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Milestone Ages In Retirement

Finishing Well / Hans Scheil
The Truth Network Radio
June 8, 2024 8:30 am

Milestone Ages In Retirement

Finishing Well / Hans Scheil

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June 8, 2024 8:30 am

Hans and Robby are back again this week with a brand new episode! This week's discussion is about milestone ages in retirement. 

Don’t forget to get your copy of “The Complete Cardinal Guide to Planning for and Living in Retirement” on Amazon or on CardinalGuide.com for free!

You can contact Hans and Cardinal by emailing hans@cardinalguide.com or calling 919-535-8261. Learn more at CardinalGuide.com. Find us on YouTube: Cardinal Advisors.

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This is the Truth Network. Welcome to Finishing Well, brought to you by cardinalguide.com with certified financial planner, Hans Scheil, best-selling author and financial planner helping families finish well for over 40 years. On Finishing Well, we'll examine both biblical and practical knowledge to assist families in finishing well, including discussions on managing social security, Medicare, IRAs, long-term care, life insurance, investments, and taxes.

Now let's get started with Finishing Well. Welcome to Finishing Well, a certified financial planner, Hans Scheil, today's show, Milestone Ages in Retirement. And so, you know, I learned a whole lot on this subject just in the pre-show information, so I think you're going to be excited to find there's some things I had no idea were some milestone ages, even some younger ones that I hadn't heard about, and specifically age 50 and 55. And I love in the video that they did with this, Tom said that the reason for this video was to help you avoid expensive mistakes. And I thought about the most expensive mistake you could possibly make for yourself, and your family probably wants to see you again in heaven, and God himself who wants to spend time with you in heaven is to not ask for forgiveness. And as Hans pointed out, you can ask the IRS and all that stuff for forgiveness, but they're not so free and willing, you know. But God, on the other hand, if you ask and you're prepared to accept, you know, that God is your savior and those kind of things, then you can avoid one gigantically huge expensive mistake, as I don't think most of us have any sense of how horrible hell really is, and what it would be like to even live with yourself when you didn't have any God in you.

You know, no love, no peace, no patience, no self-control, you know, it's just a horrible thing to think about. So along those lines, at certain ages, Hans, there are things that you need to look at, right? Yeah, and so when it comes to the topic of social security, I'm always struggling for the next week's show. A lot of you probably are not even aware of this, but we have the seven worries, and you know, the first one is social security, and then Medicare, and then long-term care, and IRAs, and income, and estate planning, and taxes.

And so every week, we shift to the next topic, and so when this came up for social security, I'm looking through all my notes from the research that I'm doing all along, and I just came up with this milestone ages at retirement, and it goes a lot further than social security. And so the first one up is age 50, and so what happens at age 50 that you couldn't do at 49? Okay, and what I'm going to tell you is, you can put additional money into your IRA contribution. You can put additional money into your 401k contribution, and so it's the government letting you do some catch-up, starting at 50, and all the way through to you quit working. You can put more money in there with a higher limit, okay, and it's just kind of that simple.

And so the next one is age 55, and what happens at 55 is really rare. I mean, I'm talking to a gentleman on the phone who's considering doing business with us. He was a referral from somebody else, and I'm talking to him, and this guy's up in New York, and he's worked for six different private equity companies, and so he's got six different 401ks that he's pretty much ignored. And this guy is very well off, and he's talking to me about consolidating all of them and trying to manage them and just make sense of them for his retirement. And so they're still in the six different 401ks, which is a little bit confusing, and I had to point something out to him because he's not working now, and he's over age 55, but he's not 59 and a half yet. He's age 57. I said, if you're going to want to use any of this money between now and 59 and a half, you may want to leave the money in the 401k, or at least one of them, because you can draw that out without paying the 10 percent early withdrawal penalty, and you were entitled to that at age 55.

Okay, and that, you know, I think that was news to you as well, Robbie. Right, but isn't there a stipulation that you have to be in retirement, right? That you actually have to not be working, you pointed that out. Yeah, that's correct. So if you're 55, you can plan retirement between 55 and 59 and a half, and begin making withdrawals from your 401k to pay your bills to live, and you're not going to be subject to the 10 percent penalty.

You'll be subject to income tax if it's a pre-tax account, which most are. But just interesting, this is a milestone, so if you're in a 401k, you might not want to roll it over into an IRA, and you're retired, and you're under 59 and a half, and over 55, it just, there's a window there that most people don't know about. And he really appreciated me telling that. He said, that really runs counter to what you're trying to do here with my business.

