Something that’s as real as the day is long is rightsizing. Unplanned retirement is a possible reality that you have to deal with when you get to be a certain age. It’s devastating to some people, while some people see it as a welcomed type of situation. They\’re ready and this forced the situation for them. But always in the back of their minds is the question, “Am I going to be all right or do I have to go back and look at jobs?” Each individual circumstance, especially when it comes to losing your job, is going to be different. The aftermath of that action is going to be different. No matter what that scenario is, no matter where you are on the timeline, no matter what decision you need to make, don\’t make the decision without consulting and getting some good information and having that conversation.
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Dealing With Unplanned Retirement
David, how are you?
I’m doing fantastic, Joe. I’m glad to be back. It’s good to see you.
I went on to check out the new website, ThriveFinancialServices.com. The one thing I love most about it easy to use, easy to navigate. If I’m there to request an appointment, it\’s there. If I’m there to follow up or try and figure out where a seminar or a workshop is going to be, there\’s an opportunity for it.
Thanks, Joe. We are proud of our team for working very hard. What we did is we took a lot of feedback from our audience, a lot of our existing clientele and asked them what they wanted to see on our website. The ease of navigation, they want it improved. We did that. I’m proud of our team. They did an excellent job. We\’ll find some little tweaks and refinements as we go along. Like you said, I do encourage people to visit it. In the anticipation of our upcoming shows going forward, we\’re going to take some live text messages and live emails that we can call. Take care of on the telephone or here on the radio. It\’ll help people get in communication with us.
Bret Elam will enjoy the day off. We send good cheers along to Bret. We say hello to Karen. Karen, I’m very excited about what you have identified as your topic of conversation. It\’s something that when you get to be of a certain age, it\’s a possible reality that you have to deal with.
I’m in that age group. I’m slightly under 55. I feel energetic. I have a lot of energy and life left in me. When I met about ten new couples, out of the ten couples eight of them had been with the new term called rightsizing. It was devastating to some people. Other people handled it differently.
[bctt tweet=\”One in five workers in the United States is age 55 or older. 64% of those workers have experienced age discrimination in the workplace.\” username=\”\”]
It’s a challenging and difficult thing to deal with, to process and understand. You talk about not seeing the light at the end of the tunnel or all of a sudden going into a world of confusion. That will do it to you instantly when you lose your job at 55.
I shared a lot of the appointments with Karen. Some people see it as a welcomed type situation. They\’re ready and this forced the situation for them. We see people that weren’t ready. That\’s emotionally and sometimes financially, both, whatever it may be and for both parties. Sometimes people who were ready for it go, “Can you tell me whether I’m good financially? Can I do it? Am I going to be all right or do I have to go back and look at jobs?”
Interestingly enough, we\’ve sat with people that are in their late 60s who still have a lot of fuel in the tank. 68, 69 years old and still want to work. We met with a person, she\’s 69 years old and anticipates waiting until she\’s 80. She loves what she does. She\’s got great health. She\’s full of energy. She said, “Why would I retire?” A lot of different variables when it comes to that situation that pops up that you\’re unprepared for. Depending on how your situation economically is, it could be the right time for you. We’ll help determine that.
One of the things that I enjoy about being fortunate to be part of this program every week is the perspective that you create. Following the perspective is the thought process. What goes into that? It\’s going to be different for me than it is for my wife than it is for any one of our readers. The information that we provide is as different as our situation is when we get to this point of retirement. I commend you David, Karen and to Thrive Financial for the ability to be able to be a chameleon. The ability to be able to adapt, adjust, understand and recognize what\’s in front of you. Meaning the individuals that are there and their circumstance.
The more and more times that we hear from people, we keep recognizing as a company that our unique ability and our unique process allow us to identify, calm the situation down, one way they never get too high, never get too low. Let\’s come together, collaborate and figure out how we get you from point A to point B, whatever you determine that going to be. That\’s what we hear back from the people that we sit and have conversations with is, “This is not what I expected. I thought you were going to sit here and dissect my portfolio. You\’re going to do this.”
