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/
Do You Know the Difference Between Being Rich and Being Wealthy?
Do you consider being rich and being wealthy the same thing? In the book by Morgan Housel, The Psychology of Money, the author argues that these words mean two different things. In this episode of Retirement Starts Today, we’ll explore the difference between rich and wealthy as well as the connotation of the word money.
Outline of This Episode [1:42] A review of the psychology of money [4:30] The difference between being rich and wealthy [6:13] How to declutter the filing cabinet Thank you for 1 million downloads I want to thank you all for helping me hit an exciting podcasting milestone. In May of this year (2021), we hit 1 million lifetime downloads. Wow! When I started this podcast several years ago I was thrilled to reach 100 listeners a month, so this kind of reach boggles my mind. Thank you for joining me on this journey.
To celebrate this milestone, I have an extra heaping helping of retirement headlines today. Both articles hail from the Wall Street Journal. The first article, written by Jason Zwieg, is a review of the book, The Psychology of Money, by Morgan Housel and it explores the different mentalities of the rich and the wealthy. The second article will reveal the best way to declutter your filing cabinet.
The Psychology of Money Have you ever thought about what money really is? Money is more than a way to show the value of things. Money is also a carrier of emotion, ego, hopes, fears, dreams, heartbreak, confidence, envy, surprise, and regret. There is so much of ourselves that we wrap up in the concept of money.
This is one of the central arguments in Morgan Housel’s new book, The Psychology of Money. The author juxtaposes two stories of two different men with two very different outlooks on money, and in doing so, he reveals that great fortunes can be built from old-fashioned values like delayed gratification.
Have you ever thought of money from a values perspective?
What is the difference between being rich and being wealthy? Housel explores the differences between those who are rich and those who are wealthy in his book. He describes being rich as having a high current income and being wealthy is having the freedom to choose not to spend money. He explains that many rich people aren’t wealthy because they spend much of their high income to show others how rich they are.
How the difference between rich and wealthy can figure into retirement “The ability to do what you want, when you want, with whom you want, for as long as you want pays the highest dividend that exists in finance.” This is what many people are looking for in retirement. Most people think of retirement as a time when you stop working, however, retirement could mean, “the ability to do what you want, when you want, with whom you want, for as long as you want.”
What are you looking for in retirement? Are you ready to give up working completely or do you simply want more freedom and flexibility?
Resources & People Mentioned BOOK - The Psychology of Money by Morgan Housel Wall Street Journal article - The Difference Between Being Rich and Being Wealthy Wall Street Journal article - Declutter the Filing Cabinet H&R Block - My Block Intuit’s Turbo Tax Jackson Hewitt Fireproof Document Bag External Hard Drive Adobe Scanning App Microsoft Lens Connect with Benjamin Brandt Get the Retire-Ready Toolkit: http://retirementstartstodayradio.com/ Follow Ben on Twitter: https://twitter.com/retiremeasap Subscribe to the newsletter: https://retirementstartstodayradio.com/newsletter Subscribe to Retirement Starts Today on
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Cheaper Health Insurance Before Medicare?
Are you one of the many that are being held back from early retirement by the exorbitant cost of health insurance? If so, you won't want to miss this episode. This week’s retirement headline comes from Carolyn McClanahan at AdvisorPerspectives.com and it outlines the enhanced health insurance subsidies that stem from the American Rescue Plan (ARP).
You’ll want to stick around for the listener questions segment if you are a fan of retirement podcasts. I have a treat for you all as I crowdsource the answer to John’s question about asset location. Listen in to hear 4 different answers from voices that you may recognize.
Outline of This Episode [2:12] Could the American Rescue Plan be the answer to your health care before Medicare question? [5:05] What do you need to do to act? [8:49] An asset location question from John [10:01] Peter Lazaroff’s answer [12:02] Roger Whitney’s answer [15:45] Taylor Schulte answer [18:44] Chad Smith’s answer Could the ARP be the answer to your health care before Medicare question? The number one issue that holds back potential retirees from retiring early is how to find affordable health care before Medicare. If this sounds like you, then the American Rescue Plan may have the solution that you have been waiting for. Carolyn McClanahan's article is geared toward financial advisors, but we’ll take a look at it and see if the ARP could help you solve this common problem.
How can the ARP help lower the cost of health insurance? With the ARP, you may now be eligible for enhanced health insurance subsidies. The Affordable Care Act (ACA) subsidies have been limited to those with a modified adjusted gross income (MAGI) of less than 400% of the poverty level. However, the ARP has lifted these levels with a credit that is based on the cost of the second-cheapest silver plan available in any person’s given area. Unlike the previous credit under the ACA, it isn’t suddenly wiped out when someone’s income jumps over the income limit. Instead, it is phased out gradually.
