Can You Afford to Retire Today? Income, Taxes & the Real Retirement Test

5.9.25: Audio automatically transcribed by Sonix

5.9.25: this mp3 audio file was automatically transcribed by Sonix with the best speech-to-text algorithms. This transcript may contain errors.

Speaker1:
Any examples used are for illustrative purposes only, and do not take into account your particular investment objectives, financial situation or needs and may not be suitable for all investors. It is not intended to predict the performance of any specific investment, and is not a solicitation or recommendation of any investment strategy.

Speaker2:
Welcome to Money Matters with Mike, with your host, Mike Zeno. Mike works hard each day to educate Americans like you on how to reach the financial freedom they've worked so hard for. And he can help you too. So now let's start the show. Here's Mike Zeno.

Speaker3:
What's up people? Welcome to the show where we dive into the strategies, the insights and tools you need in order to secure a confident and stress free financial future. I'm Mike Zeno, and my mission is to help you protect your nest egg, outsmart retirement risks, and live the life that you've worked so hard to achieve. Whether you're nearing retirement or already enjoying it, we're here to guide you along every step of the way. And boy, do we have a ton of great information for you today. On today's show, we're going to discuss planning for your income and taxes during retirement, and we'll show you how to find out if you can retire today. As always, I have the distinct honor and privilege of being joined by the one and only my co-host and producer extraordinaire, Mr. Matt McClure. Matthew, how are you doing today, sir?

Speaker1:
I'm great. Mike I think we've got just such a great show lined up for folks today because we're going to talk about so many important things. Um, income super important during retirement, taxes. Not so fun. Yeah, taxes not so fun. Uh, but you got to think about them and you got to plan for them so that it's less of a headache when you get into retirement. So I mean, it's just a lot of really important stuff, but, um. Yeah. No, I hope that you're, uh, you're doing well. And, uh, I know you've been staying busy. This, uh, you know, around this time, because things have been kind of crazy.

Speaker3:
Yeah, things are, uh, a little tumultuous, and a lot of people are kind of freaking out because they don't know what to think about, you know, the activity that's happened in the markets and how to, you know, they're concerned about making sure that they're not losing money going into retirement. And, um, biggest concern is outliving their money, right. They fear that more than death. So yes, it has been a very, very busy time. But one thing that I'm able to do for my clients is just give them the peace of mind knowing that, uh, they have a plan that is fully in place to protect them across all of those risks.

Speaker1:
Yeah. That's right. And those are the things that, uh, many of them are going to go through today and they're so, so important. And another important thing for us to do is to just say thank you, the listeners, because, you know, without you, as Mike always says, we would not have a show at all. So really appreciate it. Whether you're listening on the radio in the Carolinas or if you are listening via the podcast, wherever you might be, really do appreciate it. And, um, also, you know, if you don't even know if you're listening on the radio, maybe, for example, and you didn't even know that there was a podcast out there. Yeah. All, you know, three plus years of the show are on, um, each and every episode on the podcast feed. So go and subscribe. You can go to Apple Podcasts, Spotify, iHeart, uh, audible, Amazon, any of the big ones there, any of the little ones that I didn't mention either. Wherever you get your podcasts, you can find Money Matters with Mike. Really love it. If you would subscribe there, leave us a nice, uh, positive rating. Um, you can also go to Money Matters with.com. That's Money Matters with Mike comm, uh, where you can find all the past episodes as well and a lot of other great information, as well as a way to reach out to Mike for a free financial consultation. We'll talk more about that as time goes along here today. Um, but you can also go to YouTube. You can go to Facebook, you can go to, uh, you know, just all over the place, basically just go somewhere, search for Money Matters with Mike, and you'll find this pretty much right, Mike?

