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Where Will Your Retirement Money Come From?

What workers anticipate in terms of retirement income sources may differ considerably from what retirees actually experience.  For many people, retirement income may come from a variety of sources. Here’s a quick review of the six main sources:

Social Security

Social Security is the government-administered retirement income program. Workers become eligible after paying Social Security taxes for 10 years. Benefits are based on each worker’s 35 highest earning years. If there are fewer than 35 years of earnings, non-earning years are averaged in as zero. In 2022, the average monthly benefit was estimated at $1,625.1,2

Personal Savings and Investments

Personal savings and investments outside of retirement plans can provide income during retirement. Retirees often prefer to go for investments that offer monthly guaranteed income over potential returns.

Individual Retirement Account

Traditional IRAs have been around since 1974. Contributions you make to a traditional IRA may be fully or partially deductible, depending on your individual circumstances. In most circumstances, once you reach age 73, you must begin taking required minimum distributions from a Traditional Individual Retirement Account (IRA). Withdrawals from Traditional IRAs are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty. You may continue to contribute to a Traditional IRA past age 70½ as long as you meet the earned-income requirement.

Roth IRAs were created in 1997. Roth IRA contributions cannot be made by taxpayers with high incomes. To qualify for the tax-free and penalty-free withdrawal of earnings, Roth IRA distributions must meet a five-year holding requirement and occur after age 59½. Tax-free and penalty-free withdrawals also can be taken under certain other circumstances, including as a result of the owner’s death. The original Roth IRA owner is not required to take minimum annual withdrawals.

Defined Contribution Plans

Many workers are eligible to participate in a defined-contribution plan such as a 401(k), 403(b), or 457 plan. Eligible workers can set aside a portion of their pre-tax income into an account, which then accumulates, tax-deferred.

In most circumstances, you must begin taking required minimum distributions from your 401(k) or other defined contribution plan in the year you turn 73. Withdrawals from your 401(k) or other defined contribution plans are taxed as ordinary income, and if taken before age 59½, may be subject to a 10% federal income tax penalty.

Defined Benefit Plans

Defined benefit plans are “traditional” pensions—employer–sponsored plans under which benefits, rather than contributions, are defined. Benefits are normally based on factors such as salary history and duration of employment. The number of traditional pension plans has dropped dramatically during the past 30 years.3

Continued Employment

In a recent survey, 71% of workers stated that they planned to keep working in retirement. In contrast, only 31% of retirees reported that continued employment was a major or minor source of retirement income.4

Expected Vs. Actual Sources of Income in Retirement

What workers anticipate in terms of retirement income sources may differ considerably from what retirees actually experience.

Employee Benefit Research Institute, 2022 Retirement Confidence Survey

  1. SSA.gov, 2022
    2. AARP.org, June 8, 2021
    3. Investopedia.com, July 18, 2022
    4. EBRI.org, 2022

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite

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Financial Literacy, Longevity Literacy & Retirement

(01:04):

Hello and welcome to this week’s episode of the Her Retirement Podcast. As I was thinking about what I wanted to speak about this week, I saw an article about a T I A A institute study that kind of stopped me in my tracks because the title of the study is Financial Literacy, Longevity Literacy, and Retirement Readiness. And those are all real buzzwords, keywords in my vernacular as I am talking about her retirement and retirement planning topics. Of course, financial literacy is a huge part of the Her retirement platform, and my personal mission, longevity literacy, might be something new to listeners. I’m going to get into exactly what that means. And, of course, retirement readiness, I talk about that all the time. Are we ready? I actually have a self-assessment right on the homepage of the Her Retirement website where you can find out if you are truly retirement ready, not only in the areas of wealth but health and happiness.

(02:13):

And if you haven’t checked out that, do it yourself an assessment. Go to the homepage of the Her Retirement website and definitely take that. You’ll get an email with the results of your assessment, giving you some indication of where you are ready and where are some gaps and some suggestions on how to fill those gaps. But back to this very interesting T I A A report, six years of data from the T I A A Institute clearly demonstrates that US adults with greater financial literacy tend to have better financial well-being. This report that I’m about to talk about shows that retirement readiness, which is, of course, a specific part of financial well-being, likewise, tends to be better among those with greater financial literacy. In addition, the report shows that retirement readiness is also related to longevity literacy. While this is typically an overlooked factor, the importance of longevity literacy is really not surprising since retirement income security inherently involves planning for the time that will be spent in retirement, which of course, is uncertain for all of us, right?

(03:34):

We don’t know how long we’re going to live, and that’s the essence of longevity. So data from the 2022 P Fin Index, it’s called shows that retirees with high financial literacy were more likely to plan and save for retirement while still working compared to retirees with low financial literacy. That’s why I always kind of preach that the more you know, the more you’ll have because once you start learning about all this stuff, you’re just automatically incentivized to plan, right? It. It means that those who have a plan will accumulate more, have more, and have a better, more intentional, and financially secure retirement. The ultimate outcome is that those with high financial literacy tend to have a better financial experience in retirement. So, for example, retirees with high financial literacy are more likely to find it easy to make ends meet. Many more report that their lifestyle in retirement exceeds or meets their pre-retirement expectations, and more are very satisfied with their current financial condition.

(04:56):

For the first time since its inception, the 2022 P F N Index survey gauged longevity literacy with a question addressing longevity knowledge, specifically life expectancy at age 60. I actually just did a TikTok on this asking people if they knew the longevity of the average man, a healthy man, and an average healthy woman, both non-smoking for women, it’s 81, and for men, it’s 85. And I had people surprised they were like, no, it’s more like 74, 75. Well, those are life expectancy ages at birth. This is if someone lives to 60, what is their life expectancy? So the older you are, the longer you’ll live. The question of longevity knowledge assesses whether someone has a basic understanding of how long people tend to live in retirement. And as with financial literacy, retirees with strong longevity literacy were more likely to plan and save for retirement while still working compared with those with poor longevity knowledge.

(06:10):

And they also tend to experience better financial outcomes in retirement. These findings are pretty significant given that many Americans do, in fact, face the prospect of financial insecurity in retirement. The challenge is that longevity literacy, like financial literacy, tends to be low among US adults. Only 37% have what is called strong longevity knowledge. This challenge could be turned into an opportunity as these findings demonstrate that initiatives to improve financial literacy and longevity literacy could strengthen retirement security, which of course, is something we all want. Longevity literacy is really fundamental in this context as appropriate decision-making is really contingent upon understanding how long your retirement might last. So the point is, is yes, financial literacy, get smart, understand the financial concepts, understand your gaps, your risks, your opportunities, the strategies that many people aren’t aware of that could change your retirement outcome, but also understand longevity.

(07:33):

And there’s actually even a tool, and I may have mentioned it on another podcast where you can go to the website, it’s called Living two hundred.com. It asks you a series of questions, and it does its best bet <laugh>. It does its best to protect your longevity. Of course, you can look at family members, parents, siblings, and genetics to get an idea of longevity. I was actually posting a TikTok and a video on Instagram and Facebook, and I got so many comments from people saying, well, I’m taking social security at 62 because so many people dropped dead at 63, and I want to take it while I can. And the people that have commented, which have been a lot, really seem to think that they’re not going to live much later into their sixties, which is kind of sad on the one hand because I know so many happy, healthy 60-year-olds.

(08:32):

And I, I don’t know, I guess, you know, it’s personal, it’s a personal decision and personal choice. But I think that there’s probably a significant number of Americans that are like, hell no, I won’t go. I’m living to a hundred <laugh>, and you can count me in that group. Financial literacy really matters in its relationship to financial well-being. And I talk about this all the time. I use financial well-being on the Her Retirement website because that’s really what my platform is all about. Six years of data from the T I A A institute and the P F N Index clearly, clearly demonstrates that US adults with greater financial literacy tend to have financial, tend to have better financial well-being, and the relationship holds when controlling for other factors such as age, income, and education. And, of course, this relationship has been documented in other research as well.

(09:38):

But how strong is this relationship with respect to a specific realm of financial well-being, which is retirement readiness? Well, many Americans face the prospect of financial insecurity and retirement, as I mentioned earlier. And according to a 2021 survey of household economics and decision-making, there were some things that were discovered, some statistics; let me share those with you. One-fourth of non-retired adults have no retirement savings. So a quarter of non-retired adults have no retirement savings. Only 40% of non-retirees think their retirement savings are on track. Among non-retirees age 60 and older, 13% have no retirement savings, and 48% do not think their retirement savings are on track. Among those aged 45 to 59, the analogous figures are 16% and 55%, respectively. Almost 60% of non-retirees with retirement saving accounts report low levels of comfort in making investment decisions with their save data from the 2022 p, and the index also highlights some critical findings.

(11:04):

32% of workers do not save for retirement on a regular basis. Only 22% of those saving for retirement are very confident that they’re saving an adequate amount. 47% of those saving have not tried to determine how much they need to save for retirement. Even among current retirees, 19% have difficulty making ends meet in a typical month, which is a really, really sad state of affairs. And 24% report that their lifestyle in retirement has fallen short of pre-retirement expectations. So is greater financial literacy a viable avenue to help improve retirement readiness in the United States? It might increase financial literacy among the population and help improves retirement income security outcomes. While the 2022 P F I N Index was designed to provide such insights by including questions indicative of retirement readiness alongside a comprehensive 28-question financial literacy list, the survey also included a question gauging longevity literacy. Achieving retirement income security inherently involves planning for an uncertain retirement span. It follows that longevity literacy, like financial literacy, is likely very important for retirement readiness. So let’s dig into this a little bit. I want to explore the relationship between financial literacy and retirement readiness.

(12:45):

Retirement is better for those who have prepared for it, period. It’s what I say all the time at her retirement. It’s what my whole website is all about. Information on retirees’ past financial decision-making and current experiences really help us analyze the relationship between financial literacy and retirement readiness. In fact, data on retirees show a positive relationship between literacy, financial literacy, and retirement readiness along multiple dimensions. Retirees with very high levels of financial literacy are more likely to have one saved for retirement on a regular basis planned for retirement. I.e., like to try to determine how much they need to save and accumulate. And three, they’ve accumulated greater knowledge about ways to draw income from savings during retirement. We call that the distribution phase. It follows that those retirees with greater financial literacy report having better personal finance experiences in retirement. Retirees with very low levels of financial literacy are more likely than retirees with very high financial literacy, too, typically finds it difficult to make ends meet. And two, spend ten or more hours per week on personal financial issues and problems, which is a problem.

(14:10):

Finally, positive evaluations of personal finances are more common among retirees with greater financial literacy. More specifically, compared to retirees with very low levels of financial literacy. Retirees with high levels of financial literacy are more likely to, one, be satisfied with their current financial condition and, two, feel that their retirement lifestyle exceeds or meets their pre-retirement expectations. And, I think you could make an argument that having financial literacy, retirement readiness, and some comfort in knowing what’s happening with your finances and knowing that you are going to make it in retirement or that you are doing the right things to make it in retirement, is going to lead to much more peace of mind, less stress, more happiness. And guess what That means? You’re going to be healthier. So financial literacy and financial well-being have a direct impact on your mental and physical help. So very important people, this is what I talk about all the time.

(15:22):

So to wrap up this episode of my podcast, I think there’s really tremendous opportunity to help improve retirement security. And there are several ways to do that beyond, you know, appropriately planning and having the proper strategies and plan design. The findings of this report demonstrate that initiatives to improve financial literacy and longevity literacy can promote retirement security. This is important since even individuals who are auto-enrolled in 401K plans at like a default contribution rate and with default asset allocations should, at a certain point, proactively engage in their retirement preparation. So there comes a time where you need to say, okay, we’ve been accumulating, we’ve been accumulating, but what is my de-accumulation plan? What is my plan for retirement? As I noted previously in the podcast, longevity literacy is fundamental in this context. Appropriate decision-making is contingent upon understanding the inherent uncertainty regarding how long retirement will last.

(16:42):

So, my advice to you is, when you are doing your projections, whether you’re working with an advisor, if you’re using my Her Retirement software platform, which will help you project your income and your expenses over your retirement, regardless of how you’re doing it, spreadsheet, pen, and paper, whatever way you’re doing it, you need to make sure you have that longevity literacy, and you incorporate that into your planning. So, very important and good for you to listen to my podcast and be attentive to your retirement planning needs. And I want to encourage you to encourage other women, other people you know in your life, to do the same thing. We really need to focus on our retirement security. We need to make sure that it’s, it’s something that we start long before we get to retirement, but the closer we get, the more we have to kind of switch off the, you know, okay, it’s just about accumulating and retirement will be here someday. No, you’re going to wake up, and retirement will be here, and you need to have a plan. So get smart, and understand the impacts of long life and retirement. And I do believe, as I always say, when you know more, you’ll have more. Let’s get her done.

 

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What’s So Great About a Rollover?

What’s So Great About a Rollover?

Changing jobs can be a tumultuous experience. Even under the best of circumstances, making a career move requires a series of tough decisions, not the least of which is what to do with the funds in your old employer-sponsored retirement plan.

Some people choose to roll over these funds into an Individual Retirement Account, and for good reason. About 34% of all retirement assets in the U.S. are held in IRAs, and 59% of traditional IRA owners funded all or part of their IRAs with a rollover from an employer-sponsored retirement plan.1,2

Generally, you have four choices when it comes to handling the money in a former employer’s retirement account.

First, you can cash out of the account. However, if you choose to cash out, you may be required to pay ordinary income tax on the balance plus a 10% early withdrawal penalty if you are under age 59½.

Second, you may be able to leave the funds in your old plan. But some plans have rules and restrictions regarding the money in the account.

Third, you can roll over the assets to your new employer’s plan, if one is available and rollovers are permitted.

Or fourth, you can roll the money into an IRA. Rollovers may preserve the tax-favored status of your retirement money. As long as your money is moved through a direct “trustee-to trustee” transfer, you can avoid a taxable event.3 In a traditional IRA, your retirement savings will have the opportunity to grow tax-deferred until you begin taking distributions in retirement.

Rollovers can make it easier to stay organized and maintain control. Some people change jobs several times during the course of their careers, leaving a trail of employer-sponsored retirement plans in their wake. By rolling these various accounts into a single IRA, you might make the process of managing the funds, rebalancing your portfolio, and adjusting your asset allocation easier.

