Mike talks about taxes and how to avoid big tax bills in retirement. Plus, if you are self-employed, you do not want to miss this week’s show! If you’re thinking about going back to work during retirement, we have some tips for you – and potential downsides to consider.
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3.3.23: this mp3 audio file was automatically transcribed by Sonix with the best speech-to-text algorithms. This transcript may contain errors.
Producer:
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.
Producer:
Welcome to Money Matters with Mike, with your host, Mike Zaino. Get set for a full hour of financial information and economic news affecting your bottom line. 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 Zaino.
Mike Zaino:
What's up? What's up? What's up? It's Mike Zaino coming to you from Fort Mill, South Carolina. Happy Saturday, people. What a great day to be alive in these United States of America. Money Matters with Mike is a show designed to arm you with information each and every single week and give you plenty of meat on the bone to chew on. And today is no exception. We are absolutely bringing it again. On today's show, we're going to talk about different tips for defusing and preventing taxation in retirement just in case you have what I call a ticking time bomb. And as always, I have the distinct honor and privilege of being joined by the one and only my co-host and producer extraordinaire, who took a brief, brief respite last week to pass a very, very difficult series 65 financial exam. So, Matt, congratulations to you, sir. How are you doing today?
Producer:
I'm doing great, Mike. Thank you. Yeah, it was you know, I was telling you only semi-jokingly just before we went on here that if you notice a few more gray hairs in the head or a few more wrinkles on the face that the studying process for that exam is responsible. Yeah, it was was not an easy thing to do, but thank you. Yeah, it feels great to to have passed that and, uh, yeah, I think it's going to set me up for great things in the future.
Mike Zaino:
You'll be able to help a lot of people because let me tell you, people out there listening, that test is no joke, okay? And I know a lot of people who have taken it and failed. So congratulations, Matt.
Producer:
Well, thank you, sir. And yeah, you are right. We are bringing the heat once again this week here on the show as well. We've got so, so much coming up. First, I wanted to tell all of the listeners out there and I know that you are out there and that you are listening and you are listening intently to this information because it is important. The website is MoneyMattersWithMike.com. We want you to go there. We want you to find all of our past episodes. We want you to subscribe to our podcast as well. You can find the past episodes there on MoneyMattersWithMike.com or you can go to really anywhere you get your podcasts, you know, Apple Podcasts, Spotify, all the all the big ones there and just search for money matters with Mike you can also call Mike Zaino at (704) 560-1573. It is the famous cell phone that is always in his pocket. And well, I mean, right now, technically, it's on his desk, but still it's there. And. And he'll put it to good use when you give him a call. And you will really appreciate it as well. You can go to our YouTube channel. We want you to check us out on YouTube. Just go there and search for money matters with Mike Facebook. Same thing. Find all of our past videos, just highlights of the show and some special content that we share that way as well. So we would absolutely love hearing from our listeners. Mike We just really love getting those messages and, and really, you know, just knowing that people are out there enjoying the show and getting something from it each and every week because that's the goal.
Mike Zaino:
It is the goal. Matt And so, you know, when when people call in and when people get in contact on our Contact Us page, they often, you know, are asking questions, right? And so a lot of that information we use for, you know, fodder for future shows like this. So if you have questions out there that you want to have aired and the answers to so that everybody can benefit off of learning, you know, what the what's and the whys and the hows and everything in between, then, you know, make sure to give us a contact. We'd love to hear from you. 704 5601573 or MoneyMattersWithMike.com.
Producer:
And you can also use those very same contact methods to contact us for a couple of freebies that we have for you. One of them is the 23 retirement cost cutters for 2023 and we'll talk more about that as the show goes on and actually have a cost cutter from that particular piece of literature to share with you a little bit later on in the show. But you can get your free copy of that. Got a lot of great ideas for hanging on to more of that hard earned money. And you can also contact Mike Zaino to get a free copy of the book Annuity 360. It is also chock full of a lot of great info. It's really like the subtitle of the book is All You Need to Know or Everything You Need to Know About. Out annuities. And it's true. I mean, it's not like, you know, we're asking you to read War and Peace, but it's you would kind of feel like it after you're done because there's so much info, there's so much to soak in. So, so much great stuff there.
Mike Zaino:
There is there's a lot of good, good, good information because a lot of people hear the word annuity and they get scared because they've heard other people bash annuities or they've heard annuities that are, you know, are bad. But the fact of the matter is, is that there are over 100 different types of annuities. And some of them, quite frankly, I wouldn't suggest for my worst enemy. Others of them, I have my family members in like my mom and my mother in law. So, I mean, it's very, very important that, you know, the distinctions between all of the offerings that are available in the marketplace out there to help protect and grow your assets. Okay. And not just rely on somebody else's experience who might not have had all of the information or just might have been sold something that really wasn't in their best interest. So that's why it's important to get the knowledge. Okay. They say that knowledge is power. I'm going to disagree with that, and I'm going to say that applied knowledge is power. So you take what you learn, you put it into practical application, and then watch how both your life and your finances can benefit from doing that.
Producer:
Yeah, that's right. You can have all the knowledge in the world, but if you don't apply it, if you don't put it to good use, then you know, it's just sitting there being wasted. It's wasted knowledge at that point. You're an educated.
Mike Zaino:
Derelict.
