Bob Carlson: The Essential Guide to Retiring in 2023

0:00
[Music]

0:00
foreign

0:04
with annuities where every single week I

0:07
welcome a celebrity guest expert that

0:09
can help you maximize chapter 2 of your

0:12
life listen learn laugh and love every

0:16
minute of the most unique Financial

0:18
podcast on the planet let's get to it

0:23
[Music]

0:28
welcome to fun with annuities I'm your

0:30
host Stan the annuity man America's

0:32
annuity agent I'm so glad you joined us

0:34
a repeat guest and the reason he's

0:37
repeating is a he's one of the smartest

0:39
guys in the room but B he has a new book

0:43
called retirement watch the essential

0:46
guide to retiring in the 2020s we're

0:50
going to have a link to that on our site

0:52
I'm sure you can get it at Amazon but

0:54
we're gonna make it easy for you if you

0:56
go to the annuityman.com we'll have a

0:58
page for our guests and let me tell you

1:00
his name his name is Bob Carlson he's

1:03
been on before but boy he is a wealth of

1:05
information Bob welcome back to the show

1:09
thank you glad to be here Stan excellent

1:12
well let's just kind of Jump Right In

1:14
about the well before we get to the book

1:17
Let's jump into the secure Act

1:20
which you know if you could gloss over

1:22
some of the highlights of that that

1:24
would be good because I'm sure

1:25
everyone's trying to figure out

1:27
what Congress is going to pass if

1:29
they're going to pass it and how it's

1:30
going to affect them as human beings so

1:33
can you gloss over that as best you can

1:36
yeah the secure act 2.0 has been uh

1:40
passed by Congress the President should

1:43
sign it shortly it was included in a

1:47
large piece of legislation called the

1:49
Consolidated Appropriations act which is

1:51
over 4 000 pages and the secure act 2.0

1:55
is over 358 Pages itself

1:59
and it's a compilation of three

2:01
different laws that we're making their

2:03
way through Congress during the year has

2:05
a lot of different Provisions in it uh a

2:08
number of them are designed to make uh

2:10
retirement plans employer retirement

2:12
plans more available by uh giving

2:15
employers incentives to create them

2:18
having tax credits uh

2:21
streamlining some of the paperwork and

2:24
also to get more people participating in

2:27
the plans by making enrollment mandatory

2:30
enrollment required for the employers

2:32
the employees can opt out but they have

2:35
to take action to opt out rather than

2:37
having to take option action to opt in

2:39
so those are the big Provisions there

2:42
are a number of other Provisions that

2:44
can affect people who are entering near

2:46
retirement the required minimum

2:48
distribution beginning age is jumping to

2:51
73

2:52
effective immediately

2:54
will eventually jump to 75 beginning in

2:59
20 uh 32 I think it is 2032 and there's

3:05
a changes in ketchup contributions uh

3:08
they're being increased for both IRAs

3:10
and 401ks they're going to be

3:12
indexed for inflation

3:15
but some of those ketchup contributions

3:18
the ones the 401K plans for higher

3:20
income people are going to have to be

3:22
made on a Roth basis rather than a

3:25
traditional basis which means you won't

3:26
be able to exclude them from gross

3:29
income you'll have to pay taxes on them

3:31
even though they're going right into

3:32
your uh your 401k account

3:35
uh it's also a little change in employer

3:38
matching contributions where you can

3:40
choose to have them treated as a Roth

3:42
contributions or a traditional

3:45
contribution uh the Q lacks the quality

3:48
of the law qualified longevity annuity

3:50
contracts those are also being updated

3:53
as you know they were created by the IRS

3:56
in 2014 the legislation and they're

4:00
trying to make them more available

4:02
one way they're going to do that is the

4:05
25 percent

4:07
contribution limit is eliminated so

4:09
there's no longer a percentage

4:11
limitation and in in addition the 125

4:15
000 limit is being uh increased to two

4:18
hundred thousand dollars and it's going

4:20
to be indexed for inflation

4:22
uh so those are two things that should

4:24
make Q locks Q locks more available to

4:27
people yeah um

4:30
and uh there are also other uh well

4:32
there's ways to make new ways to make

4:34
charitable contributions to IRAs there's

4:37
for a long time been to qualified

4:39
charitable distribution

4:42
and that's now being expanded so you can

4:45
make a one-time election to put part of

4:47
your traditional IRA into either

4:50
charitable gift annuity or charitable

4:52
trust uh that will pay you income uh for

4:56
life for a period of years and then the

4:58
remainder will go to charity and so that

5:00
amount the amount you put in will count

5:03
as part of any required minimum

5:06
distribution you have to take and it

5:08
will also uh

5:12
um it's not deductible to you but it's

5:14
not included in your gross income when

5:16
you transfer it to the account to the to

5:18
the trust or the gift annuity but it

5:20
will be taxed as ordinary income as you

5:22
receive income over a period of years so

5:25
those are some main things there's quite

5:26
a bit in there as I said it's almost 400

5:29
pages and there's quite a few different

5:31
Provisions uh those are what I think are

5:34
the highlights in there yeah I wrote I

5:36
read the first first book on qlex in

5:38
2014 because I actually thought that

5:40
that was going to be one of the most

5:41
popular products on the planet because

5:42
it was a no-brainer to me but I think

5:45
they're really this enhancement of the

5:48
contribution amount and getting rid of

5:50
the the 25 percent ratios and trying to

5:53
figure that out is is a positive and

