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Retirement Planning From a CFP® Professional: 6 Keys to a Happy and Successful Retirement

sometimes I feel like I've lived through my 60s and 70s thousands of times sitting with people in retirement or those that are entering retirement we come across a lot of the same fears negative thoughts and feelings that really hold people back from having a happier retirement now we try to address those through retirement strategy and implementing plans but in today's video instead of talking about strategy I want to talk to you about how we look at retirement so you can hopefully look at retirement through a different lens and I believe this will help you have a happier retirement foreign [Music] Happy Gilmore recently and there's this place that he goes to and he calls it his happy place and if you remember the movie the lead actress she's sitting there by like a fountain of beer with pictures and Happy's grandmothers there and it's just his happy place and this helps Happy Gilmore putt a little bit better to find your happy place in retirement I want you to shift your focus away from simply trying to maximize return in retirement it's not about growing Your Nest Egg anymore what we want to do is have an acceptable level of risk something that when the market goes down we can still stay invested we can stay committed to that plan but at the same time for that level of risk we have an expected return that can help make sure that you don't run out of money and generate enough growth to provide the income that you need to maintain your standard of living so here is one of the tools that we use to help understand your willingness to take risk so risk tolerance really has two components it has a capacity component meaning given a certain level of income that you desire from your portfolio can your portfolio withstand a certain level of risk and still provide that income so that's what we call risk capacity but then you have your willingness to stay invested in a down market so when we look here this is a standard 60 40 portfolio 600 000 stocks 400 000 in bonds has a risk number on a scale of 1 to 99 of 54.

now in isolation that means absolutely nothing to you but when we start to break it down into percentages and also or I should say more importantly dollars over a six month period your standard 60 40 portfolio has the potential to lose a hundred thousand dollars with a million invested this is a statistical quantitative analysis of volatility of this portfolio going back many years now over a 12-month period that means you could lose two hundred and twelve thousand dollars mathematically speaking is that a comfortable level of risk for you if you have a million dollars it's not for me to answer that's for you to answer that's your willingness to take risk so over a 12-month period mathematically you should expect to lose at some point in time up to twenty percent you could lose more of course this is a 95 probability or what we call two standard deviations but we have what we want to achieve here is a more optimal level of risk for an expected return so we have asymmetry here where the possible upside mathematically speaking is 15.92 percent over a six month period so we do have some asymmetry here but when we look a little bit deeper the annual range midpoint is 5.27 so this would be the expected return kind of moving forward with a two percent dividend this GPA this is a pretty cool feature of this software it's designed to help you understand what we call risk adjusted returns and this is this concept is kind of what I'm talking about here they've developed this GPA and a 4.3 would be most Optimum now not every portfolio that fits your particular needs is going to be a 4.3 we're not necessarily trying to achieve that but the higher we can get to that it means we have more expected return for the For Less risk so the question really becomes are you comfortable with this range of expected outcome if not this is too aggressive of a portfolio for you but instead of just focusing on like most people do the upside we need to focus more on this downside in having a plan that is optimized or having an investment strategy that's optimized for your happy place number two I want you to start to look at all of your investment choices in retirement for what they actually are now this is much different than in the accumulation phase in the retirement phase your financial investments all the various choices out there they're really nothing more than tools tools that are used to accomplish a certain objective similar to ingredients in a recipe if you have too much sugar or too much salt or not enough herbs or spices is it may not come out the way you want it to taste we want to use the appropriate tools to accomplish the objectives that you have in retirement stocks for example they aren't used to accumulate anymore stocks are designed to help keep you ahead of inflation so you can generate income that lasts as long as you do now in the accumulation phase that's exactly what stocks are designed to do they're designed to give you the best opportunity historically speaking to accumulate a larger and larger Nest Egg of course that assumes that you save enough money but in retirement you are no longer accumulating you are Distributing so stocks are used to help keep you ahead of inflation now the downside to stocks you could lose a lot of money especially if you get too aggressive or if you invest in things that don't perform well now does that make stocks bad because you could lose a whole bunch of money no they're just a tool and once you understand how to use that tool in conjunction with other tools now you can actually construct whatever project that you're building or have a retirement plan that provides you the income you need to maintain your standard of living the number three key for a happier retirement I want you to accept that you're in the distribution phase don't expect your accounts to continue to grow each and every single year this may seem like common sense but in reality and in practice it's much harder for many people to do now you've seen your accounts hopefully grow grow grow you've been putting money in the market has performed well over most years in the past even when the market performed poorly you are still putting money into your 401k getting that match hopefully saving money elsewhere now that you're in the retirement phase you're putting a lot of stress on your portfolio through distributions now I'm not saying your accounts can't still continue to accumulate especially if we have consecutive years in the market that that does really really well but what I'm saying is don't expect it you are in the distribution phase that means you're probably taking three percent four percent five percent out when we have years where the market is also down your portfolio is down you're digging a bigger hole than you were in the accumulation phase that means that hole is harder and harder to climb out of this is why the allocation of your Investments is so important and not taking too much risk you don't want to dig such a big hole that you can never get out but at the same time you need a certain level of risk to achieve a return that can give you a Secure Retirement so mentally let's not look at our accounts every single year and say oh man they're not going up they're not increasing in value I'm going to run out I need to stop spending my money now actually if you look at it appropriately you should not expect your accounts to continue to appreciate every single year in retirement that very May well happen but if it doesn't if you're just staying level or even going down a little bit it's okay you just need to have a plan monitor your progress with respect to your goals and stay on top of it number four I want you to understand the value of secure income in retirement the more secure income you have the less you have to withdraw from your portfolio and the less emotionally you're impacted by the stock market ups and downs by political goings on by economic slow Downs if you don't have to withdraw large percentages from your Investments because you're living on passive income from Real Estate from Social Security from annuities from a pension but the point is the more income you have coming in from multiple different places that is independent of the stock market going up typically the happier you'll be in retirement also I don't want you to underestimate the power of Social Security as part of your overall retirement income plan now I hear a lot of people making comments on some of the Social Security videos that we do and also just day to day having conversations with clients that Social Security seems to be an extremely underestimated part of retirement many people want to take it early and that may be the case maybe it makes sense for you to take it early but if a husband and wife have combined Social Security of 60 000 a year and you live let's say 25 years that's 600 000 1.2 1.5 million dollars of retirement income and for many of you watch watching this your Social Security is going to be a lot more than sixty thousand dollars per year so we're talking anywhere from one million to possibly over three million dollars of retirement income for a married couple for someone who's single Social Security you can just basically cut that in half so it's a significant part don't underestimate the power of secure sources of income in retirement and also don't underestimate how valuable deferring Social Security could potentially be if you're going to live past age 80 81 or so number five I would like you to stop looking at short-term outcomes whether your portfolio is up or down whether you pull too much out whether you had an unforeseen expense and you had to spend x amount of dollars I'd like you to start looking at these short-term outcomes of things that happen to you or decisions that you've made as nothing more than bumps in the road don't get too high don't get too low retirement is a very long and windy and arduous Journey this is why it's so important to have a plan and stay connected to that because when you have visibility into the future and you're looking at things not in the short term lens but over a 20 25 30 year time frame you can see a lot of times how actually unimportant these short-term events are so don't get too high don't get too low understand that these are bumps in the road in the short term but if you have a plan these bumps in the road have been accounted for next time the Market's down and your portfolio is down 10 or 12 or 15 or more say you know what I have a plan I expected this to happen this is not a surprise and retirement is a very long journey this is nothing more than a bump in the road the number six key to a happier retirement and I know this is going to be virtually impossible for many of you watching but the number six key probably the number one is to not look at your accounts more than once a month I would prefer it once a quarter so I know some of you right now are saying Troy that's impossible I look at it every single day I need to know what my stocks are doing what my accounts are doing how am I ever going to know if I'm going to be okay well there are numerous studies on this I encourage you to look some of them up the more frequently you look at your accounts typically the worst performance you'll have over long periods of time but the person who looks at it every single day over a long period of time I think it's 25 or 30 years averages somewhere around two to three percent per year the person who looks at it once a month averages somewhere around four to five the person who looks at it once a year averages somewhere around six to seven and the person who never looks at it has averaged around 10 or 11 percent and it makes sense because we are emotional beings when we see that something isn't going right we want to Tinker we want to make adjustments this typically leads to holding on to bad Investments maybe a little bit too long or getting rid of good Investments that just haven't really had the Catalyst that maybe you were expecting and selling them too soon or we're selling our winners and cutting our losers without giving them a chance to really perform well whatever the situation may be Studies have proven this over and over again the more frequently you look at your portfolio the worse you should expect to do so instead of discussing strategy and execution in today's video hopefully today's content helps shift your perspective just a little bit with the goal of helping you to have a happier retirement [Music] foreign [Music]

