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Speaker 1: Tonight, why financial flexibility is the new financial freedom. You're

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Speaker 1: listening to Simply Money, presented by all Worth Financial on

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Speaker 1: Bob Sponseller along with Brian James. We've all heard the

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Speaker 1: American dream save enough money so you never have to

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Speaker 1: work again. But what if that's the wrong goal. Today

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Speaker 1: we're flipping that script because financial flexibility, Brian, might be

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Speaker 1: the new American dream.

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Speaker 2: So yeah, so things have change.

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Speaker 3: Financial freedom used to be here's my retirement date, and

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Speaker 3: I'm going to mark all these ex's on the calendar

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Speaker 3: until it's time to no longer go into the office

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Speaker 3: ever again, and I'm just going to spend the rest

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Speaker 3: of my life on the beach. But now people are

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Speaker 3: feeling a little bit differently, and we hear this every

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Speaker 3: day here at all Worth as we're sitting down with

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Speaker 3: clients and prospective clients talking about financial planning. And it's

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Speaker 3: people who come in and they say, you know, I

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Speaker 3: thought I wanted to just do a bunch of nothing,

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Speaker 3: but now I know. So I got family members, I

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Speaker 3: got friends who have retired and have gone ahead of me,

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Speaker 3: and sometimes they're just not as happy because they don't

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Speaker 3: have that sense of purpose anymore. So people are thinking

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Speaker 3: a little bit differently about something called financial flexibility. So

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Speaker 3: you know, tend you're a family with maybe one to

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Speaker 3: five million dollars, and it might be a more realistic,

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Speaker 3: fulfilling target here. Flexibility means you don't really have to

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Speaker 3: stop working. You just choose how you work when and

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Speaker 3: with whom. And a lot of times this conversation, you know,

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Speaker 3: comes in the form of, let's talk about what you

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Speaker 3: might do when when this particular job, this particular career

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Speaker 3: is no longer necessary. Maybe you're not ready to completely

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Speaker 3: hang it up and let the dust collect on you,

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Speaker 3: but maybe it's time to seek a new job in

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Speaker 3: a spot where, you know, where it's not the salary

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Speaker 3: that matters, and maybe it's not the benefits because you've

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Speaker 3: already kind of won that game, you know, but it

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Speaker 3: might be something where you're still bringing a little bit

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Speaker 3: in come to help bridge the gap during retirement, but

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Speaker 3: you're not quite ready to completely hang it up and

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Speaker 3: have no reason to get out of that anymore.

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Speaker 1: Yeah, I'm finding I'm having this discussion more and more

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Speaker 1: with folks that are retiring today than I did with

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Speaker 1: folks that I started working with twenty to thirty years ago.

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Speaker 2: I agree.

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Speaker 1: It used to be Hey, I'm fifty eight, fifty nine,

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Speaker 1: show me how I can get out of there. Now

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Speaker 1: I can't wait to get out of there and never

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Speaker 1: go to work anymore. And that's not the case anymore.

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Speaker 1: A lot of folks, even in their late sixties and seventies,

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Speaker 1: they want they want a way to do something. They

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Speaker 1: want to stay involved. They got a lot of experience

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Speaker 1: in acquired wisdom and value to add to whether it's

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Speaker 1: the company they worked for for thirty or forty years,

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Speaker 1: or nonprofits or serve on ministry boards, anything like that.

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Speaker 1: They just don't want to be chained to a sixty

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Speaker 1: to seventy hour work schedule. And I'm finding that companies

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Speaker 1: and institutions are way more flexible than maybe they ever

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Speaker 1: have before in allowing these folks to be involved and

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Speaker 1: do some things because it really is a win win

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Speaker 1: for both parties. Are you finding that with any of

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Speaker 1: your clients.

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Speaker 3: Brian, Absolutely, And one of the big companies around here

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Speaker 3: that does this is General Electric, so they seem to

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Speaker 3: be the gold.

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Speaker 2: Stand exactly the company I'm thinking of exactly.

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Speaker 3: Yeah, there's a conga line of people who have their

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Speaker 3: retirement dinner and then the very next week are coming back.

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Speaker 2: As a as a consultant or doing whatever they do,

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Speaker 2: and that's just a well worn path.

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Speaker 3: It's almost I can't remember the last time I had

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Speaker 3: somebody tell me that they were ready to retire from

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Speaker 3: General Electric and they had zero intent on taking that step.

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Speaker 2: So it really seems like a good move. Though.

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Speaker 3: Those seem to be some pretty happy people because they

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Speaker 3: get to slough off some of the duties that they

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Speaker 3: had before. They feel they they do are They do

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Speaker 3: feel entitled and able to say no to things, whereas

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Speaker 3: when you're when you're working and you're you're in the grind,

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Speaker 3: when you're their thirties, forties, fifties, you're just part of

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Speaker 3: the machine and so forth. But those folks do seem

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Speaker 3: to have a little more flexibility and they do seem

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Speaker 3: to be a little more relaxed. And it's a great

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Speaker 3: baby step into retirement, and I think that can be

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Speaker 3: a great thing for anybody, just the idea of, you

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Speaker 3: know what, I'm going to start to back off a

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Speaker 3: little bit, rather than that.

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Speaker 2: Cold water shock of today.

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Speaker 3: I get out of bed and I go for my

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Speaker 3: last day of work, and then I have my retirement dinner,

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Speaker 3: say goodbye to everybody, and then tomorrow what am I

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Speaker 3: going to do? That can be a really, really scary thing.

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Speaker 3: So these sort of baby steps into retirement can be

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Speaker 3: very powerful.

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Speaker 2: Well, let's talk.

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Speaker 1: About a different way of of maybe creating those baby

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Speaker 1: step steps into something else.

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Speaker 2: And here's what I mean by that, Brian.

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Speaker 1: We've just kind of talked about maybe the ge executive

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Speaker 1: that worked fifty sixty hours a week. They want to

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Speaker 1: stay involved, but they want to do it on a

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Speaker 1: ten to fifteen to twenty hour a week basis. We've

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Speaker 1: got some other folks that say, I want to make

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Speaker 1: a complete different career path decision. Maybe I worked in

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Speaker 1: it or in engineering, or what have you for thirty

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Speaker 1: to thirty five years.

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Speaker 2: For thirty thirty five years.

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Speaker 1: I want to open up a wood shop, or I

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Speaker 1: want to work with orphan children in Zimbabwe. I want

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Speaker 1: to do something like that. I'm seeing more and more

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Speaker 1: of those conversations come up. Let's talk about what we

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Speaker 1: need to be doing as we think about those dreams

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Speaker 1: and goals and actually make it come into fruition or reality.

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Speaker 1: What do we need to do in terms of planning

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Speaker 1: and getting your finances in order right.

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Speaker 3: So what you're looking at there is if you want

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Speaker 3: to be able to figure out, you know, what you

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Speaker 3: can get away with here. First of all, you got

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Speaker 3: to make sure that you understand your current situation right.

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Speaker 3: So you have a current budget, right, whatever it is.

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Speaker 3: You may not be paying attention to it. You may

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Speaker 3: not be putting money in envelopes or making sure that

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Speaker 3: we only spend exit the grocery store or whatever, but

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Speaker 3: you do have some kind of a lifestyle out there

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Speaker 3: presumably if you if you are unaware of your budget,

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Speaker 3: then you are either a very very very financially stable

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Speaker 3: person where you just know that you're bringing in more

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Speaker 3: than you're spending, or you're a complete train wreck. So

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Speaker 3: we'll assume that we're talking to the people who you

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Speaker 3: kind of have things you know on autopilot and they're okay,

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Speaker 3: But you need to look really in depth at that

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Speaker 3: to see what that actually is, because you got to

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Speaker 3: figure out what is my minimum, what's a bare minimum

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Speaker 3: I need to get going here? And a good easy

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Speaker 3: way to do that is to simply take a look

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Speaker 3: at your take home pay. This is you don't need

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Speaker 3: to fill out a spreadsheet full of here's my magazine subscriptions,

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Speaker 3: and here's what we spend at Applebe's on the weekends

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Speaker 3: and whatever. You can simply look at your take home

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Speaker 3: pay and figure out what's going where. Top line is,

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Speaker 3: here's what hits the bank from all of our resources,

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Speaker 3: from all of our income sources at the beginning of

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Speaker 3: the month, and then here's where it goes. This goes

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Speaker 3: to the mortgage that'll be gone in two three. However,

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Speaker 3: many years we always carve out and put a little

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Speaker 3: bit into savings. Maybe that's a goal you don't have

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Speaker 3: to have anymore. This is going to college tuition or

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Speaker 3: college savings right now, that's a finite goal, and so forth.

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Speaker 3: Once you knock off all those finite things that have

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Speaker 3: a limited lifespan, then you will be down to the

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Speaker 3: money you just spend to be you on a monthly basis.