Our unique process is trying to completely understand the position of the person or people that we’re sitting in front of. They don\’t take generalities. We want to know you. We want to know exactly what\’s going on. What\’s your fear? What\’s your strength? What\’s your concern? What do you got? Where do you want to go? These are questions that don\’t come up typically in most financial advisory conversations. We want to get to an end. We\’re not a commodity-based type organization. We\’re an information providing organization. Once we find the appropriate information, we can then bring you to the potential solutions.
You use what Karen\’s going to spend some time with. That would be an example, Karen, of what David just talked about. Each individual circumstance, especially when it comes to losing your job, is going to be different. The aftermath of that action is going to be different.
It\’s when you\’re sitting across from a couple or an individual, it\’s what their goals are. Sometimes people are pleasantly surprised that things aren\’t as dire as you think they are. I would say don\’t jump off the ledge. Come talk to us and we\’re glad to help you out.
A lot of times, Joe, is that people don\’t know what to know. They don\’t know what question to ask. They don\’t know what they necessarily want. That\’s a big part of our conversations is that we try to paint out that picture. What\’s the next two years? The next three years? The next five years? The next ten or fifteen years? For a lot of people we sit down, it\’s the first time especially if they\’re going through transition. If they’ve got recently laid off, all they\’ve been thinking about is working. If they don\’t think about where they want to go, you can end up anywhere. Without a map, you\’re not going to get to the location that you want to go to. Mapping out that strategy, helping people navigate that course is a big part of it.
Karen is going to talk about the scenario which is when you\’re over 55, 56 or 54 and you are faced with the inevitable of you\’ve lost your job. That can be one of the toughest things to manage through at least mentally. Where am I going to go? Am I employable? Do I earn too much for a company to even hire me? All of those questions, Karen, come into play.
I’ve met with about ten couples and it breaks my heart. Some people come in, they\’re great. Other people come in and they\’re panicked. I wanted to read a few statistics to start with. It\’s from AARP. It\’s a couple of years old. It\’s based on some of the Bureau of Labor and Statistics stats. One in five workers in the United States is age 55 or older. 64% of those workers, which I’m sure there\’s other people out there that didn\’t participate in the survey, have experienced age discrimination in the workplace. 58% of adults believe age discrimination begins among workers in age 50s. A lot of times it happens when they\’ve been with a company.
I met with a couple and this is the only job she\’s ever known. She worked there for almost 40 years. She started at low level, clerical work. Probably typewriters back then. She built her way up to a great position where she was making over $140,000 a year. She worked for this company for that long time. She got a phone call at work in her office saying, “You\’re fired.” That\’s it. End of story. “You have one-month severance. If you don\’t sign these papers that we\’re giving you, you\’re not getting your 30-day severance pay and any vacation time.” She had ten days to sign this paper and say, “Yes, I accept the agreement that you\’re putting forth, so I’ll get my severance,” and because she signed the paperwork, she is not allowed to sue them for any type of age discrimination.
[bctt tweet=\”Rightsizing is devastating to some people. Other people handle it differently.\” username=\”\”]
It\’s corporate bullying. You put a person into a position who at that instant lost their job, who is in complete panic because all they think about is that immediate moment. They take a quick assessment. It\’s like, “I’m living off of $140,000 that I now don\’t have coming in from a cashflow perspective.” Obviously, panic sets in. The next thing from the ivory tower somewhere, some human resource department that might not even be local to you makes a phone call and says, “You\’re no longer going to be working with us. We\’re going to be sending you a form that if you sign the form, we will give you your severance. If you don\’t sign the form, we won\’t give you a severance.” Here’s a person working there 40 years to get month of severance pay. We get emotional. These sometimes are not people we know at all. They\’re not our clients. These are people who came in from the workshop. One thing about Thrive is there\’s a genuine sympathy, empathy when we engage these folks. We know what they\’re going through.