What do you need to do to qualify? To qualify, you must purchase your health insurance via www.healthcare.gov. The open enrollment period lasts through August 15, and the tax credits apply only for the months a person is using a plan from the ACA. Therefore, the sooner you apply, the more savings you will receive.
Additionally, anyone who has received even one week of unemployment benefits in 2021 and is without access to affordable insurance through a family member will qualify for a silver plan at no premium cost. They also will qualify for cost-sharing subsidies to help lower their deductible.
You can utilize the calculators at www.healthcare.gov or the Kaiser Family Foundation to determine your tax credit amount. States that have opted out of the healthcare marketplace may operate differently, so you’ll want to work with a local health insurance agent to help you navigate the process.
The ARP also offers COBRA subsidies If you lose employer-based coverage due to job loss or reduction in hours, the ARP provides COBRA premium subsidies from April 1 to September 30, 2021. After that, you can continue coverage at full cost. It is important for you to weigh whether you should accept this benefit or choose an exchange-based plan. Will take advantage of the benefits offered in the ARP to retire early?
Resources & People Mentioned Article from AdvisorPerspectives.com www.healthcare.gov Kaiser Family Foundation IRS Coronavirus Tax Relief Retirement Podcast Network BOOK - Making Money Simple by Peter Lazaroff PODCAST - The Retirement Answer Man with Roger Whitney PODCAST - Stay Wealthy with Taylor Schulte PODCAST - Financial Symmetry with Chad Smith Connect with Benjamin Brandt Get the Retire-Ready Toolkit: http://retirementstartstodayradio.com/ Follow Ben on Twitter: https://twitter.com/re
Improving the 4% Rule
I’m sure you’ve all heard about the 4% rule for retirement planning. This rule is great for speculating your likelihood of success, but it isn’t always the best rule to follow in practice.
Druce Vertes at AdvisorPerspecives.com offers a different approach to implementing the original 4% Rule. On this episode of Retirement Starts Today, we’ll dive into his technical article which explores the idea of making the normally rigid 4% rule more flexible to maximize spending for different levels of risk aversion.
I’m always looking for innovative ways to help you turn your retirement portfolio into income and that’s exactly what we’re exploring this week. Tune in to hear how to tweak the 4% rule and maximize your spending in retirement.
Outline of This Episode [2:52] Infinite risk aversion [9:04] Constant relative risk aversion [14:06] Thoughts on 401K rollovers What exactly is the 4% rule? The original 4% rule was theorized by Bill Bengen in the 1990s. This rule is handy for napkin math but doesn’t allow much flexibility and it may be overly cautious.
The 4% rule states that you can invest an equal amount in stocks and bonds and withdraw 4% of your starting portfolio during each year of retirement. As long as you adjust for inflation each year, you would never exhaust your money over the course of a 30-year retirement. Have you used the 4% rule to help you calculate the likelihood of financial success of your retirement?
How can one make the 4% rule more flexible? Our retirement headline this week is titled Beyond the 4% Rule: Flexible Withdrawal Strategies Using Certainty-Equivalent Spending. It examines what would happen if we explored options beyond Bengen’s 4% rule. It asks, what flexible rules would maximize spending for different levels of risk aversion? The author used the programming language Python to maximize certainty-equivalent spending. This led him to three generalized rules based on one’s risk tolerance.
3 rules for 3 separate risk tolerance categories For those that are completely risk-averse, Bengen's 4% rule is the safest bet. The fixed constant withdrawal level never experiences a shortfall or reduction in withdrawals.
The next category is for those who don't mind plenty of risk in their portfolio. This is why this rule is not recommended for most people. It finds the withdrawal amount that historically maximized spending irrespective of market volatility. This risk-neutral category is for those that can tolerate reductions in spending or shortfalls in some years as long as they are offset by gains in other years.
For those that fall somewhere in between the two ends of the risk tolerance spectrum, different rules apply which trade off higher mean withdrawals against the risk of lower withdrawals.
Using some of these rules, a retiree could achieve more than the 4% expected withdrawal rate. All of these models are simplifications, but they are useful and allow you to visualize the choices between different rules that have varying levels of risk tolerance.
Visualize your retirement spending The author strived to create a simple model to help people understand strategies that may improve on a fixed withdrawal at varying levels of risk aversion. You can test out the different rules by using this online tool which allows you to try out and visualize each one.
It’s always refreshing to learn about new ways to live off your retirement savings. Vertes’ idea splits the difference between the 4% rule and a dynamic distribution plan. This hybrid plan would allow for higher spending in good markets and a scientific way to gradually reduce portfolio withdrawals when the market dips.
