Good morning, happy Saturday. Welcome to On the Money with Certified Financial Group right here on News 96.5, WDBO. It is all part of our Ask the Experts weekend. Phone lines are open right now, 844-220-0965. Again, that’s 844-220-0965. Our text machine is also open, just text 21232. Try to keep them around 160 characters, that way we can make sure that we read your whole questions. But anyway, we are joined here as always by Joe Burt, the Oracle of Orlando, and Aaron Burt, certified financial planner. Gentlemen, how you doing.
Good morning Jim, how are you.
Good, good. Good to be here on a Saturday. I’m filling in for Kyle today, so I’m going to do my best. We’ve got a lot of fun —
We’ll carry you through.
Don’t worry, we’re going to make it. We’re going to get to the finish line together, we’re all in this, or land the plane, I always used to say when I host morning news. But anyway, so what do we got on the docket today.
Well, Aaron and I are here to talk about anything that might be on our listeners’ minds regarding their personal finances. As we say, we go through life trying some of this, trying some of that, wake up when we’re 55 years old, look across the kitchen table at Loretta and say honey, one of these days that paycheck’s going to stop, and how do we continue living the life that we’ve always thought about. We got the kids through school, we had the weddings, we bought the cars, we have the house. Now we’ve got to worry about that income that has to keep coming in when we get into our 60s, and 70s, and 80s. Those are the things that Aaron and I and the other 10 certified financial planner professionals at Certified Financial Group do for our clients day in and day out for a fee. But on Saturday morning, Aaron and I are here absolutely free. So if you have any questions regarding your personal finances as they revolve and also resolve about issues on stocks and bonds, things you might be thinking about your IRA, about a 401k question, about life insurance, about annuities, about reverse mortgages. All that and more, Aaron and I are here to take your calls. The good news for you, and we are live this morning, unlike the previous show we are totally live. So pick up the phone and dial these magic numbers.
That’s right, the number 844-220-0965. Again, that’s 844-220-0965. If you want to reach us on the text machine, that is 21232. Try to keep that around 160 characters. Again, we’ll get all your retirement questions happening right here on On the Money with Certified Financial Group. So I know one of the big stories for me this week, and Joe we actually talked about this on Thursday, but I do want to as the callers start to come in, I do want to pick your brain on this, is that just massive stock loss for Facebook. I mean, we’re talking about $120B, just one of the biggest single day losses in history. If you’re somebody who has a lot of Facebook stock, is the time — or potentially, is this the time to buy Facebook stock when it’s so low.
Well, it’s a lot better to buy today than it was on Wednesday. Yeah, it was a big drop. Earnings came out and the forecast was <Inaudible> going to have maybe a couple more quarters of poor earnings. Mark Zuckerberg lost about 1/5 of his net worth. You don’t lose 100M — 100B I should say, that’s 1/5 of your net worth.
That’s got to hurt.
Then anyway, yeah, it was a tough day, and for all the — Twitter’s taken a hit too. They’re looking at the numbers on Twitter, Twitter’s beginning to lose users. That whole sector is under investigation — not under investigation, scrutiny I should say. It was flying high for a long time and pretty good multiples on those stocks. People thought that was the new thing, and when you’re looking at advertising, that’s where the market is between Google and Facebook, Twitter’s doing some advertising. But that’s where the ad money has been going to a great degree. But a lot of advertisers today are giving that medium second thoughts.
So do you think that political scrutiny potentially, we talk about with Facebook for example the Cambridge Analytica thing. Twitter has been — reports of other things out there, back and forth about free speech and all that. Do you think that’s had a big factor to kind of play in as well, that people lost trust <Inaudible>
Well, I think that Cambridge Analytica back in March had a lot to do with it. People are becoming a little bit more suspect about the things that they put out on Facebook. Now that they’re — Facebook and the other social media sites are also — they’re changing their privacy policies, tightening things up. I mean, it’s a very, very, very powerful medium. That’s why they were so well thought of and made so much money, and had so many advertisers, simply because they could target markets, exactly who the average — I mean, that could be right on your phone, they know who you are, where you live, what you buy, what you drink, what you eat, where you go, who your friends are. You could really narrow it down as opposed to putting an ad in a newspaper or magazine and you don’t necessarily know who is going to pick it up or when. But the beauty of social media and being able to target ads like that is really where the mojo was, where their power is, and why advertisers flock to it and are willing to pay so much money. But now that they’re changing some of the things that they need to do because the political pressures, their revenues and earnings may not be what they used to be. So it’s a whole new world out there.
