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Welcome to How to Retire on Time, a show that answers your questions about all things retirement, including income, taxes, Social Security, healthcare, and more. This show is an extension of the book How to Retire on Time, which you can grab today on Amazon or by going to www.howtoretireontime.com.
This show is intended for those within 10 years of their target retirement date or for those are are currently retired and are concerned about their ability to stay retired.
Hello, and welcome to How to Retire on Time, a show that answers your questions about all things retirement, including income, taxes, Social Security, health care, and more. This show is an extension of the book, How to Retire on Time, which you can grab today on Amazon, or you can go to www.how to retire on time.com. My name is Mike Decker. I'm the author of the book, How to Retire on Time, but I'm also a licensed financial adviser, insurance agent, and tax professional, which means when it comes to financial topics, we can pretty much discuss it all. Now that said, please remember this is just a show.
Mike:Everything we hear should be considered informational, as in not financial advice. If you want personal financial advice, then request Your Wealth Analysis from my team by going to www.yourwealthanalysis.com. With me in the studio today is my esteemed colleague, mister David Fransen. David, how are you doing today?
David:I'm well. How are you?
Mike:I'm doing well too. David's gonna be reading your questions that you've sent in, and I'm gonna do my best to answer them. Now you can send your questions in right now to 913-363-1234. Again, that's 913 363-1234. Save that number in your phone in case you think of a question later on in the week, or you can email us to hey mike@howtoretireontime.com.
Mike:Let's begin.
David:Hey, Mike. My husband has become very ill and is not expected to live much longer. He has lived a wonderful life and will be missed. Among the many things I'm concerned about as a soon to be widow Mhmm. I am most concerned about how to handle the finances when he passes.
David:Do you have any general advice?
Mike:Yes. One of the biggest problems that I see from a pseudo marriage counseling standpoint, I'm not a marriage counselor, is the habit that has created a habitat it's kinda fun there. The habits that have created a habitat of basically deferring that one spouse handles the finances and the other one doesn't have a clue. Yeah. Traditionally speaking, in the normal nuclear family marriage, right, the man typically does seems to do the finances, and the female just says he handles it.
Mike:I don't understand it, which is interesting because the female is typically the one that lives longer.
David:Right. Yeah.
Mike:And that's a precarious situation, in my opinion. So let me go through quickly kind of what you need to expect for the surviving spouse, whoever's going to live longer. Ladies, listen up. This is probably gonna be you. K?
Mike:First off, your spending probably won't change that much. So your cable bill, net if you'd like Netflix, HBO, Hulu, whatever your Internet bill still exists. The taxation on your house still exists. I mean, the the majority of your bills are probably gonna stay the same. Yeah.
Mike:You might have one less cell phone bill. Yeah. You might have a little bit less in food costs, but not always. So if you're now single, this is my opinion, you have a higher chance of wanting to go out and eat with friends. So you might actually spend more money on food because you're wanting to connect with humans.
Mike:All humans are hardwired to connect. We want to be social. Even if you think you don't wanna be social, biologically, you want to connect with a human, even if it's 1 or 2. Yeah. And so eating at home might not be as common as it once was when your spouse was there to have dinner with.
Mike:So spending may not change as much as you would anticipate. There is probably a lost income stream, at the very least, Social Security. So the larger Social Security benefit will remain and the lesser will probably will go away. That's based on current Social Security regulations. Pension, if you have a pension, is there a 100% survivability with that pension, or will it go away with with one of the spouses?
Mike:And then, also, your taxes will increase. Many people don't realize this, but when you become single, you're now an individual according to the tax code, which means you're going to get taxed more. So those are 3 pretty simple things to to consider, but you also gotta understand the other nuances of your life. Do you live near the kids? Do you live near someone that can help you when you then become ill?
Mike:How are you going to take care of the additional expenses when maybe you don't want to mow the lawn anymore, maybe you can't mow the lawn anymore, maybe you just need help cleaning around the house? Those are additional costs that, at some point, will creep in. Doing the comprehensive holistic planning on the lifestyle side, not just, you know, oh, let's let's do a 60 40 stock bond split, and that'll grow your assets and solve all of your problems. No. It's not that simple.
Mike:You've got to become a little bit more deliberate in how you're going to handle the taking of income out of your assets to compensate for these additional potential expenses or the less efficient financial situation that you would be in, mainly that you'll get taxed more. So what do you do? Well, I believe that, at least for most plans, you maintain your principles, so you're focused on growth and maintain your principle until your life expectancy of the younger person or the female. If they're the same age, then it doesn't really matter, but you wanna maintain your principles so you have a buffer towards the end of your plan. I've seen some plans that are optimized down to the $0.
