Planning for retirement is a challenge, just like the game of golf. Only 3.2% of retirees have a million dollars in their retirement accounts, and only 1-2% of golfers annually make a hole-in-one. Luckily, you don’t need a hole-in-one to win the financial game – but you do need a strategy. Joe Anderson, CFP® and Big Al Clopine, CPA show you how to get off the tee, avoid the fairway hazards, and sink the putt to get you through the retirement course successfully.
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Important Points:
- 00:00 – Introduction
- 01:56 – The Drive: Save! Average retirement savings by age
- 02:43 – 2025 retirement plan contribution and catch-up limits
- 04:48 – Investing in stocks, bonds, and real assets
- 05:42 – Asset allocation depends on your timeline
- 06:02 – How to hit the golf ball: tips with PGA professional golfer Chris Riley
- 06:47 – Calculate your free Financial Blueprint
- 07:55 – True/false: The two main types of hazards on a golf course are water and bunkers. On the retirement course, sometimes the biggest hazard is you!
- 09:19 – Hazards: longevity – outliving your money if you don’t plan
- 10:01 – Increasing healthcare costs
- 10:53 – Inflation
- 11:47 – Tax on 401(k) withdrawals
- 14:11 – Market volatility – retiring in a down market
- 14:56 – How to get out of a bunker: tips with PGA professional golfer Chris Riley
- 15:33 – Calculate your free Financial Blueprint
- 17:04 – True/false: It takes the average golfer over 2 putts per hole. On the retirement course, you actually have a couple of shots to get Social Security right!
- 17:23 – Sink the Putt: The Social Security “Do-Over”
- 18:26 – Tax diversification asset location – pre-tax, brokerage, and Roth
- 19:29 – Retirement income to sustain you
- 20:36 – Supplement income with a side hustle
- 21:00 – Extend retirement income
- 21:47 – Viewer question: Do I have to pay taxes on my deceased husband’s 401(k)?
- 22:28 – How to putt: tips with PGA professional golfer Chris Riley
- 22:53 – Calculate your free Financial Blueprint
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Transcript:
(NOTE: Transcriptions are an approximation and may not be entirely correct)
Joe: Hey folks, how’s your golf game? Or should I ask you, how is your handicap in regards to your retirement plan? It’s funny because your golf strategy and your retirement strategy has some similarities. We’re gonna break it down for you today. Welcome to the show folks. Joe Anderson here. President of Pure Financial Advisors, and I’m with my caddy today, Big Al Clopine. We’re gonna talk about how to swing properly.
Al: I love to play golf and I like to talk about finance, and I’m right there with you.
Joe: I love ’em both too. So we’re gonna combine the two in trying to make a little bit of fun out of this because golf is super challenging, but guess what? So is retirement. We all wanna hit that hole in one, or we all wanna have that magical retirement, and that’s today’s financial focus. Look at these stats folks. One to 2% of golfers annually make a hole in one. Have you ever made one? Not even close? Me neither. I play probably a hundred rounds a year.
Al: I don’t play that many, but I’ve never made a hole in one.
Joe: Looking at this, retirees that have $1 million in the account, only 3.2% of the public have. $1 million in the account. But then they survey people. They’re like, Hey, well how much money do you think you’ll need to have a comfortable retirement? Most people said 1.5. You don’t need to have a hole in one to win the game, folks, you just need a strategy. Let’s bring in Big Al.
Al: Alright, the golf course or the retirement course First you gotta get off the tee. You gotta get a good drive. Let’s talk about saving and investing. Hopefully you hit the fairway, but there are a lot of hazards and how do you get out of them? And finally, how do you get to the green? And most importantly, sinking the putt being successful in retirement. So Joe, there are some similarities between golf and retirement. Let’s start with the drive.
Joe: Average savings by age, 142,000 for 35 to 45 years old, mid forties, mid fifties. He averages 355 to 64, knocking on that retirement door. 538, 65 to 74. $600,000. So still at 65 and 74, it’s still half of what people think they need.
