339. How To Know If You Can Retire In Five Years? Without Guessing!

About 70% of Americans feel confident about retiring, but most don’t actually have a plan. Confidence without clarity isn’t confidence at all, it’s hope. In this episode of the A Wiser Retirement® Podcast, we break down how to turn uncertainty into a structured, testable retirement plan, especially if you’re within five years of retiring.

Related Podcast Episodes: 

Ep 308. The Silent Tax: How Inflation Erodes Your Retirement

Ep 276. How to Make Sure You're Ready for Retirement

Ep 259. What Pilots (& Others) Should Consider 5 Years Before Mandatory Retirement

Related Financial Education Videos:

Can You Save Too Much for Retirement?

Financial Habits to Avoid in Retirement

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Transcript

Confidence Or Hope About Retirement

SPEAKER_02 0:00

About seven out of ten Americans say they're confident they'll have enough money to retire, but when you dig deeper, most of them don't have a written plan, don't know their future income, and haven't stress test their portfolio. That's not confidence, folks, that's hope. Uh today we're going to show you how to replace hope with a clear, measurable plan to know how you can retire in five years. Stay tuned.

SPEAKER_04 0:22

Welcome to a wiser retirement podcast, where we cut through the noise and bring you real, honest conversations about investing, retirement, and building lasting wealth. No sales pitches, no gimmicks. Just insights to help you stop guessing and start planning your financial future.

SPEAKER_02 0:41

Welcome to a wiser retirement podcast. I'm Casey Smith. Today I'm joined with financial advisor William Metcalf to discuss how to know if you can retire in five years. If you enjoy listening to our podcast, don't forget to leave us a review. Let's get started. Hello, William. Hey, how are you? Uh, folks, if you haven't met William yet, this is the smartest guy I know. Like he's so smart. All his teeth are wisdom teeth. Where'd you cook that one up?

unknown 1:07

I don't know.

SPEAKER_02 1:08

Never heard that one before. It's on one of those uh commercials, you know, the smartest man alive or something. I don't normally drink beer, but whenever I drink beer, it's uh yeah, I saw that on there. It's pretty fantastic. Okay, I'm gonna use that on a podcast with William. I'll take the compliment. All right. Um man, this is uh this is a pretty good topic. Um, you know, I if you're in five years of retirement, I mean, stats say that people think that, oh yeah, I'm ready for retirement. And if you ask if they did any planning, they said no. Um, I I would say as a general rule, most people think they can retire and they probably probably could, uh, but they don't take in account market volatility, don't take into account inflation. And then next thing you know, three years down the road, you're like, oh, you know, I started retirement, it wasn't what what I thought it was, and just thought I'd come back to work for a while. And that could be true, but in my mind, I'm always going, eh no, you didn't plan. Right.

SPEAKER_01 2:06

Yeah. So we want to take the guesswork out for sure. Right, you know.

Why Guessing Fails In Retirement

SPEAKER_02 2:09

Yes, we want to to launch you uh successfully into retirement. Part of it too is like, you know, if you have a lot of time on your hands, you volunteer for something, go help somebody. Yeah. Um, you know, it just yeah. Recently I met another professional that was like, yeah, it was retirement. It wasn't for me. It's had to get back into the business. I'm like, no, you got divorced or something. Something happened. I'm not buying that, right? This is uh this is a grind someday. I'm some days. I don't I don't know that I don't know anybody just jumps back in, you know. Right. But uh we want to take that out for uh our listeners, obviously our clients as well. So let's talk about uh why guessing fails. Why, why do we guesstimate our retirement? What could possibly go wrong?

