A Retirement Roadmap for Your 50's

Episode Transcript

Speaker 1 (00:00):
And our phone nines are open for you if you've
got questions. Love to get you on the air this
morning with CJ Closs and Eric Schwartz, our retirement planning
professionals from Class Financial. You can learn more about Class
Financial on their website class financial dot com. That's Coss
Klaas Financial dot com. They're telephon number six so eight
four four two five six three seven. No charge for

(00:20):
that initial get to know you appointment tech Coss Financial.
It will be complimentary to you again. They're number six
oh eight four four two five six three seven, And
as mentioned, our phone lines are open at three two
one thirteen ten. That's three two one thirteen ten. Gets
you on the air with CJ and Eric. Speaking of CJEN. Eric, guys,
how are we doing this morning? CJ, how's your week
so far?

Speaker 2 (00:38):
It's been great. How about your Sean?

Speaker 1 (00:40):
It's going well. Great to talk with you.

Speaker 2 (00:42):
Eric.

Speaker 1 (00:42):
How have you been?

Speaker 3 (00:43):
I've been doing great. If Lex bring on the way
in so you can't complain.

Speaker 1 (00:47):
I would say I have fifty three for today. Wow, CJ.
On's the latest you've played outdoor soccer in the winter
months here in Wisconsin.

Speaker 2 (00:56):
Ooh, that's a great question. I want to say. I
want to say the latest I played was December at
least outdoor soccer, because even now it's you know, it's
hard to assume you're going to get a day like
this and plan something the ground starts getting mushy. But listen,
as I walked outside today there were birds chirping. I
was like, what's happening. It's isn't at the end of January.

Speaker 1 (01:17):
It is. It is a little different. And one of
the nice things as we as we're going to talk
this week, we're going to talk about approaching you know,
five zero and retirement, game planning and things. One of
the nice things if you plan properly, you can wake
up in January in warm climates with birds chirping outside
of your window every single day. You just got to
plan for it. And that's the importance of this program.

(01:38):
If you've got questions for c J and Eric love
to have, join us phone number six O eight three
two one thirteen ten. That's sixh eight three two one
thirteen ten. Cool feature of the show was the Class
Quiz Question week. You have a chance a little bit
later on the program to win a twenty five dollars
gift card to Best Buy provided from our friends at
Class Financial with the Class Quiz question of the week.
And before we get rolling on this week's conversation, let's
actually take a look back at LAXT week's show, Eric,

(02:00):
and we'll get the question and answer from Klassquiz Question
a week from that program.

Speaker 3 (02:05):
Yeah, so our question last week was what amount can
you gift per person in twenty twenty five with no
federal gift tax consequences? Choices were fifteen thousand or nineteen thousand,
and Abby from Madison was a great listener last week
and had the correct answer, which is nineteen thousand dollars
per person per recipient.

Speaker 1 (02:27):
Fantastic and congratulations Abby. And of course you can be
like Abby listen closely to the program because typically the
question answer come up during the show. So it definitely
benefits to pay CLO's attention for many many reasons to
the program. And you know, we've talked many times about
the importance of having a planner kind of like a
roadmap for retirement. But what does that kind of look like,
especially for folks that are getting into their fifties. CJ.

Speaker 2 (02:50):
Yeah, great question. Today we are diving into the big five, Oh,
turning fifty and what it means for your retirement game plan.
Some of you may already have a solid strategy in place,
and if so, you know, good for you. But others
might be feeling a little bit behind, and that's totally normal.
But turning fifty. Eric and I have found that when

(03:12):
we meet with people when people turn fifty, there's kind
of an aha moment that happens right where you go.
My body's not quite feeling as good as it did before.
I'm recognizing that I've been working for a long time.
Maybe in some circumstances, I'm not feeling quite as motivated
at work, and there's this the aha moments is like,
I better get my act together to make sure that

(03:35):
I am planning appropriately for retirement. Because when you turn fifty,
many times you know that window to retirement is ten
to fifteen years away. So often we hear people saying
things like, gosh, have I done enough? What else do
I need to do to kind of sure up my retirement?
And so you know, this is where we help out. Now,
even if you feel behind, there is still plenty that

