Episode 80: Rapid Fire Financial Advice for Retirement
Welcome to episode 80 of Accessible Finance! In this exciting episode, we're tackling a series of rapid fire questions about retirement and financial planning. From the biggest mistakes made before retirement to the pros and cons of paying off your mortgage, we cover it all! We'll discuss Roth IRAs vs. Traditional IRAs, Social Security, the 4% rule, and even protecting yourself from scams. This episode offers quick, practical insights for your retirement planning. Don't miss out on these invaluable tips!
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Read the Transcript
Episode 80
Eric: Welcome to episode 80 of Accessible Finance. I'm Eric Johns.
Rachael: And I'm Rachel Johns.
Eric: Let's dive in.
Rachael: Alright, Eric, so what is your favorite phrase on this podcast?
Eric: Let's dive in.
Rachael: No, you say it more than Roth conversions. Well, okay. Fair second favorite.
Eric: Um, it starts with it. It is go time. It depends. It depends.
It depends. Okay. Okay. Well, I should say that more than I feel like I do.
Rachael: Um, I feel like you say it inappropriate amount.
Eric: Right.
Rachael: Okay. So good. We have a number of rapid fire questions that are going to tell you you cannot reply with. It depends.
Eric: Okay. If that's the case, then um, the dis this is in no way financial advice or cannot be construed in disclaimer here.
Financial advice
Rachael: is that. In reality, it certainly depends, but what we wanna know is if not all of these are yes or no questions, but if it is a yes or no question, we wanna know more often than not what tends to be the appropriate answer. Okay? Okay.
Eric: These games are very fun. They're very difficult.
Because it does depend, Rachel. No,
Rachael: I know, but the rapid fire,
Eric: I understand. Okay.
Rachael: I will let you, I will let you, it depend, caveat after your answer. It's not
Eric: sure, but it's not entertaining to just hear. It depends on a bunch of questions that people want hard answers to. I understand. I understand that.
Rachael: So we're going with, I
Eric: will try
Rachael: more often than not.
Eric: Okay.
Rachael: What, at least in your experience. More often not what tends to be the correct answer.
Eric: I haven't read these questions by the way, so this is gonna be interesting
Rachael: at all. Okay? The first, not all of them are yes or nos, though. I'm with you. Let's go.
Eric: Hit me with 'em.
Rachael: All right, so the first one, what is the biggest mistake people make in the five years before retirement?
Eric: Five years. I blah. I think the biggest mistake overall is not retiring to something and retiring from something and kind of assuming that the second that you stop work, everything's going to be, you know, unicorns and rainbows and just the best time of your life. And I don't know that that's always the case if you haven't really fought through what that even looks like for you, you know?
Yeah. So having, I guess, succinctly, I would say, not having social groups. And the social interactions, particularly for men when you retire from the workplace, females typically have more meaningful relationships throughout their life that are not their spouse. Males typically talk to the people at work because it's convenient and we're, I don't know, Hulk smash type people.
So
Rachael: you certainly are. Yes. Guess that's true. That's fair. Um, I would say that the biggest mistake people make. In the five years before retirement is not thinking about retirement.
Speaker 6: Sure, yeah. Okay.
Eric: Not planning for it or pulling the trigger too early. There are a number, right? Yeah. But I think, I think large, the largest portion of unhappy, the largest, um, contributor to the unhappiness is the lack of social interactions.
Even if you are financially, you know, ready, savvy, and ready.
Rachael: Yeah. That's a good one. Look at you. I'm
Eric: incredible. That's a great point. He's growing, guys. Really good point. He's growing.
Rachael: Okay, rapid fire. Question number two. Should I pay off my mortgage before I retire?
Eric: Um, I can't say it depends. So I will say
Rachael: more often than not, yes or no.
Eric: More often than not, if you're not paying off your mortgage, you should have a great reason for not doing so, and you should be financially able to do so. Does that make sense? So if my mortgage is $300,000, if I don't have over $300,000, I should not retire. Like if I can't liquidate, that's good point.
$300,000 in, in, you know, in a reasonable timeframe.
Rachael: So it should be a conscientious. Choice you're making for a reason not. Yeah. A like I can construct not paying it off out of necessity. Correct.