Got a question here on the text line. Again, if you want to chime in on that, it’s 21232. Try to keep them under 160 characters, that way we can read them all. Anyway, this question’s coming from Ed. He asked can you explain what a 403b is.
Sure Ed, a 403b is a retirement plan offered through an employer, but typically the employer is going to be a not for profit or a school system. So schools offer 403bs, a lot of churches offer 403bs. You’ll also see 403bs in hospitals. Usually a 403b operates exactly like a 401k at your employer, it just has different testing or regulatory restrictions around it versus a 401k. 403bs are usually a little bit not subject to what’s called ERISA, which is the law surrounding how 401ks must be administered. So 403bs typically aren’t ERISA plans. But that doesn’t — from a participant perspective, it really doesn’t have an impact on you, that’s more for your employer to deal with. But it’s going to operate just like a 401k. You still that same earnings limits or the same limitations, 18,500 to contribute to it if you’re under the age of 50. You get another 6,000 if you’re over the age of 50. The money has to stay in the plan. You can take loans against it. Basically operates just like a 401k. So think 401k, 403b from a participant perspective, basically the same thing.
And those numbers, 401k, 403b, 457, all those numbers refer to a section of the Internal Revenue Code. That’s where it comes from. It’s not some congressman’s apartment in Washington, it’s what that 401a, 401k, 403b is, that’s what those numbers relate to. They’re a section of the tax code. People wonder where those numbers come from, that’s exactly where it comes from.
I know you talked about the similarities a little bit just there with the 403b and the 401k. Are there any particular advantages to either one.
No, they’re pretty much — they operate the same, it’s just who you work for. If you work for a corporation, you’re generally going to have a 401k. If you work, as Aaron said, for a not for profit, you’re going to have a 403b. But from a participant standpoint, they’re pretty much the same. 403b does not have profit-sharing because my definition a not for profit doesn’t have profits. In a 401k, you can have a profit-sharing component that will be added on to any contributions that the employer might make to your 401k. So there’s a distinction there.
You’re listening to On the Money right now with Certified Financial Group. Again, we are taking your phone calls. We are live today. 844-220-0965 is the number. Again, hit us on the text machine as well, 21232. Get your question on the air just like Ed did. We’re talking today how to avoid screwing up your retirement. There’s a whole lot of tips. I guess Aaron, you’re the one who told me about this topic. I guess what’s one thing that comes to mind right away, what’s the easiest thing to do <Inaudible> retire.
Well, what we see a lot of times, and we were talking about 401ks, we go out and do 401k enrollments because we also are the advisors on 401k plans. So we’ll go out and talk to participants at different companies. A lot of times their approach to retirement is the ostrich approach. They just stick their head in the sand and think it’s never going to happen to them. So there are some — unfortunately, there are some realities about retirement that people need to understand. The thing is that the younger you are, and we always try to get this point across: the younger you are, it’s so much easier to retire starting to contribute money when you’re younger. If you just start putting away a little bit of money now, the compounding effect of that is huge compared to trying to start when you’re 55 years old and the kids are out of college, and now you think it’s time to start getting serious about retirement. So, some of the realities that we came across, came across this article about the realities — the uncomfortable realities of retirement. Really, the first one is that we’re all going to do it, and we’re all going to live to retirement age. So the stats right now is that if you’re 20 years old today, 85% of 20 year-olds are going to live to be at least 65. So you’ve got to think that you’re going to at least hit retirement age, okay. So most people are going to approach that retirement age and be eligible or be ready to retire. The other thing is that it isn’t optional. Some people think I’m going to work all the way through retirement, I’m going to keep working. I’m going to work until I die. Well, your boss may have different ideas, so it’s not necessarily up to you.