SPEAKER_01 2:51

Yeah, so we can talk about some common mistakes. Um, and if you're looking doing your own planning, doing, you know, look listening to podcasts, watching YouTube videos, kind of seeing things like that, a lot of the advice is going to be more general. And that's okay when you're learning sort of the ins and outs. Um, but like an example of this would be like the 4% rule. And that's generally true. Like if you look in our planning software, it kind of aligns with that slightly, but it doesn't in a vacuum. So, you know, you may have years where you have a high withdrawal rate, and that's okay in your plan because we're lower in other years. Um, you know, there's other factors like income streams and things like that as well. So just relying on general rules of thumb, that's that's a red flag right there, I would say. Um, you know, another one that we see sometimes is focusing on net worth. So you might have a number in your head that's a target. And that's not necessarily the best way to think about it because, you know, like we say when we're talking with clients, we're basically creating their paycheck through the system, you know, through the bucket system that we set up. Um, and so, you know, if you have a large net worth, that could mean you just have a lot of empty parcels of land that aren't generating any income. You could have a nice big net worth, you know, with an unproductive asset. Um, so that's another thing that I was thinking about, or you know, commodities. You know, some people they're like gold bugs and they have like all gold or something like that. And it's like, you know, that, you know, I I wouldn't want all of my net worth tied to one thing, obviously, too, but um, it's not a productive asset. So you have to sell it in order to, you know, basically cash it in to live.

SPEAKER_02 4:39

So doesn't generate income, it's not easily sellable in some cases. Yeah, exactly.

SPEAKER_01 4:44

You're gonna be paying commissions and you know, some sort of transaction fee. Um, you know, same thing with empty land, it's it's kind of the same thing, but that speaks to the other point that I'm trying to make though, that basically you need to think more in terms of cash flow in retirement, and then really it's about can your assets support that cash flow long term. That's really what we're solving for.

SPEAKER_02 5:04

Yeah, with inflation, right? All the things, travel expenses, uh taxes, medical expenses, yeah, later in life for sure. Healthcare.

SPEAKER_01 5:13

Yeah. Um, and that's that's exactly what we had next year. So, you know, taxes is healthcare and inflation. So um, all of these things can be wrapped together, um, like in our planning software. Uh, but I mean it's it's definitely something you could solve for on your own, but you need to think about these things if you're doing your own, you know, projections. Um, and I would say inflation is probably the big one. And then taxes are another one that if you cross over certain thresholds, there's unforeseen things like you know, you have Irma, and for some people that matters based on your where your income falls and you know, things like that. So there's things that you can run into accidentally if you just don't know. Yeah.

SPEAKER_02 5:52

All right. Well, so set us up for uh let's call it a five-year retirement readiness, readiness framework. What is what does that look like?

SPEAKER_01 6:00

Yeah, I mean, this is really like back to basics, but it starts everything starts with how much you spend. Um, so that would be the first thing that I would focus on. So, what do you think your retirement lifestyle is actually going to cost? You know, maybe you start with what you spend now and then you subtract things out. Um, that's usually the easiest way to start thinking about that. Um, but you know, but for different people, they might be living really inside their means right now so that they can afford, you know, all this travel. Some people want to do like slow travel where they, you know, basically are living abroad for you know a portion of the year. So it just depends on your lifestyle and what you expect your lifestyle to be. But for most people, I mean I would say starting with your sort of basic necessities as they are right now, and then subtracting out things you know are not going to be there. Um, you know, like saving, um, certain expenses maybe related to your work, those those kinds of things. Um, you know, so you could break it into obviously just like a normal budget category, but needs or wants, you know, needs being things you need to live, just like it sounds like, and wants being travel and hobbies or things like that. Um, so again, this is very basic, but I think people often misalign their what they're actually expecting to spend with maybe reality. So I think a lot of people generally think they're gonna spend a lot less in retirement, and that's not always true. Um, so it depends on your situation, what you're planning to do. Um, so you need to be thinking about that. So that's that's getting clarity on your spending. So next, you know, you need to have um an idea of where you're gonna be spending that from. So you need um basically an income plan. Um, and when we're doing planning for clients, this starts with your spending, but then we're able to determine, okay, you know, we're gonna set your cash buckets up so that you have two years of liquidity. And then from there we can kind of determine the asset allocation. And that's a little bit we'll we'll get into that a little bit later. Um but so when we're when we're taking that into consideration, we're we're thinking about what income streams do you have outside of your you know investable assets, meaning your portfolio. Um, so Social Security, maybe that's not starting when you're retired, or like when you first retire, maybe that comes in later. Um, maybe you have you know part-time work. Increasingly, we're seeing that with people that want to retire a little bit earlier, so they're working part-time to kind of supplement some of the the income that they need. Obviously, investments is a source, um, pensions or annuities if you have them, those are other sources, and then rental property. Um, those are the ones that I thought of. Um, so again, it's not not that we're not paying attention to assets, but it's what can what kind of income can your assets generate and and and actually create an income stream for you, you know, in retirement.