Eric: I can construct scenarios where like your mortgage is, is at a low rate and you have a significant tax deferred balance.
So you don't wanna rip all that out and pay the mortgage off because then you'd incur a margin or tax bill. Yeah. That you would over time, and as we always say, your marginal effective tax rate would go up mm-hmm. Higher than it would, it would spike higher than it would in the future. You want that to be relatively flat.
So imagine if your
Rachael: current investments are yielding a greater. Growth then you're mortgage. Well, yeah. If the market's depressed. Mm-hmm. Sure.
Eric: Yeah, that's true. Right? Like, so if you have a lower mortgage rate, but, but more than that, I think if, if the market's in a really down cycle correct. You don't really wanna rip the funds out.
So there are a number of
Rachael: scenarios where the answer would be no.
Eric: But I think you should absolutely have the funds available to do so, and you should have a very deliberate, um, the decision should be deliberate. Yeah. And like very well thought out.
Rachael: I like that. Well done. Thank you. All right. Um, rapid fire, which means rapid answer.
Eric: Okay. I. Okay.
Rachael: What's the difference between a Roth IRA and traditional IRA?
Eric: Roth IRAs grow tax free after paying taxes. Traditional IRAs are tax deferred. You pay or taxes an ordinary income rate upon withdrawal. Was that good? Yes. Shorter Rapid
Rachael: fire, part B.
Eric: Okay. What
Rachael: one do you like more? Roth.
Eric: Roth is best.
I couldn't get right now. It's typically, it's typically great.
Rachael: It is his favorite. It's a great thing. Um, all right. How much should I have saved by age 60?
Eric: I have no idea. I don't know what your spending is. You don't have to
Rachael: gimme necessarily a number. It doesn't,
Eric: it depends, but it depends only on your spending.
Okay.
Rachael: So I spend X dollars And your retirement
Eric: age, are you 60 work until 80 or are you 60 retiring next year?
Rachael: I spend X dollars.
Eric: Um, I, I tell me in
Rachael: terms of X
Eric: divided by 0.04 and then retire at 67 on average. Okay. Fair?
Rachael: Yes. Okay. Yes.
Eric: I doubt anybody's gonna really get that and understand it. No, I, I think
Rachael: that.
How much should I have by 60 is not gonna be a a million dollars answer. Right? Right. No, definitely not. Um, but it's going to be based upon like what you're spending and what your withdrawal rate's gonna
Eric: be. Right. We've seen people spend $30,000 a year. We've seen people spend $300,000 a year at in the first four months.
Right. So, I mean,
Rachael: we've seen people who have a millions, I guess it's
Eric: closer to like, who spend 800 k Yeah.
Rachael: $30,000 a year. And we see people who have mm-hmm. $30,000 or spending $60,000, just
Eric: assuming that things will work out, right? Yeah. Yep.
Rachael: Yeah, yeah, yeah. Okay. Um, is it ever too late to start saving for retirement?
Eric: No, obviously not.
Rachael: Okay.
Eric: I mean, if you're retiring tomorrow, you've got nothing. Sure. It's, it's, it's not great. So
Rachael: then the answer would be yes. Sure.
Eric: Then I, I guess you can construe a situation or scenario where, yes, it's too late, but, but it's you.
Rachael: No
Eric: yesterday's better than today. But you should, you should always start.
Rachael: All right. When should I start taking social security?
Eric: Um, oh boy. This is a rough, uh, mm-hmm. Stipulation, little constraint here. Again, you can caveat after answer. This is not financial advice. Answer. Answer, never financial advice. Typically wanna defer. If your risk, if you're, if you plan for longevity, I would defer until 70 and look at it not as an, not so much as a, I'm maximizing my income, but that I'm insuring against or hedging against longevity.
Does that make sense? Mm. So I'm gaining the 8% in the years between 67 and 70, and then it's gonna be a cola adjusted or, or cost of living adjustment. It has cola adjustments, so it's gonna be inflation adjusted income stream.
Speaker 6: Mm-hmm.
Eric: Um, that is something that I think people really enjoy. I think income in general is maybe like overvalued by retirees.
