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Crafting Your Retirement Income: Blending Income Streams · Money In Motion with Klaas Financial

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  Speaker 1: And our phone lines they are open to you right
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  Speaker 1: now here at thirteen ten WIB I love to hear
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  Speaker 1: from you with Money in Motion, brought you by Colss Financial.
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  Speaker 1: A telph number to get on the air six oh
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  Speaker 1: eight three two one thirteen ten. That's three two one
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  Speaker 1: thirteen ten. Love to get you on the air. The
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  Speaker 1: retirement planning professionals CJ. Coss and Nate Briby as mentioned,
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  Speaker 1: they come to us from Coss Financial. The website Coss
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  Speaker 1: financial dot com. That's k l Aasfinancial dot com. Great
• 0:28
  Speaker 1: website to learn more about Coss Financial. You can see
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  Speaker 1: on the website and learn a little bit more about
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  Speaker 1: the team. You'll see that Nate and I go to
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  Speaker 1: the same barber. Also learn a little bit about the
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  Speaker 1: rest of the team as well at Coss Financial. Again
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  Speaker 1: that I'll available to you at cossfinancial dot com. Sign
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  Speaker 1: Speaking of phone numbers as well, mentioned of course, number
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  Speaker 1: to get on the air six oh eight three two
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  Speaker 1: one thirteen ten. That's six soh eight three two one
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  Speaker 1: thirteen ten. Love to have you join us this morning
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  Speaker 1: with your question. Telphon number for Coss Financial. Their office
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  Speaker 1: right here in Madison at six oh eight four to
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  Speaker 1: two five six three seven. No charge for that initial
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  Speaker 1: get to know your appointment Techlass Financial. It will be
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  Speaker 1: complimentary to you again their number six oh eight four
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  Speaker 1: four two five six three seven and you get on
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  Speaker 1: the air six oh eight three two one thirteen ten.
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  Speaker 1: That's six soh eight three two one thirteen ten. As mentioned.
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  Speaker 1: CJ Closs and eight Briby joining us this week. CJ,
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  Speaker 1: how you doing this morning?
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  Speaker 2: I'm doing great. How are you, Sean?
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  Speaker 3: I'm doing really really well mate. How have you bet?
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  Speaker 3: It's been a while. Great to talk to you, my friend.
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  Speaker 4: Yeah, more than Sean doing good?
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  Speaker 1: I uh, I know we've got a really important conversation
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  Speaker 1: ahead about withdrawal, right when it comes to retirement and
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  Speaker 1: uh what is the right amount and some of the considerations.
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  Speaker 1: So that's you're definitely gonna want to pay attention to
• 1:39
  Speaker 1: this week's program. Also reminder if you miss any part
• 1:41
  Speaker 1: today's show. You know, sometimes step out of the car,
• 1:43
  Speaker 1: dropping the kiddos, Grand Kiddo's off somewhere, maybe you're grabbing
• 1:46
  Speaker 1: a cup of coffee.
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  Speaker 3: It happens.
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  Speaker 1: You can always get caught up miss the parts that
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  Speaker 1: you miss listen to podcast at class financial dot com.
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  Speaker 1: That's coss k l aasfinancial dot com. Another girl really
• 1:56
  Speaker 1: cool thing that we do here on the show, not
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  Speaker 1: just podcast the program. Afterwards, we also do a class
• 2:01
  Speaker 1: quiz question week your chance to win a fantastic prize,
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  Speaker 1: and this week, no exception, our friends from Class Financial
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  Speaker 1: have provided a twenty five dollars gift card to Texas Roadhouse.
• 2:10
  Speaker 1: I'll tell you but a little bit later on in
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  Speaker 1: the program how you can win that with the class
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  Speaker 1: quiz question leak. I will tell you now, though, A
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  Speaker 1: good tip is listen closely to the show because oftentimes
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  Speaker 1: both the question and answer come up during the program.
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  Speaker 1: And before we get rolling on this week's conversation about
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  Speaker 1: the proper retirement withdrawal rate, let's actually look back look
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  Speaker 1: back last week, cejy I get the class quiz question
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  Speaker 1: the week and answer there as well.
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  Speaker 2: Yeah. First things first, thanks everyone for listening each week
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  Speaker 2: and participating in our little closs quiz question of the week.
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  Speaker 2: We have a lot of fun with it. I hope
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  Speaker 2: you do as well. So last week's question was was
• 2:48
  Speaker 2: a truer false question and it was risk tolerance can
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  Speaker 2: be influenced by several factors such as specific goals and
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  Speaker 2: your age and number of years to retirement. This was
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  Speaker 2: a truer Fall's question and Melissa of Middleton answered it
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  Speaker 2: correctly and the answer is true. So be sure to
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  Speaker 2: listen this week because at the end of the show
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  Speaker 2: we'll be doing another one.
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  Speaker 1: And again, if you missed any part of last week's program,
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  Speaker 1: you can always listen back to the podcast at class
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  Speaker 1: financial dot com. That's Class k l aa S financial
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  Speaker 1: dot com. As mentioned, we're gonna be talking about planning
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  Speaker 1: for the proper retirement withdraw rate in retirement and CJ,
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  Speaker 1: how do we know that right amount to be taking
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  Speaker 1: out so we don't run out of money? And of
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  Speaker 1: course and of course the other side of that is
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  Speaker 1: if we live longer than expected.
