Joe Schweiger

Joe is a CERTIFIED FINANCIAL PLANNER™ professional who has been with Pure Financial Advisors since 2018. As a Financial Advisor for the firm, Joe works with clients to develop, implement, and monitor financial planning strategies that are tailored for their specific goals and objectives. Joe is passionate about educating clients in areas such as retirement [...]

Learn how making a budget, having a written financial plan, and implementing sophisticated strategies to lower your taxes can help you create a healthy retirement. In this webinar, Joe Schweiger, CFP® from Pure Financial Advisors provides insight into evaluating the limits on your finances, and he answers your most critical retirement questions.

Free Resources mentioned in the webinar:

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Questions Answered:

Should you discount Social Security payment estimates? If yes, by what percentage or amount?

Is there software that you recommend or work with as a client to do the income and expense budget plan?

In your retirement spending example of $100,000 per year, is that before or after taxes?

At 70, I was told that I should consider transferring my $1M IRA to a Roth.  I was also told that that would have a tax due of $350K.  With my kids being my sole beneficiaries, does that sound like the right thing to do to you?

If you can’t afford to contribute to a Roth right now, would you recommend opening one anyway so that you can be moving towards the 5 years that you have to have it open for distribution mark and contributing when possible?

How would you calculate the optimum amount to convert to Roth IRA without bumping up to a higher tax bracket?  Is it wise to do Roth conversions now since the cost basis from the brokerage account is low and stocks are cheaper?

If you are currently in the distribution phase, is it too late to convert IRA assets to a Roth?

How would Roth conversion dollars affect my Medicare costs?

Do you recommend using index annuities to protect principal as all or part of an investment portfolio?

Is there a required amount that has to be withdrawn from 401(k) or 403(b) accounts at age 71?

Regarding Roth, I would caution on “never taxed”: the tax code is written in pencil; the government is already talking about forcing monies out of Roth if in excess of a base.

Is there a template that can be used in writing an investment plan?

Given current market volatility, is now the time to review/reconsider an already established plan, or do you stick to your existing plan?


Thank you all for joining us, for creating a healthy retirement with Joe Schweiger, CFP®. Joe, thank you so much for joining us today and sharing your knowledge with us. Thank you, Andi. Yeah, excited to be here. There’s a lot of content we’ll go through, and I’m sure there’s people on this call that may be in all different phases of their life, whether it’s early career stages or those that are approaching, are actually in retirement. So I think it’s important to start considering how you set yourself up and really what plan you put in place to create that healthy retirement.

So kind of jumping in here, what does it mean to have a healthy retirement? So, from a financial perspective, really what we’re talking about is relieving some of the stress that people have around money. And when you look at some of the studies that have been done for individuals that are in retirement or those that are nearing retirement, their number one fear is running out of money, which is pretty substantial given the fact that it’s even higher than death. Right?

So having a good, sound financial plan in place that you can help alleviate some of that stress and really reduce the likelihood that you will run out of assets is important. And that’s essentially what we’ll try to cover today, is helping you relieve that stress, which will allow you to spend time doing things that you enjoy and the things that you want and essentially thriving in retirement. So when we look at what we’ll cover today, we’ll start with creating a budget, and we’ll talk a little bit about what a budget is, why you would create one, and really how to create one.

From there, we’ll get into calculating how much money you actually need in order to transition into retirement. So we’ll go through a few different examples there to help calculate what that number is. We’ll then get into some different tax strategies. So as we look at tax strategies, the goal is to reduce the amount of taxes you pay throughout the course of your life. The less money that you’re paying to the IRS or to the state, the further your dollars stretch, the more you can do. The more you can do with your own dollars in your own pocket.

So after that, we’ll get into structuring your overall portfolio. And again, depending on where you’re at in life, whether it’s currently in retirement or 30 years out, you’ll want to make sure you’re making the appropriate adjustments along the way. The accumulation phase is a lot different than the distribution phase. So as you start pulling money from your portfolio, you want to make sure that it’s structured appropriately. From there, we’ll get into some of the benefits of having a written plan. We’ll go through a couple of different statistics there and then just some different financial well being tips.

So getting into budget, I think a lot of people hear the term budget and they cringe a little bit and they feel like it’s going to prevent them from spending their own dollars or limit them from enjoying life. But really a budget is just tracking your income and expenses or your inflows versus your outflows. And by putting a budget together, it really allows you to be a little more intentional with your dollars.

So as you start tracking where your dollars are going, you can be intentional if you don’t want to necessarily be spending on certain areas. It also helps ensure that you have dollars set aside for specific expenses and whether those expenses are planned or unplanned. Maybe each year you like to go on vacation or you have a family trip or a cruise that’s planned, or sometimes there are unplanned expenses such as the water heater burst or you have other issues with your home that need repairs.

So making sure that you’re ensuring that you have those funds available is part of budgeting and really gives confidence to be able to spend money on the things that you like and the things that you enjoy in the world. So, how to create one? So again, from the most simplistic term or kind of calculation, a budget is income and expenses. So step one in creating your budget is just adding up all of your different income sources.

So if you’re currently working, you might have employment income or maybe you’re selfemployed those that are in retirement, maybe you’re already collecting Social Security, maybe you have pensions, you may have some real estate income. So step one is really calculating what that monthly income is and then from there you start tracking and categorizing where your dollars are going. Now you start in shorter time frames, maybe that’s just each day you’re kind of tracking where your dollars are going and days turn into weeks and then turn into months.

