Retire Ready with Kyle Hammerschmidt

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This episode goes into the intricacies of investing in retirement, focusing on long-term S&P growth, sequence of returns risk, and bucket approaches. It emphasizes the impact of market volatility on retirement income and the importance of strategic investment decisions. The episode concludes with a call to action for seeking professional advice.

Takeaways

• Understanding the impact of market volatility on retirement income
• The importance of strategic investment decisions in retirement planning
• The significance of sequence of returns risk in retirement investing
• The value of seeking professional advice for retirement planning

How Long It Takes To Recover Source
2000-2009 S&P 500 Source
2010-2019 S&P 500 Source
2000-2023 S&P 500 Source
S&P 500 Long Term Returns Source

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Disclosure: You should always consult a financial, tax, or legal professional familiar with your unique circumstances before making any financial decisions. This podcast is intended for educational purposes only. Nothing in this podcast constitutes a solicitation for the sale or purchase of any securities. Any mentioned rates of return are historical or hypothetical in nature and are not a guarantee of future returns. Past performance does not guarantee future performance. Future returns may be lower or higher. Investments involve risk. Investment values will fluctuate with market conditions, and security positions, when sold, may be worth less or more than their original cost. MOKAN Wealth Management is a registered investment adviser with the SEC. Registration of an investment adviser does not imply a certain level of skill or training.

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• As retirement approaches, it's important to shift focus from accumulation to decumulation and develop a strategy for investing near and in retirement.
• Many people engage in 'naked investing,' investing without a clear strategy or understanding of why they are investing.
• Investing near and in retirement requires considering factors like protection, liquidity, and growth.
• Tax planning is crucial in retirement investing to minimize long-term tax bills.
• Understanding market volatility and having a realistic perspective on returns is essential for successful investing in retirement.

Subscribe to The Retire Ready Weekly Newsletter
Get more information on The Retire Ready Academy
Looking for personalized financial planning? Visit our website

Disclosure: You should always consult a financial, tax, or legal professional familiar with your unique circumstances before making any financial decisions. This podcast is intended for educational purposes only. Nothing in this podcast constitutes a solicitation for the sale or purchase of any securities. Any mentioned rates of return are historical or hypothetical in nature and are not a guarantee of future returns. Past performance does not guarantee future performance. Future returns may be lower or higher. Investments involve risk. Investment values will fluctuate with market conditions, and security positions, when sold, may be worth less or more than their original cost. MOKAN Wealth Management is a registered investment adviser with the SEC. Registration of an investment adviser does not imply a certain level of skill or training.

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Summary

In this episode, Kolin and Kyle discuss steps five and six of a tax-efficient retirement plan. Step five involves deciding whether to pay taxes now or later, considering factors such as income levels, deductions, and retirement account contributions. Step six focuses on the ongoing management of the plan, including diversifying income sources, maximizing Social Security, and adjusting strategies based on tax law changes. The episode highlights common mistakes to avoid, such as assuming lower taxes in retirement and withdrawing from retirement accounts in the wrong order.

Takeaways

• Deciding whether to pay taxes now or later in retirement requires considering factors such as income levels, deductions, and retirement account contributions.
• Ongoing management of a tax-efficient retirement plan is crucial and involves diversifying income sources, maximizing Social Security, and adjusting strategies based on tax law changes.
• Common mistakes to avoid include assuming lower taxes in retirement, neglecting Roth IRAs and 401(k)s, ignoring taxes altogether, and withdrawing from retirement accounts in the wrong order.
• Executing a tax-efficient retirement plan requires action, implementation, and sticking to the plan.

Subscribe to The Retire Ready Weekly Newsletter
Get more information on The Retire Ready Academy
Looking for personalized financial planning? Visit our website

Disclosure: You should always consult a financial, tax, or legal professional familiar with your unique circumstances before making any financial decisions. This podcast is intended for educational purposes only. Nothing in this podcast constitutes a solicitation for the sale or purchase of any securities. Any mentioned rates of return are historical or hypothetical in nature and are not a guarantee of future returns. Past performance does not guarantee future performance. Future returns may be lower or higher. Investments involve risk. Investment values will fluctuate with market conditions, and security positions, when sold, may be worth less or more than their original cost. MOKAN Wealth Management is a registered investment adviser with the SEC. Registration of an investment adviser does not imply a certain level of skill or training.

