12.9.22: Audio automatically transcribed by Sonix

12.9.22: 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 Reitrement 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:
Hello, folks. Welcome to the Retirement Unbroken radio show and podcast. My name is Merrit Strunk. I'm the chief investment officer at Momentum Financial and host of the Retirement Unbroken Show, which is where you are right now. We do this both on radio and also in podcast. So look, if you're interested in hearing this in podcast, while you're mowing the grass or going to Home Depot, you can do that just about anywhere that you take in your podcasts. So check us out. Retirement Unbroken with Merrit Strunk. And I want to thank you for being here today. You could be listening to, I don't know, easy listening tunes, you know, relaxing. And yet you are after knowledge and information that is going to benefit you for the rest of your life if you've listen up and take notes because it's just going to make you more savvy, more educated and more equipped to make the best financial decisions that you can for you and your family. If you haven't been to our website, give it a shot. RetirementUnbroken.com. Click on that complimentary consultation and you can get some time in our calendar. And I talk to every single person myself in person. You can all also call us at 858 521 9700 And we're glad you're here today.

Merrit Strunk:
And we love hearing from our listeners. We absolutely love it. Drop us an email or give us a call with your questions, concerns, things you would like us to address. So here's what's coming up in the show today. We're going to do again, like we always do, touch on the market. Got some interesting developments and perspective on the market today. And for those of you who are still working or maybe who have stopped working and still have a four or one K or a some sort of employer retirement plan, do you have any idea that if you're still working for your employer, that you could do an in-service distribution? And we're going to talk about the reasons why that may be an option for you. We're going to do a great problem solver today, and then we're going to hit up seven questions we can help you answer for retirement. And then lastly, signs. You could be ready to retire now. All right. So let's get into it, guys. Know, by the way, at the time of airing of the show would be December 10th. And Matt, did you know that on this day in 1966, the Beach Boys went on to have a number one single with the song Good Vibrations. Good, good, good, Good Vibrations. Right. That one.

Producer:
Love that song, The Beach Boys in December, though. It's kind of weird, isn't it?

Merrit Strunk:
Yeah, really, really strange. But, you know, every day on the beach is a good day, I guess. And so it's interesting. It's interesting. I'll share with you listeners here at The Unbroken Nation. Right. So that the Beach Boys was my first live concert I ever went to. It was a group of elementary school age kids, me and my buddies, and one of the mothers took us, bought tickets and took us from San Antonio to Austin, Texas, to watch the Beach Boys concert. And it was a real eye opener to me because I'd never seen one before. There was some crazy stuff going on there and the air smelled funny, if you know what I'm saying. And this was this was me, you know, elementary school kid. And going, you know, I feel funny all of a sudden. You know, there was that much of the wacky weed in the air at the time, but it was really cool and totally am grateful for having that as my first live music event. And it's funny that, you know, on the airing of this Good Vibrations with the Beach Boys that that's the first time they went to the number one on the US singles. Now interesting. It was also the first cassette I ever ordered in my life as a child. Matt, you're younger than me and I always want to quiz you on this. What is when you order something cod, Do you know what cod means?

Producer:
I know what code means because I remember when I was growing up, all of the basically all of the commercials would say, sorry, no codes, you know, And so we could cash on delivery, right?

Merrit Strunk:
That that's right. Spot on. So watching that commercial just like you on a Saturday morning, I saw the Beach Boys cassette being offered and I called and I ordered it code. How fabulous. No money. You just order and it comes. So here I am out in the country one Saturday morning and the delivery guy comes with a cassette and he wants to be paid. So I had to get my parents up and say, Hey, I need some money. There's a guy at the door asking for money for it. And they were livid. What did you do? You know, So funny.

Producer:
I bet they were.

Merrit Strunk:
Yeah. So? So I thought that would be a nice segue, actually, that when we started to get into the morning, into the markets here and what's going on at the time of recording here, there are no good vibrations today on the stock market. No, and that could be my number one. It signals and no good vibrations in the market today with Merrit shrunk on their Retirement Unbroken show. Right. So I mean it was much to do about nothing right now in terms of a numeric percentage going up or down. And we see this all the time bouncing above and below the opening. S&p was down a smidge. The Dow is flat and NASDAQ was down. Now the VIX is up. And if you've listened to us before, you might have caught the episode where we talked about what the heck is a VIX? Vix is the index that really measures volatility. And another way to put it is the fear index. It's the fear index. So when there is fear things going on in the market and the VIX is up, that's telling you there's disruption, turbulence, right? There's some turbulence going on in the market. And the other one, too, is consistent with VIX going up is gold. Gold went up. A gold is not really doing the job that we thought it is supposed to do in the volatile markets. It just really is not been doing a great job. You would think it'd be much higher, but it's not. So it went up one and oil went down a -2.57%. So in general, of all the 11 S&P sectors represented in that index, eight were trading in the red.