(03:57):
you can do to set yourself up for success and retirement.
And so we're we're going to take together this this
retirement roadmap journey through our discussion today. So the first
stop in our retirement roadmap journey is number one, save
more and maximize your retirement. So one of the perks

(04:17):
of turning fifty is the ability to save more into
your retirement account. The IRS gives you a boost known
as a ketchup contribution. So in your four oh one
K four oh three B four fifty seven, so I
think primary employer sponsored retirement plan under most circumstances, the
contribution limit in twenty twenty five is twenty three thousand,

(04:38):
five hundred dollars. But once you hit fifty, you can
add another seven thousand, five hundred dollars as what's called
a ketchup contribution, bringing your total contribution up to thirty
one thousand dollars. So again in those kind of traditional
employer sponsored retirement plans four to one K four oh
three B fourty seven, once you turn fifty you get

(04:59):
that seventy five hundred dollar catchup contribution, bringing up the
total that you can save. Also, we've talked about this
in prior shows, but a new thing in twenty twenty
five is for individuals age sixty to sixty three. You
have a we'll call it a Ketchup plus a Ketchup accelerator.
So your Ketchup contribution limit is more than that seventy

(05:20):
five hundred dollars. It's actually eleven thousand, two hundred and
fifty dollars, which brings your total contribution amount up to
thirty four thousand, seven hundred and fifty dollars. Now, listen,
for some of you listening right now, you're saying, you're insane.
I can't save three thousand dollars a month into a
retirement plan, tuche. If that's you, I completely get it,

(05:43):
and no, you know, no shame in that. I one
hundred percent understand. But for others of you, you go, well,
I could if I wanted to, right, And those those
are the ones that we would say, hey, it's important
for you to know the upper bounds. I actually, Eric
will testify. What I often say is I want to
know the size of the pool I'm swimming in and
the depth of the pool. Right, And so what we're

(06:06):
telling you is, here's the size of the pool, and
here here's the depth of the pool. It's up to
you if you want to be in the shallow end
or the deep end. But what we're getting at here
is it's important for you to know the maximums. So
for some of you who are in your peak earning
years in your fifties, these are the years to take
advantage of those catch up contributions. And then for those

(06:26):
of us who have like rays so individual retirement accounts.
These are not employer sponsored retirement accounts, but just individual plans.
The standard limit that you can put into an IRA
is seven thousand dollars. But again, if you're over fifty,
you get a catch up contribution of an extra one
thousand dollars for a total of eight thousand. So again
if you are in those peak earning years once you

(06:49):
turn fifty, we would just highly suggest that again the
first step on our roadmap here is save more and
maximize your retirement plans.

Speaker 1 (06:57):
Going through our retirement roadmap with our retirement planning professionals
from Coss Financial CJ. Coss and Eric Schwartz, don't forget
you learn more online the website costs Financial dot com.
That's Coss k l aas Financial dot com. There twelve
for what number six? Soh eight four four two five
six three seven. So Eric, what about adding money to
your health savings account a smart move that's available, And

(07:18):
wond er two about emergency savings Do we need to
have that as we approach retirement.

Speaker 3 (07:24):
Yeah, we get a lot of questions about about both
of these topics, and so we're gonna we're gonna dive
into both of them. Let's start with the HSA though,
the health savings account. So if your health plan allows it, right, So,
if you have a what's classified as a high deductible
health plan, you are potentially eligible to have a health
savings account. Okay, So this is a tax advantaged account

(07:46):
that helps cover out of pocket medical costs now and
in retirement. So that's important. You can use it now
or in the future. And we'll talk about that more
in a second. But in twenty twenty five, you can
contribute up to forty three hundred dollars as an individual
and for a family you can do eighty five and fifty.
Now when you hit fifty five, so not quite fifty

(08:08):
but fifty five, you can also contribute an extra thousand
dollars as a catch up contribution. Now, the best part
about this, especially with the rising cost of healthcare is
any funds that remain in your HSA at the end
of each year, you can roll them over to the
next year basically for as long as you'd like. So
it becomes a really good long term savings tool, like