And I said, well, that's what fiduciaries do, is I have an obligation to tell you about anything that affects you, even if it runs contrary to what I'm telling. So anyhow, so move on to the next milestone age, is 59 and a half, which is, that's when you can take distributions out of an IRA, or a 401k, or any qualified money, and the 10 percent penalty for early withdrawal is gone for you, okay? So the next milestone age, 62, and 62, most people are familiar with this one, this is the first date that you're eligible for a social security check. Now it's a discounted social security check, because if you, you're taking it early in effect, and you're only going to get about 70 percent of what you would have gotten if you waited till age 66 or 67, which is your full retirement age. So, but this is a date, and it's the first time you can take a social security check. Yeah, I was just going to say, as I was preparing for this show, and I was playing your video on this subject, up comes an ad, this guy saying the five reasons you should take your social security at age 62, and I thought, man, the insanity of what that is, that there's so much misinformation on the subject alone of taking your social security at 62, especially if you're still working, it's just unbelievable that somebody would advertise such a thing.

Yeah, and I bet he's really convinced of that. I mean, I've sat through lots of videos, lots of research, and there's a whole camp of people that believe that you're better off taking the money at 62. Now you really have to be retired, because if you're not retired, and you make over 22,000 a year, you're just going to end up giving it back. But this guy was really, my guess is, he was just trying to convince you to call him, and then he was going to show you how to start your social security, and then he was going to show you what to do with the rest of your money. But anyhow, there's a case for that, and then you invest the money, and you pay the tax, and somehow you're going to be better off by doing that. So, I'm somewhat biased, because I just believe if you have a way of doing this, and you have other money on the sidelines, or in an IRA, that you're better off living off of that, and then delaying taking your social security to the latest stage you possibly can.

But you know, we'll discuss that on another day. So the next age we've got is age 65, and you know, a lot of people think that a lot of things happen at 65 that don't. I mean, social security used to be, that was for retirement age, that's when you took your social security, and that's not anymore.

I mean, that has been moved. So what you can do at 65 is you're now eligible for Medicare, and you can sign up for it. If you're still working, you don't have to sign up for it, or if your spouse is still working, and you're covered under the group insurance of your spouse, your spouse, you can delay. But for most people out there, they're starting their Medicare at 65, because it's going to be a really great insurance form.

Yeah, I agreed. I think everybody's going to look at that age. So then the next milestone age is 66, just one year later, and that is the full retirement age for people who are FRA for social security. So that's when you can take your social security check.

And it's what it was intended to be. And you can take it and still work. And where they quote age 66, it's actually 66 in a few months, for most people, but those are people that were born from 1943 to 1959, which includes you and me. So and then right after that age 67, and that is people born 1960 or later, that is your full retirement age. And that is the age, not where you're going to get your maximum social security, but you're going to get what your social security was intended to be. And you can still delay because you're going to get extra all the way up to another age. But this is the point where a lot of people take it. And then you can also still be working, take it, and you're not going to pay any penalty for having taken it too soon.

Okay, yep. And then age 70 is the maximum social security check. And God willing, I'm going to wait till 70 personally, simply because, well, for a couple reasons. One is I can get the largest check possible. And that's really important to me in my retirement. And especially if I took it before 70, I'm earning a good living now, I'm going to pay a lot of taxes on it. So there's a lot of reasons for me to delay. And one of them being I don't need the money now. And then what I'm really doing is that I'm going to have to live to about 79 or 80 for me personally, to end up ahead.

Okay. In other words, if I wait till 70, but then I died at 75, I effectively would have lost money if I would have been better off taking it at like 67 and collecting all those checks from 67 to 70. I didn't have enough time to make it back. So the breakeven point would be like 78 or 9 or 80, depending upon how you look at it.

This is a time we got to take a break. And we want to remind you that the show is brought to you by cardinalguide.com. And if you go to cardinalguide.com, you'll see the seven worries tab, one of which is social security, which is what we're talking about today.

Milestone ages in retirement, actually, but it's social security is under that tab. You'll find a video along the same lines, as well as show notes with all sorts of details about what we're talking about today. Of course, also at the website, you'll find Hans' book, The Complete Cardinal Guide to Planning for and Living in Retirement. We'll be back with a whole lot more. Again, we go to cardinalguide.com.

We'll have a whole lot more for you coming up in just a minute. Cardinal Advisors is not affiliated with or endorsed by the Social Security Administration or any other government agency. Welcome back to Finishing Well, a certified financial planner, Hans Scheil. And today's show is milestones for your retirement, milestone ages for your retirement. And so just to review a little bit, Hans.

