Forethought Planning Podcast

Ep 91: Your Financial Plan for 60 and Beyond

April 26, 2022 Shannon Foreman Season 1 Episode 91
Forethought Planning Podcast
Ep 91: Your Financial Plan for 60 and Beyond
Show Notes Transcript

Today we are talking about what you should be considering around your wealth in your 60s and beyond. And this is a fun spot for me because I have spent much of my career guiding individuals through transformations into this amazing time of their life. 

Today we are going to talk about the stress of replacing that steady income you were making, how to handle medical insurance, finding your purpose after leaving your job, deciding if it's okay to retire earlier than expected, and how to live with your partner in peace and harmony. After all, you two will be spending a lot of time together!

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Securities offered through LPL Financial, a member of FINRA/SIPC. Advisory services offered through Advisors' Pride, a SEC registered investment advisor. LPL Financial, Advisors' Pride, Forethought Planning and the guests of Thrive For[e]ward podcast are separate and unaffiliated parties. The views expressed here are those of the participants, and not those of Forethought Planning, Advisor's Pride, or LPL financial. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. LPL Financial and Forethought Planning do not offer legal services.   

Shannon Foreman  0:00  
Hello there friends welcome to this episode of The Thrive Forward podcast. I am your host Shannon Forman. If you have never engaged with our platform before, we are happy to have you. That means that on today's podcast, we are going to be talking about what you should be considering around your wealth in your 60s and beyond. And this is a fun spot for me, I have spent many parts of my career guiding individuals through transformations in transitions, especially in this period of time, I've held take it for granted that obviously, I have not personally experienced retirement, I have experienced some of the other pieces that we will talk about when it comes to caregiving. However, I myself have not personally been cared for, I have had the incredible honor to walk many of my clients through the celebration of retirements, unfortunate circumstances of losing a loved one, especially their partner, entering levels of extended care that we might need traveling the world, being able to achieve the things that we wanted to making impacts for our families and charitable causes that are important to us. So that being said, my friend, these are topics that I enjoy being able to have conversations and feel very honored at the ability to be able to discuss them with you today. Now, if you know somebody in your 60s, or in their 60s or 70s, and you are looking to provide for them, or they are looking to seek out some sort of information when it comes to what is it that I should be doing right now, either before my retirement or going into my retirement, share this podcast with them, we would be honored to have you listen. And of course, subscribe to the podcast so you don't miss out on any of our great future content. Now, let's get to the good stuff.

