Ready For Retirement

Joe is planning for retirement and wants to minimize his tax burden, especially on the interest earned from his three annuities. James explains that non-qualified annuities are purchased with post-tax money and offer tax deferral on growth until withdrawal. When taking out funds, the principal is tax-free, but earnings are taxed at ordinary income rates. He explores strategies for tax-efficient withdrawals. He also touches on annuities, options like a 1035 exchange to transfer an annuity into a different product for improved performance, the tax implications for heirs, and early withdrawal penalties before age 59 and a half.Questions Answered:How are non-qualified annuities taxed upon distribution, including both lump sum and annuity options?What strategies can be implemented to keep the tax burden as low as possible when withdrawing from non-qualified annuities?Timestamps:0:00 - Joe’s question1:52 - Non-qualified annuity overview5:11 - Potential tax strategies10:02 - Annuitization option12:31 - Annuity regret13:22 - 1035 Exchange14:33 - Things to knowCreate Your Custom Strategy ⬇️ Get Started Here.

Deciding to work with a financial advisor is about more than how much you've stashed away. It's also about determining whether an advisor's benefits outweigh the costs. In your higher earning years, finances become more complex. More money means more decisions and more chances to make mistakes or miss out on opportunities. That's where a quality advisor can come in handy. They help you steer clear of bad investments, seize the right opportunities, and keep financial stress at bay.Having more than one perspective to draw from is the key to well-informed financial decisions. Teaming up and talking it out, whether with your partner or a financial advisor, is always beneficial.Questions answered:How can I determine whether working with a financial advisor is worth it for me?What factors should I consider when deciding if I need a financial advisor beyond just my age or income level?Timestamps:0:00 - Not an age-related decision2:43 - Value and pricing structure4:12 - Natural conflicts 7:24 - When benefit exceeds cost10:02 - Cost of mistakes12:18 - Cost of missed opportunities14:16 - Cost of anxiety 16:02 - Thought partnership21:36 - SummaryCreate Your Custom Strategy ⬇️ Get Started Here.

Listener Ray is wondering what to do with his home as he embarks on a nomadic, van-life journey in retirement. Should he sell it to finance his travels or retain it for potential appreciation and cash flow? James explores the nuances of home ownership as an asset versus an investment. He considers cash flow and leverage as he looks at Ray’s three options – sell, rent, or borrow – while emphasizing aligning financial decisions with personal goals and aspirations.Questions Answered:Why shouldn’t I consider my home an investment?What are the key financial considerations for retirees when deciding whether to sell, rent them out, or explore other options?Timestamps:0:00 - Ray’s question1:56 - Why a home isn’t an investment4:38 - Do you want to be a landlord?8:22 - The financials10:14 - Asset appreciation11:30 - Cashflow15:04 - Leverage19:02 - What should Ray do?20:33 - Reverse mortgageCreate Your Custom Strategy ⬇️ Get Started Here.

Listener Drew asks about a tax strategy for juggling capital gains and Roth conversions. While it can be a complicated question – especially when large accounts are involved – James provides some general guidelines that can be helpful for anyone with similar gnarly tax strategy challenges in retirement. In this episode, we’ll cover the extent to which required distributions will be an issue, what you need to alleviate that issue, and the timeframe within which you have to do that.James explains how to work backward to project your various tax brackets and determine how to prioritize tax gain harvesting, Roth conversions, and other tax strategies.Questions Answered: What is tax gain harvesting?What is the tax planning window and how do I use it to my advantage?Timestamps:0:00 - Drew’s question2:50 - Determine use for each asset5:59 - Tax gain harvesting11:10 - Back to Drew15:30 - James’ priorities for Drew18:41 - Usually not either/or20:07 - Working backwards24:50 - General principles29:50 - Tax planning window32:16 - SummaryCreate Your Custom Strategy ⬇️ Get Started Here.

James responds to listener Jerry’s question about the optimal time to distribute inheritance or charitable gifts: before or after passing away. James walks listeners through four important things to consider when it comes to gifting and inheritance: your gifting goal, whether you have a strong desire to see the assets gifted within your lifetime, the tax implications of various types of gifts, and what to do with assets you plan to retain for now but are intended for future generations.Questions Answered: Should I give my children and grandchildren their inheritance before or after I die?What are the tax implications to my children when I gift them my assets?Timestamps:0:00 - Jerry’s question2:20 - What is your gifting goal?3:38 - Gift during your lifetime?6:51 - Timing and priorities9:17 - Different tax implications12:08 - Exemption amounts14:13 - Tax implications to child15:33 - Proper beneficiary designations21:41 - The right time horizon24:45 - SummaryCreate Your Custom Strategy ⬇️ Get Started Here.

