Ready, Set, Retire: Key Steps for Securing Your Financial Future (Ep. 127)

Transcript

Welcome to the Life Unlimited Podcast with Larry Heller. You deserve complete financial advice so you can confidently live your life your way for life. Now, let’s get into this week’s podcast episode. Hello and welcome to Life Unlimited with Larry Heller from Heller Wealth Management. I’m Aric Larry’s producer, and I’m here to learn along with you, the audience.

Larry, what’s going? Oh, Aric, well, with spring, spring has sprung. It’s still a little chilly out, but, uh, but it’s my favorite time of the year, cuz I know the summer is coming soon. Oh man. That, yeah, it’s looking forward to some warm Larry. That’ll that’ll be good. I don’t that older I should, should get right.

The older I get, that’s, I think that’s what my parents went through. You know, I’m always cold and now kinda get to that point where I’m just tired of cold. So let’s, let’s bring on some warmer. Yeah, I mean, I can’t complain here in New York. It’s been pretty mild winter, almost no snow. So, uh, but [00:01:00] still I’m ready for some some outdoor activities.

All right. Sounds good. Before you go outdoors, can we do a podcast? Yes, we can try . So what are we talking about today, Larry? So today we’re gonna talk about, uh, issues that you should consider before you retire. Okay. Especially what’s been going on. People are like, oh, the market, the banks, . You know, should I retire?

Should I not retire? But no matter what time you’re thinking about retiring, there’s a lot of issues. And we’ve covered some of these specifically in some of our previous podcasts, but we’re gonna kind of put ’em all together and talk about it from a big picture, high level, and some of the items that you should be, uh, that you need to consider.

Okay. All right. So where do we get started? Cuz that’s, I mean, this is a huge issue. Okay. Yep. So let’s, let’s just start first, well, well, we’ll start really where the cash flow issues. Okay. And there’s a few things here that, that come into mind when I talk about cash flow issues. First is, you know, income and expenses.

Mm-hmm. , what. [00:02:00] When you, when you’re getting to retiring and you have no more income, that spigot is turned off from work. You want to know where is your money gonna be coming from? Is do you have, are you taking social security? When are you gonna take social security, which we’ll talk about. Do you have a pension?

And are you taking money out of your. Uh, qualified accounts, your 401k, your ira, so where is that money coming from to where you’re living? And then what are you going to need to spend? What are your expenses? Uh, and what a lot of times people don’t realize is when they retire, or at least pre pandemic and hopefully now post pandemic, they’re expenses in the beginning usually go which way?

I’ve been with you a long time. Up. Go up a little bit. There you go. Yeah, a little bit. You guys, you have more time. You have more time to, mm-hmm. , do things that you like. Some more time to travel. So really you wanna kind of put a game plan together and see what your income is, see what your expenses are, and then put a strategy together.

And one of [00:03:00] the reasons, the best reasons of doing this is because when we go through some turbulent times, if you have a strategy, you’re more like, Keep to that strategy and not really lose sleep, that you’re not gonna be able to enjoy the rest of your life or your second act in retirement. So knowing what your cash flow is, knowing your distribution strategy knowing your income and expenses really is one of the first critical items that you wanna do.

Yeah. And I know that we’ve talked before and I’m assuming that you. In that later stage of life when somebody’s getting ready to retire, that’s right around the time that they’re, they’re no longer gonna have a mortgage as well. Right. Do you see that, or at least not the traditional or the original mortgage that they may have taken out?

Yeah, I mean, we can have these conversations about mortgage cause I’m asked about that all the time. And a lot of times I say there’s really two answers to whether you should have a, a mortgage in retirement if you still had one. Uh, one is purely from the numbers. and one is where I call sleep factor.

It’s nice knowing that you don’t have [00:04:00] a don’t, don’t have a mortgage. Mm-hmm. , I was talking to one of our, Uh, clients and friends and he was telling me that his son-in-law was saying You should always have a mortgage. Um, but when you get older and you have no more incoming in it sure is knowing peace of mind that you don’t have one.

Yeah, of course, with interest rates low from a few years ago, even now, even when in mortgage rates a little bit higher, there’s still. Uh, on the low side historically, that if you have a very low interest rate and you’re making more money in the bank than you can, than of taxes, it still could be the right financial decision.