Producer:
Not. Exactly. Exactly. I mean, that's absolutely right. Well, coming up on the show over this next hour, we've got just so much to talk about and so much to go over here. We're going to talk about something called Unretirement in a few minutes. And really, it's not necessarily something that people do because they have to, but a lot of people are doing it because they want to. Right. So we're going to talk about that coming up here in just a few. Some financial help for business owners as well. Those of you who are either sole proprietors, maybe you're self-employed, perhaps you own a small business. We've got some tips for you that I think, you know, kind of need to do that more often. I feel like because really small businesses just the backbone of this country. Then we're going to talk about diffusing the retirement tax bombs that you so nicely teed up for us at the beginning of the show. The national debt is also a big part of that discussion. And wait, wait, wait until you hear those kind of unfathomable numbers. We've got that and much more coming up. But first.
Producer:
And now wholesome financial wisdom. It's time for the quote of the week.
Producer:
And those very words of wisdom this time around come from someone I know. We all we all know and love. We all respect very much. Mr.. Unknown That's who this one comes from, related to Anonymous, I believe, but all part of the Unknown Family. But this quote, it's I have to say, Mike, it's probably one of my favorites that we've done because it says a lot. It's very quippy and I'm just going to get right to it here. I'm going to stop talking and just do the quote. It is this be decisive. The road of life is paved with flat squirrels who couldn't make a decision.
Producer:
How true.
Mike Zaino:
Is that? You know, down here in the south, you've got flat squirrels. You've got flat possums. Okay. Yeah, I know Out west they probably have flat armadillos like we were discussing before the show. But the point is, is that you need to be decisive in all that you do.
Producer:
Hungry for something to chew on. Here's some meat on the bone.
Mike Zaino:
I was reading an article on LinkedIn actually by a founder of A Mind Over Money. That's the name of her. Her page Mind over money. Her name is Crystal Mcgilvray. And she posed the question, Have you ever procrastinated about a financial decision that you had to make or felt anxiety or stress or maybe even had a panic attack at just the thought of making a change to your finances? Okay. For some, the thought of committing just to start investing or to make a significant financial move is terrifying. Okay. So terrifying that they avoid making the decision and instead they do nothing. Okay. And so financial decisions are a part of our daily lives. And unless you are in a position where someone else makes them for you, all right, this is something that you simply cannot get away from. Okay. The term decided phobia was a term introduced by a gentleman named Walter Kaufmann, who was a philosopher at both Princeton and Harvard universities. Okay. So a pretty smart guy there. And that describes the fear of making the wrong decision. Decide a phobia is often experienced by intense, paralyzing feelings such as panic attacks, an increased dependence on other people. To help you make those decisions well applied to finance those that have this phobia are afraid of making those finance related decisions, and this can present itself as inaccurate.
Mike Zaino:
An avoidance or deliberate ignorance purposely, like purposely ignoring information. And so that deliberate ignorance may come as a result of what is called a cost benefit analysis, comparing those negative feelings of making the wrong decision. That's the cost against the benefits of the potential action and in concluding that those costs are too big. So when you fear the right things, you prevent harm and you're much better equipped and prepared to deal with threats in your environment. So fear in and of itself is not all that bad. Where it does become a problem is if it begins to prevent positive progress, if it causes mental problems and negatively interfere with everyday life. So some examples of that could be fear of losing out. Okay. Where people fear that the pain of losing is twice as much or twice as bad as the pleasure of gaining that very same thing. Another one could be learned behavior. I know a lot of people grew up and they didn't learn good money habits. All right. You watched other people not take control of of their finances. And so, you know, that learned behavior can be hard to overcome. Sometimes we get cognitive overload by too much information and too many choices. You may fear making the wrong choice or looking silly or just losing out.
Mike Zaino:
And the lack of clarity on those differentiating factors may be a result of insufficient information and can cause severe frustration and stress. Okay, so that's another one. And then always there's low financial capability. If you have a low financial IQ, in other words, a limited knowledge or a lack of financial skills training that could hinder good decision making as you simply don't know what to do. Okay. And fear can creep in in a range of ways and keep you paralyzed in the same spot for way, way, way too long, which can cause you to miss out on some really good opportunities. It can cause you to miss out on increasing your profits or just improving inefficiencies. You may have subconsciously decided that the negative feelings you associate with the decision at hand are more costly than the potential benefit of taking action and therefore decide to leave things as they are. Almost like it's paralysis by analysis, Right? So, you know, the take away is that the most damaging consequence of fear, taking control of your finances is the lack of conscious decision actually being made. You have to realize that not acting and leaving things as they are is a decision that comes with its own set of costs. So if you need some help in that arena, I happen to know a guy.
Producer:
Me too. He's right here. His name is Mike Zaino and his website is MoneyMattersWithMike.com. You can also call 704 5601573. That's 704 5601573. And boy, what a great Meat on the Bone segment today, Mike, because I think that, you know, a lot of people, they might have trouble making decisions about a lot of things in life. I mean, you know, I know that for myself, I can't tell you how many times I've talked with family or friends or whoever. And you're like, what are we going Where are we going for dinner tonight? Well, I don't know. Do you want do you want Chinese? You want to? I don't know. You want to maybe go to this restaurant or that place? And literally, like a half hour later, we're still trying to make the decision. But then this one is a little bit more high stakes when you're talking about your your finances and planning for your future. Yeah, no.
Mike Zaino:
It is a lot more high stakes to combat the first situation that you put. My wife and I go through that every single Friday night. I've dated my wife every Friday for the past literally 32 years. And so we have our group of restaurants that we like to go to, and I typically order the exact same thing at each of those restaurants. And she makes fun of me. Okay. But I have actually thought about remember as a child you had that wheel that you could pull the thing out and let it go and it would just spin the wheel and it would land on a specific farm animal or whatever. It was like it was the old McDonald wheel. Well, I thought about replacing the animals with the places that we should go to eat. And so that way it's totally left up to, you know, that that little wheel of of chance, you pull it and it's going to land on. All right. We're going there, you know, And wherever it lands, I don't care if we're not feeling it, that's where we're going because it's all of that. Now, for the second thing, obviously, I provide full retirement plan consultations for all of our listeners. Absolutely. At no cost. Okay. And also at no obligation. Okay. You're only going to work with us if it's best for you.
