Latest / Money In Motion with Klaas Financial / Planning a Proper Withdrawal Rate

Transcript

Planning a Proper Withdrawal Rate · Money In Motion with Klaas Financial

0:00
And our phone lines are open for you right now at six oh eight three
0:03
two one thirteen ten. That's six oh eight three two one thirteen ten.
0:07
Gets you on the air with our retirement planning professionals from Class Financial join this
0:11
week by CJ. Closs and Malia Quavis. You can learn more about Cjmalia
0:15
and the whole team at Loss Financial on their website Class Financial dot com.
0:19
That's k l aa S Financial dot com. Also great website and resource to
0:23
learn about the separate divisions of Class Financial, how they can help you or
0:27
if you're an employer, some great great information there, as well as an
0:31
opportunity to sign up for the weekly market Paul's newsletter They've just Got it All
0:34
atlass Financial dot com. Again, that's k l aa S Financial dot com.
0:38
Telph a number for the office right here in Madison six oh eight four
0:40
four two five six three seven. No charge for that initial get to know
0:44
you appointment at COSS Financial. It will be complementary to you. Again their
0:48
number for the office six oh eight four four two five six three seven.
0:52
And if you'd like to join us this morning, all I gotta do is
0:54
pick up phone, give us a ring six oh eight three two one thirteen
0:57
ten. That's six oh eight three two one thirteen ten. As mentioned joined
1:00
this morning by CJ Closs and Malia Quavis. CJ, how you doing this
1:03
week? I am doing great. It's kind of rainy out there today,
1:07
a little drizzly, and I guess April is the March showers. Bring something
1:11
I don't know. We'll figure, yeah, cloth exactly exactly. Malia,
1:15
how are you doing this morning? Very good, happy to be here,
1:19
Great to have you along. Keep it dry, I hope, I hope.
1:22
So a good inside good day to do just that, and of course
1:25
listen to some great, great conversation to get some fantastic information. Speaking of
1:29
getting fantastic information, we've got a great show ahead. We're going to be
1:33
talking about the proper withdrawal rate when it comes to money from your investments in
1:38
retirement. We're going to get some of the details on that from CJ and
1:40
Malia in just a moment. Don't forget. Phone lines are open at six
1:42
oh eight three two one thirteen ten. That's six oh eight three two one
1:47
thirteen ten. Got a chance for you also to win a twenty five dollars
1:49
gift card. Oh yeah, to be to Buffalo Wild Wings. And I'm
1:56
just now, I'm just off in La la land here, and I don't
1:57
think I could win this one. It Closs Financial Land provided that twenty five
2:02
dollars gift card to Buffalo Wild Wings. We'll tell you a little bit later
2:06
on the program how you can win it. With the class quiz question the
2:08
week Little Tipto, if you listen closely to the program, I both the
2:12
question and answer come up during the show. Speaking of the class quiz question
2:15
the week, we did one last week. Let's get a review of last
2:19
week's question and get the answer there as well. Malia. Yeah, so
2:23
last week we talked about having a roadmap to retirement to make sure you're on
2:28
the right going the right direction so you can get to where you want to
2:30
go to. And our question really talked about what you can do now to
2:37
prepare for the eventual retirement. Our question last week was when you reach age
2:42
fifty five, how much extra can you save into your HSA, which is
2:46
your health savings account if you have one available? Is it five hundred dollars
2:51
or one thousand dollars a year? And Jerome of Wana Key was our first
2:55
correct answer that called in. He correctly answered one thousand dollars. Dollars is
3:00
the amount extra you can put into your HSA once you reach reach age fifty
3:06
five. So if you want to look at where you're at on the map
3:09
to retirement, listen to last week's show and listen carefully for today's question.
3:14
Nice work, Jerome, and you two can be like Jerome. As Malia
3:16
mentioned, you can listen back to last week's program get all that information.
3:20
Also have a chance to win like Jerome this week with the class quiz question.
3:23
We will do that a little bit later on in the program. Again,
3:25
phone lines, they are open for you. Six oh eight three two
3:29
one thirteen ten. That's six oh eight three two one thirteen ten. Love
3:32
to have you joined, Cjmalia and myself of course. Is Money in Motion
3:36
brought you by Closs Financial, their website classfinancial dot com. That's Klaasfinancial dot
3:42
com and their telephone number six soh eight four four two five six three seven.