So that, that’s not the, always the, the clear cut, easiest, uh, easiest answer, but yes, knowing if you want to pay your mortgage off, should you pay your mortgage off, should you keep the mortgage? Yeah, definitely something to consider as you went through your retirement. Yeah. Cause if you didn’t have that mortgage again, that increases your cash flow from what you had before.

And it might be easy to spend a little bit too much or uh, or it may be easier to say, Hey, no, we’re gonna sock some of this away for a rainy day. [00:05:00] For sure. Yeah. Well, it may not increase your cash flow because if you have a mortgage, if you took out a mortgage and you refinanced a year, a year and a half ago, and you were at two and a half percent and now interest rates are up.

Five, you’re actually making more money. Oh, true. By having the mortgage so you have more money to spend. So that’s where it really depends. And really discussing that and seeing where it is. And, but again, it comes down to you knowing that you don’t have a mortgage. So, uh, so those are all factors to, uh, to consider.

All right, what’s the next section? Let’s, so let’s, I just talked about pension. So bef, if you are lucky enough to be one of those individuals that are going to be getting a pension knowing which option to select, and we, again, we can have a whole separate podcast on this, but do you select, uh, a life only option, which means that you only get.

amount of money while you live and if you’re married mm-hmm. you, you’re, and you pass away. Your spouse gets nothing. Do you take a joint survivor [00:06:00] option? Do you take a joint survivor? A hundred percent Option Joint survivor, 50% option A. There’s so many different options in there. So really considering what you wanna do and determining the best pension option is something that you should look at, and you should start looking at that a few years before you’re gonna retire.

So you really have a game plan in. Outta curiosity, if you are the one with the pension and you do a joint pension option, what happens if your spouse dies? Ah, so a great question, Aric. You are really outta luck. So, oh geez. So one of the things that’s sometimes, and it really depends, depends upon how old you are, depends upon the op the options.

I’m not recommending this carte blanche, but it is something that may be done and we’ve done it in the future. In you basically ensure yourself. So by buying a joint survivor option, you’re in theory paying. Insurance you’re paying that you’re re mm-hmm receiving less money and therefore that’s really your premium.

But you can look [00:07:00] at possibly taking the life only option and buying a life insurance policy. So now what happens is if your spouse pre ceases you day after your, uh, started, that you can either stop the life insurance and you’re still getting the full life and only, or you can keep the life insurance for.

Your children all your grandchildren. So, uh, so great question. Again, part of a plan all overall planning strategy. Yeah, absolutely. And let’s talk about the other income strategy that you’re gonna have. So everyone’s should, most just about, everyone’s gonna have some type of social security. Mm-hmm. . So when do you take your social security?

Do you take it at, uh, full retirement age? Do you take it earlier? Do you wait to age 70? And what about your spouse? What are some of the situations that when your spouse should take that, figuring all that out? Not only from an income strategy, but. From a tax planning strategy because if you wait a little bit longer, you may be in a lower tax bracket, [00:08:00] which allows you to do some other things such as Roth conversions.

So it, all of this is really just a big puzzle, Aric. Yeah. And you wanna have all these pieces and see how all these pieces fit together and create a plan where you maximize the amount of money that you can get. and minimize the amount of taxes that you need to pay and make sure that you’re gonna have enough money to be able to create the lifestyle that you want.

Yeah, absolutely. I love the analogy of it being a puzzle, because you can’t force the wrong piece into the wrong spot. Right. The picture doesn’t come out well. You know, so it, you’ve really gotta put all those things together with that in mind of the end goal. So I love that. Right. It’s not, and, and it’s, and if you put one piece in that, gives you this strategy.

If you change that and you don’t put that piece, you got a different, you know, a different strategy. Mm-hmm. . So, uh, so you want to kind of look at all the different pieces, so when you put the pieces together, you get the best outcome for yourself. Yeah, [00:09:00] absolutely. So let’s switch gears a little bit.

Let’s talk about, I’m not gonna really, we really don’t spend a lot of time on healthcare and insurance issues and, but now that you’re getting close to retirement, you need to kind of, you know, need to kind of do that. When you get to age 65, you’re gonna be eligible for Medicare and you need a Medicare supplement.