The other thing I told you that made me angry is she connected with about 40 other people who were laid off in the same age group-ish. She was reaching out to the network and they said, “We\’re in the same boat as you.” She said, “What’s funny is people that I noticed who had only been there for a couple of years, they were paying into their 401(k)s.” The company was matching, but they weren\’t vested in their 401(k). The people that were laid off, a large group perform we\’re under that timeline. That meant the company took back everything that they put into their 401(k). The company was able to legally take back. The only mine that was in the 401(k) was what the employee put in on their own behalf.
At 55 or 57, 40 years with the company, you\’re still not at that point you can look at Social Security. You can log on, go into Social Security and say, “I’m going to get this amount a month.” That might be ten years away. That might be twelve years away. I know it\’s difficult to calm the waters. It has to be a must. There are other actions that you have to do, but that would be one.
It depends, Joe. Sometimes it\’s triage. If we don\’t do something quickly, you may lose the patient. Sometimes people have prepared. That\’s the reality. There are people out there who\’ve lived below their means, saved a bunch of money and can weather the storm. I can\’t tell you that\’s the common situation. I’d say about 50/50. There are plenty of people who have done the right job and we commend them. We tell them, “Calm down, relax,” and we take a look at everything. You\’re going to pull money from this account. You\’re going to pull money from this account. You’re going to be able to be tax efficient because you don\’t have income showing up. Thrive is good at all the puzzle pieces.
One of the big things that Karen may talk about is the medical insurance issues. That\’s a big part of it. That\’s where most times we see the panic set in. “What am I going to do for health insurance with the cost of health insurance now?” That’s somewhere we can calm the waters because we understand how the Affordable Healthcare Act and the exchanges work. We know how to get people proper types of coverage at very affordable rates.
What I would say is don\’t panic. One couple that I met with, she was to the point where she said, “Should I cash in my 401(k)? Should I pay off my mortgage?” Don\’t go into panic mode. Please come in. David is a fiduciary. Talk to somebody who has your best interest at heart and they know what they\’re doing. David said, “We are holistic in the approach.” We can help you. We can guide you so that you can go on the exchange if you have to and get healthcare. Don\’t take information from your coworkers. One lady who was 55 said she wanted to take her money from her 401(k). She\’s like, “I heard I can take all my money out without the 10% penalty.”
Sometimes it depends on the plan and things of that sort. What Karen\’s point is that some people jump to conclusions. We\’ve seen it when it\’s too late. When they come to see us, they\’ve already cashed in their 401(k). They\’ve already paid off their mortgage. It’s not things that you can unwind at that particular point. Before you make those drastic types of decisions, number one, we got to take a deep breath, calm things down, and take a look at it from a factual perspective, not an emotional perspective. There\’s a lot of moving pieces. What do I do with my 401(k)? Do I roll it over? Do I leave it? If I do roll over, where do I go? How do I do it? Do I try to take all my money out? The tax consequence would be outrageous.
Don\’t panic. Take a look at everything holistically. We are here. If you\’re out there, you\’re reading and you\’re in that situation, please do not hesitate to give us a call. Go on our website. It is complimentary. Please sit down with us. We would love to help you out any way we can.
I can\’t stress it enough to the audience. Thrive Financial Services is a resource for you and your scenario. No matter what that scenario is. No matter where you are on the timeline. No matter what decision you need to make, don\’t make the decision without consulting, getting some good information and having that conversation.
In the middle of another energizing conversation about you, about reality, about what happens when you begin this roadmap or you begin this long journey, David, into retirement. There are many complexities and many things. Some you know, some you don\’t that are going to pop up as Karen\’s example has pointed out.
The conversations we have a lot of times, we see people\’s expressions that I never thought about that. People who are in their mid-60s to late 60s, a lot of people think it\’s an autopilot situation. I’ve done what I’ve done for so long. I guess I continue that. What you have to start to recognize is there comes this point where job income ceases. It changes a lot of things. When you’re working, you get paid a certain amount of money. You don\’t budget. You don\’t manage your money. You know what you want to save and then you spend the rest is basically what it comes down to after taxes.