3:46
So this wee're going to be talking about planning for a proper withdrawal rate
3:50
from your investments in retirement. I've got to assume it's important with people sometimes
3:54
retiring sooner and living longer. This is something you're really going to want to
3:59
pay attention to, isn't. It's ej it is. So cash flow as
4:03
you enter retirement is obviously critical. It is often what keeps people from retiring
4:09
is they think to themselves, Hey, for forty, sometimes fifty years,
4:13
I've been receiving income from a job every two weeks hitting my bank account,
4:16
and there's this unknown of where it's going to come from once you retire.
4:20
Where is that cash flow going to come from? And is it sustainable and
4:25
how much will it be? And so there's a lot of fear and uncertainty
4:28
when it surrounds this topic. But when re tirees think about risk, many
4:32
say that outliving their money is their number one fear. The three elements that
4:39
most significantly affect planning are the need for real, not nominal cash flow.
4:44
When we say real, that's kind of a financial term. Real means an
4:47
income stream that increases with inflation. So said another way, if I have
4:53
one thousand dollars a month today, a year from now, that thousand dollars
4:57
a month will buy me less goods and services, So I will literally be
5:01
experiencing a decline in my income if I don't keep it up with inflation.
5:05
So that's one of those risks. Another risk would be the risk of having
5:10
to sell assets to provide income at the wrong time, think of, you
5:14
know, during a bear market. And then number three would be the likelihood
5:17
of future decades of historically low market returns. There's also within all of this
5:23
discussion this concept of sequence of returns that we'll talk about a little bit more
5:27
as we go ahead. So as financial planners, managing the withdrawal rate from
5:31
your investments that is sustainable over the course of your retirement will play an essential
5:36
role in your retirement income plans. But that being said, the first thing
5:42
we need to discuss is what kind of withdrawal rate would be considered a safe
5:46
withdrawal rate. So this is the rate to determine how much money you can
5:49
withdraw from your investment accounts each year without running out of money before reaching the
5:56
end of your life. The idea is to have a balance or to balance
6:00
having enough money or income to live comfortably without depleting your retirement savings prematurely,
6:06
which again is the number one fear for most retirees, and obviously, your
6:13
withdrawal rate from your investments is not only affected by the income you need,
6:15
but also by the other various sources of income as you enter retirement that you
6:20
might have available to you think social Security, pension, maybe espousal, part
6:26
time working income, things like that. And then depending upon your age at
6:30
retirement and special expenses, there could be things like health insurance that pops up.
6:36
If you retire prior to sixty five, you might have expensive Affordable Care
6:41
Act premiums. So it's not only just what is my safe withdrawal rate,
6:45
it's what other income sources do I have available that are outside of my portfolio?
6:49
And then secondarily, what are additional expenses that will pop up that I
6:54
did not have prior to retirement. Talking this morning with our retirement planning professionals
6:58
from Class Financial, CJ. Coss and Malia Quavis. If you've got a
7:00
question for CG and Malia, we would love to have you join us this
7:03
morning. All I gotta do is pick up phone gifts call six oh eight
7:06
three two one thirteen ten. That's six soh eight three two one thirteen ten.
7:10
The website for Class Financial it is Clossfinancial dot com. That's Klaas Financial
7:15
dot Com and They're telephone number for the office right here in Madison six oh
7:18
eight four four two five six three seven. Again, that's six oh eight
7:21
four four two five six three seven. Sorry to interrupt you, cig.
7:25
I know you're on a roll there, what about And I know we just
7:27
did a show a couple of weeks ago about debt. I've got to guess
7:30
that factors into this as well, doesn't it. It does. Yeah,
7:33
So so back to you know, if if we've got to think about our
7:38
income streams, which of course will impact how much income we need out of
7:41
our portfolio, which impacts safe withdrawal rates, which Molia will get into what
7:46
that rate actually is, because I'm sure a lot of you are going,
7:47
well, you keep talking about those rate, what is the rate? But
7:51
then we also need to look at what debt do you have, you know,
7:55
coming into retirements. So it's one of the reasons that we have done
7:58
entire shows on debt to managements because when you're working and like you can just
8:03
always kind of earn more or earn your way out of trouble is what we
8:05
call it. When you're in retirement, that no longer exists, and so
8:09
your ability to earn your way out of higher interest rates, or earn your
8:13
way out of higher inflation, or earn your way out of debt. Payments
8:16
goes away, and therefore not having debt becomes a really positive impact on your
8:22
the stability of your future retirement. So these are all things to consider.