(08:30):
I said, especially as healthcare continues to get more expensive,
and depending how much money you have in the HSA,
it might be an option to actually invest some of
the dollars for longer term growth. So hsas are a
really I think we would say underappreciated tool. They allow
you to deduct your contribution going in and then as

(08:50):
long as you use it for healthcare expenses, you don't
have to pay any taxes on the way out, so
it's you know, double tax exempt money here that also
actually has the ability to accumulate from the time you
put it in until you take it out. So HSA
really really important thing, really really important. So the other

(09:10):
the other thing that comes up when we talk about
hsas is something called an FSA or a flex spending account.
So this is something that employers offer similar to an HSA.
They it's for out of pocket you know, medical expenses
and related items. But an important distinction here is that

(09:31):
f sas are employer sponsored plans, while hsas are owned
by you. Okay, so if you change employers, you can
take your HSA with you since you you can open
an HSA even if it's not offered by your employer. Now,
with an f s A flex spending any funds contributed
to the to the FSA generally must be spent in

(09:52):
the year that they were contributed. Okay. Some some plans
will give you a grace period of you know, to
two and a half months after the first of the year,
but it's generally a kind of use it or lose it.
The situation with the flex spending account. So both both
are really good options for covering health expenses. HSA does

(10:12):
give you a little bit more flexibility long term.

Speaker 1 (10:15):
Talking this morning with Eric Schwartz and see a coss
our retirement planning professionals from Class Financial online costs Financial
dot com. And they're telephone number six So eight four
four two five six three seven. So Eric, what about
that third stop?

Speaker 3 (10:27):
Yeah, our third stop is building an emergency fund. So
this one, I think a lot of times when we
talk to people about this, it feels really obvious, like, yeah,
I know I should you know, I should have money
set aside and in a savings account for an emergency.
But it's it's often one that we seem missed a
lot because it's it's easy not to do it, but

(10:47):
you know, unexpected expenses can derail even the best planned
out retirements. So when people are working, generally will recommend
they have somewhere from you know, six to twelve months
of expenses in their emergency fund. And when we say
emergency fund, we don't mean just in your savings account.
We do mean any separate account that you only access

(11:08):
for an emergency. In retirement, some people like to kind
of build that up a little bit more, maybe in
the twelve to eighteen months worth of expenses in that
type of account that's liquid, accessible and able to be
to be accessed pretty quickly. The reason for the larger
buffer is, especially as people move into retirement, there's generally

(11:32):
a concern about, well, I'm not working anymore. It's not
like I can pick up an extra shift or you know,
just put more more effort in. Maybe if you're in
like a sales role, there's less flexibility, so they like
to have a little bit more available in the liquid savings.
The last thing is health care costs. As we've talked about,

(11:52):
they tend to rise as we age, and you know,
if you have a large out of pocket expense, it's
nice to have money set aside to cover that.

Speaker 1 (12:04):
Talking this morning with CJ. Closs and Eric Schwartz. They
are our retirement planning professionals from Class Financial. The website
Class financial dot com that's coss a l aas Financial
dot com. Great website and resource learn more about Class Financial.
You can, of course get to know the team. You
can learn about the separate divisions. You can also sign
up for the weekly Market Pulse newsletter as well as

(12:24):
listening back to podcasts all online. Class Financial dot com
that's class k l aas Financial dot com. They're twelf
number six o eight four four two five six three seven.
No charge for the initial get to know your apployment
tech Class Financial, that'll be complimentary to you again. They're
telp for number six oh eight four four two five
six three seven. As we work our way down the
retirement road map, you may be wondering what about debt.

(12:45):
We'll get the details on that and so much more.
As Money in Motion with Class Financial continues next right
here on thirteen ten WIBA talking with our retirement planning
professionals CJ. Closs and Eric Schwartz. Of course they come
to us from Clause Financial. Their website Coss Financial dot com.
That's Coss k l aas Financial dot com. And the

(13:06):
telephone number six oh eight four four two five six
three seven. No charge for the initial get to know
your appointment det COSS Financial. It will be complementary to
you again their number six oh eight four four two
five six three seven. Talking this week about a retirement roadmap,
especially as you get into your fifties and you can
see retirement right on the horizon. It is so close

(13:27):
and of course there's so much excitement, but there's also anxiety.
So we're kind of working through some of the things
to get in line and be prepared for as you
work down the road towards retirement. And CJ, I know
another area that you often suggest when it comes to
your retirement strategy is reducing debt, isn't.