Listen in to hear how each of these rules could play out with concrete examples using actual numbers. You’ll also hear Joe’s question regarding multiple 401Ks.
Resources & People
The 6 Phases of Retirement, Ep # 192
As you prepare yourself for retirement, you probably have a vision of your retired self traveling, spending more time on your hobbies, or with loved ones. Retirement will give you time for all that and more.
I read an article recently that describes the 6 phases of retirement. I had never defined it that way before, but this was an interesting way to delineate a natural progression of this time period. Press play to learn what these 6 phases are.
Outline of This Episode [1:42] There are 6 identifiable phases in retirement [4:25] If you retire mid-year, is it better to reduce pretax and post-tax deductions? [7:06] What should we do if our RMD rules violate our safe spending rules? [11:04] What about using the 4% rule? The natural progression of retirement Have you ever thought about the natural phases of retirement? This week’s retirement headline is written by Andy Millard from AndyTheAdvisor.com. In the article, Andy mentions that much like the 5 stages of grief, retirement can also be broken into 6 identifiable phases. These stages don’t take the same amount of time and can vary from person to person.
Honeymoon - This is likely the most active phase of retirement and probably the one you have been looking forward to the most. People are likely to use their newfound freedom to pursue hobbies, take trips and classes, and do home improvement projects. This stage will get you out and about in the world. Rest and relaxation - After enjoying the hustle and bustle of the honeymoon phase you may be ready to settle down a bit. This is the time to sit back and relax into the new slower-paced lifestyle. This stage may also bring on some introspection. You may reflect on a life well lived and think about what brought you to this point. Disenchantment - During this phase, people begin to realize that the changes they’ve made to their routines are permanent. You may begin wondering about your purpose in this part of your life. This can be an emotional time period for many and consist of both physical and mental adjustments to a new way of life, whether it be a change in spending habits, a move to a new community, or changes to health. Reorientation - Hopefully the disenchantment won’t last long and you can quickly move onto the reorientation phase. This is a time when people begin to adjust to retirement and realize that there’s still more living ahead of them. Some examples of things that happen during this period are new marriages, learning new artistic disciplines, or finding new interests and hobbies. Retirement routine - This stage is inevitable since humans find comfort in and crave routine. Whether it be club meetings, volunteering at your favorite charity, or a weekly coffee chat with friends, your new reality becomes your new normal. Termination - Unfortunately, at some point, retirement will end for everyone. This is--hopefully--a peaceful phase where people reflect on their life’s journey, their accomplishments, and whatever the next season holds. Do you recognize these phases? Have you noticed them from your parents or older friends’ retirements? What are you most looking forward to in retirement?
Check out the newsletter for more links and retirement learning opportunities Be sure to listen until the end of this episode to hear what to do if RMD rules violate your safe spending guidelines. I’ll also include links to the Guyton-Klinger rules in the Every Day Is Saturday newsletter. Head on over to www.retirementstartstodayradio.com/newsletter to sign up if you aren’t on the mailing list. The newsletter focuses on sending out relevant retirement information to educate you on your next phase of life.
Resources & People Mentioned AndyTheAdvisor.com - The 6 Phases of Retirement The Financial Ghost - Guyton Klinger Rules Decision Rules and Maximum Withdrawal rates the original Guyton-Kling
Time for a Gap Year?
Have you ever considered going back to school? Early retirement can be a fantastic time to explore new learning opportunities.
In this episode of Retirement Starts Today, we’ll take a look at a Market Watch article that describes the burgeoning culture of adult learning for those at or near retirement age. We’ll continue by exploring many higher education programs across the United States that are aimed at people aged 50 and above.
Make sure to stick around for the listener questions segment where I answer a question about using home equity as long-term care insurance. You’ll hear my opinion on the matter and learn how much home equity you may need to make this strategy work.
Outline of This Episode [1:36] It’s time to rebalance [4:22] Have you considered taking an adult gap year? [8:32] Real-world examples of retirement age students [12:51] Using your home’s equity as long term care insurance [17:19] How much home equity would you need? It’s time to rebalance We all know that the market has had an incredible run this past year. Many people’s portfolios are up 30%. When you’re seeing these kinds of returns it can be especially difficult to take those earnings and put them into the calmer side of your portfolio, but as you approach retirement it’s a good time to edge closer to a 60-40 split.
If you are within a year or two of retirement, you should know where your first few years of retirement income are coming from. That means that this is the time to be prudent and squirrel away some of those profits in any boring type of account so that you can fund the first few years of your retirement without worrying about the ups and downs of the markets.
Now is the time to take a gap year If you have ever had the inkling of going back to school early retirement is a great time to start. Many people are turning to higher education as a way to find fulfillment after long and successful careers.