And your body might have different ideas as well.
That’s right, your body — you may not be able to. You may become disabled, you may get hurt. You may not be able to get out of bed. I mean, you may not be able to keep working until your life ends. So, eventually at some point you are going to have to stop working and rely on some of the money that you hopefully have been saving up. The other thing is you can’t pay for retirement out of current income. Unlike some expenses like college, some people think well I’ll just keep working, I’m going to pay for college out of current income, or I’m going to pay for my car that I have out of current income. When you stop working, there is no current income. So in retirement, you have to have a nest egg. So just for an example, we always use the rule of thumb, 4% withdrawal rate for living in retirement to never eat up your nest egg. So for every $100,000, you have to have $100,000 for every $4,000 of income that you want to have. So basically, right —
Yeah, you’ve got it, okay.
So, most people need to have at least saved up — I’d say the number right now has always been $1M. Even for most people, $1M saved up in a retirement plan isn’t enough money for them to be able to continue their lifestyle through retirement.
Based on that math, $1M would provide you $40,000 of income.
Right.
Which is not a lot of money.
Not a lot of money.
And today it’s not a lot of money, and 25, 30 years from now, it’s going to be even less money. But as you said, the idea is to start young. Unfortunately, we don’t realize this stuff until we’re 55 years old and look across the table to Loretta and say Loretta, we should have started earlier. But go ahead with the rest of your stuff.
The last one is you can’t afford to not save for retirement. Because like we just said, when the paychecks stop, the only money you’re going to have is maybe Social Security.
Well, you’ll have Social Security.
Maybe. You’ll have Social Security.
You’ll have Social Security, and maybe less than what you thought. You may have to wait longer to get it, but Social Security will always be here.
Okay. You’ll have Social Security. Then whatever you’ve been able to save through your working years for retirement. So the key here is that you start early, save as much as you can, and don’t try to wait until you’re 55, 65 years old to start saving for retirement and start getting serious about it. Obviously the younger you are, the easier it is to do. But we do see people come in, they’re in their 60s, and they’re just trying to — I mean, they’ve been throwing some money to their 401k, don’t really have a coordinated plan. Those people for the most part, we’re able to save them and get them on the right road for retirement. But the earlier you come in, the easier it is really to do some long-term financial planning.
But the most important thing that you need to know is what you don’t know. What you don’t want to have happen is you’re getting ready for retirement and you say jeez, I wish I’d have known this 5 or 10 years ago. To give you an example, Aaron and I worked on a case last week, a couple, she was a nurse as I recall and he was about to retire. They wanted to know if she could retire as well, and what would the difference be if she worked just one more year. We showed them if she worked one more year, that extra year of earnings for you. She wasn’t making six figures as I recall. That extra year of earnings for her provided them another $400,000 at her life expectancy. What we were able to show them is by not taking money from the cookie jar right away, because she’s going to work another year, and that other year of earnings added to her 401k, and added to their savings, that combined provided another $400,000 of cushion that theoretically could be left at her life expectancy. So that gave her a whole different perspective when she gets up in the morning of that going to work and really what that means. This is what people need to know. The toughest cases that Aaron and I work on are people that have already made their retirement decision, they haven’t sought help from a certified financial planner. Maybe they went to one of these free seminars or went online and tried to do their own retirement plan. They come into see us five or six years into retirement for the first time, and the wheels are coming off. The reason the wheels are coming off is because they haven’t done an in-depth analysis of really what it’s going to take for them to maintain their lifestyle. Those are the toughest cases. We’ve got to give them unfortunately some bad news sometimes. We don’t pull any punches. Like your doctor, we will tell you exactly what you need to do. So my recommendation for folks is if you are, as Aaron said, planning on retirement, you definitely need to seek some help, have it done. And have it done by somebody that will charge you a fee for it, not somebody that’s going to do it for free. They want to sell you something when that happens. Somebody that’s going to give you their time, their expertise, their knowledge, and to really do a details report for you to show you where you are today and what you need to do so you don’t look back 5 or 10 years from now and get it done. That’s what we do at Certified Financial Group as certified financial planners. That’s what I’ve done for nearly 40 years, and as well the other planners with me as well. They’re all very, very confident. I encourage you to give us a call. In fact, you could find out more about us by going to our website, that’s financialgroup.com, financialgroup.com. You can click on our website, learn all about us, and how we might be different from a lot of the other folks out there that call themselves financial planners. In fact, this is the only radio show in central Florida that’s hosted exclusively by certified financial planner professionals.