Build Income Streams And Kill Debt

SPEAKER_02 8:56

Yeah, I'll go back to just for a second, uh clarity on spending. Uh your debt service is also part of your spending. And I would say inside five years, you should be eliminating focused on eliminating debt. I would argue that you're better off eliminating debt than you are adding more to a retirement account or brokerage account.

SPEAKER_01 9:16

Yeah. Especially if the interest rates are you know teetering on six or more percent.

SPEAKER_02 9:22

Well, well, true, but but you you'd say, why would I pay off my two percent mortgage if I'm getting six percent in the market or more than that these days? Um, and it's because retirement's about cash flow. And this is an example of that. So we have one is clarity on spending, two is in your income plan. Um you need a lot less income if you don't have the debt. And then I promise you, you run anything into our planning software, a mortgage uh and you take away the mortgage, but you but you also have um say less income because you had you had to use some assets to pay off the mortgage, right? You the net number is always bigger than if you kept the mortgage there, right? Assuming even a higher rate of return. It's just it's all about cash flow. Right. And if you're Jeff Bezos, if you're Elon Musk and you put a hundred million dollars in a savings account paying you three and a half percent, and you got a two and a half percent mortgage, that arbitrage on that is millions of dollars, right? You're not those guys. And so the arbitrage is hundreds of dollars, most likely. Right. Right.

SPEAKER_01 10:24

So and it's not that you're taking a risk with that too, because we always say exactly. We always say, oh, well, I could be getting 10%. And it's like, okay, maybe, but that's not guaranteed. Your mortgage is guaranteed to be there, you know, whether or not the market goes up.

Withdrawal Strategy And Bad Timing

SPEAKER_02 10:37

Next thing you know, you're shooting missiles across the pond and uh uh oil prices go up and the stock market is down uh 10%. Voila. Yeah. Uh is uh you know, I think that's all temporary. There's nothing to sell a portfolio over, but right, but it's uh it certainly messes with your arbitrage calculation. With your arbitrage cash calculation, yeah. So so yeah, I I I just I go back to you gotta work on being um being debt free. I I have a different opinion on second third properties that are income generating. That's that's a little different. Right. Uh, but your primary home, you need to know that home base is just uh is just paid off. And yeah, most advisors aren't gonna tell you that because it takes away assets under management uh from from their firm. So so as a you know, a billion-dollar firm that they that that that could affect hundreds of millions of dollars worth of uh uh assets if they tell people to pay off debt. Uh same with delaying social security, you touched on that here from from an income standpoint. Uh it's really optimizing. Come over the optimization plan. Do you have all these different buckets that you can pull income from? Where do you pull from? Are your IRA? When do you pull from a brokerage? When do you uh when do you start Social Security? It all works together to give you a maximum income. That's what that's what you're trying to determine there uh between uh step one and step two of the of the process.

