Latest / TaylorMade Retirement with Taylor Demars, CFP® / Why 62 Is The Most Important Age For Your Retirement

Transcript

Why 62 Is The Most Important Age For Your Retirement · TaylorMade Retirement with Taylor Demars, CFP®

• 0:00
  SPEAKER_01: Today's content is pulled from Taylor's YouTube channel.
• 0:04
  SPEAKER_01: If you want to watch the video version or catch more great content, subscribe by clicking the link in today's show description.
• 0:13
  SPEAKER_01: Welcome to Taylor Made Retirement, where we explore what it takes to build a retirement that works for your money and your life with third generation certified financial planner Taylor DeMars.
• 0:28
  SPEAKER_00: The most expensive mistake I see in retirement planning usually does not look like a bad investment.
• 0:33
  SPEAKER_00: It's not claiming social security too early, and it's not simply withdrawing too much from your portfolio.
• 0:38
  SPEAKER_00: The real mistake is walking into age 62 without understanding what that actually means for you.
• 0:44
  SPEAKER_00: Because this is the first point when Social Security, portfolio withdrawals, taxes, and a healthcare pre-Medicare all start affecting each other at once.
• 0:53
  SPEAKER_00: And the decisions that converge here are largely permanent.
• 0:56
  SPEAKER_00: I've watched people with two, three, four million dollars get this wrong, not because they weren't smart, but because nobody showed them the full picture before it was too late to adjust.
• 1:06
  SPEAKER_00: And that's what I'm going to do for you in this video.
• 1:08
  SPEAKER_00: I'm Taylor Damars, CFP and third generation advisor, and I sat across from hundreds of people in your exact spot.
• 1:14
  SPEAKER_00: By the end of this video, you're going to understand exactly why 62 is the most consequential age in your entire retirement, what the decisions are, how they interact, and what the people who got it right did differently.
• 1:26
  SPEAKER_00: Now most people only know half the picture when it comes to 62.
• 1:29
  SPEAKER_00: Yes, it's when Social Security becomes available.
• 1:32
  SPEAKER_00: Everyone knows that.
• 1:33
  SPEAKER_00: But what most people don't know is that 62 is this critical convergence point when three major financial systems, Social Security, Retirement Accounts, and Healthcare, all land at the same time.
• 1:44
  SPEAKER_00: And they aren't independent decisions.
• 1:47
  SPEAKER_00: I like to think of them more like different sides of the same Rubik's Cube.
• 1:50
  SPEAKER_00: And they affect each other in ways that aren't obvious until it's too late to undo them.
• 1:55
  SPEAKER_00: So if you claim Social Security at 62, your benefit is permanently reduced by roughly 30% compared to your full retirement age.
• 2:04
  SPEAKER_00: And that reduction doesn't reset.
• 2:06
  SPEAKER_00: It doesn't adjust when you turn 67.
• 2:08
  SPEAKER_00: It will follow you for better or worse for the rest of your life.
• 2:11
  SPEAKER_00: Most advisors would stop there and say, you should wait then.
• 2:14
  SPEAKER_00: Don't claim early.
• 2:16
  SPEAKER_00: But what they don't tell you is what waiting actually costs.
• 2:19
  SPEAKER_00: Because if you retire in your early 60s and hold off on Social Security until 70, you've got several up to eight years to fund retirement without it.
• 2:28
  SPEAKER_00: Eight years of living expenses coming entirely from your nest egg.
• 2:32
  SPEAKER_00: And every dollar you pull in those years isn't there to compound.
• 2:36
  SPEAKER_00: And even worse, if you pull it in a bad year of the stock market, now you've sold that dollar at the bottom and it will never come back.
• 2:42
  SPEAKER_00: So the real question isn't just simply claiming early or late.
• 2:47
  SPEAKER_00: The real question is about what's the full cost on waiting in withdrawal terms, tax terms, sequence of returns terms, and when does waiting still win when you run all of it at once?
