Welcome to Take Back Retirement, the show for women 50 and better facing a financial future on their own. I’m Stephanie McCullough. And along with my fellow financial planner, Kevin Gaines, we’re going to tackle the myths and mysteries of quote unquote retirement, so you can make wise decisions toward a sustainable financial future. Through conversations and interviews. You’ll get the information and motivation you need to move forward with confidence, and we’ll be sure to have some fun along the way. We’re so glad you’re here. Let’s dive in.

 

Stephanie

Have you ever done a jigsaw puzzle? You’ve got this box of like 500 pieces and different crazy shapes, all kinds of colors, and it feels a bit overwhelming, right? How on earth are you going to turn that into a lovely picture? Well, for me the first step is to start to separate the pieces, right? Maybe I’d dump them all out on the table and then I start looking for the edge pieces and it’s always exciting when you find the four corners and then maybe I start categorizing by color or by certain patterns. Building your retirement income plan is like building a puzzle. This is Stephanie McCullough

Kevin

and this is Kevin Gaines. Welcome to the Take Back Retirement Podcast. So, just like the puzzle pieces and trying to put them into different categories, what assets do you have to work with? And what we’re talking about is categorizing the different tools you have at your disposal and how you can use them to best support your goals.

Stephanie

Right. Whenever we start with a client, we always begin with what is most important to that person and what type of life they’re trying to create, what they want to experience, what they’re worried about, who their most important people are, right? All of that stuff is absolutely the first step, but…

Kevin

But and this is really important that before we can start saying how all of it’s going to work, we have to know what we’re working with. I mean it’s just like anything else. You’re going to take it. You want to take this inventory and say, do I have access to these things? Then you can figure out how they’re going to work together. And this is really important and there’s different categories. Some may be able to generate a lot of income for you, but there’s, you know, they can go up and down in value or there’s stuff that’s going to be guaranteed, but you can’t really take more than what they were allowing. And I mean, a lot of these topics we’re going to get into in later podcasts. This is really just an overview to help you understand and start thinking of the different tools you have.

Stephanie

Yes. So, what we want to look at is kind of the main categories people often have to work with. Everybody’s picture is going to be different and unique to their situation. So, you may or may not have these pieces, but we’re going to cover the main ones. And really what we want to look at first is the government programs. We are in the United States. So, we’re talking to mostly us citizens or folks who are eligible for the two main pieces, which are social security and Medicare. And like Kevin said, we’re not going to get into all the gory details about both of these programs, but we want to give you a couple key pieces of information. Kevin, what are like three things people need to know about social security?

Kevin

Well, real quick, I would say social security is probably the single most important tool available to you. And the biggest misconception people have is that it’s a real simple decision. There’s actually a lot of flexibility and strategies you can use to claim social security. So, you want to understand how it really works. And that’s what we were talking about here first. You know, we’re talking about people that somewhere between 65 and 67, you’re going to be eligible for your full retirement benefit. But if you can plan so that you can claim it later in life, you’ll actually receive a larger benefit. So, there’s that.

Stephanie

A lot of the women I work with are surprised to find out that they are eligible for a benefit, even if they’re divorced or even if maybe they worked in the home, uncompensated for a large part of their adult life. Widows as well can be eligible for a benefit. So, it really is a key piece. And of course, the most important part is you can’t outlive it. There’s a big fear about people running out of money. Social security is going to pay you as long as you’re on the earth.

04:59

Kevin

And the other big benefit that we get from the federal government is Medicare. And what this is, is a guaranteed health insurance program that regardless of your physical condition, you’re going to be able to receive at least some of this benefit. And there’s different parts and they cover different parts of the medical process. But again, it has a series of set rules that you need to follow in order to maximize your benefits. So please be aware of the different dates associated with that too.

Stephanie

We will have another podcast on that, I’m sure. At least one on Medicare coming up soon. Yes. So that’s government programs and maybe there are others, right? There are some other specialized federal retirement benefits that some people might have available to them, but that’s the big piece for most people.

Kevin

These are the universal ones. Because you spent time in the military, you’re entitled to VA benefits or something. And again, we can talk about these later, but really these are the two big programs from this.

Stephanie

Right. So, there is a variety of other income sources that people might have available to them that you may or may not have some of. One could be a pension, which is a retirement plan. Kind of what we think of now as an old-fashioned retirement plan from an employer, right? An employer guarantees that they will give you a lifetime income just for having worked there for a period of time. Like I said, increasingly rare, but there are still people who have pensions out there

Kevin

And not just pensions from when you were working, but what if you still want to work? As we talked about in the previous episode, your retirement might be your desire to work, just not as much. Well, that’s still going to be an income source that you can use to support your lifestyle.

