Kersten Wealth Management Group - Money Sense 7-08-23

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Episode Transcript

(00:01):
Good morning, and welcome to MoneySense. You're listening to the advisors of
Kursten Wealth Manager Group, Kevin Kurstonand Brad Kurston on show one four hundred
and eighteen. As you mentioned Brada couple of weeks ago talking about how
many shows we've done and certainly beenaround a long time, and right now
we're spec dam in the middle ofdusting off one of our favorite topics,

(00:22):
which is financial planning by the decade. We had a couple of vacation weeks
here and not going to really talkabout any current market conditions because we're taping
this show, so we're gonna goback to a topic that we got a
lot of positive feedback on, andso last week we took care of the
twenties, we took care of thethirties, we took care of the forties,
and talking about the planning topics whenyou're that those ages that you should

(00:45):
be thinking about and things that youshould be tackling completing, and once you
get past your forties, it's it'swe're now talking about let's plan for retirement
and what should we be thinking aboutnow when you're in your early fifties.
I think a lot of people startto think, Okay, I only have
fifteen years to retirement. Okay,fifteen years to retirement is still a long

(01:06):
time, and it's not time tobatten down the hatches. So something we
talked about a lot last week's showand talk about it one more time here,
and it is getting too conservative tooearly, Okay, with fifteen years
left when when you turn fifty.Just taking a look at the returns,
I mean, the last ten yearshave been pretty volatile. And if you
just take a look at the returnsof say the twenty thirty fund from X

(01:30):
y Z fund, and it doesn'tmatter what it is, the ten year
return for this fund is six pointeight percent. It's pretty good for the
last ten years. The SMB fivehundred is twelve percent. The difference in
the ten year return from six pointeight to twelve if you started with a
million dollars, is about a fourhundred thousand dollars return over a ten years.

(01:51):
Yeah, but Brad, what aboutwhat about a big down year.
I'm getting close to retirement, Ican't afford it. Well, two thousand
and eight saw a thirty six pointeight percent down year from high to low.
Is even greater, and the recoverytook five and a half years.
So if you're aged fifty to dayand you're by the way, if you're
still contributing, your recovery is evenfaster. Okay, absolutely, If you're
aged fifty to day and you andyou have another two thousand and eight that

(02:14):
takes five and a half years torecover. In five and a half years,
you are way ahead of you whereyou were five and a half years
earlier, and you're only fifty fiveand a half sixty fifty six years old
at that point in time, oreven if you're fifty five, you're only
in your early sixties and you've completelyrecouped and then some. So average twenty
thirty fund that really is your youknow, your fifty call it fifteen years

(02:37):
away from retiring, is actually thatwould be eight years away from retiring,
is forty percent in bonds. Theaverage twenty thirty five fund is twenty seven
percent in bonds. It's too muchin bonds with somewhere between eight and fifteen
years away from retiring, it's it'sit's just too much. You're gonna have

(03:00):
any bonds? Do it in thatafter tax account, joint account we talked
about. Because that money has ashorter time horizon. That might mean money
when you that you need when youtake a break, change jobs, want
to go on a one year vacationand come back to work. That's the
money that could be in bonds.And that's that tax free municipal bond area
that you and I talk. Let'stalk about that time horizon before we move

(03:22):
on that non retirement accounts time horizonwhen you're fifty five years old might be
ten years to liquidate. Right,I'm gonna retire at sixty five, and
in the year we turned sixty five, we're gonna spend a bunch. We're
gonna go on around the world trip, or we're gonna buy a second home.
That's ten years to liquidate. What'syour retirement accounts liquidation date? It's
infinity. You're never going to liquidatethat account now, how about four?

(03:45):
Or if you're gonna liquidate it moreaggressively, it's when you're in your seventies
and eighties. So if you're ifyou're fifteen years away from retirement or ten
years away from retirement, the bulkof this money has a thirty year time
horizon at least at twice a yeartime horizon for the bulk of it.
So it's you're nine retirement account mighthave a ten year time rizing to fully

(04:05):
liquidate or a five year time risingto fully liquidate, but your retirement account
is much longer than that. Youmight have a small chunk that has a
ten year time horizon, maybe tenpercent of the account, and you might
have another twenty percent that has afifteen year time rizing. But you're talking
about the rest of it, callit seventy five percent of it has a

(04:26):
twenty year time horizon or greater.So don't be afraid to have more in
long term investments. And those longterm investments should be stocks. So you're
you're into your fifties brand you mentionedit on last week's show, but let's
let's do it again. We're talkingabout you're still in peak earning years.
You should be aggressively now putting intothe AFT. Excuse me, the pre

(04:47):
tax part of your four oh oneK. Your roth is still there,
it's still growing, but you shouldn'tbe contributing that anymore. You're making some
good money now you're into your fifties. Talk about the catchup provision and again
so yeah, so once you're agefifty, it's not gonna happen automatically.
With most plans, you have todo it yourself. You can put another
seven thousand, five hundred in ofemployee contribution, so for twenty twenty three,

(05:11):
that's thirty thousand dollars that you couldbe putting in as your contribution.
Now, if you're one of thesethat I got my full contribution in by
November and you think it's just goingto happen automatically, it is not the
case. In most cases. Youeither have to go in check the box
online or you have to tell yourplan administrator that you want to include the
catch up with all of your contributions, and then you'll get to that thirty
thousand dollars number for this year ifyou're if you're one of these plans that

(05:38):
is individual four one K because you'reself employed or a SEP also has some
ketchup contributions that you can do forthe raw four one K. It's the
same way you could do a seventhousand, five hundred dollars ketchup contribution over
age fifty for a raw four oneK as well. But most people by
this point are not doing a rawfour one K you're four or three b's
your four to fifty seven plants allhave this post age fifty ketchup contribution,

