Retire Eyes Wide Open: Season 1 Episode 1

Introduction:

Hi, my name is Scot Landborg and I’m here to help you retire with your eyes wide open. That means having the information you need and the clarity you deserve. It means understanding and interpreting the world as it changes. It means knowing about investments, taxes, social security, and estate planning and how they’re all connected. And probably most important, it’s about living your best retirement life. The good life. You know, I meet with thousands of retirees. I see people doing it right. I see people doing it wrong. People that are happy. People that are depressed. I see people that are informed and people that are uninformed. And I’m going to show you how to retire with your eyes wide open.

Welcome to Episode 1 of Retire Eyes Wide Open. I’m your host Scot Landborg. And on today’s episode, we’re talking about what it means to retire with your eyes wide open. We’re going to cover current news in the market segment called Money Rundown. I’ll tell you about the Best Thing I Saw this Week.

We’ll walk through our Scot Strategy Segment and Listener questions all about social security and your retirement.

Money Monologue:

A little bit about me--I’ve been a Financial Advisor for over 16 years, a Partner of Sterling Wealth Partners in Tustin CA. We specialize in helping people as they approach retirement or if they are currently retired. My focus is trying to optimize your investments, your taxes, and align your estate plan to help meet your financial goals. But that’s really any financial advisor does.

What’s unique about us, what’s unique about what we do, is that we can help you all under one roof. And is about how we’re really intentional about comprehensive planning.

This show is about educating, entertaining and inspiring you about your money. But’s its more than just about money and investment. It’s more than just strategy. It’s about everything else that comes with retirement. How do you have the best retirement life possible?

It’s about making sure you face down retirement with your “eyes wide open.” You’re facing retirement. You’re staring down some big decisions. Huge decisions that are going to impact everything about your financial future. Everything about your future life. Are you going to have enough money to do the things you want to do? Will you have enough for what you need? Will you run out?

You know, the crazy thing is no matter if you have $5 million in investments or just $50,000 – you all come to me with the exact same set of questions. The same fears. How do I make sure I’ll have enough?

I’m blown away when people with $5 million in investments, a home paid off, a pension. They have the same level of fear as someone that only has $50,000 in their bank account. Where is my money going to come from in retirement? You’re asking the same questions. How do I make sure I don’t run out? How do I make sure I don’t do something stupid?

You’re making some epic decisions. And who are you going to hire to help you on this journey? Where do you pull income from? From cash? From IRAs? When do you take your social security? What do you do about your taxes? Big decisions with big consequences. You want to make sure you go into this journey with your eyes wide open! Not closed.

Because when you look back at this time—when you look back on these decisions, when you look back 20, 30 years from now, you’re going to have perfect clarity on if you made the right decisions about your investments. If you made the right decisions about your social security. You’re going to have perfect clarity then—down the road. But what about today? What about right now? How can you have confidence that you’re making the right decisions going forward.

You make sure that you have your eyes wide open instead of closed. When you look back at this moment, you want to make sure that you looked at your options. That you analyzed different investment strategies. That you looked at different ways to position your income and your taxes. You analyze your options. You interview multiple advisors. Because when you look back at this moment, and you want to know you did everything you could. That you gave it your best shot--your best chance to set yourself up for the retirement life ahead. And that’s the way you’re going to have confidence in the future.

You’re not going to necessarily have made the right decision. Maybe you didn’t make the right choice. But you’ll have confidence knowing that you had analyzed your options and you chose the best path forward. That’s what it means to retire with your eyes wide open. And we’re going to explore that topic a lot more in the shows ahead. So we’re excited to have you join us for our podcast and we’ll cover more of those topics in the future.

Money Rundown:

There’s a lot of media sources out there that are going to give you updated information about the economy and the markets. My job is to help summarize and synthesize, to help pick out a few stories that are most important for you as a retiree or investor.

Now we’re nearing the end of July, and as of the recording of this podcast – the markets have had a choppy year. Still off the highs in the Dow achieved in late January – the Dow is up around 1% on the year and the S&P up over 3.5%. Bonds have had a challenge – down over 2.5%. International markets

also having a challenging time – developed markets down over 3% and emerging markets down over 7%.

