Subscribe
Share
Share
Embed
Welcome to How to Retire on Time, a show that answers your retirement questions. Say goodbye to the oversimplified advice you've heard hundreds of times. This show is about getting into the nitty-gritty so you can make better decisions as you prepare for retirement. Text your questions to 913-363-1234 and we'll feature them on the show. Don't forget to grab a copy of the book, How to Retire on Time, or check out our resources by going to www.retireontime.com.
Welcome to How to Retire On Time, a show that answers your retirement questions. We're here to move past that oversimplified advice you've heard hundreds of times. Instead, we're gonna dive into that nitty gritty. So as always, text your questions to (913) 363-1234 anytime during the week, and we'll feature them on the show. Just remember, not financial advice.
Mike:This is an educational show. David, what do we got today?
David:Hey, Mike. I want to keep working, but it's getting in the way of my IRA to Roth conversions. What can I do? Keep working. Okay.
David:Because if you're taking income, and you tell me if I'm wrong, this is just my shot in the dark here, but if you're taking income from your job and you're converting an IRA to Roth, that counts as income as well, and suddenly a lot of income?
Mike:Yeah. You're in the 30 to 30 whatever percent tax bracket potentially. Yeah. And that's maybe not the best use of your money. People are scared about RMDs because they're stuck on perfectionism.
Mike:Hear me out on this.
David:Okay. Okay.
Mike:What's the point of your money? To support the lifestyle you want?
David:Yeah. To do the things that I wanna do. First of all, to sustain life. Right? And then on top of that though, like, do the things I wanna do.
Mike:K. Let's say you love your job, and you would do it for free. You don't do it for free. No. You are compensated.
Mike:You need to be compensated for the professional job that you're doing. You don't work for free. That creates all sorts of issues. And this is kind of weird to say, but who cares about a perfect IRA to Roth conversion if you were to retire to try and save some money on taxes and you end up actually hurting your health, your mental health, and your physical health. Because if you don't have purpose, if you don't fill that void, you speed up your cognitive decline.
Mike:You speed up your physical decline. You end up sad, lonely, depressed. Even if you're married, your life is often worse off because you have no purpose in retirement. Why would you wanna do that? To save a few bucks on taxes?
Mike:That does not make any sense in the world. Now that doesn't mean you just do IRA Roth conversions because you're still working and that date might come up. Whatever. If you are enjoying your life and you're getting closer to the RMD age, who cares? Mhmm.
Mike:Because at the worst of it all, maybe you do take RMDs, and you can't take an RMD and put it in a Roth, by the way.
David:Okay.
Mike:But what if you just took the RMD that you didn't need, and you put it into your brokerage account, and you put into a bunch of investments that don't pay a dividend? They're just growth, and all that's now set for legacy. Is that really the end of the world?
David:No. Sounds okay to me.
Mike:So this is why we emphasize over and over again, what's the life you wanna live? If working is your purpose, if that's what helps you engage from a critical standpoint. Critical not being like, you know, a critical individual that sucks, but like critical thought, problem solving. You're engaged. It's a healthy kind of stress.
Mike:You know, you're part of a team, and you're accomplishing things. And there's this positive feedback loop of it's giving you an exciting life. Why in the world would you give that up?
David:Yeah. Especially if you had nothing to replace it with.
Mike:Yeah. And then you might say, well, but I'm working, so I'm paying taxes. Yeah. And you're also getting paid. So for all of those high income earners that love their job, I'm gonna tell you what the financial services space won't.
Mike:Don't retire. Keep working. Stay engaged. Retirement is a new modern concept. Because back in the day, for thousands of years Yeah.
Mike:You worked until you you couldn't work anymore, and then you probably died a month later.
David:Yeah.
Mike:And that's how we're hardwired to live. Retirement for many people is kind of like Pleasure Island on Pinocchio. It looks really cool at first, but after you've traveled enough, after you've seen all the sites, you've gone to the golf course because you thought you were supposed to and all these other things that you're supposed to do, you end up miserable and regretting the fact that you retired. People think, oh, retire on time. Well, I wanna retire as soon as possible.