Merrit Strunk:
So most of them led by communication services and energy. Defensive sector of health care added the most among any gainers. So and what's going on. So reality is setting in for the markets. As the fall rally that we've been seeing here. We had a weak rally and then it just fizzle the way it's ending or has ended. Well, here we have a number of days now in negative. So while the knee jerk reaction from the equity markets was that nothing new from Jay Powell, it was was dovish reality draws closer that the FOMC meeting that's just just a week away that that all right he's just saying you know possible two realities here. One is that we are likely to see a Fed hike raise by 50 basis points and a signal of further tightening in 2023. And the other reality is that the US economy could be headed to either a recession or a long period of stagnation. So you've got those two narratives working out there. You know, So those are the two main ones. And the Bloomberg recession probability forecast is now at 62.5%, a high enough reading to obviously shake the market. So if you're scratching your head in recession, recession, what's going on now? I've been hearing about it for almost a year and recessionary fears. This one indicator is saying that we have a 62.5%. Some time ago, you know, the prognosticators were saying that there's only like an 8% possibility. So, boy, has that ever changed.

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

Merrit Strunk:
Matt, you know, as our senior producer here, I'm going to give you honors, brother, if you'd bring us into the financial wisdom quote of the week.

Producer:
I absolutely will. It's always my pleasure to read the quote of the week because, you know, I like learning stuff from people who are smarter than me. That's why I like spending time with you every week here on the show. But it's also why I like reading words from somebody like this, Jackie Joyner-Kersee. And I kind of love it when we have one. That's from an unexpected source here. But Jackie Joyner-Kersee, if you haven't heard that name in a while, she's retired now. But let me tell you, in her day, she was just winning gold medals left and right, not only in the Olympics, but in any other kind of competition. You can think of the heptathlon, the long jump. Those were her specialties there. And I remember her from the 96 Olympics in Atlanta when I was growing up here in Atlanta, which is where I live, of course. So Jackie Joyner-Kersee said this one time, quote, It's better to look ahead and prepare than to look back and regret. And I think that's true in sports or athletics. And it's also definitely true when it comes to planning for your financial future.

Merrit Strunk:
Yeah, right on. I think as an elite athlete, you that's exactly what you have to do, right? It's as much as a tactical physical game as it is a mental game. And she was a very entertaining, you know, track and field athlete, very entertaining, fast lady. So this with that, with that in mind, that wisdom in mind, you know, this show, this main segment of the show right here is for all of you out there who have been disappointed with the performance of your retirement accounts this year. And that means that's a very large group, Right. Have have you lost double digit figures, triple digit figures in your accounts? It's very possible, given what's going on with the major indexes. So like S&P 500 year to date today say is a -17.95 year to date in 2022. And the Nasdaq somewhere around -30%, almost 31. That is no bueno. And if you have money and you're and the retirement red zone, that's going to hurt if you are already retired, you know that's going to hurt as well, because that is putting you in the sequence of returns, especially if you're drawing down your money. So this is to the folks that are currently working and have a 401K and you've just seen your value of your 401K go down significantly. We want to tell you about what's called an in-service distribution. In this situation where you're in the red zone, you're thinking that, you know, I may be retiring in the next five years or so or even shorter.

Merrit Strunk:
You have an option and many, many plans. And I'd say it's upwards to most of the plans in the United States allow for an in-service distribution. And we want to dispel this myth that you cannot touch your money, that you have an employer sponsored retirement plan like a 401K that you've saved and put into that account. You know, you can in most cases you can. And of course, it depends on your plan and its provisions and things like that and how it's written. But it's always our goal to help people take control of their assets, their assets that you've saved in your 41k or maybe any other retirement account we're talking about here. So most people can remain in that company they currently work for, stay participating in the plan, continue to get the advantage of getting a match. If you're lucky enough to get a match from your employer. Many people do. So you could do all those things and still consider possibly doing an in-service withdrawal. Now what's going on? Right. So why would you even do that? And it's like I said, if you're if you're thinking about retirement and you see a rough road ahead and rough road, we've already gone over and given what's happening in the markets and the limitations of for one case and when I say limitations of 401K is for one case by their structure, need to provide at least three options in large mid small international fixed.

