Transcript
Speaker: Everyone dreams about living an uncommon life, but how we define that dream is very different for each of us. And for most, it's a lifelong pursuit. Welcome to the Uncommon Life Project podcast. We're going to introduce you to people who are living that life or enjoying the journey to get there. We're going to also give you some tools, tricks, and tips for starting or accelerating your own efforts to live an uncommon life.
Speaker: A life worth celebrating and savoring. Please welcome your hosts, Brian Dewhurst and Philip Ramsey.
Speaker: Hello and welcome everybody to your favorite show, my favorite show, and definitely Brian's second favorite show, The Uncommon Life Project. My name is Phillip Ramsey and I'm your host. And I'm Brian Dewhurst and I'm your co -host. Oh, really though? He could also be the host. I could be the host. Who knows? I'm thankful that you guys tuned in for another episode.
Speaker: And I'm excited to talk about this because we've been getting a lot of conversations and just a lot going on about this topic. And it's a big one. So we wanted to at least address it, see if it helps clear things up. And we're going to be talking a little bit about retirement, retirement income.
Speaker: And I think it's good for the people who are stepping into retirement, the people who are in retirement and the people who are pre -retirement who are thinking about this whole thing. So we are gonna get into it. We're gonna kind of talk about some common ways to go about retirement and then income of it, cashflow. And then we're gonna talk about maybe how to uncommonly look at this topic. Okay, Brian, good morning. How are you?
Speaker: Good morning. I'm great. It's a balmy 37 here. So, man. So, give them a caveat about who we are, UnCommonwealth, and how we got here. Go. Yeah, we are the UnCommonwealth partners. We are, you know, helping people build wealth, retire, make financial related decisions. And especially, I think, you know, as we approach the release of our new book,
Speaker: how to integrate multiple streams of income, how to integrate the big buzzword residual income, whether that's through entrepreneurship and starting a business or real estate or investments or anything else. It's integrating that passion as the focus
Speaker: and being fulfilled in your life as maybe more of the pursuit. And then how do we build wealth and income around that? And so yeah, we're super excited to be partnering with so many people and especially through 2020 and COVID has just been an amazing year for us to get to help so many people through once, hopefully in a one in 100 year.
Speaker: type of an event and make financial decisions and continue moving forward. Right. Great job. I think I want to key on one thing you said is wealth. Like always it seems to me that people when they start talking about wealth think about financial wealth or like dollar dollar bills. And there's so much more that goes on to your wealth
Speaker: as a person, and so we like to focus on all of the aspects, not just your money. Although money is a tool to help you get to what you wanna get to or accomplish goals and things, and sometimes it's not, honestly. And so we try to take a bigger picture about wealth, try to figure out who you are, and then help you accomplish things. So that's who we are, and today we're gonna talk about retirement. So some questions that come up are,
Speaker: When do I take Social Security? Do I pay off my house or not?
Speaker: Like what, what if we want to downsize? Like these kind of, I'd say questions are coming up a lot for these people who are going to be stepping into retirement. Um, and so when we talk about all of this, a big component is social security. Now, if you are 32 and you're listening to this podcast, chances are social security will change, uh, when you get to retirement age, but Brian and I are both in the belief that it's going to be there at some capacity.
Speaker: You've been paying in for a long time. If they try to change that, it's going to be, or if they try to completely get rid of it, it's going to be a problem. But you're going to have some kind of benefit there. What that is, not sure.
Speaker: But for a lot of people who are 59 and a half or getting to that age, it is a benefit for them and it's a decision they need to make. So that's the first question that we'll kind of talk about with our clients is, you know, maybe longevity or do they have health?
Speaker: On their side, has their family history been one of longevity or have they've historically passed away sooner? How are they feeling currently? What's their kind of health backgrounds? Because at the end of the day, what are the two questions that it comes down to for Social Security? Brian.
