My Smart Retirement

How often do you think about retirement? People who are not approaching retirement or who are not in retirement, rarely spend a lot of time thinking about it. But at the same time, 6/10 of retirees wish they had thought about this phase of life more often. 

More and more people are visualizing retirement as a brand-new chapter in life. Retirees in the U.S. are reporting higher levels of happiness due to their newfound freedom. Maybe you have more time to focus on the things you love: spending time with family, hobbies, or travel. Thinking about the values you want your retirement to reflect can enhance these years of your life.

On today’s episode, we are breaking down the four pillars of retirement: health, family, purpose, and finances. How do each of these play into our plan and into our future?

Pillar #1: Health 

Having mental, physical, and spiritual health are all important for your well-being. Yet, 80% of Americans have a chronic condition. Sometimes we find our health spans don’t match our life spans. When we consider these numbers and how often people are experiencing longevity in their plans it’s important to consider long-term care and other health care options. 

Pillar #2: Family 

Family can be one of the greatest places to find comfort and your family may be an important consideration within your financial plan. Stronger relationships can be a core part of retirement once you are out of the workforce. 

Pillar #3: Purpose 

The pandemic showed a lot of people why and how to live their lives more purposefully. Similarly, in retirement, you want to have a purpose. Are you going to travel? Spend time with family? Or embark on a journey you’ve never had time to in the past? With more time, comes more time for finding your purpose. 

Pillar #4: Finances

Personal finances, retirement, and the economy all play a massive role in the level of freedom you experience in retirement. Some people go to work part-time to have more spending money to enjoy. It’s important to keep learning about your finances, even as you get close to retirement. 

 

TIMESTAMPS: 

3:42 – 4 pillars of retirement

5:29 – Thinking more about retirement

7:06 – What does retirement planning look like now?

8:37  – A brand new chapter in life

13:15 – Pillar #1 health

17:19 – Pillar #2 family

19:36 – Pillar #3 purpose

21:23 – Pillar #4 finances

 

MORE INFORMATION:  https://www.flemingfinancialservices.com/podcast

 

 

When it comes to understanding our finances, it may be easier to use comparisons when grasping new concepts. Financial literacy has become a lot more important as retirement has become more complex. Instead of relying solely on a pension or Social Security, you probably have various retirement tools to keep track of now. 

On today’s episode, we are going to help you expand your financial literacy by breaking down some comparisons between a healthy lifestyle and a healthy retirement plan.

A lot of us struggle with assessing risk and uncertainty. Understanding is crucial to making wise decisions that will positively impact your future. With a steady bull market for the past decade, it’s no wonder investors are confused about the appropriate amount of risk they should be taking on. To understand this better, let’s compare it to your health. We all know the basics to be healthier: avoiding empty calories, working out, eating healthy foods, etc. 

Empty calories come from things like donuts and soda. They taste good, but they don’t have a lot of nutritional value. In the financial world, empty calories come in the form of heavy and complex plans. You don’t always need a large retirement plan. A plan that you understand and are comfortable with is the best plan. 

Drinks with added sugar aren’t great for us. Financially, this can look like hidden fees. While fees are a normal part of the financial world you should never feel misled. Don’t be afraid to ask questions about fees from your advisors and your investments. 

Trans fats in retirement planning can look like taking on too much risk. You may be tempted by greed to continue to increase your risk for a bigger reward, but the market won’t keep going up forever.   The best way to avoid these unhealthy habits is to practice being content with what you have. Working with an advisor and constructing a plan that you can have confidence in can help you stay healthy and happy as you plan for retirement. 

 

TIMESTAMPS: 

1:08 – Easter party

2:36 – Does experience matter?

5:26 – Need for financial literacy

8:38 – Correctly assessing risk

11:20 - Empty calories

13:47 – Added sugar

15:10 – Trans fats

16:36 – Artificial sweeteners

 

MORE INFORMATION:  https://www.flemingfinancialservices.com/podcast

As you approach retirement you may notice some milestone birthdays coming up. What important ages do you need to mark on your calendar? On today’s show, we’ll break down some key birthdays that will impact your retirement plan.