They, there's something safe. Yeah. About like an annuity stream or getting your thing. Yeah. In this case. You know, an annuity stream is just usually gonna be a fixed dollar amount, unless you wanna pay for the income rider, I mean the, uh, inflation rider. But social security is gonna be cost of living adjusted, so it's quite good.
Rachael: At least defer as long as it exists. Defer, usually defer. Um, all right. What is the best way to reduce taxes in retirement? You can talk about it.
Eric: Roth conversions. Um, you should do a Roth conversion ladder usually. It depends, right? Obviously it depends if you have a bunch of deferred comp that's gonna hit you in the years right after you retire because you plan Well, I can feel
Rachael: your anxiety.
I know. Coming over. I know. I'm sorry. I know it's stressing you out.
Eric: I'm sorry. But the, the idea is it's typically advantageous to do a Roth conversion ladder so that you're not letting RMDs dictate your tax brackets. Mm-hmm. Does that make sense?
Rachael: Well, and like we talked about, um, in our last episode.
Oftentimes the largest investments that people have are in their deferred accounts. Sometimes they're their 4 0 1 Ks. Yeah. And so it's,
Eric: it's almost always the largest. Yeah. And it's sometimes north of 90%. Yeah, the largest. Right. They might have like hugely the largest 10 or 20,000, 30,000 in a brokerage account and or checking plus savings, and then.
Almost every no Roth account and almost it literally everything is in. Yeah, I would say the majority,
Rachael: we tend to see like massive 4 0 1 ks a balloon, and then we have your house and have like
Eric: Right
Rachael: for way, way further down something. I mean, I thought
Eric: I was thinking liquid. Yeah. That the housing is, is obviously No, but I think it's
Rachael: important to know that like even with
Eric: the housing, housing plus
Rachael: it's still non 401k, much larger.
Probably
Eric: still 20, 30%
Rachael: correct.
Eric: So yeah. Still north of 70.
Rachael: Yeah. It, I mean. It's big. And so if your RMDs are sitting there being like, oh, surprise, you get to pay X amount of taxes, like being able to do Roth conversions and reduce what those RMDs are later
Eric: Yep.
Rachael: Are huge. I think the
Eric: biggest thing that if, if listeners take away nothing else from this podcast in general.
I would say that it's be intentional about when you're paying taxes and the realization of income to the extent that you can, right? So we want to be absolutely sure that we have a plan. For what we're getting, when we're gonna get it, and yeah. How that's gonna impact our tax situation. Like we, we don't wanna be just you ne you do not wanna be reactive when it comes to tax planning.
You want to be proactive and you wanna be looking forward rather than just today where you hand a pile of papers to your CPA and say, oh, what do I owe? Yeah. That's not, you know what, it reminds me of the play.
Rachael: Okay. So there are these games. I'm horrible at video games. I really, I'm a fan. You're pretty good.
No, I'm a fan of them. Aw. I enjoy them. I, she's good. Think I started playing video games when we met for the first time ever, but, um, which I granted, I guess was a while ago, but
Eric: command and Conquer general. No. First it, it was Red Alert. It was Red Alert. Alert. That's Red Generals wasn't even around. No, it was Red Alert.
I wasn't playing generals games at dibs with my high school friends. Yeah.
Rachael: No, but okay, so it reminds me of the, of those games where Mario might have something like this where like there's spikes on the top and spikes on the bottom and you have to like fly and stay right in this little happy zone.
Right. Okay. And you go too high. Yeah. Yeah. So like every time you talk about taxes and stuff and, and. Doing that, it reminds me of that because you want to be able to be consciously playing this game where you're staying there, where you're, you're not dipping into the like 10 or 0% bracket, but you're not blowing yourself up and
Eric: unintentionally going up.
That is a fantastic visual. Thank you. We should absolutely create that and hand it to, you know, individuals, clients, everybody that we're trying to educate, right? Yes. So that's, that's, that's how I envision
Rachael: and it's a really. Tricky and stressful game for me. I don't like it at all. Mm-hmm. Um, but wait,
Eric: the Mario or the taxes?
The
Rachael: Mario.