Shannon Foreman  2:16  
All right, friends, let's jump into the good stuff. You're in your 60s and wow, retirement is right around the corner. Doesn't it feel like maybe it just flashed before your eyes? And how did you get here already? What are the things that you need to be thinking about and establishing a lot of what I'm going to tell you may involve your personal board of directors. And honestly, I would strongly encourage you if you have not already, which I hope you have involved those individuals in your life. However, those personal board of directors that I referred to, if you are just tuning into our fourth content, are your financial planner advisor, your attorney, your tax professional or CPA, sometimes also referred to your personal board of directors is the people that take care of you internally as well. You're about to go through a lot of really big life transitions. How are you involving maybe a coach who specializes in transformations from working your professional life through into retirement and what that looks like for you, a therapist, maybe it's a health and wellness coach, somebody that's going to help you establish healthy boundaries to stay healthy in retirement, right? All things that are super important that maybe we don't necessarily consider when talking about finances. However, I think your Pbot as I referred to them, or your personal board of directors plays a critical role as you enter into retirement. But let's talk about a few strategical things that you should consider to how are you going to replace your paycheck? We get so used to that. And I think sometimes it is the piece for my clients that provide the most amount of anxiety. How are you going to pay yourself? If you're so used to receiving a paycheck maybe every two weeks? Is that something that you can actually cultivate? Yes, is now understanding which access point where are you going to access from your portfolio? Do you have enough? Have you saved enough? And strategically how are you going to tax plan making sure that you're not pulling too much from different resources that could potentially cause you the same amount of income in retirement and tax liability in retirement that you had during your working years? The idea has always been that when you're in retirement your tax bracket lowers. That means that if you saved into a lot of tax deferred vehicles, there will be as we get into your 70s and discuss that required minimum distributions that you have to take. So why not start taking those now? You're 60 You have complete access to your retirement. In fact, you can start thinking about if you're well established, is this an opportunity for me to potentially even think about retiring early, there are different types of elections that you can take even before you are in your 60s to consider establishing maybe even a different career if you wanted to. Now, let's think about where is it that you want to access that money, if you have tax free options, that's a great idea to be able to do, but also balancing that with drawing down some of that tax deferred, especially before you hit the start button on your social security, another element of your income that you only make want to make sure that you plan for because if you pull too much from one element, like your tax, deferred your 401, K's or different things like that, that you might have potentially an annuity that you may have designed for income for yourself, you would want to make sure that you're understanding all of the different taxation pieces that are going to come into play to make sure that your Social Security, that one piece we've already paid taxes on, we don't want to pay taxes on again, which is also very important to understand when it comes to planning with your personal board of directors. Some of that isn't necessarily always always achievable depending on your accumulated wealth, and what you need to draw down or live off of for your lifestyle. So again, as I always say, it's very personal to you. And you need to make sure that you are addressing this with the people that are important in your life. That being said, some other pieces that you should be considering are, how are you going to pay for health care. Now you want to make sure that you definitely and no later than 65. In fact, I think it's 64 and a half, you sign up for Medicare, you want to make sure even if you aren't starting to take Medicare, and maybe you're working till 67 or 70, or some people who like to work beyond that, you do want to make sure that you have signed up for that and that you are eligible for a eligible for receiving those benefits. If you don't sign up, you could be subject to a penalty. So you don't want to you don't want to do that. Like let's just let's save ourselves the penalty and make sure that we sign up when we need to. You also should be meeting with and understanding working with a health care professional. There are plenty of licensed health care professionals out there. You want to make sure you're dealing with somebody who is specialized and who is licensed and has experience in these areas is incredibly complex to start shopping for supplemental plans. Also, I want you to consider are those plans going to be portable? Is your plan in retirement to stay in one state or is your plan to travel the world is your plan to be a snowbird and live six months in one day somewhere else you need to understand how your healthcare policies are going to play with your lifestyle as well. You wouldn't want to be caught somewhere that you are uncertain of how that health care coverage is going to happen. Then also understand if your premiums can be paid via the HSA that we talked about in our 40s and 50s session, talking about using those funds as tax free ways to be able to pay for your retirement benefits from a healthcare standpoint. Also considering maybe some of your employers might offer retirement benefits. How do you qualify for those? Do you have enough years of service? Is that is that plan better than perhaps the supplemental plan that you might receive? How long will they cover you paying for that? Will they cover you if you retire at 6061? Will they cover you until 65? and planning for those gap timeframes? A lot of times I have clients who say they don't want to work until they're 65. And that coverage in between what is commonly referred to as gap years sometimes we call gap years in our 20s or you know 18 or 19 or in college, but this is your gap year for insurance coverage. How are you going to plan for paying for that out of pocket? And also wanting to make sure that we understand how does insurance cover any of the prescription drugs that we might have any eye needs that we might have or dental needs? Oftentimes Medicare is not covering those things. And the other major piece that Medicare is not covering is any need for long term care. So if you have not already explored the conversation of an extended care event in your life and how