SPEAKER_01 11:55

Yeah. So moving on from that, you know, then the next portion is basically determining how you're gonna withdraw from your portfolio. So to the extent that you need to supplement, you know, income from your other sources. Yeah. So, you know, there's a couple things to think about with this. One is sequence of return risk, which our clients will know that their plans, they account for something called bad timing. And the idea there is basically that their portfolio gets run through a test where it simulates the credit crisis. So in the first two years of retirement, basically it's assuming they stop working and then the portfolio goes down basically 30% or so over two years. It depends on the portfolio and how aggressive it is. But the point is the worst time to actually lose money is right when you start withdrawing from the portfolio. Correct. So that's one thing that we're accounting for with our clients. And is something that if you're running numbers on your own, you need to think about. Um, you know, if something like that were to happen to you, would you go back to work? Would you stay at work? You know, would that affect your decision making? Our clients, we like to be able to tell our clients that, hey, you could do this even if the market's down. Now, obviously, some people make di decisions differently in situations like that. It's like, hey, maybe I'll just stay at work, you know, this year. Yeah. Um, and see what happens.

SPEAKER_02 13:14

If you established a cash reserve, do you live off that cash reserve during that turmoil? Well, exactly. And then you and then you allow the portfolio to rebound on its own. Uh, and you in most cases, you're gonna be fine 90% of the time, you'd be fine.

SPEAKER_01 13:27

Well, that's a great point too. So as you're getting close to when you plan to retire, you can start building that cash reserve early as opposed to waiting and then you know, selling for liquidity when you retire, so that you you are accounting for something like that happening, so that it's there.

SPEAKER_02 13:41

That's right.

SPEAKER_01 13:42

So, yeah, I mean, timing does matter in this situation. That's what this is really talking about. So obviously selling when the market's down. That's basically a forced sale if you're retiring and you don't have a cash bucket built up. Yeah. So, I mean, that's what we always talk about with you know, trying to time the market. It works sort of the opposite way here, where you're kind of forced into selling for liquidity, and that's something we never want to happen. So that's why we keep harping on this, but all of our clients here have a cash bucket, and then they also have a fixed income, you know, amount that we're we're able to go to if the cash bucket is also depleted. So um, you know, withdrawal strategy also touches on what assets you have, what tax treatment they're under. So whether it's ordinary income or Roth or capital gains, and then basically how how we structure that basically to optimize taxes. Um, so that's also something you should be considering too. Um, you know, early in retirement. And this all depends on your how much you plan to spend. Yeah. That really drives everything. Sure. Um, but you know, there's certain things early in retirement that we're able to take advantage of, maybe on the capital gains side, or maybe we're doing things like strategically doing Roth conversions while you're in a low income bracket. So there's all sorts of strategies that kind of come together. Um, but you need to think about that if you're trying to run numbers on your own. Um, and that's something that we do here for our clients.

Free Pre Retirement Checklist Offer

SPEAKER_03 15:10

Before we jump back into the episode, do you know if you are ready to take off and launch into retirement? Get your pre-retirement checklist, a free guide from Wiser Wealth Management, from cash flow to social security. We've got your account down covered. Go to wiserinvestor.com slash guides to download your free guide today. Now let's get back to the episode.

SPEAKER_02 15:36

Number four, risk check. Can can your plan break? Yeah. Um, probably a couple of things here. Uh obviously you talked about it. If if the market has a downturn early in retirement, can your portfolio handle that? All right. Uh that goes back to in most plans, you have some type of uh uh stress test that that will show you that you'd be okay. Uh inflation surprises. So people who retired in 2022 or 21 were shocked when prices went up through the roof. Yep. Uh so can you can you take on that? And then uh longevity risk. So what if you don't live to, you know, everyone goes, I'll probably live to 80 or I'll live to 85. And a lot of clients are making it into their 90s now.

SPEAKER_00 16:21

Yeah.

