Join Al Smith on this enlightening episode of Retirement Unpacked, where he demystifies the complex process of retirement planning. From understanding the importance of growth phases to visualizing your post-retirement life, Al shares insightful strategies to ensure your financial stability. Whether you’re a decade away from retiring or just five years out, these practical tips will empower you to make informed decisions for a secure future.
Welcome to Retirement Unpacked with Al Smith, owner of Golden Eagle Financial. You want a retirement plan that alleviates your fears about the future so you know your money will last. As a chartered financial consultant, Al Smith will help you find a balance between the risk and reward of the market and the safety of your retirement income. And now, here’s your host, Al Smith.
SPEAKER 03 :
welcome to another program of retirement unpacked i believe i have some good information for you today and we’ll dive into that and a lot of people talk to me about what the planning process is like what’s it like if i choose to work with you and things like that well that process is involved obviously but it depends to some degree on the age and the level of preparation for retirement that people are when they come to meet with me. If someone has been retired for five or ten years, then the approach that we take is considerably different than if someone has about a 10-year window to retirement or even a 15- or 20-year window. There’s other things that we often look at if someone has a mortgage, a home, children, and things of that nature. We often take life insurance into consideration and disability coverage, things that could derail someone’s plan for not only retirement but for taking care of their families. On the other hand, as people move along and children leave the nest, so to speak, then the primary concern that we have, let’s say with someone who is within 10 years of retirement, we take a look at growth. And we want to grow a healthy nest egg so that when people retire, whether it’s at 65 or 72 or 78, whatever age they choose to retire, we want them or him or her to have a good nest egg so that what they do in retirement won’t be burdened by work. you know, worries of having enough money if they should live for a long time. So again, we look at growth when people have a window to retirement. And what does that mean growth? Well, Anytime I work with someone, regardless of their age, one of the first things that we do together is we will do a risk tolerance questionnaire kind of thing. And that’s required by just everyone who’s in the securities business. And that helps us determine, us meaning financial advisors, what is the best direction that we should go? What are the best financial products that are out there? to help grow people’s nest egg but have that be consistent with their comfort level with being in the market and comfort level we use that word when we often talk about times when the market goes down now nobody’s comfortable when the market goes down but Anyone who’s invested in the market, whether it’s through their 401k or separate investing or IRAs over a number of years, everyone has seen periods of time when the market has gone down. And clearly there’s no comfort associated with that. But if people to some degree are prepared for that, And if the market downturns are okay with that individual or couple in exchange for strong growth because of the longer window they might have, then that sort of helps me determine what are the best financial products for them. And that may involve a mix of different financial products that have different levels of risk associated with them. Some of the products I work with have zero risk. Other financial products I work with have a strong track record of performance, but a significant amount of volatility in certain time frames. But again, so when we’re looking at that window before retirement of like 10 years or so we’re you know pretty much focused on growth and that growth is largely in the market some of it can be and financial products that aren’t in the market that are linked to growth. There are certain annuities, for example, that will have a guaranteed level of growth followed by a guaranteed amount of income. And for a portion of people’s retirement accounts or non-retirement accounts, just growth of their nest egg, I think some of these are quite appropriate. But I think the important thing is when we sit down and I’m working with someone who has a window before retirement, even if that window is, let’s say, 10 years or longer, I try to get people to visualize what it’s going to look like, let’s say, a day, a week, or even a year in retirement. And if I can get people to do that, we can sort of think in terms not only of what amount of financial resources we’re going to need, but also how will the retired folks, whether it’s an individual or a couple, single person, whatever, what is that retirement going to look like? How will their time be spent and I say there if I’m working with a couple sometimes couples men do one thing women do something else and they may only do a few things together but I think what’s important is if they sit down and think about what is that going to look like. And by that, I mean what is a day spent in retirement like? What’s a week like? What’s a six-month period or a one-year period like? And I know I’ve talked about this on other shows, but even the question of where will we live when we decide to retire? So that’s good to think about 10 years before retirement rather than six months before retirement, because that gives you the opportunity to explore retirement. other locations. If you have family in other parts of the country, you may want to be closer to family. You may want to relocate somewhere where the cost of living is substantially lower. That would mean that you don’t need nearly as large a nest egg as if you’re going to remain in Colorado, which is not the most expensive place to live, but it’s certainly not the cheapest. I think with the exception of New York, L.A., And maybe a few other places, Colorado, well, at least the Denver metro area, is one of the more expensive. So that process, as we prepare and move toward that