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Speaker 2: That is your target.

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Speaker 3: Start with that, and then figure out how can I

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Speaker 3: replicate that income from my existing sources. And therefore, here

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Speaker 3: is a gap I need to make, and I can

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Speaker 3: promise you, if you're one of these stable people, it's

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Speaker 3: probably a lot less than you think it is. Most

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Speaker 3: of the time we come up with happy surprises in

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Speaker 3: those discussions.

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Speaker 1: Yep, you're listening to Simple Money presented by all Worth Financial.

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Speaker 1: I'm Bob Sponseller along with Brian James and Brian. This

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Speaker 1: is where having a really sound tax strategy comes into play,

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Speaker 1: and we talk about this often. This is where having

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Speaker 1: different buckets or sources from which you could take income

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Speaker 1: divers sources of income I RaSE four oh one k's

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Speaker 1: after tax accounts, WROTH accounts, blending an income strategy from

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Speaker 1: those different sources, that's where we could really create some

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Speaker 1: nice tax efficiency of that gap income as you call it,

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Speaker 1: and then really make this thing hum in the later years.

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Speaker 3: Yes, Now this is where things get more complicated. Right,

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Speaker 3: So when for people who have worked very hard and

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Speaker 3: built built their plans and created several different resources. Right,

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Speaker 3: you've got social security history, you've got pre tax dollars

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Speaker 3: in your four oh one K, four or three B.

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Speaker 3: You might have WROTH in the mix. Maybe you've got

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Speaker 3: some taxbos to all this other stuff. Then everything gets

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Speaker 3: harder when you get you hit a point where you've

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Speaker 3: got a lot of resources. All those resources are labeled

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Speaker 3: and painted differently with regard to taxes. Are all going

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Speaker 3: to be taxed differently? When we are working slaves you're

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Speaker 3: paying ordinary income taxes.

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Speaker 2: That's it. You got to work.

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Speaker 3: Somebody gives you a check, You're going to get taxed

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Speaker 3: at the ordinary income rates. Period, end of story. When

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Speaker 3: you've created all of these different resources, now you've got

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Speaker 3: a choice to make. And congratulations, things just got harder,

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Speaker 3: and Bob and Brian just got a little more job security.

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Speaker 3: Because there are any number of ways you can combine

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Speaker 3: these things into an income stream that will keep you stable.

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Speaker 3: But each one of them is going to have its

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Speaker 3: own pros and cons. So let me throw out one

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Speaker 3: thing though, for somebody who is thinking about this. I

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Speaker 3: want to make sure that everybody knows of something called

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Speaker 3: the rule of fifty five. Remember the rule of fifty five? Bob, Yes,

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Speaker 3: so what we do there? I hate those rules because

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Speaker 3: everybody's different. You can't apply this rule of whatever to

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Speaker 3: everybody because everybody's situation is different.

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Speaker 2: But I don't want to take you off. That's okay.

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Speaker 3: And I threw this softball there and it was a

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Speaker 3: little I almost hit you in the helmet. Sorry about that,

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Speaker 3: But no, the rule of fifty five, this one does

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Speaker 3: apply to everybody, which is nothing more than when you

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Speaker 3: are fifty five years old. You get to pull money

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Speaker 3: out of your four oh one K without paying penalties.

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Speaker 3: So if you are a person who is considering an

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Speaker 3: earlier retirement and one of your resources is pre tax

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Speaker 3: dollars in your four oh one K, then know that

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Speaker 3: you can pull money from the four oh one K

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Speaker 3: without only paying income taxes. No ten percent penalty, no

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Speaker 3: early withdrawal penalty. That does not apply to IRA. You'll

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Speaker 3: notice I said the word four oh one K six

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Speaker 3: or seven times in that whole exchange there. The IRA

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Speaker 3: age is fifty nine and a half. That's what most

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Speaker 3: people think everything is. But if it's a four oh

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Speaker 3: one K, it's fifty five. You can draw on that

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Speaker 3: without penalty.

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Speaker 1: Yeah, and let's not ignore the whole healthcare question, because

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Speaker 1: what we're talking about here.

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Speaker 2: Is these bridge years.

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Speaker 1: You know, if you want to retire early and transition

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Speaker 1: into something else, and let's face it, if you go

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Speaker 1: from a for profit business into a nonprofit, a ministry

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Speaker 1: something like that, the benefits often are not as great,

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Speaker 1: and you got to sometimes self insure yourself between when

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Speaker 1: you retire from your company job and when you get

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Speaker 1: to medicate. We got we got to help people transition

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Speaker 1: and get you know, good sound medical coverage, and uh,

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Speaker 1: sometimes people overlook that.

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Speaker 2: I know.

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Speaker 1: I heard of one lady yesterday who I mean, she

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Speaker 1: could work anywhere, she's brilliant, but she just decided to

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Speaker 1: go work part time at Costco, working in some department

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Speaker 1: of Costco that sold widgets or garden equipment or something

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Speaker 1: that she was really interested in, solely to get over

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Speaker 1: there for about ten hours a week, work part time,

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Speaker 1: but get healthcare coverage. Between her late fifties and when

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Speaker 1: she could go on Medicare, she's totally happy with her life.

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Speaker 1: She goes in there, rolls in for her ten hours

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Speaker 1: a week, she does something completely different, she's out of there,

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Speaker 1: but she's got that healthcare coverage and good health care

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Speaker 1: coverage to bridge that gap to sixty five.

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Speaker 3: Yeah, and I think that's a great outcome here. I

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Speaker 3: want to throw out one caveat something to keep in mind.

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Speaker 3: Eye and I'm going back to this goes back twenty

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Speaker 3: thirty years when I first started in this industry and

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Speaker 3: home depot and lows, the big box hardware stores were

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Speaker 3: kind of new, and there were a lot of always

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Speaker 3: tend to be older men who want to retire from

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Speaker 3: my job. I love working with my hands, so I

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Speaker 3: want to help people do that. That sounds like fun.

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Speaker 3: So I'm going to go be an hourly guy at

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Speaker 3: home Depot and lows and that. You still see this

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Speaker 3: every now and then, but these are hardworking people who

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Speaker 3: have their stuff together and they will eventually recognize that, hey,

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Speaker 3: this this store isn't running as as efficiently as it could.

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Speaker 2: I'm going to fix it. I'm going to do things.

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Speaker 3: And all of a sudden, management notices and you get

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Speaker 3: a promotion, and then that happens a couple three times,

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Speaker 3: and all of a sudden, you have a new career

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Speaker 3: that you didn't want. You only wanted to help people

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Speaker 3: with their hardware projects a few hours a week. So

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Speaker 3: just be careful of that trap.

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Speaker 1: That's good. Here's the all Worth advice. The question isn't

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Speaker 1: when can I retire? It's when can I start living

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Speaker 1: the life I want to live? Coming up next, why

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Speaker 1: clinging to old investments might be the one thing holding

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Speaker 1: your whole retirement plan back. You're listening to Simply Money

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Speaker 1: presented by all Worth Financial on fifty five KARC the

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Speaker 1: talk station. You're listening to Simply Money presented by all

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Speaker 1: Worth Financial on Bob sponseller along with Brian James. Hey,

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Speaker 1: if you can't listen to Simply Money every night, subscribe

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Speaker 1: and get our daily podcast. You can listen in the

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Speaker 1: following morning during your commute to work or at the gym.

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Speaker 1: Just search Simply Money on the iHeart app or wherever

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Speaker 1: you find your podcasts. Straight Ahead at six forty three.

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Speaker 1: The lessons you can learn from going into a retirement

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Speaker 1: time machine, Brian, that's gonna be that's gonna be kind

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Speaker 1: of fun, all right.

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Speaker 2: We see it all the time.

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Speaker 1: Someone walks into our office with a portfolio they built

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Speaker 1: over twenty or thirty years, and it's filled with all

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Speaker 1: kinds of stuff, Brian. The stocks they love, mutual funds

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Speaker 1: from Therefore, when k days, maybe even some company shares

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Speaker 1: from a past employer, and when we sit across the

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Speaker 1: desk and ask them why they own these certain things,

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Speaker 1: the answer is often well, I've just always had it,

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Speaker 1: or it's done well for me, or even it's part

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Speaker 1: of my story.

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Speaker 2: What do you say to those people, Brian?

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Speaker 3: You know, Bob, I'm going through this literally today the

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Speaker 3: other day and through this weekend, just in a slightly

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Speaker 3: different area of life, and I'm referring to my garage.