(06:00):
and that's one of the things they'retalking about, even increasing I think they
did with Secure Act two point zeroand having some additional ages later we'll talk
about that. We get to thesixties where you can do even more than
the seven thousand, five hundred dollarscontribution. So one thing that's changing,
and this is why we one ofthe reasons we have a lot of new

(06:21):
rules and regulations, so we hadto dust off this financial planning by the
decade. Starting in twenty twenty four, Brad interesting wrinkle to the law.
If a taxpayer has income of atleast one hundred and forty five thousand for
the year, the ketchup contribution mustbe done as a roth Okay, yeah,
starting in twenty twenty four, soyou can still do it in twenty

(06:42):
twenty three, but starting in twentytwenty four, if you have more than
one hundred and forty five thousand,it has to be done in row.
Starting in twenty twenty five, anew special ketchup contribution is permitted, and
we'll talk about this. Never usedto have one for people in their sixties.
People in their sixties will now havean additional ketchup contribution of ten thousand
dollars the greater of ten thousand dollarsor one hundred and fifty percent of the

(07:03):
current standard ketchup, whichever is greater. So once the taxpayer reaches sixty four,
the regular lower ketchup contribution limit applies, whatever it is at that time.
So we'll talk about that a littlebit more when you're in sixties,
but a little bit more of aketchup contribution allowed. Still can do the
regular contributions. If you're making overone hundred and forty five thousand dollars,

(07:26):
you should into the pre tax partof your plan. Doesn't mean don't do
the ketchup. It'll just go intoyour wrath if you're making more money.
So you mentioned allocations, still gotto maintain primarily an all stock allocation.
Still contribute to that after tax account. You should be building that up at
this point, still contributing to anhsay, let's talk about a few things

(07:48):
that are kind of non investment relatedthat now that you're in your fifties,
it's time to start thinking about Imentioned as you get to these certain thresholds,
you're probably doing less insurance because theincome replaced smith starts to go down
because you've built up a critical mass. But you're going to continue to do
that when you're in your fifties.But there's something else that people need to

(08:09):
start thinking about. The first one. I'll touch on this maybe a little
bit later, but the first oneis starting to think about an umbrella policy.
Right now, you have assets youneed to protect. Before it was
you needed to have asset replacement forincome replacement is something were to happen to
you before you built up a criticalmass. But let's say you're in your
fifties now and you've saved a halfa million or a million dollars. Now

(08:31):
you need to protect that million incase something happens, you get in a
car accident, somebody gets an accidenton your property. You didn't need it
when you didn't have any assets toprotect, But now that you have assets
to protect, it's time to startthinking about an umbrella policy. I would
say the term policy and the umbrellapolicy are kind of two opposites. The

(08:52):
less need you have for the term, the less need you have for the
life insurance, the more need youhave for the umbrella, the term goes
down as your assets grow. Theneed for the umbrella grows as your assets
grow. So when you get tothe point where you no longer need any
income replacement because your assets to buildup to a point, that's when you're
a maximum amount of umbrella policy thatyou need. You need to protect the
assets now, right, And ifyou're thinking about income replacement four or five

(09:15):
million, you have to subtract outhow much you've saved up to this point.
So just to kind of give peoplea milestone, if they're age fifty
and I'm gonna say married, filingjoin, Let's say they're making two hundred
thousand a year. Let's say theywant to replace eighty percent of that income
one sixty per year. Okay,four percent rule states that you need four

(09:37):
million. Okay, so I findfifty, but you also have so security
or a pension. Sure. Butif I'm fifty and I want to have
one hundred and sixty thousand a yearof income, where should I be?
Okay? Well, if you're doingtwenty five hundred a month and savings,
that's thirty thousand a year. That'swhat the max four one k contribution would
be with the catchup. I'm noteven at this point going to include the

(09:58):
additional money that you would be puttingin, say a joint account or something
like that. You should be ata million because if you average eight percent
for the next fifteen years and youcontribute twenty five hundred a month, you
should be at that first million.Because at sixty five, you'll be at
four million if you average eight percentof years. So that's kind of a
milestone checklist that you should be whenyou're age fifty, you should certainly be

(10:20):
at at least a million. Twoother things to think about. You might
now have kids that are approaching college. Going to start thinking about five to
twenty nine distributions. Okay, realquick. If you build it up,
you've put the money in, shouldbe starting to take it out. Use
it for college. Make sure it'sused for college. That's tuition, room

(10:41):
board, all expenses. If youbuy a computer or whatever it might be.
Use it for college. What ifmy child doesn't go to college,
You can do a couple different things. You can change beneficiaries, you can
still keep it for them, andif they have kids now, you can
just change the beneficiaries to their kids. So if you've made the contribution and
you say this is just to helpme, and I have another child or

(11:01):
two, you can just change thebeneficiary to one of them if they go
to college. But if you're marketingit for them, you can still just
keep it in their name. Ifthey decide to go later, or if
they have children, you can justput it into their children's names. What
if they get a scholarship, theamount of the scholarship can come out still
as a tax free qualified contribution.You don't get penalized because they're going for
distribution. Because they're going for free, so only in the year that they

(11:26):
receive the scholarship has to come outin that year. You can't build it
up cumulatively, so a lot ofdifferent options for college. Obviously, using
it for college is pretty easy.You offset expenses with the amount you pull
out. If you have money leftover, you have choices to change the
beneficiary or leave it in your child'sname and change it to a beneficiary who
may be born down the road.Last thing I'll mention in your fifties and

