they’re withdrawn. So therefore, assume that Jane leaves her 403b assets in her 403b plan or rolls them over to an IRA. And let’s just assume she achieves a 6% annual rate of return while withdrawing her RMDs in the beginning of each year, she can potentially incur more than $120,000 in income taxes. And if we assume that she saves that after tax RMD amount each year, her inheritance to her children could potentially be $335,272

in a beneficiary IRA and an additional $328,759 in that taxable account by age 90. In summary, this would be a $683,756

inheritance. and Jane would have paid $120,000 in income tax on R&Ds throughout her lifetime. Let’s not forget that that $335,000 left to her children would also carry an income tax on distributions from the beneficiary IRA.

Let’s take a look at what that inheritance may look like if Jane converts that 403b to a Roth IRA. All the funds that Jane converts to a Roth IRA will be realized as taxable income in the year she converts them. And for this reason, we will spread out Jane’s conversion over a few years so that her income tax bracket does not substantially rise in the year after her retirement. But if we assume that Jane converts her 403b plan to a Roth IRA over a 4-year period and remains and she remains in that 28% tax bracket and achieves that 6% net rate of return, she could potentially leave her children $772,000 in a beneficiary Roth IRA, which is now not subject to any of those ongoing capital gains, RMDs, or income tax on those assets. So, by performing a Roth conversion, Jane would have paid nearly $45,000 less in income taxes over her lifetime. And she’d also be able to potentially leave her children more money in the form of $772,000 free from any further income taxes at age 90 as opposed to the approximate $683, 335 of which was subject to that income tax. Now, this analysis assumes that Jane pays the 76,000 in taxes due in the conversion from the amount of money converted to the Roth IRA. Let’s look at the potential inheritance should Jane pay the income taxes from her non-retirement savings. Under the same set of assumptions, if Jane were to pay that 76,000 in taxes from her non-retirement, that taxable brokerage account savings, which she’s earmarked for her annual vacations, she could pay the same income tax, but leave her children almost $1.1 million, free from any further income tax.

So, to summarize, a Roth conversion can create a more tax advantaged inheritance for your children or even grandchildren. But maybe perhaps this charitable giving is important to you. So if you’re age 72 or older, you can distribute up to 100K from your IRA directly to a charity without the IRA distribution being taxable. And if you’re considering a sizable contribution to charity or would like to avoid realizing tax on your RMDs, you can roll over your retirement plan assets to an IRA and make distributions directly to a charity without increasing your taxable income. And then another advanced planning strategy, it revolves around company stock. So if you have company stock in your 401k plan, you know, and if you love the company and stocks done really well, you should consider taking advantage of the net unrealized appreciation or NUA and potentially saves you big on taxes. And while you should review an NUA analysis with your tax professional, let’s just take a look at an example.

So, distributions from an IRA or 401k are taxed at ordinary income tax rates, which are higher than long-term capital gains tax rates. And if you have company stock in your 401k, you may be able to distribute that stock from your 401k and realize a capital gain rather than ordinary income taxation when you sell the stock. But in order to take advantage of NUA, you must elect a lump sum in kind distribution from the plan. That is a total distribution from the plan of all assets and you can then roll over the non-comp stock portion to an IRA within 60 days. But all the assets must be distributed in kind to you for the company stock portion of the plan assets which will not then be rolled over. you will realize the basis in the stock as ordinary income and the remaining unrealized gain net unrealized appreciation would be taxable as a capital gain upon sale. So let’s take a look at this in action. So if you withdraw 50,000 in company stock with a basis of $7,500, you’ll potentially owe $1,800 in tax today, assuming a 24% tax bracket. After taxes, this will leave you with 48,200 in stock. Now, if this stock continues to grow by 8% per year for 10 years, you could potentially have $104,27 in stock in 10 years. And the stock in 10 years, if so, could generate taxable gain and then net you $82,200 in after tax bucks. Let’s look at what happens when if you leave the company stock in your 401k plan and withdraw the funds in 10 years. So, similar story. You leave 50k in common stock with the base $7500 in the plan and allow it to continue to grow by 8% for 10 years. You’ll have $107,946 in assets that can be withdrawn in 10 years. However, that withdrawal would be subject to ordinary income tax rates. And assuming the $107,946

withdrawal does not push you into a higher income tax bracket, that is $25,97 in taxes, leaving you with 82,000, a little over 82,000 after taxes. And that is only slightly less than had you taken advantage of the NUA. But prior to the passage of the Tax Cuts and Jobs Act from back in 2018, I believe utilizing the NUA often resulted in a much greater net after tax amount. However, the new law kind of lowered ordinary income tax rates while leaving the capital gains brackets as they were. And for this reason, depending on your situation, might not be as great as a difference between utilizing NUA and not depends on the person. We’d be happy to run that assessment for you. All right. So, step five. So, are you ready to perform a rollover? Let’s take a look at what you need to do. One of the first things to do when you’re ready to roll over your assets is to choose an advisor. And according to IRS rules, every IRA needs to have a custodian to watch transactions and keep records so you know, penalties and taxes can be deducted. And you will need one of those. However, there are different types of advisors to choose from. For many of you, your rollover is a significant amount of money. You’ve been saving for 20 to 30 years, investing it, growing it, and it represents a large percentage of your retirement assets. And naturally, there are plenty of firms that would like to manage that money for you. Independent adviserss, banks, brokerage firms, fund families, insurance carriers are all interested in managing your money. In fact, there’s so much competition out there that everyone has made it as easy as possible to roll your money over. So, in reviewing possible advisors, run them through a vetting process. Ask them if they’re a fiduciary. Ask them if they’re held to the fiduciary standard. Interview an adviser and talk to them about their investment process, type of financial planning services they will offer you, and of course, those pesky fees and transaction costs that are associated with working with an adviser. Ultimately, you are entering into a relationship that you hope will be long, maybe even 30, 40, 50 years. And you’ll need to find a firmer individual with which you feel most comfortable working with.

All right. Now, it is time to begin the rollover process. And the steps are pretty simple as you see here. And fair warning, when you check with your 401k provider, be prepared for a spiel and either leaving your assets with the plan or rolling over to their brokerage IRA. You may have heard it already is they will certainly get more aggressive the closer you get to retirement. But at this stage we will begin the process of notifying the 401k plan and your former employer and completing the paperwork. And you need to be very meticulous in this process. Remember when we talked about the NUA strategy and your one chance to get lower tax rates on your company stock. Well, you may be prepared. have all your ducks in order. But if you give incomplete or wrong instructions to HR, you can get stuck without any way to fix it. And I go through the paperwork with all my clients, including calling the 401k provider together and working with HR when necessary. Then it’s good to have a second set of eyeballs monitoring this process because the wrong box checked or an instruction not properly communicated could subject you to taxes penalties and possibly even delay your ability to access your funds. And this is where a competent advisor can be most helpful. You’re in control now. So you need to be sure to monitor the progress of this transaction so nothing falls through the cracks. It shouldn’t, but this is a serious chunk of change that’s moving around subject to bureaucracy and human error. And I I like to watch the whole process like a hawk for my clients. You should, too. So, now that you’ve opened an IRA with a custodian and received all the paperwork, it is time to now fund your new IRA. And you can fund your rollover through a direct or indirect rollover. Through a direct rollover, the plan sponsors will send a check directly to the IRA custodian. And when performing an indirect rollover, the plan will send you a check for the balance of your account. You’ll in turn forward a check to the custodian of your IRA. I never suggest for anybody to do an indirect rollover because you have to be very careful. If you elect to perform an indirect rollover and if the funds are not deposited in your IRA within 60 days, the rollover will then be disallowed. the entire amount distributed from the retirement plan will now be taxable and may even be subject to early distribution penalties.

All right, so what are some of the common consequences of or um with the rollover? And the consequences of a mistake can be brutal. Let’s take a look at some of the common mistakes that people make particularly if they’re acting without an adviser. So missing that 60-day deadline just mentioned is a big one. If you don’t deposit rollover funds into an IRA within 60 days, the entire rollover is now taxable as if you had just cashed out the retirement plan itself. So, make sure that you select a beneficiary for your new IRA and that you name a contingent in case your primary beneficiary is not here to collect the account after your passing. And don’t rely on a will to dictate how these assets will pass to your heirs because the IRA beneficiary designation or lack of designation trumps anything that’s stated in your will.

One moment, folks.

Enrolling over company stock or not paying off your loans before you leave are more big mistakes. Then if you do not repay all outstanding loans against your 401k, you’re going to be taxing the outstanding balance, including a potential penalty if you’re under age 59 and a half. Finally, as tempting as it may be, cashing out your 401k instead of letting your savings continue to grow tax deferred. It’s just downright silly. You pres presumably got another 20 to 30 years left after all. I hope for all of you it’s more like 50 and 60 years.

Now, I work with rollovers and soon to be retirees all day long. And here’s a list of just some of the services that we offer. If you’re having a hard time visualizing your future, we’ll put you through some scenario planning to get you thinking about the kind of life you want to lead in retirement. And if you need help budgeting, we can work with you to draw up a retirement income plan and withdrawal strategy. We can help you manage your accounts and consolidate them and structure them so you can set up a tax efficient withdrawal program that works for you. And of course, we can help with portfolio management. And we offer a variety of investments and financial strategies. We can work with you to find ones that are suitable for you and manage them for you if you like on an ongoing basis.

Now, with that folks, it’s now time for questions. But should you ever need anything from us, if you need to ask questions, here’s our my information. Um, that direct number just comes to my computer. Works perfectly fine. But there’s my email. If you’d like to schedule an appointment with me, I’m sending out a poll right now. Or you can use this QR code here to schedule an appointment with me that through that route. But please ask your questions. Like we just mentioned, this is a very important process. You don’t want to make any mistakes that you’re going to have to pay penalties and taxes on for the rest of your life. Um, but if everyone would please real quick just answer the poll. If you say no or not at this time, it doesn’t hurt me or affect hurt my feelings. Uh, I just like to see that I had everybody answer the poll. But if everybody would answer, please go ahead. And for those who are saying yes right now, um I will be contacting you tomorrow via email. Um and looking forward to helping you with any questions you might have, whether it be regarding investments, rollovers, Roth conversions, we’re here to help with that. So with that, I’m going to start taking questions. Let’s see what we got today.

Oh wow. First time in a while. No questions for me today. I must have been such a great presenter. Everybody caught on. It must be such a good uh good webinar.

Here’s one.

Why do you not suggest an indirect rollover? Um, just because of the the possibility of it all becoming taxable and reportable in one year. If you do a direct rollover, it’s made out to your new custodian. So, let’s say you’re moving it over to Fidelity. Check says Fidelity for the benefit of you, the client. That way if anything happens with the mail, it’s okay. Goes right through. I mean, there’s no problem there. You can always have a new check reissued. There’s no problem with um with ind with direct rollovers. Indirect rollovers. Uh if the check gets missing in the mail, now you have to talk to the IRS and have them forgive you in that case. So, just do a direct rollover.

So, is there a way to split benefits in a 457b where a portion rolls over and you keep part of the money even if that amount is taxable? Of course. It’s called a partial distribution, partial rollover. Let’s say you have $500,000 in your account and you want to put $250,000 of it in your IRA and leave 250 in your 457. You absolutely can. And it’s not even it’s not a taxable event. Um folks, there’s about 15 20 more people that still need to answer the poll. If you don’t mind answering, I really would appreciate it. Again, yes, no, not at this time. If you say yes, we’re happy to help you. If you say no or not at this time, it doesn’t hurt my feelings. I promise you it’s okay.

Yeah. Oo, here’s a good one. Aren’t there new Medicare rules or Medicare premiums are penalized if your income is higher some years due to cashing out retirement assets? So, it’s called Irma and it’s when your your Medicare is going to be based off of your modified adjusted gross income from two years earlier from and it’s ongoing. So, your Medicare cost, your Medicare premium from for 2026, what you’re going to pay in 2026 is based off of what you made in 2024. The more that you made, the higher your modified adjusted gross income, the higher more you have to pay in Medicare. Um, schedule a meeting with me. I’d be happy to go through that one with you. That’s a good question.

At what moment do we roll over or convert a traditional IRA to a Roth IRA? It depends on the person. Um it’s but one thing that we can do for you is we can run a financial plan to find out when the most optimal time will be. Um, you know, I have some clients, I actually have a few clients who are very lucky and they’re retiring in their mid to late 50s and it makes sense for them to actually wait two to three more years cuz they want to spend some money right now. So, it doesn’t make sense for them to do it for a couple more years. They want to be in that lower tax bracket to do it. Everybody’s situation is different, but there is a solution to finding out when is the best time to do a rollover and when’s the best time to do a conversion. be happy to show that one to you too. Just schedule an appointment with me. Or wait, you said yes in the chat. I I will reach out to you personally then.

Okay. So, the question going back to the 457 partial distribution one, I’d like to put a portion of 457b funds into an emergency savings account and largest portion into a Roth IRA. Would this be a partial rollover as well? Um, don’t do that. Don’t take out a large amount of money that you’re not going to use and just put it in emergency savings account. Just withdraw it whenever the emergency occurs. you you don’t need to pull out, you know, let’s say that you want to have 50 grand in an emergency savings account. Don’t you don’t need to have, you know, an additional 50 grand added to your modified adjusted gross income, not growing anything in your checking account, etc. It it’s I I’ll show you what I mean by it. Schedule a meeting with me and we can go over that, but it really doesn’t make the most sense to put it into an emergency savings account. What you could do if you want to just have some funds allocated for an emergency within your plan, let’s say it’s $50,000 is the amount you want to put into an emergency savings account. Put it into like your stable value fund within your IRA or your 401k. Get a 3 or 4% interest rate within your investment account. It’s still liquid funds and ready to go. And then the largest portion to the Roth IRA, like I mentioned, we can come up with a conversion strategy that’s good, makes sense for you. Just schedule an appointment with me and we can go over that together. Uh folks, there’s five more people that need to answer the poll. Again, it’s okay. Just say no or not at this time. Doesn’t hurt my feelings.

Okay, I’ll be sure to reach out to you. Happens all the time at the polls. What is the benefit of indirect rollover? Um really I don’t want to say that there are any. It’s just more control in your part. I mean whenever you do when you do a direct one, let’s say you’re with Fidelity and you’re moving it on over to Vanguard, Fidelity is going to I more than likely mail a check directly to Vanguard and you never have to see the check. It’s just going to go straight into your new account that you already opened up over there. Great. You don’t have to do anything and there’s no possibility of any tax consequences or any penalties for delay of your new custodian receiving the funds with an indirect. Only time I’ve ever been asked if somebody wants to do it is somebody who just wanted to be more in control. They didn’t want us to have a check that we can’t even cash. They were kind of nervous that we might have, you know, people were nervous. This is your life savings. Um this is your retirement funds. People don’t want a stranger holding a c, you know, a check in their hand with that amount of money, but there’s no way to be shifty with these because it’s made out to the institution. So, nothing wrong can happen there. Um, honestly, I just would avoid indirect rollover altogether. Again, if if you have a bad postman and he’s one of those guys that likes to throw the mail out in the side of the road because he had a bad day, we all heard about those stories back during CO. Um, if your check just sat in the grass and, you know, never got to the next institution, penalty taxes.

If you have a 403b with an ex employer, can you do a partial cash out? Well, you can roll all the funds over, but yes, you you can pull some funds out just depending on your situation. Um, if your next keyboard, are you older or younger than 59 and a half?

Okay. Well, you can pull money out of your They’re older than 59 and a half, so you can pull out anything from your 403b whenever you want to. Um, whatever amount you’d like. If you need just 10 bucks out of your 403b, you can take out 10 bucks. No penalty. You just pay the taxes on it if it’s pre-tax account. Um, but you you might want to just consider, you know, if you have that’s an exemp employer, you might have a couple of different accounts, you might want to consider consolidating, but get with me. We I’d be happy to go over the specifics of it. And, you know, folks, I’m sorry for saying that so much. It’s just everybody’s different. two people might seem very similar on paper, might have similar amount of money and similar um similar accounts, might even be invested similarly, but they’re two completely different people. So, the strategy and the tactics are going to be different as well. The approach is going to be different. So, I have to say just ask questions, you know, and I can’t answer or get all of your personal information on a public forum, but that’s why we offer these consultations after these meetings. Not only do we want to educate you at these webinars, we want those who absolutely want help and want to understand things in in their ins and outs of all this financial advising and retirement planning. We’re here to answer those questions on a personal one-on-one basis. So, please schedule a meeting with me and I can go over that one with you as far as what what’s best to do. But outside of that, those are all of our questions for today. Um, I’ll stay on here for another minute or two, answer any other questions that come on. But other than that, folks, thank you very much for joining me today. I do appreciate it. I hope this is a good webinar. Um, before you anybody heads out, if there’s a topic that you think would be great that we talk about, go ahead and put it in the chat or the Q&A. I’m always looking to see another topic for us to cover outside of just traditional IAS, Roth IAS, rolling over things, social security, life insurance, life insurance. Sorry, I told you guys I had a bad frog in my throat. Um, but please let us know some good topics that you’d like to hear us talk about. We’d be happy to go over that. Absolutely. It’s a pleasure. Thank you very much. Hope this was a good one today. And like I said, I’ll stay on for another two minutes, but folks, take care and I will see you for the Social Security one in a couple weeks.

Thank you.

Thank you as well.

Thank you very much. You have a great night as well.

But that is it folks. Thank you all very much for joining. I’m going to sign off here. Give it about 10 more seconds for anybody to stop me for last second question.

All right. Well, thank you all very much. Take care. Have a good evening.

Hey, welcome everybody. We still have a couple of more minutes before the top of the hour here. So, we will uh wait until then to uh start this webinar. But in the meantime, let me tell you something kind of a little interesting here. So, uh um I have an uncle that passed away last weekend, unfortunately. And I don’t want to turn this into a oh, I’m so sorry, but what’s interesting here about him and my mom is they’re twins. Now, I’ve known twins. My I actually have two younger brothers that are twins as well. Uh so twins are not all that uncommon. They’re not super common. But anyway, what’s really more interesting about my mom and my uncle is they were actually born on leap year. So twins born on leap year. I I think that’s extremely rare. But uh anyway, that uh just kind of came to my mind here. my uh my tomorrow actually is the 10-year anniversary of my mom passing away. Uh and again, I don’t mean to turn this into something sad or anything like that. I celebrate both their lives. I had a great life uh for both of them, but yeah, twins born on Leapear I would think is extremely rare. Um so, but uh anyway, I’ve got uh that funeral going on uh this uh this Friday. um he died what he loved to do. He was uh he was uh at his vacation home with buddies that he’s been hanging out with for decades and decades. So anyway, so yeah, twins born on leap year top that I don’t know if anybody can top that in something rare, but uh anyway, with that being said, it is now the top of the hour. Let’s go ahead and get started here. Let me share my screen here with you. Uh click on this. There we go. Awesome. Okay. All right. So, again, welcome uh this evening. Uh my name is Bernell Baker. I’m a financial consultant with Alliant Credit Union. Uh I work for the Alliant Retirement and Investment Services. Uh I’ve been with Alliant now for almost 14 years. I think uh November it’ll be 14 years. I love what I do. I love working for the credit union. Uh I work out of my house. That’s a big benefit. I’ve been doing that for about 12 years now. Uh way before COVID hit and before we got all cool and everything like that. Uh I’ve been doing it for quite some time. So with that being said, uh let’s go ahead and get into this here. Uh just one thing is this is for educational uh purposes only. This is uh this is not being recorded and we ask that you don’t record it either. uh and it’s proprietary here for land. We we offer these services as a complimentary gift to all of our uh members of the credit union. So, we just ask that you uh respect that and uh don’t distribute or use any part of this presentation to uh anybody else. If you have any direct uh questions about uh anything in here at the end, I will have my uh phone listed and um and uh we can talk. So with that being said, let’s go ahead and get into this. So again, this is the different the website that we have here and uh the webinars we have are complimentary. It’s uh it’s there’s so many different topics that are available out there. Uh we also have the invests podcast. I’ll be honest with you, we haven’t uh put out a new podcast uh recently, at least not that I know of. Uh but the information is not time-specific. So the the podcasts that are out there uh are still good to listen to at any point in time. And then we have the uh the Aerys website and the blog uh that talks about us as a team and and everything. So with that being said, let’s go ahead and get started here and we’re talking about the home stretch, the seven things that you need to do uh in the decade before you retire. So if you kind of think about retire, you know, your your work life kind of like a marathon, you know, you’ve, you know, trained hard for it, you’ve you’ve ran most of the race and everything and then right towards the very end of it, that’s when you’re tired, your muscles ache in in a marathon, um you’ve got to really dig down deep and continue to going. You don’t want to stumble and fall just before the finish line. And that’s the same thing kind of with retiring is you’ve worked hard your whole life. Now it’s time to enjoy the rest of your life and hopefully you’ve done everything that you can do to have a great retirement and you don’t want to stumble and fall. So the seven things that we’re going to talk about here is to help uh eliminate you from that stumble and falling down. So here’s the different topics that we’re going to take a look at at different subjects here. And each one of these has their own, so I don’t need to go into each one, but let’s get into the first one here. So, determining when is the right time to retire. So, the grandfather of retirement was a gentleman back in in um in uh Germany in the 890s and by a name of Otto von Bismar. So, he was the first one that ever brought up the idea of retiring. So at that age or excuse me at that time he put the retirement age at 70. Well that’s all fine and great but the problem is is the life expectancy was about 42 43 years old. So you would have to almost double the life expectancy just to contemplate on retiring. Now, if we fast forward it to our time in 2026, our retirement ages are anywhere from 65 to 67, depending on when your birth date was. But our life expectancy is much longer than that. Anywhere from 82 to 85 typically for men and women. So, and there’s many people that live uh longer than that in retirement. And so the retirement now is completely different than what it was back in the 1890s when it was first mentioned and and first thought of. So there was many people that were asked on at what age do you think you’re going to retire? And there was a lot of people that said that they’re going to retire anywhere from 65 to 70 years old. And a few people said that they would retire prior to 65. Well, you know, the median age the people that said that they wanted to retire was about 62. Okay. Now, but the problem is is many people uh had to retire early. You know, for some reason people have to retire prior to the age that they want to based on personal health, a job loss or downsizing in in uh in a company or the company may offer early buyouts. So, I’ll give you examples on all of these. So, my mom, excuse me, my wife is retired. She had to retire because of health issues. We just deal with health issues with her. I was talking to a buddy of mine last night. Uh his wife at 45 was diagnosed with early dementia. Um he’s 60 now and she’s getting uh to be quite a handful. So, he had to quit working to help take care of his wife as well. Uh my dad lost his job and he was very very specialized in what he uh did and he could he uh lost a job at 55 and he just could not find um a a job in the same field that he did. And then I deal a lot with um uh airlines uh pilots and flight attendants and and ram people and they quite often have early buyouts uh for their employees. And so any one of these things can happen to any one of you. The problem with all of these is the majority of those that are retire is for reasons that are outside of their control. You know, you may have a loved one that is health issues. Like my buddy last night, my wife’s health issues are completely out of her control. She does everything she can, but they’re out of her control. my dad losing his job, you know, it just the whole company about 25% of the uh employees uh lost their jobs at that time. So the majority of people that retire retire anywhere from 61 to 65 years old. Now m you know bes besides that people are retiring prior to 61 years old. That’s where it makes up the other difference. And let me back up here. And then there’s a few people that are able to last beyond 65, you know, and and so you probably ought to plan on, you know, prepare to retire early, but if you can retire, well, retire whenever it’s convenient for or most convenient for you and beneficial for you. Now, couples should plan for age differences in their marriage. So on average uh there’s typically about a 2-year uh age difference being between spouses typically. Again I’m just talking typical there it’s you know my wife and I are three difference uh three years difference. Uh she’s three years younger than I am. But if you take a look at a at a couple here that are two years difference. The husband’s 25, the wife is 23 years old. Uh and that’s fine. And those those are good ages and and everything when you first get married. But down the road, if the husband wants to retire early, he can get on Medicare at 65 years old. If his wife isn’t working, then she’s got to come up with some sort of health insurance between 63 and 65. Now, typically men pass away at an earlier age than women do. And so if that happens, let’s say the husband passes away at 82. The wife then would be 80 years old. Women typically live longer than men. Not in every situation, but typically they do on average. So the wife could actually be alive in retirement on her own for 9 years or so. Okay? Those are just things you need to take into consideration when you’re looking at retirement and things that you don’t want to uh have a negative effect on you by doing something earlier on in retirement. So, let’s take a look at some ages that are very important to understand about retirement. So, at 50 years old, you can contribute more to a traditional IRA, a Roth IRA, or into a 401k. It’s called a catchup uh period. Okay, I have to say that really slow so we don’t confuse it with a condiment, but you can start contributing more to a traditional or a Roth IRA uh tradition or a 401k. At 55 years old, depending on certain qualifications, you may be eligible for early uh distribution from your qualified retirement plans. Now at 59 and a half, everybody can start taking money out of your your I your IRA plans or your 401k plans without any tax penalties. Pri unless you meet certain qualifications prior to 59 12 years old, anything that you take out of a traditional IRA, you’re going to have to pay additional 10% on your taxes. In a Roth IRA, you can take out your contributions only, but any conversions or gains prior to 59 and a half, you have to pay an additional 10% on taxes. Now, at 60 years old, people can uh qualify for widow or widower or social security. Now, at 62 years old, everybody can take out social security if you qualify for it. if you’ve if you worked or maybe you had a spouse work and everything. The problem with taking out it early at 62 years old means that you start the income sooner and you’re going to be a lesser you’re going to have a lesser amount for the rest of your life. So unless it’s absolutely needed, I do not recommend it. Also, if you take it out early and continue to work, there’s a limit on how much you can earn per year. And I want to say it’s somewhere around $23,000 give or take a little bit. I don’t I don’t remember that offh hand. I don’t I I haven’t come across that in a situation recently. But let’s say it’s $23,000. Uh if you’re taking if you’re if you earn more than $23,000 a year then um and you are taking social security then you’re going to you’re some of your social security is going to be withheld and given back to you at a later date. Now, at 65 years old, I recommend that everybody applies for Medicare Part A. That’s hospitalization. Doesn’t cost anything to have Medicare uh part A. So, everybody needs to apply for it. If you don’t, there could be some penalties down the road when you actually need do need to go apply for it. Even if you’re working in your covered under group insurance, I’ll be uh doing that in uh in not too uh longer uh distant future. I’ll be uh applying for it. Uh but at 67 years old, uh everybody then can apply for social security. That’s your full retirement age. Um if you haven’t um uh if you were if you weren’t born prior to 1960. So if you were born in 1960 or born after 1960, your your full retirement age is at 67. Anybody can do that. Now, if you apply for social security, then you can continue to work and get your full social security if you want to. Okay. At age 70, well, if you delay it and don’t take it out at 67, let’s say you’re still working and enjoy what you do. For every year that you don’t take out social security beyond your full retirement age up until age 70, you get an 8% increase in your social security. It’s called delayed credits. At age 70, you do not get any more delayed credits after that. So even if you’re still working, if you enjoy working and you’re still working, absolutely start your social security at age 70 at the very very latest. Now, at some point in time, if you have any traditional or pre-tax Roth IRAs, you’re going to have to start doing your RMD, required minimum distribution. If you are at the year 2033, if you are not 73, excuse me, if you do turn 73 prior to the year 2033, then you will have to do your RMDs, meaning every single year you have to start taking out money from your traditional or your pre-tax 401k. It starts out roughly about 4% is what you have to take out. But if you’re not 73 by the year 2033 the age jumps up to 75. It used to be at 70 and a half then they switched it to 72. Now it’s 73. And then again if you’re not 73 by the year 23 it’s 75. So you will have to then start doing your RMDs every single year thereafter. Okay. Hopefully this was uh helpful for you to see where you fall and what you need to do uh for that. So item number two, take aim at your retirement target. So I’ve got three rules of thumb here to share with you. The first rule of thumb is to save enough to generate anywhere from 70 to 90% of your pre-retirement income. If you can do that, you should feel very comfortable that you will have a very respectful and very uh uh financial worry-free retirement. Um anyway, that’s just it’s a rule of thumb. Now, there’s some cost that may go down when you retire. Hopefully, you’ve paid off your house. Okay? Hopefully, your mortgage is gone. You won’t have to pay that anymore. a transportation. Uh if you work outside of your house, you got to travel to work. I don’t have much of a commute, so I’m I’m good there. But transportation hopefully will go down for you. Clothing, you don’t have to buy these nice shirts and get them dry cleananed or anything like that, especially if you go into an office or whatever. So, that should go down. And food, you know, when you’re retired, you’ll have time to be able to cook at the house. you won’t be out with friends and family and maybe have some well, you may be out with friends and family, but you won’t be out with co-workers and uh so your your your food bill hopefully will will go down. Now, there’s some costs that may go up as well. Health care, especially if you’re covered under a group health plan. Okay, Alliant, I’ve got uh coverage under the group health plan at Alliant. I pay less per month than I would on Medicare. So, your Medicare costs may go up. Also, on top of that, you’re getting older, so you’re going to see doctors more often. Travel. I’ve got brothers and in-laws all over the country here. Actually, all over the Well, I got a brother-in-law over in Ireland. My wife is from Ireland, and her brother is still there, but the rest of her family is here. So, travel may increase to go and visit family or friends that aren’t real close to you. Utilities may go up. you’re at home more often, you got the lights on more often, you got the TV going, whatever. And then home maintenance. I fully expect that when I retire, my grandkids will come over to the house. Uh my two oldest grandsons or grandchildren, I got two grandsons and then uh granddaughter and I’ve got five grandkids, but my two oldest ones, we caught them earlier earlier this year, and they thought it would be really cool to uh throw dirt in the air conditioning fan when it was kicked on. So, uh, I hope maintenance I’m sure is going to go up because I’m sure my grandkids will be over more often and I will love it, but maintenance will go up just because they are destructive little boys and I love it. I guess it uh what goes around comes around. I was pretty destructive as a as a youth as well. Now, what can go away is a couple of different items. Social Security taxes are going to go away. Payroll taxes, I should say. It’s going to go away because you’re not working anymore. If you don’t have an income, then you don’t have to pay that social security payroll tax. And retirement contributions, you can only contribute to an a retirement plan as long as you have income coming in. And social security and pension is not considered income. So again, just to kind of recap, you do want to if you can uh save enough to generate 70 to 90% of your pre-retirement income. If you can do that, you should feel very confident that you’ll have a very very good retirement. So, rule of thumb number two, save a multiple of your salary based upon your age. So, let’s say your salary is $100,000 and let’s say you’re 55 years old. So, if you can, and I may sneeze here, I apologize. I’m going to look at the sun. See if I can bring it on. I apologize. If you are 55 years old and if you have anywhere from 60 600 to $800,000 in your retirement accounts, then you should feel very comfortable that you’ll have a good retirement because at 55 then at 60 it jumps up to eight uh to 10 times and then at 65 years old. If you have saved uh anywhere from 10 to 12 times, you should feel very comfortable. Now, that’s not to say that if you haven’t saved up to that that you won’t have a good retirement. It’s just that again, it’s a rule of thumb. If you have done this, you should feel very confident about it. If you haven’t done that just yet, I’ve got some slides coming up to show you that it is still possible to be able to do that. And the last rule of thumb that I have here is save enough to generate a 4% withdrawal withdrawal rate. So, if you want to have an additional $25,50 or $100,000 uh in uh in uh to be able to withdraw over the next 20 years, if you get a 1.5% return, you’ll need about a half a million in order to uh have in there to take out that 4% over the 20 years. If you want $25,000 extra, if you want $50,000 extra, you got to have a million and $100,000, you need two almost $2.2 million. Now, that is with a 1.5% return. Obviously, if you’re getting a higher return, the amount’s going to be get going to be less. And a shameless plug for Allian Credit Union, our savings account currently is 3.01. So if you’re getting a better return than 1 and a2 and let’s say it’s even up to 5%. Now 5% also is not being aggressive at all. It still is very being very conservative but you can see that the amount that you need then is much greater than if you’re only getting one and a half% return. So, if you need to save for 20 years of withdrawals, okay, and let’s say you’re getting a 3% return, you need to have uh for $25,000, you need to have 476, 50,000 is 972 and 100,000 is $1.9 million. Now, again, that’s a 3% return. If you double that, and again, 6% return is not being aggressive at all whatsoever. You can see that the amounts that you need is is a lot less. So item uh uh uh uh uh topic number three maximize your nest egg. As I mentioned earlier, um these are the slides here that if you’re not at that uh target range, the 6 to 8% at 55 or 8 to 10 at later on or 10 to 12%. This is how you can do it. So, let’s take a hypothetical uh situation here. We have a husband and wife. They’re both 50 years old. Let’s say the wife is a retired school teacher and now she volunteers her time at a historical society and the husband, let’s just say he’s an engineer and he earns $150,000 a year. Now, uh they have uh he has the ability to contribute to his 401k through work. there’s maximum amounts that you can contribute to a 401k and in in his 401k the maximum that anybody contribute is $24,500 now because he is 50 well let’s say his employer matches 3% as well so they’re matching $4500 now because he is 50 and and again 50 and older he can do additional money into his 401k it’s the catchup that I had kind of alluded to earlier. He can add an additional $8,000 because he’s 50 into his 401k. Now, he can also maximize contributions into a traditional or into a Roth IRA. Okay? So, the maximum contribution that anybody can do this year is $7,500. And as long as he he’s 50, so 50 and older, you can do an additional $1,100. So he does a total of $8,600 into his IRA account. Now, his wife can do an IRA account as well based upon his income. Even though she’s not working and she’s volunteering her time, they can still do it based upon his income. And because she’s 50 years old, she can do the additional catchup. So, they each can contribute $8,600 into IRA accounts above and beyond his contributions into his employer 401k. If you add all these up together, it comes out to be $54,200. So, let’s say they don’t do all of it and they just do it up to $51,000 even. So, they’ve got 15 more years until he’s planning on retiring. So, again, he’s 50. He wants to retire at 65. $51,000 per year times 15 years and let’s say he does a balanced investment. Uh this is actually even kind of a conservative investment. Say at 6% return over those 15 years those contributions and the returns would add up to $1.2 million. So again with a hypothetical 6% return. So again, it’s not too late to start. It’s better late than never. So even if you don’t have that 6 to 8, 8 to 10, 10 to 12% whatever um multiply of your salary, then don’t hesitate to start. Do it as soon as you possibly can. Now, you definitely want to get a portfolio checkup. That’s number four of our seven lists here. So, the average worker over their lifetime has 12 different jobs. I get my my oldest son has probably got half of those already. He’s been with his current company for quite a while now, which is really good. Okay. 63% of Americans have access to some sort of a defined contribution retirement plan, 401k or anything like that. If you start a new job, my sister-in-law is going to be starting a new job next week. 69% of employers now have an automatic enrollment. You have to opt out of it if you don’t want to contribute to it. So, this is kind of new kind of kind of nice to have uh those automatic enrollments. It kind of forces you to do it and you have to consciously not do it. Um which is I think is a you know, it’s a good thing that they automatically do it. Now, let’s look at perception versus reality. Okay? So, let’s say that you’re getting up there in age like myself. I’m 58 years old. And let’s say that I want to be kind of a balanced investor. 60% stocks, 40% bonds, not being very aggressive. So again, if I’ve had multiple jobs over my lifetime, and let’s just only put three here, not the 12, uh, that most people have on average, then my current investment could be 6040. But my previous two jobs may, you know, as I was younger, they were probably more aggressive. So, if I take all three of these and combine them all together, overall, I may be more aggressive than what I initially thought I would be or what where I should be at this point in time, let’s say. So, I might be 90% stocks, 40% bonds. So, you want to take a look at all of the different retirement plans you have out there and just kind of see where you fill in all with all of them combined together. So, let’s say what if you’re invested too heavily in the stock market. Let’s say you’ve got $900,000 and you want to retire in three years and you’re 100% invested in the stock market and let’s say you do an 8% return based on that. Well, in 3 years, if you’ve got $900,000 and you get an 8% return, you’ll have $1.1 million in three years to uh to retire. Now, let’s say that happens right before the tech bubble burst. And we know the stock market, the S&P 500 was was negative three years in a row, your $900,000 would have dropped down to $584. Okay? But if you had taken a look at it before that, and let’s say that you reallocated it before the tech bubble burst and you were at 50/50 stocks to bonds, your 900,000 wouldn’t have hardly fallen at all. Okay? But 3 years later, it still would have been negative. It wouldn’t have taken very long from the 50/50 to bounce back up. It would have taken 12 months and you would have been at over over your million dollars that you had initially wanted. If you had stayed uh 100% stocks, it took you almost four years to get back up or get up to that million dollars that you originally wanted. Now let’s say that you panic. You got three years towards retirement and we have 08 happened the great recession. So even if you were 50/50 stocks and bonds, your 900,000 would have dropped down to 700,000 if you’d have panicked at that time. Because unfortunately that’s what a lot a lot of people do. They see their stuff go down and they panic and they say they invest emotionally. They say, “Well, I can’t I I I I can’t take it. I don’t want to do this and they take all their money and they move it over into T bills.” Even after the first year and they kept it in T bills for the next two years, they would have had $713,000