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  Speaker 2: Right Yeah, So as retirement planners, this is one of
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  Speaker 2: the key areas that people want us to get involved.
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  Speaker 2: It's assessing, hey, have I saved enough to be able
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  Speaker 2: to retire comfortably? Because that is actually for people like us,
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  Speaker 2: For Nate and I, it's not that difficult to answer,
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  Speaker 2: but it takes you know, maybe a few hundred different
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  Speaker 2: data points to be able to answer. But we just
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  Speaker 2: know how to gather that information and answer it. So
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  Speaker 2: have I saved enough to tire comfortably? And then beyond that,
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  Speaker 2: it's okay, now that I've saved enough, how much can
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  Speaker 2: I or should I be withdrawing annually? Because we all
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  Speaker 2: know that when when you're working, it's it's this idea
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  Speaker 2: of like, hey, if I need more, I can just
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  Speaker 2: try to earn more or get a promotion or whatever
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  Speaker 2: it might be. Right, So the tools that you use
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  Speaker 2: to live comfortably while you're working are different than the
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  Speaker 2: tools that you will need for when you are retired,
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  Speaker 2: because when you're retired, there's no more like if I
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  Speaker 2: need more, I'll just make more, get a promotion, or
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  Speaker 2: get a side hustle, because you've kind of got a
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  Speaker 2: defined amount of money that you have saved and now
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  Speaker 2: you need to live off of that responsibly. So this
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  Speaker 2: is a big part of what Nate and I help
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  Speaker 2: people do every day is to say, have you saved enough?
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  Speaker 2: And if you have, Even if you have, let's now
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  Speaker 2: pivot to what consistent retirement income stream might look like.
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  Speaker 2: So when retirees think about risk again, many say outliving
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  Speaker 2: their money is their number one fear, and there's three
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  Speaker 2: elements that most say significantly affects planning, and those three
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  Speaker 2: elements are the need for real not nominal cash flow
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  Speaker 2: and reel is just an income stream that keeps up
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  Speaker 2: with inflation. The second is the risk of having to
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  Speaker 2: sell assets to provide income at the wrong time. And
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  Speaker 2: then the third element would be the likelihood of future
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  Speaker 2: decades of historically low market returns. So, as planners, managing
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  Speaker 2: withdrawal rates from your investments that are sustainable over the
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  Speaker 2: course of retirement plays an essential role in kind of
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  Speaker 2: the sustainability of your retirement. So the first thing we
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  Speaker 2: need to discuss is what kind of withdrawal rate could
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  Speaker 2: be considered quote unquote safe. What is a safe withdrawal rate?
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  Speaker 2: And think of this as I've accumulated a bucket of
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  Speaker 2: money outside of my home and vehicles and all that,
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  Speaker 2: and I now am in retirement and I'm going to
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  Speaker 2: start decumulating, right, So we accumulate and then we decumulate.
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  Speaker 2: The question is what is the right withdrawal rate? And
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  Speaker 2: this is the rate determined by how much money you
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  Speaker 2: can withdraw each year without running out of money before
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  Speaker 2: you run out of life. And guys, if you actually
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  Speaker 2: think about this, This is very complicated. It's well, wait
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  Speaker 2: a minute, what is that money in. Is it in
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  Speaker 2: something that's just fixed and guaranteed or is it in
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  Speaker 2: something that's volatile and uncertain. And if it's volatile and uncertain,
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  Speaker 2: how do I build a math model to actually account
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  Speaker 2: for that. So welcome to the nerdiness of what Nate
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  Speaker 2: and I do every day as we try to build
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  Speaker 2: optimized portfolios to grow over long stretches of time that
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  Speaker 2: also have enough stubility in them to generate income over
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  Speaker 2: that same lifetime. So obviously your withdrawal rate is going
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  Speaker 2: to be impacted by a number of different things, many
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  Speaker 2: of which are things like social Security pension. Maybe have
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  Speaker 2: a spouse that has part time income, so how much
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  Speaker 2: you need out of that portfolio can be dramaticly impacted
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  Speaker 2: by other what we call non portfolio sources of income.
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  Speaker 2: And then obviously that rate that we focused on, or
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  Speaker 2: that we do focus on, is very dependent upon your
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  Speaker 2: age and your health. So said another way, an eighty
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  Speaker 2: five year old who's retired for the first time, who
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  Speaker 2: has a chronic illness, I'm less worried about there withdrawal
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  Speaker 2: rate from their portfolio than a fifty five year old
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  Speaker 2: who's very healthy and wants to be retired for forty
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  Speaker 2: five years. So that rate is sensitive to outside factors. Besides,
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  Speaker 2: just besides, just what other sources of income you have.
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  Speaker 1: Talking this morning with CJ. Class and Nate Bribe. They
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  Speaker 1: are our retirement planning professionals from Class Financial. Love to
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  Speaker 1: have you join us this morning. Six soh eight three
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  Speaker 1: two one thirteen ten. That's six oh eight three two
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  Speaker 1: one thirteen ten.
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  Speaker 3: Don't forget.