SPEAKER_02 16:21

95 is what we plan to, but if you have longevity in your family, what if we make it to 100? I was at a conference recently and they they uh had this big old pitch of you know, they're 3D printing hearts now. So there's a good chance that if you're under the age of 60 right now, that you're probably gonna make it over to 100, over 100, maybe to 105. Wow. And the whole purpose of this was not to wow us with medical uh science, but but to say, hey, you're going to a 60-40 portfolio with people in their late 50s, early 60s getting ready for retirement, that doesn't make any sense because you should be 80-20. Yeah. You need you need to be 80 stock, 20 bonds because you need to be able to uh uh keep up with inflation over this time period. Yep. And and I think an 80-20 portfolio and retirement is probably fine. You just have to have enough reserves. You need to have if your portfolio is spitting off$100,000 a year if you'd live on, you should have$200,000 in reserve. And in the good times you pull from the portfolio and the bad times you pull from the reserve. Yep. Uh and and that's partially what that's why I think our asset donor management model uh works really well for clients because we're man we're managing that on a weekly basis. So where do we pull cash from? Where do we, where do we um protect the portfolio?

SPEAKER_01 17:34

And taking gains strategically. It's like we're not we're not getting greedy and just letting it ride. We're taking those and then filling it back into the cash bucket so that we know it's there. Yeah. Um, so we're never assuming, oh, we've got we've got a bull market, we're just gonna let it ride. You know, it's like if we need cash in the cash bucket, we're gonna replenish it.

SPEAKER_02 17:49

I mean, it's been it's been a solid 10 years. Uh, there's been a lot of what I would call political unrest. Uh, politics is getting more and more nasty. Yeah, don't see it getting better. Uh, but the reality is that companies have been making money in this in this horrendous political environment. Uh, so much so that when I look at account uh people who've retired, that their balances are right where they started 10 years ago. Yeah. And they pulled out all this money. Right. Right. Just like, well, that's not normal. Because I remember all the conversations with everyone going, okay, well, this is gonna, this is gonna spin down pretty quickly, but we've maxed, we're gonna take your social security at 70 and you're gonna get more guaranteed income going forward. And then your portfolio will kind of come back over the next decade. And that's not what happened at all. It's been much, much breasier uh d despite um despite all the um crazy, crazy things that have happened uh with with politics. It goes back to just how politics really has no correlation with your portfolio. It's just it people get round w worked up over it. I understand that's something we have to we'd have to deal with that as advisors and calm people down, but it just doesn't matter. I was telling someone recently if if you if you hate uh Trump but Delta keeps selling seats and Coke keeps selling syrup, your portfolio is gonna be just fine. You're gonna be just fine. If you love Trump and Delta can't sell seats and Coke Duck can't sell syrup, uh you're you're not you're not good, you're not gonna be in a good spot. Right. Right? Yeah. So it just comes down to uh economics and spending money and and or consumer spending money buying these products. Uh if they if they're buying products, you it benefits your portfolio. Uh that's what it really comes down to. And I don't think any one politician is strong enough to bring down capitalism itself. I got a little concern when Bernie Sanders was uh making a run for and he had a lot of following of privatizing like the entire economy. Or uh not privatizing, but yeah, going making it all go to the government. The government would take over all segments of the economy and his plan. That that was uh that would that would not be good. Yeah. Um, but everyone, everyone else, everyone else is embraced uh is embraced capitalism as a whole, and and as long as that stays in check, we'll be fine. So uh you know it so many people go, I don't know about this president, or I don't know about that president, or I don't know about this. If we don't get this, then then the economy's doomed, and it just it's just never it's just never happened because there's really smart people running Fortune 500 companies, and in the end, they're gonna find a way to uh to to to put money on on their table.

SPEAKER_01 20:30

Right.

SPEAKER_02 20:30

Right. And that money comes to you in dividends and and buybacks and everything else.

Purpose Identity And A Better Retirement

SPEAKER_01 20:35

Yeah. And you have to remember too, like, I mean, the government has a vested interest in making sure the economy keeps going. And so you saw during COVID, they made they took steps to make sure that it kept going, you know. Yes, and so which is part of the problem. It is kind of a problem, but at the same time, I think that they're they have a vested interest, is my point. So yeah, no matter what political parties, exactly.