Merrit Strunk:
So at least three of those some plans are richer in choices than others. They might give sort of a technology and science or fund or they may offer a real estate fund. Those are great if your plan does that, and they've included those in recent history to give you some sort of recourse distribution that you can allocate towards given crazy markets. So so you can if you're if you were within those five years, you might consider taking, say, 40 or 50% of the dollars in your 401K and protect a portion of that against market loss. Right. So you're like, well, I just have to stick with this 401K, I just have to stick with these options. Not really. If you can do an in-service withdrawal, you can essentially with the help of a fiduciary financial advisor, derisk that portfolio. What does that mean? Well, we could take that money and and utilize what we've talked many times now as an evolved wealth management approach of using tactically managed portfolios have become really, really popular now because of what's going on the market. How do you protect your wealth if you're if you're going to need that for your retirement? We could do. What we've also discussed in prior shows apply a buffered index fund. Right now I just saw the new offering that we're offering, which is 26% market upside growth potential with a 100% downside protection.

Merrit Strunk:
So what what was that? Let me get that straight, Merrit. I can grow 26% up to like a cap of 26%. And if the market goes down to 100%, I'm covered. I have no loss. Yeah, that's an option now. And that's what I'm talking about. If you're operating under the old passive index funds, mutual funds that you're doing in your 401K and you're not aware of this even in your IRAs, even in your individual portfolios that you may have, there are 1099 tax bases and you're unaware of these things. And it's a great way to put money sitting on the side, especially for that, that you don't want to take any risk, but you would like something like a 26% market upside cap potential. You know, pros and cons to that. The one I mentioning, by the way, is 24 months. So there you go into it at 24 months and you can get your money out there. Another one we've talked about, which is kind of like CD like and the way it functions is fixed interest funds kicking off about five and one half, 5.6% compound over five years for conservative money. You want to give 5.5, 5.6, something like that. Given what's happened with the rate hikes compound over five years, that could be an option to consider, you know, or even creating taking that 40 or 50% withdrawal in service withdrawal from your 41k. And much like the wisdom quote of the week here where you think forwardly right and saying, well, can I create a private pension for myself when I am ready to do it? And can I get that cooking now where I can have income monthly for the rest of our lives, you know, joint income that you just can't outlive.

Merrit Strunk:
And by the way, all of those things that I just laid out here, you know, there's there's no there's no fees attached to those things in order to make that transition. Right. So, wow, I can do it. The net takeaway here, what am I supposed to get from this? The net takeaway is if I'm one of those people who are currently working and I see what's going on, my 401K, can I do something looking forward in the future, just like Jackie Joyner-Kersee says, and then take prudent action now? And I would encourage you to, one, see if it's right for you. There's pros and cons to all those options that we just talked about. And the only way you're going to be able to see it is that we go ahead and play it out in mathematic mathematics and see see what the upside is, what's right for you. We are fiduciaries, folks. So that means any plans or recommendations have to be in your best interest. We take opinion and emotion out of it and use math, math, all that stuff you didn't like in high school math. And prove it out.

Producer:
It's time for this week's. Problem solver.

Merrit Strunk:
Okay, so these are real folks. Here's the problem. There is Edouard married to Marie, one of my favorite names, Grandma Marie. I had a Grandma Marie, our married couple, and they are both in their early sixties. So Ed is an accountant and Marie is an office manager. And they both have retirement plans through their employers that through their work. And they're consistently saving to maximize the free company match. Why would you do a 401K with limited options? You would do that because they're giving you free money as a match and you want to maximize that. And while they're reducing their current annual taxable income, and that would mean they're doing a tax, not a Roth. They've been great savers. So both Edward and Maria are very disappointed in what's happened to their balances and their retirement plans, much like you might be right now. That could be you. You know, if you had high risk in your 401K and this market situation started to happen, you didn't pay attention of a right that could really hurt. You see that and go, ouch. My timeline is kind of short. You know, I'm like like Ed Marie, you may be in your sixties and you see all this money going away and you're we're planning because you're in the red zone. You were planning to retire sometime soon. So each of them have seen almost, you know, 20% or more losses year to date.

