Retirement Readiness: How Do You Know When It's Time?

Show Notes On Mount Everest, nearly 80% of deaths occur on the descent—not the climb. Jim Brogan uses that sobering contrast to explain why retirement can be riskier than building wealth: spending down savings brings new pressures, from market downturns to inflation and the fear of outliving your money. He lays out a practical way to estimate your retirement income gap, protect near-term spending without giving up long-term growth, and make room for family support and charitable giving. The episode also explores a potentially valuable tax-planning window between retirement and the age when required minimum distributions begin. Automatically Transcribed With Podsqueeze Jim Brogan 00:00:02 You're tuned into more Living with Jim Brogan, broadcast live from the Brogan Financial studios at Newstalk 9087, where old fashioned values, expert knowledge and genuine understanding come together to give you the retirement straight talk you deserve. Jim's a former National Advisor of the year recipient and a financial educator, and he's here today to talk about how you can live out the best years of your life. Jim and the Brogan financial team have been helping retirees and retirees across the southeast for over 20 years in their pursuit of financial independence. You can reach them during the week at 865862 6800. So sit back, relax and get ready to learn because more living with Jim Brogan starts now. Speaker 2 00:00:46 Hello, East Tennessee on this crisp, cool third Saturday in October. Thank you for tuning in. This is more living with Jim Brogan where it's all about living the best years of your life your way. This is Newstalk 987. And today I just kind of want to talk about and focus in on when, when do you know you're ready to retire? How can you be confident? Or maybe you're there, but you're just not sure how to put it all together so you feel like you're where you need to be. Speaker 2 00:01:20 But now what? and this is a big, big question that a lot of people that I, that I talk to have is knowing how to make that transition from drawing a paycheck to no longer drawing a paycheck. The biggest retirement challenge for many individuals is not accumulating enough money. It's learning how to use that wealth that you've already built. So you may feel like you've you've gotten to the finish line or or maybe you're already retired. Either way, how can you feel confident in what you're doing? the first thing that I think is important to understand is I like to talk about the mountain of your financial life. So let's let's think about Mount Everest for a minute. Mount Everest, tallest mountain in the world. When I ask who's the first person that climbed Mount Everest? The first and most commonly associated with that is a man named, Sir Edmund Hillary. And many of you have heard that name. And my response to that would be, well, we don't know that he's the first to make it to the top. Speaker 2 00:02:35 He's the first one that made it down alive. And many times when we get you get to the top of the mountain, you feel like that's your retirement phase, and you kind of plant your flag in the ground and you feel like you've, you've you've reached the summit, you've crossed the finish line, whatever analogy you want to use. But the reality is you still have to get down the mountain and. Going down the mountain, then coming up the mountain. let's look at these two phases of life that when you're going up the mountain, that is the accumulation phase. That is when you're saving and accumulating money, you're growing your money. Now, what happens if you fall down? Then you tighten up your bootstraps and you start back up the mountain. It could be losing a job. It could be seeing a 3,540% market downturn. Whatever the case may be, you you tighten up your bootstraps and you start back up the mountain. You get to the top. And when you start coming down the mountain, that's the the the distribution phase of life, the income phase, that's when you start spending money from your life savings. Speaker 2 00:03:49 It can be much more, much more damaging when you fall down the mountain. Going down the mountain. you know, in our Mount Everest analogy, almost 80% of the deaths that have happened on Mount Everest over the years have been coming down the mountain, going not going up the mountain. So, you know, many of you maybe spent your whole career working towards financial independence, but you still don't feel comfortable retiring. And why is that? And I think a lot of that is understanding the different pressures and stresses that are put on the nest egg and putting together a plan in place to deal with those challenges. Also, it feels different. You know, you're when you go from saving money to spending money, that is just a huge emotional change and mental change in your whole approach. You know, many of us have been taught our whole lives by our parents and our grandparents. Save, save, save. But but then when you stop drawing a paycheck, Now it's time to spend that money. Speaker 2 00:04:57 And it