• 2:57
  SPEAKER_00: Because for many of my clients, the answer is still yes.
• 3:01
  SPEAKER_00: For others, it completely changes the math, and rarely is someone running all these decisions together.
• 3:06
  SPEAKER_00: Let me show you what that looks like when we play it out in a real client's life.
• 3:09
  SPEAKER_00: I had a client, I'll call him Richard, who came to me at 63 with$2.4 million.
• 3:14
  SPEAKER_00: He had strong health, his dad lived to age 91, so by every conventional measure, he should wait until age 70 to claim.
• 3:21
  SPEAKER_00: And then we looked at his exact situation.
• 3:24
  SPEAKER_00: Almost all of his retirement savings were in pre-tax accounts.
• 3:27
  SPEAKER_00: 401k he had maxed for 30 years, no Roth IRA, and a small taxable brokerage account.
• 3:34
  SPEAKER_00: So to fund seven years without Social Security at the lifestyle he described, Richard needed to withdraw$115,000 a year from that pre-tax account.
• 3:44
  SPEAKER_00: That pushed him into a higher bracket that triggered Irma, the Medicare premium surcharge, adding roughly a grand or more to a year to his costs.
• 3:53
  SPEAKER_00: And those heavy early withdrawals killed his window for Roth conversions at a lower rate, a move that could have saved his family hundreds of thousands over a 30-year retirement.
• 4:02
  SPEAKER_00: When we're running this full picture, not just the break-even chart, but the tax drag and the Roth opportunity cost, waiting until 70 looks completely different than the single variable analysis suggested.
• 4:14
  SPEAKER_00: So he claimed at his age 66, not because that's the right answer for everyone, but that was where his specific situation pointed to when we ran the full picture.
• 4:24
  SPEAKER_00: And that's what age 62 really means.
• 4:25
  SPEAKER_00: It's not just one decision, it's a set of decisions that interact.
• 4:29
  SPEAKER_00: And you can't optimize any one of them on your own.
• 4:32
  SPEAKER_00: And if this Social Security piece intrigued you, this next one will surprise you even more.
• 4:37
  SPEAKER_00: Now, if you want to run the same analysis with your own numbers, the link in the description gets you on a call with me.
• 4:42
  SPEAKER_00: But stay with me because what comes next is the part most people don't see coming.
• 4:47
  SPEAKER_00: Medicare starts at 65.
• 4:49
  SPEAKER_00: You retire at 62, you've got a gap of three years to make up.
• 4:53
  SPEAKER_00: Three years may sound manageable.
• 4:55
  SPEAKER_00: Many will say, oh, I'll just get on Cobra for a period of time and then go on the government marketplace.
• 4:59
  SPEAKER_00: It'll be fine.
• 5:00
  SPEAKER_00: Frequently, it's not just fine.
• 5:03
  SPEAKER_00: On the surface, with Cobra, you pay the full premium.
• 5:06
  SPEAKER_00: What your employer was covering plus what you were paying plus a 2% admin fee.
• 5:11
  SPEAKER_00: And a couple in their early 60s, that's often$2,500 to$4,500 every month for 36 months.
• 5:19
  SPEAKER_00: Three years at a conservative$3,000 a month is over$100,000 before you even reach Medicare.
• 5:25
  SPEAKER_00: And that's before deductibles, out-of-pocket costs, etc.
• 5:28
  SPEAKER_00: And the marketplace has its own trap.
• 5:31
  SPEAKER_00: ACA healthcare subsidies are based on modified adjusted gross income.
• 5:35
  SPEAKER_00: If you're doing Roth conversions or pulling from pre-tax accounts predominantly in those years, your income runs higher than expected.
• 5:42
  SPEAKER_00: Higher income means lower subsidies, and maybe not at all.
• 5:45
  SPEAKER_00: I've had clients retire at 62 with genuinely solid plans and find themselves reconsidering going back to work within 18 months.