(11:48):
people say, boy, that seemsa little early. If you are interested
in a long term care policy.That's the time to do it because number
one, you have the power ofcompunding of whatever you put in. You
have a lot more time, soyou can get enough money in. You
have more income. Okay, youhave more income that you can use.
You don't want to be doing longterm care after you're retired because now that's

(12:11):
another retirement expense. Yet, getthe money in, get the policy established,
and you're healthier. A lot ofthese long term care policies will look
at your current health status. You'reprobably going to be healthier in your fifties.
We've seen people get denied brad whenthey're in their mid to late sixties
or seventies. You're going to behealthier in your fifties. So if you
if that's something that's a goal ofyours because maybe you had a parent or
a grandparent go through a life savingsas a result, their fifties is the

(12:35):
time to think about the long term. So you mentioned something that I'm gonna
I want to touch on it,and you're mentioning you have the income.
You're talking about plans where maybe youonly pay for a few years or ten
years, or you're only pay forfifteen times ten years, right, Yeah,
and that's the plan that you shouldbe on. That's the plan because
there's going to be increases if youdo a full lifetime payout and when you're

(12:58):
actually needing it, you might notbe able to afford it. So a
lot of different plans that are maybelife insurance based, that have long term
care riders, or long term careinsurance with life insurance riders will allow you
to make one time, five year, ten year payments and then you're done.
So if you're starting when you're fiftyfive, you're done by the time
you're retired. And now you've hadthat covered. You want to be done

(13:18):
with those premium payments when you're retired, because I've seen too many people have
these lifelong long term care payments thatjust go up twenty percent a year and
they eventually get to the point whereit's very difficult to afford. You don't
want to be there, so bedone with it. Do the ten pay
type policies where you're done by thetime you retire, So think about that

(13:39):
in your fifties, not in yoursixties or seventies. For long term care,
especially if you have a family historyof Alzheimer's, dementia. Those are
really the types of diseases that peoplestay in a facility for a very long
time and go through a lot ofmoney. When we get back from the
break, we're going to shift gearsto the sixties. The sixties and now

(14:00):
you're in close to the pre retirementyears, so there's a lot to think
about with allocations and savings at thatpoint in time. You're listening to Money
Sense Kevin and Brad Kurston, We'llbe right back and welcome back to the
show. You're listening to the advisorsof Kurston Wealth Management Group, Kevin Kurston
and Brad Kurston. As a reminder, we are professional financial advisors with our
offices in Perrysburg. If you wantto get in touch with us throughout the

(14:22):
week to talk about what we've beentalking about these last two weeks with financial
planning through the decades and some thingsthat you might want to be considering.
Give us a call throughout the weekFOE eight seven two zero zero six seven
or check us out online at Kurstonwealthdot com. Brad, we went through
the twenties, thirties, forties,fifties and six and now we're onto the
sixties, you're getting close to retirement. We talked about the recovery period of

(14:46):
two thousand and eight. That's aworst year we've had in seventy years.
So I use that as an example, five and a half years to recover.
Might want to start thinking about puttingsome fixed income for safety, some
treasuries into your portfolio, especially yourretirement portfolio, especially in twenty and twenty
three. Now that you can geton short, short duration three months,

(15:09):
six months, nine month, twelvemonth treasuries five full percent, Okay,
now we can start to think aboutit. And I would say this is
where I knock the target date funds. Okay, First of all, if
the target date funds said, let'ssay you turn sixty in two thousand and
eight, that's not the time toadd forty percent to fixed income, right,

(15:30):
okay? And so but I reallythink the target date funds get it
wrong. I think they do itmuch too gradually. Okay. I think
you should be one hundred percent stocks. And then when you're sixty and you're
five years to retirement, if you'renot at a low point, if you're
a few percent off at all timehigh, even like we are now,
you should be jumping from zero toprobably forty percent bonds right out of the
gate, because jumping to ten percentor twenty percent and then the market has

(15:54):
a downturn, it's not going tohelp you that much. It really won't.
So now it's a time where whetherif you want to do it at
five years to retirement, I wantto do it at three years to retirement.
That's probably as far as I wouldstretch it. But you could jump
right in. As long as you'renot twenty percent, twenty five percent,
thirty percent from an all time highinequities, then you don't want to do

(16:15):
it. And the reason that you'retalking about this this bigger jump instead of
it being a percent a year likethe the glass, it doesn't matter,
it doesn't help. Well, thinkabout it. If I'm taking five percent
of my account out starting when I'msixty five, then when I'm sixty i
have five percent of my account hasa six year time rising. When I'm
sixty two, I have ten percent, fifteen percent that has a less than

(16:37):
five year time horizon. When I'msixty four, I've got I've got part
of my money's got a one yeartime rising, part's got a two parts
gotta three parts, got four.So now I need something that if the
market has a downturn, that willhold up better or be up when the
market's down. Now I have aneed for somewhere between five and twenty five
percent of my account or forty percentof my account that is in something that

(17:00):
is not going to be as vulnerable. And a lot more goes into that
allocation decision than you think, becausewhat if someone retires but they're gonna work
part time? Okay, Well,now your time rounds and is even longer.
So you need to sit down withan advisor. And it's not just
about I got to this age sixtyfive mile zone, so pull all the
money out. Um, it's it'sabout when you need the money, not

(17:22):
necessarily your age. So at thispoint the target date funds might be getting
a little bit closer. I don'tknow what is the what is the twenty
thirty was forty percent in bonds,Okay, so that's that's not even there
yet. Right. You still haveto be thinking about not what is my
year that I'm going to retire,but probably something five or ten years beyond

(17:45):
that. If you're at the rightallocation at that point, the twenty twenty
five fund at that point is let'ssee here, Um, well you said
it was thirty probably thirty what overwhat forty five? Fifty percent at that
point would be the twenty twenty fivefund. So I think that's a little
bit extreme, but we're getting alittle bit closer. Keep in mind,

(18:07):
when you're sixty years old, someof that money you need when you're eighty
five, So that's twenty five yeartime horizon at that point. The other
set of decisions that are very veryimportant when you start getting into your sixties
or social Security and Medicare decision,Well, medicare not so much of a
decision you have to do it.Yeah, you're doing it at sixty five.
Maybe what you're going to do atsixty five is a decision. But
let's talk about social security now,because I think people always have this fear.