Keep in mind that the Internal Revenue Service has published guidelines on IRA rollovers. For example, beginning after January 1, 2015, You generally cannot make more than one rollover from the same IRA within a one-year period. You also cannot make a rollover during this one-year period from the IRA to which the distribution was rolled over.4

Also, the Financial Industry Regulatory Authority (FINRA) has published some material that may help you better understand your rollover choices. FINRA reminds investors that before deciding whether to retain assets in a 401(k) or roll over to an IRA, an investor should consider various factors including, but not limited to, investment options, fees and expenses, services, withdrawal penalties, protection from creditors and legal judgments, required minimum distributions and possession of employer stock.5

An IRA rollover may make sense whether you’re leaving one job for another or retiring altogether. But how your assets should be allocated within the IRA will depend on your time horizon, risk tolerance, and financial goals.

A financial professional can help: If you’re a woman concerned about saving for retirement or have questions about your unique situation, give us a call. Our team understands the unique challenges women face, and we’re passionate about helping women just like you plan for a comfortable retirement. Contact us and let’s get started. Email retire@herretirement.com.

1. Investment Company Institute, 2021
2. Distributions from traditional IRAs and most other employer-sponsored retirement plans are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty. Generally, once you reach age 73, you must begin taking required minimum distributions. If the account owner switches jobs or gets laid off, any outstanding 401(k) loan balance becomes due by the time the person files his or her federal tax return. Prior to the 2017 Tax Cuts and Jobs Act, employees typically had to repay loans within 60 days of departure or face potential tax consequences.
3. The information in this material is not intended as tax advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult a tax professional for specific information regarding your individual situation.
4. IRS.gov, 2021
5. FINRA.org, 2021

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.

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Understanding Long-Term Care and the Secure Act 2.0

(01:03):
Hello and welcome to this week’s episode of the Her Retirement Podcast. I am a day late, but I don’t think I’m a dollar short. My mother used to say that expression all the time. I think it was something my grandfather used to say. And speaking of my mother, one of the reasons I’m delayed in getting my podcast out this week is that I was helping her. As many of you know that listen to my podcasts and have participated in some of my master classes, my mom has been successfully battling ovarian cancer, and this week was a Dana Farber week and a procedure and so many other things. Also, this week, one of my twins left for college in California, and the other one left for college in Amherst, Massachusetts. So I am once again an empty nester, and then you throw in a little hit-and-run on my car and an appointment for me and a whole bunch of work stuff.
(01:58):
And yeah, I think I have a legit excuse for being a day late on getting my podcast out to all you faithful listeners, but I’ve got some good stuff to share with you. I’m going to be talking about long-term care and also giving you an update on the secure 2.0 update that was passed late December in 2022 and some of the things that you need to be aware of with that secure act and the changes. But first, let’s jump into long-term care needs. I’m going to walk you through a case study with John and Mary Sample, and this is gonna provide a general overview of some aspects of your personal financial position. It’s designed to provide educational and or general information, and it is not intended to provide specific legal accounting, investment, tax, or other professional advice. That’s not what I do. I just educate you and then give you some personal financial coaching should you need that.
(03:05):
So for specific advice on these aspects of your overall financial plan, you need to consult with registered professional advisors. That is my advice. And, of course, because I co-own a financial advisory practice called Your Retirement Advisor, I would love for you to speak to the folks there. There’s Brian, who’s a registered investment advisor who’s an expert at retirement planning, and then also recently hired a certified financial planner or C F P Kent Cooper. And Kent is a fantastic young guy, knows his stuff, and can do fee-only financial plans, which is a tremendous new offering for your retirement advisor. But we’re really not here to talk about that. It just occurred to me as I was talking about talking to a financial advisor that they are a couple of great guys with an exceptional team to help you plan your retirement. And if you happen to need long-term care advice, they can definitely look at your situation and give you some ideas for how you can plan for long-term care.
(04:14):
Now, I did touch upon long-term care last week in my podcast with Dan McGrath. He actually brought it up and suggested that we’re going to have some challenges as we face any long-term care needs in our future. And I’m talking about more Gen X folks like myself because the problem is, there’s going to be a huge population of us retired and perhaps needing long-term care beds, but will there be enough beds for us? So that may mean, in many cases, that we have to age in place, and we’re going to have to get that care at home, which Medicare does not cover care at home. So what we need to do is we need to be proactive, and we need to plan for those long-term care needs. So that’s why I wanted to emphasize some educational components of long-term care. Review this case study with you and make sure you understand your risk for long-term care and if you’re willing and able to protect yourself from the risk of long-term care needs.
(05:24):
Basically, long-term care is sustained medical or custodial care, either in a hospital, a nursing facility, or equivalent care at home. And this care meets the needs of people when for whatever reason, they cannot care for themselves. Long-Term care insurance provides coverage for costs when the need for care extends beyond a pre-determined period. And benefits start when certain conditions and timeframes specified by a long-term care insurance policy are met. So generally, the needs requirements to obtain insurance benefit falls into two categories. Number one, an inability to perform two or more activities of daily living or ADLs and activities of daily living are basic functions of daily independent living. And these include dressing, bathing, eating, toileting, transferring, and continents. The second category is impaired cognitive ability. So this is where you have a loss of mental function, which can result from stroke, dementia, Alzheimer’s, and Alzheimer’s is a disorder that progressively, as we probably all know, affects one ability to carry out those daily activities.
(06:47):
Now I wanna talk about the cost of waiting to plan for a long-term care incident. 40% of all long-term care recipients are under the age of 65. Over 45% of seniors who reach age 65 will spend some time in a nursing home. And over 70% of seniors who reach age 65 will need some form of home healthcare in their lifetime. One out of four families provides care to an elderly relative or a loved one. And I am smack dab in the middle of this. I am the definition of sandwich generation as I have kids and pretty much adult kids and college kids who need support and financial support and advice. And then I have elderly parents. My mom’s 87, and as I said, she needs a lot more of my time, which I am giving it to her wholeheartedly. It’s, it, it’s what I, I was born to do was to help my mom.
(07:51):
And I will continue to do that as best I can, but she will probably get to a point where she needs more care than I’m able to give her. Oh, and speaking of my mom, I forgot that this week I was also talking to my dad, who happened to have been in the hospital for five days down in Florida because he’s got congestive heart failure, and he was dealing with that and a complication. So it was just, it was just one of those weeks where it rained and it, and it poured, and we all have those, but we have to keep on swimming. Alright, next statistic. 25% of people will stay in a nursing facility for more than one year, the average nursing home stay is two and a half years, and the average Alzheimer’s stay is seven years.
(08:47):
So without benefits from long-term care insurance or compatible plan or you know, funding these, these incidences yourself, the cost of providing these services could definitely devastate many people’s lifetime savings or your relative’s life savings. So, you know, certainly, you can share this information with a relative who is not prepared for this. On average, one year in a nursing home costs a lot, and it can easily, easily exceed a hundred thousand, 200,000 depending upon the nursing home costs continue to skyrocket depending on the care required. Most of these expenses for long-term care are paid for by the patient and or their family. And Medicare may contribute towards the first 100 days of expenses in a skilled care facility. And there are no Medicaid benefits available for intermediate-term or custodial care unless the state finds the patient to be impoverished under local guidelines. So the bottom line is if you impoverish yourself, perhaps you can get Medicaid coverage.
(10:08):
But what does that care look like? What does the facility look like for Medicaid folks? So even then, though, care options are restricted to care facilities, like I just said, what kind of facility they’re restricted to care facilities that accept the very limited benefit payments that Medicaid offers. I want to share a few Medicaid and Medicare facts. Medicaid is a welfare program designed as an emergency safety net to pay the healthcare costs of the impoverished. Medicare is a part of social security and helps pay for the general healthcare needs of retired persons. Medicare typically only pays for doctors, hospitals, and short recuperative stays in nursing facilities. Private health insurance is designed for medical doctors, hospitals, et cetera, not long-term care expenses. Most people end up relying on their own or their relative’s resources to pay for long-term care expenses.
(11:19):
So now I wanna talk about long-term care needs analysis. It definitely requires long-term planning, and the sooner you start, the better long-term care insurance is available to cover these expenses, protect your assets and your independence, and control the quality of the care you receive. You’re able to choose the specified daily benefit level as well as the types of medical and care services covered. When is the best time to purchase long-term care insurance? I know I’m smack dab in the middle of trying to figure this out. I’m 57, and according to this, I’m a couple of years past the ideal age. Generally, the premium stays level once the policy is purchased, much like level-term insurance in practice, the earlier you buy a policy, the lower the premium. And since the odds of becoming disabled increase with age, purchasing coverage before the age of 55 is pretty prudent planning, consider the premium cost of several coverage levels to determine which is right for your budget.
(12:28):
Okay, so what I want to talk about next is that there are some alternative options to long-term care insurance if you find that the cost is prohibitive to your budget. But definitely talk to someone like the folks at your retirement advisor to figure out if there are some affordable options for you within the insurance space. So, for instance, index universal life policies that carry a long-term care insurance writer may be a more affordable option, but they can cover all of the various options to see what is actually realistic for you and your budget. But the alternatives are a few, of course, self-insurance. This alternative to purchasing long-term care insurance is using your existing investments to pay for long-term care if needed. But what happens is, let’s say, a couple husband and wife, the husband typically will pass before the wife. He uses up all of their savings and investments to care, you know, for his care, leaving the wife without money for her own care and, in some cases, leaving her impoverished.
(13:37):
So for us women, you know, sometimes that’s not the best plan. This approach of self-insurance would be appropriate if sufficient assets are available. And the potential loss of those assets to heirs if you are planning to leave that as a legacy is acceptable. Of course, this means that you’re willing to liquidate your assets, and if you don’t have sufficient funds, you transfer the financial burden onto your spouse, that survives you when you pass if you pass from this long-term care incident or your loved ones. And while this may be more flexible and quote affordable at 55, long-term care insurance would be more beneficial if the coverage is eventually needed. The second option is a reverse mortgage. I’ve talked a few times on my podcast about reverse mortgages, and it’s certainly one of, you know, one of the three prudent ways to fund a long-term care incident.
(14:40):
It’s, it’s your emergency bucket of money, you’re leveraging a dead asset in your home, and many people plan to stay in their homes. So, in that case, a reverse mortgage definitely makes sense because if you’re not, you know, typically it doesn’t make sense, but a reverse mortgage can allow you to age in place and to have that emergency pool of money to fund a long-term care incident. But some people don’t wanna a reverse mortgage, they don’t qualify, you know, for whatever reason. And then the third option is qualifying for Medicaid. Medicaid was enacted to provide healthcare services, as I said, for the impoverished recent legislation has made it very difficult for a person of modest means to qualify for Medicaid benefits by gifting or otherwise disposing of personal assets for less than fair market value. So if you’re thinking, “oh, I’ll just impoverish myself and get Medicaid,” you need to really take a close look at that and make sure that you are approaching that intelligently, I guess, is what I’ll say.
(15:46):
Now, I do have a long-term care cost case study. You can certainly ask for a cost analysis from your retirement advisor. So definitely reach out to me for either of those. But in summary, so in summary, be aware that the potential loss of financial assets to pay for long-term care costs is definitely due to increasing life expectancies, especially for US women, and advances in medical treatment for the elderly. So longevity is definitely a double edge sword. This represents a risk to your life savings and financial future. L T C insurance is available at varying levels of coverage and corresponding premiums to meet these risks. Should you want to mitigate the risk of long-term care needs, long-term care insurance can allow you to maintain your desired level of independence and preserve personal assets. However, premium costs will certainly be a factor in your decision. And as I said earlier, consider discussing these needs and options with the team at your retirement advisor.
(17:00):
Or if you have an insurance agent already, somebody looking out for your best interest, definitely chat with them about this. Fully understanding available options can help you make the most informed best choice for you and your family’s future. As I always say, it’s all about knowing more and having more. All right, so that’s long-term care. Next, I wanna chat about the secure Act, and I’m going to give you a really quick snapshot of the changes in that legislation that went through in December. So let’s jump in. It was signed into law on December 23rd, 2022. There are hundreds of changes affecting retirement accounts, including but not limited to 401ks 4 0 3 [inaudible], 4 57 s, TSPs, and IRAs. And these are just a few of the changes to that legislation that you need to be aware of. Again, if you would like to read the full overview of the secure Act 2.0 update, definitely reach out to me at lint@herretirement.com, and I can get you access to that.
(18:15):
So first up, auto-enrollment and auto rollover beginning in 2025 with some exceptions for small businesses, the act requires auto-enrollment and DEF four ohk and 403 [inaudible] plans unless the participant opts out. You know, most people would think this is a good thing as many people fail to sign up, and they miss out on years of investing. So yes, however, if you are already, you know, significantly invested in a 401k, you might want to look at some tax-savvy vehicles that allow you to have tax-free income in retirement because, as you know, 401ks and 4 0 3 Bs are tax-deferred, which means you, you’ve got a, a bill coming due from Uncle Sam and you’re going to have to pay it well so that all your eggs aren’t in that tax-deferred bucket. You need to consider other ways to invest your money. So you need to look at it and say, how much is enough in my 401k, and when should I turn off the, turn off spigot going into the 401K and turn on the spigot into a tax-free account?
(19:25):
Right? So definitely think about that and consider that retirement plans can also offer rollover services when you leave your job. So they will handle the transfer to your jobs, new jobs, and new plans. All right, let’s talk about student loan matching. An employer can choose to make a matching contribution to your retirement account based on your student loan payment. This will allow more people to invest while still paying off debt, which is a good thing. Next, catchup contributions begin in 2025. These catch-up contributions will increase to the greater of $10,000 or 50% more than the regular catchup amount if you are 60 to 63 years old. So this will allow many older workers who may be at their peak earning years to put away more tax-advantaged money. Next, emergency fund booster and match, starting in 2024, employers can auto-enroll you in a saver’s account that you can use for emergencies up to $2,500.
(20:36):
An employee can make up to four withdrawals per year. They would be tax and penalty-free. These could also be eligible for an employer match and Roth treatment so the money can grow. Tax-free employees can also withdraw up to $1,000 from their retirement account without having to pay the 10% penalty. All right, next up, Roth option for an employer match. This is a big one. Employer matches have always been pre-tax, even when the employer offers a Roth option. Now employers may offer the option to make these contributions post-tax, which allows you to grow it tax-free. So not only are you getting free money from your employer, but it will also be free and clear of taxes. The next option is to roll a 529 plan into a Roth IRA. Lots of caveats on this one, so don’t get too excited. It starts in 2024, but a 529 plan must be open for 15 years, and there’s a lifetime limit of $35,000.
(21:45):
Changing a beneficiary will restart the 15-year clock. The rollover is treated like a contribution, so you can’t add any more money to that account. You also can’t roll over any contributions or earnings made in the last five years. Those are the highlights that I wanted to give you on the Secure Act 2.0 update. So like I said when I started, if you would like a copy of a full overview of the Secure Act 2.0 or you’d like to sit down with a CFP at your retirement advisor or go over your retirement plan, financial plan and how these changes impact your financial situation, definitely reach out to me at Lin tea@herretirement.com. And as always, here’s to getting or done and thanks for listening to this week’s episode.

medicare

The IRMAA Impact, Stop Contributing to a 401(k) & Other Tips from Dan McGrath

(00:01:04):

Hello everyone, and welcome to this week’s episode of the Her Retirement Podcast. Welcome to 2023, and I wrote my first check the other day with the correct year on it. I didn’t write 2022, so that was my big win for the new year. But in all seriousness, today I have the pleasure of speaking with a gentleman named Dan McGrath. And what we are talking about is something maybe some people have never heard of, or if you have heard of it, you’re pretty unclear about what it means to you and your retirement. And what I’m talking about is an acronym called IRMAA. Welcome, Dan McGrath, to my podcast to talk about IRMAA and to educate all the women who follow my podcast and listen to it each and every week as we explore this important topic and how it could perhaps right, affect your pocketbook in retirement. So, Dan, welcome. How are you?