can feel uncomfortable. We don't know when life is going to end, and we don't want to have life left. At the end of the money and have the money run out. And you know, when I teach classes through the area, you know, at Pella City State and the University of Tennessee, and I ask people what their greatest financial concern is, and it doesn't really matter. I have found whether somebody has 3 or 400,000 or 3 or 4 million or even 8 or $10 million. Their biggest concern normally is, is running out of money, you know, having life left at the end of the money. And it's because we don't. It's such a big mental challenge to move from saving, saving, saving to now it's time to spend. So how can you determine whether what you've accumulated is enough to support your retirement lifestyle. And I think the first thing you have to understand is how much you're spending and getting getting your arms around, how much money, what your lifestyle looks like does not have to be as difficult as you might think. Speaker 2 00:06:13 a lot of times I think it paralyzes some people because you don't, you know, you don't want to do this line item, budget and track where every single dollar is going. And I know when we're younger, we do that, when we get older and we get, you know, we get in that last ten years before retirement, you know, we're making our best. You know, usually you're that those are your peak earning years. You know, you have categories and things like that but you don't track. Many people don't track to the penny. And if you don't do that and and it is very, very good to track those things. By the way, I'm not saying you shouldn't do that. The problem is, people come into our office and it's very, very unusual that people really have their arms around what they're spending and in what different areas. And so one way you can get your arms around that without doing too detailed of a budget is just look at how much money is hitting your checking account every month from your paycheck. Speaker 2 00:07:15 You know, it really doesn't mean a lot. If you tell me, Jim, I make X number of dollars, a year's my salary. You know, let's say salary and bonuses. You make $130,000. Well, by the time you take taxes out, by the time you pay payroll tax, you know, 7.65% of every paycheck you're paying payroll tax. That's mainly going to Social Security. That is not a federal income tax. So that's a big, big chunk that's coming out of your paycheck. You have your health insurance deductions. Any other employee benefits. usually in your peak earning years, your last ten years from retirement. You're saving large amounts in your 401 K. Those are coming out of your paycheck. So look at what's actually hitting your bank account. How much is it. And then what's happening month to month is your is your bank account growing. Is it shrinking. You know, over the course of the year what happens with those bank account balances? Now you may have some one off expenses that you're not going to have in retirement. Speaker 2 00:08:25 You also want to think about things like, you know, will you have your house paid off? Will you have a mortgage payment? If you have a mortgage payment now and you don't have a mortgage payment in retirement, then you know that's going to make things a lot easier from a cash flow perspective. You also have to budget for your medical expenses, you know, for even once you're 65 and you're on Medicare, you've got a budget for Medicare premiums, you've got a budget for supplemental plans or Medicare Advantage. And then you'll have utilization costs. So you have to budget for all those things in an income plan. But you have to figure out ultimately how much money are you going to need to spend to have the lifestyle that you want. And then once you have an idea of what that number looks like, then you have to know, you know what your income, what what income can you actually count on? And Social Security would be the most common answer. You might be getting a pension. Speaker 2 00:09:23 fewer and fewer people are getting pensions now. you might have rental income if you own rental property or whatever it is, but whatever those income sources are, you no longer are going to have a paycheck from work. So you simply have to look at what your spending is, let's say, you know, let's pick some round numbers. Let's say you're you're spending about $9,000 a month, 8500 to 9000 a month. So 9000 a month is 108,000 a year. now you got to consider. So let's say you're between 100, 110,000 a year. You also have to budget for income tax. You don't need to budget nearly as much as you might think, but you may determine your retirement income. Need is 125,000 gross of tax. Then you put everything down on paper. You look at Social Security, look at pensions, you look at the other things rental income. You look at all that stuff. Let's say it adds up to 60,000 a year. So you need to draw 125,000. You know you can count on 60. Speaker 2 00:10:29 You have a gap of $65,000. So that's your income gap. And so to feel confident with what you're wanting to do in