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Episode #575 - Rocking a Solo Retirement: Nick's Resources/Laura's Resources

Today is my birthday and I'm super excited about life!

Roger: Happy birthday to me. Happy birthday to me. Happy birthday, dear Retirement Answer Man. Happy birthday to me.

Welcome to the show dedicated to helping you not just survive retirement, but to have the confidence because you're doing the work to really lean in and rock it. I'm going to have some demerit points from Nichole “Rockstar” Mills, because I sang on the podcast. I'm not supposed to do that. I've been forbidden. But today, January 22, is my birthday. I am 58 years old and super excited about life.

All right, we are continuing on with our retirement plan. Live case study with Laura and Nick. Today we're going to talk about the resources they have to fund their life.

One thing I think interesting about this is Laura was in the private sector her entire life and had to build her assets. Nick, on the other hand, was in the military and the government and still had to build his assets but has some other social benefits in terms of guaranteed income that you get when you work in public service, and it reflects in his net worth. He’s a wealthy man, but he's not one of those that has just amassed millions of dollars in a 401k. He took a different route. So, we're going to talk about those assets.

One thing that's critical, I think, when making a retirement plan of record and knowing what's feasible is approaching life from a different perspective, and that’s hard! However, it can help you find solutions to the questions you have. Let me give you an example. So, over the holidays, I did a feasibility test on my own retirement, set a vision for what I thought we needed, worked through the resources we had currently and the savings that we're doing, put in some income that I expect to receive, say, over the next 10, 20 years, and did a feasibility test.

Now you're probably thinking, dude, this is your job. Of course you did that. No, I don't have a robust retirement plan, partly because I do this all day long. I have some intuition over my 30 plus years of doing this for other people of where we're at. I have had my nose down to the grindstone for a few decades in my work. I'm an entrepreneur, but in my case, building the practice, building the business, investing in those things, that causes you not to save a lot early on because you're investing in the business rather than saving in traditional sense. I've had my nose down just trying to build the engine and build whatever wealth I have, probably like you a lot. Even if you worked for a company, you were focused on this cycle. Accumulate, build, accumulate, provide for your family, try to have some fun and balance, but accumulate. I never really looked up from that. I don't look up very often. I did it over the holidays when I had a week or so by myself. The short answer is, if I wanted to today, with some maybe slight adjustments, I could retire. That's pretty cool. It didn't really shock me, but I could just not work. I don't have to have my nose down to the grindstone if I didn't want too, financially anyway. That's not really left me. The thing that happens now is, what do you do with that?

First off, it's like, nah, I must have done something wrong. That can't be right. That's a natural reaction for others that have gone through a process and saw. But it also changes how you perceive the work that you do. Whether you work at a corporation or you're like me and you own a business because you're only doing it because you want to accumulate more assets for something that you haven't articulated yet, or you want to accumulate more assets because of the buffer you want to create in your financial life or because you want to. When you work just because you want to, all of a sudden you start to look at decisions a little bit differently. That's a healthy thing.

Imagine you work at a corporation. You get a plan of record. You see and believe that, okay, I get it, I see it. It's uncomfortable to think that I'm okay, I could retire today, but I see it and I still want to work. All of a sudden, they're not as caught up in office politics of trying to impress everybody to be at every meeting and do everything for everybody else to prove yourself over and over and over again, which is a cycle a lot of us have been on for years in our careers, and they start to find more joy in their work because they're just doing it because they love it. They're doing it for the love of it. They can create better boundaries. That's pretty cool. That's okay.

What's the punchline here as far as me in terms of the private practice that I run, the Club, and this podcast? I am having a blast, and I'm not going anywhere anytime soon. I am convinced of that. I've done a lot of work on that. It may help me to have more boundaries and be more focused, which is a good thing for me and probably a good thing for you and others that I serve. I feel very blessed. All right, today we're talking about the resources for Laura and Nick, so let's get that party started.

Oh, whoa, wait a second. By the way, I forgot to mention that if you want to see our live results show with Nick and Laura, go to livewithroger.com and register. There is one on January 30th, and on February 2nd. You'll also be registered, I believe, for our Saturday, February 1st, open house for the Rock Retirement Club, which is our online community that gives you all the tools you need and the education to build your own plan of record so you can have clarity on where you stand and what you might want to do next to improve that situation. So go to livewithroger.com before you do that. I'm glad I got that in, otherwise, Nichole would have got mad at me.

All right, let's get this party started.

LAURA’S RESOURCES

All right, we are back with Laura.

Laura, you were late. Explain why you were late.

Laura: Oh, I was just late because I was making sure my mom was taken care of, and it was a holiday today, so we didn't have coverage, so just one of the realities of life.

Roger: Yeah.

Laura: Taking care of mom.

Roger: Everybody's chipping in for coverage, if, you know those handoffs. Oh, if you think somebody has it and they don't, and then everybody has. Somebody has to figure it out. This time it was you.