Age 50

Once you turn the big 5-0 you are eligible to start saving through catch-up contributions. This valuable tool is important if you feel behind on your retirement plan. You’re entering the final stretch of retirement and being able to save a bit more is always helpful.

Age 55

If you have a retirement account with your employer and decide to leave that position you can withdraw early from that account without penalty. Keep in mind though, it’s only the 401(k) with that employer that's eligible and it will be taxed.

Age 59 ½

At this age, you can start taking from any retirement account without penalty. You can do a lot of planning during this time and move money around or start taking that money out to live on.

Age 62

Many people watch this age closely as it is the earliest you can start taking Social Security. But should you? It is a reduced benefit at 62 and the longer you wait the larger the benefit will be. So, whether you take Social Security or not at 62 will depend on your plan.

Age 65

This is when you can enroll in Medicare. If you are still employed and have an employer-sponsored plan, you’ll have options. Otherwise, you’ll enroll in Medicare at 65.

Age 66 through 67

Depending on your birthday when you turn 66 through 67, you’ll be at full retirement age. This means you can start taking Social Security without any penalty.

Age 70

As an incentive for people to delay their Social Security benefits, each year you wait to take it adds to your benefit. Up till age 70, your benefits go up 8% per year. This means you’ll get the maximum benefit.

Age 72

From 59 ½ to age 72 you can take money out of your retirement accounts, optionally. But once you turn 72 you must take the required minimum distributions. In the first year, you’ll have a grace period, but you’ll want to plan for RMDs to avoid penalties.

Whatever birthday you are coming up on is the most important. It’s never too late to start planning for the future and for your retirement. If you are curious about how your plan is going or you want to make sure you are prepared for your next milestone birthday, give us a call!

 

TIMESTAMPS: 

0:12 – Having a milestone birthday

1:31 – Milestone birthday party

2:36 – Age 50

3:47 – Age 55

5:54 – Age 59 ½

6:32 – Age 62

7:30 – Age 65

8:54 – Age 66 and 67

10:17 – Age 70

12:10 – Your next birthday

15:59 – Housing questions in retirement

18:55 – “Should I pay off the house quickly?”

20:38 – “How much money do you need to live on?”

 

MORE INFORMATION:  https://www.flemingfinancialservices.com/podcast

We all go through chapters in life, especially as we approach and enter retirement. On today’s episode, we are going to discuss some age-related questions many pre-retirees and retirees have. Which ages are most important when it comes to your retirement plan?

Peg and Paul have already started Social Security, but regulations ended up changing their original Social Security strategy. So, Peg started taking this benefit at 62, which made for a reduced benefit. She ended up taking this lower benefit for the rest of her life despite this not being their original plan. 

A lot of these regulatory changes don’t get reported on and this couple was doing their planning on their own. What they had set in place accidentally became set in stone. That’s why we encourage planning early and with an advisor that can keep track of regulatory changes for you. 

Larry’s been working for the same company for 32 years. He wants to retire but is not 59 ½ yet, the age you must be to take out money from your retirement accounts. Is he stuck working until then?  

There could be various options available for Larry. If he separates from his company there’s a rule that allows him to take money out of that employer-sponsored 401(k) after the age of 55. 

So, he won’t have to wait until 59 ½, but this rule only applies to the company he retired from. If Larry has other accounts though, he’ll have to wait. 

Steve is worried about his mother living on her own. He’s wondering if it’s a smart move to have her sign her house over to him instead of selling it when she needs to go into long-term care? 

From this question, it sounds like Steve is hoping to retain his mother’s home and have the state pay for her care. But there is a five-year lookback. If this is five years before you think she’ll need care, you may be okay but if it’s going to be a sooner transition her home will be considered. 

As we go through these changes in life, it’s always nice to sit back and reminisce. Retirement planning and life itself can be confusing, but you don’t have to navigate these questions alone. 

