Retiring Comfortably

Episode Transcript

Speaker 1 (00:00):
And their number six oh eight four four two five

(00:02):
six three seven as mentioned, joined this week by CJ.
Closs and Nate bribeing CJ. How you doing this morning?

Speaker 2 (00:08):
I'm doing great.

Speaker 1 (00:09):
How are you, Sean, I'm doing really well. It's great
to chat with you. Nate, how have you been.

Speaker 3 (00:14):
I'm happy to be back.

Speaker 1 (00:16):
It is great to have both of you along. Great
to hear from you again Nate as well. We're gonna
be talking about having a plan, having a roadmap when
it comes to retirement and how important that is. We'll
get the details from cjn Nate. We will get those
very very shortly. As mentioned, phone lines are open for
your questions at six oh eight three two one thirteen ten.
That's six oh eight three two one thirteen ten. I

(00:37):
also hope you get a chance during today's program. Head
on over to the website Colassfinancial dot com. That's coss
k l a a S Financial dot com. You can
learn more about class financial on that website. You can
also sign up for the weekly market Paul's newsletter and
listen back to this in previous shows. Podcasts. That stuff
all available to you at Colossfinancial dot com. That's closs
K l A A S Financial dot Com their telephone

(00:58):
number six oh eight four four two five six three seven. So,
before you get rolling on this week's conversation, one of
the cool features also the program is the Class Quiz
question week This week no exception chance to win a
great prize, a twenty five dollar gift card from our
friends at Class Financial to Best Buy. I'll tell you
a little bit later on the show how you can
win that. And before we get rolling on this week's topic,

(01:19):
let's actually take a look back at last week's show
and get the question an answer there as well.

Speaker 2 (01:24):
Yeah, thanks Sean. So last week's question was a truer
false question, and the question was over the last thirty years,
average tuition and fees at public four year colleges have
jumped one hundred and twenty five percent after adjusting for inflation.

Speaker 4 (01:41):
So is that a true or false statement? The answer
was true, and congratulations to our winner from last week,
which was Mike of Verona. Congratulations Mike, and everybody make
sure you listen closely this week.

Speaker 1 (01:53):
Could you to be a will You sure could? Great
great work there, Mike, You two can be like Mike.
As CJ mentioned, listen closer to the program. Typically the
question answer come up during each week's show. I'll tell
you a bit later on the show how you can
win that twenty five dollar gift guard. So on this show,
of course, we've talked many times about the importance of
having a plan or a roadmap for retirement, of course,

(02:13):
and how key that is now as we're getting a
little older. Where should we be on that map?

Speaker 3 (02:19):
Nate, Yeah, this is a great question to ask if
you're in your accumulation phase of your retirement journey. Is
you know where am I at? Am I ahead? Or
am I behind? So let's talk through some key stops
on your retirement roadmap to help you make informed decisions
yours now. While you can't rewind the clock, we can
take smart steps now, like ramping up savings, reducing spending,

(02:42):
and knocking down debt to make the road ahead smoother.
So stop one a I would say would be ask yourself,
when do you want to retire or how much do
you want to spend? You know that helps back into
some savings amounts. You know that's a common question is
how much should I sid be saving? We say, well,
when do you want to retire or how much do
you want to spend, then we can kind of kind
of back into how much you should be saving. So

(03:04):
one B would be obviously to save more. That's you know,
something financial planners love to say is, you know, we've
never heard anyone say they save too much, right, So
look to maximize contributions, right. And once you turn fifty
you do become eligible for what is known as ketchup contribution.
So if we look at four oh one K or
four h three B plans, first, the normal employee salary

(03:26):
deferral is twenty three thousand, five hundred for the year,
and if you're over fifty, that's an additional seventy five hundred.
You can save up to thirty one thousand dollars per
year that you could be saving for your future, which
would be great. Now there is an additional this is
a wonky provision honestly, in the tax code now from

(03:46):
sixty to sixty three there's an additional catchup contribution even
higher than the seventy five hundred, two hundred and fifty
for twenty twenty five, So you don't get to add
that to the seventy five hundred. It's in replace of
the seventy five hundred, so it's a total of thirty
seven thousand, seven hundred and fifty allowing you to defer