8:26
But in a moment here Malie's gonna actually talk about that rate and we'll get
8:28
into that, and we'll of course take your call if you've got a question,
8:31
love, do you have you join us this morning six oh eight three
8:33
two one thirteen ten. That's six oh eight three two one thirteen ten.
8:37
We'll get you on the air with our retirement planning professionals from Class Financial CJ.
8:41
Coss and Malia Quavis don'tgag. You can learn more about Class Financial their
8:45
website Coss Financial dot com. That's Klaas Financial dot com and the telephone number
8:50
six o eight four four two five six three seven. Don't forget no charge
8:54
for that initial get to know you appointment at Class Financial. It will be
8:56
complimentary to you again their number six oh eight four four two five six three
9:01
seven. And to join us, so I gotta do is give us call
9:03
six oh eight three two one thirteen ten. That's six oh eight three two
9:05
one thirteen ten. We'll find out for Malia about that reasonable withdrawal, right,
9:09
what that is and how that's calculated. We'll get the details on that
9:13
and take your call next as Money in Motion with Coss Financial continues here on
9:16
thirteen ten. Wiv A full lines are open for you right now at six
9:22
oh eight three two one thirteen ten. That's six oh eight three two one
9:26
thirteen ten. Gets you on the air with our retirement planning professionals from COSS
9:30
Financial. Don't forget about the website coss financial dot com. That's k Laasfinancial
9:35
dot com. Great website. We're gonna sign up while you're there for the
9:37
weekly Market Pulse newsletter. I did that a couple of years ago. I've
9:41
absolutely loved it. Gives you a link to some stuff going on in the
9:43
market, as well as our link to the most recent podcast that available to
9:46
you at COSS Financial. Their telephone number six soh eight four four two five
9:50
six three seven. No charge for the initial gets to know your appointment tech
9:54
WUTS Financial. It will be complimentary to you again. Their number six oh
9:56
eight four four two five six three seven to get on the air this morning
10:01
the regular studio number six oh eight three two one thirteen ten. That's six
10:03
h eight three two one thirteen ten, talking this week about the proper withdrawal
10:09
rate, and we got just to the point we were going to reveal how
10:13
that's calculated, what that is, and we said, oh, we got
10:15
to take a quick break. But now we're going to find out. Malia
10:18
did a drum roll. So what is a reasonable withdrawal rate so we don't
10:22
run out of money? Which I think is probably the goal of all of
10:26
this. Isn't it correct? Correct? And so you know, no letdowns
10:31
are allowed on this show, but for everyone, and truly you'll everyone should
10:37
love to hear this. No one's average, right, and we like to
10:39
lump everyone into you know, well generally speaking, I mean for most situations
10:46
we see this particular amount being withdrawn over the course of their lifetime should work
10:50
out. Again, none of us is average, and we all have different
10:54
situations. So our answer is it depends. It really does depend. We'll
11:01
give you some framework care, but it depends on your age, it depends
11:05
on your overall financial situation, and ultimately it really is affected by your goal
11:13
with regards to how much money you want to leave behind. So we're talking
11:18
about two different things here. How much money can I safely take out so
11:22
I can live my lifetime and not have to worry about money. But secondly,
11:26
many of our clients are like because they have honestly been very very frugal
11:31
as they have prepared for retirement, and they want to leave the biggest nut
11:37
available for their children or grandchildren. So there's some legacy planning that happens.
11:41
So there's a whole bunch of different ways to slice and dice this answer.
11:46
And really, since none of us knows how long we're going to be around,
11:50
this is where the estimations come in looking at your cash flow. So
11:54
when we're looking at constructing a balanced or conservatively growing part folio for people and
12:01
understanding longevity plays a big, big part in all this, this is where
12:05
we have to be very, very careful. And what everyone has heard out
12:09
in the media is generally speaking, you hear about this four percent rule,
12:16
which is literally just a simple rule of thumb saying that you know you could
12:22
pull four percent from your investments in order to see that being sustained over time.