 

TIMESTAMPS: 

1:26 – Chapters in life

4:00 – Taking Social Security at 62

9:39 – Withdrawing money at 59 ½

13:37 – Buying my mom’s home

17:22 – Reminiscing through life

 

MORE INFORMATION:  https://www.flemingfinancialservices.com/podcast

What are some signs you are in good financial health? When it comes to planning for retirement, we don’t want to rely on beginner’s luck. On today’s episode, we are going to discuss how to recognize when you are on the right track and how you can stay on the pathway to financial freedom.

You spend less than you make.

If you’re working and spending less than you make and putting money away for the future, that’s great. Even in retirement, a good sign of financial health and longevity is spending less than what you’re bringing in.

You understand the future tax implications of your savings.

Inevitably, we are all probably going to be faced with some kind of tax surprise in our lifetime. But we can better prepare ourselves for our tax bill in retirement if we understand these implications ahead of time on our retirement accounts.

If you’re married, both you and your spouse know enough about the retirement plan to be able to manage it if something were to happen to one partner.

This might be an obvious one to some of us, but you would be surprised how many couples rely on one partner to organize the finances. Pensions, life insurance, and Social Security plans are all things both partners need to be aware of. Do both of you know when and where you are taking income from?

You have a retirement income plan.

A lot of people put away money for retirement without considering how they’ll take that money out. If you don’t have an income plan, how do you know how much to take out on a monthly basis? You want to be sure you won’t run out of money in the long run.

You don’t worry about your financial future.

If you aren’t worried about your financial future, then you probably have most of these covered! You know that you are covered if something unexpected happens. Good financial health means you probably don’t worry about the financial future.

 

TIMESTAMPS: 

1:29 – Being on the right track

2:40 – Spend less than you make

4:25 – You understand your tax implications

6:42 – Both partners know the retirement plan

9:06 – You have a retirement income plan

11:39 – You don’t worry about your financial future

12:52 – Once you are in the financial red zone

15:00 – Retirement date risk

17:01 – When is retirement planning easier?

19:37 – You’re more likely to be out of debt!

20:16 – You’ll know what you want to do with your life

 

MORE INFORMATION:  https://www.flemingfinancialservices.com/podcast

What similarities do baseball and retirement planning share? On today’s episode, Nancy and her husband Brian will compare some basic baseball principles to retirement planning, which are surprisingly similar endeavors.  

When you go to a baseball game you are probably hoping to see a home run or two. As we know though, the way to win a game has a lot more to do with the little steps and strategies baseball players take than the big glory shots. The single and double hits matter too. A strong retirement plan is built the same way. It’s not always the biggest score that matters the most. The more people try to hit a home run, the more they tend to strikeout.

In baseball, it’s not always about appearances. A lot of the time new players come in looking great for a few years but they tend to not last as long as some more reliable players. Similarly, there might be flashy investments out there but will they have those reliable returns?

Coaches and managers often look for 5 tool players. These are the most skilled and reliable players on the market. They can run, score, hit, cover the field, and throw. In retirement, you also need to focus on 5 important parts: your emergency fund, an income plan, long-term growth, a plan for healthcare or long-term care, and longevity.

Every great baseball team has a great coach and managers. When planning for your future having your own retirement coach can help guide you. An advisor can help you understand what kind of coverage you need, your retirement tax bill, how much you should save for healthcare, and much more. A coach guides the players to win the game, an advisor can guide you to win at retirement.

 

TIMESTAMPS: 

1:16 – Spring training is here!

2:56 – Is a homerun the most important part?

6:53 – Not about the appearances

11:37 – The 5 tool players

17:11 – Emergency fund

18:13 – Regular income

18:47 – Long-term growth

19:39 – Healthcare and long-term care

21:05 – Keeping pace with longevity

21:37 – The importance of managers

 

MORE INFORMATION:  https://www.flemingfinancialservices.com/podcast

Our world is full of myths. We use them to make sense of things. The financial world is no different. On today’s episode, we are going to explore some common financial myths and deconstruct the valuable information we can learn from each.