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  Speaker 1: You can learn more about Class Financial their website class
• 7:53
  Speaker 1: financial dot com. That's klaas Financial dot com and the
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  Speaker 1: telephon number six oh eight four four two fives six
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  Speaker 1: three seven. So let's talk about then, c As you're
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  Speaker 1: talking about kind of the putting together it's safe withdrawal rate,
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  Speaker 1: what about some other things like other expenses as well?
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  Speaker 1: As I know we talked the other week a bit
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  Speaker 1: on debt as well. I'm guessing those type of things
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  Speaker 1: are factored in here also, aren't they They do.
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  Speaker 2: So in a moment, Nate's going to actually talk about
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  Speaker 2: what this rate is, because thus far we just talked
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  Speaker 2: around the rate. But yes, you're exactly right, Sean. When
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  Speaker 2: you start understanding this concept of Okay, I've accumulated throughout
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  Speaker 2: working years. I'm getting into retirement and I'm going to
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  Speaker 2: start de accumulating. The game has changed a little bit
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  Speaker 2: because I went from having other tools to be able
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  Speaker 2: to kind of make up from extra spending, to have
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  Speaker 2: not so many tools because I've got a fixed kind
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  Speaker 2: of a fixed budget in retirement. But then you start
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  Speaker 2: to recognize, you go, well, gosh, that rate is going
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  Speaker 2: to be impacted by Social Security pensions, a part time
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  Speaker 2: working spouse, but also things like my expenses, right, and
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  Speaker 2: those expenses could be well if I retire before sixty
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  Speaker 2: five and I have a really expensive, say Affordable Care
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  Speaker 2: Act health insurance plan that could impact my withdrawal rate
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  Speaker 2: for a period of time. Or or conversely, I decided
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  Speaker 2: to add on to the house with a heelock, and
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  Speaker 2: I didn't get the helock paid off. Helock, by the way,
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  Speaker 2: is home equity line of credit. And I didn't get
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  Speaker 2: that helock paid off prior to retirement. And so I've
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  Speaker 2: got three thousand dollars a month of outgoing cash flow
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  Speaker 2: for that helock. So you get the idea, Well, suddenly
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  Speaker 2: my rate of withdrawal from my portfolio has changed dramatically
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  Speaker 2: just because of my life's decisions until that point. So
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  Speaker 2: Nate's going to be talking about what this rate is,
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  Speaker 2: but just understand there are many factors that impact that rate,
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  Speaker 2: and this is part of the reason why working with
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  Speaker 2: a good accountant or good advisor to kind of manage
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  Speaker 2: that decision making until you get to retirement can.
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  Speaker 3: Be pretty critical, really important information.
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  Speaker 1: N nice layout there by CJ Class of course, CJ
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  Speaker 1: Class and Nate Briby. They come to us from Class Financial.
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  Speaker 1: We'll get the details from Nate in just a moment
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  Speaker 1: about what that reasonable withdrawal rate is. We'll get those
• 10:00
  Speaker 1: details from Nate in just a moment. In the meantime,
• 10:02
  Speaker 1: if you have a question, love to have you join
• 10:05
  Speaker 1: us this morning six oh eight three two one thirteen ten.
• 10:08
  Speaker 1: That's six oh eight three two one thirteen ten. We'll
• 10:10
  Speaker 1: get you right on the air with CJ n Nate Dorfge.
• 10:12
  Speaker 1: You can learn more about Class Financial their website cossfinancial
• 10:15
  Speaker 1: dot com. That's Klaas financial dot com. Didn't mention a
• 10:19
  Speaker 1: really cool feature on the website. That's the opportunity to
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  Speaker 1: great weekly email you receive, got a little snapshot of
• 10:27
  Speaker 1: what's been going on in the markets. Also linked to
• 10:29
  Speaker 1: the most recent podcast that available to you at cossfinancial
• 10:32
  Speaker 1: dot com. Speaking of things available to you, the telphone
• 10:34
  Speaker 1: number six oh eight four four two five six three seven,
• 10:37
  Speaker 1: No charge for that initial gets to know your appointment
• 10:39
  Speaker 1: at Loss Financial. It will be complimentary to you again
• 10:42
  Speaker 1: their number six oh eight four four two five six
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  Speaker 1: three seven. We'll continue our conversation with CJ, Nate and you.
• 10:48
  Speaker 1: We will do that next as Money in Motion with
• 10:50
  Speaker 1: Coss Financial continues here on thirteen ten. Wuibi talking with
• 10:56
  Speaker 1: our retirement planning professionals from Class Financial, CJ. Closs and
• 10:59
  Speaker 1: Nate Bribe website Closs Financial dot com. That's Coss k
• 11:03
  Speaker 1: l aas Financial dot com and the telephone number six
• 11:06
  Speaker 1: so eight four four two five six three seven. So, Nat,
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  Speaker 1: as we're talking this week about a reasonable withdrawal rate.
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  Speaker 1: I guess could be the million dollar question on this one.
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  Speaker 1: So what what do we do to so we don't
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  Speaker 1: run out of money?
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  Speaker 3: What do we need to know?
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  Speaker 2: What?
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  Speaker 3: As far as as far as what that reasonable withdrawal
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  Speaker 3: rate is?