Stephanie

Lots of people go to part time work, some people even try to pursue a new career. Any type of income that you’re bringing into the household are dollars you don’t have to spend from your savings. So, any type of part time work.

Kevin

And we’re also including rental income when we’re talking about income sources, you know, some people may consider that part of their savings or part of their assets, but truthfully, this is at least, in theory you can turn around and just receive this income and you don’t have to rely on the market or your investments. It’s a stream of income that you’re not solely dependent on creating.

Stephanie

The next big category is your savings. Money you have accumulated over your lifetime. And this can be in a variety of different types of accounts. Another workplace retirement plan, right? Provided by your employer could be a 401k or a 403b. Sometimes your employer put money in on top of your own money and sometimes they didn’t. But for a lot of people, that’s their biggest savings vehicle is a 401k. An IRA individual retirement account can either have been at one time a 401k and be rolled over or it could be started on its own and contributed to during your working lifetime. So, an individual retirement account is another very common asset that people have and they come in two varieties, kind of your traditional and then Roth IRA.

Kevin

And you know, each of these have their own tax rules to be aware of. Generally speaking, you would like to have a mix of both, but that’s, again that whole conversation could be another two or three episodes discussing the pros and cons. But you know, in addition to your retirement accounts, you have other investment accounts or your bank savings such as CDs. And you know, as some of you may be aware and just to point out to others, when we say IRAs and 401ks they don’t necessarily need to be invested in stocks. They could be IRAs especially could be in CDs. So, this is a confusion. And Stephanie, I know you’ve seen this as well, that people think IRA is an investment as opposed to what it really is, is just an envelope to hold your savings in, whether it’s in the bank or invested in the stock market or bonds or whatever. And that can be confusing for people from time to time when they’re talking about this stuff.

Stephanie

That is true. That is true. And we will definitely be covering that in great detail, I am sure. Another big asset for a lot of people, not for everyone, but for many people will be their house. And whether or not you actually plan on moving in retirement, there can still be ways to access the value of your home, right? There are reverse mortgages, lots of people choose to downsize, maybe move to a retirement community. Some people don’t want to be a homeowner anymore. They want to sell and rent. So, there’s different ways, different strategies for potentially using the equity that you’ve built up in your home over the years.

10:25

Kevin

And truthfully, I think this category probably is overlooked more than any of the other categories we’re talking about because many people just view their home as their home and they just figure when their estate needs to be settled, then the house will be sorted out. But there is a lot of flexibility available to you to do something with it while you’re alive and still live where you want to live. We’re not saying you have to do it, but definitely being aware of the potential could be valuable in this process.

Stephanie

Yup. So, another category that lots of people might have are types of insurance products, and there’s two big category types I’m thinking of. One is annuities. Annuities kind of mimic a pension plan where they can pay you an income for your lifetime. And then the other is life insurance. Any type of permanent life insurance is required to have some type of cash value in it. So that may or may not be something that you want to or could use during your lifetime to supplement your income.

Kevin

And, this is why we talk about taking the inventory to begin with, is to understand everything available. Because when we have the next conversations of what do I do and when do I do it as far as accessing these different assets, they fit together different ways. There are different strategies, but if you haven’t done the inventory process to understand this, you may not realize the flexibility that you have in using many of these tools.

Stephanie

That’s very cool. A lot of vehicles might be sold kind of as the one size fits all solution. But in truth, each type of tool is designed for a particular use or has, let’s say strengths and weaknesses, right? Situations where they shine and situations where they don’t. And those are the kinds of things that Kevin and I know as financial planners. What you know is the stuff you have, right? We can tell you what it means and help you figure out strategies on how to put it together to get where you want to get to. But Kevin, there’s another category of items.

Kevin

Right, and this category can be a little trickier because it’s the, for lack of a better phrase, it’s the miscellaneous. The other stuff you have that maybe you can do something with. Do you own a business or do you have some sort of a professional asset that you would be able to monetize, to be able to sell or generate some sort of income after you step away from it? Collectibles, you know, do you have, especially if you’re talking about that potentially downsizing, you may have an extensive collection of thinking of my mother. She has a humble collection and when they move, you know, it’s a consideration that, Hey, maybe we can do something with this as well as a second home. Do you have that shore house? Maybe you want to live there or maybe if you’re going to move to another part of the country, you don’t need it anymore. It’s an option. It’s something you can use, whether because you choose to, as things progress. If we need to take that step, you can say, well, there is this option available, too as a plan B if you will.