(18:33):
But once you've gotten to age,I would call it forty five,
probably because we've never done anything totouch so security on anybody over the age
of forty five in the history ofsocial security. But certainly when you get
to your fifties, and definitely whenyou get to your sixties, when you
get to sixty two, you don'thave to be saying I better take it
because they're going to take it awayfrom me if I don't, that's not
going to happen. It is afear that we don't have to have,

(18:56):
and it's gotten better when people aretaking it. In two thousand and five,
fifty percent of all people took SOsecurity at age sixty two. This
year it was thirty Now female takesit a little bit higher percentage than maile,
but the average is about thirty percentof all people eligible for SO security
take it at age sixty two assoon as they can take absolutely. Age

(19:18):
sixty three is six percent of people. Age sixty four is seven, age
sixty five, that Medicare year isten percent, and between the ages of
sixty six and sixty seven for mostpeople that this is where we're going to
fall into that full retirement age.For most people, we're gonna wait till
that full retirement age because I mightwork to that point, and when you
get to full retirement age, whateverit is for you, that's when you

(19:41):
can still be working in collect soalsecurity. And so this is the biggest
percentage group. The full retirement agepeople are thirty one percent of all people
that are eligible to take so Securitytake it at that age the full retirement
age age sixty eight and sixty nine, or another ten percent, and only
six percent of all people wait untilthey're age seventy. Now, the reason

(20:03):
I want to talk about this ishow much people are giving up. I
think is they don't realize how muchthey're giving up and the percentage of your
overall income that you could be Bradif I wrote the deal down that people
get was social Security on a pieceof paper and didn't say it was social
Security and said what do you want? No, No, If I wrote
the deal down, said I havean investment that increases, and this is

(20:26):
not perfect math, and it's alittle bit different from sixty two to sixty
seven. It is perfect math aftersixty seven to seventy. But if I
wrote the deal down, you can'trepresent to you an investment that increases at
eight percent per year. Your increasesyour income at a guaranteed guaranteed by the
federal government eight percent per year,and on top of that has an inflation

(20:49):
rider on top of it. Sothe bigger your number, the bigger dollar
amount you get as an INCLO.Last year, for example, if you
were sixty two and you soul Security, you got an eight plus percent inflation
rider. If you didn't take solSecurity, you got a seventeen percent increase
to your expected income. That inflationrider does not kick in until you get

(21:11):
to sixty two. Once you're sixtytwo, even if you don't take soul
Security, you get the benefit ofthat inflation right. So only six percent
of people wait till seventy will saywhat would say? What is that?
What does that sign me up?Guess what? You're already signed up?
And yet nobody takes advantage of itbecause they listen to the fear mongering.
They listen to the fear mongering outthere about how you better take it now
or they're not going to give itto you. So the break even for

(21:33):
if you wait, will you bebetter off at all ages is between eleven
and a half and twelve years ifyou get to age sixty. I think
a lot of people have they knowgenerally what the life expectancy is. Okay,
at birth, it's about seventy eightfor a woman and seventy six for
a man. That's what everybody thinksit is. When so they think,
when I'm sixty two, geez,I only have fifteen years left. If

(21:56):
you've made it to sixty two,a male life expectancy is twenty a female
is twenty three. If you've madeit to sixty five, a male is
eighteen, a female is twenty anda half. If you've made it to
seventy, your life expectancy is fourteenand a half for a man and sixteen
and a half for a woman.So if you've made it to age seventy,
now you do know your own longevity. And I would also say if

(22:21):
you're if you're married and your spouseis also alive, all the more recent
to wait on the larger of thosetwo social securities because you get to keep
We only need one of you tolive to that eleven and a half twelve
year break even for it and beenthe right decision. Now let's talk about
the dollar amounts. Well, itjust real quick on that too, Brad,
because you talk about the life expectancyand people say, yeah, but

(22:45):
my dad died at seventy five ormy mom died at seventy five, I'm
never gonna live that long. Well, two things, okay, Yes,
jeans play an important role if youhave a lot of different multiple ailments.
You may want to start thinking abouttaking a little bit earlier. However,
you can't just simply use your parents. Okay, we're in a completely different
world. Modern medicine has improved greatly. Okay, your parents lived in a

(23:08):
world where four out of five doctorsrecommended camel lights. All right, that
was the ad right, And ifyou weren't a smoker, you took in
a lot of secondhand smoke. When'sthe last time you smelled secondhand smoke,
Brad? Probably when I was ina city most recently, right, a
big city like New York or Chicagogy. In fact, sometimes when you're walking
around and you smell it, you'relike, well that's strange. Yeah,

(23:30):
reminds me thirty years ago. Solet's we have a better lifestyle now.
There's a lot being made about peoplebeing you know, OBEs and all this
other stuff, but modern medicine hasadvanced greatly. So to think that you're
not going to make it that elevenyears is crazy. Yeah. And even
if that means, of course,no advisor would ever recommend this. Why