Al: It is half. And another way to say that, Joe, is that Fidelity will say when you’re 65, you should have around 10 times your salary. So that would give you another frame of reference on where you should be.
Joe: If you’re making 150,000-
Al: yeah, it’s not, this is not gonna cut it not enough. And I think they get that 10 times because you take your savings and, and income from savings and, and Principle plus social security will get you there.
Joe: Couple of new rules for all of us this year. 2025. We got some added catchups, which is a phenomenal benefit. So let’s talk about your retirement plans through work. 401(k)s, 403(b)s, 457s. You might have a TSP, right? These are defined contribution plans. The contribution is defined by the IRS and you have limits of how much money that you could put in 23,500 is what the, um, the contribution limit is for those plans this year. And then you get a catchup, your standard catchup if you’re over 50. Of another $7,500. But then Al, this is the big one here, from 60 to 63, you have a giant ketchup that you could put in.
Al: Yeah, Joe. And that started in 2 20 25, and I think it’s for four years. So if you’re in that age between 60 and 63, it’s not 7,500, it’s 11,000, two 50. So in other words, you can put a little bit more in, you can catch up a little bit more if you’re in your early sixties.
Joe: IRA accounts, $7,000 is the annual contribution. If you’re over 50, you get another thousand dollars. So, hey, you need to save. You have plans available to you, so if you wanna contribute here, you can go pre-tax, right? So you get a tax deduction going in and it grows tax deferred. Or for some of you, you might have a Roth option, and so you might want to go after tax and have all of that money grown, tax free, or maybe a combination of both. Let’s look at small business owners. Solo 401(k). So if I’m a sole proprietor, I want to put money into an IRA. For years, people would put money into maybe a set plan. Simple plan. Or a standard IRA al. The solo 401(k) is a phenomenal plan for sole proprietors.
Al: Well it is and, and both of them have the same kinda limitation. Other words. You take 25% of your profit, that’s what the company can put in. But the difference between a solo K is you can have an employee part two. So you can have the 23,500 go in first dollar for dollar. And then if you still have excess profits, 25% over and above that. You can put a lot more in. So the solo K is definitely a better way to go, Joe, although there is more paperwork.
Joe: Hey, when you’re looking now as you’re funding these plans, what do you do with it? You invest? So there’s a couple of different categories that you want to take a look at. There’s equities, so this could be stocks. Large cap, small cap international. So you’re buying part of an um, organization, or there’s debt or bonds, right? So you have a little bit safer investment here. You’re going to lend your money out for a certain interest rate, and then you get those dollars back when the bond matures. So that could be in the us that could be as safe as a treasury bond or a treasury bill, or maybe you want to take on a little bit more risk and go international. How about real assets? So you can go real estate, precious metals, commodities, maybe some alternatives. So you wanna look at the balance of all of these to determine, you know, what your target rate of return is to accomplish the goal.
Al: You do and, and you tend to have slightly different allocations depending upon how old you are, because the longer you have to invest, in other words, the younger you are before retirement, the more risk you can take, the more you want to favor stocks, right? And the closer you get to retirement. You might wanna have a few more bonds because now you may be taking funds from your account for your retirement to pay for your living expenses, and the bonds are safer.
Joe: Okay, we got the drive out there. We’re talking about savings and investing, but a golf show wouldn’t be a golf show if we didn’t give you some true life golf tips to help you on the golf course. And who do we have our own? Chris Riley, PGA Professional.
Chris: Hey, it’s good to be here on your money, your wealth. I’m Chris Riley, local PGA Professional. I’m gonna show you how to get out of the bunkers, make some putts, and hit the ball a long ways. Today. When you have the driver in the hand, your feet should be out. Side your shoulders, which creates a better shoulder turn and then gives you great speed through the golf ball. If I wanna hit it a little farther, I widen my stance even more than normal to get a lot more speed.