When you get to this point in your lifespan where you\’re not going into work every single day. You\’re not getting that “steady paycheck” and as Karen’s segment, a steady paycheck is not what it used to be. Now, you\’re not getting that. You\’re going to be reliant on Social Security. You\’re going to be reliant, if you\’re lucky enough, to have a pension, and then whatever you have in your retirement assets. That playbook of how I distribute that money and what do I have to think about isn\’t discussed a lot. We hear a lot of financial advisors. We hear this commentary from the people we sit down with is if they ask about Social Security, “That\’s not my area of expertise. I’m not sure.” If Medicare comes up, a lot of advisors’ eyes go glazed over. What they do get excited about is talking about the markets and the investments. That\’s the cup of tea of most financial advisors.
[bctt tweet=\”Depending on how your situation economically is, it could be the right time for you to retire.\” username=\”\”]
What I would caution our audience, especially with these volatile times starting to present themselves. It\’s a different set of rules, Joe. While you\’re in your accumulation phase of life, while you\’re building up your savings and your nest egg to get to retirement is a different set of rules than when you want to start withdrawing that money. We have lots of complexities. As you start withdrawing money, you have tax consequences. As you start withdrawing money, if the markets are not going in your favor, you\’re reducing your principal. You\’re starting to erode away at that confidence level that I got a lot of money saved. If you happen to have a lot of money saved. You have to figure out which bucket of money whether it\’s your non-taxables, your tax-free or your tax-qualified plans. Where should you pull that money from first?
A lot of times what we see as the conventional wisdom either given to the people we\’re talking to or they possess it themselves. That\’s what they came up with, isn\’t necessarily right. We run this software called Tax Clarity. It is such an eye-opening experience for the vast majority of people that we sit down with. When you retire, and you don\’t have your job income. You need to have money set aside not only to live day-to-day. What about this thing called life when it gets in the way? If you\’re going to stay in the home that you\’ve lived in during your working years, you\’re going to stay there. Chances are if you\’ve been in the house 30 or 40 years, you’re probably going to have to replace the roof.
Replacing a roof is a good $30,000, $40,000, $50,000 depending on the size of the house. Where would I take that money from? A lot of people had their cars paid off. They need a new one because it\’s fifteen years old. Do I lease it? Do I buy it? What do I do? We run Tax Clarity to try to figure that all out. One of the big things we do with our Tax Clarity software. This is the one where people get excited. Between the ages of 60 and 70 and a half, we\’ve got this thing that we have to do at age 70 and a half. It is required by the IRS that we have to take out these things called required minimum distributions. What that looks like is we have to go into our IRAs, 401(k)s, 403(b)s, whatever that tax qualified retirement plan is. Based on the portfolio value at a given time, we have to start taking a certain percentage out of it.
If you think about it, let\’s say you\’ve been retired since you\’re 65 and you learned how to live off of your Social Security. You learned how to live off of a pension. You didn’t need to tap into your retirement accounts, but all of a sudden, you\’ve got to start taking it. The big thing that pops up that people are concerned about is now we have to pay more taxes. There are ways that we use our Tax Clarity report that during the ages between 60 and at 70 and a half, we look for opportunity. How to structure income correctly, so that we might be able to start withdrawing money. We don\’t need it, but we would do it because we have the opportunity to withdraw money out of our tax-qualified plans and not pay any taxes or pay a little bit in taxes.
We accomplish a couple of things. We improve our cashflow. We take that money and we could put it into a Roth IRA. It could be a Roth conversion or we put it in the savings account. Let it sit there and be that buffer. We\’ve done that. On top of it, what we potentially have done is also reduce the balance inside the IRA accounts or those tax qualified accounts. When RMDs start to have to come out, it\’s on a lower dollar amount.
The lower the dollar amount would ultimately lower the tax amount.
The great thing about this software, and I’d encourage people to take us up on a complimentary illustration of this. We know where the threshold. We can go up to the mark where taxes would then make no sense. We can keep stretching. We can sit where that perspective person is sitting across the table. We\’ve got our big screen TV in our conference room. We\’ve got the software active. We could start moving the dial. We can keep moving the bar down and say, “If we take this much out, we pay no taxes. If we take this much out, we pay $200 in taxes for the year. If we take this much out, we\’re going to pay $3,000. Where\’s the pain point for you? Are you okay spending $150, $200, $300, $400 in extra tax and been able to pull out $10,000, $15,000 or $20,000?
