November 27, 2025 • 38 mins
On today’s episode of Simply Money presented by Allworth Financial, Bob and Brian dig into why more countries are pushing retirement later—and what that signals for your financial future. You’ve built a nest egg, maybe refinanced your home, maxed out your retirement accounts… but have you thought about when to retire? With governments around the globe delaying official retirement ages, is longevity becoming your most important asset? Bob and Brian break it all down, including whether this global trend should influence your own retirement timeline.
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Speaker 1 (00:06):
Tonight, why more countries are pushing retirement dates out even later,
and what it signals potentially for your financial future. You're
listening to Simply Money, presented by all Worth Financial on
Bob Sponseller along with Brian James. So you built a
nest egg, maybe refinance your home, maxed out those retirement accounts.
But what about timing. It used to be work forty years,
(00:28):
get the gold Watch, retire around sixty five. Now others
around the world are working later. Maybe it's worth asking
should you work later too, Brian, I'm restraining myself right
off the bat on a couple of these things. But
let's get into this topic. We're talking about what others
around the world are doing governments and countries around the
(00:50):
whole issue of retirement dates.
Speaker 2 (00:53):
And so I think the one thing that a lot
of places didn't really account for, a lot of countries
didn't account for, and especially this one, is longevity. Right,
So how long are people going to live? When these
programs and things were set up way back when they
were based off of a shorter life expectancies, and that
started coming back around to bite the different pension systems.
We see it here, right, One of the reasons that
companies have spent the last thirty forty years getting rid
(01:15):
of pensions and dumping it into four h one K
type arrangements is to get out from under the burden
of needing to pay for somebody for thirty forty years
after the last time they sat at their desk and
actually perform some kind of service for that company. So
what's happening around the world. So France, Germany, Canada, Japan,
everybody is increasing the official retirement age or modifying their
(01:36):
pension systems to reflect that reality longer lifespans. Specifically, France
raised its age from sixty two to sixty four. You
might remember that there were protests and things kind of
exploded over there when that happened, and in so Denmark too.
The Denmark is now moving their state pension age from
sixty seven to seventy by twenty forty. China is shifting
their retirement ages as well, men from sixty to sixty three.
(01:58):
This is interesting becuse they have a difference there. I'm
up to fifty eight and that's gonna be phased in
starting January twenty twenty five. The United States has a
has had a history of this too. We have moved
ages on social security and things like that and during
my career, but it's been a very very long time.
I don't remember when that was, but it was in
the late nineties when I first started, they moved the
ages forward. So we haven't been as proactive with it.
(02:19):
But the same demographic trans exist here well.
Speaker 1 (02:23):
In the World Economic Forum has something called the Organization
for Economic Cooperation and Development, and I guess that's a
long winded way of saying they get a bunch of
people in a room from all over the world and
try to plan out the economy for all of us,
and they predict by the mid twenty sixties, average effective
(02:44):
retirement ages will climb by about two years worldwide. Brian,
I don't need a think tank to come up with
why this is happening. Let's face it, people are living
longer and globally, folks are having fewer children. So when
you have a pay as you go pension system like
social security and you have people living longer and being healthier,
(03:08):
the math's not gonna work. So adjustments are going to
have to be made. What am I missing here?
Speaker 3 (03:13):
Nothing? I mean that that is the problem.
Speaker 2 (03:15):
You hit it right there on the head, The math
won't math is really the as the kids say these days,
and I think what makes social Security our own homegrown
pension plan a little more, a little more susceptible to
this is the fact that, you know, we talk about
this all the time. The reason that that people have
a debate over when am I going to turn my
social securities pigot on? Everybody wants to max it out
for obvious reasons. How can I maximize my Social Security?
(03:38):
And the reason we look at that is because every
year you don't turn it on. Let's say you've hit
age sixty two. Now you're in the window you can
you can take it as early as sixty two and
get the lowest check you'll ever see, or you can
wait till seventy and take the biggest check you have
you'll ever see. That's not that question is not as
obvious as it seems, by the way, But the math
there basically says every year you ignore it, it will
(03:58):
go up by eight percent. That is not a number
that is indexed to inflation. It does not change. It
has been in concrete. Eight percent increases every single year
you don't sign up for it. And that was set
in concrete in the forties and fifties, back when we
were just in a different environment and longevity wasn't a problem.
Speaker 3 (04:15):
But now we've got people.
Speaker 2 (04:16):
Back then, the life expectancy might have been fifteen to
twenty years past retirement. Therefore, that eight percent didn't really
come home to roost. But remember how compounding works. We
love eight percent compounding when it comes to our four
to one case. When it comes to our public pension,
which we all have to pay taxes for. Now we
have to account for an extra ten to fifteen, even
twenty years on top because people can be retired and
on Social Security literally for forty years, so we have
(04:38):
every year we have more coming out of the system
than is flowing in, which is why the expectation of
Social Security will quote unquote the trust fund will run out.
I hate that headline, but that's what they say. Trust
fund will run out in the early twenty thirtiest. It
doesn't mean it's going to go to zero, and be
super clear about that. What it means is that we
won't have a surplus anymore. If we will simply be
functioning off of what goes into the system, off of
(05:00):
your and my pay stubs, out of that fight a
section on the top half, and so that that's something
we have to worry about. But at the same time,
there's no change can be made to it's not gonna
be fixed without some kind of sacrifice by somebody. We're
either going to pay more taxes now or we're going
to reduce our benefits. Are more likely a combination of both,
and there are thousands of ways that that could come
to bebop.
Speaker 1 (05:19):
Yeah, And going back to some of these numbers, some
of the data and again this World Economic Forum study,
they're saying that workers per retiree are projected to fall
from about four to just over two by twenty fifty.
So that's half the number of workers economically supporting the
pension you know, whatever you want to call it, social
(05:41):
security or whatever name they have for in other countries.
We're going to have half as many workers supporting that
pension system as we do today by twenty fifty. That's
a significant change. In the United States, the average labor
force exit age is already creeping up about four and
ten workers now expect to work past the age of
(06:01):
sixty five. That's a dramatic rise from just one and
ten just thirty years ago and nearly two and ten
Americans over age sixty five are still employed today, nearly
double from three decades ago. You're listening to Simply Money
presented by Allwood Financial on Bob Sponseller along with Brian James. Brian,
let's get into some of the challenges here with these
(06:24):
policy gaps, and we've talked about this before. The United
States is just you know, in my opinion, just kicking
the can down the road in the need to address
this so we don't have this overnight drop of twenty
to thirty percent of Social Security benefits in twenty thirty
three or twenty thirty five or whenever we go on
(06:45):
this fully pay as you go system. Let's get into
some of the challenges and things we should actually be
doing to get ourselves in a position to make sure
we don't have a negative impact on our retirement irrespective
of whatever the government does or doesn't do.
Speaker 3 (07:02):
Yeah, so this is something to be paying attention to.
Speaker 2 (07:05):
So we are weird a situation now we just get
here's some of the reasons, right, It's not just the longevity,
it's also you know, what a stuff costs nowadays. So
for example, if we look at homeowners age sixty five
to seventy nine. Way back in nineteen eighty nine, only
about twenty four percent of people still had a mortgage
at that age. In twenty twenty two, the last time
the study happened that I'm looking at, that percentage went
(07:25):
to forty one percent. So of course people are a
longevity is one thing. Living longer is one thing, but
another thing entirely is what does it cost to live?
So people who obviously we would all like to have
a paid off house and that kind of thing, but
to get there, it just takes longer because houses cost more.
Interest rates are higher now, and so that that is
something that this hangs around a lot longer. So I
(07:46):
think the real goal here to deal with this is,
first off, figure out where you are.
Speaker 3 (07:50):
What does it cost you to be you right now
on a monthly basis.
Speaker 2 (07:53):
This is huge most people worry about, well, so scary
is going to go away and all these scary things.
Speaker 3 (07:57):
That's fine, What does it mean to you? What do
you know where you are right now?
Speaker 2 (08:01):
And can you calculate the actual financial impact that that's
going to have. And I've found that very educational for
people to go through that process. And it's not to
say that it's always a happy result, but it's usually
not nearly as scary as what they think because they've
simply never done the math.
Speaker 1 (08:17):
Yeah, and you have to factor in, you know, and
we've talked about this, I think earlier this week. Some
people just rationalize not doing the planning and the savings, saying, well,
there's no way I'm going to live to be ninety
two or ninety four, and my spouse isn't going to either,
you know, because Uncle Joe or Grandpaul Fred died when
they were seventy seven, and I'm going to plan on
doing the same. And that's not reality in my opinion.
(08:40):
That's a rationalization in a lot of cases. So you've
got to factor in increase longevity, which can be a
good thing if your retirement plan is well funded and
you stay healthy. And then the other thing that we
always stress test our retirement plans for is the worst
case scenario, what happens if social Security benefit it's dropped
(09:00):
twenty or twenty five percent, you know, ten years from now.
Let's make sure that plan is viable and sustainable in
the event that government benefits i e. Social Security drop
a little bit. So you got to have a plan.
You got to look at different contingencies and make sure
each family out there is comfortable and feel secure with
what they've got to with with what they have in place.
(09:23):
You can't just sit back and assume that the government
is going to take care of all this, because in
most cases they can't and they won't.
Speaker 2 (09:33):
Yeah, so let's talk about that, because you've used the
term kick the can, and I've said that in my
office to people just about every meeting, as we were talking
about questions of well, what are we going to do
with this? If this changes? Yes, can the government fix it?