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Speaker 3: I have a lot of unfinished little projects out there

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Speaker 3: that they're all sitting in the garage about maybe eighty

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Speaker 3: ninety percent state of completion. And I'm sure whatever they

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Speaker 3: are where was important to me the day that I

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Speaker 3: was working on it, but I've completely forgotten about it,

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Speaker 3: and it's just they're just kind of there. And so

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Speaker 3: that's a lot of times, that's that's what happens to people,

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Speaker 3: And frankly, that's what drives people in the door, because

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Speaker 3: eventually they step way back and finally look at the

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Speaker 3: forest instead of the individual trees, and they go, what

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Speaker 3: is all of this stuff?

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Speaker 2: What does it mean to me?

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Speaker 3: And I've realized and they realized, I'm not even that

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Speaker 3: interested really in maintaining this stuff anymore. And Bob, that

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Speaker 3: defines me. I can't remember the last time I changed

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Speaker 3: my oil in my lawnmower, but it still starts the

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Speaker 3: day that it doesn't start. All probably higher professional but anyway, So, yeah,

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Speaker 3: the big people come in and they've got this grab

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Speaker 3: bag of just stuff that they some of it they inherited,

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Speaker 3: some of it they bought because they were interested in

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Speaker 3: investing a while ago or something. Like that, but they've

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Speaker 3: never figured out exactly what role does all this money

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Speaker 3: play when they're trying to knit it all together into

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Speaker 3: something that can help them retire or accomplish their financial goal.

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Speaker 2: Yeah.

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Speaker 1: The point we're trying to make here is your investment portfolio.

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Speaker 2: It's not a scrapbook.

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Speaker 1: It's not a half rebuilt Harley Davidson in your garage

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Speaker 1: with a bunch of tools laying around.

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Speaker 3: Or a family photo album. Because dad, grandpa, mom used

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Speaker 3: to work at this company and that's why we all

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Speaker 3: own the stock, even though none of us pays attention

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Speaker 3: to the company anymore.

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Speaker 2: Yeah, and you do need to change the oil on

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Speaker 2: your lawnmower button. Not yet, not yet. I don't it

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Speaker 2: started this weekend, Bob.

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Speaker 1: You'll be surprised when that day comes, all right. The

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Speaker 1: point with this whole collection of investments is.

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Speaker 2: It is a tool. You know, it should be built

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Speaker 2: to do a job.

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Speaker 1: And if it's not doing that job anymore, meaning you're consolidated,

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Speaker 1: coordinated investment and tax strategy, it might be time to

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Speaker 1: let some of those things go. And letting some of

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Speaker 1: those components of your portfolio go it doesn't mean you

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Speaker 1: were wrong before. It just means you're evolving. And we

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Speaker 1: talk about all the time investment. This investment business and

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Speaker 1: that particularly the tax benefits and tax opportunities around investing

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Speaker 1: has changed in a evolved dramatically over the last ten

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Speaker 1: to fifteen years. And we find a lot of times

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Speaker 1: people aren't even aware that some of these strategies even exist.

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Speaker 3: Right, So let's take an example here, and I think

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Speaker 3: you know, having been in this industry both of us here, Bob,

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Speaker 3: for several decades now. One of the big stories in

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Speaker 3: the stock market over the last several decades has been

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Speaker 3: Apple throwing out as an example.

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Speaker 2: Because Apple's great companies, strong company.

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Speaker 3: They are not going away, but not quite the shining

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Speaker 3: beacon that they that they once were. Steve Jobs is gone.

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Speaker 3: Everybody has an iPhone. Things just don't seem to be

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Speaker 3: innovating the way they used to. But if you've owned

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Speaker 3: Apple for a few decades, then you have a pretty

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Speaker 3: good chunk of stock. And also you probably have some

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Speaker 3: notion that if you were to sell it, if it's

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Speaker 3: a taxable account, you were to sell it, you're going

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Speaker 3: to pay taxes. Most people go, oh, I just can't

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Speaker 3: sell it. I'm gonna have to pay taxes. I can't

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Speaker 3: deal with that, don't want to have to think about it.

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Speaker 1: Well, and then that whole portfolio attachment things comes into play.

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Speaker 2: And here's what I mean by that.

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Speaker 1: We love I mean we love staring at a statement

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Speaker 1: or an online know portfolio summary, and we love seeing

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Speaker 1: that four hundred percent gain every day. It proves to

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Speaker 1: us emotionally that we were right. We bought a stock

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Speaker 1: and it went up and we made a bunch of money.

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Speaker 1: And you just sit there at that and stare at

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Speaker 1: that big percentage gain and say, this is done.

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Speaker 2: Great for me? Why would I ever sell it?

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Speaker 1: I you, but a lot of people don't look at

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Speaker 1: what the performance of that nice stock position is done

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Speaker 1: maybe in the last three to five years, as opposed

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Speaker 1: to a diversified portfolio. Do you ever find that?

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Speaker 3: I do, absolutely, And then I'll go back to my

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Speaker 3: garage full of projects. Sometimes you have a statement full

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Speaker 3: of projects that had a purpose at one point in

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Speaker 3: your past. So so really, I think that the goal

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Speaker 3: here is, Okay, now you've got something, what are you

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Speaker 3: going to do with it?

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Speaker 2: So? What what could people do? Let's get into that, bob.

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Speaker 2: So if this is.

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Speaker 3: All money, right, these are all financial instruments and they

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Speaker 3: should somehow be supporting you otherwise what was the point.

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Speaker 3: So something you might think about if you've got these

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Speaker 3: kind of assets out there, if you are charitably inclined

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Speaker 3: and you've got appreciated stocks, then you should look into

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Speaker 3: something called a donor advice fund. You can donate those

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Speaker 3: shares to a donor advice fund. You will reap the

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Speaker 3: benefits of a deduction which you may not have anymore.

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Speaker 3: Right when we swit, when the standard deduction became a

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Speaker 3: lot larger, a lot of people lost the benefit of

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Speaker 3: deducting charitable contributions. But this is the way a donor

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Speaker 3: advice one would allow you to make a contribution now,

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Speaker 3: but not ultimately have the charity receive it until a

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Speaker 3: time of your choosing. So you make an irrevocable deduction,

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Speaker 3: now give it to the charity over the same two, three, four,

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Speaker 3: five years you would have intended anyway.

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Speaker 1: Especially if you're one of those folks that's still writing

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Speaker 1: checks or putting currency into the offering plate at church,

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Speaker 1: or writing a check to chosen charities, and you're not

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Speaker 1: even able to take advantage of the much larger standard

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Speaker 1: deduction for married couples.

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Speaker 2: This is a miss that we find all the time.

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Speaker 1: And it's great that people are giving money to charity,

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Speaker 1: but there's just better ways to do it. And to

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Speaker 1: your point, you can kind of scale out of that

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Speaker 1: large concentrated position and do it on a much more

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Speaker 1: tax efficient basis. Another thing that we've talked about recently

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Speaker 1: and it's worth mentioning here again is direct invest direct indexing.

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Speaker 1: There are strategies where you can exchange that low cost

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Speaker 1: based stock for a fully diversified portfolio stocks and not

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Speaker 1: have to take the tax hit. It's a wonderful strategy.

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Speaker 3: Yeah, and that's a way too. Again you're putting diversification

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Speaker 3: into your portfolio. So let's give a quick example here.

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Speaker 3: We're here in Cincinnati. So let's say one of us

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Speaker 3: has a bunch of P and G stock, another one

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Speaker 3: of us has a bunch of GE and other ones

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Speaker 3: has a bunch of Kroger and keep adding to the list. Well,

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Speaker 3: if we sell those because we want to diversify, then yeah,

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Speaker 3: we're gonna incur capital gain because we sold the stock

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Speaker 3: and took the game. However, if we all contribute in

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Speaker 3: kind those shares to another fund, and then we redistribute

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Speaker 3: shares of that fund to ourselves. Now we have a

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Speaker 3: more diversified portfolio, and no one has actually executed a

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Speaker 3: sale resulting in a capital gain. Well, that's called an

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Speaker 3: exchange fund, and it's another way to deal with the

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Speaker 3: risk of a position that's got a little too big.

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Speaker 2: Yeah, So it comes down to when to reevaluate.

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Speaker 1: And the way I look at this is we all

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Speaker 1: have to ask ourselves. Does this investment that I'm holding

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Speaker 1: still align with my current needs? Is it helping me

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Speaker 1: hit my long term plan? Or am I just holding

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Speaker 1: it because I'm afraid.

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Speaker 2: To let it go?

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Speaker 1: Or I don't want to walk out into that garage

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Speaker 1: and clean up all the stuff laying on the floor.

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Speaker 2: Starting to sound like my spouse, Bob, I got one

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Speaker 2: of those two.

