Transcript

[00:00:00] Intro: Welcome to Retirement Unlocked with Larry Heller. Your life Your Way, unlimited possibilities. Join us as we explore how tailored financial planning and investments can help you navigate life transitions with confidence. Let’s dive into this week’s episode

[00:00:20] Bill Tucker: And welcome back to Retirement Unlocked with Larry Heller.

As more people enter their sixties, they’re also stepping into one of the most important decades for retirement decision making. And it’s a time when some of the biggest mistakes tend to happen from claiming social security too early to misjudging retirement spending, overlooking healthcare planning, or missing key tax strategies.

These missteps can have long lasting financial consequences. Larry’s gonna break down the most common retirement mistakes they see in this decade, and more importantly, how to avoid them so that you can retire with confidence and clarity. So let’s get into it, Larry. [00:01:00] What are some of the mistakes and where do we start in talking about this topic?

[00:01:05] Larry Heller: Yeah. Thanks Bill. So, yeah, over the years I’ve seen a lot of mistakes, unfortunately, but I’ve also been able to help people a lot before they make these mistakes. So let’s hopefully you’re one of those and we’ll kind of go through them. So the first one, um, that I’m kind of go through is really social social security.

Yeah. You know. Don’t claim social security that too early or too late. And this really depends upon your specific situation. So many people wait too long to take, take the money out, and a lot of people should be delaying this. So it’s one of the biggest decisions you’ll make in your sixties and when to make, when to claim that.

Um, a, a lot of the common mistakes we see are people claiming benefits at 62 simply because you can. So Larry, what’s, you know, people ask, well, how do I determine which is the right time for me to [00:02:00] take the social Security? Um, and it’s a lot of factors. One of them is longevity and how long do you think you’re gonna live?

And some people tell me, Larry, I’m gonna lift age a hundred and I wanna plan for that. And some say, you know what, I’m 80, I’m done and outta here, so I wanna enjoy my life before. So that’s one of the questions. And both their parents have. Passed on at early age. Yeah, ages. So longevity is one too, is spousal benefits.

Um, this is really a key one because if one spouse has worked and the other spouse hasn’t, if the working spouse dies, the surviving spouse is going to get either their own, which is not gonna be very much, or they will get the, the surviving spouse one. So while they’re both alive, I mean. Income winner will get their social security and the spouse will get half of that.

So they’re kind of getting one and a half, but that they lose that on the [00:03:00] first death. So sometimes for that situation, you may wanna delay Social Security eight 70 to bump up the social security that you’re gonna receive, so that on death. The surviving spouse will get a higher amount mm-hmm. At that particular time.

So that’s one of the, you know, one of the caveats to, to look at. Another one is really the tax implications with the secure Act and moving the r require distribution back to each 73 or 75. There, there’s sometimes there’s some tax planning that you, you can do at maybe earlier ages before you’re age 70.

So, um, do you wanna take the social security. Or are you gonna do some Roth conversions at that particular time? So that’s another, in another item that you should look at. And then the income needs. What are your income needs? How much do you, how much do you need? So you kind of combine all these, and we run this and we show a break even.

Um, if you take it [00:04:00] at this age, uh, a younger age, you’re gonna start to get the social security earlier. Mm-hmm. So you’re gonna get more, even though you may be getting less. What is the break even point? Is it 10 years, 11 years, and we show these numbers and we do all this planning? It starts to make sense.

When is the right time to take the Social Security?

[00:04:18] Bill Tucker: Hey Larry, really quickly, what do you mean the break even point? Uh uh, that one I don’t quite understand.

[00:04:23] Larry Heller: Okay, so if you’re taking your social security at age 65 Uhhuh, you’re forfeiting part of your, your full social security ’cause normal retirement age, um, if you’re born in 1960 is 67.

Yep. It’s working that way up there. So you’re gonna get a lower amount at age 60, 65, but you’re gonna get it for two more years. So you’re getting more income for the two years. So now if, if you waited, you’re gonna get a higher amount. So when is that higher amount? Equal the lower amount with the two extra years.