Our first story is about economic growth.

Is the economy growing at a 5% pace? The Federal Reserve Bank of Atlanta believes so. The economy could be expanding at nearly that rate. Their GDPNow model projected second quarter economic expansion of between 4.7%-4.8% for Q2 during most of June.

So, what does that mean for you and what does it mean for your retirement?

Well, a growing market and a growing economy are great for your retirement accounts and for your future retirement. It means that even though this economy is 9 years into a recovery, the second longest on record. We could be in store for more upside potential. And you have to be asking, is your portfolio positioned right to take advantage of that.

Our second story today in the Money Rundown provides us more evidence of an expanding economy. It’s also our quote of the week from Senior Market Strategist at Voya Investment Management, Karyn Cavanaugh. On June 19th on CNBC she said, “We are seeing a lot of capital expenditures. And we’re seeing companies going out there and spending more. That’s going to increase productivity. And that’s good for sustained economic growth. It just takes a little bit of time to work through the system.”

What does that mean? What does that mean for you and your retirement?

Well, the recent tax bill has added more fuel to the fire as companies are enjoying lower tax rates and less regulation. Companies are becoming more profitable. They’re spending more. They’re buying back more stock. And is your portfolio positioned to capture some of that upside?

You know, as you approach retirement and as you’re in retirement, most advisors advise you to add more conservative investments, add more bonds to your portfolio, manage your risk as this market has grown. But I have to ask the other question, too. Not only, “How do you make sure that you’re not taking too much risk?” but “How do you make sure you’re capturing upside when this economy is growing and when it’s expanding?” Since 2008—since our last recession, advisors have been giving warning signals about this market overheating. And year after year, some of those people have been wrong and the economy has continued to grow. Do you miss some of that upside? Did you miss some of that growth in your portfolio? Hold your advisor accountable and make sure that, now only are you avoiding risk and managing risk, but are you getting enough upside as the market grows. While we’re still concerned about the length and breadth of this recovery, we are always asking ourselves, “How do we capture as much upside as possible, while managing downside risk?”

And that’s our Money Rundown for the week!

Best Thing I Saw This Week:

Isn't it great to see young people with a hot dog stand or a lemonade stand on a hot day?

Did you have one as a child? What did it teach you? Teach you a little bit about money, about earning money? How difficult it can be to earn that money?

Well, we’ve heard some different stories recently about kids and their food or drink stands and sometimes they get reported. They get reported to the city for not having a permit. An example of one of these is a 13 year old in Minneapolis, Minnesota. 13-year old Jaequan Faulkner in Minneapolis, Minnesota wanted to raise some money over the summer for some new school clothes in the fall. Guess what? Someone filed a complaint because he was selling food without a permit. Can you believe it? This 13 year old’s trying to raise money the good ol’ fashioned way and someone reported him to the city’s health department. Instead of shutting him down, the city, the local Health Department and a local Nonprofit helped him files the papers needed to obtain a temporary permit and made sure he was following all the health codes. More than that, they helped him raise the money for the permit fee. Isn’t it wonderful to see a community come together? More than that, isn’t it wonderful that they didn’t shut him down? How crazy would that be?

https://www.google.com/amp/s/people.com/food/jaequan-faulkner-hot-dog-st...
Well, this story got me thinking about retirement. How does it apply to you? How does it apply to a retiree? And what it got me thinking about is--today’s world is a lot different than when I grew up and when you grew up. We didn’t have the internet. We didn’t have Facebook. We didn’t have Ebay. So, setting up that virtual hot dog stand or that virtual lemonade stand is something that’s a lot different now than it was when we were kids. You can set up a virtual hot dog stand. You can set up a virtual lemonade stand. And it opens up some really new, interesting questions about what retirement is. Retirement—it can be about travel, it can be about enjoying the things you want to do. But it’s also about doing the things that you want to do. For some people it’s about reinventing themselves. For some people it’s about starting a business. Trying out a hobby that they haven’t been able to do during their working life. One of my clients starting picking up pickle ball. He play a couple hours a day and never thought about it before as a hobby he would enjoy. But more than just hobbies, maybe there’s a business that you want to start. Maybe there’s a side job that you’d like and find enjoyable. The internet make it easier to have that virtual lemonade stand or that hotdog stand and it allows you to do thing you might not have been able to do before. You don’t have to get committed to another full time job, but you can explore some of those other interests. Maybe you want to drive Uber on the side on a Sunday afternoon just for fun. Maybe you want to start walking a dog once a week using one of those apps that helps coordinate dog walkers with people that need that service. Maybe there’s a business that you want to start.