Mike Zaino:
We can closely look at your current financial situation. We can discover. Exactly. See how much you might be paying in fees with your current plan, whether that's in a 401. K, an IRA, and we can help you cut out any of those unnecessary costs that can add up to a lot of money coming out of your pocket over the long haul. If you have any annuities, whether they're the old school annuities that you might have had for 20 years or you've inherited an annuity from a parent or some other benefactor, or you've just recently picked one up and are not sure if it's the kind that provides, you know, all of the features that we have access to, then obviously we can help you by doing what we call an annuity x ray. And we're going to talk a little bit more about that later in the show. We can help you with Social Security maximization planning. We can help you with Medicare when you're turning 65. And look at the way that things have changed over the years and what they're going to continue to do throughout the years. Bottom line is, is we can help compare your current situation to what's possible if you work with us.
Producer:
And as Mike said, it is free of any cost and any obligation. And you can take advantage of that by going to money matters with Mic.com. That's money matters. With Mic.com. That's all one word. And you can also call 704 5601573 704 560 1573. Well, you know, sort of teed this up a few minutes ago, Mike, but we were talking about how, you know, some people are going back to work in retirement and some of them are doing it. Quite a few, I would imagine, because they kind of they kind of have to they need the money, you know, with inflation the way that it's been. Right. That's not all that surprising, really. But there are others who are choosing to do that. So there are different reasons. Right, why people would choose to go back to work in retirement.
Mike Zaino:
There are I mean, a lot of folks do it to keep themselves socially engaged, right? They get lonely sitting at home and they just like the social interaction with with other folks, whether it be their co-workers or if they're in a retail environment, their customers and clients. Some people like it for the cognitive effect to keep them mentally engaged in actually producing, and they feel like they have a little bit more worth by giving of themselves to their particular job or trade or volunteer wherever they're going. Right? And then obviously the benefit of that is the extra jingle in their pocket, the funny money that they can, you know, have and add that allows them to have a little bit more disposable income as opposed to having to use it to, you know, pay for the food and the medication. Some people absolutely have to do it and then other people do it by choice. And so for some, retirees, heading back to work has actually emerged as an aspiration. And roughly 1 in 6 retired Americans have said that they are actually thinking about whether or not to get a job, according to a recent study from Paychex. And the top reasons that they cited for wanting to go number one was was personal reasons that came in at like 57%. Number two was needing more money at 53%. But get this right behind that was getting bored. 52% said they were just getting bored. Then the next one getting lonely. They're feeling that that loneliness. And so they like that social education or interaction, rather. That's 45%. And then of course, inflation with the way we've we've seen 4 to 5 decade highs over the past couple of years, some of them are just going back to help try to hedge against inflation a little bit.
Producer:
Yeah, And that was that one. You know, getting bored was really my dad after he retired several years back, it was, you know, he enjoyed sitting around for the first, I don't know, month, maybe something like that. And then he was like, okay, what am I doing now? You know, so that he would go get him a little part time job here. And then, you know, that would either be like a seasonal thing or whatever. And so then he'd go on to the next thing. So he couldn't handle just sitting at home doing nothing while he was still able to do that, you know? And so that's a huge one.
Mike Zaino:
I get it because, you know, I help people retire all the time. That's what I do. Right? And so it's so funny because it'll be maybe 4 or 5, six months after I'll get a call from the husband saying, you know, Mike, I had this one gentleman that I'm thinking of. He's like, you know, my goal was to play golf. I have played golf every single day in rain and shine and snow. And I'm like, You played golf in snow, you know? But he was that hard core. He did it for five months. He's like, I can't stand to look at another golf ball. Give me something else to do. And I'm like, All right, well, do you like to fish? He's like, Yeah, man. I hadn't wet a line in a long time. So he started going fishing and after about a month he called me. He said, Mike, I can't stand to bait another hook. Give me something else to do. And I'm like, Dude, what? What? Am I right? You know, my, my, your hobby, you know, suggestive person. What's funny, though, is that I have other people where the wives call me and. Are like, you got to give him something to do. He's driving me crazy, you know? Or the husbands are saying, Give me something to do. My honey do list is getting ridiculously long and I need an excuse to get away from the house, you know, just so I can maintain my sanity. So, I mean, I think it's a combination of all of those reasons why people may consider to unretire.
Producer:
Yeah. Yeah. And it really runs the gamut. I feel like, you know, depending on your particular life circumstances and situation. But there are some things I think that across the board, no matter the reason, some things that people really need to consider and think about when they're, you know, possibly considering going back to work in retirement. Let's talk about tip number one here, Mike. This one is is a really good one, I think, for people, especially if they don't need the income. If you're going back to work because you're bored, because your spouse is driving you crazy, those kinds of things consider a low stress job, right?
Mike Zaino:
So, I mean, if your reasons for considering going back to work are non financial, guess what? You're not alone. If you're seeking work for fulfillment, it's worth considering a job that is low stress and provides some flexibility. Okay, whether you need the income or not, it's also important to know that the impact it can have on other parts of your financial picture can be pretty, you know, severe as well, you know, is in your favor. They can impact it in a big way. I like to call those jobs Johnny Paycheck jobs. If somebody's really, you know, get gets you aggravated, you can tell them to take this job and shove it. Right. I'm not working here anymore. Right. You know, that's I'm not going to sing like I did a couple of weeks ago. But, you know, I have often thought that maybe I like to play golf. I'm not good at it, but I like to play. So maybe I'll be a ranger at a golf course. I get to drive around in a golf cart all day outside, all day, enjoy the beautiful weather, and as an ancillary benefit, I get to play free golf. I mean, that's that's a pretty low stress job if if you ask me. Right there.