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2 Retirement Tax Planning Strategies To Save THOUSANDS In Your Retirement Portfolio!

how would you like to save hundreds of thousands of dollars potentially in taxes in retirement well these two strategies I'm going to go through today when combined together have the potential to do just that now if you don't qualify for net unrealized appreciation because you don't have company stock inside your 401k you can still qualify for zero percent taxes on your long-term capital gains and dividends so when we combine these strategies together it creates a very powerful tax and income planning tool that you can use for your retirement [Music] foreign as you can tell I'm pretty excited about this video because we're going to discuss two tax planning strategies the net unrealized appreciation which I've not yet done a video on the YouTube channel about and also the zero percent taxation for long-term capital gains and dividends and you're going to want to stick around until the end of the video where I incorporate these two strategies into a real life financial planning case now unless you've searched net unrealized appreciation to find this video there's a pretty good chance you've never heard of net unrealized appreciation so in its most basic form it's when you have company stock that's been issued inside your 401k you have the option of rolling that money outside of your 401k not into an IRA but rolling it out only paying income tax on the basis that's been distributed and potentially pay long-term capital gains tax on the appreciation so that appreciation from where it was issued to where it is whenever you roll it out and retire or sever from service or become 59 and a half that's what's called your net unrealized appreciation we're here in Houston Texas where we have a lot of client clients that worked at Exxon Mobil or Chevron or some of the other big oil and gas companies we also have clients from all over the country that work for other companies that can take advantage of this net unrealized depreciation strategy so I'm going to use Exxon because we come across this plan a lot we're very familiar with the Exxon retirement plan and I want to illustrate how this concept works and there's some nuances here and there's also some financial planning considerations and of course tax ramifications that we're going to go through but if I worked at Exxon let's say from 1995 to 2020 and as part of my compensation I receive shares of stock each year over the course of my employment so these numbers are not historically accurate but I want to convey the the principle here so in the beginning years if Exxon was trading at twenty dollars and I received a hundred shares and then next year maybe I received them at 22 dollars per share and twenty five dollars per share and over time as I've received more shares as part of my compensation package the value has typically increases the price at which you were issued those shares in the year you received them is what's called your cost basis so if we do this Nua rollout that's the amount that you'll have to pay income taxes on but it's a really cool opportunity here because over time most stocks appreciate in value Exxon today is at a hundred and sixteen dollars per share so the concept of Nua is if I was issued stock at twenty dollars a share and I keep it in the IRA and now it's at 116 dollars a share that's a massive amount of capital appreciation and if I roll it to an IRA and distribute it at that point or at some point in the future I'm going to income taxes and that can can lead to a pretty big tax liability now we're down the road when I need income but if stocks appreciate it over time we typically have a mixed cost basis when it comes to the amount of shares that we've received from the company so first thing to know here and first thing to ask your company is do you guys provide a breakdown of the cost basis on an annual reporting period or do you take the average cost basis so we come across some companies here that they will provide you the information of the exact cost basis and the amount of shares that you've received in each year in that case we can really cherry pick which shares we want to roll out and really take advantage of this strategy because typically we're going to take the lower cost basis ones some companies don't allow you to cherry pick based on the lower basis shares that were issued they calculate an average cost basis for all the shares issued so this is not nearly as advantageous as being able to cherry pick sometimes it can still make sense especially if it's an older 401k or if it's a stock that has really really appreciated since those shares were issued in the average cost basis is down so this video my primary purpose is to help educate you around the financial planning considerations of the Nua rollout so I'm not going to cover all the rules and reg surrounding it I'll do that in a later video though but a couple things you should know this becomes an opportunity whenever you sever from service or typically when you're entering retirement there are some other qualifications but we'll cover those later now if you sever from service prior to age 55 you will be subject to a 10 penalty on the amount you distribute so just be aware that if you're under the age of 55 you've severed from service you have company stock inside your 401k that that 10 penalty for early distribution still applies we have Exxon this 401K here so the total value is about 1.5 million in this hypothetical example the shares the tote in totality the shares have been issued over the course of the working career equals about a six hundred thousand dollar cost basis so I'm going to use the example here where we can cherry pick the individual shares so the next question becomes which shares should I consider doing the Nua rollout because I don't have to roll all six hundred thousand basis out in the real world typically this 1.5 million of fair market value may also be comprised of mutual funds such as growth funds income Etc within the 401K for the purpose of this example Exxon stock is valued at 1.5 million dollars the cost basis of those Exxon shares within the 401K is 600 000.

Just want to point out in the real world typically everyone does not have all their money invested in their company stock but I've I've absolutely seen that over the years so the question becomes which shares do we want to take advantage of the annual rollout with the general rule of thumb is the lower cost basis Shares are more attractive and that's determined by the the value of the stock today anything above 50 percent cost basis to fair market value typically we don't want to consider for Nua now there are some extenuating circumstances sometimes with financial planning considerations that it may make sense but when we do the math and we extrapolate out looking at the value that you would have in the ira versus paying taxes on the basis now annual taxation for growth dividends Etc the Breakeven point isn't that attractive when we look at these shares that are above 50 percent cost basis to fair market value I personally like to see them around 20 or 30 percent really tops so whenever you have shares that are 10 15 20 25 cost basis to fair market value those are typically very attractive opportunities and in some situations Thirty thirty five forty percent could possibly make sense it just depends on the overall financial plan that you're putting together in other circumstances so this is a tax analysis so you may want to reach out to your CPA for help or assistance in doing this or your financial advisor if they're qualified and skilled enough to help you make these determinations I want to run through some numbers now so let's assume for whatever reason this person decides to do the whole Nua rollout so just so we understand the how this functionally works the 600 000 rolls out of the 401K into a non-ira account income tax is due on that six hundred thousand dollars you're probably looking at about a 27 28 maybe 30 percent effective tax rate we'll go with 30.

So 100 eighty thousand dollars of income taxes would be due on the basis being rolled out but in this scenario you're not just rolling out 600 000 That's the basis you're actually rolling 1.5 million dollars out of the 401K and only paying income tax on the basis now if you sell it immediately the net unrealized appreciation is the difference between the basis and the fair market value so you have nine hundred thousand dollars of gain there so if you sell that nine hundred thousand you're looking at the more preferential long-term capital gains tax that would be a pretty big tax still so the question becomes the are what planning considerations should we hold on to this stock do we feel comfortable having this much in one company what is our other wealth what if we break it out over a few years so this is what we're really going to dive into now I just want you to understand how this actually works in regards to the functionality okay let's cover how this actually works so we take the Exxon stock the basis is 600 000 but the full value is 1.5 million so if in this example we decide we want to do it all we would roll the full 1.5 million out of the 401K it will go into a non-ira account but you only owe income taxes on the basis the 600 000.