Speaker3:
Absolutely. I mean, one of the one of the biggest platforms that we share our information, uh, or two of them, I should say, is Facebook and YouTube. Right? So if you're able to see one of our short videos and you find value in that, share it with all your friends, they might pick up something that can drastically change the course of their financial future. And so the more you share, the more people we are able to help. And we can even help you with retirement planning, with risk management, with estate planning, and a whole lot more. Because building sound financial plans for our listeners is what we love to do. And like Matt said, all you have to do is go to the web at Money Matters with Mike comm, or just simply pick up a phone and give me a shout. (704) 560-1573.

Speaker1:
That's right. Easy as that. And uh, as far as what's coming up here on today's show, a lot of great stuff to get to. Of course we're going to talk we're going to talk tax plan I almost said talk turkey now. We're going to talk tax planning in just a little bit and preventing that big retirement tax bomb that may be waiting for you in your retirement years. Um, that's something that you want to diffuse. Now, also, be proactive and not reactive about your retirement plan and how to improve your cash flow and budget. All of that is coming up here on the show over this next half hour. But first, let's get some inspiration for this conversation, shall we? We'll do that with our quote of the week.

Speaker4:
And now for some financial wisdom. It's time for the quote of the week.

Speaker1:
And this week's quote comes from the, uh, legend. Really, uh, the now late legend. Unfortunately, George Foreman, who said this, the question isn't at what age I want to retire, it's at what income. I mean, it's it's good, right? Like, it's I didn't necessarily expect a quote like this from George Foreman, but it's great because it goes falls right in line with what we try to hammer home all the time is that retirement really is all about income.

Speaker3:
Yeah. And I think if you go back and think about George Foreman, right. You had his boxing career, which was legendary. You had the George Foreman Grill. I remember he used to do Meineke commercials where I'm not gonna pay a lot for this muffler. Yeah. And, uh, you know, it was. I think he really drives home a vital truth about retirement planning. And that retirement is not about how old you are. It's about whether or not you have the income to be able to maintain your lifestyle without working. And that mindset reframes retirement from being a date on the calendar to being a financial destination.

Speaker2:
Hungry for something to chew on? Here's some Meat on the Bone.

Speaker3:
Age, after all, is just a number, while income is the fuel that determines how far and how well you will go into retirement. So what it means in terms of retirement planning is that you should focus on income and not a birthday. Okay, you can't retire safely at age 62 or 65, or even age 70 unless you've built a sustainable income stream and everybody's retirement age is personal. Some people can retire at 55 because their income plan supports it, and others might have to work well into their 70s not because of age, but because there's an income gap that exists. Right? There's more month than money if they stop working. It's all about replacing your paycheck. Social security, pensions, Investments, rental income, annuities, whatever your sources. If they don't meet your income needs, guess what? You're not ready.

Speaker1:
I mean, that's just plain and simple as that. It's you know, you got to have more coming in than going out. And you've got to make sure, especially in retirement, that you're going to actually be able not only enough to meet your needs this month or next month, but for the rest of your retirement, the rest of your life.

Speaker3:
Absolutely. I'll give you a couple examples. Let's just take, uh, you know, and we'll change the names to protect the innocent. But Linda and Mark, who are both age 65, Linda has $1.2 million in savings. She has no debt, and she receives about $2,000 a month from Social Security. And she uses an annuity to generate another $3,000 a month that is guaranteed for the rest of her life. Well, she'll have a total income each and every single month of $5,000, and that is enough for to be able to sustain her lifestyle. Okay, she's going to retire at with confidence at age 65. While Mark on the other hand, he has $400,000 in savings. He's going to draw $2,200 a month in Social Security, but he doesn't have any pension. He doesn't have any other guaranteed income. And so he has a guarantee or, excuse me, an income gap of $1,500 a month based on his lifestyle, which means there's $1,500 more money every single month than he's bringing home. Well, guess what? Mark cannot afford to retire at age 65. Not because of his age, but because his income isn't there. So that's one example. Two an example. Another example is somebody retiring early because the income works. So let's look at Carlos. He's 58 years old. He sold a business and invested wisely. And his portfolio is structured to generate $7,000 a month in diversified income streams. His expenses are only $5,500 a month, and he has strong health care coverage. So despite being younger than the traditional retirement age, Carlos retires early because his income exceeds his needs. And so I think the key takeaway from Foreman's quote cuts through all the noise. You retire when your income says you can, not when your age says you should. Right.