Producer:
I love that. And pretty sweet deal, too. I you know, I can imagine if you like to do it, do it. And that's the thing. Like, you know, we were in our chat briefly before we started the show today. You know, you were talking about how you often say that you haven't worked a day in in the past. You know, what, 15 years, right? So it's like you, you know, if you love what you do, you never work a day in your life. That old saying it's true in retirement as well. Like, you know, if you need the money, great. And you know, look for a low stress job. If you can find one. Awesome, Wonderful. If you don't really need the money, do something that you enjoy and that's going to, you know, let you have fun and do something that you that's at least related to something that you like to do. And that blast point that you made there, Mike, talking about how it's important to know the financial impact of not only the positive thing of, you know, earning more money and having more income and that kind of thing, but also how that extra income can then potentially have an effect on other parts of your financial picture. And this is going right into tip number two, which is telling our listeners that extra pay can actually shrink Social Security for early claimers, right?
Mike Zaino:
So, so, so a lot of people have the idea that as soon as they turn 62, Matt, they're jumping on Social Security, they're going to do the Steve Miller band, go on, take the money and run, right? And because whether they're fearful they're not going to live a long time or they're fearful that that that Social Security is going to run out of money. But if you have tapped Social Security early, number one, you're giving up a significant portion of what you're actually owed and you're not yet at your full retirement age as defined by the government. The wages that you earn, that income that you earn, could temporarily reduce your Social Security benefits at least until you reach full retirement age for Social Security, which depending on the year you were born, is either 66, 66 and two, four, six, 8 or 10 months or 67. Okay. And once again, that depends on the year that you were born. So while delaying Social Security for as long as possible means a higher monthly check, many people, like I said, go on and take the money and run at age 62 or very soon thereafter. If you do start getting those monthly checks early and you decide to go back to work part time to get one of those stress free jobs, there is a limit on how much that you can earn from your working part time without your benefits being affected. And for 2023, that limit is only $21,240. Okay. $21,240 and according. To the current guidelines. For every $2 above that threshold, they're going to take $1 of your Social Security back all the way up until you are eligible for your full retirement at either 66, 66 and some months or 67. So that is a huge consideration when deciding whether or not you are going to go back to work. And if you do want to, that's fine. Okay. Just make sure you keep it under $21,240 for 2023.
Producer:
Yeah. And that's something that yeah, I think people might not necessarily even know, even if they're already claiming Social Security, if they've reached that age of 62 and started taking it as soon as they possibly could. You know, I feel like this is one of those things. I'm going to go back to work. I need to earn a little more money, but not too much, because then you're going to get what's essentially over that threshold of 21,000 to 40, a 50% penalty pretty much on on that Social Security benefit on every dollar that is above that amount. So it's definitely something to watch out for or be aware of. And that's, again, the point of the show. We're educating the folks here and also educating. You know, you mentioned Social Security. Tip number three has to do with Medicare and the effect that these wages could have on your Medicare premiums.
Mike Zaino:
So so Medicare, when you qualify for Medicare, they're going to look at your tax returns from two years prior. Right. So anything that you've earned up until the tax year that you turned 63. So in addition to extra income from a job potentially pushing you into a higher tax bracket, it could also trigger additional costs for Medicare. So basically the way Medicare works is it's means tested. So higher wage earners, so people that make a lot of money, they actually have to pay more money for their Medicare. And that's called a premium surcharge or an Irma. Okay. For Medicare Part B, which covers their outpatient coverage, as well as Medicare Part D, which is their prescription drug coverage. So those extra charges, if you're a single filer, start at any income above $97,000 a year. And if you're married and you file joint returns, that is increased to $194,000 a year. So if you're working and you plan on never really retiring, then those types of thresholds, those income thresholds could be of significant concern. Or if you've retired and decide to retire, then they could also be a concern for you. Even if you are getting one of those Johnny Paycheck jobs, a stress free job, just simply because those extra wages can cause you to pay a little bit more for both your Medicare Part B and Part D premiums.
Producer:
And it really goes back again to people's individual situation and what's best for you. And you know, also, let's say if you go back to work and you have some sort of health care that's eligible that you're eligible for there, if you have health insurance that that you are able to to claim or to to get as part of your job as a retiree, then you might actually benefit from dropping Medicare and using that health insurance from the job if it makes sense to do so. That's what we have to emphasize here, because it might be an absolutely terrible idea for some people, but for some others it could be the best thing in their particular situation.
Mike Zaino:
Yeah, and the only place that that wouldn't really come into play is if the employer that you're working for has less than 20 employees, you would actually still have to maintain your Medicare. But if you work for an employer who offers health insurance, then it might make sense for you to at least go on their health insurance plan until you eventually just call it quits and then you can go back onto Medicare Part B, just simply because part A, you should jump on as soon as you're 65. Why would you not want that as a supplement to whatever insurance plan you're on to begin with? But part B comes at a premium. Part A is free because you paid for it your entire life. Every single time you got a paycheck and you looked at the deductions and you saw a deduction for Medicare that paid for Part A, which is why there is no cost for it in retirement. Right. But part B, not so much. All right. There is a cost. And this year it's $164.90 at the base. And then for, you know, for household incomes that are over $750,000. Okay. Not many people have to worry about that. But if you're married filing joint and you have a household income of over 750,000, then you're paying over $500 a month for your Medicare coverage.
Producer:
Wow.