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Summary
In this episode, Kyle and Kolin discuss steps three and four of a tax-efficient retirement plan. Step three focuses on understanding the order of withdrawals, which involves categorizing money by tax impact and developing a withdrawal strategy. The goals of a withdrawal strategy include maximizing retirement spending, minimizing taxes, enhancing portfolio longevity, reducing long-term tax bills, and eliminating or reducing taxes on Social Security benefits. Step four involves understanding tax bracket capacity and planning for tax-efficient withdrawals. The hosts provide examples and case studies to illustrate these concepts.

Takeaways

• Understanding the order of withdrawals is crucial for developing a tax-efficient retirement plan.
• A withdrawal strategy can help maximize retirement spending, minimize taxes, and enhance portfolio longevity.
• Measuring tax bracket capacity is important for planning tax-efficient withdrawals.
• Tax-efficient withdrawals can help reduce long-term tax bills and eliminate or reduce taxes on Social Security benefits.
• Proper planning and understanding of tax strategies can lead to a more secure and tax-efficient retirement.

Subscribe to The Retire Ready Weekly Newsletter
Get more information on The Retire Ready Academy
Looking for personalized financial planning? Visit our website

Disclosure: You should always consult a financial, tax, or legal professional familiar with your unique circumstances before making any financial decisions. This podcast is intended for educational purposes only. Nothing in this podcast constitutes a solicitation for the sale or purchase of any securities. Any mentioned rates of return are historical or hypothetical in nature and are not a guarantee of future returns. Past performance does not guarantee future performance. Future returns may be lower or higher. Investments involve risk. Investment values will fluctuate with market conditions, and security positions, when sold, may be worth less or more than their original cost. MOKAN Wealth Management is a registered investment adviser with the SEC. Registration of an investment adviser does not imply a certain level of skill or training.

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Summary
In this episode, Kyle and Kolin discuss the three tax funnels that can be used to build a tax-efficient retirement plan. The first funnel is the tax later bucket, where contributions are made with pre-tax dollars, such as employer plans and IRAs. Distributions from this account are taxed as income. The second funnel is the tax now bucket, where contributions are made with after-tax dollars, such as brokerage accounts. The growth or income from this account is subject to taxes. The third funnel is the tax never bucket, which includes Roth plans where contributions are made with after-tax dollars and distributions are tax-free. The hosts also provide a case study to illustrate how these tax funnels can be applied in practice.

Takeaways

• There are three tax funnels to consider when building a tax-efficient retirement plan: tax later, tax now, and tax never.
• The tax later bucket includes contributions made with pre-tax dollars, such as employer plans and IRAs. Distributions from this account are taxed as income.
• The tax now bucket includes contributions made with after-tax dollars, such as brokerage accounts. The growth or income from this account is subject to taxes.
• The tax never bucket includes Roth plans, where contributions are made with after-tax dollars and distributions are tax-free.
• It's important to understand the tax implications of each funnel and consider the best withdrawal strategy to minimize taxes and maximize income in retirement.

Subscribe to The Retire Ready Weekly Newsletter
Get more information on The Retire Ready Academy
Looking for personalized financial planning? Visit our website

Disclosure: You should always consult a financial, tax, or legal professional familiar with your unique circumstances before making any financial decisions. This podcast is intended for educational purposes only. Nothing in this podcast constitutes a solicitation for the sale or purchase of any securities. Any mentioned rates of return are historical or hypothetical in nature and are not a guarantee of future returns. Past performance does not guarantee future performance. Future returns may be lower or higher. Investments involve risk. Investment values will fluctuate with market conditions, and security positions, when sold, may be worth less or more than their original cost. MOKAN Wealth Management is a registered investment adviser with the SEC. Registration of an investment adviser does not imply a certain level of skill or training.

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In this episode, Kolin and Kyle discuss step number one of a tax-efficient retirement plan: provisional income. Provisional income is used to determine whether a portion of your Social Security benefits are taxable. The four components of provisional income are non-taxable interest, ordinary income, dividends and capital gains, and half of the household Social Security benefit. They provide examples of two different strategies: the traditional strategy, where most income is subject to federal tax rates, and a tax-efficient strategy, where proactive tax planning is used to lower the tax bill and keep more of the Social Security benefits. They emphasize the importance of running the numbers and considering different strategies to maximize tax efficiency in retirement.

