2.10.23: Audio automatically transcribed by Sonix

2.10.23: this mp3 audio file was automatically transcribed by Sonix with the best speech-to-text algorithms. This transcript may contain errors.

Producer:
Any examples used are for illustrative purposes only and do not take into account your particular investment objectives, financial situation or needs, and may not be suitable for all investors. It is not intended to predict the performance of any specific investment and is not a solicitation or recommendation of any investment strategy.

Producer:
Welcome to your Retirement Unbroken with your host, Merrit Strunk.Merrit is a licensed fiduciary and financial advisor who always places your needs first. Merrit works hard each day to educate Americans like you on how to reach the financial freedom they've worked so hard for. And he can help you, too. So now let's start the show. Here's Merrit Strunk.

Merrit Strunk:
All right. Welcome to the Retirement UnBroken Show and podcast. This is Merrit Strunk, the host of the show. And if you're joining us, you're part of the great unbroken nation. Our mission is to educate you, equip you and make you more financially savvy so that you can potentially unlock your financial future. So if you're listening here, we're just grateful that you've tuned in today and we know that we're going to give you some information, some good meat on the plate to help you be wiser, smarter and better and even run faster about your financial well being. So for the show today, this show today, we're going to hit the market a little bit. We're going to talk about a review of the top line points You need to know about the Secure Act 2.0. If you're going, what secure? Act 2.0? I don't even know what you're talking about. When did one point come out? Well, then you're going to get some good news, a lot of changes that might affect your retirement accounts. So we're going to talk about inflation demonstration a little bit. And we're going to hit a couple of key points here on our retirement planning series, the Smart Retirement Planning series. But before we do, I just want to say howdy to Matt McClure, our senior producer here in the booth. Matt, how are you doing?

Producer:
I'm doing great.Merrit I hope you are as well in beautiful Southern California.

Merrit Strunk:
Yes, sir. And if you've never been to the Retirement Unbroken website, why don't you step on by to w w w RetirementUnbroken.com And if you need to talk to us, talk to us about any of this stuff, just call us. Call us. We're you know, we don't bite. I make it a policy to talk to everyone personally. You can call us at 858 521 9700 and we'd love to talk to you. Answer any questions you have. And, you know, I got to tell you, folks, you know, here here we are making this offer. Call us and we'll give you some unbiased feedback on things or whatever or Answer your questions. A lot of people have questions about what's going on now or what they should do in their situation. We do spend time with people educating them and sharing information when they call us or email us through the through the website or directly, look, you can Google us. My name is Merrit Strunk. The name of the company is Momentum Financial. We also have Retirement Unbroken show. You can Google any of that and we will pop up right away. So we're going to go ahead and get in the show here. But first, I would like to go ahead and give you a little financial wisdom quote of the week. Matt, bring it on, my brother.

Producer:
And now for some financial wisdom, it's time for the Quote of the Week.

Producer:
And I will do just that. This quote of the week this time around actually comes from Will Robinson and not the one from lost in space.

Merrit Strunk:
Danger. Danger.

Producer:
Exactly. Exactly. None of that going on here. This is the author, Will Robinson. And he said one time, quote, Financial fitness is not a pipe dream or a state of mind. It is a reality.

Merrit Strunk:
If you are willing to.

Producer:
Pursue it and embrace.

Merrit Strunk:
It. Yeah. Yes. Financial well-being, financial fitness, not a pipe dream or a state of mind. You have to be willing to pursue it and embrace it. It's like this. You're going to go on a road trip. You need to know where you're headed. You need to have a map to get there. So you got to pursue it. Okay, folks. So a market update. Markets were mostly down today on the primary indices. It's interesting. We had an up day the other day. And as Jerome Powell had mentioned, that inflation seemed to be coming down. We seem to be really getting it down there, folks. Yeah. And what happened was the market liked it and then it took off really nice day or the other day. And then what happens? Then they get the sell off, people take profit and then the market goes down. That's what we're seeing. We're seeing some ups and downs. Right. And it's really all around the Fed. The Fed in approved their 25 basis points. Last week or so. And so that softening of those rate increases again. Right. So when they do that, they they raise rates for short term borrowing is what what's happening there. They're taking liquidity out of the market, strangling the economy, trying to slow the rate of price increases, which is inflation and cool this economy and dial it back. Right. So, yeah, you know the story. The Fed has made all these rate increases and that that's their tool. That's their tool that they've got to do.