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  Speaker 4: Yep, I promise. But so first let's understand why. The
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  Speaker 4: answer to this is it depends in the case of
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  Speaker 4: total return investing. So think stocks, bonds, mutual funds, or ets.
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  Speaker 4: Returns fluctu eight year to year and are not constant.
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  Speaker 4: One year you may be up fifteen percent and the
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  Speaker 4: other you may be down to don't you account for
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  Speaker 4: this inconsistency? You should set a reasonable initial withdrawal rate
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  Speaker 4: and monitor it throughout your retirement. Now, if you google
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  Speaker 4: this question, the number you're most likely see is four percent.
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  Speaker 4: But let's actually dig into that number and see what
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  Speaker 4: adjustments could be made to increase it Before that. The
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  Speaker 4: spark notes are that your initial withdrawal rate can be
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  Speaker 4: anywhere from four to seven percent, based on how conservative
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  Speaker 4: or aggressive you want to be with your assumptions. Now, first,
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  Speaker 4: how long does your money need to last? Like CJ said,
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  Speaker 4: someone retiring at seventy will be able to spend more
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  Speaker 4: than someone retiring at fifty since they don't need their
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  Speaker 4: money to last as long the four percent rule your retirement. Second,
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  Speaker 4: and honestly most important, is are you willing to make
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  Speaker 4: adjustments to your spending along the way. Research has shown
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  Speaker 4: that those willing to make slight modifications if needed, can
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  Speaker 4: start with a higher withdrawal rate, even as much as
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  Speaker 4: one one and a half percent higher in equal So
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  Speaker 4: the four percent rule assumes no adjustments to spending will
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  Speaker 4: ever be made. And now, in practice CJ and I
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  Speaker 4: see just all the time. You know, if someone has
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  Speaker 4: a downturn in their account and they're really traveling a lot,
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  Speaker 4: they may choose to cut back on their trips. Where
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  Speaker 4: there you go. That's that's the difference between theory and
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  Speaker 4: in practice. We're humans, and if we see our accounts
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  Speaker 4: go down and we're thinking about a third trip for
• 13:08
  Speaker 4: the year, we may not take that. So that would
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  Speaker 4: be an adjustment to spending. Right. Third, we alluded to
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  Speaker 4: this before, But do you want to get a raise
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  Speaker 4: each year to keep up with inflation? This is called
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  Speaker 4: real spending versus nominal spending. Those who spend in nominal dollars,
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  Speaker 4: which is no inflation adjustment, says shown most retirees do,
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  Speaker 4: and we can attest to that in practice as well.
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  Speaker 4: You can further increase your initial withdrawal rate up another
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  Speaker 4: zero point seventy five percent, and there again the four
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  Speaker 4: percent rule assumes payments will be increased every year for
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  Speaker 4: inflation annually, no matter how high that adjustment is. Lastly,
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  Speaker 4: two other factors that can increase the initial withdraw rate
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  Speaker 4: further are further diversifying the portfolio. So the four percent
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  Speaker 4: rule only assumes US large cap stocks and intermediate term treasuries.
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  Speaker 4: And for those of you who know anything about portfolio management,
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  Speaker 4: that is a very elementary allocation and can further be
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  Speaker 4: the volatility of the portfolio. And lastly, paying attention to
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  Speaker 4: market valuations. We won't get into that, but that has
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  Speaker 4: been shown to also increase initial withdrawal rates.
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  Speaker 1: Interesting stuff this morning as we talked with Nate Briby
• 14:19
  Speaker 1: and CJ. Coss, our retirement planning professionals from COSS Financial
• 14:22
  Speaker 1: the website Coss financial dot com. That's Coss k l
• 14:25
  Speaker 1: aasfinancial dot com. Tell number six oh eight four four
• 14:29
  Speaker 1: two five six three seven no charge for the nancial
• 14:31
  Speaker 1: gets to know you appoyment at Coss Financial. It will
• 14:34
  Speaker 1: be complementary to you. Again, they're number six oh eight
• 14:36
  Speaker 1: four four two five six three seven. You mentioned Nate
• 14:39
  Speaker 1: taking a vacation and taking vacations. One of the nice
• 14:42
  Speaker 1: things about taking vacations in retirement is there's a lot
• 14:45
  Speaker 1: less stuff to do before you take that vacation, and
• 14:49
  Speaker 1: of course thinking about then tax flow and you know
• 14:52
  Speaker 1: how things or cash flow excuse me, and how things
• 14:54
  Speaker 1: are different during your working career and retired. I've got
• 14:57
  Speaker 1: to guess that we've got on every little thing. There's
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  Speaker 1: probably going to be some adjustments when it comes to
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  Speaker 1: planning for retirement versus pre retirement income, isn't there?
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  Speaker 4: Yes, yep. So the best place to begin is by
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  Speaker 4: looking at your current take home pay per month while
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  Speaker 4: you're working. Say this is five thousand dollars a month.
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  Speaker 4: Start here and see if it's possible to replace all
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  Speaker 4: that income from your retirement funds. Next, look at how
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  Speaker 4: much of that cash flow is going towards fixed expenses
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  Speaker 4: and debt payments. If that number is two thousand dollars
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  Speaker 4: a month, you only have three thousand left right of
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  Speaker 4: the five to actually spend. This is called discretionary income.