A listener says, “Eventually, one spouse will pass before the other, which will often catapult the survivor into a significantly higher tax bracket. Shouldn’t a Roth strategy take this into account?” James explores several factors that could positively and negatively impact a survivor’s tax liability and what to consider when creating a Roth conversion strategy. Questions Answered: How can Roth conversions benefit married couples beyond tax savings?What factors should be considered when determining the optimal strategy for Roth conversions to protect a surviving spouse?Timestamps:0:00 - Steve’s question3:40 - An example6:41 - 3 changes12:32 - Positive impacts15:22 - RMD calculations16:45 - Widows tax penalty19:46 - When to do Roth conversions23:40 - Big age gap28:45 - Start with a good reason29:57 - The bottom lineCreate Your Custom Strategy ⬇️ Get Started Here.

Jason and his wife face a crucial decision: whether to purchase an annuity or pursue traditional investments as they prepare for a full-time, slow-travel retirement. With a diverse array of income sources, including pensions, 401k, property sales, and Social Security, they estimate their monthly expenses at $7,500. James analyzes their situation, emphasizing the balance between annuity stability and investment flexibility.He highlights the security of annuities and explains their limitations, guiding the couple towards a tailored approach that aligns with their goals and circumstances.Questions Answered:What are the pros and cons of annuities?How can I effectively balance the stability of annuities with the flexibility of traditional investments?Timestamps:0:00 - Jason’s question3:07 - Pros and cons of annuities6:32 - Assessing Jason’s situation9:52 - The role of Jason’s portfolio11:40 - Annuity alternatives13:23 - Support your retirement vision16:54 - Integrate financial plan and portfolioCreate Your Custom Strategy ⬇️ Get Started Here.

The "Three Bucket Strategy" is a popular retirement income planning method. The first bucket covers immediate expenses in retirement. Listeners John and Donna are seeking advice on constructing their first bucket. With $1.6 million in assets and pension incomes, they aim to retire in 2026. James analyzes their needs, income sources, and portfolio and lays a foundation for their Bucket #1. It's crucial to bridge the gap between expenses and income, considering risk capacity and tolerance. Questions Answered: How do you divide assets into the three buckets, and what is the purpose of each?What role do risk capacity and risk tolerance play in determining portfolio allocation?Timestamps:0:00 - John and Donna3:36 - The bucket approach5:50 - Start with expenses8:53 - Non-portfolio income sources11:23 - Identify and bridge the gap13:06 - Assessing their portfolio14:53 - Portfolio dividend yield16:49 - Do you need Bucket 1?19:16 - What is the specific need?21:07 - Risk capacity23:22 - Test contingenciesCreate Your Custom Strategy ⬇️ Get Started Here.

Benjamin, nearing retirement at 65, faces a familiar dilemma with his taxable account housing expensive mutual funds. Despite their underperformance, converting to low-cost index funds entails a significant tax hit due to long-held appreciable value. James explains weighing the immediate tax consequences against the risk of holding onto underperforming assets. He also provides a framework for assessing risk, identifying options, and making decisions based on personal financial goals.Questions Answered: How can you decide whether to sell underperforming mutual funds or continue holding onto them?  What factors should you consider in determining whether converting to low-cost index funds aligns with your financial goals and risk tolerance?Timestamps:0:00 - Listener question from Benjamin2:17 - Tail wagging dog?3:52 - Benjamin’s situation5:31 - WCS of selling vs not selling11:17 - Be careful about tax drag12:47 - Rethinking the break-even point14:11 - Consider your goal for the money17:17 - Identify the bigger risk19:26 - Make your decision20:26 - Will your tax situation change?24:20 - Consider staggering sales28:21 - SummaryCreate Your Custom Strategy ⬇️ Get Started Here.

Typical retirement strategies assume a retirement age of over 60. With an earlier retirement goal, a careful look is required to determine what strategies will create the best outcome. James responds to a listener’s question about where to invest as he anticipates an early retirement. James walks through the steps of Root’s Sequoia System to explore options for early retirement scenarios.Questions Answered: How does early retirement impact traditional retirement planning strategies, such as the 4% rule?When deciding between retirement accounts (e.g., 401k) or brokerage accounts for pre-60 funds in early retirement, what factors should be considered?Timestamps:0:00 - Question about early retirement2:21 - Is early retirement possible?3:30 - Why the 4% rule doesn’t apply6:08 - Assessment of Juan’s situation8:11 - The Sequoia system Step 1 - purpose10:16 - Step 2 - retirement income12:49 - Relying on SS benefit?14:09 - Withdrawal strategy15:32 - Sourcing funds from age 50-5917:20 - Brokerage vs 401K20:22 - A part-time income scenario23:04 - Consider how expenses might change25:14 - Step 3 - investment planning28:09 - Steps 4 & 5- taxes and protectionCreate Your Custom Strategy ⬇️ Get Started Here.