Speaker1:
It's absolutely right. I mean, yeah, you can have this goal of a date on the calendar and you can have that marked on the on the cat. But you know what? If you are not ready, if you're not prepared at that date, you might not be the right time for you. It probably isn't the right time for you. You got to either delay that or if you're, you know, like that last example that you shared there, um, and you're ready early. Great. If you've got the wherewithal and the circumstances in your life that you can call it quits earlier and then go and do all the things that you want to do. Wonderful. I mean, you know, go go on a cruise every other week or, you know, do whatever you want to do. Sit, sip a mint julep on the front porch. You know.

Speaker3:
You say that I have clients that that are on the vacation of the month club, and they really, really enjoy doing that. The question is, will you have a paycheck that lasts as long as you do? And the way I look at my job is to make sure that you never have to fear outliving your money. And that means building a plan that's focused on reliable, protected income and not just hoping that your investments last. Hope is not a strategy, folks.

Speaker1:
It's not a strategy. It is not a plan. Uh, you know, if you are just, you know, living by hope right now and, uh, barely, barely hanging on to it, uh, that's a good reason for you to get in touch with Mike Zeno. I feel like because he can give you more than hope, he can actually give you a plan, which is a real plan that's going to make sure that your money lasts throughout your entire retirement throughout your entire life, no matter how long that life is.

Speaker3:
And I'm kind of chuckling right now because when you said living on a I was like prayer, right? Yeah. And then the Bon Jovi song. Oh we're halfway there. Right. So no matter if you're halfway there, you're all the way there. You know, we can get you there. That's that's the key.

Speaker1:
That's right. If you're if you're living on a prayer, call Mike Zeno and he can maybe be the answer to that prayer. Who knows? Um, money matters with Mike. Com is the website once again, Money Matters with Mike comm. You can also call him 7045601573704560 1573 is that number. And really you know, Mike, it's all about, you know, income and retirement. As we've been saying it's all about cash flow really as you said. There you go. I have more coming in than going out. Um, so we've got some tips here for how to actually do that, how to master your cash flow and create a budget for retirement, or as we like to say, instead of budget, because people don't like the word budget. A lot of the time it's a little bit scary. Um, we like to say spending plan, maybe, uh, or, you know, whatever you want to call it, whatever label you want to put on it, you can do that for your retirement years. And we have five steps here for both retirees and pre-retirees to go through. Step number one, I think is is essential because it's the ground level stuff. Before you do anything else, you've got to assess your financial landscape.

Speaker3:
Right. If think of it like a GPS system, if you don't know where your starting point is, you're going to have the GPS system is going to have absolutely no idea how to get you where you ultimately want to go. So you have to gather all of your relevant financial information, all of your income, all of your expenses, all of your debts, all of your savings and investments. Right. Take note of any irregular income sources and any significant financial obligations like, you know, car payments or mortgages or personal loans or college debt that you may have. And then you need to understand your current financial standing starts with creating this household budget. Or like Matt said, spending plan that, um, has a balance sheet that will serve as your foundation for the rest of your financial lives. Okay. The second step would be to set clear financial goals and reflect on your short term, as well as your long term aspirations. What is it that you want to achieve and when do you want to have it achieved? By defining specific financial goals with measurable amounts and measurable timelines is extremely important for your long term success. And those goals can include things like saving for emergencies, paying off debt, or investing for the future.

Speaker1:
That's absolutely right. And I know that you you like to emphasize, Mike, with your, um, clients and what like step one in when you assess the financial landscape and then you start, you know. Step two, setting those clear financial goals, one of those goals, the very first is, you know, saving for those emergencies, having an emergency fund, because that is really so important before you even get to anything else, because, you know, God forbid something happen and you know, you need a new HVAC system or some medical thing comes up or whatever life happens like it inevitably does. Right.

