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A Way to Think About a 403(b) Rollover · How to Retire on Time

• 0:00
  Mike: Hey. Thanks for joining. Here's a question I was recently asked on my show, how to retire on time. Take a look. David, what do we got?
• 0:12
  What's the first question?
• 0:13
  David: Yeah. Gail. Thanks for listening. Gail asks, I have a 4 zero three b that I can do an in service rollover at fifty nine and a half. And then side note, in service rollover meaning, like, she's still working but she can roll some money out of this.
• 0:28
  Mike: Yeah. She could take it out of 403 b.
• 0:29
  David: Yes. Okay. So she can do an in service rollover at 59.5. Is it a good idea to put half in an index annuity so that I can get monthly income during my retirement years? Also, what is the order of withdrawal from four zero three b, Roth IRA, pension, and Social Security benefits?
• 0:50
  So we got a two parter here.
• 0:51
  Mike: Now, Gail, this is this is a great question. Mhmm. Because it highlights how everyone has been trained to think, and it's wrong.
• 1:01
  David: Okay.
• 1:02
  Mike: I'm not saying Gail, you're wrong.
• 1:03
  David: Right.
• 1:04
  Mike: Very intelligent individual. You've saved enough for retirement, and you're right now being proactive. But I'm gonna push back on the methodology for a second. What's the first thing? Should I move money out?
• 1:14
  Yeah. Is there any question about the strategy? See, 403B is just it's just an account. It's like saying a car. Well, is it a car that does four wheel drive?
• 1:24
  Is it a car that can go off roading? Is it a car for the speedway? Is it a car that goes fast, slow? Is it economically better, or is it more expensive? Is it a sports car?
• 1:34
  Like those are questions that to ask. And a four zero one k is different than a four fifty seven, which is different than a four zero three b. And it depending on your four zero three b and your state regulations, you may actually wanna keep your four zero three b in your four zero three b. Why? Some states and some plans will allow you to do IRA to Roth conversions and avoid state income tax.
• 1:54
  Oh. Which is a major player. Yeah. Now many four zero three b's also are typically associated with like teachers, nurses, and and certain certain categories. Sometimes they will sell you an annuity, and sometimes they won't.
• 2:09
  So do you want that? But that's even product pitch, and that shouldn't even be done first.
• 2:13
  David: Mhmm.
• 2:14
  Mike: So for people that say, should I do this? I can't answer that. It has to start with, okay, if you're retire when you wanna retire, what does that look like? Do those numbers work out? We're not even talking about the rollover yet.
• 2:33
  We're not talking about the distribution. We're not even talking about the index annuity. None of that. That's too soon. You gotta start with the plan first.
• 2:41
  Okay. You're gonna earn this much money for maybe two, three more years, then you retire. Great. When you retire to the day that you expect to die, let's say a 100 years old. You don't wanna actually go to like your date of death or your expected date of death because you might live longer.
• 2:56
  Mhmm. So you wanna kick it out maybe 95, 100 years old. Do the numbers work? Do they not work? If they don't work, why?
• 3:04
  If they do work, why? Then you need to go to strategy. What strategies are available to you? What if she did some of her four zero three b rollover just to shore up a part of the plan, but most of it stayed in there. See, this is a conflict of interest for people that are not flat fee advisors.
• 3:22
  They want you to roll the money out so they can get paid on it. Mhmm. But what if there's a 5% tax benefit of keeping your money in there? Yeah. Is anyone telling you, hey, you should ask the question, should I keep that in there?
• 3:39
  Are there any tax benefits? Most don't. That's a problem. Mhmm. So you've got you've got that idea.
• 3:47
  Okay. 403b rollover, maybe it's a good idea, maybe it's not. I know in Kansas we got a lot of 403b, but people that should keep their assets in the 403b, and then plan within that. I mean, that's you want a 17% effective tax rate or a 12% effective tax rate? Oh, right.