Some people want to take it further. We had a client in who retired early. That couple’s effective tax rate is 2.1%. Neither of them are working. They\’re both 60 years old. They’ve got a couple of million dollars saved. They’ve got a lot of non-qualified money. They’re pulling money from their non-qualified accounts, which are not showing up on the tax return. It\’s not taxable income. Their tax rate is 2.1%. We showed them this where they could start pulling money out of their IRAs to a pretty decent clip and not pay much in taxes. When they do get out to retirement at that 70 and a half point, where they have to start taking those required minimum distributions, their taxes, because of their RMDs, go from 2.1% to 18.4%.
If we could start working with them now, can you see how that would be advantageous for somebody? That conversation never ever happened before. They work with an advisor that\’s given to them at Vanguard. To my point, most financial advisors give investment management advice. When I said, “Have you not had this conversation with your advisor at Vanguard?” They said, “I’ve never had this with my accountant.” We\’re trained, we\’re schooled. Our unique process is to uncover opportunities during retirement that are going to greatly improve the probability, the predictability and the peace of mind to get somebody through retirement, Joe.
Another thing that people forget is there\’s a difference between income and cashflow. People are like, “What if I need that money to live? What if I need that RMD when I’m 70 and a half?” We get that but there\’s a difference.
Sometimes we get people to understand that Social Security and when you retire don\’t have to happen at the same time. Meaning if you decide that you want to retire, that doesn\’t mean you have to start Social Security. Cashflow is the money that comes into your checking account that you can spend. Taxable income is what shows up on your tax return. If we can show you ways to utilize these different buckets of money at the right times, it gets less money showing up on your tax return, which obviously means less taxes that you got to pay. That optimization process is a unique process that Thrive brings to the people that it serves.
I can\’t ask you to do anything more, but go to ThriveFinancialServices.com, go to one of the workshops. They\’re complimentary. Absorb the information. You’ll schedule your complimentary appointment.
Tax Clarity, David, in that last segment fit into the dialogue or fit into the middle of the conversation.
Taxes is this voodoo word. If you know what you\’re doing, and you understand how it all fits together, how it works, how you can get it to work to your advantage. It could be huge. We work with a number of CPAs. When I talk to CPAs, it\’s funny, this Tax Clarity software. When I sit with a CPA, an accountant or enrolled agent and I show them what we do with it, they\’re blown away. Most times accountants don\’t get the opportunity to be creative. It\’s a matter of credits, debits., give me all your stuff, and your receipts. It\’s more about recording what already happened and then informing what you need to do, whether it\’s pay more taxes or you\’re going to get a refund. There are many opportunities throughout the year prior. The tax reporting year that you could make decisions differently that would cause your taxation to be much more efficient.
It\’s an algorithm-based software. You certainly have to know how to utilize it properly. What we tell people too, we\’re not CPAS and were not enrolled agents or accountants. When we show them this, we want them going out and getting it verified by other financial professionals. Don\’t take our word for it. This is a first draft. We know it inside and out, upside downs, frontwards and backwards. We are well-versed in how it all works. At the same time, we want to show people that we are not trying to jam this information down your throat.
[bctt tweet=\”Collaborate and figure out how to get from point A to point B.\” username=\”\”]
We are not telling you that we are all knowing, all seeing. We want to share with you what we feel is in your best interest as a fiduciary. We have run the report. We have run the numbers. We understand it to be an advantage. Go back-test it. Go talk to somebody else, somebody who knows that space. Not your neighbor across the yard type situation. Talk to your accountant and say, “Here\’s what I was shown. Here\’s what I’m thinking. It sounds like it makes sense to me. What do you think?” If you got confirmation on it, then certainly execute on it. That\’s across the board, Joe, with everything that we do here at Thrive. It\’s funny to see people go through this disarmament. They walk into our office after a workshop, they were referred to us or they heard our radio show and scheduled an appointment with us. They\’re used to walking into what I call a commodity-based financial advisory practice.