Speaker3:
Yeah. It does. And so, you know, the last thing we want to have people do is borrow from their retirement because they didn't have an adequate emergency plan. So doing that is extremely important. Built on a foundation that is very, very solid. Because when you have six months worth of living expenses, put aside in a high yield account, um, that is accessible. You kind of walk a little bit taller, you with your shoulders back, you may even strut a little bit because you have that peace of mind knowing that no matter what life throws at you, you've got it covered.

Speaker1:
Absolutely right. And then, of course, step three in our checklist here is to then, after you've set those clear financial goals, to track and categorize your expenses right.

Speaker3:
Keeping track of your expenses diligently for at least a month. I prefer to have people do it for three months. That means every single penny you spend. This is a great exercise for people, because a lot of people have no clue how much money they're actually spending. And if you write down on a piece of paper on a legal pad or wherever, take notes in your phone every single time you spend a penny, and then review that at the end of the month or the end of the quarter, I think you'll be shocked. And then when you can, when you do that, categorize those expenses into very broad categories. Things like housing, like transportation, groceries, entertainment, and then just, you know, waste it. I like to have that category. Where did I waste money this past month, this past quarter. And what you'll be able to do is start identifying Flying patterns and areas where you can potentially make those adjustments, especially in the wasteful spending category.

Speaker1:
Yes, a very important one to to include because God knows we are all guilty of just wasting money. And as you said, you know, not even knowing where it goes. A lot of the time we may have these subscriptions and stuff that we just forgot about. Maybe during the pandemic, you were sitting at home and just, you know, watching nothing but a bunch of, yeah, everything in the world from Tiger King to everything else. You were watching it all and you've got streaming services now that you've forgotten about years later. And so maybe that's your wasteful spending category. Absolutely right. And, you know, I see.

Speaker3:
That I see that, Matt, with people who, you know, bought a particular channel to watch a particular show. And then it's another, you know, two years go by before the next season of that show comes on. And they totally forgot about it. Yeah. So that's where I see things happening a lot.

Speaker1:
That's yeah, that's that's happened quite a bit with especially with me. Yeah. It's happened with um it's happened with me. It's happened with several members of my family as well because, you know, a lot of shows during the pandemic, they had to take time off before they could produce a new season. And so they're big gaps in there. But yeah, you're absolutely right. Um, so then after you do that, after you do step three, which is track and categorize those expenses, step four is to allocate your income.

Speaker3:
Um, prioritize essential needs first. And what are those? Well, those are your housing, your utilities, your groceries, your debt payments. Okay. And then you need to allocate a specific portion of your income towards your defined financial goals. Set aside a designated amount for discretionary spending while maintaining balance. Because if all you're doing is saving saving saving, saving, saving, um, you're never going to be able to enjoy life, right? We we're not trying to take all of your pleasure away from you. But we just want to you to understand that having balance work life savings balance is very, very important for your long term mental and financial health.

Speaker1:
Yeah. Priorities. You know, get the priorities in line and adjusted and fun can be a priority. Just not maybe the top priority right now as you're trying to save and plan for retirement. Um, but then, you know, step five is to really work that plan and review and adjust it as needed, because, yeah, you know, things happen. Life happens. Right?