• 4:04
  That's thousands of dollars every year. That's a big deal. Yeah. Now with the fixed index annuity, I I'd even go as far as to say, okay. Well, when do you need income and why do you need that income?
• 4:14
  Is that the right system? Is it not the right system? Based on how much you have, do you want that? And then how much do you want of it? And what does that look like before you file for Social Security and after you file for Social Security?
• 4:27
  And how much of that is going to front load the income? Because a lot of index annuities, you'll get like six, seven, even sometimes 8% of whatever you put in there. That's a good deal. Right? Depends on your age and so on, but that can alleviate part of the portfolio.
• 4:46
  But you don't want more income than you need. So let's say you needed let's I'm gonna just kinda make up some math here. Let's say you're gonna get 40 from Social Security. Okay. Okay.
• 4:59
  40 from Social Security, you just need 20 k to bridge that gap of the income that you want. Social Security 20 k, 60 k total. That's all the income you really want. Right? Yeah.
• 5:11
  Well, why would you put income into an annuity, or assets into annuity, turn on income of 30 k? Mhmm. Oh, I want extra money. Do you? Because the plan says you need less money, and maybe you wanted to save that for like healthcare costs in the future, or IRA Roth conversions, or the one off trip.
• 5:29
  But you don't get that flexibility if you put too much into the annuity. So you have to start asking all these strategy questions first before you can determine if that product is right or not.
• 5:38
  David: This is this is why this is just showing why that it's so important to have the plan first. Right?
• 5:43
  Mike: Plan first, strategy second.
• 5:45
  David: Yeah. Because if we just decide, yep, I'm gonna give this index annuity, I'm gonna give the I'm gonna fund that and get the income. Okay. Now let's make our plan. Well, maybe you don't need it.
• 5:54
  Mike: David, you're not a dentist.
• 5:55
  David: I'm not.
• 5:56
  Mike: But your wife is.
• 5:57
  David: I am married to one. Yeah.
• 5:58
  Mike: So do you think it'd be funny if someone walked in the dentist chair and she starts looking for tools before she looks in the patient's mouth? It's like, you know, today I feel like I'm gonna use a drill.
• 6:09
  David: Yeah. Before they even open their mouth. No. Why? Maybe you don't need a drill.
• 6:13
  Mike: No cavities, but have the drill. Let's just drill anyway. That'd be
• 6:17
  David: the wrong order.
• 6:17
  Mike: Yeah. I mean, and this is I mean, let's say you're building a house. Mhmm. K? Now I gotta go get my hammer.
• 6:24
  What if you have nothing to hammer? You're you need to cut wood and you never bought the saw or brought the saw.
• 6:29
  David: You've gotta do the site survey and like test the soil. Alright? And all that stuff.
• 6:33
  Mike: And how effective is a hammer if you're pouring concrete?
• 6:36
  David: It's it's not.
• 6:37
  Mike: I mean, I'm not a that's not my specialty, but I'm pretty sure Mhmm. You're not hammering in the cement.
• 6:43
  David: Yeah. I wouldn't think so.
• 6:45
  Mike: Too often, we've we're looking for income products before we understand the strategies. I've got an email coming out that determines or shows the difference of a typical plan. And in the typical plan, so they have 1,500,000 of assets, same net income in both plans, same projections, but it was their strategies that caused them to run out of money at at 94 years old, or to pass the age 100 with $500,000, or to pass the age 100 with $1,500,000. The only difference was one explored strategies before they picked their products. Mhmm.
• 7:24
  I don't think people fully appreciate strategies because we just say, oh, everyone just talks about IRA to Roth conversions. There's nothing more to talk about. That's just tip of the iceberg. Oh, it's a big deal.
• 7:37
  David: So it could be that once Gail sits down and, like, makes her plan, maybe pension and Social Security are enough to fund her lifestyle. She just so she doesn't need, you know, an annuity. There's a
• 7:48
  Mike: lot of people out there that have enough assets that I call them accidental dividends. Just being in the market, even in worst case scenario, you're probably gonna get enough in dividends accidentally to fund your lifestyle that you want. So do you really want guaranteed income? The answer may be yes for other purposes, but that's a question about strategies, and now they're selecting the tool to implement that strategy. I just really caution like people wanna solve the problem so fast, but they don't know all the other problems that they're avoiding talking about.