Of course, government can do whatever it wants. Is the
government going to be willing to That's the problem because,
like I said before, there's there's no way to fix
this without some kind of sacrifice being involved. So the
(09:55):
person who's gonna every change that comes through legally has
a person attached to it. Somebody drives the bill, somebody
will permanently have their name attached to an attempt to
either lower benefits on retirees or raise taxes on workers.
Both of those are obviously a sacrifice. So if I'm
a politician and I would like a chance at being reelected.
It is really, really, really super scary right now for
(10:17):
me to go out there and be that guy that says, hey,
you need to sacrifice. American people have not been great
at that over years. Maybe you go back to World
War Two and when the last time we were really
able to come together and make sacrifices for the better
of the whole. Ever since then, it's been a full
steam ahead. Let's make as much money as we can.
And I got yours, and that's kind of where I
got mine. That's kind of where we are right now.
(10:37):
And you know, so I didn't think about this. We're
not the only country associated with this. What happened in France,
So President Macrone raised the national retirement age there from
sixty two to sixty four. And this is this is
in twenty twenty three. Millions of people took to the streets.
Speaker 3 (10:51):
This was the yellow.
Speaker 2 (10:52):
Jackets, Transportation shut down, trash piled up all over in Paris.
Speaker 3 (10:55):
It was just chaos.
Speaker 2 (10:56):
It wasn't that they were upset more about working two years,
two more years. They were just upset that the decision
was made without a parliamentary vote. So, in other words,
France had the same problem. Nobody pushed a bill forward
or whatever they call it in France to do this.
The President basically just said, you know what, this is
broken and it's not going to get fixed unless we
just tear the bandd off and do it. And that's
what he did, which triggered a lot of social unrest.
Speaker 3 (11:18):
Though, so and that was over age sixty four.
Speaker 2 (11:21):
Here, we have already pushed that four retirement agents and
states to sixty seven, although you can sign up for
so security a little bit earlier than that. But anyway,
I would anticipate a lot of pushback when this happens,
even if it's good for us in the long run.
Speaker 1 (11:33):
Yeah, what we don't want to get into is we
do not want to get into the situation here in
the United States where the Social security benefits system gets
changed in an emergency order, you know, via executive order.
To your point about France, I mean, we Congress has
to do their job, and the sooner they do it
do it the better. Yeah. So, all right, here's the
(11:55):
all Worth advice. Longevity is an opportunity if your financial
house is in order, Working longer can be a strategic
asset too, not a burden. The key here is to
have a plan in place and monitor it on an
ongoing basis. Speaking of longevity, we're going to break down
some of the nuances of long term care insurance that
(12:16):
even savvy investors often miss. You're listening to Simply Money,
presented by all Worth Financial on fifty five KRC, the
talk station. You're listening to Simply Money presented by all
Worth Financial on Bob Spon Seller along with Brian James.
If you can't listen to Simply Money every night, subscribe
(12:37):
and get our daily podcast. You can listen the following
morning during your commute or at the gym or whatever
else you do in the evenings where you might want
a little bit of financial advice, just search Simply Money
on the iHeart app or wherever you find your podcasts.
Straight Ahead at six forty three it's our ever a
popular Ask the Advisor segment where nuanced advice meets real
(12:59):
life well health decisions. We talk a lot about risk
and retirement market risk, inflation, risk taxes, but there's one
that often flies under the radar, the cost of needing
long term care. And just because you might have looked
into insurance in the past, or might even have a
policy that's fifteen twenty years old. That doesn't mean you
(13:21):
understand what you're really getting or what you actually own today.
Let's jump into this topic, Brian, because it is coming
up more and more and more. I don't know about you,
but I'm I'm running into this often now with folks
in their mid to late eighties and in their children.
It's an important topic to cover.
Speaker 2 (13:42):
Yeah, and especially earlier in retirement. This doesn't mean you
should rush out and by long term caricter because we're
talking about it, but there are a lot of topics
out there that sometimes we just need to plan a
seed and make sure that the basics are there and
we start thinking about it so that when the time
actually comes, it won't be the first time you've started
learning about these kinds of things.
Speaker 3 (13:58):
So and really speaking to.
Speaker 2 (14:00):
Those of you who might be in that kind of
weird middle zone where you too much money to qualify
for Medicaid, which is the that's the uh that's in
the headlines a lot lately. That's what we provide for
people who don't have a lot of resources to cover
their healthcare, but at the same time also not wealthy
enough to self ensure, meaning you've just got enough to
pay for whatever comes down the pike. And so that
is where that that middle zone there, that's where long
(14:21):
term care insurance can make some sense. But there's some
things that people often miss. That's what we want to
talk about today. First off, it's not just nursing homes.
We instantly think as soon as I'm thinking long term care,
that's a nursing home. Well that's yes, that's of course
part of it. But a lot of policies actually cover
in home care. As matter of fact, the insurance companies
prefer it because in the long.
Speaker 3 (14:38):
Run it's cheaper.
Speaker 2 (14:39):
People are happier and healthier when they're in their own environment,
and so you know, sending a nurse or somebody there
to kind of help them through the day can be
a lot a lot better for everybody all around. Also,
assisted living, moving into a facility that you're still pretty
much independent, but at the same time there's medical staff
on on on site. There even adult daycare somewhere you
(14:59):
would go once a day and come home at night.
So if your goal is to stay in your home longer,
long term care insurance can cover those things if you
pick the right policy.
Speaker 1 (15:07):
All right, I want to jump in with a couple
of things here. You talked about folks that are in
that middle zone, and Brian, you know, this is the
unfortunate situation that I find, you know, in doing retirement
planning for well over thirty years. Now. You've got the
folks that you know they're in danger or running out
of money, and they're they're the ones that are in
danger of having to need to qualify for Medicaid. And
(15:30):
then you've got the folks that have way more than
enough money to self ensure. They're not worried about this
cost because if they need long term care coverage, their
lifestyle economically really isn't going to change in terms of
how much money is spent, you know, every month. It's
those folks in the middle, and that's where things get
challenging because if folks are just trying to get enough
(15:52):
money saved to retire, and their retirement income need or
want is about half of what it would be if
one of the two spouses goes on any kind of
long term care situation. That's the challenge because you can
make people borderline insurance poor by having them buy long
term care insurance. And there's the conundrum what happens if
(16:14):
you don't get it, you know, in the worst case
scenario happens. That's where it's really critical to sit out
and look at the pros and cons of even doing
insurance the other thing, you know, And I'm finding this.
I have found this for the last ten fifteen years,
where I've had clients actually use this stuff or need
some type of care. I mean the claims. The claims
(16:36):
data bears this a well over eighty percent of all
claims for long term care coverage or for in home care.
People want to stay in their home, and understandably so,
so remember that when you're looking at this stuff, everybody
wants to stay in their home if possible. It's about
getting the right type of assistance at the right price
(16:59):
to make sure sure staying in your home is economically
feasible and most importantly, keeping people safe in that process
and not burning out or overburdening loved ones. So we've
got some assistance coming in.
Speaker 2 (17:13):
Yeah, So let's talk about some of the things that
do trip people up when we're looking at what our
solutions might be for this. So, first off, Medicare does
not cover it. There's Medicaid, which is which will cover,
because that assumes you really don't have enough resources to
support yourself. That's what Medicaid is for the dagen. Medicare
does not cover it. So I want to say that
a couple of times. Medicare does not cover long term care.
(17:34):
So it might cover like a rehab stay. It'll give
you thirty days after some kind of major medical procedure,
but that is limited and it is temporary, so you
can't rely on the government for that.
Speaker 3 (17:43):
Premiums do go up even after you buy.
Speaker 2 (17:45):
You know, I think back to thirty years ago when
I believe it was General Electric was the last or
maybe it John Handt.
Speaker 3 (17:52):
It don't matter, It doesn't matter anymore.
Speaker 2 (17:54):
But anyway, somebody was so proud of the fact that
they had never ever ever raised their premiums. That was
in the history of the company, and that was their
big market tag level. Then all of a sudden they
realized that they too had misspriced the risk and weren't
able to cover the things that they had taken on.
Speaker 1 (18:06):
So these General Worth policies, yeah, these gen Worth policies.
And this is no slam on General Electric. I mean,
they I think wisely vested themselves be again and need it.
Speaker 3 (18:16):
So nobody remembers that gen Worth's General Electric.
Speaker 1 (18:18):
But Brian, I'm having people every two to four years
or getting these letters in the mail saying, hey, if
you want to keep what you have, great, but the
premiums are going up fifteen to twenty percent. I mean,
this is happening, and I know a lot of our
listeners out there have experienced this happening. It's real. And
because twenty five thirty years ago, when these policies first
(18:38):
came out, there was not a lot of underwriting history
on these things, and they were too inexpensively priced based
on the claims data. So you know, it's dollars in
dollars out from an insurance company standpoint, they got to
make a little bit of profit. But if they pay
way more out in claims than they're taking in in premiums,
they obviously go out of business and then nobody gets
(18:59):
there there benefits. So that's a real situation that has
been happening to people. I didn't mean to interrupt, No.
Speaker 3 (19:06):
It's okay.
Speaker 2 (19:06):
So, and this is something to look at. Now, if
you wait, you might not qualify. So early sixties, even
late fifties, that's the good window there. There are policies
out there that will let you share benefits with a spouse,
you can pay with hell savings accounts, and there's also
something called a hybrid policy that will offer a death
benefit too.
Speaker 3 (19:20):
So lots of moving parts to look at.