Speaker: Yeah. The main two questions are, you know, how long are you going to live and how much do you need to spend a month? And obviously most people don't know the answer to number one. And sadly, most people don't know the answer to number two. Uh, and it's hard. Budgeting is hard. We get that. Uh, it's, it's difficult. And, uh, even this day and age with all this technology, it's just not, it's not fun to do. Um, but it is the front lines of the war and building wealth.
Speaker: financial wealth and Super important. All right, so Social Security sitting down with the client and they say when do I take Social Security? We ask them these questions we kind of start figuring out what their monthly expenses are on a normal life and Honestly, it's not rocket science We just try to figure out what they were making at their current job and we try to multiple or we try to duplicate that in retirement so if
Speaker: Let's say $5 ,500 was hitting their bank account every month when they were working. Guess what we try to do in retirement? $5 ,500 in retirement. Yeah, the adage, you know, if you do a lot of research online, you know, those calculators and gurus will say, you know, you only need 70 % of what you're making. Most people don't like to hear that. Right, right. I don't like to hear that.
Speaker: Yeah. And I think, you know, post COVID with inflation, I don't think it's largely as true anymore. And I want to, I don't want to go into a lot of tandems of this. I'm trying to keep this conversation concise, but the home decision is a real big factor in this budget decision. And what we often uncover is kind of like, we'll start the conversation and it'll be like, Oh, how do I file for social security? And we talk about expenses and all those things. And then at the end of the meeting, it's like, Oh, we kind of want to, we kind of want to downsize our home.
Speaker: Well, that's like a whole other can of worms. Not saying it's bad or you shouldn't do it, but like what we're seeing with a lot of folks, I kind of want to go here first and then we can double back. What we see with a lot of folks is you're really not going to downsize in the sense of a payment or total expense of owning the home.
Speaker: It might be smaller. Like you might go from 3000 square feet to 1800 square feet, but it's probably going to cost you what you're selling your house for because you're going to either buy or build brand new. You know, we're shooting this in October of 2020.
Speaker: And we're hearing from lots of people that are building and other home builders that material expense is through the roof, through the supply shortfalls due to COVID and everything shutting down. And then just so many people relocating out of California, which is real.
Speaker: And so many people now working from home, you have like Coinbase, the big crypto company, they're saying 100 % of their people can work from home. Microsoft has taken that bent. Some other major companies are taking that platform as well. So I mean, you're talking about hundreds of thousands, millions of people that are now not driving into work and can live wherever they want to live. And so you're going to see massive shifts.
Speaker: in the in the housing market and so anyways when you look at those like let's say you go into one of these 55 and up communities you know we're in central Iowa you're not getting into one of those units for less than 400 grand right and then you go and do the thing and you can get the upgrades in the extra bedroom and now you're closer to 500 grand wait wait you want toilets with that okay we're gonna have to upgrade you you know you want sleeping bags for your guests and then you have HOA fees you know
Speaker: which you probably don't have right now at your house. Now you have an expense to shovel or mow and all that stuff, but now you have this HOA expense. And then if you're switching States, which a lot of people are doing, you know, you got to look at the state income tax ramifications on your budget. And then also the property tax ramifications on your budget. We just had a couple of, they're moving from the South super low property taxes, moving to the Midwest. And it's going to be like a five X jump in just property taxes.
Speaker: That's not like 5x 'ing your entertainment budget or your clothing budget. That's just like, that's just money coming out that you're not, you know, I'm not saying you're not benefiting from it, but you're largely not going to notice it. And so these things have a massive impact on your, on your retirement. So we're, you know, I feel like our advice is always like, if you can move,
Speaker: while you're still working. And handle these adjustments in your budget and get to the other side of this major decision.
Speaker: then we'll have a much clearer picture of what your budget will be and if that's sustainable or not. But tackling that after you retire and after your major income source shuts off and now you're relying more solely on your own money, there's risks in that. And so I think I wanted to hit that and then we can kind of double back to the expenses. Think about just changing houses for a second.