Merrit Strunk:
Very real. I mean, people are living this scenario right? So so here's the solution we're working through. Ed and Marie are going to both do a traditional 41k rollover using the in service distribution provision. So we've got these two new accounts and this will allow them to implement a more risk efficient, I would say risk appropriate for their age and time horizon, a market efficient and fee efficient solution. They started asking questions. You know, they reached out and they said, okay, is there a better way to do this? Because we're not happy. What's going on in the employment 401K risk efficient, market efficient, fee efficient strategy? There's nothing wrong with that. So they will withdraw the maximum amount of funds according to the plan regulations so that they can remain in the company plan. So they still get like it's like cake and eat it too. So they're going to remain in their company plans and continue taking advantage of the free match. They didn't give it up. So that benefit is not gone. They still participating in it. We wouldn't we wouldn't suggest anything different. Or the the currently unvested balances. So most people can do this maybe once or twice a year to better control their assets. So how do you find out? Well, I would say give us a call.

Merrit Strunk:
Give us a call, and let's go over some of those questions and we'll address these. It's completely cost free, complimentary. So we'll take a look at your 401K plan. Find out if you can do the in-service withdrawal and you can schedule your time any time it's convenient for you that you can reach out through our website, RetirementUnbroken.com Or you can go to https://momentumfsgroup.com/ or call us 858 521 9700. So we're going to take a break here. Before we go to the next segment, I want you to ponder that and ask yourself the question out loud. Can I do an in-service withdrawal of my retirement, my employer's retirement plan? And how do I know if that works for me? What are the benefits? What are the pros and cons? And there are pros and cons to each strategy, so let's work that through for you. There could be a better answer for you than what you're currently working on, but you'll never know if you don't ask the question and reach out to get some help. All right. My name is Merrit Strunk. This is a retirement and broken radio show and podcast. And we'll see you back at the next segment here.

Producer:
As part of today's show. Your Retirement Unbroken is available wherever you listen to podcasts and online at RetirementUnbroken.com

Producer:
As the song says, it's the most wonderful time of the year, But don't let holiday spending wreck your retirement plan. I'm Matt McClure with the Retirement dot Radio Network. Powered by Amerilife just over $832. That's how much the National Retail Federation says the average American plans to spend on holiday gifts, food and decorations this year. Many of us will spend much more than that. So how do you keep from overdoing it? Financial website Investopedia has some tips on keeping holiday spending under control. Number one is perhaps the most important set spending limits for yourself. Tyler Ferguson with Jack's Federal Credit Union agrees.

Tyler Ferguson:
Some can even go old school like myself and use a cash spending plan to ensure that you're staying inside of your budget. You're actually using cash to mitigate those swiping of the cards. It's also an effective plan if you have kids wanting to shop as well.

Producer:
That from News 4 Jax. The number two tip from Investopedia is to make your own naughty or nice list. In other words, if you're shopping list includes more than five people outside your immediate family, start cutting it, then bake cookies or other treats to give to those who didn't make the cut. That way you spread holiday cheer without breaking the budget and you don't seem like Scrooge Humbug. Other bits of advice from Investopedia include being realistic about your budget. Collecting coupons or discount codes and organizing group volunteering instead of holiday parties. Ferguson says one thing you should not overlook is getting the kids involved.

Tyler Ferguson:
For the younger kids, you want to give them a smaller dollar amount, maybe a $10 cash transaction to kind of help provide them a visual observation of what they're using the funds for. And then for your older kids who have either been saving themselves already or they have a lump sum to kind of go shopping with can open up an account for them. Go over how to budget and how to spend.

Producer:
So how can you give this holiday season without busting your budget? That's a key question to consider. As Santa starts warming up the sleigh with a Retirement dot Radio Network powered by Amerilife, I'm Matt McClure.

Producer:
You're listening to your Retirement Unbroken to schedule your free no obligation consultation with Merrit visit RetirementUnbroken.com.

Producer:
Welcome back. This is the Retirement Unbroken radio show and podcast. I am Matt McClure here alongside Merrit Strunk, the host of Retirement Unbroken. And we've been talking about how to plan for your financial future. Do it in a smarter better way than maybe you had thought about it before, you know, and just sort of reframe your thinking around certain aspects of it. And we've really been talking about 401K and how unhappy you probably are with yours in the first half of the show. If you miss the first half of the show, go back, listen to the podcast version on the website RetirementUnbroken.com because that is going to be some great information there and you'll definitely learn something. So check that out. Well, that brings us now to seven questions in this next segment that we can help you answer for retirement. And actually, by we, I mean Merrit's trunk can help you answer for your retirement. Seven questions here, Merrit and I'm going to present them to you and just kind of, you know, sort of explain how you can help folks answer these questions, if you will, as we go forward. So number one on the list of seven questions is when should you and your spouse claim Social Security benefits if you haven't already? And do you know the best way to maximize your benefits? So how would you guide someone through answering that question?