5:56
once again they're encouraging people to

5:59
create lifetime income streams using Ira

6:02
assets which I think is is great

6:05
um and then the index to inflation do

6:07
you have any more details on what

6:09
they're doing just they'll just I guess

6:11
increase the limit is that what they're

6:13
thinking well for the qlex they're

6:15
increasing limit right away to 200 000

6:18
right and then after that it's just

6:20
going to be indexed for inflation okay

6:23
annually Hey listen I'll take it and you

6:26
know the other one was

6:28
um you know the rmd age going to 73

6:32
and it will be interesting to see if it

6:34
I guess if it holds 275

6:38
um by 2032 as you said right yeah right

6:41
there's one other provision that might

6:44
interest you and your your listeners and

6:46
that is uh you know current law if you

6:49
uh use part of your IRA to buy a a a

6:53
spear basically

6:56
um people have done analysis and say

6:59
that the way the regulations compute

7:01
rmds when you have a sphere in there

7:03
increases the rmd for your non-speed

7:07
apart and so this law has a very

7:11
technical provision but it's intended to

7:14
change that uh that ratio so that you've

7:18
got so that that satisfied satisfies

7:21
these researchers that you're not

7:22
increasing your rmd by putting part of

7:25
your IRA and SPF got it got it well

7:27
let's get to your book I know that

7:29
you've been working on it a while

7:31
and it just did come out

7:33
um

7:34
and I think retiring in the 2020s is

7:37
different

7:38
for sure just because interest rates are

7:40
at levels we haven't seen for over a

7:42
decade

7:43
um you can't actually get good interest

7:45
rate paper on migas and and CDs and

7:49
treasuries I do think that changes the

7:52
game a little bit because some people

7:53
have enough assets to just peel off the

7:56
interest

7:58
um

7:59
since you wrote the book on that and

8:02
things have changed drastically

8:05
um

8:06
you know you say that the the mid you

8:09
know

8:10
2020s will be a very difficult time for

8:13
retirees and people that are looking

8:16
toward retirement

8:18
why is this likely to be a very

8:20
difficult time and if things change even

8:23
since you've written the book

8:25
yeah I had actually identified six

8:28
Trends and uh several of these were in

8:31
effect

8:32
really accelerated during 2022 as I was

8:36
writing the book and you know one of

8:38
them is inflation's back we can no

8:40
longer count on this period when there's

8:43
basically a ceiling of two percent on

8:45
inflation it's it's gone up quite a bit

8:48
in 2022 and it's going to be sticky I

8:51
think uh somewhere between a three

8:53
percent and five percent range and it's

8:55
going to take a lot to get it below that

8:57
and there were also some long-term

9:00
trends that kept the lid on inflation

9:02
such as free trade and globalization and

9:05
uh and excess of Labor so uh the the

9:08
advantage was to employers rather than

9:10
to labor I think that is Switched so

9:13
there's a range of factors like that

9:15
that has put more of a floor on

9:17
inflation instead of before there was a

9:19
ceiling sure ceiling on it and you know

9:23
that as you said that's going to

9:24
increase interest rates going forward uh

9:27
you know they won't probably stay where

9:29
they are but they're gonna they're gonna

9:31
be above where they were the last few

9:32
few years they're going to be edging up

9:35
towards their historic averages and

9:38
that's gonna that's gonna be good for

9:40
conservative income investors but it's

9:42
going to be bad for people

9:44
who got used to the riskier Investments

9:46
like growth stocks and cryptocurrencies

9:49
and that sort of fair so people who

9:51
counted on high returns from those type

9:54
of Investments to bail out a lot of

9:56
their other retirement mistakes are not

9:59
going to be able to count on that going

10:00
forward and I also think there's other

10:02
factors

10:03
they're going to keep down stock returns

10:06
there was some long-term trends such as

10:08
the extraordinarily High profit margins

10:11
uh low labor costs

10:14
regulation friendly governments low

10:17
taxes these and other factors are being

10:19
reversed and so that this boom and

10:23
profit margins and earnings growth I

10:25
think is has peaked it's probably going

10:27
to reverse and you know a lot of the

10:29
stock returns were based on high uh

10:32
profit margins and earnings growth over

10:35
the next 5 10 20 years and so those

10:37
those forecasts have to be scaled back

10:40
that's going to reduce your stock

10:42
returns going forward

10:44
and there are also several other

10:46
problems you know there's the issues

10:48
with the solvency of Social Security and

10:50
Medicare those are going to be coming to

10:53
a head in the next 10 years

10:55
and so we're going to have to see what

10:57
happens to taxes and benefits once

10:59
Congress finally decides to take action

11:02
uh another factor is demographics as you

11:05
know the Baby Boomers have started

11:07
turning 65 in 2011. uh and that's

11:11
increasing once we get to the year 2024

11:15
that's beginning of the peak of the Baby

11:17
Boomers the largest uh number of them

11:20
were born in that year in the following

11:22
years so there's going to be 12 000

11:24
people a day turning 65. so that's going

11:27
to put additional pressure on every good

11:30
and service that retirees by and it's

11:34
all supporting additional pressure on

11:36
Social Security and Medicare and another

11:39
aspect of that is it's it's causing an

11:42
aging population aging population means

11:45
lower productivity lower earnings growth