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Speaker 1: Hey, if you don't know the answer, that's the sign

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Speaker 1: it's time for a review. Whether it's an old mutual fund,

440
00:19:38,840 --> 00:19:42,399
Speaker 1: a legacy annuity, or a chunk of employer stock, you

441
00:19:42,480 --> 00:19:46,359
Speaker 1: owe it to yourself to reassess, and reassess that with

442
00:19:46,440 --> 00:19:48,920
Speaker 1: a good fiduciary advisor who can help you look at

443
00:19:48,920 --> 00:19:50,000
Speaker 1: your various options.

444
00:19:50,320 --> 00:19:53,320
Speaker 2: Here's the all worth advice. Your money isn't your identity.

445
00:19:53,440 --> 00:19:57,760
Speaker 1: It's a tool to build the life you want today, tomorrow,

446
00:19:58,080 --> 00:19:59,119
Speaker 1: and into retirement.

447
00:20:00,040 --> 00:20:00,680
Speaker 2: Coming up next.

448
00:20:00,720 --> 00:20:05,680
Speaker 1: It's the most emotional and most overlooked retirement decision, and

449
00:20:05,720 --> 00:20:07,600
Speaker 1: we're going to get into it. Coming up next. You're

450
00:20:07,640 --> 00:20:10,399
Speaker 1: listening to Simply Money, presented by all Worth Financial on

451
00:20:10,560 --> 00:20:19,800
Speaker 1: fifty five KRC, the talk station. You're listening to Simply

452
00:20:19,840 --> 00:20:22,920
Speaker 1: Money presented by all Worth Financial on Bob's sponseller along

453
00:20:22,920 --> 00:20:26,400
Speaker 1: with Brian James. We talk a lot about how to

454
00:20:26,480 --> 00:20:30,959
Speaker 1: downsize your portfolio, but today we want to talk about

455
00:20:31,440 --> 00:20:36,120
Speaker 1: downsizing something far more emotional. And Brian, we run into

456
00:20:36,160 --> 00:20:41,160
Speaker 1: this often with clients, the whole topic of downsizing your home.

457
00:20:41,480 --> 00:20:43,359
Speaker 3: Yeah, so this comes up in a lot of ways

458
00:20:43,440 --> 00:20:46,480
Speaker 3: during financial planning. It comes up in a form of,

459
00:20:47,160 --> 00:20:49,040
Speaker 3: you know, people will realize that, you know what, we

460
00:20:49,080 --> 00:20:51,200
Speaker 3: don't do we want to be in this house anymore.

461
00:20:51,240 --> 00:20:52,960
Speaker 3: The kids are up and out and now it's just

462
00:20:53,000 --> 00:20:55,320
Speaker 3: a bunch of bedrooms I gotta clean and that kind

463
00:20:55,320 --> 00:20:57,600
Speaker 3: of thing. But what I find, Bob is frequently people

464
00:20:57,840 --> 00:21:00,360
Speaker 3: who have come to that conclusion will decide to move,

465
00:21:00,440 --> 00:21:01,800
Speaker 3: and then they move into a house that is the

466
00:21:01,800 --> 00:21:02,280
Speaker 3: same size.

467
00:21:02,280 --> 00:21:03,600
Speaker 2: I think we get into our heads.

468
00:21:03,359 --> 00:21:06,160
Speaker 3: That well, if I've always lived in a five bedroom house,

469
00:21:06,160 --> 00:21:07,639
Speaker 3: that's just kind of what I need. Was just you know,

470
00:21:07,640 --> 00:21:09,880
Speaker 3: I don't want to it's too scary to go smaller.

471
00:21:10,359 --> 00:21:13,080
Speaker 3: But then inevitably we'll find people, you know, talking about

472
00:21:13,080 --> 00:21:15,359
Speaker 3: how they bought too much house and heaven forbid.

473
00:21:15,400 --> 00:21:16,719
Speaker 2: You know, a lot of times there winds up being

474
00:21:16,720 --> 00:21:17,520
Speaker 2: a mortgage against it.

475
00:21:17,520 --> 00:21:19,199
Speaker 3: Don't be one of those people who retires and then

476
00:21:19,200 --> 00:21:21,240
Speaker 3: puts a thirty year mortgage in place for a bigger

477
00:21:21,240 --> 00:21:23,240
Speaker 3: home that you you're just gonna fill with stuff that

478
00:21:23,280 --> 00:21:24,920
Speaker 3: someday you're gonna have to drag your good will.

479
00:21:25,760 --> 00:21:26,000
Speaker 2: Well.

480
00:21:26,000 --> 00:21:29,480
Speaker 1: We also talk with families that are struggling with Hey,

481
00:21:29,240 --> 00:21:32,320
Speaker 1: they deep down know that this big house that they

482
00:21:32,440 --> 00:21:34,960
Speaker 1: raise their kids in and where they've got a ton

483
00:21:35,000 --> 00:21:38,679
Speaker 1: of memories and it's been paid off for years, and

484
00:21:38,720 --> 00:21:41,520
Speaker 1: they kind of swore to each other they'd never leave

485
00:21:41,600 --> 00:21:44,359
Speaker 1: the house. You know, they just feel like they can't

486
00:21:44,440 --> 00:21:47,280
Speaker 1: leave because of all these memories. They want to have

487
00:21:47,320 --> 00:21:49,800
Speaker 1: a place for their kids to come back, all good stuff,

488
00:21:50,400 --> 00:21:55,560
Speaker 1: but sometimes those maintenance costs, taxes, upkeep, it just becomes

489
00:21:55,560 --> 00:21:59,240
Speaker 1: a huge burden to them that prevents them from traveling

490
00:21:59,800 --> 00:22:02,800
Speaker 1: and doing some other things that they might otherwise like

491
00:22:02,920 --> 00:22:05,080
Speaker 1: to do if they didn't have this huge house to

492
00:22:05,119 --> 00:22:05,639
Speaker 1: take care of it.

493
00:22:05,640 --> 00:22:07,640
Speaker 3: And Bob, I think this is where some war stories

494
00:22:07,680 --> 00:22:10,040
Speaker 3: from our financial planning tables here at all Worth can

495
00:22:10,080 --> 00:22:13,240
Speaker 3: come in. So what I'm speaking about is when we've got,

496
00:22:13,680 --> 00:22:16,760
Speaker 3: you know, the heirs of their parents. My mom and

497
00:22:16,880 --> 00:22:18,960
Speaker 3: dad have passed away, it's time to settle the estate,

498
00:22:19,040 --> 00:22:22,480
Speaker 3: and it's time for everybody has received their distributions, and

499
00:22:22,760 --> 00:22:24,959
Speaker 3: the very first thing that they wind up talking about

500
00:22:25,359 --> 00:22:26,800
Speaker 3: is we're going to get rid of this house.

501
00:22:26,840 --> 00:22:28,560
Speaker 2: Mom and Dad were convinced that we wanted it. We

502
00:22:28,640 --> 00:22:29,840
Speaker 2: just didn't know.

503
00:22:30,040 --> 00:22:32,560
Speaker 3: None of us, the siblings, nobody wanted this house because

504
00:22:32,600 --> 00:22:34,320
Speaker 3: we've all got our own houses and we're happy where

505
00:22:34,359 --> 00:22:37,399
Speaker 3: we are. I think people tend to convince themselves that

506
00:22:37,440 --> 00:22:39,679
Speaker 3: I have these warm, wonderful memories and this isn't to

507
00:22:39,720 --> 00:22:41,480
Speaker 3: take any of that away, that is important stuff, But

508
00:22:41,520 --> 00:22:44,680
Speaker 3: I have these warm, wonderful memories in this structure. Therefore

509
00:22:44,680 --> 00:22:47,600
Speaker 3: it must be maintained and passed down. And your kids

510
00:22:47,640 --> 00:22:49,760
Speaker 3: have those warm wonderful memories too, and they know it's

511
00:22:49,760 --> 00:22:52,080
Speaker 3: important to you. They may not be being upfront with

512
00:22:52,160 --> 00:22:54,640
Speaker 3: you as to whether they really want this house. Most

513
00:22:54,680 --> 00:22:56,280
Speaker 3: of the time, one of the very first calls that

514
00:22:56,320 --> 00:22:58,239
Speaker 3: happens during the settlement of the state is a real

515
00:22:58,359 --> 00:23:00,480
Speaker 3: estate agent because we can't let that house sit empty.

516
00:23:00,520 --> 00:23:01,400
Speaker 2: We got to deal with it.

517
00:23:01,640 --> 00:23:03,400
Speaker 3: Something's going to go wrong with it if nobody's paying

518
00:23:03,440 --> 00:23:05,600
Speaker 3: attention to it, and we're going to eat property taxes

519
00:23:05,640 --> 00:23:07,720
Speaker 3: and expenses as long as we have it, so they're

520
00:23:07,760 --> 00:23:10,040
Speaker 3: going to sell it relatively quickly. So you know, we

521
00:23:10,280 --> 00:23:13,040
Speaker 3: make make decisions based on that knowledge as you move

522
00:23:13,080 --> 00:23:14,040
Speaker 3: forward on your own plan.

