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We've got a whopper of a show today for you. It kind of covers all sorts of ground in the retirement plan decisions once you reach 64 and a half. And that tends to be where, you know, I really started to hone in like, oh, I better be thinking about how to finish well and what all's involved in that. And we always talk about the seven worries here on this show.
And the neat thing about this first one is we're going to be getting into that. But on every one of these, you know, topics that we talk about every week, you know, it requires advanced plans. Like, you know, we're going to have to make some decisions. And when it comes to making decisions, you know, we want to make right decisions. You know, ask for the ancient plans, you know, as it says in Proverbs and Jeremiah. And so when we're looking for that, we look for something that we can trust.
You know, the first person to get righteousness in the Bible is Abraham, because he believed God and he counted it unto him as righteousness. And so when we have the Bible at our disposal, obviously we know, here's some truth, and how does this information about how we're going to finish well line up with what I know to be true, the cornerstone, and truth is truth. And once we've found something that we can have faith in, we can be making sound, right decisions. And, you know, I love that we've always, at Finishing Well, tried to aim things in that biblical truth, right, Hans?
That's absolutely right. And most people, when they're making decisions, in the area of the seven worries, and which I'll rattle off real quickly, Social Security, Medicare, long-term care, planning for your 401k, IRA money you haven't paid taxes on yet, income and investment, like what's your monthly income going to be after you retire and you're not working anymore, your estate plan, and then taxes, income taxes. And so that's how we at Cardinal have lay out financial planning, and we lay out all these decisions in over these seven areas.
And when we do financial planning, or we even talk about financial planning, and we're considering it with a new client, I go through, we go through all seven of these things, and apply them to the individual person. And most people don't make decisions that way. Most people, like with Social Security, they know they can start it at 62, and they're going to get less. Most of them know that they can wait till 70, and they're going to get more. And they don't really plan, they just kind of take it, you know, at a certain point.
And then they kind of go on. And with the reason I say 64 and a half, is that's really when a lot of people come to us, because they don't know what to do about Medicare, and how to get it, what's going to start, how to, what are all the considerations. And so, which there's a lot of people in my business would be say it's too late. I'm going to say that congratulations on thinking about this stuff before you really have to, because if somebody comes to us at 64 and a half, it's probably over Medicare, and that's probably all they want is Medicare, but they're going to get a whole lot more than what they wanted when they come to us, or they're going to get an opportunity to go over all seven of these things.
And so the first one, I'm going to give you an idea of what I'm talking about here. With Social Security, I mean, I just said you could start it as early as 62, you could start it as late as 70, and it's about 67 or pretty close to it, is the full retirement age, where you can get the amount that used to be at age 65, but now it's 67. That's where you're going to get your full Social Security check. And you're probably not going to take it then, unless you're retired at 67. You're forced to make decisions on this is if you retire at like 64, well, then you're taking it early. And a lot of people just take it, you know, so they're not really planning for Social Security, they just say, I just retired, I'm going to take it, and they find out how much it is.
And they say, Okay, I'll take it. And you know what, if you come to us with a sense of planning, and we go through all seven of these things, the first thing we're going to do with Social Security is we're going to pick a time for you and your spouse. And that's going to depend if you're married, it's going to depend upon the earnings history of both of you. But you're going to start your Social Security checks if you come to us, probably at different times.
And you're probably different ages. And then one of you might the lower earner might started earlier, the higher earner might wait till 70. But then, you know, once we do that, we're going to back it up as to why we're going to wait because we're going to get more for life. And then we've started a problem in the income area where we've got to say, okay, so if you if the minister is going to delay his Social Security check till 70, what are we going to live off?
If he's retired at 66? What are we going to live off of for the Social Security that we're not getting because we're delaying. So we're going to go over to the income and investment in 401k. And most likely, we're going to pull an amount out of the 401k to replace that income. And that sounds a little counterintuitive, but we just bounced into three subject areas.
So react to me a little bit, Robin. Yeah, well, that's the the overarching thing I love about today's show personally, is you'll see that we always talk about these seven different categories. But the idea of finishing well is that it it's one big package that all of these things change other things, right? That, you know, when you take your Social Security, you know, may affect your Irma, you know, what happens with your Medicare when you when you take your Social Security certainly is going to affect your taxes in lots of different ways.