if they didn’t panic. If they had left it alone 3 years afterwards, even after the start of the Great Recession, you would have been up to your million-doll mark. So realize in in retirement, get a good game plan going and let it go. By far the majority of the time the stock market is up. It’s up 75% of the time. If you look at the history of the S&P 500, it’s positive 75% of the time. negative 25% of the time. The majority of the time with the stock market is up, the S&P is up, it’s up over 18% per year. The majority of the negative the times that the stock market is negative, it’s it’s down less than 12%. So, get a good game plan and stick with it. If you had panicked, moved in into T bills, never got out of T bills, you’d barely be up to the million-doll mark at this point in time. Now, you always want to take a look at your accounts. You want to update your beneficiaries. I’ll give you an example of this. My uh my mom, as I mentioned earlier, passed away in 2016. Uh at at the uh at the end of 2017, my dad got remarried to a wonderful lady. So when and then he got sick. He passed away in 2024. And prior to him passing away, um he had a trust. Me and my brother were co-rustees on that account. We were taking a look at a lot of his accounts. And we noticed that he had an an old IRA account out there that still had my mom listed as the primary beneficiary and only one of my brothers listed as a contingent beneficiary. Uh this was done obviously many, many, many years ago. So thank goodness prior to him uh passing away we were able to tr change that uh from the beneficiaries around and put the trust as the beneficiary. You may have young children or grandchildren. As I mentioned we got five grandkids. Um I’ve had two born in December and February February of this year December of last year. And so take a look and see whenever you have a new addition to the family. Uh whether it’s grandkids, a son or daughter-in-law, brother or sister, anyway, any any change to family members, you want to take a look and see do you want to update the beneficiaries to include that person or not. And I always recommend that you do a trust. Um a trust is just written in stone. It’s more solidified. If your assets are not in a trust, they could they will go through probate. And in probate, anybody can contest uh the the will of the or the estate. So, I highly recommend that you do a trust uh whenever possible. Uh item number five, create a social security strategy. Now, when I talk about social security, I always get it. Well, social security is going to go bankrupt. There’s not going to be anything left. But that is not true. Social Security as a is a pay as you go program. Those of us that are working now are paying into it through our paychecks and then those that are retired are taking that payment out. What could go away is prior to 192, excuse me, 2021, prior to 2021, there was more money going into the social security trust fund than what than what was coming out. After 21, the baby boomer started to retire and they should, okay, if they want to, but they they have the full right to retire. And what’s happening now is that there is more coming out of social security than what’s going in. So it’s the excess that is expected to run out in 2033. If the government doesn’t do anything then some people I mean then social security may be 22% less than what it currently is. Now, I’ll be honest with you. I cannot imagine that whatever parties in charge would ever allow that to happen. I’d think there would be a lot more riots going on than we’ve ever seen before. Um, but in true government fashion, nobody’s doing anything about it right now. They’re all just kicking it down the road. Now, the possibility of what can happen to save that so that people still get a full amount of their social security that they’re currently currently getting now plus all the cola raises and increases and everything is a potential solution is that they could raise payroll taxes up to 3.65%. Nobody ever wants to talk about raising taxes, but I just can’t see any other way of of solidifying social security for for everybody anyway. But social security will always be around. It’s not going to go under. It’s not going to go bankrupt. It’s the surplus that’s going uh that’s going down. So, I’m sure there will be something that will happen. uh we just don’t know what it’s going to be yet because we’re nowhere close to 2033 and so the government’s not going to do anything until the very last moment in my opinion. As I mentioned earlier, there’s a full retirement age. So again, if you were born at 1960 or after, your full retirement age is at 67 years old. If you were born prior at 1956 or prior, your full retirement age is at 67. And then you’ve got excuse me 65 your full retirement age is 65 and then you’ve got 66 and so many months this is your full retirement ages. Now I often get the question also what is the maximum amount that anybody can receive in social security. So if you paid into social security, you worked hard your whole life and you paid the maximum amount, these are the amounts, the maximum amounts that you can get uh from social security. If you had an average income, worked an average job, got an average income, this is the averages that you would get then. So at 67, my full retirement age, my average would be $2,600. Okay, take a look at, you know, think of yourself. Do you think you’ve earned more or less than the average? And this is what it is. I mean, you can look on the social security website, the social security.gov website, and you can know exactly what dollar amount that you will be getting. Now, if you had a a less than or the lower amount of income that you had, Social Security is going to replace a higher percentage of that income. So, let’s say you had an average income of $50,000 a year when you retired and were on Social Security. That would cover about half of what your income was going to be, about $25,000 of that. If you earned $200,000 a year and you contributed to the social security, that would only cover about 25% of your pre-retirement income. So again, think of that 70 to 90 rule and figure out, okay, where’s the rest of your money going to come from? And that’s what this uh next subject is. Build a retirement income stream. So, if we have an average money market savings account paying.22% and you have a half a million dollars in there, you’re going to earn a whopping $93 a month. Okay? Now, if you’re a little bit more aggressive and you do a CD, even though they’re not aggressive at all, that’s going to give you about an extra $214 a month. Again, if you do it into some bonds and just get a little bit better of return. Again, bonds are not risky. They can go up and they can go down in value as well, but they’re not risky at all uh compared to the stock market. You know, if you are into the high yield bonds and are getting a 6 12% return, then you could get a substantial monthly amount, $2,700. Okay. So, if we take a look at systematic withdrawals from your retirement account. So, let’s say you’ve got a a stock price, an individual stock that’s paying you, excuse me, that costs $5 and you have a 100,000 shares on that. And let’s say that you want to withdraw $1,500 a month from that uh from that stock. Okay? If the stock price goes up from $5 up to $6, you have to sell fewer shares. If that price goes down from $5 down to $4, you have to sell more shares to cover that same $1,500 a month. Okay? So, think of it that way. If you know, obviously we all want the stock market to grow, but it doesn’t grow all the time. 75% of the time it does, 25% of the time it’s down. Now if we can take that uh retirement savings and turn it into an income stream if we have some income producing products okay and we do distributions from original savings or income may fluctuate from the income producing products. So for example you have stocks or ETFs that are paying out dividends. Dividends are different so your income would fluctuate. You may get a little bit more one month, you may get a little bit less, but there’ll be no distributions of the original amount. And we’re talking on the amount of shares that you own. The share price can always fluctuate, but the number of shares would remain the same versus if you set it up for a systematic withdrawal plan, you want the $1,500 a month. Again, that’s going to fluctuate and it could uh dip into the original share the number of shares that you had. Okay, so couple of different things to look at. Do you want a incomeroucing product uh product or a systematic withdrawal? Item number seven here, look beyond the money. So many years ago they did a a happiness curve. Um and they they they asked people at different ages, how happy are you? Well, from 45 to 55 is when people are at least happy. I don’t want to say that they’re miserable at all because you can still be happy, but they’re the least happy. You know, they’re getting closer towards retirement. They’re maybe stressed out that maybe they haven’t saved enough. They’ve got kids that are thinking about going off to college then and you’ve got the expense of college. You’ve got aging parents maybe that you’ve got to take into consideration. That’s why I moved out where I’m at is my parents were getting older and between me and all my brothers, I’m the only one, excuse me, I’m the only one that could live near them because I can work out of my house and um uh so I was able to move closer to my parents and help help them out. Here’s the great thing about this though is at 55 happiness starts to improve for many people. And the reason for happiness can improve is if you’ve got some good health. As I mentioned earlier, my wife’s got pretty poor health, but I’ll be honest with you, she’s a pretty positive person, which is good, but it would be much more amazing if she was healthier. Um, but she still does the very best that she possibly can. You have friendships. I’ve got lifelong friends, 58 years worth of friends. Well, maybe not quite 58 years, but I got friends that I’ve had for decades and they are a big support to us uh and everything. And then we got families. I mentioned I’m a grandfather. I’ve got five grandkids. I love hanging out with my grandkids. I actually had my two oldest grandsons. uh they spent the night uh Friday night a couple weeks ago when we roasted hot dogs in the backyard and did s’mores and and uh anyway they’re they’re looking forward to doing that again. So made me happy to hang out with my grandkids and my children as well. I’ve got three kids. Now the island of Okinawa is notoriously known for being having a very long life and they have something that they refer to there is called icky guy. Basically icky guy translates into something to live for. So we all need to find out what our icky guy is. Find out what you love to do and in retirement hopefully you can do that or find out what you’re good at and contribute back. Find out what the world’s needs and create it or build it or do something for that and then find out what you can be paid for of the things that you enjoy doing. Uh my uncle that just passed away, he loved to do woodworking and there was a a little shop in his community where they built little toy little toy cars kind of like uh Pinewood Derby cars but on a much smaller scale. Um, and he volunteered a lot of his time, uh, just cutting it out and sanding it and doing stuff. And that’s just what he did in retirement to just kind of stay busy. But find out what your icky guy is and what it it does. I’ve got a buddy of mine from Australia and he is he’s said in the past where he has either had all the time in the world uh but no money to go back and visit family and friends in Australia, that’s when he’s been unemployed. Or he’s got all the money in the world but no time to do that. That’s when he’s been employed. And so hopefully in retirement, you have prepared well enough that you’ll have all the time in the world because you won’t be working anymore and you’ll have all the money to be able to do it uh based on your retirement savings to be able to go and travel and and basically do the things that you enjoy and the things that you love to do. So to create your own retirement living plan, you know, things in retirement and just because you’re retired doesn’t mean uh that life is going to end. Contribute to a cause. Find a good cause. Like my uncle, he found a good cause that he could he can contribute to and and and feel good about what he was doing. Visit family and friends. As I mentioned, I’ve got family all over the country and brothers all over the place and a brother-in-law in in Ireland and stuff. pursue different hobbies. Again, you’re going to have the time to be able to do things and so do a hobby. Uh do some traveling. So many people want to travel when they’re retired. Start a business if you want to or go back to school. Here’s a few examples of people that didn’t let retirement stop them. Peter Roier, he invented the the thesaurus when he was 73 years old. Didn’t let retirement stop him. Colonel Sanders started her first KFC at age 65. Madonna Bter, she’s known as the the uh iron nun. She was a nun and she started doing her uh her marathons at 40 and completed one at uh at 82. I don’t think I could do a marathon or excuse me, triathlon, sorry, triathlon. Much harder than a marathon. I don’t think I could do one now. Uh even a marathon. Uh, Grandma Mosa started painting at 76 and Yichiro Murai he he set the world record by climbing Mount Everest at age 70 and then he crushed it when he was 80 years old. So these are people that didn’t let retirement stop them and they continue to thrive and do and do very well. There’s an unknown author that came up with this and said, “Retirement is wonderful if you have two essentials, much to live on and much to live for.” So hopefully you’ve been able to save enough money that you’ll be able to um be able to do the things that you want to live and be able to enjoy the people that you want to live it with. So, just to kind of recap, here’s the seven things that you need to do in the decade before retirement. You need to make sure that you have each one of these. Um, at least you’re taking a look at each one of these. Uh, you may not have them all exactly where you want to, but at least start with a plan and move forward from this part from this point going forward. I highly recommend that everybody works with a financial professional. We have so many different products that people just are not aware of. Things that people say, “Oh, I wish I’d have known about that earlier.” Uh work with a financial professional and and um and and get a plan going. You want a plan going into retirement because if you don’t have a plan, all you have then is a wish. And you don’t want to go into retirement with a wish. There’s a there’s a commercial on TV where this guy’s hoping hoping for retirement. I can’t remember. It’s one of the uh insurance companies credential maybe. Anyway, I can’t remember but he’s he’s hoping. You don’t want to go into retirement with a hope or a wish. So, one of the things that we can do here to help you out which is complimentary is a report that we can run here. And this report is called wealth vision. That’s what the name of the report is. It covers so many different things and I’ll just go over some of the the slides here that it can cover. Again, this is complimentary. I recommend that everybody um uh has it done based on your situation. And so we put in a bunch of different information from you. And so we’ve got Bob and Mary here. And this report re uh printed this out. So this is their income and expenses. The red line there is their expenses. The dark blue is their social security. That light blue is the a pension plan and then the orange is the RMDs. So they’ve got enough from their social security to cover their monthly expenses. Their pension is paying it putting them well over the top and then their RMDs kick in and they got way way too much money uh than what they need to. And the reason why the red line jumped up uh into the orange there is because when you have to start taking the money out of your traditional IRA for your RMDs, your income tax is going to increase and that’s going to increase your your expenses there then. And the one thing that we can do is is uh with this plan here is see how much in total taxes that you’re going to pay over your lifetime and then what will your portfolio be at the end of your life to be able to pass on to loved ones. Now, one of the things that we do quite often in this, at least I do a lot, is is run a Roth conversion scenario for you. Does it make sense for you to do a Roth conversion? And in this situation here, it’s a Roth conversion for a set $60,000 for 5 years to see what does that do. And the big thing to look at this is in that uh that red is an increase in taxes because when you do a Roth conversion, you got to claim it as income and pay taxes on it. So it increases their taxes for those uh years that they were doing it. But what it benefited uh Bob and Mary here is it decreased their overall taxes for their life by $140,000. But it then it also increased the amount to pass on to beneficiaries by over $800,000 just by doing a simple Roth conversion in the beginning. Another example here is Dave and Sarah. Uh and again, they’ve got different income. In this particular situation here, Dave and Sarah’s uh expenses are exceeding their income. That’s what the yellow is, is they have to start doing withdrawals. And if they were able to do a well, here’s here’s their assets value growing over over their lifetime. And if they were able to do a Roth conversion in this particular situation, this is usually what I run instead of a set dollar amount is at what tax bracket then is the optimal uh benefit for you to do a Roth conversion. And just for example here, if they fill it up to the 22% tax bracket, you could see here that they do it for five years and then they’re all done with their Roth conversions. This scenario here for Dave and Sarah would save them $116,000 over their lifetime in withdrawals, uh, excuse me, over their lifetime in in paying taxes, and it would increase their portfolio by $250,000. Okay. Now, if you look towards the very end, the the fourth column from the right, that’s when one of them passed away. I’m assuming it would be Dave. This doesn’t tell us here on this which one it is, but Dave, let’s say it’s Dave that passes away. And if they’re basically about the same age, then Sarah can assume Dave’s traditional IRA into her name. She’ll still have her RMDs that she’ll have to take out if if they have any RMDs left over. But the problem is, and most people are not uh aware of this, and we call it the widow or widowers tax. So when they’re both alive, they’re filing as joint uh as a joint uh file, a joint as married, filing jointly. Unfortunately, when one person passes away, even if your income remains the exact same, it may bump you up into a higher tax bracket because now you will have to file as a single person. So, that’s something that we can take a look at and this report will run for us. So, if we can reduce taxes over your lifetime, I am all about paying your fair share. be legal about it because um in jail it doesn’t matter how much time or money that you might have. If you’re in jail, you’re not going anywhere or doing the things that you want to do. Um but there’s no reason to give the government extra money if you can legally avoid it um by doing Roth conversions up front. And that’s something that I never know how this is going to end up until after I run these reports. So that’s basically it. Um, now let me um, as some people I don’t know if I mentioned this earlier and I apologize. If you have any questions, there’s a Q&A or a chat feature. Go ahead and type your questions in there and I’ll get to all these questions and everything. But why Arys? What’s so special about us? You know, the Alliant Retirement Investment Services. Well, first of all, we are a full-fledged financial uh, firm. We have access to so many different products that are out there. We have many many of our accounts are are no fee accounts or if there’s a basically my philosophy is one thing that we don’t do here. We don’t charge you a set fee on everything you have with us. It’s all based upon the different account that you have and there’s many accounts that don’t have any fees. So my philosophy is is that I look for the one that that costs the least but makes sense for you so that if there’s less cost then that’s more money in your pocket. Obviously if the account does have a fee on it then we have to pass it on to you. Um but um and I go over all those all those uh fees and and costs and everything uh in in advance. We have different products that give you a guaranteed income stream for the rest of your life. If you’re married, it would be for both of you. We have different type of strategies. I have some really cool products that when I do share with people, they’re like, “Wow, I’ve never heard of that before. That sounds cool.” Um, but anyway, just things that you can’t do on your own. And unfortunately, that’s why many people have not heard of those. So, how can we help you with that? Number one, we can help you by running that that wealth vision report for you. That would be the first step. I highly recommend that everybody get that ran from them. And and then as I mentioned, we have different uh investment strategies. We have estate planning here and we can tailor a plan specifically for what you’re looking to do. So basically what we want to do here at ARIS, we want to get to know you and design a plan specifically for your situation. Then we use a team approach to make sure that we’re looking at all the different things, all the different types of products we have out there uh for you and and tailor something for what you’re looking for. And then we want to build a lasting relationship for the rest of your life. The cool thing with Alliant is if you’re a member and you’re one of my clients or any of the other financial consultants here, you have our direct phone numbers. You call us directly. It’s not a toll-free number and hoping that the person you picked up has more than a couple of weeks worth of experience and you get the right information. As I mentioned, I’ve been with the line almost 14 years here. I’m too old to start anywhere else. I plan on retiring here. So, I’d be with Alliance for over 20 years. Uh, I love the credit union. I love working for the credit union here. So, I plan on being here for as long as I possibly can. Here is my direct contact information. If you have any questions, you can call me directly. My phone number here is 773 4628612.

Uh, that’s for people that may are may be on the phone and aren’t seeing this or that’s my direct email there, bbaker.lplantcreditun.com.

So, let me get into the questions that people had here. And before I do that, let me launch this. If you would like to have especially that wealth vision report if you’d like to or just talk to me one on- one, I will be glad to uh to talk to you. Answer yes to this and I will reach out to you. I’ll try to do it as soon as I possibly can, but like I said, I got the funeral on Friday that popped up. Uh I may not be able to reach out until uh next week, but I will try and reach out as soon as I can to you. I will call you first and if I get my I get your voicemail, I’ll leave a message with my phone number, but then I will also shoot you an email and in that email, you’ll have access to my calendar and you can schedule a Zoom uh meeting so we’re not playing phone tag back and forth. So, let me get to some of these questions here. Uh first one here, my grandfather from my mother’s side and my grandmother from my father’s side both died on Christmas Day, 10 years apart. Wow, that is uh yeah, Christmas Day is probably not the the best holiday then. That’s uh that’s interesting. It’s interesting piece of information there. Uh number one, if you pay another question here, I should say if you pay off the mortgage, there will be no write off for taxes. Yeah, that is true. Uh will this be beneficial? Uh could we write off any repairs, home insurance, taxes of HOA fees? Um, I’ll be honest with you. I am not a CPA. Um, but I do know that if you ride it, if you pay off your mortgage, you won’t have those deductions. I I agree with that. Um, but can you write off any repair for home insurance and taxes and HOA fees? That’s a good question. That would be a question for a CPA, an accountant. Um, I know the basics of taxes, but more towards investments, not uh considering real estate. So, I apologize. I do not know that answer there for you. Uh, I got three C’s in well, well, I got three C’s in college. Two were accounting. Um, but I know accounting is different than actually doing taxes. And my last C was my last semester. I was just done. The rest were A’s and B’s but I was just done at this point in time. Uh number uh another question here. Can I do a Roth conversion even in retirement? Uh yes you can because there’s a difference between a conversion a Roth conversion and a contribution. So with the contributions that’s your limit uh $7,500 or $8600 if you’re 50 or older. Those are contributions. That’s new money going into retirement accounts. Um, a conversion is already in a retirement account, a traditional IRA retirement account, just moving that over into a Roth. You’re not adding anything more to your retirement. You’re just moving it from one account to the other. So there’s no income limits on a conversion and there is no contribution limits on a conversion either. You can do whatever you want in a conversion. Uh either a little bit every year or anyway. Yeah. So you can do any you can do a Roth conversion in retirement. Yes, you can. Um another question here. What are your thoughts uh thoughts on fixed annuities? Great question. I love them. But let me explain it to maybe some other people here. There’s when I say annuities, there’s all different types of annuities. There’s variable annuities, index annuities, equity annuities, fixed annuities. Some are horrific. I absolutely am not a fan of variable variable annuities. If you’ve heard anything negative about a v about an annuity, it’s typically talking about a variable or an equity annuity. I don’t disagree with the negativity. I don’t like them. I have them. I’ve not offered one and I can tell can’t can’t tell you that when the last one is. But a fixed annuity is a fixed interest rate for a fixed period of time. Basically like a CD. The difference is CDs through a line credit union or we call them certificates but CDs certificates of deposit. They are federally insured through NCUA. Uh at a bank, they’re FDIC insured. Same insurance, same federal insurance. It’s just credit unions are non-public uh excuse me, nonprofit organizations. Banks are for aprofit. Same thing. Uh annuities are all insured through your local state. Every state has a life and health guarantee association. Uh the amount of insurance on on any annuity I have not seen anything under $250,000 same as FDIC or NCUA. I’ve seen even some states even go up to $500,000 on annuities. The insurance, excuse me. So fixed annuities are a fixed interest rate for a fixed period of time. Right now, I want to say I’ve got a fixed annuity for 3 years, and that’s the least amount of time you got to commit to it. I want to say I’ve got one for about 5.75%. Uh I looked it up earlier this week, which is quite a bit higher than even the Alliant uh certificates. Um so I think fixed annuities are great. Also, if you are if you’re using non-retirement money, so not an IRA, traditional or Roth, annuities grow tax deferred, you will pay taxes on the interest, but only when you take it out of the annuity. So, versus a CD, you’re paying taxes every single year on the interest that you earn in the CD. So, if you put the same amount of money in a a CD and the same amount of money in an annuity and got the exact same amount of return, the annuity would be higher after the 3 years because you’re not taking money out to pay taxes on that. So, I think fixed annuities are a a great alternative to a CD. And um if you’re wanting something with little to no risk like a CD, that is all the questions that I have here. Uh and we’re at the top of the hour. We’re actually a little bit beyond the hour and I try to cut cut it off in an hour, but I get talk about investments and that’s it. So, I am grateful for everybody. uh spending some time with me today. Hopefully, it was helpful for you. Uh and again, for those that answered yes to the questionnaire, I’ll try and reach out tomorrow, but I can’t guarantee I will. If not, it’ll be early next week. And um and then we’ll touch bases and and we’ll get going. The rest of you, I hope everybody has a great weekend. Uh it’s getting fall weather out, nice and cool outside, so I hope everybody can get out inside and enjoy it before it gets too cold for everybody. Have a wonderful evening and take care everybody.

how to create a good life in retirement. So, we’re going to be talking about some retirement income ideas for you today. Just want to do a little bit of a housekeeping first. Um, you saw uh most of you the chat feature. So, as I go through the presentation today, any of the slides that uh you might have questions on, just let me know. As I’m talking, you could just go ahead and put any questions in the chat feature or the Q&A feature of the uh Zoom meeting. And again, if anything happens, any technical difficulties, go ahead and put it in there as well. I’ll kind of monitor monitor that through the presentation, get that adjusted for you. But yeah, feel free to uh just kind of throw your questions in there as I’m talking. Uh credit union asks me to let you know that uh one of the questions that come up uh do we record these meetings? Um we do not record them. We just kind of do them on a onetoone basis here. So we don’t record and we ask that you do the same. Please do not record, reproduce, distribute any part of this presentation either through uh audio, video, screen capture, or any of those AI based tools. So, thank you for that. Um, just a little more housekeeping. I do an every other week uh webinar series for the credit union here. Today, we’re talking about life after work. In a couple weeks, October 14th, I’m going to be talking about a uh presentation I created and entitled the good, the bad, and the ugly of annuities. Uh what are they and who would want one? So, inevitably, someone has owned an annuity, been presented an annuity, and this is really kind of clearing up the myths, myths and misconceptions around the annuity category. So, if you uh have any questions on that specific topic, please join me on the 14th. I do my presentations at 12 central time on uh every other Wednesday. And then on October 28th, we’re getting into tax season here towards the end of the year. So, we’re going to talk about some uh tax planning changes. I’m going to call it the four stages of retirement. But uh again kind of like today’s topic uh income in retirement taxation and timing of taxation order is going to be different in retirement. What sources do you pull it from? What’s the best tax efficient way to invest your funds to withdraw your funds? Some uh search charges and penalties that you need to be aware of as well. And some new tax law uh legislation that’s been recently updated. So, we’ll be talking about taxes in the fourth quarter here to get you ready for tax filing time. Uh here’s a complete list of all the webinars. We do uh an entire webinar series. Uh I’m also the co-host of the podcast here at the credit union. Uh and there’s also a financial blog on our website. I always say I don’t expect you to memorize this link or write this whole link down, but you could tell it’s the credit union website. So, our department erys alliance retirement and investment services.allantcreditun.comvents

