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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 dotcom or by going 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, whatever's on your mind.
Mike:Now that said, please remember this is just a show. Everything you hear should be considered informational, as in not specific advice. This is not financial advice. If you want personal financial advice, then request Your Wealth Analysis from my team today by going to www.yourwealthanalysis.com. With me in the studio today is my esteemed colleague, mister David Fransen.
Mike:David, thanks for joining us today.
David:Hello. Thank you.
Mike:Now for all those listening, David's gonna be reading your questions. That's right. Your questions. And I'm gonna do my best to answer them. You can send your questions in by either texting them to 913-363-1234.
Mike:That number again, 913-363-1234, or email them to hey mike at how to retire on time.com. Let's begin.
David:Hey, Mike. I read your Kiplinger article about Social Security optimization, but I'm unclear when I should file. I plan to retire at 62 and intend to file for Social Security when I retire. Should I change when I file?
Mike:That's a great question. Yeah. I don't know.
David:Let's dig in.
Mike:Here's where my heartburn is. Got a lot of heartburn. Oh. It's only figurative, though.
David:Okay. I'm
Mike:pretty healthy, but oversimplified advice tends to come at a a large price. Oh. That's good. Oversimplified advice often comes at a large price. And the reason is it's all connected.
Mike:When you file will affect your income strategy. It will affect your taxes and tax planning strategies. It will affect your estate and estate planning strategies, your legacy planning. Because it affects those things, it may even affect your health care strategies. I mean, there's certainly a ripple effect when it comes to when you file for social security.
Mike:And my problem is financial advisers can go online or you can go online as well, type in social security optimization, pay $50 for analysis, or maybe the advisor has some sort of subscription, and hands you some sort of report that says, alright. If you live this long, then this would be the best strategy, and then don't don't file wrong. You could be leaving 100 to $200,000 of cash on the table, and there's all this manipulative marketing around an isolated social security optimization report that's really intended to say, and this is the truth. Here's your social security. Here's when you file.
Mike:By the way, that social security amount isn't enough for you to live the life you want. How about this annuity? And then they sell you an annuity to bridge the gap, so then you have the the income that you want and you're securing it. You know, there's commercials I hear. Don't retire until you've secured your income.
Mike:K? My entire book, How to Retire on Time, actually argues against the insurance income stream. It doesn't make it always wrong. There's no such thing as absolutes, which is kinda funny because that's an absolute in that phrase, but you get what I'm saying.
David:Yeah. Sure.
Mike:Sticking to these extreme strategies of keeping all your assets at risk or locking up your assets into an income stream that may not keep up with inflation, those those are problems. Those are real problems. And Social Security optimization reports, in my opinion, have been more used as a marketing tool to sell an annuitized income stream than anything else. Just my opinion.
David:K.
Mike:Here's what you need to know about Social Security. Most everyone's gonna file for Social Security. This may be the most important 10 minutes of your life. I'm gonna give you the Social Security Optimization Report right now. K?
Mike:Here's the information you need to be able to gather in order to run analysis. First off, you need to establish what's more important to you. Do you want more income or do you want more legacy? Can't have your cake and eat it too. What's more important to you?
Mike:Because if you file too early, your income could be hurting. But if you file too late, you could be hurting your estate. As in if you retired at 60 years old and you filed early, great. You're gonna have income earlier on, which is less pressure on your portfolio. So you might have more assets to pass to the kids.
Mike:But if you live a long time, you just might have less income overall. But if you file late, let's say, so you you retire at 60 years old and you file at 70 years old, that's 10 years. You have to bridge that gap with additional stress on your portfolio until social security kicks in. And then once it kicks in at 70 years old, then maybe the portfolio has time to recover, assuming you live long enough. So, first off, what do you want?
Mike:What's more important? Are you maximizing your income or maximizing your legacy? Because it can't be both. Mhmm. You can blend it.