11:48
and so lower stock returns again

11:51
and then there are different issues out

11:53
there big picture issues like the large

11:55
level of government debt uh the global

11:59
problems with uh you know conflicts over

12:01
trade and and conflicts over politics

12:04
and territorial things of that nature

12:07
and right all these things I think are

12:09
going to reduce investment returns

12:11
reduce economic growth and just make it

12:14
harder to be a retiree or to be near

12:17
retirement in the coming decades so you

12:20
need to really look beyond your

12:22
investment returns not look at stock

12:25
returns to be bailing out your other

12:27
retirement mistakes look at all these

12:29
other aspects of retirement making the

12:32
right decisions about social security

12:33
and Medicare and and all the other

12:36
things that that we talked about

12:38
what can retirees or pre-retirees do

12:42
to overcome some of these obstacles and

12:45
and try to increase

12:47
you know what you call retirement

12:49
security

12:51
yeah um you know for if you go to many

12:53
financial planners or look at many books

12:56
on retirement planning the focus there

12:58
is Investments maximizing stock returns

13:02
things of that nature and you really

13:04
can't control stock returns or market

13:07
returns but you can control a lot of

13:09
other aspects of your retirement you can

13:12
make sure you uh elect Social Security

13:14
benefits at the optimum time for you

13:17
that you got the right Medicare plan for

13:20
you

13:22
um that you make use of your home equity

13:24
that you a very important thing is to do

13:27
tax reduction tax planning all year

13:30
round uh particularly if you have large

13:33
Ira or 401K traditional IRA or 401K you

13:38
know that money is going to be fully

13:40
taxed as ordinary income when you take

13:41
it out many people just take that for

13:44
granted but there are strategies you can

13:46
do with that to reduce over the long

13:49
term uh those taxes uh also uh you know

13:53
many people they follow the traditional

13:55
rule of never pay a tax till you have to

13:58
defer taxes for as long as you can uh I

14:02
think with the high level of federal

14:04
debt with the 2017 tax laws scheduled to

14:08
expire after 2025 you're probably now

14:12
paying the lowest income tax rate you're

14:14
going to

14:15
and it might be a good idea to kind of

14:18
abandon that traditional rule with at

14:20
least part of your IRA balance and start

14:23
looking at ways to take some of it out

14:25
now pay the taxes at today's rates and

14:28
then re position that money you can put

14:31
it in a Roth IRA if you want income you

14:34
can put it in a charitable gift annuity

14:36
you can put it in a regular annuity you

14:39
can put it in life insurance if it's

14:42
there primarily for your children or

14:45
grandchildren to take advantage of so

14:46
you're paying the taxes for them and

14:48
giving them a tax-free benefit so if you

14:51
do some long-term planning rather than

14:53
year-to-year planning you'll take some

14:56
strategies that many people are not

14:58
taking but I think you'll be increasing

15:00
both you and your families after tax

15:02
income and wealth in the coming years

15:06
we're talking to Bob Carlson if you're

15:07
not familiar with him you should be I'm

15:09
sure you are he is a

15:11
he runs one of the best newsletters and

15:13
I don't really want to call it a

15:15
newsletter it's informational Services

15:17
Organization for retirement called

15:19
retirement watch if you want to go there

15:22
is www.retirement watch all one word

15:25
retirement watch

15:27
dot com and

15:30
if two words are ever put together that

15:32
made sense is veritable plethora of

15:34
information this Bob Carlson and

15:37
retirement watch it should be on your uh

15:40
pinned list on your computer you should

15:43
look into subscribing to his newsletter

15:46
he does have a lot of things you can get

15:48
for free as well but I would subscribe

15:50
he's got insights to so much and what I

15:54
really like about what Bob provides is

15:56
all of this legislature stuff that's

15:59
coming through

16:00
he's your whisper he's the guy that's

16:03
gonna dig in and actually read it and

16:06
understand it and be able to translate

16:08
it so you don't have to worry about it

16:10
and um I I think going into the next

16:13
four or five years is going to be

16:15
important for you to have your finger on

16:17
the pulse especially if you're retired

16:20
which is chapter two of your life and

16:21
your part-time job

16:23
is knowing what you're supposed to do

16:25
with what you've accumulated and Bob can

16:28
certainly help with that Bob what you

16:30
know I was thinking while I was doing

16:32
that just kind of riffing about who you

16:34
are because people need to know

16:36
what made you initially

16:38
um interested

16:39
in this whole helping people with

16:41
retirement no one wakes up in the

16:43
morning wants to do that right Bob

16:45
right I initially was uh interested in

16:48
you know people with their taxes I

16:50
passed the CPA exam I went to law school

16:55
okay and I I started out uh basically

16:58
writing a tax newsletter

17:00
and this is back in the 1980s and I

17:03
started to get a lot of questions from

17:05
people about retirement related taxes

17:08
things like uh you know different ways

17:10
to take money out of your IRA or 401K

17:13
taxation of Social Security benefits and

17:17
I looked around and you know this has

17:19
been the Baby Boomers was still in their

17:22
40s so there wasn't a big market for

17:24
retirement advice

17:26
and I realized there wasn't much there

17:28