Myth #1: Shifting from stocks to bonds removes the volatility from your portfolio.

On a basic level, bonds are going to be less volatile than most stocks. But we have to remember that bonds don’t have principal protection so they depend on interest rates.

If you bought a bond and interest rates went up and you sell your bond you may end up with less money. The volatility with bonds just looks different than the risk associated with investing in stocks.

Myth #2: Once you are retired life insurance is no longer necessary.

This certainly isn’t true for everyone. Do you still have people who are depending on you financially? This might be children or a spouse. Life insurance can also be a form of protection against long-term care costs.

Myth #3: You will need less income when you are retired than you are working.

A lot of people assume they’ll be spending less in retirement but this isn’t always the case. You’ll probably have to pay for at least some medical expenses out of pocket. You also have more discretionary time to spend money.

Myth #4: You will be in a lower tax bracket in retirement. You may think since you aren’t working, you’ll be in a lower tax bracket but we often find this isn’t true. For most accounts like a 401(k) and IRA you’ll have a tax bill in retirement. It’s important to find the balance between how much money you need to live and how to keep your tax plan efficient.

Myth #5: Financial planning is easier to do without a professional. Some people think planning is easy and accessible in today’s world with our technology and knowledge. But saving for retirement is becoming more and more complex. Having an advisor can help you address nuances in your plan and prepare for the possibility of longevity.

 

TIMESTAMPS: 

1:21 – Where do myths come from?

2:40 – Shifting from stocks to bonds is less risky

5:42 – Once you retire you no longer need life insurance

7:26 – You will need less income in retirement

10:35 – You will be in a lower tax bracket in retirement

13:02 – Financial planning is easier to do without a professional

17:40 – Looking for easy answers

 

MORE INFORMATION:  https://www.flemingfinancialservices.com/podcast

The old saying goes “This Isn’t My First Rodeo.” We've seen similar rising gas prices in the 70s and 80s. It feels like it’s going up almost every day or so now. Adding this to inflation in the grocery store we are faced with more and more uncertainly in the market.

A lot of people are rethinking traveling and employees that have to commute are feeling the pinch in their wallets. Because of this turbulent time, we are going to take some time to answer some of your questions when it comes to retirement planning. 

Doug in Clean Creek says his company is not allowing him to move his 401(k) into an outside account. He’s heard of a lot of people doing so, but how does this work? 

401(k)s have some broad rules, many of which are put in place by your employer. As far as the government is concerned there is no regulation on when you can do a rollover. What you have to be aware of then is what rules your employer has in place. 

Commonly, people are eligible to roll over their own contributions at 59 ½. Others can’t roll over anything until they leave their employer. Often times if your employer is matching your contributions, you won’t be able to roll over that money until you leave your job. 

Doris is in the middle of a divorce after 30 years of marriage. Will she be better off getting half of her husband's 401(k) or half of his pension? 

Pensions can give a lot of people a sense of comfort and security in the form of a secured income. If you take the Pension, you could live off those payments and your Social Security. 

You can sit down and calculate how much you’ll get with both benefits. However, if you are working another 10 years you can’t guarantee how much money will be put into your husband's 401(k). If you like the form of a guaranteed income taking the pension may be the better option. 

James is wondering if he should change how much he is saving with interest rates going back up? He hasn’t been keeping much in the bank recently because of the historically low rates. 

To determine this, we have to look at your age and need. If you are already retired, the recommendation is to have at least 6 months of living expenses in your savings account. The same rules apply if you are working. You want to keep pace with inflation but you need to ensure your emergency savings can support you if necessary. 

 

TIMESTAMPS: 

1:45 – At the rodeo

3:35 – Be aware of the history

8:40 – “How do I roll over my 401(k)?”

12:00 – Avoiding the snow

14:51 – “Half of my ex-husband's pension or 401(k)?”

19:25 – “Should I change how much I am saving?”