That’s right, and we are preventing the wheels from coming off right here on On the Money with Certified Financial Group, planning tomorrow —
Today.
With Certified Financial Group. It’s all part of our Ask the Experts weekend. Again, phone lines are open, 844-220-0965. Give us a call. The text machine open as well, 21232. Keep them under 160 characters. Dave Wall’s going to have the big three, then we’ll be back with more On the Money right here on News 96.5, WDBO. And welcome back to On the Money with Certified Financial Group right here on News 96.5, WDBO. It’s all part of our Ask the Experts weekend, Joe Burt, the Oracle of Orlando and Aaron Burt, certified financial planners are here taking your questions. Phone number is 844-220-0965. Again that’s 844-220-0965. We actually want to go right to the phones right now. Sue is calling in from Winter Springs. She’s got a question about a traditional IRA. Sue, how are you.
Good morning, Sue.
Good morning, thank you for the call.
Sure, how can we help you.
I have traditional IRAs and they’re a mixture of pre and after-tax money. The form 8606 is always filed. My question is when we’re dead and gone and my son inherits this IRA, how does he make sure that he doesn’t pay tax again on that after-tax money.
Well, your custodian will know what is pre-tax and what’s after-tax. So, when it comes time to withdraw it, you’ll be able to withdraw that after-tax money on a tax-free basis. But not the earnings on that. You know, I think that’s the way it’s going to work. I’ve never had that question posed and I’m shooting from the hip here, to be honest with you. But I would guess that is what would happen, unless he has — unless he wants to do a stretch. Then if he wanted to do a stretch, then he’d probably have to continue with the 8606.
Yeah, I think so too.
Right, okay.
Now that I think about it, I’m going to retract what I said just a few minutes ago. He would probably have to continue doing the 8606. For our listeners that might not be familiar with that form, it’s a way for you and the government to keep track of what is pre-tax, what’s after-tax, and what the tax deferred earnings have been on the dollars going into the account.
So it would be the accountant, your tax person, not the brokerage firm that would do that.
More than likely yes, because he’ll have the discretion as to what to draw out and where to draw those funds from. He’ll be required to do required minimum distributions based on his life expectancy.
Right, so when they figure that out, you’ve got to figure out what is pre-tax and what is after-tax.
Right, I think they’ll have to continue to do the percentage calculation to determine what’s going to be taxable and what’s going to be not taxable.
So your tax accountant would have to do that.
Yeah, that would probably make life easier.
Okay, well thank you very much.
That’s a great question.
I appreciate the call. We’ve never heard that question before, but I’m pretty sure that that’s how it’d work. Thank you again.
Alright, and of course if you want to call into the show here on On the Money with Certified Financial Group, the number is 844-220-0965. Again that is 844-220-0965. And our text machine is open, 21232. We’ve got a couple of questions there that we’re going to get back to in a bit. I’m Kevin Rafews <?>, we are planning tomorrow —
Today.
With Certified Financial Group. Taking a quick news break and we’ll be back with more On the Money here on News 96.5, WDBO. Welcome back to On the Money with Certified Financial Group right here on News 96.5, WDBO. It’s all part of our Ask the Experts weekend. I’m Kevin Rafews, pinch hitting in hosting duties today. Call us now, the number is 844-220-0965. Again that is 844-220-0965. Text machine also open at 21232, try to keep those under 160 characters. I’m here with Joe Burt, the Oracle of Orlando and Aaron Burt, certified financial planner. Guys, we’re live on Facebook too right now.