SPEAKER_02 20:58

Uh, lifestyle alignment, uh number five. So we we tested your plan, can it break and you'd be okay? Uh, we did that. Uh lifestyle alignment is number five. Um, this this is a touchy-feely segment because um you got you get you need a purpose. Like you need to go into retirement with a purpose. If you the the people that I know who go into retirement and don't have much of a purpose have medical issues, it's it's the weirdest thing to see. I mean, we've been doing this for 26 years. I've looked at uh thousands and thousands of families and gotten to know them so well, and and uh it was it's just very interesting. The uh also for women, the I've noticed that the women that were in charge of like the family finances have are their minds are so sharp in their 80s. And the ones that were not in charge are a little mushy. Just not as just not as sharp. Interesting. Um just an observation. I'm not sure what that means exactly, my sample. Obviously, is just with the people that we worked with. Sure. But um we lost some dear ladies uh in their 90s a few years ago that had been with me since the very beginning, and uh they were so sharp. And then they had one friend that when her husband passed away, you know, we kind of had to step in and find people to take take over day-to-day finances for her. Right. Um but yeah, she was never she was never super sharp um when it came to things. So so you gotta find something to keep your mind engaged. Um I'm not saying that being in charge of finances is is is the part of fight each other, who's gonna be the sharpest. Right. Yeah. But I would I would say uh your mind needs to be engaged doing something, so either volunteer work or uh something that would give you uh give you a sense of purpose. Um a lot of times it's it's grandchildren, and we see that a lot, especially with daycares being so expensive that yeah that grandparents uh have kind of taken in that role and good for them. That's what the next generation needs is is wisdom from grandparents. Now you have the time because you don't you're not you're not busy working, hopefully, right? Yeah. But uh with our airline pilots the same way. Everyone goes to, oh my gosh, the airline's still working without me. This is crazy. Airplanes are still flying. Uh they didn't maybe they didn't need me after all, you know. And and the sense of ego, your ego has been hurt a little bit because you're a former pilot now. And I wouldn't say that's uh the case for every single one. I I know a few uh retirees that are thriving that are pilots, but right again, they have a purpose, they're doing things. It could be just be traveling or seeing all the things by land that they've been looking at over over the sky over their careers. Um, but yeah, it could be a family involvement, it's a it could be a charitable uh involvement, it could be you start a small business of some sort um to kind of get out there and and keep your mind sharp on something, consulting. A lot of guys do consulting, it seems like. Yep. Uh so just have an identity, a structure, and a purpose. Um, that's really that's really important. It'll help your marriage too, if you have if you have this, rather than um fighting each other over uh you know what's what's going to be happening today.

SPEAKER_01 24:06

Yeah, exactly.

SPEAKER_02 24:07

So let's talk about um let's talk about the five-year test, William.

The Five Year Test Questions

SPEAKER_01 24:12

Yeah, this is just kind of wrapping up what we were just talking about. Um basically some questions you should be thinking about are could your income cover your lifestyle? Could your plan survive a bar a bad market early? So that means right as you retire, like we were talking about, sequence of return risk. And then, you know, could it could you still retire into that? You know, do you understand your tax exposure? That's kind of touching on the withdrawal sequencing that we talked about. So making sure that you understand some of the things that could, you know, if you cross into this threshold, could really drive your, you know, tax liability up, or maybe you lose somebody's subsidies for healthcare, things like that, um, where you may have had that, and then you just, you know, take a little bit too much from the portfolio, and then you have that exposure. Um, and then things like stress tests in terms of healthcare costs. That's another thing too. When we think about healthcare costs, they're inflating higher than everything else in the market.

SPEAKER_02 25:07

So yeah, 5.3% per year.

SPEAKER_01 25:10

Exactly. Um, you know, so that's that's kind of a two-edged sword there. Um, and then you think if you're planning prior to 65, you know, you're not gonna have Medicare. So that's another aspect of things that is gonna be more expensive. So there's all sorts of little planning things like this that you know you need to make sure that you have in line, or maybe consult a professional to, you know, make sure that you're on the right track.