Hans Scheil Yeah. So what we're doing today is we're taking the milestone ages that people need to be thinking about in retirement when they're approaching retirement and preparing for retirement. And these are defined by things you can do once you reach this age. So we started with 50. That's where you can put more money in your IRA and 401k each year up till retirement. And we went over 55. Between 55 and 59 and a half, you're able to take money out of a 401k if you're retired and not pay the 10% penalty.

We went over 59 and a half. That's the age where the 10% penalty for early withdrawals disappears. We went over 62 is the early Social Security. 65 is when you can apply for Medicare. 66 is when you're at full retirement age. 67 is full retirement age for people 1960 or later for a birth year. And then where we were just talking about is the maximum Social Security check is if you wait till age 70. Now, keep in mind, you've given up a number of checks because you get nothing from Social Security till you're 70.

So it's going to take you some time with this much bigger check to make up for everything you've lost. And I think that guy that was running the ad to you started at 62 when you were watching the video, that would be one of the big points he would be making is, is look how far you're going to be ahead by 70. You're much better off starting it early, and then just banking all that money like a bird in the hand is better than two in the bush.

And I think in an overall financial plan with people with alternate sources, I'm a little more on the side of waiting as long as you can. And so the next date we're talking about is we're getting into IRAs now is 70 and a half. And that was when RMDs required minimum distributions used to start for people born in 1949 and earlier. And there's many people out there that think that it's still 70 and a half. But this was changed and this was increased.

We're going to go over that in a sec. But for people born in 1949 and earlier, this was the required minimum distribution age. Now, it's still significant at 70 and a half, because this is the age that you can make your first qualified charitable distribution or QCD.

And for, you know, Christians that are listening, and I think, you know, most of our audience are Christians. And even if they're not Christians, they donate to charity or donate to some charity. And this is an opportunity that starts that a lot of seniors are not aware of. And even people that don't have a whole lot of money in their IRA, but they're just letting it sit there and just taking the minimum every year, planning to give it to their kids or whatever. And you can make your donations to the church, which is a qualified charity, directly out of your IRA. And then that counts as your RMD or your required minimum distribution.

And you can do that every year starting when you reach age 70 and a half. I mean, it makes a lot of financial sense, and it makes a lot of kingdom sense. Let's put it that way.

So what do you have to say about that, Robbie? Oh, I've always, you know, to me, it's a brilliant way to maximize, you know, what you give to the church or what you're given back to the kingdom, whatever that may look like through, you know, another arm of the church, whether it's a 501c3 or something like that, because essentially, you're able to, you know, use that same money that you would have given to tax to increase the gift and what, you know, obviously God can do with it, which to me is a way to invest treasure in heaven, just absolutely great stuff. Well, I mean, I've always thought that this would be a good opportunity for some churches to have somebody like me or me or Tom, or to come out and make a presentation to the seniors that are in the church and just talk about, talk about all the things we do, but specifically around this subject, because I'm sure that there are many people that have IRAs and they're fussing about RMDs and they're having to, they're fussing about the taxes and the government making them pull money out of there. And they could start donating that RMD to the church.

You got to do it properly. It's not just that simple as throwing it in the basket. I mean, it, you, you, you got to do some things, but we can help you with those, but it's just, it's a shifting of money. And a lot of them are just hanging on to the money to give to their kids. And they're much better off giving their kids at their death their other money and then using this for their charitable contributions during the rest of their life. Oh yeah, it's, it really, really is. But unfortunately, like we've talked about before, a lot of people have it backwards when it comes to what they're doing with their, their IRA, but that age of over 70, that becomes, you know, another strategy.

Well, sure it does. And we even have people in their sixties that we make them aware of this within the financial plan, just earmarking money. They can't give it yet, but they leave it in the IRA. They don't pay taxes on it. They don't pay taxes on the earnings, but they're earmarking it for gifting after 70 and a half. And we're working all that into their financial plan and then gifting annually after that and putting it all together in the financial plan.

So it makes sense for them. Yeah, that's beautiful. Absolutely wonderful. Yeah. So the next stage is age 73. And that is what the RMD or the required minimum distribution age has moved to.

Okay. So, and, and that's the age for you. And that's the age for me. Uh, I was born in 1958. And so, and it's the age now people that are a little younger than me.

I mean, we can go to the next stage. I mean, it doesn't make a lot of difference whether it's 73 or 75 until you actually get there. Um, but people that are 1960 and after birth, it's actually the last age that we have on our chart, which is age 75.