Speaker 1 (19:22):
There. Here's the all Worth advice. Long term care insurance
is more complicated, but it's also more flexible than most
people realize. Understand the fine print. Now get out in
front of this so that you're not caught off guard
later next Why the next few years could present a
once in a generation opportunity to keep more of what
(19:42):
you've worked hard and earned. You're listening to Simply Money
presented by all Worth Financial on fifty five KRC the
talk station. You're listening to Simply Money presented by all
Worth Financial. I'm Bob sponsorer along with Brian James. Markets
fluctuate and tax laws evolve. Investors are navigating a financial
(20:05):
environment that demands more foresight and examination than ever For
those with significant wealth. These shifts don't just impact annual
tax filings. They carry long term implications for investment outcomes,
retirement readiness, and legacy planning. Brian, let's get into some
of the complexities here. What's going on and what should
(20:28):
we be thinking about as we juggle all these balls
in the air about tax efficiency, investment returns and making
sure we don't run out of money in retirement.
Speaker 3 (20:37):
Well that's what it's all about, isn't it. Above Just
not letting the bucket run dry.
Speaker 2 (20:40):
So yeah, lots of moving parts people have to think
about that they didn't used to because you're a high earner.
There's just more moving parts to all this. You often hit,
you hit your deductions and your credit limits faster. And
the capital gains income tax management. The capital gain is
one of the biggest drivers of tax exposure. If I
own if I bought something for tan and I sold
it for twenty, that means I made ten bucks to
(21:02):
share on it or whatever that is. That means the
I r S gets a chunk of it too, in
the form of capital gains.
Speaker 3 (21:07):
And a lot of.
Speaker 2 (21:07):
Cases, if I'm a you know, if I'm a high earner,
then I may be in a situation where I've now
got a concentrated stock position. This is where we know
locally it's a lot of Procter and Gamble people and
Kroger people who have been there you know, spend twenty
thirty years at those large fortune five hundred companies. A
lot of the compensation is made up of stock grants
and or options.
Speaker 3 (21:25):
That means ended with the giant pile of it.
Speaker 2 (21:27):
And there's risk in that we don't have to look
too far and that there's nothing wrong with Proctor, Gamble,
Kroger and all that, But there are plenty of Life
is littered with lots of companies with terrifying stories about
how they evaporated, even if it's in the short term.
I was just having a conversation with somebody last week
who's in this exact situation. Procter and Gamble is, you know,
goes through these waves of laying off people in that
(21:47):
kind of thing. So everybody has to start thinking about
what they want to do and what winds up happening.
Is they all remember the Dirk Yager years from the
early two thousand when Dirk Yager was installed as the CEO.
He came up with his Millennium two thousand plan or
whatever it was, and the market insta hated it and
took away about fifty percent of the value of Procter
and Gamble in a matter of about six weeks, and
(22:08):
that can happen. You know, if you make the stock
market mad, the hert is going to stampede and take
your retirement with it. Procter and Gambled itself obviously, is
in fine condition today and it came back roaring and
better than ever. But if you were somebody who wanted
to retire from P ANDNG in two thousand and one,
two thousand and two when that happened, that probably changed
your life because you had so much tied up. And
again that has nothing to do with P ANDNG being
(22:29):
a bad company, but the market can smack anything around
in the relatively short term.
Speaker 1 (22:34):
Yeah, And that's the unfortunate thing. And we're not calling
a doomsday scenario for Procter and Gamble, a great company,
well run company. But the unfortunate thing, Brian, is these
kind of what i'll call black Swan type of events.
They usually only happen about twenty every twenty to twenty
five years. And the generation that experienced that is way past,
(22:55):
you know, gone and retired, and the folks that are
retiring today don't remember that those days twenty to twenty
five years ago. And history doesn't always repeat itself, but
it often rhymes. And that's where you got to stay.
You know, you got to remember, too much of any
one thing can blow up on you, no matter how
well managed or how well intentioned people are, and that
(23:16):
get you know, there's ways to get around this. As
far as this over concentration thing, you can stage it
in over time. You can put collar strategies in place,
you can direct index. There's a lot of things you
can do to you know, responsibly and tax efficiently, unwind
a concentrated a concentrated position in anyone's stock. And to
(23:38):
say nothing of some of the charitable you know, opportunities
out there with donor advise funds, charitable remainder trust. There's
a lot of things you can do out there. Let's
get into a state in gift tax exemption planning. I mean,
I know, with the the new bill that just got
passed that took a lot of uncertainty out of there
as far as you know, making permanent the large unified
(23:58):
credit now be up to almost fifteen million dollars per person.
But there are some things that you got to plan around,
you know, in that regard to right Brian.
Speaker 2 (24:08):
You know, one of the most impactful provisions for these
high networth families. That is the preservation of the pretty
high historically speaking, the relatively high federal estate and gift
tax exemptions, those are going to increase to fifteen million
dollars per person. In other words, what I'm saying to
you out there, dear listener, is that don't worry about
a state taxes unless you yourself individually own more than
(24:29):
fifteen million dollars worth of assets.
Speaker 3 (24:31):
I mean thirty million dollars for a for a.
Speaker 2 (24:34):
Married couple, if titled properly. That's its own radio segment.
We'll leave that there for now. But state taxes are
not an issue. There was the threat that it might
come back where this all comes from. As President George
Bush the second a long time ago started the process
of increasing how much was being passed through, and I
believe it used to be six hundred thousand dollars. Anything
above that, which is not that hard of a level
(24:55):
to get to anymore, anything above that was deemed with
the state taxes. But now that number is fifteen million.
So state taxes are not a thing anymore. That could
have gone away, but those were extended and actually increased as.
Speaker 3 (25:04):
A result of the big, beautiful bill and so forth,
so other things out there.
Speaker 2 (25:10):
In your vocable life insurance trust, that's a way to
keep life insurance proceeds out of your estate. And you
can also apply valuation discounts if you've got a business
or real estate interest.
Speaker 3 (25:19):
There are ways that the.
Speaker 2 (25:20):
Tax laws will allow you to affect that valuation to
make a little more different than here's what it is.
If I could if I sold it on the open market,
it's worth this. But there are different things you can
take advantage of the tax code, if you'll understand all
that properly.
Speaker 1 (25:34):
All right, those are some of the kind of what
off unique strategies out there. But I want to talk
about what most people should be doing, and Brian, what
we do every day, and we run into this situation
with almost everybody we work with, and that's doing just
good old proactive cash flow and tax planning. What do
I mean by that? During that window between when you
(25:54):
retire and when required minimum distributions kick in, examine whether,
if or when and how much rawth conversions makes sense
for you, factoring in how that's going to impact your
overall tax strategy. You dovetail that with your social security
claiming strategy. How to take some capital gains. There's a
lot of things you can do there if you do
(26:16):
some planning and get with a good CPA financial advisor, or,
in the best case scenario, a combination of both of
them working together. Here's the all Worth advice. A flexible
strategy that aligns with your goals and adapts to policy
changes can help reduce risk, boost after tax returns, and
preserve more of your wealth. Coming up next, we are
(26:38):
tackling the real questions that listeners are asking, maybe even
ones you've been wondering about yourself. You're listening to Simply
Money presented by all Worth Financial on fifty five KRC,
the talk station. You're listening to Simply Money presented by
all Worth Financial. I'm Bob Sponseller along with Brian James.
(27:00):
Do you have a financial question you'd like for us
to answer. There's a red button you can click while
you're listening to the show right there on the iHeart app.
Simply record your question and it will come straight to us.
Speaking of questions, Brian, let's hear from Brad and mount
look up in Mountains.
Speaker 3 (27:15):
Please explain what the survivor penalty is? Yeah, Brad, great question.
Speaker 2 (27:20):
So that's something that has come up that comes up
all the time we're talking about taxes and what happens
after you lose a spouse and all of a sudden
you have to switch from married. Let's set as out
all the emotional that goes of that. You also have
to insult injury switch from married filing jointly to single.
So the reason this is the thing is because the
income thresholds for the tax brackets are much lower for
(27:41):
single filers. Right when I hear the word lower and taxes,
I usually get a good feeling, but this is a
bad one.
Speaker 3 (27:46):
Me.
Speaker 2 (27:46):
What that means is that if you hit the thresholds
sooner because they're lower, that means your taxes go up quicker,
so the survivor can get pushed into a high tax bracket.
Speaker 3 (27:54):
You also lose.
Speaker 2 (27:55):
The one standard deduction, and so that the standard deduction
in twenty twenty five is a round four teen six
versus twenty nine to two for joint filers over sixty five.
Speaker 3 (28:03):
That's the problem.
Speaker 2 (28:04):
Single person may get taxed a little more on their
Social Security IRMA kicks in a little sooner because of again,
because of the way all this math works, so again
This is really the way to avoid this. You can't
change the tax brackets, they are what they are, but
control what you can control.
Speaker 3 (28:19):
This is where roth conversions come in.
Speaker 2 (28:21):
If you have a significant pile of money and a
pre tax IRA, you might look at paying taxes on
then now pulling that taxation forward.
Speaker 3 (28:28):
So that your rmds will be reduced.
Speaker 2 (28:31):
You can also, if it's a concern of draining your
own estate and therefore taking it away from your kids
life insurance, might make some sense to create an estate
at your death to offset some of that. And Joe,
just make sure you this all starts with what we
always say, Bob. This all starts with knowing where you
are in the first place. So understand where your situation
is now, then you can look at what if Heaven
forbid I lose my spouse. Let's move on to Joe
(28:51):
and blue Ash, who has a question about, Hey, go
figure it roth conversion.