Coverage. So making sure that you have that, if you’re still working for a big company, you may not, may become secondary, but knowing what the health insurance is gonna be and making sure that you have the right or the right coverage in place before you turn 65. So when you turn 65, you’re ready, you’re, you’re ready to go.

Mm-hmm. also, what about a long-term illness? Uh, you’re protected. Are you self-insured? Should you have long-term care insurance if you don’t? So protecting and looking at that is something also to discuss prior to getting going into retirement. Um, okay. So let me ask you that, because the, [00:10:00] the age has always bothered me, and, and I think you’ve talked about this a bit before.

When it comes to long-term care or long-term care insurance, when should somebody be looking at that? Cuz I don’t, I don’t think it’s something you should wait till 65, right? Or shouldn’t you be a little bit early? No, you should be looking at that earlier now. Yeah, things have changed. We’ve had a couple of guests on the long-term care insurance, especially here in New York, where now the policies have basically gone and some of the existing policies, the premiums are, are raising.

So maybe, maybe it’s time for another guest on the long-term care. But yes, normally we were looking, looking at doing this as in your fifties rather than the waiting until you’re older. Because not only is the cost goes up, the chance that you may be uninsurable go up. Mm-hmm. Uh, and now a lot of those products that were available are no longer available in New York and in different and, and in different parts of the country as well.

So, uh, so looking at that, looking. If you can’t get insurance or if you don’t, how much money do you have? And do you set aside a pot of that [00:11:00] money for the potential of getting of doing this? Because we do know and we have seen where one spouse has unfortunately a long-term illness, it could impact the financials of the other spouse.

Yeah. So, uh, so just planning for it is something that will give you a bit more peace of mind before you enter into. Yeah, no, absolutely. That’s a great idea. And just a minor amount thing that we, you know, look at, based upon your income, you could be paying a surcharge for your Medicare. So in that, there are certain break points in there.

So knowing what that is and seeing if you’re below or above it and trying to figure that out, could be helping to save a few dollars along the way if possible. . So let’s kind of switch gears and talk about some of, well, really more of the long-term planning issues. So the cash flow, the insurance, that kind of is gonna affect you right out of the start, right from day one, how you’re gonna live your life and, and how much do you actually need.

But now, [00:12:00] Hopefully you’ve earned a lot of money, and if you have, you may be in an estate tax issue, uh, whether it’s a New York state estate tax issue, whatever state you live in, or a federal estate tax issue. Right now, the federal estate tax issue is extremely high. It’s, if you’re a married couple, is like 25 million that is gonna come down when the lost sunsets, if nothing changes in 2026.

So, So there is some changing to this, but again, in New York, somewhere around 6 million, and again, it’s always changing. So you always want to kind of consult your tax expert on this, but. Can you set up your plan to minimize some of the estate taxes and based upon what your cash flow is, is your portfolio, is your net worth gonna grow?

That’s gonna kick you into an estate tax later on? And in New York, it’s, we have what’s called a cliff tax. So if you’re, uh, a few dollars over, you’re gonna pay tax, like just from dollar one. Mm-hmm. . So knowing what [00:13:00] your estate tax is, and if you have one. and making sure that it, you are looking at that to do some of the planning.

So that’s kind of the long term issues and that’s really from an tax issue. And some people may say, you know what, I don’t really care about that. But they’re making sure your documents are in place. And this is where we find a lot of is issue. A lot of things are not. up to date and need to be revised.

Your power of attorney, your healthcare proxy, your will, should you have a revocable trust. Mm-hmm. are your beneficiaries correct? And again, we’ve talked about all these different stories of clients that we’ve come in and they’ve seen and they’ve had a previous spouse name this, a beneficiary missing, a child having no wills, how many times.

have you heard some famous entertainer die without a will? Yeah. So making sure that you have the right documents in place will get kind of give you p, you know, peace of mind. Yeah, absolutely. Hey Larry, real quick, I wanna touch on the the estate tax, that may [00:14:00] sunset. You said around, it’s around 26 million now.

What is it gonna go down to? And then my follow-up question, Larry , is how soon should somebody who’s in that, in that upper range be talking to somebody about how they can? Cuz if that law sunsets and nothing changes and it goes back down to whatever, it’s gonna go down to. Can lose a lot. Right? Their family can lose a lot in those estate plannings, in the, in the taxes.

