Retirement Planning is More than Dollars and Cents

have you join us. Six eight three two one thirteen ten. That's six oh eight three two one thirteen ten. Another cool feature of the program is the Class Quiz Question the Week. It's your chance to win a fantastic prize from our friends at Class Financial. This week, chance for you to win a twenty five dollars gift card to Chewy.

than just flipping the switch and saying I'm retired. It's really about being truly ready, and there's a lot that goes into it. Your mind, your body, your wallet. We're going to discuss actually the health of your wealth also for your own self, aren't we CJ.

How does medicare work? These are all quantitative questions, but when you do what we do for a living, not that we are like formally trained in psychology or anything, but you end up recognizing there's more to retirement than just the quantitative. Now, we can't be all things to all people, but there is a lot to consider here. So we're going to talk about both of these elements, both the quantitative and qualitative aspects, or think of it as the math and the mental health side of retirement.

And twenty twenty five I'll start with some some quantitative elements here. Twenty twenty five is expected to see the highest number of Americans reaching the traditional retirement age, with an estimated four point one to four point two million people turning sixty five in twenty twenty five. Let me repeat that, four point one to four point two million Americans are anticipated to turn sixty five and twenty twenty five,

which is the highest number ever. That translates to around eleven thousand, three hundred dollars earth, I'm sorry, eleven thy three hundred Americans per day reaching sixty five in the year twenty twenty five. That's a lot of birthday cake.

you can keep doing your job. Funny thing is that people are terrible at predicting their retirement dates. So we would say to you, life is going to throw you a lot of curve balls, health issues, layoffs, or just plain old I don't want to be doing my job anymore.

So we want you to think about the future, but be flexible because unfortunately, we see a lot of people set goals, and you know, they'll set those goals that I want to work to sixty five and then retire from this one job, and you know a lot of things happen along the way, or we see the following cee jy Eric. My goal is just to get to two million dollars in a net worth and then once I'm there, I'll be happy. Well, what do you think happens?

They get to the two million dollar net worth and they go, you know, I just feel like five more years that would really make me happy, maybe three million. We call this the goal posts are moving. You know, imagine being a football kicker and kicking and the goalpost moves out of the way before it gets there. That's kind of what it's like to be a retirement planner, by the way, because it's often hard. We are almost like hardwired as Americans to want more, more and more.

So part of Our job is to help you think about the financial and the mental side of retirement and then help you to keep those goal posts stable so that you can move towards a secure future.

a A S Financial dot com. Telephonomer for the office right here in Madison six o eight four four two five six three seven. So, Eric, how important is it to figure out how much money you actually need?

I make. I was like, well, that's a good spot to start, right, And so as people get close to retirement, it can feel kind of foreign to begin creating a line by line budget, but that's often what we what we need to do, not not that we need to be, you know, tracking we're We're not here to be checking where you spend your money and scolding you, but just understanding where your money is going so that we can

make some plans going forward. Sometimes people will look at it as maybe I'll get a you know, if I have eighty percent of my income my pre retirement income, I'll be in good shape. But the fact is some people need ninety percent, some people need one hundred percent. Just depends on what you want to do in retirement. You know, if you want to travel more, right, you're going to hopefully have some more time than when you

were working. So if you want to be traveling more, maybe a plan to downsize your home right, maybe moving to a cheaper area. All of these things are going to impact impact how much money you're going to need on a regular basis in retirement. So I think the most important thing is create kind of an initial understanding of what you're spending while you're working, and that is a really good jumping off point to begin looking at retirement.