Laura: So, again, sorry for being a little late.

Roger: No worries. I call it free time.

So last week, we talked about your goals that came from your story and your values, which we did the prior week. Now that we've stepped away a little bit from those conversations, are there any insights or thoughts that you've had?

Laura: It's really interesting because sometimes when you're on the spot, you may not say everything exactly the way you want to say it. But at this point, I can't think of anything that I would have corrected. The only thing that we didn't mention, really fitness and health, which was my number three value, which is super important to me. It's something I do every day. It takes absolutely top priority, whether it's making sure for health or just because to me there's psychological as well as physical health that feeds into that. So, I get my work out every day and try to stay healthy.

Roger: I can attest that it's the best antidepressant.

Laura: Absolutely. It really helps to level things out internally. If you have a lot going on and you skip that, oh, forget it.

Roger: So why did you want to make sure we brought that up?

Laura: To me, it's very, very important. I mean, I don't want to wait until I can't do things. It's very important for me to stay healthy and fit so I can continue to enjoy life. I think that's one of the things you talk about a lot and I think it's super important. You know, every time I hear someone mention retirement or talk about retirement, it almost sounds like you're going to go into the sofa and you're never going to get up again. But for me, I don't like using that word. It's kind of just the next phase of life because I'm not going to retire to anything, you know, I guess other than, you know, trying to just continue to enjoy life.

Roger: But that “retire” in retirement is one of those words that does have that connotation. Some people have tried to change the word, I don't know. But I get what you, I get what you mean. I get what you mean.

Laura: Yes, because it definitely sounds like, okay, you're done, instead of I'm going into the next chapter of life, which could be anything, but retirement sounds like you're done almost.

Roger: So, let's talk about fitness for a second. Okay. When you were younger, high school, 20s, 30s, were you an athlete?

Laura: I was not an athlete in the sense of organized sports or anything, but I've always enjoyed sports. Some level of fitness, whether just bike riding, or road riding has always been in and out a part of my life. In fact, during summer school I would do the 40 mile ride to the university I was going to and back again. It was just one class, but boy, that was a good weight loss program. It's always been a part of my life, but I think it's something I'm much more aware of now at this age.

Roger: As you have gotten older, have you had to change how you exercise based on injuries and wearing things out and all that other. Have you had to deal with that at all?

Laura: I think the only thing I'm really aware of is running. I love the feeling of running. I mean, I don't run so much that I necessarily get the runners high, but I think I come close and if I could, I'd run every day, but I know I can't. So, it's something that I make sure I don't do back to back. But that's about the only thing I really am aware of.

There is a lot of good information coming out on women's health right now about not necessarily getting away from the cardio, but don't just focus on cardio. Start to lift weights because women's muscle mass atrophies very quickly based on hormonal levels and all that. but so, it's something I'm more aware of now and I'm really integrating that consciously as I've gotten older.

Roger: Especially with endurance athletes riding 40 miles to one class. I barely made it to one class in college. I love the focus on weight training. Keeping up with your muscle mass is so important. So, you've incorporated that. any other things that you've incorporated into your health protocol?

Laura: Some people may not agree with this, but less red meat. I try to eat a little healthier. Not to say that I don't enjoy going out and having a good meal, but on a day to day I try to be a little healthier about my choices.

Roger: Okay.

Laura: Not a fast food person anymore. Although if the need arises. I won't die doing that or anything. But it's not a regular thing.

Roger: Okay.

Laura: Try to be smarter with food.

Roger: This is related to the word, retirement, before we get into your resources, because we actually have a purpose for being here. But I wanted to explore that a little bit more. I agree with you on that. We call it rocking retirement. Rocking is a verb, but I was thinking of a quote from Hunter S. Thompson that I think encapsulates what retirement should be, what life should be, but what retirement should be as well. I pulled it up because I don't have it memorized, but I'll read it here briefly.

“Life should not be a journey to the grave with the intention of arriving safely in a pretty and well preserved body, but rather to skid in broadside in a loud cloud of smoke, thoroughly used up, totally worn out and loudly proclaiming, wow, what a ride.”

Laura: I think that's, that's pretty awesome.

Roger: That would be a great way to retire and look back and say, holy crap, that was awesome. Hopefully your goals represent that for you.

Laura: Absolutely, yes.

Roger: But we do have to figure out how we're going to pay for them. So today I wanted to talk about that. We'll stay relatively high level so we don't have to get into your personal finances too deeply publicly. Even so, Laura is not your name and we're changing some other things. There are three sources of capital that will pay for all of the dollars attached to the goals.

The first source is what we call social capital in the financial planning world. That's going to be like Social Security or pensions or annuity income. So, let's start there. Do you qualify for Social Security?

Laura: I will when I get there, yes.

Roger: Have you pulled up your benefit? Do you know roughly.