(04:08):
into a company sponsored retirement plan, which is great. Now
for those that may not have coverage through an employer plan,
most should you should be eligible for a traditional or
a roth IRA. What's the normal contribution limit is seven
thousand dollars or it's the lesser of seven thousand dollars

(04:28):
of your or your earned income for the year, and
if you're over fifty, you can add an additional one
thousand dollars for a total of eight thousand dollars, which
are great. So now stop number two would be looking
at health savings accounts, So these are great accounts. Okay,
So these you do have to be enrolled in what's
called an HSA eligible plan, so certainly ask your employer

(04:50):
if they have a plan available, and open enrollment should
be coming up here towards to make sure to see
if you're eligible potentially next year as well. Now hsas
are great their triple tax exempt savings vehicles, so contributions
are tax deductible, earnings grow tax free, and qualified with
drills are also tax free. So this is the only
count that is actually triple tax free, so something very

(05:13):
important to take advantage. Still going to have health expenses
at some point in the future, and you know, these
have a ton of flexibility in the sense that unlike
a flexible spending account that has to be distributed fully
every year, these balances can be ruled to future years.
So even if you don't have a health event or expense,

(05:33):
you know this year or next year, you can save
it for retirement and continue to accumulate those funds. So
just quickly hear the maximum contribution limits are foury three
hundred for individual coverage and eighty five hundred and fifty
dollars for family coverage plus at age fifty five, there's
an additional one thousand dollars catchup contribution as well, making

(05:54):
them great saving vehicles in addition to your traditional retirement.

Speaker 1 (05:58):
Accounts, really good, really good tools and really good opportunities there.
As we talked this morning with our retirement planning professionals
from Class Financial, CJ. Coloss and Nate Briby, you've got
a question, love to have Jonas this morning, tell Fortomber
to get on the air. Six eight three two one
thirteen ten. That's six o eight three two one thirteen ten.
You can learn more about COSS Financial on their website
coss financial dot com. That's Coss k l aa s

(06:20):
financial dot com. They're tough for number six so eight
four four two five six three seven. No charge for
that initial gets to know you appointment at Coss Financial.
It will be complimentary too. Again their number six O
eight four four two five six three seven looks you
our conversation with CJNA. We will do that next as
Money in Motion with Class Financial continues here on thirteen ten.
Wiv A hanging out with our retirement planning professionals from

(06:41):
Class Financial, Cjcloss and Nate Briby. Hope you get a
chance today to head on over the website coss financial
dot com. That's Coss k l aa s financial dot com.
Great website resource to learn more about COSS Financial, learn
about the team. You can learn about their separate divisions.
You can also sign up for the weekly Market Pulse
newsletter that available to you at cossfinancial dot com. They're
telp for number six so eight four four two five

(07:02):
six three seven. No charge for that initial get to
know the appointment deck Claws Financially. It will be complementary
to you talking this morning about putting together a plan,
a roadmap, if you will, for for retirement and kind
of knowing where we should be on that map. And
you know, I've got a couple of questions for you, CJ.
You still need like an emergency fund, for example, as
you approach retirement, and what about the challenges of you know,

(07:25):
debt and and how we're kind of dealing with the
debt at this point. There's got to be some pretty
important questions to have answered, aren't they.

Speaker 4 (07:34):
Yeah, so pre retired and retired people still need to
make sure they have an emergency reserve savings account that
is that is well funded. Unfortunately, life always seems to
get in the way when when we least expect it. So,
you know, stop number number three here on our on
our trip is building and maintaining an emergency fund. So

(07:55):
ideally keep at least six months of living expenses in
an accessible savings or money market account. And by doing this,
the buffer helps to protect your retirement accounts from unexpected
expenses that keep your long term plan intact. Now, this
emergency fund is actually more powerful than people realize. The
emergency fund can keep you from using a credit card.