backl back slmpodcast for the podcast or blog. Easier way to do it is if you go to the credit union website, click on the investment tab on the homepage. It’s going to take you to uh our website here for investment services. At the top of the page, you’ll see webinar button, complete list of all the upcoming webinars, podcast series, and blog there as well. So, uh just want to introduce uh our financial planning capabilities into this conversation. So, as we go through today’s uh material, I’m going to be referring back to some slides from financial planning outputs. This is just one to uh get us going here a little bit. This is a uh cash flow overview and love the title of this slide. Right? A goal without a plan is just a wish. So we want to put together a financial plan. We don’t want to put together a financial wish. But this is our department in the credit union. I feel that we are the best kept secret here at the credit union. So we’re a full services investment arm of the credit union. We’re a fiduciary firm and we offer members of the credit union really a no cost, no obligation service to build these financial plans, do an overall check-in for you on your finances. And really by going through this process, we sit down together, we’ll have a meeting, we can have an initial meeting to see if this is the the right route to work on a financial plan together, but in a planning meeting, we’ll have a discussion, gather some basic information for from you to build this plan. And by doing this, what it does, it gives you a clear picture of where you are today and where you want to go into the future. Helps you make sure your investments, retirement accounts, taxes, insurance, estate planning, it all works together. And we look for potential gaps or opportunities in your overall financial plan to help determine are you on track to reach your goals? Are you on track for your retirement income is what we’ll talk about today. And then from there, we could uh talk a little bit more deeply about investments, what to do with those uh old 401k plans, and really kind of review today’s markets and make sure everything is aligned for a coordinated long-term strategy for you as well. So, that’s what we do here uh in the financial planning side. We talk about ways of uh reducing taxes, fighting inflation, generating more income from your income, from your income sources, from your account. So, this here uh will answer a lot of questions, do a lot of coordination, and answer those whatifs, right? Will I have enough? Will it last my lifetime? And really, uh we’re doing this only 36% of Americans have a written financial plan. We’re trying to change that a little bit for our memberships. Make sure if this is appropriate for you, you have access to a financial plan and a financial planner to help you with those. So, again, if that’s uh something that you’d like to explore, uh please you could put a note in the chat feature. there’s an email that comes out after the uh presentation, so you can just respond back to the email if you’d like to talk a little bit more about our capabilities or financial planning here. So, uh again, we’re going to talk uh today we’re getting back on topic, right? We’re going to talk about uh life after retirement, creating a uh good life in retirement, but really the agenda is these bullet points here. How does your retire uh retirement plan currently measure up? uh imagining your life in retirement, looking at all potential sources of income, determining a withdrawal strategy. We’ll talk a little bit about taxes, and then how to get started on creating your specific comprehensive financial plan. Again, if you do have any questions, please just go ahead and use that chat feature, and we’ll make sure we get to them at the end of the presentation. But, uh, we’re going to look at retirement income, right? So, a retirement income plan. The first bullet point here, how much income will you need in retirement? That’s a big question. I really think that boils down to your expenses and how much you spend in retirement. We’ll have some questions that pop up. Do I have enough? Do I need a million dollars? Do I need a $2 million in my retirement plan? But everyone’s going to be a little bit different. And I think that’s really driven by your expenses. How much will you spend? And to cover those expenses, where will that income come from? As you can see here, all these different accounts are pieces of a puzzle. So, we have social security that we’ll talk about today. We have your specific investment accounts, 401k accounts, if you’re lucky enough to have it, a pension plan to provide some of that income, Roth IAS, but basically you have to look at all these income sources and you have to look at those expenses and you have to make sure that these assets or this income plan that we put together has the ability to provide income over a 30-year retirement. We’ll talk about life expectancy here in a little bit, but we just want to make sure that these assets or this income stream is able to last an extended period for you. This is a recent study, a little bit older, but uh this is a study. It’s a retirement confidence study. I find this interesting because it pulled two different sources, right? Pre-retirees in dark blue, so workers and retirees. and it was looking at potential retirement income sources. So those who are working, where do they think their income is going to come from? Those who are retired, where is the income actually coming from? So when you look at this, I think a few things kind of jump out at me. Uh the first one is social security, right? of those who are working. If you look at your social security estimated benefits, if you do some calculations, if you put it together in a financial plan, but if you’re working, you might think this could be a major source of income from for me. Don’t know that’s going to cover all expenses, but workers have social security listed as 88% uh as a major source of income. When in actual retirement, retirees are calling social security a larger source of their income all the way up to 94% is a major source of income for retirees on social security. Now, that goes to the next one as well. Next one is a workplace retirement savings plan. So, let’s call it a 401k plan. So, as you’re working and as you’re saving and you see those balances get bigger and bigger, you think to yourself, “This is being substantial. this is going to provide me a lot of income in retirement to the tune of 84% of workers responded that their 401k is going to be a major source of income when in actuality in retirement most retirees are saying that’s about 49%. Really not relying too much on the 401k most of the heavy lifting is being done maybe from social security maybe from a pension. So, that kind of begs the question, which we’ll talk about a little bit more, but what to do with those retirement plan savings, those 401ks, as they keep growing and growing over time if you’re not distributing from it if it’s not a major source of your income. Do we look at estate or legacy planning? Do we look at tax planning with those dollars? So, that’s another one that kind of jumped out. And then if I go all the way down, fifth one, work for pay. We have these conversations quite a bit as we’re going through a financial plan. Maybe the idea is I’m going to switch careers, maybe end this career, do something for fun, maybe some part-time work that uh will pay the bills in retirement. Maybe if I’m under age 65, that work will also cover some medical expenses, some health care plans until I reach 65 for Medicare. So workers, 73% said, “I may have a job, whether it be full-time or part-time or consulting in retirement, and that may be a major source of income for me in my retirement years.” When in actuality, maybe it’s conceptual. Maybe most people don’t act on this and actually continue working. when they stop working and they enjoy maybe like we’re talking about today, the good life, only 23% of retirees actually continue on and get a job in retirement and work for pay. So to me, those are the big ones here. Social Security, 401k plans, and then will I work in the future? So, uh, one of our bullet points here, right? How do we measure up? How is your retirement plan savings doing right now as compared to others? So the first one we have is 28% of American workers have no retirement savings. So if you have any retirement savings, then you’re ahead of 28% of workers in this country. So this might be a little misleading because sometimes we’ll run into situations where if you look at social security benefit estimates, if you look at a pension uh uh benefit estimate, especially for governmental workers, those uh pensions could be substantial. So maybe that person didn’t really see the need for private uh retirement plan savings. So but just to give you an idea, if you have retirement savings at all, you are going to be ahead of uh 28% of the country. Only 16% of Americans uh take advantage of the ketchup contribution in their IAS. Ketchup contribution. I’ve done presentations uh in the past on these. Hopefully you all know what the catch-up contribution is. Now, catch-up contribution is available in an IRA account. It’s available in a 401k plan account, but basically it means for those of us over 50 years old, you can add more money into your retirement plan savings, whether it’s an IRA, a 401k. So maybe at that point in life, you have more free cash flow. Maybe the kids are out of the house, maybe college expenses are paid off, maybe the mortgage is paid off. That more free cash flow can be put into retirement plans to kind of superersize the retirement plan savings towards the later years. IRA account, if you’re over age 50, you can add an extra $1,100 into the IRA for this year, 2026. So the standard amount is $7,500. If you’re over age 50, that’s going to come out to 8,600 for an IRA. Now, the 401k contributions, those are bigger than IRA. So, if you have a 401k contribution, the base amount that you can do this year is going to be $24,500. But if you’re over age 50, you can do a catch-up contribution for an additional $8,000. So, that would bring the total up to $32,500. It’s kind of a a quirky rule here. In the 401ks, ketchup contribution, if you are age 60 to 63, they give you a bigger ketchup contribution. So, that number is $11,250 for the ketchup. So, that would take you to a total of 35,000 in the 401k if you are ages 60, 61, 62, or 63. So, make sure you understand and you take advantage of those catch-up contributions while you can. There was a new rule change to the ketchup contribution. If you make income over a certain level, the ketchup has to go into a Roth portion of the 401k. Another point here, right? Are you on track? Only 41% of Americans age 60 and older think their retirement savings are on track. And then finally, going back to my financial planning statistic, right? Only 36% of American households have $250,000 or more in retirement savings. Goes back to our financial planning bullet point, right? Only I think the number was 36% of Americans have a financial plan in place. So, I think it helps understand, do I need more than 250,000? Do I have a confidence in my plan going forward as well? If you could see it kind of all put together. So that’s kind of uh just stacking it all together, looking at statistically to give you a feel of how your plan or how your assets might fit into the other uh averages across the country. So now we’re going to talk a little bit about life in retirement, right? Where will you live? How much home do you need? What will you do? How long will you live? I know I mentioned we need assets to last 30 years in retirement. So we’ll define that a little bit more. what surprises may come up in the future uh additional expenses and how much income will you need to cover all this. So when we look at it, the first bullet point, where will you live? It’s a personal question. Um most of the survey respondents here, right? Where do I choose to live? Most important factors are nearby family and friends, affordability of the housing, uh maybe access to health care and hospitals, climate, good weather. It’s not the top one. Usually that comes up in conversation, but that would be number four on the list. Crime rate, leisure, recreation activities, but it really kind of boils down to nearby family and friends, and affordable housing. So, what’s interesting, I started the presentation talking a bit about financial planning. So, this is always one of the questions that comes up, right? Where will you live? Will you maintain the same household? Are you going to downsize? Maybe in this conversation, it might even be a second home or a vacation property or something like that. But in those financial plans, we have the ability to model sever several different scenarios. Number one would be maybe do nothing, keep the same house, keep the same expenses, watch the mortgage pay off over time and see how that affects the financial plan. We can also do a side-by-side comparison on housing saying, “Okay, in this year after another three or four, I’m probably going to sell this house. I am probably going to move to this state and we may downsize.” So, we could run some of those assumptions and say, “Well, if you downsize, here’s what it would look like to have the mortgage paid off. Here’s what your lower expenses would look like. Here’s how it it would affect your overall financial plan.” So even on housing in those financial plans, we could run sideby-side comparisons, whether it’s kind of reducing downsizing the house or increasing the size of the house with the second home or so. We could show you the factors involved in that and what that would look like for the next 10 to 20 years in a financial plan. What will you do? What will you do in retirement? So right hand side, right? Some things that this is kind of what we talked about before. Uh this is a survey. Uh this is light purple retirement dreams, right? Most people say I want to travel. I want to do certain things. So 60% said travel is important as they’re nearing retirement. Actually spending time in retirement. 36%. Again, these are all completely personal choices. Everybody’s going to be a little bit different as to what you want to do. But I think more importantly in this conversation is the left hand side. The left hand side. This is the way I look at this, right? We are either looking at income generating activities or we are looking at expense generated activities. Income generated activities, right? Making income. Maybe I want to work for fun. Maybe there’s something I want to do that uh is not full-time, but it’ll provide me a bit of a paycheck. It’ll keep me busy. It’ll maybe pay some of those health care plans until I’m 65. Maybe I’ve done some work already. I’ve started a business. This business is fun and this business is profitable for me. Keeps me busy, but it is not a drain on my expenses. It’s actually adding to the story. So, income generating activities, expense generating activities, right over on the right hand side, a lot of people dream of retirement, uh I’m sorry, of traveling in retirement. So travel, we budget a certain amount in a financial plan for travel expenses, but that is going to be an expense generating activity that’s going to increase with inflation over time as well. Hobbies, right? I love to golf. Golf expenses, tea fe ges are expensive. So we could model certain discretionary spending to match what those activities might look like for you. And then finally, uh, owning a business, a startup, it may be capital intensive. It may cost you money to get that going. It may be a bit detrimental to your income plan. All things that we could model together, but it’s important to understand is what I’m doing. Income generating, helping out the overall plan, or expense generating. Next one we’re looking at is how long will you live? And we could run through all the statistics on the right hand side. If you reach a certain age, life expectancy factors will take you to a certain age, right? But a lot of times when we have these conversations, it’s important to a financial plan because at some point we don’t want the accounts or the income plan to run out of money. So usually what we’ll do is kind of default a plan to age 95. know a lot of times that’s easier said than done for age 95. So I’ll have a conversation with my clients. We’ll talk about some family history. Within that family history, I’ll receive stories of relatives who are octogenarians or centiggenarians and there’s a lot of longevity in the family. So we need to plan accordingly. Again, back to what I said before on that 30-year income plan. We just don’t want to leave you destitute at any certain time. And then the flip side, these are completely customizable plans. So based on family history, we could use whatever time frame or whatever is appropriate. So we could do some uh guesstimating here. There’s also a website living00.com. It’ll walk you through a questionnaire and ask you a a bunch of lifestyle questions and come up with some of the calculations. But uh again, we just want to make sure that whatever plan we put together has the ability and the probability of success to reach well into your expected life expectancy. So when I put this together, right, I said there might be a couple outputs here in the presentation of our financial plans. So this one here is called lifetime portfolio value. So this one is just a hypothetical example. We ran this plan out to age 95, but this is showing portfolio values at various ages. This could be affected by market performance. I have this one set to a average market performance for this moderate investor over time, but you’re going to see the balances change year-over-year. some accumulation going on in the account. If the accounts are growing, if the uh uh there’s additions into the investments, either through required distributions going back invested in the plan, or you’re just not spending all the money. So, basically, year-over-year, we can see what the portfolio value is. Now, this one is set to portfolio value. This is not looking at home values or illlquid assets. We could say at any given time, this happens to be at age 95, this plan had $2 million left over in it. But then we could say, all right, at age 85, this is potentially what your assets will grow to. I think this is also important to know and to understand because a lot of times in conversations we will talk about possibly long-term long-term care and some long-term care planning. If we model some of those projections of if that scenario were to happen and what the average costs are, we just want to make sure that the conversation is had that there’s either assets in the plan to cover some of those types of major medical expenses or that you’ve had a conversation or discuss long-term care uh coverage in the past. So, this is a great way to do it just to see yearbyear what the projections are for longevity and your portfolio values. So next what we want to do is we want to look at all potential sources of income. Right back to the piggy bank that we looked at before, social security, pension payments if you’re eligible for a pension, possibly annuity payments, which kind of behave like that pension payment for income or lifetime income. Again, working if you’re not working, if you are working, if it’s part-time work, can it be relied on? How long do you think you might do something like that? And business interests as well. So when you look at each one of these categories, characteristics of each, what we’re looking at at the top, the key term here is guaranteed income, right? Guaranteed income for life. So social social security at the top. Two important factors. Uh social security is inflation adjusted for income. So you probably hear about this every year. and we’re just waiting in October to get the cost of living adjustment on social security. Last year declared for 2026 at 2.8%. So it goes up over time and it’s guaranteed for life. So guaranteed income. Next is the pension, right? Fixed income may or may not have that inflation adjustment or the cost of living adjustment depending on your specific plan, but it’s going to carry that guaranteed for life. Right? So, we have two guaranteed for life there. From there, we’re going to go into earnings from work questionable. How how long may this go on? How much might I get paid? So, it’s not going to have that uh kind of designation of guaranteed for life. the annuity C category. It could, right? You could use it guaranteed for life. So, that is a possibility. The income it provides you may be fixed. It may be variable. It may have a a cost of living adjustment depending on which route you may have taken on the annuity. And then really other income, right? other income, investment properties, business interest, uh withdrawals from your investment accounts, IRA, 401ks, savings, uh nonqualified means nonretirement accounts. So, if you have a brokerage account, mutual funds, a stock account, how do you coordinate the investment uh the income from those investments? But what I want to do here, I just want to point out again, the first two were guaranteed for life. pensions and social security, possibly the annuity, but the key there is guaranteed for life. So, what that’s going to help me do is determine what your income stability ratio is. How much of your monthly income is from a stable fixed source that has nothing to do with the market, with the stock market. It does not fluctuate. It is stable income. And how much of your income on a monthly basis is questionable. Maybe from that employment income, maybe from market driven investments. We come up with your personal income stability ratio. For example, you spend $2,000 a month. Your social security is $1,000 a month. Your income stability ratio there would be 50, right? 50%, the 50% ratio. So, we’d like to have conversations around that number. Understand that there could be fluctuation in that other 50%. look at ways to advance that number above 50%. Whether potentially it’s waiting longer to take social security to get a bigger payment, whether it’s uh deciding when to start the pension payment, your annuity payments, things like that. But we just want to make sure you have a good amount of stable income coming in on a monthly basis. Uh this one here, just average retirement income sources. kind of hinted at this in the past, but uh major source of income for most people is social security. So, it was never meant to be the sole source of income. It was meant to be a complement to those pensions, personal savings, uh all those different things. But most income is coming from retirement income is coming from social security with a smaller amount coming from pension plans. even smaller amount coming from 401ks and IRA. Everything else gets very small after that. Inheritance, home equity, anything like that. So, the first three are going to be the biggest categories. Social security being the biggest one. I’m sure you know I offered before if you have questions, put it in the chat feature. I’m sure there’s a lot of questions on social security. Uh so we could definitely answer those for you or have some conversations offline about your specific situation or the viability of social security going forward. But uh when you look at this, this is social security. This is just kind of uh emphasizing the cost of living adjustments 2.8% this year. This is basically saying that if your monthly benefit is $2,000 right now with the cost of living adjustment in 10 years that would come out to 2600. In 20 years it would be 3,400 a month. 30 years 4500. So it’s going to be uh continuing to grow and grow. So now I’m just going to pause here and say if you haven’t yet gone to the website below ssa.gov/s /estimator. What you want to do is just go to that website. You want to get logged in. You want to create your own password. You want to make sure the account is secure so nobody else can access your information or falsely file for any kind of benefits. Number two, you want to go in there and you want to get your benefits of statement, statement of benefits. You want to see what the projections look like when you are depending on your personal time frame, but let’s see what your benefits will be at 62, at 65, at full retirement age, maybe 67, and then if you let it grow for some time all the way to age 70, what would the difference be there as well? It’s important key if we uh run any financial analysis or put together a financial plan. So if you have some time take a look at the social security website secure it and then understand your benefits as well. And then the next question right what age will you start social security will you and your spouse start social security and how can you optimize your benefits? So if you put that all together those are some pretty big questions. Um, what I would say is if you look at it within a plan, how it coordinates with other income sources, how it coordinates with your taxes and what you’re trying to accomplish on the tax side. We could come up with a time frame that may be appropriate for you to start that benefit. Now, a lot of people will ask, they’ll say, “I’ve heard that there’s a break even point in time.” And that break even point in time, what that means is if you start your benefits early, you’re going to get a lower amount. It’s going to continue on for life. If you defer for a few years, you’re going to get a higher amount and that’s going to go on for life. But at some point in time, if you wait a little bit longer, there’s going to be a break even point. And usually for most people, that break even point is right around age 80. That means at age 80, you would have been paid the same amount whether you started early or you started later. So, it goes back to our question before about longevity in your family. How long would you potentially receive these benefits? Because the longer you wait, the more you get paid. Now, if you are full retirement age 67, if you have the ability or luxury to wait till age 70, you’re going to have what they call deferred credits. Deferred benefit credits. You wait from age 67 to 70. The amount you are paid in benefits goes up a guaranteed 8% each year until age 70, which would be a 24% increase over your age 67 full retirement age amount. So you wait the maximum, age 70, 24% increase. You could start your benefits all the way as early as 62. You started at 62. Every year there’s going to be a reduction of 6 and a4%. So if you take it the earliest you can, you would have a 30% reduction. So a lot of calculations go into this. Not only your own personal calculation, but coordinating with your spouse or spousal benefits in there as well. So really going through a financial plan can help answer a lot of these questions. What difference will it make to me and what opportunities would be presented to me if I wait as far as taxation or uh working on my other investment accounts for some income sources. So we’re happy to talk to you about uh social security as well. Pensions if you look at pensions if you get one right do you get one at all? When do you become eligible for it? How much will it be? what are your distribution options? So, I would really say with pensions, if you have one, if you haven’t received an estimate of benefits in quite some time, this is a good opportunity. Hopefully, now it’s on the top of your mind, but you contact that plan administrator and you have them run an estimate, an estimate of benefits. They’re going to ask you a couple questions. Uh, when would you like to see the example run? At what age? And it kind of goes back to these conversations, a little bit of financial planning, but you’ll be able to tell them, say, I would like to start my benefits at 62 or 65 or whatever the appropriate age would be. And then they’re also going to ask you about your spouse and if you’d want any continued benefits to go to your spouse as well. So really what we’re looking there for there, similar to social security, we want to find out what the monthly amount is and we also want to know if a pension plan has a cost of living adjustment. Some do, some do not. So uh you want to find out that see if they have any kind of a inflation factor where your payments would go up over time. The other thing is we want to know what the spousal benefit would be. bigger the age and difference, the lower the payment is going to be for kind of a uh joint life payment. But just want to run a couple examples just to make some educated decision and get those uh uh pension estimates put together. The next category we have is earnings from work. Right? Same thing we’ve talked about before. Uh will you work full-time, part-time? What do you want to do? How much can you expect to make? and how long can you expect this work to go on. So, I know these are some big questions, but uh some estimates that we like to deal with when we’re creating an income plan and also kind of judging going forward. We don’t want to overexaggerate your income. So, we just want to put a little thought into this to see if this is something that would actually take place where most retirees say, “I didn’t actually work when I said I would work in retirement.” So, uh, annuities, um, I have a whole presentation coming up on annuities in two weeks. So, we can dive deeper into that, uh, this category then. But if you have an existing annuity, uh, a lot of times, now these are all different and we’re going to go over myths and misconceptions, but you have an existing annuity. A lot of people, uh, purchased an annuity for lifetime income, which is great if you need it. It may help you with that income stability ratio, may help to replace some of your income as well and complement social security, especially if you don’t have a pension or a private pension plan. If you do have uh one of these annuities, you just want to do a review on it because these have drastically changed over the last 10 years or just things you want to take a look at. Uh do you have an income ride or an income benefit? What would that pay you? What does it cost you in expenses and fees to maintain something like that with your annuity company? Do you have any charges, any surrender charges that you would be liable for if you make any changes to your annuity? And then the tax implications of receiving that income. Is it a retirement account? Is it all taxable? Is it a non-retirement account? You might you have a exclusion ratio? Part is taxable, part is not taxable. So different things that we could uh help you explore just to make sure you’re making the right decision if you have one of those investment categories. And then from there, right, we’re going to look at uh investment, income, personal savings, great big category, but for income sources, IRA, if you have a traditional IRA, it’s taxed differently than the Roth IRA. Traditional IRA is all taxable. It all counts as income on the tax brackets where the Roth does not. So, we want to make sure you coordinate distributions from each of those to make sure you’re uh spreading out or doing the most tax efficient income distribution as you can. Along those same lines, right, uh SE IRA, simple IRA, all different versions. If you have one of these, you’re familiar with it. Self-employed IAS, but all different versions of that pre-tax model of the traditional IRA. Uh continuing on with the Kio 401k, all same pre-tax kind of dollar, but here we go into a few different categories. Now, we’re out of retirement accounts, but we have a uh cash designation. We have brokerage accounts. The brokerage accounts are going to be again like stock and mutual fund investments. They’re going to qualify for a capital gain distribution tax. different than the retirement accounts account as income. Brokerage accounts are a bit more tax efficient with the capital gain distribution and it says nonqualified accounts here. Basically, non-qualified accounts means nonretirement account does not qualify for any special tax treatment as well. But the main idea here is there’s many different investment account registration designations. So, you have to look at this in a couple different ways. You have to say, well, the first way is investing. How am I invested in my pre-tax retirement accounts versus my Roth or tax-free investments? Do I want more growth in the Roth and the tax-free? Because it’s all tax-free, I’ll have a more growth lean into those types of investments. May I then be a little more conservative with the pre-tax dollars because that continues to snowball and create a larger tax liability for me? But if you put the two together, you’re going to balance them out into the exact portfolio you’re looking for. You’re just looking for more of the growth to happen within that Roth account. So that’s number one, investment accounts diversified by tax treatment. But you also want to look at these when we start the income distributions. You want to look at the most taxefficient way to withdraw from your investments. Most tax efficient way, right? Some is pre-tax, maybe some is brokerage, those capital gains. There’s a mixture of everything in there. But we can go through these different categories and we can model different scenarios to find the most tax efficient way. default theory is we look at cash accounts, brokerage accounts first, then we look at taxable accounts uh then uh I’m sorry cash and brokerage account taxable accounts first then we go into pre-tax accounts next or distributions final phase of the distribution strategy is the tax-free or Roth. So taxable accounts first, pre-tax, traditional IAS, Roth at the end. Now, if we run that together in a plan, we could say, “All right, this is how it works out for a tax liability for you, but there’s alternative tax strategies, right? What if we take money to live off of, we start our social security, we do distributions from cash and brokerage accounts, and then we do Roth conversions in there as well.” So we can model different scenarios but we’re looking for the most taxefficient way to distribute from income accounts. Now these are uh a little bit other income sources might uh be applicable might not be applicable to to each one of you but home equity it’s uh it’s there there’s conversations around it. Um uh not necessarily something that we uh see or take into consideration in a income plan. real estate investments. Uh if it’s ongoing rental income that you can count on, we have to look at that in the same respect that we talked about housing for primary housing before. Do you plan to continue this rental property, the maintenance of it, the income? Is it going to be sold at some point? Can we model the sale of that, the tax implications? Business ventures, right? Maybe I’ll do this business for a while, maybe I won’t. Maybe I’ll sell it. inheritance in the future, trust accounts, all those different things. They’re consideration. They might be one off in most financial plans, but different things that that we could take a look at. So, with that said, I just talked about five or 10 minutes about different income sources. So, I say the best way to look at this again is uh as a comprehensive view. This is where I started the presentation in a cash flow overview that takes all those categories I just mentioned. It puts it all together on one clean source. And really what it’s trying to do here within the plan is solve for that red line for those expenses in the middle. So we calculate our expenses and we say all right where do I need to take my income from to meet that red line of expenses. Left hand side is easy. Those uh light blue bars are employment income. The dark blue bars are social security. And then the yellow and then the orange are withdrawals from your accounts to meet those expenses. So this is where we get into some of that tax efficiency strategy in there. Just a couple ideas on withdrawal strategies for you as well. But uh once you’re at that point, we need to create some income. Couple different ways to do that. We’re just going to bullet point a few of these here. Um, you’ll probably be able to tell which one is my favorite as I go through this, but uh, the first one is something called live off the interest. Next one is the 4% rule, maybe four to 5% rule, bucket strategy, and then uh, covering mandatory versus [clears throat] discretionary expenses. Just a couple minutes on each one of those, but uh, living off the interest, it is exactly as it sounds. uh assets are invested in an income oriented security. So think to yourself here at the credit union the savings account is 3% their CDs a little bit north of 4%. Think of a bond that will pay a coupon rate or an interest payment to you on a monthly basis. Maybe in this category it says dividend paying stocks. Dividend paying stocks might have some principal fluctuation in there. But the basic idea is this is going to pay an interest rate. This is going to pay me a dividend and I’m going to live off of that interest rate or that dividend. My main goal here is to keep that principle and untouched and live off of the interest. So that’s number one, just living off the interest. Number two is 4% rule, 5% rule maybe just to expand it a little bit. But the investments or the assets are invested for total return. Right? So this may be a portfolio stocks and bonds maybe a moderate portfolio might be 60% stocks and 40% bonds. You may have some other holdings in there that pay some interest. Other stocks that pay dividends, but you’re investing really for total return. So, what you’re going to do is have your investment portfolio with all these different pieces in there, all these different pieces to the puzzle and then you simply go in there and you withdraw 4%. So, if you have $100,000, you’re taking out $4,000 and you increase that a little bit each year for your own inflation adjustment or for the cost of living adjustment. Now, I said 4%, I said 5%, right? Studies show that four to 5% is a safe withdrawal rate to sustain a income plan for an extended period of time. But when you look at the 4% you say well if I am receiving 4%. And inflation is 3% we’re kind of taking money out but eroding the account by about 7% per year. I need these portfolio assets to return that maybe six to eight% per year to keep up with this strategy. But basically, you’re just going into your accounts and you’re removing a set amount plus inflation each year. Now, the bucket strategy is kind of taking those first two concepts together. Now, what this does, it segments assets into durations into different time periods. So assets are placed into buckets for the corresponding time horizon. Investments are dependent on that time horizon. The longer the time horizon, the more growth oriented an investment can be. And then income is taken from the bucket specifically designated or earmarked for that purpose. Other buckets are left to grow. Again, real simple example. Uh, in my example before, I said maybe expenses are 2,000 a month, maybe social security covers 1,000 a month. So, you have a $1,000 a month shortfall. You have $12,000 a year shortfall. So, the theory here is 12,000 for one year, 12,000 for year 2, 12,000 for year three. So if you take 36,000 maybe 50,000 of the overall portfolio and you put that into bucket number one, safe, conservative, fixed rates, nothing to do with the market, you’re eventually going to deplete bucket number one. So as time goes on, your withdrawals are from that bucket. Bucket number two is investments, lower volatility. Think of your blue chip stocks, your dividend paying stocks, things like that that would have a five to 10 year horizon. The last bucket is your growth component, right? So, you’d have access to different investments, maybe have a bit of a more uh stock exposure in there, more of a growth lean. Conceptually, here’s what happens. If you wake up and you see the market is down and it continues to go down 10 20% and it goes through a bare market period, you know to yourself that you’ve already planned for this specifically. There’s enough funds in bucket number one to carry you for the next 3 to four years. So you don’t have to worry about what the market is doing in the short term. It’s not going to affect your spending. Now, on the flip side of that, if the market is up, right, if we do account reviews and we say, “Hey, it’s been a great year, you just spent six months or a year of bucket number one, because the markets are doing so well. Why don’t we take some money out of bucket number three or bucket number two and replenish bucket number one to give you that fresh three-year horizon of the income?” So, that’s the uh the bucket strategy. Final thing is the mandatory versus discretionary expenses. This is uh a little interesting. Mandatory expenses, right? Utilities, property taxes, keeping the lights on. Everything that is mandatory is funded by guaranteed. So making sure that social security and pension is enough to cover those mandatory. Discretionary, the fund money, the travel, the gifting, the shopping, all that kind of stuff. Discretionary are funded by investment accounts with growth potential. So this one this one’s a little bit interesting because I think you know if you look at it if the market’s down and your fund money is in overly growth opportunity potentials uh you might have to skip a year of some of the fund money. So I always kind of lean towards the bucket strategies just making sure all bases are covered for any market condition. But then when you do a comparison of all this right living off the interest it’s simple you just take the uh the interest off of it. The problem with that is if interest rates go down, dividends go down, your income will go down over time as well. Mandatory versus discretionary kind of peace of mind that the base expenses will be met, but you just don’t know that you’ll fully be able to fund all this the discretionary spending you want to. Uh 4% rule is great. Uh success depends on the investments. I’ll just say this in 2022 stock market was down, the bond market was down. So even diversified portfolios were down kind of uh accentuating that would be taking a 4% withdrawal from both uh asset classes that are down. And then finally bucket strategy like we talked to like we talked about uh a little bit more complex. You got to monitor a little bit harder to uh set up. It’s a little easier right now because uh interest rates are remaining high. So it helps that bucket number one story as well. So that’s some uh distribution ideas. Uh we’re going to talk a little bit about taxes, tax basics, tax regulations for different income sources. So all the things that we talked about uh so far, these are just the uh tax liabilities that come along with those. We talked about housing and moving to different states. Uh I’m currently I’m here in Illinois and Illinois we do have high property taxes, but we are a retireefriendly state. Illinois does not tax social security or pensions, retirement account distributions, IRA distributions, anything like that. So, just something to keep in mind as you’re looking to maybe move in retirement or even what your current state taxation is. Everything mentioned here is going to be a federal taxation. So, no matter what happened with the one big beautiful bill, no matter what you’ve heard, um social security is taxable. There’s different tiers. Most people pay 85% on their social security benefits. 85% is taxable. Uh pensions, think this is a little misleading. All or part may be taxable. I’d imagine for most people all of your pension income is going to be federally uh taxable as well. And we talked about earnings from work. That’s income. Investment income depends how it’s invested. Uh if you have dividends, you might receive some qualified dividend payments that qualify for capital gains. You take money out of an investment account. If you held it over a year, that’s capital gains. On those accounts, if it’s under a year, it’s going to be considered income, ordinary income. And then also on the IRA, IAS are income treated as well. So all IRA distributions be federally taxable as uh as the marginal income tax break brackets. Then finally, since we talked about it, right, just a little bit on annuities, it depends if your annuity is an IRA retirement annuity. It would all be taxable unless it’s a Roth or if it’s an annuity that is uh not a retirement account, that annuity grew uh tax deferred. So, part of it is going to be a tax liability to you as well. So, I went through that kind of quickly, but uh let me know if you have any questions on uh on taxation of accounts. So, uh, just a little bit on taxation again. Uh, the required minimum distributions on retirement accounts. The line in the sand is 1960. If you were born before 1960, your required distribution age is 73. Anybody born 1960 or later, you get to wait till age 75. So some strategies are right uh before those required distributions come along converting some of the money from a traditional pre-tax IRA to a Roth. I’ve done presentations on that. We can model that within a financial plan. So let me know if that uh is something you have a question on. Um if you delay your social security, it’s going to do two things for you by delaying social security. Number one, it’s going to lower your taxes for those years you’re delaying because most people are going to pay 85% taxes on social security, but it’s also going to increase your benefit. So, the longer you wait, the more you get paid. So, it’s kind of twofold by delaying social security. And then again, uh reducing expenses. That’s where we started today, right? If you have lower expenses, all these stories are much easier. But focusing on paying down debt, uh simpler lifestyle, maybe downsizing the house would help with some of those reduced expenses, which will then reduce the amount you have to take from your retirement accounts, which reduces taxation on it. And then finally, uh big bullet point here, but continue to manage taxes throughout retirement. It’s an ongoing conversation. Tax laws and legislation are constantly changing, especially with required distributions, right? We just want to monitor your tax brackets and your Medicare u premium charges. So just a few strategies there on the tax front. And then finally, right, taxes. You have different tax accounts. We talked about this taxable accounts. A stock account, mutual fund account, it’s taxable. It’s not a retirement account. Tax deferred account. You have to pay the taxes on it when you take it out. It’s going to be counted as income. And then tax-free is the Roth, right? So also types of investments, risk horizon, time horizon, risk tolerance, all this stuff put together. But I’m just going to look at these top section here, tax deferred and taxfree. We put the whole tax conversation together. You’re going to have a tax liability. Now, you’re going to be able to see within a financial plan, what do my taxes look like today? I’m working, so maybe my taxes are a little bit higher. What do my tax liabilities look like at maybe the 10% rate, the 12% tax rate? What do my taxes look like when I stop working? And then we mention required distributions. What does it look like in the future? Will my taxes be higher in the future? This is kind of a little typical of a uh retirement plan, right? Higher taxes in the beginning, kind of a valley there where there’s no employment income, but yet required distributions haven’t started. This is going to be the opportunity for a lot of retirement account tax planning. Whether it’s taking some of that money out, spending it, do different things. You just want to pay the taxes at the lower rate or we start to introduce the idea of doing a Roth conversion, converting some of those dollars at a lower tax rate when you can anticipate your tax rate would be higher in the future. So within this plan, alls we do is we say, “All right, for those low tax years, I want to do a conversion to Roth. I want to pay the taxes now so I never have to pay the taxes again.” And in this example, I just put in a 12% tax rate. So basically what we did here is we just added some yellow bars into our tax pax bracket financial report. Those yellow bars are Roth conversions up to the 12% bracket. So you can see it added a little more income with the yellow brackets, but it smoothed out the future taxation. And at the bottom of the plan, whenever you do a uh Roth conversion, right? Whenever you look at that conceptually, you want to say, does this help me? Does it lower my taxes? Bottom middle of the screen in this example, it was able to lower lifetime taxes by $112,000. and also added portfolio value by doing a conversion. Added portfolio value of $600,000. So if you don’t do that, this is the do nothing plan, right? Social security, dark blue. You hit age 73 or 75. You have all those big orange bars. We can do the calculation on the required minimum distribution. and we could show you what it potentially will look like in 10 years with some assumed growth in the account and what it’s going to look like tax-wise year-over-year if you do nothing. We take the do nothing scenario, we compare it to the Roth conversion scenario and see if that may be appropriate in your situation. So, with that said, right, I think we’re uh kind of wrapping up here a little bit on all my life after work uh bullet points, but uh action plan, right? gather resources on transitioning to retirement. We kind of talked a little bit about getting your social security benefit statement. We talked about pension statements. We talked about putting together that financial plan. See how it all works together. Make sure everything is coordinated to reach your goals. Put together a list of questions, concerns, anything that we might have touched on today that you want to talk about in a little bit more detail. And then of course, uh create a make an appointment, talk a little bit more about this. It’s what we do here uh at the credit union. Um how we can help. I’m just going to launch. Credit union likes me to put out a poll. If you’d like to talk, if you have any questions, if you’d like to explore seeing if putting together a financial plan is uh is ideal for you, just let me know there on the survey. We’ll be sure to get back to you. But uh we can help, right? life planning questions to help uh imagine your life in retirement, creating those income plans, determining your income needs, identifying those sources of income for you. We can help look at uh the IRA accounts, IRA rollovers, 401k rollovers, model your personal Roth conversions, and create that uh tax efficient withdrawal plan for you as well. And then of course, we also do uh I’m a certified financial planner. I’m also a registered investment adviser. So, we could do portfolio review and management. We can review your uh current investments and take c tax consideration into your investment portfolio. So, with that said, I am going to wrap up. I’m sorry we went uh just a little bit long on today’s topic, but again, a goal without a plan is a wish. We don’t want to wish for a successful plan. We want to plan for a successful plan. This is all my contact information. Uh I always say call, click, or visit. We could talk over the phone. You could uh scan the QR code and access my calendar to set up a time. U if you do that, it’ll set up a Zoom meeting for us. Same format as we’re doing here, but uh we just talk about your specific situation. And then if you’re in the Chicago area, I’m at the credit union headquarters every day and happy to meet in person with you as well. So, with that said, I know uh I promised I would get to the uh Q&A, the chat feature. So, if you have any questions, let’s go ahead and put it in there. I’ll take a quick look at that and uh see if we can answer some questions for you. There’s also going to be a credit union sends an email out on my behalf at the end of these presentations. So, any questions, comments, any additional topics you’d like to see or if you’d like to uh talk a little bit more about your personal situation and your comprehensive plan, just uh let me know. So, I’m going to go to Q&A first. Uh actually chat first. So, we got uh somebody wrote in here, what constitutes taxable accounts? So, taxable accounts uh we’re going to define that really as nonretirement accounts. So, a taxable account would be a savings account, a checking account. Those type of accounts are going to earn interest or dividends. It’s taxable every year. You’re going to get a 1099 int. Another taxable account is have a brokerage account. You have some stocks. So you have some bonds, you have some mutual funds, anything like that. It’s going to be a taxable account really on an annual basis. You’ll receive a 1099 DIIV, a dividend report. So those are all taxable accounts. Now the other accounts are tax deferred for a traditional IRA. You got to pay the taxes eventually, but it’s tax deferred. [snorts] And then the other one is the Roth, which is tax-free. So kind of different tax treatments, but taxable account you kind of pay as you go. either credit union, uh, brokerage accounts, anything like that. So, another question came in. Are withdrawals from traditional IAS considered income that is taxable? The answer there is yes. Uh, I’m struggling because there’s no other way to answer that. Uh, somebody has to pay the taxes on traditional IAS. So if you do it yourself, if you take some money out, uh it would be treated as income that year and it goes through those marginal income tax brackets. You get a standard deduction, but then some would be taxed at 10%, some at 12, and it kind of goes through the uh the different tax brackets. That’s why those required distributions kind of wreak so much havoc at the end of a plan because they’re larger distributions and they go right through those uh those tax brackets. So the other way I would look at this is you know sometimes we run financial plans and there’s money left over and it goes to the next generation or the kids and in that situation uh that money is still taxable. Traditional IAS are going to be taxable to the beneficiaries. uh Roth IAS are not taxable to the beneficiary. So it just gives a little more validation to having that uh Roth conversation. Uh somebody asked is there a cost for your services here? So when we talk when we meet we’ll have an introductory meeting that financial planning is right for you and your situation making sure it’s a good match to continue on. We do that financial plan. There’s no cost. it’s part of your membership at the credit unions. We just don’t charge for that. I know a lot of advisors don’t even offer full financial planning. They charge for maybe we don’t do that. It’s it’s just part of the the membership here. Now, I mentioned I’m a certified financial planner. I’m also a registered investment adviser. So, throughout the plan, throughout the journey, there might be some investment recommendations that I make to help you reach your goals. Now, some investments do have a fee, some investments don’t have a fee. Again, you’re under no obligation, but uh I would completely disclose any any fees on the investment side for you as well, but uh whatever’s in your best interest. Again, we are a fiduciary firm here. Uh another question, how safe is it to use you for advice as I have all my Fidelity, all my accounts with Fidelity? It’s a great question. um that’s that’s a little tough because we can’t really manage uh assets that are not here. So, we could have conversations with you. We can go over some of those topics, answer some of your questions, but it just wouldn’t be an ongoing financial advisor relationship going forward, but u happy to get some uh some questions answered for you as well. Uh, another maybe same person. I have only used Fidelity financial advisors, but I feel like they are only order takers. Yeah, that’s what we’re trying to to give you a little bit more of the uh personalized experience. Um, so it’s uh me here. There’s a couple of us in Chicago, few others across the country, but we work with our individual clients. We work creating your financial plan, going over it with you. I would be your contact person. So really instead of uh dialing up those 800 numbers and talking to a different person each time, it’s really kind of building that relationship and working on that financial plan throughout the year as well. So I think we’re good on the chat feature Q&A. So uh another great question here, right? Does the 8% social security increase after 67 include cola? It does not. So again, uh if you’re over full retirement age in this question, 67, each year you wait, your benefits will go up at a guaranteed 8%. You don’t have to wait the full year. You can get 11 12th of that, 612ths of that whenever you start your benefit. But your benefit goes up 8% per year. And then on top of that, you’re going to get the cost of living adjustment. So if you waited, all right, this year, you got 8% this year plus it was uh 2.8 8% cost of living adjustment. So this year the payment would have gone up uh 10.8%. That’s a good question. Uh so another question, can one do a Roth conversion in the year turning 73 but before actually turning 73? So I’m assuming your required distribution is at 73. If you’re born in 1960, it’s 75. But if you have the required distribution, the year you turn 73, you have to take the required distribution out first. So if you’re 73, but your birthday is in, let’s say, October, right? You can’t do the Roth conversion until you do the required distribution. Once you get that required distribution done, that can’t go into Roth, but once you get that one done, then you’re free to do the Roth conversion. Uh, another question. I retired three years ago. Would it be a benefit of me to convert my IRA to a Roth? Uh, the answer there is it depends. Depends on a few factors. Um, number one, we kind of look at your age. Uh, one of the factors in Roth conversions is kind of time. How much time you have to let this grow tax-free. We look at how you would pay for it, making sure there’s funds available to cover the taxation of it. So, there’s a couple things that uh kind of swirl around that question. Love to uh answer that with you on a kind of onetoone basis and go over your situation. But, you know, if you retired a few years ago, if you’re close to the required distribution age, a lot of times I say we lost some time there. You don’t have the time to to really benefit from all the tax-free growth. you start to look at it as you do the conversion for your beneficiaries. So, that’s still an option, but yeah, happy to uh to go over that with you if you’d like. All right, I think we did it. Got all the questions answered. Appreciate you bearing with me. Sorry for going so long just uh talking about our topic here today. But again, there’ll be an email with my contact information. Happy to answer your questions or uh go down a little bit uh more of a comprehensive path with you on some of these planning topics. Hope everybody has a great Wednesday afternoon and um thanks for joining me. Take care.

Okay. Uh, got 12:02. I’d like to get started here. Looks like, uh, we have a few more few more attendees joining in. So, hopefully we’ll give you a chance here to connect to the audio. We see a couple more coming in, but yeah, we’ll get started today. Appreciate you joining me. My name is Tom Davia, one of the uh, financial consultants here at Alliant, our department or division of the credit union. It’s called Alliant Retirement and Investment Services. And today we’re going to be talking about social security, right? It’s called uh looking at the big picture. We’ll talk about social security from the uh the comfort of your own home. I do a uh bi-weekly schedule on these webinars for the credit union. So today’s social security coming up uh next I think I have my old schedule here. So this one does not look correct. Uh but this is our list here. So this is our webinar schedule. And uh I’m also the co-host of the podcast and uh we have a blog on the website as well just for some more financial resources. But uh what you could do since I had the wrong webinar information, but uh if you go to aerys.allcreditun.com/events,

that’s going to be our webinar schedule and also alliantcreditun.com/mpodcast

for the podcast episodes. don’t expect you to memorize or write down that long website address. But basically, if you go to the credit union website, if you click in the upper right hand corner investments, it’s going to take you to our homepage here on the investment side. And right at the top, there’ll be a button to the uh webinars, podcast, and blog there as well. So I always say if anybody uh wants to join us, if you have friends and family, anybody interested in these topics, they missed today on social security, happy to talk with them on a onetoone basis. Some upcoming events as well, please uh just let us know, have them register the events and we’d like to have as many people join us as possible. What we do is uh put out these uh uh presentations just to share some financial information with you, but also let you know that we’re here, that we exist, that your credit union does offer a fullervice financial planning arm or division. I always say we’re the best kept secret at the credit union. We do full financial planning for you here as well. So this is an output of a uh a kind of hypothetical financial plan. But basically when we put these plans together, we want to sit down with you, have a discussion about your situation, your goals, put together that comprehensive plan, talk to you about today’s topic, social security, what may be the right decisions for you on that. also about ways of reducing taxes or some tax efficient investing or income distribution strategies for you that are tax efficient. Talk about uh ways to fight inflation. Over the last couple years, it’s been high. We want to make sure your portfolios are resilient for that as well. Generating more income from your investments or your nest egg. Looking to the right accounts tax-wise to pull income from your investments as well. dealing with volatilities, health care costs. There’s a lot that we could talk about within a financial plan. So, just want to make sure uh you’re aware that we’re here. We’re able to help you with this. What we’re talking about today in these plans, I’m going to reference the back to this a couple times when talking about social security, but this is available to you as a member of the credit union. It’s something that we do on a nocost service to get this planning together just to see that everything is in line and make sure that you’re reaching your financial goals. We can also help on the investments implementing the plan as well and help you uh implement some of the investments to uh to work through the financial plan. So, with that said, uh I’m going to get into social security here. We’re going to reference back to some of our investments and some of our investment planning. I just had one last s slide about that. Only 36% of Americans have a written financial plan. So, we’re really uh making a connection today, letting you know these resources are available that you could work on your plan and kind of change some of those numbers. So, we’re on social security. This is the agenda for today. We’re going to talk about uh then and now. So, we’re going to talk about the history of Social Security, how it started, how we got to this point, where we’re at in the the whole system. Uh, we’re going to talk about benefits, calculating your benefits. We’re going to talk about when to file, how to file. We’ll give you some filing strategies, talk about survivor benefits, spousal benefits, of course, taxes. We always have to talk about taxes, and then we’ll wrap it up with a couple ideas at the back back end of the presentation as well. Um, just as you did as I go through this information, if you have any questions, right, if something comes up in one of the slides, think about maybe one of your situations you’d like to have a question answered. If you use the Q&A feature, there’s a Q&A box within the Zoom meeting. There’s also a chat feature. Just go ahead while I’m talking, put your uh questions in there, and then at the end of the presentation, I’ll circle back and get those questions for you as well. get those questions answered. So, what we’re going to do first is we’re going to talk about Social Security then and now. Then meaning when it started. Social Security actually started in 1935. It’s the ironically the same year that uh Alliant Credit Union started, 1935. So back then it was a great system, right? It paid retired workers and I think workers are the key to that phrase. So just people who paid into the system retired got funds out and more people were paying into the system than we’re drawing out of the system. So more people paying in and life expectancy was age 63. Full retirement age back then when the program started was 65. So life expectancy was 63. Social Security, full retirement started at 65. So if you’re around long enough to collect the benefits, you don’t really collect them too much longer, which kind of created a surplus over time. More people paying in, people not receiving the payments for as long. We build up the Social Security trust funds. So there’s extra funds above what’s coming in from the workers. So now we change it to today. Today it’s a little opposite of what it was when it started. So life expectancy, right? Life expectancy has gone from age 63 when the program started. Life expectancy is now in the mid80s. So it’s much longer, right? Statistically, if you reach age 65, there’s a good chance you’re living another 20 years. So, we’re paying out more money than we were before, more benefits because life expectancy is longer. Now, before I said we were paying the retired workers, but over the years this has changed. So, it’s not just the retired workers. Now, it’s changed. It’s actually called the old age OASDI. Old age and survivors disability trust fund is the official name for social security. But instead of just paying a retired worker, now we have spousal benefits, we have benefits for children, disabled benefits, divorce benefits, all these sorts of things. So when you put it all together, there’s more money going out of the system today than there was in the past. So what we’re doing is we’re tapping into those excess surplus trust funds that were built up over all those years. So now if we look at it right over 173 175 million workers are covered more than 65 million Americans are receiving benefits and there are currently 2.8 workers for each beneficiary. By 2037 that number goes down. Less people in the workforce. There’s going to be about 2.1 workers for each person each beneficiary receiving payments. So you probably heard this in the news quite a bit. uh under current assumptions, if nothing changes with social security, when we get to the year, this is debated back and forth, but when we get to the year 2034, 2035, under all current assumptions, the program will only be able to pay out 80% of benefits. So whatever is promised on the statements uh if we don’t change anything there will be a reduction in social security be a 20% reduction. It cannot completely go away. It can’t go away because it’s a pay as you go system. So all the workers that pay out of their paychecks in July is paid out as benefits to retirees in August. So that will always continue. So, we’ll always have some funds coming in, and those funds coming in will represent 80% of promised benefits being paid out the next month. I always joke, uh, I say whatever I pay in in July goes out to my dad in August. So, just kind of pay as you go. But, if we put the whole story together, and I’m going to kind of speed up through some of these uh, graphics, but this is really showing you graphically what’s happening. So over time, all right, this surplus account has built up and it’s grown grown bigger and bigger, but at some point in time, we needed extra funds up and above the revenues that were coming in. So we started using some of those trust fund accounts. So now current estimates are that in 2035 the trust funds are exhausted. So the gap rate here is showing there’s a shortfall of 20% or 80% of benefits. So now we look at that and say as we go through this presentation we’ll talk about how much social security should be used to replace your income your employment income but too many people rely on social security for a majority of their retirement income across this country. So I truly don’t believe that we can do a 20% across the board cut. It would just hurt too many people to do something like that. So instead, what you’re going to see is as we get closer to 2035, we’re going to see some solutions presented. Now, those solutions could easily be presented today, but these solutions are going to be about more taxes and raising retirement age. So, here is one potential solution. One potential solution in this chart is right now I work at the credit union. So I pay in the social security myself 6.2%. The credit union matches that pays 6.2% for a worker. It would come out to that 12.4% combined. So if one solution here is if that is raised to 3.42, right? We raise that 3.42. So an extra 1.7 to me, an extra 1.7% to the employer. that would really solve the shortfall and that would bridge that gap. But we’re talking about a tax increase. We’re talking about a 2% tax increase. So I think what you’re going to see happen is a combination, right? The payroll taxes may increase a bit. We’re also looking at right now there’s a cap on how much you earn and keep paying into the system. So for this year it’s around $186,000. If you make more than $186,000, you stop paying into Social Security. So that may be raised a bit. They may raise that. They may increase the payroll taxes. They may increase retirement age. So some people are familiar with 66 in a few months. Some are familiar with a full retirement age of 67. You might see a few months added on to 67. You might see something like 67 in two months, 67 in four months and and so on and so forth. But you put it all together, a combination of those things in a smaller increments, it will bridge this gap, and I truly believe this gap will be filled. It’s just not accounted for in 2026. There’s still a little ways to go. So, I think as we get closer, someone is going to run on a platform. Congress is going to adopt some of these changes and uh and correct that shortfall. So, we have conversations with clients. Some clients will come in and be motivated to start their benefits based on what they see in the news and based on those reductions. So, again, nothing is set. I believe the uh the issue will be dealt with, but I wouldn’t make decisions based on a question mark in the future. I believe this will be corrected. So when we look at that, as I said, so many people count on social security for a majority of their income, if not all their retirement income. It would hurt too many people to do that type of reduction, but it was never meant to be your sole source of retirement income. Supposed to work together with other investment accounts, possibly a pension. You have a pension if you’re lucky enough to have one of those. So it’s a piece of the pie. It’s a piece of the puzzle, right? Social Security along with personal savings, investment accounts, retirement accounts, 401ks, IRA. Hopefully, you’ve been joining my presentation on Roth IAS as well, and you have some of those in there. Annuities pay income like pension and social security. Small sliver for some people, maybe inheritance, but when you put it all together, this is kind of where Social Security fits in. Just a piece of the puzzle, not the whole thing. Now we look at uh this is the maximum monthly benefit that social security would pay. This chart is a little bit dated. So maximum monthly benefit at full retirement age in 2026. Maximum benefit is $4,152.

So that would be at full retirement age if you reach that in 2026. This chart is just a few years old. So the numbers are a little bit less. I like to share this chart because number one, it shows you the maximum monthly amount, but number two, it shows you the average monthly amount, how much somebody at each given age receives on average. Everyone’s going to be a little bit different. Everyone’s going to have different work histories, which kind of dictate how much you get in benefits. uh we have situations where in this chart somebody may start their benefits early before full retirement age and they’ll have a reduction in there as well. So basically you look for the most part the program isn’t fully maximized by most people on average there’s about $2,000 for the average benefit. And once we take that, we have the average benefit that’s being paid out and we can help you walk through your numbers specifically to find out where you would be. But then what you do is say, well, based on what it’s going to pay me, based on what my statement shows me, how much should I count on that to replace my pre-retirement income? Now, this is based on earnings, right? So, if you earned $100,000 before you retired, you would look at the benefits that Social Security is potentially going to pay you to replace about 35% of that pre-retirement income. 35% from Social Security. Then you look at, do I have a pension plan? Do I have other sources of fixed income? I’m going to turn to my investment accounts again, the 401ks, the IAS to withdraw in a taxefficient manner to make up the other 65% that social security really doesn’t pay. The more you make, the more income you need, the less of a percent social security is going to replace that. So, if you had lower earnings pre-retirement, if you could live off of lower expenses, going to be a larger majority of your retirement income, higher expenses, higher earnings pre-retirement, it’s going to be a smaller percentage. Just again, a personal situation where you fall within that financial planning chart, how much you need to to live on. I’m going to walk through a timeline here. This is a retirement milestone uh timeline. This incorporates a couple concepts in addition to social security here. So just a couple milestones we want to make sure you’re aware of and taking advantage of. Number one on the lefth hand side is age 50. You want to make sure at 50 you know that you’re available for what they call catch-up contributions. Catchup contributions are retirement plan contributions that are uh increased or enhanced over age 50. So, if you’re doing IRA contributions, you get an extra cont uh catch-up contribution. If you’re doing your 401k contributions, you’re allowed to put in extra money and kind of superersize the retirement savings from age 50. age 55. Uh if you are still working, if you stop working, separate from service, leave your 401k plan at age 55 or later, uh you’ll be able to take penaltyfree withdrawals from that 401k that you left behind, but you have to be 55 when you leave that 401k. So, it’s the rule of 55. everybody else out there, you have to wait till age 59 and a half for penalty-free withdrawals from your retirement plan. Something else happens at age 59 and a half. Back to the 401ks, there’s a uh item in there called the inservice rollover. The inservice rollover really means the IRS is being nice. It recognizes that you may be retiring in a few years. So, it allows you to do a rollover of your 401k before you actually leave work or separate from service. So, you can still have access to the 401k rollovers at 59 and a half. Today’s topic, Social Security starts at age 60 for this conversation. age 60, earliest social security conversation, but it’s only available for surviving benefits. Survivor benefits. Surviving spouse can be started at age 60. Once we get to age 62, we’re going to talk about the first time being eligible for payments if you’re not a surviving spouse. So, age 62, we’ll start benefit eligibility. At age 65, we’ll have those Medicare conversations with you. So, we want to make sure you’re looking at the correct enrollment periods. Age 66 through 67, those are the full retirement age amounts. As I mentioned, 66 in a few months for some people, 67 for more and more people as time goes on. And then age 70, your benefits are going to maximize. You’ll get the maximum deferred credits at age 70. So, if you have not started taking benefits by age 70, you definitely want to do that as quickly as possible. You have to get those started and you must be present to win when you receive those those payments. So, you got to start it. And then at 73, finally, on the retirement milestone, uh required distributions begin for some people born before 1960. Uh required distributions at 75 for those born 1960 and later. So now we set up the conversation. We’ll go back into the benefits. This is the maximum benefit. So at full retirement age in 2026, if you maximize the program, maximum benefit is going to be $4,152.

That’s going to go up a little bit each year with inflation. Simple math. If you take the monthly amount, you times it by 12, that’s going to give you just about $50,000 a year in annual benefits. This is where we take a step back. We put in our I put on my financial planner hat and I say this type of income that’s guaranteed to you. If we look at it in an investment view through an investment lens, you would need to have an investment account of around $1 million where you withdraw funds and say you might take a 5% withdrawal or 4% withdrawal, but you have a million-doll investment account. If you take out 5% to pay yourself income, that’s going to equal the same type of income that we’re talking about with your social security payments. So, I just want to point this out. Treat it as a million-doll investment. Spend time with me. Go through the financial plan. Find out the ideal situation for you, your filing status, go through all the points that I’m going to make today, and spend time on this. You just don’t want to retire on a Monday and start looking at this on Tuesday and start to file your benefits a day later. You really want to treat this again as a million-doll investment. And just take it a step further. That’s for one person, $50,000. A spousal benefit, a simple spousal benefit would get 50% of the other spouse’s benefit. So it would take your total benefit on this slide to $75,000. and it would be like having a million $1.5 million investment account. So that’s why we’re doing this presentation, spending time on it today to make sure you fully understand and know what’s in your best interest to do this. So when we talk about those, right, we’re talking about your benefits, they add up over time. They increase with inflation. The amounts get significant. They last a lifetime. They last spouse’s lifetime. So again, we just want to make sure we’re putting in the work and the time to find out what would be ideal for you. So we’re going to talk here about determining your benefits. Um determining your benefits, obviously it’s based on your earnings. So when you get paid, again, 6.2% out of that paycheck goes into the system. So what we have to do is we have to qualify you for payments. So to qualify for this conversation, you need what’s called 40 credits. So the way you get a credit is every year if you make $1,890,

you get one credit. So if you make $7,560 this year, you would get four credits for the year. 4 * 10 is 40. So to even have this conversation you need a work record of 10 years. Now if you only make 7,560 you’re not maximize them program you won’t have a very large benefit but you’ll be in the conversation. So 10 years to get in the conversation. However what social security does is they take the highest 35 years of earnings. I is 35 years of earnings monthly average. So if you only have 10 years of work history, they’re going to do the calculation. You’ll have 10 years of history. You’ll have 25 zeros in there. So it’s kind of like calculating a grade point average, right? We have a bunch of A’s. We have a bunch of zeros or Fs in there. So if you average all that out, if you only have 10 years, you’re not maximizing the program. your benefits are going to be reduced by all those years you were not working, all those zeros. I might be describing something like a spousal benefit if there’s only a few years of work history in there. Again, we’ll go through spousal benefits, but then a spouse would still qualify for 50% of the working spouse’s benefits. So, I just want to kind of lay it out how it works. 10 years to get in, 35 to really maximize everything. If you find yourself uh confused, if you don’t know what your work history looks like for the last 35 years, well, the good news is you can go and get a copy of your benefit statement. So, years ago, Social Security used to mail this out to everyone every year. It was right around their birthday. This is years and years ago, but I think they took a step back and said, “That’s a lot of paper. That’s a lot of stamps. we’re going to cut those costs and we’re not going to mail statements anymore. So, you don’t get uh paper statements in the mail. You do get a paper statement if you are over age, I believe, 60 and you have not set up for your online account. They will still send that uh paper statement to you. Uh most people what they’ve done is gone to the website, social security website, ssa.gov/myaccount.