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  Speaker 4: Once again, this shows how important it is to eliminate
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  Speaker 4: debt leading up to retirement, which will make your cash
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  Speaker 4: flow go further. The bottom line is that determining how
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  Speaker 4: much you want to spend in retirement is imperative. Once
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  Speaker 4: you have this number, a good financial planner will be
• 15:49
  Speaker 4: able to look at your situation a determined if it
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  Speaker 4: is doable. The truth is everyone wants to know when
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  Speaker 4: they can retire, But perhaps the better question is how
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  Speaker 4: much do you want to spend?
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  Speaker 1: Talking this morning with Naprow Greenly read perspective on it
• 16:04
  Speaker 1: to Nate. Talking this morning with Nate Briby and CJ.
• 16:06
  Speaker 1: Closs our retirement finding professionals from Class Financial important factors
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  Speaker 1: to consider, and it's also an important to consider a
• 16:13
  Speaker 1: conversation to have and a plan to be putting in place.
• 16:15
  Speaker 1: It's always a great time to chat with our friends
• 16:17
  Speaker 1: at Coss Financial. Of course, they're telephone number six oh
• 16:19
  Speaker 1: eight four four two five six three seven. Don't forget
• 16:22
  Speaker 1: no charge for the initial get to know your appointment
• 16:24
  Speaker 1: at Coss Financially. It will be complementary to you again
• 16:27
  Speaker 1: their number six oh eight four four two five six
• 16:30
  Speaker 1: three seven. Of course, the website Coss financial dot com
• 16:33
  Speaker 1: that's Coss k l a a S Financial dot com.
• 16:36
  Speaker 1: It is a great resource to learn more about Coss Financial.
• 16:39
  Speaker 1: There's separate divisions also mentioned signing up for the weekly
• 16:41
  Speaker 1: Market Pulse newsletter. You can also subscribe to the podcast
• 16:44
  Speaker 1: right online at Coss financial dot com. That's Class k
• 16:48
  Speaker 1: l a a S Financial dot Com. If you are
• 16:51
  Speaker 1: a regular listener to the program, you're probably going what
• 16:54
  Speaker 1: about those three letters r mds. We'll get the details
• 16:57
  Speaker 1: on that in just a moment with CJ and Nate
• 16:59
  Speaker 1: as Money in Motion with Class Financial continues right here
• 17:02
  Speaker 1: on thirteen.
• 17:03
  Speaker 3: Ten do wi u ib i.
• 17:06
  Speaker 1: Just moments away from our class quiz question leek you
• 17:09
  Speaker 1: want to sit tight with that? Also some great conversation
• 17:12
  Speaker 1: this week about when it comes to when it comes
• 17:16
  Speaker 1: to withdrawal rates in retirement. Of course we talk with CJ.
• 17:20
  Speaker 1: Closs and Nate Briby. They are our retirement planning professionals
• 17:23
  Speaker 1: from Class Financial. Their website class financial dot com. That's
• 17:27
  Speaker 1: Coss k l a a s Financial dot com and
• 17:30
  Speaker 1: the telephone number six oh eight four four two five
• 17:33
  Speaker 1: six three seven, no charge for the financial gets to
• 17:35
  Speaker 1: know your appointment CHLSS Financial. It will be complementary to
• 17:38
  Speaker 1: you again their number six oh eight four four two
• 17:41
  Speaker 1: five six three seven. So CJ, let's talk about the
• 17:44
  Speaker 1: age seven age of seventy three. I know, of course
• 17:48
  Speaker 1: a forced to take out money, and I think the
• 17:50
  Speaker 1: one thing I wonder too is like how fast of
• 17:52
  Speaker 1: a withdrawal them out.
• 17:54
  Speaker 3: Do I have to have to take their CJ.
• 17:58
  Speaker 2: Yeah, so reques our minimum distributions. I think we've talked
• 18:01
  Speaker 2: about this topic ad nauseum on the air, but I
• 18:03
  Speaker 2: will admit, between Social Security and required distributions, these are
• 18:07
  Speaker 2: two things that tend to confuse people and generate a
• 18:10
  Speaker 2: lot of interest. So we're going to talk about require distributions.
• 18:14
  Speaker 2: Today's show is all about income from your portfolio and
• 18:17
  Speaker 2: sustainable withdrawal rates. Nate just talked about the four percent
• 18:21
  Speaker 2: rule and some of the strengths and weaknesses there. Well,
• 18:23
  Speaker 2: it would be impossible for us to talk about kind
• 18:26
  Speaker 2: of retirement income and sustainable withdrawal rates without addressing required
• 18:31
  Speaker 2: minimum distributions. So, for those who don't know, once you
• 18:35
  Speaker 2: turn seventy three, the IRS does require you to take
• 18:40
  Speaker 2: a certain amount of money out of certain retirement accounts
• 18:43
  Speaker 2: every year, which is known as your required minimum distributions.