(08:18):
It can keep from you from having to use a
line of credit on your home. It can keep you
from really accepting jobs that you shouldn't be. So think
I lose a job, I have no emergency reserve. Well,
my goodness, the first job that pops up available to
me is just I'm going to take it right because
I have no breathing room in my budget, so cannot

(08:40):
emphasize enough emergency reserves. Think that is again, the six
months of living expenses in an easily accessible savings or
money market account is pretty critical, and that's why we
highlight it as stop number three on our trip here.
Now that does bring us to stop number four, which
is tackling your debt head on. So you can start

(09:00):
by accessing your full financial picture. This is your income,
your expenses, and any outstanding debts. Calculate how much after
tax income you'll need to maintain your lifestyle and retirement,
and then identify areas of unnecessary spending and redirect those
dollars towards savings or debt payoff. Eliminating debt, especially high

(09:20):
interest debt, can drastically improve your retirement readiness. So Nate
and I will often talk with people about this, like, Hey,
it depends on where you're at in the phase of
retirement preparation. So if you're in Nate's age or my age,
or fifty eight years old, ready to retire at fifty nine,

(09:41):
the level of aggression you have to eliminate a particular
debt can actually vary. We would generally say to you,
which if you've listened to our show, everybody's going to
know what I'm about to say. We would generally say,
retiring with no debt is bar none the best way
to retire. However, if you're if you're you're not going
to be able to do that, it can be risky

(10:02):
to hear what we're saying, go at fifty eight years old,
pull all your money, iud to hear four O one
K and pay off your mortgage. That's not what we're saying.
So you do need to work with an advisor to
figure out the balancing act of that. But tackling your
debt head on is critical. Think of it this way.
If I could take ten thousand dollars of say emergency

(10:23):
reserve funds, and save five hundred dollars a month on
an auto payment as I head into retirement, or I
could put that ten thousand dollars into my four toh
one K plan that already has eight hundred thousand dollars
in it. I am much better off paying off my
auto loan to free up five hundred dollars a month

(10:45):
than I am to put that same ten thousand dollars
into a four to one K plan. So each situation
is unique. Sit down with your advisory. But here's some
fun facts. As of late twenty twenty four, the average
US household with debt carries over one hundred and five
thousand dollars in total debt obligations, with mortgages representing seventy
percent of total debt. For baby boomers ages fifty six

(11:08):
to seventy four, that average stands approximately at ninety seven
thousand dollars. And this is according to a CNBC poll.
Boomers usually have the largest portion of their debt as mortgages.
Personal loans come in second, and then credit card debt
comes in third. So it's important to note that these
are averages, and of course individual debt levels can vary

(11:30):
greatly depending upon different factors. But just some kind of interesting,
interesting stats for.

Speaker 1 (11:34):
You to be aware talking this Morning with CJ. Closs
and Nate Bribey are retirement planning professionals from COSS Financial
the website Coss financial dot com. That's Coss k l
a as Financial dot com. Dell for number six soh
eight four four two five six three seven, no charge
for that initial get to know your appoyment debt loss financial,
It will be complimentary to you again their number six
oh eight four four two five six three seven. And

(11:56):
I know, CG. I know that there's more to tackling
debt as well, and some really really interesting perspectives and
things to think about when it comes to taking care
of debt, isn't there.

Speaker 4 (12:06):
Yeah, So lingering debt in your fifties can delay retirement,
So just take control of that now and try to
build a plan to eliminate your debt before you retire.
We would say pay off high interest credit cards as
soon as possible, obviously largely because those are going to
compound against you the fastest, and then again consider working
towards paying off your mortgage. Now. A lot of people say,

(12:28):
but CJ, do you know that I can get four
percent on my money market and my mortgage is at
two and a half, Like why would I ever do that.
So I just want to remind everybody there are financial
planning firms that I'll call it quantitatively centric, so think
of it as math centered. And then there are firms
that are behavioral centered, and truth be told, our firm

(12:50):
tries to be balanced in these approaches. However, far and
away we are a behavior centric firm. And here's why.
Because we don't see math being the center of the
problem for people. Okay, we don't see math, We see behaviors.
So said another way, I don't think people like don't
know the math of credit cards. It's not like they

(13:11):
don't understand that they're paying twenty to twenty five percent
on credit cards. It's their behaviors that are out of control. Right,
So what we would say is we're not saying math
doesn't matter, but we're saying behaviors matter more, and therefore
those behaviors need to be modified in a robotic pattern
to help you accomplish your goals. This is why we
tell people pay yourself first, save into your four to

(13:33):
one K plan, because if you rely on just simple math,
your behaviors tend to override all of them. Okay, rant
over all, we're trying to say is try to get
your mortgage paid off. We understand the arbitrage opportunity, but
we would suggest don't take advantage of that arbitrage opportunity,
at least in the long run, try to get your
debts paid off.