Speaker 1 (28:54):
How do you balance roth conversions with staying under Medicare
premium cliffs? Great question, Joe. Let's talk about what these
Medicare premium cliffs are. There's something called IERMA, and I'm
not going to get into it's a big, long acronym,
but it basically means what Joe's asking about. If you
have too much earned income, you pay more in premium
on your Medicare. So what we do, what it sts
(29:17):
with is what we talk about all the time, developing
an income strategy and along with that a Wroth conversion strategy.
So when you layer in things like a potential Wroth
conversion along with maybe pension, social Security, other income you've
got coming in, we want to make sure we walk
right up to that line where you take advantage of
(29:39):
the great opportunities that Wroth conversions give you, but don't
cross over that line from an income standpoint and start
to irrevocably drive up your Medicare premiums. There's some great
there are some great tools out there that help us
do that. We sit down and do that with every client.
I know a lot of good CPAs are doing that
as well. But again it comes down to the difference
(30:01):
between tax preparation, which is what eighty to ninety percent
of people just do. They just mail in all their
stuff and wait for the answer to come back from
their CPA versus proactive tax planning where you sit down
and run some actual scenarios on. If I do this,
what happens over here and you balance it out and
(30:21):
you maximize your income strategy. All right, let's hear from
Laura and Villa Hills.
Speaker 3 (30:26):
I've got a concentrated stock position from a former employer.
What's the best way to onwind that without triggering a
huge tax bill?
Speaker 2 (30:34):
Well, congratulations, Laura, this is a good problem to have.
Concentrated stock means just that I got a lot of
my networth tied up in a stock that is mostly
because of an employment, or perhaps you own the company
or whatever.
Speaker 3 (30:45):
But so then the risk there.
Speaker 2 (30:46):
If it's a concentrated stock position, that usually implies that
the thing did pretty well, So congratulations, it must have
grown a lot. But that also means that there's usually
capital gains in the mix here, So that's usually the concern.
If it is a position that is not inside of
a retirement plan, not an IRA, not a four oh
one K, nothing like that, then it's exposed to capital
gains taxes, which actually are slightly more favorable than income taxes.
Speaker 3 (31:09):
But taxes are still taxes. So what do we do
about that?
Speaker 2 (31:11):
Well, the first thing I would look at is if
you are some of the easier things to handle. If
you are already charitably inclined, then you might look at
if you write checks to a church or you know,
some five oh one C three type organization every single year.
Then first off, you may have lost your deduction on
that a few years ago twenty seventeen when the Tax
Cuts and Jobs Act increased the standard deduction and therefore
(31:32):
losing the deduction or just getting it for free basically.
So that's a case where you might donate some of
that stock, just donate the shares. If you do that
donation of appreciated shares, then you will you're passing the
gain on to an entity that doesn't pay taxes anyway.
You get the deduction for the full dollar amount whatever
it was worth a day you donated it. That five
oho one C three will turn around and immediately sell
(31:54):
it and you use it for whatever their purposes are.
They will not pay any capital gains. So, as a
matter of fact, I run across people all the time
that are writing checks to these organizations, which to me
is a waste of everybody's tax dollars because they could
simply give the shares its five zoe C three gets
the same amount of money and no sacrifice but really
by anybody. But if that's not what you have in mind,
(32:14):
then you're going to be looking at something called an
exchange fund or a swap fund. This is where if
I have a big pile of PNG, I can band
together with people who have a bunch of Kroger, or
a bunch of IBM, or a bunch of Apple and Video,
whatever it is. We all throw our shares into a pile,
and then we each take a proportionate share of the
resulting pile of stuff. This is not a sale, it's
not nearly as simply as I'm making it right now.
(32:36):
It's not a sale, so it doesn't trigger taxes, but
I do have Now I have a representation of a
lot of different companies.
Speaker 3 (32:41):
It's a way to spread that risk out. So those
are two you're either.
Speaker 2 (32:43):
Charitab being inclined, or you want to spread out of diversification,
and sometimes both of those can help. Bill and Mason
is retired and has got some questions about rmds.
Speaker 3 (32:53):
My wife and I are retired, and we don't need
our r and vs to live on. What's the smartest
options for putting our money to work?
Speaker 1 (33:00):
Well, Bill, I obviously don't know whether you're retired and
not yes yet at r M d age or whether
you're already at r M d AID. So the answer
is slightly different depending on what situation you're in. So
let's briefly cover both. If you're tired and not yet
at that RM D age, there's where the opportunity is
and a big one. You know, you just retired, your
(33:22):
income is lower, and you've got an opportunity to do
these WROTH conversions that we've been talking about. You know,
you sit down and sketch that out and try to
get as much money moved into wroth IRA's at the
lowest possible tax rate you can. Wonderful strategy there if
you're already at r M d age. And I run
into this a lot with folks that are in their
(33:43):
late seventies and are still writing checks to their church.
If you're charitably inclined, you tie to your church. You
give other money to other you know, ministries or other charities.
A lot of people are still making cash gifts where
they could be taking IRA money at age seventy and
a half and diverting that IRA money directly to charity.
(34:05):
And if you do that, the amount of that charitable
gift does not even hit your ten forty and is
not even counted as taxable income. You don't get a
deduction for that gift. But it's even better, the RMD
does not hit your tax returns taxable income. So that's
Those are two scenarios you can look at. And then
(34:26):
if worst case scenario, if you don't need the rm ds,
you've maxed out what you want to give to charity,
you just convert whatever is left in those rmds over
to a taxable investment account. Because you brought up keeping
that money, you know, working for you and putting it
to work. Put it in a taxable, tax efficient brokerage
fund and let it grow long term for your kids
(34:46):
and grand kids. Coming up next, why you could be
eating your retirement literally eating it one mimosa brunch at
a time. You're listening to Simply Money, presented by all
Worth Financial on fifty five KRC, the talk station. You're
listening to Simply Money because I by all with Financial,
(35:06):
umbop spon seller along with Brian James. So get this.
Brian MarketWatch recently published an article that got our attention.
If a couple spends one hundred dollars a day eating
out or just fifty dollars a person over the course
of forty years, which is you know, which is I
guess a long but not out of the question retirement shold.
(35:28):
Now they'll have spent nearly two million dollars just on
restaurant meals. Something to keep an eye on here. Two
million dollars is a lot of money, Brian, and that
can make or break the viability of one's retirement plan.
Speaker 2 (35:44):
Yeah, and that that one hundred bucks a day eating out.
That used to sound like a lot. Remember when one
hundred dollars meal that meant you were celebrating somebody's birthday
or graduation or whatever.
Speaker 3 (35:51):
It was a big deal.
Speaker 2 (35:53):
But now you know, if I'm eating lunch and dinner
out there, and I'm a married couple, well then that's
fifty bucks apiece. That's twenty five apiece per meal. Well,
that's that's bunch of skyline, love my skyline. But that's
where that's about where they are now. And so again
that all sneaks up, and that's two million dollars, right,
this is the problem with the snowball and so forth.
Speaker 3 (36:12):
That's before you factor in the tip.
Speaker 2 (36:14):
If that's a thing, and maybe that extra glass of
wine and all that stuff, you know, where there's two
million dollars that that's a nest egg for a lot
of people. So again, one hundred bucks a day eating
out over forty years is going to add up a lot.
So you can apply this to a lot of different things,
but different expenses that maybe you can seem to be
fairly innocuous but end up sneaking up on us. So
if you've done the right things and you built up
(36:35):
a solid nestick, it's probably.
Speaker 3 (36:36):
Not a major concern. It's more of an expensive hobby.
Speaker 1 (36:40):
I think, Yeah, I think the key here, and we
can make fun of, you know, one hundred dollars skyline
bill and eating out and all that. But I think
the point we're trying to make here is is when
you examine your your retirement budget, what you're actually going
to spend or want to spend. And what I what
I always tell people Brian, is I don't need to
know how much you spend on a pack of gum
(37:02):
or something like that, but numbers that start to add
up to, you know, in the hundreds of dollars per month,
it's worth taking a look at, especially if you're on
the margins in the area being able to viably retire,
and say, hey, are there things that we can trim
back on just a little bit without ruining our life
(37:22):
and taking all the fun out of our life, as
opposed to just letting it rip, do whatever we want
and hoping it works out in the end. That's really
what we're talking about here, Brian.
Speaker 3 (37:32):
Yeah, and again, this is not at all about stop doing.
Speaker 2 (37:35):
You know. I always tell my clients everybody comes in
wanting to build a retirement plan, and most people who
have built something are relatively frugal people to begin with.
So they'll walk in and they'll say, we're gonna build
a vegetable garden in the backyard. We're gonna eat out
of that, and we're never gonna leave the house. And
I always say, no, you're not. If you were gonna
do that, you'd have done it already. That sounds awful,
and it sounds like a terrible retirement. I just keep
working if that's your plan, So let's not start there.
(37:56):
Let's figure out what you do now. If eating out
is a social thing, if that's an important thing, that's important.
Stuff is not, We're not on this planet to stare
at a growing pile of money. We are here to
enjoy each other's company and help out where we can,
and so on and so forth. So understand what your
life is like and then build your financial plan around that.
Speaker 1 (38:13):
Yeah, if you really love eating out and you want
to keep doing that, great, Maybe just trim back from
having four paid movie subscriptions or streaming services to maybe two.