When should they be looking at other strategies with you? Yeah, so the, the number, the numbers, and it’s gonna be, uh, tied to inflation, but it’s gonna be a little over 6 million. Again, it’s a big change. It is portable. So when you, when you’re a couple will be 12, $13 million. Mm-hmm. , roughly. So again, it’s not gonna affect a lot of people out there.

But yes, if you have. , um, more than that. You may wanna do some giving now depending upon how old you are. And, and again, we can talk about a whole, that could be a whole podcast just talking about the, that. Uh, and again, [00:15:00] probably good time to bring another estate attorney back on, uh, on for a future podcast to really discuss that and some of the planning opportunities that should be done before the loss onsets.

Absolutely. Or call Larry. Well, you can call me, we can do some of the, do some of the planning and then we can work together with your estate attorney to, uh, to put it in place. Absolutely. All right. What else are we talking about? All right, so let’s shift over and just talk a little bit about your assets and maybe your debts.

And we think, we’ve actually talked about your debt a little bit ahead of time when we talked about your mortgages. Mm-hmm. , so that’s what I was talking about. Should you keep your mortgage payoff in mortgage? We’ve already touched upon that, but let’s talk about some of your assets.

And there’s one. That comes to mind. That’s really the first, and for a lot of people, their biggest asset that a conversation should be taken, should be had. What asset do you think that is yourself? No . Good question. Good, good answer. . Come on, . Come on, Larry. [00:16:00] Well, okay, so if you’re retired, then you’re not an asset because you’re not making any money.

That’s correct. So, okay, on that side of things, your house. Bingo. There we go. So, okay. So what, what about your house? Are you gonna stay in your house? Are you gonna sell your house? Are you gonna move somewhere else? How is that going to impact your retirement, both now and later on? Uh, are you gonna buy a second place?

So looking at that and into determining that, cuz a lot of people, this asset has grown a, a, a, a very large amount, especially the last few years. If you sell it where are you gonna go afterwards? I know you do you need that money to, to live on and do you not need that money to live on? Mm-hmm. . So determining what the house is.

where you gonna go? Because if you are in one state and you’re thinking about selling and going to another state, there’s a lot of different rules in that state. We have a lot of clients that have relocated down to Florida. Florida has no estate taxes. Mm-hmm. , but they have a high probate tax. So there’s different things you [00:17:00] wanna do as far as your estate planning versus your income tax planning.

So knowing what to do and what you think you’re gonna do about your residents is definitely, I. Okay, I’ve gotta jump in, Larry, because something very strange happened last week. I wasn’t even thinking of this until you said it. The other thing that people need to be aware of is if you’ve been in a house for a long time as you’re aging, please.

Budget for somebody taking care of a lot of that house. Last week, literally three different people I had conversations with had to talk about their father’s not going on the roof anymore. Right. Because it’s dangerous. And our story was, one of ’em, my father-in-law got on the roof to, to cover something.

I can’t remember. A swamp cooler cuz he’s down south. Mm mm-hmm. , he’s 74 years. And bad knees, please. For the love of everything, holy, put that as part of your budgeting or get to a house that you, don’t have to get on a two story roof. I don’t know if you hear those stories, Larry, but people we haven’t heard, we’ve heard some of the stories, but one of the things that we talk about, we get couples that say, I wanna live in my house for the rest of my lives.

[00:18:00] Yeah. And they live in a colonial. And, um, we’re like, there’s a lot of stairs, , you know, and the, the primary bedroom is upstairs. Yeah, absolutely. And are you gonna be able to live there for the rest of your life? Or maybe if you really wanna stay there, you’re gonna have to reconfigure where your primary is.

Downstairs. Mm-hmm. . So thinking ahead along those lines is, is important. Yeah. Or purchasing a in, in a community. Has had these homes fitted that you can, that you can stay in them. . I actually, mm-hmm. in one now and it’s all set up that you can age with the house and not have to worry about that really.

Yeah. Yeah. So, uh, so that’s great. They have it. So the shower is the same level, so if, yeah. Zero entry, long time down the road, you need to have a wheelchair to roll you in the shower, it’s there. Yeah. The microwave is down at low level. The primary is on the first, is on the, the [00:19:00] first floor.