Speaker 1 (13:53):
Well stated this morning, CJ. Clause in Nate Briby, our
retirement planning professionals from Class Financial some great understanding as
well well about the thinking when it comes to working
with the folks at C Loss Financial. If you want
to set up appointment to make it easy to do,
I can expect foe pick up the phone and give
them a call six so eight four four two five
six three seven that first gets to know you. Appoyment
at Lost Financil no charge, It'll be complimentary to you again,
they're number six oh eight four four two five six

(14:16):
three seven. So, Nate, where canna you start start? When
it comes to planning for how much I think I'll
need as far as income in retirement? It seems like
a big question.

Speaker 3 (14:25):
There it is, and honestly it's one of my favorite
ones because this is truly probably the most important variable
in the retirement income equation is how much do you
plan to spend in retirement and you ask the client
that they're going to look at you with the blank
stare like do what now?

Speaker 4 (14:38):
You know?

Speaker 3 (14:39):
So determined, but this really does need to be answered
before we can tell you how much you need to
have you know, if you saved enough to retire. This
is because how much you need to have saved depends
entirely on how much you plan to spend. Okay, now
you know, so this is stop five determining your retirement
spending needs. And some people I assume that you retirement,

(15:02):
but that's truly not always the case. And in fact,
if you think about it, you actually have more time
and opportunity to spend money in retirement, right because you're
obviously not working. So you know, you know, you work
all day, you go home, you cook dinner, and you
read a book or watch TV. Right, Like, but you
know today, if you weren't working, you could go, you know,
out to lunch with your friends and go golf in
the afternoon. Right, you have more opportunities to spend money, Okay,

(15:23):
more time available. So but here's what we tell people.
A good starting point would be, look at your current net,
take them pay for the month and see if it's
possible to replace that. Right, So, say I met twenty
five hundred dollars each pay period, I get paid twice
a month. That's five thousand dollars. Right, Let's see if
we can get to five thousand dollars a month sources
at least get us on par to what we were

(15:45):
used to experiencing. Now, on top of that, you could
add a separate like annual budget for travel or you know,
some other big expenses that you would like to have
in the future. And truly, I tell people, don't don't worry,
I mean worry about tax but let up determine that, truly,
because I've seen people coming like I'm just gonna add
thirty percent on for taxes, Like, where do you even

(16:07):
get that number?

Speaker 4 (16:07):
Right?

Speaker 3 (16:08):
It's it's not probably not going to be that high.
So anyway, start with the net amount that you want
and let someone like us add back on the taxes.
So the first once you have that, what you're trying
to hit, say five thousand a month, okay, first add
up your fix your expected fixed income sources. So we
look at social securities, any pensions, any part time work,
and things like that. Right, where is that? What does

(16:29):
that get us to now? Second, and more difficult would
be determine how much you can withdraw from your investments,
which you know to be accurate on this honestly is
not as easy as it sounds. And CJN and I
could with all the research we've read about this, but
to simplify it, say it's anywhere from four to six
and a half percent of your investments. And of course
your exact number could be determined with the help of

(16:50):
a financial planner. But but say we take we do
that math, take five percent of whatever you have saved
for starters, add that to your fixed income sources, and
maybe that gets you. It's your current take home pay
and you should be on the right track to retire
with that, right. That's just kind of a rough rule
of thumb. At least get us in the ballpark there.
And finally, you know, just a kind of a pet

(17:12):
peeve of all of us, is, you know, make sure
you're you're tracking your cash balances. You know a lot
of money markets and checking and savings accounts are paying
point one percent right ten bases points. So the Fed
just cut rates yesterday, I believe a quarter point but
you should be getting around four percent maybe three point
seventy five now on on high yield money markets accounts.
So don't make sure you're maximizing your cash and other

(17:35):
higher yielding money market vehicles if you have those available.