Speaker 2 (13:44):
It It is? Yeah, So this is our fourth stop
on our retirement planning roadmap. As you hit your fifties,
the Big five oho some things to be thinking about,
and so we're thinking about the fourth stop on our
on our kind of path here, our journey towards retirement,
and it is tackling debt. Retirement just cannot suggest this enough. Now,
I have to admit, even as we go through this,

(14:06):
there's this recognition of wait a minute, you told me
I should max out my four to one K at
thirty six thousand dollars a year, and you want me
to eliminate my debt, Like, come on, you guys are
living in the clouds. Fair enough, touche, You've got to
This is why ultimately we can give you a roadmap
with important stops on it. But often you have to

(14:26):
end up meeting with somebody that doesn't have to be us,
but meet with some advisor to say, can you help
me prioritize because I listened to these crazy people on
the radio show and they just gave me too much
at once. So that's tongue in cheek, by the way,
But you guys get the ideas. Hey, it is difficult
in practice to decide what has a higher priority. But

(14:47):
if you've listened to our show for any period of time,
one thing you have learned is that as retirement planners,
we are big fans of you being debt free by
the time you get to retirement. That's not a must,
but it's a pretty big step and really reduces not
only risk but stress in your life. So we would say,
take a hard look at your income and expenses and

(15:07):
any outstanding debts that you have, and then prioritize eliminating
some of those highest interest debts, maybe some of the
low balances, to clip them off and start doing what
we call a debt snowball. But listen, credit cards alone,
the average interest rate around the United States is somewhere
between twenty to twenty two percent. So often we'll have
people come in and they'll say, hey, I'm I'm trying

(15:29):
to increase my four to one K contribution because I
heard what you said, and so like, I'm doing it.
I'm doing it, And then they go, but yeah, I
also have twenty thousand dollars a credit card debt. I'll
be frank with you, there is no world in which
your four oh one K account is going to grow
more than twenty percent a year on average. It's not
going to happen. And therefore, to prioritize increasing your four

(15:51):
ROH and K contribution while you're sitting on a bunch
of unsecured high interest credit card debt. You get the
idea it would be wiser to go a different direction.
I have to mention because we'll often hear this, well,
but my interest rate is so low, and so here's
what'll happen. People will go, oh, my gosh, it's amazing.
I'm getting three percent four percent on my money market

(16:11):
account at the bank, but they'll never pay off their mortgage.
So think about this with me, everybody. If I pay
off my mortgage with excess cash that I have, and
it's say at four percent, that is a guaranteed four
percent return on that money, right, because if I don't
pay it off, I still am paying the four percent.

(16:32):
Not to mention, I have reduced my risk. So we
are just huge fans of as you get into your fifties,
prioritize tackling debt, try to get it rid of that mortgage,
and just kind of simplify.

Speaker 1 (16:44):
Talking this morning with CJ. Coloss and Eric Schwartz retirement
planning professionals. I'll weur retirement planning professionals from Class Financial
website Class financial dot com that's k l aasfinancial dot
com and following along CJ. Step four leads us to
step five. Stop five, Oh, what do we need to
know when it comes to retirement itself?

Speaker 2 (17:02):
Yeah, so step five is knowing what you'll actually need
in retirement. Many people assume they'll spend much less in retirement,
but the truth is most retirees spend somewhere between eighty
to ninety percent of their pre retirement income. Now, I
will just warn you all, I really, as much as
I love giving you rules of thumb, this is one

(17:23):
of the rules of thumb that I get really queasy about, Like,
how much of my working income am I going to
need in retirement? Goodness? Rules of thumb would say about
eighty percent, but in practice, I've seen it as low
as thirty percent, and I've seen it as high as
one hundred and ten percent, And it's not the It's
common to see it range that high. So an example