Laura: Okay, yes, I have.

Roger: What roughly will you get a month?

Laura: Of course, when you decide to retire or when you decide to start to draw on it. But I'm thinking if I draw between ages 65 and 66, it would be about 3,000 a month.

Roger: Okay. I think your full retirement age is 67.

Laura: Okay.

Roger: I have to look at it because it changes by month, but have you actually looked at your statement and gone into SSA.gov?

Laura: I love SSA.gov. Thank you for, bringing that up, in previous podcasts as well.

Roger: At full retirement age, it's about $3,000 a month, you recall.

Laura: Yeah. At 67, it would actually be about $3,300, I think.

Roger: Okay.

So initially, when you're building a plan of record, it's always just good to use that number. The full retirement age. Full retirement age doesn't mean you can't change it later on, but that way you don't get into. It's just a good default to use, and then that's going to be adjusted to inflation. Do you have any pensions?

Laura: I have a small pension from a previous job before they got rid of them all everywhere. It's going to be about five, let's say, $520 a month.

Roger: Maybe $520 a month.

Laura: That can start right away.

Roger: Do you know if it increases if you delay?

Laura: They only communicate through email. I sent out an email and they said it takes two to three weeks to hear anything back.

Roger: So, this is interesting. Just for those of you that do have pensions, when they start, usually there's a determined retirement date. Usually, it's 65. Sometimes it's different. Laura could start today and get it, or you could delay. Some will increase if you delay based on interest rates and other factors. Some will not. You're experiencing what we experience all the time in our practice, Laura. Trying to get information, just any information on how the benefit actually works and how it's calculated is nearly impossible. I have a client who is a wonderful man who was pretty senior in the company that he has a pension from and extremely detailed, and he has this as his personal mission. He's just amazed at how he can't get clear information. So just be aware of that. We'll assume it can start today, but we don't know if it increases or not if you wait.

Laura: Correct.

Roger: If it doesn't increase, is there a reason you haven't started it already?

Laura: Probably because I don't know if it increases. You had mentioned that. That's why I sent out that email. But I still haven't received anything back.

Roger: Okay.

Laura: I do find it amazing, exactly what you're saying. There's no phone number. There's no way to get in touch with anyone. There's no website. It's all paper or email. They don't want to talk to you is what I'm feeling. They did try to actually buy it out because they've now gotten rid of that plan altogether.

Roger: Do you recall what they offered when they did?

Laura: It was maybe 100 grand.

Roger: 100 grand.

Roger: Okay.

Laura: Yeah. I thought, you know, having guaranteed money for the rest of my life, that I didn't have to wonder if I thought it might be a better plan than not at that moment.

Roger: You may still have a lump sum option. Your decision on do you take a lump sum or a pension is easier because you don't have all the other options you would have if you had a spouse. Joint life, you don't have to deal with. There may be a protocol to say, hey, I want to start my benefit, do the calculation, and that might give you a lot of the data you're seeking. That might be something to pursue because they should have a process for that.

Do you have any other social capital, pensions, or annuity income that you have set up?

Laura: No, nothing. Just those two.

Roger: Okay, now let’s move to human capital, which is any kind of work or income that you receive, that's more from your efforts than a socialized benefit.

Are you going to do any kind of work when you retire?

Laura: I don't think so, but you never know. I still feel like I want to be a contributing member of society and I want to still keep learning and growing and thought of, like, for me, the strangest thing, I guess would be, grooming dogs. I don't know why. I mean, I love animals, so, like, oh, I could do that part time or something. It's not the plan to make ends meet. It would be just something different to do and learn.

Roger: Okay, we're going to assume no work.

Laura: Okay.

Roger: Okay. Your male counterpart, who you have not heard yet, he's a big volunteer person. We had a pretty good discussion around how getting a paycheck changes it from just enjoying the act to now I got to show up on time and they can tell me when to be there and just all this stuff.

Okay, so no human capital. The other capital is going to be your financial capital, which is what we think of most of the time. Money. So, let's start off with after tax assets, those are assets in a bank account, in an after tax brokerage account that are either invested or sat in savings. We can just use a sum total.

Laura: Would that include the Roth IRA or not?

Roger: It would not. It would not.

Laura: It would not.

Roger: Okay, so like your savings account or if you have an individual investment account.

Laura: Okay. Now, I would think that between, like cash, CDs, that kind of stuff, anything that's fairly liquid, I'd have about $150,000.

Roger: Okay, so we have $150,000 in after tax assets. Now we're going to look at tax deferred. So, tax deferred are traditional IRAs, traditional 401ks, annuities, whether they're in our IRA or not. So, these are essentially monies that you have not paid tax on yet. I can see you pulling a calculator.