Merrit Strunk:
Man, that's a super good question, and it's one that everybody hopefully will have to answer. If you've got Social Security benefits, you're entitled to those maximizing it. Getting the most out of it for your household and over your lifetime is a critical, critical decision you've got to make. Why? Well, there are many ways that you can select it and and to tell you the truth, most people, if you if you were to take a guess, you would you would answer this, Right. How many people take it at the first opportunity they can? That first opportunity is at age 62. Now, most people don't know this because they haven't taken the time to ask, but they may be leaving hundreds of thousands of dollars on the table when they do that. Why? Well, UCA is what is called an actuarial reduction. If you take it at the earliest time, that means you're getting 25% less than you would get at your full retirement age. That sets the stage for any increases, COLA increases. Those COLA increases are predicated upon inflation. So now those increases over your lifetime are going to be on a smaller amount. And, you know, it sets the stage that you'll you'll you're missing out on money that you could have had. Now the real answer is it depends what is your financial situation? What is your health situation? Violation. Did you do you have longevity in your family? And here's why I bring that up is the other ages you can elect are two main pit stops.

Merrit Strunk:
There is full retirement age at 67 for most people that are listening now. And then the latest you can take it is at 70. Why would you wait to 70 and not take it at 67? Well, there are reasons. Maybe you don't need the income. Maybe you get the fact that there is an 8% delayed retirement credit per year and you can get 24% greater by waiting to 70, then taking it at 67. That might mean another 1000 a month. And when you start collecting that, if you say, okay, well, here's what I'm going to get between the figure I can expect on a monthly basis. Let's say it's 2000 and then my 70 would be 24% greater. And if you said, okay, let's multiply that times 30 times 12, then for a whole year, then times 30 as a another 30 years in retirement, for example, and the difference could be hundreds of thousands of dollars. It could be 607 hundred and 800 and 900,000 difference. Oh, my goodness. Well, an extra 900,000 sound good for you over your retirement lifetime. And there are selections that if your spouse is also eligible for Social Security, which one's making the greater income was expecting the higher income. And are there other strategies for the spouse who's going to get a lower amount on their individual record to increase that amount based off the main Breadwinners record? Did you follow The bouncing ball is a little confusing, isn't it? So what I'm going to say is just rules of thumb.

Merrit Strunk:
62 could be right for you, but it also may or may not be that if you do it wrong, you're leaving hundreds of thousands of dollars on the table. Potentially. Table for who? Well, I don't know. The government, IRS, you know, if you want to contribute to them, that's fine. If you don't want to take what's yours. Okay, I don't know what your rationale is, but suffice it to say, it's so important. And for many married couples, that's a $2 million decision. When you do the math and project it out for your lifetime. A $2 Million decision, please don't leave hundreds of thousands of dollars on the table because you didn't ask the question. You don't know how to optimize it. Now, I could tell you from sitting at our conference room table going through the numbers with clients, this is an eyebrow-raiser for many people. They're like, huh? And especially for the for the young folks who are trying to get their act together. They have no clue. They don't know this. I mean, you kind of start getting familiar with Social Security as you're getting a little closer to retirement. All right. So so, you know, hopefully that was enough to answer that question. But such a critical question, maximize that. Why not? It's one of the biggest asset classes you have in your retirement.

Producer:
Yeah, And I think one of the biggest points there that you made was it's not a one size fits all thing. I think people hear, you know, any talk about Medicare, which we'll mention in a minute, or Social Security, which you just talked about these government programs and they think, oh, well, it's going to be a very one size fits all kind of a thing. But no, you have options. And that's the important thing to know is that you do have those options knowing what they are and getting somebody to work with you who can help you wade through it all. Yeah, that's very, very important.

Merrit Strunk:
Yeah. And sometimes people will say, Oh, I'm going to when are you going to retire? And they say, Oh, I'm going to retire at 62. It's like, Well, that's an interesting number. What makes you think that? And they go, Well, Social Security, that's what I'm going to do. My soul is curious when I stop working, working as a drag, and I'm like, I got it. That's why they call it work. But is that really working out for you? And do you know you can claim and still work as well, but that has an impact on taxation of those benefits. If you make past a certain amount of income, your Social Security benefit is taxed and can be taxed. As much as 85% of the benefit is taxed at your income tax rate. So you've got to pay attention how that works, you know, and if you're going to keep working and take Social Security, there are some knowledge there that you need to know as well. And guys, I got to tell you, if you're listening to this, most people don't seek counsel on this. They don't. And they make a mistake.