Dan (00:02:01):

I’m doing very well, Lynn. Thank you very much for the introduction and allowing me the opportunity to speak on your podcast, Her Retirement.

Lynn (00:02:08):

Thank you. Happy 2023. So yeah, I’m a, I’m a glass half full kind of person, so let’s, is there any good news with Irma? Can you tell me what the acronym is and tell my audience what the acronym is and just give us a little quick background on that, and then I’ll probably ask you what you and your company is all about.

Dan (00:02:28):

Sure. The acronym for IRMAA is just short for the income related monthly adjustment amount, and that is through Medicare. So ultimately what IRMAA is, is a surcharge on your income or surcharge in your Medicare premiums for those that happen to be earning too much income. Okay. So anybody in 2023 that’s earning over a certain threshold, which is $97,000, is going to pay extra for their Medicare part B and part D premiums.

Lynn (00:02:56):

Okay. And part B and part D cover what exactly?

Dan (00:03:00):

So part B covers in Medicare, everything’s, it’s called the alphabet of health coverage. Yep. So Medicare Part B covers basically all costs that are associated with physicians. So a physician comes in and sees a patient, part B will cover it. If the physician prescribes drugs or medications while with inside the hospital or under that appointment, those medications will be covered under part B prescription. Part D, the other part of IRMAA that is prescription drug coverage. So anything that has to do with medications outside of the hospital is going to be covered under prescription drug coverage. So if you are earning too much income, that income is go, that, that income is going to reach a threshold with inside what is known as Irma, and then you’re gonna have to pay more depending on how much income you have. So the more income you have, the higher the threshold, but the higher the surcharges.

Lynn (00:03:59):

Okay. So is it safe to say that IRMAA doesn’t really impact people that are just collecting social security? It’s more, you know, you know, if they’re, if they are just high income earners from whatever they saved in their retirement savings, that kind of thing. Correct.

Dan (00:04:19):

So the scary part of Medicare ZBA is Medicare ZM is based on income. Now, how they define income, meaning the Medicare Centers for Medicare Medicaid services, as well as the Social Security Administration, which works as the, the pocketbook of the piggy bank of Medicare. So anything financial runs through the Social Security Administration for a key reason which we’ll get to. So when you’re looking at, I’m sorry, I lost my complete train of thought.

Lynn (00:04:57):

That’s okay. <Laugh>. So we were talking about, I was so busy. Yeah, we can edit this out. Yes. But,

Dan (00:05:02):

So No, no, no, no. Please keep it. So we’re talking about income sources. The way they define income is very simple. It is modified adjusted gross income. So that is your top line, which is AGI i your adjusted gross income. Now, when you’re looking at your tax returns, that’s basically line two, that is your top line, and then they’re not going to allow you to put deductions in. So whatever your gross income is, then they’re going to add any tax exempt interest. So if you have income from muni bonds, if you have no, that’s actually tax exempt interest is income from muni bonds. Yep. So if you have any dividends from that, as well as any income that you are generating, that’s going to count as your M A G I. Where this becomes an issue is the biggest production of income in retirement is your social security check and your savings.

(00:06:03):

So what happens at the age of 72, for everyone that has invested into what is known as a traditional 401k at the age of 72, they have to take out a required minimum distribution that R M D counts as income, which is on the top line. Okay. Now, what happens is that R M D, which counts as income, is then added to half of your Social security benefit. If that total half of your social security benefit and your R M D are over $34,000 as an individual, or over 44,000 as a couple, 85% of your social security benefit is going to be taxed. Now, what they do from that point is they take your new 85% social security benefit that’s taxed that amount, and they add it back to your R M D. So what happens to your income?

Lynn (00:07:02):

Yeah.

Dan (00:07:04):

Now we got good news in 2023 or 2022 For 2023. The very good news is social security’s cost of living adjustment has gone up by 8%. So what does that do? That increases everyone closer to the taxation of social security, which means their overall taxable social security benefit, 85% of it can be taxed. Okay. And they’re receiving more social security benefits. Now when they speak to their financial advisor, their financial advisors trying to get ’em 35% rate of return and their traditional 401k. And then each year with the required minimum distribution, they have to pull more and more money out. So what ends up happening with Medicare IRMAA is eventually anyone that has made over $75,000 a year has already has about 50, $60,000 in their traditional 401k. Let’s say they’re 55 years old today, they’re going to reach Medicare’s Irma.

Lynn (00:08:05):

Yep.

Dan (00:08:06):

This isn’t just for the rich, this is for people that are saving money incorrectly, and that is 95% of everyone in the country that is saving money.

Lynn (00:08:21):

Okay. So if they’re saving incorrectly, i e in those deferred, you’re talking about tax-deferred accounts? Yes. What, what are the alternatives? So if you know, you’re like, okay, I’m, I’m maxing out my 401k, or I’m putting all of my eggs in that tax-deferred bucket. What are some options that don’t impact your top line, your M I M A G I and also, you know, all right.

Dan (00:08:50):

Yeah. So first I’d like to say anybody that’s maxing out their traditional 401k, that is legitimately, if you’re doing it with tax deferred traditional 401k, you can’t do anything worse for your retirement than that.

Lynn (00:09:06):

Okay.

Dan (00:09:07):

Singularly there is nothing worse that you could possibly do. Even health-wise, even smoking cigarettes, there is nothing worse you can do than max up your traditional 401k. There’s nothing worse that you can do than put money into your traditional 401k. It is a complete utter waste of time.

Lynn (00:09:27):

Okay.

Dan (00:09:28):

The simple solution Roth.

Lynn (00:09:33):

Okay. Yeah, a lot of c that’s it. Offer the Roth 401k.

Dan (00:09:37):

Now, where the problem arises in, what people have to pay attention to is companies are not, they’re not incentivized to put their company match into a Roth 401k. So what happens with many firms that you decide to put money into a Roth and then the company in order to make a benefit, so they get a tax break, if they match the money, they put it in the traditional 401k. If they don’t put it in the traditional 401k and they don’t, and they put it in a Roth for the company match, they don’t get that incentive from the federal government for giving money to their employees for saving for retirement.

Lynn (00:10:17):

Oh, okay. Did I see legislation that they were trying to change, that

Dan (00:10:21):

They are trying to change it? They’re not going to, but they’re gonna sit there and say that they should be able to contribute to the Roth and it there being an in a monetary incentive for the employer to do that. It doesn’t behoove the federal government for people to put money in a Roth

Lynn (00:10:43):

Mm-Hmm.

Dan (00:10:44):

<Affirmative> in any way whatsoever.

Lynn (00:10:46):

Right. Now, would you say it’s okay to put just enough to get that match? Because isn’t that free money? No.

Dan (00:10:53):

Nope. No. Nothing’s free. So the way retirement works, again, when you’re looking at your social security benefit, if you’re making $34,000 an individual, or $44,000 as a couple, 85% of your social security benefits gonna be taxed. So that company match, you’re putting money into a Roth, your company’s matching that Roth with a traditional 401K asset, that’s free money. When you pull it out at the age of 72, that free money’s taxable at your tax rate. We can have a discussion on where we believe tax rates are going. Some could argue they’re going up. The sunset provision states in 2026 that the tax, the tax brackets revert back to 2017, which means they’re going up. So not only are you gonna be in a higher tax bracket later on in retirement, your social security benefit because of that r and d is now going to be 85% taxable.

Lynn (00:11:52):

Mm-Hmm. <affirmative>. So basically the free money that you got is negated by the taxes you will end up having to pay.

Dan (00:11:58):

That’s why it doesn’t behoove the federal government to give an incentive to the employer to give the match in anything other than a traditional 401k.

Lynn (00:12:06):

Okay. Now, if you’re self-employed, you can open your Roth 401k and Bingo. Just Yeah, just do it.

Dan (00:12:15):

Just do it. The other, the only other alternative, so for self-employed, there’s a couple other alternatives. You can work with a financial professional by setting up life insurance, however they do that. I’m not a financial advisor. I just am the, the person that speaks about Irma. Yep. That’s all. I am Medicare, I work, I work with people on helping them find the right Medicare plan, and I help them setting up Irma. I am not licensed. I don’t sell any product. We just provide information to people. Okay. So they can use life insurance. And also for self-employed people, they should all be using a four one [inaudible] plan.

Lynn (00:13:01):

And what is a 401k?

Dan (00:13:03):

So a 4 0 1 H plan, as we like to kid, is new legislation that was passed by Congress in 1984.

Lynn (00:13:12):

Oh, <laugh>.

Dan (00:13:14):

So that’s been around for quite some time. And no one in the financial industry has acknowledged that this even exists. So have you heard of a health savings account? I have

Lynn (00:13:26):

Hsa. I was actually just on the phone with Mass Health Connector because it’s that time where you can choose a new plan and I’d like to have an HSA account and I need a high deductible health plan, but the two different people I’ve talked with at Mass Health Connector are like, we have no idea what you’re talking about. And <laugh>.

Dan (00:13:46):

So if you’re going through mass connector, that’s a state exchange. Yes. So under the state exchange, and I haven’t looked at Massachusetts they may not have an h s a high deductible plan. Okay. For the simple fact that Mass Health is Massachusetts is structured health insurance wise different than all 49, all, all 50 states. It’s, it’s its own entity.

Lynn (00:14:13):

Okay.

Dan (00:14:14):

They may not have that. Now, the reason why I would deter you from looking at an HSA is in order to have an hsa, we say this on stage and it does infuriate people, and I’m sorry, but it’s the reality. You have to have a really bad health plan in order to have an hsa.

Lynn (00:14:35):

Right.

Dan (00:14:36):

You have to spend $12,000, or it’s 8500, 80, 900, whatever the number may be, but you get, spend an exorbitantly large amount of money in order to start getting the benefits of an H S A while also paying premiums on a monthly basis. Mm-Hmm. <affirmative>. So it’s gonna cost you, if you actually do need healthcare, it’s gonna cost you $15,000 of after tax money to take advantage of your hsa.

Lynn (00:15:02):

Yeah. So what is the That’s insane. Yeah. So what is the benefit? I mean, I know it’s triple tax free, but

Dan (00:15:08):

For the employer Yes.

Lynn (00:15:09):

Yeah.

Dan (00:15:10):

Benefits the employer.

Lynn (00:15:11):

Yeah. But if you, you put in your money tax free, you take it out tax free. Yep. It grows tax free. So I guess you just have to run that analysis to see all that extra money you paid in deductible. If that’s more than what your HSA is gonna give you down the end when you start

Dan (00:15:29):

To use it. If you are not using healthcare, meaning you’re in shape, you’re healthy, you’re not going to the doctor HSAs are absolutely fantastic vehicles. You should be plowing in the money up to the maximum every single year.

Lynn (00:15:45):

Yeah.

Dan (00:15:47):

If you need healthcare in any way whatsoever. You know, I like to joke, if your kid’s a soccer player or you, you, you’re active in sports, may not be the greatest thing to look

Lynn (00:16:01):

At. Yeah. We just joined a ski race team. This might not be the year

Dan (00:16:05):

<Laugh>. Precisely.

Lynn (00:16:09):

<Laugh>. Yeah. And, and the big guy needs a knee replacement this year, so that’s probably not,

Dan (00:16:15):

Not, yeah, you’re, you, you may wanna look at something else. Yeah. so what we do do is if you do need any help I can do some digging and tell you the differences between the plans you’re looking at. And that’s one of the things we do at earn a certified planner for people we work with. Yeah.

Lynn (00:16:35):

I mean the, the, the whole healthcare is just a whole nother issue. I mean, we, our healthcare just went up another $300 this year. Yep. $2,500 a month for a family plan here in Massachusetts. And that’s, that’s probably with a pretty high deductible also through Harvard Pilgrim healthcare anyway, through the Mass Health Connector. But that’s, that’s, that’s another topic. <Laugh> a whole nother topic,

Dan (00:17:01):

<Laugh>. It’s, it’s not it’s a convoluted mess that is only going to get unfortunately worse. Yeah. There is no, there’s no need or there’s no reason in any way whatsoever for the problem to be fixed.

Lynn (00:17:22):

Right? Yep. Yeah. So back to Irma. Oh,

Dan (00:17:30):

So before we go back to Irma, yes. You as I’m assuming you are, are self-employed. Yes. Okay. So you need to open up a four one H

Lynn (00:17:40):

Oh yes. That’s

Dan (00:17:41):

What we were talking about. What a 4 0 1 H is, is to piggyback to your company the way it’s structured to their retirement account. Now, like in hsa, any money that you place into a 4 0 1 H is fully tax deductible. The money grows tax deferred. If you take the money out like an HSA to pay for the health benefits of you, your spouse, or any dependent, it is tax free. The difference between a 4 0 1 H and an HSA account, besides it being piggybacked to a corporation’s retirement account, is you can put an unlimited amount of money into a 4 0 1 H and again, it’s fully taxed deductible.

Lynn (00:18:27):

Nice.

Dan (00:18:29):

Now, that should be something every single self-employed person has not up for debate, not up for conjecture. Mm-Hmm. <affirmative>, they have to have it. Because the argument that we make here is what is your greatest asset

Lynn (00:18:45):

Yourself.