What you can do is register for your account so you know it’s secure. You have the password so we cannot have some identity theft or somebody filing for your benefits. So we want to secure the account for you. Uh number two, we want to get a copy of your benefit statement so you can look at it and you can track your past 35 years. You want to take a look at that, make sure it looks somewhat correct. They’re going to increase those numbers for inflation over time. So, it might not look like, hey, I didn’t make $100,000 in 1995. They’ll do some inflation adjustment in there for you as well. One thing I would caution if you take a look at that, if you find something you’d believe to be incorrect, maybe a zero for a year that should not be a zero, you need to find that, you need to report that. And you have a time period to do that. So generally you have 3 years, 3 months and 15 days to get that corrected. So you need to alert social security that there’s a inaccurate reporting of your earnings on there. But uh final reason, right, you want to make sure your earnings are correct. Final reason is for our financial planning services. It’s just a great statement. It’s going to show you your benefit calculation. It’ll show you what your benefits would be at age 62, 63, 64, full retirement age, and then it’ll give you the monthly amount if you go beyond full retirement age. So, those are some of the numbers that we need for that financial planning and helping you make that decision when the right time is to start your benefits. So, now we’re going to talk a little bit uh I mentioned it a few times. Full retirement age, FRA, full retirement age. So, it depends, right? It depends on the year you were born. Full retirement is the age when you could start receiving your full benefits. Again, for most people, 66 and a few months. And if you were born 1960 or later, it’s going to turn into age 70. Very simple calculation. If you take your benefits early before your full retirement age, you’re going to have a reduction in your benefits. If you take your benefits after full retirement age, again, maximum is 70. Maximum what they call delayed credits to 70. Uh you’re going to have an increase. Every year you take it early. There’s going to be reduction every year, which comes out to reduction of 6.25% 25% per year. It’s not an annual calculation. Everyone’s going to be different on what month they start. But if you take it early, the annual reduction is 6.25%. You divide that by 12 for each month you may start early. On the flip side, if you wait till age 70 from full retirement age to age 70, the benefits are guaranteed to go up by 8% per year. And again, you don’t have to wait per year. You just simply take 8% divided by 12 months. Every month you wait beyond full retirement age. It’s going to go up that uh that percentage. So, here’s the chart, right? Uh just finding the year you were born and finding your full retirement age. And again, we’re getting to that point where more and more people uh we’re looking at age 67. So, this is something that may change over time. Again, as the years go on to help solve the shortfall, you may see 67 start to add those two month or four month increments in there. Nothing set yet, but that’s something that uh probably would be looked at. So, another way to look at uh full retirement age, age 67, right? If I am on my benefit statement, if I’m getting $1,000 a month, $12,000 a year, left hand side, if I take it early, right, I go all the way down to age 62, it’s going to be that reduction. 6 and a4% every year. So, simply going from 67 to 62 is going to cost you a 30% reduction for life in your benefits. Now, if you go from 67 to 70, uh, you were full retirement, promised $1,000 per month. We’re going to move it up 8% every year, guarantee that for you, and then it goes to $1,224 or a 24% increase or 8% per year. I don’t think I’m stressing this enough, but there’s also a cost of living adjustment here as well. So, it’s not only the 8% of the guaranteed increase, it’s also the cost of living adjustment. Last year, last year the uh actually for this year uh the cost of living adjustment with inflation, right, it came out to 2.8%. So, you would simply add that on to the 8% guaranteed uh increase in your payment. So, for this year, it would have gone up 10.8%. So, the bigger decision is here. I look at this in a bigger scope, right? We have a reduction from 67 to 62. But if you look at it bigger, right? From 70 down to 62, that’s going to be a 43% reduction. So, if you have the ability, the wherewithal to make it to age 70 versus age 62, that’s going to be a 77% increase over your 62 age 62 amount. $700 increases by 77%. That’s 1,240. Right? So, there’s big decisions, big calculations, things you want to look at and look at and consider. One of the things I mentioned was life expectancy, right? What’s my family history? What do I typically come up with right in my family? Are we octogenarians? Do we have centiggenarians? How long may we live? Because the simple calculation is the longer you live and the longer your life expectancy is, the longer you want to wait, the more it’s going to pay you. If it’s a reverse situation, right? Why do people start early? Now, it’s a personal preference. It’s a personal choice. Some people will say, “I’ve been paying into the system long enough. I want to take money out.” Some people will say, “I’m concerned with what I read in the news and them solving the problem. I want to get some benefits coming to me today based on what today offers.” We did talk about that a little bit uh later earlier. Other reasons, financial issues. Number one, if you need the money to live off of or to make your financial plan work, you’re going to have to start those payments early. There might be other issues, uh, health problems, issues that would cause you to start it early. Single income household, more income coming in will help with social security. children under age 18, school children at home. If you’re eligible for benefits, if you file for your benefits, you can receive benefits for younger children as well, your children. So, all these different things swirl around. Maybe do I start the benefits early? Right? So, it’s kind of personal decision. But what we can do here is when we put together that financial plan, we’re going to look at different scenarios for you. We’re going to look at here’s what it would be if you start now or start early. Here’s a projection at full retirement age. Here’s another projection for you at age 70. So, we can do a compare and contrast. Look how it would go through your financial plan for a tax planning uh strategy. Look at how it would affect withdrawals from your other investment accounts. Maybe if you defer your social security, you’re entering back into my Roth conversion presentation and doing some of those is as far as part of your financial planning. But one of the outputs here from this financial plan is showing the difference between starting early and delaying late. So if you look on the left hand side, you see some gray bars, right? original idea was I was going to start it at 62. Now I’m going to compare that with age 70. So I reduce how much I was going to get paid at 6263. So those gray bars are the reduction. Since we delayed it, the green bars are the extra income coming in by delaying. So what we do is we come up with this break even calculation. Break even calculation give or take. Everyone’s a little bit different, but we’re going to have a break even calculation right around age 80. In this example, it’s 79. Some clients, it’ll be 81. But that’s the point in time where whether you started your benefits early or you started your benefits late, it would have been the same amount of money in your financial plan. It’s just how much longer you live past that point. And then it goes back to that family history, back to the octogenarian sentinarians to see how much longer you should defer taking those payments. So it’s a bit of a calculation tax-wise, longevity wise, and income-wise as well, but something that we could definitely help you put together and look at the the pros and cons of each situation. So now we’re going to go into our next section, which is spousal benefits. Really three things here. uh basic spousal benefits, divorce benefits and uh widow or surviving uh spouse benefits, widow, a widowerower. So the first section is uh spousal benefits. As I mentioned before, it’s a pretty easy calculation. It is uh the calculation of when you go to file for your benefits, they will ask you about your own personal work record. Then they’ll ask you about your marriage. They’ll give you the greater of your own work benefit or 50% of your spouse’s benefit. So there used to be some other more intricate planning techniques that went away years ago, but the spousal benefit really does break down to being as basic as this. So you could have a uh spouse with one work record start early, start receiving their benefits for a number of years. Maybe the higher wage earner continues working, continues to get their deferred credits and build it up. You can then switch from your own record to the spousal b uh record. The only problem with that is if you start your benefits early and just say age 62, right, you have that 24% reduction. That 24% reduction stays with you for life. So if you later switch to a higher amount for your spousal benefit, might be a higher amount, but they’re still going to reduce it by that 24% because you started early. So you have to keep that in mind as well. But that’s the basic spousal benefit. Uh your own benefit or 50% of your spouse’s. So if you want to file for that spousal benefit, your spouse must also file. Filing for spousal benefits early, right? That’ll reduce your benefit. And as we talked about before, the percent of the reduction depends on how early that benefit is taken. You can take it all the way as early as 62, but it’s going to cost you. So, now moving into category number two, uh benefits for divorced for the divorced. So, basically here, marriage has to last 10 years. So, we always joke we we would do these seminars in person before and I would say if anybody’s married 9 years or 9 and a half years, just at this point, you got to stick it out to the 10th year, right? Marriage has to last for 10 years. Divorce has to have has had to last for two years. So you have to be divorced for two years. The other spouse, former spouse is entitled to benefits. Expouse, right? If you’re the divorced spouse in this situation, expouse unmarried. They did not remarry. You’re at least 62 years old and you cannot qualify for a higher benefit on your own record. If you put all that together, you could file for divorced benefits and uh again, you would receive half of the benefit, half the full retirement age benefit reduced if you take it early. So, we had a situation before where one of those in-person meetings, somebody came up to me after the meeting and said, “I will not file for my benefits. I don’t want her to receive anything.” But unfortunately, we had to tell him that you’re over age 70, so you’re missing out on your own benefits and you will never be told or never know if your ex-spouse is receiving benefits off your record. It’s probably something that she’s been doing for quite some time anyhow. So, it it will not affect the uh divorced spouse as the other spouse at all. You just walk through the social security questionnaire. You let them know about the previous marriage and they will do the calculation for you. So key here is marriage lasted for 10 years and divorce lasted for two years. Uh widow widowerower surviving spouse benefit. So this is the one two things change here. Uh number one you could file as early as age 60. So everybody else we said 62. This one goes down to 60, but there’s further reduction all the way down to 60. So, they’ll reduce it even more if you start early. And then you could start the benefit early. You can start at 60 while letting yours continue to grow and acrue and receive all those deferred credits for all those years. So, age 60, right? Let your own benefit grow. Um, this one is a little bit different than the spousal benefit. So, the spousal benefit is really going to max out at full retirement age. So, at full retirement age, the other spouse would get half of that benefit. Surviving spouse benefit, it goes along hand in hand all the way to age 70. So if I defer my benefits, if I wait till 70, I’m going to get a larger and larger amount. My wife, if I pass away, my wife would get my full age 70 amount where she would get less uh under the living right spousal benefit. So widow widowerower just want you to remember could start at 60. you could let your own benefit grow and it could be more than the full retirement age amount if the uh other spouse let it grow. So uh we’re going to talk about somebody who is under full retirement age. So you’re under full retirement age and you are still working. You’re 62 years old, maybe 63. So, you’re still working, but you want to start your benefits under full retirement age. So, this is still working and receiving benefits. There’s just something you need to be aware of called the earnings offset. That simply means that if you make too much money, they’re going to reduce how much they send you in your benefit check each month. Now, for 2026, if you’re under full retirement age, the earnings limit is 24,400. So, if you make less than 24,400, you have a part-time job, a hobby, something you do for fun, this is not going to affect you. If you make more than 24,400, this is going to affect you. So, they’re going to reduce how much they pay you in your benefits, $1 for every $2 in earnings. Easiest way to explain this is if you make 44,000, 24,000 is okay. Nobody has a problem with that. The problem is the extra 20,000. So, the calculation is $1 reduction for every $2 in earnings. Well, you had $20,000 in earnings above the limit. So, they’re going to reduce your benefit payments by $10,000 annually or say $800 a a month. $800 a month. So, it could be a big amount. You just be careful if you’re still working. If you’re under full retirement age, this might be a uh a bad calculation for you. It might significantly reduce how much they pay you. And what they’re going to do eventually, they’re going to pay this back to you once you reach full retirement age. It’s not a lump sum. It’s a bit of a calculation. It’s like a 10-year calculation. So, you will get paid back, but you need to understand under 67, under 66 could be a problem. Now, at some point in time, you’re going to turn full retirement age, uh the year that you turn full retirement age, that earnings limit goes uh that goes up to 65,000. So, just say your birthday’s in July. pre- July, you can make $65,000 for that year. Once you hit July, your full retirement age, nobody does this calculation anymore. So, the year that you turn full retirement age, you can make much more. After full retirement age, no earnings offset. So, that’s the uh the earnings offset and we’re going to go from there. We’re going to talk about taxes. Your taxes on social security. So, social security is a tax, right? I said I look at my pay statement. It comes out. It says FICA tax 6.2%. Every time I get paid, I had to explain that recently to my daughter where her FICA tax money is going. So, you’re taxed on this throughout your earnings years. And that comes up with your benefits calculation. But, uh, what we’re going to talk about here is the second bullet point. When you receive benefits, you’re taxed on it as well. So, it’s going to be taxed to you on both sides. We’re going to talk about the uh the later how much is taxable when you’re receiving benefits. So what they do is they come up with this what they call provisional income. Provisional income is everything and it honestly is everything. So any income from wages, uh investment accounts, interest at the credit unions, dividends, capital gains, anything that looks like an investment, investments to the point of if you have some tax-free municipal bond funds, you put that back in there. That’s considered income. Uh pension plans, anything that’s an exclusion income, all this is included in what they call provisional income. But the key to this is half of your social security benefits. So when you put all this together, all your income and half of your social security, you’re then going to go into this chart. And this chart tells you how much of your benefit is taxable. So top line is married filing jointly. Married filing jointly. If you’re able to keep that number under 32,000, your social security is not taxable. If that number is 32 to 44,000, half of your social security is taxable. And then finally, income of over 44,000, 85% is taxable. So at the maximum, this conversation is 85% taxable. Optimistically, you could look at it and say it’s 15% tax-free income that’s coming to me. But it was taxed to you as a payroll tax. It’s taxed to you as a benefit tax as well. I’ll just kind of take a pause here, mention the new tax bill, the big beautiful bill that came through. There was a lot of talk that social security is not taxable. Social security is absolutely taxable. This is how it’s taxable. What was done in the the tax bill is if you are over age 65, if you don’t make over a certain amount of money, they gave you a larger standard deduction for each person. That larger standard deduction was presented as this makes social security not taxable. Some people don’t qualify for that larger standard deduction. That larger standard deduction is going to go away after 2028, but you need to know. Social Security is absolutely taxable. These are the tax rates that are due on it. So when you look at this, you think, well, what is my provisional income and how do I figure this out and how do I make sure I don’t go into the Social Security torpedo into the next bracket on some of my income? Again, with a financial plan here that I can help you with, one of the things we look at is your tax rates. So we can look at your tax rates left hand side. They might be a bit higher because you’re still working and you’re going through those brackets, the 10%, the 12%. But then we identify a period in time where maybe tax rates are lower. Maybe that uh is an opportunity to stay below that threshold and have your social security benefits not taxable. Maybe it introduces the idea of some advanced tax planning strategies. uh implementing the Roth conversion strategy, implementing distributions from your accounts in a tax efficient manner. So this is something that we put together again identifying those low tax years, identifying the taxation in the future with required distributions and then overlaying social security benefits to find the optimal tax time to do that for you. In this example, right, uh I just put here that there are low tax years again as an example. We could run uh scenarios where we use the lower tax rates to do those Roth conversion strategies. And we could show you at the bottom again tax savings for doing something like that. So, uh from here, right, we’re just talking about filing for benefits. Uh fil filing for benefits. You could do it in person if you live close to an office if that’s convenient for you. Most people these days uh use the online service ssa.gov. Go in there uh make sure you secure your account, you have your passwords, you have your statements, and you go in there with a strategy either in person or online. You need a strategy because you need to elect when you want to start your benefits. So, you want to make sure you do it a few months ahead of time. I think they say it’ll take a month. It usually takes about 3 months or so for them to process and start payments coming through. They’ll ask you a few questions, uh, work history questions, marriage questions, life questions, just to make sure they’re working off the right record and they’re finding you the highest payment that they can get you. You can also schedule a time on the phone if you’d like to talk to somebody in person. One thing I’ll stress is Social Security, they are not financial planners. They’re not going to sit down and hold your hand and say, “Well, if you do this, you’d save a little bit on taxes, but if you wait, it might help your spouse.” They’re going to say, “All right, name, birthday, when do you want to start?” And they’ll help you get it started. Another thing to watch out for is they’ve been doing recently, they will call you to verify some of this information. So, uh, they have made calls and they say, “We notice that you want to start your benefits at this age, say age 70. if you like, we could send you a large check right now, a lump sum to get you going and then we could start your benefits at a lower amount. So, all they’re doing is they’re rewinding time. They’re saying, “Hey, you’re not starting at 70, you’re starting at 69 12.” So, they’re going to add a permanent half-year reduction to you. So, we do the proper planning. You just want to make sure you uh kind of stick with the plan. if you get those lumpsum benefits, just know that that’s all going to be taxable income in those years and then they’re going to apply the age reduction to you. A couple other strategies when you uh look at this, right? If you’re filing for benefits, there’s uh something that’s a voluntary uh suspension. So, if you file for benefits, if you’re in between full retirement age and age 70, you could go back and voluntarily suspend your benefits and you could then start to earn some of those delay credits. You can also withdraw your application. So, it’s kind of called the doover. So, if you started your benefits and you said, “I shouldn’t have done this. I now have a tax surprise. I want to go in a different route.” You do have the do over ability one time and it’s only good for 12 months. So when you file for benefits within that 12-month period, you could withdraw your application. So there is still limited ability to suspend and limited ability to withdraw an application as well. So uh just kind of reviewing again uh the bigger picture, right? Where does social security fit in into the bigger picture? mentioned it’s a piece of the puzzle. We have to look at how everything works together. We have to look at the optimal time not only for life expectancy but for taxation coordinating with other benefits. One thing important that we pull out in a financial plan is something I call a income stability ratio. This is important because this is going to tell us how much of your monthly income is stable, has nothing to do with the market, and how much is variable and could have fluctuations over time. If these markets turn in a different direction, they’ve been great for the last 3 years or so, but if it turns down, we want to have a high income stability ratio for you. Income stability ratio is really a matter or a function of your stable fixed income. Number one, today’s topic, social security. How much will it be? How can I optimize that plan? Same type of conversation with a pension plan. What’s my options? When should I start it? Does it grow in the future? Does it have a cost of living adjustment? How much will it give my spouse? How much will it increase my taxes? And then also we’re talking about fixed income. Some people may have annuity income which again is for life guaranteed income. So we put all this together. We want to look at how much is coming from stable sources. And then we compare that to your expenses. For example, if we go through a expense conversation with you and you spend $2,000 a month, but yet your fixed income is $1,000 a month, your income stability ratio will be 50%. Right? 50% is coming from variable sources. Can’t control what the market’s going to do. 50% is stable. We’d like to see that number higher. We’d like to see you have that 60 to 70% stable income coming in. So we could talk to you again about uh that income stability ratio within the financial plan. Financial plans are designed to answer just a lot of questions for you. So will I have enough? Uh do I have confidence in when my where my income is coming from tax-wise and accountwise? Uh my social security options, right? What are the best opportunities for me? Put this all together, put it in a comprehensive financial plan for you. Get those questions answered. put you on a path to make sure you’re reaching your financial goals. We’re here to help you, right? Not only social security. We could talk about uh income withdrawal strategies. We could talk about when to use retirement account assets versus social security. We could evaluate existing retirement of plans, 401ks, help you walk through the rollover options that are available. As I mentioned, uh, Roth conversion strategies, we can help you out with some of those as well, finding out if that’s a a good strategy, making the most of your, uh, retirement account money. That’s, uh, that’s really what we’re here for you to do at the credit union. What I’m going to do now is, uh, look at some of the questions that came in. I know we had a few. Also launch a poll. credit union likes me to send this out just to get some feedback on our presentations, make sure we’re providing uh good, useful information to you, and again to see if you’d like to either continue the conversation on social security, if you’d like to work on a financial plan, if you have questions in financial planning in general, doesn’t have to be about social security. So, this gives us a way to uh to identify that and respond back to you. And again, if you have any feedback on today’s presentation or future uh topics you’d like to see, you can put that in there as well. This is all my contact information. I always say call, click, or visit, right? We could talk over the phone. If you use this QR scanner, it’s going to take you to my calendar. Uh you’ll be able to choose a convenient time. It sets up a Zoom meeting like this. We could talk through some of these concepts. If you are in the Chicagoland area, I’m in the credit union headquarters every day as well. So, you’re welcome to come in for investment account meetings, do some financial planning, and uh we can meet in person face to face. So, with that said, I appreciate everyone’s time. Again, please, if you have a chance, fill out that poll, make sure we can get back to you with uh with what you need. I’m going to go through, we got some questions coming in on the uh chat. First one I’m going to look at as the chat, then go over to Q&A. So, you want to catch me real time, uh go into the uh the chat feature here. So, uh question came through. I’m just going with the most recent. Somebody asked, uh, how to schedule a time with you to create or review a financial plan. Um, again, information is on the screen. A little phone. Take a picture of that. Not take a picture, but tap on the camera. It’ll take you to my calendar. The credit union is going to send you a email on my behalf. When this is over, you’ll have all my contact information. You’ll have a link to my calendar. Choose a convenient time. But uh you you mentioned in your question uh review a financial plan. It’s a great question. Um if you have a financial plan, if you have investments, think of this, right? We go to a doctor, we’ll not hesitate. I want a second opinion, right? I I it’s my health. It’s important to me. Same thing with financial planning. We’re here for you. We can give you a second uh opinion. We could do a complete analysis on an existing financial plan or a account statement. look at your holdings. We’ll do a risk profile. We’ll do a cost analysis. See what they’re charging. See if we can reduce those fees. Do some stress testing on it. Really see how it implements with your comprehensive plan as well. So, great question there on on a review. We absolutely do that. Uh, somebody asked the question, uh, does this change if you are self-employed? And I did see this question come through. So, this question was regarding the 6.2% 2% tax I pay and this 6.2% that the credit union pays into the social security administration rate. So it does change if you’re self-employed. If you’re self-employed, your employer is not putting in that 6.2. So if you’re self-employed, you’re seeing that 12.4% come out when you do your taxes. So you’re paying that that full amount yourself. So that’s kind of the difference for the self-employed. Another question came in. Uh, good one. What’s the difference? 30. I think you took a look at my calendar, but what’s the difference between a 30% u 30% 30 minute meeting and a 60 minute meeting or appointment? Um, what we might want to do with the 30 minute is get to know you a little bit, go through your situation, if you have specific questions you want answered, tell you a little bit about my background, walk you through our our services here and see if we’re a good fit or we can get some information answered for you. 60-minute appointment, that would be a little deeper, right? We want to start to get involved in financial planning for you. look at some of those statements, start to compile that information. I say the initial meeting um just again introductory understanding your situation. 30 minute would be great helps me understand what you’re trying to accomplish and then I can help you organize that information for the second for the 60 minute appointment. Again, another question came in. What materials to have ready for the appointment? Um, that’s something that uh we kind of talk through, but I have an email that I could send you that uh bullet points what we would talk about in a financial planning meeting. It also bullet points what information to have available, too. So, we could uh send that out to you once you schedule that meeting as well. So, all good questions there. I think I cleaned out the uh chat feature. I’m just going to take a look at the uh Q&A here. Uh there is a question. Is social security still taxed if it is invested? I don’t know that I understand the question or I could be able to uh answer that. So, we might have to take that offline to go a little bit deeper. Not sure uh if it is invested really. Currently, the way it stands, there’s no investment options with social security. There was talk about some privatization, maybe having an investment component to it, but yeah, everything we talked about so far, right? It’s a tax coming out of your payroll, out of your check, and then once it’s uh paid to you, it’s going to be taxed maybe to a certain level. So, yeah, I’m happy to uh elaborate on that, maybe go through your personal situation, see if I could pull out a little bit more to get you a better answer there. We have a question. Uh what is the cost for financial planning like to say right you’re a member of the credit union credit union is defined by members helping members so we do not plan we do not charge sorry we do not charge for our financial planning something that helps me understand your situation better helps make any recommendations to you either with this social security conversation maybe an investment uh recommendation so something that uh again we do not charge charge for if we do have any recommendations for you on the investment side that may change right some investments do have a fee some investments don’t have a fee will completely disclose that to you so no charge on the financial planning front uh somebody wrote if I did not quite get all the information will you I believe will this air again um we don’t do not record the presentation we kind go through every once in a while. So, you may see this pop up again as a topic. But, uh, I would say, you know, today’s really about introductions. Just want to introduce myself as a certified financial planner at the credit union. So, what we can do here, we have an introduction, you know, uh, that we can help you with these conversations. I would recommend scheduling a time. We could talk through your specific situation, your social security questions, and, uh, and get those answered. Uh, another question that came in here. Sorry, I’m going a little bit long, but uh if somebody just got married for the first time in February, if something happens to us at the age of 62, I wouldn’t be eligible for spousal benefit since we were never married for the 10 years in your example. So the 10 years, right? So you just got married. So the 10 years is going to be for the um divorced benefits. uh if something so I believe in your uh question you’re actually questioning the surviving spouse benefits the widow widowerower benefits so I believe I’ll have to double check but that is I believe it’s like 2 years a year two years on these surviving spouse benefits so under your question your example um yeah I believe everything should be fine we can go a little bit deeper in your your example but we just don’t want to confuse uh divorce benefits 10 years with surviving having spouse benefits. You just need to be married a couple years. And here we go. We got one other, right? If you are divorced and looking for your spouse’s social security as an option, was married uh 28 years. What paperwork should I take in the Social Security office to get insight into this benefit so you can make sure you get your benefits. Yeah. They’re going to walk you through. They’ll ask you sequentially when were you married? How long did it last? When did you divorce? So any backup information that you take with you to that office if you have marriage certificate if you have divorce decree uh current identification all that is really going to expedite the whole process for you but I would really concentrate on marriage license divorce decree if you do have that uh inperson meeting with them. Uh does the financial planning last one here does the financial planning include members spouse? Absolutely. you’re a member of the credit union, that’s your spouse is 100% included in your financial plan, especially when we do those taxes. So, yes, please, we want to make sure we get it right for the tax aspect. So, uh, make sure you do set that up. I notice somebody wrote in there, I’m having a hard time setting up a meeting. If for whatever reason, if you can’t get that QR code working correctly, again, there’s going to be an email coming out from the credit union. It’s going to have uh all my information is gonna have a link to my calendar as well, so it might be easier for for you to use. With all that said, uh appreciate you joining me this afternoon. Thank you for the great questions. Sorry again, we went a little bit longer than an hour, but you had some really good questions today. Look out for the email uh from us. Uh look out for uh future events that we have and uh hopefully we can help you along your financial journey. Have a great afternoon again and thanks for joining me. Take care.

Hello everybody and welcome to my webinar this evening. We’ve still got a couple more minutes before the top of the hour, but I thought I would open it up here. Uh I do want Well, I’ll I’ll mention this coming up here. I have a pretty nasty uh thunderstorm going on outside and uh typically I don’t get affected by thunderstorms, meaning my power doesn’t go out uh or anything like that. But this is not your normal uh uh western rain shower going on, the thunderstorm. Uh this is a good old good Midwestern rainstorm. uh there’s a lot coming down right now. So, for some reason, if uh I just drop off and everything cuts out, it’s because the power is out. Like I said, I it I typically don’t have that happen, but you just never know. I live in Utah. I work out of my house and I’ve got a uh I live in this big valley and I swear there’s one power cord that comes up over the mountain and every once in a while a squirrel will chew on that power cord and for no reason at all whatsoever it can be sunny out and everything and for no reason at all the power will cut out for hours. Uh, again, it happens only a couple times a year, so it’s not like it happens on a regular basis, but uh, like I said, I’ve got a pretty nasty thunderstorm going on out here, which we which we need it because Utah, Wyoming, Colorado, we all got almost no snow this last winter. And so, uh, we we desperately need this rain, but because it’s down coming down so heavy, it’s al going to wash out a lot of things. But anyway, it’s at the top of the hour. So, let’s go ahead and get started with that. And again, typically, uh, when I do these webinars, my dogs are outside, but as of right now, they are hanging out with me because I don’t want them all wet and, uh, and, um, you know, having that wet dog smell uh, for the rest of the evening. So, again, let’s go ahead and get started. Thank you so much. Uh, let me share my screen here as we get started here. Here we go. Okay, perfect. Um, let me set this up. Okay, so again, my name is Bernell Baker. I’m a financial consultant with Alliant Retirement and Investment Services. Um before we get started, let me uh just say that as I go along here, you may have some questions that pop up and um I I strongly encourage you to write those questions down as we go along in either the chat or the Q&A and then I will get to all the questions at the very end. Um I do encourage everybody to stay to the very end so that um you know somebody else may have a question that you hadn’t thought of that might pertain to you as well. So with that let’s go ahead and get started. Um there we go. So this is the different websites that we have here. We have our webinars. Again all of our webinars as you know uh signing up for this one is complimentary. Doesn’t cost you anything to do the the webinars. And we have a whole bunch of different topics. there’s uh quite a few of my co-workers. We all do different topics and everything. So, I’d go on to the webinars and and take a look at that. I’ll be honest with you, our p podcast, I don’t think that we’ve updated that anytime recently. So, there’s not any new uh podcast out there. Kind of the same thing with our blog. the information out there is uh is is still good but um it’s uh we have not updated anything or uploaded I should say anything recently that I’ve heard of. Uh and then also the AIS website. So again stands for Alliant Retirement and Investment Services. Uh that’s the division you know we’re all employees of the credit union here. That’s just the division that uh that I work for. Uh just a little quick thing. This presentation is intended purely for educational purposes only and it’s proprietary to uh a lang credit union. We just ask that you don’t um uh record any of this. Um just uh there’s a lot of uh regulations that we have to do and and stuff. So we just ask that you comply with that. Uh but I appreciate it. So uh getting into the Roth conversions, we’re talking about uh our future tax environment. This slide here is a little bit old. Last time that I checked, we were at $39 trillion and it just keeps rising. I just honestly don’t understand how we’re going to be able to pay that that debt off without raising taxes. Um, you know, right now, uh, our taxable portion for every single person in the United States, at least based upon these numbers here, is over $100,000. So, if you all had a cool $100,000, we could all I’m not recommending that we do it, but we could all chip in and pay down that national debt, but it would cost over $100,000 for each one of us to be able to do that. I don’t want to do it myself, but that’s just what it is. Now, our natural and national debt has been rising. Uh it’s we’ve heard it all over the news, and it’s just constantly going up. And at some point in time, our taxes that we bring in as a country is going to exceed any of the entitlement programs that we have. Our social security, our Medicare, our Medicaid, and any of the other debt instrument uh interest payments that we have to uh pay. That does not include like our national debt and any of the non-entitled program. So, at some point in time, our income is going to uh just be just enough to pay for the entitled programs and then where are we going to get the rest of the money? Unfortunately, with a government, they just kick it down the road to have somebody else deal with it. And I’m not trying to get political here or anything because both parties do it. Uh they just kick the things down the road. But we’re in a very, very low tax environment. If you take a look at the history of our taxes, it’s uh it is we’re at a very low tax environment, which I appreciate. I’m grateful uh you know, I I say pay the taxes that we owe, but there’s no reason to pay extra um on our taxes, but at some point in time, I just can’t imagine the government not having to raise taxes for whatever reason. So, to help us with the taxes, there’s a couple of different accounts that we can take a look at. So, there’s the tax now accounts, which is our savings accounts, our brokerage accounts that have stocks and bonds inside there, index funds, everything. If you have a brokerage account or a savings account or CDs as this is listed here, you’re going to be taxed on the interest and dividends that those pay out each year. There’s the tax later accounts, the traditional IAS or the uh pre-tax 401ks and any annuities. You can have non-retirement money, so money from savings account go into annuities. You’re not taxed on the principal you put into that and then you’re not taxed until the money comes out of the annuity down the road. So that’s a tax later account. And then my favorite is the tax never accounts, which is the Roth IRAs. Uh municipal bonds, not a big fan of those. You know, bonds just don’t pay a whole heck of a lot. And to have it completely taxfree, you’ve got to have specific municipal bonds. Not every municipal bond fund out there is going to be taxfree for you. And then we also have the HSA accounts that are tax never as well. So, those are the different uh tax taxations on different accounts and stuff. So, again, as we get moving into retirement, we’ve got to definitely take a look and see does a Roth conversion make sense for you? Um, and we’ll get into the Irma down the road here, but just see does a Roth conversion make sense for you. Now, this is the four different topics that we’re going to be talking about today. So let’s just get into the first one here. The basics. So the basics of a Roth IRA. So I want to make sure that we understand there is a difference between a contribution and a conversion. So, with a contribution, that is new money going into a Roth IRA that is not currently held in a retirement account, either an a traditional IRA or into a 401k or anything like that. You don’t get any deductions from your income taxes the year that you contribute into the Roth IRA. Now, the contributions that you put in there can be withdrawn at any time tax-free and penalty-free. So again, the contributions can be not the gains of it. Now, in order to take the gains out of retirement, excuse me, out of the Roth IRA, uh, without having any tax consequences or penalties at all whatsoever, there’s two requirements that have to be met. Number one, you have to be 59 a half or older. And number two, the money, the first penny that you uh that you’ve put in there has to be in there for at least 5 years. Okay, so that’s the two requirements to take this out. Any Roth uh money out, the gains of it taxfree, 59 a half and the money has to be on there for 5 years. Now, in order to be able to do a Roth contribution, there’s some requirements to do that. So, number one, you need to have an income coming in. Okay? Generally, income from a uh uh from a job or something. You can’t contribute to a Roth IRA if you don’t have an income coming in. And social security and pensions do not count towards that income. There are also Roth contribution limits. Same thing as traditional IRA. So, with a traditional IRA or a Roth IRA, there are contributions limits. If you’re 49 years old or younger, the maximum you can contribute this year is $7,500. If you’re 50 years old or older, the maximum contributions you can do is $8,600 up to whatever age. There’s no age limit where you can’t contribute to a Roth, but there are some income limits. So, I’ll take my uh example. Uh my my life for example, I’m married. So, as long as my wife and I earn less than $242,000, we can do a full contribution of $8,600 each. If we have an income coming in at 242 to 252, we can’t do the full $8,600. We can do some of that depending on what the income is in there. And if we earn more than $252,000 for the year, we cannot do any any contributions into the Roth IRA directly. You can do backdoor Roths or Roth conversions is which is what this is this is at. So um and again this is all modified adjusted gross income. So after deductions and everything like that, that’s where the income limit is. Now as I mentioned I am married. I’ve got a wife there. She does not work. But even though she does not work, we can still do a contribution into her Roth IRA based upon my income. So if you’re married, one of your spouses is not uh uh doesn’t have any income coming in, you can still do the contribution p based upon this spouse’s income that is working. Okay. Now, in order for the uh in order for my wife to be able to take out all the money, this still the 59 and a half uh and older and the um uh 5-year rule does need to apply for her to be able to do to do that. Now, again, those are all contributions. So, again, a contribution is new money going into a Roth that is not currently in a retirement account. Now, conversions are completely different. Conversions is money that’s already in a traditional IRA, a rollover IRA if you want to say, or if it’s currently in your 401k. So, those are money that’s already in retirement plans. You can do Roth conversions for any of those. Now, uh there’s no contribution limits because this is a conversion. I should say back up and say there’s no conversion limit. So you can do whatever amount of money that you want to do as a conversion. When you do the conversion, you are taxed the year that you do the conversion. So like a contribution up until when taxes are due, typically April 15th, but up until taxes are due, you can do a contribution for a prior year. You can’t do that in a conversion. If you do a conversion, you are taxed on the year that you do the conversion and you have to claim that as income and then just pay your federal and state taxes if you if you uh live in a state that has taxes. So, it counts towards your income. I’ll get into an example coming up here, but let’s say for example here, Jill Jill wants to convert $100,000 from her traditional IRA, rollover IRA or 401k. She’ll have to add that $100,000 to her income and then that may bump her up to a new tax bracket depending on what her other income is. So that be uh you got to be careful about that here. So again, tax-free Roth distributions. So now, let me back up and say your conversion, again, coming from a traditional to a Roth, for your conversion to be able to be taken out tax-free, it has to be in there until you’re 59 and a half or older. And uh it’s got to be in there for the 5 years. Okay? With a contribution, you can take out your contributions, but when you do a conversion, you cannot take out your conversions and unless you met these meet these two requirements here. So, who can do a Roth conversion? Pretty much anybody can. There’s no age limit, there’s no income limits, and there’s no requirement to be working. But just as I mentioned earlier, you have to claim it as income and pay taxes on it. Now, I’ll get into the story here after this one here. So, my story is prior I’ve been working with Alliant now for about 13 years. And prior to Alliant, I worked for a big nationwide bank and I was a financial consultant there as well. Um, uh, one day a husband and wife came into me all kind of in a panic. Uh the wife had lost her job and the husband thought he was doing the right thing and he converted her traditional or her pre-tax 401k directly over into a Roth IRA. When they went to do their taxes again, they had to claim that as income. Their accountant said, “Congratulations, you owe the government $40,000.” So that’s when they came in to me all in a panic and said, “What can we do about not having to pay the government 40 grand?” So, I was able to work with their old 401k company, get the money moved back into the 401k company, and then we were able to roll that over into a traditional IRA, so they didn’t have that um that tax burden. You could do that prior to 2018, and that’s when it was since the uh tax cuts and job act of 2018. You cannot roll it back out again. Once you do the Roth conversion, you’re stuck with it. I couldn’t do the same thing that I did back then by rolling it back into the 401k and then into a traditional. Nope. Once you do a Roth conversion, you’re going to have to pay taxes on that money when it uh when your taxes are due. Okay. So now the cool thing about Roth conversions is in retirement is there’s no RMD. There’s no uh required minimum distribution. So like there is in a traditional IRA. So currently right now the RMD age is at 73. If you are not 73 by the year 2033 then it jumped up to 75. Okay. So, at 73 or younger or older, uh, you’re doing RMDs every year. And the RMDs is the required minimum distribution coming out of a traditional or a rollover IRA because when you added money to that while you were working, typically through your 401k or whatever, each year that you contributed to that type of an account, you got that amount of money deducted from your income for the year. So the government says, “Well, since you got a deduction off your income, you have to start paying the taxes on it at some point in time.” So then again, at 73 or 75, you have to start doing RMDs. With a Roth since the since you’ve already paid taxes on the principal going into it, and there is no taxes on the amount of money coming out of it, then the government says there’s no requirement to take money out of a Roth IRA. So that’s kind of the bene one of the many benefits of doing a Roth IRA. Oops, I there we go. Now again, talking about taxes, because of our national debt is so high, having a Roth IRA may help us hedge towards increases in taxes down the road. Because again, when you take money out of the Roth IRA, it does not count towards taxes or your towards your income. So you’re not uh uh having to pay taxes on it. We just don’t know what the taxes are down the road. Uh so by doing it into a Roth IRA, it uh it it may help you out with taxes down the road. And then also there’s something called Irma, IR MA. Basically what that means is in retirement if you make enough money uh on an annual basis you may have to pay more money uh towards your Medicare part B and Medicare part B D insurance. So for a single person that income limit is $109,000. So, if your income is $ 109,000 or less than $109,000, you don’t have to pay anything extra. But once you start doing your RMDs, if you’ve got enough in a traditional IRA, your RMDs are going to kick it may kick you above that $109,000. So like at 109,000 to 127 I want to say it is if you earn that amount of money in in uh retirement you’re going to have to pay like $86 more for Medicare part B and another 14 I think it’s like 1450 $14.50 extra for part D. The next bracket up, you’re going to have to pay an extra $22 extra for Medicare Part B and I want to say $64 extra for Part D. So again, those Medicare premiums may increase because of your income, your RMDs in retirement. Again, if you take money out of a Roth IRA, they do not qualify uh do not make you qualify for anything higher in uh in uh paying Medicare Part B and Part D. I like to say quite often, congratulations for being successful. Now, the government wants more of your money. So, so social security and Medicare. So if you take money out of a traditional IRA or a rollover IRA, oh 100% of that is taxable. It also gets added to your provisional income and that could greatly increase your your modified adjusted gross income for your Medicare pricing in a Roth IRA. Any distributions that you take out of that doesn’t affect any of those things at all whatsoever. So let’s take a look and see. Does a Roth IRA conversion make sense to you? So, let’s say you have $100,000 and you get an average 5% return and you’re at a low tax bracket this year for whatever reason, lost a job, maybe you’ve got a lot of deductions or whatever. So, if you do a Roth IRA without doing a Roth conversion, let’s say it’s in there for 10 years and again you’re getting the 5% return in a traditional IRA or a again a rollover for a rollover IRA. That $10,000 in 10 years is going to jump up to be 16,289. Now, let’s say that you’re doing RMDs and you’re taking a taking out more money. So, you’re at a higher tax bracket after you take out 24% just for federal of that $16,000. Your after tax value is $12,380 bucks. Now, if you had done a Roth conversion while you’re at the 12% tax bracket of $10,000, so your 12% off of that is $1,200. So, let’s say that you actually start and you take that that taxes out of that $10,000. So, you start to invest technically with8 $8,800. Same investment, 5% return for the next 10 years. Your account value will grow from $8,800 up to 14334. So, you will actually have about $2,000 more than if you did then you than if you didn’t do the Roth conversion and was at a higher tax bracket later on. So, you got to take in that into consideration. It’s actually 15% 15.8 to be exact at a greater um uh balance for you. So, one thing to consider is the future taxes. Are taxes going to rise in the future? I I again, I just can’t see us not doing it without um you know, and and trying to pay down our national debt. I don’t know how else they’re going to do it. So, we know what our tax brackets are today and our tax bracket is good until 2028 and then uh you know that’s part of the one big beautiful bill and then Congress at that time can vote to extend the taxes that we currently have or come up with different taxes or they can just let them pass. And if they let them pass, our taxes are going to go up a little bit. nothing drastic, nothing massive, but they’re going to go up a little bit if the taxes a current tax bracket is not extended out. Now, when I talk about doing it up to a tax bracket, it again, it all just depends on where income is at. And um so if you’re currently in the 22% tax bracket and you want to stay within that 22% tax bracket, I recommend that you do it towards the end of the year where you’re going to have a pretty good idea of what your income is. Again, towards the end of the year, I’m talking about late November, early December. You’ll have a pretty good idea of where your income is going to end up in. uh and then minus all your deductions and then that is what you would be able to do uh Roth conversions to fill up to the 22% tax bracket. As I mentioned earlier, the Irma, this is the cost of the Irma. So again, for an individual, if your income is 109 or less than $109,000, you don’t pay anything extra. You know, your your um you just pay the normal regular part B and part D. Now, if your your income is 109 to 137, I thought it was 127. It’s 137. Uh if your income is uh between that, you’re going to have to pay extra money. You know, again, another $82 a month extra for um uh Medicare Part B and then another $14 extra, $1450 extra for Part D. What really uh jumps up is if you’re in the 137% 137 uh dollars there, you can really see that it starts to jump up quite a bit more. You know, $400 a month extra uh because you earn extra money in income. So again, congratulations for being successful. The government wants more of your money. That’s just what it is, unfortunately. Now, you in order to do a Roth conversion, you may want to hunt for those years that are, you know, that you’re in a lower tax bracket. Not everybody can do this because if you have a a job with a regular salary, then your income’s not going to fluctuate too much. But if you’re a business owner or if you have a lot of deductions for whatever reason for a year or whatever, when you do a Roth conversion, if you’re in a lower tax bracket, you’d be able to do more money, but then still stay within uh the tax bracket that you normally are at. So, let’s say you’re at a 22% tax bracket uh normally, and then this year with uh maybe deductions or whatever, you might fall down to the 20 or the 12% tax bracket. You could stay in the 24 and just do more because of your income is at a lower amount or you could just do it into the stay within the 12% tax bracket and just do it up to that and and be safe there. Okay. Now, the original IRA owner. So again, with a traditional IRA, you do have RMDs that you have to take out. Again, if you’re 73 currently or if you’re not 73 by the year 2033, it jumps up to 75. And you’ll have to start doing RMDs uh from any any non uh Roth account. So any traditional IRA 401k. If you still work for your company full-time, you do not have to do RMDs from your 401k. But if you have an old 401k out there from a previous job, yes, you got to do your RMDs from that. But if you still work for the for that company at 73, you must love your job. Um, and and and failures to take out your RMDs, it you’re going to have to pay a penalty for that up to 25%. Now, your RMD isn’t a big big percentage of what you have to take out. Here’s how they calculated it. So, let’s say that you turn 73 next year. At the end of this year, December 31st, after the market closes for the day, you have to total up all your traditional IRAs to get your entire balance. And then next year, since you’re turning 73, you’ll have to take out 3.78% of that balance. And you can see here, every year, the percentage that you have to take out slowly increases. Not drastically, it’s slowly in most cases here, but you’re going to have to start taking money out more and more, a a higher percentage, more and more as the older you get. So again, jumping back to the Irma, you may not be at Irma at 73, 75, maybe at even 80, but if you get in, you know, again, depending on what your balances are, you may have to start paying your Irmas down the road. And it’s amazing how quickly uh your your RMDs can add up to that. Again, B, you know, if you have enough. Now, surviving spouse here. So, let’s take a look at an example here, Adam and let’s say that they want to have $110,000 uh after tax income. So, they’ve got their pensions, which a lot of people don’t have pensions anymore. They’re kind of lucky that they have it. They’ve got their social securityities, uh, checks that are coming in here and income, uh, taxes, everything. So, they’re at $110,000. So, their marginal tax bracket is 12%. Now, let’s say that Adam passes away and Ann wants to maintain that $110,000 income. Then, while Adam was alive, they were married to filing jointly. But now that Adam has passed away and is having to file as a single person if she maintains that $110,000 now obviously she’s going to lose Adam’s social security or the she’s going to lose the lesser of the two social securityities. Uh in this example here they’re dead even at $30,000. But that means that she’s going to have to take out that additional $30,000 uh from her IRA account to come up to the $110,000. And that $110,000 income is going to put her into a higher tax bracket. She’s going to be at the 24% tax bracket. But so being at the 24% tax bracket instead of being at theund or the 12% tax bracket when Adam was alive, that means that she’s going to be paying about 14% more for income uh towards taxes, which is going to reduce her overall income limit. So there’s something to be said about um you know there’s a they we kind of refer to it as a widow’s tax or widowers tax. Um if you maintain the same income your tax bracket is going to be less. Okay. So just be aware of that. now. And then that also could put her at a a single tax bracket where, you know, when Adam was alive, they may not be paying Irma, but now that Adam has passed away, if she wants to maintain that $110,000, she’s going to be have to having having to pay extra for Irma because now she’s a single person. So, just be aware of that down the road. So, beneficiaries, let’s look at an example here. So, prior to 2020, if somebody passed away, then you and you inherited a non-spouse, so let’s say from your parents, typically from a parent, um when you inherited a money prior to 2020, uh you didn’t have to take, you know, you took out about 5%. Okay? They called it a stretch rule. So, you excuse me, about 4%. You would have to take about out about 4% per year. uh as far as RMDs went. Okay. Now, uh so that if you inherited a million dollars, you’re taking out 90 $25,000 uh dollar. Now, if you and then let’s say that Carrie was earning uh $90,000 a year, you add in that uh that RMD that you have to take out. Now, her new tax bracket is going to be at a higher amount. But um

