This is the Truth Network. Welcome to Finishing Wealth, 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 Wealth, we'll examine both biblical and practical knowledge to assist families in finishing wealth, 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, with certified financial planner, Hans Scheil. Today's show is retirement income plan, specifically cash flow. Now, this is the first of a series of five videos of Tom and Chelsea, and Tom and Chelsea are going to be going all the way through their retirement income plan. But today, specifically, on the idea of cash flow, ages from age 65 to 95, and oh, I think you're going to be amazed at the software that's available to help you with this plan.
And I bet you could hardly wait to put your money in there and your situation and to see how it all looks. But it's interesting, when they asked Tom why they were doing this video or the idea of this radio show, it was he said that the number one worry at the seven worry tabs at cardinalguide.com is that people are going to run out of money. And when he said that, it immediately crossed my mind that, you know, most of us, when we do the Lord's Prayer, it says, lead us not into temptation. And the idea of that is that we don't think, you know, God's going to hold us up.
He's not going to support us. And so when you look at that word temptation in Hebrew, there's a beautiful letter called the letter psalmic, and it has to do with God's literal support of us. And so Satan tried to tempt Jesus and think that God wouldn't support him. He took him up on the top of the temple, as you may recall, and that idea of God would not uphold you is the reason for much of our worry. Well, the cool thing is that you are now listening to this show. And Hans is all about helping you finish well, which would include no worry.
That's why you put the seven worry tabs up there so you can see there's no reason to do that. And I think today's show will help you find yourself not being led into temptation, Hans. That's right on the money, and that's what we're talking about today is money. And so this example, this is a doctor client, medical doctor, and Tom is the example, and Chelsea, his wife.
Chelsea really didn't work much other than a little bit after college before they had children. And so she doesn't have much of a Social Security check coming until she gets half of Tom's, and Tom's is pretty significant. And when we met these people, they're like a lot of couples that are retiring at 65.
A lot of doctors retire, some of them even before that, and they go from big income to no income. And they're inclined to start Social Security immediately. And that's the thing that's common in these people and a lot of folks is some of them start the Social Security before they get in touch with us, because they say, you know, look, I want something coming in. They start it for both of them, and even though it's not enough to live on, I want to start it, and then at least I know I got that. And that was the case here in this example, and that's going to be a later show where we're going to get into the nuts and bolts of delaying Social Security.
But what we wanted to do in all of these shows is actually if you go to the video and you watch it on YouTube, Tom takes you into the software and shows you how we came up with all the proposals that we did. But for the purposes of the show today, what we're going to do is just walk through the cash flow that we set up for them. And so we discovered these people have, they have $750,000 in taxable investments, money they already paid tax on. They've got $2.5 million in Tom's IRA. They've got $230,000 in cash, and they need and want to spend $12,000 a month.
Okay, that's $144,000 after taxes. So you can't spend tax money. And so when we build all our retirement plans, we're going to spend a lot of time arriving at that number, the spend number, okay? And we're going to encourage people to include everything, and if they want to put some discretionary spending in there, put it in. I mean, we want to come up with a number, and then we're going to test against that.
And if it's too much and your money can't support that, then we're going to tell you. But we don't want it to be too low, and then you go into retirement and you have to spend more or you choose to spend more, and that makes the plan flawed. So for the first couple, it was $12,000 a month. And like I said, they were intending to start Social Security in January 2025. And between the two of them, their Social Security checks were going to be $4,300 a month.
And they said, well, at least we got that going for us. We're going to go from a big income to nothing. And then they were going to supplement their spending out of their cash, out of the $230,000 that's sitting there, and plus the taxable accounts, thinking that they can spend their money they already paid taxes on, and they're going to keep their taxes real low so they won't have to withdraw as much. And these people could get away with that for four, five, six years of spending $12,000 a month, and that would just leave their IRAs there deferring and deferring and deferring. And their plan was really to delay taking anything out of the IRA until they were 75, which is the start date for RMDs for them, and really to pay as little tax as possible in the current.