There's always a way to skin the cat. Here here's
the all Worth advice. You've saved well don't. You don't
need to skip the stake, just maybe skip the third course.
Thanks for listening. You've been listening to Simply Money, presented
(38:35):
by all Worth Financial on fifty five KRC, the talk
station
Tonight, why more countries are pushing retirement dates out even later,
and what it signals potentially for your financial future. You're
listening to Simply Money, presented by all Worth Financial on
Bob Sponseller along with Brian James. So you built a
nest egg, maybe refinance your home, maxed out those retirement accounts.
But what about timing. It used to be work forty years,
(00:28):
get the gold Watch, retire around sixty five. Now others
around the world are working later. Maybe it's worth asking
should you work later too, Brian, I'm restraining myself right
off the bat on a couple of these things. But
let's get into this topic. We're talking about what others
around the world are doing governments and countries around the
(00:50):
whole issue of retirement dates.
Speaker 2 (00:53):
And so I think the one thing that a lot
of places didn't really account for, a lot of countries
didn't account for, and especially this one, is longevity. Right,
So how long are people going to live? When these
programs and things were set up way back when they
were based off of a shorter life expectancies, and that
started coming back around to bite the different pension systems.
We see it here, right, One of the reasons that
companies have spent the last thirty forty years getting rid
(01:15):
of pensions and dumping it into four h one K
type arrangements is to get out from under the burden
of needing to pay for somebody for thirty forty years
after the last time they sat at their desk and
actually perform some kind of service for that company. So
what's happening around the world. So France, Germany, Canada, Japan,
everybody is increasing the official retirement age or modifying their
(01:36):
pension systems to reflect that reality longer lifespans. Specifically, France
raised its age from sixty two to sixty four. You
might remember that there were protests and things kind of
exploded over there when that happened, and in so Denmark too.
The Denmark is now moving their state pension age from
sixty seven to seventy by twenty forty. China is shifting
their retirement ages as well, men from sixty to sixty three.
(01:58):
This is interesting becuse they have a difference there. I'm
up to fifty eight and that's gonna be phased in
starting January twenty twenty five. The United States has a
has had a history of this too. We have moved
ages on social security and things like that and during
my career, but it's been a very very long time.
I don't remember when that was, but it was in
the late nineties when I first started, they moved the
ages forward. So we haven't been as proactive with it.
(02:19):
But the same demographic trans exist here well.
Speaker 1 (02:23):
In the World Economic Forum has something called the Organization
for Economic Cooperation and Development, and I guess that's a
long winded way of saying they get a bunch of
people in a room from all over the world and
try to plan out the economy for all of us,
and they predict by the mid twenty sixties, average effective
(02:44):
retirement ages will climb by about two years worldwide. Brian,
I don't need a think tank to come up with
why this is happening. Let's face it, people are living
longer and globally, folks are having fewer children. So when
you have a pay as you go pension system like
social security and you have people living longer and being healthier,
(03:08):
the math's not gonna work. So adjustments are going to
have to be made. What am I missing here?
Speaker 3 (03:13):
Nothing? I mean that that is the problem.
Speaker 2 (03:15):
You hit it right there on the head, The math
won't math is really the as the kids say these days,
and I think what makes social Security our own homegrown
pension plan a little more, a little more susceptible to
this is the fact that, you know, we talk about
this all the time. The reason that that people have
a debate over when am I going to turn my
social securities pigot on? Everybody wants to max it out
for obvious reasons. How can I maximize my Social Security?
(03:38):
And the reason we look at that is because every
year you don't turn it on. Let's say you've hit
age sixty two. Now you're in the window you can
you can take it as early as sixty two and
get the lowest check you'll ever see, or you can
wait till seventy and take the biggest check you have
you'll ever see. That's not that question is not as
obvious as it seems, by the way, But the math
there basically says every year you ignore it, it will
(03:58):
go up by eight percent. That is not a number
that is indexed to inflation. It does not change. It
has been in concrete. Eight percent increases every single year
you don't sign up for it. And that was set
in concrete in the forties and fifties, back when we
were just in a different environment and longevity wasn't a problem.
Speaker 3 (04:15):
But now we've got people.
Speaker 2 (04:16):
Back then, the life expectancy might have been fifteen to
twenty years past retirement. Therefore, that eight percent didn't really
come home to roost. But remember how compounding works. We
love eight percent compounding when it comes to our four
to one case. When it comes to our public pension,
which we all have to pay taxes for. Now we
have to account for an extra ten to fifteen, even
twenty years on top because people can be retired and
on Social Security literally for forty years, so we have
(04:38):
every year we have more coming out of the system
than is flowing in, which is why the expectation of
Social Security will quote unquote the trust fund will run out.
I hate that headline, but that's what they say. Trust
fund will run out in the early twenty thirtiest. It
doesn't mean it's going to go to zero, and be
super clear about that. What it means is that we
won't have a surplus anymore. If we will simply be
functioning off of what goes into the system, off of
(05:00):
your and my pay stubs, out of that fight a
section on the top half, and so that that's something
we have to worry about. But at the same time,
there's no change can be made to it's not gonna
be fixed without some kind of sacrifice by somebody. We're
either going to pay more taxes now or we're going
to reduce our benefits. Are more likely a combination of both,
and there are thousands of ways that that could come
to bebop.
Speaker 1 (05:19):
Yeah, And going back to some of these numbers, some
of the data and again this World Economic Forum study,
they're saying that workers per retiree are projected to fall
from about four to just over two by twenty fifty.
So that's half the number of workers economically supporting the
pension you know, whatever you want to call it, social
(05:41):
security or whatever name they have for in other countries.
We're going to have half as many workers supporting that
pension system as we do today by twenty fifty. That's
a significant change. In the United States, the average labor
force exit age is already creeping up about four and
ten workers now expect to work past the age of
(06:01):
sixty five. That's a dramatic rise from just one and
ten just thirty years ago and nearly two and ten
Americans over age sixty five are still employed today, nearly
double from three decades ago. You're listening to Simply Money
presented by Allwood Financial on Bob Sponseller along with Brian James. Brian,
let's get into some of the challenges here with these
(06:24):
policy gaps, and we've talked about this before. The United
States is just you know, in my opinion, just kicking
the can down the road in the need to address
this so we don't have this overnight drop of twenty
to thirty percent of Social Security benefits in twenty thirty
three or twenty thirty five or whenever we go on
(06:45):
this fully pay as you go system. Let's get into
some of the challenges and things we should actually be
doing to get ourselves in a position to make sure
we don't have a negative impact on our retirement irrespective
of whatever the government does or doesn't do.
Speaker 3 (07:02):
Yeah, so this is something to be paying attention to.
Speaker 2 (07:05):
So we are weird a situation now we just get
here's some of the reasons, right, It's not just the longevity,
it's also you know, what a stuff costs nowadays. So
for example, if we look at homeowners age sixty five
to seventy nine. Way back in nineteen eighty nine, only
about twenty four percent of people still had a mortgage
at that age. In twenty twenty two, the last time
the study happened that I'm looking at, that percentage went
(07:25):
to forty one percent. So of course people are a
longevity is one thing. Living longer is one thing, but
another thing entirely is what does it cost to live?
So people who obviously we would all like to have
a paid off house and that kind of thing, but
to get there, it just takes longer because houses cost more.
Interest rates are higher now, and so that that is
something that this hangs around a lot longer. So I
(07:46):
think the real goal here to deal with this is,
first off, figure out where you are.
Speaker 3 (07:50):
What does it cost you to be you right now
on a monthly basis.
Speaker 2 (07:53):
This is huge most people worry about, well, so scary
is going to go away and all these scary things.
Speaker 3 (07:57):
That's fine, What does it mean to you? What do
you know where you are right now?
Speaker 2 (08:01):
And can you calculate the actual financial impact that that's
going to have. And I've found that very educational for
people to go through that process. And it's not to
say that it's always a happy result, but it's usually
not nearly as scary as what they think because they've
simply never done the math.
Speaker 1 (08:17):
Yeah, and you have to factor in, you know, and
we've talked about this, I think earlier this week. Some
people just rationalize not doing the planning and the savings, saying, well,
there's no way I'm going to live to be ninety
two or ninety four, and my spouse isn't going to either,
you know, because Uncle Joe or Grandpaul Fred died when
they were seventy seven, and I'm going to plan on
doing the same. And that's not reality in my opinion.
(08:40):
That's a rationalization in a lot of cases. So you've
got to factor in increase longevity, which can be a
good thing if your retirement plan is well funded and
you stay healthy. And then the other thing that we
always stress test our retirement plans for is the worst
case scenario, what happens if social Security benefit it's dropped
(09:00):
twenty or twenty five percent, you know, ten years from now.
Let's make sure that plan is viable and sustainable in
the event that government benefits i e. Social Security drop
a little bit. So you got to have a plan.
You got to look at different contingencies and make sure
each family out there is comfortable and feel secure with
what they've got to with with what they have in place.
(09:23):
You can't just sit back and assume that the government
is going to take care of all this, because in
most cases they can't and they won't.
Speaker 2 (09:33):
Yeah, so let's talk about that, because you've used the
term kick the can, and I've said that in my
office to people just about every meeting, as we were talking
about questions of well, what are we going to do
with this? If this changes? Yes, can the government fix it?
Of course, government can do whatever it wants. Is the
government going to be willing to That's the problem because,
like I said before, there's there's no way to fix
this without some kind of sacrifice being involved. So the
(09:55):
person who's gonna every change that comes through legally has
a person attached to it. Somebody drives the bill, somebody
will permanently have their name attached to an attempt to
either lower benefits on retirees or raise taxes on workers.