Merrit Strunk:
That's how they're going to beat inflation back. So then it lowered, you know, lowered the inflation rate ever so slightly. And then we're making progress. There's a little bit of lag effect. You can imagine if someone to raise lending rates 75 basis points, not once, but twice, but not four, not five, but then a 50 basis points and now 25. Och, well that takes a little time. You can't just do that month by month and month and expect it to click. But the Fed knows they're trying to get to a terminal rate in the future of which they lend money and then they've got what they call bullets in the gun. Right. The bullets and that they have to spend. If we need to stimulate the economy, then they do what's called the Fed pivot. Everybody do the Fed pivot. Yeah, that's that's right. That's right. You do the Fed pivot. No, it's not the it's not the dance. It is changing their perspective now to we were raising rates, but now look at the economy. It's down. So now we need to go ahead and loosen up liquidity and we need to drive the economy again. And then guess what we get to do? We have to go on a bull run. So there's the wisdom of not stay. No, don't be out of the market. Be right in there at your risk tolerance and then you can take the ride up with the recovery. Right. And on the bull run. And right now we see the the S&P folks is up for year to date.

Merrit Strunk:
You know, yesterday it was about eight plus percent. Today it's down. So it's about seven something percent. But the good part is year to date, we're in the green. That's a good thing. We haven't seen that in an entire year. You know, it just was down. So that that is tough. So I would say this for you. It's like, okay, what are we supposed to think about that merit? That's great. We're up year to date and we hope that those successively higher closes continue as a trend. However, uncertainty still abounds. And I'll tell you this, and some of our tactically managed strategies and I've talked about tactically manage portfolios before, and if you don't know what that is, that probably means you don't have one, right? That means it's not even active. We have actively managed strategies, but tactically managed every day measuring what's going on in the market, eyeballs on your portfolios. And not that long ago we're talking days. We added risk, not a lot, but a little more risk, more like cautiously, cautiously bullish sort of positioning to some of those portfolios. That's a very good sign. But I will say this just as quickly. We may receive some negative market signals and we might we might then once again correct that there is a way that I call more like brake portfolios and the car metaphor. You've got the gas pedal, you've got the steering wheel, which is active and you've got the brake, and that brake is money that is conservative.

Merrit Strunk:
I want better than bank rate, but I want to try to avoid any large losses. And that's really the purpose of those. Right. So we are seeing some nice things and we are adding a little bit of beta beta to the portfolio. So class vocabulary term beta, that is really financial lingo, which means add risk, add some beta back into the adding risk. So if you shows ago we did a review, kind of an in-depth review of changes to retirement accounts that are now in place for 2023, and that happened via the Secure Act 2.0. And these are so important, we're probably going to cover some of those, again, just the top ones. So this passed in late 2022 in a congressional session, and this is what it could mean for you. So the changes that will affect retirees and pre retirees are M D's. If you're a regular listener to the great unbroken nation and you carry a membership card to the unbroken nation, then you know what this is r m d required minimum distributions. That is, if you had a pretax IRA and it's never been taxed before. At some point in the future. You can imagine the IRS wanting its tax dollars, Right? So they were going to force you to take money out whether you need it or not. That's a required minimum distribution. You do a little calculation, figure out what that amount is, and then you take it out.

Merrit Strunk:
And during tax time, you pay the taxes for that withdrawal. So a couple of years ago that was 70 and one half. Then the Secure Act under Trump, he changed that to push it back during some tougher times and like COVID situation and pushed it back to 72. And now with the Secure Act 2.0 has been pushed back to 73. So at 73, now is the law of the land for your pre tax IRA when you have to take money out and then you get taxed on it on your pre tax IRA. And that is still where the majority of retirement account money lies in comparison with a after tax dollar tax free forever. Roth And you heard us talk about on the show many times about Roth IRAs. Then there's another change coming starting in 2033, I believe, top of my mind, which is then that age gets pushed back even farther back to 75. So with the age of RMDs changing, you might be you might the stress, this might with an underlying it might be better for you to consider. Letting your bulk never been taxed before money grow longer before you take out. The RMDs from drawing from these accounts until you need income. But I'm going to give you a juxtaposition there. Let's turn it around. If you think of taxes are going up over your lifetime, why are you waiting to take that money out at your potentially low as historical tax rate? So let's say you're at a 24 tax rate bracket, right? And you take that money out and you pay your income tax rate on it, That's great.