So that was a change they made out of the secure act. So, uh, people from 1951 to 1959 births at 73 is when required minimum distributions are, it means you have to take money out of your IRA. Um, and people born in 1960 or after it's age 75. So you can leave it sit there for a couple more years. Now, as with all of these ages, especially RMDs, it's almost it's almost like the government is telling you what to do.

And then when people learn about these, I think they get to the point of the show. Oh, so that means don't take any money out of my IRA or 401k till I'm 73. And they're not telling you that at all. I mean, if you want to start taking money out of your IRA when you're 65 or 61 or 70, or you needed to live or to supplement your social security, whatever that, that is your right. And generally in financial plans, we encourage people to start before the government tells them they have to.

So, and that is now age 73 or 75 or somewhere in between. And I encourage people to start earlier than that. And I encourage them to consider Roth conversions because we've got to wind this balance down because this is not good money to be passing on to the years. I'd rather get it out of the IRA, pay the taxes little by little, and then have the money on the sidelines. So these milestone dates here at the end, um, kind of send the impression like somebody's telling you, Oh, don't start taking anything till you're 73.

And then once you're 73, we're going to go through this complicated calculation and we're only going to take the minimum, which is a little less than 4% at age 73. And that makes no sense at all. Okay. Um, and, and, and the reason it doesn't is that a lot of people are just unknowingly creating this tax bomb that it's just accumulating and accumulating and they're spending money they have outside of an IRA because they don't have to pay taxes on it. And they are, um, I mean, they're just receiving, they're just letting this money pile up and they don't realize the tax bill that that's going to create later on for them or for their heirs.

Right. And, and, you know, and this is a great point to always talk about, you know, what was the money originally for? Like, what, why were you, why were you putting this money together and what was your plan? And the idea of right, maximizing that, that I, you know, what is it that, that you really intend for that money? And there's so many great, I mean, wonderful, you know, Roth conversions, life insurance, all sorts of ways to pass it over the next generation, if that's what the end result is, but you may add other plans for it.

And it still requires distributions at some point in time. That's a good part payday. Well, and that's what we do when we're creating financial plans for our clients is we're trying to make sense of social security and how much you're going to get from that.

And when you're going to start it, and then we're, we're taking your IRA money that you haven't paid taxes on it and figuring out how much we need to pull from there to live on and putting that with the social security, with their other savings, considering Roth conversions, if, if it makes sense for you and if you can afford them. Yeah, unfortunately, we've run out of time again before we ran out of show. So we don't remind you as you're thinking about these milestones, right, that there's all sorts more information at cardinalguide.com. So if you go to cardinalguide.com, you'll see the seven worries tab. And again, today's show is on the social security tab, milestone ages for retirement. And you'll see the show notes on a video that's associated with this, that it gives you all the details about what we're talking about. And of course, Hans' book, The Complete Cardinal Guide to Planning for and Living in Retirement.

My favorite part of cardinalguide.com, of course, is the contact information, where you can contact Hans, Tom, you know, have somebody to actually talk this stuff over with and figure it out. As obviously that, you know, that's the whole point of what we're doing is God wants to arm you with the best ways to finish well. So thank you, Hans. Great show.

Yeah, thank you and God bless you. not be suitable for everyone. Information Express does not take into account your specific situation or objectives and is not intended as recommendations appropriate for you. Before acting on any information mentioned, please consult with a qualified tax or investment advisor to determine if it's suitable for your specific situation.

Finishing Well is designed to provide accurate and authoritative information with regard to the subject covered. Investment Advisory Services offered through Brookstone Capital Management LLC, abbreviated BCM, a registered investment advisor. BCM and Cardinal Advisors 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. Cardinal Advisors is not affiliated with or endorsed by the Social Security Administration or any other government agency. We hope you enjoyed Finishing Well, brought to you by CardinalGuide.com. Visit CardinalGuide.com for free downloads of this show or previous shows on topics such as Social Security, Medicare, IRAs, long-term care, life insurance, investments, and taxes, as well as Hans' best-selling book, The Complete Cardinal Guide to Planning for and Living in Retirement and The Workbook. Once again, for dozens of free resources, past shows, or to get Hans' book, go to CardinalGuide.com. If you have a question, comment, or suggestion for future shows, click on the Finishing Well radio show on the website and send us a word. Once again, that's CardinalGuide.com. This is the Truth Network.
Whisper: medium.en / 2024-06-08 10:25:49 / 2024-06-08 10:36:08 / 10

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