Joe: Hey, have you ever taken a golf lesson? Do you think that would help your overall game? Well, we have your golf lesson for retirement. Go to yourmoneyyourwealth.com. Click on that special offer this week. It’s our Financial Blueprint. You gotta practice to get better. This is going to be your practice session. You can break things out. It’s gonna tell you what’s going well, what areas that you should look at some ideas and things that you should consider in regards to improving your overall retirement game, folks. Go to your moneyyourwealth.com, click on that special offer. We gotta take a break When we get back, we’re gonna be in some hazards. How do we get out of this trap?
Andi: Can’t get enough Joe and Big Al? Follow us on the Your Money, Your Wealth Podcast, in your favorite podcast app and on YouTube. Visit yourmoneyyourwealth.com and click Ask Joe and Al on air to get a retirement spitball analysis.
Joe: All right. Welcome back. Just warming up my game here for my my little golf match later, Big Al.
Al: I like it.
Joe: All right. Hey, we’re talking golf. We’re talking finances. We’re talking about your overall retirement course. Are you ready to hit the links, folks? Let’s how you did on the true false question,
Al: the two main types of hazards on a golf course are water and bunkers on the retirement course. Sometimes the biggest hazard is you. Well, I think that’s a true statement, although I think there’s more hazards. I think there’s out of bounds, Joe, I seem to hit it behind a tree. I can find a lot of stuff.
Joe: Yeah, I mean there’s all sorts of things looking at investing, right? When we’re talking about hazards, the average investor, if I look at the s and p 500 over the last 20 years, right? Pretty good returns, nine and a half percent. If I had a 60 40 portfolio, 60% stocks, 40% bonds, I did seven and a half almost. Not bad. What did the average investor do over that same time period? That’s all of us. If I would’ve just kept it in the s and p, I would’ve did nine and a half maybe. I don’t want to take on that much risk, so I want to have less risk. I still did seven, but most people did half that. Three and a half, 3.6%. Alan.
Al: It’s crazy, Joe, and you see this every single year. DALBAR does this study and they go back 20 years and we have get the same stats. The numbers are slightly different, but the trend is the same. And why does this happen? It’s because we are afraid of the market. We get out, we sell when we’re afraid when it’s going down, and then we buy back when it’s going up, and we’ve missed the climb. So just stay in the market.
Joe: All right. Here’s another hazard, which is a good one. If there’s such a thing as a good hazard, longevity, we’re living a lot longer. That’s great news. The bad news is, is that we don’t have enough cash to make sure that we can still maintain the lifestyle that we want for the extra 5, 10, 15, 20 years. In some cases, someone in the mid fifties, if you’re a male, one out of three is gonna live until their nineties, one out of two.
Al: Females. Wow. So we gotta be, we gotta be prepared for that. And when you look at the stats of like a 65-year-old couple, right? There’s, there’s a 50% chance that at least one of you is gonna live into your early nineties. So make sure when you think about retirement planning, you’re looking long term,
Joe: right? And let’s say we’re living longer, but we not, might not be all that healthy those many years. So there could be some healthcare costs. Average healthcare for people 65 and older. It’s $315,000, $315,000, and if we break this up, you got copays, you got premiums, you got out-of-pocket expense, but still, this is a large number that’s going to come out of the overall annual budget to make sure that you can still be healthy to live that long. Right? So just other things, other hazards that you wanna make sure you’re prepared for.
Al: Yeah, Joe. And sometimes when people see that they freak out. I don’t have $300,000. I think a better way to think about this, $300,000 over 25 years is a little over 12,000 a year. So just imagine your budget adding $12,000 a year is what you’re probably gonna need to do.