(23:51):
because most advisors want to have asmuch money to invest for them. I
find that to be almost without failthat they're recommending early soil security and praying
on that fear because that's less moneythat will come out of investments that they're
managing. Right, it shouldn't bethe goal. No, the goal should
be a successful retirement. If thatmeans I'm telling you to wait because we're

(24:11):
taking more out until you're sixty sevenor seventy, and I know you're going
to be more successful, then thenthat's what we should be recommending. So
talk about how drastic some of thesenumbers are. Waiting till sixty seven or
seven. Yeah, so the averagethe average soil security right now for last
year was one eight hundred and twentyfive dollars. Okay, The average sixty

(24:32):
two is about fourteen hundred. Theaverage age seventy is over thirty five hundred,
so that is more than a doublefrom sixty two to seventy. Yeah.
But Brad, if I die,I'll be mad I didn't take it.
You won't because you won't be aliveto know that. You won't be
alive to be mad. Okay,your live self will never be mad at

(24:52):
the decision for waiting. Okay.Now I want to first touch on one
thing here. There is no livingperson in the United States of them America
who waited till seventy, who regretsit? Yeah? Is that fair that
I can one percent guarantee that?Um So, let's talk about that inflationary
increase. Okay, So that averageage sixty two benefit of fourteen hundred,

(25:14):
what was it? What was theinflationary increase last year? Eight percent?
Something like that? Oh? Ohyeah, it was over eight percent.
Use. So the person with afourteen hundred dollars so security got one hundred
and twelve dollars raise twelve eight percentof one fourteen hundred. The age seventy
person, if they waited and theyhave thirty five hundred and twenty four dollars,

(25:36):
their eight percent increase is two hundredand eighty two dollars, So they
got more than a double of anincrease. And that compounds and then that
comes about the compounding effect. You'reseventy, How about the compounding effect when
you're eighty eighty five? And howthat just keeps going year after year.
Let's talk about what this means ifyou wait. How much is the present

(25:56):
value? How much do I haveto have had safe to replace that income?
Okay, the if and I'm gonnaassume that you're gonna you're gonna live
to a certain age. When you'reage sixty two and you're taking taking your
benefit. If you'll live to eighty, the lump sum you would have needed
to replace that income is two hundredand fifty seven thousand. They're gonna pay

(26:18):
you four hundred over that whole time, well, four hundred and two thousand.
You would have needed to have alump sum of two fifty seven to
have a replacement income where you're takingincome out and ending at zero. That's
what it's worth. That's what it'sworth. If you live to ninety,
it's worth three hundred and sixty fivethousand, and that they're paying you out
seven hundred and thirty seven thousand,Okay, and it's worth three hundred sixty

(26:41):
five thousand today's dollars in today's oryou'd have to save that much to be
the equivalent the same thing if youwait till seventy How much are they paying
you out if you live to ageninety If you waited till seventy one point
one five three million, so insteadof seven hundred thousand, they're paying you
out one point one The people whowait till seventy. If you're using an
average life, expect you a lotof times literally get over a million dollars

(27:03):
out of Social Security. Yeah,if you wait till seventy. Yeah,
the amount you're getting out of SocialSecurity if you live to eighty five is
eight hundred thousand. Lived to ninety, it's one point one five. You
lived to ninety five, it's onepoint five million you're getting out. Okay
that the lump sum required if youlive to ninety and you waited till seventy
is seven hundred thousand dollars. Okay, it's a three hundred and thirty five

(27:26):
percent difference in the lump sum requiredto replace that income. So by waiting,
yes, you're getting out five hundredfour hundred thousand, five hundred thousand
more out of soil Security. Butthe amount of replacement assets you'd have to
have to replace that income are threehundred and thirty five thousand. If it's
if it's age sixty two to ageseventy's, it's an exponential amount more.

(27:49):
And so I think more people needto wait. I think people are waking
up to this. I think peopleare working longer, pushing out that retirement
ages help people not go so earlyon social Security, but I think it
is still shocking that only six percentof all people are are waiting until age
seventy. And if you're two workingspouses, yes, you can make a

(28:12):
case for one of them going earlier, maybe at full retirement age, and
the other one at seventy. Andif that's the case, you'd want it
to be the larger because that's theone you get to keep when the first
spouse dies, The larger of thetwo should be should be taken. And
I even mentioned that no one everseventy years old ever regretted saying, well,
what if someone has terminal cancer whenthey're seventy, you're still providing for
your spouse. Yes, yep,you're still providing for your spouse. Now.

(28:34):
People always want to rule a thumb. I don't think there's any rules
of thumb, Brad. They're certainlynot all the file and suspend options for
people anymore where they could really maximizesocial Security. But I would say,
if you're gonna take one early,you're gonna do the smaller one early,
because that's the one you're gonna lose. Yep. Okay, I would prefer

(28:55):
that early with sixty seven, andthe bigger one you went till seventy.
But if you're gonna make an argument, say we're both retiring at sixty two,
maybe you take the smaller one atsixty two, but you still want
to wait on the larger one.Just be very careful though, because you
can't earn very much money before theystart confiscating a little over eighteen thousand dollars
a year of income and they starttaking one dollar for every two you make.

(29:18):
Yeah, so it's not just I'mnot taxed, it's they're just taking
it. So if you're still working, that should be the other option for
you. I'm still working, I'mwaiting till full retirement age, or I'm
waiting untill or you might do someconsulting or contract worked or whatever. It
might be. Not income from yourretirement savings. This is working income.
They'll start taking it away from you, so you have to be very very

(29:41):
careful. Yeah, so that earnedincome, think about it. Where I'm
getting so security taken out is theincome that counts. So where are we
on full retirement age this year?Would be people born in nineteen fifty seven,
that's age sixty six and six monthsthis year, and those are people
that are going to get to thatretirement age this year. So we're in

(30:02):
the year where at sixty six andsix months, that's how long you have
to wait, right, and ifin your fifties and early sixties and planning
your sixty seven at the moment.But take a look at those numbers.
I mean, think about how dramaticthat can be in a high inflation period,
Brad, where you're getting an eightpercent increase for waiting and an eight
percent increase for inflation, you justgot a sixteen percent increase to your income.