That's where they were when they met us. After we took in all their information, got to know them, and we started to put together the first thing, which is what they're going to live off of starting in January, and we needed to work with $12,000 a month. So the first thing we told them is we're going to delay Social Security. So we're going to – you're not going to take the 40 – under our plan, you're going to forgo the $4,300 a month, and you're going to wait until you're 70, and the projection is they're going to get $7,300 a month starting. So they wait five years, they get $3,000 a month more. And all of our numbers – it's a huge amount. I was even shocked by that number when I put the two of them together and then the inflation is put in there by the software. But we're going to do a Social Security show on them and really dig into those numbers a couple of weeks from now.
So stay tuned. And the biggest thing that we did for the income plan is we set up an insurance policy that pays them $12,500 a month for five years. So they paid a lump sum of money into the insurance company, and that lump sum money was about $670,000 or something out of their taxable investments.
It was already post-tax money. But right off the bat, this policy for five years while they're delaying Social Security pays them $12,500 a month, and only $1,300 a month is taxable. The $11,200 a month is just a return of their already paid tax money. So we set them up with their income, kept them in very low tax and covered their income needs, and then set up the delaying of Social Security.
So then they're great. And then the question it brings up is, well, what happens after five years when that $12,500 a month stops? Well, in five years, the $7,300 a month Social Security starts. So we replaced some of it with Social Security, a much higher Social Security. And then we set up another annuity, which we've shown and talked about on this show many times, which they're going to put a million dollars of their IRA in there, and it's going to kick out $112,100 a year starting in 2030 when the other one stops.
And it's guaranteed to last as long as both either Tom or Chelsea is alive, or both of them. So it pays for life. And so they're going to have much more income after 70 than they did pre-70 or during these five years. And that's kind of it for the show is that through the purchase of two annuities, the delaying of Social Security, we got them their money. And then there's a whole lot more to the plan. And we're going to talk on the back half of the show about how that plan plays out in simple matters. But it's pretty easy to do what we do if these people have the amount of money that Tom and Chelsea have saved up in both retirement accounts and out of retirement accounts.
Right. And so the neat thing is that Tom's got this software, I guess Cardinal has this software, that Tom's an expert in. And we know obviously for most of us, especially me, when you start talking about a million dollar annuity or a million dollar in our IRA, that's not us. But the neat thing is that it's just as applicable for your worries that if you put how much money you have saved here and what your Social Security. And then there's other issues like the age of your spouse and what's going on with your Medicare and what's going on with all these different things that all enter into the idea of cash flow. Because clearly all those things are part of what's going to be your cash flow, one of which is, of course, long term care. And we talked about in many shows that that can come in and just wreck a plan. And so the neat thing is you guys put all that stuff into the software, right?
Oh, it's in there. And we buy the software from Right Capital. I mean, it's a company that provides all of this and it's really tailored toward retirees. And we do a lot of planning for people that have about 20% of the money that Tom and Chelsea do. And by the way, they need more than 20% of the $12,000 monthly spend. And all of these numbers work out fine. So don't let the size of these numbers scare you. We did this based on a presentation that Tom and I made to an industry group. And so we just used these doctor clients as an example.
But plenty of our planning people have about 20% of the wealth with this exam. Right, right, right. So this would be a good time to remind you that the show today is brought to you by Cardinal Guide, cardinalguide.com. And there, as always, we talk about these seven worries tab. And of course, today's worry is running out of money or, you know, obviously retirement income. And so, you know, as we talked about, there's going to be five of these particular shows on Tom and Chelsea.
And all of those will be under that same worry tab. And of course, the show notes are what's absolutely beautiful about this. Because as you look at the show notes, as you look at the video that is along these same lines, you know, you get to see the software. You get to see how the software works. And, you know, what an opportunity you have, again, to finish well.
Because that's the idea of the show. It's the idea of what we're talking about is that by using all this information, you know, we want you to finish well as we do. And again, it's all at cardinalguide.com, as well as Hans' book, The Complete Cardinal Guide to Planning for and Living in Retirement.