Speaker 1 (17:39):
So and and Nate, there's some real numbers to that
as well. A little fun fact, isn't.

Speaker 4 (17:43):
There it is.

Speaker 3 (17:44):
It's a big number. Yeah, Sean, it's been estimated that
almost two hundred and ninety one billion dollars in interest
has been lost by sticking in in low yielding money
markets account over let's see here a three or four
year period.

Speaker 1 (17:56):
So wow, that's yeah, that's it's pretty staggering when you
when you kind of break it down that way. As
we talked this morning with Nate Briby and CJ. Closs,
they are our retirement planning professionals from COSS Financial the
website cost financial dot com. That's Coss k l A
A S Financial dot com. They're telephon number six so
eight four four two five six three seven. No charge
for that initial gets know you appoyment at Loss Financial.

(18:18):
It will be complementary to you again their number six
O eight four four two five six three seven. We'll
do the Closs Quiz question the week, we'll head on
over to the Money in Motion Listener question corner. We'll
also wrap up this week's roadmap that and so much
more next as Money in Motion with Coss Financial continues
here on thirteen ten. Wu ib A talking with our
retirement planning professionals from COSS Financial this morning, c J.

(18:40):
Closs and Nate Briby. The website Coss Financial dot com.
That's Coss k l a A S Financial dot com.
They're telephone number six so eight four four two five
six three seven. No charge for that initial gets know
you appointment at Costs Financial. It will be complementary to
you laying out a roadmap this week, several stops along
the way when it comes to you getting ready for

(19:01):
retirement and understanding retirement. And before we get to the
Money in Motion listener question corner, CJ. I know a
lot of us, You know, I look towards fifty or
as you hit fifty, we start to think, you know what, I,
I probably should have saved more earlier. Is there any
advice or any any thoughts as far as a guidance
for folks that that feel that way?

Speaker 4 (19:22):
Yeah, good point, Sean. It is common you get to
around the magical age of forty or fifty, and somewhere
in that range you have this kind of like hack rap.
It's this guilty feeling of I should have done more,
and that's truth to be told that that is even
common for people who have done quite a bit, because
you never feel quite adequate. We have this phrase in

(19:43):
our business which is people never compare down, they always
compare up. What do I mean by that? If you
have two hundred thousand dollars saved when you're fifty years old,
you're going to compare to people that have more than that.
If you have two hundred million dollars when you're fifty
years old, you're going to com to people that have
more than that. To see my point, we don't compare down,

(20:04):
we compare up. So it's normal. It's normal for you
only to feel like you're behind. But we would say
getting started as the key that the kind of sinking
your head in the sand and not being aware of
where you're at is not a great strategy. So obviously
this is where working with a fee based financial planner,
a fee based fiduciary can really help. Because Nate and

(20:24):
I don't meet with one or two or three people.
We actually have as a firm eleven hundred households. I
believe Nate oversees something like two hundred and twenty households.
I oversee about one hundred and seventy households. And so
you get the idea like, this is not we're not
retiring once. We're not working with people in their thirties
or forties. We're working with people in there's thirties, forties, fifties,

(20:47):
sixty seventies, eighty nineties. We have people across the age spectrum.
We get to see them retire, make mistakes, make good decisions.
And so the idea being that working with a good
advisor are our statement of hey you're in a good
spot or hey you're ahead of pace is not an
uneducated one. It is both an educated one and a

(21:09):
and an experienced one. So consider working with an advisor.
And then, you know, don't let pride or past mistakes,
you know, stop you from making progress. Just sit down
with somebody to see what changes you need to make,
if any, to build a secure retirement.

Speaker 1 (21:25):
Great day to do just that. I got to just
pick up phone, game a call, a class financial make
that appointment six oh eight four four two five six
three seven that initially gets to know the appointment will
be complimentary to you again their number six oh eight
four four to two five six three seven. Time now
for the money in Motion listener question corner and Diane
from Madison time to write in. She says, Hi, there,
I'm sixty three years old and a widow. I feel

(21:47):
very fortunate to be in a stable financial position, but
my adult son is looking to buy his first home
and is struggling with the high prices and interest rates.
I'm considering taking out a home equity loan or dipping
into my retirement save to help him with a down payment.
Is this a good idea? And CJ, I'm going to
step away from this and I'm leaving this up to you.