Laura: Yes. You see me grabbing my phone and trying to add. I just let my 401k stay in my previous employer's spots. It was kind of like a homage to this part of my blood or part of things I learned at different places since I worked for some large corporations and I left it there. Now I'm like, oh, geez, I've got money here and I've got it there and then I've got it there. I did combine two of them, which is making it a little easier. But I have three different locations, which of course with the stock market doing what it does, you're constantly adding them up to see where you're at. In that I have about 1,300,000.

Roger: $1,300,000, and you're contributing while you're working still?

Laura: Yes.

Roger: Okay, and then now we're going to talk about tax free. So, this is going to include Roth IRAs, 401ks. Those will be the two main assets.

Laura: You know, so with the Roth, I have about $115,000 in a Roth I think I mentioned before. I wish I had understood Roth IRA’s a little better and had put more in there. But it is what it is. Now, Health Savings Account, are those separate or is that something you can just open up? I mean, how do you open up an HAS?

Roger: Good question. So, a health savings account is structured based on the type of health care you have. You probably have health care through your employer.

Laura: Correct.

Roger: They may have a menu of different types of plans, you know, bronze, silver, gold. If you have a health care plan that is called HSA compliant, then you qualify and could open up an HSA account. What makes a health savings account HSA compliant is that it's a high deductible healthcare plan. It doesn't have a low deductibility in terms of, and I'm looking up the numbers of what the deductible amount is.

As an example, my medical plan, I intentionally chose an HSA plan because I wanted to self-insure more out of pocket because I don't use health care a lot. Then that allowed me to get money into that. I'm looking up the numbers for 2025 and the maximum annual deductible for an individual is $1,650 and max out of pocket is $8,300. So, you essentially would cover that, but your plan would say it's HSA compliant.

Laura: Then you could open an HSA with your bank or where do you open it at?

Roger: Good question. So, number one is you have to have a high deductible policy.

Laura: Okay.

Roger: Usually, it'll say that it is HSA compliant. So, you check that and if you have one of those, then you are eligible to open up a health savings account. Every employer has one that they suggest, but Fidelity is one of the ones I've seen as the best place to have one. That's where I have mine. Then you're allowed to contribute as an individual $4,300 a year to the Health Savings Account. If you're over 55, you can add another thousand as a catch up. So, in this case it would be 5,300 to a health savings account and that is deductible off your income.

Laura: Okay.

Roger: You get a deduction and then as long as you pull that money out to cover qualified medical expenses, it comes out tax free.

Laura: Okay, so, you can use it to cover your healthcare that you're now having to pay for.

Roger: Right. The idea is you get this money into the Health Savings Account. So, if you have an event, you can cover the max out of pocket.

Laura: Okay.

Roger: Then the health insurance is more catastrophic type insurance. Since we're peeling this onion a little bit, what's interesting about it is that it is one of those things that it's like a Roth IRA. I wish I had known earlier and done something right. But we all have regrets of various levels of severity, which is that most people use the Health Savings Account, and take the money out when they need it. What I do, and I think if you're overfunded it is an interesting thing to do is I actually have mine invested just like a Roth IRA.

Laura: Okay.

Roger: Then I keep track of all of my medical bills, because if you, Laura, if you had a $2,000 medical bill for whatever this year, you could just pay it in cash. if you kept your records, you could get reimbursed for those 10 years from now because there's no time limit. So, you can build up your, and then it can act like tax free bucket of money.

Laura: All right.

Roger: But for now, we're not that worried about it. Right. If you retire next year and you leave your employer plan when you go into the government marketplace, it might be something to consider because before Medicare because you could get five years of contributions in there and it might help, but it's going to be one of those smaller levers to optimize. It's not going to be a huge one for you, but hey, okay. It’s optimizing.

Laura: None.

Roger: Okay, and you have a house. Any other financial Assets before we go, Any other financial assets?

Laura: no.

Roger: Okay. Let's talk about your house.

Laura: Okay.

Roger: Roughly, what is the value of your house?

Laura: I would say roughly about $900,000.

Roger: Okay.

Roger: Do you have any debt on the house?

Laura: Zero debt.

Roger: Do you have any debt?

Laura: Zero debt.

Roger: Okay.

Roger: You plan to age in place as of now? No plans to move?

Laura: Correct. I love my location as of now. Yes.

Roger: Yeah, you talked about that. Never say never, but you know.

Laura: Right, exactly. there may come a point in time where I need to move into a smaller place or a place that has a little help offered, but for now, I really like where I live.

Roger: You're good to go. Do you expect to receive any money from corporate benefits or inheritance or anything like that at some point?

Laura: I don't expect, no. But I someday my mom will pass and there'll be a little bit of money but it's distributed amongst many people. Maybe a hundred thousand, two hundred thousand, nothing.

Roger: Okay, well, $100,000 is a decent percentage of your financial assets. Right. So, these are always weird conversations, but we have got to deal with reality here. Right? So, an estimate would be about $100,000, or what would it be? $200,000.