The 4% rule helps us understand how much we can safely take out of our portfolio each year without running out of money in retirement.Yet, as simple as the 4 percent rule seems, the practical implications are drastically misunderstood. I explore the three common mistakes people make when applying this rule and how to avoid them.Questions Answered:How do RMDs impact the 4 percent rule?Does the 4 percent rule account for changes in expenses and income sources?Timestamps:0:00 - Questions from listeners1:26 - Misconception 1 - RMD 3:27 - 4% rule applies to portfolio5:51 - Assumption of 30 years retirement7:51 - Misconception 2 - annuity distributions10:01 - An example 12:33 - Misconception 3 - static cash flow13:42 - Examples of changes17:44 - SummaryCreate Your Custom Strategy ⬇️ Get Started Here.

Retirement is not just about financial readiness; it's also about finding purpose, passion, and personal growth. James and guest Cynthia Meyer debunk the arrival fallacy, the illusion that reaching retirement will bring lasting happiness. Having structure in retirement and pursuing your passions is vital to feeling fulfilled. Although it's easy to fall into comparing our retirement experiences to those around us, this is a dangerous trap. Finding what's truly important to you and following that will lead to much greater happiness.Questions Answered:What is the arrival fallacy?How can retirement coaching help you find freedom and fulfillment in retirement?Timestamps:0:00 - Arrival fallacy1:25 - Retire…then what?3:58 - Structure in 4 chunks6:06 - Risks of no structure7:59 - Procrastination9:35 - Finding your passion12:33 - Microsteps and consistency14:32 - Prodding the brain17:01 - Not just for retirement20:33 - Passion follows commitment22:43 - Experiment and be flexible24:20 - Be careful of stereotypes26:17 - Rewire retirement28:08 - Advice and resourcesCreate Your Custom Strategy ⬇️ Get Started Here.

Sammy, a 51-year-old retiree, is seeking advice on how much she should convert from her traditional IRA to a Roth IRA each year to avoid jumping tax brackets and minimize the taxation of her social security benefits. James analyzes Sammy's current financial situation and offers guidance on approaching the tax planning aspect of her retirement strategy.Learn:How to determine how much to convert from an IRA to a Roth IRA Why forward-looking tax planning is essentialThe potential consequences of certain financial decisionsQuestions Answered:What factors should you consider in planning Roth conversions?How can you avoid going into a higher tax bracket?Timestamps:0:00 - Sammy’s Roth conversion question2:29 - The Roth/tax rules today4:58 - Tax on different types of income7:24 - Some assumptions10:19 - Figuring tax and making assessments12:28 - RMD part 115:33 - RMD part 217:25 - Caution about tax bracket assumptions21:58 - Important side note23:45 - TakeawaysCreate Your Custom Strategy ⬇️ Get Started Here.

James addresses a common concern for a couple approaching retirement through a listener’s question. Listener Rob plans to collect Social Security early at 62, raising questions about his wife’s retirement.Understanding Social Security strategies to avoid potential losses during retirement is important.James explains the intricacies of spousal benefits, detailing how they are calculated based on the primary earner's full retirement age benefit.Key Takeaways:-Wait until full retirement age to maximize spousal benefits-Primary earner must start to start collecting for the spouse to be eligible-Nuanced calculations involving the spouse's own retirement benefitQuestions Answered:When should a spouse collect Social Security spousal benefits?How are spousal benefits calculated?Timestamps:0:00 - A listener’s question3:00 - Two SS options5:17 - Spousal benefit amounts7:24 - When spouses can collect8:55 - Spousal + primary benefits11:59 - Implications of collecting early14:16 - The good news16:00 - The key takeawaysCreate Your Custom Strategy ⬇️ Get Started Here.

As one listener prepares for an early retirement, James discusses the situation, covering how to build a bond ladder based on non-retirement funds.James provides a different way of looking at the stock-to-bond conversation.Learn how to determine the appropriate amount to have a bond ladder and whether you should own individual bonds or bond funds as a part of that ladder.Questions Answered:How do you balance risk capacity and risk tolerance in portfolio allocation?How do you build an effective bond portfolio for retirement?Timestamps:0:00 - Listener case study2:37 - James’s perspective on bonds7:42 - Considering purchasing power10:18 - Balance of stocks and bonds13:39 - Dividends are typically resilient16:40 - All bonds not created equally20:30 - Bond ladder23:09 - Different types of bonds24:51 - Withdrawal strategy26:39 - More on bonds30:09 - 3 questions to considerCreate Your Custom Strategy ⬇️ Get Started Here.

