How do you know if you are retiring with your eyes wide open? Are you informed? What’s missing? Our 13 yes or no questions will give you some clarity on how prepared you are for retirement. Scot Landborg, host of the weekly podcast, Retire Eyes Wide Open, shares his thoughts on what you need to know to be prepared for retirement.
Welcome to Episode 7 of Retire Eyes Wide Open. I’m Scot Landborg. On today’s episode, the “REWO” Test. Are you ready for retirement? This show is all about making sure you don’t go into retirement with your eyes closed, but how can you be sure your eyes are open?
We’ll review the Retire Eyes Wide Open test. 13 questions that will let you know definitively if you have your eyes wide open. We’ll review the week’s news in the Money Rundown. We’ll talk about the best thing I saw this week. And our Scot Strategy Segment and Listener Questions are all about retiring with your eyes wide open.
This is Retire Eyes Wide Open!
Today, the “REWO” Test! The Retire Eyes Wide Open Test. How do you know if you are retiring with your eyes wide open? I had someone I care about tell me with confidence that they are retiring with their eyes wide open. But how do you know? What does it mean to retire with your eyes open? What does it mean to have enough confidence to know you have enough information to make those difficult retirement decisions?
We created a test. 13 yes or no questions that will clearly tell you how informed you are. You’ll know with certainty if you are retiring with your eyes open. Are you going into the biggest financial decisions of your life with your eyes closed? I sure hope not. Let’s go through our top 13 questions. Again, these are yes or no questions. You’re going to get a score at the end. Answer them yes or now and you’re going to know with confidence how ready you are for retirement.
Now if you answered 12 of them correct, you’re really ready for retirement. If you answered 10+, you’re in pretty good shape, higher than average, but still some work to do. 6-9 correct is average, but a lot of work to do – a lot of questions to be answered to make sure you are fully aware and fully ready for retirement. And if only 5 or less were answered yes, you’re below average and have a lot of work ahead of you. I don’t care how many you got right, having some help talking through these questions is part of what I do. It’s a very important piece of what we do. And an important piece that any financial advisor should be able to help with you with. If you want to talk one on one about your situation, go to our website: RetireEWO.com, click on “Schedule a Consult” and you can get an hour free of my time to review these questions to get you really up to speed and ready for retirement.
If you also want to take this test again or know someone that might benefit from taking the “REWO” Test, go to our website and look for the button “REWO Test” R-E-W-O Test. It’ll give you a link, and an ability to take the test, look at your scores to make sure you are ready for retirement. This retirement stage. You can win at it. You can fail at it. You can just get by. One of the best ways to WIN is to really make sure you did your homework. That you went into it after careful analysis of your options. You made the best decisions you could. The stakes are high. You’re going to look back at this time with perfect clarity on if you made the right decisions. The way you can be comfortable, is knowing you did all you could to get it right. Really take the time to get it right.
And that’s the Money Monologue.
Our Money Rundown segment is where we cover the week’s news. There are a lot of media sources out there that are going to help give you updated information about the economy and the markets. My job is to help summarize and synthesize – help pick out a few stories that are most important for you, as a retiree or investor.
Story #1 – Bloomberg published an article outlining some very interesting income tax statistics. First that the top 1% paid more income taxes than the bottom 90 percent combined. Second, the bottom 50% only paid 3% of the federal income tax received.
What does that mean for you? Well this article is very interesting. It’s not including all taxes. It’s only including federal income taxes. It’s not including social security tax, Medicare tax, real estate taxes, sales taxes. Those are taxes that have a heavier burden on the lower 50%. But when people are asking if the rich are paying their fair share, this article is very enlightening. The top 1% paying more than the bottom 90% combined. It’s kind of crazy when you think about it. The recent tax bill from Trump has made it more tax efficient for higher income earners. They lowered the highest tax rate and they’ve offered some fantastic tax deductions for business owners, possibly a 20% exclusion, and for people that own C-Corporations. So definitely a lot of opportunities in the tax world for higher income earners. Also, pay attention to what’s going on in real estate – these things called opportunity zones. There’s some new really fantastic regulations that have come up regarding real estate that can be even more attractive from an investment standpoint.
