Benjamin Brandt wants to teach you how to retire! Listen in as Benjamin Brandt CFP©, RICP© answers the questions on the minds of the modern retiree, often joined by the top experts in the retirement planning industry. Ask Benjamin a question here: https://retirementstartstodayradio.com/ask-a-question/
Could Living Abroad Save You Money? with Tim Leffel
Would you want to raise your standard of living for half of what you live on now? Tim Leffel did, which is why he chose to uproot his family from their life in Nashville to move to a small city in Mexico. Tim is the author of the book A Better Life for Half the Price and he joins me today to discuss the pros and cons of living abroad.
Don’t miss the opportunity to learn how you can save money by living abroad. Tim is an expert in the subject and has written extensively about this topic. Listen in to hear this interview.
Outline of This Episode [1:22] What made Tim decide to live in Mexico? [5:06] Why did he rent before buying? [7:08] What are examples of how he saves money by living in Mexico? [10:45] Do you need to know Spanish before moving to Mexico? [13:55] Why would people not want to move abroad? Why did Tim choose to move to Mexico? Tim and his wife have traveled extensively and even lived in Seoul, Korea, and Istanbul, Turkey when they were young. When they had their daughter they knew that they didn’t want to live in the far flung reaches of the world but they still wanted the experience of living abroad.
Mexico was close by and easy to travel to, plus they liked the culture and the food which made it an easy choice to settle on. They chose to live in the central Mexican town of Guanajuato which is a mid-sized city of 200,000 with pleasant weather all year round.
It makes sense to rent first before purchasing abroad Tim chose to rent for a year first before taking the plunge and purchasing a home. He remarks that buying a house abroad is not like it seems on those popular house hunting TV shows.
There is a lot you need to think about when buying a home abroad. The zoning laws aren’t the same as in the U.S. and it can be hard for a foreigner to understand what things are worth without living there first. Tim recommends putting in the time and effort to truly understand the market value before purchasing a home.
What are examples of how he saves money by living in Mexico? It’s no secret that living in Mexico is less expensive than living in the U.S. Rent in the United States can easily cost $2000. In Mexico, you can find a house to rent for a fraction of that.
Healthcare expenses are notoriously high in the U.S. and in Mexico, Americans are shocked to find how easy it is to pay for those expenses out of pocket.
Tim finds that his total monthly expenses in Mexico are roughly equivalent to what he paid in rent in the U.S. Not everything is cheaper in Mexico though, listen in to hear about what costs more in Mexico.
Do you need to know the language first? You would think that you need to be fluent in the language before moving abroad, but there are some places in Mexico where you can get by being monolingual.
Tim still doesn’t consider himself fluent, although he is learning the language. Since his daughter went to school in Mexico, she had the opportunity to become fluent. Would you want to learn the language before moving abroad?
Connect with Tim Leffel CheapLivingAbroad.com CheapestDestinationsBlog.com TimLeffel.com BOOK -A Better Life for Half the Price by Tim Leffel Connect with Benjamin Brandt Get the Retire-Ready Toolkit:http://retirementstartstodayradio.com/ Follow Ben on Twitter:https://twitter.com/retiremeasap Subscribe to Retirement Starts Today on
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What You Need to Know About Coronavirus Stimulus Package 2.0
I’m thrilled to be back sharing the latest retirement headlines with you after my short holiday break. The biggest news on the retirement radar this week is that the 2nd Coronavirus stimulus package has passed. Together, we’ll take a look at the most relevant parts. Then I’ll answer the question: do you need a Roth IRA even if you make more than the income limits allow for? Let’s start preparing for tomorrow by learning today. Press play now.
Outline of This Episode [1:22] What will the Coronavirus stimulus package bring for us? [7:19] Health expenses are now deductible after 7.5% AGI [9:07] Standard deduction + $600 if you are married filing jointly in 2021 [10:45] Unemployment benefits have been extended [13:09] Does Janet need a Roth IRA? Will you be cashing a $600 stimulus check? The 2nd Coronavirus stimulus package has recently been passed and rather than have you read this 5500 page piece of legislation, I’ll cover the highlights that most pertain to you. Jeff Levine, @CPAPlanner on Twitter was a great source to help me understand the most important information in this bill.
Perhaps the biggest news out of the stimulus package is that new stimulus checks are heading our way. These checks aren’t structured exactly the same as the last ones. The checks are $600 for each person in your household if your income falls under a certain amount. Find out the income limitations by listening to the details here.
If you subscribe to the Every Day is Saturday newsletter this week, we’ll have a link to a calculator that can help you calculate the amount you’ll receive.
Health expenses are now deductible after 7.5% Another change brought about by the Coronavirus stimulus package is that healthcare expenses are deductible after 7.5% of your income. This number often bounces back and forth between 10% and 7.5% of your adjusted gross income (AGI). This means that your healthcare expenses must be 7.5% of your income to be deductible and even then it only counts for the amount that is over 7.5% of your income.