retirement, you have to understand what that income gap is. Because now you've got to focus your life savings on funding that income gap. And this is where the comprehensive planning comes into play. You have to have an idea of what your tax burden is going to look like in retirement. You know, when you draw income, where are you drawing it from and how much of that end up being taxed? I mean, I we have clients drawing 150, 160, 180,000 a year that are in a 12% marginal tax rate. In other words, their taxable income is under $100,000 by the time you do all the deductions and you look at tax efficient income and where to draw what your income sources are, all those kinds of things. But it all starts with understanding what your lifestyle desire is and how much income you're going to need to fund that lifestyle. And then you can look at in this case you need 125,000 a year. Speaker 2 00:11:39 You've got 60,000 a year in Social Security. So you've got an income gap of 65,000 a year. And then let's look at your life savings. You know, if you've got $2 million and you need 65,000 a year to live on, you know, that's a little less than 3.5%. That ought to be pretty doable. And we'll talk about the 4% rule and whether or not that even makes any sense. We'll talk about that a little bit later in the show. But these are the kind of numbers. Now, if you have $1 million saved up in your investment base and you need to be drawing 65,000 a year in retirement, well, you're probably not ready to retire. So the first step is to know what type of income need you'll have. Then you have to start putting together the income, the tax planning, the estate planning, all the things that already that you know that also go into that. And when you do that, it can give you confidence to be able to live the retirement lifestyle that you want. Speaker 2 00:12:44 So we're going to get to our first break when we come back. I want to talk about changing the mindset from accumulating your assets to enjoying your retirement lifestyle and enjoying your income and enjoying your assets. So stay with. It's a huge mental shift. So stay with us. This is more living with Jim Brogan right here on Newstalk 987 Woking. Jim Brogan 00:13:08 Welcome back to Newstalk 98. Seven's Brogan Financial Studios or Jim Brogan is coming to you live with important news and advice to help you achieve your dream retirement. Get ready to learn and live. Here's your host, Jim Brogan. Speaker 2 00:13:23 Welcome back to More Living Here on Newstalk 987 KCRW. I'm your host, Jim Brogan, and we're talking about how you can feel comfortable retiring. You know, you've worked your whole life in saving and accumulating money. How do you make that transition? How do you do it confidently and be able to live with with with confidence that that you have the plan in place. How do you change your mindset from accumulation to enjoyment of your assets? And that becomes a critically important thing. Speaker 2 00:13:55 I think one thing is you have to have an idea that you have a plan that can support what you're wanting to do. You know, it's as as I've discussed, it's it's difficult when you start focusing on saving and taking money and spending money and drawing from your life savings. You know, it's a big mental adjustment. And I think a big part of that is having a good plan in place to support it and understanding how that fits together. so, you know, many of the things that we hear, things like how should your investment strategy change when you no longer need to prioritize aggressive growth? Well, is that really the case? How should you be looking at your investment profile and how much risk you need to take. And what are those risks and understanding those risks? When you're going to start drawing in income from your life savings, it puts a different pressure on the nest egg. You know, when we're accumulating and saving money, we know there's going to be good markets and there's going to be bad markets overall. Speaker 2 00:15:07 Historically, the stock market has gone up, but it's choppy along the way. And so the question is how do you adjust your investment policy as you get closer to retirement and then as you retire? And I think it's critical, number one, to understand how important growth continues to be. You know, there's more and more coverage about the inflation challenges that we're facing right now. you know, inflation is means sticky. The Federal Reserve would like to get it down to 2%. I don't see that happening any time of year in the near future for sure. I don't know that they'll ever get back to 2% in the next, say, 5 to 10 years. Maybe they will. You know, I don't know, but I think it's going to take a while. And that means asset prices, costs, everything is going to continue to become more expensive. And you better have a plan to fight inflation. You know, people are living longer and longer lives. Believe it or not, a married couple that's age 65 is likely one of you is likely to live well into your 90s, 93, 94 years old. Speaker 2 00:16:21 That's just kind of average. A lot of us think, you