523
00:23:14,480 --> 00:23:16,600
Speaker 1: Well, the other thing to keep in mind, Brian, is

524
00:23:16,640 --> 00:23:19,920
Speaker 1: the larger the house and the longer you've lived there.

525
00:23:19,960 --> 00:23:22,879
Speaker 1: And my wife and I went through this personally, you

526
00:23:22,920 --> 00:23:26,760
Speaker 1: know about four years ago, the more accumulated crap you've

527
00:23:26,760 --> 00:23:29,800
Speaker 1: got in that house to use your garage and tool example.

528
00:23:30,040 --> 00:23:31,000
Speaker 2: I mean, you stay in.

529
00:23:31,040 --> 00:23:34,679
Speaker 1: A house for seventeen, eighteen twenty years, you raise a

530
00:23:34,680 --> 00:23:37,000
Speaker 1: few kids there, and all you got a whole bunch

531
00:23:37,080 --> 00:23:40,200
Speaker 1: of stuff laying around in there that you don't need

532
00:23:40,600 --> 00:23:43,800
Speaker 1: and nobody wants. And if you end up dying with

533
00:23:43,880 --> 00:23:46,760
Speaker 1: that big house and all the crud that's in it,

534
00:23:47,280 --> 00:23:50,000
Speaker 1: that can create a whole other set of burdens for

535
00:23:50,080 --> 00:23:51,879
Speaker 1: your kids, Like, what are we how are we going

536
00:23:51,960 --> 00:23:53,560
Speaker 1: to get rid of all this stuff? Yeah?

537
00:23:53,800 --> 00:23:56,600
Speaker 3: I always think back to seventh grade chemistry over ats

538
00:23:56,600 --> 00:23:58,520
Speaker 3: Ainty Nation's on there on the west side when I

539
00:23:58,520 --> 00:24:01,959
Speaker 3: think about this a gas element. One of the characteristics

540
00:24:01,960 --> 00:24:04,080
Speaker 3: of a gaseous element is that it expands to fill

541
00:24:04,119 --> 00:24:05,040
Speaker 3: the container it's in.

542
00:24:05,280 --> 00:24:07,159
Speaker 2: And I got news for you about so do we.

543
00:24:07,240 --> 00:24:08,760
Speaker 3: If I have a big house, I'm gonna fill it

544
00:24:08,760 --> 00:24:10,399
Speaker 3: with stuff I probably don't need, but I got the

545
00:24:10,480 --> 00:24:11,399
Speaker 3: room for it, So why not.

546
00:24:12,080 --> 00:24:14,919
Speaker 1: You're listening to Simply Money, presented by all Worth Financial

547
00:24:15,000 --> 00:24:18,560
Speaker 1: Lumbob spond Seller along with Brian James. Let's get into

548
00:24:18,640 --> 00:24:21,000
Speaker 1: taxes and numbers a little bit. Brian, what are some

549
00:24:21,040 --> 00:24:24,879
Speaker 1: of the benefits in addition to unburdening yourself with the

550
00:24:25,000 --> 00:24:27,400
Speaker 1: huge house and all the stuff that's in it, Let's

551
00:24:27,440 --> 00:24:30,320
Speaker 1: talk about tax planning opportunities if you decide to make

552
00:24:30,320 --> 00:24:30,840
Speaker 1: a change.

553
00:24:30,920 --> 00:24:31,160
Speaker 2: Yeah.

554
00:24:31,160 --> 00:24:33,160
Speaker 3: So, one of the things that most people are comfortable

555
00:24:33,200 --> 00:24:36,119
Speaker 3: is the concept of well, if I own something anything

556
00:24:36,119 --> 00:24:40,240
Speaker 3: a stock, a mutual fund, collectibles, crypto, whatever, if I'm

557
00:24:40,240 --> 00:24:42,080
Speaker 3: gonna sell it at a gain, then the irs is

558
00:24:42,280 --> 00:24:43,959
Speaker 3: gonna come sniffing around for some taxes.

559
00:24:44,000 --> 00:24:46,199
Speaker 2: And that is true most of the time, but not

560
00:24:46,320 --> 00:24:46,920
Speaker 2: in this case.

561
00:24:46,960 --> 00:24:49,040
Speaker 3: So if you're sitting on a house that has a

562
00:24:49,040 --> 00:24:51,880
Speaker 3: good chunk of equity built into it and you there's

563
00:24:51,920 --> 00:24:55,080
Speaker 3: some rules you gotta follow. But basically, with the moment

564
00:24:55,119 --> 00:24:58,120
Speaker 3: you downsize that home to a smaller house, you will

565
00:24:58,160 --> 00:25:00,520
Speaker 3: have incurred. Again, you can always roll the game forward.

566
00:25:00,520 --> 00:25:02,240
Speaker 3: When you're buying a bigger house, that's never a thing.

567
00:25:02,800 --> 00:25:05,080
Speaker 3: But when you are, by buying a smaller house, you

568
00:25:05,119 --> 00:25:07,920
Speaker 3: get a one time, lifetime exemption where you can take

569
00:25:08,240 --> 00:25:10,120
Speaker 3: up to a two hundred and fifty thousand dollars gain

570
00:25:10,160 --> 00:25:14,000
Speaker 3: if you're an individual a half million dollar gain per couple, uh,

571
00:25:14,200 --> 00:25:17,120
Speaker 3: and you can avoid paying any capital tax capital gain

572
00:25:17,160 --> 00:25:19,520
Speaker 3: taxes on that at all. And again this is specific

573
00:25:19,520 --> 00:25:21,320
Speaker 3: to a house. You have to have lived in it

574
00:25:21,359 --> 00:25:23,600
Speaker 3: for two of the previous five years and that right,

575
00:25:23,920 --> 00:25:25,960
Speaker 3: there's no flipping a property here in the short term.

576
00:25:26,000 --> 00:25:27,560
Speaker 3: It has to be really be your house, and so

577
00:25:27,600 --> 00:25:29,280
Speaker 3: there's some hoops you got to jump through there, But

578
00:25:29,320 --> 00:25:31,159
Speaker 3: the point is you can get out from under that

579
00:25:31,240 --> 00:25:33,120
Speaker 3: home and avoid capital gain taxes.

580
00:25:33,560 --> 00:25:35,760
Speaker 2: Yeah, one more thing to throw out there.

581
00:25:35,400 --> 00:25:37,960
Speaker 1: If you're if you're thinking and we're not trying to

582
00:25:38,000 --> 00:25:40,960
Speaker 1: sell people on, you know, liquidating their home. But a

583
00:25:40,960 --> 00:25:43,480
Speaker 1: lot of times people I think they want to make

584
00:25:43,520 --> 00:25:45,879
Speaker 1: a change, they just don't know how to go about it.

585
00:25:46,240 --> 00:25:49,080
Speaker 1: You know, you talked about the tax implications. One other thing,

586
00:25:49,280 --> 00:25:53,760
Speaker 1: just from an emotional and lifestyle standpoint is test it out.

587
00:25:53,960 --> 00:25:57,840
Speaker 1: Go rent something that for three to six months or

588
00:25:57,880 --> 00:26:00,960
Speaker 1: a year that might be in your wheelhouse or where

589
00:26:01,000 --> 00:26:03,119
Speaker 1: you think you might want to live from a lifestyle

590
00:26:03,200 --> 00:26:06,600
Speaker 1: standpoint and home standpoint, and see how it works before

591
00:26:06,680 --> 00:26:09,720
Speaker 1: you pull the trigger and buy something else or sell

592
00:26:09,760 --> 00:26:12,920
Speaker 1: that home that you've been in for twenty years. Test

593
00:26:12,960 --> 00:26:15,800
Speaker 1: it out, make sure it's the right move, and then

594
00:26:15,880 --> 00:26:17,920
Speaker 1: you're not going to regret your decision down the road.