Merrit Strunk:
Had you waited until 75 and 2023, you're it's more like this. That money in there is on loan from the IRS to you to grow. But then the tax rates are going to go up over your lifetime and hopefully that IRA balance is grown. And now that big chunk of money that you got to take out, now, it's at a higher tax rate. So whether you start taking it out now to legalize your tax hit on your income tax or wait longer. Depends on you and your situation. So if you're trying to figure out which one works for you, let's do the calculation for you. Let's take a look at that and see which one is best for you. How does that work out on your long term goals? What happens if you don't take that money out? Right. The IRS has a big old bat. That big old bat says the penalty used to be if you don't take your RMD when you're supposed to whack, we're going to charge you a penalty of 50% of the amount that you were supposed to take out. So let's say you needed to take out 30,000 for your required minimum distribution, but you didn't. Okay. The IRS is going to penalize you $15,000. Wow. 15,000. And hey, I could use a little extra 15,000 rather than give it back to the IRS. No way.

Merrit Strunk:
So now in the 2.0 secure act, 2.0, that's been reduced. And instead of 50% of what you were supposed to take out, it's now 25%. And if you say, whoops, you forgot to do it and I file a corrected tax return, then they're going to lower it down to 10%, which is nice. Isn't that nice? That is nice for the IRS to do that. Super. Then another 2.0 change out there is catch up contributions. That's right. No mustard contributions, Just ketchup contributions. No, no, no. That's not what I'm talking about. So when you have a retirement account, like a41k or an IRA or something like that, after you go past 50 years old, you now are able to do additional money that you can contribute. And so there is now a catch up contribution that will go into effect and go into increases at 2025, not 2023, not 2024, but 2025 for your 401 K and your 403b and your government plans and your IRAs. And this will give pre-retirees more room to catch up and save. If you're wondering what those amounts are and the breakdown of that, go look and listen to our previous episodes on the Secure Act 2.0. I believe it's two episodes ago, possibly. And that's going to give you all the whole breakdown of what those numbers, what those amounts are and so on. I'm not going to take the time to do it here. Then if you've got college folks, you're a pre retiree and you've got college age children and you are wise enough to put it in a file, put money in a 529 so that you're prepared for that.

Merrit Strunk:
But look, maybe their plans have changed or maybe they didn't use it all. So one of the changes in the 2.0 secure act 2.0 is if you got money in that 529, it's been in there for 15 years. Listen to this. Now you can do it. You can roll it into a Roth. You can roll it into a Roth IRA for who? Well, for that beneficiary for that child or the beneficiary that's stated. And by the way, you can always change a beneficiary of a 529, but you can't do it afterwards. Right. So let's say you got extra 100,000. I know that sounds crazy, but you've got an extra. There are some 529 that people didn't use it and you had grandpa and grandma give money that. 529 and now it's just plump and it's sitting there and they didn't use all the money. What do you do now? Now it can be rolled into a Roth IRA for that beneficiary for that child, which is pretty cool. Then it is subject to the Roth IRA contribution limits. But you like this then? And. But not if that. But this then that's a logic argument. There is a lifetime limit of the roll over. Right. So you gave me that was using that example of 100,000 for easy math, but it's actually limited to 35,000. So you can you can roll 35,000 of left over money and a 529 into a Roth.

Merrit Strunk:
So those are some really super great changes that came through with the Secure Act 2.0. If you're wondering like, wow, I wonder which one of those apply to me or how can I use or are there more how do I do this? Smart, right, Smart. That's the whole idea about retirement planning, financial planning, making sure you and your family are financially secure. We want to offer you this. We can help you navigate these changes. We strive to help our people that contact us and adapt to what's going on with legislative changes or tax changes, things like that. If you've never had a plan, then why? And is it okay now to get that? I'd say every second is the next best time to get control over this, to ask the questions. How many times have we talked to people that go, Man, we've been talking about this and we just put it off, put it off, put off, put off. Guess what? You're 50, 55, 48, 38, Any of those times. Get your plan together, because sometimes it's not too late to make a change that will change your life forever. And I'm not kidding. We do it all the time. So call us and get what we call the Retirement Unbroken report. And that is all of these critical components that you get to see your entire financial life, whole cloth, that we'll do it right in front of you, right in front of your eyes.

Producer:
Want to know where your hard earned money is going. It's time for an inflation demonstration.

Merrit Strunk:
There's something coming up this weekend, isn't there? There is a big national event going on that hundreds of thousands, maybe even millions of people are all going to gather around, eat chicken wings, drink the libation of their choice and hoot and holler and yell and all those other things. What, what, what, what is that mat? What volleyball is it? Volleyball. Did I get that right? Could be.