12:30
But again, there's so many factors that affect that four percent rule that
12:35
we hear out there. It could be your own risk tolerance, it could
12:39
be the tax rates or the tax status of your current portfolio. So we
12:43
do look at the ratio you have in tax deferred assets as compared to taxable
12:48
assets, and then we look at inflation. So for many many situations,
12:54
we might be looking at only a three percent pull for some people depending on
12:58
the amount of that nest egg, depending on the age that they need to
13:03
start pulling from that, and of course trying to stay ahead of inflation,
13:09
and ultimately it depends on what you really want to do in retirement. So
13:13
we do have a lot of people are just happy living from their homes,
13:18
you know, a walk in the park, walking their dogs. It doesn't
13:22
take a lot of money to do that. But other people are saying,
13:24
nope, we're going to start traveling the world, and they actually might need
13:28
more than their current income. So that's where we get a little crazy with
13:33
defining what that percentage is going to be across the board. And another thing
13:37
that comes up sometimes is, you know, everyone could look back at twenty
13:41
twenty two and go who that was? That was a difficult ear in the
13:43
market. For returns. But then in twenty twenty three we saw some really
13:48
nice returns. So the question comes up as well, if my portfolio returned
13:54
ten percent last year, shouldn't I take out ten percent? I mean,
13:56
when it's really good, should I just take out as much as it's given
14:00
me? And we would say we've got to be really careful because when you're
14:03
in retirement and suddenly your portfolio may sway the other direction minus ten percent,
14:09
does that mean you're going to stop living? You're going to stop pulling that
14:13
money. And that's why we have to have a guided plan according to what
14:16
your assets currently are. As CJ mentioned, are you getting a pension?
14:22
Social Security comes into play, and honestly where you're at with your debt,
14:26
so so many factors to really dig into. It's an important conversation to have
14:31
and of course an important thing to be thinking about and as kind of what
14:35
we're all saving the money for is of course to have those great days in
14:37
retirement. If you want to learn more about costs financial, don't forget about
14:41
the website colssfinancial dot com. That's k l aas Financial dot com. Delp
14:45
it up for the office here in Madison six oh eight four four two five
14:48
six three seven. No charge for that initial get to know you appointment tech
14:52
loss financial. It will be complementary to you again their number six oh eight
14:56
four four two five six three seven. So, Malia, how much can
15:00
cash flow or income should we plan then in retirement versus our pre retirement income
15:05
and lifestyle? Yeah, so you know, and what's funny is this really
15:07
has to do with how long you're able to work, how long you want
15:11
to work, and what that income looks like. So, based on what
15:16
we have observed, is likely you're really going to need seventy to one hundred
15:22
percent of your pre retirement income when you retire. As most people really don't
15:28
generally want to change their lifestyle. They don't want to, you know,
15:31
stop eating, stop eating out. They actually maybe want to eat out more
15:37
things get expensive, right, So, so calculating how many years might I
15:41
be retired, and this is a good question for our younger listeners because we
15:46
do see so many people starting to retire in their mid fifties. So you
15:52
know, consequently we could be looking at forty years of retirement for those folks.
15:56
So even at age sixty five, we could be looking at thirty years,
16:00
and what we saw in the US Census Bureau said that currently the length
16:07
of retirement in the US, the average is eighteen years. So you just
16:11
multiply current income or seventy percent of your current income times eighteen years. That's
16:19
kind of the nugget you might be looking at as far as potentially how long
16:23
you're going to live and not want to run out of your income. The
16:27
age that people tend to retire is sixty five for men here in the US,
16:33
slightly lower for women, currently sits at sixty two. Again, there's
16:37
this whole idea how long do I want to want to work for my employer?
16:44
How long can I physically work for them or mentally work for them?