for these people to refer them to or

17:30
even for me to read get a hand on these

17:32
topics so I started out I wrote a little

17:35
book called retirement taxes and I sold

17:37
that to my subscribers and it did well

17:39
so I

17:41
I experimented with offering a broader

17:43
retirement newsletter to covered all the

17:46
financial aspects of retirement

17:48
and I offered that to these book buyers

17:50
and it did well uh so it became a

17:54
standalone business it's something I've

17:56
been doing for over 30 years now

17:58
and uh so I found there's a good market

18:02
for it and it's something I enjoy

18:04
helping people uh you know learn their

18:07
way excuse me through these really

18:09
complicated decisions you have to make

18:11
regarding your retirement Finance as

18:14
many of these decisions you know they're

18:16
one time irreversible

18:18
choices you have to make and there's a

18:21
lot of things you have to look at and

18:22
discuss

18:24
it's like a big puzzle you have to put

18:27
together so you know I enjoy uh doing

18:29
the number crunching and the research

18:31
for that and then telling people

18:33
what might work for them and what might

18:35
not work for them so there's no

18:37
Mulligans golf lingo and retirement

18:39
which is one of the reasons that that

18:41
Bob needs to be

18:42
as part of your team you know you're you

18:46
put together a group of people that you

18:49
trust you know they're going to tell you

18:50
the truth they're going to do the

18:51
research and Bob really is he's really

18:53
kind of a retirement researcher in my

18:56
opinion but with a lot more than that a

18:58
lot more detail than that

19:00
um what are some of the other

19:03
in your mind unique challenges

19:06
right now at this point in time at the

19:08
time of this taping to retirement and

19:11
retirement planning what is what's

19:13
what's making you scratch your head a

19:15
little bit here

19:17
well you know one thing people don't

19:19
spend enough time on are their income

19:21
taxes you know they've there's been this

19:24
long-term view that you get into

19:26
retirement there's all kinds of tax

19:28
breaks you're going to pay lower taxes

19:31
and in fact that's not the case many

19:33
people they're going to be in the same

19:34
or similar tax brackets before they

19:36
retired

19:38
and more importantly Congress over the

19:40
years has avoided overall broad tax

19:43
increases but it's raised Revenue

19:46
with these Provisions I call the stealth

19:48
taxes which change how you compute your

19:52
taxable income or how you compute

19:55
deductions and it turns out most of

19:58
these stealth taxes are either

20:00
intentionally directed at retirees or

20:03
they just happen to catch retirees more

20:05
than other taxpayers and these are

20:08
things like how much of your Social

20:10
Security benefits you include in gross

20:12
income you know it used to be Social

20:14
Security was entirely tax-free

20:17
but over the years they've gradually

20:19
increased the taxes on your Social

20:21
Security benefits and more and more

20:24
people are going to be paying taxes on

20:26
those benefits because the provisions

20:28
that the income triggers for that were

20:30
never indexed for inflation so just over

20:33
time because of inflation more and more

20:36
Social Security beneficiaries are going

20:39
to be paying taxes on those benefits

20:40
that used to be tax-free uh similar

20:43
provision is the Medicare premium Sur

20:45
tax also known as Irma as your income

20:49
goes up you pay a higher part b Medicare

20:52
premium also a higher Part D

20:54
prescription drug Medicare premium many

20:57
people don't know about these two

21:00
provisions and they they take

21:02
distributions from their retirement

21:04
accounts or their investment portfolios

21:06
without realizing it's going to have

21:08
these secondary effects and in some

21:11
cases each dollar you take out of your

21:13
Investments your IRAs is going to

21:16
trigger a very high percentage of

21:18
additional taxes not just say the 24

21:21
bracket you might be sure but you can be

21:24
up there paying 30 40 percent uh taxes

21:27
on each dollar you take out of that

21:29
portfolio just because of the stealth

21:31
taxes that you didn't know about and you

21:34
really need to be planning for all year

21:36
round so that's one thing that that

21:38
always concerns me about

21:40
new retirees and people who particularly

21:43
early years of retirement is they don't

21:45
realize that I call these tax Torpedoes

21:48
are out there to get them and all they

21:51
have to do is just uh you know have an

21:53
un unplanned expense decide they're

21:55
going to take it out from a certain

21:57
account and they find out they're paying

22:00
a significant part of that that money in

22:03
income taxes once their tax return

22:05
season comes around

22:08
was perv it to the most exciting two

22:10
topics of all time Bob that would be

22:13
Social Security and Medicare and I guess

22:16
for a lot of us out here that I you know

22:19
I follow you and you follow those but

22:22
um

22:23
why does it seem they're not as

22:25
Dependable as they once were

22:27
well each year is that just me or is is

22:30
there something to that no there's

22:32
there's definitely something to that

22:33
each year the trustees uh issue an

22:37
annual report updating the financial

22:39
condition of the two programs

22:41
and each year they've been saying it's

22:44
going to run out of money at a certain

22:45
point in time they estimated each year

22:48
the latest estimate is that the social

22:50
security retirement trust funds going to

22:52
run out of money in 2034.