Unemployment benefits have been extended If you found yourself unemployed, like many this year, there’s good news. The stimulus package added federal unemployment benefits for another 11 weeks. This means that $300 per week will be added to your state’s traditional unemployment benefit.
These weren’t the only changes in the bill. You can learn more about how the latest Coronavirus stimulus bill could affect you by listening to this episode of Retirement Starts Today Radio.
Do you really need a Roth IRA? Janet’s financial advisor told her that since she is over the income limitations to save in a Roth IRA that she doesn’t need to open one. However, Janet is a few years away from retiring and she is worried about retiring without one.
In my opinion, everyone could use a Roth IRA eventually. If your current income doesn’t allow for it, you can always fund a Roth IRA with a Roth conversion. Listen in to hear how you can fund your Roth most effectively while filling up your tax bracket.
Resources & People Mentioned Jeff Levine on Twitter @CPAPlanner Nerd’s Eye View Blog by Michael Kitces Connect with Benjamin Brandt Get the Retire-Ready Toolkit:http://retirementstartstodayradio.com/ Follow Ben on Twitter:https://twitter.com/retiremeasap Subscribe to Retirement Starts Today on
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A Special Year End Message from Benjamin
Schedule time for an introductory phone Zoom call at https://RetirementStartsToday.com/meeting
Retirement Rewind: How to Retire Abroad with David Jacoby
Welcome back to another edition of Retirement Rewind -- episodes so good we played them twice!
Time for travel is by far the number one thing that Retirement Starts Today Radio listeners look forward to in retirement. That’s why I interviewed David Jacoby on to this episode and why it was chosen as a Retirement Rewind.
David Jacoby is a financial planner and travel expert who specializes in helping travelers and expats. David, himself has lived in 4 different countries and even built his business while living abroad. On this episode, he’ll help us understand the unique aspects of retiring abroad. If travel abroad piques your interest then you won't want to miss this interview.
Outline of This Episode [2:06] The 3 types of people that are interested in travel abroad [5:22] When does traveling extensively turn into living abroad? [9:10] How to determine where you might want to live? [13:33] How do people plan for their elderly years? [15:26] How does health insurance work when you live abroad? [17:42] What do people neglect to plan for? The 3 types of people that are interested in travel abroad Many people are interested in traveling when they retire, but David Jacoby has found that there are 3 types of people that come to him for his services.
Digital nomads or globetrotters are people who work remotely or are location independent entrepreneurs.
Next are people who want to retire abroad for financial or social reasons. They are looking for the right country to move to.
The last group of people is those who are not quite ready to retire abroad and still live in the U.S. They may be traveling a bit right now to scope out potential locations.
Would you consider living abroad when you retire?
When does traveling extensively turn into living abroad? Traveling abroad and living abroad aren’t quite the same. Rather than living full time in another country, some people would rather keep their house in the U.S. and spend extended vacations in other parts of the world.
Others just want to sell it all and start fresh in exotic locales. However, before this romantic idea sets in, it’s important to do your homework first. David encourages his clients to visit a place 2-3 times in different parts of the year before making any final plans. Renting a place for 3 months or so will give you a better feel for everyday life in your desired location.
How to determine where you might want to live? Some people may not know exactly where they want to live, they just have a general idea. They may prefer a tropical climate, be near the ocean, or perhaps they have always wanted to live in Europe.
David can help his clients consider practicalities when choosing a location. Oftentimes visas and taxes play a huge part in choosing where to settle. For instance, Portugal, Spain, and Italy have easily obtainable visas for Americans while other countries in Europe are more challenging for American citizens to move to.
But what about healthcare? Have you considered travel health insurance? No matter where in the world you choose to settle you’ll need to think about health care especially since Medicare does not work outside the U.S. Depending on where you live you’ll either rely on the local system of care or pay for private health insurance.
Some people even chose to forgo health insurance. This sounds crazy but when you consider that the costs of medicine in many parts of the world are 1/10 of what you pay in the U.S. it isn’t that scary.
You need to understand why you should still enroll in Medicare even if you plan to live abroad for several years, so make sure to listen to this interview with international travel expert, David Jacoby.
Connect with David Jacoby Remote Financial Planner 4 Ways Moving Abroad Can Radically Improve Your Finances Connect with Benjamin Brandt Get the Retire-Ready Toolki
Retirement Rewind: Estate Planning Strategies to Preserve IRAs with John Ross
Welcome to this episode of our Retirement Rewind. Retirement Rewind episodes are so informative that we decided to play them again while I take the month of December to spend a bit more time to enjoy my family.
Estate planning attorney, John Ross from the Big Picture Retirement podcast, joins me to discuss how you can preserve your IRAs for your heirs in the wake of the SECURE Act. Check out this interview to discover how to optimize legacy tax planning, how to utilize an accumulation trust, and learn about the charitable remainder trust.