it will affect you find out to leave, then you definitely need to make sure that you're having those conversations now, understanding how that will impact you from a financial standpoint. And what are some things that you can do. Because if you get to your 70s, and you start planning the resources, start to dry up on what is actually available out there for you to mitigate your risk, as opposed to dealing with it much earlier and having those conversations to understand those what ifs, not saying that insurance is the only way to go. You need to explore that for yourself, and understand how much it costs, the versus have different things and make sure that someone is not just selling you something, but truly understanding how all of it works with your financial plan. Another piece that I want you to consider We already touched on this a little bit is tax planning, potentially, now you have a well appreciated portfolio. And what do you want to do with that maybe you're at a stage where you have great income in retirement, and how are you going to transition that estate on to the next individuals, sometimes we want to start gifting stock and different things like that to our loved ones, which is a phenomenal way for us to help the next generation start, as I say that head start in their wealth building. That being said, understand how you could potentially give them cash, which might be better for them, versus give them securities and instead direct your securities to a nonprofit that you might have find that's really important to you. Because that tax consequence for your children or loved ones versus the nonprofit, the nonprofit doesn't have to pay any taxes on that gain. And if your loved one needed to access those securities, they would have to pay all of your capital gain in that gifting process, as opposed to when you pass away, then there's a little bit of a different taxation on those pieces. All right, so I'm going to spend a little bit more time in our 60s, this could be also your 70s, depending on what date of retirement it is for you. But that being said, we just talked about gifting the other pieces that you want to understand is don't give right away, right, unless you're well established. And that's a part of your financial plan. Understand how some of these impacts like some people want to make decisions like right away once they retire. The reality is you have three stages of retirement your go go years, your slow go years, and you're maybe not so much, sometimes refer refer to it as your no go years. So a lot of times, you're gonna want to do all of those things, maybe you want to downsize your house right away, you want to travel the world, you want to do all of those things. Don't do everything at once, really make sure that you're evaluating the right spaces for you to be in and financially making the right decisions at the right time. And making sure that you're understanding to perhaps you're buying a second property, how is that going to play into the full financial plan, you've been saving for this. And now it's the time for you to kind of switch from that save to that spend. And that is the biggest behavioral adjustment that I see for my clients when it comes to retirement, that fear of still having enough is definitely there. And so wanting to spend money can sometimes be harder for individuals, especially the first couple of years, sometimes even more into retirement. Because that fear of isn't going to last is something that is very real, the reality is a good solid financial plan is going to show you and a good solid financial advisor and financial planner is going to be right there explaining to you all of the different things that could potentially happen. That might be things that would slow you from being able to do the things that you want to do. But in reality, those individuals are also going to encourage you when in the right space to spend your money and enjoy all of the savings and hard work that you have done. That is a big behavioral piece that is going to be a harder piece that maybe you won't even realize till you get to that stage. You have been waiting all these years and saving all of this money, and now you get to spend it and it isn't a switch that just goes like this. The other piece to consider from a behavioral standpoint is you went from working maybe at the same place for several decades, to now not having that same level of value for yourself and you need to transform and find a different purpose and it feels like this place that might be a little unsteady. How do you do that? Well, I mentioned at the beginning of this involving a coach. I was an athlete for many years and then I was an athletic coach and think of it as somebody who's not going to yell at you to do burpees or wall sets or run drills but right Other to explore, enter the power you already have. But self discovering the things that are important to you and giving yourself permission to do those things. Maybe there's a passion project that you have, perhaps you love volunteering, maybe you want to go be an athletic coach yourself. Now that you have more time on your hands, maybe you want to write a book, maybe you want to paint watercolors, maybe you want to travel the world and write a manuscript about it. Perhaps you want to be involved in community theater, there are all different types of things, those little dreams that you wanted to do all of your life, well take the bull by the horns, my friends, and do it. Also, those of you that are in partnership with each other, evaluate for yourselves, you are now going to be spending a lot more time together than maybe you have in previous decades. And right wrong or indifferent. Sometimes you want to sometimes you don't establish how you guys will do things independently of each other. And together, how you will involve family, have those conversations, not only from a strategical standpoint, financially, but also just the emotional and social pieces of things, because that plays a big part in how you experience your retirement. Let's take a pause in this episode, as we are talking about what you should be considering in your 60s and beyond. Perhaps you heard me say personal board of directors and that wow, that's an interesting concept. I've never heard of that, I guess maybe I've been doing this by myself or just interesting to my 401 K. Or maybe I have an advisor that's just not as involved as I thought they were. This is an opportunity for you to reevaluate, and it is such a critical stage in your financial life, that you do have a team surrounding you. And we would love to be that team for you. So if you are interested in having a conversation with how we can help you plan for these next stages of life and surround you with your personal board of directors and team working towards what it is that you need, not what they need, you need a team that has you at the center of all decisions, then go to forethought backslash wealth assessment,