(30:25):
That is, and I think thisyear is going to be another decent
year and then we'll probably level offat that point. But even when you're
getting three percent increases, that's stillan eleven percent increase to your income for
every year that you wait. Andthen, of course social Security doesn't go
up anymore after seventy but you stillget the inflation increases. So you want
those increases to be on a highernumber, because that same percentage on a

(30:49):
much higher numbers a lot more dollarsin your pocket. Then you think about
compounding that, and that compound interesteffect over another ten plus years can be
a really drum maddic number. Isee people sometimes with both spouses over four
thousand dollars. Yeah, and thatthey can think about they're about eighty five
ninety thousand of income from social Securityand people, oh that's great. No,

(31:11):
that these are the people who waited. They're getting that much income.
It's out there and it's available ifyou can remain patient. So we're gonna
take our next pause. You're listeningto Money Sense Kevin and Brad Kurston,
and we're gonna get into the seventiesand beyond. For financial planning. You're
listening to Money Sense. We'll beright back and welcome back to the show.
You're listening to the advisors of KurstonWealth Manager Group, Kevin Kurston and

(31:32):
Brad Kurston. We are going throughour popular series Brad Financial Planning by the
Decade. We did this about ayear ago and we're coming to the tail
end. We're getting people into theirsixties and seventies now and beyond. We
talked a lot about social security inthe last segment for the sixties. Now
you're getting into your late sixties earlyseventies. One thing we didn't mention on

(31:52):
in your sixties is depending on yourmix of assets. Now I'm hoping at
this point you have a WROTH,hoping you have an EAR. You know,
after fifty nine and a half there'sno penalty, so you can start
distributions. It's nice when you're takingthose distributions from a tax planning point of
view, to have a lot ofdifferent tax buckets, right you You you

(32:12):
have a tax free ROTH, youhave a taxable IRA, and you have
a maybe a non retirement account nowretirement. It's sort of in between on
taxability. So you have a lotof different options to manage your tax resources.
You should have already been. Nowyou're finally selling some stocks, buying
some treasuries and things like that,getting to forty thirty forty, maybe even

(32:34):
fifty percent fixed income depending on theenvironment. Not going to do that at
a at a low point for stocks, and so now you're into your late
sixties early seventies. One thing Ididn't mention was roth conversions. If you
don't if you already have the ROTHand the traditional and the non retirement depending
on the size, you know,if you've got a you have four million

(32:54):
dollars and you have a two milliondollars ROTH a million dollars IRA, in
a million dollars non qualified, youdon't probably need to do the Roth conversion.
It's not even necessary. But ifif you didn't do all the stuff
that we talked about in the earlierdecades, Okay, let's say you're four
million of IRA, might I wantto try to put a den in that

(33:15):
before required distribution? Because of therequired distribution that first year is going to
be about four percent. If it'sa four million dollars IRA A, you're
talking about one hundred and sixty thousandthat has to come out. And then
you have some taxable your soul securityis partially taxable. Maybe you have a
non retirement account that also has sometaxable income each year that's going to hit.
Now you might be up in thattwenty two or even beyond bracket,

(33:37):
and so yeah, maybe maybe youwant to put a den in it before
that age seventy three comes. Butif not, Yeah, and really all
you're really thinking about is if you'reretired and you're in a very low bracket,
just topping out that ten twelve bracketwith especially the twelve, especially the
twelve, but it really needs sometime to do it, you probably have
to start thinking about it. Ifonly if you're retiring early, you don't

(34:00):
need the income out. But Ithink the other thing before we move on,
usually if you've waited on Social Security, that's another big chunk of income
that's coming at seven, that's comingat seventy. Right. So you mentioned
the having most of the assets inthese retirement plans, whether it's the ROTH
for one K, a regular ROTH, or a non retirement. I really

(34:21):
when people have income that they're thatis pretty stable out of the out of
the taxable assets and Social Security,and you have a one time expense that
you want, I don't care ifit's a car, a big vacation,
or some you want to help oneof the kids, that really has to
be thought of as coming out ofthe non retirement of the ROTH for the
taxes to not hit you all inone year. In iras and four oh

(34:44):
one ks are not designed for biglump sum withdrawals, and we had that
they're designed for slow gradual distributions overyour Life's try about one big no no
here. And I know people arethinking, I'm putting the money back in
Okay, the bank won't give mea loan on the second house, or
I'm moving and they won't give mea loan on the house I want to

(35:05):
buy because I haven't sold the otherone yet. Uh, it's not I'm
downsizing. It's only two hundred thousand. Okay, I need I need two
twenty five for the move and takeit out of my IRA. Okay,
Well we probably have to take outclose to three hundred thousand out of your
IRA in order to cover enough fortaxes. Okay, I sold my other

(35:27):
house. You know, here's twotwenty five back. Okay, we still
have a big chunk out for taxes. And here's the problem. I'm you're
sixty six years old, you're alreadyMedicare age. Now you're going to have
a year where it costs you ifyou're married, Uh maybe eight to ten
thousand dollars more for your Medicare fivehundred and sixty two dollars a month premium,
Yeah, times two if you're married. That that it's going to be

(35:50):
more. And so not only arewe going to get taxed a bunch federal
state locals, but now our Medicareis going to cost us more for a
year. So that that that bigjunk that you had to take out for
the second home, or you know, a motor home. We're gonna buy
one hundred thousand dollars motor home.Okay, it's a great deal. I
have to do it. Well,it's gonna cost you one fifty Is it
still a great deal because we haveto take it out of the IRA?