Eric: Okay. It's
Rachael: stressful for me because I'm like in ha. I'm like, oh my God, I'm gonna po I like, it is stressful and the taxes situation can feel that way. The idea is to find somebody who loves it. I
Eric: was gonna say, I like taxes more than Mario. I was gonna say I don't. Mario. Mario. Mario Card. That's a different story.
Mario Card's a great game.
Rachael: There's a new one. Mario Universe.
Eric: People love. Yeah, people love. Um. People love regular Mario though. I just was never really that good at it, so I can't, it's
Rachael: hard. It stresses me out because I know I'm either gonna, like I am a very reactionary video game player. Yeah. So like I'm the person playing Mario Kart that does this with the controller.
Speaker 6: So
Rachael: like when, when
Speaker 6: fast, when
Rachael: I'm playing regular Mario, if I go up a little too much, I'm gonna overcorrect every time. And so I end up. You know, dying. Um, but you never, you don't wanna feel that way. You don't wanna feel that anxiety with tax, with your tax brackets. You don't wanna feel like you have to overcorrect because last year, you know, I took out too much.
So now this year I'm gonna take none out. Like there is a very mathematical way to calculate all of this stuff out. And if you find the right person or the right tools, um, it can be a really, really easy game that you can play and win at. Um, and it's, I think it's one of the only, and we talked to our clients about this.
We can't predict what the market's gonna do. Correct. We can make best decisions with the information that we have mm-hmm. But we know exactly how to prepare for taxes. Yep. It's not a guessing game. We know where the spikes are at the top. We know where the spikes are at the bottom. We know how to stay in the little happen zone.
That
Eric: is right.
Rachael: Um, so yeah. Welcome. Um, thank you.
Eric: I'm looking forward to the visual.
Rachael: I am on it. I'm on it. Um, alright, so next thing, um, we're relying
Eric: on you for pacing, by the way. I have no clue how many questions are
Rachael: I'm gonna ask you. 80 million.
Eric: I mean, they're right there, but I haven't, I haven't read them.
I'm not sure where we're, you're not gonna read them. All right. Proceed.
Rachael: It's more fun this way. I. Okay. Um, my apologies. Uh, all right. How do I estimate my healthcare costs in retirement?
Eric: Ooh,
Rachael: tricky, tricky.
Eric: There is, um, there's a Medicare bracket, and then you can look at your tax brackets for your Irma, and you can look at, you can assume Medigap.
Coverage and go look at, what is it, plan GI believe it is. They retired. What is it? F Um, sorry. But there's, yeah, G is the, there's various forms of Medicare, um, and then you can have Part D prescription coverage. So Medicare Part D coverage is also gonna be offered by a private insurer. So when you're going above and beyond the standard provisions of Medicare, there's gonna be Medicare part A.
Um, which is the hospitalization. And then part B is going to be your, um, what you think of normal, like your clinic clinical visits and, um, and short ho stays in like nursing homes, following hospital care, that kind of thing. Um, that will have like Medigap coverage, which is supplemental coverage so that you're not just paying 20% of all the expenses.
Sorry, I didn't, I don't wanna go too far in the weeds, but
Speaker 6: You're fine.
Eric: Um, but essentially you can look at your expected, um, modified adjusted gross income for, uh, Irma purposes, which is the Medicare, um. Adjustment amount. The pre, the, the additional premiums you have to pay over the, I think it's like 1 75 ballpark a year.
If you had like low income mm-hmm. You'll have to, you know, there's about a hundred dollars extra per jump. So you wanna look at that, you can quantify that, and then you can quantify the cost of the Medigap coverage on a monthly basis. You know, maybe a hundred bucks, 200 bucks, something in that ballpark.
And then the prescription coverage, another a hundred dollars or so. Um, you can get a pretty decent idea of what healthcare's gonna cost, you know, maybe six grand a year. Something in that ballpark. Okay, you can go in Plan G, uh, with, with, uh, prescription coverage. So that'll
Rachael: cover my healthcare coverage piece.
Um, and then what if you're trying to estimate, okay. Like what are average, like medical expenses? I.
Eric: Well, you're only gonna pay the deductible for Medicare. I think it's like $240. Don't hold me to that. But if you had like a medical Medicare supplement. Mm-hmm. So like if you're on Medicare supplement part G, then you're only paying the deductible and then the premiums for Part G and then the additional premiums, you're Irma premiums.