The rise of Covid and the ease of learning through technology are augmenting this trend. The pandemic has caused stagnant enrollment rates in many colleges around the country. This has led those institutions to find new ways to make money. Many universities are turning to alternative programs and continuing education as a way to reach a broader audience.
What kinds of learning opportunities are out there? There are learning opportunities offered through many different types of programs at different universities, private subscription programs, and even free online programs.
These are a few of the programs are offered by different universities:
UT Tower Fellows Program Encore!Connecticut Duke Lifelong University Stanford University’s Distinguished Career Institute The University of Virginia You don’t have to turn to a university to continue your education. There are many types of subscription learning programs available as well.
Osher Lifelong Learning Institutes One Day University GetSetUp Oasis Everywhere If you don’t want to invest any money into continuing your education you can take advantage of free or low-cost programs through these websites:
Coursera EdX The Great Courses LinkedIn Learning MasterClass Skillshare TED Talks Udemy Learning is easier than ever before There are so many amazing educational opportunities to enjoy. The pandemic has caused a giant leap forward in virtual learning. With modern technology, you can learn anything at any time from any place. Since people are living longer, retirement can last for 30 years or more. This leaves plenty of time for an encore. So, if you ever had the notion to go back to school to either pursue your options for a second act or simply to explore new educational opportunities, the world is your oyster. Have you ever considered going back to school? What would you want to study?
Resources & People Mentioned Market Watch
Deducting Your Home Office in a Work from Home World
Since 2020 was the year of working from home, you may be wondering how you can deduct your home office expenses from your taxes now that tax time is upon us. For this reason, we explore an article written by Jeffrey Levine at Kitces.com. Learn the home office deduction rules and discover if they will apply to your situation.
Outline of This Episode [2:12] The specifics of the home office deduction [9:19] How to calculate the home office deduction [11:55] Should he open an additional IRA? Who is eligible for the home office deduction? Many small business owners can claim a home office deduction as a tax break. However, not every person working from home can claim this deduction. For instance, the deduction is not accessible for employees who work from their own home offices. People owning partnership interests, on the other hand, are potentially eligible for this deduction. There are specific rules that need to be followed in order to determine whether your home office qualifies.
What are the rules to claim the home office deduction? In order to claim the home office deduction, there are requirements that must be met.
The home office must pass the exclusive use test. This test dictates that in order to claim a home office deduction, the portion of the home that is deemed the home office must be used entirely for business purposes.
Something that limits a person’s ability to claim a home office deduction, but not necessarily eliminates it, is the ability to claim a separately identifiable space within their home that is used exclusively for business purposes.
Another stipulation of a home office deduction is the regular use requirement. Occasional office use is not enough, even if the business is the only use for that particular space. It must be used regularly in order to qualify for the home office deduction.
Another requirement is that the home office must be considered the taxpayer’s principal place of business for a particular business activity. This means that this is the space where the majority of business is done. Deciding on this can be tricky if you have a home office as well as one in an office building. When deciding on a principal place of business, individuals should consider both the amount of time they spend at their various business locations, as well as the relative importance of the tasks performed at each location.
Because of the pandemic, many have had to shift work that they typically did in an office building to spaces in their homes. For the year 2020, people in this situation may be able to claim a home office deduction.
How to calculate the home office deduction There are two ways that you can calculate the home office deduction. The regular method will calculate the actual expenses of using your home office space. The simplified method will calculate the square footage of your home office and multiply it by $5. The maximum deduction using the simplified method is $1500.
If you are considering using the home office deduction it is important to work with your tax professional to ensure that you are within the detailed guidelines. Make sure to click on through to the article to learn all the details about claiming the home office deduction.
Resources & People Mentioned Kitces article on home office deduction Connect with Benjamin Brandt Get the Retire-Ready Toolkit: http://retirementstartstodayradio.com/ Follow Ben on Twitter: https://twitter.com/retiremeasap Subscribe to the newsletter: https://retirementstartstodayradio.com/newsletter Subscribe to Retirement Starts Today on
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Ben is a great host and wealth of knowledge! Highly recommend the listen!
One of the best
I really look forward to this podcast among the group of retirement related podcasts that I regularly listen to. Benjamin has a straight forward delivery of great information without seeming to be subtly steering you to a paid group like some other podcasts. Of course he is using the podcast to grow his advisory business. Nothing wrong with that. The way he presents information is clear and upfront and helpful. No hard sell or scare tactics to motivate you. I am not a customer of his but if I was looking for an advisor I’d look for someone like Benjamin.
Excellent job with the show notes. It’s hard to capture and retain everything said in the podcast so the notes and background are very much appreciated!