Both of those are obviously a sacrifice. So if I'm
a politician and I would like a chance at being reelected.
It is really, really, really super scary right now for
(10:17):
me to go out there and be that guy that says, hey,
you need to sacrifice. American people have not been great
at that over years. Maybe you go back to World
War Two and when the last time we were really
able to come together and make sacrifices for the better
of the whole. Ever since then, it's been a full
steam ahead. Let's make as much money as we can.
And I got yours, and that's kind of where I
got mine. That's kind of where we are right now.
(10:37):
And you know, so I didn't think about this. We're
not the only country associated with this. What happened in France,
So President Macrone raised the national retirement age there from
sixty two to sixty four. And this is this is
in twenty twenty three. Millions of people took to the streets.
Speaker 3 (10:51):
This was the yellow.
Speaker 2 (10:52):
Jackets, Transportation shut down, trash piled up all over in Paris.
Speaker 3 (10:55):
It was just chaos.
Speaker 2 (10:56):
It wasn't that they were upset more about working two years,
two more years. They were just upset that the decision
was made without a parliamentary vote. So, in other words,
France had the same problem. Nobody pushed a bill forward
or whatever they call it in France to do this.
The President basically just said, you know what, this is
broken and it's not going to get fixed unless we
just tear the bandd off and do it. And that's
what he did, which triggered a lot of social unrest.
Speaker 3 (11:18):
Though, so and that was over age sixty four.
Speaker 2 (11:21):
Here, we have already pushed that four retirement agents and
states to sixty seven, although you can sign up for
so security a little bit earlier than that. But anyway,
I would anticipate a lot of pushback when this happens,
even if it's good for us in the long run.
Speaker 1 (11:33):
Yeah, what we don't want to get into is we
do not want to get into the situation here in
the United States where the Social security benefits system gets
changed in an emergency order, you know, via executive order.
To your point about France, I mean, we Congress has
to do their job, and the sooner they do it
do it the better. Yeah. So, all right, here's the
(11:55):
all Worth advice. Longevity is an opportunity if your financial
house is in order, Working longer can be a strategic
asset too, not a burden. The key here is to
have a plan in place and monitor it on an
ongoing basis. Speaking of longevity, we're going to break down
some of the nuances of long term care insurance that
(12:16):
even savvy investors often miss. You're listening to Simply Money,
presented by all Worth Financial on fifty five KRC, the
talk station. You're listening to Simply Money presented by all
Worth Financial on Bob Spon Seller along with Brian James.
If you can't listen to Simply Money every night, subscribe
(12:37):
and get our daily podcast. You can listen the following
morning during your commute or at the gym or whatever
else you do in the evenings where you might want
a little bit of financial advice, just search Simply Money
on the iHeart app or wherever you find your podcasts.
Straight Ahead at six forty three it's our ever a
popular Ask the Advisor segment where nuanced advice meets real
(12:59):
life well health decisions. We talk a lot about risk
and retirement market risk, inflation, risk taxes, but there's one
that often flies under the radar, the cost of needing
long term care. And just because you might have looked
into insurance in the past, or might even have a
policy that's fifteen twenty years old. That doesn't mean you
(13:21):
understand what you're really getting or what you actually own today.
Let's jump into this topic, Brian, because it is coming
up more and more and more. I don't know about you,
but I'm I'm running into this often now with folks
in their mid to late eighties and in their children.
It's an important topic to cover.
Speaker 2 (13:42):
Yeah, and especially earlier in retirement. This doesn't mean you
should rush out and by long term caricter because we're
talking about it, but there are a lot of topics
out there that sometimes we just need to plan a
seed and make sure that the basics are there and
we start thinking about it so that when the time
actually comes, it won't be the first time you've started
learning about these kinds of things.
Speaker 3 (13:58):
So and really speaking to.
Speaker 2 (14:00):
Those of you who might be in that kind of
weird middle zone where you too much money to qualify
for Medicaid, which is the that's the uh that's in
the headlines a lot lately. That's what we provide for
people who don't have a lot of resources to cover
their healthcare, but at the same time also not wealthy
enough to self ensure, meaning you've just got enough to
pay for whatever comes down the pike. And so that
is where that that middle zone there, that's where long
(14:21):
term care insurance can make some sense. But there's some
things that people often miss. That's what we want to
talk about today. First off, it's not just nursing homes.
We instantly think as soon as I'm thinking long term care,
that's a nursing home. Well that's yes, that's of course
part of it. But a lot of policies actually cover
in home care. As matter of fact, the insurance companies
prefer it because in the long.
Speaker 3 (14:38):
Run it's cheaper.
Speaker 2 (14:39):
People are happier and healthier when they're in their own environment,
and so you know, sending a nurse or somebody there
to kind of help them through the day can be
a lot a lot better for everybody all around. Also,
assisted living, moving into a facility that you're still pretty
much independent, but at the same time there's medical staff
on on on site. There even adult daycare somewhere you
(14:59):
would go once a day and come home at night.
So if your goal is to stay in your home longer,
long term care insurance can cover those things if you
pick the right policy.
Speaker 1 (15:07):
All right, I want to jump in with a couple
of things here. You talked about folks that are in
that middle zone, and Brian, you know, this is the
unfortunate situation that I find, you know, in doing retirement
planning for well over thirty years. Now. You've got the
folks that you know they're in danger or running out
of money, and they're they're the ones that are in
danger of having to need to qualify for Medicaid. And
(15:30):
then you've got the folks that have way more than
enough money to self ensure. They're not worried about this
cost because if they need long term care coverage, their
lifestyle economically really isn't going to change in terms of
how much money is spent, you know, every month. It's
those folks in the middle, and that's where things get
challenging because if folks are just trying to get enough
(15:52):
money saved to retire, and their retirement income need or
want is about half of what it would be if
one of the two spouses goes on any kind of
long term care situation. That's the challenge because you can
make people borderline insurance poor by having them buy long
term care insurance. And there's the conundrum what happens if
(16:14):
you don't get it, you know, in the worst case
scenario happens. That's where it's really critical to sit out
and look at the pros and cons of even doing
insurance the other thing, you know, And I'm finding this.
I have found this for the last ten fifteen years,
where I've had clients actually use this stuff or need
some type of care. I mean the claims. The claims
(16:36):
data bears this a well over eighty percent of all
claims for long term care coverage or for in home care.
People want to stay in their home, and understandably so,
so remember that when you're looking at this stuff, everybody
wants to stay in their home if possible. It's about
getting the right type of assistance at the right price
(16:59):
to make sure sure staying in your home is economically
feasible and most importantly, keeping people safe in that process
and not burning out or overburdening loved ones. So we've
got some assistance coming in.
Speaker 2 (17:13):
Yeah, So let's talk about some of the things that
do trip people up when we're looking at what our
solutions might be for this. So, first off, Medicare does
not cover it. There's Medicaid, which is which will cover,
because that assumes you really don't have enough resources to
support yourself. That's what Medicaid is for the dagen. Medicare
does not cover it. So I want to say that
a couple of times. Medicare does not cover long term care.
(17:34):
So it might cover like a rehab stay. It'll give
you thirty days after some kind of major medical procedure,
but that is limited and it is temporary, so you
can't rely on the government for that.
Speaker 3 (17:43):
Premiums do go up even after you buy.
Speaker 2 (17:45):
You know, I think back to thirty years ago when
I believe it was General Electric was the last or
maybe it John Handt.
Speaker 3 (17:52):
It don't matter, It doesn't matter anymore.
Speaker 2 (17:54):
But anyway, somebody was so proud of the fact that
they had never ever ever raised their premiums. That was
in the history of the company, and that was their
big market tag level. Then all of a sudden they
realized that they too had misspriced the risk and weren't
able to cover the things that they had taken on.
Speaker 1 (18:06):
So these General Worth policies, yeah, these gen Worth policies.
And this is no slam on General Electric. I mean,
they I think wisely vested themselves be again and need it.
Speaker 3 (18:16):
So nobody remembers that gen Worth's General Electric.
Speaker 1 (18:18):
But Brian, I'm having people every two to four years
or getting these letters in the mail saying, hey, if
you want to keep what you have, great, but the
premiums are going up fifteen to twenty percent. I mean,
this is happening, and I know a lot of our
listeners out there have experienced this happening. It's real. And
because twenty five thirty years ago, when these policies first
(18:38):
came out, there was not a lot of underwriting history
on these things, and they were too inexpensively priced based
on the claims data. So you know, it's dollars in
dollars out from an insurance company standpoint, they got to
make a little bit of profit. But if they pay
way more out in claims than they're taking in in premiums,
they obviously go out of business and then nobody gets
(18:59):
there there benefits. So that's a real situation that has
been happening to people. I didn't mean to interrupt, No.
Speaker 3 (19:06):
It's okay.
Speaker 2 (19:06):
So, and this is something to look at. Now, if
you wait, you might not qualify. So early sixties, even
late fifties, that's the good window there. There are policies
out there that will let you share benefits with a spouse,
you can pay with hell savings accounts, and there's also
something called a hybrid policy that will offer a death
benefit too.
Speaker 3 (19:20):
So lots of moving parts to look at.