Dan (00:18:46):

Yeah. Bingo. Your health.

Lynn (00:18:47):

Yeah.

Dan (00:18:49):

You’re the first person to know that. People say, oh, my house, my car, <laugh>. No, you’re, you’re hell.

Lynn (00:18:53):

Right.

Dan (00:18:54):

Think of it. If you have a slip and fall and you break, you know, you break your hip and can’t walk all the money in the world, doesn’t mean anything. You can’t walk.

Lynn (00:19:02):

Right.

Dan (00:19:04):

Unfortunately, if you contract cancer, the only thing that matters is cancer. Mm-Hmm. <affirmative> worse. It’s the person you care most about contracts, cancer. The only thing you care about is that

Lynn (00:19:17):

Yep.

Dan (00:19:18):

Health is the greatest asset. Quick question, how many people have actually planned for it?

Lynn (00:19:26):

Not very many.

Dan (00:19:30):

So, back to Irma, how to get around it is basically have assets that the i r s does not see in any way whatsoever. And that’s, again, assets that don’t show up on line. It’s, it’s line two and 11 of the 2021 IRS tax form. I believe it’ll be the same for 2022. Okay. So it’s lines two and lines 11. So the only things that are available, believe it or not, are Roth Life Insurance. 4 0 1, 4 0 1 H or HSA Home equity. And the last thing that you can use in retirement is if anybody has a non-qualified annuity, if you annuitize or work with the right annuity company, if you take that annuity and you annuitize it, that income will have what is known as a tax exclusion ratio. Okay. And you can generate an income that is excluded from your tax return.

Lynn (00:20:33):

Okay. Yeah. When you mentioned home equity, we do talk about reverse mortgage and how that greatest,

Dan (00:20:39):

Greatest thing everybody should be looking at.

Lynn (00:20:40):

Yep. Tax free, tax free income buffer for retirement.

Dan (00:20:46):

It’s than that as well. Mm-Hmm. <affirmative> for the simple fact that we, I ask a very simple question when speaking to the general public, and I ask for a raise of hands and you can imagine what the, the, the reply is. And the question is, how many people here believe they’re gonna go into a long-term care facility?

Speaker 3 (00:21:10):

Hmm.

Dan (00:21:11):

Now what do you think the reaction is when I ask for raising hands?

Lynn (00:21:14):

Yeah. Not many.

Dan (00:21:15):

Okay. And I see, congratulations, you’re all a hundred percent correct. I know for a fact, none of you, none of you are ever going into a long-term care facility. Now I also know that 70% of you need to go into a long-term care facility, but none of you are going in. Now, here’s the reason why, and I’m gonna use old numbers for setup. Back in 2015, the US Census, as well as the Kaiser Family Foundation as law, as well as the Bureau of Labor, believe it or not, released reports stating that there were 15,648 long-term care facilities in the United States of the 15,648 long-term care facilities in the United States. There was about 1.6 million beds of the 1.6 million beds in the 15,648 long-term care facilities in the United States. 1.31 million of those beds were occupied as of 2018. So there are less than 300,000 beds available in the United States. The long-term care. Now, baby boomers comprise about, let’s call it now, I know the numbers off of 80. I haven’t computed them for 70, but let’s say it’s still 80 million baby boomers. Of the 80 million baby boomers, 70% of them are expected to need some form of long-term care. Meaning they can’t do an adl ac

Lynn (00:23:06):

Activities of daily living.

Dan (00:23:07):

Living Yes. Activity deal living of that 70%, which is about 54 to 56 million people. Mm-Hmm. <affirmative>, 20% of them are going to need to stay in a long-term care facility. That’s about 12 million people. So here’s the question, ladies and gentlemen. How are 12 million people gonna fit in a 1.61 million beds?

Speaker 3 (00:23:34):

Yeah.

Dan (00:23:39):

So where are you gonna convalesce when you get older?

Lynn (00:23:43):

Yeah. With family?

Dan (00:23:47):

So now, quick question. Quick question. Does your hallway, can it accommodate two walkers, husband, wife? Is it wide enough to accommodate a wheelchair? Have you adult proofed the bathroom, those kitchen cabinets today? Can you reach them? What do you think’s gonna happen when you’re 85, 90? Is your laundry room on the same floor as your master bathroom, as well as the kitchen, and as well as the master bedroom? So what are you gonna do when you’re 85, 90 years old? Oh, I know. Cuz your financial advisors already told me, I made you a super duper bunch of money in your traditional 401k and y’all gonna rip it out of the traditional 401k. And then what happens to your Medicare premiums? Oh, by the way, how do you pay for your Medicare premiums? Which we didn’t talk about. So how do we pay for IRMAA through your social security check? So what happens to your social security check? So now you rip out even more money to offset that. And now do we see the vicious cycle?

Lynn (00:25:04):

Yeah. Scary.

Dan (00:25:06):

So why you need a reverse mortgage is you are not leaving your house wherever you are living when you retire, that’s where you’re living.

Lynn (00:25:16):

Mm-Hmm. <affirmative>.

Dan (00:25:18):

Now, quick question, or I’ll make a statement. My mother who has equity in her house, god forbid she, and there is some signs, but God forbid something happens medically and she needs help. I really don’t want to go back to her house and mow the lawn every other Sunday. Mm-Hmm. <affirmative>, I, I really don’t want to pay another tax bill every month on a, on a piece of property I’m not living in. I really don’t wanna repair the roof. I’d rather see her take the assets out and live a comfortable life than worry about inheriting something that’s just gonna cause me headaches.

Lynn (00:26:01):

Right? Yep.

Dan (00:26:04):

Everyone that’s retiring, the second thing they should be doing after getting rid of all of their visible assets to the i r s. Yeah. They should be lining up a reverse mortgage.

Lynn (00:26:20):

Yeah. We’ve talked about reverse mortgage a couple times here on my podcast. Once with a, a great guy named Luke Cintron. And yeah, he’s, he’s a wealth of information about reverse mortgage. So it’s definitely one of the key strategies that we talk about at her retirement. So I appreciate you shedding some light and giving some real like, case study like this is gonna happen. In fact, when we purchased this home, our realtor kept saying, this is a great aging in place home. And Brian kept saying, can you stop saying that? And I’m like, well, no. Like, other than the cabinets, I was going through the list in my mind I was like, yeah. Other than the cabinets, we just, we wouldn’t be able to access any food above the certain height of the cabinets. But, and you know, we’re super competitive, so we’d be, we’d be racing each other to see who could get their walker in the hallway before the other guy. But or the other gal <laugh>. But I mean, I think we’re, I think we’re, I think we’re good cuz everything you said we’re like one level, you know,

Dan (00:27:23):

That’s

Lynn (00:27:23):

Fantastic. Might need a little, actually, might need a little ramp, but other than that, you know, yeah.

Dan (00:27:28):

It’s besides, you know, being in the area, let’s say the northeast, that’s, you know, e every house has got multi-level stairs. So for you to do, pull that off in the Northeast, that’s fantastic. A

Lynn (00:27:41):

Ranch, you gotta buy a ranch.

Dan (00:27:43):

<Laugh> <laugh>.

Lynn (00:27:45):

I did, I did the, you know, the big 4,000 square foot colonial three floors, you know, all that. And I’m like, I ended up in a ranch where I started my life with my mom. But it’s not a bad thing.

Dan (00:27:57):

There’s there’s a lot of reasons why those that were before us built things the way they built <laugh>. We’ve unfortunately forgotten a lot of information. Yeah.

Lynn (00:28:08):

Pretty smart people. Yeah. So what do people do that already have those big 401ks and they want to pay attention to this issue and plan for it before they retire?

Dan (00:28:26):

So I would highly encourage them to start looking at taking up, well, first stop putting money in traditional 401k. Okay. Stop whoever’s listening to this, and if you want to argue or debate just keep this in the back of your mind. I have the federal government backing every single thing that I’m saying. So unless you can come with information other than the federal government and how they’re gonna attack you, I winded aey. Okay, stop putting money in a traditional 401K yesterday. That’s the first thing. The second thing, you gotta start taking the money out, spending down. So let’s say you retire at the age of 62, 63, you still have a couple more years to Medicare, spend down that money. You’re 59 and a half years old, you can start taking money out of your traditional 401k. You want to go on vacation, use that money. Your kid needs to go to college. You happen to have children later in life. Pay pay for the college education out of the traditional 401k. Get rid of the traditional 401k yesterday. Yeah. Now for those of you doing research, everyone’s gonna start googling and hitting IRMAA after you see me, because I’m it, unfortunately, and I’m not saying it because I’m the smartest, I’m not. My mother will tell you I’m not that bright <laugh>.

(00:29:55):

I just happened to have got here first. It’s the only thing that separates from me, from everyone else. I just got here first. I’ve been doing this for 12 years. 15 years. Okay. I actually started a company with our former governor of Massachusetts years and years and years ago. And then he became governor and I, I went my other way and left that company because he’s really passionate about people planning for healthcare. And God does, does, does Charlie Baker know a lot about the subject <laugh>? So I just got here first. Yeah, that’s all. It’s, I’m not smarter than anyone else. I just got here first. Yep. So if you want to debate and argue, when you start looking at Irma, you’re gonna find out that ooh, 5% of the population in Medicare hits her. That’s not the case. It’s actually more like 30%, but we are not gonna go there. I’m sorry, not 30. It’s more like 11% this year. By the time 2030 rolls around. So in seven years, the Medicare Board of trustees report is stating about 30% of everyone on Medicare is going to be an erm

Lynn (00:31:12):

Because they’re gonna be starting to take all those RMDs.

Dan (00:31:15):

Correct. Not only that, because they’re gonna start taking the RMDs, but more importantly, the frightening part of what’s going on with our country, Medicare is officially broke. There is no more money. Sorry. So there’s only two alter, well, three alternatives that the government actually has. The first alternative is to raise everyone’s taxes, which they can’t do. The next alternative is to how Medicare works. Real quick for alternative two, how Medicare works. You are on Medicare, you go see your physician. Your physician doesn’t hand you a bill. They take your Medicare card, they put your name number Medicare card, and they give the codes for that. Identify the procedures that were done on you. They then take those codes and they build the federal government or Medicare, the amount of money for the services provided. Medicare then reimburses the physicians or the healthcare providers, the amount of money that they’re charging.

(00:32:25):

Now, the reimbursement rate for Medicare by law is 80% of what the insurance companies are paying your physician. So let’s say you go in for, I don’t know let’s use a colonoscopy. Everyone can, everyone I’m assuming is subject to that at some point. Yep. Let’s say the colonoscopy is a thousand dollars. Well, the insurance company’s only gonna pay the healthcare provider, let’s call it $900. Well, Medicare only has to pay 80% of that 900. So does the physician actually get all of their money? They do not. So every year the physician has to raise their prices to make up the loss. Mm-Hmm. <affirmative>, hence why healthcare costs continue to rise. So one of the easiest ways for Medicare to save money is to cut the reimbursement rate from 80% of what the health insurers are paying, cut it to let’s say 60%. But what it will end up happening to healthcare costs, they’ll just skyrocket. So what’s the other easiest way that Medicare can generate income to make sure it doesn’t go insolvent? Anybody ever hear this thing called Irma? All they’ve gotta do is increase the surcharges and they’re gonna generate a bunch of money if they leave the brackets alone and they just follow the path that they’re supposed to be following the federal government between today in 2030, the federal government’s going to collect $355 billion. That’s what they’re projecting in the report. Mm-Hmm. <affirmative>. So going forward, they’re gonna collect $355 billion off of seniors. That’s where we’re headed. Quick question that we like to ask, how many people have actually planned for this?

Lynn (00:34:45):

They just don’t know about it.

Dan (00:34:48):

There’s a reason. Yeah. It doesn’t behoove the federal government or the financial industry to inform anybody of this. The thing that people have to realize is, I’ve been doing this for, let’s call it 15 years, and I did it with the former governor of Massachusetts. IRM has only been on the books since 2020. I’m sorry, since 2003. Mm-Hmm. <affirmative> IRM is only 20 years old. How does people, how do people not know about it?

Lynn (00:35:19):

Yeah.

Dan (00:35:23):

And it gets worse for the simple fact that it isn’t just for supposedly affluent people, the way the rules and regulations are set up for Medicare. And I’ve already asked the question, which you’ve answered properly, how do you pay for your Medicare premiums through your social security check? So as Medicare is going insolvent or going broke, and they need to generate more and more money, the other easy, simple way is to just increase the premiums. So if I increase the premiums as the federal government, and I don’t give out a cost of living adjustment for Social security because you pay the bulk of your Medicare premiums to your Social security check, what happens to your social security benefit?

Lynn (00:36:11):

Mm-Hmm. <affirmative>.

Dan (00:36:16):

So no one’s social security benefit is actually ever gonna get increased because the Medicare premiums are gonna consume all of that cola. So in order to avoid all of this is you take a step back, get out of the traditional assets, get out of tax deferred place money into vehicles that the I r s doesn’t acknowledge. Again, I, I cannot speak more for Roth accounts.

Lynn (00:36:45):

Yep.

Dan (00:36:46):

And then I know people despise life insurance, but it’s the only thing that hasn’t changed.

Lynn (00:36:56):

Yeah. The cash value whole life.

Dan (00:36:58):

So the way we like to describe it, in 1913, the federal government passed and passed a law that brought taxation permanently to the United States. Mm-Hmm. <affirmative> prior to 1913, it was never permanent. It was always because of certain situations from the federal government. Yep. There’s always been taxes for state. That’s a completely different avenue. But when it comes to an income tax that was created in 1913, the legislation that enacted your tax code in 1913, the tax code was 194 characters. It consisted of 194 words. You could have tweeted sort of the entire tax language in 1913. Today, what is our tax code? How many characters are in it? Oh,

Lynn (00:38:04):

Probably hundreds

Dan (00:38:04):

Of, no, not hundreds. Yeah. Tens of millions of characters. Yeah.

Lynn (00:38:07):

Yep.

Dan (00:38:10):

Can you tell me the name of the financial product that hasn’t changed since then?

Lynn (00:38:14):

Yeah, life insurance.

Dan (00:38:16):

What are we telling people not to buy

Lynn (00:38:18):

<Laugh> life insurance? Well, I don’t,

Dan (00:38:21):

The only product that has never changed, ever. The only product that every bank owns, every senator, every house that rep owns, we tell people not to buy. And what do we tell people to do? Put money into tax deferred as much as humanly possible. This is all better for us.