(36:13):
Okay? If we have an optionto get a loan, now's the time
to get a loan because all ofthese other things are going to dwarf the
amount that you're going to pay,or your interest on the more, or
you take it from your non retirementaccount that hopefully you've build up if you
listen to our recommendations or the roth. The IRA is just people think,
oh, I have this money,I have two million dollars in my IRA.

(36:34):
We actually don't have two million dollarsin your IRA because if you liquidate
it, you only have one pointtwo yep, yep, okay. It
is not designed for lump sum distributions. It is a perfect design for steady,
gradual distributions over your life expectancy,that is, and to pass along
to your spouse and to pass alongto your spouse. So so we're in
our seventies, let's talk about therequired distributions. Been some changes there in

(36:59):
the last couple of years. Lasttime we did this, it was probably
seventy and a half. It mighthave been at that point where we were
at seventy two, but at thelast week of the year, Secure Act
two point zero had the retirement agego to age seventy three, And I
think, is there a provision nowwe're going to seventy four here at a
certain age or a certain year,But for this year, we are at

(37:19):
age seventy three for your required beginningday. So if you were seventy one
last year, you're seventy two,seventy one this year, seventy in years
past, you can't delay it.Now you already have started your required to
distributions. But if you're turning seventythree this year, this is your first
year. Well, if you're seventyseventy three this year, you already had

(37:39):
to do it last year. Takethat back. But if you're turning seventy
two this year, you can wait. Seventy three is the beginning day.
So a couple of different things,it'll go to seventy five and twenty thirty
three and ten years, so it'sgonna be a long time, so it's
seventy three for the foreseeable future.The penalty for missing has gone down to
twenty five percent from fifty yep,and if you correct it in a timely

(38:04):
manner, whatever that is, it'sonly time you shouldn't. You should never
pay the penalty to take your RMD. People get stressed about the RMD.
It's not that complicated. Just makesure you'd do it. I would say,
whether it's the RMD inherited assets orit's the RMD on your own,
set it up automatically. If youwant to take it earlier, by all
means do so. But we havea lot of people that think about this
decision maybe too much. It's justsomething that the year that you turn seventy

(38:27):
three, you set it up automatically, and if you have a non retirement
account, you can just simply onJanuary or December move it over to your
non retirement account. You don't knowwhat you want to do, I don't
know what I want to do withit, or I don't know what I
want to hold on. Taxes shouldnot be a reason to not set it
up automatically so that it doesn't getmissed. Something could happen to you,
and it does get missed, andthe penalty is still so great that it
should never happen. That you havea thirty thousand dollars required distribution and we're

(38:52):
going to get penalized seventy five hundreddollars on it. That shouldn't ever happen.
Right. One of the changes inthat Secure Act two point oh it
doesn't really apply to seven year oldswas the fact that the company match can
now go into the ROTH. I'dbe curious if the company's getting a right
off for that. If they are, I guess there's no reason not to
do the ROTH for the employee shouldbut I can't imagine that they're getting because

(39:15):
that now you're getting, you're givinga double tax benefit. Yes, and
so they probably not. I can'timagine that somebody writing that into the law
that doesn't know what they're talking,right, But the R and D required
distribution. The only thing I gotto watch out for is if you have
four three b's. Were you talkingthere? I was reading I was just
talking about setting it up automatically.But yeah, this is worth a mention
that you could you can co mingleany of your IRA balances, you have

(39:37):
two different iras, or if youan IRA and a SEP anything with the
letter's IRA at the end, youcan take your your aggregate and take them
all out of one if you want. But what you can't co mingle our
retirement plans with IRA balances. Soif you have, if you know that
all of your retirement plans, combineyour iras in your four one K and
your four H three B, areyou know the the amount that I have

(39:59):
to take out fifty thousand? Butthey're different. You have to take your
actual required distribution out of your IRAand your actual retirement are RMD out of
your four one K or four orthree B. They can't be they cannot
be comingled and take it all outof one. Yeah, you have a
requirement out of each one. Yeah, unless you roll it over to an
IRA from the four H three B. But even in that year, you'd

(40:20):
still have to do the final Rand D. I think I see this
come up more where somebody may beretired and then went back to work and
the employer was putting, you know, the safe opera contribution in and it's
that's so small. You know,I'm not going to bother my advisor with
it. I just have this fiftythousand left over, and I'm taking a
good enough chunk out of IRA.It's not going to matter well that that
fifty thousand that got left over alsohad a required distribution, and that's a

(40:44):
situation where you have a penalty youdidn't need to have. So now you're
in your seventies, you're taking requireddistributions, You've taken Social Security hopefully,
so you've got a nice, steady, stable income. Probably should be thinking
about reducing risk a little bit further, as long as we're not one or
thirty percent below stock market all timehighs. But rates are better now,
so having a little bit extra andfixed income in your seventies is not bad,

(41:07):
and you probably don't have to keepsticking to the four percent rule.
If you've done pretty well in yoursixties performance wise, maybe you can even
take a little bit more. Youcould maybe even up up to five percent
plus at that point time. Whenwe get back from the Blake, let's
touch on eighties and beyond and someof the key points for folks to look
out for. You're listening to moneysince Kevin and Brad Kurston will be right
back and welcome back. You're listeningto the advisors of Kursten Wealth Management Group.