595
00:26:18,000 --> 00:26:21,480
Speaker 1: Here's the all Worth advice. Your home has served your family,

596
00:26:21,600 --> 00:26:25,640
Speaker 1: perhaps for decades now, it's time to ask is it's

597
00:26:25,680 --> 00:26:30,320
Speaker 1: still serving you. Coming up next, how a retirement time

598
00:26:30,400 --> 00:26:34,240
Speaker 1: machine can keep you from making bad financial decisions. You're

599
00:26:34,280 --> 00:26:37,040
Speaker 1: listening to Simply Money presented by all Worth Financial on

600
00:26:37,160 --> 00:26:46,359
Speaker 1: fifty five KRC the talk station. You're listening to Simply

601
00:26:46,359 --> 00:26:49,359
Speaker 1: Money presented by all Worth Financial. I'm Bob Sponseller along

602
00:26:49,400 --> 00:26:52,600
Speaker 1: with Brian James. Do you have a financial question you'd

603
00:26:52,640 --> 00:26:55,040
Speaker 1: like for us to answer. Well, there's a red button

604
00:26:55,080 --> 00:26:57,560
Speaker 1: you can click while you're listening to the show right

605
00:26:57,600 --> 00:27:00,720
Speaker 1: there on the iHeart app. Simply record your question and

606
00:27:00,800 --> 00:27:03,960
Speaker 1: it will come straight to us. We all want to

607
00:27:04,000 --> 00:27:07,240
Speaker 1: know what retirement will look like, but most of us

608
00:27:07,400 --> 00:27:11,560
Speaker 1: are making choices today without fully understanding the future impact

609
00:27:11,600 --> 00:27:15,040
Speaker 1: at all. What if you could climb into a time machine,

610
00:27:15,080 --> 00:27:19,199
Speaker 1: Brian and see the results of your decisions fifteen to

611
00:27:19,240 --> 00:27:20,199
Speaker 1: twenty years down the road.

612
00:27:20,240 --> 00:27:22,760
Speaker 2: Wouldn't that be fun? Yeah? This is really an important

613
00:27:22,800 --> 00:27:23,920
Speaker 2: part of financial planning.

614
00:27:24,040 --> 00:27:25,760
Speaker 3: So I think a lot of people get hung up

615
00:27:25,800 --> 00:27:28,480
Speaker 3: on the idea that you know that I don't know.

616
00:27:28,520 --> 00:27:30,240
Speaker 3: I can't predict the future. I don't know what's going

617
00:27:30,280 --> 00:27:33,280
Speaker 3: to happen. Therefore I shouldn't bother making any decisions right now.

618
00:27:33,640 --> 00:27:35,800
Speaker 3: And that impacts things from how much should I be

619
00:27:35,840 --> 00:27:36,360
Speaker 3: saving my four?

620
00:27:36,400 --> 00:27:36,560
Speaker 1: Oh?

621
00:27:36,600 --> 00:27:39,240
Speaker 3: Okay, when do I turn on my Social security? Can

622
00:27:39,240 --> 00:27:41,959
Speaker 3: we afford to take this big vacation, or you know,

623
00:27:42,200 --> 00:27:44,600
Speaker 3: retire at a certain time or whatever? It's never about

624
00:27:44,640 --> 00:27:46,639
Speaker 3: right now. Most people are able to make the decision

625
00:27:46,680 --> 00:27:48,479
Speaker 3: that they want and do what their gut tells them

626
00:27:48,520 --> 00:27:50,560
Speaker 3: they want. To do right now, but we can't pull

627
00:27:50,600 --> 00:27:53,360
Speaker 3: the trigger because we cannot see fifteen twenty years into

628
00:27:53,400 --> 00:27:56,560
Speaker 3: the future. So let's go through some mathematical examples here

629
00:27:56,600 --> 00:27:59,160
Speaker 3: to kind of help people understand what this is about. First,

630
00:27:59,200 --> 00:28:03,280
Speaker 3: we'll take a Mikes, young guy. He's established in his career, married,

631
00:28:03,280 --> 00:28:05,440
Speaker 3: he's got a couple kids, brings in one hundred and

632
00:28:05,440 --> 00:28:07,520
Speaker 3: fifty thousand dollars a year. Mike's big question this is

633
00:28:07,560 --> 00:28:09,520
Speaker 3: we get this all the time. Am I putting enough

634
00:28:09,520 --> 00:28:11,520
Speaker 3: away in my four to oh one K? And the

635
00:28:12,080 --> 00:28:13,359
Speaker 3: answer to that is, well, what are you trying to

636
00:28:13,359 --> 00:28:15,720
Speaker 3: accomplish with it? Are you one of these fire people

637
00:28:15,800 --> 00:28:18,359
Speaker 3: you know, financial independence, retire early? Well, then the answer

638
00:28:18,400 --> 00:28:20,040
Speaker 3: is put as much as you can possibly afford and

639
00:28:20,080 --> 00:28:22,480
Speaker 3: not mess up your current bills. Or are you somebody

640
00:28:22,480 --> 00:28:24,080
Speaker 3: who wants to live a certain lifestyle. You're just trying

641
00:28:24,080 --> 00:28:26,000
Speaker 3: to make sure you're putting away a minimum of enough.

642
00:28:26,119 --> 00:28:28,720
Speaker 3: So Mike right now is putting ten percent into his

643
00:28:28,720 --> 00:28:30,960
Speaker 3: four oh one K. That's pretty average, that's pretty pretty standard.

644
00:28:30,960 --> 00:28:32,439
Speaker 3: We try to get everybody to double digits and then

645
00:28:32,480 --> 00:28:35,520
Speaker 3: you'll be in the ballpark of OK. But he's wondering, well,

646
00:28:35,560 --> 00:28:38,080
Speaker 3: what if we sacrifice some things now and instead of ten,

647
00:28:38,200 --> 00:28:40,600
Speaker 3: I put twenty percent in and my pay drops, my

648
00:28:40,680 --> 00:28:41,800
Speaker 3: take on pay drops now.

649
00:28:42,040 --> 00:28:44,280
Speaker 2: But at the same time, I'm putting away more money.

650
00:28:44,280 --> 00:28:47,080
Speaker 3: So his original plan, Bob, if he's putting away ten

651
00:28:47,080 --> 00:28:49,719
Speaker 3: percent and we get a seven percent annual return, right

652
00:28:49,760 --> 00:28:51,320
Speaker 3: that is that's kind of the Goldilock zone.

653
00:28:51,320 --> 00:28:52,440
Speaker 2: That's not too high, not too low.

654
00:28:52,480 --> 00:28:57,320
Speaker 1: It's not unreasonable, good balance portfolio, long term, not super responsible,

655
00:28:57,680 --> 00:28:59,120
Speaker 1: responsible return of something.

656
00:28:59,200 --> 00:29:01,360
Speaker 3: Yeah, now forty year guy could be more aggressive. That's

657
00:29:01,360 --> 00:29:02,640
Speaker 3: a little bit of a different story. So we're just

658
00:29:02,640 --> 00:29:04,840
Speaker 3: trying to keep the number simple. So if Mike does that,

659
00:29:05,000 --> 00:29:07,040
Speaker 3: he works for twenty five years and now he's got

660
00:29:07,080 --> 00:29:09,560
Speaker 3: roughly nine hundred thousand dollars in today's dollars, that's a

661
00:29:09,640 --> 00:29:12,520
Speaker 3: nice pile. He's going sixty five, and he's sixty five,

662
00:29:12,560 --> 00:29:14,600
Speaker 3: so he's forty. Now we did this for twenty years,

663
00:29:14,720 --> 00:29:18,320
Speaker 3: what's the difference. So he right now could generate about

664
00:29:18,320 --> 00:29:21,000
Speaker 3: maybe a reliable fifty thousand dollars a year worth of

665
00:29:21,040 --> 00:29:22,760
Speaker 3: income off of that. On top of his he'll have

666
00:29:22,800 --> 00:29:24,760
Speaker 3: SoC security and some other things as well, and that's

667
00:29:24,800 --> 00:29:27,520
Speaker 3: pretty good, but it might limit them. They may maybe

668
00:29:27,640 --> 00:29:29,440
Speaker 3: back off on the travel, or maybe there's not as

669
00:29:29,520 --> 00:29:31,360
Speaker 3: much going to the grandkids the rest of the family.

670
00:29:31,680 --> 00:29:33,600
Speaker 3: So let's look at it again. Mike, who is again

671
00:29:33,680 --> 00:29:36,800
Speaker 3: now forty, decides, you know what, let's forego some of

672
00:29:36,840 --> 00:29:38,800
Speaker 3: the take home pay. I'm going to bump to twenty percent.

673
00:29:38,920 --> 00:29:41,840
Speaker 3: What does that result in now putting twenty percent of

674
00:29:41,840 --> 00:29:44,600
Speaker 3: his salary away for twenty five years, Now he's got

675
00:29:44,600 --> 00:29:45,920
Speaker 3: one point eight million.

676
00:29:46,200 --> 00:29:49,520
Speaker 2: This is just math. This is the snowball effect. You know.

677
00:29:49,560 --> 00:29:51,920
Speaker 3: The bigger the numbers, the larger the snowball gets. And

678
00:29:51,920 --> 00:29:54,000
Speaker 3: this really starts to change the game because now we're

679
00:29:54,040 --> 00:29:57,640
Speaker 3: talking ninety thousand dollars in sustainable retirement income. Again that's

680
00:29:57,640 --> 00:30:00,440
Speaker 3: in addition to Social Security. All that stuff is back

681
00:30:00,480 --> 00:30:03,240
Speaker 3: on the table. Retiring earlier, taking the bigger trips, helping

682
00:30:03,280 --> 00:30:04,680
Speaker 3: the grandkids, all of it's back.