know, if I make 85, 87, I'll be fine. The reality is, as I said in the first segment, you don't want to have life left at the end of the money because you live longer than you thought, or market conditions were more challenging than you thought. But man, you better have a plan to grow your investments to fight inflation. Inflation is a silent killer of retirement income. You know it. It kind of slips up on you. It's not like losing 30% in a bear market where it happens so fast. Inflation just kind of creeps up on you. And you wake up one day and you're sure now, and you're like, where all the income go. I don't have enough income. So, you know, to someone 65 years old that's on the cusp of retirement, need to have an aggressive growth strategy. Probably not. But you know. And what does that even mean? Aggressive growth. I think the biggest thing is you need to have growth in your mix. Speaker 2 00:17:29 Now, the problem with growth is, you know, the single best way historically to beat inflation with our investments. In other words, to have our investments grow at a pace that will outpace inflation after we pay taxes on that growth. The stock market has been the very, very best way to do that. The obvious market is you have it no idea what's going to happen in the short term. And in the short term. You say, well, Jim, I'm going to retire in a year. So you've got to kind of balance, okay. In a year you're going to need to draw retirement income. But you also have to balance that, that you need that income to continue to grow for maybe 20 or 30 years. So it creates this competing interest you. You have this need for stability of income to replace a paycheck, but you also need that income to grow over time. And so I think one you still need. Don't underestimate the need to have growth assets. But one of the things that you need in order to If you can be successful with growth assets, you need time. Speaker 2 00:18:43 You know the single biggest hedge. Best. The single best hedge against market risk historically, is time. I'm 30 years old and I have a 401 pay. I'm not too worried about a market downturn. Next. You know that in the next five years because I've got so long to recover from that. Also, when the market turns down substantially, when you're still working, you get to take advantage of those downturns because you are continuing to contribute money through your paycheck, through payroll deduction. So you actually take advantage of the market decline. Think about when you're in your last ten years before retirement. You're in your peak earning years. Many of you may be saving the max over $30,000 a year in your 401. So when the market dips substantially, I know it. You don't like the way that looks on your 401 statement that you're adding in substantial amounts of investment while the market is down, and when the market does nothing but come back to where it was, you're not breakeven. You're ahead. Your investment that you had before the market went down is breakeven. Speaker 2 00:19:57 But all that investment you were making while the market was down, you're up. So you profit from the decline entirely. We don't have that. We, generally speaking, don't have the ability to be making investments. When markets are down. You know, you don't have disposable income. You don't have you don't have working earned wages. So, you know, you've got to be very, very diligent about understanding. Not only do you not have time on your side, you don't, you know, it's just it You aren't going to be contributing money in market downturns. So, you know, you've got to balance these competing priorities in the short term. You need stability of income. And so many of you that have listened to this show over the years, you know that I'm a big believer in bucket planning for retirement income. That is not the only approach to retirement income, but is the approach that, if you look at the research and the data suggests the greatest likelihood of you being successful and not letting the stock market dictate your ability, your lifestyle and retirement. Speaker 2 00:21:13 So think about this. If you're living on all of your investments, which I'm not a fan of, it's called a total return approach. You've got all this investment base and you start selling stuff off when you need to draw income. The problem is markets are going to be sharply down at some point, and when they're sharply down, that means you're selling off into that environment and you're spending that money. It'll compound your loss. You know, you. It's okay to sell something when it's down and reinvest it, but you don't ever want to sell it when it's down and end up spending that money because you have to. Well, the problem is, as I said, the stock market is completely unpredictable. In the short term. We have no idea what we're going to need, what's going to happen. So, you know, markets are choppy, markets are volatile. Markets are unpredictable. So next time we have a significant downturn, if you're having to sell off investments for income. And you know what I think people