• 5:53
  SPEAKER_00: Not because the money was gone, but because the healthcare gap costs two to three times what they had budgeted.
• 5:59
  SPEAKER_00: And here's the part that ties back to everything we had just talked about.
• 6:02
  SPEAKER_00: The danger is not just that healthcare is expensive, it's that how you pay for it changes your taxable income, which changes your ACA subsidy eligibility, changes how much you need to withdraw, and changes whether Social Security delaying still makes sense.
• 6:16
  SPEAKER_00: This is the internet connection that this whole video is built on.
• 6:19
  SPEAKER_00: These decisions don't live in separate boxes, they live in the same threshold.
• 6:24
  SPEAKER_00: And the only way to delay Social Security is to create taxable income that may destroy your healthcare subsidies, the optimal claiming strategy, and more.
• 6:32
  SPEAKER_00: Healthcare before Medicare is not a line item, it's a chapter.
• 6:36
  SPEAKER_00: If your plan doesn't have a specific strategy for that gap, your plan, in my opinion, is not yet finished.
• 6:42
  SPEAKER_00: So far, we've talked about the financial cost of getting 62 wrong, but I would say there's another cost that almost never gets measured.
• 6:49
  SPEAKER_00: The cost of waiting when you did not need to.
• 6:51
  SPEAKER_00: And every retirement planning conversation you've had, be it with an advisor, family member, or on your own, running numbers at 11 o'clock at night, how much time has been spent on the question of what happens if you retire too early?
• 7:04
  SPEAKER_00: Probably a lot.
• 7:06
  SPEAKER_00: Now, how much time has been spent on what it costs you if you retire too late?
• 7:10
  SPEAKER_00: Likely little to none.
• 7:12
  SPEAKER_00: Because the financial industry does not have a product for that.
• 7:15
  SPEAKER_00: There's no chart for it.
• 7:16
  SPEAKER_00: No Money Carlos simulation measures the probability of you getting your knees back, whether your grandchild turns four, or the trip that your wife has been asking about for the last six years.
• 7:26
  SPEAKER_00: I like to refer to a study from New York Life that found that 51% of retirees over age 60 wish they retired sooner, by an average of four years.
• 7:37
  SPEAKER_00: Not a small minority of this data set, the majority.
• 7:40
  SPEAKER_00: I have a client story that has not left me.
• 7:43
  SPEAKER_00: She and her husband had been planning a trip to Italy for years, thinking hiking the dolomites, stopping at every single gelato stand that they could stomach.
• 7:51
  SPEAKER_00: But every time they were close to that, her husband said, We'll just wait one more year.
• 7:56
  SPEAKER_00: The money was there, the plan for it was there, but three times they kept kicking the can down the road until she got a diagnosis.
• 8:05
  SPEAKER_00: They never took the trip.
• 8:07
  SPEAKER_00: If you retire too early and the numbers don't hold, you can adjust.
• 8:11
  SPEAKER_00: It could mean cutting the budget, it could mean picking up some part-time work, maybe tightening travel for a couple of years.
• 8:18
  SPEAKER_00: This is recoverable.
• 8:19
  SPEAKER_00: But if you retire too late, you can't get those years back.
• 8:22
  SPEAKER_00: You can't get the year your knee gave out, you can't get the year that your grandchild started to walk.
• 8:27
  SPEAKER_00: The industry that I'm in has spent 50 years training for you to fear one side of this equation far more than the other.
• 8:35
  SPEAKER_00: And a good plan will address and measure both.
• 8:38
  SPEAKER_00: So you may be asking, what does getting 62 right actually look like in practice?
• 8:43
  SPEAKER_00: Because when someone comes to us at 62, there are four questions I need answered before I can tell them anything useful.
• 8:49
  SPEAKER_00: I like to think of it as the 62 gap analysis.
• 8:52
  SPEAKER_00: The first question we ask is whether your portfolio can safely bridge the gap from when Social Security starts without exposing you to a bad sequence of returns in those first five years.