• 18:47
  Speaker 2: These will be coming from any of your old pre
• 18:50
  Speaker 2: tax four oh one KS, four H three b's and
• 18:52
  Speaker 2: or current iras unless you're still working. Now, if you're
• 18:56
  Speaker 2: still working and you're in a company sponsored plan like
• 18:59
  Speaker 2: a four one care for THREEB, you may be able
• 19:01
  Speaker 2: to bypass those required distributions until when you retire. But
• 19:07
  Speaker 2: for some of you, you're listening, going seventy three, that's
• 19:09
  Speaker 2: not right, it's seventy and a half. Well, those are
• 19:12
  Speaker 2: the old rules. And then others of you go, no, no, no,
• 19:14
  Speaker 2: it's seventy two, and again that's now again an old rule.
• 19:18
  Speaker 2: And some of you yet go, I thought it was
• 19:20
  Speaker 2: seventy five, and that's now the new rule. But assuming
• 19:23
  Speaker 2: you're after, you were born after nineteen sixty. So welcome
• 19:26
  Speaker 2: to the complexity of anything that happens in tax law.
• 19:30
  Speaker 2: Is changes compound on top of changes and creates some
• 19:33
  Speaker 2: level of confusion. But the simple answer is the new
• 19:36
  Speaker 2: rule is aged seventy three unless you were born after
• 19:40
  Speaker 2: nineteen sixty. And I'm raising my hand because I'm one
• 19:43
  Speaker 2: of those, and then your required minimum distribution age would
• 19:46
  Speaker 2: be seventy five. Now, of course the question comes, why
• 19:51
  Speaker 2: do I have to pull money out of my pre
• 19:53
  Speaker 2: tax retirement accounts? And the answer is, well, if you
• 19:57
  Speaker 2: understand how the federal government operates, it's by having money
• 20:01
  Speaker 2: in circulation. When you earn a dollar, you pay income
• 20:06
  Speaker 2: taxes on that. You then take that dollar and you
• 20:09
  Speaker 2: go buy something and you pay sales taxes on that.
• 20:13
  Speaker 2: The person who you gave that money to pays somebody
• 20:16
  Speaker 2: a salary to take your money, who pays income taxes,
• 20:19
  Speaker 2: who pays sales taxes, who pays you know, all kinds
• 20:22
  Speaker 2: of different taxes. You get the idea circulation the dollar
• 20:25
  Speaker 2: circulates many times throughout a year. If you remove that
• 20:29
  Speaker 2: money from general circulation by putting it into a pre
• 20:32
  Speaker 2: tax retirement account, that would be smart, by the way,
• 20:35
  Speaker 2: That's what wise people do. But uncle Sam, this isn't
• 20:38
  Speaker 2: his first time to the rodeo. You know, We've were
• 20:41
  Speaker 2: founded in seventeen seventy six and so we've been around
• 20:43
  Speaker 2: for a little while. They have figured out, oh, we
• 20:46
  Speaker 2: have to manage how long money is out of circulation,
• 20:50
  Speaker 2: and required minimum distributions is one way to do that.
• 20:53
  Speaker 2: So you put it into a pre taxed retirement account.
• 20:56
  Speaker 2: It then grows for a period of time, and then
• 20:59
  Speaker 2: at some age they require you to pull it back
• 21:01
  Speaker 2: out and pay income taxes on it. So hopefully nobody's
• 21:05
  Speaker 2: getting angry at me, don't shoot the messenger. I'm just
• 21:07
  Speaker 2: telling you the way this stuff works. Now. One thing
• 21:11
  Speaker 2: to be aware of is that roth iras, which are
• 21:14
  Speaker 2: post tax accounts growing tax free. Those do not have
• 21:18
  Speaker 2: required minimum distributions when you turn any age unless it's
• 21:22
  Speaker 2: an inherited wroth ira. And separately, it used to be
• 21:27
  Speaker 2: that Wroth four oh one k's and Roth four to
• 21:31
  Speaker 2: oh three bs did have a minimum distribution. Don't ask
• 21:34
  Speaker 2: me why. It never made any sense to us. But
• 21:37
  Speaker 2: as part of the recent legislation through Secure Act two
• 21:40
  Speaker 2: point zero, as of twenty twenty four, those Wroth four
• 21:44
  Speaker 2: oh one ks and four oh three b's are now
• 21:46
  Speaker 2: more synonymous with a roth ira, meaning they don't have
• 21:49
  Speaker 2: minimum distributions that have to come out of them.
• 21:51
  Speaker 1: Talking this morning with CJ Closs and Nate Bribe are
• 21:53
  Speaker 1: retirement planning professionals from Class Financial.
• 21:55
  Speaker 3: The website class financial dot com. That's Class klaas Financial
• 21:59
  Speaker 3: dot com.
• 22:00
  Speaker 1: Teph number six SO eight four four two five six
• 22:03
  Speaker 1: three seven. No charge for the initial get to know
• 22:04
  Speaker 1: the appointment Lost Financial. It will be complimentary to you
• 22:07
  Speaker 1: again their number six SO eight four four two five
• 22:10
  Speaker 1: six three seven. CJ, let's talk about the when of
• 22:12
  Speaker 1: all of this. Then when can I, when should I
• 22:14
  Speaker 1: be taking or when do I have to take take
• 22:16
  Speaker 1: that RMD YEP.