Speaker 1 (19:22):
There. Here's the all Worth advice. Long term care insurance
is more complicated, but it's also more flexible than most
people realize. Understand the fine print. Now get out in
front of this so that you're not caught off guard
later next Why the next few years could present a
once in a generation opportunity to keep more of what
(19:42):
you've worked hard and earned. You're listening to Simply Money
presented by all Worth Financial on fifty five KRC the
talk station. You're listening to Simply Money presented by all
Worth Financial. I'm Bob sponsorer along with Brian James. Markets
fluctuate and tax laws evolve. Investors are navigating a financial
(20:05):
environment that demands more foresight and examination than ever For
those with significant wealth. These shifts don't just impact annual
tax filings. They carry long term implications for investment outcomes,
retirement readiness, and legacy planning. Brian, let's get into some
of the complexities here. What's going on and what should
(20:28):
we be thinking about as we juggle all these balls
in the air about tax efficiency, investment returns and making
sure we don't run out of money in retirement.
Speaker 3 (20:37):
Well that's what it's all about, isn't it. Above Just
not letting the bucket run dry.
Speaker 2 (20:40):
So yeah, lots of moving parts people have to think
about that they didn't used to because you're a high earner.
There's just more moving parts to all this. You often hit,
you hit your deductions and your credit limits faster. And
the capital gains income tax management. The capital gain is
one of the biggest drivers of tax exposure. If I
own if I bought something for tan and I sold
it for twenty, that means I made ten bucks to
(21:02):
share on it or whatever that is. That means the
I r S gets a chunk of it too, in
the form of capital gains.
Speaker 3 (21:07):
And a lot of.
Speaker 2 (21:07):
Cases, if I'm a you know, if I'm a high earner,
then I may be in a situation where I've now
got a concentrated stock position. This is where we know
locally it's a lot of Procter and Gamble people and
Kroger people who have been there you know, spend twenty
thirty years at those large fortune five hundred companies. A
lot of the compensation is made up of stock grants
and or options.
Speaker 3 (21:25):
That means ended with the giant pile of it.
Speaker 2 (21:27):
And there's risk in that we don't have to look
too far and that there's nothing wrong with Proctor, Gamble,
Kroger and all that, But there are plenty of Life
is littered with lots of companies with terrifying stories about
how they evaporated, even if it's in the short term.
I was just having a conversation with somebody last week
who's in this exact situation. Procter and Gamble is, you know,
goes through these waves of laying off people in that
(21:47):
kind of thing. So everybody has to start thinking about
what they want to do and what winds up happening.
Is they all remember the Dirk Yager years from the
early two thousand when Dirk Yager was installed as the CEO.
He came up with his Millennium two thousand plan or
whatever it was, and the market insta hated it and
took away about fifty percent of the value of Procter
and Gamble in a matter of about six weeks, and
(22:08):
that can happen. You know, if you make the stock
market mad, the hert is going to stampede and take
your retirement with it. Procter and Gambled itself obviously, is
in fine condition today and it came back roaring and
better than ever. But if you were somebody who wanted
to retire from P ANDNG in two thousand and one,
two thousand and two when that happened, that probably changed
your life because you had so much tied up. And
again that has nothing to do with P ANDNG being
(22:29):
a bad company, but the market can smack anything around
in the relatively short term.
Speaker 1 (22:34):
Yeah, And that's the unfortunate thing. And we're not calling
a doomsday scenario for Procter and Gamble, a great company,
well run company. But the unfortunate thing, Brian, is these
kind of what i'll call black Swan type of events.
They usually only happen about twenty every twenty to twenty
five years. And the generation that experienced that is way past,
(22:55):
you know, gone and retired, and the folks that are
retiring today don't remember that those days twenty to twenty
five years ago. And history doesn't always repeat itself, but
it often rhymes. And that's where you got to stay.
You know, you got to remember, too much of any
one thing can blow up on you, no matter how
well managed or how well intentioned people are, and that
(23:16):
get you know, there's ways to get around this. As
far as this over concentration thing, you can stage it
in over time. You can put collar strategies in place,
you can direct index. There's a lot of things you
can do to you know, responsibly and tax efficiently, unwind
a concentrated a concentrated position in anyone's stock. And to
(23:38):
say nothing of some of the charitable you know, opportunities
out there with donor advise funds, charitable remainder trust. There's
a lot of things you can do out there. Let's
get into a state in gift tax exemption planning. I mean,
I know, with the the new bill that just got
passed that took a lot of uncertainty out of there
as far as you know, making permanent the large unified
(23:58):
credit now be up to almost fifteen million dollars per person.
But there are some things that you got to plan around,
you know, in that regard to right Brian.
Speaker 2 (24:08):
You know, one of the most impactful provisions for these
high networth families. That is the preservation of the pretty
high historically speaking, the relatively high federal estate and gift
tax exemptions, those are going to increase to fifteen million
dollars per person. In other words, what I'm saying to
you out there, dear listener, is that don't worry about
a state taxes unless you yourself individually own more than
(24:29):
fifteen million dollars worth of assets.
Speaker 3 (24:31):
I mean thirty million dollars for a for a.
Speaker 2 (24:34):
Married couple, if titled properly. That's its own radio segment.
We'll leave that there for now. But state taxes are
not an issue. There was the threat that it might
come back where this all comes from. As President George
Bush the second a long time ago started the process
of increasing how much was being passed through, and I
believe it used to be six hundred thousand dollars. Anything
above that, which is not that hard of a level
(24:55):
to get to anymore, anything above that was deemed with
the state taxes. But now that number is fifteen million.
So state taxes are not a thing anymore. That could
have gone away, but those were extended and actually increased as.
Speaker 3 (25:04):
A result of the big, beautiful bill and so forth,
so other things out there.
Speaker 2 (25:10):
In your vocable life insurance trust, that's a way to
keep life insurance proceeds out of your estate. And you
can also apply valuation discounts if you've got a business
or real estate interest.
Speaker 3 (25:19):
There are ways that the.
Speaker 2 (25:20):
Tax laws will allow you to affect that valuation to
make a little more different than here's what it is.
If I could if I sold it on the open market,
it's worth this. But there are different things you can
take advantage of the tax code, if you'll understand all
that properly.
Speaker 1 (25:34):
All right, those are some of the kind of what
off unique strategies out there. But I want to talk
about what most people should be doing, and Brian, what
we do every day, and we run into this situation
with almost everybody we work with, and that's doing just
good old proactive cash flow and tax planning. What do
I mean by that? During that window between when you
(25:54):
retire and when required minimum distributions kick in, examine whether,
if or when and how much rawth conversions makes sense
for you, factoring in how that's going to impact your
overall tax strategy. You dovetail that with your social security
claiming strategy. How to take some capital gains. There's a
lot of things you can do there if you do
(26:16):
some planning and get with a good CPA financial advisor, or,
in the best case scenario, a combination of both of
them working together. Here's the all Worth advice. A flexible
strategy that aligns with your goals and adapts to policy
changes can help reduce risk, boost after tax returns, and
preserve more of your wealth. Coming up next, we are
(26:38):
tackling the real questions that listeners are asking, maybe even
ones you've been wondering about yourself. You're listening to Simply
Money presented by all Worth Financial on fifty five KRC,
the talk station. You're listening to Simply Money presented by
all Worth Financial. I'm Bob Sponseller along with Brian James.
(27:00):
Do you have a financial question you'd like for us
to answer. There's a red button you can click while
you're listening to the show right there on the iHeart app.
Simply record your question and it will come straight to us.
Speaking of questions, Brian, let's hear from Brad and mount
look up in Mountains.
Speaker 3 (27:15):
Please explain what the survivor penalty is? Yeah, Brad, great question.
Speaker 2 (27:20):
So that's something that has come up that comes up
all the time we're talking about taxes and what happens
after you lose a spouse and all of a sudden
you have to switch from married. Let's set as out
all the emotional that goes of that. You also have
to insult injury switch from married filing jointly to single.
So the reason this is the thing is because the
income thresholds for the tax brackets are much lower for
(27:41):
single filers. Right when I hear the word lower and taxes,
I usually get a good feeling, but this is a
bad one.
Speaker 3 (27:46):
Me.
Speaker 2 (27:46):
What that means is that if you hit the thresholds
sooner because they're lower, that means your taxes go up quicker,
so the survivor can get pushed into a high tax bracket.
Speaker 3 (27:54):
You also lose.
Speaker 2 (27:55):
The one standard deduction, and so that the standard deduction
in twenty twenty five is a round four teen six
versus twenty nine to two for joint filers over sixty five.
Speaker 3 (28:03):
That's the problem.
Speaker 2 (28:04):
Single person may get taxed a little more on their
Social Security IRMA kicks in a little sooner because of again,
because of the way all this math works, so again
This is really the way to avoid this. You can't
change the tax brackets, they are what they are, but
control what you can control.
Speaker 3 (28:19):
This is where roth conversions come in.
Speaker 2 (28:21):
If you have a significant pile of money and a
pre tax IRA, you might look at paying taxes on
then now pulling that taxation forward.
Speaker 3 (28:28):
So that your rmds will be reduced.
Speaker 2 (28:31):
You can also, if it's a concern of draining your
own estate and therefore taking it away from your kids
life insurance, might make some sense to create an estate
at your death to offset some of that. And Joe,
just make sure you this all starts with what we
always say, Bob. This all starts with knowing where you
are in the first place. So understand where your situation
is now, then you can look at what if Heaven
forbid I lose my spouse. Let's move on to Joe
(28:51):
and blue Ash, who has a question about, Hey, go
figure it roth conversion.