It’s important to start looking at this longer term however, because a lot of times with your overall expenses you may have some things like seasonal expenses and that could be at the end of the year, maybe there’s the holidays that you like to spend a little more money on the kids and grandkids, or during the summer is when you kind of take your trip. So as you start tracking that longer and longer, you can then really start to identify patterns of where your dollars are going. And then you can start determining what your priorities are.

And this is the next step in really helping you create that budget and develop and design your own personal budget. So as you start looking at where your dollars are going through longer periods of time, you then can reallocate say, hey, maybe I don’t need to go out to eat as often as I am or maybe I’m spending too much money over here and I could be doing something else with it. So you can start designing your budget and as with anything. It’s important to track this through time and really monitor and redefine what your budget is.

As your life changes and evolves, as you get to different stages in life, you can definitely update that budget and keep that along the way. So with that, this kind of gives a brief overview or a sample of what a budget may look like when it comes to needs and wants. So we all have needs are going to be things like housing expenses. So do you have a mortgage? Are you renting those? Housing costs are definitely needs. There’s also things like your food budget or insurance or health.

Those are all going to be things that are absolutely necessary to continue to live. Now the wants on the other hand, is going to be things like annual vacations or maybe hobbies that you pick up, like golf, could be eating out at restaurants or just other entertainment that you enjoy doing. So kind of categorizing it and then allocating and then lastly you have savings. And if you’re early on in your career or you’re in retirement, this may look a little bit different.

But you want to start with having an emergency fund or a savings that is there in case of something happening. From there you start looking at things like high interest rate, debt to target and then goal planning such as retirement. So if you’re saving for retirement, where are you saving, how much are you saving? How are those dollars invested? That’s all going to be impact. You may have other goals before retirement as well. Maybe college planning for kids or grandkids or you wanted to purchase, purchase another home or whatever it may be.

Kind of looking at what your goals are and then putting a savings plan together to accomplish that. So step one is creating that budget that gives you a really good understanding of what you are spending, what you need to spend and what you want to spend. And that really helps segue into this next topic, which is calculating that number. And I will say retirement is different for everyone and it’s relative to your own situation and what your goals and objectives are. This idea here, the pillars of retirement, kind of help get the wheels spinning a little bit.

Maybe you want to downsize in retirement or maybe you want to travel. Maybe you have kids that are spread out across the country or the world that you intend on traveling too often. So kind of thinking about what retirement means to you specifically because you can relay that back to cost. That will be kind of in that once category of what are you spending or what do you want to spend and how are you going to create that income. I would say most people in retirement want to live a similar lifestyle.

So maintaining that standard of life is pretty important for most people as they transition into retirement. There are other things that come up, such as medical expenses. Maybe there’s dependents or other people that are reliant on you for some type of financial resources. So having a plan in place can help alleviate some of those burdens. But maintaining that standard of living is definitely going to be a goal for many people.

So when we look at that and kind of going through a couple of examples here, there’s a common theory about how much money you can distribute from your portfolio in any given year and allow that portfolio to last throughout the course of your retirement. So there’s a couple of different factors in here, and I will say this is a general rule of thumb, but that percentage base is 4%. Now, that assumes that you’re in your mid sixty s, and you have a life expectancy of 25 to 30 years.

And it assumes that your portfolio is broad and globally diversified and rebalanced regularly. So if we look at that as an example and we say, okay, well, if we have a desired retirement spending here of $75,000, so that’s the goal, that’s what we’ve calculated. As far as how much money that you want to live off of, the next step is looking at where your income is going to come from. So in this example, there’s fixed income, and we’ll assume that’s a combination of pension and Social Security.

So you want to spend $75,000, you have 50,000 coming in. So take the retirement spending, subtract out the fixed income gives you your shortfall, which is $25,000. So if your goal is 75, you’re going to have 50 coming in. You’re going to need to draw $25,000 a year from your overall portfolio. So looking at the actual distribution rate, you can then look at what your liquid assets are. So liquid assets in this example are $700,000.

So essentially, you will take 25,000, divide that into 700,000, and get to that 3.6 distribution rate. Now, of course, again, if you’re retiring in your earlier than those mid sixty s, this distribution rate may need to be adjusted. Maybe it’s a little lower, two or two and a half percent. If you’re a little older, maybe that can be enhanced a little bit. It also will depend on where those liquid assets are held relative to how they’ll be taxed. So we’ll jump into that here in a second.

But before we do getting into kind of another example, one that we can maybe put your own situation too, I’m going to use a very simple number here. So assuming that you wanted to spend $100,000 a year in retirement, so if this is the goal, again, it will depend if you’re retired now or if you’re going to retire in one year or five years or 30 years.

So you have to adjust this by inflation. So you add the cost of living adjustment, whatever you think that may be. Now, inflation is an important factor in retirement planning. As the cost of goods and services do rise through time. So factoring that in is definitely important. So this is the goal 100,000. Then you look at what type of fixed income sources you have coming in. So we’ll use a pretty simple and straightforward number here as well. So we’ll assume between pension and Social Security you have $50,000 of income coming in.

So if you want to spend 100, you got 50,000 coming in. That means you are short $50,000. So this is the shortfall that will essentially need to be withdrawn from your portfolio on an annual basis. So if we utilize that 4% rule, what we can do here is essentially divide this by 4% or simply multiply it by its reciprocal, which is 25. That will help you determine how much money you need.

So 50,000 divided by 4% ends up being roughly $1.2 million. So the goal is to get you to that $1.2 million of assets. So again, depending on if you’re in retirement now or if you’re a ways out adjusting that for inflation, another impact of this will be where your dollars are coming from.