And so or even your estate and so they very much overlap and the idea of planning and the idea of right decisions all has to do with looking at the overall plan, not just one area. Yeah, and what most people are concerned about, okay, what am I going to live off of? I got this glob of money that I've saved in my 401k and IRA and then a lot of them haven't really thought I haven't paid taxes on that money. So every time I pull money out of the 401k or IRA, I got to pay taxes. So but you know, you had to pay taxes on the income that you collected from your employer every two weeks. So this is a replacement for that.
But it's a consideration. So if we draw, if we need $1,000 out of the IRA, 401k, we're probably going to have to draw 14 1500 just to pay the taxes to net 1000. So now we've just touched 401k IRA, we've touched income, we've touched taxes, and I was still on Social Security. Because if we're on Social Security, Social Security, and we're delaying Social Security, so we get more for life, we're thinking long term, well, then we got to replace that income. And we're probably going to do that out of the 401k, or out of the IRA.
And it's really not that hard to do. And once people see that they can get the money from somewhere else, it starts to look more attractive when they see all this on to delay Social Security. So jump over to 401k IRA, you know, when you're 64 and a half, whether you're retired or not, you're coming to us about Medicare, we point out to you that you need to plan for the distribution of your 401k in your IRA. I mean, you just yeah, it would have been nice to make it sooner than this.
But here we are. And if you're still working all the better, but even if you're retiring, we need a plan. Because that's a ticking time bomb as far as taxes. You know, if you have a million dollars in IRA and 401k, only 650 700,000 of that belongs to you. The other 300,000 belongs to the government. Because it's unpaid, untaxed money, and somebody's going to pay the tax on it sooner or later. And if that's the money you're going to live off of, then we need to scientifically plan to pull out the right amount each year to make maybe we could skim those taxes down to a lot less than 300,000 or 350,000 by parsing it out over a whole bunch of years.
It's just going to depend upon your needs and other income sources that you have. And I just wanted to go through that's really the topic of the show is the decisions in each one of these areas. And I could just read them off to you and go over and spend an equivalent amount of time in each of the seven areas. But I really like bouncing around. Because every time we make a decision in one area, we affect a couple three other areas. And then we got to bounce over there. And we got to say, Okay, so now what's happening here? And so this is, this gets kind of messy, while we're doing it.
Yeah, it, it, it, it does. But by the same token, it just more information, right, that provides for given more options, because, you know, another thing that the information gives you options. And that's part of the right decision process as well, right?
Sure. In the Medicare, we've been over many times. And, you know, that's the second worry, the second set of decisions. And we need to decide, are we going Medicare Medicare Advantage, or, you know, are we starting at 65? Or are we going to rely on the group insurance from work if we're working past 65, or our spouses. So if you're going to continue to rely on group insurance, that group insurance is credible for either you or your spouse, then you don't have to sign up for Medicare at 65.
But we need to make that decision. Are you going to sign up? And if you sign up, how are you going to supplement it?
That sort of thing. If you've had a high income, either in the past, you will have in retirement, we got to deal with Medicare's Irma. And then if you if you're going to buy a Medicare supplement policy, we got to decide which one, we got to think about dental insurance, vision insurance, how you're going to pay for that Medicare is not that difficult for us certainly to solve for people, but it is very intimidating to people coming into it. And moving on, like with long term care.
I've got several questions that I you know, when I ask people like, do you take long term care seriously? Or is this something you want to talk about today? I had to jump in there.
But we got to go to a break. We want to remind you right before that, that, as always, you know, the show's brought to you by Cardinal guide and cardinal guide.com. You're going to see all seven of these worry tabs. You know, we're covering them all to give you an idea of the overall planning today. But that's all at cardinal guide.com, as well as a similar show on this with the show notes and all it's at cardinal guide.com Hans's book, the complete cardinal guide to planning for and living in retirement.
Of course, the all important contact Hans to get an overall plan, you know, for you and your family. It's all there at cardinal guide.com. We'll be right back with a whole lot more on retirement plan decisions at age 64 and a half 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. Welcome back to Finishing Well with certified financial plan, certified financial planner, Hans Scheil. And today's show is along those planning ideas is a retirement plan decisions at age 64 and a half. And so Hans, we're in the middle of talking about, you know, one of those decisions, certainly at one of the worry tabs is long-term care.