Speaker: because you probably have lived there or the person has probably lived there for several years, if not, you know, double digits, maybe 20 years. Now, of course that's appreciated, but the interesting thing is whatever that new appreciated price is,
Speaker: You're not going to go buy a house that's going to be obviously a little bit more money, right? If you're going to try to get to the quality, even if you downsize, you're going to probably get a newer house and that house costs are different than it was 20 years ago.
Speaker: For sure. So people are stepping into a house, whether or not it's $400 ,000, but what they're finding is, wait a second, what I can buy for the money that I can today, I feel like the house that I'm in currently is nicer than that. It seems like that's happening across the board. So what they have to do is almost upgrade. So they think they're going to downgrade or downsize, which is probably true, but it doesn't mean downsize on the price.
Speaker: Yeah, your budget might not be downsized. We'll put it that way. Right, your budget might not be downsized and then you just have this, you know, you always want to do this when you do have income just in case things aren't going according to plan and you're actually spending, in our example, $7 ,500 instead of $5 ,500.
Speaker: That's probably extreme, but you get what we're trying to say is do this while you have an income. Also, from the bank's perspective, it's always easier to get a loan when you have income. Now, you totally can do it when you're retired. That's not what we're saying, but it's easier from the bank's perspective to see that income coming in and seeing that you move.
Speaker: Right. I think we can go into that tangent, do you pay off your house or not? We have a lot of retirees that still have a mortgage payment. I think when you look at the national average, most people over 60 still have a mortgage payment. Obviously, we're in a very low interest rate environment.
Speaker: A lot of our clients are refinancing that type of thing or securing a new property for under three and a quarter, even under 3 % mortgage rates, which obviously are historically low. We do think that mortgage rates will continue to trend lower, not higher just because of
Speaker: the dynamics and demographics and the national debts and where the banking system is set up. Most of Europe is already in a zero interest rate environment. You can get 20 -year mortgages in Europe for 0%. The Bank of England just went to negative interest rates on
Speaker: checking in savings accounts. And so we think that interest rates will trend towards zero here in the United States. We're the best credit risk in the world. So I don't see why interest rates would go up. And then when you look at our national debt approaching $30 trillion after these politicians pass this next stimulus bill, which looks to be happening, it's going to be close to two.
Speaker: to $3 trillion plus our deficits plus interest plus, you know, plus, plus, plus we'll be at 30 trillion national debt. So there's really no way the fed can raise rates into that. And if you think about it, this is the way that I kind of process through that because it's a lot of stuff. That's like Brian level detail. This is Phillips level detail.
Speaker: If you had a million dollars on a credit card, the last thing you would do is call the credit card company and be like, hey, could you raise my interest rate on that credit card? You just wouldn't do it. Now multiply that how many times? Trillions. And that's kind of what they're saying is so it's hard for them to raise interest rates when there's so much debt happening. Exactly. Okay. And you know, you're never going to pay it off.
Speaker: That's the other route. Yeah, that's true. So here's another thing too. So the question always will come up, should we pay off our mortgage? And there's a lot of things that go into this. That being said, interest rates are at all time low. So you have to do the benefits to risk. If you have $200 ,000 worth of debt in your home,
Speaker: It might not benefit you paying off that by taking a lump sum of your IRA or a lump sum of your money that you have nested for retirement and pay off that mortgage. Because the amount of money that you can generate from interest off that 200 might be more than the actual mortgage itself.
Speaker: So, just having the banks take more of that risk on and you can just pay monthly payments might be wiser. Now, there's always a psychological point of this. Like, I just want my house paid off. Right. So, let's go back. If you're there, I think, you know, on the other side of the coin is if you're under like $100 ,000 or $75 ,000 and that finish line is in sight, you know, then we really would encourage you just get it done, get it paid off. Right.