• 22:18
  Speaker 2: So, if you're turning seventy three this year, you must
• 22:20
  Speaker 2: take your first required minimum distribution no later than April
• 22:25
  Speaker 2: first of next year. So again, if you are turning
• 22:28
  Speaker 2: seventy three this year, you must take your first RMD
• 22:32
  Speaker 2: by April first of next year. That is known as
• 22:35
  Speaker 2: your rb D, your required beginning date. Now, in subsequent years,
• 22:42
  Speaker 2: you have to take your minimum distribution by the end
• 22:45
  Speaker 2: of the calendar year. So if you're tracking with that logic,
• 22:49
  Speaker 2: progression you in the year you turn seventy three, it
• 22:53
  Speaker 2: is the only time you can push off your minimum
• 22:56
  Speaker 2: distribution by by set to the next calendar year. Every
• 23:00
  Speaker 2: future year you have to pull it out by the
• 23:02
  Speaker 2: end of the year. So if you're tracking with that logic,
• 23:05
  Speaker 2: it means that if you do push it off the
• 23:07
  Speaker 2: next year, then you're gonna have to double up and
• 23:09
  Speaker 2: take two in the calendar year of twenty twenty five. Now,
• 23:12
  Speaker 2: if anybody's head is spinning like mine is a little
• 23:15
  Speaker 2: bit right now, then feel free to call in and
• 23:17
  Speaker 2: we can kind of walk you through this logic. And then,
• 23:20
  Speaker 2: of course the next question becomes how much are we
• 23:22
  Speaker 2: talking about here? And the answer is, there's an RMD
• 23:26
  Speaker 2: life expectancy table there's different tables that are used for
• 23:30
  Speaker 2: different reasons, depending upon how old your spouse is, if
• 23:32
  Speaker 2: you're married, or if you're a single. So we won't
• 23:36
  Speaker 2: get too deep into the weeds on that today, but
• 23:38
  Speaker 2: there are different tables, and they have what are called
• 23:40
  Speaker 2: divisor factors or life expectancy factors. And you take your
• 23:44
  Speaker 2: end of year pre tax values, so December thirty first
• 23:47
  Speaker 2: pre tax values, and then you divide it by this
• 23:50
  Speaker 2: life expectancy factor and it gives you a dollar amount.
• 23:53
  Speaker 2: That dollar amount, to keep it simple for our listeners,
• 23:56
  Speaker 2: represents about three point sixty five three point seven percent
• 24:00
  Speaker 2: in the first year at age seventy three, somewhere in
• 24:03
  Speaker 2: that neighborhood. As a matter of fact, my colleague date
• 24:05
  Speaker 2: is a lot nerdier than I am on these details, Nate,
• 24:08
  Speaker 2: Do you know that exact percentage at seventy three?
• 24:10
  Speaker 4: Yeah, three point seven eight Okay.
• 24:13
  Speaker 2: Thank you. See I knew I could rather rely on them. Okay,
• 24:17
  Speaker 2: So three point seven eight percent is what has to
• 24:20
  Speaker 2: come out, so simple math, one hundred thousand dollars three
• 24:24
  Speaker 2: seven hundred and eighty dollars would have to come out,
• 24:27
  Speaker 2: and you'd have to add that to your income and
• 24:29
  Speaker 2: then pay income taxes on them. Now, find a little
• 24:33
  Speaker 2: thought here, because some people are saying, wait a minute,
• 24:36
  Speaker 2: if I've got a I'm gonna go really big here,
• 24:39
  Speaker 2: if I've got a million dollar pre tax retirement account,
• 24:42
  Speaker 2: are you really saying that I'll have to add thirty
• 24:45
  Speaker 2: seven eight hundred dollars to my taxable income when I
• 24:50
  Speaker 2: turned seventy three? Maybe is the answer. Maybe. One get
• 24:56
  Speaker 2: out of jail free card that you have in your
• 24:58
  Speaker 2: hip pocket is what is known as qualified charitable distributions.
• 25:03
  Speaker 2: Because you do have to pull the money out, there's
• 25:05
  Speaker 2: no exception for that. But you could take that money
• 25:10
  Speaker 2: and actually give it directly from your IRA, let's say,
• 25:14
  Speaker 2: to the charity. It qualifies towards meeting your minimum distribution,
• 25:20
  Speaker 2: but you don't have to claim it as taxable income.
• 25:23
  Speaker 2: A huge bypass here. So for those who are listening
• 25:27
  Speaker 2: who are going, yeah, this whole RMD thing is really
• 25:29
  Speaker 2: screwing up my taxes, and I don't like it, and
• 25:31
  Speaker 2: I don't really need the money. You know, first things. First,
• 25:33
  Speaker 2: recognize you're in a blessed position. Most people need that money.
• 25:36
  Speaker 2: But if you don't need the money, one get out
• 25:38
  Speaker 2: of jail Free card to bypass the taxes and to
• 25:41
  Speaker 2: benefit causes that you care about would be this notion
• 25:44
  Speaker 2: of what are called qcds or qualified charitable distributions. If
• 25:48
  Speaker 2: you don't know about it, talk to your advisor, your accountant,
• 25:51
  Speaker 2: or give us a ring and we'll describe it to you.
• 25:52
  Speaker 3: It's an absolutely amazing tool. As we talked this morning
• 25:55
  Speaker 3: with CJ.
• 25:55
  Speaker 1: Closs and Nate Bribey are retirement planning professionals from Class Financial.