Maybe you want to start teaching kids at the local park about rockets or about science. The list of things that you could do to satisfy that itch to contribute to the community around you is really endless in this internet age. Maybe you want to start a travel blog. Maybe you want to be a wine critic. The list goes on and on but the tools available today make it easier than ever to do just that. The world is changing and so is retirement.

You’re going live longer than you think and if you think fulfillment is going to come with every vacation, you're in for a surprise! What’s your purpose? What do you love? What do you enjoy and how do you do more of that in your retirement?

I had someone that I met with recently and they started taking euchalale lessons and they couldn’t stop talking about how much fun they were having.

So whether you’re doing it because you’re earning money, or whether you’re doing these things to turn over a new leaf, they all go to the same thing. And that’s helping you find more relevance in your retirement. That’s critical to have that happy retirement lifestyle.

Scot Strategy Segment:

This is where we’re going to share with you insightful strategies to help improve your retirement picture. Today, we’re talking about social security. How do you embark on social security with your eyes wide open. What are some strategies for you to take away as you’re making some very important decisions about your social security?

First, is to realize how important of a decision it really is. How big of an asset your social security income is going to be. The average retiree depends on social security for a significant portion of their retirement income. So, strategy #1 is just embrace the fact that this is a big decision and can be a huge part of your financial picture.

Next tip is to remember to think about your spouse when calculating benefits. This is a very common mistake. People don’t think about their spouse when calculating their benefits. They only think about themselves. What’s interesting, is it you’re 70 years old, if you waited to take your social security until you’re 70 and didn’t take a nickel of your own benefit, but your wife, your wife lived until she was 92. You passed away at 70, never took a nickel of your own social security, your spouse would collect over $100,000 more in her retirement life because you made that decision. Now you might not be happy because you passed at 70, not collecting two nickels, but your spouse is happy because they collected over $100,000 more than they would have by you taking your benefits early.

Next, think about if one of you can wait. Can one of you wait to take your social security benefit? By waiting, that means you’re going to get an increase every single year once you turn on your benefits. Waiting is not just beneficial for you and your life but it can also be beneficial for your spouse’s life. Think about longevity.

That’s my next tip.

Think about longevity. What if you live to 100? What if you live to 120? And these rules that we have in place now about social security, can impact you for all of that time. When they set up the social security system, live expectancy was only in the 60’s. Now we’re in the 80’s. Well fast forward 20 years from now, what is life expectancy going to be? Your social security benefit is one of those few benefits that’s going to offer you pay raises almost every year tied to inflation. And with the government $17 trillion in federal debt, we’re likely to see inflation at some point in the future. Social security, under the current rules, could help you hedge that inflation as you get pay raises all of those years. And if you live to 100 or if you live to 120, you may regret taking that social security earlier.

Next, you need to think about how your benefits are being taxed. That really changes the game when you look at your social security benefits. You may want to wait longer until you’re in a lower tax bracket. It’s not what you make, it’s what you keep and that’s a critical function when you’re planning out your social security benefits.

And that covers our Scot Strategy Segment for this week. We hope you found it informative and insightful. We’re going to have more content next week to give you information about your retirement and moving forward, strategies to help you right now. If you want to learn more about your social security, because it’s a very complicated question, we’ve got a whole presentation on social security strategies and tips and we’d love to share it with you. We’d love to talk with you one-on-one about your social security situation and what is the optimal time in light of all of your other retirement assets and your retirement income picture. If that’s something you want to take advantage of, please reach out to us on RetireEWO.com to set up a one-on-one discussion about your social security and how it fits into your retirement plan.

Listener Questions:

If you want your questions answered during the show, go to our website and click on our button to have your question answered on the air. We’d love to get your question addressed so if that’s something you want to do, visit our website.

Joining us is our producer, Angela.