A commodity-based financial advisory practice is where that financial advisor and his or her support team run a product-based business. They already have the product in mind or the solution in mind. They want that person sitting across the conference room table from. They know that\’s what they want them to get involved, buy or whatever it may be. When we go through our process, people are waiting for that. They’re waiting for the setup. They’re waiting for, “I’ve got the perfect solution for you,” and that\’s not what we do. We are completely advocacy-based. We are pure educational approach. We have to understand everything. It\’s funny because there are times that people will come visit with us and we ask them, “You make it an effective appointment. Make it an efficient appointment. Please bring all your information with you.”
We understand you don\’t trust us yet. I get that. We take no offense to that. Redact out your Social Security number. Redact out your statement numbers or policy contract. Whatever you want from a privacy perspective, cross it out. We don\’t need to see that. I hurt my foot. I rolled over on my foot. Didn\’t hear a snap, but I knew something was going on. I couldn\’t get into my orthopedic guy. I needed it fast. I went to one of these urgent cares. I said, “My foot hurts over here.” He went through, “We\’re going to do this, this, and this.” I didn\’t resist at all. I know what it takes, is it\’s going to take a battery of tests to come to some conclusion on what the heck\’s wrong with my foot.
Sometimes people come into our office, close to the vest that they don\’t want to share anything. I say, “I completely understand it.” Not to waste your time, not to waste my time, look at it like being a doctor. If you come in and you got pains in your belly, it would probably be in your best interest to have the doctor take an X-ray, a CAT scan, an MRI and a blood test. After that, come to some potential conclusion of what\’s going on on the inside. If you try to get us to make an evaluation of how your retirement is and the two biggest questions that people ask us are one, do I have enough money to retire with the type of lifestyle that I always wanted to have in retirement or at least equal to what I had while I was working? Number two is, and equally as important. Is my retirement going to last as long as I do? If I happen to be a married person, will it last both of our lifetimes?
For Karen, Bret and myself to answer those questions, we need to see everything. We need to see your Social Security. We need to see your non-qualified money, your qualified money. Not only see it, but what it\’s invested in. Sometimes what you invested in to get where you want to be and what you invest in to keep what you have are two entirely different types of things. We need to see tax returns for the last two years, so we could see any consistency. What that\’s going to let us do is run a Social Security maximization report. Remember, there are 567 different election choices that you could potentially make to optimize your Social Security.
The Tax Clarity report, we got to see everything. Where your money at? What it looks like? Do you own real estate? Do you not? Do you have options? All those types of things so we can figure out what it looks like today, what it\’s going to look tomorrow when you retire, and what\’s going to look like at 70 and a half. We run a stress analysis to test. What if the market goes down? What if, God forbid, you have a health crisis? What if you inherit money? We look at all of those scenarios with our software and are able to provide an actual plan. Probably most importantly as we look at risk. We look at the risk that you\’re willing to take and then the risk profile of your actual portfolio that\’s called Riskalyze.
[bctt tweet=\”Sometimes people are pleasantly surprised that things aren\’t as dire as you think they are.\” username=\”\”]
Those four reports are comprehensive, detailed and informative. It\’s hard for me to understand why somebody wouldn\’t want to go through that. Our encouragement again is if you want to come out and see our workshops, do those. That maybe gets you some comfort with us. For those of you who\’ve been reading our blog for some time, I would hope that the comfort is starting to seep into your body and understand that we\’re here for you. Go visit our website at ThriveFinancialServices.com and see all the things that we have to provide there. If you feel like making a phone call (800)516-5861. Our entire team that we have here at Thrive are dedicated professionals to helping people navigate retirement. That\’s from the person who does our marketing, the person who processes our business to the person who takes care of schedule, the person who gets the mail. Everybody is one team, one dream.
On behalf of David Bezar, Karen Bezar and Bret Elam and on behalf of all of the audience, we thank you very much. This is The Retirement Roadmap the Radio Show presented by Thrive Financial Services. I’m Joe Krause. See you next time.