SPEAKER_02 25:35

I think some of the biggest mistakes that people make in that state in this five-year stage is they wait too long to plan. There have been times that people have walked into our office and then like, I retired yesterday, I need to get this figured out. And you're like, well, I guess it's not retirement planning, it's a retirement situation. Yeah, what is your retirement situation? Um so waiting too long to plan, being too conservative or too aggressive. So there's people who get way too conservative too soon. Uh then there's people who are way aggressive because maybe they felt like they're playing catch up or they're just gonna stay aggressive. Aggressive, I can deal with if again, if you have a big enough reserve, that's fine. Uh, or if there's a lot of excess capital, then you can be too aggressive and still be okay. Uh, but you being too conservative, the bonds aren't gonna be your friends right now, uh, with with the inflation and what it looks like on the horizon.

SPEAKER_01 26:24

So you being or selling everything and going to precious metals or something. Oh, yeah, yeah, yeah. Like that.

SPEAKER_02 26:30

Yeah, there's there's a few preppers we run into every now and then, and it's like, yeah, no, this is not gonna work out well for you. And this is fine. Um, but yeah, not not having enough fixed income. So like you gotta have fixed income in a portfolio to to balance out the portfolio, uh, the portfolio is kind of like it's a buoy, which which if your ship is sinking, you know, it it it keeps you higher longer. Um, obviously, if if you're if your boat's trying to fly, it's this it's not gonna keep you, yeah. It's gonna keep you down, which which is why people don't like bonds, because we've had a solid 10 years and they go, oh wow, these things aren't doing anything. Yeah. It's like, no, you're still getting four to five percent a year out of the bond market, uh, but it's it's it just looks very minuscule compared to what uh equities have done. Yep. But you still need to have that that reserve there. Kind of how we look at it is if you had a cash failure in the marketplace, you have cash for the two years, which we keep talking about, and then bonds probably another 10 years. So you you have like 12 years worth of reserve before you never have a touch equities, meaning never touch your equities in your entire life, actually. So if if you can if you can show clients that, then their anxiety comes down on on the markets.

SPEAKER_01 27:40

Um yeah, and depending on your liquidity needs and your asset level, you know, for you having 10 years of your liquidity and fixed income may mean that you're invested 90% in stock. It just depends on how much how much you have in assets and then how much you spend, really. So that that's kind of a flexible thing. But at the you know, at the end of the day, we're really concerned about your liquidity.

Tax Planning And Roth Conversions

What To Do Right Now

SPEAKER_02 28:03

Yep, that's right. Um, don't ignore tax planning. Uh, people try to do do all this math uh to figure out do they have enough money and where is it coming from, but they aren't thinking big picture. You could have a decade between 65 and 75 that you should be doing Roth conversions from higher pre-tax money, pay tax into Roth at lower tax bracket. We we go around and around with CPAs like with this all the time. Uh, we we do tax planning in-house, we don't do preparation. So we send the, you know, the client goes to preparation, he comes back because he's like, Oh my gosh, they said I paid$30,000 more than I should have because of whatever. I'm like, well, yeah, you you paid, we topped you out at the 12% tax bracket, as we discussed, because people never remember this stuff. Right. We topped you out in the 12% tax bracket because uh when your wife hits her requirement of distributions, it's gonna be$230,000 a year. Yep. So I'd rather, I'd rather pay, I'd rather pay 12% on the tax and have to pay, you know, 32% on the tax. Right. And they're like, oh, and then the CPA is, you know, looking at us like, what are you guys doing over there? And they're like, well, you don't have the big picture. CPAs don't they they get 1099s, right? They get they get the 1099 Rs. Right. Uh they don't see the big picture. And so that's what a financial advisor's role is, is to be the quarterback with the with the CPA, the and the attorneys for the estate planning, especially if you have a state tax due, uh, is is to coordinate all that to hit what the ultimate objective is, which is to pay the least amount in tax over time. Yeah. Uh so the tax planning is is uh such an important part of your five-year and five-year plan, really continuously every year. For our clients, we do tax planning typically starting in September all the way through uh December. Uh so that that that's that's an important uh thing to consider as you get ready for retirement. Absolutely. Um so what can you do right now? Um we want you to build a retirement income plan. We want you to run multiple scenarios, good, bad, average on the markets. Uh we want you to evaluate your social security timing. Uh, do not say that Casey and William said to take social security as soon as possible because it may not be there when when uh you get older. Yeah. Uh we have lots of podcasts on that. You can search our podcast. There's what how many podcasts we got now?