Right.
Rachael: And this is where it's really important to understand the benefit. Or value in understanding the supplemental coverage. If you're looking, what is the
Eric: Irma acronym again? It's like income related monthly adjustment amount or something like that.
Rachael: There's two m's. Oh no, there's two A's,
Eric: yeah, I think so.
Rachael: I think you're right. Um, this is
Eric: important everyone income related, monthly adjustment amount.
Rachael: Look at you.
Eric: So good at this one.
Rachael: Um, but again, yeah, so this is where getting that, if you were to go and get the supplemental coverage, it lets you have a far greater. Um, idea of what those costs are gonna be.
Mm-hmm. Because you understand kind of like what your ceiling is. Correct. Whereas if you're not getting that, it's gonna be variant much and your ceiling's
Eric: quite low, so very much. Right. So the ty right? Yeah. Let's just, let's leave it at that. That's good enough, right? Yeah. For a, for a rapid fire answer, we can do an episode on if we want.
Rachael: He was ready to start a whole episode.
Eric: Yeah. He's gonna start talking about Medicare Advantage and the differences, but that's, yes. Rabbit holes.
Rachael: All right. So Eric, this will help, um, you to elaborate a bit on the earlier question about, I'm 60, how much money should I have saved up?
Eric: Okay.
Rachael: Um, what's the 4% rule and then a caveat to that.
Does it still work?
Eric: Boy, this is. Been debated heavily. Yeah. In the, uh, shout out to Rational Reminder. The Rational Reminder community, his favorite. There are people that have re replicated the study and said that it's less. There's some people that said it's more, there's some people that say that's because American exceptionalism and markets number of, um, reasons.
Yes. But. Essentially that is, the study was done initially and found that you can be relatively certain, I forgot what the probability of success was, but I believe it was north of 99% probability of success with a 60 40 portfolio, um, over about a 30 year retirement period, starting, I think, 65 to 95, ending at 95.
If you had your assets allocated 60 40 and you withdrew 4% a year on in the first year, and then adjusted for inflation from that initial number. You would win or you would,
Rachael: and with money, you would not
Eric: outlive your dollars. Um, like 99 plus percent of the time, maybe it was a hundred. It was a, a substantial, like a cer relative certainty, right?
So the idea is I can always withdraw 4% when I retire and then just inflation adjust that amount. Does that make sense? Yes. So if I can withdraw a hundred, if 4% of my total is is a hundred K, then I can withdraw a hundred K my first year and then say inflation's 4%, now I get 104,000 my second year, and so on.
Mm-hmm. So that's the idea. That's the 4% rule that you'll hear a lot about. Uh, talked about that. You'll hear discussed quite, quite a, quite a bit. Some people still use it. It's a decent ballpark estimate. Um, I think that's a. About as far as I would go with that rule. So it's a,
Rachael: it's a super oversimplification of Yes.
Reality, right? Right. But it's like a decent proxy for anything else. Yes. I mean, like, if you aren't working with a planner, if you're not willing to put in the work to look at your specific numbers and your specific situation. Correct.
Eric: It's a, it's a good idea. Did map match? Yeah. You can get in the ballpark, right?
Like maybe you divide it by, or you take your spending, you divide it by 0.04 and you get a number, like 2 million and you're, you're. Current, you know, liquid assets or current net worth is even like 500,000. We are not close. You know, you're not there. Yeah.
Rachael: Right. You're not ready to retire. You can't,
Eric: you can't make the leap yet.
Rachael: And again, this goes off of the idea of retiring for 30 years. Right? So if you're looking to retire earlier, you're looking for a, a larger number.
Eric: Correct. And it's gonna interact with Social Security as well, right? Mm-hmm. Because we said that that's cost of living adjusted. Um, so you're really gonna be with the demand on your portfolio is the, what the 4% is talking about.
Does that make sense? So it's the shortfall. So my spending is a hundred thousand dollars a year, but social security from both of us provides us with let's say $50,000 a year. Well then not, or let's say 60, just so the numbers are the same. So our social security provides us with $60,000 inflation adjusted.