Lynn (00:38:45):

Mm-Hmm. <affirmative>.

Dan (00:38:51):

Yeah. And I do a whole diatribe on why the financial industry hates women. I’m not sure if you want me to go down that path. I don’t know how much time we

Lynn (00:38:58):

Have. Oh, wow. That would be a good one. But I have a quick, quick other comment about people that have money in their 401ks, Roth conversions. Right. So that’s a way for people to get those funds out of those 401ks into Roths, but you have to do it intelligently.

Dan (00:39:18):

Well, that’s why they work with people that I’m assuming they work with you.

Lynn (00:39:21):

Yeah. I I’m not a financial advisor. I’m an educator. Oh, you know what, no, I’m not a licensed financial advisor. No. I I am an educator and a coach. So I po focus on personal financial coaching and what I call retirement readiness. And I like to educate women on these various topics. And then you know, if they need help, I have a network of experts that I can connect them to, depending upon their needs. I help them figure out what exactly are their needs and get them matched up with that professional. So, and I am a co-owner of your Retirement advisor, which is a financial advisory practice. So on that side, that team can do the Roth conversions and help you figure out your 401ks and your retirement income plan and tax efficiency, which is very critical and all that good stuff. So, yeah. So her retirement, thank you

Dan (00:40:13):

For doing

Lynn (00:40:13):

It. I’m sorry.

Dan (00:40:15):

Thank you for doing that. That’s incredible. Thank you for doing what you do.

Lynn (00:40:18):

Thank you. Yeah, it’s it’s a passion project and helping a lot of women who are in the financial services industry. I feel like women in particular have a lack of trust greater than the population at large. For a lot of different reasons. You know, I, I could talk about all the, the issues. Women are a little overwhelmed, perhaps older women have been in a partnership where they weren’t the, the C F O, they weren’t making those long-term decisions. The average age of a widows 59, so like 90. Really? Yeah. 95% of women are going to eventually make their decisions. You know, 80, 80 or 90% of women die single lots. Statistics point to the fact that women are going to have to make these decisions on their own. They’re going to have to make sure because of longevity, that they have enough money, you know, that all their, their family money with their partner wasn’t used by their partner.

(00:41:24):

So it leaves them Yep. Unable to care for themselves. So that all these different factors that I am trying to educate and alert women too and give them objective information. Not, not you know, a financial advisor who just wants to take their money and, you know, manage it. Or not an insurance salesman who just wants to sell her, you know, a big fat annuity. Like never be sold anything because you get educated. You won’t be sold anything. You’ll make a buying decision. And that’s what I’m trying to impart to women is that base level knowledge. Give them some questions to ask. I was actually just communicating via email with a woman who said she’s talking to a few different financial advisors. She’s aware of your retirement advisor. Because when I first talk to women, I tell them that I co-own a practice, but I gave her a guide to financial advisors and I gave her a series of questions to basically vet that quote retirement advisor to make sure that that person they’re going to be working with isn’t just focused on investments. You know, that they know about reverse mortgage, they know about Irma, they know about all these topics because that person can serve your best interest. Not someone who just wants to manage your money and, you know, collect a commission on the assets under management and call it a day. Someone who’s truly going to look out for all these gutches. Right. Because there are a lot of gutches and it requires proper planning. And not, not a lot of advisors know all of these things.

Dan (00:43:09):

No. And that, so here’s where we like to say, we step in and thank you for what you’re doing. That’s incredible work. And thank you for being the educator, not being licensed and having a ha ha having a horse in the race. That’s just incredible. Thank

Lynn (00:43:23):

You.

Dan (00:43:23):

Where, why we started IRMAA certified planner and all IRMAA certified planner is, is an educational stop certification for fi financial professionals have it be accountants, c CPAs, tax attorneys not, we are targeting the financial industry. We want financial advisors to be certified because they’re the ones that’ll end up doing the ultimate work. But we are targeting other financial professionals other than the financial industry. We’re, we like to say why IRMAA certified certification matters. Why IRMAA certification is the key out of everything that you’re going to speak about as a financial advisor, you’re gonna speak to the end client. What’s the only thing mandated by law? What’s the one thing that you have to have in retirement, or one thing you have to have to meet the requirements set forth by the federal government? You have to have health coverage. One thing government says you have to have it if you don’t, granted, they don’t have what is known as the individual mandate on the, the Affordable Care Act currently. So you can’t be taxed just yet. You used to be able to, it’s coming back. Oh. But by the way, if you don’t enroll in a Medicare when you’re 65 and older and you don’t have any other credible health insurance through an employer or spousal employer, you forfeit a hundred percent of your social security check. Hmm. So what must you have in retirement

Lynn (00:45:04):

Healthcare,

Dan (00:45:06):

Which financial professionals helping people plan for it? Hmm. You want to ensure that you have a list of people that they can go to that are qualified. Do you, what do you know about IRMAA if they don’t know it, don’t work with them. Yeah. Because guess what? They’re not following federal law then they should have to know about reverse mortgages, HSAs. They should have to know about everything else that goes into it.

Lynn (00:45:35):

Yep.

Dan (00:45:38):

You know, what we’re trying to prevent is, as we were talking earlier before we came on about a, a particular call that I was on, that particular call that I was on is always with unfortunately a woman. And ultimately this call for your listeners woman who’s in her sixties, she’s unfortunately divorced. She’s not necessarily healthy, not by anything that she’s done wrong. She eats completely clean, she tries to exercise. She just has a disease that she was born with that she’s struggling with now because of the way she’s saved for retirement assets through a traditional 401k. All of her money is visible to the I r s. Mm-Hmm. <affirmative>. She needs prescription drugs that are extremely expensive. They’re looking at 15, 16, $17,000 a month for these type, it’s called tier four or five injectable of biologic drugs. They’re extremely expensive. She can’t afford them. And then also maintain savings. Her social security check is getting destroyed because of the Medicare premiums. So what does she do? She’s choosing to go without medication so she can save her money. So if she, unfortunately to her quote, unfortunately, if I live too long, I can at least stay where I am and I won’t be homeless. Mm-Hmm. <affirmative>, that’s a quote.

Lynn (00:47:10):

Yeah. It’s horrible.

Dan (00:47:12):

And my only comment back, and hopefully people realize this, if you don’t have tax deferred assets, I get you your medications for free. Mm-Hmm. <affirmative>, it’s that simple.

Lynn (00:47:30):

Yep.

Dan (00:47:32):

But we can’t do it for some reason, the financial industry just can’t do it.

Lynn (00:47:37):

Yeah. Yeah. I think, I think of the 300,000 financial advisors in the country, they’ve been focused on the accumulation phase of life. I think that’s one of the issues. And there’s not a lot of quote you know, de accumulation phase of life focus. You know, it’s, it’s I know in my case, my partner Brian, he decided probably 10 years ago to start focusing on retirement planning and, and decided to rebrand the company to your retirement advisor to address that specific phase of life and why I’ve chosen to focus on her retirement as a brand and an education platform to do just that. Right. Because I, I also understand, I know this is perhaps a not a minor point, but with Irma, isn’t there like a two year look back or not look back <laugh>, but how would you describe that?

Dan (00:48:37):

Wow. You want to go into the weeds <laugh>. Just

Lynn (00:48:40):

Quick, quick weed.

Dan (00:48:41):

All right. Real quick. What Medicare, so the majority of your listeners, congratulations, all of you are going into Irma, not up for debate, not up for conjecture. Because what Lynn is just pointed out is the hard truth of retirement. So Medicare is always looking back at a two year tax return. The reason being is I’ll use the example planning for 2023. So what they do for those that are enrolled in a Medicare or those that are enrolling the Medicare, they contact the IRS electronically or your M A G I information. So when they’re looking at 2023 to see who’s in Irma, well unfortunately you haven’t filled out your tax return in 2022 yet. So they’re looking at your 2021. If you don’t have your 2021, they look at your 2020. If you don’t have 2021 or 2020, meaning you don’t have a tax return, Medicare automatically puts you in the highest Medicare IRMAA bracket.

(00:49:41):

So if you don’t have any tax returns, you go on Medicare, you get hit with the highest IRMAA bracket. So now Medicare is looking back at your two year tax return. That’s just what it does. So now let’s say you are turning 65 years old, or you’re 65 years old. In 2023, you’re gonna retire, go on to Medicare. Well guess what? Tax return they’re gonna look at. You’re 2021. Are you making more than $97,000? Well, you just reached derma. Granted, you have the ability to file an appeal, and you should, and you will. If you speak to lamb and you speak to your retirement is your retirement planner,

Lynn (00:50:22):

Your retirement advisor,

Dan (00:50:23):

Your retirement advisor, you’re gonna automatically file that appeal. Okay? Now what happens next year in 2024? Well, they’re still gonna look at your two year tax return from 2022. You haven’t retired yet. You still have income. Y’all gonna be in IRMAA again unless you appeal. So yes, they’re always looking two years behind. This is a bigger problem. Now, let’s say you turn 72, you take out that R M D, you’re not really planning for it. Take out the R M D. You don’t get subject to tax of IRMAA until age 74. Now, when you get the letter in the mail at the age of 74 that you’re reaching IRMAA, the last thing you’re gonna do is file an appeal. You are just gonna pay the money.

Lynn (00:51:12):

Yeah.

Dan (00:51:13):

The reason being is the Social Security Administration, which sets up to find out who’s in Irma. Again, I said it earlier, electronically contacts the irs. So every time you appeal an IRMAA determination, what you’re telling a federal agency, the Social Security Administration, is that the other federal agency, the Internal Revenue Service is wrong. So ultimately what you’re stating to the I R s is the tax information that you have about me is incorrect. Hmm. How many IRS agents is the current administration hiring?

Lynn (00:51:54):

Yeah, a lot.

Dan (00:51:57):

Everyone thinks it’s to try to go after corporations or go after the rich. How many baby boomers are there?

Lynn (00:52:07):

10,000 retiring every day,

Dan (00:52:09):

About 80 million. What do you think the i r s agents are going after? Mm-Hmm. <affirmative>.

Lynn (00:52:16):

Yeah.

Dan (00:52:18):

So yes, IRM is a two year lookback

Lynn (00:52:21):

Is like, what’s the average increase? What does, what does IRMAA add to that budget that you might not be prepared for?

Dan (00:52:29):

So the first IRMAA threshold is about 40% more Okay. Than the second IRMAA threshold is double. So whatever the Medicare premium is, it’s double.

Lynn (00:52:40):

Okay.

Dan (00:52:41):

Then there’s two other bra, three other brackets after that. So it goes from 40 to a hundred percent to 160% to 240% to 260%.

Lynn (00:52:52):

Okay.

Dan (00:52:54):

So now here’s where people need to take a look at real IRMAA. I don’t know how much time we have under the Medicare Monetization Act, which started Irma, that was back in 2003. The IRMAA thresholds are supposed to adjust based on the C P I U. So the consumer price index of IRMAA consumers. So each year they’re supposed to look at what the C P I U is on average, and it’s supposed to go up by that percentage. It has not done that in the history of Medicare zma. It didn’t even do it this year. When it jumped from 91,000 to 97,000. It’s really supposed to be at 111,000. So it still hasn’t done that. Yep. Now, through the years, the Medicare IRMAA bracket threshold has gone up. Now, what people have to realize in 2014, the president of the United States and the Vice President, who is now your president, passed legislation through the budget in 2015, that decreased Medicare’s IRMAA brackets by about 40% on the coup on the, the, the couple side. It also increased the surcharges by 25%. Now, that was supposed to take effect in 2017. What ends up happening is the next president of the United States comes in and enacts legislation. It’s called the Bipartisan Budget Act that happened in 2018. Enacts legislation, which blocks the legislation that happened in 2015, and then readjust the herba brackets and states that they cannot be adjusted. The the bottom tier. So the, the highest tier, the the 500,000, that can’t be adjusted through at least 2028. So unless Congress creates another act, hopefully the IRMAA brackets don’t change.

Lynn (00:55:00):

Okay.

Dan (00:55:01):

But have they’ve already been enacted to be lowered. They have. Is it coming? Yes, it’s coming. And it has to because Medicare’s broke.

Lynn (00:55:15):

Yeah. Yep. Before we wrap up, and I may end up breaking this into two podcasts. I’ll have to see how how it pans out. We’ll make uhoh we’ll leave, we’ll leave it on a cliffhanger like Netflix to get, you know, when you’re watching Yellowstone and you know, Beth shoots someone in, don’t know if they died or whatever. She’s hit someone over the head. I don’t know if you’re a Yellowstone fan, but they leave you on a cliffhanger. So you have to watch the next, next episode. So we may end up doing that. But there’s, there’s 30 trillion that’s going to transfer the greatest wealth transfer of all time. And women are probably going to inherit a lot of that money. So my question is, what does that inheritance do to women’s incomes? And it’s probably when you’re gonna need a financial slash retirement advisor to help you when you inherit that kind of money. Because it can have impact. Right. Cuz it’s, it’s it’s taxable.

Dan (00:56:23):

Yeah.

Lynn (00:56:25):

Yeah.

Dan (00:56:28):

So I don’t know how much time again I can assure you 30 trillion isn’t going to be transferred. It’s not gonna happen. The government’s going to take 29.9 trillion of it. Women are gonna be left with nothing. As again, I do a whole presentation on, I do a five minute real five minute quick why the financial industry hates women.

Lynn (00:56:52):

Okay, we got five minutes for that cuz this might be part two of the podcast.

Dan (00:56:56):

So let’s take a typical scenario of husband and wife. Currently 45, 50 years old today. They sit down with a financial advisor. The financial advisor’s going to tell them to invest as much money tax deferred. So you get a tax break today cuz it’s all about putting money in your pocket today when you’re working and you can afford it. They’re going to tell the person to buy term insurance to protect themselves. God forbid either one passes away and you want to invest the difference. There is no reason to have life insurance later on other than term because we’re gonna invest your money and you’re gonna have so much money you’re not gonna know what to do with it. They’re gonna tell them to work until the age of 70 and they’re gonna tell ’em to do the third worst thing you could possibly do in retirement. And that is maximize your social security benefit. Newsflash, you don’t wanna really do that, especially if you have tax deferred assets. There are times when you should do it and we’ll show you when. So let’s say the couple continues. Life, life goes on now they’re about to retire. They have a lot of money in their traditional 401k. They’re gonna maximize their social security check.