Takeaways

• Provisional income is used to determine whether a portion of your Social Security benefits are taxable.
• The four components of provisional income are non-taxable interest, ordinary income, dividends and capital gains, and half of the household Social Security benefit.
• There are different strategies to maximize tax efficiency in retirement, such as the traditional strategy and a tax-efficient strategy that involves proactive tax planning.
• Running the numbers and considering different strategies can help lower the tax bill and keep more of the Social Security benefits.

Subscribe to The Retire Ready Weekly Newsletter
Get more information on The Retire Ready Academy
Looking for personalized financial planning? Visit our website

Disclosure: You should always consult a financial, tax, or legal professional familiar with your unique circumstances before making any financial decisions. This podcast is intended for educational purposes only. Nothing in this podcast constitutes a solicitation for the sale or purchase of any securities. Any mentioned rates of return are historical or hypothetical in nature and are not a guarantee of future returns. Past performance does not guarantee future performance. Future returns may be lower or higher. Investments involve risk. Investment values will fluctuate with market conditions, and security positions, when sold, may be worth less or more than their original cost. MOKAN Wealth Management is a registered investment adviser with the SEC. Registration of an investment adviser does not imply a certain level of skill or training.

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Summary
In this episode of the Retire Ready Podcast, Kolin and Kyle discuss the importance of tax planning in retirement. They highlight the underappreciation of tax planning by pre-retirees and their financial advisors, and emphasize that the lack of tax planning can result in paying more taxes than necessary. The hosts provide six steps to building a tax-efficient retirement plan, including mastering provisional income, categorizing money by tax impact, strategizing the order of withdrawals, measuring tax bracket capacity, deciding between paying taxes now or later, and engaging in ongoing tax planning. They also discuss common mistakes to avoid in retirement tax planning.

Takeaways

• Tax planning is a critical part of retirement that is often underappreciated by pre-retirees and their financial advisors.
• The lack of tax planning can result in paying more taxes than necessary.
• Building a tax-efficient retirement plan involves mastering provisional income, categorizing money by tax impact, strategizing the order of withdrawals, measuring tax bracket capacity, deciding between paying taxes now or later, and engaging in ongoing tax planning.
• Common mistakes to avoid in retirement tax planning include assuming that taxes will be lower in retirement, ignoring how Social Security is taxed, neglecting Roth IRAs and Roth 401(k)s, disregarding taxes altogether, and taking money from accounts in the wrong order.

Subscribe to The Retire Ready Weekly Newsletter
Get more information on The Retire Ready Academy
Looking for personalized financial planning? Visit our website

Disclosure: You should always consult a financial, tax, or legal professional familiar with your unique circumstances before making any financial decisions. This podcast is intended for educational purposes only. Nothing in this podcast constitutes a solicitation for the sale or purchase of any securities. Any mentioned rates of return are historical or hypothetical in nature and are not a guarantee of future returns. Past performance does not guarantee future performance. Future returns may be lower or higher. Investments involve risk. Investment values will fluctuate with market conditions, and security positions, when sold, may be worth less or more than their original cost. MOKAN Wealth Management is a registered investment adviser with the SEC. Registration of an investment adviser does not imply a certain level of skill or training.

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Summary
In this conversation, Kyle and Kolin discuss the mistakes people make when hiring a financial advisor. They highlight 6 key mistakes and provide advice on how to avoid them. The mistakes include ignoring the importance of tax planning, not having a strategic investment plan, confusing fee-based and fee-only advisors, focusing on investments before comprehensive planning, relying on big financial firms for guidance, and not seeking a customized retirement plan. The conversation emphasizes the need for a clear understanding that not all financial advisors are created equal and encourages listeners to make informed decisions when deciding to partner with a financial advisor.

Takeaways

• Not all financial advisors are created equal, so it's important to do thorough research and make informed decisions when hiring one.
• Tax planning is a crucial aspect of retirement planning that should not be ignored. It's important to have strategies in place to minimize tax bills and protect social security benefits.
• Having a strategic investment plan that focuses on income and cashflow is essential for a successful retirement.
• Understanding the difference between fee-based and fee-only advisors is important. Fee-only advisors are typically more transparent and have fewer conflicts of interest.
• Focusing on comprehensive planning before diving into investments is crucial. A customized retirement plan that considers taxes, income, healthcare, estate planning, and other factors is essential.
• Choosing a financial advisor solely based on name recognition or the size of the firm may not be the best approach. Consider working with independent firms that prioritize personalized service.
• Avoiding these common mistakes can lead to a more successful and fulfilling retirement journey.