uh with the new rule here, every single penny of your traditional IRA and your Roth IRA has to come out within 10 years. So your traditional IRA, if you inherit it, you’re going to pay taxes on it. on your Roth IRA. If you inherit it, you do not have to pay taxes on it, but you still have to take it out of the IRA. Here’s the reason why. Let’s say you inherit a million dollars in Roth IRA, comes out tax-free. Most of the people are not well, you’re going to do one of basically one of two things with it. You’re going to either spend it in the economy. that’s going to, you know, help the economy grow. You may buy a new house, that’s going to help the realer. The realer is going to make money off of that. The builder may make some money off of that and down the road, whatever. It’s going to help out the economy. So, you’re either going to spend that million dollars or you’re going to save it or invest it, okay, with a Roth IRA that comes out, it comes out taxree. But now that you are investing it or saving it, now you’re going to have to start paying taxes on the dividends and the interest that you earn from that amount. It used to be prior to 2020, it used to be that you did not have to take any money out of the Roth IRAs. The government wasn’t getting any taxes when they took it out, but now they have figured out they can get taxes on it by you saving or investing it, and they’re going to get more taxes that way for a longer period of time. So, that’s why uh it um uh that’s why they changed the rule. Now, if we take a look at this and say Carrie, she’s again making uh $90,000 a year, she’s just barely into the uh uh 22% tax bracket. But if she inherits the million, and again, if it grows a 5% return, to take it out evenly each year for the next 10 years, she’s got to take out the $123,000 a year. That’s definitely going to put her into a higher tax bracket. So on that million, she’s going to pay $310,000 in taxes on that amount. So in reality, she’s really only getting about $700,000 from a traditional IRA. So just going over some things to con uh to uh consider by doing a Roth conversion. Again, there’s no income limits, there’s no age limits. You can do it at any income even no income or at any age you can do it uh when whenever uh now you cannot do a Roth conversion from a beneficiary IRA. You can’t do it. It has to be from your own IRA. Um, there’s no pre-age 59 12 additional taxes because you have to take the money out or excuse me on this on the on the conversion. So, if you’re under 59 and a half, which I am about by about a year, um, if I do a Roth conversion this year, uh, it’s a conversion, not a distribution. So, with a distribution, you have to and you’re under 59 and a half, uh, then you have to take out, uh, pay an additional 10% in taxes. If you do a conversion, you do not have to pay that additional 10%. Uh, and it’s just a it’s a great thing to do. uh the more money or excuse me the the longer of a time frame that you have for that money to be in the Roth IRA what I have found is the better it is for you because then it can grow tax-free over that lifetime. So there’s some limitations also that uh by doing a Roth conversion uh there’s no guarantee that the Roth conversion is going to achieve the same results as the traditional IRA. if you invest them in the same investment products, you’re going to get the same kind of return. Um, but and so in in theory, you’ll actually be a further ahead in the Roth IRA because now it grows tax-free versus in the um in the traditional IRA. Now, all these rules that we talked about are rules that are currently going on right now. But these rules are not written in stone. the government can change these rules if they pass a new law. I don’t think that they would or we’re going to have a lot of grandmas and grandpas marching in the street riding instead of the younger generation and that just wouldn’t be uh that wouldn’t be very good. I just don’t see them changing the rules, but they could technically. Okay. Um again, when you do a Roth conversion, you got to claim that as income the year that you do the Roth conversion. So, just be aware of it and only b only do the Roth conversion up to the tax bracket that you’re looking to do and and things like that. So, it’s um again, it’s not the best thing for everybody. Uh but here’s how we can figure out if it’s the right thing for you. We have a complimentary uh program here at uh at Alliant Credit Union where we can run a program to see if a Roth conversion is a a something that you cons you should consider. It’s actually a a a plan that we call a wealth vision. So it does more than just the Roth conversions. It looks at a lot of different things. And again, this is complimentary, so it doesn’t cost you anything. So we’ll take a look at some of the the reports of this wealth vision here. So the wealth vision will show us where our income is coming in. So for example, we’ve got Bob and Mary here. The dark blue there is you get they’ve got social security. The light blue there, the little thin line there, that’s a pension that they may have had. And then the uh the red line there, that’s their income. And then you see the orange there, that’s their RMDs. So you can see that that red line bumps up when they have to start taking out their RMDs because their expenses are going to increase because now they’ve got to pay taxes on those RMDs. You know, when we do a comparison of uh a Roth conversion, we look at the base plan first without doing any Roth conversions. So Bob and Mary here over their lifetime based upon the information that was put in here, their cumulative taxes that they would have to pay over their lifetime is $832,000.

Now their portfolio when they when this second of the two pass away is $4.2 million that they’d be able to pass on to beneficiaries. So, that’s just part of the plan that we do here is let you know, do you have enough money saved for retirement? And it’s amazing how many people just just feel comfortable once they know that they have enough. Then it’s just a it’s a great uh uh relief off of their shoulders worrying about it. Now, when we do Roth conversions, we can do it a couple of different ways. If we want to program it to say, okay, well, let’s do a Roth conversion over the next 8 years and let’s say you’re going to retire in 8 years and we want to do a Roth conversion during that time and so that it’s all done and over with by the time that we retire, we can figure that out and put that in here and say, okay, so here the red would be the increase in taxes because they’re doing Roth conversions for those eight years. And then you can see down here at the bottom, by doing the Roth conversion, it would save Bob and Mary $140,000 taxes over their lifetime. But by but by doing a Roth conversion, they don’t have to do RMDs later on, it would actually increase their portfolio to pass on to beneficiaries by $828,000. So, that’s those are the two things really that we look at to see does a Roth conversion make sense for you. Is it going to save you money over your lifetime and is there going to be more money to pass on to beneficiaries? Now, it might not be that it’s going to have more money to pass on to beneficiaries total, but again, going back to the example of, you know, paying taxes on it, they may have a little bit less money overall, but the majority of it now is in Roth IRAs, which they don’t have to pay taxes on it. So, we take a look at a lot of those different things here. Uh here’s their uh assets uh as well and where their income is going to be coming from. So they got their social security uh they’ve got other other income coming in and then the again the red line is their is their expenses and then in this example here for Dave and Sarah their income is not enough to uh exceed their expenses. So they may have to take some money out. This is an example where their mortgage, they may have a mortgage a few years into retirement, six or seven years into retirement. So, they would have to take money out of out of savings or whatever to pay for that mortgage or whatever the extra expense is. But, we can see that once that expense goes away, it can it’ll show us, you know, what the what the uh balances are and and how it will benefit uh or hurt somebody depending on if they do the Roth IRA. we can see that if their assets are going to continue to grow and again the biggest thing here is do you have enough money to last through your lifetime that’s the one thing that most people just want to know now if uh again one of the things that I talked about here is doing a Roth conversion to fill up to a a bucket strategy say for five years in a row here and they want to do that we can take a look at and just change all different types of things around we can see that okay if we do a Roth conversion for five years. What how is that going to affect us? And in this example here, they would save $116,000 overall on their lifetime in taxes and then uh increase their portfolio when the second of the two passes away at uh $250,000 in this example here. Now we can take a look and see how is it going to reduce our taxes uh again by doing a Roth conversion upfront then you don’t have to do RMDs for so long in retirement especially have if you have a long lifestyle um based not not lifestyle life expectancy uh based upon your uh family history and how long they typically live. My mom’s side of the family typically lives until the mid80s, 85, give or take a few years. My dad’s side of the family typically lives until their mid 90s or even later. Uh my grandfather was 3 weeks away from his 100th birth on his 99th birthday. So he was three weeks away from that. My grandmother was 94 when she passed. So, uh, I’ve got, uh, kind of a, excuse me, I’ve kind of got a an average life expectancy on my mom’s side, but then my dad’s site uh, lives much longer than average. So, I’m I’m looking at 90ish or something like that, give or take, somewhere around there. Now, that’s all that we have here. So, I appreciate everybody’s time here. Let me give you uh, so we’re here to help here. Any questions that you have on Roth conversions, I’ll be glad to help you out and answer any questions that you have. Again, write them down there in the Q&A is typically the best, but either the Q&A or the chat and I’ll be able to take care answer the questions that we have here. So, we’re here to help in any any way that we possibly can. And how can we help you here at Alliance? There’s so many different uh things that we have here. We have complimentary foundational financing financial plans. Uh that’s this wealth vision. We have we have estate plans. We have uh all kinds of investment options that we have here. And we’ve got some investment options that I didn’t even have when I worked for the n national bank. We’ve got some really neat ones here that are very uh protected, very safe, but can also give you a great a great return. But why Aerys? Why Alliant Retirement and Investment Services? So number one, we want to get to know you and devise a plan specifically for your situation. Everybody’s situation is a little bit different. We use a team approach where we gather the information and talk about a team if we need to and come up with a situation that’s specifically for you. And then we also want to create a lifetime um a relationship with all of our members here at the credit union. The cool thing with Alliant is there’s not a a toll-free number to call up and ask for anybody and everybody for the investments. Uh for any of my clients, they know that they can call me directly and get answers directly from me. That way when I know your situation, I can help you out in any way. Um I do reviews consistently depending on the type of plan that we have. Uh sometimes it’s 6 months, sometimes it’s once a year. Uh but again, I’m always uh able to be uh reached by phone or me or my assistant. So any questions? Here’s my contact information. Uh and and uh my my direct phone number here at Alliant is 773462

8612. I like to joke and say that Alliant pays me to talk on the phone and I do a very good job of that. So, you may get my uh voicemail. Please leave a message and I promise I will call you back as soon as I possibly can. Let me launch this before we get into the questions here. If you would have like to have a one-on-one conversation with me or maybe to do that wealth vision plan that I went over at the very end here, just answer yes to this question here and I will reach out to you and um and we will uh set a time. I’ll call you. Uh first of all, I will uh try and give you a call. If I get your voicemail, I’ll still leave a message, but then I’ll shoot you over an email and uh with my email, you uh have access to schedule a Zoom meeting directly with me. So, with that being said, let me get into some of the questions here. Uh how are Roth IRAs different from Roth 401ks when offered by my employer? So, with a with an IRA, Roth or traditional, it’s an individual retirement plan. With a 401k, Roth or pre-tax or Roth 401k or or a traditional or post tax Roth 401k, excuse me. Uh, the difference is in your 401k, you typically have a lot lot fewer options to be able to invest in. Um, in a 401k you typically have, yeah, 20 maybe 30 different mutual funds to pick and choose from. In an IRA account, you have so many more options. In a we went over contributions into Roth IRA. So, if you’re under uh 49 and a 49 years old or younger, it’s contribution limit is 7,500 uh uh uh 8,600 if you’re 50 or older. In a 401k, your contributions are a lot greater. I don’t do 401ks. I want to say 23 $24,000 a year is your contribution limit into a 401k. Um, but again, your biggest difference is the investment options that are available in a Roth versus a 401k. Hopefully that answers your question there. Uh, do I have to wait the 5 years for the conversion? If my conversion goes into my rollover 401k Roth IRA that I’ve had for uh 5 years, as long as you are over 59 a half, you don’t have to wait the 5 years. Uh but if you’re under 59 and a half, you need to do a conversion. You still got to wait the 5 years for that. Yes. Uh I am 41. I only do Roth. That’s awesome. Congratulations. Any disadvantage for only doing Roth for the rest of my life? none that I can see. Well, technically the only disadvantage is you don’t get a tax deduction now. But uh but all that money grows taxree and especially since you’re 41, I see no disadvantages by doing a Roth 401k or a Roth IRA. You’re on the right track. That is awesome. Uh any comments on doing a Roth conversion from a 401k account after retirement? Um, yeah, I do them all the time. Again, it all really that that wealth vision plan that I talked about could really uh help us know how much to do or is it a benefit for you or not. Um, again, the longer the money is in the Roth IRA account that it can continue to grow, the better it’s going to be for you and then also for your beneficiaries. But also take into consideration that your beneficiaries are receiving all that Roth tax-free. Now they still have to take it out in 10 years, but it can stay in there for that additional 10 years and grow taxfree for them so that it hopefully it’s at a higher amount after the 10 years as well. How to keep track of all their Roth. I was told IRS don’t keep track of Roth for me unlike income history. in social security. I don’t want to I don’t want IRS to turn 30 years later and said they think my IRA is not host tax. So, it just all depends on the account that you set up. If you set up a Roth IRA account, then the money going in into there is is money you’ve already saved or excuse me, money you’ve already paid taxes on it. It’s like money that has come out of a savings account. So, that’s a contribution. Uh I’ve never heard of the IRS auditing somebody and and making them prove that the money was uh post taxing money. I’ve not had that. Again, I don’t do taxes, so I maybe I’ve not heard all the stories, but that’s honestly that’s not a concern that I would have about that. Uh, how can I get the complimentary scenario you showed? I have lots of IRAs waiting to be converted. Just uh Aaron, just schedule a time with me. I’ll reach out. If you answered yes to the um that you wanted the um Roth conversion or that wealth vision done, I’ll reach out to you. If you didn’t, either shoot me an email uh with that email on the screen there or give me a call and we’ll schedule to do um look at the uh the wealth vision plan for you. Uh, do most of these rule apply to 401ks as well as traditional IRAs as far as conversions goes? Absolutely. 401ks or traditional pre-tax 401ks or traditional IRAs, all the rules apply the the exact same. Uh, is it true you can’t take an RMD for a 401k from an IRA? What about an annuity in a retirement plan? So Howard, here’s how the RMDs are calculated. As I mentioned earlier, let’s say you turn 73 next year. At the end of this year, after the market closes on December 31st, you add up all your traditional IRA accounts or pre-tax 401k accounts. It doesn’t matter if it’s what the type of investment is. So, it can be an annuity, it can be stocks, it can be a CD. You just have to add up all your traditional IRA accounts or your pre-tax 401k and then with that balance based upon your age next year, let’s say you turning 73 next year, uh was it 3.87% I think is what you have to take out. So you just have to add them all up. Each one of your accounts should tell you what your RMD is for that account. So next year, usually after a week or two into the following year, you would be able to call up those each one of those accounts that ask what your RMD balance is.

Now, can you uh is it true you can’t take an RMD for a 401k from an IRA? Incorrect. It doesn’t matter if it doesn’t matter if it’s a 401k or a traditional IRA or a rollover IRA. As long as you you can take let’s say you have five different accounts. You have to figure out what your RMD amount is. And let’s just say hypothetically it’s $20,000. The government doesn’t care if you take out that $20,000 from one of your accounts or if you take out each amount from each of your four accounts. they’re still going to get their taxes either way. So, it’s the RMD is the m required minimum distribution. Doesn’t matter from what account it comes out of. It’s going to be taxed the exact same way. Are there any scenarios where you eliminate the tax bill when converting? Not legally. No, you have to do uh you have to pay your taxes. So, there’s no scenarios legally that I can think of uh where you don’t have to pay your bills. I’m not going to talk about the illegal ones. Does it pay to make uh Roth conversions after you have to begin taking RMDs, especially when you’re living off of your IAS and annuity income?

Uh again, the longer the money has to be into the Roth IRA, the better of a situation is going to be for you. So, because again, the money then can stay in the Roth IRA, grow tax-free, and if you need the money, you can take it out without any tax consequences or anything. So, it is, you know, if you’re already taking RMDs, you can’t go back and change the past. It still might be more beneficial for you to do it. But if you’re not doing RMDs, I highly encourage you to look at the Roth conversions before you have to start doing your RMDs because then again, if you can do Roth conversions before that, it might eliminate that Irma uh down the road for you as well. Um, better late than never in most situations, but I would say look at it as soon as you can. Uh, do you only advise on IRAs held with Alliant or is your uh, consultation available to an Alliant member who has an IRA and 401k and another organization. So legally any financial consultant whether it’s here at Alliant or at the big bank that I used to work for or an independent legally we cannot offer you any advice on it on accounts that we are not directly responsible for. So in your 401k legally I cannot tell you buy this, sell that, change it around. What I can do is maybe break down the type of investment that you have. You know, for example, if you have a mutual fund, the name of the mutual fund doesn’t may not give you an indication how that mutual fund is. Is it aggressive? Is it conservative? Is it balanced? Does it do whatever. So, I can I can break down the investments for you. Anybody can but nobody no financial consultant can give you advice on an account that they are not directly responsible for. Uh can we use the wealth vision tool on our own or do we need to work through you uh and my staff? Unfortunately, it is only through us. There is not a tool out there that I know of that you can do on your own. I’ve had many people say that they have tried to look for one and this is the only one that they have found. But you have to work through us to do it. That doesn’t mean you have to do an investment here, but you have to do it through us. Uh I’m 69 and retiring at the end of the year. Congratulations. That’s awesome. Uh thinking about starting to do Roth conversions starting in 2027 to reduce future RMDs. Absolutely. The wealth vision tool would be great for you to see does it make sense and if it does to what amount or what tax bracket you should do to optimize any Roth conversions. Uh what about when traditional IRA monies were non-deductible amounts and time to begin conversions? Is it still recommended when they are pre-tax 401k SE and non-deductible IRAs? Um, most of the time, yes. But again, that wealth vision tool will tell us. I mean, there’s so there’s so much that goes into calculating if a Roth conversion is good for you, more so than just your dollar amount that’s in there. There’s so many things that it takes into consideration other income, takes in consideration your age, it takes into consideration your longevity. So I would have to run the plan to see if I would recommend a Roth conversion for you. And if it does make sense, which tax bracket is the best tax bracket to optimize your Roth conversions. So that is all the questions that I have here. Um I appreciate it. So for anybody who answered yes to the questionnaire, I will reach out to you. Uh I will try and give you a call again. If I get your voicemail uh then I will shoot you an email as well. And my email you’ll be able to you can give me a call back or we might be playing phone tag back and forth for a little while. Um, but uh you could just schedule a Zoom call with me and that way it’s on both of our calendars. We know that uh there’s a set time for us to speak. So hopefully this was helpful for everybody. Uh again, another question here. Are the slides available? Unfortunately, they are not uh they are not available. We don’t record on our end. We don’t record uh these slides or anything, but they are not available. I’ve got a bunch of thank yous. Um you’re sure you’re welcome. Glad to do this for you. Got another one. To be clear, can you do a wealth vision tool for someone whose IRA is outside of uh Alliance who is in outside alliance? Yeah, we can do a wealth vision tool. That’s not that’s not telling or giving you advice as to what you should do with that alliance or anything. But yeah, we can definitely do a wealth vision tool uh plan for you even without any investment here directly with Alliant. Um so uh yeah, again I got a bunch of thank yous. You’re so welcome. I am glad to uh be able to do this for you. Uh so we’re in the evening of hump day Wednesday. So we’ve only got a couple of more weeks left, excuse me, a couple more days left for the uh for the rest of this week. And I’m so glad that we made it through here without uh my power going out. So I hope everybody has a wonderful evening and uh we’ll talk again soon. Take care. Bye.

ending in gov. Make sure it’s the right website uh to check the status of your tax return or a refund. Um so, you know, don’t click on anything from tax authorities or IRS. Just go to their website, make sure it’s the right website, and uh you’ll be safe that way.

Uh so, you know, this financial exploitation, it can happen to anybody. Um so, if it’s happening to you, uh you’re not alone. uh you shouldn’t feel bad because it’s really tricky out there. Um you know, you want to make sure that uh again you’re pausing and stopping if you uh find anything suspicious in any of your communication, social media, any of your emails, uh etc. So, if somebody contacts you via the phone or internet requesting money, um it’s probably fraud. Uh if somebody, you know, claims that you need to pay taxes or you’re going to win a prize, uh almost certainly fraud. Uh, if they tell you that they’re stuck out of the country, one of your kids, one of your grandkids, uh, they need money, almost always fraud. Um, somebody asks you to use gift cards, wire transfers, cryptocurrency as a form of payment. Uh, bad news, almost fraud. Um, and then, you know, if somebody attempts to scare you by saying you cannot speak to somebody else, then again, be careful. Um, so these are just some common things to watch for. Verify all communications. uh especially when it uh pertains to financial accounts, you know, money uh health information, sensitive information. Uh just be on the watch out.

Here we’re going to go through kind of a little challenge. So um you know there is a knowledge gap in terms of uh many of us out there uh you know staying secure uh keeping up to date and uh you know this little cyber security kind of uh score can help you understand where you’re at. You’re going to go through this um you could take the quiz or uh just kind of follow along either way. Uh but basically uh you want to give yourself five points for each question you answered. Yes. the higher the points uh the better off uh that uh you are the more secure you are uh and you just want to kind of think about you know the there is no pass fail uh it’s not a hard test it’s just you know where you need to to get smarter about cyber security so number one you know you have one email address that you use exclusively for online financial accounts which is banking credit cards have a different email address for those financial accounts uh number two you have two-step verification um um implemented. So, two factor authentication, so turned on for email and online financial accounts. Uh number three, you can spot the difference between um kind of sketchy, dangerous free public Wi-Fi and uh secure free public Wi-Fi. Uh you understand how to tell if your home Wi-Fi network is vulnerable to hackers. Um, you’ve set up uh alerts when uh when money leaves your bank account or your credit cards are charged. Uh, number six, uh, you have complete control over your credit files at the big three bureaus, Equifax, Experian, TransUnion. Number seven, uh, you’ve confirmed with those three credit bureaus um, that uh, your minor children have not been the victim of identity theft and have frozen frozen their credit file. And then lastly, uh always make sure that any computer device has the most up-to-date software, including operating systems, browsers, Microsoft Office, virus protection, um routers, everything. Okay, I’m going to go through uh a whole bunch of suggestions, tips, um ideas for you to stay safer, uh increase your cyber security score. Uh so again, Paul G, I’m going to go through this pretty quickly. Um but these are all just good ideas. uh best practices. Uh again, our email address is the key to our digital lives. You know, you know, we share it with lots of businesses, um organizations, people. If you’ve used the internet for any amount of time, you’ve entered your email address, uh and many different places for shopping, traveling, exercising, gaming, dating. Um and we’re all kind of used to it. Uh sorry, just skipped.

Okay, back. Um, so you want to make sure that uh again if your email address is out there that uh you’re not putting yourself at security uh any kind of significant security risk. U you know hackers try to routinely um you know breach networks um that hold your primary email address and you know try to kind of pair that uh uh information with you know with other things and try to get hold of your data. uh you might not care if uh someone hacks your uh your food network of your uh uh your other account like Yelp or something uh but you certainly don’t want your you know online banking exposed in the same way um this email address um you know if you um decide to kind of follow this rule um you know what you should do is create a secret email address for your financial accounts and you know this email address will be uh only used for your most sensitive information. Uh do not use your first name, last name, initials, other identifying information and make it a strong and unique password. So the first rule of thumb here is create a secret secret email address for your financial accounts that’s different than your other email addresses. And this will help keep you protected.

Um you know, what goes kind of uh part and parcel with your login is a uh a password. And you want to make sure that you are um coming up with strong passwords. Technology is making it easier for us to have stronger passwords. Um but you just want to be diligent about this. Constantly update them. Um you know, there’s some tricks here uh to kind of beat the password paradox. You know, and the paradox is is that um you know, we have so many passwords out there. It takes so much time. Um and uh you know if we have a a simple password it’s easier to hack and we have a compliment complicated password then it’s just going to take much more time to kind of think of it and uh kind of uh manage it. Um kind of fun fact here uh it a computer can crack uh a thousand weak passwords in like 17 minutes. Uh so we’ve all heard the statistics about you know supercomputers being able to crack passwords uh you know and AI and everything else that’s coming uh in the future and and password protection. But you know make sure you’re you know using things like uh pneumonics um to come up with complicated passwords um ask asking um you know using a password manager uh to help you come up with uh complicated passwords. you know, never use the word password uh or one two three four five six kind of goes without saying, but uh lots of people still do that. Uh you know, there are some online, you know, ways to to create complicated passwords. You know, there’s the um again password managers or um uh you know, ways to kind of do it. There’s the diceware method um you know which uh which you kind of roll a dice uh you know five times and record the number and then kind of match it to a password. So lots of different ways. I don’t want to go into you know what works for you but the whole idea is uh make sure that you have a complicated password and make sure that you’re using it don’t have simple passwords. Uh number three enable two-step verification on your email and financial accounts. So this is where you have an additional code uh where you log in u most sites more and more these days have this technology. So when given the choice enable it please uh use it uh because then you’ll get a code to your phone and then you know there’s uh you know something online and something physical that grants access to these sensitive websites. Uh so please do use multiffactor authentication. Uh number four use Wi-Fi with extreme caution. Uh, so you want to avoid, you know, financial transactions, checking email on public Wi-Fi. I know this is an inconvenient and, uh, we’ve all done this. Uh, but the whole idea is that public Wi-Fi is often not secure. Um, you know, you want to use your smartphone as a hot spot whenever possible. Um, use a VPN. Uh, sometimes you’re in a place, you know, maybe at a hotel or something where, um, you don’t have a good signal. Um, so you got to find out workarounds. Uh a VPN is a virtual private network. Helps you kind of uh it gives you a bit of a tunnel uh through the internet to help protect you. Uh so look into that. Come up with a you know find a reputable VPN provider to help you so that you can stay secure and avoid issues with public Wi-Fi. Uh your router at home which is that box that helps you kind of tap into the internet. Um other people can you know log in and guests can log in and have access when they’re at your house. uh make sure that it’s secure. Um you know, encrypt your wireless router, change your username and password. Um there is this thing on there called uh Wi-Fi protected se set setup WPS. You want to disable that. You want to make sure that you’re updating your firmware, which is the software, which is um uh running uh you know um running your hardware and uh uh and operating everything. So, make sure you’re doing off all of this. Research this, you know, figure out how to make your Wi-Fi network more secure.

And then, uh, sign up for, uh, text, email alerts for your credit cards and your bank account so that you know what’s happening inside of those transactions. It only takes a second to get this uh, email or, uh, alert or text, uh, but it will help you. Um, and you know, if you um have a credit card that’s uh stolen or fraudulently used, then um you’ll be alerted. The bank will be happy. You’ll be much happier. It’s less hassle for you. Uh you can set this up online um and then contact your bank or credit card company for help. Number seven, uh credit monitoring and freezing. So, monitor your credit report and freeze your credit. Highly recommend this. go to your um main credit bureaus, Equifax, TransUnion, Experion. Um many of us are not signing up for loans, car loans, mortgages very frequently. Um and as we get older, less so. So there’s really no reason that your credit report needs to be accessible. If you freeze your credit, you have a complicated passcode that uh opens it up um and only you know it, then you’ll be much safer. Nobody can take out a loan or a mortgage in your name. Uh freezing your credit is highly recommended.

Update your software always. Do not um fall asleep on this. You know, somewhere like 40% of computer users don’t up their software in a timely fashion. Don’t be in that 40%. Um you know, like 80% of computer hacks are related to outdated software. Um updates um are very very important. uh they fix bugs, they close security vulnerable vulnerabilities. Uh so make sure auto update when you can and just uh remember to be diligent about this on your phone, off your on your laptop. Depending on which laptop you have, whether um you know uh it’s an Apple uh product or uh maybe a Dell or HP or something like that, you’re going to have different protocols, different security updates and fixes for to manage all of that. Uh but stay on top of that and always update. Uh back up your files. Um so there’s a rule of three. Should back up your files to your computer uh a physical backup device and the cloud. Uh so um you know you have three sources. If your information if your computer crashes crashes, if your information gets stolen, if your device gets stolen, um you can be quickly up and running. Secure your information. um like find my phone, uh find my device on your um on your devices and uh again keep bad actors from accessing your information, shutting down those lost devices and just getting back up and running. Rule number 10, uh there’s a 10-second email rule that you want to remember. Uh so when you see an email, um and use the acronym uh email, E A E M A I L. So examine it, you know, look at the message and inspect the link. Um, you know, you want to look at the subject line, the sender, um, you know, information, the greeting, the grammar, the signature, the attachments, all of these. You know, number one, ask yourself if it makes sense. Ask look at for any typos. Big companies do not make typos. They look at their emails very carefully. Uh, so be suspicious if you see anything fishy. If it’s kind of from a uh you know a um an unknown source, then be even more cautious. If it’s from a known source, you know, hover your um your mouse uh over the um you know, over the sender. Uh you can right click on it and uh you know, check who it’s from. Uh but don’t click on any attachments and things like that. Uh just hover. Um again, 10-second rule. uh don’t uh don’t click on anything uh until you’ve kind of like looked at it, taken your time, paused. Uh fishers will uh you know create uh fraudulent links uh you know again hover your mouse over the link uh to determine whether where it’s coming from. Um so again just follow the rule um you know examine it uh look for inconsistencies and and anything that looks fishy. So there you have it. Um, you know, lots of great tips and ideas for um, you know, for uh, staying safe uh, online, increasing your cyber awareness and cyber security. Uh, but you know, it’s up to all of us. We want to take action and uh, you know, we’ve learned a lot today. Hopefully, use some of these tips and ideas, some of these uh, concepts, strategies are new to you and you’ll implement them uh, and and be smarter and safer online. Uh so um again our hope is that uh you get you know sparrer about your financial planning. Um and here again just another friendly reminder uh if you like this information you know please do sign up for other webinars and then if you’re interested in any of these topics uh including financial planning uh we can work with you um I’m going to launch a poll in a second. You’ll have a chance to uh sign up for a meeting. Um I can answer your questions with regard to planning and investments. uh help you get your financial plan done, help you get your estate plan done. Um if that’s something that you put off, then uh you know, please do reach out or you know, click on the poll, respond yes, and I will uh set up a meeting together and make it as easy as possible for you. Uh so again, lots of different strategies to take advantage of. Uh portfolio management, dividend portfolios, um you know, we’ve got feebased, we’ve got no fee strategies, um everything that uh can help you reach your goals. And like I mentioned, the estate plan is also available to you if you become a client. So with that, I’m going to um you know, launch the poll. Um, so if you’d like to uh follow up with a one-to-one meeting or uh ask any questions, uh take advantage of our services, uh think about investments, um you know, please do respond yes and I’ll reach out and we’ll schedule something. Okay, with that, um you know, I have a chat uh up and running also um a Q&A. So uh if you have any questions uh following today’s discussion or on any topic regard with respect to financial planning um just put into the uh the Q&A put it into the chat and I’ll do my best to uh uh respond.

Uh somebody mentioned that uh Firefox as a browser has a VPN built in. Um so I didn’t know that. Thanks for mentioning that. um that’s something to investigate. So if um you know built-in VPN is a good idea again, virtual private network. So uh do your homework and kind of Google that to look at uh you know how that works before um you know you use it. Firefox is a smaller company browser but that doesn’t mean it’s not good. Um so I wasn’t aware of that. Thanks for mentioning that. and uh you know um you know another option for you uh versus Google um Google Chrome or um Internet Explorer. Uh so there’s other B uh browsers out there.

Another person here um I read not to use your cell phone number for two way authentication. Hacker stealing your cell phone number calling bank and using your cell phone to verify uh prove they are the account holder. you know about this precautions um I have heard about this um you know it is an issue it is a risk out there um you know two-way authentication um it is extra protection and uh you know if the hacker has stolen your phone number um you know they’re pretty sophisticated um and then you need to kind of you know have even more steps you’ll figure out pretty quickly if uh you know that two-way authentication is not working um I can tell you that the banks are still using um you can use kind of uh you know there’s some apps online uh Microsoft has one I think it’s called authenticator u some apps online that are another option um to provide uh you know verification u so you can look into those programs or apps as well if you’re not comfortable um you know with two-factor multiffactor authentication um you know but you the the responsibility is on all of us uh I would say two-way authentication is better than nothing uh and certainly is an elevated level of security. But if you want to take it to the next level and the bad guys are always getting smarter, then you know then then great, you know, fully support that. Um so again, it’s up to all of us to educate ourselves, our family, our spouses if they’re not techsavvy, help them, you know, get smarter about this, you know, talk about it at the dinner table. Uh and technology is always changing. So again the latest technology is u you know some authenticator apps uh you can look into that as well uh but multiffactor authentication is still used by the bank. So it is a kind of added level of security that you want to consider.

Okay. Uh that looks like all the questions. Uh not a lot of financial planning questions uh today. Um so I’ll post my contact information. Uh again thank you so much for joining us today. Um, again, my door is always open if you have any questions. Hopefully enjoyed today’s information. Um, my phone number 213-320860.

Uh, thanks very much for everybody that signed up for a meeting. Uh, I’ll be in touch and we can schedule that. In the meantime, look forward to seeing you at the next webinar uh, next week and have a great weekend. Take care.

So again, good morning everyone and my name is Baptiste Brunner. I’m one of the financial consultants with the credit union with Alliant um based here in the great state of Texas and just part of this team of financial professionals. We give regular educational webinars to assist our credit union members in understanding the ins and outs of retirement. Again, like to start by thanking you all very much for joining me this morning. I know it’s Saturday, college football starts in about an hour. try to get us in and out of there real quickly. Um, but today we’re going to be talking about, you know, learning about taxes in retirement, ways to save money on taxes and avoid some costly mistakes because taxes more than likely will be or could be one of the biggest expenses that you have in retirement. And there’s a few things that you can do to avoid those to at least lower or mitigate your tax implications, future RMDs, etc. And of course, as always, I’m going to reserve time at the end to take any of your questions. Oh, I’m seeing that there’s an echoes. Everybody else exper Anybody else experiencing that right now?