If you sell the stock immediately you will owe long-term capital gains tax which is a more preferential rate than income taxes at this level of income on the difference between the basis and the fair market value or nine hundred thousand there but you don't have to sell it right away if you don't sell it right away and then you sell it six months later you'll be subject to short-term capital gains tax because you're holding period rules take take into a place or taken to effect if you don't sell it immediately but if you wait 12 months after the distribution date 12 months in one day then you qualify for long-term capital gains tax treatment so some of the financial planning considerations are now what are the income taxes due what is my income and tax plan year one year two year three of retirement how does this fit into that overall tax and income plan and how do we optimize how do we reduce the total taxes we pay while maximizing the value that we retain if we have to pay income taxes on six hundred thousand dollars you're looking at an effective tax rate there of about 27 28 maybe 30 percent so 30 on 600 is a hundred and eighty Grand so you'd write that check to Uncle Sam and you would have 1.5 million outside of the 401K in the more preferential tax environment of long-term capital gains and dividends now you would have annual taxation on these dividends so that's something else we need to consider and we also need to consider future tax rates and make assumptions with what do we think income tax rates are going to be in the future long-term capital gains and dividend rates all of these things go into the analysis but for now this is the logistics of how it works we roll it all out pay income taxes on the basis we can either sell it immediately and pay long-term capital gains on the differential or we can hold it and if we hold it past the distribution date sell it within 12 months short-term capital gains sell it post 12 months long-term capital gains okay so I want to dive deeper into the two options we have just high level so option A is We Roll everything to the IRA we do not take advantage of the Nua rollout eligibility things that we have to consider here is future tax rates rmds other income sources and the secure act now this is not an exhaustive list this is just some of the big ones we have to take and consider future tax rates because when everything is inside that tax infested Ira when you distribute it in the future you have to pay income taxes you've given up the ability to take advantage of long-term capital gains and dividend taxes which are typically a preferential rate rmds Force distributions from your retirement account and when added with other income we oftentimes see people who did not plan for this have 150 200 250 even more of income because of required minimum distributions and their other income so when doing this analysis we have to extrapolate out and look at these factors to help make the decision today secure act I threw this in here because it forces distribution of your retirement accounts if they go to a non-spouse beneficiary that's more than 10 years younger than you full distribution of the retirement account within 10 years so if you have kids and it's important to leave this money to your children if they have income and they're working and now your retirement account has to be fully distributed within 10 years that could be a massive amount of income going on top of their income which now 30 40 50 60 potentially of your retirement account has gone to Uncle Sam if you live in a state with income taxes that could be an issue as well inheritance taxes so a lot of issues here rolling everything into the IRA you can be hit with um pretty big income taxes down the road option b is we do take advantage of the Nua rollout either wholly or in a partial Nua rollout how that works is we would take the shares that we do decide to take advantage of this strategy and we roll them into the non-ira account some things to consider there is that what are long-term capital gain rates now what are they possibly going to be in the future but also we have annual taxation of the dividends and if we're buying and selling inside that account whatever we do not roll into the non-ira account with the strategy the rest of the funds from your 401k go into the IRA and then of course whatever's left here we have the same considerations that I went through over here so now there are financial planning considerations here let's say I was at 35 cost basis to fair market value so I'm kind of right there where mathematically it may not make sense but how much non-qualified money do I have how much essentially I'm saying how much do you have outside of your retirement accounts because if you're entering retirement and all that money is inside that tax infested 401K then you don't have any ability to manipulate what goes on your 1040 your tax return by manipulate I mean we determine which accounts were withdrawing income from to manage our taxable income that we report to the IRS if we pull from our non-qualified accounts think your bank account well you don't have to report that so if you need a hundred thousand a year we pull 50 from your bank and 50 from your IRA you get your 100 000 but only fifty thousand goes on the tax return that's how we can manipulate that so how much non-qualified money do you have if you don't have much we may want to consider doing a little bit higher Nua rollout because even mathematically it may not make sense when we just compare that decision in isolation to do or not to do the Nua rollout but when we now look at the other benefits that we're receiving such as the ability to do Roth conversions the ability to manipulate what goes on our 1040 the ability to possibly qualify for a health care subsidy if you retire before the age of 65 by managing the reportable or taxable income that's reportable we can qualify for a subsidy so this is why we're so big on financial planning because as you can see it's not just about Investment Management in retirement that's important absolutely but when we tie in financial planning with Investment Management we can create some really optimal scenarios where we're creating a ton of value and helping you have more income pay less tax and ultimately have more value throughout the course of your retirement okay this is the part that I mentioned in the beginning of the video where we're going to tie into kind of a real world plan planning case so we laid the groundwork for what Nua is and some of the considerations that you have to make in order to determine if it makes sense for you to do the Nua rollout so what I want to point out here is the tax and income plan for retirement years one two and three for someone who takes advantage of the Nua rollout because the question becomes when do we sell that stock if we have 30 40 50 percent of our entire net worth in our company stock it's pretty risky to hold on to that position just so we don't pay more in taxes so here's where we're going to tie the financial planning considerations of the real world application and decisions we have to make on the Nua rollout with years one two and three of someone just entering retirement one of the big risks is if we roll it out the company's stock and we decide not to sell it because we don't want to pay the long-term capital gains immediately if we hold on to that that concentrated Equity position we have increased our risk now there are investment strategies that can be used such as buying a put option or what we call an Equity caller but I want to just talk about the tax and income plan here so in this scenario client rolls out the annual way so they have a large concentrated Equity position and they've paid income tax on the basis but do not want to sell the company stock yet so as part of the tax and income plan what I want to show you is we could break this up so year two year three and even year four possibly depending on the size of the concentrated Equity position Company stock where zero percent taxes essentially so we have total income here of a hundred and twenty thousand so what this is the tax and income strategy where we're generating income year two of retirement not year one because in year one you've done the the Nua rollout you have a big tax liability from paying income taxes on the cost basis of that company stock so here's your two so year two the the tax and income strategy is don't take anything out of the 401K no Roth conversions we're going to sell the company stock that we previously rolled out take advantage of Nua and we can have a hundred and twenty thousand dollars of income here as long as it's all capital gains and dividends your total tax liability 458 dollars now what I've done here is assumed twenty thousand dollars of dividends because if you have company stock and you roll it out it probably paid some dividends so 20K there and a hundred thousand of long-term capital gains we're realizing we're recognizing so this is darn near zero percent on a hundred and twenty thousand dollars of retirement income and we're divesting from that company stock now again some risk management strategies we could have an equity caller or put option helping to support downside volatility of that concentrated position but just taxing in complaining wise I want to show you how how this can work out so here now I've added 125 000 of long-term capital gains with twenty thousand dollars of dividends total AGI 145 000 the total tax 4208 on 145k of income 2.9 percent so again we've divested so maybe this is year two of retirement or year three we've divested from the company stock we've reduced our risk we've provided the income that we needed for retirement and we've done so in a way that's tax advantaged same thing goes on now I wanted to point this one out because I've here I've thrown in the same 20 000 of dividends 125 000 of long-term capital gains so we're selling the stock again but now we also take advantage of a twenty thousand dollar Ira distribution so this is which accounts do we pull income from in retirement how do we generate income what's the tax plan total AGI comes up to 165 the total tax is 7208 but here's the cool part the IRS ordering rules for how you pay tax on income based on where that income is generated the distribution from the IRA is actually tax-free but what happens is when you take money out of the IRA it brings some of those long-term capital gains into taxation so I did a video not too long ago where we talked about adjustments and Social Security and IRA distributions and wealth conversion taxes the tax code is filled with these where if we we take one more dollar of income it brings one other item into now a taxable State such as Social Security or long-term capital gains or dividends so just just be aware of that I guess 165 000 of income seven thousand two hundred and eight dollars in income taxes representing a four point four percent tax rate so now one two three four years into retirement we've divested the uh concentrated stock risk we provided income and a very tax advantaged manner we still have that Ira with a lot of money in it to deal with but once this is done we would probably at that point start down the Roth conversion path now every situation is different but hopefully these topics and ideas and and considerations when it comes to risk management income planning tax planning and retirement will help you have a better retirement if you want to learn in more detail how to potentially pay zero percent in long-term capital gains and on your dividends click this video right here I did a couple years ago where we do a deeper dive into the special tax advantage [Music] thank you

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2 Retirement Tax Planning Strategies To Save THOUSANDS In Your Retirement Portfolio!