Which brings us into the next topic, which is tax strategies. So when we think about tax strategies, and again, going back to that example of where those dollars are held while you’re saving for retirement, there’s really three distinct pools that you can save into. So there’s a tax free pool, there’s a taxable pool and there’s a tax deferred pool. Now, each of these pools have distinct characteristics for when money goes in and when money comes out from a tax perspective.

They also have different rules and limitations around when you can pull these dollars out. But if we start here with the tax free pool, this is going to be things like Roth IRAs. This could also be municipal bonds that you own that pay tax free interest. So essentially you’re putting after tax dollars into this account and the income that’s generated. So anything you put in, which is the principal plus the growth, will eventually come out at a 0% tax rate. So tax free as the name implies.

Now, the taxable pool, so this is what we call non qualified assets or capital assets. These are assets you hold outside of retirement. So this could be stocks, bonds, mutual funds. When you purchase those stocks, bonds, mutual funds, real estate or whatever other capital asset, whatever you purchase that asset for is what’s called your cost basis. You do not pay tax on that cost basis again, but any of the growth when you eventually sell that asset will get taxed at capital gains rates which under current law is 00:15 or 20%.

And that’s dependent on your taxable income. When you are modified, adjusted gross income is above a certain threshold. There’s also an additional 3.8% net investment income tax that may be imposed on those dollars. So we have tax free, which are ross we have the taxable which are the capital assets and then tax deferred. And this is going to be the most common type of vehicle that people save into retirement for. This is going to be things like your maybe you have a Tsp or a Kio plan, a Sep IRA, a simple IRA.

When you put dollars in here, you essentially are getting a tax deduction today. But when those dollars come out in the future they come out at these ordinary income rates which currently are between 10% and 37%. And it’s a marginal system. So the more income you make, the higher tax bracket you fall in. So the idea here is to create some diversification from a tax perspective to be able to control your taxes.

And a big part of this is looking at, number one, what your income sources are today, what your income sources will be in the future and then really kind of running these forward looking tax projections of where that income is going to come from will impact your taxes. So the idea is to give you flexibility and control long term. So right now, when we look at the majority of retirement assets in our country the tax deferred pool is kind of the go to for most people.

Now, that may or may not be the best solution when it comes to planning for that retirement. So again, as we go back and calculate how much money you need, if everything you have is in your tax deferred pool you may very well be in the same type of tax bracket in retirement as you are today. So there may be some potential strategies to look at to give you a little more flexibility and control with that, looking at ways to get dollars into the tax free pool which is, again, a pretty friendly pool from a tax perspective, essentially, there are two ways.

There are contributions and then there are conversions. For contributions into a Roth account, there’s two types. There is a Roth IRA contribution and then there are qualified Roth contributions. For the Roth IRA, you have to have two things. One, you have to have earned income. And then two, your modified adjusted gross income has to be below a certain percentage. So to add dollars into the Roth IRA the maximum contribution limits today are $6,000, assuming you qualify.

And if you’re above the age of 50, there’s another $1,000. Now for the Roth 400 and 103. B’s roth PSP’s. Those contribution limits are the same as they are for the pre tax. A lot of employers now and a lot of plans actually have the ability to put money in Roth today forego that tax deduction. And again, by doing that you’re starting to build up a pool that will forever be tax free. So all of the contributions that you put into that as well as all of the growth when you eventually take out, come out tax free.

So contributions is the first way to get dollars into the Roth. The second way would be looking at converting dollars. So anyone that has a retirement plan here is eligible to do a Roth conversion. Now, the IRS has no limitations for income. They have no restrictions on how old a person is or if you have earned income or not. Anyone that has dollars here can move money from this tax deferred pool into the Roth pool. Of course, you will pay tax on those conversions.

So by doing that, you want to make sure that the amount of tax you’re paying today is likely less than it will be in the future. And again, the way to do that is looking at where your income is at today, where it’s projected to be in the future. That gives you a really good understanding of what strategy makes the most sense. Should you be contributing tax deferred or should you be contributing to the Roth? Do Roth conversions make sense or not? Now the other pool. Here we have the taxable pool.

There’s no limitations on who can put dollars in here or how much or restrictions on when you can take it out. Both the tax deferred and the tax free do have age restrictions on being able to take dollars out, which is typically 59 and a half. For the Roth account, you need to have it open for at least five years and essentially successfully control both of those. Where you’re above 59 and a half and you’ve had it longer than five years for the taxable pool, those funds can be accessed at any point in time.

However, you do receive a tax bill at the end of each year based on any of the interest, dividends, or capital gains that that pool produces. So again, looking at these three pools is important. And when we look at how our current tax system works, this says married filing jointly, but this also applies for head of household and single individuals. It’s just the brackets are lowered. So the limits that you have where you pay at 10%, 12%, 22% are all a little different.

So these are current tax brackets today. And again, depending on if you file married filing jointly or single or head of household, these will still be the brackets. It’s just you may be increasing in those brackets a little sooner. So when you’re looking at kind of projecting this out, you can kind of make the calculation of, okay, here’s how much income I have today from wages, from Social Security or from pension or real estate. Here’s how much money I want to spend in retirement. Here’s where my dollars are at.

And with creating that income, this is kind of what will guide some of those strategies for you. So I know that’s quite a bit of information here, Andi. Maybe I’ll pop in now for seeing if there’s any potential questions. We do have a little bit of housekeeping that I want to do. First of all, we’ve gotten a number of people who have asked if they can have the slides and I’m going to post a link right now in the chat so that you can download these slides that Joe is going through right now so that you can refer back to them later.