683
00:30:05,080 --> 00:30:08,120
Speaker 1: Well, and we we we need to talk about one thing.

684
00:30:08,160 --> 00:30:11,880
Speaker 1: And I'm going back in time, you know, reverse time machine.

685
00:30:12,160 --> 00:30:15,600
Speaker 1: Remember Mike's forty and he has two kids. Uh, those

686
00:30:15,640 --> 00:30:18,960
Speaker 1: two kids cost money. So Mike's probably right in the

687
00:30:19,000 --> 00:30:23,560
Speaker 1: middle of travel, sports, music lessons, you know, ballet lessons,

688
00:30:23,560 --> 00:30:26,400
Speaker 1: all that stuff. He's probably saying, yeah, Bob and Brian,

689
00:30:26,440 --> 00:30:29,160
Speaker 1: it'd be great to put twenty percent of my income away,

690
00:30:29,240 --> 00:30:31,800
Speaker 1: but I got bills, you know, to cover today, so

691
00:30:31,920 --> 00:30:34,440
Speaker 1: it is a balancing act. It's easy for us to

692
00:30:34,480 --> 00:30:37,080
Speaker 1: pull out a calculator and say, yep, you could have

693
00:30:37,200 --> 00:30:40,720
Speaker 1: one point eight million dollars if you save all this money.

694
00:30:40,800 --> 00:30:43,320
Speaker 1: I think the point we're trying to make is at

695
00:30:43,400 --> 00:30:47,200
Speaker 1: least run some numbers and just don't hope all this

696
00:30:47,320 --> 00:30:50,160
Speaker 1: works out at age sixty five, seventy seventy five. Run

697
00:30:50,200 --> 00:30:53,440
Speaker 1: some numbers when you're early in your early forties, and

698
00:30:53,480 --> 00:30:56,680
Speaker 1: then you can make some informed decisions on hey, if

699
00:30:56,720 --> 00:31:00,080
Speaker 1: I sacrifice a little bit, now, here's the benefit that

700
00:31:00,120 --> 00:31:01,280
Speaker 1: it's going to pay down there.

701
00:31:01,320 --> 00:31:03,680
Speaker 3: And as a financial advisor, I would say to Mike, yes,

702
00:31:03,720 --> 00:31:06,240
Speaker 3: that's exactly correct. You've got stuff screaming for money now.

703
00:31:06,280 --> 00:31:08,520
Speaker 3: But I would say, Mike, do you know your own worth?

704
00:31:08,720 --> 00:31:10,760
Speaker 3: You've been at your job for a couple of decades now,

705
00:31:10,800 --> 00:31:12,760
Speaker 3: and you're a loyal guy and so forth. Are you

706
00:31:12,840 --> 00:31:15,360
Speaker 3: sure you're being paid what your experience says your worth?

707
00:31:15,840 --> 00:31:17,720
Speaker 3: Have you looked at other opportunities out there? Have you

708
00:31:17,760 --> 00:31:19,240
Speaker 3: talked to your bosses about you?

709
00:31:19,240 --> 00:31:19,320
Speaker 1: Know?

710
00:31:19,360 --> 00:31:19,880
Speaker 2: Where you are?

711
00:31:19,920 --> 00:31:22,360
Speaker 3: So sometimes you can simply increase what's coming in at

712
00:31:22,360 --> 00:31:24,680
Speaker 3: the top, then you can find extra dollars. But again

713
00:31:24,680 --> 00:31:26,640
Speaker 3: that comes back to knowing what your value is and

714
00:31:26,640 --> 00:31:28,400
Speaker 3: not wasting a bunch of time getting underpaid.

715
00:31:28,800 --> 00:31:31,440
Speaker 1: You're listening to Simply Money, presented by all Worth Financial

716
00:31:31,440 --> 00:31:34,920
Speaker 1: on Bob Spon Seller along with Brian James. Brian introduced

717
00:31:35,000 --> 00:31:37,920
Speaker 1: us to Lisa. Let's look at another test case here.

718
00:31:38,120 --> 00:31:40,120
Speaker 3: Okay, so a little bit of a different situation. So

719
00:31:40,200 --> 00:31:43,920
Speaker 3: Lisa's got she is a little bit nervous, and so

720
00:31:43,960 --> 00:31:46,560
Speaker 3: she's got a half million dollars that she has put away.

721
00:31:46,680 --> 00:31:48,320
Speaker 3: We don't know where it came from. Of course, maybe

722
00:31:48,320 --> 00:31:50,440
Speaker 3: she inherited it. She just let it build up over time.

723
00:31:50,600 --> 00:31:53,200
Speaker 3: This is not retirement money, but it's just sitting in

724
00:31:53,240 --> 00:31:55,840
Speaker 3: a money market fund earning about three percent. So she's

725
00:31:55,840 --> 00:31:58,719
Speaker 3: got about thirteen years until retirement, which means at that

726
00:31:58,800 --> 00:32:01,640
Speaker 3: three percent good safe rate, that's going to grow to

727
00:32:01,640 --> 00:32:04,280
Speaker 3: about seven hundred and twenty five thousand dollars. And she's

728
00:32:04,360 --> 00:32:06,440
Speaker 3: also in her retirement account, she's got an extra two

729
00:32:06,560 --> 00:32:09,720
Speaker 3: fifty so now she's got about nine to seventy five total,

730
00:32:09,760 --> 00:32:12,600
Speaker 3: and that's not terrible, but she's drawing down that principle

731
00:32:12,640 --> 00:32:15,400
Speaker 3: pretty quickly, and so mathematically Lisa will be out of

732
00:32:15,440 --> 00:32:18,600
Speaker 3: money by the time she's eighty or thereabouts. So let's

733
00:32:18,600 --> 00:32:20,920
Speaker 3: do this again. Let's say that she takes that half

734
00:32:21,000 --> 00:32:23,640
Speaker 3: million and doesn't buy into the notion that the stock

735
00:32:23,680 --> 00:32:26,280
Speaker 3: market could go poof tomorrow. I always love that argument, Bob,

736
00:32:26,280 --> 00:32:28,160
Speaker 3: where people so well the stock market it goes down

737
00:32:28,160 --> 00:32:30,160
Speaker 3: because so and so lost all his money. I'm looking

738
00:32:30,200 --> 00:32:31,720
Speaker 3: at the S and P five hundred right now, it

739
00:32:31,760 --> 00:32:33,880
Speaker 3: still exists, Kroger is still open, P and.

740
00:32:33,840 --> 00:32:35,720
Speaker 2: G is still open. Stock market doesn't go away.

741
00:32:36,040 --> 00:32:38,280
Speaker 3: So if she puts it in a conservative balanced portfolio,

742
00:32:38,360 --> 00:32:40,800
Speaker 3: that would earn about six and a half percent by

743
00:32:40,880 --> 00:32:44,040
Speaker 3: average on by about eight sixty five. Now her half

744
00:32:44,080 --> 00:32:47,240
Speaker 3: million is one point one million dollars. Add her existing

745
00:32:47,280 --> 00:32:49,320
Speaker 3: two fifty to that. Now she's retiring with a net

746
00:32:49,360 --> 00:32:51,600
Speaker 3: worth of a one and a half million dollars. That

747
00:32:51,720 --> 00:32:53,840
Speaker 3: is a big difference between scraping and by just paying

748
00:32:53,840 --> 00:32:55,520
Speaker 3: the bills and having a nice, comfortable life.

749
00:32:55,840 --> 00:32:58,560
Speaker 1: Well, and it's a huge change. And the nice thing

750
00:32:58,680 --> 00:33:01,480
Speaker 1: is it didn't require any sacrifice. She didn't have to

751
00:33:01,480 --> 00:33:03,680
Speaker 1: earn more money, she didn't have to cut back on

752
00:33:03,720 --> 00:33:07,160
Speaker 1: her current spending. All she had to do was change

753
00:33:07,200 --> 00:33:10,600
Speaker 1: her investment strategy and be open to something that has

754
00:33:10,720 --> 00:33:14,280
Speaker 1: worked for decades and decades and decades, and just take

755
00:33:14,280 --> 00:33:16,920
Speaker 1: advantage of what the markets give you over a long

756
00:33:16,960 --> 00:33:19,480
Speaker 1: period of time. And again, she didn't get an extra

757
00:33:19,520 --> 00:33:23,560
Speaker 1: twenty years to save her money. She didn't win the lottery.