Producer:
Yeah, that's very, very true there. All right. So number two on our list of seven questions that we can help you answer for retirement is this Merrit? It is. What's your budget and what's your tax plan for retirement? And do you expect those things to change in the future? And very importantly, as part of this question, are you accounting for inflation and future tax increases? Those are those are some good questions lumped into one longer question here, but they're important is to have people wade.

Merrit Strunk:
Through MAT It's funny a Pat Benatar popped in my head is hit me with your best shot all of a sudden. That is a great question. And you hit me with a multi factor question here, but it's a great one because these areas OC budgets, a Gimme tax, that's one that people forget to kind of put into their own projections and do it yourself or retirement planner. And how that might change. And and then the other one, inflation. So let's let's take it one at a time. So I'm glad the way that you put that question because you said what's your budget And there was a little bit of pause there and you got right into end the tax plan for your retirement was thinking this is the words you have to say if you want somebody to switch on to music instead of a talk show, you know, what's your budget time to switch. You know, if there's married couples in the car. Let's switch now. So here's the deal on the budget because what your what your monthly expenses are today must include an inflationary multiplier in it. If you're going to project your happy and successful future, you have to account for inflation. Or you let's just say a brand new I say this all the time. A brand new car in 1975 was around $3,100. Okay, what's a brand new car today? 40 50,000 or that's inflation in a nutshell. So your expenses of it don't hold me to this, guys, but let's just say 6500 bucks today, in 20 years from now is far from 6500. It's bigger numbers, you know, in the tens of thousands instead of 6500.

Merrit Strunk:
And do you expect it to change, if that's the answer? Yes, it's going to change. What you spend is going to change taxes. Here's the fallacy. If you retire and you say, oh, this is going to be the lowest tax bracket in my entire life, but what if your income goes up through Social Security or your investments or you're taking more, more taxable type of income and then the government raises the taxes in your retirement, Let's say you're at 22, it goes up to 24. Let's say you're 24, it goes up higher. So you weren't counting on that. You have to count on it. You have to include appreciation, taking interests, taking profit, things like that. And inflation, as we've seen, this is the biggest killer, folks. When we do our projections out of all the things that can happen, market drops, the economy or whatever inflation increase is the biggest hit to people's longevity in their retirement. Why? And you're feeling it now. Butter is up, eggs are up, gas is up. Transportation costs to get the goods to market or go up. They're passing along those costs to you. This continues, folks, and we all run out of money faster. So I would say that the situation with energy and fuel and the runaway policies of this have got to change. It's it's killing us. It's killing America with higher cost. I'm not trying to get political, but irks me a lot. So so that's the answer there. There's a lot in the gotcha category that can really screw you up. And if you're not planning for it, it's going to surprise you later on. Okay. Thank you, Matt. Great question.

Producer:
So number three on our list of seven questions here is how should you best manage your account balances and those RMDs required minimum distributions? Those are things that can trip people up.

Merrit Strunk:
So, you know, on RMDs and if I'm saying that acronym for you and you don't know what that is and you didn't catch it when Matt it said it is required minimum distributions, those RMDs are applied to your tax-deferred accounts. So many people have a tax-deferred IRA, the traditional or a traditional 401K where you haven't ever paid taxes on it and someday you will. When you quit, you roll it over into a traditional IRA and at some point you're going to have to pay, take a withdrawal and keep withdrawing that over your lifetime. That got pushed back from the age it used to be. And now it is. I think it's Was it 72? 72? I think it's 72. It used to be 70 and one half. Now at 72. Och, so so then now it's pushed out a little bit. But guess what. In combination with the other question you ask me Matt, if you've got deferred accounts and those accounts have been growing and at 72 they've been growing, growing, growing, let's say you didn't need the money and now you have to take it out. That could be your average person's entire salary in one withdrawal, depending on how much you had in an IRA and all of a sudden that's taxable at your income tax rate. Another thing you need to know is tax deferred IRAs are called things like the the insanity of the IRA tax trap.