Producer:
So it really does there's there's a wide, wide berth in between those two numbers. So so it depends on your situation. As we said, you know, it really does. And for people who are self-employed or maybe business owners, you know, I remember I've been I've fallen under that category a few times in my life. And I remember particularly in my in my 20s and I won't tell you how long ago that was now, but when I was in my 20 seconds, I did some some independent contractor work and stuff like that. So I remember getting that big stack of 1099 at the end of the year and tax season not being fun. When I was in my early 20 seconds and I didn't have any money put by to actually pay my taxes, that, you know, it's it's one of those lessons I learned the hard way. But if you're self-employed or if you are a business owner, a sole proprietor, that kind of thing, there are some things that you need to know. And I think that it would be a great thing for you as a as a business owner or self-employed person to reach out to Mike Zaino and get that free consultation, because there's a lot of different things that come into play with your particular situation.
Mike Zaino:
Yeah, I mean, there are I mean, bottom line is, is if you try to go it alone and you're trying to deal with all the complexities of owning a business and filing a business return, or maybe you're an LLC that's taxed as an S corporation, right? There are a lot of moving parts. And so we are absolutely going to harp on the importance of working with both a financial professional as well as a tax professional, because we can help you navigate those unique challenges of being a business owner and take advantage of retirement savings strategies that are made specifically for you that other wage earners, W-2 employees, they just don't simply they don't have the access that business owners and independent contractors have access to. So if that sounds like you, I absolutely recommend forming your own LLC. If you haven't done that, then paying yourself first each month while also making regular contributions to the right tax advantaged retirement plan and here's another tip. Make sure that you're making your retirement savings contributions monthly rather than all at once during tax time to reduce and manage risk of you not having any money left over. You should always pay yourself first. And by doing it on a monthly basis, that's called dollar cost averaging. Okay. The bottom line is if you're a business owner, you need to be consulting with a financial and tax professional. Operating your own business is challenging enough. Let us help you chart a course for retirement and start setting up your retirement income plan. Okay, so you definitely want to give us a call.
Producer:
Yeah. And you can do that at 7045601573704560 1573. Go to MoneyMattersWithMike.com to check out the website and also reach out there for that free consultation and really really important information there. You know and especially when you talk about like dollar cost averaging. We have mentioned that and talked about it pretty in-depth before on the show, but it's something that I think more people need to kind of have as part of their own plan because, you know, over time when we're talking about investments, particularly over time, if you if you and they've done studies on this, the history has shown if you invest a certain dollar amount each and every month versus buying a certain number of shares every month or whatever, then over the long run, with that, buying a certain dollar amount each and every month, you are going to come out ahead. In the long run, your costs, say, per share, is going to be a lot, a lot less, or at least, you know, a good amount less. And so you're going to be ahead of yourself. You're going to pay a less on average per share. And so that dollar cost averaging can really come in handy. I think it's one of those great sort of little nuggets here that people can really pick up on and apply. Yeah.
Mike Zaino:
And more importantly, you're paying yourself first and you're just setting it on automatic and making sure that consistency is the key because there are people who try to time the market, right? There are people that try to put money in when you know the market is down and then they try to sell when the market is up. And the problem with that is most people are able to get one of those timings right. But very few, including professional money managers, are actually able to get it right twice. Okay. So therefore time in the market and through using dollar cost averaging is just going to allow you to come up that much more ahead over time. Consistency is the key.
Producer:
That's right. That's absolutely consistency is key and it is absolutely true when we're talking about that whole concept there and investing for your future. And okay, so we mentioned a little bit earlier these cost cutters. Mike and I wanted to share something with our listeners to get just a taste, just a taste of the 23 retirement cost cutters for 2023. We actually have one of those tips to share with you today And. And once again, if you weren't listening at the very beginning of the show when we mentioned this, this is a free resource that we can send to you. Mike Zaino will be happy to email it to you just as a as a PDF. It's got a lot of great information on cutting your cost, hanging on to more of your hard earned money, whether in retirement or even before, just to really make sure that you have more to go farther. You know that that dollar, the dollars that you do have, will go farther each and every month. And so I've got this particular cost cutter to talk about today called reducing your housing Costs. Let's take a listen to this. It's just about a about a minute and a half here. Let's listen to that and we'll tell you how you can take advantage of the rest. The other 22 of the retirement cost cutters in just a moment. Is your house too big for your current needs? What about your current budget? I'm Matt McClure with the Retirement.Radio Network. Powered by AmeriLife. As our circumstances change, so do our needs.
Producer:
In.Retirement, it's likely you'll no longer need the two story five bedroom home you've lived in since your kids were all in school. But it's not just the size of the home that can be a consideration in deciding whether to downsize.
Sandra Rinomato:
Some people are living in a situation where the house needs a lot of work. It's time to renovate the kitchen. It's time to put on a new roof. And they they think, do I spend that money? Do I have the energy to do that? Maybe I should just move instead.
Producer:
Real estate expert Sandra Rinomato told CBC News that selling your home and moving into something smaller can be a good way to free up cash in retirement.
Sandra Rinomato:
By selling the house that liquidates gives you the money to live a lifestyle that you've dreamt of your whole life.
Producer:
A smaller place.
Producer:
Is also cheaper to heat, cool and maintain. Moving into an apartment or living with family members is another way to.
Producer:
Potentially save money on housing.
Producer:
Expenses such as lawn care and maintenance, experts say. To maximize your profits.
Producer:
On the sale of your old home.
Producer:
Keep your real.
Producer:
Estate agent's commission as low as.
Producer:
Possible.
Producer:
And there are companies out there that can help.
Producer:
If you decide downsizing is right for you, So could cutting the size of your home help keep your retirement budget in check? That's a key question to consider. And it's one of 23 retirement cost.