758
00:33:23,840 --> 00:33:28,240
Speaker 1: She just made smarter, more intentional choices now in order

759
00:33:28,280 --> 00:33:30,560
Speaker 1: to get those huge dividends down the road with making

760
00:33:30,640 --> 00:33:34,160
Speaker 1: no other changes in her lifestyle. Here's the all Worth advice.

761
00:33:34,240 --> 00:33:38,320
Speaker 1: The future isn't a mystery. Oftentimes it's a math problem,

762
00:33:38,400 --> 00:33:41,760
Speaker 1: and the earlier you solve it, the better your retirement

763
00:33:41,840 --> 00:33:46,200
Speaker 1: story will probably end. You're listening to Simply Money presented

764
00:33:46,200 --> 00:33:52,360
Speaker 1: by all Worth Financial on fifty five KRC, the talk station.

765
00:33:53,480 --> 00:33:56,040
Speaker 1: You're listening to Simply Money presented by all Worth Financial

766
00:33:56,120 --> 00:33:59,200
Speaker 1: on Bobs fun Seller along with Brian James and Brian

767
00:33:59,520 --> 00:34:02,200
Speaker 1: on Mike two. I'm gonna give you my two cents here,

768
00:34:02,360 --> 00:34:06,600
Speaker 1: just another story on this whole Should I switch to

769
00:34:06,680 --> 00:34:09,120
Speaker 1: a different house scenario and we talked about a couple

770
00:34:09,160 --> 00:34:12,359
Speaker 1: of them during the prior segment. I'm gonna share one

771
00:34:12,400 --> 00:34:14,759
Speaker 1: that I've run across more often than not, and I

772
00:34:14,800 --> 00:34:16,560
Speaker 1: want to spend a few minutes on it, get your

773
00:34:16,560 --> 00:34:18,880
Speaker 1: take on it in a story time with Bob's Bonds

774
00:34:19,040 --> 00:34:22,239
Speaker 1: story time. A lot of times people say, hey, Bob,

775
00:34:22,280 --> 00:34:25,239
Speaker 1: we want to downsize. We want to sell our big

776
00:34:25,280 --> 00:34:28,600
Speaker 1: house and we want to buy a ranch with everything

777
00:34:28,640 --> 00:34:31,319
Speaker 1: on the first floor in a big great room. And

778
00:34:31,360 --> 00:34:34,120
Speaker 1: so we're gonna sell our four or five bedroom house.

779
00:34:34,520 --> 00:34:37,200
Speaker 1: We're gonna pocket all that money, and we're gonna be

780
00:34:37,200 --> 00:34:39,440
Speaker 1: able to go out and get this beautiful ranch that

781
00:34:39,520 --> 00:34:42,440
Speaker 1: has everything on the first floor, and that'll solve all

782
00:34:42,440 --> 00:34:45,840
Speaker 1: our problems going forward. What they find, what I find

783
00:34:45,960 --> 00:34:48,480
Speaker 1: oftentimes is they have not gone out and looked at

784
00:34:48,480 --> 00:34:52,839
Speaker 1: the cost of this ranch home. Factored in the part

785
00:34:52,920 --> 00:34:57,400
Speaker 1: that everybody wants a ranch home with the main bedroom

786
00:34:57,400 --> 00:34:59,719
Speaker 1: and bathroom on the first floor in the big great room,

787
00:35:00,440 --> 00:35:03,080
Speaker 1: and those houses cost a lot of money. And when

788
00:35:03,120 --> 00:35:05,720
Speaker 1: people go out and start looking at it, they find

789
00:35:05,800 --> 00:35:09,319
Speaker 1: that they're really not going to save any money. And oftentimes,

790
00:35:09,360 --> 00:35:12,479
Speaker 1: by the time they fix up that ranch house, they're

791
00:35:12,520 --> 00:35:16,040
Speaker 1: looking at spending more money than the what their current

792
00:35:16,120 --> 00:35:19,799
Speaker 1: house is worth. And it was they rationalized making a

793
00:35:19,840 --> 00:35:25,640
Speaker 1: decision quote unquote downsizing, and they didn't really downsize at all.

794
00:35:25,680 --> 00:35:27,760
Speaker 2: Have you ever seen that one come down? The Absolutely?

795
00:35:27,800 --> 00:35:29,520
Speaker 3: And I think this is a big supply and demand

796
00:35:29,520 --> 00:35:31,919
Speaker 3: discussion because there's tons of You can drive anywhere around

797
00:35:31,920 --> 00:35:33,640
Speaker 3: Cincinnati and see new subdivisions going up.

798
00:35:33,680 --> 00:35:35,319
Speaker 2: How many of them are full of ranch homes? Right?

799
00:35:35,400 --> 00:35:37,160
Speaker 3: And I'm not referring to the ones where are all

800
00:35:37,200 --> 00:35:39,000
Speaker 3: patio homes retirement type communities.

801
00:35:39,040 --> 00:35:40,560
Speaker 2: A lot of people aren't quite ready to take that

802
00:35:40,600 --> 00:35:41,200
Speaker 2: step yet.

803
00:35:41,320 --> 00:35:43,240
Speaker 3: They want a ranch home in a more traditional neighborhood,

804
00:35:43,239 --> 00:35:45,000
Speaker 3: but those don't exist anymore because the builders can't make

805
00:35:45,040 --> 00:35:45,879
Speaker 3: as much to build them.

806
00:35:46,360 --> 00:35:48,160
Speaker 1: Yeah, and here's the point I'm trying to make here.

807
00:35:48,320 --> 00:35:51,480
Speaker 1: Count the cost and take your time before you delve

808
00:35:51,520 --> 00:35:54,799
Speaker 1: into this. Oftentimes, if you spend a little bit of

809
00:35:54,840 --> 00:35:58,280
Speaker 1: money on an architect and take your existing four bedroom

810
00:35:58,360 --> 00:36:01,320
Speaker 1: home with the master bedroom and bath on the second floor,

811
00:36:01,800 --> 00:36:04,839
Speaker 1: and convert your first floor to accommodate all that, you

812
00:36:04,880 --> 00:36:08,000
Speaker 1: can find that you can spend less money staying put,

813
00:36:08,360 --> 00:36:12,160
Speaker 1: putting a little money into that is existing home, staying

814
00:36:12,160 --> 00:36:14,760
Speaker 1: in that neighborhood that you love and have been there forever,

815
00:36:15,000 --> 00:36:18,960
Speaker 1: and really win as opposed to just making a rational

816
00:36:19,320 --> 00:36:22,480
Speaker 1: short term decision that you might be surprised at how

817
00:36:22,520 --> 00:36:24,279
Speaker 1: much money and aggravation it costs you.

818
00:36:24,400 --> 00:36:26,120
Speaker 3: Yeah, I've had some clients go through this where and

819
00:36:26,160 --> 00:36:28,120
Speaker 3: I joke with them, and there's more than one where

820
00:36:28,120 --> 00:36:30,680
Speaker 3: they almost financially speaking, built a house inside of a house.

821
00:36:30,719 --> 00:36:33,360
Speaker 3: They spent a significant amount of money improving their place

822
00:36:33,520 --> 00:36:36,160
Speaker 3: for this exact reason, but it prevented them from having

823
00:36:36,160 --> 00:36:38,280
Speaker 3: to buy a whole new place and incurring those expenses.

824
00:36:38,320 --> 00:36:40,839
Speaker 3: So even though it was significant to reconfigure their house

825
00:36:40,840 --> 00:36:42,839
Speaker 3: to something that would make them happy, it wasn't near

826
00:36:42,880 --> 00:36:44,080
Speaker 3: what a brand new house would cost.

827
00:36:44,320 --> 00:36:46,960
Speaker 1: Well, and a lot of people like all that first

828
00:36:46,960 --> 00:36:49,560
Speaker 1: floor stuff, the master bath, the master.

829
00:36:49,320 --> 00:36:50,640
Speaker 2: Bedroom, the great room.

830
00:36:50,719 --> 00:36:53,160
Speaker 1: And if you do take the time to reconfigure a

831
00:36:53,239 --> 00:36:56,160
Speaker 1: current home, if you stay in it and your heirs

832
00:36:56,200 --> 00:36:58,640
Speaker 1: do decide to sell it down the road, they sell

833
00:36:58,680 --> 00:37:01,279
Speaker 1: it a lot quicker because it's been fixed up the way,

834
00:37:01,360 --> 00:37:03,520
Speaker 1: you know, to meet that supply and demand that we

835
00:37:03,560 --> 00:37:04,080
Speaker 1: talk about.

836
00:37:04,440 --> 00:37:05,640
Speaker 2: All right, thanks for listening.

837
00:37:05,680 --> 00:37:08,439
Speaker 1: You've been listening to Simply Money, presented by all Worth

838
00:37:08,480 --> 00:37:11,960
Speaker 1: Financial on fifty five KRC, the talk station