how would you like to save hundreds of thousands of dollars potentially in taxes in retirement well these two strategies I'm going to go through today when combined together have the potential to do just that now if you don't qualify for net unrealized appreciation because you don't have company stock inside your 401k you can still qualify for zero percent taxes on your long-term capital gains and dividends so when we combine these strategies together it creates a very powerful tax and income planning tool that you can use for your retirement [Music] foreign as you can tell I'm pretty excited about this video because we're going to discuss two tax planning strategies the net unrealized appreciation which I've not yet done a video on the YouTube channel about and also the zero percent taxation for long-term capital gains and dividends and you're going to want to stick around until the end of the video where I incorporate these two strategies into a real life financial planning case now unless you've searched net unrealized appreciation to find this video there's a pretty good chance you've never heard of net unrealized appreciation so in its most basic form it's when you have company stock that's been issued inside your 401k you have the option of rolling that money outside of your 401k not into an IRA but rolling it out only paying income tax on the basis that's been distributed and potentially pay long-term capital gains tax on the appreciation so that appreciation from where it was issued to where it is whenever you roll it out and retire or sever from service or become 59 and a half that's what's called your net unrealized appreciation we're here in Houston Texas where we have a lot of client clients that worked at Exxon Mobil or Chevron or some of the other big oil and gas companies we also have clients from all over the country that work for other companies that can take advantage of this net unrealized depreciation strategy so I'm going to use Exxon because we come across this plan a lot we're very familiar with the Exxon retirement plan and I want to illustrate how this concept works and there's some nuances here and there's also some financial planning considerations and of course tax ramifications that we're going to go through but if I worked at Exxon let's say from 1995 to 2020 and as part of my compensation I receive shares of stock each year over the course of my employment so these numbers are not historically accurate but I want to convey the the principle here so in the beginning years if Exxon was trading at twenty dollars and I received a hundred shares and then next year maybe I received them at 22 dollars per share and twenty five dollars per share and over time as I've received more shares as part of my compensation package the value has typically increases the price at which you were issued those shares in the year you received them is what's called your cost basis so if we do this Nua rollout that's the amount that you'll have to pay income taxes on but it's a really cool opportunity here because over time most stocks appreciate in value Exxon today is at a hundred and sixteen dollars per share so the concept of Nua is if I was issued stock at twenty dollars a share and I keep it in the IRA and now it's at 116 dollars a share that's a massive amount of capital appreciation and if I roll it to an IRA and distribute it at that point or at some point in the future I'm going to income taxes and that can can lead to a pretty big tax liability now we're down the road when I need income but if stocks appreciate it over time we typically have a mixed cost basis when it comes to the amount of shares that we've received from the company so first thing to know here and first thing to ask your company is do you guys provide a breakdown of the cost basis on an annual reporting period or do you take the average cost basis so we come across some companies here that they will provide you the information of the exact cost basis and the amount of shares that you've received in each year in that case we can really cherry pick which shares we want to roll out and really take advantage of this strategy because typically we're going to take the lower cost basis ones some companies don't allow you to cherry pick based on the lower basis shares that were issued they calculate an average cost basis for all the shares issued so this is not nearly as advantageous as being able to cherry pick sometimes it can still make sense especially if it's an older 401k or if it's a stock that has really really appreciated since those shares were issued in the average cost basis is down so this video my primary purpose is to help educate you around the financial planning considerations of the Nua rollout so I'm not going to cover all the rules and reg surrounding it I'll do that in a later video though but a couple things you should know this becomes an opportunity whenever you sever from service or typically when you're entering retirement there are some other qualifications but we'll cover those later now if you sever from service prior to age 55 you will be subject to a 10 penalty on the amount you distribute so just be aware that if you're under the age of 55 you've severed from service you have company stock inside your 401k that that 10 penalty for early distribution still applies we have Exxon this 401K here so the total value is about 1.5 million in this hypothetical example the shares the tote in totality the shares have been issued over the course of the working career equals about a six hundred thousand dollar cost basis so I'm going to use the example here where we can cherry pick the individual shares so the next question becomes which shares should I consider doing the Nua rollout because I don't have to roll all six hundred thousand basis out in the real world typically this 1.5 million of fair market value may also be comprised of mutual funds such as growth funds income Etc within the 401K for the purpose of this example Exxon stock is valued at 1.5 million dollars the cost basis of those Exxon shares within the 401K is 600 000.

Just want to point out in the real world typically everyone does not have all their money invested in their company stock but I've I've absolutely seen that over the years so the question becomes which shares do we want to take advantage of the annual rollout with the general rule of thumb is the lower cost basis Shares are more attractive and that's determined by the the value of the stock today anything above 50 percent cost basis to fair market value typically we don't want to consider for Nua now there are some extenuating circumstances sometimes with financial planning considerations that it may make sense but when we do the math and we extrapolate out looking at the value that you would have in the ira versus paying taxes on the basis now annual taxation for growth dividends Etc the Breakeven point isn't that attractive when we look at these shares that are above 50 percent cost basis to fair market value I personally like to see them around 20 or 30 percent really tops so whenever you have shares that are 10 15 20 25 cost basis to fair market value those are typically very attractive opportunities and in some situations Thirty thirty five forty percent could possibly make sense it just depends on the overall financial plan that you're putting together in other circumstances so this is a tax analysis so you may want to reach out to your CPA for help or assistance in doing this or your financial advisor if they're qualified and skilled enough to help you make these determinations I want to run through some numbers now so let's assume for whatever reason this person decides to do the whole Nua rollout so just so we understand the how this functionally works the 600 000 rolls out of the 401K into a non-ira account income tax is due on that six hundred thousand dollars you're probably looking at about a 27 28 maybe 30 percent effective tax rate we'll go with 30.

So 100 eighty thousand dollars of income taxes would be due on the basis being rolled out but in this scenario you're not just rolling out 600 000 That's the basis you're actually rolling 1.5 million dollars out of the 401K and only paying income tax on the basis now if you sell it immediately the net unrealized appreciation is the difference between the basis and the fair market value so you have nine hundred thousand dollars of gain there so if you sell that nine hundred thousand you're looking at the more preferential long-term capital gains tax that would be a pretty big tax still so the question becomes the are what planning considerations should we hold on to this stock do we feel comfortable having this much in one company what is our other wealth what if we break it out over a few years so this is what we're really going to dive into now I just want you to understand how this actually works in regards to the functionality okay let's cover how this actually works so we take the Exxon stock the basis is 600 000 but the full value is 1.5 million so if in this example we decide we want to do it all we would roll the full 1.5 million out of the 401K it will go into a non-ira account but you only owe income taxes on the basis the 600 000.