Yeah we are, tell them how to get there, Aaron.
You can go to facebook.com and search for Certified Financial Group, or actually go directly to our link, facebook.com/certifiedfinancia
That’s right, gig out all that great advice on a Saturday morning.
That’s what we’re doing.
With that, let’s go right to the phone lines. We’ve got George in Orlando calling in right now. George, good morning, how are you.
Good morning, George.
Good morning, pretty good, thank you.
What’s up.
I’m working on a will for me. I want to know the executor whenever I go, what does she do with that will. Where does she present it, etc.
Well a will — first of all, George, let me preface everything by saying that Aaron and I are not attorneys, but let me tell you what And Erin and I are not attorneys but let me tell you what I do know about your question is that a will is nothing more than the instructions to the probate judge. The will needs to be probated, and that judge will be sure that the executor/executrix that you’ve appointed will carry out your wishes, so the will goes through probate and the executor has to follow the instructions that are laid out in the will and the role of the probate judge is to be sure that those are followed.
But the will only comes into effect if you have assets that need to go through probate, so that goes into the conversation of properly titling your assets to make sure that they don’t go into your estate when you pass away but rather bypass probate and go directly to the beneficiaries that you want them to go to.
<Inaudible> whenever the will gets drawn, does the <Inaudible> go to the courthouse automatically, or got to hand carry it in there?
Nope, yes, yes. Your attorney should hang onto one and you should have one and somebody should know where when you pass on where that will is because what you don’t want to do is have the will show up 10 years later in the bottom of the drawer after you’re gone and say oh my gosh we were supposed to get the house.
Where do they take it? To the courthouse?
Yes, take it to your attorney, your attorney will walk through the probate or you can carry it in and they will walk you through the process but it’s better to use an attorney. Tom Olsen would probably be better prepared to answer that question for you in detail. What time is Tom on? Tom’s on I think at like 1:00 here on WDBO, but that’s the process you need to go through. But getting back to what Erin said, you know the only thing that goes through probate, the only thing that goes through the will are those things in your name alone, things that you own jointly, joint tenants whose right of survivorship as most married couples have their assets will automatically pass to the survivor. That will not go through probate. Your life insurance or even beneficiary name that doesn’t go through probate, your IRA, your 401(k), your 403(b), your 457, your annuity where you have beneficiaries named as a go through probate. If you have a bank account that you set up with someone else you don’t want to put anybody else’s name on the account but you could set it up as what we call POD, Pay on Death, and so it’s your name, George, and then POD to John Smith or POD to Mary whatever your name <Inaudible> last name is. That would automatically then pass to her without going through probate but don’t put her name on your bank account so there’s a way to avoid probate. The only thing that has to go through probate are those things that remaining in your name alone and that’s the end of your cars and jewelry and that kind of stuff.
And one mistake we see a lot of times is people think that because they have a will that they should leave their 401(k), their IRAs and name their estate or name their will as the beneficiary of that account and that’s an automatic ticket to go to the probate court and incur expenses that are unnecessary so really the best way is to try to avoid probate as much as possible, make sure all your assets are properly titled and then that will is basically there to clean up any loose ends and hopefully they’re small when the time comes.
These are some of the things that we do as certified financial planners when we open up accounts for clients, we discuss it in detail as to how these assets should be transferred to minimize those transfer costs and what you don’t want to do is necessarily as Erin said is name your estate as the beneficiary of your IRA or 401(k). You want to name those specific beneficiaries, oftentimes so they can continue to do the stretch and that’s why you don’t have to pay taxes in a lump sum when you pass on so that’s the way to do it, George. I hope that answered your questions.
Good afternoon, a quick one?
Of course.
What about the deed to the house.
What about the deed?
Well what happens to the deed?
The house is in your name and you named somebody in your will to get the house and the house will then be transferred to the survivor.