Story #2 – US Job openings topped 7 million for the first time ever. Right now there are more job openings than there are unemployed people in the US.
What does that mean for you? Well it’s just another indicator of the absolute strength of our economy. Jobs are not a forward looking indicator, they’re a backward looking indicator. But this economy is strong. 7 million jobs openings posted is absolutely incredible. If you look at the graphic, more jobs available than unemployed people – it’s just crazy and just bodes well for the economy moving forward. If you’re in the labor market, it’s a positive thing.
And that’s our Money Rundown for the week.
Best Thing I Saw This Week:
My wife, Shannon, and I got away for a little date night and went to see the movie A Star Is Born.
The movie stars Bradley Cooper and Lady Gaga. It’s a modern remake. It’s a movie that’s been re-done three other times. In 1937, ’54 and 1976 with Barbara Streisand. What a beautiful remake of this film. What a beautiful film. If you haven’t seen it, I’d recommend it! Cooper and Gaga are amazing.
Great chemistry on film. Cooper – you’ve never seen him act like this and Gaga is stellar. Definitely a sad ending to this story. Don’t worry I’m not going to spoil it. But how does it relate to you? How does it relate to retirement?
It got me thinking about how the world has changed. The internet age has put more power in the hands of the individual to shape our future. The musician is not forced to follow the traditional models. Touring just on someone else’s schedule. There are other ways. And we’ve seen some artists buck the traditional norms. Retirement is the same way. There are more choices and more power for you than ever before in shaping the life you want. Retirement is an adjustment for people. It’s tough going from having a high-profile job to suddenly nothing. There is a loss for many people. Especially if you haven’t planned enough for the transition.
The honeymoon in retirement lasts for 6 months to a year and then you’re faced with all this time. What do you do? What do you want to do? How do you find value and purpose? It’s important to understand that this world provides so many more options than any generation before you has had! So, don’t be sad. Be optimistic. Be willing to experiment and try new things and get a little out of your comfort zone. What’s sad about A Star Is Born is they didn’t see any other options – any other way out. The world of solutions that could have given them what they wanted. And the love and the joy right in front of them. For many, retirement starts as a transition period. Embrace it. Hire a personal trainer. Get in the physical shape you’ve always wanted. Throw a party. Hire a chef or a caterer and celebrate something like Mardi Gras or first day of Spring. Start writing a blog. People want to hear your insights. Write that science fiction novel you’ve been thinking about and go all in. Volunteer at a shelter for golden retrievers. Be a business consultant or coach or volunteer at SCORE helping the next generation of business and entrepreneurship. This internet age means there are no more dead ends. Only new beginnings.
You can get a gig like Uber or a dog walker. You can start the next big idea. Don’t ever feel boxed in or the best is behind you. The best is today. The best is ahead. Make the most of it.
And that’s the Best Thing I Saw This Week.
Scot Strategy Segment:
Earlier in the show, we talked about the “REWO” Test – the Retire Eyes Wide Open Test. In our Scot Strategy Segment, we’re going to talk about getting extra credit on that test and what questions didn’t make the cut. How can you be extra sure? Here are few more questions to ask? A few more that didn’t make the cut but still important to ask.
That’s our Scot Strategy Segment for the week.
If you want your questions answered on the air, go to our website RetireEWO.com and click “Submit a Question”. We’d be happy to get your question answered during the show.
Joining us is our producer, Angela. She’s going to be reading some questions that we’ve been getting from some of our listeners. Angela, take it away!
[Angela] Thank you so much, Scot. So our first question comes from Tom in Escondido, CA.
Hi Scot. Why does interviewing advisors matter? I’ve been doing a great job managing my own portfolio. I’ve actually tripled my portfolio over the past 10 years and don’t think I could find someone to do a better job than me.