Producer:
Cutters for.
Producer:
2023 with the Retirement.Radio Network powered by Emeril Life. I'm Matt McClure.
Producer:
And if you would like a free copy of the 23 retirement cost cutters for 2023, just reach out to Mike Zaino. Go to Money Matters with Mic.com or call 704 5601573. And I love those, Mike. I'm really enjoying, you know, putting these pieces on those together because it really gives gives me an opportunity to kind of dive in on, on a few of these concepts. But I just think it's practical stuff that people can really use and we're offering it as a free resource. I think it's great.
Mike Zaino:
It is. And Matt, you know, we're already in March. All right. The first quarter is almost over. So think of it that way. People are already in the third month of the year. They say the older we get, the faster time flies. And I've really experienced that, you know, over the last several years myself. I cannot believe how fast time flies because we're already almost a quarter of the way through. You've only got nine months left of 2023. So make sure that you are reaching out to me so that you can put some of these cost cutters actually into your plan and start saving some money.
Producer:
Yeah, absolutely.
Producer:
Essential there, especially as I say, with inflation being what it is. I mean, every penny really, really counts. The more that you can keep in your own pocket, in your own bank account and your own, you know, retirement plan, all of the above really comes in handy. Right. And another thing that comes in handy, Mike, is having a plan in general, but having a plan to avoid the dreaded retirement tax bomb that that ticking tax time bomb that we mentioned at the beginning of the show. People it's common. It's common for you if you've got many of the traditional retirement plans that people have through their employer, you know, or as an individual. But it's something that you can plan for and avoid. You just have to know how to do it.
Mike Zaino:
That is so correct. See, the government gives people an option, right? Pay me now or pay me later. I'll use a farming analogy. Okay. They give you a chance to pay the tax on your seed. But what they would much rather do is have you go across to that field. Okay, tell up all of that earth. Get all the rocks and all the, you know, bad stuff out. Prepare that soil. So the seed. Okay. And then over 20 to 30 to 40 years of your working career, they want you to keep it irrigated. They want you to keep the insects out. They want you to keep it fertilized. They want you to grow that harvest as big as you possibly can. Why? So that at harvest time or retirement, okay, they will not only tax you on the amount of seed that you sowed, but instead. Are going to tax the entire farm. Okay. So that is a revelatory moment for people that when you think of how much you have saved and put away in your 401. K, your 403. B, your thrift savings plan or whatever employer sponsored plan that you have or you've saved outside in an IRA and you've been socking money away religiously because you are a smart and diligent saver. I want you to think for a moment, just take a few seconds and think for a moment what your balance is. Okay, Everybody got that balance, you know, ballpark figure of what their balance in those accounts are. Guess what? It's not all yours because you have yet to pay the piper. Okay. So we have some tips for defusing that ticking tax time bomb because they offer free, you know, tax free qualified withdrawals, both Roth IRAs and Roth conversions is can be a critical strategy for defusing that bomb, that traditional IRAs, 401 seconds and any other pre tax savings account can set you up for in retirement. I mean, think about that, Matt. Just can you imagine? I'm just imagining people's faces when I just said what I just said. They're like, you know what, Mike? You're right. That's not all mine.
Producer:
Yeah, you.
Producer:
Look at your, you know, you check that that retirement account, you go online to whatever the the company is that it's through. And you look at the balance and you're like, okay, you know, or you're like or you're like, What happened to all the money? One of one of the two after this past year. Right. But you look at it and you're like, okay, all that, that's the money I'm going to have in retirement. You're going to you'll have a portion of it, but another portion of it is going to go to the government. And this is why it's so important to have a plan in place to avoid as much of that as possible. And here's the thing. We don't want to stiff the government. We don't want to, you know, not pay what what we need to pay and pay our fair share. Right. We don't want to pay more than that. We don't want to pay more than we have to.
Producer:
Yeah.
Mike Zaino:
If there's a smart way of of planning to, especially when you're in retirement, you're not going to have as much money to begin with. So the thought of giving more of it to the government for some people is like, Oh no, I definitely don't want to do that. Well, the good news is, is if your employer offers a Roth version of whatever employer sponsored plan, so they might have a Roth 401. K, I know that I contribute to my Roth 401. K. My wife contributes to her Roth 401. K. I know that if you're a federal employee, there's a Roth option in your thrift savings plan. It's almost always almost. I'll put that out there, almost always to pay the tax up front rather than defer it to a later point in time. Because I ask people all the time, Do you think taxes are going up or going down? Matt I've never had anybody say, Mike, I think they're going down. Okay. So if that is the case, why are you pushing off taxes to a point in time where it could potentially be a lot higher than what we're paying right now? Because, you know, by diffusing those ticking time bombs now while you're still working and putting a plan in place, it can protect you from future tax increases by the federal government. Just overall, a smart play, because I know a lot of our listeners were alive in the 60s. Well, from 60 to 63, the current 24% tax bracket, the tax bracket, that right now is at 24%. Well, back in the 60s, it was at 56%. So can you imagine getting to keep $0.44 on every dollar that you earn? That's not a pretty picture.
Producer:
Yeah, I mean, we are paying historically low tax rates right now.
Producer:
And with the national debt being what it is, you know, 31.6 trillion and counting according to US debt clock.org really is an unfathomable number and that money's going to eventually it's got to come from somewhere. And so, you know, the tax rates pretty much everybody is in agreement. They're going to have to go up at some point. So while we're paying those historically low rates, take advantage of it, right.
Mike Zaino:
The current tax cuts that were that were instituted by the former president. Okay. They are set to expire December 31st, 2025, which means hello, 2026.
Producer:
So have.