If you sell the stock immediately you will owe long-term capital gains tax which is a more preferential rate than income taxes at this level of income on the difference between the basis and the fair market value or nine hundred thousand there but you don't have to sell it right away if you don't sell it right away and then you sell it six months later you'll be subject to short-term capital gains tax because you're holding period rules take take into a place or taken to effect if you don't sell it immediately but if you wait 12 months after the distribution date 12 months in one day then you qualify for long-term capital gains tax treatment so some of the financial planning considerations are now what are the income taxes due what is my income and tax plan year one year two year three of retirement how does this fit into that overall tax and income plan and how do we optimize how do we reduce the total taxes we pay while maximizing the value that we retain if we have to pay income taxes on six hundred thousand dollars you're looking at an effective tax rate there of about 27 28 maybe 30 percent so 30 on 600 is a hundred and eighty Grand so you'd write that check to Uncle Sam and you would have 1.5 million outside of the 401K in the more preferential tax environment of long-term capital gains and dividends now you would have annual taxation on these dividends so that's something else we need to consider and we also need to consider future tax rates and make assumptions with what do we think income tax rates are going to be in the future long-term capital gains and dividend rates all of these things go into the analysis but for now this is the logistics of how it works we roll it all out pay income taxes on the basis we can either sell it immediately and pay long-term capital gains on the differential or we can hold it and if we hold it past the distribution date sell it within 12 months short-term capital gains sell it post 12 months long-term capital gains okay so I want to dive deeper into the two options we have just high level so option A is We Roll everything to the IRA we do not take advantage of the Nua rollout eligibility things that we have to consider here is future tax rates rmds other income sources and the secure act now this is not an exhaustive list this is just some of the big ones we have to take and consider future tax rates because when everything is inside that tax infested Ira when you distribute it in the future you have to pay income taxes you've given up the ability to take advantage of long-term capital gains and dividend taxes which are typically a preferential rate rmds Force distributions from your retirement account and when added with other income we oftentimes see people who did not plan for this have 150 200 250 even more of income because of required minimum distributions and their other income so when doing this analysis we have to extrapolate out and look at these factors to help make the decision today secure act I threw this in here because it forces distribution of your retirement accounts if they go to a non-spouse beneficiary that's more than 10 years younger than you full distribution of the retirement account within 10 years so if you have kids and it's important to leave this money to your children if they have income and they're working and now your retirement account has to be fully distributed within 10 years that could be a massive amount of income going on top of their income which now 30 40 50 60 potentially of your retirement account has gone to Uncle Sam if you live in a state with income taxes that could be an issue as well inheritance taxes so a lot of issues here rolling everything into the IRA you can be hit with um pretty big income taxes down the road option b is we do take advantage of the Nua rollout either wholly or in a partial Nua rollout how that works is we would take the shares that we do decide to take advantage of this strategy and we roll them into the non-ira account some things to consider there is that what are long-term capital gain rates now what are they possibly going to be in the future but also we have annual taxation of the dividends and if we're buying and selling inside that account whatever we do not roll into the non-ira account with the strategy the rest of the funds from your 401k go into the IRA and then of course whatever's left here we have the same considerations that I went through over here so now there are financial planning considerations here let's say I was at 35 cost basis to fair market value so I'm kind of right there where mathematically it may not make sense but how much non-qualified money do I have how much essentially I'm saying how much do you have outside of your retirement accounts because if you're entering retirement and all that money is inside that tax infested 401K then you don't have any ability to manipulate what goes on your 1040 your tax return by manipulate I mean we determine which accounts were withdrawing income from to manage our taxable income that we report to the IRS if we pull from our non-qualified accounts think your bank account well you don't have to report that so if you need a hundred thousand a year we pull 50 from your bank and 50 from your IRA you get your 100 000 but only fifty thousand goes on the tax return that's how we can manipulate that so how much non-qualified money do you have if you don't have much we may want to consider doing a little bit higher Nua rollout because even mathematically it may not make sense when we just compare that decision in isolation to do or not to do the Nua rollout but when we now look at the other benefits that we're receiving such as the ability to do Roth conversions the ability to manipulate what goes on our 1040 the ability to possibly qualify for a health care subsidy if you retire before the age of 65 by managing the reportable or taxable income that's reportable we can qualify for a subsidy so this is why we're so big on financial planning because as you can see it's not just about Investment Management in retirement that's important absolutely but when we tie in financial planning with Investment Management we can create some really optimal scenarios where we're creating a ton of value and helping you have more income pay less tax and ultimately have more value throughout the course of your retirement okay this is the part that I mentioned in the beginning of the video where we're going to tie into kind of a real world plan planning case so we laid the groundwork for what Nua is and some of the considerations that you have to make in order to determine if it makes sense for you to do the Nua rollout so what I want to point out here is the tax and income plan for retirement years one two and three for someone who takes advantage of the Nua rollout because the question becomes when do we sell that stock if we have 30 40 50 percent of our entire net worth in our company stock it's pretty risky to hold on to that position just so we don't pay more in taxes so here's where we're going to tie the financial planning considerations of the real world application and decisions we have to make on the Nua rollout with years one two and three of someone just entering retirement one of the big risks is if we roll it out the company's stock and we decide not to sell it because we don't want to pay the long-term capital gains immediately if we hold on to that that concentrated Equity position we have increased our risk now there are investment strategies that can be used such as buying a put option or what we call an Equity caller but I want to just talk about the tax and income plan here so in this scenario client rolls out the annual way so they have a large concentrated Equity position and they've paid income tax on the basis but do not want to sell the company stock yet so as part of the tax and income plan what I want to show you is we could break this up so year two year three and even year four possibly depending on the size of the concentrated Equity position Company stock where zero percent taxes essentially so we have total income here of a hundred and twenty thousand so what this is the tax and income strategy where we're generating income year two of retirement not year one because in year one you've done the the Nua rollout you have a big tax liability from paying income taxes on the cost basis of that company stock so here's your two so year two the the tax and income strategy is don't take anything out of the 401K no Roth conversions we're going to sell the company stock that we previously rolled out take advantage of Nua and we can have a hundred and twenty thousand dollars of income here as long as it's all capital gains and dividends your total tax liability 458 dollars now what I've done here is assumed twenty thousand dollars of dividends because if you have company stock and you roll it out it probably paid some dividends so 20K there and a hundred thousand of long-term capital gains we're realizing we're recognizing so this is darn near zero percent on a hundred and twenty thousand dollars of retirement income and we're divesting from that company stock now again some risk management strategies we could have an equity caller or put option helping to support downside volatility of that concentrated position but just taxing in complaining wise I want to show you how how this can work out so here now I've added 125 000 of long-term capital gains with twenty thousand dollars of dividends total AGI 145 000 the total tax 4208 on 145k of income 2.9 percent so again we've divested so maybe this is year two of retirement or year three we've divested from the company stock we've reduced our risk we've provided the income that we needed for retirement and we've done so in a way that's tax advantaged same thing goes on now I wanted to point this one out because I've here I've thrown in the same 20 000 of dividends 125 000 of long-term capital gains so we're selling the stock again but now we also take advantage of a twenty thousand dollar Ira distribution so this is which accounts do we pull income from in retirement how do we generate income what's the tax plan total AGI comes up to 165 the total tax is 7208 but here's the cool part the IRS ordering rules for how you pay tax on income based on where that income is generated the distribution from the IRA is actually tax-free but what happens is when you take money out of the IRA it brings some of those long-term capital gains into taxation so I did a video not too long ago where we talked about adjustments and Social Security and IRA distributions and wealth conversion taxes the tax code is filled with these where if we we take one more dollar of income it brings one other item into now a taxable State such as Social Security or long-term capital gains or dividends so just just be aware of that I guess 165 000 of income seven thousand two hundred and eight dollars in income taxes representing a four point four percent tax rate so now one two three four years into retirement we've divested the uh concentrated stock risk we provided income and a very tax advantaged manner we still have that Ira with a lot of money in it to deal with but once this is done we would probably at that point start down the Roth conversion path now every situation is different but hopefully these topics and ideas and and considerations when it comes to risk management income planning tax planning and retirement will help you have a better retirement if you want to learn in more detail how to potentially pay zero percent in long-term capital gains and on your dividends click this video right here I did a couple years ago where we do a deeper dive into the special tax advantage [Music] thank you