(17:46):
of this would be, if you pay off your mortgage
right before you retire, well, my goodness, you're going to
need way less income to live the same lifestyle than
you did when you were working. You get the idea,
or you pay off a large student loan, or you
have a grandchild that was living with you, that moves
on or whatever it might be, you could end up

(18:06):
needing substantially less. Not to mention, retirement income is actually
taxed differently than ordinary income, So even if I needed
the exact same net income, I would actually need less
gross income in retirement. Don't want to bore you with
the details of that, but just trust me. Taxes are

(18:27):
different on sources of retirement income than they are while
you are working. So long story short, you really want
to sit down and say, all right, what would my
Social Security be when I get to retirement? Am I
going to draw it? Sixty two, sixty seven, seventy? Do
I have any pensions? So to find benefit pension plans
from current or prior employers. How much do I have

(18:48):
in investments? What are my liabilities? And just take a
look at that overall cash flow to make sure that
you will have enough to live a similar lifestyle. We
often will just say, hey, keep it some look at
what hits your bank account on a monthly basis prior
to retirement. Assuming there's no major changes in like elimination

(19:09):
of a mortgage, then you're probably going to need a
similar amount of net income in retirement. Right, So people
will say, well, I can make one hundred thousand dollars,
and I go, I know that, but what hits your
bank account after the four oh one K, after the
health insurance, after the you know, dental vision, uh FIKA tax,

(19:29):
federal tax, state tax, right, And often people go, oh,
well that number is like fifty thousand dollars a year.
Well that's probably going to be the number that you're
going to need to try to replace the majority of
when you're in retirement. So there you go, some some
food for thought. The fifth stop in our retirement planning
roadmap is know what you'll need in retirement.

Speaker 1 (19:48):
Talking this morning with CJ. Class and Eric Schwartz, our
retirement planning professionals from Class Financial website, Class financial dot com.
That's coss k l a as Financial dot com. They're
twelve number six, so eight four four to two five
six three seven, no charge for the initial gets to
know you appointment tech costs financial It will be complimentary
to you again their number six, so eight four four
to two five six three seven. So, as we've been

(20:11):
talking this morning with that retirement roadmap, the age in
the fifties kind of came up, and I know a
lot of folks in their fifties, start thinking should I
have saved more? And Eric, what do you say to
those who maybe feel that they're behind?

Speaker 3 (20:26):
Well, Sean, if I had a dollar for every time
I heard a new client say that I might be
in that retired in that one climate you were talking
about earlier. But you know, I think a lot of
people have this this feeling that they know I haven't
saved enough, I haven't been doing the right things, because
I think a lot of people hear these kind of
rules of thumb that CJ was referencing earlier. You know,

(20:46):
I need X million dollars or I can't retire, or
you know, if you if you haven't paid off your
mortgage and reinvested those dollars, you're not You know, it's
all this kind of comparison game, but it is such
a normal feeling. We hear it all the time. And
my direct response would be, well, doing nothing about it

(21:07):
is not going to help, and it's it's not too
late to make to make meaningful progress. Slow down, start
where you are, and focus on what you can change now,
because they're you know, even in your fifties, there's a
lot of things you can do to make sure you're
set up to retire, and you know, maybe you've had
bad financial habits in the past or you know, can't

(21:30):
change any of that. Let's let's start where we are,
work with a with a trusted advisor and figure out
where you go from here. And really, as CJ mentioned
this earlier as well, working with an advisor can allow
you to kind of get past some of those rules
of thumb and really understand what it is that you need,

(21:53):
because what you need and what somebody else needs are
are completely different. You know, we can have a client
who's saved as much as another client, but they spend
twice as much, so maybe they're not ready for retirement,
but the one with the lower balance is right. So
it's really really something that needs to be customized to you.
So what I would just leave you know, listeners with

(22:14):
this morning is you know made if for those in
your fifties, you've made it, You're you're ready to take
control of your retirement. So no matter where you are
on your roadmap that we went over today, there is
still time to set yourself up for success and great retirement.