Also, if you have any questions, put them into the Q and A. And I guess that goes for comments too because Kathy says she loves my haircut. Thank you very much for that, Cathy. And then also Susan says should you discount Social Security payment estimates? And if yes, by what percentage or amount? So discount Social Security payment estimates. So I’m not entirely sure on the phrasing of that question, but I think she may be referring to not all of your Social Security benefit is taxable.

So if we come back to this tax bracket, if Social Security is your primary income source, the taxability of your Social Security is based on provisional income. So if your provisional income is low enough, none of your Social Security benefits are taxable. If it falls between thresholds, depending if you file married or single, then up to 50% of your benefit could be taxable. And then if your provisional income is above a certain threshold, up to 85%.

So as far as tax withholdings, you can elect to withhold taxes on your Social Security payments and you can do that with the Social Security office. I hope that was answering that question. It sounded not entirely sure on the phrasing. However, Susan, if you’ve got more information on your question, go ahead and put it into the Q and A. And then the other thing, do you want to go through a little bit about what happens as Social Security is depleted? So she’s asking about whether or not she should discount the Social Security payment estimate. Should she be planning for there being less Social Security later.

Got it. And that’s a good question and obviously a very relevant concern. And when we look at the projections of when the Social Security trust fund is predicted to be depleted, some time in the mid thirty s, I will say that if you look at the United States in America, more than 50% of retirees are completely reliant on Social Security, which means that is their only income source. So I do think Social Security will be around my own personal belief, I do think there will be some changes made to the system and whether that’s increasing the taxes that we pay as income earners.

So when you’re paying into the system right now, you’re paying 6.2% into the Social Security system of every dollar you earn and 1.45% into the Medicare, and then the employer does the same thing. So if you’re self employed that’s double. So there’s been talks about that potentially being risen to higher levels to help combat some of the you get more inflows into the Social Security System other decision points. Right now, full retirement age for individuals is anywhere between 66 and 67.

And that’s depending on the year you were born. So there’s also talks of potentially pushing that back. So maybe your full retirement age will eventually be 69 or 70 or even past that, or they’ve talked about means testing. So if you’ve saved up enough to essentially cover your own retirement, you may get penalized. That’s the least kind of I would say the least credible one or the least that people would want. Now, of course, a lot of this has to do with taxes and how much money is going into the system.

So a lot of times that’s a little more political than I want to get into here. Okay. We do have a couple more questions, bob says, is their software that you recommend or work with as a client to do the income and expense budget plan? That’s a good question, and I think one of the best softwares I’ve seen out there is going to be Mint. It’s actually a free software. You can log in and create that, and it tracks your expenses through time. It’s also a way to aggregate some of your assets and get a quick snapshot of your overall net worth.

So assets liabilities, and then attracts income and expenses. So it’s a great tool to utilize and kind of look to create your own budget. Denise also has a question. Denise, I might need more information from you. She says if you’re not working right now and you want to transfer IRA to Roth IRA, I would be on the low scale of 10% tax that I would pay, withdrawing it. Are these taxes different for being single and not married? Correct. So exactly. If you’re going to be moving money from this tax deferred pool up into the Roth, you will pay taxes on it.

Essentially, there’s no way of getting out of the taxes you owe in this pool. So as you’ve saved into this pool through your working years, you’ve gotten a tax deduction. So from a Roth conversion standpoint, if you are single right now and this is kind of rounding numbers, but the 10% bracket goes up to about $10,000. The 12% bracket goes up to about 40, 22, 80, the 24, 170. So it stair steps up. So, yes, you may have some room here in the 10% bracket where you could move dollars from this tax deferred into the tax free.

And that may be a very viable strategy long term if you have no other income sources and your taxable income is low enough. All right. And then the only other question that we have right now is will we be able to get the recording itself afterwards? And yes. The answer to that is yes. So stick around. Awesome. So with that kind of went through, and again, a big part of should you convert or not? Is really dependent on a few things. How old are you? How long are those dollars going to be able to accumulate tax deferred?

Do you need the dollars now? If you’re not working and you have no other income sources, maybe you need to actually withdraw from this. So there’s a number of factors, but these are potential strategies to reduce taxes through the course of your life. If you do have assets in this taxable pool, there’s a few other strategies through tax gain and loss harvesting. So again, these capital gains brackets are 00:15 or 20%. And if your taxable income falls within that ten or 12% bracket, any capital gains in that bracket get taxed at 0%.

So that may be an opportunity to also harvest some of those gains. Now, obviously, we’ve had a year of market volatility here, where markets are up, markets are down, so maybe you don’t have a lot of gains. So there’s also the concept of tax loss harvesting, which means when an asset falls in value, you can actually sell that asset and realize that loss against your income. Now, there are rules against when you sell and when you can buy that asset back to the wash sale rule.

So it is dependent on your overall situation. But that may also be something to look at where you sell a position and buy back maybe a shadow position. So this works good with pooled investment vehicles like ETFs or mutual funds, if you own that in that account. But kind of getting to the bigger picture, having that flexibility and control is really the important part here. So once you go back to your number and say, okay, well, I’m going to have $50,000 of income coming in, I want to spend 101st off, where is that 50,000 coming from? Is that Social Security?