Speaker: and get rid of that payment, but, you know, especially if you're still working, you know, and I think that's a good segue into kind of our next topic. Right. So at the end of the day, a lot of times we will start with how much, well, we start with how much money will you need in retirement, at least to your knowledge now. And then we get that number. A lot of times then we'll look at how do we maximize social security, which then it normally goes, if we want to maximize social security,
Speaker: the most easy way to process through this is, okay, as soon as I'm going on social security, whatever that date is, let's say it's 66 and a half for that individual, then I'm going to retire at 66 and a half. And everyone puts this like date on the calendar. I'm telling you, and Brian's telling you, like, it's a struggle bus to get to that date. Once you have a date on the calendar, there's really nothing you can do except fall victim to the fricking calendar and it just starts ticking along.
Speaker: It's brutal, brutal bus. And we're speaking from experience with working with lots of families that have planned it this way. And I'm serious, like not one, not one of them has made it to that date. Right. Why is that? I don't know. But like it's something psychological. Like when you put something on a date, it's like forcing you to do something that you just like, I don't want to do.
Speaker: for whatever reason. And it's interesting cause you know, I was thinking about this the other day, we had like five meetings in a week with basically the same conversation, you know, and it's great. Like we love helping people. And so I was thinking about it in the context cause my parents were just in town and I'm like, why is my mom still working?
Speaker: And I'm like, she's never set a date. She kind of just see, you know, I'll reevaluate my situation and she's just never set a date. And she continues to work and she loves what she does. And she is drawing social security now and working. And so she's kind of double dipping and she's enjoying it, you know? And so it's just like, I don't really feel a need to stop. So that's kind of what the synthesis for this conversation is. And having a few people say like, well, I'm just going to set this date and then I'll be done. And it's like, well, I don't know that you're going to get there. And that's okay. I think that's the other side of it. It's okay.
Speaker: if you don't make it to that line in the sand, it's okay. That is the beauty of social security. Every month you don't take it, the amount you're gonna get out is a little bit more. And so looking at it in terms of this, like, well, I only need four more years, like, well,
Speaker: you know, we really could take it a month at a time, but with that, the government has closed a lot of the filing strategies for social security and every person's situation is different. And so what we do is we, obviously there's like some information that we need off of your social security record and then other things that can play into this. You know, some of the, you know, if you had the, if you were one of the railroad employees or if you're a government employee,
Speaker: You know, if you have a family member with a disability that's getting money, if you're a foreign national, we have people from other countries that are now US citizens that have retirement in their previous country and that can impact their retirement in this country. So every person's situation is different and then we kind of go to, I'll do a shameless plug here.
Speaker: I mean because I like kind of Peyton Manning and his commercials at Nationwide but Nationwide has a really great social security desk. They pay for it. It's free. We can access that because we do business with Nationwide on some things and we can just go through your personal situation with the team at Nationwide.
Speaker: and they can speak to your different filing options, and then we can help kind of narrow down what the plan is of how to best execute and optimize social security for your plan.
Speaker: Perfect. Okay. So although I just said, do not set the date or it's not as powerful as you think, I think it's the first step to say, Hey, 66 and a half and this date, this month, this year, you're going to retire. Now the next point I think is the key, but let's start thinking about goals that you can accomplish to help you exponentially, uh, speed up that process. If you want, for example,
Speaker: Some things that we've told people is like, hey, when your 401k gets over this amount of money, then you can punch out early. Or, hey, if you pay off your mortgage, I don't know what it is, but if you pay off your mortgage or you pay off this kind of that kind of debt, that all changes your retirement picture and for the better, and you can control that. So what we found is like, yeah, here's the date. That's when we're like, hey, drop your good,
Speaker: you can retire then. The optimal date based on just the numbers. Right. Now, if this, this, and this happen, the optimal date may move forward because the numbers have gotten better. So that to us is the most healthy way to be able to sit somebody down, say, here's the date, but if this, this, and this happens, that date can be sooner. Now we put control back into the individual and now they feel like it's almost a game and there's a scoreboard, they want to beat it.