Mike:You can find us a nice balance for your situation. But at some point, you've got to decide what is priority 1 and what is priority 2. Then you need to look at how much income do you want, how much is in your portfolio, and then dive a little bit deeper into lifestyle plan. So, David, if you could afford to vacation 3 years I mean, you are a jetsetter going around the clock the 1st 3 years of your retirement
David:I like this.
Mike:Would you do it? Yes. Not everyone would say yes, by the way. Alright. But you you would want that.
Mike:Okay?
David:For me, sure. Yeah. Absolutely.
Mike:But what if that doesn't work in your plan? What what if that's too much pressure on your portfolio? What if social security isn't enough to kick it in? Do you see these unnecessary limitations? Yeah So you've got to start looking at okay if you want your travel years to be excessive Nothing wrong with that That's going to affect how you prepare for social security.
Mike:It's all connected. Okay? And it can't be solved just by social security by the way. It's a part of the puzzle. Alright.
Mike:And I would say yes too, by the way. Alright. Yeah. It it's a lot of fun. It's it's a way to kind of reset and transition to retirement in a a very nice and healthy way.
Mike:But okay. So you figured out the income that you want during your travel years. You know how much is in your portfolio. How much do you have in your pretax accounts, like your traditional IRA and 401 k? How much do you have in your nonqualified accounts, the after tax accounts, in your brokerage accounts?
Mike:How much do you have in your Roth account? How does that blend? How are you gonna take income from all three of those accounts? And how much do you need to convert each year from irate or Roth when you retire and or from 59a half or wherever the starting point is until you're good, until you've balanced it. Do you see how all this this all is affected by when you file for social security?
Mike:Let me say that last part a little bit differently.
David:Okay.
Mike:If you know what your the maximum amount of money you wanna pay in taxes is, you've set a max threshold, max tax threshold, maybe it's by a bracket, maybe it's by an effective tax rate, and you turn on social security, you now have less you can convert from IRA to Roth. Oh. Because if you turn on social security, you you can let's say you were gonna convert a $100,000 this year and you turn on social security, that's a 120, 130,000 tax events. These things affect each other.
David:Okay.
Mike:You need to understand what the tax strategy is and how that would affect when you would file. Then you also need to understand, okay, are you within striking distance of a 50% social security tax bracket? So for example, if you have more income in retirement and it's all coming from pretax accounts, then 85% of your social security would be subject to taxation, income tax, whatever the tax bracket is. If you can organize this through efficiencies, you may be able to find that you can lower your overall effective tax bracket or your your total taxes, and only have 50% of your social security subject to tax. You can even go down to 0%.
Mike:In very specific situations, getting the 0 tax bracket may be more effective for certain people. Are you one of them? Is that within striking distance? Once you've run all of that, then you can start running actual Social Security optimization reports to figure out, okay, if you file at 62 years old, what would that look like? How does it affect your taxes?
Mike:How does it affect your estate? How does it affect your income? How does it affect your flexibility in the future? Let's say you file at 67 years old, 70 years old. How does it affect all these other strategies?
Mike:If you understand how it affects all the different strategies, then you can make an informed decision on when to file. But if you're filing based on your longevity because you wanna get the most out of social security, you're doing it wrong. Sorry. Just my opinion. But you're doing it wrong because that is how you end up jumping over dimes to pick up pennies.
Mike:If you wanna understand more about what I'm talking about, if you wanna see what your social security could do specifically in your retirement plan, because everyone's are different, text benefits with an s. Benefits with an s. So benefits to 913-363-1234 to get our comprehensive social security analysis. Don't settle for the isolated analysis that may give you oversimplified advice that could cost you a lot of money. Whether it's missed opportunities or just whatever the inefficiencies might be, text benefits right now to 913-363-1234, or go to social security dot report.
Mike:That's www.socialsecurity.report. It's incredible how much more could be done when you take social security and look at it from a comprehensive standpoint. Do it right now. It doesn't cost you a dime, but really could make a significant difference in your overall quality of life. Text benefits right now to 913-363-1234.
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. Learn more about Your Wealth Analysis and what 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.