Is that pension? Is it both? Is it real estate income? Those all get taxed at a specific rate. And then where are your assets currently located today? And what strategies would make sense to essentially give you the most flexibility and control while understanding these are the current tax rates and where you would likely be in the future? Okay, one more question. Carsten says spending, for example, $100,000, is that before or after taxes? So that’s a good point and that would be after taxes.

So you start looking at what your net amount is that you want to spend and then you calculate how much money you actually need. So if we kind of go back to this, I would say that in addition to cost of living adjustment, you want to make sure that you’re considering in the tax as well, because that will play a big part of what your retirement looks like. So adding in that tax number is going to be important and depending on where those dollars are held, is going to dictate what your taxes are likely to be or what they’re projected to be in.

The future. The questions just keep coming. Lanford says at 70, I was told that I should consider transferring my $1 million IRA to a Ross. I was also told that that would have a tax due of $350,000 with my kids being my sole beneficiaries. Does that sound like the right thing to do to you? So I would say that the IRS has no limitations on how much you can move from this tax deferred pool into the raw.

But if you’re going to move a million dollars and depending on what your tax status is, these are marginal brackets. So a big portion of your dollars are going to get taxed at this 37% bracket. And plus, depending on where you live, there could be state taxes as well. So a lot of times a multi year conversion strategy is probably more appropriate. That way maybe you only convert over the next five years to the 22 or 24% bracket. That way you’re not unnecessarily paying taxes that you don’t need to.

Now that being said, there are differences when non spousal beneficiaries inherit these accounts and under legislation a few years ago, it’s actually forced out over ten year period and both tax free and tax deferred. However, anything that gets into the tax free pool will never be taxed again. So that means to your heirs, to your children. So I would say that hard to give exact recommendations on that, but I would say it probably makes more sense to do a multi year strategy just from what I hear.

All right, we’ve got two more and then I’m letting you get back to the presentation, I swear it. So if there are more questions, go ahead and put them into the Q and A. But we are going to hold the rest of them until later in the presentation. Glenn says if you can’t afford to contribute to a Roth right now, would you recommend opening one anyway so that you can be moving towards that five years that you have to have it open for the distribution mark and possibly contributing when possible? Correct? I think that’s a great idea. The earlier you can open one, the longer that five year rule is satisfied.

Now keep in mind, conversions and contributions have different five year clocks, so each conversion has its own five. It gets a little more complicated than just that, but I would say usually it makes a lot of sense to open up one sooner rather than later. All right, and then we have another question. How would you calculate the optimum amount to convert to Roth IRA without bumping up into a higher tax bracket? For example, 22 to 24? Is it wise to do Roth conversions now since cost basis from brokerage account is low and stocks are cheaper and then I’m letting you get back to the presentation?

Yeah, that’s a great question. So again, the biggest key here in determining how much you should convert or if a Roth conversion is even an appropriate strategy, is where are you at today from a tax perspective and where are you likely to be in the future? Because tax rates are subject to change. And in 2026, these are actually going to sunset back where the ten will stay. The 1012 goes to the 1522 will be the 25, 24 will be the 28, 32 goes to the 33, 35 stays the same and 37 goes up to 39.6.

So keeping that into consideration, then maybe it makes sense again to convert at some of these brackets if you’re going to be in a higher bracket in the future. And to the point about stocks being at lows. There are opportunistic Roth conversions. Maybe you have a lot of dollars that you have in this tax deferred pool that now with some of the market volatility we’ve experienced for the year has been depleted. So as an Opportunistic Roth conversion, you can convert those shares of those companies into the Roth. You only pay tax on what you moved over.

All of the appreciation when the stocks do come back will be completely tax free. So that’s a great strategy to look into during times of heightened market volatility, for sure. So with that, we’ll kind of recap some of the tax strategies that may make sense. Where are you saving those retirement contributions into? Is it pre tax? Is it Roth? Is it the non qualified? Should you be looking at changing those contributions? Roth conversions, do those make sense?

Should you do them now? Should you wait till later? Charitable Giving Strategy so we didn’t hit much on this, but if you are charitable and you have large dollar amounts in your qualified pools and depending on your age, there’s things like qualified shareholder distributions, there’s also things like donating appreciated stock or setting up what’s called a donor advised fund. If you have largely appreciated securities, that could be a very good strategy, especially if you’re pairing it with other strategies like Roth conversions. And a couple of other accounts that you may have access to through employment are FSAs and HSAs.

FSAs are flexpending accounts. HSAs are health spending accounts. Flex spending accounts. They each have their own limits. But each dollar you put into these accounts will lower your taxable income. And as long as the dollars are used for qualified medical expenses, you get to pull those out completely tax free. So very unique and efficient accounts. One thing I will say, the flex spending account is a use it or lose it account.

Meaning if you add dollars to this account and you don’t actually spend them throughout the course of the year, those dollars revert back to your employer. Whereas the HSA, you can actually accumulate a balance in that account and carry that with you throughout the course of your life and use that for future medical expenses. The HSA does require you to have what’s called a high deductible health plan. So a little more planning goes into with what your own specific health needs are, how often you go to the doctor and things like that. But those are a couple of other areas that may make quite a bit of sense for some people.

So again, as we mentioned, traditional versus Roth, the biggest factors to consider are your current income tax bracket and your future income tax bracket. Other things like your age also play a big consideration in that the longer time you have to accumulate in those accounts, the better. And then also your timeline until retirement. So if you’re not pulling dollars out for the next ten or 20 or 30 years, having money in Roth accumulating growth tax free is a very good benefit.