Mike:Are you sure? Are you sure? Gotta be sure. On time means that it's financially prudent for you and emotionally prudent for you. On time might be later than you thought because you don't want to speed up your date of death just to go on a couple more cruises a year.
Mike:And you might think, well, I wanna spend more time with my family. I wanna travel. Do it while you work. Maybe take a few more vacations. Maybe negotiate.
Mike:Say, hey. I wanna keep working, but can I just get more PTO? I'll take a salary reduction. Yeah. I just want a little bit more flexibility, but I love my job.
Mike:Who's gonna be upset with that? Right. I mean, really. Yeah. They're keeping you there for a reason.
Mike:And if you just got laid off by your job, a lot of government employees have been laid off, get another job. Maybe you retired for six months, even enjoyed a little bit, but you're still looking for another job because it gives you purpose. Just don't assume and here's the conflict of interest. The entire financial services space wants you to retire so you can roll your four zero one k over into their account, charge you 1%, and make money off of it while they hope that you're happy.
David:Yeah.
Mike:That's not in your best interest from a psychological standpoint, but that's not talked about. It's more profitable for the financial services space to roll your funds over and charge you 1% or 1.5% or whatever it is, and we do that. We don't do the percentages. We do a flat fee up to $600 a month, but still, everyone has this conflict of interest. We get paid when you move your funny money over from a four zero one k.
Mike:And I'm telling you, don't do it if it doesn't give you purpose. And, yeah, I mean, if you're 65, 70 years old, yeah, you can roll your funds over and still work. So I guess I'm not fully representing the argument there, but it's not about retiring quickly. What is the lifestyle that you should be living? That's the most important thing.
Mike:And if you're really good at your job and you wanna keep doing it, whether it's in your current position or as a consultant or something else, go for it. We call it your encore career. And it's actually a lot of fun too if you end up being a consultant to do your own LLC. You take your salary. You've got your already long term contracts with a couple of clients, and you could do some tax planning around this because you're earning income, so you can still do Roth contributions.
Mike:You can still set up like a simple IRA, do your own contributions as well, or a SEP IRA if you're individual. There's a couple of options there. Then you could I'm just kinda spitballing here a couple of these options. You could file your taxes as an s corp, LLC as an s corp, then you're taking income off of a reasonable wage, whatever that is determined by your job, and then the rest is profits. Now you've just done some more tax efficiency on your income, so you're getting more out of your work as it is.
Mike:So many things that could be done. Mhmm. And that's the easy tax form to file every year. You've got more purpose. You're still earning money, so you've got more assets for legacy or for other reasons.
Mike:You got more flexibility for vacations. I mean, who wouldn't want something like that? The idea that we're all supposed to stop working is a farce. We all need to work. It's just which path do you want?
Mike:Is it with a church? Is it with a charity? Is it with a professional career as an encore or something else?
David:Maybe you're helping your kids by watching your grandkids or something.
Mike:Yeah. But don't become codependent on them. There's boundaries.
David:I set a trap for you there, and you you didn't get caught.
Mike:Nope. Can't get me. But that's that's the point. Set up your lifestyle to give you purpose, to help breed happiness, joy, well-being, not quickly go to a vacation because that's what everyone else seems to wanna do. That's all the time we've got for the show today.
Mike:If you enjoyed the show, consider subscribing to it wherever you get your podcasts. Just search for how to retire on time. Discover if your portfolio is built to weather flat market cycles or if you're missing tax minimization opportunities that you may not even know exist. Explore strategies that may be able to help you lower your overall risk while potentially increasing your overall growth and lifestyle flexibility. This is not your ordinary financial analysis.
Mike:Learn more about Your Wealth Analysis and what it could do for you regardless of your age, asset, or target retirement date. Go to ww.yourwealthanalysis.com today to learn more and get started.