Speaker 4 (22:08):
Well, Diane, Again, I hope you know some of you
listening to Diane's question may have your own opinions about this,
but believe it or not, these are the questions that
people have, and so Diane, thank you for asking it,
and I encourage everybody else to consider doing the same.
But again, thank you, thank you for your thoughtful question.
And first off, it's clear that you love your son

(22:28):
and you want him to succeed, and that's certainly admirable,
But here's an important truth. Your retirement, Diane needs to
come first. At age sixty three, from what you said
in your question, you're likely on the doorstep of retirement
or already there, and obviously, taking on new debt, especially
something like a home equity loan, can significantly strain your

(22:48):
own financial picture your own retirement. Likewise, withdrawing from retirement
savings to help your son not only reduces your nest egg,
but can also come with tax consequences depending upon where
you're pulling that money from. So that said, if you
run the numbers and your retirement is already well funded,
gifting a reasonable and affordable amount from your savings without

(23:11):
borrowing or jeopardizing your financial future could be an option
that we've got affirm like ours would support. The irs
allows you to gift up to nineteen thousand dollars per
person per year in twenty twenty five without triggering any
gift tax of reporting requirements. So kind of key takeaway
here is your retirement needs to come first. You wanting

(23:32):
to help your son, you know, buy a home, because
you're right, interest rates are higher prices are higher. We
get that. So if you wanted to help your son,
kind of like a nineteen thousand dollars gift, assuming that's
not going to submarine your own retirement, could be something
you move towards. And you know, Diane, that could even
become a multi year gift if you said, hey, well
I really want to give them more like one hundred

(23:53):
thousand dollars. Okay, maybe you give him nineteen thousand now
nineteen thousand the next year. You get the idea you
could do that, assuming it's not going to submarine your
own retirement. And there are rare instances where even going
above that nineteen thousand is something we might support. But
final thought, Diane, and this is I want everybody to
hear this. If you loan money to children that is

(24:16):
expected to be paid off, which, Diane, you didn't specifically
say this, but I want to address this topic. You
loan money to your children at lower interest rates because
you want to help them, but notice you're not gifting
it to them, you're loaning it to them. You will
permanently change the dynamic of the parent child relationship. We

(24:36):
would just highly suggest don't do it. If you're going
to give money to your children. Gift it to them.
What they do with it is up to them. But
don't become the lender to your children. You will permanently
change the dinner table. So there you go. There's some
direct guidance. I hope that was helpful. Diane. Obviously call

(24:58):
her office if you have any other questions.

Speaker 1 (25:00):
A great question, great answer. As always, don't forget. If
you've got a question, you can email. If you head
on over to Cossfinancial dot com. You can email right
from the website. Also their telephone number six oh eight
four four two five six three seven. No charge for
that initial get to know your appointment at Loss Financial.
It will be complimentary to you again their number six
oh eight four four two five six three seven. Hold

(25:20):
on down to that telephone number now because it's time
for the class quiz question of the week. It works
like this. In just a moment, I'll ask you the
class quiz question of the week. We'll then have thirty
minutes from the today's program to call the Class Financial
office right here in Madison at six oh eight four
four two five six three seven. If you are the
first caller with correct answer, you'll win this week's prize,
which is a twenty five dollars gift card to Best Buy.

(25:41):
This week's Class Quiz Question of the week Is this
true or false? Contributions to a health savings account are
considered triple tax advantage savings vehicles. Is that true or
is that false? Telephone number six soh eight four four
two five six three seven, first call with correct answer.
When's twenty five dollars gift guard two Best Buying again.
That's Class Financial Office right here in Madison. Six oh

(26:03):
eight four four two five six three seven C J Nate.
It's always great chatting with both of you, guys. Have
a great day and we'll do it again real soon.

Speaker 4 (26:11):
Thanks Sean.

Speaker 1 (26:12):
All right, thanks Sean, Take care guys. News comes your
way next year. On thirteen ten, wu ib A