And a lot of times that break point may be 11 years. So [00:05:00] someone says, you know what, I’d rather get higher money earlier ’cause I don’t think I’m gonna live as long. So that’s kind of the analysis that we make there.

[00:05:07] Bill Tucker: Oh yeah, no, that, that is interesting. And in terms of income needs, I I, I don’t know if you’re gonna touch on this a little bit later on, but if you want to know what your income needs are, you’re gonna have to have a budget.

So do you help people work through a budget or set the, set them up in terms of that?

[00:05:21] Larry Heller: We don’t really kinda like the word budget, especially for our clients, but it’s really, really what they’re gonna spend and expenses. So, and some of the income needs is, is interesting is do they have a, you know, do they have a pension?

What are the income from the other assets? Do they have a lot of money in their retirement accounts and we wanna delay those retirement accounts. So maybe we wanna take the social security. Earlier, um, because we don’t wanna start pulling out of those, those accounts, or maybe we have to pull out of those accounts and supplement it with that, with that, or maybe it, they don’t even need the social security.

So we would [00:06:00] delay that to age 70 to provide a higher amount in case one of the spouses pass away. So we gotta look at the income needs from all, from all areas.

[00:06:09] Bill Tucker: Yeah. No, no, I understand that and, and people who are listening to this podcast. Don’t panic. This is a lot of complicated stuff. I know it can be confusing, but there will be a checklist covering all the key points that we discussed today, and you can find that download link in the episode description below.

So you know, if you’re driving your car and trying to take notes at the same time, don’t do that. Okay? Especially if you’re on the Long Island Expressway, that’s just not gonna work out while over it. But you know, you don’t like the word budget, but you talk about income needs and the thing that we do have to talk about.

That goes with income needs is cost. I don’t think a lot of people understand retirement will actually really cost ’em Larry.

[00:06:44] Larry Heller: Yeah. So that, that’s really the, the kind of the one of the biggest things that we do and what a lot of people don’t wanna do. You mentioned the word budget. People hate that word, budget.

Yeah. But they really should know what their expenses are. Yeah. Because if they don’t know what their expenses are, they don’t really [00:07:00] know. What they can spend in retirement. So sometimes they’ll, they’ll spend less, uh, in retirement than they need. More often than not. Believe it or not, when we do this analysis, people can spend more than they’re planning on doing rather than less.

But they’re afraid because they haven’t seen a cashflow analysis. Sure. They haven’t put together their income versus their expenses and they haven’t properly, you know, planned out. And some of the planning we’re doing is if you’re doing it over your lifetime. Um, we kind of, when we talk to clients, we say, you know what, when you’re starting to look at the expenses, we know you like to travel, for example.

So we’ll put in higher travel expenses for the first 10 years. Um, and then we may wanna add some home updates. If you’re a living and you wanna see. Stay in your house. Yeah. And you may, may need to make some adjustments. And then usually the second, 10 years after that may level off the, the travel expenses may go down.

Uh, they may now, we got clients [00:08:00] in their eighties still traveling all over the place. But, uh, they may go down and then you may have some additional health. Health costs LA later on. So we’re actually kind of asking that and we’re talking about this day and age. A lot of, unfortunately, a lot of adult children still need help.

So we’re asking for, you know, kind of all that to try to kind of put together an expense strategy. Um, and the biggest one, the unknown factor is do you have a strategy for long-term care? Yeah. Because that could become a major number. Or you may not need it in in your entire life. So how do you account for that in your retirement plan and not accounting for that could be a catastrophe.

So whether it’s purchasing insurance or self. Funding that that is a major, you know, a, a, a major item that we need to talk about when, and that people in the sixties don’t always, they think about it, but they don’t plan for it.

[00:08:58] Bill Tucker: Yeah, and I mean, it’s [00:09:00] interesting too because I. We’ve had discussions in this house about retirement and everybody panics about it because it’s like, you don’t, you kind of know what your expenses are gonna be, but you, you, you don’t, in truth, you, you don’t know what they’re all going to be.