We can go ahead and go in the webinar, the Q&A section, let me know. Okay. Hopefully, it’s better. I’ll get a little closer to the computer. Maybe that’ll be a better Thank you very much. But those folks already found it. But at the end going to answer some questions uh for you if you have any Q&A section, chat section, either or. I’ll get to those questions of course.

All right. And before we dive in, um quick housekeeping item. Please don’t put your AI based or AI recording tool in here. We can’t do that. It’s proprietary information. So I can’t allow you to put in your AI noteaker in here. However, I can’t stop you from taking photos of any of these screens at home. I’m not insinuating that you do that. I might actually at one point, but can’t stop you from doing that. Just let’s keep the AI note takers out of here, please. All right. And some upcoming webinars that I have on Wednesday, October 7th, going to go over estate planning titled estate matters. Hey, you don’t have to be a millionaire to have to set up a will or a trust or figure out ways to best plan your legacy. So, join me for that one. It’s Wednesday, October 7th, 2 central, 3 Eastern. And after that, Roth IRA conversions. We’re going to cover those a little bit today. Um, but today’s webinar top two, this is the other top two one. If you really want to find out how to pay less in taxes down the road, maybe solve a tax problem that you’re going to have. We’re going to cover that today. But one of the best tools to reduce your RMDs, to reduce future taxation, to create a better legacy Roth conversions. And that’s going to be Tuesday, October 13th. It’s going to be a night one at 6 central, 7 Eastern. And of course, again, our team at Alliant Retirement Investment Services. We’re focused on helping you, our members, understand the ins and outs of retirement. You know, ways to save for retirement and much more than that. But go ahead and take a look at our website. That’s a ris.creditun.com.

Plethora of information there. Give you a quick second to take a photo of this slide if you want to go on the website and check it out. But have a podcast. Our events page in there is going to show you all of our webinars. I might be the most, you know, the best looking guy on our team, but there’s 10 other financial advisors to the credit union who are also doing webinars. Go ahead and check out theirs as well, but we’re here to assist. And then we have a website, blog, a resource center. Check it out. And so before we dive into our presentation, we’re just going to warm up with a little bit of a tax brain teaser. And it’s about Bill. Guy’s name is Bill. It sounds fun. So, after working hard for his entire adult life, Bill is now 63. He’s finally retired and he’s going to go to a lot more concerts than ever before. That’s his way of doing things. And Bill has $58,688 in taxable income, which includes $37,500 of Social Security benefits this year. And as you can see, Bill’s $58,688 of taxable income puts him in that 22% tax bracket because it’s more than $50,41 and it’s less than $105,700. But toward the end of the year, Bill decides to take an extra,000 out of his IRA for a trip to go see old Willie Nelson. He’s playing in Austin. So, how much is Bill going to be taxed on that extra,000?

So, the logical answer is that for every dollar of IRA money he pulls out, he pays 22 cents in federal income taxes. And therefore, if he took out $1,000, he should owe $220 in federal income tax. 22% tax, right? Simple enough. Wrong. In fact, he’d owe $47 in taxes. That’s a 40.7 federal tax rate on that income. So, thanks to the madness that is our tax code and the unique formula that determines how your social security benefits are taxed, the real answer is that bill owes $47 on that extra income. We’re going to get into it more, but everyone’s tax situation is different. You should always consult with a qualified professional tax advisor to discuss your specific tax situations, especially about these topics here. traditional IAS the tax deferred one you must pay taxes on distributions or conversions at ordinary federal and state rates and then your Roth IRA which is the non-deductible you paid taxes before and now it’s taxree that money grows taxfree and earnings may be withdrawn tax-free in accordance with IRS rules you know state taxes this presentation does refer refer to federal taxes so you may still face state taxes if you’re in Texas or for a different story. But just check with your tax pro. So again, I I’m a financial consultant. I do not prepare taxes. I don’t provide tax advice. We do tax planning. We can show you ways to get better tax deferral. Put yourself in a better tax situation, but I’m not the one that’s going to be preparing your taxes at the end of the day. So that’s what we do. We help people understand how the tax code and other rules could impact their financial planning, their investments. And then we’ll develop a plan to take into account many of the odd things people encounter, especially around taxes and retirement. And our goal here is to help you understand that the retirement distribution game, spending assets in retirement, is much different than the accumulation game when you’re saving for retirement. You know, the previous 40, 50 years. And chances are you’ve been in the accumulation phase of your life for multiple multiple decades and you’ve been working hard and trying to save money and hopefully your accounts have grown. But now as you enter prepare for retirement, you’re in an entirely different phase now. It’s the opposite to the distribution phase. And the distribution phase has new strange rules that can catch people way off guard. And along with those new rules, there are often many changes in your own personal life that can have a big impact in your taxes too. You know, for instance, your your children are grown and that means no more child tax credits. Your house may be fully paid off and that means no more mortgage interest deduction. Um, under the one big beautiful bill act, you should be aware of the phase outs for certain credits and deductions and changing tax rules as well.

So that brings us to a simple problem or a simple statement about the problem we’re here to discuss. Simply put, people often pay more taxes in retirement than expected because a confusing system treats various income types differently and contains hidden taxes and penalties. So in that accumulation phase, people build their assets in several different forms. stocks, bonds, real estate, pensions, 401ks, IRA, cash buried underneath a tree in the backyard. In the distribution phase though, your regular wages stop coming in. So, you have to take the money you’ve saved and use it to fund your retirement, which can go on for decades with good health on your side, God willing. And that’s challenging because you’ll need to make informed decisions about the tax implications of tapping different accounts. And it can be costly in retirement. Your tax rate can vary dramatically based on decisions you make, such as the timing and order in which you use different sources of money to pay for your expenses. So those poor choices through misunderstandings or ignorance of the rules can result in people paying more taxes than necessary and as a result they may see their savings drop faster. And that can mean less to leave to their kids and their grandkids. Of course, we don’t want that to be you. And the fact that you’re here today means to me that you’re willing to work towards a solution, which is an important first step. And because your tax exposure will change throughout four stages of retirement, you’ll need a strategy that anticipates both traditional taxes and possible taxes, search charges, penalties related to social security, Medicare, possibly a possible increase in tax rates in the future, and other income sources as well. And that means you’ll need an informed and proactive plan that addresses how you create your income in retirement. So my goal is to introduce you to the major aspects of such a a strategy, show you the challenges we all face, and then explain what makes up a workable solution to our retirement tax problem. And the first step is to develop an understanding of the types of taxes. And you know, I’m talking about all the costs that can increase as your income does, including some that aren’t actually called a tax. So to me, if your cost goes up as your income rises, it’s a tax in my book. You also need to understand the retirement expenses you’ll face. And you’ll need to create a strategy that will help you decide which of your assets to have first, how much you should be taking from those assets, and when those distributions should occur. And getting this right will help you pay as low a tax rate as possible. So before we go on, here are four stages of retirement we’ll discuss. And these are rough ranges and descriptions. Your experience may differ. Of course, everybody’s different. This is just a framework for discussing our topic. But first, there’s pre-retirement, the final stretch, the work and save years of 50 to 60. Then next, the early years of retirement, 60 to 70, the go- go years, the golden years. People often have grand plans for this time like traveling, volunteering, starting new hobbies, working part-time, and spending more time with their family. And then next you reach the middle years of retirement, 70 to 80, 75, 85. Those are the go slow years, which bring more financial decisions such as how to deal with required minimum distributions from your IAS and other retirement accounts. And then finally, there’s the later years of retirement when your health may not be as good and you’re thinking about your legacy and your state. The no-go years starting around age 80. My dad’s case, he’s 84 and he still hasn’t hit those yet. So, hey, God willing for all of you, you live to be 120 and those years don’t come about for some some time. But as you’ll see, there are a wide range of issues that must be planned for in each phase. And this can be a lot harder than it seems because retirement is full of surprises. And even the best planning will divert from reality at some point. One future unknown is inflation. People tend to view the their future costs and current dollars and they don’t always anticipate how those costs grow with inflation. So, think back about 30 years ago to the cost of a gallon of milk or a gallon of gas or a visit to the emergency room and think about those costs today and what they’ll grow to over the next 30 years when you’re not working. That’s inflation. Or how about your longevity? Many people end up living far longer than expected and that requires more money at a time when it’s difficult to work. How long do you think you’ll live? And many people also underestimate how much money they need to maintain a pre-retirement standard of living. And who wants to see their standard of living drop to be honest? And then there are healthcare like all this. That’s the 10,000lb gorilla. That includes your out-of- pocket payments for services and drugs plus Medicare and Medigap and insurance costs which just keep rising about triple of what typical inflation is. But for many retirees, taxes could be their largest expense in retirement. And it’s not often discussed or addressed with a thoughtful with a thoughtful plan. So at this point, you may be thinking, okay, so what’s the first thing I need to understand about retirement taxes? Well, here it is. Our first key, you have to know what your after tax retirement savings picture looks like before you actually retire.

Because a half a million dollar 401k or IRA balance isn’t really half a million dollars. Government has a claim on part of that money because the taxes were deferred. You haven’t paid taxes on it yet. And they’re going to get their share when you’re forced to start your required minimum distributions. More than likely, it’s going to be 73 for those born before uh 1960. It’s 75 for those born after. But the Secure Act 2.0 pushed back those RMDs a couple years back. So obviously the higher your tax rate in retirement, the less you’re actually your accounts are actually worth. And here’s an example. This chart shows you the cumulative after tax value of a half a million dollar IRA earning 6% per year at various tax rates. And as you can see, the lower your tax rate, the more you keep. Simple in theory, but it’s difficult in practice. And by the way, of course, this presentation applies to both pre-retirees and retirees. So don’t worry if you’ve already started your retirement. Tax planning is important throughout your retirement. And you may be thinking, okay, my accounts may not be worth as much as I thought, but I’ll have a steady flow of benefits from Social Security to supplement my income, and I’ll have Medicare to pay my health costs. But one thing you need to understand when creating your retirement tax strategy is social security and Medicare have their own tax traps that you need to plan for as well.

Which brings us to our next topic. So let’s go back to Bill from our tax break tease earlier. We want to understand why he paid such a high tax rate on the extra money he took from an IRA to go on a concert road trip. So remember, Bill has $45,000 of IRA income. It’s part of his adjusted gross income of $65,538 and he has $37,500 of social security benefits. So that does put him squarely in the 22% bracket and he also will take that standard deduction. But when he took that extra,000 IRA distribution, he got hit with a nearly 41% marginal tax rate on that $1,000. So let’s break down how this actually happens. First, let’s remember the only difference between our two scenarios here is that Bill is taking an additional $1,000 from an IRA. You see that in after concert trip column, he has $46,000 in the IRA income box. So, we see here that by adding that additional $1,000 of actual income, it increased both his adjusted gross income and his taxable income by $1,850. So that means your every dollar of income he actually received, he’s being taxed on a $1.85. What? How? When? Here’s the deal. Depending upon how much other income you have, the amount of your social security benefits that are taxable varies. For instance, if your other income is low enough, all of your social security benefits will be income tax-free at the federal level. On the other hand, if your income is high enough, up to 85% of your social security benefits can be taxable at whatever your personal rate is. And Bill here finds himself in the latter scenario. At his current income after the concert trip, for every dollar that he takes out of his IRA, he not only adds $1 of IRA money to his taxable income, but he must also add an additional 85 cents of taxable social security benefits. And if you add that up, that’s a dollar each not taxable as 22% rate for every $1 of additional IRA income he actually receives. And if you do the math on that, comes out to 40.7% real tax rate on the additional $1,000 income. That’s the so-called social security tax torpedo. And it can impact single filers and married couples with even fairly modest income during any stage of their retirement. And it’s one reason planning taxes and retirement is so important. And let’s look at another aspect of social security and taxation and how people approach retirement. Now during those go-go years, those golden years stage, some people retire altogether, but other people enter into a sort of semi-retirement. Sometimes it’s a continuation of a previous job just with fewer hours. Others use semi-retirement to explore an interest in a new field. Still others use semi-retirement to pursue non-paid rewarding volunteer work as well. So working retirement can in fact impact your planning and taxes in a number of ways. Some good, some bad, and some just downright ugly though. But let’s look at how working during these years can be a good thing. Chances are you have researched what your social security benefit might be at various stages. And if you haven’t, sa.gov, make an account, click on your statement, you’ll find it there. But you may not know that your social security benefit is calculated using your highest 35 years of inflationadjusted earnings. Well, what if you started working late in life? Or what if you left work to raise children? You may not have 35 years of earnings history. So suppose you have only 28. The remaining seven years count as big fat zeros when they calculate your benefits. And if anybody here ever missed a homework assignment or a quiz in college or a test, you know that you can have an A in perfect grades, but that one zero is going to really bring you down. So imagine having seven in this case with this example. But there’s good news, though. Earnings at any age can help you increase your Social Security benefit. And thanks to how Social Security calculates benefits, replacing several years of zeros with even low modest earnings can really positively impact your benefits. Now, let’s look at how working during your go-go years can be somewhat bad if you’re already collecting benefits and unaware of the Social Security earnings limits that applies to your prior reach prior to you reaching your full retirement age. So, here’s how that that rule works. If you start social security, be it your own retirement benefit or spousal benefit, prior to the year you reach your full retirement age, so that’s 67 for most. For every $2 above a certain amount that you earn, which is $24,480 for this year, Social Security will withhold $1 benefits. So for every two, they withhold one. Keep in mind that we’re talking about earnings here, like a W2 salary or self-employment. It’s not pensions. Doesn’t go against interest, dividends, capital gains. They don’t count and won’t reduce early social security benefits. But let’s do an example. Let’s say that you earned $25,400 in 2026. That’s $2,000 over the limit or now it’s about $1,000 over the limit. Therefore, under the $1 withheld for a $2 earning rule, Social Security would withhold $1,000 of your 2026 benefits. And these benefits are not truly lost. When you turn full retirement age, your benefit will be adjusted to make it as if you had applied at full retirement age with respect to those withheld benefits. So, in other words, your benefit going forward will be a bit higher. Also, in the year you reach full retirement age, there’s a separate higher earnings limit. Okay, so we’ve talked about the good and the bad. Now you get the ugly. And we’re here today to talk about taxes and retirement, but there are other taxes that you may face, too. For instance, while you’re working, you’re subject to the 7.65% Social Security and Medicare taxes. But in addition, that’s in addition to your Medicare taxes. in addition to your income tax, but the self-employed pay twice that amount, 15.3%, because they have to cover the employer’s contribution, too. So, you’re contributing half, your employer’s contributing half. If you’re self-employed, you have to cover both. Now, these taxes don’t go away if you’re working past your full retirement age or even if you’re collecting social security. Worse, if your go- go year earnings don’t make it into your top 35 years, those social security taxes go into the trust fund and do not increase your benefit.

And let’s get into Medicare and taxes. Now, this is a pretty big portion of two. So, Medicare um sometimes referred to as Irma. Now, just if you meet with me later, if you ever have a meeting with me, we refer to it as Irma. that’s necessarily that’s kind of the fancier abbreviation I’m sorry um not abbreviation the other word but it can impact some couples and Irma can really affect couples in their go- go years and beyond but what is it and it stands for income related monthly adjustment amount and the emphasis is on income because it is a monthly tiered search charge again it’s another kind of tax that is tacked on to people’s Medicare parts B and D onto those premiums But it only happens if you have income over 109,000 for single filers or 218,000 for married couples filing a joint return. So let’s take a look at what this means in action. Here we have George and Martha. They’re a high earning married couple. Both are Medicare Part B and D participants. Irma charges affect income from two years prior, too, by the way. And this couple was on track for $342,000 of modified adjusted gross income back in 2024. But on December 1st, 2024, George decided to sell a stock that he bought for 10,000 in 2007. And he sold the stock for 11,000, resulting in just $1,000 capital gain at that 50 15% long-term capital gains rate, plus an additional 3.8% net investment income sir tax for a total federal tax bill of 18.8%. 8% and that 3.8% net investment income sir tax is another tax that comes into play when your modified adjusted gross income exceeds $200,000 for single filers, 250,000 for joint. So George and Martha now owe $188 of tax on the gain from their sale of that stock, right? 18.8% of a,000. Or do they?

So look at this part BMA chart. That extra $1,000 gain pushed their AGI into the next premium tier that starts at $342,01. So now instead of owing $45.80 each for their monthly Medicare Part B premiums, George and Martha will now owe $527.50 per month each. an extra $122 per month just about times two. So, it’s about $244 extra a month for an annual total and additional income related monthly adjusted Medicare Part B premiums of $2,920.

And it’s not over because Medicare Part D Irma charges are also impacted. George and Martha will each pay another $22.90 per month for their drug plans and an extra $550 for the couple over the course of a year. Adding all the Hermes charges together for that year, George and Martha will each owe an extra $14460 a month or more than $3,470 a year for of combined additional charges for the year. So now combine that amount with the $188 of actual federal income tax they’d owe on their stock sale and the total tax owed on $1,000 of gain comes to $3,65840.

So that’s a tax rate of $337%. Let me repeat that. A tax rate of 337%. I’m just going to do a quick review. They sold the stock for a,000 in income gain. Stock sale tax is $188. That 15% plus the 3.8 from the net investment income tax. The extra income from the stock sale triggers new Irma tiers that total Irma charged amounts for the year to $3,470 for George and Martha. So the $1,000 extra income triggered taxes of $3,658 for that $365% tax rate. Didn’t mean to say 377, but 3675% tax rate. So you see, being pushed into a higher Medicare part B and D premium range is worse than being pushed into a higher tax bracket. That’s cuz if you go over a regular tax bracket by even a single dollar, only those dollars above that tax rate are going to be taxed at that higher rate. But if you go over the Medicare Part B and D income levels by even a single dollar, you move into the next premium tier. And it doesn’t matter if you exceed the limit by a dollar or $10,000. That’s why they call it the Irma cliff as well. So, we have the Social Security one and we have the Medicare one. But keep in mind, your Irma payments aren’t determined by how much money you made the previous year, but rather from your modified adjusted gross income from two years ago. So, if you’re starting Medicare next year in 2027, it’s going to be based off of what you made back in 2025. It’s another tax thing that catches people by surprise and you need to plan for it. So, making sure that you enroll in Medicare at the right time is a critical decision. If you bungle it, you’ll get hit by a lifelong penalty as well. So, to help you understand, meet Jim and Ann here. They’re our next example. They’re both 68. Jim retired at 65. Anne retired at 66. Prior to her retirement, the couple had health insurance through Anne’s employer. and they continued that after Anne retired because her employer offers retirey health benefits. Unfortunately though, they didn’t know they had to enroll in Medicare Part B as soon as Anne retired. And even though Anne’s employer offers retirey health insurance benefits, those benefits are generally paid secondary to Medicare after retirement. But Jim and Anne didn’t realize the mistake until it was way too late. And thanks to the way Medicare enrollment periods worked, they weren’t able to begin coverage until the next year. Now, in a worst case scenario, this might have resulted in a gap in coverage for Jim and Ann if they had a major medical need. But even in a best case scenario, because Jim and Anne missed their deadline to sign up for Medicare Part B, they will each owe a 10% Medicare Part B base premium penalty for life. Not just for one year, but a 10% Medicare Part B base premium penalty for the rest of their life. And you can see how much that translates to in real dollars. They owe $486.96 extra in 2026. And historically, we can estimate that premiums will be higher. So that 10% penalty will continue to grow and grow and grow. And over the course of lifetime, that could translate into a $10,000 plus mistake for the couple. So, for simplicity sakes, pardon me, for simplicity sake, we’re assuming that Ann’s retirey health insurance covers prescription drugs, so they don’t have to sign up for part D. Just know there’s a penalty for that, too.

And we’ve seen how Social Security and Medicare have their own tax straps and unique rules and penalties. So, if you’re like some who’ve seen this presentation, you may be asking yourself, “Wow, are there other tax traps we’ll face in retirement?” Well, the rest of what we’ll cover isn’t like what we’ve seen with Social Security tax torpedo or the Medicare Irma cliff. The public generally isn’t aware of those tax squeezes. What we are going to see now is how the tax code of plain view snags retirees, especially when there’s no planning. And that brings us to our third key. You must plan how and when you will use taxable, tax deferred, and tax-free assets to manage your income and tax brackets efficiently. And you can’t be halfhazard about you tapping your tax deferred savings. Timing is everything. And if you don’t plan carefully through all stages of retirement, you’re going to encounter unintended tax consequences. So, let’s take a look by first addressing a question I hear often when doing retirement planning. which accounts to spend from first. Which ones do I pull from first? Now, we’re off to our next couple here, Sam and Mary. They’ve been great savers. And as you can see, they’re looking forward to spending their retirement years traveling and seeing their grandchildren. In addition to social security benefits, though, they have $450,000 each in an IRA. They both have a $60,000 Roth IRA, and then they have 300K in a joint bank account. and they want to spend about $8,500 a month or just over 100k a year. Where would you take money from first? And most people think first take the after tax money in the bank, then take tax deferred IRA money and then take the taxfree Roth IRA. And this is conventional wisdom. It has been promoted by many big investment firms in the past for some time. And it’s not a bad plan, but we know conventional wisdom isn’t always the best approach. That’s just saying it’s a cookie cutter strategy. And not surprisingly, this topic has drawn the attention of academic researchers specializing in financial planning. They’ve conducted multiple studies on how to prepare for retirement using a combination of social security, taxable bank accounts, tax deferred accounts like IAS and pensions and tax exempt Roth accounts. And you can see some study titles there. And you can see some of the uh the study titles there. Take a photo of this if you’d like. You know, look into them yourself. But their research has shown that the conventional wisdom approach probably isn’t ideal.

And here in an alternative approach, there are two key elements in the early years. First, use the taxable bank money for expenses, but also during the same period, accelerate IRA distributions during otherwise low income years and putting that money into Roth accounts. And this is the filling your tax bracket approach, which we’ll discuss in a second. But this alternative approach gives you more flexibility to use that tax-free Roth money strategically in future years. So does it make a big difference? I surely think so. Our plans surely show so in many cases, but some academic research suggests this approach may improve portfolio longevity under certain assumptions. And that is how long your portfolio assets will last without requiring you to take on additional risk. The big takeaway here though, folks, is of course is that you’ve got to plan all the way through retirement, especially around how you handle your tax deferred assets. And of course, I’m going to say this a few more times, see your tax professional for tax advice. But one way to help manage your income both before and during retirement is to utilize Roth IRA conversions. mentioned earlier, we’re going to cover these, but a Roth IRA conversion is a simple process that allows you to move money from an IRA or other pre-tax retirement accounts like a 401k to a Roth IRA. In general, the amount that you convert is added to your income for the year and will be taxed at your normal tax rate. So, for example, if Jill converts $100,000 from her IRA to a Roth IRA, she’ll have to add $100,000 to her income. conversion is then income. Uh the conversion is now counted as income. It’ll be taxed at Jill’s rate. For that reason, it’s recommended that you speak with the professional before making any of these decisions. And our financial planning software can show you what to do and how this can work too. Happy to go through that with you. But a conversion doesn’t need to be all or nothing though. One helpful conversion approach is called filling up that bracket, filling up the tax bracket. And often you may find yourself in the middle of one of the tax brackets with room to add more income without pushing yourself into a higher tax bracket. So for 2026, the 22 the 22% tax bracket for married couples filing jointly ranges from approximately 100,81 to 21400 of taxable income. Now, if a couple’s taxable income is $150,000, they may have approximately $61,000 of room remaining before reaching that next bracket. And this may create an opportunity to evaluate a partial Roth conversion while staying within the same marginal tax bracket. And if you file a joint return and your taxable income is 110,000, that means that you could add another 100 grand of income without going into the next bracket. Making a Roth IRA conversion like that could possibly make sense. You don’t have to fill up the bracket though, folks. In most cases, you probably don’t want to, but you might want to stay in your bracket. And we got to keep the ear uh brackets in mind, too, as well as your social security, so on and so forth. A lot goes into a Roth conversions plan. You just don’t want to dive into it, say, “Fill up the bracket for me.” A lot of times, there’s an optimal fixed amount. We can help you come up with that. But if you plan to convert a large IRA, this approach is often more tax efficient than converting the full amount in one year. Instead, you can make smaller Roth IRA conversions over a number of years, filling up your bracket each time. And this can help reduce the average tax rate you’ll pay on your converted money and also spreads that tax bill out over a much longer period of time.

And Roth IRA conversions can be especially powerful in years when your taxable income is low, such as having a high non-recurring medical expense deduction or a low sales year for a business owner. It’s also common for people who retire early and are not yet receiving social security benefits, pensions, or IRA distributions. they may have a low tax bracket that year and making it, you know, possibly a good opportune time to complete a Roth IRA conversion in those pre R&D gap years.

So, this is a good time to spell out the crux of things. You must know whether you’re trying to keep income below a bracket threshold to avoid bumping up to the next highest tax rate or whether you’re trying to increase income to fill up a bracket to take advantage of that tax rate. And some tactics you could use in managing income around tax brackets could include withdrawing taxfree money from life insurance policies to keep that income low, selling highly appreciated stock for low or no capital gains, taking distributions from IRA or 401ks to take advantage of a lower tax rate. And as we’ve seen, you can also consider partial Roth conversions to fill up those lower tax brackets. And there are also two other pre-retirement strategies to consider, but they don’t apply to all people. First has to do with how you use a health savings account. This would only apply to people who are covered by a high deductible health plan. And the second has to do with small business owners. Those who want to be extra tax savvy and saving for retirement can fund a company pension plan, which for certain high earning business owners can increase their ability to claim the qualified business income deduction. But both of these features of the tax code could be used to manage your tax exposure and provide significant tax favor benefit throughout retirement. And if either or both of these apply to you, go ahead and note that now in the questions area of your evaluate or I’m sorry, forget about that. I didn’t do one of those today. But you know, if if you think this applies to you, take a note of it and ask me a question about it at the end or send me an email here at the end.

So we’ve seen throughout our pres the presentation today the critical importance of managing our tax divert accounts because at some point you’ll be forced to take out required minimum distributions or RMDs. That’s if you have pre-tax funds and that can be trouble very troublesome to your tax bill. But many people make charitable donations supporting their favorite nonprofits with annual gifts. Um, you know, let’s look at how your RMDs and charitable giving may work for you with some planning. So, next example, we have Albert and Shirley here. They’re in the 24% federal income tax bracket. For this example, we assume their income is high enough that they do not qualify for that enhanced senior deduction available under current law. That standard deduction for a married couple filing jointly this year is $32,200. And if Albert and Shirley claim the standard deduction, they may also qualify for the additional charitable deduction available under current law subject to applicable rules and inflate and limitations of course. But Albert and Shirley already have approximately $15,000 of itemized deductions from sources such as state and local taxes, deductible medical expenses, and mortgage interest. So what happens if they make a $5,000 charitable gift? Even though they make the contribution, they still do not exceed the standard deduction amount and as a result contribution may not provide any additional federal income tax benefits for them. However, if you’re over 70 and a half and you have an IRA or an inherited IRA, there’s another way to give to charity than simply writing a check. And it’s called a qualified charitable distribution. I’ll refer to it as QCD moving forward. But let me explain how it works so you can see why a QCD can be so powerful. First, some rules. If you’re 70 and a half or older, you can make a qualified charitable contribution of up to $111,000 for this year from your IRA. And if you’re married and both of you are over 70 and a half or older, and both of you have an IRA, you can each make the $111,000 qualified charitable contribution from your own IRA. Second, any qualified charitable distributions you make counts towards satisfying your required minimum distribution for the year. So when you make the however though when you make the distribution from your IRA, it has to go directly from your IRA to that charity or you can receive a check from your IRA custodian made payable to that charity. Third, this is the odd part. Even though you gave to the charity, you get no income tax deduction. So, why would I suggest a strategy where you get no uh Pardon me folks, it’s Saturday. Why would I suggest a strategy where you get no deduction for giving to a charity? It’s because when you make a qualified charitable distribution, the distribution from the IRA is never counted as income when you compute your taxes. So, let’s see how that could actually help Albert and Shirley. Let’s suppose that they do what many retirees would do. Albert takes his RMD of 5,000 at the beginning of the year and deposits it into the bank. He’s done with his RMD for the year. Now, being charitable people, they donate 5,000 to the charity. The end result is that the charity gets 5,000. Everybody understands that. But let’s look more closely. By virtue of giving to charity this way, Albert and Shirley’s $5,000 contribution will cost them a total of $5,720. Why? because that $5,000 RMD that went into Albert’s checking account at the beginning of the year still has a tax cost. Remember, the couple is in the 24% tax bracket, 24% of 5,000 equals 720. So $720 of additional tax that Albert and Shirley must pay when they file their taxes means the total cost of that donation is $5,720. Remember though, the gift didn’t impact their standard deduction. The RMD behind the gift just added to their income. Now, ouch. But let’s see what happens if they gave it through a QCD to that charity. So, instead of requesting a $5,000 distribution from his IRA to go in his bank account, Albert simply has his IRA custodian, transfers that 5,000 directly from his IRA to the charity. It satisfies his RMD because he’s 73. Now, the charity is still getting $5,000 and they still gave $5,000. Even though they received no deduction from making a contribution, their IRA distribution is excluded from their tax return. Therefore, they owe no income tax in that $5,000 distribution and their total amount of money that they gave to them was still $5,000 and they saved themselves $720.

But we all know charity starts at home. So, it’s a natural question to ask, how does retirement tax planning fit in? And it’s a very good question because the government still wants its share of those tax deferred assets when you pass away. And like we’ve seen, how you set things up really matters, which leads us to our final key number four. Organize your assets for your family’s benefit. Estate planning still matters here. And remember, that’s one of my upcoming webinars. Join me for that one. Estate planning is always a relevant topic. Even though people don’t like to discuss death, it’s depressing. It’s morbid. But we’re not going to discuss it in the traditional way. That’s because the new tax law excludes states valued at up to 13.99 million from the federal estate tax. Meaning only the tiniest fraction of people need to worry about estate taxes. But per the one big beautiful bill act that was signed a few years back or last year, the exclusion was made permanent and is increasing to $15 million per person in 2026. It’ll be indexed for inflation going forward. Still very important tax issues remain around how your assets are received by your beneficiaries after you pass. One example is making sure married couples plan for their available step up in basis. That’s quite a tax term, right? Simply put, a step up in basis is a tax rule that readjusts the value of an inherited asset. So, its value is not what your spouse or your destin paid for it initially. Instead, it’s stepped up to its price on the date of their passing. And this can make a big difference as we’ll see. So, what I mean here though is if you bought a house for 150,000 and now it’s worth a million, you have 850,000 in gains. Whereas if you sell your if you pass away and gift the house, those your beneficiaries, their cost basis is a million at your passing. Whatever it’s worth in your passing. Quick example. It’s likely that most assets you own other than your retirement accounts and annuities will be eligible for a step up in basis. Well, so next example, say hi to Phil and Mary. They live in a separate property state. They’re married and own a variety of taxable investments in a joint account known as joint tenants with rights of survivorship. You may have heard of that. And the investments have long-term capital gains of 120,000. One day, bad news arrives. Phil’s diagnosed with terminal cancer. He has eight 18 months to live. Let’s see how this works with two scenarios. In the first, Phil and Mary make no planning changes to their assets. So, when Phil passes, Mary will receive a step up in basis on Phil’s half of the joint account, which is 60,000. she’ll still face a future $60,000 of unrealized gain on her half of the account. Simply put, that means if Mary decides to sell all the assets, she’ll owe tax on her $60,000 of gains. Now, suppose that upon Phil’s diagnosis, Mary and Phil move all the investments into one account in Phil’s name. Then, as long as Phil lived longer than one year, Mary would receive a full step up in basis on the entire $120,000 account. So, simply put, Mary could sell that account and pay no tax as opposed to paying on $60,000.

When you sell your investments, would you rather owe tax on $60,000 a gain or none at all? And let me say, playing around death is hard, but that is where a professional can help because they’re they’re emotionally removed from the situation and can assist you to make good decisions that may seem pretty hard at time. Now, maybe you’re someone who has managed to save up quite a bit in your IRA or 401k. You feel pretty confident that you’ll be comfortable in retirement and you’re hopeful that you’ll leave behind the account to your children. In the past, we have recommended that because with the right structure, your heir could withdraw that money throughout their lifetime, possibly decades. That changed with the passage of the new secure act back in 2019. So now beneficiaries of inherited accounts with some exceptions must withdraw all of the money within 10 years of the owner’s death and pay taxes on that money. So the restriction on what was called stretch IAS shines a light on how important tax planning is. Laws can change at any time. So you need to have a plan and revisit that plan regularly. So let’s look at Pamela and Kyle as an example of what choices beneficiaries have when they inherit IAS and no longer can stretch distributions over their lifetime. First scenario we have involves Pamela and her son Kyle. Pamela unfortunately passed away at 70 years of age leaving the full IRA pre-tax IRA to her son Kyle. And he’s an only child. He’s healthy and this sole beneficiary of the IRA. And we know that Kyle has a maximum of 10 years to withdraw the IRA monies to meet those RMD rules. And Kyle likes the regular distributions. So he chooses to take equal distributions of the funds over 10 years. And the IRA earns an average 6% rate of return annually. So this payment would calculate to be $54,347 to Kyle each year for 10 years. Kyle would have to add this amount as income on his tax return for 10 years, too. And the second scenario for Kyle looks a little different. Kyle lost track of time. He’s already reached at year 10, the required minimum distribution window. And since it’s year 10, he must now take out the full distribution in one year. Assuming that same 6% rate of return we mentioned earlier, that’s earned annually on that $400,000 IRA, we can now calculate that IRA balance. Has it grown to $716,339?

And now Kyle has to take the full amount as a distribution in year 10 and pay income tax on that amount. Kyle’s going to be in the top tax bracket now, paying 37%. So enough about death, though. Let’s let’s move on from that. One thing I do want to mention, we mentioned Roth conversions earlier. Roth conversions are exempt from those RMDs. So the money that you have that’s in Roth accounts that does not have to be stretch taken out over a 10-year period. Your children get to take that on. Your beneficiaries get to take that on tax-free, penaltyree, and they can hold on to it for the rest of their life and give it to your grandkids. But let’s move on from death. Let’s talk about long-term care. This is not a long-term care presentation. It’s just about retirement and taxes. But believe it or not, there are a number of tax breaks associated with long-term care insurance. For example, long-term care premiums may be a deductible medical expense at the federal level and possibly eligible for deductions or credits at the state tax level. On the other side, if you’re receiving long-term care benefits, in many cases, those benefits are tax-free. For instance, benefits received from reimbursements, reimbursement style policies are taxfree. In addition, cash benefit style policies are taxree. if they don’t exceed the higher of your actual long-term care cost or an IRS daily limit of I think it’s currently $430. Choosing how you pay for long-term care is cost so can have a big impact on your state and your heirs. In recent years, non-traditional long-term care policies that blended together some long-term care insurance and life insurance that become quite popular. Often the first inclination of the insured here is to tap the policy to pay for long-term care costs, but that’s often a tax mistake. So, moving on to Florence here. She’s a widowed woman who qualifies for long-term care benefits and lives at home with in home care, but her yearly care costs are about $60,000. And Florence’s social security benefits $20,000 annually, which covers her basic expenses, but not long-term care. She also has a $400,000 IRA and a life insurance policy with a long-term care provider that will pay half a million dollars to her children upon her passing. Alternatively, Florence could use up to $10,000 per month for long-term care costs and any amounts used for long-term care will reduce the life insurance death benefit. Just note that this is an example we’re going through here. Suppose that she’s infirmed for five years and uses her policy to pay for long-term care expenses. You know, that’s why they why she bought it in the first place. But here, Florence pays little to no income tax during this period because she’ll have such large unreimbured medical expense deductions. So, the half a million dollar policy pays out $300,000, $60,000 per year for 5 years. That means your kids will inherit taxfree life insurance of $200,000. the remainder, which is the remainder of that half a million dollar policy. And in addition, her children will receive the $400,000 in her IRA, and that will be taxable to them because she didn’t convert it. She just left it in a tax-free account. Now, let’s suppose Florence lives for the same 5 years, but uses her IRA money to pay for the long-term care expenses instead. Well, Floyd still pays minimal income tax per year because of her high medical expense deduction, but now the kids will inherit half a million dollars of life insurance completely tax-free, as well as roughly $100,000 of remaining IRA money, which will be taxable. But different story now, because of how she distri distributed it, her children are now getting a half a million tax-free and only $100,000 that’s taxable. So comparing the scenarios, the ultimate net benefit is unknown because it depends on Florence’s children’s tax rates. But it’s hard to imagine a scenario where paying for her care with $300,000 of taxable money with minimal cost of Florence is not a better option than paying for her care with $300,000 of tax-free money. And in the second scenario, we’re preserving the taxfree money for the heirs and paying for the long-term care with Florence’s taxable IRA money. Okay, so we’re towards the end and you’re probably thinking, goodness, how in the world will we ever manage this? It’s a good question. Let’s just bring it all together. So, we started with a clear statement about the problem. Retirees often pay more taxes than expected because a confusing system treats various income types differently and contains hidden taxes and penalties. So, let’s do a quick review on what we’ve learned in the context of the four stages of retirement. under the pre-retirement heading saw the importance of understanding the after tax values of your retirement savings before you retire. We also saw that in those pre-retirement years it’s critical to consider your tax deferred savings and start taking advantage of funding Roth accounts to fill your brackets something you do throughout your early retirement years in low tax years maybe in your pre-retirement years. We also looked at social security and taxes plus the importance of couples having benefits their benefit strategy that considers a serving sp um the surviving spouse. And we saw Medicare has its own tax-like structure that can push you off the Irma cliff. And we saw the importance of signing up for Medicare on time right in the middle of those early go- go years. That’s cuz starting in your middle retirement years, you’ll be confronted with required distributions. And we’ve seen the importance of planning your income needs before then and the tax issues involved. Then we saw the importance of setting up your assets and managing them during the later years of retirement so you can preserve the most for your heirs and leave them with the most tax flexibility. All those items together lead us to this obvious solution to our original problem. So, because your tax exposure will change throughout retirement, you need a strategy that anticipates how and when you tap assets to cover your personal expenses. It understands the range of taxes you’ll face at various stages and manages your actions so you pay the lowest tax rate possible. So again, by attending this presentation, you’re indicating that you’re preparing to leave the accumulation phase. Congratulations. And you want to move into that distribution phase, i.e. retire. you guys have been working long enough. And we’ve seen that the distribution phases are way more complicated than working and collecting a paycheck. Managing your tax rate through the four stages of retirement is part of the challenge of retirement planning. We’ve seen the cost of these mistakes and naturally we want to be efficient with our savings. There are strategies to reduce that tax burden. But as with many things in life, this takes education and planning and advice. It’s a lot to think about and our tax code is complex and the rules keep changing, but what doesn’t change is that you need a plan. So, I’d be happy to help everyone here out with this. I’ll go straight to the back back page. This is my information here. Feel free to scan that QR code if you’d like to set up an appointment with me. I’m also going to send out a poll here in a second. These meetings cost nothing. We don’t charge our members to do financial planning. We’re here to create a plan for you. Show you how to avoid these pitfalls, these costly mistakes to not go off that uh hit the social security tax torpedo or the Medicare gaps. How to come up with a good distribution strategy. We’re here to help you out with that. It costs nothing but your time. We’re here to help. We’re just the greatest credit union on earth and that’s why we do this. But we’re here to educate our members, show them what else we can do for them, too. If you’re coming up on retirement, get a plan made. If you said yes on the web on here, and thank you very much to those who have. Um I will be following up with you hopefully today, but the um my colleague who puts all this together for me might still be working. We do work on Saturday sometimes, too. Um if he’s not, I’ll be in touch with you on Monday via phone or email. Just here to help. If you have any other questions, though, feel free to say no or not at this time. It’s perfectly fine. You know, it doesn’t hurt my feelings. But if everybody could answer the poll, it makes me look good. Um, I have the highest numbers on our team as far as participation and rates of response. It just shows that I’m keeping everybody’s attention. I’d really appreciate if everybody can answer. Even if you’re saying no or not at this time. Again, doesn’t hurt my feelings. I’m just happy that you’re here today and I hope you learned something. And if you want to learn more, QR code or click yes right here. We’re here to help. With that, I’ll get through some questions, get you guys off. We have two minutes until college football kicks off today. One other thing I want to make a note of. I’m gonna make a point of this whenever we have our estate planning webinar in two weeks. Trustw.com. Um, we are able to give access to our clients to this website uh at no cost. This is where a website where you can make your own trust and make your own will online. We have a membership to it that we’re allowed to give to our clients. But yes, you have access to attorneys through this website as well with this platform to ask them questions, see if you’re missing anything, have them review it. It’s a great platform. Really is. If you have more questions about this, send me an email. Again, here’s my email. I don’t like that phone number that goes to my office line in Chicago and I’m in Texas. Um, but feel free to call it, but really email is best right now. Be happy to go over this with everyone, but let’s go through some questions here. Feel free to ask away too. Um, if this person’s still in, I’m sorry they were late. They said, “Is webinar recording?” We’re not allowed to record these webinars. Uh, we do one webinar a month that we are allowed to record, but this is finance. We deal with people’s money. There’s a lot of rules and regulations, so we’re not allowed to record these without going through some serious scrutiny. But if anybody is on here late, I’d be happy to go over this information with you on a one-on-one, too. Just let me know what I can do. All right, let’s see the questions. Is there an RMD for a Roth IRA? All right, I made that comment earlier, but no. Correct. Um, I didn’t get to it when you asked though, but there are no RMDs with Roth IAS. So, if you have a million dollar or $100,000 in a pre-tax and $100,000 in a Roth account, post tax, you’re going to have to take out money from here because Uncle Sam wants his cut come your R&D age, whether it be 73, 74, 75. You have to take money from this. If you don’t need the money in your Roth account, let it sit. Let it sit. Let it grow. Give it to your heirs if you want. And it’s taxfree to them, penalty-free to them. Whereas this $100,000 pre-tax um IRA, when you give it to them, they have to take it out and they’re probably going to have to take out 12 grand a year. And now as opposed to you being able to convert it at maybe a 12% tax rate, your heirs are going to have to pay 22 to 32% taxes on it depending on what their tax bracket is. But see it all the time. There’s ways to get around it. It just comes with planning, planning, planning, planning.