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Step 4 of Retirement Success Plan: Health Care Planning

in between medical insurance costs medicare costs and also out-of-pocket expenses like prescriptions co-pays and deductibles you'' re expected to invest well over two hundred thousand bucks on Health Care over the training course of your retired life which doesn'' t include the capacity for long-lasting treatment costs later in life this is why Health and wellness Care preparation is tip 4 of the retirement success plan foreign step one the allotment this is exactly how we spread your Dollars around numerous Investments according to your determination to take threat and your capability to take risk to create revenue which then income preparation is tip two tax preparation is step three and also Health Care preparing right here at step four needs to be done in this series since truly what wellness treatment preparation is if you retire prior to 65 it'' s actually income and also tax preparation and the result of that is what you ' ll pay in wellness care costs so I want to go with several of the devices that we use that you can use in your home however additionally begin to consider the bigger photo as well as just how these different choices influence your overall retired life prepare the very first step in this procedure is to truly determine what selections we have and after that comprehending the influence that those choices can make so several of you will certainly have extra options than others as an example if you have every one of your cash inside your pension anytime you take cash out of that account you need to pay tax on it that raises what'' s called your changed adjusted gross income which then determines whether you get approved for an exceptional tax credit scores approve aid for a health and wellness treatment strategy or if you do not so if we conserve cash today by managing where we take distributions from in retirement how does that impact United States in 5 years in one decade in 20 years as soon as we have that clear image of exactly how these decisions can impact you today as well as into the future we can really begin to discuss the benefits as well as factors to consider for going down each course a number of you around you have a great deal of money inside your 401k or an IRA whenever we take cash out once again those distributions are subject to earnings tax there'' s nothing we can do regarding that here we have a longer term contrast of dealing with the tax obligation infestation in your retirement account by doing Roth conversions at a critical Speed over an established variety of years currently the strategy always transforms since account worths transform the tax obligation regulations can change yet from a high degree sight we see we could potentially pay 269 000 in tax obligations if we address this challenge versus over here if we adhere to the conventional wisdom path we'' re looking at regarding 7 150 Grand in taxes so this is a significant lasting obstacle the inquiry currently ends up being do we address this first or do we attempt to purposefully take money from perhaps your non-qualified which is cash that'' s beyond your pension in mix with pension withdrawals or we delay the retired life account merely pull from Bank financial savings or other possessions that aren'' t inside a retired life account do we turn Social Security on what influence does that carry the tax computation this is the ordinary healthcare costs for a pair retiring in this nation prior to age 65.

So it'' s regarding twenty four thousand 9 hundred and seventy one for a person that'' s retiring this is a couple concerning two thousand dollars a month before Medicare to make sure that'' s twenty four thousand bucks a year that ' s cash today that if we do tactically prepare for for reducing those expenses now we do have to defer the pension planning so the question becomes do we intend to save money today or is it more crucial to deal with the longer term obstacle so that 24 000 and that'' s the average price for medical insurance costs and also out-of-pocket prices now your situation might be a bit different but we sit with hundreds of individuals and when they retire before 65 that'' s a pretty excellent quote of what you ' re mosting likely to be confronted with when it involves cash outlays for Healthcare coverage prior to Medicare from a preparation viewpoint there are means that we can maintain those health insurance policy costs down we have to be very mindful of what'' s called our modified adjusted gross earnings so this is a really vital number in the tax code and also in retirement planning in basic it influences various elements of of the code but additionally it'' s computed in different ways for numerous facets of the code as an example when we'' re checking out any kind of Medicare costs increases the estimation for changed adjusted gross earnings is different than the estimation for superior tax obligation debts for decreasing your wellness insurance prices same exact same word customized adjusted gross income but it'' s calculated 2 various methods so we need to recognize several of these subtleties we'' re mosting likely to undergo these yet right here is just a calculator that we can utilize it'' s from the Kaiser Foundation there ' s a whole bunch of these online but I just desire to go through how it functions so you can enter your state right here we'' re just taking a look at the U.S average your household income so thirty 5 thousand bucks is insurance coverage offered no for your from your spouse'' s task this is health coverage number of individuals in your family members variety of grownups 21 to 64.

any kids no so the variety of the earnings number there that is the changed adjusted gross income we'' re going to obtain into in just a min just how you determine that yet we see right here we can certify if this was our circumstance the average advantage is two thousand and also three bucks each month so that'' s 24 000 a year in a tax obligation credit report that will certainly buck for buck reduce your medical insurance premiums now at the end of the year due to the fact that you have to inform the federal government what we expect our earnings remaining in advance if it ends up being various than what we'' ve informed them we may get a costs at the end of the year yet also we make it a refund if it'' s actually much less and and our aid can potentially be a lot more so just want to present you to this tool there are a number of other tools available but in order to effectively utilize this device you need to know just how to determine your modified adjusted gross revenue so this is straight from healthcare.gov it'' s important to keep in mind though that not every state joins the federal exchange we simply lately had a client we were collaborating with in New York and despite the fact that it'' s imitated the Affordable Care Act legislation the regulations are a bit various a minimum of we were told that of exactly how tweaked adjusted gross revenue is calculated it especially involves which deductions you can take to lower your modified adjusted gross earnings number down so if your state does take part in the government exchange you can most likely to healthcare.gov I'' m going to reveal you where to look as well as what to search for if your state does not participate you'' re mosting likely to need to contact them straight there should be a website and a number for some sort of hotline for help to aid figure this out you can just Google healthcare.gov m-a-g-i computation that need to obtain you here so Social Protection it'' s essential to comprehend this since a great deal of times people intend to take Social Safety early as soon as they retire yet you need to comprehend that it increases your customized adjusted gross earnings for this estimation and afterwards that can result in you paying extra in wellness insurance coverage sets you back so net you'' re not actually getting any fringe benefit by transforming Social Safety on or a minimized benefit Social Safety and security is either 100 free of tax 50 tax obligation free or 15 percent tax obligation cost-free to relying on you guessed it changed it just a gross earnings but think what it'' s likewise a various calculation than what we ' ve spoke about previously so just recognize turning your social safety and security benefit on can influence your certification for a medical care aid if you'' re retiring prior to 65. Any kind of earnings so if a spouse is still working any type of self-employment earnings and also any kind of joblessness compensation Social Safety these are every one of the revenues that enter into determining your total customized adjusted gross revenue when you'' ve determined your revenue an approximated basis for the approaching year we now have to take right into consideration any type of reduction so just listed below this chart I simply revealed you it says can I take reductions for my income if we click that this page shows up we can subtract these expenses we can not subtract these expenses so overall earnings minus certain reductions is going to equal your changed adjusted gross earnings for the function of doing this estimation this estimation once again is not the very same for all aspects of the tax code that depend on Magi to identify if you certify or do except other various other parts other benefits spousal support if your separation was wrapped up prior to January 1st 2019. educator costs if you'' re an educator as well as you pay out of pocket student funding rate of interest as well as any health interest-bearing account payment so you do not need to be functioning to make a wellness savings account payment that money can go in there on a tax obligation insurance deductible basis it grows tax deferred as well as if you take cash out for certified health care expenditures it'' s 100 tax-free every little thing so the HSA is one of the most incredible accounts out there if you'' re not making use of it something you ought to absolutely check into philanthropic contributions reliant or childcare costs clinical costs home mortgage interest a great deal of real estate tax state revenue tax obligations tuition sets you back a great deal of the expenditures that you usually would get to deduct to calculate your tax obligation responsibility you do not obtain to subtract when computing your customized adjusted gross earnings level fine currently you have a good understanding of exactly how this estimation is made to assist establish whether you qualify for an aid or not because again keep maintain let'' s keep concentrated below we'' re trying to reduce the out-of-pocket price that you spend for your health insurance coverage premiums however we do have to evaluate this choice versus the longer term tax obligation obstacles that we have inside the retirement so one of the tools that we use right here is the tax planning software that enables us as soon as we get as soon as we'' ve got this information from you we can begin to place it in right here and after that begin to have fun with a few of the numbers so let'' s claim we have a dividend portfolio that tip one the allotment visit we'' ve chose we wanted a dividend profile IRA circulations so allow'' s state we were considering doing a forty thousand buck Roth conversion right here now you'' ve come in as well as'you ' ve taken Social Protection so you just retired as well as the gross Social Security in between 2 spouses is forty 6 thousand bucks so currently we boil down below first the software application is truly cool this is mosting likely to show us other chances as an example if one spouse is still working we might make a Roth individual retirement account contribution since we'' re under the limits a few other things right here individual retirement account contribution this is very essential since this is just one of the devices we can make use of to aid reduce your customized adjuster gross earnings to get a higher aid but really this is what I'' m searching for so customized adjusted gross earnings for ACA premium tax credit report alright can be found in at a hundred and also 9 thousand bucks so currently if we go back to the Kaiser Structure site we take this mhei get in 109 000.