Merrit Strunk:
It's also called the tax torpedo, because it's coming for you and the government is coming for you. And the whole reason why they require you to take that minimum distribution based off actuarial mortality tables is because they want to tax you and get their money because you've never paid money on those things. So there's different ways you can do that. You can aggregate the withdrawals on your tax deferred accounts. You do you do a multiplier calculation and you end up with your your taxable amount. I just think about this. Why wait to 72? If you're retired and you can take money out now and pay your historically low tax rate before the tax rate goes up, that's you controlling your taxes, not taxes controlling you. Can you flat line your taxes by putting a strategy in place or you just move it from one pocket of tax forever and move it out here to not taxable forever and what is called a Roth conversion, a backdoor Roth conversion. If you don't have a Roth IRA, you don't have that option because you weren't planning ahead. Jackie Joyner-Kersee would say, I need to open a Roth IRA while my income is lower. Bill and I can still do that so I can have a backdoor tax conversion opportunity in the future if that works for you. Okay.

Producer:
All right. Well, very good. They're number three. So number four in our list of seven questions here, should you consider converting some of your savings to a Roth IRA? We're just talking about it. So let's let's see those. What are some of those considerations that folks should take into account?

Merrit Strunk:
Yeah, that's a great question. So the answer, much like many of these, is it depends who are you? What's your income? What's your tax rate? What are your needs in the future? Do you have outside sources to pay the taxes outside of that traditional IRA to bring it into a Roth IRA? And so all those factors play into converting that. And I could tell you what happens in a traditional IRA and you die. And it passes along to your heirs. Somebody has to pay those taxes. You've never paid taxes. And if you think you're $500,000, IRA is going to say, if I have 500,000 IRA, when you pass it along to your heirs, it's not they're going to have to pay taxes on it. So it diminishes greatly, greatly your legacy. So what we do, Matt, we do a calculation on what your legacy will be, what your taxes will be in a pre tax situation and if we convert it. And by the way, one of the other fallacies is you don't have to do it all at one time. You don't have to do a mega back door. You can do a strategic backdoor conversion over time. You could do it over five years. You can make the taxes covered by your standard tax deduction. That's another tool we have in our in our golf club bag there. Pull out that golf club bag and say, how can you make this a non hit? So the answer depends. And we have to do the math and see if it works out for you based off what's going on with your situation.

Merrit Strunk:
Sometimes it is a really great idea and sometimes it's not a great idea depending on that person's situation and age outlook, income assets. So there's not a hard and fast rule there, but for many people it makes a lot of sense. The tough part, though, Matt, is like I said before, is if you didn't look ahead and you didn't open a Roth while you could, you're you no longer have that catcher's mitt that's waiting for that possibility. Right. So it's better to do it now. Talk to somebody like us to figure it out. That's right. Do it now. Put a little money in it. Now you've got that catcher's mitt open and you've at least allowed use allowed yourself and your spouse the ability to do a Roth conversion. Better to have one than not. And like I say, many times, a retirement with tax-free income beats the heck out of a taxable retirement income. You want to be in a zero-tax bracket? That's a great question. We really haven't talked about that. You want to get yourself to a zero tax bracket. There are strategies to make that happen. And if we were given the choice to get up out of our seats for the rest of our life and line up under which of those signs we would like to live under, the one about tax-free forever, everybody would line up there. But you've got to act on it. It's not going to happen by itself. Long answer there. Thank you, Matt.

Producer:
Great question and no problem. So number five on the list of seven questions is has to do with real estate. What should you do with your real estate? You know, do you want to downsize? Do you have rental income to account for? What do people need to think about Merrit as far as real estate goes.

Merrit Strunk:
When you get to the area of real estate, there are so many options. And by the way, do you have to have real estate in order to get real estate benefits? You don't have to. Isn't that interesting? If you're an accredited investor, there are real estate investment options available to you to receive tax-free income. To receive tax-free income. He'll like the inflection on the wrong syllable. Yeah. So. So tax free income can be yours. A wonderful thing. Many of our millionaire plus clients do have real estate as part of their portfolio. It's a wonderful thing. So that's a great question. On downsizing, a lot of people in their retirement downsize. A lot of people want to get that house paid off for anticipating retirement. That's also a wonderful thing to do. It just gives you a psychological error. Now you've got more money for your expenses. Pros and cons, Real estate as part of your portfolio, your own house. You want to downsize and keep that house as rental. That's great. You also get a you get to shelter 500,000 of the profit in your home if you've lived in it. The two out of the last three years, you could shelter 500,000 of the profit on your cell. You can also, if you have rental income already, you can 1035 exchange as you trade up or you can 1030 1031 exchange into something like a Delaware statutory trust.