[Scot] Tom, thank you so much for the question. Congratulations. Kudos to you for managing your money so well. I think the most important thing to understand is that the next 5 years are going to look very different than the last 10 years. Anybody that’s been investing money has been making money over the past 10 years, including you. If you’ve picked stocks well, you’re accounts are probably worth a lot. You’ve done very well. I would encourage you, though, to not get complacent—not get so drunk with your own success. And to be open to the fact that, coming ahead, we may have a recession. It could drop 20, 30, 40, 50%. How will your portfolio weather that storm? The reason I encourage you to interview multiple advisors is because now, when things are good, is the time to start asking the difficult questions and time to start interviewing advisors. Once you interview three advisors, you may pick none of them. You may decide to manage your money yourself. But you’ll be better prepared if a recession comes and now you want to have professional help. You won’t be scrambling. You’ll have a plan. You’ll have an idea – okay I have these three advisors. If something happens, I’m going to go back to this guy and have him manage 25-50% of my portfolio. Better to do the planning in advance. And also better to analyze and look at their investment philosophies. How they manage investments. How they manage risks. And there’s very many people that I’ve worked where we’re not managing all of their money. Maybe we’re managing a piece. We’re managing 50%. We’re managing 25%. But we’re kind of their canary in a coal mine. We’re another indicator for them that if things start changing in this market, they have another resource that they can go to and trust to make those difficult decisions. Hope that helps, Tom.
[Angela] Question 2 comes from Tatum in Costa Mesa, CA.
How do you evaluate social security strategies? It seems pretty simple to me. Take as much money as you can as quick as you can before the federal government runs out of money.
[Scot] Tatum, it’s way more complicated than that! It really is. In fact, one of the biggest mistakes people make is they just turn on their social security at 62 even though they’re still working. What they don’t realize is they’re going to get penalized and not receive very much of those benefits and not get the same pay raises they would have received by waiting. Everybody’s situation is different and there are strategies such as a restricted application, spousal benefits, how these benefits are taxed that you really need to understand in order to tax optimize your overall picture. It’s not as simple as just taking it as early as possible because there are other factors to consider like your taxes, your assets, where your other income is going to come from, etc. And social security benefits are taxed very differently to make sure you understand that when you’re analyzing different social security strategies. One of the biggest things to keep in mind is if you’re married, remember the lower benefit amount goes away. The smaller amount goes away if something happens to you or your spouse. Now if you’re both 95 years old, you’re not going to miss that other social security amount, but if you’re in your early 70’s and heaven forbid something happens to one of you and you miss out on that lower social security amount it can really impact your overall plan and you would have been a lot happier if one of you would have been deferring your benefits a little longer to have that bigger pile of money.
[Angela] And our final question is Beth in Corona CA.
I have a home worth $700k and a mortgage of $350k. I’m 65 and feel like I can’t retire until it’s paid for. Should I withdraw my 401k to pay it off or downsize instead? What are my options?
[Scot] Well, Beth, thanks so much for writing in about this question. Definitely, you don’t want to pull from your 401k to pay it off. At least not all in one year. For you to pay down a mortgage of $350,000, you’d likely have to pull your entire 401k or $700,000 to pay the tax. Because of the way our tax laws work, the more income you make, the higher tax bracket you’re in. If you want to net $350,000 to pay off your mortgage, you’re going to have to pull out almost $700,000. It just doesn’t make sense. Now if you want to pay a little bit off over time, say you pull $35,000 over the next 10 years, a little bit better strategy, a little bit more manageable, and probably a little bit better tax bracket. I understand your desire to pay down your mortgage. It’s a very common thing. So you have some other options. Some of your other options would include pulling from your investments to pay down the mortgage quicker. That’s an option. Another option would be downsizing to a lower cost community. Especially in Southern California, if you can afford to live more inland or live further from some of the employment centers, you can save some money on housing. Consider over 55 communities where the price of housing can be over 50% less than regular communities. Those would be your options to reduce the cost of your housing.
That’s the end of our listener questions for the week. Angela, thanks so much for joining us. If you want your questions answered during the show, go to our website retireEWO.com and click on the button “Ask a Question”. You can also follow us on Facebook or subscribe to our podcast on iTunes. I want to thank all of you so much for listening. Stay tuned next week as I continue to help you learn how to retire with your eyes with open. Don’t go into retirement with your eyes closed, retire with your eyes wide open. I’m Scot Landborg and we’ll see you next week.