Producer:
Fun during the 2026.
Producer:
Tax year. You know.
Mike Zaino:
So like we actually know the date that they're set to expire, which means that guess what, taxes are going up. Okay. So and you mentioned the national debt. Well, what about the unfunded liabilities, what America owes and how do we, you know, get that $182 trillion under control? The way I see it, the government can sell assets, which they're probably not going to do. They can spend less, which, you know, they're not going to do, or they can tax more.
Producer:
Yeah, good. Good luck with, you know, asking anybody to to spend less if they're in there. But, you know, we're talking here about avoiding that tax time bomb, that ticking tax time bomb. And, you know, I have this sort of picture in my head about, you know, like an action movie and and the whole do I cut the blue wire? Do I cut the yellow wire, that kind of thing. And it's counting down. And have you ever noticed, by the way, how it's you're talking about time moving faster as you get older? The time and the action movies always seems to take about, I don't know, half an hour when they've got like 30 seconds on the on the clock. It is always build the suspense. You know, I get it. But it's still. Come on, people. Anyway, so you got these Roth conversions that are your your pair of clippers to cut those wires with. And but you got to know kind of the ins and outs of this because there's different like timing is important. You know, you don't want to time the market like we were talking about. But this is something that you really need to pay attention to. The timing.
Mike Zaino:
It is very important. And for those listening who don't understand what a Roth conversion is, if in any given year you have some room left in what you are paying as far as your tax inside of that bracket, you can convert some of your tax deferred dollars, just the amount that would keep you from going into the next tax bracket. You can convert that into a Roth by paying the taxes in that year at a known rate. Okay. That is what a Roth conversion is. And so the first window would be the years right before you enroll in Medicare. Okay. But remember that Medicare is means tested and has that two year look back and so that your income at age 63 is going to determine both your Medicare Part B and your Part D premiums at age 65. And so a prime window for Roth conversions is between retirement and age 62, because if you do end up triggering those Medicare means tested for a year or two while you're doing Roth conversions, you might even still find that it's worthwhile because the next year they'll look at what you made two years prior, and then the next year they'll look at what you made two years prior.
Mike Zaino:
So once you're done doing those conversions, you're not going to have as much to report and you may still be able to appeal the Medicare means testing surcharges through a form IRS form SSA 44. That's the specific form. Okay. So that's the first window. The second window for the Roth conversion is between when you retire and when you start taking your Social Security or pension income home. Okay. At which point your income may be significantly higher and you may want to do smaller Roth conversions. And that's an additional argument for deferring those Social Security benefits for several years just to allow you to have more room inside to to defer or excuse me to convert. Okay. And that third window is going to last from retirement all the way until your required minimum distributions begin. Now at age 73. Okay. If you're still sitting on a retirement tax bomb, at that point, the conversion window has probably closed. And, you know, because now you're going to be required to take minimum distributions from those tax advantaged plans.
Producer:
Yeah, And and.
Producer:
That's something that people really need to be aware of and think about. You've got those dates or times. Periods in which that that window opens and then they're coming up to you and slamming it shut. When it comes to age 73, when those RMDs begin, those required minimum distributions, which we have covered here on on the show. And that's one of those changes, by the way, that went into effect. If you're if you're listening and you're thinking, well, I thought it was 72 or I thought it was 70.5. Well, yeah, it used to be it actually used to be both of those things at different times. And until the end of this past year, it was 72. But now in the new year, with the Secure Act 2.0, it's 73. That was one of those changes that got made and it pushed that one year later for folks to take distributions that.
Mike Zaino:
Matt That's a big change, okay? I mean, the Secure Act, the original Secure Act pushed it from the April 1st. Following the year you turn 70.5. Couldn't be more convoluted, you know, to 72. And then the secure Act 2.0 pushed it to 73. And there were also a host of other really, really beneficial things for savers and investors that if you're not aware of, you definitely need to give me a call so that I can make you aware of those and we can go over them and how it applies to you and your individual situation.
Producer:
Yeah. And once again, that is what it's all about is your individual situation, because it's, you know, it all depends on what your situation is. It's not like there's a one size fits all plan that you can just stroll down the aisle of the grocery store and pick out. You know, it's it's not that kind of thing. It doesn't work that way.
Mike Zaino:
Not cookie cutter.
Producer:
Not at all. Yeah, at all. So if that sounds like something that you're interested in getting something customized for you II Hey, I know a guy. It's Mike Zaino and it's MoneyMattersWithMike.com. That's the website where you can go or call 704 5601573704560 1573. Now you know we've we've talked about annuities earlier and we've got a little bit more annuity talk coming up before the end of the show. But one of the ways that we sort of think about annuities.
Producer:
Is that.
Producer:
It is your own personal pension because pensions have gotten so much more rare or rarer, so much rarer. That's one of those rare it's almost like rural, you know, it's a weird word to say it's they've become rarer over the years. And so a lot of people, though.
Producer:
Still have them.
Producer:
I mean, if you worked for for, you know, a company for many, many years, large company, and you've got like a like a legacy pension plan.
Producer:
From that company.
Producer:
Or if you work for certain.
Producer:
Government.
Producer:
Bodies or agencies, that kind of thing.
Producer:
You might.
Producer:
Have a pension. And a lot of times those employers, former.
Producer:
Employers.
Producer:
Will force people to actually buy X date, start taking their pension, right?