Yeah but where do you go through all that stuff, I mean —
That’s going to be done through the courthouse.
Oh really.
Yes and that’s why you want to have an attorney involved to be sure that this — You can do it yourself, but for those who —
I got an attorney <Inaudible>
Well there you go. That makes life easy.
Yeah.
Yeah.
<Inaudible> do have to take the certificate up there to the biostatistics and all that?
Well yeah all that has to be — that’s part of the probate process is to <Inaudible> they got to have a death certificate and they got to be sure that you’re gone and then the survivor shows up and that’s the way it is and okay.
All right, George, thanks for the call!
Thank you George and of course if you have a question for Tom Olsen that is on from 11:00 to noon every Saturday here on News 96.5 WDBO so please stay tuned for that coming up but now we want to go back to the text machine, which is open, 21232, again that’s 21232. Let us know text in you can give us your questions there, just try to keep it under 160 characters and we’ve got one. This is actually a two-parter. It says if I have $425,000 in a Roth and 401(k) how much can I withdrawal yearly to last over 40 years and how much on bonds?
And how much on bonds?
I’m not sure about that last part of the question.
We were okay until we got to how much on bonds. So yeah four and a quarter but you’re looking at probably about $18,000 is the rule of thumb, it’s for roughly 4%, little under $18,000 per year.
Now the Roth is tax free so obviously it’s not taxable as income so maybe if you take out a little bit more but and that goes to the point of I mean you’re going to have $17,000 6 — $17,000 to $18,000 of income coming from those 401(k)s in the Roth and then Social Security could be what, another $20,000. So you’re looking at $37,000, $40,000 something like that of income in retirement if you have $425,000 saved up so just —
And that’s a very very rough rule of thumb. This is where planning comes in and gets involved. What you want to do is get that money growing for you at a rate faster than you’re withdrawing it and hopefully get you a little bit more income than that 4% will but there’s no guarantees there.
Well and the most successful plans that we run are the people that take out less than 4% and so really it’s a function of how much money you need to take in retirement versus how much money you can take in retirement so that’s part of the financial planning process and if you only need to take 2% your money’s going to last you a lot longer and you don’t have to invest it as aggressively as if you wanted to take 4% so really it’s more of a function of what you need, versus how much can you take and people always say I want to make as much money as possible but at what risk are you trying to make as much money as possible. When we do our planning process we figure out what you need to continue living your lifestyle using reasonable assumptions and apply the most conservative rate of return against that to make sure you have the money in retirement to last through those 40 years.
We do what’s called a Monte Carlo simulation and that’s exactly as it sounds, Monte Carlo which was a detailed analysis, we run 10,000 different simulations firstly with computers, we can do that with ease but it looks like our very best case and the very worst case and then stress test your plan to look at probability if you’re not running out of money when you’re 90 years old. So that’s all part of what we do as certified financial planners. It’s a lot more than just selling you something because we don’t sell you anything when we do financial planning. We do it for a fee and this is what we do at the Certified Financial Group. If you want more information about us you can go to our website, that’s financialgroup.com, financialgroup.com, and you get some information about the upcoming workshops. Erin, what do we got going on there?
Yeah so on our website at the top of the screen we have our workshop and events tab and underneath that tab are our upcoming workshops and the one coming up soon is August 25, health care options in retirement. This is a very popular workshop. My guess is it’s probably full but you can get on the waiting list by going to our website and clicking on that tab and getting more information. That’s again August 25 from 9:00 to 11:00 in our office in Altamont Springs, right off of I-4, Douglas Avenue. The next one coming up after that is September 18 or September 8, again from 9:00 to 11:00. This is the financial basics for life, strategies for success, again hosted by Gary Aveley, and then in October we have another countdown to retirement and that’s October 6, so those are the next three workshops coming up. You can get more information by going to our website, financialgroup.com, at the top of the screen click on the workshop and events tab and you can get some more information about the upcoming workshops so that’s how we do it. And we got another question here on the text line coming in now. Again that’s 21232 if you want to weigh in. This question: I am 31, my wife and I make a combined $150,000 a year. We have about $200,000 in the bank and no debt. What’s my best investment the money is just sitting there.