22:56
and if nothing's done by Congress that's

23:00
going to result in an immediate cut of

23:03
benefits of somewhere between 20 and 25

23:05
percent oh that'll go over well

23:07
politically right so that that you know

23:10
that's in the news every year for the

23:12
people who pay attention to it uh but uh

23:15
so Congress has to act it's going to

23:17
have to either uh cut benefits or

23:19
increase taxes or what's probably going

23:21
to do with some combination sure of

23:24
those two and my hope

23:26
and expectation is that we'll provide a

23:29
grandfathering or exemption for those

23:32
who are already receiving their benefits

23:34
and those who are likely to get them in

23:35
the next five to ten years and put all

23:39
or most of the burden on younger people

23:41
than that because they still have time

23:44
to plan uh they probably won't provide

23:47
grandfathering for your higher income

23:49
higher net worth retirees uh they'll

23:52
find some way to reduce their benefits

23:54
through some formula or increase the

23:57
taxes to them but I'm hoping that's the

24:00
way it will go and you know what the

24:01
trustees annual report says is the

24:04
longer Congress waits to act the greater

24:07
the changes are going to have to be in

24:09
order to get back into balance

24:11
so you know each year Congress Waits and

24:14
spends time on each other issues

24:16
increases the cost to the rest of us of

24:19
getting these programs back in order now

24:22
there's a one myth about the social

24:26
security and medicated it's widespread

24:29
and really hampers people's retirement

24:31
plan and we need to address that and

24:33
that is when the trust fund runs out of

24:36
money that doesn't mean the program's

24:38
over

24:39
uh the there's you know there's annual

24:42
payroll and self-employment taxes

24:45
collected each year

24:46
and the trustees estimate that

24:48
indefinitely those are going to pay for

24:50
about 77 percent of the promised

24:53
benefits

24:54
so the program won't end even when the

24:56
trust fund ends uh the question is what

24:59
are we going to do uh that gap between

25:02
the 70 77 that can be paid through the

25:06
annual taxes and the rest of it the 23

25:09
percent that's been promised but that

25:11
there's no money for it so you know

25:13
there's a lot of young people and you

25:15
can look at polls where they say well

25:17
I'm just assuming I'm not going to get

25:19
anything from Social Security

25:21
and that will make you save too much

25:24
money it will make you deprive yourself

25:27
of a current standard of living you

25:29
could achieve it might make you invest

25:31
uh taking higher risk than you need to

25:34
just because you think you're going to

25:36
have to make up uh this money so it's

25:38
important to understand even when the

25:40
trust funds run out of money the

25:42
program's not going to end it's just the

25:45
full benefits might not be available but

25:48
you're going to still going to get a

25:49
substantial part of these promised

25:51
benefits that's a that's an interesting

25:53
explanation that I've really never heard

25:56
because you hear the media which

25:59
unfortunately we listen to

26:01
talk about it and it they talk about it

26:03
and frame it so when that's gone it's

26:05
gone it's okay and

26:07
um I think everyone on this show

26:09
probably went raw okay that actually

26:10
makes sense in common sense and it's

26:13
linear thinking

26:15
um let's talk about for the people that

26:18
are listening to this podcast on all the

26:20
major podcast platforms are watching us

26:22
on the fun with the annuities YouTube

26:23
channel and they're about five years

26:25
away they can see the finish line but

26:27
I've been a four lap race they're

26:29
they're they've run three laps and

26:31
they're going into lap number four so

26:34
they're five years away

26:36
what should they

26:39
be aware of I mean what should they be

26:41
looking out for and planning for it

26:43
there's several things that are very

26:44
important at that stage one is you start

26:47
looking at when are you going to take

26:49
your Social Security benefits and many

26:52
people just assume you know when I stop

26:55
working I'm going to collect the

26:56
benefits or when I'm first eligible I'm

26:59
going to collect the benefits the data

27:00
show that most people start their social

27:04
security benefits before full retirement

27:06
age

27:07
but it's better to take a longer term

27:09
View

27:10
realize that those benefits are going to

27:12
increase about eight percent a year for

27:14
each year you delay them that's eight

27:16
percent tax free and guaranteed which

27:19
you can't get anywhere else eight

27:21
percent tax-free guaranteed uh that's

27:24
not available or anywhere else and you

27:27
can look at the numbers and there's

27:28
studies out there that show it actually

27:30
makes sense

27:32
to draw down your other retirement

27:34
assets to pay retirement expenses so you

27:37
can delay your Social Security benefits

27:40
so I I think it's important for people

27:42
to really carefully consider when

27:45
they're going to begin those benefits

27:46
particularly for married couples

27:48
uh because what they don't realize is at

27:51
some point one of them is going to die

27:53
and leave the other one as a solo spouse

27:56
when that happens one of the Social

27:58
Security benefits ends

28:00
and it's usually the lower benefits so

28:03
whichever the higher of the two benefits

28:05
is will continue to the surviving spouse

28:08
and they'll have to maintain the

28:09
household without that other benefit so

28:12
I think for most people married people

28:14
you want to make sure that survivor's

28:18
benefit is the highest it can be so it

28:20
makes sense

28:21
for the higher earning of the two

28:23
spouses to delay receiving Social

28:26
Security benefits for as long as they

28:28
can in order to ensure that during those

28:30
solo years that the thriving spouse has

28:34
the highest benefit possible so that's

28:36
one thing that's important to consider

28:38
in those pre-retirement years

28:41
another thing to carefully consider

28:44
is how are you going to turn this Nest

28:46
Egg you're accumulating into income into

28:49
cash flow during retirement you've been

28:52
trained for 30 or 40 years to invest as

28:57
we're save as much as you can invested

28:59
for growth

29:00
and accumulate as big a balance as you

29:03
can

29:03
but once you get in retirement

29:06
you have to think about how am I going

29:08
to turn this into cash flow

29:10
and I typically recommend that people

29:13