understand that. Speaker 2 00:22:14 And that's why I can feel uncomfortable. How do you retire. So but you need growth assets because of inflation. So I think setting aside two buckets, one bucket is what we'll call safe, protected or stable money that's not in the stock market. And you have another bucket that's risk money that can have growth. As I mentioned, you have to have time on your side when it comes to market investing. So the moneys that are invested in the market have to have time to go through the inevitable ups and downs that they go through. Where what does that mean? It means if we have a substantial downturn in these next four or 5 or 6 years, you don't have to spend those assets. So now, if you're one year from retirement, your time horizon on your wrist bucket is not one year. It's maybe 6 or 7 years because you've put enough money in that safe money bucket for you to safely withdraw income when markets are down. Now, if markets are way up, you can draw income across the board. Speaker 2 00:23:19 But when markets are sharply down, you've got to have a plan, in my opinion, where you're prepared to have safe or protected or stable assets that you can leave your market investments alone. Maybe make take advantage of opportunities. Maybe reinvest, but not spend that money and you've got time to get through the downturn. And that's so critically important, especially in the first 5 to 10 years of retirement. So you've got to protect income in the short term. When you do that, if you know you've got income protected for the next 7 or 8 years, you know, 4 or 5 years would be the minimum to me. But if you've got, you know, 5 to 10 years of income protected now, that risk money, you're not a one year investor because investing in the stock market for one year, you will know where the market is a year for now, when instead you've got an income plan that protects income. So you're not going to need to touch those risk assets for 5 to 10 years. Speaker 2 00:24:26 And that is that is really where things have to start. So to kind of go back to the first segment, you have to understand what your income gap is and how much you're going to need to fund income to replace your paycheck. Now, Social Security strategy is certainly going to fall into all of that. and taxation of is going to fall into all that stuff. But you gotta you gotta know what you're going to want to spend and you have to you have to protect that income. And what are you protecting it from? Market decline. So when we have the next significant downturn, you're not having to spend those investments that you're not to have that risk bucket grow over time to find it. And then having a plan like that will allow you to feel more comfortable spending money on things like travel, family, hobbies, and other retirement goals because you've got a plan in place to support it and you know your plan doesn't depend on the short term results of the stock market. Now, I keep talking about the short term instability and unpredictability of the stock market. Speaker 2 00:25:40 But let's you know, I've said safe and risk money. When I say safe, I want to be very careful with that word. My definition of safe money is ideally you have a guaranteed return of principal. And then certainly you've got to look at who's backing the guarantee that. So it's protection of principle. That does not mean it doesn't have risk. What is the worst. What's the biggest problem with safe money? I asked you that question. It doesn't grow right. It doesn't grow a lot to fight inflation. So it has risk. It has inflationary risk. And if you, you know, taking unnecessary investment risk to me in retirement, you could have, could be having too much money in that safe bucket because then you wake up in ten years and you don't know where your income is. So you you really need both of these. So you start with protecting income with that safe bucket. But the safe bucket is not going to. Typically going to have a hard time. You're going to have a hard time beating inflation. Speaker 2 00:26:42 And in the risk bucket you you can kind of set it and let it grow and go through those inevitable ups and downs. Now there are other approaches to retirement income. You can use what we call an endowment approach. Or you know, where, hey, you draw 4 or 5% a year off your investments. the one of the challenges with that is when markets are substantially down, you have to decrease your lifestyle. And so most people that come to see me and come into our office and they come to my classes, you know, that their first 5 to 10 years of retirement is, is exactly when they don't want to be doing that. And we don't want market conditions to dictate your ability to have the lifestyle that you want in retirement, especially in those early years. So you start by protecting income with safe money, and then that allows you to have some risk money that can grow to fight inflation. Now what does that well ultimately allow you to do. What does it allow you to do when your retirement income needs are covered and you have other opportunities