Now, we talked a little bit about some of the different contribution limits. So this slide here just kind of lists some of that out. So for those retirement plans, the 401, the 403, BS, TSPs, even if it’s a Roth component, the maximum amount is 20,500 that you can defer into it. If you’re above the age of 50, there’s an additional $6,500 catch up provisions and that’s for 2022 the total amount of contributions you can put into a retirement plan.

And this includes employer match as well as any forfeitures or if your plan offers after tax, which is separate, then pre tax and Roth the most is $61,000. And if you’re above the age of 50, it’s actually $67,500. There’s other plans. Like Simple IRAs sep IRAs Kia plans. Those all have separate limits as well as mentioned with the Roth IRA. So depending if you file single or married, your modified adjusted gross income needs to be below these thresholds.

So for single, that threshold is $129,000. For married, that threshold is $204,000. If you make more than that. But it’s between this upper threshold, which for single is 144, or for married it’s 214, you start getting partially phased out. If you’re above that upper threshold, you get fully phased out. So this is what dictates if you are eligible to make that Roth IRA contribution, assuming you have earned income. So you need earned income and then your modified adjusted gross income needs to be below these specific thresholds.

So with that, another big piece of the puzzle is how is your portfolio structured? What are you doing to set yourself up for distributing from your accounts? And again, the biggest factor is going to be your time horizon. So if you’re retiring now and dollars are currently coming out of your portfolio, that would mean that your portfolio should look a little different than somebody that won’t be drawing money from their portfolio for 30 years. So the time horizon of when you need these dollars is extremely important.

Now, a big part of this is going to be once you do retire, there is a new risk that gets associated with your overall portfolio and that’s called sequence of returns risk. When you look at this, I’ll go through two examples here and these are relatively simple examples. You can see this starts with $100,000 balance and different types of returns. And really these returns are just completely flipped. Now this is assuming no other dollars are invested. This is assuming no dollars come out of the portfolio.

But you can see here on the left hand side that the sequence of return starts at positive 10%. Then the next year it goes to 9-8-7 so on and so forth. And then at the very bottom it goes to negative ten. On the right hand side it’s the same exact numbers, it’s just in the absolute reverse order. So it starts with negative ten, goes to negative nine, negative eight, and finishes with positive ten. Now, you can see during the accumulation phase, these sequence of returns aren’t really all that important.

At least if you’re not adding more dollars to the portfolio. You can see that the ending balance in 2040 ends up being exactly the same. Now the risk that gets brought to people that are now pulling dollars from their portfolio, you can see here we have that same example. There’s $100,000 that’s initially invested and $4,000 a year is coming out from that portfolio. So on the left hand side, where you start with positive returns, you can see the very ending balance is $40,000. Now on the right hand side, you start with that negative 10%.

You’re still pulling dollars out. And in 2040 you can see you’ve ran negative, right? So you’ve actually ran out of money four or five years prior to the end of the other period. And again, this is important because how the markets are performing now will impact and especially those early years in retirement can impact the long term longevity of your overall plan. So making sure it is structured appropriately to be able to withstand some of that volatility in adding potentially a little more diversification to achieve your goals.

And when we look at investing, risk and return are correlated. So there’s no way around that. The more risk you take, the higher expected return you’ll have, the less risk, the more less potential return you’ll see. So just kind of looking at some examples here, on the very low end you have a portfolio. The green segment is fixed income or essentially bonds which are less risky than equities. So an 80% bond, 20% stock portfolio.

When you have the growth portfolio, that transitions into a 30% bond, 70% growth or equity. So again, there’s more risk, higher potential for returns, but also more likely that there’s going to be some volatility in the portfolio. So again, just knowing that risk and return are correlated the closer you get to retirement and as you go from accumulation to distribution phases of your life, those need to be considered. The last thing I’ll kind of point out here with the overall investments is the liquidity.

So as you need to start distributing from your portfolio, you need to make sure that the assets you have inside of your overall portfolio can be easily turned into cash and sent out to you, so you can maintain that lifestyle. With that, I now want to go through some benefits of having a written out plan, but before I do, look like we may have some more questions. Yeah, we are getting a whole bunch of questions, so if we do not have the opportunity to answer your question during the course of this webinar, you can always email info@purefinancial.com and we will be able to get an answer for you one on one.

But I will start at the top here. Bob says if you’re currently in the distribution phase then is it too late to convert IRA assets to Roth? I would say no, it’s not too late. It does depend on your overall situation and depends on where your assets are located. That still could be a very viable strategy for people that are pulling from their portfolio, so it’s a little more dependent on your own circumstances and situation. Michael says how would the Roth conversion dollars affect my Medicare costs?

That’s a very good question because anything that comes out of that pool will impact your modified adjusted gross income, which is how your Medicare premiums are calculated, and they go two years prior. So if you do a Roth conversion this year, it could impact your 2024. So you definitely want to be cognizant of that and you want to make sure that if you are converting, you understand where those breakpoints are and how much you really should convert.

If you’re going to have a lot of tax in the future, it may be worth even going through and actually paying the increased Medicare, but again, that’s a case by case basis as well. Bob also says do you recommend using indexed annuities to protect principal as all or part of an investment portfolio? So index annuities are definitely a tool that people can utilize. There’s a lot more intricacies in those policies and from what I see, there’s benefit, there’s pros and cons of everything.

So just know what you’re getting into if you purchase into one of those and understand how they work, because annuities are the one product out there that can provide guaranteed income and if that is what you’re looking for as a guaranteed income, that may be a good choice to utilize for your dollar. All right. Mark says Is there a required amount that has to be withdrawn from the accounts at age 71? Age 72.