consider generating enough guaranteed

29:16
lifetime income to pay for their basic

29:18
living expenses Social Security

29:21
any employer pension they have and then

29:24
start looking at putting money into

29:27
either Spears or or mygas to generate

29:31
that income gap yeah and the myga

29:33
Edition has just been recent so you know

29:36
just because the rates have gone

29:38
up and you can for a lot of people they

29:40
can just peel off the interest and never

29:42
touch the principle it Harkens back to

29:43
the Jimmy Carter days a couple things on

29:46
the Social Security waiting to age 70. I

29:48
just had Steve Parish on from the

29:51
American college and him and Wade fowl

29:53
who's been on the program as well

29:54
they're releasing a study in January

29:57
that Echoes what you were saying which

29:59
is the you know waiting to age 70 if you

30:02
can and they ran it looking at every

30:05
mathematical possibility just like you

30:07
did Bob

30:08
um the other thing just on on retirement

30:10
income and income floor is what I call

30:12
it as well

30:13
if you can get away

30:16
with peeling off interest from say a

30:19
Miga CD or treasuries then do it now the

30:22
question is well what happened Stan and

30:24
Bob if rates go down if they force our

30:28
hands to then annuitize and buy an

30:30
immediate annuity then we do that but

30:32
also two you need to think of the

30:33
immediate annuity as a

30:36
precursor strategy for the cognitive

30:39
decline that will happen if you live

30:41
long enough so these are also things I

30:43
think that are I'm having more and more

30:46
conversations with people at this point

30:48
because you know you can lock in a

30:50
10-year guaranteed manga with an

30:52
interest rate that makes sense but the

30:54
question is what happens after those 10

30:55
years that's a bridge we have to cross

30:58
but these are unique times and I think

31:00
they're pro-consumer times

31:03
as well because the pricing of annuity

31:05
guarantees are very favorable as Tom

31:08
hegner says the mortality credits are

31:10
very favorable at this point in time

31:12
never a good time to you can't time

31:15
annuity purchases but you have to feel

31:17
comfortable with the guarantees and the

31:19
bell doesn't ring at the top of the

31:20
bottom what are some other things that

31:22
you want people to be aware of if

31:24
they're retiring within the next five

31:25
years

31:27
well one thing people tend to ignore is

31:30
their home equity

31:32
it's one of the most valuable assets

31:35
most people have and they kind of know

31:37
it's there

31:39
but they don't really know what to do

31:41
with it or have a plan for it now some

31:44
people decide they're going to downsize

31:46
they're going to move part of that home

31:48
equity

31:49
into their Investment Portfolio which is

31:52
fine it's a good strategy the problem is

31:54
most people who try that they do it

31:56
wrong there are a lot of costs with that

31:59
strategy that are often overlooked when

32:01
they're estimating the benefits of it so

32:04
in the book

32:05
I go through that strategy and explain

32:08
you know the things people often

32:10
Overlook or over exaggerate or things of

32:13
that nature so that's one aspect of home

32:16
equity to to look at carefully is if

32:18
you're going to downsize to use your

32:20
home equity for retirement make sure you

32:23
do it right make sure you have a good

32:25
estimate of the benefit that's going to

32:27
come from that and the costs that are

32:29
going to be associated with that move

32:31
the other thing to look at is once

32:33
you're in the home you plan to stay in

32:35
and you have a little no mortgage on it

32:37
consider setting up a reverse mortgage

32:40
line of credit

32:42
and this is something that can come in

32:43
really handy when there's some kind of

32:46
cash crunch you know once you're into

32:48
retirement you don't have a regular

32:50
income it can be hard to get a loan if

32:52
you need it yeah even if you have a

32:55
substantial home equity

32:57
a lot of lenders won't give a home

33:00
equity loan to someone who does not have

33:02
a an employer income even if you have

33:05
say annuities and Social Security often

33:08
they don't count that as right you know

33:11
so if you can set up a reverse mortgage

33:14
line of credit there are fees at the

33:15
outset so it can cost money to set it up

33:18
but it's something there's no interest

33:21
charges until you actually draw on that

33:24
line of credit

33:25
uh in addition there are different ways

33:28
you can use if one strategy that's been

33:30
frequently recommended now is you uh you

33:34
you have your regular Investment

33:36
Portfolio and that's invested you're

33:37
drawing money and income from it as

33:39
needed

33:40
um but the market goes down uh the

33:43
stocks might go down 20 or more and uh

33:46
and you don't want to keep drawing down

33:49
on that portfolio when it when it's gone

33:51
down you want it to stay in there and

33:53
recover

33:54
so what you can do is use this home

33:56
equity line of credit to pay some of

33:59
your living expenses leave that money

34:01
intact in the markets until it recovers

34:03
and then once the portfolio recovers you

34:06
start drawing income from that again and

34:09
stop drawing down on the reverse

34:11
mortgage line of credit and you might

34:13
even be able to pay down that line of

34:16
credit so it's back down to its Euro

34:18
balance the interest stops compounding

34:21
and you can have the whole balance

34:23
available again in the future when the

34:25
next Market downturn comes so that's

34:28
that's a big oversight in many

34:30
retirement plans is what are you going

34:32
to do with your home equity so give that

34:35
some careful thought and run the numbers

34:37
on it yeah and there's been such bad

34:39
kind of like annuities have gotten a bad

34:41
rap for how they've been sold I mean the

34:43
reverse mortgage and the hum equity line

34:45
all that has been

34:48
really done wrong on the uh from from

34:50
how they've been presented on television

34:52
with X movie stars and athletes that

34:54
know nothing

34:56
kind of like the Medicare thing as well

34:58
it drives us all crazy

35:00
um if you had to narrow down like one or

35:02
two things

35:04
um about retirement planning like if you

35:06
if if someone only could know two things

35:10
what would you tell them to not what

35:12
what would be those one or two things

35:13
that they just have to know

35:16
yeah I'd say the first one it's

35:18
non-financial

35:19
uh many people are financially secure in

35:22
retirement but they're unhappy they have