Outline of This Episode [1:22] How has the loss of the stretch IRA changed estate planning? [4:06] An accumulation trust may be the key to planning your estate [6:44] A new opportunity for state income tax planning [9:22] How to turn a 10-year stretch into a 20-year stretch [16:32] A case study [18:44] You may want to consider a charitable remainder trust How has estate planning changed with the elimination of the stretch IRA? The SECURE Act brought about huge changes to estate planning when it effectively killed the stretch IRA. The stretch IRA provided the opportunity for people to name their spouse as a primary beneficiary and their children as secondary beneficiaries.
Upon inheritance, the IRA could be sent into a conduit trust and the RMDs were sent directly to the beneficiary. Those RMDs were based on the life expectancy of the beneficiary. One benefit of this trust was that it was doled out over a lifetime, another is that the IRA was preserved and protected from creditors. With the SECURE Act in place the conduit trust will no longer set the standard.
What will replace the conduit trust? Now that the conduit trust is defunct, how should people plan their estate? An accumulation trust may be the key. Inheritors can no longer withdraw those IRA funds over the course of their lifetime. They now have only 10 years to draw on the IRA.
In those 10 years a lot can happen. If your inheritor gets sued, divorced, or has problems with creditors then the IRA is at risk of disappearing. One solution to this problem is to set up an accumulation trust.
You may want to rethink your beneficiaries Now that the long-term stretch IRA is gone we need to rethink legacy planning. You may be thinking that 10 years is too short of a window for your inheritors. However, there is a way to stretch that 10-year window into 20. You could stretch these funds into 20 years by leaving your spouse half of your IRA and your kids the other half. Find out how this could work by listening to this interview with Johnn Ross.
Now is the time to review your estate plan Instead of thinking of this change in the law as an inconvenience, take the opportunity to review and update your estate plan. Many people set up their estate plan and then never revise it, but a lot can change over the years. When was the last time you reviewed your estate plan?
Connect with John Ross Ross and Shoalmire Law Firm Big Picture Retirement Connect with Benjamin Brandt Get the Retire-Ready Toolkit:http://retirementstartstodayradio.com/ Follow Ben on Twitter:https://twitter.com/retiremeasap Subscribe to Retirement Starts Today on
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Retirement Rewind: It’s Roth Conversion Season
What would happen if you go over your tax bracket by $1 when doing a Roth IRA conversion? On this Retirement Rewind episode, we’ll explore the best way that you can take advantage of the current tax cuts and get the most out of your money. What will Roth conversion season mean for you? Listen in and find out!
Outline of This Episode [1:22] Why do we wait so long to convert our Roth IRA’s? [3:44] What happens if I go over my tax rate? [6:40] What about Medicare? [13:15] Why are Roth IRA conversions such a big deal? [15:48] How do Duane’s earnings this year affect his Medicare premiums? [17:15] Should Don put 100% of his portfolio in stocks? Why should you wait until the end of the year to convert your Roth IRAs? It’s a good idea to wait until the end of the year to convert your IRAs into a Roth. This is because you’ll have a good idea as to how much you will earn during the year.
The reason that you’ll want to wait until the end of the year to make a Roth conversion is to understand how much you’ll be making this year so you can fill up your tax bracket with the conversions.
Will you take advantage of Roth conversion season?
Why should you bother to convert your traditional IRA into a Roth? The funds in your IRA are pretax dollars so when you convert them to a Roth you pay taxes on them. It’s a good idea to convert your IRA into a Roth so that you can pay taxes now rather than later.
Roth conversions are a fantastic way to take advantage of the current tax cuts since it’s better to pay the devil you know than wait until later on in retirement when you’ll have no idea what the tax rates will be like.
Have you been converting some of your traditional IRA into a Roth over the years? If you haven’t now is a great time to start!
What happens if you go $1 over your tax bracket? You may have the idea that if you go even just $1 over your tax bracket that all of your planning will be for naught. Before you panic too much, let’s talk about marginal income tax rates.
Those couples who are married and file jointly and earn $79,000 per year will be taxed at a 22% federal income tax rate. However, that doesn’t mean that all $79,000 is taxed at the same rate. The rates are different for different parts of your income. The first $19,400 is taxed at 10%. Then the income from $19,400 to $78,951 is taxed at 12%. So that means only $49 would be taxed at 22%.
This type of taxation is called marginal income tax. A marginal income tax ensures that if you get a raise your net income won’t decrease.
Hopefully, understanding how marginal income taxes work will help you understand that the sky will not fall if you go over your tax bracket by a few dollars.
What if you go over the income bracket for Medicare? Unfortunately, Medicare is not as forgiving as the marginal income tax system. Many people don’t realize that Medicare has income-based premiums. If you make over $170,000 then you will no longer qualify for the Medicare Part B standard premium and you will also pay more for the Part D drug plan.
Listen in to hear how much your Medicare premiums could be and find out the answers to our listener questions.
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