Producer:
Could be. It might be.

Merrit Strunk:
You know.

Producer:
Cricket or something like that. I think maybe as a possibility.

Merrit Strunk:
Very, very popular here in the United States. Very pop. Now, it's the Super Bowl. It's the Super Bowl. And if you thought if you thought inflation on butter and eggs was bad, right. Super Bowl tickets, if you're lucky enough to get them, you know, somebody who knows somebody who's got the inside, you know. Wow. So the Super Bowl number one, how long ago is that? Anybody remember that that's listening to this boy, if you are I did call in will recognize you. Super Bowl number one was in 1967 and you could have a stadium seat watching the Super Bowl for $10. Isn't that nice? $10 for the Super Bowl. And since then, it went up to 21, up to 75 and 1996, it went up to 352,006, still somewhat reasonable at $700 for a really nice quality time with you and a buddy or a friend or family member. Okay. Then in 20 2016, Super Bowl 50. 2500. K Now you've got a guess yourself. All right. How much is Super Bowl 57 and 2023. Okay, Starting prices, just holler it out. I can't hear you. Can't hear you. Right. It is $5,400. $5,400 for a seat. A seat. Ouch. Yeah. You haven't even bought a beer or anything by then. And if your team doesn't win. Yikes.

Producer:
Oc and your buddies saying, Oh, you're not taking your buddy to this one. The buddies staying at home, you get to go by yourself.

Merrit Strunk:
You know, this. This is inflation. I got to tell you. So, yes. Somewhere around in the 1970s, a brand new car cost around $3,100. And now look at it now 40, 50,000 for a brand new car, depending on which car you're talking about. Right. And that's not even an electric vehicle. Right. So. So think about this. That is inflation in Super Bowl tickets alone, nut shell deliver to you. Ouch. It is a time now here we are, second month. It's already the second month in 2023. And I'm telling you, this is the best time to do a smart review of your financial situation. So that is where we review the performance, review your holdings, review your risk tolerance. Right. And it reminds me, Matt, one of the famous statements for Ronald Reagan. Right. By the way, Ronald Reagan had some really great one liners when he was talking out loud, One of one of the guy he where was he? In Germany or somewhere. And he was talking and something went bang. And everybody flinched like he was being shot at. And he goes, Miss me? Right? And he just killed he killed it, You know, Ronald Reagan. Cool as a cucumber, right? Always, always miss me. I'm shaking my head like Ronnie. And then the other one, he had a heckler just like there was in the the State of the Union speech just the other day with Biden. You know, somebody heckled him and he and he looked at him. He goes, shut up. Oh, Ronald Reagan. Yes. The president putting you in your place. Absolutely no Ronald Reagan's phrase in one of his very famous for is trust, but verify. Trust but verify. And I want you to kind of take that related to your investments in your in your financial situation, trust but verify.

Merrit Strunk:
That's great. There's nothing wrong with verifying. Let's do a comprehensive review right now before this year gets going here. Rate of return fees you're paying allocation risk exposure to loss. Right. What a great time to do that. Marshall Market's getting ready to go up right. Get hopefully, you know, God willing, the creek don't rise what they say So call us up go to our website retirement or broken dot com request your personal and custom retirement unbroken report and this is at no cost and no obligation to our listeners. This is going to be educational and very, very helpful. Every single person that goes through this process and gets their report goes, Aha, I didn't know that. That's interesting. And our hope is even if we don't work with you, that you will end up in life much better off, much better off financially. And you only work with us, by the way, if it is best for you. We don't want to work with anybody where it doesn't work out right and like I said, I don't buy. I make it a policy to talk to everyone who reaches out through through the show. We're going to take a quick break here. We're at the end of our first segment here, but I want you to be thinking about that. And if you want to stop by our website, Retirement UnBroken, you could do that. And also you can just give us a call at 8585219700. We'll see you right back here on the Retirement Unbroken show with Merrit Strunk after the break.

Producer:
Are you concerned about market volatility, rising taxes, economic uncertainty, and how it all could affect your future in retirement? Then tune in to your retirement. Unbroken with your host,Merrit Strunk. To learn how you can protect and grow your hard earned money. Your Retirement Unbroken every Saturday at 1:00 PM right here on FM 96.1 and AM 1170. The Answer Protect your hard earned money today and schedule a free no obligation consultation now at retirement un broken dot com.