16:48
That's another big question. Sometimes people end up retiring sooner than they think they
16:52
want to, and sometimes they're let go, so a lot of things come
16:56
into play. Bottom line is we really want you to have maybe more stored
17:02
away in order to enjoy that longer retirement. And again it depends what you
17:07
want to do in your retirement. Really important stuff and just a great conversation
17:11
to have. And these are as we work and talk each week with CJ
17:15
and Malia. They love to work and talk with you. Oh, you
17:18
got to just pick a phone, give a call the telephon number at the
17:19
office here in Madison six o eight four four two five six three seven.
17:23
No charge, but initial get to know you appointment at COSS Financial. It
17:26
will be complementary to you. Again their number six oh eight four four two
17:30
five six three seven, the website colss financial dot com. That's k l
17:36
Aasfinancial dot com. And again the website Cossfinancial dot com. And we'll continue
17:41
our conversation with Cjenmalio. Also get to the class quiz question week and we
17:45
will talk about what happens when he turns seventy three. There's some important things
17:48
to know about there. We'll get the details on that next as Money in
17:51
Motion with Coss Financial continues right here on thirteen ten wu ib A. We're
17:56
talking withdrawal rates this week with our friends from Loss Financial here on Money in
18:00
Motion thirteen ten WIBA. The website for Coss Financial it is Clossfinancial dot com.
18:07
That's k l aas Financial dot com. There telephon number six oh eight
18:11
four four two five six three seven. No charge for that initial get to
18:15
know you appointment. Tech co Loss Financial it will be complimentary to you.
18:18
Again. They're number six oh eight four four two, five, six three
18:21
seven a little bit later on the segment Wallso do our closs quiz question of
18:23
the week your chance to win a fantastic prize this week a chance to win
18:26
a twenty five dollars gift card to Buffalo Wild Wing. So, as we're
18:30
talking about this stuff this morning, CJ, one of the things I think
18:33
about is, you know, when you turn seventy three and you got to
18:37
take out money, how much withdrawal do I have to then then take each
18:41
year? I've never heard of this concept. No, none, this is
18:47
new. No fortant. Oh, we like to have a little fun on
18:49
this show. Yes, required minimum distributions is what this is called. And
18:55
since we're discussing with draw rates, then this is obviously a perfect topic.
18:59
So rmds or MrDs as they're commonly referred to, is an age of which
19:04
the IRS says, hey, on any of your pretax retirement accounts, assuming
19:08
you're no longer eligible to contribute to a company sponsored plan, then you must
19:11
start making these minimum distributions. So for now, that age is seventy three.
19:18
And yes, for those of you who are listening, you're going,
19:21
wait, seventy three. It was seventy and a half for me. That's
19:23
true for some of you listening who are say mid to late seventies, it
19:29
was seventy and a half for you. For some of you listening, you
19:32
had to start at seventy two. But for those who are not yet seventy
19:36
three but will soon be seventy three, then your age is your required minimum
19:40
distribution age is seventy three. And finally, for anybody born after nineteen sixty,
19:45
so again i'm raising my hand. I was born after nineteen sixty,
19:48
your minimum required distribution age is seventy five. So it just depends upon when
19:53
you were born as to when that age kicks in. But again, the
19:57
IRS does require you to take a certain amount of money out of certain retirement
20:03
accounts every year, which is that RMD. These will be coming from any
20:07
of your old four to oh one KS, four to HO three b's and
20:10
iras unless you are still working, as there are some minor exceptions to that.
20:15
And then of course people say, well, why does the HI r
20:18
S require me to do this? And the answer is time to pay taxes.
20:22
So there's this concept in finance, which is known as cycling money for
20:26
Uncle Sam. And if too much money gets out of the cycling of the
20:30
system. Think I earn money and pay taxes. I buy something in pay
20:33
a sales tax. They then take and pay people who pay an income tax,
20:37
who then buy something in pay a sales tax. This is the cycle
20:40
of money and what allows the governments, whether it be local or national,
20:42
to run their operations. If they allowed you to just put all your money
20:48
into retirement accounts and never have to pull it out, well you see the
20:52
problem, don't you. All of that money, millions, if not trillions
20:55
of dollars would get out of that cycling system, and suddenly you wouldn't be
20:57
able to run the federal government. Now. I know there's people on right
21:02
now who are going exactly that's the problem, and I'm sure there's anger and
21:06
frustration around all of that. I'm just the messenger. I'm not saying this
21:10
is right or wrong. I'm just the messenger. But the pre tax money
21:15
that you have put away in anticipation of retirement, that's been deferred for all
21:19
of these years, does have to begin coming out at these ages, even
21:25
if you don't need it, And when it comes out, it gets added
21:27
to your taxable income and whilst you pay tax on it, which gets it
21:33
back into the cycling. Now, this does not apply to your Wroth I
21:37
rays and Wroth four owin Caves by the way, So if you have Wroth
21:41
money, you've already paid tax on that money and the growth is tax free.