So, I mean, how do you help people just sort of work through a realistic idea, Larry, about what, what it, what the cost. Probably we’re gonna be and get ’em in a ballpark.

[00:09:26] Larry Heller: Well, I mean, it’s not as, not as complicated as that. And there are some tricks to trade that we do. So while you are working, we know what you’re making.

We know what you’re paying in taxes, and you know what you’re saving. So, um, so you can kind of back into what your expense number is and then add on things like additional travel because now you’ve got more time, maybe some additional entertainment. So there’s a way of doing that without kind of, um, going through I line item by line [00:10:00] item.

Um, another trick, and this you gotta do this earlier, is basically you could take your bank account in the beginning of the year and track how much money that you kind of. Putting into your checking account. So everything goes into your savings account. You move the same amount into your checking account at the end of the year, you look at the, your bank account difference.

If the bank account difference is the same and everything’s going into the checking account from your savings, you know exactly what you spend. So we can help you kind of do some of those little. Tricks of the trade a few years before and then add on to that. And that’s very helpful ’cause a lot of people don’t wanna go through their credit card bills and do all this.

So that’s how you can kind of, you know, figure out what you’re, you know, what you’re gonna spend. And then we account for some of these other items and that’s how we come up with a game plan. Of course, it’s not an exact science of what’s gonna. Actually happened. But if you know that and you know what your income is, you start to feel a little bit better that, Hey, I can spend this money because of my [00:11:00] income.

It from all the areas, it’s gonna be greater than my expenses.

[00:11:03] Bill Tucker: Yeah. So you have a degree of confidence about it All talk. Tell me about healthcare planning. ’cause I, that I think is, to me at least the most complicated and, uh, and potentially most confusing part of this, I.

[00:11:16] Larry Heller: Yeah, we, you know, we talked a little about what long-term care.

Now some people think that Medicare covers long-term care, so Medicare doesn’t cover long-term care. Um, so the, the, it covers, um, hospitals and drugs, and then you’ve got, um, with a supplemental plan. So you need to kind of, you know, make sure that you have a good plan for that and, and reach out to somebody that specializes in that.

Mm-hmm. It doesn’t cover dental or vision or hearing, and it doesn’t cover long-term care. Yeah. So really understanding what the Medicare part covers along those lines is, is important. And also what the cost of the, uh, Medicare is gonna be because, uh, it’s based upon your income. So you may, right now, the basis, I think somewhere around [00:12:00] $202 that you pay each month, but based upon your income from two, two years ago is what they used to calculate what your additional Irma costs are.

It can be seven, $800 a month. So, uh, so you wanna kind of check that, and that’s also part of the planning, um, is. You know, if you’re close to a certain number, you may wanna defer some of your income to the following year so it doesn’t bump you up into a higher Medicare quest. Yeah. So another little thing you want to take a look at when you’re in your sixties before Medicare eligible.

[00:12:33] Bill Tucker: Yeah. And I think one of the things that a lot of people don’t understand about Medicare is there is a age at which you are required. To sign up for Medicare, not necessarily receive benefits, Larry. Right. But you gotta register, correct?

[00:12:49] Larry Heller: Yes. Yeah. So you gotta register for, for, for Medicare when you’re turning 65 if you’re not on an employer coverage.

So it’s critical to, to, to work with somebody to help [00:13:00] you really understand that and make sure that you, you apply so you don’t trigger any penalties.

[00:13:04] Bill Tucker: Yeah, I, I, when I learned that there are penalties for not signing up, whether you need it or not. I was shocked. And those penalties gonna be really punitive.

I mean, man, like holy cow. Yeah. What about investments? There are two schools of thoughts on this and, and I, and I guess this comes down to the personality of the people you work with. A lot of people think, well, you know, once I get to 65, I’m gonna get really conservative with my investments. But to me, the mistake in getting a little too conservative with your investments is that you are losing a lot of opportunity.

With your investments as well. Can you talk a little bit about that?