Producer:
Are you concerned about inflation, political uncertainty, rising taxes, and how it could all affect you and your family during retirement? If you have an IRA balance over 400,000, you could save six figures in retirement taxes that you would be paying over a 35 plus year retirement. Find out how much you could save today by scheduling your free Roth conversion consultation with Merrit Strunk at RetirementUnbroken.com. Missed part of today show your retirement unbroken is available wherever you listen to podcasts and online at RetirementUnbroken.com.

Merrit Strunk:
All right this isMerritand welcome back to the retirement and broken show and we just got through talking about smart review and I want to ask you something if you're already in retirement. No, I'm not We're not talking to the pre retirees right now necessarily. This is a great question for the retirees. Did you suffer significant loss of value in the 2022 market? A more than likely you're shaking your head. The reason why I know that is. S&p was down close to 20. And even if you had something of a diversified portfolio, which I hope you did say very stereotypical, a 60% equities, 40% bonds and bonds were your hedge. In 2022, both equities and bonds were down. Almost all asset classes globally were down right 94%, if I recall correctly, of all global asset classes were down and sometimes significantly. You know, if you were just in commodities, fine. If you were just in energy, then okay, then maybe you're in there or maybe you're in a single stock that did okay and escaped the market drawdown. So if you're 64, if you're in retire and you Answered, yes, I suffered significant value loss in that market. You're going to be saying that, huh? Yep. Don't even need to think about it. So. So now you may be saying yourself. Yeah, but. t. Listen up, buddy. Mr. Financial Advisor, I know the market's up 8% or close to 8%. Well, seven today, but close to 8% year to date. You're right. Let me ask you this trick question. If you have a dollar.

Merrit Strunk:
And you lost 50% of that dollar value in the stock market. What percent do you need to grow that money in order to get back to where you were? To get even. Most people say, oh, 50%. Yeah, I've got I've got to replace that 50%. In fact, folks, you only have $0.50 left. So you need to get 100% growth. On your $0.50 to come back to your full dollar. Did you did you hear that? If you lost 50%, you have 50% $0.50 left. You need to get 100% growth on that $0.50 to get back to your dollar. So how long is it going to take you to get back to where you were and when was the last time the market increased 100% from where it was? Now, going forward, it's like this. We really lost a lot of money in 2008, and here came 2022. And guess what? Potentially that happened again. Are you kicking yourself and saying never again? Or you saying, oh, look, it got better? Because now time is not on your side. You don't have time to get back there. Now's a great time to reassess your risk tolerance, your allocation and your plan might as well get it inspected, and we'd love to do that for you. So interesting conversation. All right. So maybe you're not there in retirement yet. So these are some rules we're going to talk about smart rules. These are rules that are kind of rules of thumb. Rules of thumb. And they're fun. They're fun at parties.

Merrit Strunk:
All right. So that can help you kind of figure things out. Rule of 100 K, the name of this rule is Rule of 100 is a way to figure out just on age, just on an age based rule of thumb, how much risk you may consider taking. It's not a psychological risk comfort level, but it's just a mathematical based on your age risk or okay, here it goes. Rule of 104. Really easy math will, will will do this with the age 70. So let's say you're age 70. You'll take the number 100 and subtract 70. And what are you left with? Everybody just said 30. You're right. Fantastic. You're a very good class. Very good class. So now you have 30. So you've got two sets of number. You got you got a 70 and a 30. Okay. 70% conservative investments that are exposed to less risk in the market. 30% exposed to some level of risk. You see how that went? Take the 100 number, subtract your age we use to 70 years old, and then you end up with the other number, which is 30. The difference, 70% conservative, 30% at risk. Makes sense. If you're 70 years old, I can I can maybe do 30% risk and then 70 70% something else makes perfect sense. Bring it in to your situation. Let's say you're 25, you're super young and you're starting your investment, right? That's an easy one. 25 from 175 is your other number 75% mark at risk and then 25% something as hedges.

Merrit Strunk:
Not that they're not at risk or subject to growth, just, you know, less risk, a little less growth, especially for 25. Right. But you get the idea. So there's the rule of 100. You may not have heard it before, but you might want to ask somebody, what do you know? How much how much do you go do do the calculation. So take 100, subtract their age, and voila. Then there's the 4% rule, 4% rule. So if you got a full beer and drink for now, I'm kidding. You're not going to drink 4%. So 4% rule is some time ago there was a very smart individual as a financial advisor, and he figured out that if you only used 4% of your assets in retirement per year, that your nest egg should last you the rest of your life, just take 4%, you know, then you'll be fine. And you could say, well, 3% of that some maybe is dividends and 1% is capital appreciation from the capital appreciation profit. Right. You could say that it might be true. It might not be true. But again, that's what happened then we hit the very low interest rate environment. Which was just two years ago. And now that 4% rule fell apart. I mean, it's a great place to go. A great place to start. But a 3% would be even more conservative. So a 3% rule. So what they're saying is, you know, could be a safer route to go to track your money and make sure your money last the rest of your life.