Now I know that my draw on the portfolio only needs to be 40,000. So now I can have a million dollars. Right. Theoretically with the 4% rule. 'cause I'm saying 4% of a million dollars is 40,000. Mm-hmm. Now we're okay. Yeah. Does that make sense? And then I just inflation adjust the 40,000 my and that social security portion's already inflation adjusted.
I'll probably be good to go there. They should be. That's what the rule is saying. I'm not saying that
Rachael: right. That is your very rugged napkin math.
Eric: Yeah. There's a bunch of granularity you can get into on why or why that study may or may not still work.
Rachael: Perfect. Thank you.
Eric: You're welcome.
Rachael: Um, can I work part-time and still collect social security?
Eric: Can I work part-time and still collect social security? Um, it depends on your age, right? So once you get to full retirement age, you will have no reduction in your social security benefits from work. Um, if you are below full retirement age, which is 67, if you're not born within like the window, when they change the rules mm-hmm.
Um, or shortly after they change the rules. Um, yes, you can work post full retirement age with no reduction, pre full retirement age. There are caveats, right? So if you earn over, uh, it used to be like 19 and then some change. So let's say if you earn over $20,000, then it reduces you by like your social security by a dollar.
For every $2 you make over that limit. Don't hold me to that, but it's ballpark accurate. Mm-hmm. Maybe it's three. I don't,
Rachael: so you can look up the limits easily, but yeah,
Eric: it starts to phase out. Or you, you start to reduce your social security once you start earning over, let's say, $20,000. You're below full retirement age after full retirement age, you're good to go do what you want.
Rachael: Well done.
Eric: Thanks.
Rachael: How do I avoid running out of money?
Eric: Um, then last, use a calculator and do some math. That's pretty funny, right?
Rachael: I mean, honestly, we imagine it like calories in, calories out, right? Like there's some type of stasis here with funds, right?
Eric: Sure.
Rachael: Like if you're spending more than you are.
Eric: Yeah, just note that the, the funds are gonna go like this because that's what markets do, right?
Yeah. They're gonna move, they're gonna be volatile. They're gonna, there's gonna be some variance in the actual account balances. Like if you check it every day, you're probably gonna have a bad time, especially if you're an anxious person. Honestly, I
Rachael: think the best way is to, uh, like check in. But like, like Eric was saying, if you're checking in with your plan, like if you're looking daily or hourly at your balances and right in the market, you're gonna drive yourself crazy.
Right. You need to list, but like monthly check-ins to see like, how did I do on my spending this month? Mm-hmm. How is my, like income? Right? Or if you're retired, um, like am I withdrawing in keeping with, you know, the percentages and stuff that have been aligned?
Speaker 6: Mm-hmm.
Rachael: Um, if you're totally not sure or out of, I mean, if you don't have a budget or anything like that, like.
It's at least worth looking at, like having a firm grasp on, on what your outflows are.
Eric: Right?
Rachael: Um, okay. Should I downsize my home or stay put? I'm retired now.
Eric: You do what you want. It depends how much extra money do you have? How much happiness are you gonna gain from downsizing your home? I
Rachael: think it's a frequent question where people are like, okay, like what's the opportunity cost?
Kids are out of the house. I don't need a house this big. Like I could retire to a condo. I could, you know, um. But downsizing doesn't always mean saving money.
Eric: That's also true. I, I would say like, what are you gonna do with the money? Right? Like, maybe I sell a $500,000 house and I go buy a $200,000 condo.
I now have $300,000 that I can pocket minus the realtor fees,
Rachael: closing costs, right?
Eric: What am I gonna, what am I doing? Mm-hmm. Like, what's my goal? Right? Like, do I want leave it to my kids? Do I want to go tour Europe every year for a month or so? Like, what am I, what's the purpose? Yeah. Yeah. Have, have a plan.
If, if that works with your plan and you think that's gonna increase your happiness more than staying in your $500,000 house, please do.
Rachael: All right. What's the safest investment for retirees?
Eric: Oh boy. I could, we're already over time or I could sit here and talk for 30. We're not over
Rachael: time. We're in time.
Eric: Well, I like to keep it brief, Rachel.
Um, so what,
Rachael: okay.