[00:13:39] Larry Heller: Yeah, so 65 isn’t the same thing as our grandparents. 65, when they retired at 65, they gotta watch and maybe lived a couple years and that was it. Yeah. People now are living 20, 30 plus more years, so we can’t just plan for a few years, we gotta plan for 30 years.

So we gotta, we gotta make sure that you have enough money. [00:14:00] We also gotta make sure that you stay ahead of inflation, so. If you just get really conservative and you’re only getting interest on this and inflation kicks up your assets, the the, the power of what your assets come by can go down. You can start seeing your portfolio going down.

So you, you don’t wanna stay too conservative, of course, you don’t wanna be too aggressive. And have a huge drop right before you’re going to retire. Right. So we’ve had podcasts on the precise asset allocation that you should do. We’ve had one called the Our Reservoir strategy. So making sure that you have enough cash to write out any downturns, and usually it’s somewhere between two and three years.

So then you can have kind of a, a medium term, and then you can kind of have a longer term then that real important thing is. I don’t care how much money you have, if there is a correction in the market after you’re retired, people get nervous and they wanna [00:15:00] stop the bleeding and sell the equities. So you wanna make sure that you, that you have other money to ride out any down stuff and not touch those equities in a down year.

And of course the other way around and the equities are doing really well, you wanna take some of those profits off and people are like, why are you selling things when things are doing, doing well? So you wanna know what your risk tolerance is. Mm-hmm. So you know what you’re comfortable with. The swings in that your time horizon and the the right strategy.

Obviously as you get older, in your seventies, eighties, you could become more conservative, although, although we have some people that they have enough money that. Part of their money, even though they’re, it’s their money is for their kids and their grandkids. So that’s another whole discussion. So making sure you have the right asset allocation, the right portfolio, to provide you with the what you wanna do during your lifetime, and not being too conservative or too aggressive.

[00:15:54] Bill Tucker: Yeah, and I’m gonna remind people listening again, there’s gonna be a checklist covering all the key points that we’re discussing [00:16:00] today. That’ll be in the download link in the episode description below. I mention that now because, and it was implied I think in Larry’s last answer. Things get complicated here and we’re gonna talk about tax planning.

Uh, nobody likes to talk about taxes. Larry, I hate to talk about taxes. We gotta talk about ’em. So we

[00:16:19] Larry Heller: need to talk about taxes. Yeah. It’s one of the things that, that we see and some of the mistakes that we see is people coming to us in their, in their seventies and miss these opportunities, and they’re like, well, why didn’t my accountant tell me this?

While the accounts are not doing proactive planning to preparing what you’re doing now versus what’s gonna happen in the future, and projections, they’re just looking at year by year, by year. So, you know, we’ve had clients come, come into the seventies and all their money is sitting in their, uh, retirement accounts.

Mm-hmm. They had years, they had retired in their sixties. They had years where they had so little taxable income. They could have done Roth [00:17:00] conversions each year and they’d be so much better off during those lower income years doing these Roth conversions. But now they’re in their seventies and they’re getting their require minimum distributions, and it doesn’t make sense to make sense to do that.

So that’s one of the biggest things that we see as not taking advantage of Roth conversions or. Even if they don’t wanna do Roth conversions, the next one is managing the withdrawal order. Mm. So even though your requirement and distribution isn’t until 73 and seven or 75, if you wait, that portfolio can grow so much that it’s kicking you up into a much, much higher tax bracket.

So maybe you want to take some withdrawals out. Earlier and keep you in a lower tax bracket. It’s not just what the money that you’re gonna make, it’s what? It’s none of the taxes. So the taxes can have a really, really powerful impact, and how do you minimize that properly? We talked a little bit about the armored charges and seeing if that is something that [00:18:00] you can kind.

Kind of do and like, like I just said, ignoring the require minimum distribution until you’re 75 may not be the best thing to do. So there’s a lot of different things to do. Sometimes there’s also some charitable benefits that you can do and some planning along those lines in your sixties. So there’s a lot.

There’s a few different things that you can do for taxes and having to make those, uh. Plannings.