Speaker: It's so much more exciting for everyone. And if something happened or whatever, you inherit some money or you have a stock that goes way up or whatever, you can really cheat that date and it's just a lot more fun psychologically to have that freedom and flexibility as opposed to feeling like you're stuck in a cubicle dredging out the next three years of your life.
Speaker: Right. Especially in central Iowa when we have a little thing called winter and snow and all of that. So anyways. Right. So I think setting a goal is great. And not only a goal, but also a date. Like, hey, here's the date. Everyone's unified on that. But we also are unified if we save more or we spend more money trying to get rid of the debt that we have.
Speaker: Then it puts it put things back in our camp and then we can control a little bit more Two things I want to hit on social security because these came up with clients in the last couple weeks and they They were confused on these points and I think they're really important. We'll just reiterate them if you retire before you
Speaker: uh or you don't retire like if you're working let's put it that way if you're working uh and you claim social security before your full retirement age and each each is not each person is different but they're kind of age banded based on when you were born if you just type in
Speaker: and Google what year you were born and what your full retirement age Google will tell you has the chart in there. It's actually super easy to do that. But if you retire or I'm sorry, if you take Social Security before your full retirement age and you still plan on working
Speaker: there's a threshold at how much money you can make without being overly taxed. And I think right now I'm just going to ballpark it. It's about 18 grand. It changes with inflation in the IRS every year and it's a really goofy number, but let's just say it's about 18 grand. And if you make over that, they are going to tax you at a 50 % tax rate. So if you made 30 grand, you're going to lose six grand to that 12 to taxes.
Speaker: So don't plan on that as part of your strategy like you can't file and keep working It you know when you're under your full retirement age the second thing is I mentioned earlier the government has closed multiple filing strategies and one of the big ones was is filing off of your spouse's record if you're You and your spouse are born after 1 1 1954 so if you are a
Speaker: you know, born after that or younger, you do not get to do that like the people born before 1 -1, 1954. That is the line in the sand. And so that was a major shift. I think that was about two years ago. And so if you were planning on this kind of filing off your spouse's record thing, you really need to check your birthdays and you really need to check if that's still an option for you.
Speaker: because that was a major change that did happen, so. Okay, I think we've pretty much covered the main gist of this, and the biggest one is, hey, set the goal as a date, that's great, but do more things in your control. Also know that your real estate, when you downsize, might not be that you cash flow downsize. If you're gonna do it, do it while you're working.
Speaker: Um, and then paying off your house is more of a numbers and psychological question than anything. Um, and then working with somebody, I think the two other things that we hear a lot of that I want to touch on is health insurance. What do I do with that? And then, and then I would say inflation. How does it affect me? Yeah. So was hit health insurance because inflation is boring to talk about. Yeah.
Speaker: Health insurance, if you retire pre -65, you're obviously not eligible for Medicare. And so you're going to have to find some sort of alternative. There is Christian sharing organizations that Philip and I use and tell people about.
Speaker: Um, they're much more affordable than, uh, like if you're maybe laid off or you take an early retirement, sometimes you have to use Cobra. Cobra can be very expensive. Uh, and now obviously with Obamacare, um, we'll caveat that we'll see what happens with this Supreme Court nomination. It seems like they want to rule on the legality of Obamacare as a mandate, um, because it is actually, uh, should not be
Speaker: able to mandate that and I don't want to get political, but that's kind of my view. So we'll see what happens with that. But anyways, you can get insurance now without pre -existing conditions being a factor and go to an exchange and get a policy that way, but it is rather expensive. All of our clients that are on Medicare really like it. It's simple.