• 8:21
  They don't understand the inefficiencies, the leaks, these massive bills they're paying, and they don't realize they've got lifetime of coupons that they could be redeeming. If they just put strategies before the products. It's a big deal. Yeah. So Gail, I hope that helps.
• 8:39
  I'd encourage you. Go to retireontime.com/call to schedule that call, meet with one of our advisors, start the planning process, and just really explore one, could you retire? Sounds like you could. Two, how do you get more out of your money? And then let those two aspects, the plan and the strategies, select them the right tools for the right jobs.
• 9:02
  Yeah. Diversify by strategy. That's how you do it. If you appreciate, by the way, the fact of how we do planning, I know the markets are a little wiggly right now. This is a really good time to get the plan in order because if the markets go down 30%, and you didn't get the plan in order, you had too much exposure to AI, like those are real risks right now.
• 9:20
  Now maybe it doesn't go down right now. Maybe it does. No one knows. But a prepared reaction is better than a risky prediction. Knowing that your plan was built to to benefit from the good side, but also protect you from the downside in the way that was right for you, now is a really good time to to set that up.
• 9:38
  Tireontime.com/call. I'd encourage you to start the process. It's real simple. A free thirty minute call. The purpose of the call is just to ask you what do you want your retirement to look like?
• 9:48
  Give us context, and what do you want from a financial professional like us? The idea is simple. We'll build you a one time plan and teach you how to fish. That way, you can manage it on your own. You can have our subscription model, so you get access to our models and software and so on, and you manage it yourself.
• 10:06
  You've got the recipe, and then we'll give you additional tools to manage it if you want. Or our private client experience, we just take care of it all for you, including filing your taxes. You've got three options there, but the the common denominator is everyone needs a plan. Everyone needs a plan for proper Social Security optimization, proper tax planning based on your specific situation, proper income planning, which isn't just buying products that provide income. It's laddering the sequence and the withdrawals and so on so that you're getting income in the right way and not getting in the way of your tax planning strategies and so on.
• 10:42
  So retireontime.com slash call is where you go. Schedule it, talk with one of our advisers here who's gonna dive into the details, and our process is really simple. We do the call first to get context, then we run what's called our retirement leaks analysis. We want to start by finding problems. We want to identify where could things go wrong?
• 11:03
  Where are the leaks? Where are the bills you don't know you're paying? And then we start to shore up which what's the priority list? What do want your money to do for you? Kind of then ease into, okay, here are the strategies we want to implement.
• 11:16
  We have a whole process on building then those strategies in that portfolio, and by four or five appointments, you should have a comprehensive written plan. They're usually 30 to 40 pages long. Like, I'm willing to bet no one joining us right now, and there's a lot of you, have seen an actual comprehensive written plan like that. Why? Because the incentive is to get you in, charge you 1%, and say, we'll figure it out as we go.
• 11:43
  I'm not throwing rocks at the industry to belittle them. They're brilliant advisors out there. I just have, after doing this for a decade, emphasized the importance that we really need to focus on the plan first, and then you can ask those other questions of, okay, what's the growth strategy for the allocation for growth? What's the reserve strategy for if markets go down, how do we sail through that and not adjust our lifestyle? Time's our most precious commodity.
• 12:11
  It's not about being the richest person at the graveyard. It's about being able to spend your time when you want, how you
• 12:16
  David: want. Mhmm.
• 12:17
  Mike: That's a beautiful thing. Agree. And the ability to make a decision. So if you love your job right now, you still wanna get the plan in place because the day you get tired of it, you wanna know what you're moving towards. So retireontime.com/call if you haven't scheduled already.
• 12:33
  Some of you are already clients just enjoying your time. I appreciate you being here.