[00:18:25] Bill Tucker: Yeah. And, and, and I, and I don’t think any discussion about retirement unlocked, locked, or anything else can happen without this next topic because I, emotional preparation is probably just about as important as.

All the other stuff you’re talking about here today, Larry.

[00:18:42] Larry Heller: Yeah. And you know, a lot of times we have, we have a, a book that, um, you know, we, we didn’t write, but somebody wrote on, you know, really preparing for the emotional, you know, transition. Yeah. And. You know, because you know, if you’ve been working for 40 [00:19:00] years, a lot of times you’re kind of associated with what your career is all about.

And now all of a sudden, if that’s kind of stopped cold Turkey, how do you replace that? I mean, we’ve had a lot of people say, oh, no problem, I’m gonna. Golf, I’m gonna go to the beach, I’m do, but after a year or two, they realize that their purpose is gone. So what should they really be? What should they really be doing?

And we kind of talked to them a little bit about this early on to try to kind of see what it’s gonna be like and kind of focus in about what you’re going. Spending your, your, your money, your, your time, and your money on. Some people have no problem, they just go from one to the other. But we’ve seen a lot.

Um, we had even a teacher, um, o one of our clients, the spouse, one of our clients, the teacher in. She had a really hard time ’cause she would teach her for 30 years. Yeah. And that’s kind of what she did. And now she really didn’t feel like she had any, any, any purpose after that. So we’re just bringing that up and saying that’s something you should kind of think about.

Um, and so you can [00:20:00] match that with the financials. And like you said, it is super important to be able to do both.

[00:20:05] Bill Tucker: No, it really is. And I mean, I, a lot of people I, I’ve, I’ve asked people, well, who are well past retirement agents, why don’t you retire? And they, they look at me like I have two heads. And they’re going, no.

’cause when you retire, you die. I’m not retiring. You know, that’s not happening,

[00:20:20] Larry Heller: right? I mean, you know, look, look at Warren Buffet and Charles, um, Munger Munger. You know, they, they never retired. I look at some of the, the coaches out there and, you know, Pete Carroll coaches football for Vegas and, uh, Rick Patino at St.

John’s, and they’re in their seventies. Yeah. And they’re still, that’s what they, you know, they don’t wanna retire. They love what they’re, they love what they’re doing. Right. So, uh, so yeah, so you don’t have to just kind of, you know, hang it up and go sit at the beach every day if you don’t want to, but if you’re not gonna work, what are you gonna replace?

All that, that free time, you know, free time with.

[00:20:55] Bill Tucker: It’s true. On the other side of that, I do have a good friend, he retired and I said, what are you gonna do? And he said, I’m gonna [00:21:00] play golf. Moved to Florida. He lives on a golf course, he’s involved with the golf club there, and he plays. Golf three, four days a week.

And he’s one of the happiest people I know. So he just

[00:21:12] Larry Heller: does go, this goes both ways, right? It goes both ways. There are definitely people, big people like that, but uh, you know, we’ve had similar scenarios like that. And then the person got hurt Oh, and they couldn’t play. And now I’m like, what’s their purpose?

And they kind of take a step back and try. If you can’t do what you want because of unfortunately physical side, now they gotta kinda re-envision what their life’s gonna be. And that’s a whole nother challenge.

[00:21:40] Bill Tucker: Yeah, that’s a whole different challenge. Well, before we get outta here, we can’t leave this conversation with talking about.

Is state documents, Larry?

[00:21:49] Larry Heller: Yeah, so that’s another thing that, you know, we see people in their sixties and seventies not update their, their wills or the revocable trusts or having, you know, [00:22:00] incorrect power of attorneys, um, or healthcare proxies, um, or even beneficiary designations that are, that are wrong.

And we’ve, we’ve had. We’ve reviewed, um, beneficiary designations that had ex-spouses in there. We’ve had adult children missing from the beneficiary designation. So really creating a a, a plan, um, and even deciding whether you kind of wanna bring your adult children into this, into this scenario so they understand exactly what the game plan is, game plan is for.