SPEAKER_01 30:19

300 and unless it's going away next year. It the math doesn't work out on that. So if you're claiming at age 70, you often would break even anyway. So the math just doesn't even add up on that. No.

SPEAKER_02 30:28

Anyway, that's just uh political political banter that uh makes people go crazy. But anyway, um, so yeah, social security timing is very important. Start uh proactive tax planning, which we just talked about, i.e. Roth conversions, uh align investments with your retirement timeline. So this is how you're allocating correct.

SPEAKER_01 30:49

This is how you're allocating your money. Another thing that that people often overlook sometimes is things like having a large amount of company stock in your 401k, and it might be Coke stock or something like that. And you're not thinking that's aggressive, but it really is because it's one stock that you're exposed to.

SPEAKER_02 31:05

Coke stock can go multiple directions and usually down, it seems like. So yeah, or just kind of just kind of kind of sideways. Um, yeah, there's there's uh there's so many strategies related to single stock issues. So those that's where you need to work with an advisor to uh figure out how to diversify more. Um and then yeah, this seems a little self-serving, but speak with a fan speak with a financial advisor.

SPEAKER_01 31:30

Right. I mean, it's good to have a second pair of advisors.

SPEAKER_02 31:39

That's a whole other podcast right there. Don't even start my annuity, my annuity uh rants. Um but yes, have um uh you need you need someone to piece together a comprehensive plan uh to give you a strategy for doing that. And that that's partially why we developed our financial planning only service. Well, you don't have to come to Wiser and us manage assets for you. We have a financial planning only service where we can make sure that you're getting ready for retirement uh without asset management. Our asset management is still the fastest growing segment of our of our business, um, partially because we we do it a little bit differently than than other firms as far as uh how we're structuring assets and how we focus on planning so much throughout the year routinely for families. But the the the big thing here is you need an unbiased professional voice. Uh and I know there's people who listen to this podcast. We're getting nearly 9,000 downloads now. So there's lots of people listening to the podcast that are all over the country, and you may want to work with somebody locally, and I certainly respect that. But you can go to like NAFO's website. Um uh what's the uh acronym?

SPEAKER_01 32:46

National Association of Personal Financial Advisors.

Finding A Fiduciary Advisor And Closing

SPEAKER_02 32:49

And you can search that in your Google search there, and it'll it'll you can find people that are local to you that are fee-only advisors. Uh so I would say uh I would say do that uh because it's they're hard to harder to find. Uh our firms like we're considered a mid-sized firm, actually. We're not considered a small firm anymore, but um me even uh me being a mid-sized firm, most likely uh truest park here is not going to be named Weiser Park. So we're a little we're a little we're a little we're a little harder to find than than maybe some of the other uh these other smaller firms. Um but yeah, uh so confidence doesn't come from guessing people. Confidence comes from testing a plan that you developed. Uh so if you're within five years, uh this is probably the most important financial window of your life. And in fact, I would argue that once you go through the process, you probably reach back to your your kid, your young kid, younger kids, right? And be like, hey, you need to get ahead of this. Right. Don't wait till I'm inside five years. Do some little things now to make big changes later. Yep. Uh the so the legacy planning's uh really important. Uh thank you, William. Yeah. Uh thanks for listening to today's episode. If you're interested in learning more about Wiser Wealth Management or want to schedule a consultation, meet with one of our fiduciary financial advisors, you can do so by going to wiserinvestor.com or you can click in the link in the episode notes. We'll see you guys next week.