Mike:They're getting everything that they possibly can out of it. What if you live a little bit longer than expected? Yeah. What if the market doesn't cooperate a little bit longer than expected? There needs to be a buffer from a cash standpoint that you can access so that later on the plan, if lifestyles switch up on you, if you get hit by a surprise, that you can afford those adjustments.
Mike:And that's where my concern is of too much in an income stream may be restrictive on those extra needs. If your lifestyle costs increase and you're on a flat fixed income, there's not much you can do. You wanna have that future flexibility. Also, having an additional buffer to help take care of additional expenses, and we talked a little bit about that earlier, but you don't want just a buffer, you want maybe a couple of buffers, kind of mini portfolios within your portfolio to anticipate these costs. Have the long term care conversation.
Mike:Long term care is a funny thing. Some people have it, some people don't. How expensive is your long term care policy? Do you even need a long term care policy? And then, get your pre tax accounts, those amounts down overall.
Mike:This is where your tax minimization strategy is so important because think about it this way. If your IRA assets are low enough that your RMD isn't forcing you to take more income than you need let's say you need, I don't know, $7,000 after tax and your RMD only requires you to take 3,000 out. The rest of it is kind of up to you on where you wanna take it, whether it's pretax, whether it's after tax, or whatever it is. So having more control over where you take income that you've done your rmd preparation can allow you to really have more control over your taxes so that when you go into the individual tax bracket, you can still target the same effective tax rate, because nothing's pushing you into a higher tax bracket. Now, that effort doesn't happen overnight, doesn't happen in 1 or 2 years.
Mike:You're starting that at 59 and a half, 60 years old, and you're working slowly at it every single year of your retirement, slow and steady when it comes to tax minimization, and that can significantly alleviate some comfortable managing finances, if you're if this is overwhelming to you, then you need to find a financial professional that is comprehensive and holistic, that is a fiduciary all the time, not just during some situations. So I define a fiduciary as someone that's independent. There's no big name on their door. That they are independent, do their own due diligence. That they're licensed in insurance, securities, and taxes.
Mike:They can file your tax returns, and so on. That they're comprehensive, holistic, and independent. That's what Kedrick does. We're not the only one. We didn't invent this.
Mike:It's just we're far and few between. But if you can find someone like that, then start talking with them now because this relationship must be built on mutual trust and respect. If we're focused on doing what is right, you've gotta be able to have healthy conflict. You've gotta be able to have hard conversations. You gotta have someone that you trust has your best interest, truly, in the fiduciary sense.
Mike:And you don't build that kind of trust overnight. And you don't want to try and build that relationship during a stressful time. Because if you're stressed, if you're flooded, if you're in an emotionally difficult time, you can't critically think. And if you struggle to critically think, it's gonna be harder to find that right person and you might get taken by a sales professional. So for all the ladies listening up, if you don't understand your plan and you're working with a financial professional, sit down that financial professional and ask them every question you want.
Mike:If they're having a hard time answering it or if they just don't wanna be bothered by all those questions, then find someone new. This is the person you're probably gonna work with. And if you don't trust them, if you don't respect them, time to break up.
David:Yeah. And
Mike:if you wanna have that breakup conversation, you don't need to have it now. You can keep the peace, but start dating around. Yeah. Start dating your financial professional. Only on a professional sense, But figure out who do you trust, what makes sense, and then do you trust them to do things correctly?
Mike:And if you wanna put Kedrick, our independent fiduciary financial practice that's comprehensive and holistic into the mix, and and you wanna explore your lifestyle and legacy potential, how we work, then text analysis right now to 913-363-1234. That's keyword analysis to 913-363-1234. Or you can go to www.yourwealthanalysis.com. And if you do, here's what it's gonna look like. We're gonna discuss what you and your spouse both want when it comes to your lifestyle and legacy goals.
Mike:Then we're gonna review your current plan, create a secondary plan, and compare the 2. We wanna point out problems so that they can be addressed, whether it's with us or someone else, but you can't solve problems that you don't know exist. Ladies, this is especially for you. We wanna make sure that you understand what's going on. You don't need to have a financial background, but you understand the strategy behind it and that you're in harmony with that strategy.
Mike:Now your wealth analysis won't cost you a dime, but it could help you live a more comfortable life in retirement all because you had a smoother transition either into retirement or a smoother transition when a spouse passed. Don't make your life harder by kicking the skin down the road. Take action now. Text analysis to 913-363-1234. That's keyword analysis to 913-363-1234, or go to your wealth analysis.com today to learn more and get started.
Mike:That's all the time we've got for the show today. If you enjoyed the show, consider subscribing to it wherever you get your podcast. 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.
Mike:This is not your ordinary financial analysis.
David:Learn more about Your Wealth Analysis and what
Mike:it could do for you regardless of your age, asset, or target retirement date. Go to www.yourwealthanalysis.com today to learn more and get started.