Hans Scheil Yeah, I want to bring up long-term care before we start talking about the money. Because, you know, I just want to make a statement about long-term care is, if this happens to you, or if it happens to me, the last thing I want to be worried about is how I'm going to pay for it. Because there's plenty to worry about, like, who's going to take care of me? Where am I going to be taken care of?
How well am I going to be taken care of? And what's the effect of all this going to be on my family, which is, it's very difficult. And when you add how you're going to pay for it, to the equation, it makes all of those things more difficult.
So in other words, I'd like to figure out a way to take part of the burden of the money away from the situation. I mean, I just, that's the thinking. And I really want to ask people, do you take long term care seriously? And if you want to have a little discussion right now, we'll talk about it. But if you just want to tell me, I'm not really taking it seriously, we'll talk about it later at some point.
A lot of people say, well, I can't afford long term care. And they'll say that right out of the box, just to try to move me off the subject. But if they want to explore that, now we're going to get into the money. And we're going to move over to those sections. And, you know, I'm the financial planner, and I'll look through everything you got, and we'll figure out a way to address it.
That's kind of what we did with you, Robbie. Oh, yeah. And I can tell you that, you know, it was something that before age 64 and a half, I really had not, probably certainly before age 60, I'd never given any consideration to. But when you're at that point where you begin to become a caregiver for your parents, or you see what's going on with that, all of a sudden, like, man, this is a real issue. And one of the biggest things that, you know, I, I'm so glad we get to share this information, you know, on this show is that long term care. Oh, yeah, I mean, it's just, and for the people that end up using it, it's just a blessing.
Yeah. So, you know, the next worry, or the next area is 401k IRA. And, you know, the four decisions I talked about in the video is what's your distribution plan? Or do you have a distribution plan?
And for most people, that's no. And so they're telling me back on long term care, they can't afford long term care, but they don't really have a retirement income planned out yet anyhow. So So do you have a distribution plan for your 401k? Do you have an income tax plan for your 401k? Because taxes are going to eat up a bunch of your IRA 401k, especially if you don't plan this well. So we need a tax plan within this worry. We need a Roth tax free plan. So there's a way to turn your IRA 401k into a tax free savings account. And for your retirement income or to pass on to your beneficiaries. Do you have a plan for that? Do you have a beneficiary plan? Do you have a plan for who this is going to go to and how it's going to go to them tax wise. So when we begin to make these decisions, obviously, we affect other areas.
And so we go on to income. Well, before you go on, you couldn't help but remind me that, man, just, you know, I handled my father's estate, it was in 2019. And just recently, all of a sudden, I get a statement from this other company saying there's other funds that were not in any part of the plan that I ever saw coming. And, you know, it's just awkward because, you know, we didn't have a complete plan where all the different accounts and all the stuff was communicated to, you know, to our family.
And so all the more reason that, you know, having some help, you know, with the different accounts and all that because, you know, there's all sorts of different ways that that could have been set up to where this would have been handled all in one fell swoop, right? Sure. And so, you know, the time to get this stuff out, for you folks listening, and to make those a distribution plan and income tax plan, a Roth plan and a beneficiary plan is now it's not when you're 80 years old, unless you're 80 listening today, and you haven't done it. Well, then let's get together. Let's get this done now.
The time is not five years after you die, when your son is finding something that wasn't planned for. So, you know, we just go through all of these areas. And what I'm trying to point out, I'm not really giving you any answers for any of these decisions, or a little bit I am, but I'm just showing how they just jump into other areas.
And so this stuff, like I said, it gets messy. Yeah, you know, you get into the income area, and we need to know how much money you want and need to spend in retirement. And we want to know after tax month, because people always say, Oh, I want to spend $100,000 a year. And I'm gonna say is it before taxes, or after taxes? And they look at me and say, Well, I never really thought of that.
Well, how can you not think about that? I mean, $100,000 after taxes is $100,000 you can spend. It's really 140 before taxes are 130. And $100,000 before taxes is really going to net you I don't know, 70 80,000 after tax. And so what I really want to know is how much do you want to spend in retirement. So we're going to build our plans from the bottom up, instead of the top down. Yeah, you know, people, when we're doing financial plans, they'll go back and forth. And we usually recommend adding in some money.
But we want to know what's the target. And then we want to go over three phases of retirement. We want to talk about the gogo years, you know, which is the time you're traveling and really going and looking like the people on the retirement planning brochure. I saw that in the show notes in it. I was like, What is what is this gogo?