21:45
It's only the pre tax accounts that have this required minimum distribution. Fantastic
21:51
stuff this morning speaking with CJ. Closs and Malia Quavis. They are our
21:53
retirement planning professionals from Class Financial. Don't forget you to learn more about Class
21:57
Financial on their website Claw Financial dot com. That's CLSs k l a A
22:02
S Financial dot com. They're telephone number six oh eight four four two five
22:07
six three seven. No charge for that initial get to know you appointment tech
22:11
Class Financial. It will be complementary to you again their number six oh eight
22:14
four four two five six three seven. There's some other important things to know
22:18
about as far as when you should start taking your RMD, isn't there CJ.
22:22
Yeah, So, as though it's not complicated enough to know, you
22:26
know, when is my minimum distribution age based upon when I was born?
22:30
Well, there's another layer of complexity here, which is when, actually do
22:34
I have to pull out that first minimum minimum distribution known as your RBD,
22:38
your required beginning date. And so it's simple in concept, we say,
22:44
well, when you turn seventy three, and somebody says, but wait a
22:48
minute, what if I turn seventy three on April or I'm sorry, on
22:52
December thirtieth of twenty twenty four, does that mean that I have to have
22:57
a minimum distribution for the end hire year in the year twenty twenty four.
23:03
And actually the answer is no, not in the year in which you first
23:07
are required to pull a minimum distribution. So at that required beginning date,
23:11
it is actually April first of the year following when you turned required minimum distribution
23:18
age, So again April first of the year after you turn seventy three.
23:22
In this example, however, you got to be cautious with that because if
23:25
you push off that minimum distribution. So take my example, I turn seventy
23:30
three on December thirtieth of this year, but I decide to wait to pull
23:34
it out until next year, and I have to get it out by April
23:37
first of next year. Then every year thereafter, including next year, I
23:42
have to get that year's RMD out by December thirty first, So if I
23:47
push off my first year's minimum distribution to the following year, then I have
23:52
to double up in the following year, and then every year thereafter it has
23:56
to be out by the end of the year. This is confusing stuff to
23:59
actually think about the radio, So I do encourage you to talk to your
24:02
financial advisor, your accountant. These are things you're going to want to work
24:04
with a professional just to make sure you have your arms around it and can
24:07
can manage it. But of course then the next question becomes how much do
24:11
I take out? And this has to do with life expectancy tables that are
24:17
dependent upon or. It basically calculates a life expectancy formula that tells you that
24:22
gives you a divisor that you have to divide into the value of all your
24:26
pretax retirement accounts on December thirty first, and it gives you a percentage.
24:32
For those who want to kind of quick and easy sample of this, in
24:37
your first year in which you have a minimum distribution at seventy three, it
24:41
ends up being right around three point seven percent. So if I have one
24:44
hundred thousand dollars IRA and I turn seventy three, I need to pull out
24:48
about thirty seven hundred bucks for that year that gets added to my taxable income.
24:52
But you got to be cautious. If you have a spouse who is
24:55
more than ten years younger than you, then you have a different table to
24:59
use, just a lot of different things to be aware of here. And
25:03
unfortunately, this simple concept that came out from Uncle Sam, which was while
25:07
we can't let people defer forever, the simple concept has all these tentacles of
25:11
exceptions and formulas and tables and calculators that you have to get involved in.
25:18
Not to mention, well, what happens if I die and leave my money
25:21
to my children. I've heard they have a minimum distribution. Oh boy,
25:25
Well, now we've got a whole another set of rules and calculations and ten
25:27
year timelines and distributions and all kinds of fun things to look at. So
25:33
unfortunately, what is simple in concept is very complex actually in carrying it out.