So really making sure that you’re. Wishes on where you want everything to be, uh, handled, you know, money or if you’re sick, who’s gonna make those, this, you know, those decisions for you super important that, that get updated, uh, and make sure that it’s, it’s done properly.

[00:22:51] Bill Tucker: Yeah. You know, I got two really quick questions on this topic.

One is I recently won’t go into the details, but I recently was in the hospital [00:23:00] and they came over to me and said, do you have a living will? Mm-hmm. And I was like, mm-hmm. No, and you know, Larry, it sounded kind of silly, but it had never occurred to me that I needed to have. Thought about that before I got asked that question.

Do you bring this up to, to people and do you talk to them about the, like what the healthcare proxies might be and like that kind of thing?

[00:23:22] Larry Heller: Yeah, I mean, I mean, we talk to ’em about, you know, having those healthcare proxies who they’re. The living wells, depending upon which state you’re in. Yeah. Um, and who they, who they should be.

Should they be your adult children? Should they be someone else? And unfortunately we have clients that have, uh, challenged, uh, children. Yeah. Whether they’re disabled or whether learning impaired. And what do you do about those? Um, so yeah, so we definitely have those conversations because, uh, you know, it’s such an important document and we see that it’s not done properly.

People just. Don’t update them. So, yeah, [00:24:00] and you know, I, I even had a story with, with, with my, my mom. So one of, one of the things that, um, we actually do is we actually encourage, especially, especially if you, your, your one of your parents has passed away and there’s only one spouse left. Um, my mom had to be taken to, uh, to the hospital and she wasn’t able to, uh, to speak, and they asked, well, who’s her doctor?

And I’m like, I know. I have no idea who our doctor was. Yeah. So now one of the things, we have a document. All the key people are on there. We have that, the doctor on there, we tell them to share that document with your adult children. So if that ever came to pass, and if I would’ve had that document, I could have contacted her primary care physician, which I wasn’t able to, wasn’t able to do.

So all those little things are kind of the values that we add. And people think about that and a lot of these times we have it in a, um, electronic. Vault where, uh, with, you know, password protected, where your adult children can get [00:25:00] into that vault if they need to. So, uh, all these kind of things will make life a lot easier if something should happen down the road.

[00:25:07] Bill Tucker: Last question from me about this is, I, I hear a lot about trust. I don’t understand trust, Larry, but I hear a lot about trust. Um, what kind of guidance can you give there? Should people have

[00:25:18] Larry Heller: trust? Trust is, you know, that is a big word. Yeah. ’cause there are a lot of different types of trust. So, uh, so now, you know, revocable trust and, you know, each state is a little bit different on their rules, but a revocable trust, um, avoids probate.

So should be be using revocable and it’s revocable trust is what it means is you can change your mind on. What you put in this, who gets what? Who manages that? So who needs revocable trust? Why do they need one? We gonna have a whole nother podcast as by talking about that. And then there’s irrevocable trust.

And why do you wanna do irrevocable trust where you’re kind of giving up control of those assets? And do you wanna do [00:26:00] that for asset protection planning, for estate planning? So there’s a lot of different things to talk about when it comes to trust, and these are all things that we talk about when we.

Update your estate planning documents.

[00:26:11] Bill Tucker: Excellent, excellent. Any closing words here before we get out? Larry?

[00:26:15] Larry Heller: Yeah, so I mean, thinking about retirement is great, thinking about it a little bit earlier so you don’t make these mistakes when you’re in your sixties and seventies are super, super helpful. So think about all these, um, look at all these, and if you have any questions, you can feel free to reach out to us.

[00:26:34] Bill Tucker: Absolutely. And thank you for listening to Retirement Unlocked, if this episode gives you insight into avoiding common retirement mistakes in your sixties. Please like, subscribe and share it with someone who you think might benefit. And do you wanna make sure your retirement decisions are aligned with your goals financially, emotionally, and tax wise?

Check the episode description for resources and a link to schedule a complimentary, [00:27:00] complimentary 20 minute call with a team at Heller Wealth Management. Remember, a confident retirement starts with a clear plan. We’ll see you next time on Retirement Unlocked.