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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.
Thanks for joining. Here's a question I was recently asked on my show, How to Retire On Time. Take a look. Let's go to the next question.
David:Next question submitted. How do you determine where to put your savings in retirement?
Mike:I think the first part of that is how old are you? So if you're 30 years old, it's a very different question than if you're 40 years old or 50 years old. If you're 50 years old and maxing out your four zero one ks and the match, that opens up opportunities. If you're not even maxing out your four zero one ks, but you can get the match and you've got extra room for savings, that opens up even more conversation. So it's don't fall for blanket statement advice here.
David:Yeah. And an example of blanket statement advice to me would be like, well, we were just talking about max out your four zero one ks, make sure you get your company match and like full stop.
Mike:And that's it. That's all you need to do.
David:Yeah. That's I feel like that's all I've ever heard in my
Mike:whole life. Work. Yeah. That's blanket statement advice. I hate it.
Mike:Yeah. And the reason is what if you wanna hit this FIRE movement? Financial independence, retire early.
David:Yeah. I've seen them.
Mike:That four zero one k is very problematic if you wanna retire early. Let's say you wanna retire at 60 years old. Instead of you maxing out your four zero one k, maybe you get the match and start putting money into your brokerage account or your brokerage account. Because if you if you coordinate this early enough, then you could do something like, taking long term capital gains. So you're putting it into a taxable account where you don't pay taxes.
Mike:Because you're you're you're taking a section of money that it's in it's intention is when you turn 60, 61, 62, you're taking out long term capital gains. That opens up a slew of other opportunities and efficiencies. But what does everyone do? Max out the four zero one k. Yeah.
Mike:Maybe do some Roth, And that's it. Right. There are people that don't like having that much risk. There are people that are concerned about health. Understanding how to fund a life insurance policy if that is you, you don't pay for life insurance unless you want to pay for that insurance cost.
David:For
Mike:some people, it's a death benefit because they have a younger spouse. And if they die sooner, there's a gap between when they retire, when their spouse will retire and the potential miss social security. So maybe you want some life insurance, whether it's term life insurance to a certain point or it's, like something like index universal life insurance, permanent life insurance. And maybe you want a terminal illness into the death benefit. So you can tap into your death benefit early to protect the portfolio from illness.
Mike:And maybe you don't. I'm really indifferent, but I wanna define things as they are. And so when you say here's where we are, here's where we want to go. And then you start saying, all right, let's map this out. We're 50 years old.
Mike:We wanna retire at 58 years old. Okay. That tells me a lot. We need to start funding in different places. We wanna retire there and we're gonna live this way.
Mike:Okay. If you're gonna be traveling abroad, that's gonna tell me the type of insurance you're gonna need. Because not everything is very kind abroad. Some insurance is cheap and very friendly when you travel abroad and if you were to get sick. So we have to start with what do you want your life to look like?
Mike:And if we have the privilege of doing this ten, fifteen years before you retire, we can really do a lot of good. Usually people say, I'm retiring next month. How do we handle this? Which also is great. We have a lot of people that say I retired last year.
Mike:This is actually quite common. Most of my money's in cash. I retired and now I'm just spending time trying to figure out how I want to do my retirement. Then And they'll come to us and we'll put a plan together. That works too.
Mike:Yeah. The best day to plan is today. Yeah. But if that today, I'm gonna sound like Kamala Harris for a second. If that day today is about future in the future.
Mike:No. If today gives us a longer runway to prepare you for retirement in ten or fifteen years, we could do a lot more when it comes to efficiencies and getting more out your money. We could be a lot more deliberate in your plan. People just don't think about these things because it's easy to just not want to deal with it. And I get that.
Mike:I don't enjoy planning my day around taking my car to the shop to get a oil change and a tune up. I don't enjoy that. I don't enjoy taking a morning and going to the dentist. But there are certain things that's like, it's good for you even though you don't enjoy it. This is kind of one of those things.
David:So
Mike:there's so much efficiency available to the person that's proactive.
David:That's nice. I mean, you might even wanna repeat that actually.
Mike:Yeah. We had a couple that didn't think they could ever retire. Uh-huh. We helped them sell their plot of land. They didn't make much money off it.
Mike:So it wasn't a big tax bill. And by doing that, we we they wanna retire in five years. We then allocated the monies very strategically to now they have an incredibly high probability of retiring in five years. That's a really cool situation. They went from, I we can't we'll never gonna be able to retire to, I can see ourselves retiring.
Mike:We just had to make a couple of adjustments from a tax planning standpoint, from an income planning standpoint, from a social security optimization, which was unconventional from what is you'd assume. Those are some really cool things. Yeah. So and that's why we that's why we start the planning process with the retirement leaks analysis and the first version of the plan. We want you to see what could be.
Mike:Because once you start to see that, then you're motivated to want to continue to plan. It becomes exciting to start to take control of what you can control and be prepared for what you cannot control.