you can begin considering? That's what we'll talk about when we come back. Speaker 2 00:27:49 As you listen to more Living with Jim Brogan here on Newstalk 987 Woking. Jim Brogan 00:27:57 Welcome back to Newstalk 98 Seven's Brogan Financial Studios, where Jim Brogan is coming to you live with important news and advice to help you achieve your dream retirement. Get ready to learn and live. Here's your host, Jim Brogan. Speaker 3 00:28:12 Well, the black hole is 287 W okay, it's all about living the best years of your life your way. As you're listening to Newstalk 987 w Sky. we're talking about being able to, you know, you save money your whole life and you feel like you're in a good place. How do you make that transition confidently? Or if you're already retired, how do you continue to live a retirement lifestyle confidently being, you know, constantly meaning you're really worried that you'll get the money you want the first? So we've talked about how you how you develop a plan for figuring out how much income you need, how you need to structure your investments to support that income and protect income in the short term. Speaker 3 00:29:06 We're not dependent on the short term results of the stock market, but yet long term, you have long term growth in the stock market. When you do all this, what does this allow you to actually do? That's the exciting part. I mean, the retirement year, if we talk about it on this station, all this show, the goal is to live the best years of your life your way. And when you can confidently pursue lifestyle and the things that are important to you in retirement, when you can do that confidently and you see income projections and how your plan can support that, it just opens up a world of other opportunities that you may be thinking about. You may want to start balancing your wealth today with the idea that you want to preserve some assets for your children or grandchildren. Now, that's certainly not a primary goal of most people. I mean, with their primary goal is take care of us. But when you have a good plan in place and you start doing the things you want to do and you understand how that plan works, it's going to open up more possibilities. Speaker 3 00:30:16 And so you can start thinking about those things that are more not not to the sacrifice of your own retirement lifestyle, saying, hey, when I'm when I'm gone, I'm probably going to have a significant, you know, significant money here, how I want to make impact on people that are important to me, people I love on causes that are important to me. How can I make an impact? You may want to start making an impact now while you're still alive. You know, I I'm a big fan of enjoying your enjoying your retirement wealth with your family while you're still alive. If you can pay for family vacations or help a grandchild with college or whatever the case may be, those are exciting kinds of things. And when you have, that's even more exciting than the idea. Don't you think the idea of leaving behind when I'm gone? I mean, that's exciting, but you don't. You don't want to do it in short, circuit your own retirement plan and risk running out of money. So when you have a plan in place that does all these things I'm talking about. Speaker 3 00:31:26 It allows you to then start focusing on impact. Now, while you're alive? Yes. Impact that you can make when you're gone, too. But what impact can you make now with sharing your wealth? Also, what about charitable giving and philanthropy? You know, I think philanthropy should be a fundamental part of most people's financial plan, because one of the best things that philanthropy does for us is it gets us outside of ourselves. You know, one of the biggest challenges in today's society that we live in is money, life balance. We know money's not whole. Money is a tool that allows us to pursue things, but it's not the be all goal. If it's the goal, you'll never be happy. You know, they ask J.D Rockefeller how much money is enough? His answer a little bit more. It's never enough. If that's the if that's the goal, it's what the tool can provide. And when we are giving to other causes that and to people and things that help people that are not in the same situation we're in. Speaker 3 00:32:38 it gets us out of our outside of ourselves. So philanthropy can be a wonderful way to. A wonderful thing to include in your retirement planning. You can also invest time. It's not just money. You can invest time into philanthropy, and it changes your perspective on everything, potentially. Now then, how do you do that in a way that will put money in your pocket? And yeah, that's not why we do philanthropy. The goal should not be to the goal of philanthropy is not to save taxes. But by goodness, if I'm going to do philanthropy, I'm going to maximize my tax savings, and I'm going to be smart with how I give money. So we really want to be cognizant of that. You know, the best for for most retirees. You know, if you're making charitable gifts, the one thing you should probably not be doing is doing cash gifts where you write a