transition, I think where someone wants to live, I think that’s an important component of that process. And if it looks like maybe people haven’t saved quite enough, we can look at that and create a strategy. If children are out of the home and if some of the people’s bills have been paid off, maybe as people pay off a vehicle or a charge card or something like that, I think it’s extremely wise to with a 10-year window to retirement to increase the amount of money people are saving. And even if you have a retirement plan at your employer, you can put as much as $8,000 into an IRA And even if you have a spouse who is stay-at-home, you can do the same for a spouse. So there is significant opportunity to save as people get closer to retirement if that additional income for savings is available. And if people find themselves a little bit short in terms of their savings goal, I think exploring some of these other alternatives makes a lot of sense. And by other alternatives, I mean additional money into an IRA, spousal IRA. And I also think it’s wise to make those IRA contributions Roth because Because that means your income, at least part of your income in retirement, will be tax-free. And I like tax-free income more than I like taxable income. And one of the reasons for that is with tax-free income, there’s no variable there. The tax rates for zero tax aren’t going to change anything. anytime in the in the near future but the tax rates and the tax brackets and that sort of thing they can change but zero tax is still zero tax and as we get closer to that transitional period I think planning to have more of a couple or an individual’s income be tax-free, I think that makes sense, and I think it’s a wise way to move closer to retirement. So again, that phase of 10 years or so before retirement, a lot of that involves growth. There are a lot of attractive things ETFs and so forth that specialize in, let’s say, NASDAQ type accounts, which have a strong track record of performance. Now, those aren’t for the faint of heart, because in the times when the market goes down, they often take a healthy nosedive. But if you would look at the NASDAQ’s performance over time, it has been quite good. And as people get closer to retirement, if they find themselves a little bit behind, it’s not a bad idea to have a slightly more aggressive stance with part of what you’re setting aside for retirement. And again, that’s different for everybody. So that’s something I would not recommend until we had quite a conversation about where is the best place to put your retirement assets after this phase we take a look at a transition that’s where people move from the workforce to the retired component of their lives and that transition involves a lot of things i’ve met a lot of couples where they don’t necessarily retire at the same time and that can be because of an age difference or something like that and also um Someone may really like working, whatever they do for a living, and the other spouse, for example, may not like where they work very much. They might like their occupation, but they may not like where they’re working for whatever reason. So there’s a lot of things to take into consideration when it comes to what is the best time to retire. But You know, creating that transitional plan, in other words, like selecting a retirement date, there’s a lot of things that go into that. And going back to that growth phase, I think what’s important in that growth phase is is that you sit down with your advisor, hopefully myself, and we do some projections of, well, if you continue with the savings rate you’re now doing, how large will your nest egg be at some point in the future? And we don’t measure success by the size of the nest egg. We take a look at what we can do in the form of income. How can we convert this nest egg into income, which is one of the things that we talk about when we move into that transitional phase, which also involves selecting the best time to file for Social Security benefits, finding the best place to move a 401k from a previous employer. If someone is fortunate enough to have a pension, selecting the right pension option to provide survivor income. That’s a transitional question that we’ll have a good conversation about when I sit down and work with people. And these are things that we don’t necessarily decide in one meeting. We’ll put together some alternatives and bounce those around. And so these conversations can last for a couple of meetings because I think having enough money in retirement, knowing what your retirement is going to look like, I think that’s important and it clearly should not be rushed. And we’re going to talk more about different buckets of money. Your resources in retirement and also some ways to have your retirement income be tax free. Maybe part of it, maybe even all of it.
SPEAKER 01 :
Most retirement planners start with numbers, but Al Smith of Golden Eagle Financial starts with your story. At Golden Eagle, your first meeting’s not a sales pitch. It’s a simple conversation about where you’ve been, what matters to you, and where you want to go when you retire. Al listens intently, and then, using simple tools and the info you already have, he can show you how long your current plan might last if you were to retire today and not change anything. That alone can be eye-opening and expose any holes in your current strategy. It’s the foundation Al uses to help you build a plan that works for the long run to retire on your terms. No pressure, no jargon, just a clear picture of where you stand and how to make it better. Al’s been helping people retire well for decades, and he’s seen it all, the good, the bad, and the overly complicated. He’ll help you keep it simple. If you’re ready to plan your retirement with purpose, schedule a no-pressure visit with Al Smith. Go to the klzradio.com advertisers page to schedule your conversation. Investment advisory services offered through Brookstone Capital Management, LLC, Registered Investment Advisor, BCM, and Golden Eagle Financial Limited are independent of each other. Insurance products and services are not offered through BCM, but are offered and sold through individually licensed and appointed agents.