So for QCDs, you’re still getting the RMD, but the taxable amount is reduced. Yes. So, with a QCD, if you take out your, let’s say you take out your RMD, I’m just going to go over it again. Take out your RMD and they give it to you. It’s $5,000. You give that $5,000 to the charity. Because it hit your bank account, though, it’s counted as income towards you. So, now you have to pay taxes on it. Whereas, if you had that $5,000 surpass you, where your IRA company writes the check out directly to the charitable organization, it’s $5,000 that the charitable organization receives. you gave it to them, but you don’t get taxed on it and it’s it counts towards your RMD for the year. I hope that answers the question.

It’s not necessarily that your tax correct. Correct. Your taxable amount is reduced technically.

Uh information needed to prepare for a meeting with you just to have a good understanding of your current position. I’d like to know what your when you plan to retire, if you’re retired, what your current spending is. Um, how much you currently have in different accounts because we just showed the importance of knowing the difference between your IAS pre-tax and your Roth accounts and if you have money over here in some stock funds, uh, capital gains because it all comes together and it’s all taxed differently. So, a plan needs to be put in place, where you reaching where and how you approach everything. But just have a good understanding of your positions right now when you want to retire as well. And if there’s information missing from there, I’ll give you some homework for the next meeting.

Okay, here’s a good question. Did I understand you correctly that when you go over into another tax bracket, the only amount that will be taxed at the higher rate is the amount you went over and not your total amount. Correct? We are in a marginal tax rate society. So, let’s say just for the sake of making it easy, uh 12% is the $10,000 range and anything from 10 to 20 is 22%. If you make $10,01, only $1 is taxed at 22%. That’s how it works. Marginal tax rates. Um, I could pull it up here real quick, but I’m going to get to the other questions.

How about RMDs for an inherited Roth IRA IRA by the ninth year? I don’t understand the question, but you can push them off until the 9th or 10th year, but keep in mind that account’s just going to keep growing and going to be more and more money. It’s going to be taxed at a higher rate. So, if you take it out over a 10-year period, you might be in that 22% tax bracket, but if you take out $700,000 all in one year, now you’re in the 37% tax bracket. There’s a strategy whenever it comes to these inherited IAS too to make sure that your beneficiaries or if you’re the one receiving an account uh as a beneficiary. There are strategies to make sure you don’t just burn through that money. That’s what happens a lot in these cases. You know, people just live off of that 54 grand each year and then they deplete the account. whereas you could go ahead and do other things with it. Live off of your other income um or just live off of most of, you know, live off of some of it, but then put the mo rest of it away. You get to switch it around a bit. We can talk about that, too. Can you convert to a Roth after RMDs kick in? You can convert to a Roth for the rest of your life. Um it’s just whenever RMDs kick in, now you’re pulling out another 20 grand over here from the RMD. that raised your income level. But there’s workarounds. Everybody’s different. I can show you exactly how it works. Our planning software is fantastic to where we can see what room you have without jumping Irma, Social Security, or federal income tax brackets. We can review that with you. It’s pretty nice. Um, I appreciate it. Roth is not tax correct. Therefore, that’s why it is not there’s no RMD with it because you already paid taxes on it. Uncle Sam doesn’t get the double dip. at least not in this era.

Do you do Zoom meetings since you’re in Houston? Yeah, most of my meetings are via Zoom. Um I I live in a very hightraic area of Houston. Um I really wouldn’t if a client wants to meet with me in person and they do. Um at times it’s just I I don’t want to put them through the traffic behind me. But yeah, I do Zoom meetings and um if you can only meet on Saturdays, I can make a special circumstance. Uh better to meet sooner than later and depends on when LSU plays and if it’s deer hunting season. But I’d be happy to meet with you on a Saturday. We just have to plan that out ahead of time. All right.

Once you start Medicare Part B and D, if you go back into the workforce, can you stop the benefit and restart later? Remember what we said earlier though, Medicare Part B and D, once you start taking them, it becomes your primary insurance and your work insurance more than likely will become less expensive because it becomes supplemental insurance in that case. So, you more than likely want to stay on it and just keep your workplace plan, but as opposed to it being 200 bucks a pay period, it’s going to be 50 bucks or 100 bucks. Those are rough numbers. That’s what I’ve seen with some other clients. But generally speaking, your Medicare will become your primary and your workplace plan will become your secondary and become less expensive.

Is it best to wait to claim social security until 70? And I’m sorry to say this. It depends on the person. Um, generally speaking, I love to see when people do it at 70, but I’ve had three clients I spoke with this week where I’m trying to tell them to go earlier at 68. And that’s rare, but it just sometimes there’s just tax implications that’ll be involved and she could retire earlier and you go from she doesn’t need the $100,000 that she’s making each year. She only needs 40 to live off of. She has all this room and now we have room for conversions by retiring two years early. Everybody’s different.

But yeah, we can help you come up with that social security number of one might be best. That’s another webinar I do. Social security planning is just as important as tax planning. So, make sure you don’t make a costly mistake by going too early, but there are people who can. If you stop working, but don’t claim social security for 2 years. Does that help with taxes? And again, it depends on like your other provisional incomes that you’re taking in. But it it comes down to your current income situation. And also, do you you know, one thing I see whenever people do retire early but wait to take social security, you might be depleting that 401k or that IRA really quickly just from living purely off of it for two years rather than using it to supplement your social security. But again, I see people regularly who can do that. It just comes down to the person and your financial situation. Folks, I got about six more people that need to answer the poll. If you don’t mind, I’d appreciate it. Do you need current actual spending or estimates? Has been working on this, but too much time consuming. Thank you. I can do some current actual. Yeah, good estimates. Good estimates. And whenever somebody says I live off of 70 grand a year, I say 75 or 80. I like to be conservative with it. I’ll say more than you tell me as far as spending. I’ll give you less returns than what the market’s been doing. And if your numbers hit, great. If you spend less or you earn more, we’re in a better financial situation. But I like to use not necessarily a doomsday scenario in financial planning, but um postrecession, you know, early postrecession recession numbers. And that way we’re really planning for the nitty-gritty and making sure that hey, I’m going to be fine even with all these bad scenarios thrown at me. Great. That’s good planning right there. All right, I think that’s all the questions for today, folks. Games just kicked off 9 minutes ago. If you’re not a college football fan, I’m sorry for making all the references. If you are, um, hoping you’re I didn’t hold you back from first quarter of your game today. Everyone have a wonderful day. I I love doing these webinars on Saturdays. I really do. We have a great turnout um for them and we’re going to have I’ll be doing these about two or three times a quarter, I think. But join me for my next one. Uh we got estate planning and then Roth IRA conversions. If you have any questions, there’s my email. Take a photo of it. Send me a question is your questions at any time. I work six days a week and I check my email seven. So here to assist you guys with any questions you have. You are a credit union member. If you didn’t know this, that means you own the place. We’re not owned by stockholders. We’re owned by the members. You guys get to vote. So, there’s any questions I can answer my, you know, answer. Any way I can help my bosses, let me know. You guys have a wonderful weekend. It’s a beautiful day out here in Texas. Hope it is a beautiful day where you are located, too. Have a wonderful day, folks.

All right, think we can go ahead and get started here. Hello everyone. Thanks for joining today’s webinar presented by Alliant Retirement and Investment Services in partnership with Alliant Credit Union. We will have a live question and answer session at the end of today’s presentation. Please submit your questions regarding today’s topic, retiree healthcare, or about Alliant Retirement and Investment Services in the chat or the Q&A. The presentation will be recorded and a link will be provided later by email for on demand viewing. Today’s event will be hosted by our financial consultant, Shawn Floresca. Shawn is passionate about helping individuals and families work towards financial independence through thoughtful investment and retirement planning. He enjoys getting to know each client’s unique story and helping them navigate important financial decisions with greater greater clarity and confidence. Shawn believes that some of the greatest value he provides comes from listening carefully, understanding what matters most to his clients, and using his more than 20 years of experience to help guide them through an everchanging financial landscape. Outside of work, Shawn lives in Chicago with his wife, Linda, and their two sons, Mason and Lucas. He enjoys traveling with his family, whether it’s a weekend getaway to Michigan or a trip to sunny San Diego. when he’s not helping clients plan for their future. You’ll likely find him cheering from the sidelines at his son’s soccer games or spending time on the golf course. Now, I’ll hand it over to Shawn to start our presentation on retiree healthcare. Thank you so much, Brandon. And speaking of uh soccer on the sidelines, we got a a rainy one here in Chicago today and this weekend, so I don’t think that’s going to happen. But anyhow, welcome everyone to today’s presentation. Again, my name is Sean Floresa, one of the financial consultants with Alliant Retirement and Investment Services, and our goal today is to provide information and resources that can help you better understand retirey health care options and considerations. It’s also important to acknowledge that there’s no single perfect retiree healthcare strategy. Every option comes with its own advantages and limitations, and no one approach works for everyone. And at Alliant Retirement and Investment Services, we understand that each family situation is unique. And in this presentation, we’ll share key insights to help you make informed decisions about healthcare in retirement. You’ll be seeing information about how health care costs can impact your overall retirement picture, including some of the key considerations to keep in mind as those expenses continue to evolve over time. We’ll walk through the basics of Medicare, including how the different parts work together, as well as additional coverage options such as metagap and Medicare advantage. And we’ll also cover important topics like long-term care and the role it can play in your plan along with lastly resources that may help you better understand your options as you prepare for retirement. So, 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.allioncreditun.com

to see our list of weekly webinars, our podcast, which is called Invests Savvy, our blog, and other financial resources.

So just before we get started, just uh another disclaimer. LPL Financial and its adviserss are only offering educational services and cannot offer participants investment advice specific to their particular needs. So if you’re seeking investment advice specific to your needs, such as advisory services, these must be obtained on your own separate from this educational material. Securities and advisory services are offered through LPL financial which is a registered investment adviser and broker dealer. These are not insured by FDIC or NCUA or any other government agency and these are not bank or credit union guaranteed and may lose value. So with that let’s get started.

So we’re all well aware that the cost of medical care are rising. We see that in our insurance premiums, co-pays for doctor office visits, and prescriptions and other aspects of healthcare. A significant issue in the coming years will be that baby boomers will continue to retire in large numbers, which means that the number of older people competing for health care services is increasing as well. And they may have greater medical needs, more serious medical situations, and limited income. Our life expectancy is progressively increasing. The Social Security Administration estimates that a man reaching age 65 today can expect to live on average to age 82. And a woman who is 65 now can expect to reach on average age 84.7. Among those who are 65 today, one in four will likely live past age 90. And I’ve seen it with clients over the years. There’s a lot of people in their 90s that I’ve I’ve seen over the past decade. One in 10 will live past age 95. So, do you have spare money to cover for your medical cost as you get older? Here’s a figure that should get your attention. Fidelity estimates that a 65year-old retiring 2026 may spend an average an average of $185,500 on health care and medical expenses throughout retirement. $185,000 for a couple retiring at age 65. That could represent approximately 371,000 combined. This estimate does not include long-term care expenses. So, what will you do about your healthcare expenses when you retire?

Here are some of the topics we’re going to cover on our agenda today. So, first we’ll talk about understanding Medicare. Second, we’ll go over long-term care. And lastly, we’ll discuss some of the important resources available to you for some help.

So understanding Medicare for many individuals Medicare eligibility begins at age 65 and then it often becomes an important part of retirey health care planning. For many retirees, Medicare serves as the foundation of their health care coverage. It is a federal government program that helps older and some disabled Americans obtain and pay for medical care. It’s administered by the US Department of Health and Human Services. The program is divided into three components. Part A, which covers hospital cost, part B, which covers doctor and other health provider office visits and other medical cost. and part D offers coverage for prescription drugs. Let’s take a closer look at each part.

Part A of Medicare is called hospital insurance. It covers most of the cost of uh stay in the hospital as well as some follow-up expenses after you spend time in the hospital such as a period in a rehabilitation or nursing home. Part A pays some outpatient medical services, including some health care, home health care. It does not cover prescription drugs since those are covered under part D, which we’ll talk about here in a bit. In most cases, you do not have to pay a premium for part A. Specifically, if you have 40 or more quarters of Medicare taxed employment, you pay no premium.

Medicare Part B is what we might think of as a medical insurance. This optional coverage is intended to help pay for doctor’s bills for treatment in or out of a hospital. It also covers many other medical expenses you incur when you are not in the hospital, such as cost of durable medical equipment and tests. In 2026, the Part B deductible is $283. Again, $283 for Part B deductible. If you choose Part B, a monthly premium is automatically deducted from your Social Security check. If you are not receiving Social Security benefits, other payment arrange uh arrangements are made.

How much does the monthly premium for part B cost in 2026? The standard monthly premium is $22.90.

Your premium would be higher if your modified adjusted gross income on your 2024 federal income tax return was $19,000 or more if you filed single. or it would be 218,000 or more if you’re married and filing jointly. In these cases, premiums would range from $284 to $689 per month in 2026.

Part D coverage is for prescription drugs and it is optional. To get this coverage, you must enroll in a plan run by an insurance company or other private company that follows the rules set by Medicare. Each Medicare prescription drug plan has its own list of covered drugs. Also, each of these plans sets its own monthly premium. You can find out the cost of these various plans available to you by going to the official Medicare website, which is quite simply www.medare.gov.

Note that some of these prescription drug plans require deductibles and co-pays in addition to that monthly premium. For 2026, Medicare Part D includes an annual out-ofpocket threshold of $2,100 for covered prescription drugs, though premiums, deductibles, formularies, pharmacies, and cost sharing can still vary by that by plan.

Now, were you wondering if there’s a part C? Yes, indeed there is. Part C includes what’s known as Medicare Advantage plans. These are optional and they’re available through private insurance companies that follow the rules set by Medicare. Medicare Advantage plans are managed health care plans and provide coverage just like an HMO or preferred provider uh provider organization. You use the plan services just as you would if they were not under the Medicare umbrella. So, for example, you may have to choose doctors from the plan’s approved network of providers or use the hospitals specified by the plan as well as follow other rules regarding accessing healthcare services. Most Medicare Advantage plans offer prescription drug coverage and again you usually have to use affiliated or the sponsor’s mail order drug provider. The availability of these plans to you depends entirely on where you reside. So again, you can learn about these plans for which you are eligible and their coverage at www.medare.gov.

Medicare Advantage plan sponsors get some or all of their premium from the amount you pay each month for your Medicare part B premium. In some cases, sponsors of Medicare Advantage plans may charge an additional amount above that Part B premium for higher levels of service. So, now let’s take a look at Metagap coverage.

Medigap coverage is private health insurance that is designed to supplement traditional Medicare. It helps pay some of the health care expenses that Medicare does not, such as co-ayments, co- insurance, and deductibles. Now, if you have traditional Medicare and a Medigap policy, Medicare pays its share of approved amounts for covered healthcare costs. Then, the Medigap policy pays its share. So, it’s different from a Medicare Advantage plan because that type of plan is a way to get medical uh Medicare benefits while a metagap policy only supplements traditional Medicare. So, keep in mind that Medicare does not pay any portion of the cost for you to get a Medigap policy. In most states, metagap policies are standardized and identified by letters such as plans A, G, K, L, as in Larry, M, and N. Benefits vary by plan, and the same letter plan generally provides the same standardized benefits regardless of the insurance company offering it. Costs can vary by insurer or location and other factors. Every policy must follow federal and state laws and each standardized metagap policy must offer the same basic benefits regardless of the company that sells it. Cost is usually the only difference between metagap policies with the same letters sold by different insurance companies.

Medicaid is a health insurance program for certain low-income individuals and their families. The program is run jointly by the federal government and each state. People aged 65 or older who meet the income and asset limits for their state are eligible for Medicaid. States set their own income and asset requirements for residents of their state. Medicaid provides a broad level of healthcare coverage and often it covers doctor’s visits, hospital costs, nursing home care, and home health care. Medicaid does does cover the cost of prescription drugs. However, this does not mean all prescriptions are completely covered. Each state can choose which medications they are willing to cover and which prescriptions they will not cover. They can also set rules regarding prescription co-ayments or shared costs. However, there are limits placed on how much the state can make the patient pay for prescriptions covered by healthc care benefits. So, please make sure to check with your state’s policies with regard to Medicaid and prescription drug coverage.

Okay. Now, on to long-term care.

The federal government estimates that 70% of people reaching age 65 are likely to need some form of long-term care during their lives. So, what are the factors that are directly related to the need for long-term care? Well, first obviously is age. So, the older you are, the more likely you will need this type of care at some point. Another factor is gender. Women, like you saw in earlier slides, live it longer than men on average, 5 years. So, they’re more likely to live at home alone when they’re older. Disability considerations also affect the need for long-term care. Having an accident or chronic illness that causes a disability can lead to a need for this care. Your health status is another factor. So chronic conditions such as diabetes and high blood pressure may mean you’re likely to need long-term care as long as you age. Then there’s family history. of chronic conditions that can also play a role. And of course, poor eating and exercise habits often increase the need for long-term care. And believe it or not, another factor is your living arrangement. So if you live alone, you’re like more likely to need paid care than if you’re married.

So what does long-term care include? Usually it is not medical care but more likely assistance with basic personal needs of everyday life which are called activities of daily living or ADLs. ADLs include bathing and dressing, using the bathroom, help with getting into or out of a chair or bed and eating. Other types of assistance may also be offered. So this type of support relates to basic everyday tasks like housework, taking medication, preparing meals, shopping for food, and and so on. Long-term care can be in a setting like an assisted living residence, a home, or other residential situations.

Long-term care insurance covers long-term services, including personal and custodial care in a variety of settings, such as we just mentioned, a home, an assisted living facility, or other residential arrangements. So, what are the factors that go into the price of long-term care insurance? This cost uh the cost of this type of insurance is based on several factors including your age when you buy the policy, the maximum amount that you want to be paid for each day, the number of days or length of the payout period, and any optional benefits you select.

Add one thing here. Well, ultimately there will be a maximum amount uh amount that the policy will pay. And remember that if you are in poor health, you may not qualify for long-term care insurance or could have to pay a much higher uh premium than someone who is healthy and satis satisfactory.

Now, thinking from a broad perspective, there may be other routes to having health care coverage when you retired. For example, you might get a part-time job that offers some form of coverage for health care expenses. More employers today are seeking out retirees to fill part-time positions and offers some level of coverage in order to attract retirees who are not interested in full-time work. You might also be able to obtain or keep coverage under your spouse’s employer sponsored health plan if he or she is still working.

Now, one of the biggest concerns that many retirees have is understanding the potential cost of long-term care and how those expenses might fit into their overall retirement plan. First, let’s talk about long-term care insurance. The cost of coverage can vary considerably based on several factors, including your age when you apply, your health status, the amount of coverage selected, and any optional features included in the policy. As an example, a healthy 55-year-old purchasing a standard long-term care policy may pay approximately $1,700 to $2,700 per year. Although actual premiums will vary from person to person and insurer to insurer, it’s also important to understand the potential cost if long-term care services are needed and paid for out of pocket. Based on 2025 national median costs, long-term care expenses can vary widely by care setting, location, provider, and level of support needed. For non-medical home care, the national median cost is approximately $35 per hour, which can equate to roughly $80,80 per year for someone needing regular assistance. for individuals who require additional support but do not need skilled nursing care assisted living facilities uh have a national median cost of approximately $6,200 per month or about 74,400 annually. The highest expenses are often associated with nursing home care. And for some of you folks out there, you might have experienced this with uh older loved ones. A private room in a nursing home has a national median cost of approximately $10,000 $10,789 per month, which is nearly $129,575

per year. These figures are not intended to alarm anyone, but rather to illustrate why health care and long-term care planning are essential and important considerations in retirement. While no one can predict their future health care needs, understanding potential cost can help individuals evaluate available options and make informed decisions as part of a broader retirement strategy.

Now, the key takeaway is that long-term care expenses can be substantial and planning before a need arises may provide more flexibility and more options in the future. So, understanding the potential costs of long-term care is an important part of retirement planning because healthc care expenses can have a significant impact on long-term financial security. So, of course, long-term care is only one piece of that healthcare puzzle in retirement. And for many retirees, Medicare will serve as the foundation of their healthcare coverage. And making informed decisions about that coverage is just as important as planning for potential long-term care needs. Unfortunately, as I’ve seen, many people make avoidable mistakes when enrolling in Medicare or selecting those coverage options. And these mistakes can lead to unnecessary costs, coverage gaps, or penalties that may follow them for years. So, let’s take a look at some of the most common Medicare enrollment mistakes and what individuals should be aware of as they approach eligibility or review their current coverage.

Now, some of the most common Medicare enrollment mistakes that can potentially increase cost or limit coverage options are the first mistake is missing your initial enrollment period. For most people, this enrollment window begins 3 months before the month they age turn age 85 and this includes their birth month and continues for 3 months afterward. So missing this window may result in delayed coverage or penalties depending on your circumstances. Another common mistake is enrolling late in Medicare Part B when you don’t qualify for a special enrollment period. Some individuals delay enrollment because they are still working or covered by an employer sponsored health plan. However, if the delay isn’t handled properly, Medicare may impose a permanent late enrollment penalty that increases Part B premiums for as long as coverage remains in force. A similar issue can occur with Medicare Part D prescription drug coverage. If you postpone enrolling and do not have what Medicare considers credible coverage, meaning other prescription coverage that is expected to pay at least as much as Medicare’s standard benefit, you could face a late enrollment penalty later. It’s also important to avoid choosing coverage without comparing costs and benefits. Medicare Advantage plans, Medigap policies, and prescription drug plans can vary significantly in premiums, deductibles, provider networks, and out-ofpocket expenses. So, taking time to compare options can help individuals select coverage that aligns with their health care needs and budget. And finally, many people enroll in a Medicare plan and never review it ever again. However, healthcare needs, prescription medications, provider networks, and plan costs can change from year to year. That’s why it’s generally a good idea to review coverage annually during Medicare’s open enrollment period to determine whether any changes may be appropriate for you. And because this presentation is taking place shortly before Medicare enrollment period, this may be a good time for individuals already enrolled in Medicare to review plan notices, prescription coverage, provider networks, and projected out-ofpocket cost for the coming year. So, the key takeaway is that a little preparation and periodic review can help individuals better understand their options and avoid some of the more common enrollment pitfalls associated with Medicare coverage. So, now that we’ve reviewed some common mistakes to avoid, let’s take a look at a few good resources that can help you evaluate your Medicare options and make more informed decisions about your healthcare coverage.

Let’s take a look at some of these resources. So, as we’ve discussed throughout today’s presentation, retiree healthc care planning can involve a number of decisions from understanding Medicare and evaluating coverage options to consider uh considering potential long-term care needs. Now, the good news is that there are several trusted resources available that can help you research your options and make more informed decisions. One of the most valuable tools is the medicare.gov planfinder. This resource allows you to compare medical uh Medicare Advantage plans, prescription drug plans, premiums, provider networks, and estimated out-ofpocket cost based on your specific location and medications. Medicare.gov gov and 1800 Medicare are official resources for comparing Medicare health uh and prescription drug plan options. Another excellent resource is your state uh your state’s state health insurance assistant program, often referred to as SHIP. SHIP counselors provide unbiased information about Medicare and can help individuals understand coverage options, enrollment periods, and plan comparisons at no cost. And then you have the National Council on Aging’s benefits checkup, which is a tool that can help individuals identify programs that may assist with health care expenses and prescription drug costs and other retirement related benefits for which they may qualify. So for those interested in learning more about long-term care planning, long-term care.gov Gov offers educational information about care options, planning considerations, and the potential cost associated with different types of care. Now, while these re uh resources can be extremely helpful, every person’s situation is unique. So healthcare needs, retirement goals, family circumstances, and financial considerations can all play a role in determining which options may be appropriate for an individual’s situation. So the key takeaway is that you do not have to navigate these decisions alone. Taking advantage of credible sources and asking questions can help you better understand your options and make informed decisions as you prepare for retirement.

So, with that, we’ve covered many of the key healthcare considerations retirees may face. Everything from Medicare and supplemental coverage options to long-term care planning and available resources. So, I’d like to conclude by sharing a few ways our team here at Alliant can help if individuals uh need to evaluate these important retirement planning considerations and continue the conversation with you if you’d like to learn more. So, when it comes to retirement planning, we can assist in assessing topics such as social security planning, 401k, and IRA reviews, as well as helping with retirement income strategies. We can also assist with investment planning and conducting portfolio reviews to discuss if your investments are in line with your objectives and risk tolerances. And we can also assist in being a resource with your estate and trust planning needs. So Medicare is essentially just one piece of that puzzle of the overall retirement picture. So again, please don’t hesitate to contact me if you have any other questions and concerns regarding your individual situation because for the past 18 years I’ve been with Alliant, I focus on creating financial and retirement plans for clients to make it a little bit easier when looking at the whole retirement picture and making that a little less confusing. So with that being said, here is my information up on the screen there. Uh so please don’t hesitate to reach out to me with any specific questions to your situation or if you’d like to set up a meeting with me directly to discuss retirement in further detail. So again, thank you all so much for coming and uh with that, I’ll give the floor back to Brandon here for some Q&A. Thank you, Sean. Uh let’s go ahead and get started with our live question and answer session. If you do have any questions for Shawn about Retiree Healthcare, Allian Credit Union, or his role as a financial consultant, please submit it in the chat or Q&A tabs. We’ll go ahead and start with the first question here, Sean. Okay. And that is a pretty specific question. Um, I’m a former pre merger United flight attendant, so I have access to the United Airlines retiree medical if I retire before 2032. I’m now 65 and still covered by active employee insurance, not Medicare yet. My question is about the UA retiree medical option. If I go on to Medicare, do I need that UA coverage? Is it mostly intended for retirees younger than 65 who don’t yet have Medicare or does it offer valuable benefits in addition to Medicare coverage? Boy, Brandon, that’s a great question and I think I’m not sure if uh if you were familiar with the uh United Healthcare plan. I’ I’ve had a couple clients ask about this, but Brandon, would you agree it just depends on coverage in terms of cost? Uh, you know, what what you’re looking at with Medicare and those supplemental plans versus the United plan that that I’m I’m not sure. Yeah, you don’t strictly need the United Airlines retiree medical coverage once you do transition onto Medicare, but it can provide you with significant value depending on how you choose to supplement your Medicare coverage. Okay. Um, now the retiree medical is heavily focused on acting as more of a bridge for retirees that are younger than 65 who don’t yet qualify for Medicare. United also explicitly uh structures a after Medicare medical plan for those that are 65 and older. So once you do turn 65 and transition from active employee insurance to retirement, your primary health coverage does shift to Medicare parts A and B because traditional Medicare has gaps like deductibles, a 20% co- insurance with no out-of- pocket maximum and no routine vision or dental coverage. Retirees usually do buy private supplemental coverage. All right. So, um, let’s move on to the next question here. When do you enroll in Medicare Part A and how do you enroll? Um, so go ahead. No, I was uh just going to say like in the presentation uh the the the initial enrollment period which again lasts for a total of 7 months. This starts the 3 months before you turn age 65 and ending 3 months after. So, uh that is again called the initial enrollment period and uh that is done through the social security administration. Brandon, right? No. Anything to add to that? I mean, if you do have social security turned on already prior to turning 65, you do get automatically enrolled into Medicare Part A as well. Uh, so there is an automatic enrollment there if you do have your social security benefits turned on prior to age 65. Um, as Sean alluded to, you do have that seven-month window 3 months before your 65th birth month, the month of 3 months after uh where you can sign up for it as well. And how you would enroll is just by calling Social Security at 1 80077213.

That’s 1 8007721213

and I will put that in the chat. Great. Thank you, Brandon. Uh, next question. If I opt for traditional Medicare instead of advantage, can I still have coverage with an HMO? Um,

okay. Let me look at this again. traditional Medicare instead of advantage, can I still have coverage with an HMO? So, the the answer to that question is no. U if you choose tradition traditional Medicare, original Medicare, you generally cannot use an HMO or a PO, which is also known as Medicare Advantage. You’re generally signing up with a metagap plan to work with traditional Medicare in those situations. If you do choose to go the Medicare Advantage route with an HMO or a PO, uh you’re effectively replacing the benefits of Medicare part A and part B with the benefits of the HMO or PO going forward.

Let’s see what the next question is.

Can you please explain what happens if you have been with Medicare Advantage for five years and want to move back to original Medicare? Uh so requiring that’s going to require um either a spe a specific enrollment period or qualification as well. Uh so to move back to original Medicare, you can do that, but you generally wouldn’t want to do that without including a metagap policy or a supplement to cover the 20% of co- insurance with no out-ofpocket maximum. Um whereas with the Medicare Advantage plan, you do have a m maximum out of pocket with that plan. So, if you do move from a a Medicare Advantage plan, an HMO or a PO back to original Medicare, you generally would want to probably qualify for a metagap policy to work with original Medicare before giving up your Medicare Advantage plan. So, you’ll want to make sure that you do indeed qualify for it from a health standpoint before you move forward with replacing your Medicare Advantage plan. Uh now when you do that and you enroll into a part D prescription drug plan that will automatically disenroll you out of a Medicare advantage plan that you were previously on. Um, so kind of the way I would facilitate that if I were in your shoes and I was serious about doing that is I would get a Medicare uh or a Medicare uh supplement or a metagap policy, one and the same thing and I would apply for that and if I am approved on that and I’m happy with moving back to original Medicare with that metagap policy, I would then apply for a part D prescription drug plan and that would disenroll me out of the Medicare Advantage plan at that point, but I would want to make sure that I at least am qualified for the metagap plan before I cancel anything um that I I currently have in place.

Let’s see here.

We’re getting quite a few questions in here, so we’ll do our best to try to cover as many of these as we can here before the end of the hour.

My spouse and I are retired but below Medicare age and have three kids. We have a small consulting company. Should we shop for insurance through the individual market or try something like a PEO, a professional employment organization to get something closer to group rates using our small business? Um, do you want to take that one, Sean? That’s a that’s a good one. Uh, Brandon, what’s Hold on a second here. So, repeat that, Brandon. Uh, Ken, please. So, they have a small consulting company. They have a couple of kids. Uh, it’s a family here. They’re debating whether they should shop through the individual state marketplace for premedicare plans or if they should try something like a professional employment organization to get something closer to a group rate versus an individual rate. I would just absolutely compare cost. That’s a great question. I have had one other person ask about that situation and again I think it’s depending on cost now through the marketplace Brandon are you familiar with um because I was more um familiar with individuals not uh you know companies or businesses through that that site do you know um what’s going on with that? Yeah, that’s a pretty unique question. And I mean, I I I would pursue both options and just have all of your options in front of you before you make a decision so you can see what the benefits actually are and what the actual costs are and then make a decision from there. Yeah, that’s that’s a good question because comp I did not know that businesses can go on to the marketplace. I thought there was more individuals uh you know to to qualify for those type of plans. That’s good to know.

question here is when does your Medicare coverage start? Uh, I could address that pretty quickly. It would be the month that you turn 65 as long as you have your part A and part B active. So, when you do get your Medicare card, there’s an actual effective date for part A and part B on that card

is a good question. Uh, can HSAs be used to pay for long-term care and Medicare? I don’t know that you know that one off the top of your head, Sean. I can address that if you’d like me to. There’s a lot of good questions that Yeah. know. Yeah. So, with an HSA, you are able to use it for specific things towards uh Medicare. There are specific things that you’re not able to use it towards. A uh paying for your metagap premium would be one of the restrictive items uh with an HSA. You’re not allowed to do that. Uh, but you could use it for dental expenses, vision expenses, um, other out-of- pockets that are out there. Um, so there are some some specific rules with that. Um, I would suggest reaching out to one of our consultants. Um, if you do want to get kind of a detailed list of what what applies and what doesn’t apply there.

This is actually a really great comment and and something that probably should have been mentioned in the uh presentation. Uh people rarely mention turning off your HSA deposits or contributions 6 months before retiring because you can potentially pay fines. So that is something worth considering when you are approaching retirement if you are contributing to an HSA.

And Brandon, this next question I actually had uh experience with with a client. The um this one, do you need any Medicare supplements if you have Texas UT system, UTRA, Medicare, which includes A, B, D, and possible long-term care uh and short-term health insurance. And the the good thing about this, and I don’t know if you knew this, Brandon, is that uh the UT care plan functions as more of like I guess an open access Medicare Advantage PO and bundles medical, hospital, and prescription coverage together. And that’s one thing I did not know about until recently. So that’s

the answer to that question would be no because they do bundle the benefits together, provide a max out of pocket, right? Yep. That’s that’s exactly it. They’re they’re one of the the plans that that bundle everything together. So, yep. No uh any no Medicare supplements if you are in specifically the the Texas UT uh care plan.

The next question here is uh somebody is asking they’re self-employed. They’ll be 65 in a few months. They do not receive nor do they plan to receive their social security until age 70. So, they’re delaying. Uh, they take no medications. I will be enrolled in Medicare Part A during the initial enrollment period. When do I enroll in Part A and Part ND? Um, I can answer this quickly. You can enroll into Part A 3 months prior to your 65th birth month. So, if your birth month is, let’s call it June, you would be able to apply in, let’s see, June, you would be able to apply in March. in that situation. So, March 1st would be the first date you could apply. U as far as part D goes, I would recommend uh also applying for part D once you do have part A active. Uh the reason you’re going to want part D in the mix here is because you will well if you are let’s see I’m employed do not receive social security. So, I assume um with moving on to part A, you’re going to also turn on part B. So, you will need part B to go along with A and B um and then a supplement and then part D, which is the drug plan there. Even though you’re not taking prescription drugs, I would recommend just finding the cheapest uh premium plan that’s out there and enrolling into that. There might be one in your area that’s offered for zero a month, but at least you have the qualified coverage at that point and you won’t be subject to penalties down the road. Uh, should you need prescription drugs at some point?

I am 65. Okay, next question. I’m 65, employed full-time with an employed sponsored health insurance. I also contribute to an HSA. My employer is more than 20 employees. I understand that it’s best not to enroll into Medicare Part A and B at this time. Is this correct? Yeah, I I can take this, Brandon. Yep. because you are in your uh employer’s health care plan uh your understanding is correct because you can delay both A and B without penalty um but uh because your employer has you know 20 or more workers your job based I guess health plan acts as that primary coverage so uh do not do not enroll um but once you do enroll and and Brandon correct me if I’m wrong once you enroll in Medicare then your HSA pays you cannot put any more money in that. Is that correct? That’s correct. Okay.

And the with that question, you you have what is known as credible coverage. Um even though you’re 65, you’re still with the employer. There’s more than 20 employees there. So, you’re not subject to any penalties down the road. enrolling into Medicare once you do lose that credible coverage from your employer either, you know, at at no fault of your own is generally kind of the consensus there. So, when you retire, they they take it from you. It’s at no fault of your own. And then you would then you would qualify for a special enrollment period through Medicare uh where you would be able to sign up for a Medicare Advantage plan, a metagap plan, and a part D plan. You know, however you want to have that uh shaped for the future.

All right. Here. Still have a quite a few more questions. I’m trying to We’re going to try to work through as many of these as we can. If I’m still working, can I sign up for for Medicare outside of part A once retired at any time or only during the enrollment period? Well, so so I’m I’m assuming Brandon, anything outside of part A, so Medicare part B, uh if if you are uh you have to do it during that uh special enrollment period, which is eight months starting the year after you start the month after you stop working. Is that right, Brandon? So you retire at the end of that month, you would technically lose your credible healthc care coverage through your employer. Uh you then have 61 days, I believe, to enroll into a Part D drug plan and 3 months to enroll into a metagap plan uh or a Medicare advantage plan. Now, keep in mind if you choose the Medicare Advantage route, generally you have your Part D plan that comes with that. But you do want to make sure that your Medicare Advantage plan covers prescription drugs as well when you’re enrolling into it because they do offer Medicare Advantage plans that don’t have prescription drugs.

Let’s see here. Uh

John talked about a part-time job after retirement. What’s the minimum employer healthc care coverage needed to still qualify for a credible coverage exemption for part B? You can. So that that’s just 20 employees on their healthare plan. If you qualify for their plan, you would be able to enroll into it as long as they have 20 or more employees, you should have those can be either part-time or full-time employees. Correct, Brandon? Yes. Okay. So, it just depends on the company, right? If they offer healthcare coverage to part-time employees. A lot of them don’t, right? But some may.

Next question. My husband is still working, has not filed anything. He will be 68 in December. Is this okay? he plans on retirement in 2027. Uh I think we’ve kind of addressed that. Should be okay as long as he’s got 20 or more employees on his healthcare plan through his employer. Um you know, once he retires, he’ll qualify for that special enrollment period.

See, as a US citizen and a non- tax filer living in Mexico, will I be qualified for Medicare? Um, so as long as you have 10 years paid into uh social security taxes, you should qualify for part A. Uh, part B there is a premium for. So you would have to pay for that out of pocket, but you should be able to uh apply for for Medicare even though you are living in Mexico at this point. Yeah, you just need to be aware uh when you are signing up for uh you probably won’t want to go the Medicare Advantage route because those are based on regions and with you being outside the US, you’re not going to have really any coverage with a Medicare Advantage plan there. Um you may want to go with the Medicare supplement there. Um there are restrictions on out of the country care, so you do want to pay attention to that. But that’s where my focus would be if I’m outside the country and I’m looking at utilizing Medicare as health coverage.