boil down right here send okay so we still get approved for one thousand 2 hundred as well as seventy 9 bucks or fifteen thousand 3 forty seven annually so we can still perhaps do the Roth conversion we can have that dividend as well as interest and still certify for some kind of aid right here now we'' re checking out this is based off a silver strategy one of the most you need to pay is eight and also a half percent according to the law without financial help your plan would certainly have cost concerning 2 thousand dollars a month so you have various other information down below regarding bronze strategies gold prepares so this is something where you'' re mosting likely to need to locate a specialist that collaborates with these different wellness insurance plans yet actually you have to learn see to it that these plans are going to cover whatever requires that you may have there are specific restrictions that establish the optimum out of pocket costs this is not our location of expertise the health and wellness insurance Marketplace so you certainly intend to locate someone that can help you browse the selections that you have and see to it they fit you and your medical requirements at this phase of life however strictly from a financial perspective we see just how we'' re beginning to currently do planning where we'' re incorporating the various choices that you have to make where you take earnings from do you turn Social Safety and security on are we doing Roth conversions and also looking at this analysis to determine what your Magi is and currently an additional tool where we can go in as well as plug it in and also seek to see if we certify for a subsidy so allow'' s consider if we didn ' t do the Roth conversion so let'' s state even if we began Social Protection if it'' s been just a couple of months you do have the alternative of either putting on hold Social Safety or paying it back so we can in fact reverse this decision we have a pair of ways of doing that so let'' s state we look at every little thing as well as because social safety and security has a surefire boost to it each year that we delay it allow'' s state we decide you know what I such as that principle Troy I don'' t want to take Social Protection currently we begin to examine no social safety revenue therefore you understand what I have these cost savings where I put on'' t really require to pull earnings out and let ' s look at possibly refraining a Roth conversion simply to kind of see what that is still mosting likely to have the rewards since we have money spent and we put on'' t want to allow the the tax tail necessarily Wag the Pet dog meaning we require to generate income we have an investment strategy so we'' re simply gathering info so we come down right here as well as we see now our changed insurance adjuster gross earnings is twenty 3 thousand so we can go back and forth we can say what is the boost to the costs if we do a 60 or 70 or 80 000 conversion in any case we can check out that come back to the calculator it need to be quite comparable to what it remained in the start however just to show you twenty 3 thousand whatever else is the same we struck send 2051 back to twenty four thousand bucks a year so possibly we can do an additional Roth conversion so there'' s no real exact right solution below you can start to see now how it'' s kind of great since we still have this tax problem long term to where if we put on'' t address this and also especially right currently where we have a much larger chance to fill up these tax obligation buckets up due to the Trump tax obligation cuts which are vanishing in 2026 so it'' s an equilibrium right we have to make a few of these decisions however I just intended to kind of show you why step 4 of the retired life success plan is so vital is because these choices can assist place even more cash in your pocket today and also when we start to look at these choices I'' m constantly a large proponent of keeping even more cash in the pocket today since rmds put on'' t beginning on that particular retired life account till you'' re 73 potentially 75 depending on your age we have even more time to deal with that issue where this is an assurance where if we do these points let'' s claim take no cash out of the individual retirement account do not transform Social Safety and security on live off the non-qualified or non-ira counts if we can place two thousand bucks added monthly in your pocket today it'' s an assured win I like that I'' m aboard with it the 2nd component of medical care planning is the long-lasting treatment side of points a lot of of you have taken treatment of a moms and dad or you recognize a person that has or perhaps you'' re experiencing that now and you understand not just the monetary problem that that can develop yet likewise the emotional and time concern so we have to decide do we intend to self-insure do we want to acquire what'' s called a standard long-lasting care insurance plan or do we wish to take a look at some more long-term choices so when we'' ve done those initial 3 actions we can start to extrapolate out right into the future do a level of sensitivity analysis to see okay ideal instance situation most likely or or mean scenario and afterwards worst situation situation and see roughly just how much money that we are anticipated to have less so below we have the Genworth expense of treatment calculator so you can Google this it'' s simply generous price of care calculator enter your ZIP code take a look at the hourly day-to-day monthly prices we have a little slider where we can check into the future to see what the projected costs are these are based on median expense so not the most you can pay not the least yet right there you understand between in Houston presently for for residence health and wellness treatment forty five hundred a month is the average I moved this out 25 years it'' s estimated to be 9 500 each month now we have customers right currently that are investing twenty thousand dollars a month to deal with their parents for house healthcare most of you recognize the individual tale that I completed my grandparents this was practically twenty years ago I was ideal out of college I took three years to look after them due to the fact that my grandfather had two aortic aneurysms and also in country North Carolina they were being charged 40 000 monthly 2 registered nurses 12 hr changes 24 hr a day 40 Grand each month so these prices are throughout the board yet this is an useful calculator to type of allow you know what the mean remains in your particular location but please understand you might likewise invest a lot even more currently some people will need look after thirty days some people will certainly need look after a long time if it'' s something like Alzheimer'' s or dementia so you have to consider your individual situations however what I'' m attempting to access is we'' re just trying to make use of data to assist understand just how much we can possibly need to pay in the future if this sort of care is important to us because then we can work that right into the economic strategy once we'' ve gathered a few of this info and involved just how essential to intend for long-term care it is to you or your partner we can start to make use of the financial planning software application to truly check out what are a few of things that we'' re terrified of as well as among them for numerous clients is healthcare as well as lasting care prices so let'' s say one partner at age 80 needs treatment lasting for 3 years and it'' s ninety 2 thousand bucks a year as well as state the second partner after that requires treatment for two years beginning at 92.

however it'' s not substantial care but still inflation So based upon all the planning that we'' ve done earlier having this kind of treatment scenario for both spouses reduces a plan from a 99 probability of success to an 89 so in the conversation is are you comfy keeping that now for some plans it'' s mosting likely to reduce it a whole lot much more if we'' re actually checking out your personal circumstances the possible cost in your location so lasting care is the second step when it concerns Wellness Treatment planning the very first step for most of you when you'' re retiring we ' re going to knock that out in the first couple of months of you being a customer because it involves the earnings and also the overall tax prepare for the long-lasting treatment side of points normally we'' re going to have this conversation within the first one year unless you tell us that this is a priority and also we want to relocate it up in the timeline so in summary the initial part of medical care preparation is if you'' re retiring before 65 we have to establish where your income is going to come from because where we take income and also just how the money is spent establishes exactly how much tax you pay it additionally establishes what'' s called your modified adjusted gross earnings that Magi number figure out if you receive an aid to help reduce your medical insurance costs so the initial part is figuring all that out putting the items of the problem together the 2nd component is longer term Healthcare preparing lasting treatment so for several of you this might be very very beneficial details for others perhaps you make too much cash or you'' re past the age of 65 you put on'' t need to fret about the very first component in any case everyone'' s financial strategy is personalized as well as these are points that you need to be considering whenever you'' re structure your monetary prepare for retirement [ Music] thanks