Subscribe to The Retire Ready Weekly Newsletter
Get more information on The Retire Ready Academy
Looking for personalized financial planning? Visit our website

Disclosure: You should always consult a financial, tax, or legal professional familiar with your unique circumstances before making any financial decisions. This podcast is intended for educational purposes only. Nothing in this podcast constitutes a solicitation for the sale or purchase of any securities. Any mentioned rates of return are historical or hypothetical in nature and are not a guarantee of future returns. Past performance does not guarantee future performance. Future returns may be lower or higher. Investments involve risk. Investment values will fluctuate with market conditions, and security positions, when sold, may be worth less or more than their original cost. MOKAN Wealth Management is a registered investment adviser with the SEC. Registration of an investment adviser does not imply a certain level of skill or training.

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This week on the show, we’re diving into the mailbag to answer some recent listener questions that have landed in Kyle’s inbox. He will share his thoughts on these inquiries and share helpful tips for those of you who might’ve found yourself in a similar situation. Stay tuned to see what you can learn!

Here are the questions we tackle in today’s show:

• I’m 67 and have reached full retirement age for Social Security, but I don’t plan on retiring soon. Should I go ahead and take it now because I’m eligible?
• A majority of my 401 K is invested in company stock. I understand that I'm not diversified, but I feel like it's okay because I am invested in the company and what they're working towards.
• I've enjoyed the growth in my 401(k) over the years despite volatility. But how do I know when it's time to step away from the roulette wheel?
• My brother mentioned a law requiring my kids to withdraw a significant amount from my IRA within the first 10 years after my death. What’s the deal here?
• I’ve spent 40 years saving and investing and now that I'm about to retire, I can't even comprehend going the other direction and pulling the money out. Is this a normal thing people struggle with?

Helpful Info:

Kyle's website: http://www.mokanwealth.com/

Phone: 913-257-3991

Subscribe to The Retire Ready Weekly Newsletter
Get more information on The Retire Ready Academy
Looking for personalized financial planning? Visit our website

Disclosure: You should always consult a financial, tax, or legal professional familiar with your unique circumstances before making any financial decisions. This podcast is intended for educational purposes only. Nothing in this podcast constitutes a solicitation for the sale or purchase of any securities. Any mentioned rates of return are historical or hypothetical in nature and are not a guarantee of future returns. Past performance does not guarantee future performance. Future returns may be lower or higher. Investments involve risk. Investment values will fluctuate with market conditions, and security positions, when sold, may be worth less or more than their original cost. MOKAN Wealth Management is a registered investment adviser with the SEC. Registration of an investment adviser does not imply a certain level of skill or training.

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“Learn from the mistakes of others. You can’t live long enough to make them all yourself.” – Eleanor Roosevelt… Ever wish you could foresee financial missteps before they happen? In today’s episode explore some real-life stories of regret and arm yourself with the essential dos and don'ts to ensure your money works for you, not against you.

Here’s some of what we discuss in this episode:

•  Avoiding premature IRA withdrawals
•  Spending too much in your peak earning years + being aware of “lifestyle creep”
•  Being mindful of overspending on your child's education
•  The risks that come with retiring early without a proper plan
•  The importance of your diversifying retirement savings across various tax buckets

Helpful Info:

Kyle's website: http://www.mokanwealth.com/

Phone: 913-257-3991

Subscribe to The Retire Ready Weekly Newsletter
Get more information on The Retire Ready Academy
Looking for personalized financial planning? Visit our website

Disclosure: You should always consult a financial, tax, or legal professional familiar with your unique circumstances before making any financial decisions. This podcast is intended for educational purposes only. Nothing in this podcast constitutes a solicitation for the sale or purchase of any securities. Any mentioned rates of return are historical or hypothetical in nature and are not a guarantee of future returns. Past performance does not guarantee future performance. Future returns may be lower or higher. Investments involve risk. Investment values will fluctuate with market conditions, and security positions, when sold, may be worth less or more than their original cost. MOKAN Wealth Management is a registered investment adviser with the SEC. Registration of an investment adviser does not imply a certain level of skill or training.