• 9:03
  SPEAKER_00: This window is the most financially dangerous period of arguably your entire retirement.
• 9:08
  SPEAKER_00: Your portfolio will be at its peak, withdrawals are consistent, but there's no paycheck absorbing a bad market year.
• 9:14
  SPEAKER_00: So getting hit hard in year one is fundamentally different than getting hit hard in year 15.
• 9:20
  SPEAKER_00: The second question we ask is what healthcare would actually look like pre-Medicare.
• 9:25
  SPEAKER_00: Not a national average, your personalized number and your state, your income level with your healthcare needs.
• 9:31
  SPEAKER_00: This is where the most expensive surprises happen, and it almost always comes down to something that wasn't specifically modeled.
• 9:38
  SPEAKER_00: The third question is what tax opportunities or traps open up between 62 and 75?
• 9:44
  SPEAKER_00: This is the Roth conversion window, the bracket management window that most people either use well or miss entirely without realizing it.
• 9:52
  SPEAKER_00: The fourth question is one I would say most advisors never ask, which is what is one more year of work actually buying you?
• 10:00
  SPEAKER_00: I had a client, I'll call him Michael, who was 63 with just over$3 million, and his Monte Carlo projection scored him at a 96% probability percentage of success.
• 10:10
  SPEAKER_00: He was ready by every measure, but he still said he didn't have the confidence to pull the trigger.
• 10:16
  SPEAKER_00: We spent most of our meetings not on the spreadsheet because the numbers spoke for themselves, but we were trying to dive into the question underneath, such as what would one more year actually give him that he didn't already have?
• 10:28
  SPEAKER_00: More of a buffer?
• 10:29
  SPEAKER_00: He already had a buffer, more certainty, certainty wasn't going to come from a bigger number.
• 10:34
  SPEAKER_00: He eventually said something quietly, looking at his own spreadsheet, saying, I don't think that I know what I'm retiring to.
• 10:41
  SPEAKER_00: That is the real conversation everyone needs to have.
• 10:44
  SPEAKER_00: One that my industry almost completely is unequipped to have because it isn't one we can easily quantify.
• 10:50
  SPEAKER_00: Michael retired four months later from that series of meetings.
• 10:54
  SPEAKER_00: Not because his number got bigger, but because he had the right conversations.
• 10:58
  SPEAKER_00: I think about Michael a lot when I look at a client's life savings and try and determine what it's actually for.
• 11:05
  SPEAKER_00: For his scenario, he had everything he needed in a spreadsheet.
• 11:08
  SPEAKER_00: He had run the numbers more times than he or his wife could count.
• 11:11
  SPEAKER_00: And he felt like he did everything right.
• 11:13
  SPEAKER_00: So more numbers, more charting wouldn't necessarily help him.
• 11:17
  SPEAKER_00: Just someone as a third party to be able to ask him the questions that he hadn't answered himself.
• 11:23
  SPEAKER_00: Not what you can afford to stop, but what are you waiting for?
• 11:26
  SPEAKER_00: And in my opinion, that's what getting 62 right actually looks like.
• 11:30
  SPEAKER_00: Not a perfect claiming strategy, not a flawless healthcare bridge.
• 11:34
  SPEAKER_00: It's running the full picture, both sides of the equation with someone who is willing to have the conversation, the numbers can't alone.
• 11:40
  SPEAKER_00: If you want to have that conversation about your own situation, the link in the description gets you on a call with me.
• 11:46
  SPEAKER_00: We do this analysis by building you a tailored retirement readiness roadmap without the requirement of you moving your investments for us to manage.
• 11:54
  SPEAKER_00: This conversation is worth having either way.
• 11:56
  SPEAKER_00: And if you're not ready for that yet, the next video I would point you to is one that I made on why the math says yes, but you may not still be able to pull the trigger.
• 12:05
  SPEAKER_00: I'll link for you on screen now.
• 12:07
  SPEAKER_00: Thanks for watching, and I'll see you in the next video.