So there’s an option later on if you want to put an elevator in the building, in the, so there’s everything there that you can age with this, so it’s all geared towards that. That’s fantastic. I love that. Yeah, I’d like an elevator now. . . Yeah. But so, so they, they kind of thought of everything with, with, with that.

So you can definitely properly age there with literally no steps in the house. Nice. That’s fantastic. I. So, uh, so that’s, and then just talking about your other, your assets mm-hmm. , um, your actually investments, your retirement plans versus your non-retirement plans, how should they be allocated? Again, we can have a separate podcast on this.

We’ve talked about our reservoir strategy numerous times. But is your assets set up properly as you get into retirement? Do you want to take as much risk? You need more income from your assets. So you need to really look at this and come up with a game plan and. I don’t wanna, I’m [00:20:00] not gonna put you on the spot again, Aric, but we’ve talked about how many years before you really wanna start looking at this and start changing and looking at your allocations and preparing for the need of income.

So literally three to five years before we wanna start making those changes in preparation of when you’re gonna need to withdraw your money on mm-hmm. . So, uh, so that’s another item that you need to. Again before you’re gonna retire, not a day or two before. Yeah, absolutely. And touching on one of the things that you said earlier, you know, are you gonna move, are you gonna move states?

You had a podcast with somebody, a, a guest, again talking about that. And there’s so many different rules. So if that’s something that people are considering, again, call Larry. And he’s got a huge network of folks that he is worked with and guess that he’s had on because New York is. How do you put it, Larry?

Tight, strict. They, they like want to keep their claws in you because they want that tax money. So there’s certain rules about how long you spend in one house compared to another where, you know, your primary residence is. There’s a lot of things [00:21:00] to consider that people just don’t know. So, again, I’m, we’ll be asking for contact information at the end of the show, but you can point ’em in the right direction for sure.

Oh, for, you know, for sure. And like, like you said, New York is very, very tough if you’re, if you’re gonna move and make sure that you’re not a New York State residence. There’s definitely some rules. Yeah. And, and anybody can go and look at all of our podcasts. We have a lot of our podcasts now, they’re on YouTube, and you can search by category, and we have podcasts on that issue and numerous of the issues that we are talking about today.

Yep, absolutely. All right. What. . So the last one is tax planning issues. Hmm. So they’ve, we just did a podcast on the require minimum distribution being moved back. That’s right. So what are some of the tax planning that you could do on where you’re gonna take your money? Are you gonna take your money out of your retirement accounts?

Are you gonna do Roth conversions? So planning on having to. You know, pay for [00:22:00] taxes and minimize it. If you had assets that have a, a lot of capital gains, how do you do that so you can pay the minimum amount of taxes so you can maximize what’s what you’re earning. . Yeah, that I like that. Pay the minimum, maximize everything else.

But it’s not always paying the minimum. Right now you may wanna do a Roth conversion and pay Yes. Pay some taxes now to avoid paying a lot more taxes later on. Yes. So good point. You know, those strategies people like. You know, not, don’t really think about that. They don’t think about what effective tax bracket are you in now versus what tax bracket are you gonna be in when you’re 72 or 73, and now 75.

Yeah. So you want to do the planning now before you’ve started social security, before you have to take your acquired minimum distributions. So thinking about those, plan for those now, don’t wait until it’s. Yeah, absolutely. Speaking of that, they need to talk to somebody about [00:23:00] that, Larry, and that’s you.

So, yeah. So they need, yeah, so just so you know, also, we’re gonna put a, a, a copy of this checklist. A lot of these items that I talked about, and some more, we’re gonna put it in the resources section below. So if you wanna. Click on that. You can get a, a list of all these items that we’ve talked about and a few others.

Of course, if you’d like to, speak to me, you can go onto our website at uh hello wealth management.com and go in to schedule a, uh, schedule a appointment. You can schedule a free 20 minute call with myself or you can feel free to call the office at six three one two four eight thirty six.

Perfect. Larry, thank you so much. Always a pleasure, my friend. Yes. Another fun day, Aric. Yeah, absolutely. All right, and our last thank you. Of course, go see your listening audience, thank you so much for tuning in and listening to the Life Unlimited podcast with Larry Heller. If you have not subscribed to the podcast yet, please click the subscribe now button below.

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Again, thank you so much for listening today. For everyone at Heller Wealth Management, this is Aric Johnson reminding you to live your best day every day, and we’ll see you next time.