And naturally, you're going to need the contact information to get them to put that information of yours into their system. And that's all there at cardinalguide.com, you know, the contact information for Hans and Tom. And so we're going to be right back with a whole lot more of retirement income plan, cash flow specific.
We'll be right back. 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 today's show, retirement income plans, specifically cash flow. We're following the adventures of Tom and Chelsea through a series of five videos, with today being the first, specifically cash flow age 65 to 95.
So that's interesting, Hans. Why do you go so old? Well, we do that, you know, in all our plans because both people might live that long. And we want to make sure that if they live that long, they don't run out of money. And so we realize most couples, they're not both going to live to be 95.
Probably one of them is going to go in their 80s or 70s and then the other one is going to live on and that one might live to 95. But we assume the best and we just go to 95. And some people ask us, what happens if I live to 95 or 96?
Well, then we can just move the little slide over on the software and we just say, oh, could we just change it to 100 real time? And then we show them how it works out and usually it's just fine. I mean, it's just because most of the people that we do plans for have significant money, assuming they both died on their 95th or 96th birthday or whatever. But that's the reason is that people are concerned about running out of money.
We want to make sure that we construct a plan for them that has a very high chance of having sufficient money to pay all the way out through 95 for both of them. Okay? Wonderful.
Yeah. And so this example that we did is, and there's going to be four videos. And the first one is over the retirement income plan, which we went over in the first part of the show.
We're going to go over it again. And then the second video is about the Roth conversion plan that we did. We proposed numerous Roth conversions for these folks. And then the third one is going to be on the Social Security delay where we're going to dig into that and show you the numbers of why we did that and show you the software. And the fourth one is going to be on the long-term care recommendation that we made for these folks. So, and just to go over the, probably the biggest thing and the best thing that we helped these folks with is we took their Social Security from taking it now at 65 and 4300 a month to a delay of five years and it's 7300 a month projected.
Okay? And we'll get into the details of that later, but that's a $3000 monthly increase that will have inflation on it every year past 70 and it's for the rest of both of their lives. And then furthermore, if one of them dies, then the survivor is going to live off of Tom's inflated Social Security check. So convincing them to delay was the, I would just say the best thing that we did for them. And then what we needed to do to convince them of that is we needed to replace the income and we used some of their investment money to create a five-year stream of income of 12,500 a month because their monthly spend they were looking for is 12,000 a month. So we created 12,500 because we got to put a little inflation in there because it's a fixed amount for five years.
And we did that out of money they've already paid taxes on. So their actual taxable portion of that 12,500 a month is only going to be $1300 taxable. And we did that for a reason because they're going to have a very low taxable income for five years and we wanted to make room for some substantial Roth conversions. Okay, but we're just sticking today on the income.
So then you say, well, what happens after five years? Well, we set up on five years the Social Security is going to start at that much higher amount so we can throw $7300 a month over there on their good side of the sheet. But then remember that this five-year income annuity, the SPEA, is going to stop at the end of five years so we put another annuity in there that starts an income of $112,100 a year which is a little under $10,000 a month. And that income lasts as long as either Tom or Chelsea is alive. So if one of them dies at 80 and the other one lives to 99, they're going to be sending that $112,100 a year to the survivor all the way to age 99. So it has a life contingency on it. And so we've just shored up their income and guaranteed it through the use of Social Security and two annuities and we've put a big inflation factor in there. If you add up all the money they're getting after 70, it's pretty significant and they still have a good amount of money left over that's going to be invested that's going to be for other contingencies or inflation itself.
It's pretty cool actually. Yeah, I would think, you know, again, it's the beauty of making this totally, you know, sort of bulletproof and what were Tom and Chelsea's reaction when they saw it? Well, yeah, I mean, they're just, I mean, first of all, they're just staring at the screen and initially, as most people would do, you try to poke some holes in the thing. I mean, and it just, because we don't give them that whole summary real fast like I just gave you and they're looking at on the screen, they're looking at their money in the software that we have in the video. So I'd encourage you all to watch that video or watch all four of them because it, you know, it shows models Tom using the strategy, but they were just thrilled because their concern is, do we have enough money here?