Eric: Um, that, well this answer's not gonna be brief, that's for sure. Huh?
Rachael: It has to be brief.
Eric: Uh, what was the, what was the question? I forgot.
Rachael: Safest investment. Nope. For retirees. I'm just
Eric: kidding. I, I guess the, the, the actual answer is probably an annuity, right? An annuity with an inflation rider.
Mm-hmm. Um. Yes, I would resist the urge to say any kind of fixed income because you will typically get eaten up by inflation, or the tips rate of return will be so low that you won't meaningfully impact your um, uh, your actual nest egg.
Rachael: Love it. Um, is long-term care insurance worth, it's worth it?
Eric: No. Uh, no, just if you have it already.
The, it used to be better than it is. I've said this before, right? Mm-hmm. It used to be they, they actually wrote it too well at the beginning, and, um, and the, they didn't charge enough. So if you're in one of those old school grandfathered in policies, those are probably okay. The newer ones, they've started to realize how much they need to charge you so that they can cover their costs, and that turns out to be a lot higher than they were charging initially.
Mm. So, yeah. Yeah. Um, probably nice or great. This, this stage.
Rachael: Mm-hmm. There are other ways to self-insure,
Eric: right? There are also ways you can convert whole life policies into like, um, you can convert them into long-term care or whole life with long-term care riders, things like that. Mm-hmm. You can do some creative planning if you already have other insurance products.
Yeah. But I would not advocate typically speaking all else equal. You know, generally I would not advocate long-term care. In my, um, very specific scenarios arose. All right, you
Rachael: got three more.
Eric: Okay.
Rachael: How do I protect myself from scams, targeting retirees?
Eric: That's rough. Um, we were talking about this. That's really rough.
Rachael: Um, we're actually probably gonna do a podcast specifically about this 'cause there's a whole variety of scams that are out there. I almost clicked that You've seen a lot of them.
Eric: I almost clicked that DMV link. Oh, at the get those text. The text one. Yeah. Yeah, yeah. No, it's ridiculous. Yeah, I saw the. You know, somebody in Louisiana came out and said, you know, be careful.
This is bad. But yeah, I, I was close to, 'cause I, there's an aversion to doing stuff that's wrong. Yeah. I'm like, oh, I might have actually been, you know, I
Rachael: was not close to it. 'cause I'm smarter than this one. Well, I was the one driving on, it was, honestly, it was very, it's very convincing. They do a really good job and they now have fear tactics stuffed in there.
I thought it was for
Eric: one of those toll cameras in like Florida, because, you know, we drove to Disney last time or whatever. I thought it might have been from that.
Rachael: I think we were of this too.
Eric: Yeah. We're on the way to, um, to Durango for, it's crazy. Yep.
Rachael: Um, but there's a whole bunch of, of things out there. I think the, the best thing to do is to not knee jerk react to anything that happens.
Yeah. Um, they use a lot of like fear tactics there, where it's like, if you don't respond timely, if you don't like, it's a lot of things like that that make you feel like you have to do it.
Eric: You know what you can do as well. Run it by somebody. I, yes. Talk to somebody. I think you run it by somebody, particularly like your kid.
Yep. Somebody you trust. I also would say. Add a trusted contact Yep. To a lot of your accounts. They'll do that. Um, at like most of the custodians these days, I know Schwab does it, we do it with our clients. Mm-hmm. You want a trusted contact so that if you're doing something that seems somewhat erratic from somebody that's been looking at your money for a while, you know, if they see like a series of, you know, $10,000 withdrawals, like back to back to back every week or something.
Yeah. You know, they can call somebody else and be like, Hey, is mom okay? Is this happening? You know, is that okay? Like, are, do they intend to do this? That'll help with identity theft stuff. He's buying a jet ski. Like, exactly. Okay. Like, that's great. Exactly,
Rachael: but before doing anything with anything, I would find someone you trust.
Eric: Yep. Have them take a look.
Rachael: Yes. Get their thoughts on it. It can
Eric: happen to the best of us.
Rachael: I mean, if Eric had asked me prior to almost clicking on that DMV thing, I would've been able to be like, I got that too.