Ooo. Your best investment is to pay a certified financial planner a modest fee to figure out what you need to do and then you take it from there. There is no one perfect investment. Investments should be diversified. When we look at growth, people need growth, they need income the way we do that is we use no load, no commission, no transactions to be mutual funds and we built portfolios to make our clients’ long-term needs but what you want to do as Erin said just a few seconds ago is you want to have your money invested as conservatively as possible to still give you a high probability of not running out of money when you’re 95 years old. Unfortunately most people when they look at investing they’re trying to get high returns, chasing their tail, making mistakes or in your particular case you’re too conservative. You have your money sitting in the bank and frankly it’s rotting there. By the time you’re done paying taxes on the little bit of earnings that you have in inflation you’re actually going backwards every year. You may have the same amount of dollars or a few more but in terms of purchasing power you are in fact going backwards so the best investment you can make is to call a certified financial planner, have him or her design a specific plan for you for a fee. Don’t go to somebody that’s going to say I’m going to do this for nothing because they want to sell you something. Have somebody that’s going to invest their time and their effort in designing something for you that’ll work and then that’ll tell you what you need to do, so I wish I could tell you there’s one rule of thumb that just pop your money here and I guarantee you if you watch enough television or listen to radio enough there’s somebody out there that will sell you something that wants to tell you this is the absolute end all be all. The one that really drives me crazy is the one that convinces you that you shouldn’t put your money in your IRA or 401(k).
Yeah they want you to buy whole life insurance.
Yeah right. Yes.
Anything else, other than trying to get that magic wand, which we all could do that.
There is no magic wand.
That’s right, got to remember that. Another question here on the text line how was Social Security income calculated?
Well Social Security is actually based off of your earnings so the higher earnings that the maximum <Inaudible> right now 119,000 I think is the maximum or close to? So if you’re making $119,000 that’s the maximum Social Security tax, that’s the maximum so Social Security is based off of how much you earn if you are making 119,000 that’s the maximum that you can earn for the Social Security calculation that’s based off your highest 35 years of earnings so at the end of the day what they do is they take your highest 35 years, index it back up to current levels and then run a very complicated calculation to figure out what your income is going to be in Social Security. So basically what you need to know is the more money you earn the more you’re going to get and the longer you work the more money you’re going to get, and you can actually go to the Social Security website at ssa.gov/estimator and you can go in there and plug in your information. They actually know your earnings history, and then you can play some what if games with earnings to see how long you need to work to get a certain amount of money and what sort of earnings you need to get in order to get a certain amount of money out of the Social Security so the Social Security website’s actually pretty good. ssa.gov/estimator would be the way to go get an estimate of your Social Security benefit.
Yeah certainly a super useful tool but we do got to take a break right now, get into some more news. Dave Wahl is going to have the three big things you need to know coming up. You’re listening to On the Money with the Certified Financial Group right here on 96.5 WDBO. Again, we are live. Give us a call 844-220-0965. Again, that’s 844-220-0965. Text machine also open at 21232. Text us in your questions. We are planning tomorrow —
Today!
With Certified Financial Group, right here on News 96.5, WDBO.
Big girls don’t cry!