Can we create enough income and not run out of money in our 80s? And they got that answer is they could spend more than $12,000 a month. And Tommy even showed him that and he shows everybody that he starts bumping it up and then it's really easy to do in the software and you could find the pressure point real quick where, you know, you get to a certain level of spending because that gets inflated every year in the software all the way into your 90s. And, you know, you hit that point. This is the amount that you could spend and not run out of money.
And they're elated because that's the big question that people have. And it really causes people, many people like Tom and Chelsea to be misers, to just live off of a smaller social security and make small little distributions because they're afraid of taxes and they're afraid of stock market corrections and they're afraid of a lot of things of doing to their nest egg and running out of money when they're in their 80s. Including long-term care, right? That's baked into this pie as well, right?
That's baked into the software. We got, in addition to everything I've talked about, we got Roth conversions. So we're going to take on taxes and try to reduce their lifetime tax bill and that'll be shown in a later show.
And then we've recommended the purchase of a hybrid life long-term care annuity with a single premium out of their IRA of $250,000 that they're going to transfer into another IRA. And I'll just make you wait for all the details on that. But it's all put together and all brought together in the financial plan and in the software. And the whole idea is that they can just go enjoy their retirement and monitor it regularly and they're going to have us in the background.
Right. And when you're talking about a $12,000 a month cash flow, when you try to wrap your mind around that one, you can have a lot of fun with that, I would think. Knowing that you're out on a cruise for six months or whatever and that just keeps coming in.
Well, it does. And frankly, with people with this kind of money, they have a little bit of that on their mind, but they're afraid to start doing it because they think they're spending their money from their 80s. And then in the software, this thing gets inflated every year by our estimate of inflation. So by the time these people are like 80, that's draining out of their account, 18, 19, 20 grand a month. When the reality is people will generally trim back their spending when they get to be 75, 77, 80, just because they don't want to do it anymore. And it's just so we can in this software, let's say we had run across, these people didn't have as much money, but they still had this desired spend.
We can scale that back at like 75, taking all that into account. And that takes a lot of pressure off of the financial plan so we can show them how they could spend 12,000 a month inflated for 10 years and then starting in the 11th year, that's scaled back to the inflated number of like 7,000 a month or 8,000 or 9,000. So we've got a lot of flexibility in the plans and some people do that, the people that don't have enough money to support the right after retirement spending. Yeah, as you could imagine that life is going to come at them in all sorts of different angles, but that's why a plan comes in and having some intentionality on looking down the road and already they found some things they could do between the age of 65 and 70, which critically is going to change the trajectory of what happens when they're 80 or 90, right?
Oh, it is. And we just want to list what are the threats. I mean, you've got long-term care, that could happen to both of them and it could happen in their 70s and that could destroy a financial plan. That's why we need long-term care insurance. We could have hyperinflation. We need to plan for that and that's where the cushion comes in.
The stock market crash, right? I mean, you've got all kinds of things that could happen, but the ones that we know about and we can quantify, we can prepare for them and we use their assets to do that. And so it tames down the amount they have just for raw investment, but it also takes a lot of the risk off the table. Once again, the show is brought to you by Cardinal Guide, cardinalguide.com, and there you'll find the seven worries tabs. And we don't want you to go into temptation, so click on that one and you're going to see a video along these lines of, again, retirement income. And that idea of retirement income, well, there'll be this video that was with Tom and Chelsea's example and all the show notes that gives you all the details of the plan.
You can see, again, Tom putting all this stuff into the software and how cool is that? It's at cardinalguide.com as well as Hans' contact information and Tom so that you could obviously put your numbers into this plan and see how that works for you. And of course, Hans' book, The Complete Cardinal Guide to Planning for and Living in Retirement. Thanks, Hans. Thank you very much and God bless you.
God bless. 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 Whale 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 Whale 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 Whale radio show on the website and send us a word. Once again, that's cardinalguide.com. Cardinalguide.com. This is the Truth Network.