Merrit Strunk:
So with inflation as high as it is and the low interest environment, a 3% came into the conversation go you know, that 4% rule debunked maybe 3%. Now maybe that works. I've even seen some some people in the financial services academia, analysis researchers financial analysts say to 2% ultra conservative take 2% per year and you will then be assured to last the rest of your life. Now, it's a rule of thumb, right? If you've got 100 bucks and you're taking 2%, you're not you can't even not going to happen, right? I got it. So in that respect, you've got to take it for what it's worth. On that rule of thumb, 4%, 3%, things like that. Okay. The next rule of thumb is pretty fun. If you're thinking you need to reexamine your definition of fun, none of this is fun merit, you know. Och, well, you're here listening to this for a reason. I'm going to have a cup of coffee, by the way. Hmm. Coffee costs, by the way. Global warming. Do you know the people that grow coffee in the world have to keep going up that mountain to hit that right climate? So there's only so much of that mountain you can go up, right? So coffee is also going up. We're probably see some scarcity of coffee somewhere along the line that keeps going on. Och, rule of 72. Yeah. I know a lot about a little, don't I. Or a little about a lot. One of those things strike that, reverse it.

Producer:
Just enough to be dangerous.

Merrit Strunk:
That's the. Yeah, yeah, yeah, yeah. Or distracted. So rule of 72 is a very straightforward calculation, and it's used to estimate the time it will take for an investment to double in value. Rule is 72 is what you use to calculate how long an amount of money will take to double. To calculate this, you'd simply take, you know, divide 72 by an expected rate of return to get the number of years needed to double the investment. So for example, if the expected rate of return is like 8%, then it will take nine years, right? So that'd be 72 divided by 8%. And then you equals nine is all the high school math students would know that, right? 72 divided by eight equals nine. So it will take nine years for those that money at 8% to double. Right. So the rule is 72 can be used also to help investors determine which investments to make and how long to hold them. Right. So by understanding the expected rate of return for that investment, investors can use that rule 72 to estimate when's it going to double for me? You know, if that's number is important to you, that'd be nice. You know, like, for instance, if I have 100,000, how long will it take for that 100,000 at an 8% growth rate to double boom rule. The 72 can do that. So it can also be used kind of in reverse to to estimate the rate of return needed to hit that goal.

Merrit Strunk:
Right. So how about this? For example, if an investor wants to double their money in three years and they need an expected rate of return of 24, so that be 72 divided by three, yada yada yada. 24 makes sense. Och rule is 72. So those are some great rules, aren't they? So we cover, you know, the rule of 100. Figure out your risk based on your age as a rule of thumb, 4%, the distribution rate that you might use from your nest egg to last your lifetime, 3% might be even more conservative. You might want to use that. Like we said, then the rule is 72 to figure out how long it takes money to double, at what rate of return or how long it might take. Purty Nice. Right? We've equipped you with some really great tools here. The rules write quick down and dirty rules of thumb that are very very helpful. Och. So that brings us to smart income. Too many people think it's about building one big giant number, right? Nest egg number. All right. $1 billion. Right. So it's not so much about the big nest egg. The assets. Right. You need to have a plan to replace your income and fund your monthly expenses. So that's kind of like the income gap. What are my expenses? What's my income? Subtract my income or the expenses from my income that I expect in retirement? Then I end up with the income gap.

Merrit Strunk:
Now it becomes a question for financial advisors to figure out, well, how do we fill and fund that income gap? Right. So that's about a lifestyle conversation, too. So part of that income that you will receive is Social Security. You know, Social Security. I don't know if you heard the State of the Union, but right away a very divisive conversation. Of course, it's campaign trail type of a bullet point, which is that side of the room is wants to take away your Social Security and your Medicare. Well, yeah. How how nice to get the attention of all seniors with a gray hair going. We're going to take your money away. Well, you're not going to do that. You know, these are round numbers. So Social Security benefits are what's considered to be a non funded obligation by the government. Yeah, there's a trust fund and it's only expected to. We don't be able to fund 75% of its obligations at some point here in the near future. So somewhere around, I'm going to say 69 to 70 million people. And don't quote me, guys, I'm not I'm not bringing this up on a source, but it is a source that was in my head for quite some time. So let's just say 69 million people are on some kind of Social Security benefit. You know, that that there is.