And don't forget about your healthcare expenses. Okay, so you're moving from likely having employer provided health insurance to maybe you're moving on to Medicare Part B and and you need to be thinking about deductibles and maybe even a Medicare Part D plan for for your drug coverage. All of these things are going to add up. And remembering your spend, your spending is not fixed. Okay, So we

see this all the time. A lot of times people will will spend quite a bit more early in retirement and then kind of settle into a slower pace of life as they age. So so don't be as CJ said earlier, be flexible about these things and don't get don't get too wrapped up in, you know, making things super exact. But we I would say, more often than not, we see retirees spending more than they expected to pre retirement.

as well. Also an opportunity at class financial dot com to sign up for the weekly Market Pulse newsletter that available to you at COSS Financial. Their telephone number six oh eight four four two five six three seven. No charge for that initial get to know you appointment at Coss Financial. It will be complimentary to you again their number six oh eight four four two five six three seven. We'll continue our conversation with Eric and CJ. We'll talk

about some some income sources. Also, it's kind of the importance of taking care of your health. Yeah, that's a vital part of enjoying retirement. We'll get the details from cgen Eric. We will do that next as Money in Motion continues right here on thirteen ten wib A chatting this week with CJ. Class At Eric Schwartz. Of course, they are our retirement planning professionals, and they come to us from Class Financial the website class financial dot com.

That's Class k l AA Sfinancial dot com. Dee for what number six oh eight four four two five six three seven. Don't forget no charge for that initial get to know your appointment tech loss Financial. It will be complementary to you again their number six oh eight four four two five six three seven talking about getting prepared for retirement. And there's many things to think about when it comes to retirement preparation. Obviously, financial aspects are very important.

They always say money makes the world go round, and it's it's an important conversation and question I think for a lot of folks, kind of thing that they focus in on when it comes to retirement. And just before the we went to break there, Eric had mentioned that that retirees often will spend more than expected, especially early on. So let's talk about some income sources and making sure that you don't run out of money CJ.

income streams. But Eric is correct, I mean We often find that early on in retirement is when you finally have the time, You're at home, and you're seeing all the problems with the house, right Like, Okay, finally I have the time, maybe the resources, and I'm sitting around my house and I'm seeing all the things that annoy me. And so often we see this kind of spike in early spending. Now Eric will attest that actually levels out

quite a bit later on in retirement. We will even see a reduction in spending later on in life, although Fay I typically at the very end of life there's a spike, but that's because of you know, nursing, home expenses on and so forth. So here's one thing I want everybody to think about. Here's the blessing Thatck and I have in doing what we do. We get to retire thousands of times with our clients. That might sound odd, but let me repeat that. We get to retire thousands

of times with our clients. We have people who are pre retirement, entering retirement, have been in retirement for five years, ten years, twenty years, and are ending retirement and life. Why does that matter? Because for Eric and I, this is not a concept planning for retirement is not a concept. We live it and breathe it every single day. We get to see what plans worked, what plans did not work.

We get to see behavioral biases, investment biases, risk biases, and why this matters, because my goodness, we get this really really deep understanding of all the elements that impact your ability to be retired, stay retired, and live happy in retirement. Okay, without rambling out of the way, let's talk about these income streams. So obviously there there's income streams you need to think about in retirement. Number one for Americans would be Social Security. How much is that?

When should you draw it? There's pensions, pensions for think of our state of Wisconsin employees the Department of Employee Trust funds pension. There's part time work, so we have a lot of people who, whether they need the money or not, just want to stay active in retirement. And then you know, you need to think about these elements of do I take soci Security at sixty two or

my FRA or do I wait till seventy? And I heard that my spouse gets something off of my Social Security benefit if they don't have enough, And there's a lot to consider here. And then, of course, for the State of Wisconsin employees, do you know what pension claim option do I take? Eric? Do I take the single life? Do I take the the one hundred percent contingent, the fifty percent contingent, the ten year guaranteed. There's all these different claiming options and you need to understand the math

behind it to make a good decision. And then obviously a good financial advisor, good retirement planner can help in in making these decisions because remember, most of these decisions become irrevocable within about you know, two to three months after you make them, so it's pretty important that you think about them carefully. And then, of course the big one that we get it very very involved in is will my like portfolio? So what we call your net

worth spending? Will your net worth spending last you the rest of your life? Said another way, do I have enough money saved and set aside to not run out? And everybody, if I can give you any insights on this, it is a lot more complicated than you actually think. Because we have people who have been blessed to work for the State of Wisconsin, who have great social security incomes, who get to retirement and they come into our office and they say, do I have enough? I don't think