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Five Important Steps to Planning a Secure Retirement

my grandparents marketed their home in business for a pair million dollars they were extremely straightforward people didn'' t have a load of financial savings prior to this but within five weeks of retirement my grandfather had two aortic aneurysms the next couple of years went to healthcare costs long-lasting treatment costs a decline in economic conditions triggered a few of the high rate of interest rate paying cars that they were counting on to go down the rates of interest so their revenue was greater than cut in half this experience led me to become a retirement coordinator someone concentrated on financial suggesting however with the specialty in the retirement Field I'' ve sat with thousands and thousands of family members throughout my profession which experience integrated with what occurred to my grandparents caused the production of what we call the retirement success strategy here at Oak Harvest Financial Team foreign success plan or RSP as we call it is an organized procedure that leads to a last retirement strategy that'' s personalized to your certain retirement requirements and worries it covers 5 essential areas which we'' re going to obtain into in today ' s video of what ' s vital to be successful in our point of view when it concerns retired life planning it'' s built by a group of consultants that you contend your disposal as well as operates in conjunction with the financial investment approach by your in-house investment team here at Oak Harvest Financial Team what this implies for you is that you have actually marked off the essential boxes that we'' ve discovered over our years of experience are most essential to retirement success and it'' s likewise a timeline for execution as well as a method to monitor progression so we can make modifications in actual time to ensure you'' re staying on the right track for your retired life one of the large Ideas to understand regarding retirement planning is that every solitary choice you make is adjoined when you take Social Security exactly how much you spend in retirement from which accounts you take out from all of these influence your account balances every one of these effect how much time your cash will last and also just how much revenue you'' ll need to invest these are the large inquiries that we have in retired life do I have enough for how long will certainly my cash last if something happens to me will my family members be fine how do I pay less tax every one of these points are adjoined so a great deal of times we see people come in for the very first time and they'' re one year two year three years right into retirement and also points are going swell as well as they feel like they'' re okay and also a great deal of the moments that is true but what'' s taking place is they ' re setting down a specific course every choice that you make sets you on a particular trajectory usually in the first pair years of retirement we wear'' t have adequate visibility into exactly how the choices we'' re making today are impacting the trajectory of our anticipated account equilibriums things often can feel like they'' re working out but we don'' t have that exposure to fairly see hey am I on the right path or might I be making better decisions that puts me onto a better trajectory let me reveal you what I mean international so we see below this is a plan as it currently stands is at 81 percent probability of success now 81 isn'' t a bad number can it be improved probably however we see in the starting years right here 2023 via 2025 all of these trajectories and we see the diffusion below they'' re all very carefully concentrated with each other so the very first two 3 4 5 years of retirement we do not understand which one that we'' re on as well as that can lead us right into a feeling of complacency or a false feeling of safety that states hey you understand what I'' m doing excellent I'' m doing wonderful I ' m on the appropriate path since I ' m 3 years right into retired life as well as I still have about the very same money that I started with well as you can see several of these paths eventually deviate into the red which is not excellent that implies you'' re lacking cash or you'' ve run out of cash and also others diverge right into a far more comfy and protected range right here we see 2.5 million 1.9 million 4.7 million these are all various possible paths that the choices you'' re making today and over the next numerous years might potentially put you on the purpose of the retired life success plan is to one determine that you are what'' s important to you and also how do we establish what success implies for you then we have a structure procedure that'' s based on your financial investment allowance creating earnings lowering taxes looking out for health and wellness care and afterwards estate intending the retirement success plan isn'' t simply a first plan that established it and neglect it it ' s a timeline for implementation of the crucial elements and also a procedure to continue to Monitor as well as make adjustments on the fly when essential as long as we have visibility into exactly how the choices we'' re making today are affecting our future protection what we find is you have a tendency to live a much more comfortable retired life which implies Comfort around the degree of revenue that you'' re receiving and just how much you'' re spending and also what we'' re doing from a tax viewpoint to make sure you wear'' t carry a load of risk and possibly pay way too much tax obligation down the roadway there are 5 crucial locations we really feel are necessary to have a strategy for leading right into retired life at retirement as well as after that post retired life that we remain to Screen and also change as needed display going into is an exceptionally essential part of the retirement success plan because once again we don'' t actually recognize where we ' re at on this trajectory in years one 2 three 4 or 5 it'' s concerning a partnership a partnership moving on that permits us to have presence into just how the choices we'' re production are affecting our trajectory as well as additionally allow us to change in real time when scenarios require now outside events like the supply market collapsing or the economic climate going right into the tank or inner decisions such as how much we'' re investing or if we intend to get that villa or perhaps we want a present to the children or grandkids these are all decisions that influence their trajectory that we'' re on so having that relationship and having that exposure is what enables us to be tranquil as well as recognize hey we can'do this or we can ' t do this or these are the parameters that we should operate in to see to it that we proceed on the course that we we really feel comfortable with step one of the rrsp is what we call the allowance this is an extremely vital action due to the fact that after we'' ve learned who you are just how you specify retirement success and also what your goal Czar we make a suggestion of just how you ought to spread your cash across different asset courses so assume stocks as well as other low-risk Stocks one means to think of the appropriation and why it'' s so vital is if you think concerning active ingredients in a recipe so if you have too much sugar or possibly too much salt you'' re not mosting likely to have something that'' s tasty that you neither any individual else really desires to consume but with the allowance in your retirement we'' re not discussing a negative pot roast that you can simply remodel you have lots of time possibly next weekend break we'' re speaking about your retirement and also with the wrong ingredients or the incorrect allocation you can perhaps run out of cash maybe you have to go back to work maybe you wear'' t have enough cash to aid spend for healthcare expenses for you or your spouse possibly there ' s not sufficient to take treatment of your surviving partner so this is a very crucial action in the process which'' s why it ' s step one the structure that we use to develop your allocation is what we call the core four so we have the Comfort pillar we have several streams of earnings we have the growth pillar as well as then we have the protection or alternative column some of our clients have money spread throughout every one of the core for and also for other customers it makes sense to simply have two or possibly 3 items of the core four however that'' s the framework that we utilize based on your objectives and your circumstances to construct out the appropriation for your retired life action two of the RSP is the earnings planning process so we intend to see multiple streams of income in retirement we'' d like to live off passion as high as feasible not get involved in that principle yet we also want to understand where our earnings is originating from is it coming from the retired life accounts is it coming from the non-retirement accounts because in retired life where you withdraw your income from figures out just how much tax you pay and additionally rather of having simply a static 4 percent guideline we wish to have a more Dynamic plan a strategy that adjusts our earnings either up or down based upon their trajectory of our strategy action three of the RSP is tax preparation so tax planning is an incredibly essential part of this general process but the reason it'' s step 3 is because if we don ' t recognize what the appropriation is or just how much income we'' re obtaining as well as when we'' re getting that revenue we can'' t potentially do a tax evaluation rather of informing you to go see your CPA to develop a tax obligation approach we develop that in-house as component of your tailored RSP here at Oak Harvest Financial Team now the factor we do that is since our company believe to genuinely be a fiduciary and also provide referrals and also guidance in your best rate of interest you need to check out tax obligations and the influence tax obligations have on the amount of income you in fact reach keep so a tax plan is an extremely critical part of the retirement success strategy step 4 of the process is Health and wellness Treatment intending so this is one location where my grandparents and their consultants stopped working to get the task done as well as this costs them well over a half a million dollars within the very first couple of years of retired life I put on'' t want that to happen to you so we'' ve constructed that in to the RSP if you retire prior to 65 we have to determine health insurance much of you have concerns about end of life treatment or later on in life care is long-term care a suitable remedy for you exactly how do we not have premiums that proceed to go up throughout retired life addressing the prospective prices of Health Care in retired life is an essential action since one blunder below can cause every little thing else to explode action 5 of the RSP is the estate planning side now a big mistake that we see clients make all the time is they go to their lawyer they obtain the estate files and after that they never ever inform us so what we'' ve done is we ' ve built this estate preparation right into the financial process so primarily your financial coordinator need to be the quarterback of this overall estate preparation procedure this method possessions that need to obtain retitled to either enter into trust fund or other entities we make certain that obtains done beneficiaries that need to be changed we make certain that obtains done but additionally having a discussion with you regarding the disposition of your estate we wear'' t desire your cash going to your children and afterwards fifty percent of that mosting likely to your youngsters'' s future ex-spouse so there'' s a great deal of facets Beyond just having a will certainly maybe a living trust fund and your medical regulations that we need to address and we construct that into the RSP those are the five steps of our retired life success plan that we tailor for you not only are these workable items that we feel can improve your general retirement giving much better satisfaction more visibility right into the future or openness as well as Quality around some of the things that are necessary in retirement it'' s also a timeline for execution of these certain items it'' s additionally a framework in a framework that allows us to continue to check your retired life to ensure that your strategy gets on the appropriate trajectory and also that you have an effective retirement we'' re always creating even more content to assist you go more comprehensive with retirement success strategy and also the general procedure to proceed that Trip you'' ll desire to click right below to find out even more about what the RSP implies for you and your family members [Music]

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