Laura: Let's go with $100. she has a lot of grandchildren.

Roger: Okay. When she does pass, who is that executor or power of attorney?

Laura: She has a trust then. My brother and sister are there as executors.

Roger: Is there clarity? So, you know that you're included in that and all of that?

Laura: Yes.

Roger: Now, just for planning purposes, it's an awkward question, but we just need an estimate. How long do you think your mother will live?

Laura: Oh, that's a good question. If you could help me out, I'd love it. I'm going to just say on the high side, I am saying 10 years, but I know it's not 10 years. Physically she's very healthy, but dementia is setting in, and unfortunately, that could also dry out all of her assets for sure. That's why I don't put that down in my mind or any of my planning as something that is going to happen. If we have to do a reverse mortgage to pay off things or sell her place to put her in a memory care facility, then I don’t know.

Roger: When we look at it, because we're building a net worth here, a good thing that you can do is have it listed as a future cash flow. At least have it book marked as something that we can look at on and off because we don't want to count on something that you may not even get.

Laura: Exactly.

Roger: Okay, so those are your resources. Now what we need to do, and we'll do this during the live event as part of what we do because we're going to do it a little bit differently this year. Now we just need to do a feasibility study and say, okay, here are the goals that Laura has and all the spending and the sequence of the spending. Here is the cash flow that I have, social security, and my assets. Do they match up or are they lopsided one way or the other? So, we can have a feasible plan because we need to know. Then we'll get into how we make it resilient because that's just as important, but an often missed step.

Laura: Okay.

Roger: Anything I didn't ask that you thought I would or should have?

Laura: No, I think that covers all of it.

I'm kind of curious and maybe you will go over this later about taxes. I mean, how do we figure out taxes?

Roger: We don't figure it out. Now we have your cash flow and your assets. And in your case, and you bring up a good point, you know, outside what social security and this pension does not cover, is going to have to come from your assets. Right?

Laura: Correct.

Roger: If we look at your assets, we have 115,000, Roth. The rest is going to come from your IRA.

Laura: Correct.

Roger: Which hasn't been taxed.

Laura: Right.

Roger: That means every dollar you take out of your IRA because you'll blow through your after tax assets and Roth pretty quickly if you started there. So, every dollar that comes out of your IRA is going to be like taxable income just like you had a job.

Laura: Correct.

Roger: The way that in the feasibility test it will have assumptions on taxes and will include that within the test. The example would be in year two, Laura needs 50,000, but she only has 30,000 in income. We will take the money from this account and any tax consequence will be added on top. It'll do that year by year in all of the trials.

Laura: Okay.

Roger: There'll be a lot of simplifying assumptions, but it'll be close enough to know whether we're in a safe direction or not.

Another thing that we actually didn't talk about is all of the spending that we mapped out, it's adding inflation on all of those things. So, if we're buying a car 10 years from now and we put $40,000 in the modeling, it'll be $40,000 plus the inflation on top of it for 10 years.

Laura: Okay.

Roger: So, for a feasibility test, we're trying to incorporate as much as we can. It makes sense when we're looking at how to make it resilient to forecast a little bit. So, let's assume this is all feasible. That feels safe. I got my birthday present. But now how do I actually do it so the market doesn't blow the plan up or a health event doesn't blow the plan up? We have to figure out how resilient it is and then where specifically am I going to get every dollar to manage taxes? So, we're not being dumb.

Laura: Okay. Now you're Rock Retirement Club. You guys use a software, correct?

Roger: Yeah, that's what we'll be using in this test.

Laura: You input all this information and it kind of spits out the answer to a certain extent.

Roger: It does. In fact, one I'm building that we're going to look at when you and I meet on the 30th, when you come into the club, because that's part of what you get for doing this. It'll already be built because we would have done it together, then you can put more details in when it's private and not public.

Laura: Okay. yeah.

Roger: So, we'll use that software for the feasibility. Then there's an Excel planner that we'll use in the 30th event that you'll have as well when you're really mapping out in detail how exactly you're going to get every dollar.

Laura: Okay.

Roger: I think one thing, Laura, is when you're doing this, to know whether it's feasible you have to have that long term perspective. Like when you were riding your bike 40 miles to class. You need to know if it's feasible, right?

Laura: Yes.

Roger: You have got the legs and the lungs. You get the bike and you have your tentative route mapped out. But making it resilient is I have my extra tube, I have a bike kit, I have my phone. You can only see so far over the horizon. So, when you're actually doing this, you can't look too far forward. You need to look in, I'd say five years in retirement, but like on a bike, you can't look too far forward or you might just miss everything that's coming at you right now. You know, the car that comes out of the corner. So, it's important to close the aperture and focus on the near term and not worry about the horizon all the time. Next week we're going to talk about some risk you're feeling on risk and investments and aging and just get a sense of where your mind is there.