(00:58:11):

They don’t have any life insurance. They don’t buy an annuity because annuities are bad. Reverse mortgages. Why would you ever want to do that? You want to give your house to your children. Correct?

Lynn (00:58:24):

Hmm.

Dan (00:58:25):

Do i, does does this sound off the wall?

Lynn (00:58:28):

Sounds pretty common.

Dan (00:58:30):

Okay. So what ends up happening in the real world, and I’m sorry this is gonna sound sexist, but this is just the way it is because women are smarter than us as they get older, the husband’s gonna collect more in social security benefits because the wife stayed at home and raise the kids. She did the most important job for our society, for them, for their family, is they raised sensible normal children. That’s the most important job. I don’t care what anyone says. And by the way, by the way, as a, as a male, you don’t want me raising my own kids cuz I’m a moron. <Laugh>. And I’m gonna get there to a point. <Laugh>. So she’s collecting half of his social security benefit. Now what happens? Every single, I don’t care what anyone says, the man gets sick. Correct? Mm-hmm. <Affirmative>, is there any long-term care insurance? No. So what does the woman do? Takes care of him. What happens to her health? Is she starting to take care of the man?

(00:59:45):

Hmm? Her health deteriorates. So what ends up happening is he passes away. But because his health was deteriorating did they take money out of the traditional 401K to help offset the medical situation? Did they reach Medicare’s? Irma, did their social security check start going down? Now he passes away after he, he’s depleting some of the assets. The assets really don’t have much. Hmm. She’s now stuck with a social security benefit. She’s now in a higher IRMAA bracket because it’s no longer married. She’s an individual. There is no life insurance. There is no stream of income. All she has is her house. So she has very little assets cuz they got bled to take care of the husband. She’s collecting a social security benefit that’s being chewed up by Medicare’s Irma. And she has a house and that’s it. So what happens to her?

(01:00:42):

Oh, they move her to a long-term care facility and they take the house. And the only thing that she had in the, in her entire life, everything she worked for vanishes. Oh, and by the way, when you go to a long-term care facility and you see women that are there by themselves and they have nobody visiting, it’s not because they’re bad people. Not even remotely close. The reason is when you decide to make yourself look indigent to get on a welfare or, or to get on a Medicaid, which is unfortunately where women are headed by law, they can move you anywhere to a long-term care facility that’s a 50 mile radius of your home. How many times can your children get out to visit you if they’ve gotta drive 50 miles each way? Mm-Hmm. <affirmative>. So how does the women end up ending their lives? Homeless and a long-term care facility with no loved ones and broke.

(01:01:42):

Correct. Now how easy is this? Same couple sits down with their financial advisor. Who doesn’t hate women? Hmm. They buy life insurance. They invest money instead of into their traditional 401k. They put it into a Roth. They get the, they ex, they excu, they, they take away the company match. Don’t even want it. Just put it in a Roth. Don’t even want the company match just before retirement. They sit down with their financial advisor. They take some of the money that’s been in a Roth. They buy annuity. They it over two lifetimes. Now, no matter what anyone says, the guy’s getting sick. And the reason the guy’s getting sick is men are dumb. Men are stupid. To give you the quick example of how stupid we are. Couple years ago when I was married, I’m out in my backyard with a machete. You can think of where this is going. <Laugh>. I’m drinking beer while using a machete to cut a path for my children to play in the woods. I sink the machete into my shoulder <laugh> and like a genius. I pull the machete out and then I pour beer on it and say it’s alcohol. I cleansed it. And because I’m a moron, I continue to do the work. A couple days later I get an infection and my, my wife at the time who’s a nurse tells me, Hey stupid, you’re not sleeping in this bed because your arm smells cuz it’s infected. You need to go to the doctor

Speaker 4 (01:03:20):

<Laugh>.

Dan (01:03:21):

Now, couple weeks later, my wife again a nurse at the time, she goes out, she’s a runner. She has some pain in in her hip region. She immediately stops running, immediately goes to the doctor, comes out, she’s got a crack pelvis from whatever it may be. They put her on a regimen for rehab. She follows it to a T. She’s healthy. Within three months she’s back to normal. So out of the two stories that I just gave you, which person deserves to live?

Speaker 4 (01:03:53):

<Laugh>

Dan (01:03:57):

Women outlive men. Because men are stupid. There’s no other reason. <Laugh> women are intelligent. Sorry. Anybody wants to argue, debate? I can. We’ll just go to a cemetery and we’ll look at the headstones. <Laugh> there. Proof women are smarter than men. Proof. So John still gets sick. I’m sorry the, the husband still gets sick, but they have long, they have life insurance inside the life insurance. What do they have? Long-Term care rider. Long-Term care rider kicks in. There’s money spent on John. It doesn’t come outta their savings. Ah. Now instead of the wife getting sick, getting unhealthy from taking care of the husband. Well the long-term care coverage allows somebody to come in. She maintains your health, huh? No assets are being spent. Now when he passes away, what happens? There’s a death benefit. Huh? So now she gets half of the social security benefit, but she’s no longer in IRMAA because she’s got Roth assets also. They have the income from the annuity coming in and she has life insurance. Huh? Does she have to worry about anything else?

Lynn (01:05:18):

Nope.

Dan (01:05:19):

Can she stay in her house for the rest of her life and be surrounded around people that love her? Yeah, but we can’t do that. Why? Cuz we hate women. So, I’m sorry if anybody wants to say it. A financial advisor that doesn’t understand IRMAA and doesn’t understand federal law, you shouldn’t not work with, you should run away. You should report, you should sue, get away from them. Yes. I’m sorry. The financial industry to this day still and will continue to hate women because it’s really not that hard to make their lives extremely easy for everything that they’ve given to us. Mm-Hmm.

Lynn (01:06:08):

<Affirmative>.

Dan (01:06:12):

So that’s, that’s my little spiel.

Lynn (01:06:14):

Love it. Yeah. I did a podcast with Larry Kotlikoff. Not sure if you’ve

Dan (01:06:21):

Heard of it. Oh, quick guy. Yeah.

Lynn (01:06:22):

Yeah. I know Larry. He went into a whole diatribe during the podcast on, you know, how the Social Security system is not friendly to women. And he just, he just, he just brought out things that I just never even thought of. And it was,

Dan (01:06:38):

Larry’s a great guy,

Lynn (01:06:39):

So insightful. Yeah. He’s he’s fun to chat with. Very, very, very nice man. We’ve actually been to his townhouse oh, back, back, probably five or six years ago. We went into Beacon Hill and visited with him. But so if we could just summarize, if somebody is listening, what are like the three most important things that they could do with this information like today?

Dan (01:07:08):

All right. So the first three things that we like to talk about is the biggest mistake you can make in retirement. The number one biggest mistake is placing money into tax deferred today. Just, just don’t do it. There’s no reason to put any tax deferred money in. Don’t get what anyone says. The third thing we tell people is never maximize your social security benefit until speaking to a financial professional. Now, if you have all assets in a Roth and life insurance, by all means maximize your social security benefit. But you have to realize if you have any tax deferred asset, if you maximize your social security benefit, you just get quicker to 85% of your social security benefit being taxed and

Lynn (01:07:50):

Irma. So when you say maximize social security, are you saying to wait in as long as Yes, not as as

Dan (01:07:55):

Possible. Do not wait, unless of course you have non recognizable assets to the I R S, then by all means, yeah. Get as much money as you possibly can. Right. Social security is a tool to strip away your retirement assets.

Lynn (01:08:12):

Yep.

Dan (01:08:13):

So, and that leaves us to the second one, and this is the running joke in retirement. Don’t start a land war in Asia. So that’s an ode to the Princess Bride. So those are the three things that we tell people not to do. Irma, very simple, is a surcharge on your Medicare premiums for those that earn too much income. That’s all it is. It’s really not that, not much more to it than that, unfortunately. It’s all encompassing to your income with the exception of a few things. You need to work with a financial professional that understands these federal laws and understands what income is so you can maintain your healthcare costs and keep as much of your social security benefit is humanly possible.

Lynn (01:08:56):

Yep. Great. Dan, thank you so much. This was quite a topic. We covered a lot of ground. We went over my typical podcast time. So like I said, I may divide this into two part one and part two, get people to listen to us two weeks in a row chatting about all of this. I came into it thinking we were going to be talking about Irma, but we covered life insurance, annuities, reverse mortgage. So many important topics for women to understand. And I always say, you know, retirement is about not only risk mitigation, like under identifying your gaps, your risks, but also opportunities. So on a positive note, I always take a look at, you know, don’t be afraid of these things. Look at these things as opportunities, right? And opportunity to change your outcome. You have control to do that. The sooner you do it, the better. <Laugh>. That’s what I also preach is, you know, cuz I talk to so many women where they think, oh, it’s too late, but I always say it’s never too late to make some change. So as I always say, retirement, her retirement is about knowing more and having more and getting her done. Thanks for listening. Thanks Dan, for participating in this episode of the Her Retirement Podcast.

Dan (01:10:23):

Thank you.

Lynn (01:10:24):

Bye-Bye.

 

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The Her Retirement Platform and You

(02:01):

So you could probably say I created the platform for me, but I also made it for you. And I refer to her retirement as the first retirement readiness platform. I used to dream or only dream about having a happier, healthier, wealthier life and retirement. And guess what? I worried too. I had the same worries that you used to have. They used to keep me up at night, like running out of money in retirement, being a bag lady, getting sick, being a burden on my family, or a thousand other worries that we carry around and burden ourselves with. Well, guess what? One day I realized a better retirement didn’t have to be a dream, and I didn’t have to worry like a worry war, as my mother used to say. And I didn’t have to keep putting everyone else’s needs before my own, which is something we women do a lot.

(02:55):

I decided that I could be the hero of my own story. Next, I partnered up personally and professionally with a retirement advisor, which was a good move working alongside him. In doing a ton of research, I learned and continue to learn and train on everything I could and can about women and retirement. I’ve learned about the gaps, risks, and opportunities unique to us women and how to address them with prudent strategies and planning. I did all this because I wanted to be my retire mentor, but I wanted to do this so I could become your retirement. I had an aha moment one day when I was digging through all of this research and uncovering all the challenges that we women face, knowing that I wasn’t the only woman with dreams and fears who needed some retirement and financial education and trustworthy guidance, I decided to create the Her Retirement platform, what I call the world’s first online retirement readiness platform.

(04:02):

I offer to retire mentorship for women 50 plus going through significant life transitions. But I say that women of any age can leverage the platform. Also, my platform combines high-tech, proprietary software that I’ve designed with High Touch, which means I have a team of retire mentors who can guide you. Plus, I have a whole bunch of resources to educate, prepare, and guide you on your successful journey. And retirement, as I like to say, it’s all about knowing more and having more. And guess what? We, women, deserve this more than ever. My platform is the first to bring together financial and non-financial retirement planning. Because a good life isn’t just about money, and within my five-tier Good life framework, any woman can connect with her money, her story, and her life regardless of her affluence or stage of life.

(05:03):

This isn’t just financial planning, ladies; this is life planning. And my platform also features my retirement readiness roadmap that lays out each step of your retirement journey. You’ll learn, envision, assess, plan, and implement with 100% confidence: no doubts, no fear, no excuses, no stress, and no bs. Thank goodness we women are not afraid to ask for directions. So that’s my story. The rest, they say, is her story. I’d love to help you write or rewrite yours. If you’re ready, let’s get her done. So that’s just a quick snapshot of the story behind her retirement and an overview of the platform. Of course, you can go to the website and get much more detail. I have three ways a woman can invest in herself and a better retirement. One is my masterclass, which is like eight hours of education. It is a fee-based class.

(06:12):

I have many other educational resources on my social media channels, including this podcast. And I have a whole library on the website of free resources, videos, white papers, you name it, all kinds of free resources. But my no more have more masterclass is fee-based because it has hours and hours of educational content and workbooks and guides and tools and resources access to my software. So many things come within that masterclass offering. So that’s number one. Number two is I have a no more have more club. And while the masterclass starts you on your journey to knowing more and having more, the club helps you take action and stay the course through retirement support and group coaching. You’ll take tiny steps and make incremental commitments to your retirement readiness. The goal is to help you make informed decisions and have more conversations about your money and retirement.

(07:11):

And you don’t have to do this whole retirement thing alone when you are part of the club. Number three is what I call the no more have more plan. This is a three-month journey to a better retirement. That starts with that five-step retirement readiness roadmap that I talked about earlier. It’s guided by our retirementors, empowered by our software, in which we’ll identify your financial and lifestyle gaps, risks, and opportunities. You’ll learn, envision a SaaS plan, and implement a retirement plan you understand and have 100% confidence in. And we’ve been known to help women live a better, more intentional, and financially secure retirement with this planning framework. So if you are interested in investing in yourself and a better retirement, those are three ways you can do it. Also, I offer a lot of different à la cart services so that if you don’t want one of those programs, you can chat with me or a retirementor, you can get a subscription to my software, my retirement readiness software.

(08:22):

You can just, you know, look at some of the educational resources. You can join my free community, which is Her Retirement Facebook community. So there are some à la cart things that you can get as a benefit from her retirement. So, I hope that explains a little bit more about the Her retirement platform and how it may help you in 2023. I know it’s getting to be that time of year when we all make New Year’s resolutions. And so if you are resolving to focus on your retirement planning, regardless of age, keep her retirement platform of resources in mind for whatever journey you’re on and whatever starting point you have. Because we are here to help women live a happier and wealthier life and retirement. We’re here to help women get her done. So now I want to transition and share three concepts with you today that have to do with aging and retirement.

(09:22):

And I think this is kind of a good framework for thinking about aging and retirement and helping you prioritize these three things. They are lifespan, health span, and wealth span. Basically, lifespan is all about longevity. Over the past 30 years, women have been living longer. In fact, in 1984, a women’s life expectancy was 78. Today, women live to 81, which is just average. And that number continues to rise. However, the life expectancy of women still ranks far below Asian and European women, whose life expectancies range from 87 to 90. And you know, that’s a whole other topic of a podcast for why that is, but it’s probably a lot of it’s related to the second topic that I’m going to bring up is health span. But I guess the point with lifespan is you need to look at the longevity of your family history and figure out, you know, make the best guess at your own longevity.