Merrit Strunk:
And then let's just say about 5 million or so people are lumped in there every year as a growing factor. So if doesn't matter who's in the White House or who's in the House of Representatives, it doesn't matter. So when they say we are going to cut or take away your Social Security and or Medicare benefits permanently, you're going to have 69 million people with walkers and canes and pitchforks and torches. It's headed towards Pennsylvania Avenue to take that bum out of office. So politicians know this is a hot point. They will not do that. They may modify it. They may make it less sweet. They may take away the 8% delayed retirement credits. They may push the election of benefits back past 70, which currently 70 is the latest. You can do it. And they may tweak these these little different things. It may take away spousal claiming strategies. If you don't know what that is, you probably should and they may just make it less sweet. I couldn't understand how they would do that. Do you remember not long ago, all across Europe they were having riots about changing their austerity programs. You mean the austerity programs, their pension, these socialist countries that were cutting their pension. Greece insolvent. Greece was people were, you know, protesting and throwing stuff at cops because they wanted to cut their pensions because there was an insolvent government.

Merrit Strunk:
Why are they insolvent? Because the austerity national pensions were too much. Och, you're born there, you're a citizen, you get a guaranteed pension. You know, that's a tough one. So when government kicks the can of the budget, the budget limit down the road, down the road, down the road, $31 trillion of deficit. That's how that happened. Nobody's budget. Nobody's controlling the budget. Everybody wants to run for office and keep their seat permanently. And no one will make the hard choices. But Social Security, you get taxed at about 7% on your on your income tax, on your paycheck. We don't like when that happens. And it's a big chunk of money that comes out of our paycheck, except when we retire. If you're entitled to Social Security, it now becomes a lifetime pension per say air quotes. Then there's a cola increase. See cola, cola cola, cost of living adjustment. And right now that's average. Last ten year average, top of my head, 2.48. It was much less than that about two years ago as an average and it was more like 1.4 something. Why? Well, we had inflation. We had the largest amount of inflation. You'd have to go all the way back to the eighties to see similar rampant runaway inflation. When you elect your Social Security, those COLA increases come into play. If you take it early, your level setting in a lower, lower benefit package. If you're waiting to 70, it's going to be higher, right? 8% delayed retirement credits per year that you delay.

Merrit Strunk:
Let's just say 67 is a full retirement age for most people, plus or minus some months. And then you can get C three years from 67, 67 to 73 years, 8% per year, 24% greater compound benefit. That could be another 1000 a month. Think about this, 1000 a month times 12 months, right? That's 12,000 more a year. Then do the calculation times however long you spend in retirement, let's just say 30 years, 12,000 a year times 30,000. Right. That's a lot more that's a lot of money. And you need to know these things. People give up hundreds of thousands of dollars when they elect Social Security benefits. Unbelievable. I'll tell you a story real quick here. My mom with a schoolteacher for about two years before she gave birth to her amazing, you know, daughter and son. I'm just saying. So then she became a, you know, a homemaker. And dad was out plowing the fields at the donut factory. Right. He was he was out there making the money. Very stereotypical sort of American situation back in the sixties. So much, much later as I my building, my financial acumen, I asked Mom, Mom, when you elected Social Security, how old were you? When did you do it? She goes, Oh, honey, I elected the first time I could. Why? I was like, Well, mom, that's 62, blah, blah, blah, blah.

Merrit Strunk:
Right? So I'm like, Mom, did you elect at your income record, your individual benefit record? And she says, Well, of course, I was like, Well, didn't you only teach school for a couple of years? You could. Yes, I did. So that's that can be a lot of income that their Social Security was calculated on. I'm like, Mom, why didn't you claim spousal benefit on dad? They were divorced, but on Dad's benefit. She goes, Well, I don't know what you're talking about. Oh, what? What? I tell you, he worked 30 plus years or more. He made the money in the family, and you could have claimed 50% of his record without diminishing his. And her mouth dropped open. Och, I hate to tell you, but people there's a good portion of people. I mean, we're talking about like 80 plus percent people in America elect at the earliest time they can and they may tell you I'm doing it because it's going to go away and I want money. Money Now I get it. And or you may be single elected 62 and or your health may be bad, therefore you're not going to live a long time. Och, that makes sense. Or nobody in my family ever lived past 65. Och, go ahead and get it right. Makes sense. I got you. However, we are living longer with medical advancements and help with replacement parts.