25:40
So I just can't encourage you enough. Work with your advisor, work
25:42
with your accountant. If you have any questions on this, can I also
25:45
ask speaking of working with an advisor and an accountant and working hard and saving
25:48
three years, and sometimes folks send up with the with you know, a
25:52
little extra. What are you required then to you know, let's say you
25:56
need to obviously have to take that money out. There's some avenues, avenues
26:00
that you can put that money to good use if you don't need it,
26:02
right there are. Yeah, thanks for mentioning that, Sean. So so
26:04
for those as Sean just said, Hey, I've done well and maybe I've
26:08
maybe I inherited some money, and so the money I save for myself in
26:11
retirement accounts, I don't need as much of that anymore. Or or I've
26:17
been blessed with a great job, and so again I don't need all this
26:19
money in a pre tax retirement account. But now I have these minimum distributions
26:23
that are coming out that is really increasing my taxable income and increasing the tax
26:29
I have to pay. Well, there is a little bit of a bailout
26:32
here. We think it's a great bailout known as qualified charitable distributions. So
26:36
if you choose to do this, you can donate up to one hundred and
26:38
five thousand dollars per year per individual with no taxes that counts towards meeting your
26:45
minimum distribution. So now again there's some things you need to be aware of.
26:48
You can't do qualified charitable distributions until you reach age seventy and a half.
26:53
And yes I did say seventy and a half, which is not the
26:56
minimum distribution age for a lot of people. But or qualified charitable distributions,
27:02
you have to be seventy and a half. And again these can count towards
27:06
your minimum distributions if you are minimum distribution age, but they are limited to
27:08
one hundred and five thousand dollars per year per kind of per IRA account owner
27:15
and it only applies to iras. You cannot do a qualified charitable distribution from
27:21
an old four to oh one K plan. So again, a lot of
27:23
things to be aware even in this simple concept. But the good news is
27:27
that if I have been blessed and I don't need that income, there is
27:33
a way to keep that income off my text return, so to speak,
27:37
by just giving it to a charity directly. Again, speak to your accountant,
27:41
to your financial advisor about how to do this. We cannot emphasize enough
27:45
If you are giving to charities and you are taking a standard deduction on your
27:51
tax return and you are over seventy and a half with an IRA, you
27:56
should probably talk to your financial advisor about changing the way in which you give
28:00
and to give out of your IRA instead of out of your checking and checking
28:03
account. And we've done some great shows in the past where we really dug
28:07
into qcds as well. You can listen back to those at class financial dot
28:11
com. That's k l a A S Financial dot Com. There telling number
28:14
six so eight four four two five six three seven before we get to the
28:18
class quiz question a week as well as the listener question corner real quick.
28:21
As we've been going through this conversation this week, liquidity and of course savings
28:26
keep popping into my head and that's an important aspect of this planning as well,
28:30
isn't it? Did we? Uh see? J Yeah? Ken you
28:37
sorry, Sorry, that's okay. I was just I was just asking about
28:41
liquidity. I had mute button. Oh I was talking. It was really
28:45
good, Sean everyone the greatest piece of radio. Yeah. Yeah, So
28:51
we want to remind our listeners who are in the thick of retirement planning to
28:55
also remember the importance of having liquidity and emergency reserves. So we've done entire
28:59
shows in this concept. But again you want to have a solid cash emergency
29:03
reserve at your bank that represents three to six, even three to nine months
29:07
worth of living expenses, and it only takes one unexpected event event or medical
29:12
bill or a job loss to make you recognize just how important this is.
29:17
We'll often talk to young people who are still in almost the romantic phase of
29:22
like, oh, I've never lost a job. I don't know what you're
29:25
talking about and why I would need these reserves, and then life beats them
29:27
up a little bit and they go, I get it. I get it
29:30
now, I understand what that reserve is for. And then just create a
29:33
process. We've talked about this before, but a systematic savings plan to carry
29:38
out both your retirement savings goals and your emergency goals and your debt elimination goals.
29:45
If you rely on emotional decision making. Also said another way, if
29:52
you rely on what is left at the end of a month to make your
29:55
debt service payments and your savings patterns, you will never meet your goals.