Speaker3:
Frequently checking in on your spending plan so that you're able to make sure it's still aligns with your goals and your financial circumstances, is paramount to long term success. It'll help you identify areas for improvement and then enable you to make those necessary adjustments. So adapt your plan as your life evolves. Right when you're in your 20s, you're paying off a lot of debt. When you're in your 30s, you're still paying off debt. And now you may have kids when you're in your 40s. Now you're got your kids are in high school or college, and kids are expensive. And you may or may not still have student loans, but you probably have a mortgage, right? And is your budget in life evolves? Embrace those new opportunities and embrace those new challenges, because following those steps will help you gain a much clearer understanding of your finances. It'll help you set more meaningful goals. And believe it or not, folks, it will help you make more informed decisions that will enable you to have and achieve financial stability, as well as pursue your aspirations in retirement. So if you are in the retirement red zone again, meaning you're planning on retiring within the next ten years or you have just retired in the last ten years, please, please, please give us a call so that we can help strengthen your plan because you cannot afford to lose too much during this retirement. Red zone, which means protection and growth is key. And even if you have a financial advisor, it is never a bad idea to get a second set of eyes. And if you're on the right path, I'm going to tell you to keep charging ahead. You're doing great. I'm not trying to take you away from your financial professional, all right? But if you were diagnosed with the C word, you would probably get a second opinion. We just want to make sure that you don't have any financial cancer out there. Okay. So (700) 456-0157 three is my direct number. Or you can visit us at Money Matters with Mike. Calm.

Speaker1:
Easy as that folks. Just go to Money Matters with Mike comm or once again that number (704) 560-1573. And the goal here folks, in working with Mike or with any financial pro, but, you know, with working with this guy that I know does a great job for folks is Mike Zeno of is to be more proactive and less reactive about your retirement. And there are several things that you can do. And I know, Mike, that you work with folks every day to do to help them do just that, be more proactive and less reactive about retirement planning, right?

Speaker3:
No doubt. I think the first thing that I like to look at is where do you have your money? Okay. And I find that a lot of people have more than $250,000 in one single bank. And you should never do that because the FDIC only protects up to a quarter million dollars. So you want to protect both yourself as well as your family from any volatility inside of the banking sector. In fact, we recommend keeping significantly less than the FDIC limit in the bank in general, because most banks offer very low interest rates on your deposit. And so while inflation is eating away at that spending power, when your money could be earning a little bit more, that is something I think that a lot of people don't really consider.

Speaker1:
Yeah. And then another thing, of course, is to, as you were just saying, you know, establish that retirement income plan today. And there are ways to do that that can be really, you know, advantageous for folks where it kind of takes a lot of the guesswork out of it when retirement comes.

Speaker3:
Yeah. You know, if you think about the tried and true 6040 plan, like your grandfather used, um, and believe it or not, a lot of financial professionals still use, um, 40% of your money was, you know, for income, but it was placed in bonds. Okay. And we're starting to see a movement over the last decade or so is that a lot of folks are replacing that bond portion of their portfolio with alternative income producing investments that offer market like returns, but without the market like risk and without the ability. I mean, bonds lost 15% back in 2022. People have short memories, right? These alternative investments have no potential of market risk and still give market like returns. So I think those are very, very important for folks that really want to establish that retirement income plan today.

Speaker1:
Yeah, and a lot of people too. Mike might may not realize that they have, um, in retirement waiting for them, a tax bomb that's about to go off. And, uh, we plan on spending more, more time on this, but let's go through this, uh, you know, just kind of in the, I guess, the CliffsNotes version, uh, here now, because you can diffuse that retirement tax bomb, uh, using a couple of different types of tax free investments. Really, the only two truly tax free investments that are available out there.

Speaker3:
The only two truly tax free investments. Okay. Number one is a Roth IRA. Uh, and number two is life insurance. Believe it or not, folks, life insurance can offer both a death benefit in case you die too soon. But it is also a great tool to build your retirement savings and generate tax free income in your golden years.

Speaker1:
Yeah. Absolutely. Right. And then, you know, also legacy is a huge part of, you know, planning and getting things where you're going to be more proactive because you want to take care of this obviously ahead of time. If you wait too long, it's going to be too late to, um, get your legacy and all of that, uh, plan out in place. So work with a legal expert to, you know, do things like putting a will in place for your final wishes. Right?

Speaker3:
Yeah. Not only a will, but a medical directive, a healthcare power of attorney. You know, just having your estate taken care of, right? If you don't have those documents in place, your family could be in court for years after you pass away while your final affairs are actually settled, not by them, but by the state in which you live. That is not a good thing to do. We want to avoid probate at all costs. So make sure you're talking with a legal expert. And I don't care if you say, Mike, I don't have an estate. Yes you do. Yeah. I don't care if you have $4,000 worth of stuff. You have an estate?