Stephanie

That’s a very good point because one of the things we’re always looking at is flexibility, right? We don’t want to pretend that we can predict the future.

Kevin

No, and that’s, I think that’s probably the biggest conversation we try to have is helping people understand this is about being flexible. There are, you know, social security is a wonderful tool for your retirement. Truthfully, it’s not, once you turn it on, it’s really not all that flexible. You’re going to get that check each month and it’s a great secure base to have, but it doesn’t provide the flexibility. You’re 401ks and IRAs. There’s a lot of flexibility with them. You know, just like, maybe your CDs or annuities and it’s understanding how they fit together that, their true power can be realized.

Stephanie

Yup, and again I don’t want to go into a whole lot of detail on this, but taxes are a consideration as well, right? A lot of these vehicles have different tax treatments and that’s a piece that we want to take into consideration because, while we all want to do our part, we don’t necessarily want to give more to Uncle Sam or our state governments than we need to.

15:10

Kevin

Yeah. I mean that’s a big consideration because you know, again, not wanting to jump ahead into another episode, but you know, taxes are an expense and when we’re retired, trying to control and minimize our expenses is a great way to have a successful retirement. So, being aware of our tax bill is something we want to try to control, but also understand how one choice can impact others such as a Roth conversion. Well, that’s going to generate some taxable income for you that year. And that’s all well and good. But depending on the size of that conversion, that could impact your social security and Medicare as far as you know, the premiums you may have to pay or taxes, you might get charged on those. So, this is where the, again, I hate to keep saying, using this phrase of the power of them working together, but understanding this, having this inventory and understanding the different moving parts. How these tools are going to help each other is so important to the planning.

Stephanie

The interplay between them. Yup. So, our suggestion to you is because this retirement income planning is a complicated process and our goal with the podcast is to demystify it and to help you get your arms around it. Our suggestion today is to start to gather your information, right? Put all the puzzle pieces on the table. Step one and then start to try to categorize them. We actually have an inventory worksheet that we’ve created that we’ll link to in the show notes. It’s a free download for anybody who might find it helpful just to start, get you thinking about what you have available to you. Maybe being a little creative about it, too. What potential post retirement income sources could you think of, right? Are there some ways that you could earn a little bit of money here and there? But the sooner you start thinking about it and gathering your information, the better.

Stephanie

In my experience, a lot of women especially tend to have these stories running in our heads. Like, oh my gosh, I should have done more, or, I can’t believe I haven’t paid attention to this for so long. Or, I’m going to be a bag lady because I never put enough money in my 401k. Whatever the stories are in our head, the danger of them is that they prevent us from taking the steps that actually help. So, give yourself a little compassion, set aside the judgmental voice and start to gather your information. Hopefully this free worksheet will be helpful to you.

Kevin

Don’t forget retirement income. We know retirement income planning is complex, but the best way to handle something complex is to break it into as small of pieces as possible. And that’s what we’re doing here is helping you break these pieces down into manageable steps and don’t delay. Yesterday is gone. So, the best day to start this planning process is today. So, do it.

Stephanie

You’ll feel better, you’ll feel more in control every time. I always say to my daughter, the antidote to anxiety is action, right? Taking some action step. It will give you a little momentum. Find a buddy if you’d like to do it together, right? Put together a little accountability group and maybe work through the inventory worksheet together. There are ways to find support. Don’t listen to the judgmental voices, whether from inside your head or from outside. You can do this and we’re going to be here to help you. This is Stephanie and Kevin checking out. It’s goodbye from me.

Kevin

It’s a goodbye from her. Goodbye.

 

Be sure to subscribe to the show and please share it with your friends. Show notes and more information available at TakeBackRetirement.com. Huge thanks for the original music by the one and only Raymond Loewy through New Math in New York. See you next time.

19:15

Investment advice offered through Private Advisor Group, LLC, a registered investment advisor. Private Advisor Group, American Financial Management Group, and Sofia Financial are separate entities. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investments may be appropriate for you consult your financial advisor prior to investing. This information is not intended to be substitute for individualized tax advice. Please consult your tax advisor regarding your specific situation.