Angela, thanks so much for joining us and what kinds of questions do we have from some of our listeners this week.

[Angela] Thanks, Scot. So our first question is from Don in Diamond Bar, CA.

Hello. I have a question about Social Security. My wife and I are both 62 and both retired. We have plenty of income from pensions and investments where we don’t actually need the income from Social Security to live, but we’re wondering should we take it early and get what we can?

[Scot] Well, Don, thank you so much for sending in the question. When you’re 62, there’s a lot of other questions to really consider. And the first question for you is, “are you still working?” Well, you mentioned you’re both retired, so that’s an easy one. But for listeners that are listening in, between 62 and full retirement age, normally 66 or 67, you have to very careful if you’re still working and turn on your social security you could be penalized so be very careful and conscious of that. Now, Don, you mentioned that you’re both retired so that doesn’t really apply to you. What you really need to be thinking about is your breakeven point. You need to think about, if you don’t need the $, does taking from social security take pressure off some of your other investments. In other words, if we start taking from your social security first, does it allow us to defer more of our investment and pension income? That’s really one of the questions. The other question is you have to look very closely at your tax situation. What’s your tax situation and how is it going to change when you turn 70 and have to start taking required minimum distributions from your investments. Looking at your taxes is a critical question when thinking about when you’re taking your social security. Lots go into this and we’ll have to talk more offline, Don, about your specific situation. Hope that helped.

[Angela] And our next question. Jack from Tustin, CA. He writes:

Hi Scot, I’m 68 years old and I’m a successful attorney. I don’t plan on stopping work anytime soon. I do plan on turning my social security on at age 70 because I don’t really need the income now. My wife is enjoying retirement and she’s also enjoying her spending in retirement. She’s 62. I really want to turn on her Social Security benefit. It’s about $1k per month. We have about $500k in retirement accounts and our home is paid off. What do you think we should do?

[Scot] Jack, thank you so much for the question. You know, the issue I think in your situation is because you’re still working. You’re likely earning more income now than you will in retirement. Your tax bracket is higher today than it will be in the future. So that’s a very, very important consideration when you’re looking at what you should do about your social security. What’s your tax bracket? Because if you turn on that social security benefit and you’re giving away 40% of it to Uncle Sam in the state of California—let’s say that benefit is $10,000 a year, you’re giving away $4,000 away in taxes it might not make sense. Because once you reach retirement, you don’t have a huge amount of investment savings with $500,000. The good news was your home is paid off. Because your home is paid off, plus your social security benefit, you are going to be in a decent position. But one thing that I can tell by listening to your question, is it seems that you’ll likely be in a lower tax bracket in retirement. So for you to turn on your social security benefit on now, you’re going to stop getting those roll-ups in the benefit, and whatever income you do receive, almost half is probably going to go to the government. So it might make sense for you to wait. We have to look very, very closely at that. It’s’ not going to make sense or you to wait past 70, that doesn’t make any sense at all, but for your wife, you’re going to want to look very closely at that. The other thing that complicates that question, is your wife is younger than you are. Right? She’s 6 years younger. Normally, what I would advise people in a situation like that is to look closely—is there a way for one person to wait and defer? And that person is obviously you. You’re waiting until 70. So because of that, I would be more inclined to have her take hers early because of the age difference. What happens, when one of you passes away, that lower social security amount goes away. So you might as well take what you can. The challenge I have for you is your tax situation. And she’s 62. Looking at your tax situation, I’m concerned if you’re going to have enough income in retirement. If she can wait just a few more years, and then you’re done working, being in that lower tax bracket with the money you get from social security can make a huge difference. Again, would love to talk to you more one-on-one about your situation to give you some more specifics but I hope that helps.

Thanks for joining us today on the show. Angela, thank you so much for joining us. If you’ve got a question, again, hopefully this was helpful to our listeners. If you‘ve got a question, send us an email at RetireEWO.com. You can also follow us on Facebook, subscribe to our podcast on iTunes. I want to thank all of you so much for listening. Stay tuned next week as I discuss how to retire with your eyes wide open. Don’t go into retirement with your eyes closed. Retire with your eyes wide open! I’m your host Scot Landborg and we’ll see you next week.