I've saved enough. And Eric and I run the math and we go, you don't need your investments at all. Your pensions in social Security are one hundred and twenty percent of what you spend per year. So not only have you saved enough, you've way over saved. You see my point? And then we see the opposite where people come in and they go, I'm good, I'm good. I've got a pension in Social Security. I'm not worried about it. And we go, yeah, but that's like fifty percent of

your need. The rest is going to have to come from your net worth, and you haven't saved enough. You get the idea. It is way more complicated. And the reason it's more complicated because it's not a dollar amount. You all remember those commercials that would come on in the TV like what's your number? I think it was from Voya. People would be walking around the streets with a number of how much they needed to save. What I'd say to you is that can be really tricky,

really really tricky to focus on a number. I'm not saying it doesn't have a purpose. I'm just saying it's tricky because one person might need zero saved because they've got so much in pensions in social security, and another person might need eight million and they could be living the exact same lifestyle. But it just depends on these guaranteed income sources. Now I do realize we're on the radio. I might be confusing some people. I would just encourage

you planning for retirement. Knowing how much you need to save is a lot more complicated than just a number you walk around with.

will be taxed. So, for example, you could have tax deferred dollars, right, these are probably the most common retirement assets where you've you've contributed funds before tax and they've grown tax deferred. So that went so that when you draw the dollars out there fully taxable to you, you may then also have taxable or we might even call

these non retirement accounts. So I mean, you could be thinking of something as simple as a savings account, an investment account, but dollars that are maybe mostly already taxed, but you know, maybe there's some interest income or some some unrealized capital gains, so more tax efficient than the tax deferred assets, but still not fully tax free. And

then finally we would have our WROTH assets. And listeners have heard us talk about these different types before, but WROTH dollars are dollars you've put in after taxes and then the benefit of that is they grow tax free. So distributions from WROTH accounts would be would be fully tax free. Now why why am I explaining these Because it matters which order in which combination of these different

tax buckets you use to create income. Right, because if we're in retirement, we're looking at for some well for a lot of folks, I guess you could say, hopefully they're a lower tax bracket than when they were working, and we have more flexibility because we're not. We're not. It's not a matter of okay, you get paid your your salary, and that's that we get to decide when and where you draw from each of these types of accounts.

So you can imagine, if you're taking all of your income from the tax deferred bucket, well, you're probably going to be in a higher tax bracket than if, for example, you did maybe a combination of tax deferred and maybe some distributions from non retirement accounts. So you want to think about, you know, how you're going to be what what order, and what combination of these you're going to

be using to create your income. And you also want to think about how you're investing your dollars in each of those three different buckets, because if, for example, you are you're not planning to use your WROTH dollars for a while, you might invest those more aggressively because they have a longer time horizon and they grow tax free. So we'd love to we'd love to concentrate some growth in those in those WROTH buckets, and we want to bring this into the discussion about the order in which

you're drawing dollars out of these accounts. You're also going to need to think about required minimum distributions, so we talked about that quite a bit last week. You're going to be wanting to think about how your your taxable income impacts your Medicare premiums, because if your income exceeds certain thresholds, you can actually pay it temporarily higher Medicare premiums.