Shannon Foreman  17:21  
give us a phone call at 612-431-2899. and schedule your next step with us today. All right, on to the next.

Shannon Foreman  17:32  
Now, let's transition into maybe some key areas that you might want to think about. I mentioned earlier when you are in your 70s. As of right now, the law is 72. For new retirees, however, some of you that are still in your 70s or 80s, and have already participated in required minimum distributions, you started at the age of 70 and a half, the key is 72. And so if you are younger than 70, it's likely that this age bracket will be the timeframe where you are required to start taking distributions from your retirement accounts. And I have found that several my clients that are in this space, don't necessarily always need every required minimum distribution to live off themselves. Some individuals who are in their 70s Still have pensions, those that are participating in my 20s and 30s and 40s and 50s conversation I shared with you, you might not have that. But in our 60s and 70s. For those individuals who are in that space right now, likely, you might have some of that you might have Social Security. And then you might need to draw some from your portfolio. But a lot of times individuals have set that money aside as maybe their bucket to use for long term care if something were to happen to them, or for them to give to the next generation. That being said, understand the taxable situation of that. Just because you take that required minimum distribution doesn't mean that you have to spend it in fact, you can take it out, pay the taxes on it and reinvest it if you want to, you can take that money out, you can make a charitable donation. In fact, if you make those distributions at the required minimum distribution age, that money actually doesn't count towards your actual income. from a tax perspective. They're called charitable distributions. And then they basically are like that income never existed. Because if you have to take those required minimum distributions, it does add to your pension income, you're retired other retirement income, your social security, and so it is something that you want to consider. And that's where, if you're in your 60s, start to consider how you can draw some of that down now, so that you can potentially reinvest that for accessibility in the future, but not keeping it in that same bucket. So I've spoken about this on previous podcast, but we have three buckets that we want to access in retirement tax deferred tax bubble and tax free, and some individuals take that too. Tax Free as Roth IRAs other cash value life insurance policies as well. Taxable would be your Social Security would be your outside of your IRA investments, dividends, capital gains that you might be receiving from that, as well as your tax deferred, which would be your pensions would be your 403 B's, your IRAs, your traditional IRAs, your 401, K's anything that maybe you never paid taxes on, but got a tax deduction for it when you made the contribution. Those are the three main areas that we access income for in retirement, and understanding how you're accessing them and trying to even them out as much as you possibly can. You can also start thinking about how do you want to contribute to the next generation, if this is a part of your wealth plan, thinking about maybe establishing college savings plans for those younger students in your life. But having conversations first, I think it is very critical for us to open that conversation, I find that many clients don't want to give away to their children, what they have accumulated in their wealth, look, you don't have to tell them dollars and cents, my friends, I get it, this is your money, you don't want them to think that they can live off of it. That's not what they want, either. Most of the time, I mean, I get that there's a few bad apples, but they want to know that you're going to be okay. They want to understand what their role might play for you. And that's a great conversation to start talking about when it comes to caregiving. When it comes to generational wealth planning, especially if you have quite a lot of accumulated wealth, understand how that's going to play a part for them. For instance, I have clients who are very charitably inclined, I have clients who want to be able to pass on to their next generation, they might have very successful children on one hand and children that might need more financial help on the other. Have that conversation. Are you okay? If we leave Susie more money than Tricia like, what is the element of being able to have those conversations? But I want you to always remember that you are at the core of every single one of these conversations, what is it that you need to do so putting a bow on this conversation, making sure that you are planning for where you're going to access your income and strategically planning ahead of when you need to plan those required minimum distributions. And thinking about how maybe you're accessing them early, and maybe reinvesting them to have another bucket to access in the future. Also thinking about when are you going to start Social Security, when is the best timeframe to be able to do that, when is the most tax efficient timeframe to be able to do that based on distributions that you need to take from other vehicles that you have understanding when you're going to enroll with Medicare? What are the costs associated with that, having conversations about long term care if you've not already, and of course, we didn't talk about this yet. But if you have not established your estate plan, your will your powers of attorney and healthcare directors, it is very critical that you do that. Now, your power of attorney and your health care directive are pieces of legal direction that you are going to give somebody but it is also the trust in someone to operate on your behalf while you are still living. So you want this person to understand what their roles and responsibilities are. Not many people understand what that might mean. And so being able to involve a third party, whether it be your estate planning attorney, or your financial planner to help have those family conversations. Keeping people in the dark is not the way that creates good finances, family dynamics going forward, understand who it is that you want to choose, and have that conversation and expectations with them so that they can live out the things that you want to be able to do and how you want it to be able to be done. But, my friends, this isn't just the things that you should be focused on. I say this quite frequently, but it is personal. So make sure that you are having these conversations with your personal board of directors, you're involving them and you understand what are the next steps that you need to be taking in order to have a healthy relationship with your wealth, because my friends, you are worthy

Shannon Foreman  24:35  
of wealth. The views expressed here are those of the participants and not those of forethought planning advisors, pide, or LPL. Financial all investing involves risk including loss of principle, no strategy assures success or protects against loss securities are offered through LPL Financial and member of FINRA and SIPC advisory services offered through advisors pride and SEC registered investment advisor LPL Financial Advisors pride forethought planning and the guests of the Thrive Forward podcasts are separate and unaffiliated parties

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