Speaker 1 (22:30):
Wise words, that is for sure. Talking this morning with
Eric Schwartz and CJ Closs our retirement planning professionals from
Class Financial the website classfinancial dot com. That's Klaas Financial
dot com. There tellphone number six, So eight four four
two five six three seven. We'll check in the Money
and Motion Listener question corner as well as you get
the Class Quiz question week. We will do that next
as Money and Motion continues right here on thirteen ten.

(22:52):
WIBA talking this morning with our retirement planning professionals, Eric
Schwartz and CJ. Closs. Of course they come to us
from Class Financial the website Coss Financial dot com. That's
cost k l aasfinanci dot com. Great website with a
lot of great information. A great feature on the website
as well is to submit a question for our Money
in Motion Listener question corner. And this week Joe wrote

(23:13):
and he says, I'll begin drawing my Social Security benefit
in September, and I'm trying to understand if this income
is taxable or not. Eric, I'll let you take this one.

Speaker 3 (23:26):
Such a good question. And when we hear a fair amount,
as you can imagine, so as always it depends, but
generally about forty percent of people who get Social Security
will have to pay federal income tax on their benefits.
This usually happens if there's other income outside of Social
Security coming in. So think you know, if you're still

(23:49):
working part time, if you have interest and dividends off
of investments, or maybe distributions from your retirement accounts, or
maybe even a pension, if you're lucky enough to have
one of those.

Speaker 1 (24:01):
So it is.

Speaker 3 (24:02):
It does depend. But to be more specific, if we're
thinking about this in two ways, one your your federal
income taxes and to your state income taxes. We'll start
with state because it's easier. Depends on your state. Some
states do tax Social Security benefits, some do not. For
our folks here in Wisconsin, the state of Wisconsin does

(24:24):
not tax Social Security benefits. Now, at the federal level,
it's more complicated. Okay, So, if if you file an
individual return and your combined income is between twenty five
thousand and thirty four thousand dollars, you may have to
pay income tax on up to fifty percent of your benefit.

(24:45):
If your income is more than thirty five more than
thirty four thousand dollars, you will pay taxes on up
to eighty five percent of your benefit. So the irs
will not tax you on, We'll say fifteen percent of
your benefits at the federal level. Now, for our folks
who file joint returns, those income thresholds are thirty Between

(25:05):
thirty two thousand and forty four thousand, you may have
to pay income tax on up to half of your benefit,
and then more than forty four thousand dollars you will
pay tax on them to eighty five percent of your benefit.

Speaker 1 (25:17):
Really great question, don't fore You can submit your question
as well online at cossfinancial dot com. That's Coss k
l aas Financial dot com. Van Ben there recently head
on over get to know the team at Costs Financial.
Learn more about the separate divisions at cost Financial how
they can help you, or if you're an employer looking
for some options again, you can learn more online costs
Financial dot com. Tell for number six oh eight four

(25:38):
four to two five six three seven. No charge for
that initial gets know you appointment Tech Class Financial. It
will be complimentary to you again their number six oh
eight four four two five six three seven. You're going
to want to hold on to that telephon number now
because it's time for the Coss Quiz question the week.
It works like this and just a moment, I'll ask
you the Coss Quiz question the week. You will then
have thirty minutes from the today's program to call the
Class Financial office right here at mattis So. That's six

(26:00):
oh eight four four two five, six three seven. If
you are the first call correct answer, you win this
week's prize, which is a twenty five dollars gift card
to Best Buy. This week's Class Quiz question the week
is this true or false? If you contribute to a
health savings account, your remaining funds in the account will
roll over a year after year True or false? Televille

(26:23):
number six oh eight four four two five six three seven.
First qual correct answer won that twenty five dollars gift
card to best Buy. Don't forget that's Closs Financials Office
right here in Madison again their number six oh eight
four four two five six three seven and online Class
Financial dot Com. That's Coss k l aa S Financial
dot Com. CJ. Eric, It's always pleasant and great and
love talking with both of you guys. You enjoy this

(26:44):
beautiful day, and CJ get out and play some soccer today,
Great Eric, Eric, do you play soccer by the way
back in high school. I okay, guys, I know what
we're doing this afterdude, doctor Marty Green joined us next
from checkout vet here at thirteen ten wib A