And welcome back to On the Money with Certified Financial Group. I’m Kevin Raith who’s filling in for Kyle this weekend. Right here on News 96.5 WDBO phone lines are still open 844-220-0965. Again that’s 844-220-0965. Text open as well, 21232, we’re talking with Joe Burt, the Oracle of Orlando, and Erin Burt, Certified Financial Planner, and we got a couple of questions here on the text line that we want to sneak in before we have to go. This first one, I have $600,000 in a 401(k) and 400,000 in the annuity that I would like to take, or 400,000 in the annuity, excuse me, and I would like to take $100,000 and pay off my mortgage. Is that financially sound? Well it depends, just like everything that we talked about. And the reason it depends is because — it, well, first of all, you wouldn’t want to take $600,000 — wouldn’t want to take $100,000 out of your 401(k) in order to pay off a mortgage because that $100,000 will be taxable to you and would be added to your income and it’s going to cost you anywhere from 15% to 25%, 30% to take that money out and pay taxes on it. You’re not going to want to take it out of your 401(k). Out of the annuity, possibly depending on what your basis in the annuity is, what sort of benefit that you have, if you have living benefits on it, are you going to screw up your living benefits by taking out $100,000 out of it, is it an IRA annuity, is it a after tax. Basically if your basis is low in the annuity everything that you take out until you hit your basis is going to be taxable to you as income too so you’re in the same situation as the 401(k). Also it’s going to depend on what the interest rate is on the mortgage and how long you’ve been holding it. If you’re in a low interest rate mortgage taking money out and paying taxes on it probably isn’t a good idea to pay that mortgage off and if you’re on the tail end of the mortgage you probably already paid all the interest so there’s a lot of questions that go into that, but we get that question a lot. From a financial perspective it usually doesn’t make sense to take a large lump sum out of a retirement plan to pay off a mortgage. However with that being said a lot of people from a mental perspective think or want to have that sort of peace of mind off their shoulders heading into retirement they want to have the mortgage paid off. And we understand that as well, so it’s kind of a — it’s a financial versus a mental decision that you kind of have to be able to make for yourself but from a financial perspective it usually doesn’t make sense to do that.
And those are some of the things that we address when we do financial planning for clients because it’s a very common question and we have the ability to play what if scenarios right there before your very eyes so we’ll look at okay this is what happens if I pay off the mortgage. We plug in the numbers and this is what happens if I don’t pay off the mortgage and then we just continue to draw from my 401(k) or annuity and pay as I go and we show you the tax consequences and what it means to you in your retirement years. That’s one of the benefits of doing planning. There is no one rule one size fits all when it comes to those kinds of questions but these are the kinds of questions that people oftentimes make the wrong decision on and they like I say they look back five or 10 years to say gee I wish I’d have known that so the most important thing that you can do as you enter or near those retirement years or if you’re in the retirement years is to meet with the certified financial planner professional, somebody who’s going to do this work for you for a fee, somebody that’s going to look at your situation and design something specifically for you to answer those questions so when you put your head on the pillow at night you can rest easy knowing you know where you are and what you need to do, as opposed to guessing. There’s nothing worse than living in anxiety and fear. One of the things that I <Inaudible> dawned on me. You know that guy that sells the MyPillow? You’ve seen those ads? You’ve seen those ads, Kevin?
Oh yeah.
The guy’s all over the place and all these ads today are geared toward the baby boomers because we can’t sleep for whatever reason. I’m serious, it’s just dawned on me, and I think one of the reasons that my generation is having difficulty sleeping is anxiety and it’s anxiety about those coming years. It’s anxiety about what we’re going to do as we approach or in those retirement years and we try to sleep at night and we wake up and our mind is swirling and we’ve got all these personal issues, financial issues running through our head, the most important thing you can do is get peace of mind. Meet with a certified financial planning professional, somebody that’s going to do this for a fee for you and not try to sell you something to answer those questions that they don’t teach us about how to answer him when we go to school so that’s my pitch for this morning.
We want you to sleep well at night. That’s always the name of the game here on News 96.5 WDBO.
You have to buy one of those MyPillows. But I did buy one of those MyPillows. They’re not bad.
I hear they’re amazing. My mom got one too. She loves it. I’m telling you —
The ads drive me crazy. If I see that guy one more time —
All the time, he’s all over, he advertises on this station, there is just no way around it but thank you everyone for listening to this edition of On the Money with the Certified Financial Group right here on News 96.5 WDBO. You can always listen to the guys, Joe Burt, the Oracle of Orlando and Erin Burt, certified financial planner every single Saturday from 9:00 to 10:00 right here on News 96.5 WDBO. We are always planning tomorrow —
Today!
With Certified Financial Group right here on News 96.5 WDBO.