30:00
That if you rely on what is left at the end of a month to
30:03
make your debt service payments and your retirement savings savings patterns, you will never
30:08
meet your goals. Instead, make it your first fruits. Right, so
30:12
as soon as you get paid, or prior to even getting paid, you're
30:17
immediately almost robotically taking care of these core patterns. That is what drives the
30:22
greatest successful outcomes from what we've seen talking this morning with our retirement planning professional
30:26
CJ. Closs and Malia Quavis. The website Coss Financial dot com. That's
30:30
Coss Financial dot com. You can also submit a question to be answered here
30:32
on the program right from the website and the Money in Motion listener question corner.
30:36
And this week Paul writes and he says, last week I began a
30:38
new job that offers a four h one K plan. Should I consider rolling
30:42
over my old four h one K plan into this new plan? Or should
30:48
I leave it at the old employer. Yeah, so that's a great question,
30:52
Paul. And honestly, again it depends, that's my favorite answer today.
30:56
Really, it depends on the size of the old four oh one k
31:00
might be able to leave it behind. Sometimes companies that you've previously worked for
31:03
will force you to roll it if in fact the balance is too low.
31:08
But if it's not too low, you certainly can leave it right where it's
31:11
at. If you're comfortable with the investment choices, that's the first first thing
31:15
you can do. Number two, you could could consider rolling it into your
31:18
new plan. Oh that's assuming that the new plan allows for that. Most
31:22
of them do. And then finally you could look at potentially rolling it into
31:27
an IRA. You want to be careful, You want to make sure you
31:30
understand your choices as you would enter that IRA, as far as are the
31:34
investment choices something that you want as well. Generally speaking, you have a
31:38
lot more choices in an IRA, but that's not necessarily the right answer for
31:42
you. What we would suggest you be careful of is many people say,
31:48
well, it's an old four oh one K, I'll just cash it out
31:49
and I'll put the money in my bank. A. No, that's usually
31:53
not the right answer, and the reason for that is number one, you're
31:56
going to pay taxes for that money that you deferred previously. So with all
32:01
these questions, this is a perfect situation where you should, you know,
32:06
speak to a financial planner, look at your your situation, see what's the
32:09
best choice for you. Great question, Paul don't forge. You can submit
32:13
your question online at Cossfinancial dot com. That's k l Aasfinancial dot com.
32:17
Great website and resource to learn more about COLSS Financial as well. You can
32:21
listen back to this in previous shows podcast as well. Right at class Financial
32:24
dot com. There telephone number six oh eight four four two five, six
32:28
three seven. No charge for that initial get to know you appointment at COSS
32:30
Financial. It will be complimentary to you again. They're number six oh eight
32:35
four four two five six three seven. Can you want to hold on to
32:37
that telephon number now because it's time for the COSS Quiz Question of the Week.
32:40
Works like this, just a moment, I'll ask you the Class Quiz
32:43
question of the Week. You will then have thirty minutes from the interday's program
32:45
to call the Class Financial office right here in Madison at six oh eight four
32:49
four two five six three seven. If you are the first call with correct
32:52
answer, you will win this week's prize, which is a twenty five dollars
32:57
gift card two Buffalo Wild Wings. This week's Clus Quiz question the week is
33:01
this true or false? Per the irs, You must begin taking your required
33:07
minimum distribution from your retirement accounts by April first of the year. Following the
33:13
year you turn seventy three? Is that true or is that false? Telephone
33:16
number six so eight four four two five six three seven first goalth crid answer.
33:21
We'll win that twenty five dollars gift card to Buffalo Wild Wings and don't
33:23
forget as well. That's Coss Financial's office right here in Madison, ce Jmileia.
33:28
It is always great chatting with both of you guys. Enjoy this beautiful
33:30
day. Thanks Chan. This is Money in Motion with Coss Financial Asset Advisors,
33:36
LLC, a registered investment advisor registered with the SEC. The contents of
33:40
this show are for informational purposes only and should not be considered individual investment advice.
33:45
Class Financial does not offer tax or legal advice. Any opinion offered during
33:51
the course of this show is the opinion of that particular investment advisor representative and
33:55
not necessarily the opinion of Cost Financial. New Ooz comes your way next right
34:00
here on thirteen ten. WIBA