Joe: Inflation. We’re feeling the impacts of inflation. So let’s say I wanna spend $50,000 a year, what is the purchasing power of the $50,000? Well, in 25 years from now at a 4% inflation rate, it’s 18,000 in some change, or 19,000. If I have a 2% inflation rate, it’s 30,000. I lose about $20,000 of purchasing power from inflation over that 25 year time period. Most people’s retirement is probably in that 20, 25 years, depending of course when you retire and when you die. But on average, you know, you have to really take a look at inflation and run the appropriate assumptions. To see what that’s gonna do to your overall strategy.
Al: Yeah, and Joe, another way to think about this is if, if you’re gonna retire, let’s say in 10 years and you know, your pension, social security is about $60,000, well, $60,000 today in 10 years will be more like $80,000 or more. So just make sure you factor that in.
Joe: Alright, let’s talk about taxes too. You got a 401(k), you pull out a hundred thousand dollars. Let’s say if you’re under 59 and a half, there could be a penalty. Or if not, look at the impact of taxes of dollars coming out of your overall retirement accounts. You know, we look at these balance of the IRA and the 401(k), 403(b), and you’re like, Hey, I have a hundred thousand dollars or 200 or 500 or 600, or whatever the number is. I’m here to tell you, you don’t have all of that money because of the tax that you pay to get those dollars out of the retirement account. Especially if you take those dollars out early, you just add on another penalty for taking the dollars out. But Al, you get rid of the penalty. You still pull a hundred thousand dollars out. In some cases, state and federal taxes.
Al: You are losing a third, you lo you are losing about a third and, and this is a really common thing that happens. People in their thirties, forties, or fifties, they have some kind of financial emergency, oh, I’ll just pull out of the 401(k), not realizing the taxes and penalties. And some states have penalties on top of the federal penalties. Plus some states are high tax. Joe, you and I have seen people that ended up with only 50% of the amount that thought they thought they were gonna get.
Joe: Yeah. Well here’s another common mistake. Let’s say you are 65 years old and you just retired. And you wanna pay off your mortgage, that’s a few hundred thousand dollars. You pull it outta your retirement account and they have no idea the impact of the taxes on those dollars that they’re withdrawing. All of this is ordinary income. It’s gonna add to your tax return. The more dollars that you pull out, of course the more taxes that you’re gonna pay, or it’s gonna push you up into higher brackets. And the IRS is just gonna take more. So making sure that you understand the tax impact of your withdrawals. It’s so key, another killer. So taxes is a huge one. So if you kind of put this together, it’s like, alright. Myself, I get freaked out when the markets go down. I get overzealous when the markets go up, and so I’m in and out of the markets at the wrong time, and then I’m living a lot longer, so I gotta be in the markets, but I keep getting in and out of the markets at the wrong time since I’m living longer and I’m getting bad returns. I’m gonna have health issues because I’m freaked out because of the market. So then I have healthcare expenses, and then I wanna take money outta my retirement accounts. And Uncle Sam gets me. I mean, how many hazards is there? Big Al?
Al: Well, and, and then I retire and the market goes down. And that first year, now I’m really in trouble.
Joe: It’s like, what? Man, this game sucks. You got a 20% loss that first year. It’s like, oh, boop. Inflation, taxes, uh, you’ve run outta money. 10 year shortfall. This is called sequence of return risk. It happens all the time. We don’t know what the market’s gonna do. So you retire and then the market hits up or down. If it goes up, hey, that’s great because now that’s increasing my balance. But given our luck, the market’s gonna take the next day you retire. You have to have a strategy to combat this.
Al: And Joe, one of the best ways you do that is as you get close to retirement, you have more safety in your portfolio, you have more bonds that tend to hold their value in a market correction. So you can pull money from there, let the stock part of your portfolio come back on its own.
Joe: Alright, so we avoided some of the hazards on our retirement course, but if you get in that bunker on the real course, let’s see how you get out. Take it away, Chris.