Merrit Strunk:
See what most people don't even know what a dced is. It's a great way to transfer the profit of your sell into a Delaware statutory trust where real property is held from an investment company and they depreciate that property so that they funnel tax free income to you over your lifetime. And so there's pros and cons again to doing each of these strategies. If you've got that situation, you have a house. Should I pay it down, Should I rent it out, should I sell it and take the profit, which a lot of people did just not that long ago during the crazy real estate market. They took the profit in California and ran. They got the heck out of town. And where did they go? Texas, Arizona, Tennessee, those kind of places. And what you can buy for for the profit is is great. Then you then you just 1031 exchange. So so there you go. There's a lot of possibilities, a lot of different ways you can treat it, a lot of real estate related investments that you can consider. So Matt, it really does. When I come down, it's like the same answer for many of these, which is it depends on your overall situation. And because I don't know your situation, I cannot make a recommendation, obviously, but we're fiduciary. So a recommendation can come if we understand and help you with your situation.

Producer:
Yeah, absolutely. And that's the important thing, is to get that get that help for for your retirement planning and sooner rather than later for.

Merrit Strunk:
For a lot of folks and there's real well I want to throw in there real tax benefit there's real tax benefits when you're dealing with real estate in your situation.

Producer:
All right. Well, number six on our list of seven questions, is it just a few minutes left here in the show? What is your plan for Medicare? I mean, did people got to think about health care here? Any potential long term care needs also an important thing to think about?

Merrit Strunk:
Merrit Yeah, there's there's nothing as effective to make people's eyes glazed over if they've never been exposed to this topic of long term care. You just mentioned long term care. And they just they just don't get it. Don't get it. It has become the cornerstone of fiduciary financial planning because long term care, in the event that it is needed, can be an estate extinction event. It can just go away and you may be going Och, but you know, that's fine. But what if there's two of you? What if you're married and both people need long term care? How does if you need a full scale, full skilled nursing facility towards the later part of your life here, just think about 10,000 a month or 20,000 a month or 30,000 a month. It just depends how far in the future, because the inflation on this is crazy. Medical care cost is crazy and it's expensive and it goes in phases. At some point you need care at home friends, family, spouses, daughters, sons, those kind of things. And at some point you need nurses, you need hospice care, and then you may need a facility at the end. And it's a tough deal. And I would ask every single one person here, would you prefer to be cared for at home where you're comfortable? Got to be, got your own bed, got your own shower, or are you going to be taken care of in a facility? Would you prefer that your spouse pick you up, will you into the bathroom, shower you off? I don't mean to be morbid guys, but I see it up very close. And if you don't plan for these things, it. A provision that will provide some level of diluting the care. Then you may have an outcome that you wouldn't prefer. Medicare does not pay for long term care. That's a that's a fallacy. It's a myth. Medicare will not pay for long term care. Medicaid will. The state. Medicaid will. But you can only have about $2,000 on paper, basically destitute. So that's the answer there. It's a lot to consider. And the earlier you have this conversation, the better.

Producer:
Yeah, definitely. Well, in just the last really the last minute of the show here, the last question, what legacy plan would you like to leave for your children and your grandchildren? It really important one, because I think when people are planning for retirement right there, they're thinking about myself, my spouse. But you've got to think about that next generation.

Merrit Strunk:
Interesting. And what's going on now. Many people are, look, if I could just have enough for myself, that's great. We can leave behind what's left over. Other people who are doing better want to be legacy minded if they don't think about it. There are great ways to give charitably to 501. C three qualified folks and still get more money back to you and to your heirs. Think about that. Wait a minute. I give and still get in. My errors still get even greater. There are strategies to do that because a 500 1c3 is in the mix of that. So that strategy may exist for you. And if you're just simply saying, look, I just want to be tax efficient and proper wealth transfer at the time that it's available. There are ways to do that transfer greater wealth, tax efficiency and the transfer of wealth. But you have to have, again, the same conversation. Don't wait, start talking about it. Reach out to us. You can do that at 858521 9700 or reach out through our radio show and podcast website which is Retirement Unbroken and become part of the unbroken nation. Hey Matt, thank you for hitting me with those super great questions. They went kind of quickly with a lot of stuff in there, right? I wish we could have capsulize that even more. But as you can see, folks, there's so much to cover here. We've really enjoyed it. And I hope this has equipped you to be more savvy and more educated and more equipped about your financial future. And if you want to reach out to us, go ahead and give me an information. This is Merrit Strunk, the host of the Retirement UnBroken Nation. 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 Merrit 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 Merrit Strong an independent agent. California License number 0L7510 Certified Financial Fiduciary is a FINRA recognized professional certification.

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