SPEAKER 03 :
Welcome back to Retirement Unpacked. We were talking about the different phases of retirement planning, and we primarily talked about the phase before people make that big move and actually retire. And that first phase is the growth phase, when you’re setting aside money for the future. And then we were gradually moving into that transitional phase now one of the components that is incredibly important and i would say it’s worth looking at even in the growth phase is where would resources come from if you or your spouse would need long-term care because when people sit down and they think about how much income they’re going to need in retirement If you or a spouse needs care in assisted living or a nursing home or something like that, that can double or even triple the amount of income that you will need because of yourself personally or because of a spouse needing care. So this clearly needs to be looked at. And I’m not suggesting you run out and purchase long-term care insurance, but I’m suggesting that you take it into consideration because there’s different ways that this can be funded. And I think at least having a discussion about it is incredibly important. So we’re in the transition phase. People make choices of where’s the best place for their 401k. And we have alternatives there that are quite attractive. But before we make any recommendations, we like to hear more about what you want your retirement to look like and how can we convert that into income. and so in addition to making the best selection of when to draw social security and where to put your 401k we take a look at how much income will be needed in retirement and one of the things i like to do is i like to put people’s resources or assets, whatever you want to call it, into different buckets. The first bucket and the one that I believe is the most important is the one that will generate income. And if that’s guaranteed income, that’s even better because that’s going to be the significant part where you will draw income from in retirement in order to pay your bills. And with assets that go beyond what’s required to generate income, we can have assets that are at risk in the market. And assets in the market at risk are fine, but these are… assets that may or, in most cases, may not be needed for regular income. If the risk assets, for example, are qualified, and qualified essentially means like IRA or 401 assets, then as you age to age 73 or if you’re way younger, age 75, there will be required minimum distributions that come from those. But those may or may not be necessary as part of your income in retirement. Last, but also incredibly important, is having an emergency fund. And the financial gurus all say that you should have six months in there, and I’m not going to argue with that because I’ve had financial emergencies and I’ve had problems. emergencies that my clients bring to my attention, or they will need distributions of some of their resources. And I think having liquid assets for that purpose is incredibly important. So these three buckets, the income, the guaranteed income, the assets that are at risk, and having a third bucket with emergency resources, I think is extremely important. The last but perhaps most important thing I want to talk about is how to have tax-free income. There’s different ways to accomplish that. Now, most of the people listening and most of the people I work with do receive Social Security benefits. And Social Security is taxed if your other income reaches a certain level. And if your other income is substantial, then as much as 85% of your Social Security will be taxed along with the rest of your income. On the other hand, if your income in addition to Social Security is quite small, then none of your Social Security might be taxed. So a lot of things to consider there. One of the things I often recommend, especially going back to that growth phase 10 years before actual retirement, is I recommend that people convert part of their IRAs or 401Ks if that option is available in 401ks. Not all 401ks have a Roth option, but if they do, I recommend making those changes over time before retirement because you do pay tax on IRAs when you convert to Roth, but you’re paying tax on the seed rather than the harvest. For example, if someone converts a $200,000 IRA to Roth, they may pay ballpark 20% in tax, depending on their bracket and so forth. Now, that remaining $160,000, over time, that can grow to as much as $800,000, well within the life expectancy of someone who’s a little ways before retirement. And then the question becomes, do you want to pay income tax on the $200,000 or on the $800,000? And the other big question to ask is, do you want to have the IRS determine how that nest egg generates income, or do you want to be the one that determines how that generates income or how it passes on to the next generation if that’s what occurs? now one way to get tax-free income that you may not be too familiar with is dividend income whether you have an etf or a portfolio or individual stocks dividend income if it comes from qualified dividends now qualified dividends are essentially stock owned by a U.S. corporation or a qualified foreign corporation, dividends from these stocks are treated as capital gains, provided that you’ve owned the stock for 60 days or longer before the dividend is paid. Now, there is an exception to this, REITs, which many of you are familiar with those. Those are real estate investment trusts. Those are like mutual funds and so forth, but they invest purely in real estate. Those are not qualified dividends. So essentially, those dividends are treated as capital gains. And that’s the same as if the stock is held for one year or longer and is sold. Now, what that means is, let’s say right now for couples, If a couple has $96,000 a year of income or less, and part of that income is capital gains, then there will be zero capital gains tax. And that is quite significant. So just along with Roth conversion, if you can use dividend income, as part of your financial retirement plan, that can clearly minimize your taxes. Now, even if your income is quite healthy, let’s say if a couple’s income is like over $300,000 a year, and they’re in a 22% bracket, Well, the dividend bracket, the capital gains bracket, is only 15%. So I think taking a look at dividend income as a mechanism for part of your retirement income makes a lot of sense because that, in addition to Roth IRA income, neither one of those are going to cause your Social Security to be taxed. So hypothetically, if someone, a couple, let’s say, they both have Social Security, and if their income were from capital gains and Roth IRA income, and that is all, then their Social Security wouldn’t even be taxed. They would be in a zero tax bracket. If you’d like to learn how this kind of planning can be helpful for you, call my office at 303-744-1128. And I’d love to sit down and have a conversation so we can learn what you would like your retirement to look like. God bless you. Thank you for tuning in. And let’s pray for our political leaders and let’s pray for some of this unrest to cease and for our country to move forward. Bye now and God bless you.