And you want to you want to think about uh, your taxable income as it relates to how much of your Social Security benefits gets gets taxed, because the amount of your Social Security tax or your Social Security benefit that gets taxed at the federal level is a function of your of of your total income that you're earning throughout the year. So these are a lot of things to juggle. As always be encouraged folks to to seek out professional advice because in many cases we do. We

do think it's absolutely worth it. And the last thing I'll say here on the tax management side is if you are retiring early, that's an opportunity for you to consider some what we might call it a more advanced tax strategy like WROTH conversions, which involves moving dollars from your tax deferred bucket to your WROTH bucket earlier on so that you can you can reduce those required minimum

distributions later and increase your tax free growth bucket. So I would say that's kind of a really high level rundown of what we're looking at on the tax management side. And then just some kind of final checklist items here. If you're retiring before sixty five, we've talked on the show before Medicare starts at sixty five prior to that if you are if you are retired, we need to be thinking about getting health insurance for you and or your spouse and maybe even some children that are not

adults yet. So we need to be thinking about where you're going to get health insurance, whether that's you know, Cobra or through the health insurance exchange, or maybe your employer offers some type of benefit, so that it's something to think about. We want to think about eliminating debt as much as possible by the time you get to retirement. The less debt you have, the lower your monthly expenses and the less income you need to create to fund

your lifestyle. And we want to be thinking about making sure our estate plans are up to date and in order. And finally, we want to make sure that we've fully funded that emergency fund prior to retirement.

It will be complimentary to you. Again, they're telephone number six oh eight four four two five six three seven. We'll do the class quiz question leak. We'll also talk about the importance of health in retirement. We'll get those details next. As Money in Motion with Class Financial continues right here. I'm thirteen ten WIVA talking with our retirement planning professionals CJ. Closs and Eric Schwartz. Of course they come to us from Class Financial, the website colss financial

dot com. That's Class k l aas financial dot com. Talking this week about really getting ready and preparing for retirement to things think about not just your wallet, but also your mind and body, and that brings us uh, that kind of the the we got through the financial part, let's talk about the importance of taking care of our health as well.

don't have any money to live off of. But they are the same coin. You have to flip those sides over and recognize if I've got all the money in the world but no ability to use it or enjoy it, then it doesn't do you a lot of good. So think of health as a foundation. Imagine having a perfectly crafted retirement plan, but you're constantly battling health issues. That is again not the retirement retirement dreams that you probably

had early on. And just like you wouldn't want to build a house on a shaky foundation, you do not want to build your retirement on shaky health. So start thinking about simple things like am I actually working my body out so that when I get to retire minute sixty five or sixty seven or sixty two, whatever it might be, that I will have the physical health to go travel, to do the things that I want to do,

to play with my grandchildren, whatever it might be. So some proactive health habits to think about as again, developing a good diet, running exercise, scheduling checkups, and screening with your doctor for early detection in case you do have any issues going on. And then even mental health awareness, so not only just kind of working with counselors as you need to, but beyond that is also actually exercising

your mind. One thing that Eric and I see happen as people retire, if they don't retire to something, is that often their mind really slows down. Now this can be actually cognit you diagnosed cognitive decline, but it's not always that. Sometimes it's just I'll call it mental laziness where you're not having to think critically about things anymore. It's for a good reason. Many times people are tired of having you think critically, so they get to retirement

and they just want to slow down. But that slow down can cause your brain to actually lose some of its stimulus and struggle to recall information or to even be engaged. So you know, think of health as a lifestyle and aligning your health and wealth are are really important factors to consider.

You'll then have thirty minutes from the ener today's program to call the Claws Financial office right here in Madison at six oh eight four four two five six three seven. If you are the first call with the correct answer, you'll win this week's prize, which is a twenty five dollars gift card to Chewy. This week's class Quiz question of the week is this true or false? In twenty twenty five, we will see the highest number of Americans reaching the traditional retirement age of sixty five. Is that

true or is that false? Telephone number six oh eight four four two five six three seven, first call, correct answer, win the twenty five dollars gift card to Chewy. And again that's Class Financial office right here in Madison, CJ.

Class Financial does not offer tax or legal advice. Any opinion offered during the course of this show is the opinion of that particular investment advisor representative and not necessarily the opinion of Class Financial. News comes your way next right here. On thirteen ten, WIBA