Speaker 1 (28:54):
How do you balance roth conversions with staying under Medicare
premium cliffs? Great question, Joe. Let's talk about what these
Medicare premium cliffs are. There's something called IERMA, and I'm
not going to get into it's a big, long acronym,
but it basically means what Joe's asking about. If you
have too much earned income, you pay more in premium
on your Medicare. So what we do, what it sts
(29:17):
with is what we talk about all the time, developing
an income strategy and along with that a Wroth conversion strategy.
So when you layer in things like a potential Wroth
conversion along with maybe pension, social Security, other income you've
got coming in, we want to make sure we walk
right up to that line where you take advantage of
(29:39):
the great opportunities that Wroth conversions give you, but don't
cross over that line from an income standpoint and start
to irrevocably drive up your Medicare premiums. There's some great
there are some great tools out there that help us
do that. We sit down and do that with every client.
I know a lot of good CPAs are doing that
as well. But again it comes down to the difference
(30:01):
between tax preparation, which is what eighty to ninety percent
of people just do. They just mail in all their
stuff and wait for the answer to come back from
their CPA versus proactive tax planning where you sit down
and run some actual scenarios on. If I do this,
what happens over here and you balance it out and
(30:21):
you maximize your income strategy. All right, let's hear from
Laura and Villa Hills.
Speaker 3 (30:26):
I've got a concentrated stock position from a former employer.
What's the best way to onwind that without triggering a
huge tax bill?
Speaker 2 (30:34):
Well, congratulations, Laura, this is a good problem to have.
Concentrated stock means just that I got a lot of
my networth tied up in a stock that is mostly
because of an employment, or perhaps you own the company
or whatever.
Speaker 3 (30:45):
But so then the risk there.
Speaker 2 (30:46):
If it's a concentrated stock position, that usually implies that
the thing did pretty well, So congratulations, it must have
grown a lot. But that also means that there's usually
capital gains in the mix here, So that's usually the concern.
If it is a position that is not inside of
a retirement plan, not an IRA, not a four oh
one K, nothing like that, then it's exposed to capital
gains taxes, which actually are slightly more favorable than income taxes.
Speaker 3 (31:09):
But taxes are still taxes. So what do we do
about that?
Speaker 2 (31:11):
Well, the first thing I would look at is if
you are some of the easier things to handle. If
you are already charitably inclined, then you might look at
if you write checks to a church or you know,
some five oh one C three type organization every single year.
Then first off, you may have lost your deduction on
that a few years ago twenty seventeen when the Tax
Cuts and Jobs Act increased the standard deduction and therefore
(31:32):
losing the deduction or just getting it for free basically.
So that's a case where you might donate some of
that stock, just donate the shares. If you do that
donation of appreciated shares, then you will you're passing the
gain on to an entity that doesn't pay taxes anyway.
You get the deduction for the full dollar amount whatever
it was worth a day you donated it. That five
oho one C three will turn around and immediately sell
(31:54):
it and you use it for whatever their purposes are.
They will not pay any capital gains. So, as a
matter of fact, I run across people all the time
that are writing checks to these organizations, which to me
is a waste of everybody's tax dollars because they could
simply give the shares its five zoe C three gets
the same amount of money and no sacrifice but really
by anybody. But if that's not what you have in mind,
(32:14):
then you're going to be looking at something called an
exchange fund or a swap fund. This is where if
I have a big pile of PNG, I can band
together with people who have a bunch of Kroger, or
a bunch of IBM, or a bunch of Apple and Video,
whatever it is. We all throw our shares into a pile,
and then we each take a proportionate share of the
resulting pile of stuff. This is not a sale, it's
not nearly as simply as I'm making it right now.
(32:36):
It's not a sale, so it doesn't trigger taxes, but
I do have Now I have a representation of a
lot of different companies.
Speaker 3 (32:41):
It's a way to spread that risk out. So those
are two you're either.
Speaker 2 (32:43):
Charitab being inclined, or you want to spread out of diversification,
and sometimes both of those can help. Bill and Mason
is retired and has got some questions about rmds.
Speaker 3 (32:53):
My wife and I are retired, and we don't need
our r and vs to live on. What's the smartest
options for putting our money to work?
Speaker 1 (33:00):
Well, Bill, I obviously don't know whether you're retired and
not yes yet at r M d age or whether
you're already at r M d AID. So the answer
is slightly different depending on what situation you're in. So
let's briefly cover both. If you're tired and not yet
at that RM D age, there's where the opportunity is
and a big one. You know, you just retired, your
(33:22):
income is lower, and you've got an opportunity to do
these WROTH conversions that we've been talking about. You know,
you sit down and sketch that out and try to
get as much money moved into wroth IRA's at the
lowest possible tax rate you can. Wonderful strategy there if
you're already at r M d age. And I run
into this a lot with folks that are in their
(33:43):
late seventies and are still writing checks to their church.
If you're charitably inclined, you tie to your church. You
give other money to other you know, ministries or other charities.
A lot of people are still making cash gifts where
they could be taking IRA money at age seventy and
a half and diverting that IRA money directly to charity.
(34:05):
And if you do that, the amount of that charitable
gift does not even hit your ten forty and is
not even counted as taxable income. You don't get a
deduction for that gift. But it's even better, the RMD
does not hit your tax returns taxable income. So that's
Those are two scenarios you can look at. And then
(34:26):
if worst case scenario, if you don't need the rm ds,
you've maxed out what you want to give to charity,
you just convert whatever is left in those rmds over
to a taxable investment account. Because you brought up keeping
that money, you know, working for you and putting it
to work. Put it in a taxable, tax efficient brokerage
fund and let it grow long term for your kids
(34:46):
and grand kids. Coming up next, why you could be
eating your retirement literally eating it one mimosa brunch at
a time. You're listening to Simply Money, presented by all
Worth Financial on fifty five KRC, the talk station. You're
listening to Simply Money because I by all with Financial,
(35:06):
umbop spon seller along with Brian James. So get this.
Brian MarketWatch recently published an article that got our attention.
If a couple spends one hundred dollars a day eating
out or just fifty dollars a person over the course
of forty years, which is you know, which is I
guess a long but not out of the question retirement shold.
(35:28):
Now they'll have spent nearly two million dollars just on
restaurant meals. Something to keep an eye on here. Two
million dollars is a lot of money, Brian, and that
can make or break the viability of one's retirement plan.
Speaker 2 (35:44):
Yeah, and that that one hundred bucks a day eating out.
That used to sound like a lot. Remember when one
hundred dollars meal that meant you were celebrating somebody's birthday
or graduation or whatever.
Speaker 3 (35:51):
It was a big deal.
Speaker 2 (35:53):
But now you know, if I'm eating lunch and dinner
out there, and I'm a married couple, well then that's
fifty bucks apiece. That's twenty five apiece per meal. Well,
that's that's bunch of skyline, love my skyline. But that's
where that's about where they are now. And so again
that all sneaks up, and that's two million dollars, right,
this is the problem with the snowball and so forth.
Speaker 3 (36:12):
That's before you factor in the tip.
Speaker 2 (36:14):
If that's a thing, and maybe that extra glass of
wine and all that stuff, you know, where there's two
million dollars that that's a nest egg for a lot
of people. So again, one hundred bucks a day eating
out over forty years is going to add up a lot.
So you can apply this to a lot of different things,
but different expenses that maybe you can seem to be
fairly innocuous but end up sneaking up on us. So
if you've done the right things and you built up
(36:35):
a solid nestick, it's probably.
Speaker 3 (36:36):
Not a major concern. It's more of an expensive hobby.
Speaker 1 (36:40):
I think, Yeah, I think the key here, and we
can make fun of, you know, one hundred dollars skyline
bill and eating out and all that. But I think
the point we're trying to make here is is when
you examine your your retirement budget, what you're actually going
to spend or want to spend. And what I what
I always tell people Brian, is I don't need to
know how much you spend on a pack of gum
(37:02):
or something like that, but numbers that start to add
up to, you know, in the hundreds of dollars per month,
it's worth taking a look at, especially if you're on
the margins in the area being able to viably retire,
and say, hey, are there things that we can trim
back on just a little bit without ruining our life
(37:22):
and taking all the fun out of our life, as
opposed to just letting it rip, do whatever we want
and hoping it works out in the end. That's really
what we're talking about here, Brian.
Speaker 3 (37:32):
Yeah, and again, this is not at all about stop doing.
Speaker 2 (37:35):
You know. I always tell my clients everybody comes in
wanting to build a retirement plan, and most people who
have built something are relatively frugal people to begin with.
So they'll walk in and they'll say, we're gonna build
a vegetable garden in the backyard. We're gonna eat out
of that, and we're never gonna leave the house. And
I always say, no, you're not. If you were gonna
do that, you'd have done it already. That sounds awful,
and it sounds like a terrible retirement. I just keep
working if that's your plan, So let's not start there.
(37:56):
Let's figure out what you do now. If eating out
is a social thing, if that's an important thing, that's important.
Stuff is not, We're not on this planet to stare
at a growing pile of money. We are here to
enjoy each other's company and help out where we can,
and so on and so forth. So understand what your
life is like and then build your financial plan around that.
Speaker 1 (38:13):
Yeah, if you really love eating out and you want
to keep doing that, great, Maybe just trim back from
having four paid movie subscriptions or streaming services to maybe two.
There's always a way to skin the cat. Here here's
the all Worth advice. You've saved well don't. You don't
need to skip the stake, just maybe skip the third course.
Thanks for listening. You've been listening to Simply Money, presented
(38:35):
by all Worth Financial on fifty five KRC, the talk
station
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