Speaker1:
Yep. Absolutely. And you got to plan for what's going to happen to that stuff. And then also, you know, while we're on the subject here, having a plan for when either you or your spouse passes away because chances are, you know, it's not going to happen at the same time. So one of you will be here, uh, potentially long after the other. So you got to have a plan for that scenario as well.

Speaker3:
Yeah. So, you know, often spouses, uh, have that, you know, your husband may have that do it yourself retirement planning process. And when that person passes away, you're kind of left with questions and absolutely nobody to turn to. And even if your husband had a financial professional, 80% of widows change financial professionals because they didn't have a relationship right with their husband's financial professional. And according to statistical data from the World Health Organization. Globally, men have a lower life expectancy than women. And so that suggests, obviously, that the men in the relationship are going to pass away before their female partners and marriages. And while it is important to note that life expectancy is just an estimate, it is influenced by many factors. The fact remains that the surviving spouse is going to have a lot to deal with, including a thing called the widows tax.

Speaker1:
Absolutely right. And then, you know, speaking of planning for when one person passes away, you've got to make a Social Security plan. That's got to be part of that whole discussion, because you've got to understand how that benefit is calculated, including things like spousal benefits and survivor benefits and all of that.

Speaker3:
Yeah. So right. So understand also that the trustees report from 2021 projected that the program's trust fund reserves. Well, guess what. They're going to be depleted in eight years in 2033. 33. And at that point or any point before, if Congress does not act to address the shortfall, Social Security beneficiaries could potentially face a reduction in their benefits. So we want our clients to have a solid income plan, regardless of what Social Security ends up doing, especially if they cannot make the payments that people are expecting later on in life.

Speaker1:
Yeah. And just before we have to run here, that last step is to determine those big budget items before you retire. That's things like family weddings or grandchild's education. Plan for all of that in advance as well. And you can do all of this, folks, with the help of Mike Zeno. Just reach out to him. Money matters with Mike. Com is the website. You can give them a call (704) 560-1573. Well, Mike that's going to do it for our time here together again this week at it has come and gone quickly as it usually does. But I thank you for all that you bring to the table. And we'll do it again next time, sir.

Speaker3:
Matt, thank you for everything that you bring to the table as well. But most importantly, thanks to each and every single one of our listeners, whether you're listening to us on the radio in the Carolinas or globally, anywhere on podcast without you guys, we don't have a show. So if you learned anything today, please share it across your socials. Because if you help other people learn, you could change their lives for the better. No matter what you're doing this weekend, I hope you enjoy it to its fullest extent and as always, make it a great day.

Speaker2:
Thanks for listening to Money Matters with Mike. You deserve to work with a licensed financial and insurance professional who can offer strategies for protecting and growing your hard earned money. To schedule your free, no obligation consultation, visit Money Matters with Mike comm or pick up the phone and call 704560 1573. That's 5601573. Not affiliated with the United States government. Mike Zeno does not offer tax, legal or investment advice. Consult with your tax advisor or attorney regarding specific situations. Opinions expressed are subject to change without notice. These opinions are not intended as investment advice, nor do they predict future performance of any product. All information provided is believed to be from reliable sources. However, we make no representation or warranty as to the accuracy of any statement. This information is intended to be educational in nature and does not provide a guarantee or a specific result. All copyrights and trademarks are the property of their respective owners. Amara Life assumes no responsibility or liability for the content of this message. The information contained herein is provided on an as is basis with no guarantee of completeness, accuracy, usefulness, timeliness, or the results obtained from the use of this information.

Speaker1:
Remember, all of Mike's listeners receive a free financial consultation just for listening to the show. Visit Money Matters with Mike comm to learn more and schedule an appointment. Thanks for listening to Money Matters with Mike and subscribing wherever you listen to podcasts.

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