check. Because most retirees now are not itemizing deductions. So you're getting no economic benefit for making. I mean, you're getting the the benefit of philanthropy and charitable giving, but you're not getting a tax benefit. Speaker 3 00:33:57 Whereas if you can give assets that have not been taxed, and then you never have to pay tax on the asset, that's even better. Now, the most common of this is once you're 70.5, you can give money directly from your IRA to church, qualified church or charity. It's called a qualified charitable distribution. And you do not have to pay tax on income. So think about the money you have in your retirement accounts. You've not paid any of the income tax on most, if not all of that money. So every dollar comes out typically has to be taxed at 73. If you're born before 1960 at 73, you have to start taking out money from that retirement account every every year to the tune of about 4%. If you're born 1960 or later, you have to start that at 75. And those are typically fully taxable distributions. But if anything that's given out of an IRA directly to a church or charity, a qualified charitable distribution where the check is made out to the charity, it does not count as taxable income. Speaker 3 00:35:09 So it and it can come straight off of your RMD your required minimum distribution. So if you have $1 million IRA and you're having to take $40,000 out and you get 5000 of that as a direct pay directly to the charity as a qualified charitable distribution. Now you're only paying tax on 35,000 instead of 40,000. And that's just more tax efficient than writing a check to a charity. Likewise, if you give an appreciated asset like a stock or a fund for real estate, you know, if I have a stock and I paid $5,000 for it, now it's worth 10,000. You know, if I sell that stock, I have a capital gain that I pay income tax on. But if I give that stock charity then I don't have to pay the capital gain. I can still take a $10,000 deduction if I'm itemizing. So let's say you own Apple stock and 5000 is worth 10,000. I say, well Jim, I, I, I don't I don't want to sell my Apple stock. I want to continue to own it. Speaker 3 00:36:12 Well not right back. Go ahead and give it to the charity and then take the $10,000 of cash you were going to give to charity and buy by Apple. And now your tax basis is 10,000, not 5000. So that's just more tax efficient. So anytime we're doing charitable giving and we had a good financial plan, it enables us to do more of those kind of wonderful things. So it makes you it puts us in a position where we can have impact on our families and the people that we love and we can impact, have impact on other people, causes that are important to us. And then we can have a tax plan to maximize that impact. You know, if I'm minimizing taxes, in the end I'm maximizing impact. I'm either able to give more to the church or charity and have more impact there, or by giving to the church or charity, I keep more money in my pocket and I have more impact with my lifestyle and more confidence to be able to make all these impacts I'm wanting to make. Speaker 3 00:37:14 So you can you map all this stuff in place and you move from accumulation to enjoyment in retirement. You now can use your financial resources to create meaningful experience and opportunities for your family, without compromising your own financial independence. So when we come back from our last break, we'll talk about a little bit more. Tie this off with creating a retirement with purpose. So stay with us. This is more living here on Newstalk 987 Woking. Jim Brogan 00:37:48 Welcome back to Newstalk 98 Seven's Brogan Financial Studios where Jim Brogan is coming to you live with important news and advice to help you achieve your dream retirement. Get ready to learn and live. Here's your host, Jim Brogan. Speaker 4 00:38:08 Welcome back. More living here on Newstalk 97. Wookey. Speaker 3 00:38:13 I'm Jim Brogan. We're talking about retiring confidently and successfully. And when you have a good plan in place and you understand how you're going to derive dependable income, when you have a plan that allows you to be confident that you'll be able to beat inflation and be drawing enough income in ten or 15 or 20 years, it allows you to make more impact with the people you love on your own life, with your family, and with charitable causes. Speaker 3 00:38:44 So to me, a retirement plan is about a lot more than simply determining when you can stop working. And I just keep going back to you. You need a comprehensive plan that can address all these things. Now, we do see mistakes that affluent retirees make when they fail to develop a clear plan for the next phase of life. And those mistakes kind of run the gamut of things. Some of those mistakes deal with not understanding the short term market risk. On the flip side, many of those mistakes deal with not understanding the risk of inflation over the long haul and and the need to grow income and grow your asset base to produce more income later in life. And and the need to understand that things are