(10:28):

We obviously cannot guess how long we’re going to live, but a lot of experts recommend that your projections for how much you’re going to need in retirement should be based on a pretty long lifespan, maybe up to a hundred years old, maybe even longer. So very important to make sure you understand the concept of lifespan and longevity. The next one is healthspan. So according to recent research published and male clinic proceedings, less than 3%, yes, 3% of American adults achieve four of the most essential healthy living characteristics. One, is a healthy diet. Two, moderate exercise. Three, not smoking. Four, low body fat. These measures, along with stress levels, sleep habits, social engagement, and mental health play a significant role in life and longevity. So, you know, having a long healthy life is kind of a double-edged sword, right? One is that it’s great to have longevity; it’s obviously even greater to be super healthy, but living longer means you need more money to support that longer lifespan.

(11:43):

But I would choose to have health over a lifespan. So you really need to focus on that health span. And in addition, healthcare costs are huge in life and retirement. And one way to reduce your healthcare costs is to protect your health, to be healthier, and to pay attention to those four essential healthy living characteristics. So focus on your diet, exercise, not smoking, and your body fat. Commit to it and live a healthier life and retirement. And finally, wealth span. According to a recent study, Americans now think they need at least 1.25 million for retirement. This is a 20% increase from just a year ago. And this was a survey by Northwestern Mutual, but the average amount in an American savings account is just $87,000. That is a huge gap between 1.25 and 87,000. It’s going to take some exceptional thinking and strategies to fill a gap that big, especially given the performance of the stock market this year.

(12:53):

About half of Americans think they may have to work until they die due to a lack of retirement savings. According to AARP, another study by AARP, 80% of women working today could face poverty in retirement. They do not make the proper commitment to their money. So you know, these statistics tend to alarm me not only from a personal perspective, but you know the fear, right? We already have a great fear factor. It’s one of the obstacles women face in focusing on their life and their money, and their retirement is the fear factor. Of course, another obstacle is the trust factor. But so many people in the industry and financial services focus on fear factors to get people motivated to take action. But I think, you know, while these statistics can scare you, you should focus on allowing them to motivate you and have you pay attention to the things you need to do in terms of your financial wealth span.

(14:07):

You really need that focus and commitment to getting educated and making sure you put a plan in place to protect your wealth span. So my question is, are you willing in the new year, since we’re here at the end of the year, to recommit and focus and plan around your lifespan, health, and wealth span? I know it can be overwhelming, but you can take baby steps. You don’t have to take on everything. You can do small things in each area to impact your outcome. That’s what it’s all about. It’s all about knowing more, having more, whether it’s more health, wealth, or happiness, and getting her done. And if you’d like some help, many of us feel overwhelmed by tackling all this. It’s completely natural to want help. And we can help you. We can give you some resources and connect you to those resources, whether those are people, resources, content, resources, or whatever you need. Her retirement is here to help women live a happier, healthier, and wealthier life in retirement. Please reach out to me. I’m always available at lynnt@herretirement.com. Thanks for listening to this episode of the Her Retirement Podcast. Have a great week.

 

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Find That Lost Retirement Account

Find That Lost Retirement Account

Do you have a long-lost retirement account left with a former employer? Maybe it’s been so long that you can’t even remember. With over 24 million “forgotten” 401(k) accounts holding roughly $1.35 trillion in assets, even the most organized professional may be surprised to learn that they have unclaimed “found” money.1

What Are “Forgotten” Retirement Accounts?

Considering that baby boomers alone have worked an average of 12 jobs in their lifetimes, it can be all too easy for retirement accounts to get lost in the shuffle.2 Think back to your first job. Can you remember what happened to your work-sponsored retirement plan? If you’re even slightly unsure, then it’s time to go looking for your potentially forgotten funds.

Starting Your Search

One of the best ways to find lost retirement accounts is to contact your former employers. If you’re unsure where to direct your call, try the human resources or accounting department. They should be able to check their plan records to see if you’ve ever participated. However, you will most likely be asked to provide your full name, Social Security number, and the dates you worked, so be sure to come prepared.

If your former employer is no longer around, look for an old account statement. Often, these will have the contact information for the plan administrator. If you don’t have an old statement, consider reaching out to former coworkers who may have the information you need.

Even if these first steps don’t turn up much info, they can help you gather important information.

Websites to Check

Next, it’s time to take your search online. Make sure you have as much information as possible at hand and give the following resources a try.

National Registry of Unclaimed Retirement Benefits

This database uses employer and Department of Labor data to determine if you have any unpaid or lost retirement account money. Like most of these online tools, you’ll need to provide your Social Security number, but no additional information is required.3

FreeERISA

If your forgotten account was worth more than $1,000 but less than $5,000, it might have been rolled into a default traditional Individual Retirement Account (IRA). Employers create default IRAs when a former employee can’t be located or fails to respond when contacted. You can search for retirement and IRA accounts for free using this database, but registration is required.4

Once you reach age 72, you must begin taking required minimum distributions from a traditional IRA in most circumstances. Withdrawals from traditional IRAs are taxed as ordinary income and, if taken before age 59½, may be subject to a 10 percent federal income tax penalty.

The U.S. Department of Labor

Finally, the Department of Labor tracks plans that have been abandoned or are in the process of being terminated. Try searching its database to find the qualified termination administrator (QTA) responsible for directing the shutdown of the plan.5

What’s Next?

Once you’ve found your retirement account, what you do with it depends on the type of plan and where it’s held. Your location also matters. Depending on where you live, the rules and regulations may differ.

No matter what you decide to do, be sure to involve your tax and financial professionals since they’ll be informed on current regulations for your state. They can also help you identify a strategy for your newfound money: travel, investment, or maybe that vacation home you’ve always wanted. You worked hard for that money, after all, so you should get to enjoy it!

A financial professional can help: If you’re a woman concerned about saving for retirement or have questions about your unique situation, give us a call. Our team understands the unique challenges women face, and we’re passionate about helping women just like you plan for a comfortable retirement. Contact us and let’s get started. Email retire@herretirement.com.

  1. Kiplinger.com, August 27, 2021
    2. USNews.com, October 22, 2021
    3. UnclaimedRetirementBenefits.com, 2022
    4. FreeERISA.BenefitsPro.com, 2022
    5. DOL.gov, 2022

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.

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10 Myths of Aging

(00:02):

Hello and welcome to this week’s episode of the Her Retirement Podcast. This week I’m talking about an article I saw on the National Institute on Aging website. It is called 10 Myths About Aging. And what happens many times, people make assumptions about aging, sometimes younger people and sometimes older people, and these assumptions are based on what we think it’s like to grow old and how older age affects people. But as we are getting older, it’s essential to not just think about the negative aspects of aging and how we overcome those, but I think we should think about the positive aspects of aging and look at those things as opportunities because, as we get older, there are so many opportunities. Research has shown that you can help preserve your health and mobility as you age by adopting or continuing your healthy habits and lifestyle choices.

(02:14):

And this is something I think about all the time. I focus on that and make it not just something I have to do but something I have the privilege of doing. And when I think about my health and lifestyle choices as things I’m able to do versus things I have to do, it just puts a whole different spin on it and gives me a whole new different attitude about it. I say, “Gosh, I am so thankful I get to work out today.” I get to move my body, exercise my mind, and so on. So, let’s talk about some of these myths that are out there in our population about aging.

 

Okay, so let’s talk about myth number one, depression and loneliness is normal in older adults. While studies show that older adults are less likely to experience depression as they age, some people feel alone and isolated, which can lead to anxiety, sadness, or depression.

(03:25):

However, these feelings are not a normal part of aging. As growing older can have many emotional benefits. So, it’s not just this, oh my goodness, you get older, and you get depressed, sad, and lonely. Many older people have an opportunity to establish or continue long-lasting relationships with friends and families, and they have this lifetime of memories to share with loved ones. So, when should those feelings of depression, anxiety, and sadness if you have them become a concern? Well, it’s important to remember that older adults with depression might have less obvious symptoms and might be less likely to talk about their feelings. It could be related to some mood disorders, but some treatments are effective for those feeling that way. And I also think when you don’t have a retirement plan, and you haven’t thought about what you’re going to do in retirement, and then all of a sudden wham, you’re depressed, and you’re like, what do I do with all this time?

(04:38):

I went through something similar, although it wasn’t retirement. My children left the nest, my last two, and I had this empty nest. And I thought about it, and I thought I had prepared for it, but I still felt sad and a little depressed and lonely for all the activities they brought into my life. And as much as you try to prepare, you can’t always qualify. But in terms of retirement, the more you can do without thinking about how you spend your time, the people you’re going to spend the time with and your activities, your purpose, that part of it is so important. It’s the non-financial part of retirement, and it’s something that we have experts whom we can connect you with to help you through that so you don’t experience those periods of depression and loneliness. But in and of itself, it is not 100% associated with growing older.

(05:39):

Myth number two, the older I get, the less sleep I need. As people age, they may find themselves having a more challenging time falling asleep, maybe staying asleep. But a common misconception is that a person’s sleep needs decline with age. But the fact is that older adults need the same amount of sleep that we all need at any age, seven to nine hours each night. Of course, sleep helps you stay healthy and vivacious, and alert. Adequate sleep can also help reduce the risks of getting injured, improving your overall well-being and, of course, many other health benefits to good sleep habits. And I know one of the other myths of retirement, and maybe this isn’t such a myth, but the afternoon nap or siesta; I’ve been taking those for years because working for myself, my time is my time. And if I want to take a good little afternoon snooze so I can work later at night, then I do that.

(06:45):

So, sleep is essential to your mental health. And, of course, in retirement, you can take siestas, right? Because you don’t have a boss or work demanding your time at two o’clock in the afternoon. So, sleep away; it’s perfect for you.

 

Number three, older adults have a hard time learning new things. Wow, that’s a big one. That is so not true. Older adults can learn new things, create new things, use their brains, and improve their performance in many areas. While aging often comes with changes in thinking, many cognitive changes are undoubtedly positive, such as having more insight, knowledge, and skills that you can tap from those life experiences. One of the issues is in the workplace, perhaps ageism, because they think that as you age, how is your brain functioning? Well, that is a complete myth.

(07:51):

Learning new skills can also improve cognitive abilities. For example, one study found that older adults who learned things like quilting, digital photography, or even ballroom dancing improved their memory and potentially put off dementia. And Alzheimer’s is critical to seek new social connections with others in engaging in those social activities. Of course, as I mentioned, ballroom dance and other dance classes are so valuable. My mother does an exercise class at the senior center book clubs. All those types of things can really keep your brain active and may also boost your cognitive and may also boost your mental help. And if you’re like my father-in-law, he’s still pretty busy using his brain in the retirement advisory practice I’m a co-owner of. He was still talking to older clients as friends until a couple of months ago. And they’re still kind of saying, Hey, Norman, what do you think about this?

(09:03):

What do you think about this? And he loves to share his skills and experiences. He loves to share his skills and experiences from so many years of working in this industry.

 

Okay, number four, it’s inevitable that older people will get to men. Older people will inevitably get dementia. Well, guess what? Dementia is not a normal part of aging, although the risk of it grows as people get older. It’s certainly not inevitable. And many people live into their nineties and beyond without any significant decline in their thinking and behavior, which is characteristic of dementia. I just mentioned my father-in-law, 93 years old, with no real signs of dementia from my perspective. And even my father, 87, I haven’t noticed anything. Maybe a little forgetfulness, like forgetting an appointment or losing your keys. That’s typical mild forgetfulness, which is very common in normal aging at 57; sometimes, I have that brain cramp.

(10:12):

Well, that’s normal. Nevertheless, if you have any concerns about your memory or you’re thinking, or you notice changes in how you’re behaving or your personality, even back to that topic of anxiety or depression, definitely bring it up to your doctor because some of these things can be treatable or reversible. And finding the cause and recognizing it in the first place and finding the cause is essential for determining how you can stave off that decline of your brain.

 

Number five, older adults should take it easy and avoid exercise, so they don’t get injured. <laugh> well, as an exercise buff and someone who never wants to stop moving, this is a big one to me. And as you age or as other people see your age, like family, children, and friends, they may think that you could do more harm to yourself than you would do good, especially if you have any chronic conditions.

(11:18):

However, studies show that you have much more to gain by being active and much more to lose by sitting too much. And I’m not going to include napping because you want to nap, you want to rest your body, so you want to move your body, but you need some rest time. Also, often inactivity is more to blame than age when older people lose the ability to do things independently. So, keep moving, people. My mother always said You have to keep moving. The famous basketball player, Larry Bird, said,  “Keep moving.” And almost anyone at any age with most health conditions can participate in some physical activity, even if it’s just walking your dog every day, getting up, and moving. If it’s vacuuming your house, cleaning your tub, or doing those types of daily living activities, that is better than nothing. Physical activity can also manage some of those chronic conditions as well.

(12:24):

But you need to check with your doctor on that. Exercise and physical activity are not only great for your physical and mental help, but they can help keep you independent as you age. My mom started taking a tai chi class at the local rec center, which definitely made her feel better. These similar mind and body movement practices have been shown to improve balance and stability in older adults. And, of course, this helps maintain independence and prevents one of the most significant risks to people as they get older and frailer is falling. So even yoga, check out yoga. So essential to keep that body strength. You don’t have to lift weights; you can do other movements to keep your core strong and your back straight and stand up tall. All those things are going to help prevent frailty from setting in falling balance.

(13:25):

It would be best if you kept all those in check. It would be best if you kept all those on your priority list so that you can live a healthier retirement.

 

Myth number six, if a family member has Alzheimer’s, I will have it too. Well, let’s break this down. A person’s chance of having Alzheimer’s disease may be higher if they have a family history of dementia because there are some genes that we know the increased risk. However, if you have a parent with Alzheimer’s, it doesn’t necessarily mean a child will develop the disease. You need to learn about your family history and talk to your doctor about any of these concerns. Environmental and lifestyle factors such as exercise, diet, exposure to pollutants, and smoking may affect a person’s risk for Alzheimer’s. And while you cannot control the genes you inherited, of course, you can stay healthy as you age, exercise, control your blood pressure, watch what you eat, eat healthily, and of course, not smoke and not drink too much.

(14:40):

Alright, myth number seven. Now that I’m older, I will have to give up driving. I know again; I mentioned my mom; she’s 87, she still has her car, and she’s still going. She doesn’t drive at night. But is this something you have to think about? Well, of course, as the US population ages, the number of licensed older adults on the road will also increase. The Federal Highway Administration recorded a record high of 221.7 million licensed drivers in the US in 2016, including almost 42 million, or one in five, who are 65 or older. And, of course, with longevity rising and the number of people retiring, the baby boomers will go up quite a bit. So, you’re going to see many people to older people driving around. Of course, natural changes can occur with any age that can affect a person’s ability to move, like a slower response, diminished vision or hearing, and reduced strength or mobility.