So the required minimum distribution or the start date recently moved from 70 and a half up to 72. So again, it’s going to be dependent on when you were born, but right now the RMD start date is 72. Alright, now I’m letting you get back to the slides. Awesome. So with this we’ll go through some of the benefits of having a written out plan. And again, the purpose of all of this is really to set yourself up, relieve some of that stress, and put yourself on a good path for retirement. So the idea of putting a plan together can really help in a number of ways.

Number one is it helps save time. So a lot of people think that if I have to write things down, that’s actually going to increase the amount of time. But the way the planning process works is once you write down goals, then you start understanding how you’re going to accomplish those goals and what steps need to be taken in order to put yourself on that right path. From there, you can measure the progress that you’ve made and gives you a little bit of motivation as you start checking off some of the boxes there. As you get closer and closer, it reduces conflict, which you know what the right thing to do is.

So there’s no internal conflict of saying, hey, well, maybe I’ll do this or that. You know what the right things to do are. So you’ll constantly be doing those. It gives you that basis for action, and it can essentially stimulate visualization. And really that’s what that pillars of retirement is meant to do, is kind of get the wheels spinning a little bit, start thinking about what you want your retirement to look like. So when we look at the amount of Americans that actually have a financial plan for retirement, seven out of ten do not have a plan.

So when I think of that, it’s kind of like you’re winging it. Sometimes it’s all right to go into a weekend where you’re just winging it. But when you go into one of the most crucial time, and it could be 20 to 30 years of your life in retirement, and from a financial perspective, I think that having a plan is definitely very imperative. So, seven and ten. This right here kind of outlines some of the differences in kind of habits with planners versus non planners.

So people that have emergency funds or being aware of fees and investment costs regularly rebalancing their portfolio to manage the risk in it, or carrying loans, especially credit cards, and not making payments on time. So you can see people that have plans in place are much more likely to fall into the positive side of that category. One of the things I also think is interesting is a number of people rely on family members or maybe friends to give them financial advice, which maybe they do have your best interest at heart and in mind.

But you want to make sure that the people you’re taking advice from are credible, they’re educated, and that’s something that they specialize in. If you’re looking to get advice from somebody that you work with that does the same thing as you, and you don’t have that knowledge. Maybe you ask where they attain that knowledge and what their credentials are to be giving that type of guidance and advice. As far as financial well being, we’ll go through a couple examples here or a couple of thoughts, but again, bringing it back to the stress that money causes.

90% of people say money causes some stress in their life. And obviously stress is interconnected with other parts of your life, your mental state, your physical state. So if you can relieve some of that stress around money and you put a plan in place to be able to alleviate that, you can help reduce that stress and start doing the things you want to do. And again, it’s interconnected with those other areas of your life. This is another interesting statistic when we think about having enough or having a budget to be able to cover planned or unplanned expenses.

Roughly 44% of Americans would not be able to cover an unplanned expense of $1,000. So again, kind of prioritizing what you’re doing with your dollars and how you’re setting yourself up is imperative. So a couple different tips here and kind of just some may be general rules of thumb depending on where you’re at. Number one is building an emergency fund. So as you start looking at an emergency fund, you want to look at things like how much income do you have coming in and what are your overall expenses.

So typically six months, three to six months is a good expectation for that as far as building up some cash reserves. So if you lose your job or if there’s a medical issue that comes up, you have dollars to kind of cover that cost from there. If you do have high interest debt, you start tackling that. And there’s a couple of different ways to look at debt management through targeting higher interest rate debts first or targeting smaller loan balances first.

So those are different strategies, but both of those will kind of help get that same goal done, which is getting rid of that high interest debt and not continually finding yourself in those areas. Increase your savings. So again, as you start looking at how much money you need based on what you’re spending, you can then start really putting a plan together to show where you should be saving those dollars and making sure you’re investing appropriately. And then through time, you’re monitoring and you’re rebalancing to manage the risk. So again, as life changes and evolves, you want to make sure that your plan is adjusting with it.

So with that, there’s a few other ways to kind of stress test your situation depending on where you’re at, especially for those that are in retirement, things to look at is especially this year is important. With the pullback that we’ve experienced, are you still on track? So as you map out what your goals are and you map out what your cash inflows and outflows are going to be? Can your portfolio handle another 20% dip? What does that look like as far as on your finances? Assume increased retirement expenses.

So right now we’re dealing with increased inflation and obviously the federal reserve is stepping in to try to tackle that. But what happens if they continue to stay at these heightened levels? What if they go up by 15%? Or what if you have another large medical or some type of large medical expense in the future? Can your plan handle that or any other type of one off large expense? So other thing, if you aren’t retired yet, maybe you get forced into retirement or you choose an early retirement. What does that look like?

So just a couple of different ways to really stress test your overall situation and kind of set yourself up for, again, that healthy financial retirement. So with that, open it back up, see if there’s any other questions at this time. Joe, you made a good point about stress testing your portfolio. And I’ve just put a link into the chat so that you can schedule a free one on one financial assessment with a certified financial planner at Pure Financial Advisor so that you can stress test your portfolio.

And Jeff, you want to slide over to the next slide there. It’s got all of our contact information on it. And I’ve also put the link in chat so that you can just schedule it right away at a date and time convenient for you. And we got a comment from Andrew regarding the Roth and he said he would caution on the never taxed part of the Roth. The tax code is written in pencil. The government is already talking about forcing monies out of Roth if in excess of a base.