Mike Zaino:
Mike They do. And the reason that they do that is to get the money off of their books, right? And to get them onto your books. Why? Because you're going to have to start paying the taxes on them. So if you're a current or former employer is going to require you to start taking a pension, but you don't really need the income, okay, we can help you reinvest that money in as far as in a tax efficient manner. You have way more options than you think. And we want to help you obviously make the most of it. So if that sounds like you, please get in touch with us and we may talk about whether or not what's called an IUL is right for you. It's one of the only two tax free investments and can provide a death benefit to protect you and your family and your spouse. It also allows you to build cash value and then can later become an extremely valuable tax free retirement income stream. So we want our clients to have more mailbox money, write paychecks and play checks are very, very important that you can count on each and every month just to be able to enjoy the retirement lifestyle that you've always imagined.
Producer:
And you can go to money matters with Match.com for that free consultation. And also as part of that, you know, talked about the traditional pension that people think of, but also the the personal pension that I mentioned a few minutes ago. And that is an annuity. And we talk about doing something called an annuity x ray during that consultation. What what does that entail?
Mike Zaino:
Mike So mean if you've bought an annuity over the last few years or you inherited one and you're not really sure what's going on, you definitely need to give me a call to schedule an appointment just so that we can do what we call an x ray. Okay, So many annuities allow penalty free withdrawals anywhere between the first 30 days. Most commonly I've seen is after the first 12 months. But we can sometimes structure it in a way where we can see how changes could improve your situation. So if you haven't seen much growth over the last two years, we would love to help you get more out of those funds.
Producer:
Yeah, and that's why it's so.
Producer:
Important to give Mike Zaino a call. 704 5601573 or go to MoneyMattersWithMike.com.
Producer:
It's this week.
Producer:
In history so a lot of very important and pretty cool stuff happened this week in our history and the very first one on this date March 3rd I should say on March 3rd in 1847, a guy who we should all be very thankful for was born scientist inventor Alexander Graham Bell, of course, the man who invented the telephone. He also co-founded a company you might have heard of called AT&T.
Producer:
So there you go.
Mike Zaino:
Yeah, Think it was American Telegraph and telephone, I think is what it said. And don't quote me on that. I could be way off base with that. You know, another historical moment, one that touches my heart very dearly because I served in the military and was sworn to uphold and defend the Constitution of the United States and blah, blah, blah and all that good stuff. But on this date in 1931, Matt the Star Spangled Banner, which was written by Francis Scott Key, was officially adopted as the anthem of the United States by Congress. And so Key was inspired by the large US flag that at the time had 15 stars and stripes and obviously now has 50 stars, 13 stripes, you know, to represent the states and the original 13 colonies.
Producer:
Yeah, just, of course.
Producer:
A big moment in our nation's history there as it was officially adopted as the national anthem. Then on March 4th.
Producer:
Some.
Producer:
Music history being made by the Rolling Stones. This date back in 1967, the single went to number one called Ruby Tuesday. It was the group's fourth number one single great song. Boy, the Stones have had so many hits over the years. And they're still I mean, they're.
Producer:
They're still trucking along Here.
Mike Zaino:
They are. I mean, that song, you know, it led to Rolling Stone magazine. And then and then Rolling Stone magazine ranked that song. Okay, 310 on on the top 500 songs of all times. Okay. Also, on March 4th, back in 1801, Thomas Jefferson was inaugurated. He was the first US president to be inaugurated. All right. Um, in 1861, Abraham Lincoln was the 16th US president to be inaugurated. And then in 1933, Franklin D. Roosevelt was the 32nd president to be inaugurated. So March 4th had a lot of inaugurations.
Producer:
Yeah. And it's weird for us now to talk about that because now the inauguration obviously takes place in January. Correct. But it used to take place in March, but then they were like, we don't need to wait so long between the November election and, you know, all the way to march to have this done. We'll just get it get it over and done with, you know, first month of the year.
Producer:
So they made that change.
Mike Zaino:
You know, I just want to just take a second because I know we're coming to the end of the show. And and again, thank everybody. But next week, make sure you tune in because we're going to talk about thanks to the Secure Act 2.0, how you can now do a tax free rollover of any unused funds inside of a 529 plan. Okay. So we're going to talk about who qualifies and how you can benefit from that new change. So make sure you tune in next week.
Producer:
Yeah, it'll be right here at the same.
Producer:
Time, same bat time, same bat station as we would say. But yeah, that is just about all the time we do have for this week. And glad to share the past hour with you, Mike. I know that our listeners appreciate it as well because I think we've we've shared a lot of great tips and info. And folks, remember, reach out to Mike Zaino, go to Money Matters with Mike Mic.com or call (704) 560-1573. Mike thank you We'll talk to you next time sir.
Mike Zaino:
Matt, I appreciate you. Thank you, as always. And for all of our listeners. Out there without you. The show does not exist. So I hope whatever you're doing this weekend, you enjoy it to the fullest extent. And as always, make it a great day.
Producer:
Thanks for listening to Money Matters With Mike. You deserve to work with a financial and insurance expert who can offer strategies for protecting and growing your hard earned money. To schedule your free no obligation consultation visit MoneyMattersWithMike.com or pick up the phone and call 704 560 1573.
Producer:
Not affiliated with the United States government Mike Zaino 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. Ameri 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 guarantees of completeness, accuracy, usefulness, timeliness or the results obtained from the use of this information. Are you concerned about market volatility, rising taxes, economic uncertainty and how it could all affect your future in retirement? Then tune in to Money Matters with Mike to learn how you can protect and grow your hard earned money. Money matters with Mike every Saturday at 9 a.m. right here on FM 100.1 and AM 1340. Schedule a free no obligation consultation now at MoneyMattersWithMike.com.
Producer:
Fixed annuities, including multiyear guaranteed rate.Annuities, are not designed for.Short term investments and may be subject to.Restrictions, fees and surrender charges as described in the annuity.Contract. Guarantees are backed by the financial strength and claims paying ability of the issuer.
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