Laura: Okay, sounds great!

NICK’S RESOURCES

Roger: All right, we are back with Nick.

Nick how is 2025 starting off or you.

Nick: So far so good, Roger. Have a little bit of a lingering cold, but hopefully we'll get through this okay without too many outbursts of a cough. How are you?

Roger: I'm starting off great. It's like every morning I get up, before I get out of bed, I say this is going to be a great day. There's going to be challenges, but it's going to be a great day. It's sort of like the year too. It's going to be a great year. I'm going to have challenges that I can't foresee.

Now I pick a word every year. Do you do that, anything like that for marking a new year?

Nick: I really haven't, I know you do that and I really haven't taken that one on and maybe I should think about it.

Roger: Okay, well, let's play a game really quick.

If you did have a word for this year, what's the first one that comes to mind?

Nick: Good question.

Roger: That's not a very powerful word.

Nick: No, no, that's not the one I was coming up with. I was going to say another and maybe it's changed.

Roger: Okay, well just marinate on that. You don't have to commit to it. Change is sort of theme. Mine is outdoors. I think of specifically Colorado. I'm using that as a filter to say yes or no to things in my life. It'd just be interesting. Don't feel obligated.

Today we are going to get more practical. We started at the beginning of Nick. We went through your values, which I really enjoyed. Then you created some goals that are congruent with those values. Now we've got to figure out how the heck are we going to pay for any of this and is it feasible? That's what we're going to do today.

There are three sources of capital that you're going to have to pay for or, fund all those goals. The first one is something we call social capital, which is socialized benefits. So, we think of Social Security, pensions, etc. So, let's start there. Now you're a government dude.

Do you qualify for Social Security?

Nick: I will qualify for Social Security, yes.

Roger: Okay. Have you looked at your Social Security statement lately?

Nick: I did earlier this year, and at the time it looked like, I think at 62, I was going to be eligible for about $2,200 a month. I don't remember what the 67 and 70 number were, though.

Roger: Okay.

Nick: But I think it's like an 8% increase per year, right?

Roger: Correct and there are other aspects of that if you take early. So, what made you key in on the 62 number?

Nick: So, the reason why I keyed in on that number is, as a federal employee, if I retire before the age of 62, I'm eligible for a special supplemental annuity for the years between the time I retire pre 62 until 62. It's a calculation based upon that number. That's why I zoned in on that number because it becomes the base of the special annuity that I would get if I retired prior to 62.

Roger: Okay. Okay. So, you’re not required to take it at 62 for that special annuity?

Nick: No, the special annuity just ends at 62. Then what you do from that point forward is up to you, your regular decision making process.

Roger: Understood. Okay. I am blessed that we have Scott Sanborn on our team, who is a retired Colonel, so he can always help me dive into these things because he's a specialist there. Okay, so you have Social Security, which will start at 62. I can infer into what the full retirement age is. If you happen to have that number, that would be helpful, but I don't need it today. Well, we are planning on you retiring before 62. So, have you figured that special annuity out? Do you have an estimate?

Nick: Yes. So, the estimate was $9,000 a year for the special annuity.

Roger: That would end when you turn 62.

Nick: It ends the, the first day of the month that you turn 62.

Roger: Okay.

Nick: Yes.

Roger: Okay, perfecto. Do you have any other pensioned or socialized type of income?

Nick: Yes. So, at retirement age, I'll also draw my federal annuity. The estimate on that is if I retired at the end of 2025, it would be approximately $55,000 a year. That is not COLA adjusted until I turn 63. If I were to retire at the end of this year, that number would not change for the first five years.

They institute COLA on the first day of December every year, so because my birthday is in December, that means I have to wait until the first day of the month of my 63rd birthday before I get my first COLA. It's just one of those things that is a cutoff date. For me, it just happens to be a negative because I have to go for an extra year before I get a cola.

Roger: Okay. You're about to go back to that special annuity for a second.

Nick: Right. That also is non COLA adjusted also for the period of time I draw it. If I retire at the end of next year, it would be four years of the exact same number.

Roger: Understood.

Any other income that you have?

Nick: yes. So as a, as a former service member, I do receive a disability check from the Veterans Affairs Department. That is COLA adjusted each year and for 2025 will equate to about $13,000 for the year.

Roger: Is that tax free?

Nick: That is tax free.

Roger: Okay.

Nick: That is the great benefit of that payment is it's completely tax free.

Roger: Disability typically is, depending on how it's paid for. Then that is for life.

Nick: That is for life.

Roger: Okay. Any other social capital, annuity payments? Sounds like you have a pretty good handle on things.

Nick: Nope, that's my social capital.

Roger: Okay. I think I know the answer to this. We sort of talked about it. Do you plan to have any work of any sort for money?