So that is a perfect reason why you might want to consider having your financial assessment done, stress testing that portfolio and finding out if it makes sense to do Roth conversions or what other strategies make sense for your personal situation. Because obviously the information that Joe has provided today has been general for everybody that’s on this call, which is almost 200 people, your situation is going to be very different. So keep that in mind. And then also, Joe, Bob also asked, is there a template that can be used in writing an investment plan?

As far as the template, again, it’s going to be a little more specific to your circumstances. I would say that, again, some of the key considerations are going to be the age that you are, the time horizon before you’re pulling dollars from the portfolio and then really looking at how much return you need in that portfolio and trying to back into the portfolio. So I’d say there’s no simple general specific template, but having broad and global diversification can help reduce some of the risk as well as increased risk adjusted return.

So I would say that having a diversified portfolio especially if you’re getting closer or in retirement. Makes a ton of sense. Can you explain a little bit when somebody comes in to have their portfolio stress tested, what do they walk away with? Do they have some sort of bones of an investment plan that they can work with? Definitely. So in the financial or stress testing we look at it as kind of an assessment. So a lot of these concepts and strategies that we talked about today are general and they may or may not make sense to you.

So in the stress test, as you come in, we’ll look at what type of assets do you have, what type of other financial resources do you have, what type of income sources do you have, what are your goals? So really looking at where you’re at, where you’re looking to go, and then just provide some feedback on things that you may want to start looking at and give some guidance on the overall portfolio so we can actually look at what’s under the hood. A lot of times people think they have a diversified portfolio, but in reality they hold 30 different mutual funds that are all the same or at least they have the same underlying withholding.

So we can at least kind of break down exactly what’s inside the portfolio, what risks you’re taking, what costs you’re paying, and just give some feedback on that. So yeah, that’s a great point and to stress test your situation, no matter where you’re at, I think is obviously very important and prudent on your part. We’re coming down to the last few minutes of this webinar, so if you do have questions that have not yet been answered, now is the time to put them into the Q and A to have Joe answer them right now.

Or like I said, you can always call the number or send an email to the address that you see on screen there to get your questions answered one on one. Mike says given current market volatility, is now the time to review or reconsider an already established plan or do you stick to the existing plan? I would say that yes, a plan is a process, it’s not necessarily a product. So life changes, life evolves, market changes, market evolves, tax laws change and evolve.

So once you put together a plan, you definitely want to continue to monitor it and make adjustments as necessary. The plan is maybe giving you the initial destination, but as time goes, there’s going to be little course corrections that need to be made. So I think if you put together a plan, especially as we go through some of this volatility, it’s a great time to review and make sure that you’re still on the right course. Beth says how should a budget be adjusted with the current state of how things are in California with all items always going up?

Good question. Again, depending on your own specific circumstances, I mean, there are certain things that you can’t get around, right? I mean, you have to go to the grocery store, you have to buy food, you’re going to have housing expenses. And again, those impact people differently. If you’re still working, maybe you have to commute to and from the work or you still need clothes, whatever that may be. Inflation impacts everyone differently. Right now, we’re definitely going through a period of time where it’s heightened and that’s because of everything that’s taken place over the last few years.

So I would say if your plan, if you’re stress testing your plan and all of a sudden it looks like, hey, you’re not on path to make it all the way through retirement, sometimes it may be tightening the belt on some of the things that you want to spend money on, which may be the vacations or maybe the holidays or whatever it may be. So kind of looking at your own specific circumstances, that’s kind of how I would go about that.

And that would be a perfect time to schedule that assessment so that you can find out exactly where things can be changed in your financial situation to make sure that you are setting yourself up for a really solid retirement, given your circumstances and your risk tolerance, your goals, your needs. Denise says I’m 64 and expected to retire in two and a half years. Is it wise to mess with my IRA that I would pay taxes on in my Roth? IRA isn’t a Roth something you do earlier five to 20 years before you retire?

So again, it’s all relative to your situation. If you’re still working, obviously your income is going to be a little higher than maybe it will be in retirement, unless you have things like pensions or real estate or you eventually turn on Social Security. So again, depending on where you’re at today, from a tax perspective, where you’re going to be, that’s really what kind of dictates what makes the most sense. Now, I will say that some people don’t have Roths until they’re in their later years. I’ve seen people in their start looking at Roth, so it’s never too late to get a Roth.

The longer it’s in the Roth, the longer it grows tax free and comes out completely tax free, the better. But sometimes as far as legacy planning, some people don’t need all the money that they have in their IRAs. So they start looking at the next generation is if my kids are going to inherit this asset, what is their tax bracket and what is that eventually going to be subjected to? So again, a lot of variations of this and kind of very specific to your situation, but it could or could not make sense depending on goals and where you’re at.

All right, and we just have one more question. Robert says, how do I save the chat? Robert, we are going to be sending. Out this recording of this event and I will make sure that we send out all the links to the resources that I included in the chat in that email. So pay attention to your email. In the next couple of days. We will be sending that out with all of the resources. You can also go to purefinancial.com and just click on Financial Resources. There’s all kinds of free white papers that you can download from there. You can also watch the Your Money, Your Wealth television show which is free.

You can also listen to the Your Money, your wealth podcast. Also free. Schedule that stress test your retirement portfolio. That is free as well. Joe, thank you so much for taking the time today and answering all these questions and giving us all this great information. Thank you, I appreciate it. Thank you all so much. Again, email us if you have any questions. Call the number that you see on your screen and schedule that meeting to stress test your portfolio. Everybody have a great day. Thank you so much.

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