Chris: A big part of the game is getting outta hazards and this is how you get out of the sand trap. First of all, I need a wedge that’s gonna help me get the ball up in the air quickly. Second of all, you need to build your stance, open it up, and then when you take the club back, you have to make sure you drive the club into the bunker with velocity to get the ball up in the air.
Joe: Let’s get you in shape, folks. Let’s get you prepared for this retirement course. Go to our website, your moneyyourwealth.com. Click on this special offer. It’s a Financial Blueprint. It’s absolutely free of charge. You can download it right there. You just put in some information. It’s gonna tell you what you’re doing well, what areas of improvement that you need. It’s like, alright, hey, you’re doing really well. Oh, you’re in the zone, or, oh, not good at all. Your money wealth.com, click on our Financial Blueprint. It will definitely help your game on that retirement golf course. Alright, we gotta take another break. When we get back, we’re gonna talk about probably the most important piece of the overall game. It’s sinking the putt.
Andi: Ready to take charge of your financial future? Pure Financial Advisors can help. We offer a no cost, no obligation financial assessment. With a personalized action plan, make informed decisions on how to get on your best path to retirement. Start planning your financial future today.
Joe: Welcome back to the show. We’re talking about golfing here, your retirement golf course. This is the most important piece of the overall game. You gotta sink the putt. Alright, you got your drive in the fairway, you avoided the hazards, and now you’re on the green. You gotta put it in the hole. If you don’t want a three putt in your financial plan, go to your moneyyourwealth.com. Click on that special offer folks. It’s our Financial Blueprint. You can figure out exactly what you need to do, the pros and the cons of your current situation. You can do it right there in the comfort of your own home, yourmoneyyourwealth.com. Click on that special offer. It’s our financial. Blueprint. Alright, now let’s see how you did on that true false.
Al: It takes the average golfer over two putts per hole on the retirement course. You actually have a couple of shots to get social security, right? Well, that is true. Social security. You can undo it. You can suspend, you can withdraw. Joe, what does that mean?
Joe: Yeah. Let’s see if you take your benefits at 62. So there’s some rules and regulations in regards to how you claim your benefit. If you are earning income, let’s say you retire at 62, 63, you start claiming your social security benefits early. You take that reduced haircut for the rest of your life, but then you get a job offer. They’re like, Hey, let’s hire you. Now you have income and you’re like, you know what? I don’t necessarily wanna take that social security benefit. I want it to continue to grow. I can suspend my benefits and then have it continue to grow. Another option is that as long as you claim your benefits, you have 12 months to change your mind. So if you wanna withdraw that claiming strategy, you just have 12 months, but you have to pay the dollars back from, you got from social Security, and then you can kinda start over your claiming, uh, strategy, whatever you want.
Al: Yeah. And that’s. The key suspending, you just suspend the benefits. Your benefits continue to accrue. So when you do start them up again, it’ll be a higher amount when you withdraw, it’s as if you never started Social Security, but you do have to pay it back. So Joe, that’s a lot more expensive.
Joe: Another issue when you’re on the green folks is that asset location or me and diversified in regards to the investments that you have, right? There’s pre-tax dollars, those are your IRAs, 401(k)s, retirement accounts that you have on. A tax deduction going in that gross tax deferred, but will be taxed when you pull the dollars out. You might have a brokerage account that’s an after tax contribution and you’re stuck with maybe a capital gains tax shorter, long, depending on when you sell that security. And then you have tax free accounts or Roth. So understanding your asset location, how you are investing the funds in each of these different pools, and then what is your distribution strategy when you pull ’em out, I think can make a huge difference.
Al: It’s so important and it’s, it’s widely forgotten or not even considered. And if you think about it, where do you want your assets to grow? The fastest, well, or most, or expected growth the most that’s in your Roth because you’re rewarded for that growth. You pay no tax. You actually want some of your safer assets in your retirement account. So your pre-tax, because you pay ordinary income tax, that’s the highest of taxes, and then maybe a mixture in your brokerage account.