 

MORE INFORMATION:  https://www.flemingfinancialservices.com/podcast

On today’s episode, we are going to have some fun and answer a potpourri of financial and retirement-related questions. We will explore some of the questions sent in to the show and how they relate to your financial future. 

Pat asks “I have two old 401(k)s, is now a bad time to roll them over?”  We are going to assume your 401(k) is inside of mutual funds. If you are immediately going to sell and put it somewhere else, there won’t be much of a big-time gap. In that case, it probably isn’t a big problem. 

But if you were thinking about waiting for the market to recover before putting it into a Roth you want to be careful and discuss this with your advisor. 

Lucy says, “As part of my divorce settlement I am receiving a portion of my ex-husband's pension for as long as he is alive. Should I take a life insurance policy out on him in case he dies before I die?” 

If Lucy’s ex-husband dies before her, she could lose a big portion of her retirement income. If he is insurable and can afford it a life insurance policy would be a great way to protect herself. 

In some divorce settlements, we see life insurance policies that cover this kind of situation. We don’t want to have anyone left with a big gap in their retirement income. 

Chris says, “I owe $21,000 on my truck, but it’s the only debt I have. I just turned 59 ½ and I can take money out of my 401(k). Should I take a withdrawal to pay off my truck?” 

What type of interest rate do you have on the truck? How long until you pay it off otherwise? Is there a pressing need for you to have no debt? 

You need to consider these questions against your 401(k) earning and the tax bill you’ll owe. As you enter the retirement red zone, these decisions can become a little dicey, so you’ll want to consider the best decision for your situation with your advisor. 

Rose asks, “How much is too much to spend on our forever home?” 

The right price to pay for your forever home is going to depend on your retirement lifestyle. Let’s suppose you want to travel. Having a house without a large mortgage frees up money for travel and hobbies. A smaller home would be great for these retirees. 

Other retirees want to be active at home. Do you want to do a lot of entertaining and host family and friends in your home? In this case, a bigger home might be the right fit. There isn’t a universal “correct amount” to pay for a home. You have to decide what will make you happy in the long run. 

If you ever have questions similar to these and want more in-depth and personalized advice give us a call and we’d love to discuss your personal retirement future! 

 

TIMESTAMPS: 

1:41 – Putting together a community event

2:48 – “Is now a bad time to roll over my 401(k)s?”

4:21 – “I am getting a portion of my ex-husbands pension; should I take a life insurance policy out on him?”

9:00 – More about our community event

11:45 – “Should I make a withdrawal from my 401(k) to pay off my truck?”

15:30 – “How much is too much to spend on our forever home?”

 

MORE INFORMATION:  https://www.flemingfinancialservices.com/podcast

The FIRE Movement started back in 1992 after the book Your Money or Your Life detailed the steps to financial independence in a new light. FIRE stands for financial independence, retire early. This lifestyle was characterized by saving 50% or more of your income.

Now that seems like a lot! But followers of this movement highlight the importance of optimizing their money to achieve happiness and leveraging their assets to achieve financial independence as early in life as possible. While much of this philosophy may seem extreme, there are some valuable things we can learn from the FIRE model. Many retirees save their entire life for retirement but are content not spending all of it down to the last dollar. Similar to a budget, with FIRE you track every dollar you spend.

With this mindset you buy what you need and nothing else. With less to buy or maintain, you save a lot of money.   While the FIRE movement may not fit everyone’s lifestyle there are valuable money lessons to learn from this mindset.

Some people want to retire as early as possible. While others, enjoy their career and may spend a little more now and retire later in life. At the end of the day, the FIRE movement’s biggest lesson is about learning to be happy with what you have.  

 

TIMESTAMPS: 

0:21 – The FIRE Movement

5:24 – Having a similar mindset

7:10 – Tracking every dollar you spend

9:45 – Buy what you need and nothing else

11:12 – Wanting to retire later in life

15:40 – The generational cycle

 

MORE INFORMATION:  https://www.flemingfinancialservices.com/podcast