We’ve made it to 100 episodes! So in this special edition of the Retirement Made Easy podcast, I’ll answer five questions from the first quarter of 2022. These questions cover a wide variety of topics that are all important to know, from paying off your mortgage to following the “4% rule.” Make sure you give it a listen!

You will want to hear this episode if you are interested in...

• [0:22] Make sure you check out RetirementMadeEasyPodcast.com!
• [1:39] My three-step process to help you retire 
• [5:13] Listener Question #1: Should Bill pay off his mortgage?
• [8:28] Listener Question #2: What do you need to know about annuities?
• [12:05] Listener Question #3: Social security and 401k distributions
• [16:14] Listener Question #4: Can you put your 401k in savings bonds?
• [17:35] Listener Question #5: Does following the 4% rule work?

Listener Question #1: Should Bill pay off his mortgage?

Bill wants to retire in two years. He owes $82,000 on his home but recently inherited $100,000. Other than the mortgage, he is debt-free. Should he pay off his house when his mortgage rate is only 3%?

Do you want a mortgage when you retire? I wouldn’t. You won’t be taxed on the $100,000 you inherited, so you can easily take $80,000 and pay off your mortgage. Then you can take the money you’ll be saving and beef up your emergency fund or save more for retirement. 

Then you have to figure out what to do with the remaining $20,000. Who knows, maybe the inheritance will allow you to retire earlier. I recommend updating your written retirement plan to see what options are available.

Listener Question #2: What do you need to know about annuities?

This listener met with someone who offered them two “guaranteed” annuities. The slick salesperson said they were “free” and didn’t have fees. Is that true? 

Yes, some annuities don’t have fees. If they don't have fees, they have “surrender charges.” For example, if you try to cash out within a certain timeframe (5 or 10 years, typically) you’ll have to pay a surrender charge. 

Here are some questions you need to ask if you’re considering an annuity: 

• What is the surrender charge if you want to get out? How long do they apply? 
• Are their fees? What are they? 
• What is the purpose of the annuity? 

Some people will buy an annuity for tax deferrals. Some want a fixed interest rate. Some offer lifetime income or death benefit riders. The bottom line is that I don’t like to see someone put more than 50% of their liquid net worth—i.e. retirement accounts—into annuities. 

Lastly, I wouldn’t really trust someone you’d describe as “slick.” When it comes to your retirement, you want to work with someone you trust. 

Listener Question #3: Social security and 401k distributions

Can Roger claim half of his wife’s benefit and wait to claim his until he’s 70? The only way you could do this is if you were born on or before January 1st, 1954. It was done through a loophole called “filing a restricted application” that can’t be done anymore. 

Let’s say Roger’s benefit is $3000 a month. His wife’s is $1,000 at her full retirement age. She would claim the $1,000 and Roger would claim 50%—$500. So his benefit would grow by 8% and he could claim the full $3,000 a month at 70. You can’t do this anymore. 

What about survivor benefits? If Roger passes away—and his wife is over 60—she would get a survivor benefit—the higher of the two benefits if both were collecting social security. She’d also get a $255 lump-sum payment. 

Lastly, I would have a discussion with your wife about listing your boys as partial beneficiaries of your 401k. If you want to gift them money from your 401k, the other option is to make a withdrawal, pay taxes on the withdrawal, and then give the money to your sons. 

I answer TWO more listener questions in this episode—don’t miss it! 

Resources & People Mentioned

• Get FREE resources at RetirementMadeEasyPodcast.com!
• Treasury Direct

Connect With Gregg Gonzalez

• Email at: [email protected] 
• Podcast: https://RetirementMadeEasyPodcast.com
• Website: https://StLouisFinancialAdvisor.com
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