Joe: Hey, let’s talk about how much money can you pull out. So we talked earlier in the show about the average savings of someone 65 to 70, and it’s roughly around $600,000. So what can $600,000 produce an income Big Al?
Al: So a little over $5,000 a month, of course, realize that then your assets are depleted at that point, given a 6% rate of return. But it shows you the difference. Now what if you do it for 20 years, then it’s about $4,300 and 30 years. It’s about $3,500. Now, we really never recommend Joe, you deplete your assets completely. ’cause you never know how long you’re gonna live.
Joe: If you pull 10% outta the overall account, guess what you’re broke in 15 years.
Al: That’s correct.
Joe: So it’s understanding what is sustainable distribution rate, first off. And then second is that you want to be dynamic as you’re pulling these dollars out. That’s, I think, the issue and the problem sometimes with some financial planning software, it’ll be like, well, what does my max spend? How much money can I spend? And it might show you a number. But if that market tanks, that number changes the next day.
Al: Yeah, no question about it. So let’s talk Joe, about how you improve your situation if you’re a little behind.
Joe: Well, a couple things. You could freelance, you could blog virtual assistant, personal instructors. I mean, you could do some side hustles. I think these are just examples of some interesting things that people could potentiallydo/
Al: And I guess to put it in our vernacular, you got a long putt, right? You wanna make this a shorter putt. You can supplement by doing some of these other things.
Joe: Couple other things that you could do. Make sure that you pay off your debt because those dollars, instead of going to the credit card company or the interest payments can go to your living expenses. You could downsize something smaller or just move outta the state entirely into something. Maybe that’s a little bit less expensive.
Al: You know, Joe, when it comes to moving to a low cost state or a low tax state, uh, a lot of people ask us, can I pretend I live in Nevada or Texas or Washington State or Florida because they don’t have state taxes. No, you cannot pretend. You actually gotta move there. You gotta show that you’re living there. You gotta show utility bills. You gotta, you gotta change your driver’s license, registrar voters. You gotta have a house that’s commensurate with your income, not some little tiny condo compared to your mansion in California or wherever. So don’t fake it. You gotta really do it.
Joe: All right, let’s, uh, switch gears. Let’s take some viewer questions.
Al: Do I have to pay taxes on my deceased husband’s 401(k)? Great question. So you don’t pay taxes right off the bat, so that basically is available for you as a spouse. However, as you start withdrawing money, then of course you have to pay taxes at that point.
Joe: Yeah, there is no way around the tax on a retirement account. 401(k)IRA, 403(b)TSP, whatever it is, that is in a tax deferred account. So if you inherit that account, you could roll it into your own IRA, or you could keep it in the decedent’s IRA, whatever that you want to do there. But all distributions will be taxed at ordinary income. As I said, the most important part of the game, in my opinion, is putty. Let’s see how an expert does
Chris: it. The first thing I do is I believe I’m gonna make the putt. I have an open stance, which allows the putter to go towards the hole. Hands are very soft and all I focus on is a good stroke.
Joe: Good luck everyone on the retirement course. Hopefully it’s a lot easier than playing actual real golf. If you don’t want a three putt in your financial plan, go to your moneyyourwealth.com. Click on that special offer folks. It’s our Financial Blueprint. You can figure out exactly what you need to do, the pros and the cons of your current situation. You can do it right there in the comfort of your own home, your money wealth.com. Click on that special offer as our Financial Blueprint. For Big Al Clopine, I’m Joe Anderson. We will see you next time.
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• Investment Advisory and Financial Planning Services are offered through Pure Financial Advisors, LLC. A Registered Investment Advisor.
• Pure Financial Advisors, LLC. does not offer tax or legal advice. Consult with a tax advisor or attorney regarding specific situations.
• Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
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• Intended for educational purposes only and are not intended as individualized advice or a guarantee that you will achieve a desired result. Before implementing any strategies discussed you should consult your tax and financial advisors.
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