James explores the concept of sequence of return risk in retirement planning. Most people are unaware of how risky this is, as it doesn’t become an issue until you begin living off your portfolio.Responding to a listener’s inquiry about early retirement, James dives into the potential impact of market timing on retirement outcomes. Learn three actionable strategies:Ensure a reasonable initial withdrawal rate.Implement a suitable withdrawal strategy.Own a diversified mix of assets.Questions Answered:How does sequence of return risk impact retirement outcomes?How can early retirees protect against sequence of return risk?Timestamps:0:00 - Ben’s question3:19 - Sequence of returns matters6:48 - 3 projections to consider11:49 - The 4% rule16:05 - Considerations for early retirees18:57 - 3 protective takeaways22:15 - SummaryCreate Your Custom Strategy ⬇️ Get Started Here.

Should you sell long-term stocks for a real estate investment?I walk through one listener’s question and explain what you need to consider before making such a decision. Aside from the obvious–is it a good financial investment–you also need to consider if it's a good emotional decision.Learn:➡ The tax implications: how are capital gains taxed differently?➡ How to compare the dividends of a bond to those of a property investment➡ What important factors and questions need to be carefully accounted forQuestions Answered:When does it make sense to sell long-term stocks for real estate investments?How can you determine the “dividends” of a real estate investment?Timestamps:0:00 - Trade stock for real estate?2:55 - Calculate yield6:39 - Consider net operating income9:15 - Other considerations12:36 - Calculate taxes18:57 - Quick summaryCreate Your Custom Strategy ⬇️ Get Started Here.

When you’re doing well financially, paying advisor fees might seem unnecessary. So do you need an advisor if you’re already in a good place?Having a successful retirement isn’t just about not running out of money; it’s about what more you can do.Through a real-life client story, I explain how having an advisor’s perspective to implement the right strategy can be more valuable than the cost of their fee.Advisors can help you avoid biases in the way you invest and plan. They can ensure you have the right withdrawal strategy and don’t overpay on taxes. When handling finances for yourself, you may worry about what you could be missing. A good financial advisor will give you peace of mind, knowing you have all the right information.It’s important to reframe your thinking: Is the cost of your advisor justified by the value provided? Questions Answered:What’s the opportunity cost of not having an advisor?What value does an advisor provide when you are stable financially?Timestamps:0:00 Financial advisor vs DIY3:37 Does an advisor add value?8:30 Story of lost opportunity12:27 Understand the bigger picture13:41 Being ok vs optimizing17:44 Risk of wrong withdrawal strategy21:13 Risk of overpaying taxes22:20 Continuity costs23:27 The real goal27:31 Appropriately compareCreate Your Custom Strategy ⬇️ Get Started Here.

James addresses a listener's question regarding Social Security strategies in retirement. Sasha, aged 59, seeks advice on when to start collecting Social Security, considering her husband's benefits and their overall retirement plan. James emphasizes the importance of considering spousal benefits, survivor benefits, and age gaps in making this decision. He explores the complexities of Social Security analysis, encouraging listeners to run break-even calculations based on the assumed age of the first spouse's death rather than just life expectancy. James also shares a real-life example where delaying one's own benefit and collecting a survivor’s benefit early can be a strategic move. When choosing a Social Security claiming strategy, evaluate the broader impact on taxes, withdrawal rates, asset allocation, and legacy considerations. Questions Answered: How does the age gap between spouses impact the Social Security claiming strategy?What factors should be considered when deciding on your Social Security claiming strategy?Timestamps:0:00 - Sasha’s SS question2:19 - Analysis of Sasha’s situation5:51 - The challenge9:08 - When assumptions don’t pan out12:29 - General principles16:08 - Look at the whole pictureCreate Your Custom Strategy ⬇️ Get Started Here.

James explores the nuanced aspects of Roth IRAs, shedding light on intricacies that can confound even experienced investors. Through a listener question from Manfred, a retiree contemplating a $50,000 conversion from a 401k to a Roth account, James dissects the crucial five-year holding period and the order in which contributions, conversions, and earnings are treated during withdrawals. James also provides clarity on distribution rules, exceptions, and strategic considerations, offering a comprehensive guide to navigating the complexities of Roth IRAs for optimal retirement planning.Questions Answered:How does the timing of subsequent conversions impact the application of the five-year rule?In Roth IRA withdrawals, what is the specific order of operations, and what implications does that have? Timestamps:0:00 Manfred’s question 1:39 Get the cheatsheet2:37 Understanding source nuances7:01 The five-year rule8:37 IRS’s order of operations11:59 Exceptions to the rule13:49 Only a small impediment16:14 Back to Manfred’s exampleCreate Your Custom Strategy ⬇️ Get Started Here.