Nick: I don't plan on it. At this point. I'm not going to say I would be against doing something that maybe I would enjoy that would come with a side benefit like working at a bookstore or a movie theater or something part time. But, at this point I would prefer not to work. I'm not necessarily against it. It just wouldn't be where I'd want to land.

Roger: Yeah, we're walking around money, as they say.

Nick: Yeah, exactly. So, I would have to stand with the Social Security earnings cap because of that special annuity. So even if I did work, I would be limited to whatever the annual cap is on earnings before you hit the reduction limits for Social Security.

Roger: Which are pretty low. I don't have them here in front of me, but they're pretty low.

Nick: Seems like it's in the $20,000 range maybe.

Roger: Yeah. Until you reach full retirement and then they don't. But in your case, I don't think this is going to be something you have to navigate.

Nick: Right.

Roger: Okay, so let's get to financial capital and let's start with just high level numbers like after tax money. So that's money in your bank account. If you have an after tax investment account, savings account. What's the total there?

Nick: The total for after tax would be I guess about $515,000. Yeah.

Roger: Okay. What about pretax? That's traditional IRA, traditional 401K, et cetera, or 403B.

Nick: Right. my traditional amount is $672,000.

Roger: Then what about tax free, which would be Roth and HSA if you have one, which probably not.

Nick: Right. So, tax free is $437,000.

Roger: Okay. Do you own your anything else financially?

Nick: No, that's it, financially.

Roger: Now, do you own any nontraditional investments? Let’s talk about real estate. You have your house. Let's actually go to other assets. Give me a rough value of your home.

Nick: My home is valued at about 500,000.

Roger: Okay. Do you own any other real estate or other nontraditional assets?

Nick: I own a share of a family cabin which is in a LLC, so I don't own it directly. I guess to liquidate out of it would be very complicated. I also have an investment in a property development firm for $20,000. That's I guess nontraditional probably.

Roger: That's an odd duck in the mix. ink in the water.

Nick: A nephew of mine works in that realm and there was an opportunity for family members to buy into this opportunity at a lower rate. Traditionally it's like 50,000, but for family members they allowed investments below 50,000. It was some money sitting on the side that I felt like might be able to earn something better. So, I rolled the dice and we'll see where it goes.

Roger: I have a number of those and it's one of those things you put the money into, you assume it's gone and it either is gone or you're like oh wow, that's a surprise years later.

Nick: Right?

Roger: Yeah. So, tell me a little bit about the cabin. Roughly what is your value in that?

Nick: My value is approximately $130,000.

Roger: You're originally from the north, which is not unusual to have a cabin. I know a number of people that have those types of things. It's more of a use asset, right? The family uses it.

Nick: Yes. So, we use it exclusively for family. It's not a rental of any kind.

Roger: Yeah, yeah. Do you expect to have any inheritances?

Nick: I do expect probably to inherit some money at some point, but it's really hard to know because you just don't know where people are going to land in the final time in their life. I would be surprised if I didn't inherit something. But there's not a dollar value I could put on it or even a time frame.

Roger: Would it be from up here?

Nick: One side of my family is very long lived into the 90s and the other side of my family isn't quite as long lived but still late 80s is normal. It would probably be five to 10 years out I would expect.

Roger: Okay, so five to 10 years out. Could you even swag an amount if you had to?

Nick: If, if I had to, I would guess probably between $100,000 and $200,000. I would guess there could be more, there could be less, but that would probably be the best guess.

Roger: Okay, but you don't have like communicated estate plan. This is what's going to happen.

Nick: I do know that I am a direct. I'm in my parents estate directly. I have an aunt and uncle who are childless who have left half of their estate to their nieces and nephews, which number currently like 25 or 26. They have indicated that if you pass away before they do that your share will go to the other nieces and nephews. However, once again, I don't really have a really great idea of their estate. I just know that I'm going to be one of a group of nieces and nephews who inherit when they pass away. 50% of their estate goes to charity and 50% goes to family is what I do know.

Roger: Okay. I feel like I hear in your voice what I hear all the time when we talk about this stuff. It’s uncomfortable.

Nick: It is very uncomfortable.

Roger: Yeah.

Nick: None of us want to see the older generation go away. I know that's a natural reaction for most of us.

Roger: Also, just the money part feels icky

Nick: Yeah.

Roger: The reason I was poking a little bit on it, Nick, we'll have it listed, but we won't include it. It's good to just have it listed as a possibility. But in some cases, as uncomfortable as it is, it could be a key component. I've had a number of instances of, well, I know that I am getting this share and I have a pretty high estimate that it's this amount and this is the state of their health. It's reality. It's information that even though it is uncomfortable, we should still incorporate it. In your case. I don't think so. But we can still have it listed.

Nick: Right.

Roger: But I get it. They have 20 plus nieces and nephews.

Nick: Twenty plus.

Roger: Wow.

Nick: My uncle had a very extensive family. it's not on our side of the family. We're much smaller.