(15:46):

The other night I was telling my mother that I was driving, it was dark, and my mother, the area where I live, is very dark, with few streetlights. And this deer darted out in front of me, and I slammed on the brakes. I was actually in my mother’s car, so I was glad I didn’t hit it, but I saw it out of my peripheral vision to see it coming. I didn’t know when it would cross in front of me. So, I had already started breaking, and then I had to press the brakes harder to avoid hitting it. However, I was thinking about older people and how they lose their peripheral vision. Had that been my mom or someone more senior, if they wouldn’t see that deer coming out or had the reaction time that I had to stop?

(16:34):

However, the question of when it’s time to limit or stop driving shouldn’t be about age. It’s about your ability to drive safely. And, of course, we know many younger drivers who could be better. So could be better needed to think about those things that affect your ability to drive and have honest conversations with the people that love you about your driving. Have them take a driving test with you to ensure you are okay to drive. That is so important for your health and safety and those of others on the road.

 

Alright, myth number eight, only women need to worry about osteoporosis. Well, osteoporosis is more common in women. This disease still affects many men and sometimes goes underdiagnosed. Men might not be as likely to have it because they start with more bone density than women.

(17:30):

One in five men over 50 will have an osteoporosis-related fracture by age 65 or 70. Men and women lose bone mass at the same rate. So many things that can put men at risk are the same for women, including your family history, which you can’t control not having enough calcium or vitamin D; I take both every day and do a little exercise. So again, you can exercise and stave off many diseases and things that can debilitate you. Low levels of testosterone, too much alcohol, taking certain drugs, and smoking are also risk factors. So, people get healthy and stay healthy.

 

Myth number nine, I’m too old to quit smoking. Yeah, my dad is 85, and he quit smoking, and I was like, “Whoa!” I mean, it’s been several years since he did it, but I think he just kind of stopped cold turkey.

(18:29):

So, it doesn’t matter how old or long you’ve been smoking; quitting anytime will improve your health. It’s like, Oh, it’s too late. I’m just going to quit smoking. No, if you leave anytime, it will improve your health. Smokers who quit have fewer illnesses such as colds and the flu, lower rates of bronchitis and pneumonia, and a better feeling of well-being. The benefits of quitting are almost immediate, according to many studies. Within a few hours, the carbon monoxide level in your blood begins to decline. And your circulation improves in a few short weeks, and your lung function increases. Smoking causes an immediate and long-term rise in your heart rate and blood pressure, but quitting can lower your heart and blood pressure over time. And, of course, quitting smoking will reduce your risk of cancer.

(19:21):

Heart arc stroke, lung disease, quitting smoking also lowers your risk of cancer, heart attacks, stroke, and lung disease. Quitting can also reduce that yucky secondhand smoke exposure you give to other people around you. So it’s never too late to reap the benefits of quitting smoking. And, of course, you’ll set a healthy example for your children and grandchildren.

Myth number 10, my blood pressure has lowered or returned to normal, so I can stop taking my medication. Well, guess what? High blood pressure is a common problem for older adults, especially people in their eighties and nineties. And, of course, it can lead to serious health problems if not treated. So, if you take high blood pressure medication and your blood pressure goes down, the medicine and any lifestyle change you’ve made are working. However, it’s essential to continue your treatment for the long term.

(20:24):

If you stop taking your medicine, your blood pressure could increase again, increasing your risk for health problems like stroke and kidney disease. But what’s important is that you need to talk with your doctor about the possibility of changing or stopping your medication. And I want to do a bonus myth. And the other bonus myth is that it’s related to depression and loneliness, but as we age, we aren’t as happy. And I used to wonder about this, but the studies show that older people are some of the most satisfied people in the world, and there are various reasons for that, right? Oh, I’ve retired. I don’t have the pressures of kids and work and commute. And you’re happier because of those things. Those things are no longer in your life. But studies prove that as you get older, you do get happier.

(21:31):

So that’s a good thing. Because we’re already dealing with the fact that we’re getting older, we will be happier. And, of course, doing all these things that I just talked about definitely contributes to helping you be more comfortable. And, of course, it was her retirement. I’m all about helping women live a happier, healthier, and wealthier life and retirement. So, if you need help putting together a plan for any of those things, definitely reach out to me at lynnt@herretirement.com. I can connect you to experts or myself to help you get the coaching and guidance you need to live a happier, healthier, and wealthier life and retirement. It’s all about knowing more, having more, and getting her done. Reach out to me if you need help. I’m here anytime. Here’s getting you done.

 

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How Retirement Spending Changes with Time

New retirees sometimes worry that they are spending too much, too soon. Should they scale back? Are they at risk of outliving their money? This concern may be legitimate. Some households “live it up” and spend more than they anticipate as retirement starts to unfold. In 10 or 20 years, though, they may not spend nearly as much.

By The Numbers

The initial stage of retirement can be expensive. The Bureau of Labor Statistics figures show average spending of $60,076 per year for households headed by pre-retirees, Americans age 55-64. That figure drops to $45,221 for households headed by people age 65 and older.1

When retirees are well into their 70s, spending often decreases. The Government Accountability Office data shows that people age 75-79 spend 41% less on average than people in their peak spending years (which usually occurs in the late 40s).

Spending Pattern

Some suggest that retirement spending is best depicted by a U-shaped graph — It rises, then falls, then increases quickly due to medical expenses.

But in a 2017 study, the investment firm BlackRock found that retiree spending declined very slightly over time. Also, medical expenses only spiked for a small percentage of retirees in the last two years of their lives.2

What’s the best course for you? Your spending pattern will depend on your personal choices as you enter retirement. A carefully designed strategy can help you be prepared and enjoy your retirement years.

A financial professional can help: If you’re a woman concerned about saving for retirement or have questions about your unique situation, give us a call. Our team understands the unique challenges women face, and we’re passionate about helping women just like you plan for a comfortable retirement. Contact us and let’s get started. Email retire@herretirement.com.

  1. Bureau of Labor Statistics, 2019
  2. CBSnews December 26, 2017

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2022 FMG Suite.

 

 

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The 10 Components of a Financial Plan

I’ve read a statistic that those who have a written financial plan accumulate 445% more assets than those who don’t. The source was an HSBC Future of Retirement study from back in 2013.

In Charles Swab’s 2021 Modern Wealth Survey, those with a financial plan are more likely than those without one to pay their bills on time and save each month.

But what exactly does a financial plan look like? I’ve done some research, and while some of the components vary a bit, there are ten main components. Of course, a plan defines what we want to accomplish, helps us stay on track, and gives us a tool to measure our progress. Plans must be adaptable to changing circumstances, and a financial plan should be revisited at least once a year. A plan should also consider the risk of market volatility, sequence of return, inflation, taxes, and interest rates.


Component 1. Financial goals

You need to define your goals as the first step in planning. Money is just a tool to help us achieve a goal.

Goals can be broken down into:

  • Short-term goals which are those you hope to achieve in the next five years—perhaps you have a major purchase, funding your education, preparing for a baby, or you just want to become debt free.
  • Medium-term goals are those you hope to achieve in the next five to 10 years—these might include purchasing a home, paying for marriage, or starting your own business.
  • Long-term goals are those that are ten or more years away—which could include college funding, retirement, purchasing a 2nd home, or paying for some vacations.
  • You should specify a dollar figure and a target date for each goal. Goals should be S.M.A.R.T.
  • Specific: Increase the chances that you can accomplish your goals by ensuring they’re well-defined. Determine the who, what, where, when, and why.
  • Measurable: Develop criteria for measuring progress toward your goals. Detail the key indicators that help you decide if and when you reach your goal by quantifying them.
  • Achievable: Create goals for your life that are attainable and achievable by ensuring that you and your family have the resources needed to reach the goal.
  • Relevant: Align your goals with the overall objectives with the realities of life.
  • Time-based: Give yourself a deadline for reaching your goal to provide a sense of urgency and the opportunity to schedule the steps needed to achieve the goal.

Many calculators and online tools help you run various financial numbers. You can also use my Retirement Readiness software, which has various financial numbers crunching and analysis.

I believe that as soon as you graduate from college, you should have a financial plan, whether it’s something you do on your own in a journal or on a spreadsheet or you hire a financial planner to help you create one.

A key to achieving your financial goals is to start saving and investing as soon as possible. Having a reliable and sustainable income source and living within your means allow you to save and invest as much as possible for those goals you’d like to achieve.


Component 2. Net worth statement

A net worth statement is critical to identify and track and plan how you will increase your net worth over time. My software identifies and tracks your net worth. Basically, you’ll make a list of all your assets (bank and investment accounts, real estate, valuable personal property) and another list of all your debts (credit cards, mortgages, student loans). Your assets minus your liabilities equals your net worth.

When young people are just starting out, their liabilities may outweigh their assets, particularly with car debt, student loan debt, and of course, when you buy a mortgage…this will be your biggest liability but will someday become one of your biggest assets.


Component 3. Spending and cash flow planning

Your spending plan helps you determine your day-to-day priorities for your money. Some people refer to this as a budget. But that word sounds restrictive to me. I like a spending plan better. Your cash flow is your income sources minus your expenses. You need to know and track your cash flow. The more cash flow, the more you have to save and invest. Having a spending plan and tracking it allows you to identify spending leaks and prioritize your spending better. As one of my spending categories, I also like to have savings and invest for the future. You need to pay yourself first.

A tracking tool like my Smarter Spending tracking tool in my software helps you get a great handle on all your expenses and, of course, your income sources. Just having visibility into your money creates better habits.

When considering how your goals fit into your spending plan, you may want to pressure-test it using “what if” scenarios: What if you want or need to retire earlier? What if you downsized your mortgage? What if you or your spouse gets sick and you can’t work?


Component 4. Debt management plan

I read somewhere that “Debt is sometimes treated like a four-letter word, but not all debt is bad debt.”  A mortgage, for example, is considered good debt because you’re building an asset, and as you pay down the loan, you’re building equity. And, of course, it helps build your credit score.

High-interest consumer debt like credit cards, on the other hand, is considered bad debt mainly because of the interest you pay to the credit card companies, and if you mismanage your credit cards with late payments and your credit score takes a big hit. Plus, every dollar you pay in interest charges is money you can’t put toward other goals.

If you have high-interest debt, create a plan to help you pay it off as quickly as possible. If you’re unsure where to start, we have resources that can help you prioritize, then determine how much your money should go toward paying down your debt each month.


Component 5. Retirement plan

One rule of thumb says you’ll need approximately 80% of your pre-retirement income to live off of in retirement. Some financial planners say to assume you’ll need the same amount of income in retirement since some expenses go down and some go up. The best approach is to create a spending plan with as many best guesses as possible to determine how much income you’ll need in retirement to cover your expenses.

Many people significantly underestimate the cost of healthcare in retirement. Plan on $300,000 over the course of a 30-year retirement in out-of-pocket healthcare costs for a couple. And this doesn’t include long-term care needs.

My retirement readiness software has all the bells, whistles, and calculations to help you figure out these numbers and identify potential financial gaps.

Remember, if you have $1,000,000 saved, you can safely withdraw $25,000-$30,000 a year for 30 years from that portfolio without running out of money.

If you’re saving 20–30% of your pre-retirement income, then you could start with an 80% income-replacement rule. Otherwise, it’s safer to aim at covering 100% of your pre-retirement income, less whatever you’re saving for retirement. As with any general rule, there are plenty of exceptions. So be sure to sit down and fine-tune your retirement budget as the time draws near. This should be your top priority since you can borrow for most other goals but not for retirement.


Component 6. Emergency funds

It’s recommended your plan has 6-12 months of liquid money in an emergency fund. Many Americans would be unable to cover more than a $1,000 emergency. We clearly have a savings problem in this country.

Having this fund allows you to weather some unexpected expenses without borrowing from your retirement savings or putting the expense on a credit card.

Save this money in a highly liquid checking or savings account so you can access it quickly should an emergency need happen.


Component 7. Insurance protection

Protecting yourself and your family with insurance is an important component of a financial plan. Everyone should have a few different types of insurance and a few others that are important to consider. It all comes down to which risks you are willing to assume and which risks you want to protect against.

  • Health insurance: Without it, even routine care can cost a lot. Medical bills are reported to be the number-one cause of U.S. bankruptcies. One study has claimed that 62.1% of bankruptcies were caused by medical issues.1 Another claims that medical expenses adversely affect over two million people. As you get older and as part of a retirement plan, you may also want to consider long-term care insurance.
  • Disability insurance: This coverage protects you and your family if you cannot work. Employer-provided disability insurance typically replaces about 60% of your salary and is usually short-term disability insurance. Many experts believe the more important disability insurance to have is a long-term disability, especially if you are the primary breadwinner. Both types are important if you’re self-employed. Stats show that two-thirds of Americans don’t have either type of insurance but probably should.
  • Auto and homeowners’/renters’ insurance: If you own a car or home—or rent and can’t afford to replace possessions out of pocket—you obviously need to ensure you’re adequately protected.
  • Life insurance: If you have dependents, life insurance is a good idea. It’s also a good idea if you want to leave your heirs an inheritance.


Component 8. Saving & Investing

I believe every financial plan should have a saving and investing plan. There may be some overlap with the retirement plan section, but this section is focused on other types of saving and investing that you may do, such as brokerage accounts, gold, real estate, etc.


Component 9: Taxes

Many people don’t include taxes in their financial plans. Being tax-aware and tax-smart is important to improve your financial outcome. Both before retirement and in retirement, proper tax planning can help you keep more, legally, of your hard-earned income, savings and investments.


Component 10. Estate plan

An estate plan is comprised of a will and various types of trusts. At a minimum, you should have a will, which states your final wishes regarding your assets, dependents, and who you want to administer your estate. You should also keep the beneficiaries of your insurance policies and retirement accounts up to date. The plan will also identify powers of attorney and health care proxies in case you become incapacitated. Trusts are important for those with bigger estates and help to protect real estate and minimize probate and probate costs.  Statistics show that 67% of Americans don’t have a will.

At Her Retirement, we give our clients access to a really affordable trust and will company that significantly slashes the cost of traditional estate plans.

If you or someone you know needs help creating a financial plan, I can connect you with a certified financial planner who offers fee-only planning services. Not having a financial plan is one of the major regrets of many older people.

Here’s to creating a plan to help you know more and have more about your goals and your money. Let’s Get Her Done.