Eric: Yeah. Fair. Well, I didn't click. I did not. I know. I promise. So
Rachael: I say it almost. Um, all right, Eric, second to last.
What is the best way to leave money to my heirs
Eric: within a Roth IRA account? Did I win?
Rachael: You won?
Eric: Um, no, that is, I mean, that is gonna be the best, right? It's tax free to them. Um, or alternatively, if, you know, if it's in a taxable account and you do not sell it, so like you want to, oh, you were close
Rachael: to winning.
You're just really close to winning the RapidFire answer. I'm
Eric: sorry it wasn't rapid fire. No doubt.
Rachael: Go. I'm just messing with you. I
Eric: was just gonna say, you can take advantage of the step up in basis from your taxable assets. Mm-hmm. So tax deferred accounts are probably one of the worst ways, I'm sure I could think of some others that aren't particularly good.
But you don't want to gift highly appreciated assets before your death. That's bad. Um, because if you just wait. And they like, 'cause then they get the stack up, they're gifted at market value. Yeah. But then the basis is gonna transfer. So if I have a really low basis asset, then my kid gets a really low basis asset, they get to pay the tax.
However, if I die, then they're still getting it at the market value, which presumably is not that much later. If you're really old. And then, um, this is cheery, right? Yeah. And uh, the way
Rachael: you phrased
Eric: that I know, not great, but,
Rachael: but the real, I mean the reality is that like,
Eric: but yeah, take advantage of the full step up in basis.
Yes. Or leave, uh, tax free in a Roth.
Rachael: Alright, and then last but not least, Eric, how often should I review my retirement plan?
Eric: We talked about this breakfast, lunch, and dinner. You should look at it constantly all day,
Rachael: every day. But again, to be clear, don't do that. Please. Your retirement plan is not the stock market.
So like reviewing your retirement plan and looking at your stocks are not the same thing.
Eric: Correct. Looking at your plan three times a day should show you the same thing three times a day.
Rachael: It should. It should help you to feel more, um, confident about the decisions that you've made.
Eric: There will be a level of stability there.
Um,
Rachael: so whether it's you've created one yourself or you're working with somebody, um. How often should you review it? Um, or if you're working with someone, how often should they be reviewing it?
Eric: I like, um, so if you're asking me, I like monthly, at least at first, and then quarterly is probably sensible after that.
Um, once you realize everything's good, we're on the rails, we're all set. Um, we wanna see kind of what the impacts of, uh, we wanna, we wanna kind of get a sense of the impacts of the volatility in the markets and that might tell us, Hey, we don't have the stomach for this. You know, there's too much volatility.
I'm seeing in my percentages change too much. Based on, you know, the market's going down 20% Yeah. Or 14% or whatever. Now it's back. Um, yeah, we, we wanna get a sense of that, but once you get a sense of it and you're, you're comfortable with it, then yeah. Checking the recorder's probably fine.
Rachael: And this right here goes back to the question of how do I avoid running out of money?
Like, it's literally just look, looking at your. Plan and making adjustments as needed. Right. And like everyone was saying in the beginning of when you're retired, um, looking monthly is very reasonable because your estimations of what you're gonna spend in retirement and the reality of what you're spending in retirement Yes.
Are likely not the same thing. And then adjustments can be made accordingly.
Eric: Right. You have a bunch of free time now.
Rachael: Yeah. What you do in
Eric: it gotta go have fun. Yeah. Once with the friends, sometimes that cost money.
Rachael: Sometimes. Sometimes only sometimes. Sometimes you're lucky and it's free and they
Eric: pay for it because they're richer than you.
Rachael: You alternate. Um, alright. Eric, thank you so much for our rapid fire question and answers. Thank you. You did a really good job. This is fun. I like this. Again, just to recap. I do too. I'm gonna find some more. Um, again, just to recap these, this was a no way financial advice. Um, it was Well, thank you Rachel.
Just a, um, more times than not, this tends to be. Mm-hmm. You know, the better option.
Eric: Yep.
Rachael: Alright.
Eric: Hypothetically speaking, generally educational.
Rachael: Yes. All the, all the disclaimers. Yep. Okay. All right. Well thank you so much for tuning in. Um, until next time.
Eric: Thanks guys.