35:24
what you would call an unsuccessful

35:27
retirement

35:28
uh simply because they're not happy and

35:31
the reason that happens is people are

35:34
you know your retirement plan is focused

35:36
on finances making sure you have enough

35:38
money you've gone over these issues

35:40
we've discussed

35:41
uh but what happens is you have a lot of

35:44
free time in retire all that time you

35:47
used to spend working and commuting

35:50
it's time you have to fill yep and and

35:53
you have to decide how you're going to

35:55
do that you need not only fill that time

35:58
you need structure to your days to your

36:01
weeks to your months and you need a

36:04
purpose the the really key to uh to

36:07
successful retirement is having some

36:10
sense of purpose and it doesn't have to

36:12
be something big it's not like you have

36:13
to go out and start a charity or

36:15
something like that fulfilling purposes

36:18
according to the research that's been

36:20
done include things such as improving

36:23
family relationships or expanding and

36:27
maintaining uh your close friends uh

36:30
things of that nature so you don't have

36:32
to do something significant you don't

36:34
have to get your golf handicapped down

36:37
to uh to zero anything of that nature

36:40
but you have to find out what's going to

36:42
give you a purpose what are you going to

36:44
enjoy what's going to give you a sense

36:46
of accomplishment

36:48
and plan to do that in retirement you

36:51
really need a plan for your

36:52
non-financial life just as much as you

36:55
need a plan for for the financial part

36:57
of retirement and that's something that

36:59
that's overlooked uh by almost everyone

37:02
that goes into retirement and uh you

37:04
know I've talked to many people and it

37:06
said it's taking them anywhere from two

37:07
to five years to figure out how to be

37:10
retired oh yeah

37:13
no it's it's it's hard definitely I I

37:16
have those conversations all the time

37:18
you're in chapter two of your life one

37:20
of your part-time jobs is managing and

37:22
overseeing with the experts that you

37:24
surround yourself with

37:25
your retirement assets and and that type

37:28
of planning whether it's for legacy

37:30
or you know while you're alive

37:33
um you know it it is a part-time job as

37:35
you have accumulated these assets you

37:37
just can't let them sit there

37:39
as a lot of people do

37:42
um

37:43
regardless of age this is something I've

37:45
always wanted to ask you regardless

37:46
someone's age whether they're young or

37:48
old or whatever that means

37:51
what are some of the basic steps that

37:53
people could take to start preparing or

37:56
prepare better

37:57
for retirement

38:00
um

38:00
you know whether they're just you know

38:02
they're in retirement now and trying to

38:04
get better at it or they're trying to

38:06
think ahead what would you recommend

38:08
yeah step one is to establish goals uh

38:12
you know not only financial goals but as

38:14
we discuss these these non-financial

38:16
goals so established goals another thing

38:20
that's often overlooked and that I

38:21
emphasize the newsletter is expect

38:23
change

38:25
uh retirement's changed a lot in the 30

38:28
years I've been doing retirement watch

38:29
it's going to change again and in fact

38:32
it appears to me that the changes we've

38:34
had in recent years and that I see

38:37
coming down the pike are going to be

38:39
more rapid and more significant than

38:41
it's been in the past so anticipate

38:44
change be prepared for it know that your

38:46
retirement plan is not set in stone it's

38:50
not a road map it's something you have

38:52
to review regularly uh see where your

38:55
assumptions are wrong see where you've

38:57
changed uh see where of course the tax

38:59
law and other things outside your

39:01
purview have changed and adapt your plan

39:04
to that you know the important thing is

39:08
the longer you wait to review and make

39:10
changes

39:11
when you eventually do it the bigger the

39:13
changes you're going to have to make are

39:15
so it's better to review regularly

39:18
and make modest changes rather than to

39:22
wait five years and suddenly realize

39:25
you've got a slash expenses or something

39:27
of that nature uh so those are the

39:30
probably the two most important things

39:32
at any age are to set your goals

39:34
uh to be prepared for Change and I'd add

39:37
one more thing is to simplify

39:40
particularly as you get older but but

39:42
certainly at any point I find out that

39:45
many people procrastinate about the

39:47
decision simply because

39:50
they've accumulated such complications

39:52
in their life whether they have too many

39:54
Financial accounts or they're trying to

39:57
balance too many things uh you know I

40:00
recommend people

40:02
consolidate their Accounts at one broker

40:06
if they can if not and you know narrow

40:08
it down as many as you can uh your

40:12
different types of asset ownerships you

40:14
know I've seen people they've got like

40:15
30 different Investments well and you

40:18
also said something last time you were

40:19
on that just floored me I loved it was

40:21
that the password

40:23
all the passwords and all of the ways to

40:25
get into your accounts now

40:27
those need to be secured in a place

40:29
where people can find it both digital

40:31
and hard copy correct yeah and you know

40:34
that's the whole estate planning topic

40:37
is very important many people look at

40:38
something they do once or twice but it's

40:40
kind of a continuing thing and with so

40:43
many digital assets that's really an

40:45
important thing I've uh you know I've

40:48
met many people who uh their spouses

40:50
have passed away and and the biggest

40:52
difficulty for they were one of the

40:54
biggest difficulties was just getting a

40:56
handle on their Finance just figuring

40:59
out how to pay the bills which how to

41:02
get access to those accounts uh you need

41:05
to have some kind of Master uh file or

41:10
or spreadsheet or something where anyone

41:13
can walk off the street

41:15
and say all right this is where the

41:17
money is this is how I access it you

41:20
also have to list things like your

41:22
automatic bill payments we're having

41:24
bills paid automatically uh and some of

41:28
these bills are annual

41:29
so it could be a long time before

41:31
someone else figures out this money is

41:33
being taken out of your account or put

41:35
on your credit card right a lot of this

41:38
stuff you know some of it has to

41:39
continue because it's a joint expense of

41:42
the household but others it's just for