still going to be expensive and cost money when you're in your 80s. So yeah, you may be thinking primarily, well, it's the first 10 or 10 years of retirement I really want to spend, and then I'm not going to spend as much. But that is to say, your income still need to go up for basic necessities. Speaker 3 00:39:51 And of course, healthcare expenses late in life get even more cumbersome. So don't underestimate that impact of inflation. and then the next step towards truly identifying a good plan is to then live the way you want to. So, you know, the ultimate goal of retirement planning isn't simply to accumulate the largest possible portfolio, it's to create the financial freedom to live the life that you work so hard to build. Now, the one thing we have not gotten into in too much detail today is tax planning. And I just want to kind of end the show today with the importance of tax planning. You know, there's often a retirement tax trap. You know you're saving money, but are you saving in the wrong accounts? How should you be looking at Roth versus traditional IRA? You know, we've all heard that expression. It's not how much you make, it's how much you get to keep. And I think that's going to become extremely more and more relevant in the future. We had the one big beautiful Bill act that was passed into law last year on July 4th, and it made the Tax Cuts and Jobs Act permanent. Speaker 3 00:41:02 But only in the sense that Congress was permanent, right? I mean, Congress can change the law. I was just looking at a chart this morning That was showing the deficit spending over the last 20 years of our federal government. It was, in other words, it was showing the annual revenue. And then it was quick government revenue and it was showing the government. And of course, we know deficit spending has continued to increase. Our federal debt is at record levels. You know, we're pushing 125 to 130% of GDP. We have unfunded liabilities for Social Security and Medicare and prescription drugs. Now, there's ways out of this. Economic growth is an engine that can help with the debt problem. And inflation is part of economic growth, right. When prices go up and when costs go up, GDP goes up, our economy gets larger. And the way we should be looking at debt is debt to GDP. How how much do we owe relative to the size of our economy. And while there's a lot of alarm and desert with where we are, there's also ways out of this. Speaker 3 00:42:20 And economic growth is a big, big part of that. And part of that economic growth would be inflation. But it's hard to imagine that in the next ten years we don't see a change in our tax system. I may be wrong. We don't know for sure. Let's look at what we do know. When you retire, if you're in your 60s. You don't have to take any money out of your retirement accounts until 73 or 75, depending on when you're born. And then once you turn 73 or 75, you've got to start taking income from these retirement accounts. And that is taxable income. You don't have to do that when you first retire. So you're going to have this sweet spot and you're planning? Between retirement age and age 73. And it's a wonderful opportunity to keep tax rates very, very low and be smart about what you're doing. You know, tax planning is not about figuring out how you can minimize your tax bill in 2026. It's about how you can minimize your tax bill over the remainder of your lifetime. Speaker 3 00:43:34 And unfortunately for most of us, income taxes is the largest expensive we'll ever have. When you add it all together over our lifetime, it's more than our house. It's more than our health care expenses. It's our income taxes. And we need to take advantage. Many, many retirees or soon to be retirees need to be taking advantage of today's low tax environment. You need to understand how the tax system works. You need to understand how Roth conversions work. You have to understand how long term capital gains can be a very, very good thing and not a bad thing. and incorporate that tax plan into your financial plan. That's going to put more money in your pocket. That allows you to make more impact. With all the things I've been talking about today. Today we've discussed your wealth because greater wealth provides for living, so you can live the best years of your life your way. Thank you for tuning in this week. thank you to Wayne, to Mary Caroline for all the help us with the show. Speaker 3 00:44:33 it's the first Saturday of October. Let's go. Tennessee Vols. Let's go, big orange. Let's beat the Crimson Tide. Have a great week. This is your living with Jim Brogan here on Newstalk 987 W. Speaker 5 00:44:45 The views expressed by Jim Brogan and his guests are not that of Cumulus Media. Any discussion of financial, legal and tax planning strategies is not intended to be individualized advice and is general in nature. Always consult with your advisor for advice specific to your needs. This program's content does not represent a recommendation of any particular security strategy or investment by Jim Brogan or Brogan Financial, Incorporated.