Roger: Do you have any debt?

Nick: I do have debt. Currently I have a $305,000 mortgage. It’s 2.25%. I don't feel any desire to pay it off.

Roger: Is that a 30 year?

Nick: It's a 30 year of which I've paid down eight years, I believe.

Roger: Okay. Yeah. I'm in a similar situation and feel the same way. Any other debt?

Nick: Yeah. I also have a car loan that has four years remaining for $28,000, and that's a zero percent interest rate. So once again, I don't desire to pay it off. I just would like to pay it off as part of my monthly expenses.

Roger: Okay. I have a random question totally unrelated to anything, which is what does Nick splurge on for himself. I'm not talking experience. Well, it could be a bottle of wine, it could be a watch. It could be anything. What's a Nick splurge?

Nick: A Nick splurge is a nice dinner out for me. I enjoy a nice dinner and in the area in which I live, there's a lot of opportunities to try out some very highly rated restaurants. Every few months, a group of us will go out and have what can be a $300 meal very easily. So that's probably where I splurge. I could live without it while I'm working. It's fine.

Roger: Yeah. Yeah. I was talking with someone in the club the other day, and we were celebrating 2024, and they had two celebrations that I thought were hilarious as bookends. One was they got their trust updated. You know, it is a very exciting goal to hit. The other extreme was that they went to their first Michelin star restaurant.

Nick: They are quite an experience.

Roger: They are, and it is an experience. I mean, we don't have to get the stories right now. I've been to one, but I have a good friend, an attorney who is a high profile food and beverage attorney, and he has some crazy stories about service.

Nick: It's amazing.

Roger: Yeah. If I'm trying to think of the book, if you're into food. I have the book right over here. Let me find it. Here it is. I had to run to my bookshelf to get it. It's Unreasonable Hospitality.

Nick: I have to check that out.

Roger: I bought four of these books, Nick. So offline, let me get your address. I'll send it to you. It's by Will Guerrera.

Nick: Thank you.

Roger: It’s a story about a famous New York restaurant that went from the bottom to the top. The level of detail that goes into fine dining. Whether you're into fine dining or not, appreciate the intentionality and the attention to detail.

Nick: Their margins are also pretty thin. Even at the very top of their game, because they generally pay their staff better, they buy better ingredients.

Roger: They're not just transient jobs.

Nick: They're actually careers as opposed to in between gigs.

Roger: Right.

Nick: Yeah.

Roger: I've actually done personally some nontraditional investment in a restaurant or two. I would not recommend it. But there is a huge difference between a real operator and someone who runs a restaurant. One thing I've learned is with a real operator it comes down to a science and it's not a bad business if you really know how to operate a restaurant. The problem is 90% of the people that start restaurants don't have the pedigree to do the operational part of it and just want to own a restaurant. That's a good splurge.

Nick: I enjoy it once in a while.

Roger: I'll send you the book then.

Nick: Thanks.

Roger: Next week we're going to talk about risk.

Nick: Yep. Sounds good.

SMART SPRINT

Roger: On your marks, get set, and we're off to set a little baby step we can take in the next seven days to not just rock retirement, but rock life.

I was laughing a few weeks ago because of Fritz Gilbert from Retirement Manifesto. Great blog by the way. Fritz is a great guy, he was on one of our episodes and by the way, he was our first Retirement Plan Live case study. He was essentially the brainchild of this series. He was on social media. I deleted my Twitter account as part of the new year but before I deleted my Twitter account he was on there just giggly because it was almost December 31st so he could update his network statement. He loves to do that. I like to do that too to be honest with you. It's a great document.

My challenge to you over the next seven days you got all your yearend statements by now update or create a net worth statement. So, you have a listing of all of your assets and all of your liabilities so you have organized your financial resources.

If you have never done this, we are going to share a net worth resource in our 6-Shot Saturday email which you get every Saturday morning as a summary of the show or supplement. If you are not getting that yet, go to rogerwhitney.com and sign up for our 6-Shot Saturday email because if you like the show, you're going to love our weekly recap.

BONUS

All right, time for the next installment of the missions of Zigmund Canceller in his flight in a B17 bomber in World War II. Been doing this since Memorial Day. All right,

“Mission number 14 and 15 7-19-1944. Ship number 274 sortie 10 went to Munich, Germany today and hit an ordinance depot. Darn good. Lost quite a few ships on this raid. Our bombardier, Lieutenant Perella, went down. Hope he got to earth safely. The flak was hell. Our number two engine was hit right through with flak, but held out till we got home. We were the only ship from our squadron to come back to our base.”

Wow.

The opinions voiced in this podcast are for general information only and not intended to provide specific advice or recommendations for any individual. All, performance reference is historical and does not guarantee future results. All indices are unmanaged and cannot be invested in directly. Make sure you consult your legal, tax, or financial advisor before making any decisions.