• 25:59
  Speaker 1: Just hold to the class question week but Nate, wow
• 26:03
  Speaker 1: and amazed sasas absolutely for sure. And one last thing
• 26:06
  Speaker 1: I do want to I want to ask you about,
• 26:08
  Speaker 1: is you know, retirees making sure that you have liquidity
• 26:12
  Speaker 1: and of course emergency savings. You want to make sure
• 26:14
  Speaker 1: you have those available to yourself as well, don't you.
• 26:17
  Speaker 4: Yeah, absolutely so while saving for retirement, remember the importance
• 26:21
  Speaker 4: of having liquidity and emergency savings. You want this protection
• 26:24
  Speaker 4: in our earning years as well as your distribution years.
• 26:28
  Speaker 4: So your cash reserves should include three to six months
• 26:31
  Speaker 4: worth of cash flow. Now you can substitute expenses cash
• 26:35
  Speaker 4: flows a little bit easier to get a more round number.
• 26:39
  Speaker 4: So someone bringing home five thousand dollars a month, could
• 26:42
  Speaker 4: have fifteen to thirty thousand set aside to replace their
• 26:45
  Speaker 4: income if they lose a job or have a situation
• 26:48
  Speaker 4: come up where that income is not coming in. Putting
• 26:52
  Speaker 4: everything into a retirement little in a savings account can
• 26:56
  Speaker 4: be problematic, especially if you're under fifty nine and a half.
• 27:01
  Speaker 4: You don't want to trap assets in a retirement plan
• 27:04
  Speaker 4: if you can't access them quickly and without a penalty.
• 27:07
  Speaker 4: If that is the case, you probably want to back
• 27:09
  Speaker 4: off your retirement savings an acubulate money in a savings
• 27:13
  Speaker 4: account at your bank. Most importantly, create a process read
• 27:17
  Speaker 4: budget okay to automate your savings. Your cash flow may
• 27:22
  Speaker 4: follow a priority list like this, retirement savings first, then
• 27:27
  Speaker 4: pay your bills, next, moving money to your savings account,
• 27:30
  Speaker 4: then spending what is left.
• 27:33
  Speaker 1: Well stated again, more of that brilliance from our friend
• 27:36
  Speaker 1: Nate Bribe. Of course, Nate and CJ also our friend
• 27:39
  Speaker 1: from Claus Financial. You learn more on their website class
• 27:42
  Speaker 1: financial dot com. That's closs Klaasfinancial dot com and the
• 27:45
  Speaker 1: telephone number six oh eight four four two five six
• 27:48
  Speaker 1: three seven. Want to hold on to that telephone number
• 27:50
  Speaker 1: as well, because it's time now for the Class quiz
• 27:52
  Speaker 1: Question the Week works like this, just a moment, I'll
• 27:54
  Speaker 1: ask you the class quiz question leak. You will then
• 27:56
  Speaker 1: have thirty minutes from the end of today's program to
• 27:58
  Speaker 1: call the Class Financial Office right You're in Madison at
• 28:01
  Speaker 1: six oh eight four four two five six three seven.
• 28:04
  Speaker 1: If you are the first cost correct answer to win
• 28:06
  Speaker 1: that prize, which is a twenty five dollars gift card
• 28:08
  Speaker 1: to Texas Roadhouse. This week's closs quiz question the week.
• 28:12
  Speaker 1: Is this true or false? If you are turning seventy
• 28:16
  Speaker 1: three this year, you must take your first required minimum
• 28:20
  Speaker 1: distribution no later than April first of the year after
• 28:24
  Speaker 1: the year you turn seventy three. Is that true or
• 28:28
  Speaker 1: is that false? Telephone number six O eight four four
• 28:30
  Speaker 1: two five six three seven. First cost correct tans win
• 28:33
  Speaker 1: the twenty five dollars gift card to Texas Roadhouse.
• 28:35
  Speaker 3: Again.
• 28:35
  Speaker 1: That's Class Finances Office right here in Madison. No charge
• 28:38
  Speaker 1: for that initial gets to know you appointment Tech Class Financial.
• 28:40
  Speaker 1: It will be complimentary to you again their number six
• 28:43
  Speaker 1: oh eight four four two five six three seven.
• 28:46
  Speaker 3: Nate CJ. It's always great chatting with both of you guys.
• 28:49
  Speaker 3: Enjoy this beautiful day.
• 28:50
  Speaker 2: Thanks Sean.
• 28:51
  Speaker 4: Thanks Sean.
• 28:52
  Speaker 3: Doctor Mardy Greer joins us next year.
• 28:54
  Speaker 1: On thirteen ten Wuiba, this is Money in Motion with
• 28:57
  Speaker 1: COSS Financial Asset Advisors LLLC, a registered investment advisor registered
• 29:02
  Speaker 1: with the SEC. The contents of this show are for
• 29:05
  Speaker 1: informational purposes only and should not be considered individual investment advice.
• 29:10
  Speaker 1: Class Financial does not offer tax or legal advice. Any
• 29:13
  Speaker 1: opinion offered during the course of this show is the
• 29:16
  Speaker 1: opinion of that particular investment advisor representative, and not necessarily
• 29:21
  Speaker 1: the opinion of Class Financial. News comes your way next
• 29:24
  Speaker 1: right here on thirteen to ten Wiba