I had the term I had not seen before. Well, and that's the people in their 60s that retire. And that's how long are the gogo years gonna last for you? I mean, some people they last till they're in their late 70s.
Other people they're over with at 71. Some people they never happen, because they either don't feel free to spend the money, or they're they have health issues, or one of them is just so the gogo years don't happen for everybody, but I want to talk about them. And you're going to spend more money during the gogo years than you are later.
Okay. And they're going to have a beginning and an end. And so we need to plan for that. And this is usually when we ask people, What do you want to do in your retirement?
This is where we get all this. I want to fish, I want to golf, I want to travel to see my grandkids, I want to go on a bucket list trip, whatever it is. And then we want to repeat that year after year after year, then we got to pay for it. But we want to we want to talk about it.
Okay. And then the slow go years are just like they say is that you're, you're pretty much done doing the gogo year stuff, and you're going to spend less money in the slow go years. And you're still going to do some traveling some, but you're not going to spend as much money during this time. And we can plan accordingly. And then the no go years, you're going to spend even less money. And this is this is the end of your retirement. Some people, this is very short. Some people, it's very long.
It's different for couples than one person in a couple, but they tend to get on the same program. And your big expense during the no go years is going to be long term care. And for one or both of you. And so we can plan for all of this. But we want to have that discussion and talk about the different phases. And it's not neat and clean and simple. It's not clean and simple as I've just made it sound.
But it's a good topic to go over with people. We want to know where your sources of income are going to come from, from work. Are you going to work past 65?
You know, like I'm doing and like you're doing, Ravi? Or do you have a pension? A lot of people don't have those anymore. Do you have Social Security?
And are we still planning that? And do you have an IRA? Do you have a Roth IRA? Do you have savings outside of an IRA? Do you have life insurance and life insurance, cash values?
I mean, what are the sources where, where can we look at drawing money from? And then we're going to talk about outliving your money. Is that is that a concern of yours? And then a lot of people, well, you know, I, I'm going to be gone by then or whatever. But when you actually track your savings, most people are really not ready to start spending principal, and betting on the fact that they're going to be deceased by 80. Because what if you get to be 80, and you're out of money, and you're still alive, and you got living to do. So we want to talk about this whole issue of life expectancy, life expectancy of a couple, or certainly one of them outliving the other one.
And we want to make sure that whatever retirement income we plan for is not going to run out money. That make sense? Oh, yeah, my wife and I were talking about that. Just it's a conversation.
I think everybody in their 60s and 70s has. Oh, sure. So, you know, the next subject estate planning, and we want to go through, and we want to find out first of all from you is how important is estate planning to you? I mean, is it, you know, are you in the camp that says whatever's left, the kids can have? Are you in the camp that I don't care what I leave my kids, I'd like to spend my last dollar, you know, the week before I die?
Or are you people that say, I definitely want to leave this and this and this. And of course, that's going to depend on how much assets you have, how long you're going to live, but we want to get a general sense of your feelings and your direction and where you want to go with that. And our biggest concern for couples is one of you is probably going to die before the other one does and the other one might live on for a long time. That's the estate plan estate plan that we want to plan out first is making sure the survivor of you two is fine.
Okay. And it's not going to run out of money and it's not going to everything's going to be taken care of long term care. You know, we want to talk about your IRA and leaving that to your kids. And that the income tax problem that's going to put on them.
And some people would rather just say, look, let's just free money that they're getting and let them worry about the taxes. Again, that's all the more reason to remember this show is brought to you by Cardinal Guide and cardinalguide.com. And if you go to cardinalguide.com, you're going to see all seven worries. And again, all sorts of show notes on this show and many, many more, as well as Hans's book, The Complete Cardinal Guide to Planning Foreign Living Retirement, which is centered around these seven worries.
Again, all to help you finish well. The contact information for Hans is there as well at cardinalguide.com. Again, we're so grateful for your listening and we're so looking forward to finishing well. Thanks, Hans.
Thank you and God bless you. The opinions expressed by Hans Scheil and guests on this show are their own and do not reflect the opinions of this radio station. All statements and opinions expressed are based upon information considered reliable, although it should not be relied upon as such.
Any statements or opinions are subject to change without notice. Investments involve risk and unless otherwise stated are not guaranteed. Past performance cannot be used as an indicator to determine future results. Any strategies mentioned may not be suitable for everyone. Information expressed 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. Cardinalguide.com. This is the Truth Network.