Merrit Strunk:
And so if you don't know these strategies, I mean, essentially mom left hundreds of thousands of dollars on the table for the government to keep that she was entitled to. Isn't that amazing? And by the way, if you're divorced and you married twice and you were divorced two times, you as long as you were married ten years minimum, like ten years on the day. Not a day short, but ten years and divorced at least by two years. You could actually pick which husband she would like to claim spousal porn of her ex spouse. Wow. There's a small group of ladies out there who just had an epiphany. Right? Wait a minute. And by the way, I said, Ladies, but guys, if you're if your spouse made more money than you and you divorced, you can still claim spousal on them. It's not a gender specific deal at all. So you can see interesting ins and outs of Social Security, by the way, Max monthly benefit in 2022 for people ages 62 was $2,364. Isn't that cool? Max benefit for in 2022 for people age 70. Listen to this. 4194. Wait a minute. 62 2364 or 70 years old. Max monthly benefit, 4193. That's a whopping difference right there. That's the pay raise that you get when you do the 8% delayed retirement credit. This is what I'm talking about, that if they did change Social Security, they might unsweetened that program and say, no, you don't get those 8% delayed retirement credit.

Merrit Strunk:
But what's their incentive then? What's the incentive, you know, to put it off so they would have a hard time kind of make that make that work. So think about this. If your max monthly benefit for you at 62 was 2364 and therefore do the calculations times 12 per year, that's 28,368 28,368. But if you did the same thing for the 70 year old who's making 4001 94, that's 50,328. Do you know what? I meet with people, Matt and I go through this calculation with them and they're getting ready to claim and then I tell them what they can do. One, to bring in more money in the household over their lifetime by doing that spousal strategy. And then the other one is the delayed retirement credits. And if they didn't need the money, then they could go ahead and do that. We're talking I mean, for a married couple who did well, that's a Social Security could be a $2 million decision to get it right over their lifetime. Yeah. Yeah. And for a single person, that could be that could be a million, right? It just depends what they made. Because, you know, this is 35 years of earning history that did do the calculation on and adjusted for inflation and three part sort of deal folks we covered quite a bit here so we did the smart review we did the secure Act 2.0 highlights and then we did some some education on some of the things that you need to know in terms of rules, some really great rules of thumb that you can use if you are listening.

Merrit Strunk:
I hope he took some notes. Kind of hard to do when you're driving, right? I wouldn't encourage you to do that, but it's our pleasure and we are grateful to have this opportunity to help you and equip you and give you the information you need, because this is critical stuff. My name isMerrit Strunk. I am the lead financial advisor at Momentum Financial here in San Diego. But we do business all across the country. We are on the radio, we're on the podcast. Anywhere you take podcast on the radio here, San Diego, 1170 8 a.m. 96.1 FM on Saturdays at 1:00 PM. We would love for you to listen to us live or just go on our website at retirement and broken. Click there and you'll find the episodes and the podcast. Click like Click subscribe, and then you can listen to it while you're mowing the grass at any time. Thank you for joining in here. Give us a shout out. Let us know you listen. Tell us what you like. Tell us if you have any questions we address on the air and we will do that again. This is with the retirement and broken show. We'll see you next time.

Producer:
Thanks for listening to your Retirement Unbroken. You deserve to work with an experienced and licensed expert who will strategically work to protect and grow your hard earned assets to schedule your complimentary no obligation consultation with merit. Visit RetirementUnbroken.com Or pick up the phone and call 858 521 9700.

Producer:
Advisory services are offered through Momentum Financial and Insurance Services LLC. An investment advisor in the State of California. Insurance products and services are offered through Merit Strong an independent agent. California License number L7510 Certified Financial Fiduciary is a FINRA recognized professional certification.

Producer:
Are you concerned about market volatility, rising taxes, economic uncertainty, and how it all could affect your future in retirement? Then tune in to your retirement. Unbroken with your host, Merrit Strunk. To learn how you can protect and grow your hard earned money. Your Retirement Unbroken every Saturday at 1:00 PM right here on FM 96.1 and AM 1170. The Answer Protect your hard earned money today and schedule a free no obligation consultation now at RetirementUnbroken.com

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