(41:30):
Wrapping up are two weeks of talkingabout all the decades of your life
and the ages, and now we'reon to the eighties and beyond. Really
this is a this is a decadewhere I think people are maybe slowing down
in their retirement with travel and thingsthat they're doing, and it's it's on
their mind that they think they needto do a bunch of estate planning and
in most cases having the knowledge ofwhat estate planning items are out there,

(41:55):
but then also having the knowledge thatyou don't have to do them all right,
There is a need for a trust, but it's very specific. Okay,
I think a lot of people thinkthey need a trust to avoid probate.
You don't. You just need toname beneficiaries on all your accounts.
So while your retirement plans have them, there is some work to do on
your non retirement accounts to make surethat they're uh that they you have beneficiaries

(42:15):
named. That's something that you canbutton up. Transfer on death payable on
death accounts, not on accounts,joint accounts. But yet, don't forget
about your bank accounts. Ye,don't forget about um, your home,
your cars. You can have Imean, say one of the spouses dies
at this age, you can haveone of your kids that maybe as your
executor, be a joint on youron your checking accounts. So there's something

(42:36):
happens, there's no probate issues thereif they're a joint owner on even if
what if you're going to give youyour child your house, make up a
joint owner. Yeah, and thensomething happens you let's say your spouse has
already passed away and it's just oneof you on the house. Maybe the
reason not to do it and todo the cod instead would be the step
up basis um because on a primaryresidence, you're not going to need yap

(42:57):
up so um. So the trusthas kind of specific needs just touch on
it. Beneficiary arrangements that are goingto go beyond your life. I'm gonna
have people getting paid for a lifetime, or we're gonna have skipping generations,
or we're gonna go to multiple generations, or I'm gonna go to charities eventually
and keep assets intact in that trust. There you can only do it with

(43:19):
a trust. So if you havea spouse, or maybe your spouse has
passed away and it's you and youhave two kids. What do you want
now? I just want to takemy money, split in a half,
give it to my kids. Idon't care what they do. It is
it gonna stand the trust for andthe trust's gonna stay around? No?
No, no, just as soonas I die, is is going to
go to them. The trust isnot necessary. Yes, you're gonna avoid
probate and the trust is not accomplishinganything in that case. How about for

(43:40):
a state taxes? State tax exemptionlimit in twenty twenty three is over thirteen
million per spouse, so most peopleit's transferable. It's transferable, so it's
for most people it's not going tobe an issue that we need to avoid
a state taxes with the trust,and so it's also something that we don't
have to think about. So onething though, it would be the power

(44:00):
of attorney documents or just simply havinga wheel so that the executor is named.
A lot of people maybe did thatwhen they're younger. Now is the
time to make sure that it's stillcurrent and that your executors maybe alive,
and that the power of attorney isstill the way that you want it.
So, I mean my eighties,Brad, I should want to start just
giving all the money away. Well, the most efficient way for you to

(44:22):
give it away is to have itbe done after your death. The step
up in basis is not going tobe something that we have on non retirement
assets forever. But as long aswe do, you've already set up the
perfect plan for giving it away taxwise, and that's naming your beneficiaries as
beneficiaries after your death. That's right, And maybe next next week, since

(44:44):
we did retirement planning by decade,we should do what happens when you die
to all your various accounts that you'vebuild up, and we'll do that.
Well, let's try try to touchon that a little bit on next week's
show, since we did take peoplethrough an entire lifespan. Yeah, in
your if you want to do thefifteen thousand a year where you don't have
to file any gift tax paperwork oranything like that, you know, go

(45:06):
ahead and do that. But ifyou're going to take something that has a
very low basis, something you paidfifty thousand and four that's worth three hundred
thousand and give it away, thatis a huge mistake. You're either going
to pay taxes yourself or you're makingsure that the person you're giving it to
is going to be paying taxes ifthey will, and no one has to
pay the taxes if they just inherit, they just inherit after your death.
And then finally touching on one lastthing, long term care. If you

(45:29):
did do the long term care policy, you might be activating that in your
eighties. Doesn't always have to beyou go into a facility. A lot
of these long term care policies,most of these long term care policies now
will allow you to get some stayat home care. So if you're still
healthy but you see it a littlebit of help, you probably can use
some of that long term care andreally feel like you haven't wasted it.
And really the ones that we lookat, you would never waste it at

(45:50):
all because it would still even ifyou've never used it, it would still
pay out in the form of adeath benefit anyway. So that the eighties
is the time where you're going toactivate that long term care too. So
but yeah, Denny always talks aboutwith financial planning, sometimes the answer is
don't just do something. Stand therewell, when you're in your eighties and
you feel like you have to doall this estate planning, sometimes you may

(46:12):
have already have everything you need inplace, and doing a bunch of giving
away and trust work might not bewhat you need. Maybe maybe you've already
got everything in place. You've gota couple things like beneficiaries you need to
tidy up, but other than that, you might already have the plan in
place that if you've had a goodadvisor, you should, you should,
you should already have it. Sothanks for listening everyone. We'll talk to

(46:34):
you next week. You've been listeningto Money since brought to you each week
by Kristen Wealth Management Group. Tocontact to Dennis Brett or Kevin professionally called
four one nine eight seven two zerozero six seven or eight hundred eight seven
five seventeen eighty six. Their emailaddress is Kristen Wealth at LPO dot com

(46:54):
and their website is Kristen Wealth dotcom. Opinions voiced in this show or
for general information only, and arenot intended to provide specific advice or recommendations
for any individual. To determine whichinvestments may be appropriate for you, consult
with your financial advisor, Prior toinvesting. Securities are offered through LPL Financial
member Finra SIPC