41:44
you

41:45
and that stuff should be canceled right

41:48
away so people should know

41:50
what obligations you have out there and

41:53
how to turn them off so yeah that's a

41:55
good point is uh these digital assets

41:58
and they're wider than many people know

42:00
they're email addresses their phones

42:02
yeah you know if you have biometric uh

42:05
Security on your phone

42:07
how is someone else going to access that

42:09
phone and get into your email and your

42:11
text and other things you have to have a

42:13
a passcode that's uh you've written down

42:16
somewhere so someone can find it because

42:18
Apple you cannot call Apple and they

42:20
will not give you that

42:22
that sign in login it just won't happen

42:25
and that's true of many many different

42:28
things uh uh some of the the financial

42:31
firms and some others they will

42:33
eventually do it once you go to Probate

42:35
Court yeah and get a letter that

42:38
authorizes you to access these things

42:42
um but short of that

42:44
um it can take people weeks or months

42:46
just oh yeah that's a good money it's

42:48
messy it absolutely is messy we've

42:50
talked about the Baby Boomers let's talk

42:52
about the youngsters the 40s the 45 year

42:55
olds those people what

42:57
um what advice would you give to them

42:59
because they're you know there's some

43:01
proactive thinkers out there that want

43:03
to retire early and they're trying to

43:04
think about it at least look underneath

43:07
the rocks and trying to figure out

43:08
what's the best plan for them what are

43:09
you telling the youngsters here

43:11
yeah I'm telling them

43:13
you know you wanna

43:15
you weren't expecting investment markets

43:17
they're going to be different than

43:18
they've been the last 10 or 20 years uh

43:21
you could make a lot of money in the

43:23
recent past by just investing in the

43:26
biggest growth companies uh with

43:28
interest rates going up those have been

43:30
revalued and I don't think they're going

43:33
to return to these prior rates of growth

43:36
and stock prices that they had uh

43:39
Studies have shown that the rapid

43:41
increase in stock prices over the last

43:43
couple decades a big part of that

43:45
was due to this increase in profit

43:47
margins we had historic levels of profit

43:50
margins uh those forces we discussed

43:53
earlier lack of free trade uh higher

43:56
interest rates higher inflation the the

43:58
tight labor market all that stuff is

44:01
going to keep those profit margins from

44:03
continuing to grow and probably cause a

44:05
lot of them to decrease also as interest

44:09
rates go up that revalues assets so the

44:12
valuations which have been near historic

44:14
levels those are going to come down so

44:16
don't rely on the Investments that have

44:19
worked best in the past instead I would

44:21
suggest going for a more Diversified

44:23
portfolio you want assets

44:25
they're going to do well in any

44:27
environment many people now do not

44:29
really have any insulation hatches uh

44:32
they're used to this period of two

44:34
percent or less inflation they think the

44:36
inflation we had in 2022 is just going

44:39
to go away very quickly

44:41
I think you have to be prepared for

44:44
inflation to be somewhere in the three

44:46
percent to five percent range foreign

44:50
so you know have inflation Hedges uh

44:53
don't just have assets that depend on a

44:56
lot of fed liquidity low interest rates

44:58
and low inflation that's the environment

45:00
of the past I don't think that's going

45:03
to be the environment of the future so

45:05
as I said more diversification in the

45:08
portfolio than previously people have

45:11
had

45:14
yeah sure we're talking to Bob Carlson a

45:16
retirement watch you can go to his site

45:17
at retirementwatch.com that retirement

45:20
watch is all one word

45:21
retirementwatch.com

45:23
if you haven't been there go there if

45:25
you know where it is keep going there

45:27
pin it put in your favorites subscribe

45:30
because he is a

45:31
fire hose of factual information and we

45:34
just love when he's on especially when

45:36
there's new legislation Etc but in this

45:39
occasion it's because of his new book

45:41
and the book is called retirement watch

45:43
the assistant the essential guide to

45:45
retiring

45:46
in the 2020s and it's timely you know

45:50
with all these baby boomers retiring you

45:53
should have it on your shelf you should

45:54
flip through it and refer to it because

45:56
it is a very good read now before we go

45:59
Bob as you know I do a mic drop moment

46:01
so that I'm going to ask you to wow us

46:04
with some

46:05
you know whatever you have on your mind

46:07
to as a mic drop moment to leave us with

46:10
a an epiphany a thought or whatever you

46:13
have so here we go Bob Carlson

46:16
retirement watch

46:18
and five four three two one go yeah I'd

46:22
emphasize the point I made earlier which

46:24
is expect change

46:26
um not only retirement issues but all

46:29
kinds of issues we've had all these uh

46:31
rapid changes in 2022 with inflation

46:34
interest rates to Global conflicts uh

46:38
Congress passing this large piece of

46:40
legislation at the end of the year uh so

46:44
expect change and as we said Social

46:45
Security and Medicare are going to have

46:47
to change simply because they're not

46:50
sustainable under the current structure

46:53
so you know don't be close-minded I find

46:56
many people once they get in their late

46:58
30s or in their 40s they think they've

47:00
learned all they need to know they're

47:02
just going through life uh repeating

47:05
what they already know saying oh this is

47:07
what you do for this this is what you do

47:09
for that uh as you get even more older

47:12
you'll you'll realize that that's not

47:14
the case uh you have to keep an open

47:17
mind at these things you learned in your

47:19
20s and 30s might not still apply some

47:21
of them will but not all of them right

47:23
so keep an open mind keep learning keep

47:26
being inquisitive uh always be

47:29
questioning uh things you've been told

47:31
uh things you think you know and and be

47:35
looking out for what's new and of course

47:37
evaluate what's new to see if it's

47:39
really good or if it's just someone

47:41
being a huckster

47:43
uh but but keep an open mind be be

47:46
available for change

47:48
that's Bob Carlson Bob thank you so much

47:50
for being on fun with annuities I want

47:52
to thank everybody on all of the major

47:54
podcast platforms and the fun with the

47:56
news YouTube channel for joining us and

47:58
I'll see you next time

48:04
[Music]