So, uh, next question. I’m nowhere near retiring. I’m about 26 years out, but can you please speak to this administration’s proposed changes to retirey care and what we can expect going forward? Um, good but tough question. That is a tough question. Um I I’ll preface it with this and I’ll let you kind of take it Sean. Uh you know the senior population in the country is the largest voting block in the country today. Uh personally I think if a politician was going to try to gut or change Medicare, it’s it’s kind of like shooting themselves in the foot, so to speak. Absolutely. I’ll let you take it from there, Sean. No, just like you were saying, it’s it’s so far out, but but again, when you need to make or want to make a change to the system, it is going to feel the shake across the board. And so, you know, I I’m just hoping at least even though it’s 26 years out, we see progress even in the next few years. And I think, you know, if we can start by, you know, for example, lowering prescription drug prices, right? um and and not keep these premiums just rising astronomically as as the years go on. But again, that’s a question I get all the, you know, pretty often and it’s it’s hard uh to answer just because of uh the way, you know, um the powers that be are you are are addressing things and just, you know, it’s always a what do you call this? A uh uh what do you call tugof-war about what’s what’s going on in in in that, you know, sector of of uh healthcare. So, that’s going to be interesting. I I wish we had a a better answer, but we just have to kind of wait and see and see how how we progress, you know, in the years to come. And 26 years away is is definitely a long way out. So, let’s see what happens. I’ve gotten this uh a few times here, so I’ll I’ll just kind of address it here. Um what are options for health care if you retire before 65? Uh, generally speaking, I the first place that I would go to is your state specific uh, insurance exchange. Your state should have a website with all the insurance options that are on there that you’re able to shop through. Uh, so you could search that up on Google. Just type in your state insurance exchange and it should be one of the top options that pop up there for you. Um, another question I got here, Sean. Um, I’m a snowbird. Seven months in New York, five months in either North Carolina or Tennessee. Some of this seems to be state specific. What if I sign up for a plan in New York but have an accident or get sick in North Carolina? Um, that’s a great question. Never dealt with that one before, Brandon. Yeah, happy to dive into that. Um, so there’s kind of two different trains of thought here. It kind of depends on what you have in place. If it is a Medicare Advantage plan, I would seek to make sure that my network provides coverage in all three of those states that that I know I’m going to be spending time in and just get a firm understanding of where those networks are. Um, in addition to that, you can uh, you know, find, uh, on the Medicare Advantage side, you can look up like Humanana where their hospital networks are and and determine is there one near where I’m staying in Tennessee that I could utilize in the event that I do get sick there when I’m snowbirding. Uh if you are going the metag gap route, all that really matters there is that the doctor in the area takes original Medicare and they’re willing to see you. Uh because Medicare remains your primary on the metagap side. On the Medicare Advantage side, whatever company you sign up for becomes your primary there.

So we got time for about one or two more questions here and I apologize if we were not able to address your specific question. Uh you are more than welcome to send your question to Sean. Uh his email address is up on the screen here if we were not able to get to it today and we’re happy to address that. Next one here is I will be 65 next February. I’m retired already. If I get employed again in a full-time with health insurance plan, should I delay my Medicare enrollment initial window? It’s a good question. Um I think timing plays a big big part there. Um, if you get the the the job prior to your initial enrollment period coming about, that’s definitely an option. If your initial enrollment period comes about prior to that occurring, I would probably just move forward with going on Medicare because you you you can only plan for what you know today. Yeah.

So, here’s a question uh that we’ll end on here, and it’s it’s kind of more related to the Social Security spousal benefits. Uh but my husband passed away 17 years ago. My condolences. He would have been 62 like myself. Can I receive his Social Security now or do I have to wait until he would have been 65?

Brandon. So for that one, um you can receive the so the survivor benefits now uh at 62 because surviving spouses, correct me if I’m wrong, Brandon, that can start collecting as early as age 60. Correct. So nope, you do not have to wait.

All right, let me see if there’s one that we can pop in here real quickly to end it on.

Um, okay.

If you deferred it for an entire year, are the penalties to start once I retire in 2027? So, I assume this is somebody who was eligible for Medicare um may not have had credible coverage um while they were eligible for Medicare and then they’re looking to start during the general enrollment period here at the beginning of 2027, apply for part A and apply for part B. Unfortunately, in that situation, there will be a small penalty uh incurred for the late enrollment. uh it’s based on how how long that delay was from when you were eligible versus when you actually signed up. Um but if you did have credible coverage through an employer 20 or more employees during that period of time, you would not be subject to that penalty. So

this is going to conclude our Q&A session. Uh if you do again have any additional questions or would like to schedule some time with Shawn, please do reach out to him. We do thank everybody for attending today and have yourselves a wonderful day. Appreciate it. Thank you all.

Hello everybody and welcome to tonight’s webinar. We’ll get started here in another minute or so. I wanted to uh uh open this up. I hope everybody’s having a fantastic day and fantastic week as well. Uh I don’t know if if we have many people out there that are big football fans. Football recently started. Uh I can’t wait till hockey starts. that is uh coming up in I think this well I think pregames or so this weekend anyway um but we’re getting into the fall season and uh things are getting a little bit cooler where I’m at here. Hopefully things are not too hot where everybody else is at. Um so we’ll go ahead again. We got about another minute left. We’ll go ahead and get started in about a minute here and just let everybody join the webinar that uh that had signed up for it and is able to do so.

I hope everybody has some good plans for this weekend. I don’t have anything exciting which I’m okay with. uh a weekend without well I guess it depends on the type of excitement but a weekend without too much uh major excitement is perfectly fine with me. I am I am okay with that. So all right well we’ll go ahead and get started here. It is the top of the hour here. Again thank you everybody for uh joining uh me here today. My name is Bernell Baker. I’m a financial consultant with Alliant Credit Union here. Let me pop this up here. Uh before we get started and get into the meat and potatoes of this, uh let’s just do some house uh housekeeping stuff here. Excuse me. Um as we go along here, if you have any uh questions, um please type them in the uh uh the Q&A or the chat uh tab there. I will get to every one of those questions by the end of the or at the end of the webinar here. I uh encourage everybody to stay here uh until those questions are answered because maybe somebody has a question that um they thought of that might pertain to you that maybe you hadn’t thought of or anything. But let’s um yeah, I I recommend staying to the end. Uh this will be about an hour long. I try and keep it uh uh within an hour. I also hopefully it’ll not be too dry and too stuffy for you. I’ve been on many webinars myself where the presenter is just so stuffy and you pretty much fall asleep. So hopefully that won’t happen here. And uh with that being said, let’s go ahead and get into this. Now this presentation is purely for educational purposes only and it’s proprietary here at the line credit union. We don’t record any of these um and but we and we ask that you don’t record any of these either. This is purely for educational. We offer these as a complimentary service for being a member of the credit union here. So, we just ask that you not uh do any of that. Uh here are the different uh websites that we have here. The different uh places where you can find information about AIS Alliant Retirement and Investment Services. Uh obviously, as you know, these webinars here are complimentary, don’t cost anything at all. We have a bunch of different topics and subjects that you can pick on and and learn. Just continuing to learn. That’s the good thing about it. Uh we also have the Investsavvy podcast. I’ll be honest with you, we have not done a a new podcast in quite some time, but the information there is not uh time-sp specific or anything. So, it may be some good information there for you. And then the AIS website and blog, find out about uh me and my team and and everybody here at the credit union as part of the Alliant Retirement and Investment Services here. So, let’s go ahead and get started here. So, how can we help you? The one thing at the very end of this webinar here, I’ll talk about a a complimentary report that I really encourage everybody to to take advantage of. It’s really detailed. There’s many other places that charge quite a bit of money uh to do this report. We don’t do it because of your membership with Allian Credit Union. And so, I um encourage you to uh you know, when I get to those slides, I’ll tell you what slides they are. They’re they’re pretty um obvious which slides they are. Um but we also do all sorts of estate planning, uh investment management. We have so many really cool and unique uh products here that are just really cool that we can uh we can uh take a look at for you if you’re interested in those. So with that being said, let’s go ahead and let’s get started here. So, this is the subject that we’re talking about, the home stretch. Seven things that you need to do before you get to retirement. You know, if you’ve ever watched a uh a race, especially a long distance race or maybe even participated in in one like a marathon or anything like that, you come around the uh the last little bit here, your legs are exhaust, you’re totally tired, you’re exhausted, you can see the finish line, and that’s where you don’t want to stumble and fall. uh you want to go ahead and continue on into the finish line and and finish uh the race. Same thing in retirement. You may be getting closer toward retirement, kind of like myself. I got the gray hair to prove it. Uh but you may be getting closer towards retirement. And right now is not the time to stumble and fall. And um you know right now you really really need to um take a look at your your retirement plan and make sure that you are in the um on the right track to go ahead and retire and have a very comfortable time in retirement. My apologies. I have asthma. It kicks in every once in a while. So I apologize for not uh uh for coughing and hopefully I’ll be able to stop those. Okay. So, here’s the different uh subjects that we’re we’re going to be taking a look at. Each one of these has their own slides. So, we’ll just get right into that here. So, the biggest thing is determining when to retire. You know, Ottovon Bismar, he was the kind of the the godfather of retirement. He brought up the idea of retirement in the late late 1800s over in Germany. He came up with a retirement age of age 70. The problem with that is that life expectancy at that particular time was about 42 and a2 years old. So if your life expectancy is 42 and he comes up with a retirement age of 70, not many people actually retired. Um and the problem is with today our retirement age is 65 to 67 and we’ve got a slide coming up here that will uh show that. But the life expectancy is much uh much older than that. You know, 80 mid80s uh for the majority of people, some even well beyond that. My dad’s side of the family typically lives until their mid9s or, you know, pushing 100. Um and uh so it’s a very different time frame right now than than it was back in 1890 when the term retirement came into uh into play. Now there was a a study a research uh that was done recently that asked many people at what age do you think that you’re going to retire. Most people said that they wanted to retire between 60 and 65. And obviously that is a big goal for many for many people out there. But the problem is is there was a lot of people that didn’t retire until after 65. Some of those that retired early retired for different reasons. So the average age of retirement was 62. And so why do you think that some people retired early? Well, there’s there’s three different reasons that uh that uh people retired early. Um reason number one, personal health uh issues. I’ll be honest with you, that’s what happened to my wife. My wife was got a lot of health issues. She had to retire early. Or it may not be just health issues for you. It may be health issues for somebody else. A loss a job, downsizing or stress or burnout. Uh my dad falls into that uh category. He lost his job early on. Well, I shouldn’t say early on. He lost a job before retirement. He was very very specialized in what he did and he just couldn’t find another job. So, he uh he retired early uh because the company uh had layoffs and everything. And then there’s some other people that uh get the the benefit of having a buyout offer and they can retire early because the company gives them a lump sum here. Now if we take a look at this, so for about 70% of retirees, the reason that many people retired early was it’s something that was completely out of their control. You can’t really control any of those things that uh that happen up there, especially in the top two. You really can’t control those things. If there’s a health issue or if a company has layoffs, it’s completely out of your control. By far, the majority of people retired between uh 61 and 65. The majority, even more than that, retired prior to 65 for whatever reason. And we just covered three different reasons. There’s only a few uh a handful of people percentage-wise that retire at at uh 65 or or beyond technically 66 or beyond. So let’s take a look at why people couples should plan for retirement based upon different ages. Uh often times there’s a couple of years difference between a husband and wife uh or spouses if you want to say. In my situation, my wife is uh three years younger than me. And that’s okay. So, when you first get married, a couple of age difference is really not that big of a deal. It is going to be down the road though when you go to thinking about retiring. So, it used to be retirement age was at 65. So, when the uh if this is your scenario here, when the husband went to decide to retire, he could get on Medicare at 65 years old. but his wife couldn’t go on Medicare. She couldn’t get it for another couple of more years. Now, fast forward that even further. Statistically speaking, uh men pass away at a younger age than women do. So, if the husband is a couple years older and he passes away early and if we look at statistics, the wife could live quite a few years in retirement on her own. And that is something that people need to need to take in into consideration. So there are some very important ages when you’re talking about retirement. Um so if we take a look at these, so prior to 59 or younger than that, you can add money to a uh a retirement plan. But once you turn 50, then you’re allowed to add more to a retirement plan. It’s called a ketchup. I’ve got to say that really slow or people get it confused with a condiment. So, at age 50, you can start adding more to a 401k or to an IRA uh than you could uh prior to 50 years old. At 55, some people depending on the situation, but some people are eligible eligible for early distributions from their current plan. Okay? uh your current employer plan at age 59 and a half. That is so if anybody wanted to take any money out of IRA accounts prior to 59 12 there’s an additional 10% on paid on taxes. Um but at 59 a half that additional 10% goes away. At 60 you can either have a widow or widowers uh social security eligibility. And at 62, anybody can apply for social security if you qualify. Now, the problem with uh uh applying early at 62 years old, you’re going to get a much lower amount than if you waited until your full retirement age, and it’s going to stay at a lot lower amount for the rest of your life. It’s going to be even more difference the the older you live because COLA, the cost of living adjustment, uh the increase that Social Security, uh gives is going to either be based on a lesser amount if you took it out early or a greater amount if you waited till your full retirement age or even until age 70. It’s the same percentage for everybody. It’s all based upon uh primarily I should say it’s based upon u inflation. Uh but if everybody’s getting the same amount if you took it out early you’re just getting a lesser of an increase uh that year. At 65 in a number of different months uh people or give or take three months people can enroll for Medicare. I absolutely encourage that you enroll for Medicare part A at 65. Uh part A is hospitalization doesn’t cost anything to have Medicare part A and if you don’t do it then you may uh come into some issues down the road when you do go to qualify for it. Again you don’t need part B if you’re covered by say a group health insurance or whatever. But part A is really important to be able to um to get. Now at 67 everybody is at their full retirement age. So, it’s again, I’ve got a slide coming up. It’ll show you 66 in so many months or 67. Uh, then everybody is will be in their full retirement age amount. Now, uh you don’t have to take out social security at 67 or your full retirement age. You can if you want to and you can continue to in uh to earn an income at your full retirement age and there’s no deduction in benefits. Uh if you take out social security prior to your full retirement age, there is a limit on how much you can earn each year without acrewing a penalty. And I want to say it’s somewhere around $22,000 give or take a little bit. Um, so but if you’re if you’re working full-time, don’t don’t take out social security prior to uh your full retirement age. At age 70, that’s the last age that social social security will increase. So from 67 to 70 if you don’t take out uh social security uh they they give you what’s called delayed credits and it’s an 8% bump in your social security. Um and again down the road that might benefit you because of COLA. The cost of living adjustment is going to be based upon either a higher amount at age 70 a little bit lesser of amount at your full retirement age or even lesser than that at 62. Now, at 73, if if you are at the age of 73 prior to 2033, you’re going to have to start taking out your RMD, required minimum distribution. This is money, excuse me, that you have to take out every single year from your pre-tax 401k or your traditional IRA. And that’s if you’re not working for that company in your 401k. So, if you’re not of the age of 73, by the year 2033, it bumps up to 75. It used to be 70 and a half, then they changed it to 72. Now, it’s either 73 or 75, uh, depending on when you were born and everything. So, uh, again, at those ages, you have to start taking money out of your traditional IAS. Your Roth IRA, you don’t have to, but your traditional IRA you have to take out. It’s roughly it starts out roughly about 4% per year that you have to take out and then every year thereafter the percentage uh slowly increases

uh topic number two take a mature retirement target. So I’ve got three rules of thumb to take a look at here when we’re talking about that. Now rule of thumb number one save enough to generate anywhere from 70 to 90% of your pre-retirement income. Again, most people don’t do that, but it’s a good rule of thumb. If you can do that, then you should feel very confident that your retirement is going to be very, very good. Now, there’s some costs that may go down. Hopefully, your mortgage is paid off. You don’t have to do that anymore. Transportation. I work from home. My transportation’s probably going to go up because I don’t uh I don’t have to tra to drive anywhere and I will have time to to go see my grandkids or whatever. Uh clothing will probably go down. You don’t have to buy such nice suits um dress clothes or anything like that uh as for a work environment. Uh and then food. you’ll have time to be able to cook at home and uh you won’t be going out to dinner or lunches and everything with all the co-workers. Now, there’s some costs that may go up. Healthc care may go up. I work for the credit union. Credit union uh as part of my benefits, they pay a good chunk of the health care. I do pay some, but uh Medicare is will cost more than what I have to pay currently. Travel could very well go up. I’ve got uh in-laws that live all over the country. I’ve got brothers that live all over the country. Uh so we can travel and visit them and and do different things. Uh utilities will probably go up. You know, if if you work in an office, you’re going to be home now more often. You’re going to have lights on more often. The TV’s going on more often, whatever. And then home maintenance probably will go up. For me, that’s almost a guarantee because I’ve got grandkids that come love to come over and just wreck havoc on my house. It’s pretty funny. Um, I just fully expect that when I retire, the grandkids will probably be over more often and I will love it. Uh, because then I can spoil them and then send them home after I’ve doped them up on sugar and everything. Uh, so my home maintenance will probably go up. My grand I’ve got two grandsons, four and six. I’ve got three, five total, but four and six spent the night with me last Friday night and uh something broke. And then my four-year-old grandson, he thought it would be really cool to stick it down in my air vent into the floor. Where he comes up with some of these ideas is just mindboggling. I just have to laugh at him. He’s such a funny kid. Now, costs may go away. Obviously, if you don’t have an income coming in, then you’re not paying social security payroll taxes. And again, without an income, you can’t do any contributions into a retirement plan. So again, just to kind of recap, if you can generate anywhere from 70 to 90% of your pre-retirement income, you should be feel very comfortable um with retirements. So rule of thumb number two, save a multiple of your salary based upon your age. So, a good rule of thumb in here is if you take a look at these, let’s say you salaries $100,000 and you’re 50 to uh 55. So, then you you know, again, if you have saved anywhere from 600 to $800,000 in retirement accounts, you should be able to feel very comfortable. Now, if you don’t have that saved, it’s not the end of the world. I’ve got some slides coming up here that can help you understand that it’s not out of uh not all hope is not loss. Okay, we’ll take a look at some slides coming up here. And then the third rule here is save enough to generate a 4% withdrawal rate. So, if we take a look at that and let’s say you want to add an additional 25,50 or $100,000 to your your income for the year in order to generate that amount and do a 4% withdrawal withdrawal withdrawal rate for the next 20 years. If you’re getting a 1 and a.5% return, this is the amount of money that you need to have in uh in um in your assets to be able to do that. Now, a shameless plug here for Alliant Credit Union. We’re paying double that one and a half percent return, but obviously we don’t do that all the time. Interest rates fall. Uh savings accounts are going to go down, CDs are going to go down, things like that. But let’s say you want to have an additional $25,000 for the next 40 20 years uh to get a 4% return. You need a little over half a million dollars in in an in your assets. If you want 50,000, you need a little over a million. And if you want 100,000, a little over 2 million to be able to do that. Now, if you get a higher return than uh 1 and a.5% and let’s say you get a 5% return, and 5% return is not being aggressive. It really isn’t. Uh, but you you as you can see here, you need a lot less money to be able to take out 4% per year over the next 20 years and get the 25,50 or $100,000 that uh that you want. Now, what if you need to save for 20 years of withdrawals? Okay. So again, if you have a 3% return here, if you want to have a 20 uh 20 years worth of withdrawals, getting a 3% return. And then if at $25,000, you need $476. At 50,000 for a year, you need 952. And if you um want $100,000 a year for the next 20 years, then you need just shy of $2 million to be able to do so. Again, that’s a 3% return. Now again, if you’re if you want to take on a little bit more um return and get a little bit better return, you can see obviously the more of a return that you get, the less that you need overall. And again, a 6% return is not being aggressive. There’s some very very good uh conservative things out there that can give you a 6% return. So item number three is to maximize your nest egg. So as I just mentioned, if you’re not at that uh uh you know 6 to eight times your salary, here is the plan that hopefully that you can get there. Let’s take a hypothetical uh situation here. Uh and let’s say that uh we got a husband and wife here. The wife is a retired school teacher and now she volunteers time at a historical society. And let’s say the husband is a is an engineer and he earns 50 $150,000 a year. Let’s say they’re both 50. And then let’s take a look and see what we can do here. So again, your contribution into a 401k, there’s an annual maximum that you can contribute. And into a 401k is 24,500. A simple uh 401k or a simple IRA 17,000. and a set IRA is a maximum of 72,000. So since he’s employed, he can only do into his 401k. So he puts in 24,500 and the employer matches 3% which is standard. So they’re going to put in $4,500. Now, um he can also contribute more since he’s 50 years old. He has that catchup uh that he can do. so he can add an additional $8,000 into his 401k through his work. Okay. Now, um you can do it into you can also contribute into a traditional IRA as well. Okay. So, since he’s 50 years old, he can put $8,600. So, it’s a 75 for everybody. But since he is 50 and older, for those that are older, you can do an additional $1,100. So that’s a total of uh $8,600 that he can contribute for into his uh IRAs for the year. Now even though his not wife is volunteering her time and not earning any income coming in, she can still contribute money into her IRA account based upon his income. Again, since she’s 50, she can do $8,600 total for the year. And if you add all these things up, you can contribute 45, excuse me, $54,200 into uh uh IRA accounts. So, let’s say you don’t do the maximum amount. Let’s say you just do $51,000. And let’s you say that over the next 15 years, because again, if they’re both 50, he wants to retire at 65. And if you get a 6% return, again, which is not ultraaggressive, it can add up substantially. So over those 15 years, you can have $1.2 million or add $1.2 million to your retirement. And then again, you and that’s just until 65. And then you’re going to hopefully be living quite a long time after that. you wouldn’t be able to add money to that if he decided to retire at 65, but that money can still continue to grow uh for him. Topic number two, you want to get a portfolio checkup. So, the average worker has about 12 different jobs throughout their lifetime. My oldest son has probably done that already in his lifetime. He has jumped from job to job. He’s been in one spot now for quite a while and he really likes it. But that means you could have potentially four or 12 different 401ks out there. And 63% of American workers, they have access to to a defined contribution plan at work. Now, for many people that just uh start a new job, 69% of plans have automatic enrollment into 401k. So, let’s say that in a previous job, well, excuse me, in your current job, you are, you know, getting closer to retirement. So, you want to be kind of balanced kind of down the road. You have a 60% stocks, 40% bonds. That’s what you have in your current one. But let’s say you had three other uh previous 401ks out there. Obviously, they were when you were younger, and let’s say that you were ultraaggressive in that time. If you combine all three of them to take a look to see what you’re uh where you’re at, you may find out that you are a lot more aggressive than what you expected that you would be. Now, it’s not necessarily a bad thing, but again, you want to take a look at all the different retirement plans that you have out there. Um combine them all at least on paper just to see where you’re currently are at. Now, let’s uh let’s take a look at to see what would happen if you were overinvested in stocks. Okay? So, let’s say you’re you’re at u at $900,000 and your goal is to retire in three years. And let’s say that you are 100% stocks. Uh now your goal in order to retire at um uh at uh at a million dollars, if you get an 8% return over those three years, you would have $1.1 million in your portfolio. But what would happen if that was at the tech bubble burst and beginning of 20 beginning of 2000, 2001, and 2002, the tech bubble burst happened and the stock market was down for three years in a row. If you were overly invested in stock market, say 100% into stocks, your 900,000 could have fallen down to $584,000. But if you were 5050, not overaggressive, not uh ultraconservative, but right down the middle, your 900,000 would have then only fallen to $871,000. Now, if you decided to go ahead and leave everything as is, your 50/50 plan would have earned you that million dollars within 12 months. And your 100% stock plan, it would take it would have taken you almost four years to get back up to that hundred million or that million dollars that you were ultimately that was what your goal was. Let’s take a look at another scenario here. Let’s say that you’re at $900,000 and your goal is to retire in three more years. You want a million dollar. And let’s say that you’re not overaggressive. Let’s say you’re 50/50 and the stock market crashes and burns during the Great Recession. Okay? If you panicked at that point and took all the money out of the stock market and put it into T bills, by the time you were going to retire, you would have had $713,000. Okay, if you didn’t panic and if you left things as is knowing when the market goes down, it has always rebounded again. Sometimes it rebounds faster than others, but it has always rebounded. If you didn’t panic, it didn’t take anything out. You still would have been able to retire in those three years with a million dollars with your T bills. it would have taken you almost until now to be able to get up to that million-doll marker. So again, get a good plan game plan going. Know that the stock market is going to go up and know that it’s going to go down. Historically, whenever it go has gone down, it’s it has always rebounded and come back up. As I said, sometimes it comes up faster than other times, but if you’re not ultraaggressive and you just leave things as is, it’s going to be well for you. You know, the um Warren Buffett always says that he buys when people are selling and he sells when people are buying because people buy into the stock market emotionally. the stock market falls and they go down and down and down and then people finally panic because they’ve seen their market go down and then they panic and sell out of it at the wrong time and then the market rebounds, come back up and then people wait and wait and wait to build up their confidence back up again into the stock market and then they buy in after it has already risen. If you don’t panic and you don’t get out of it, it’ll rebound. It’ll be fine for you. Now, you want to update your beneficiaries. You may have a new spouse. My mom passed away in 2016. And my dad got remarried at the end of 2017. Uh they were old enough. They were in their 80s, so they uh kept things separate. My my stepmom and stuff, but you know, it might be younger. But you want to take a look at beneficiaries. I’ll tell you when then my dad passed away a few years ago when he was um getting closer towards towards his time that we knew he was going to pass away. We, you know, he had a trust set up, a highly recommended trust over a will, but he had a trust set up and me and another brother were uh co-rustees on that. We noticed that he had this uh little IRA account out there that he still had my mom on as the primary beneficiary and he had only one brother, one of my brothers as a as a contingent beneficiary. So we were able to put the trust as the beneficiary. So you want to take a look at that. Uh you may have young children or grandchildren in my case, see if you want to add anything and and u you know leave them anything. Uh and as I mentioned earlier, I highly recommend recommend a trust over a will. Um it’s just more more uh solid uh more concrete when it comes to the uh uh dividing up the assets and everything. So item number five, you want to create a social security strategy. So when I talk about social security, I always hear, “Oh, social security is going to go under. It’s going to go bankrupt. we’re not going to ever have social security for uh this older people and stuff. That is not true. Here’s what it is. Up until a up until 2020 or 2021 actually, there was more money going into social security than what was coming out to pay benefits. Uh in 2021, that started to flip uh because the baby boomers are retiring and they should retire. Uh but because of that there is now less money going into social security than what’s coming out. So it’s the surplus that’s expected to run out if the government doesn’t do anything. It’s the surplus that’s that’s expected to run out somewhere around the year 2033. Okay. Now, I highly highly doubt that the um uh the the different political parties don’t come up with something to save Medicare or Social Security, I should say, Social Security. If they don’t do something, I think there’ll be bigger riots than we’ve ever seen, even in the recent history. Now, if they don’t do anything, Social Security benefits may drop by about 22%. But one of the things that they can do, and there’s a number of different things, but one of the things that they can do is raise uh Social Security payroll tax. Okay? It’s a ugly uh don’t kill the messenger. It’s an ugly thing to say, but in order to uh have enough social security paid out to those that have put into it, uh then there’s probably going to raise uh income tax, some sort of a tax, increase some sort of a tax uh to uh benefit Medicare or Social Security and keep that going. As I mentioned earlier, here’s this slide that is uh for the full retirement age. So take a look at this. This is uh whatever year you were born, this is the year that your full retirement age kicks in. Now I often get questions, what is the maximum that you can earn in social security? So these are the maximums here. If you paid into social security, the maximum amount, this is the uh the max the average maximum benefit that you would you would get back. If you had an average job and received an average income, this is what you’re going to be receiving. So again, my social security uh full retirement age, I should say. My full retirement age is 67. If I had an average job paid in the average earning an average wage and everything, uh my benefits would be $2,600 a month uh in social security. Now, the more money that you had made in your lifetime, the less social security is going to contribute to that 70 to 90% of your income. If you made less in your line lifetime, then Social Security is going to contribute more as a percentage to that. So, if you earn an average of $50,000 a year, once um once you uh turn on Social Security, it would cover about half of that 50,000. Okay? If you earned $100,000 and you turned on Social Security, it would be about 40% and you can see 32 and 25% if you made over uh $200,000 in a year. So, so if you earn that income, you definitely want to make sure that you are contributing into a a retirement plan as much as you can to offset the uh the difference there. So, item number six on on the agenda here is to build a retirement income plan. So let’s take a look at different uh uh returns for different amounts or for different uh percentages here. So let’s say you have a half a million dollars and you put it into a money market account earning 2 point.22% return. You’re going to get $93 extra a month off of the interest from that. If you’re able to get a half percent, basically a half percent, then you’ll earn four $214 a month extra on that. Now, by not being hardly any more aggressive at all whatsoever, if you put those into different kind types of bonds, and if you’re getting a 2.79% return, you can see that an average monthly income would be $1,100, a little bit more than that. if you want to do mut bonds getting 3.94% you can get a little over $1,600 a month and so you can see here the higher return that you get obviously then the more of an income that you’re going to be able to uh obtain. Now, let’s say if you want to have systematic withdrawals and let’s say you want to take out $1,500 a month and you have an individual stock that has a share part a share price of $5. So, if it’s at $5 and you want to be able to take out uh money, then you would have to take out 300 shares. right here is if the if the share price increases 20% up to $6, then you only have to take out 250 shares. But if it drops down to the 4%, then you only have to then you have to increase the number of shares up to 375. Okay? Okay. So, it it’s going to depend on when uh you know what the price of the um of the investment is to see a how much you’re going to have to take out to get that systematic withdrawal. So if you put it into some income producing products and there’s no distribution from original savings. Okay. But if you if you want to have uh some dividend paying stocks then the income is going to fluctuate because not all dividends pay the exact same. Even a savings account is going to change a different uh over time here. Um but your income could fluctuate if you do the income producing products. But again, if you have a systematic withdrawal plan, then you know what your budget needs to be because you’re going to have consistent income, but you may dip into your original uh savings. Just the two different things that you have to take a look at. So, the last item that we’re going to talk about here is to look beyond the money. Now, there was something uh done a study done some time ago about the happiness curve. Okay? As you can see, typically ages 45 to 50 is usually the least happy. Um, you know, you’ve got children that may be going into college or or going into the workforce. You want to make uh you know, you’re kind of stressed out to make sure that your children are are doing the right thing for their future. You may have ailing parents that you may need to be concerned with or whatever. But the the good news about that if you’re within that age, and I’m I’m 58, so I’m a little bit on the upswing there. But the good news is happiness usually gets better later on in life. And there’s a number of different things that factors into somebody’s happiness. Health, health is a big factor into happiness. As I mentioned earlier, my wife had to retire early because of health. I’ve seen the benefit. I’ve I’ve seen the what health can do on somebody’s happiness or even state of mind. Friendships, you know, often times you have lifelong friendships that you have in retirement and you have the time to hang out with them and do a little bit more. And then family, as I mentioned, I’ve got five grandkids currently right now. I love hanging out with them uh with my grandkids. uh and uh that that bring me brings me joy and especially it brings me joy knowing that I can send them home again which is awesome. Now the island of Okinawa has they’re known for being very very happy people and they’re also known for their longevity and they have something that they call there is called icky guy and basically icky guy is something to live for. So what you need to find out in retirement is what is your icky guy? Find out what you love and go ahead and do that. find out things that you are good at and find out what the world needs and then if you can get paid to do those things even better. You know, at that point in time, as I say, it’s it’s not a job if you enjoy what you’re doing. If you’re in retirement and decide to do something different, it’s not a job. It’s something that you enjoy doing. So, I’m sure that that will improve uh your happiness and and possibly even your longevity. So in retirement, you know, you may decide to uh contribute to a cause. Okay. Visit family or friends. I mentioned that I’ve got family all over the country here. May pursue different hobbies. you know, a buddy of mine uh is from Australia and he has said that up until well, he’s still working a little bit, but uh he says up until about now, either he’s had all the time in the in the world to go back and visit his family and friends in Australia, but he’s had no money, that’s when he’s been unemployed, or he’s had all the money to be able to go and do that, and that’s when he’s been um but he doesn’t have the time to do that. That’s when he’s been employed. So, in retirement, you want to hopefully be able to have the money and the time to be able to go and do what you want to do. Here’s a few examples of people that in retirement didn’t slow down and they did some amazing things. Peter Roier developed the first theorist when he was 73 years old. Uh, Colonel Sanders started his first KFC at 65 years old. Madonna Buddhis known as the uh the Iron Nun. She started her, excuse me, she started training for triathletes when she was in her 40s and she finished the last one when she was 82 years old. That’s amazing. Grandma Moses started painting when she was 73. And Yichiro Murray, he set a record of cl of being the oldest to climb Mount Everest at age 70 and then he crushed it when he was 80 years old. So these are people that in retirement didn’t slow down, didn’t stop. They continued to do what they wanted to do. They found their eeky guy and was able to have a very good and long uh life in retirement. So an unknown author once said, “Retirement is wonderful if you have two things to have two essentials, much to live on and much to live for.” So find out what your icky guy is and and uh and live for that. So just to kind of recap, uh here’s the seven different things that you need to do in the decade before you retire. Um I obviously I highly highly encourage you to work with a financial professional. Again, that’s what we do. Oops. That’s what we do here at Allian Credit Union. We are uh financial professionals, financial consultants here and we can help tailor a plan specifically for what you’re looking to do and to be able to live in retirement. As I mentioned very early on, we do have this report that I do recommend that everybody take advantage of. Here’s a few slides of what this report can do. So, it’s, you know, it covers a lot of different things. this report here, you know, we’ll take a look at how much social security you’ll be able to I get in here in this particular slide here. The dark blue is the social security that you have in here. The light blue is the pension plan if you have it. You can throw in rent. You can throw in anything in there as as extra. The red line there is the uh this particular situation is their expenses. And then the orange there is the RMDs that have to take out. Unfortunately, well, these people unfortunately do not need the RMDs to survive and to uh pay bills. They’ve got enough income to be able to do that. But unfortunately, they have to start doing it uh at 73 or or 75 depending on uh what their ages are. You know, if we take a look at that report here, it will give us our cumulative taxes that you will pay over your lifetime. uh and then again how much portfolios will be left uh on to beneficiaries when you pass away. A big thing that uh I am hearing quite a bit out there and I have many people ask me about is what about Roth conversions? Does a Roth conversion make sense for you? Uh and you know every time I talk to somebody about that I never know the outcome until I run this report here. And we can do a Roth conversion in a number of different ways. For example, this one here is if we just do a set amount, say $60,000 for the next 8 years, what will that change in taxes and or accumulation? So, in this particular situation, it would reduce this couple’s taxes, overall tax uh consequences by $140,000, and it would greatly increase their portfolio by $828,000 when they go ahead and go ahead when they pass away. But not only is it just increasing it by 8 $800,000, it’s also increasing it quite a bit in the Roth account that then their beneficiaries will also be able to cash in tax-free when they re when they need to. Another example here, Dave and Sarah. Uh, if we plug in some numbers here for them, we can see that they’re going to have their assets continue to grow in retirement. And if we do it into a tax bracket, this is typically what I recommend is we fill it up to a set tax bracket. maybe keep it in within the tax bracket that you are currently in and just whatever the income is figuring out what the maximum tax bracket is and then reduce that. In this particular situation, if they do that for the next 5 years, then they will um it would save them $116,000 overall in their lifetime of uh of paying taxes. and it would increase their their a assets when they passed on by $250,000. So, is a Roth conversion good for you? Maybe, maybe not. I never know until I until I um I run the numbers here. Now, let me share something with you here. If you look at the last four lines here, that little triangle there, that’s when somebody passes away. Now, when if you’re married and you have a spouse that passes away, um or anyway, let’s say you’re the surviving spouse here, you know, if you have traditional IAS, if you’re still within the same or very close to the same age, you’re still going to have all the RMDs that you’re going to need to do. But the problem is is that you’re going to be filing now as a single person, not as a married filing jointly. So even if the income reduces down, your tax percentage might increase. Okay? Call it the widow or widowers tax. So, one thing that a lot of people don’t take that into consideration is that there, you know, when one person passes away, you’re filing as a single person, your tax bracket might uh increase and you might be paying uh more in taxes. Even if it’s the same amount or maybe slightly less, you still could end up paying more in taxes. Okay. Now again with this uh with this particular situation here obviously in the beginning years when you’re doing the Roth conversion it will increase your taxes for those years because any of the money coming out of a traditional IRA you have to pay taxes on it but it would then uh um eliminate that amount there uh would go into a Roth IRA so that you wouldn’t have to do any RMDs down the road on that and it can stay in there and continue to grow and you’re not required to take any money out of the Roth IRA. So, just to kind of end this thing and I’ll get into questions here. So, again, if anybody has any questions, please type it in the chat or the uh Q&A uh question and answer and I’ll get to those questions here in just a little bit. But why Aerys? Why why us versus uh somebody else or whatever? You know, the the cool thing with ARIS is number one, we want to get to know you and we want to design a plan specifically for your situation. And then we use a team approach to come up with that plan and make sure that we’ve got all of your bases covered and then you can have a very good comfortable retirement uh and life for the rest of your life and living for the rest of your life. And then lastly, we want to build a lasting relationship for life. The cool thing with with Aerys, excuse me, is that for example, all my clients know that they call me directly. Uh my phone number rings directly on my desk and they can call me. Now, a pays me to talk on the phone and I would like to say I do a pretty good job of that. So, oftentimes they will get my voicemail, my voicemail, but I will pick up every time that I can. If they leave a message, I will call back within 24 hours. Usually by the end of the day, but sometimes it’s the uh by the next day, but I I always call back. Now, here is my contact information. My direct phone number here at Allian Credit Union is 773 4628612.

As I mentioned, that rings directly on my desk here. Uh if you have any questions, absolutely feel free to uh give me a call here. That’s my email address, bbaker.lpliancreditun.com.

Um now with that being said, let me get into some of these questions here. I’ve seen some pop up. Um while I’m doing that, let me let me do this. If you would like to have a one-on-one question, uh a one-on-one conversation with me, I would be glad to to have that with you. If you’d like this report ran, I’ll be glad to run this report uh for you for your situation here. Go ahead and hit yes to this uh question and I will reach out within the next couple of days. I will give you a call first and uh if I don’t get you on the the phone, I will then shoot you an email. And in my emails, you all have access to my calendar. you could schedule a Zoom call uh with me and that way um we’re not playing a phone tag back and forth. Um so let me get into this questions here. Uh will there be a recording of this webinar shared un as I mentioned in the very beginning? No, there’s not a recording. This is purely for educational purposes. There is no recording on this one here. Um you can always call me anytime that you would like to if you have a question. Uh another question here. I’m 61 years old. Can I do a Roth conversion now? Yes, you can. I am not currently working. Does not matter. I had to quit to care for my husband full-time. I’m so sorry to hear that. So, a Roth conversion is not adding to your retirement plans. It’s just moving from one tradition from a traditional IRA over into a Roth IRA. You can do that at any point in time. There’s no and you can do it for any dollar amount. Um, you know, more it’s not considered a contribution, which is brand new money, not in a retirement account going into a retirement account. That’s a that’s a contribution, but anybody at any age, regardless of income, can do a Roth conversion. Uh, another question here. Does contributing to an employer’s Roth 401k plan or personal IRA impact the cost of one’s Medicare premium? Uh, not contributions, but I’ll get into that. I thought I once heard that it’s not good to contribute a year or two before starting Medicare. Is that true? No. It’s not the contribution that impacts the cost of Medicare. It’s the income that you have. It’s called Irma. I R M A. If you have in in I want to say it’s $109,000. If your income is less than $109,000, you don’t have any additional costs for Medicare Part B or Medicare Part D. Again, Medicare Part A is free. But if your income is 109,000, I want to say it’s 124,000, then you’re going to pay an additional 80 or 90,000 a $90 a month for part B and D. And if it’s above 124, it can get quite uh quite expensive for Medicare. If you are uh are lucky enough to be able to save for retirement and have a really good nest egg, by the time you have to start doing your RMDs, you may be paying a couple hundred extra a month for Medicare Part B. That’s why a Roth conversion might really benefit you. So again, it’s not the contributions, but it’s your income during retirement to see if uh Medicare Part B and Part D is going to cost you extra. Uh how can I find a worksheet to see if I can convert to a Roth IRA? Um Lisa, contact me. Um hopefully if you answered yes to the questionnaire, I’ll reach out to you. Um but if uh it it’s a program that I run here. So I have a spreadsheet that I have created and I uh I I fill that spreadsheet out or have my clients fill that spreadsheet out and then based upon that uh the answers that will determine whether a Roth uh Roth conversion is the right thing for you to do or not. Okay. Um, and I I think that is all the questions that I have on that. So, again, we’re right about the hour or 55 minutes into this. So, just just a little bit before the uh the hour mark. So, thank you everybody for uh spending the this hour with me here. Uh for those of you who answered yes to the questionnaire, I will go ahead I will reach out to you over the next couple of days. again. If I get your voicemail, I’ll shoot you an email and you can schedule a time to do a Zoom or give me a call back. Uh, whichever is uh most convenient for you. Uh, a few people have said thank you. You’re sure welcome and thank you for joining me. I hope you all have a great um uh rest of the day and rest of the week and hopefully we’ll catch you on another podcast, another uh webinar soon. Take care everybody.