Speaker: thousands of people go on it every day. And so, you know, most of the doctors are all on that system payment system. And so people that like
Speaker: You know, people like Medicare and then obviously you got to get your supplement. And we, we have a gallery for people too, for that, for the supplement insurance. And yeah, let's talk about that quickly because the supplement thing is super confusing for a lot of people. Normal, what you do is find an expert and you give them your circumstance and they tell you which one is best for you. Right. That's how that is. Based on your prescriptions and budget and you know, yeah, all that stuff. There's, it's a, it's not one size fits all for sure. Right.
Speaker: The thing that I would say on health insurance, and I'll plug this, the power of owning residual income or rental income specifically, and being able to maintain a corporate veil, like if you have a rental property like an 8 -plex or a 24 -plex, and you have that inside an LLC,
Speaker: There are ways to run health expenses and deduct those against that rental income and shifting some of that rental income to what we would call wages. This is a little complex, but you can utilize what's called an HRA, which is a health reimbursement account, and essentially deduct this stuff against your income. So when you're paying for Medicare supplement insurance, you're paying that out of pocket after tax.
Speaker: If you have an HRA and you're a property manager of a building and you could essentially deduct your health, Medicare supplement, hearing aids, CPAP machines, all your dental work, iWork, all that stuff's not covered under Medicare.
Speaker: And so what we are advocating is having some sort of business or corporate veil in retirement so that you can still claim deductions against these medical expenses instead of paying for them out of pocket and after tax. If you want more info on that, you really need to call and schedule a free call. It's a little bit more complex. There is some literature on our website. If you search HRA in our search box, you can learn more about that.
Speaker: But we'd love to help people with that because it's really powerful.
Speaker: In that inflation obviously Medicare Medical inflation is going to be real when you have 10 ,000 people a day turning 65 for more than a decade to go Inflation is going to be huge, especially with how much money is being printed post covid You know, the money supply has to grow Because all money is debt and debt has interest payments. So if the money supply doesn't grow the economy contracts
Speaker: And if you look at the major contractions of the U .S. economy over the last hundred years, pretty much every major one has been due to a liquidity crisis. And the reason the market, so to speak, snapped back so quickly, stock market, is because the Fed and the government printed so much money so fast. It's one of the largest increases in liquidity in the history of the world in the last six months.
Speaker: Now we probably don't feel that because a lot of that money went into the stock market and bond market directly from the Federal Reserve. But over time, especially if we get into what a lot of people are talking about, there's two acronyms for it is MMT, Modern Monetary Theory, or UBI, Universal Basic Income, which is basically that we can just print money into infinity and that we could pay people a monthly stipend like Social Security when they're 21.
Speaker: and to give more income, income equality to the masses. And so if we were to do that as a country, you know, you're going to have a lot of money chasing fewer goods, which should drive up prices and increase inflation, right? And who knows what's all this is going to do with all this printing money and stimulus? Like this is like a big threat to our like, I'd say elder population and inflation. And we really don't know what that's going to do.
Speaker: like in all honesty, I would say like it's obviously gonna impact it, but at what degree it impacts it, that's what everyone's like, ooh, I'm not sure, right? Yeah, and that's why we advocate owning hard assets, you know, having a portion of your assets maybe invested in real estate that produces rental income, you know, owning gold, owning stocks, owning things, you know, Bitcoin, we've talked about that, owning businesses, being entrepreneurial,
Speaker: or maybe you just work part time, you know, at the local YMCA or something like that to get a little extra pocket money and keeps you young and spry. I mean, those are the things you kind of got to think about for your overall plan and not only that, but just your mindset. You got to know yourself and what you need to be healthy.
Speaker: and be successful. But inflation is definitely real and it's the downsizing house conversation. The way we normally talk about it is, remember when you used to ride to the 7 -Eleven or the whatever the name of your gas station was and how much was a Snickers bar? And now 20 years later, for me and you, I think it was about 50 cents, 55 cents. And now it's like a $1 .30 and it's about 75%, the size of what it used to be.
Speaker: That's the home downsize. You're gonna get 75 % of what you thought you were gonna get and it's gonna cost more than what you thought it was gonna cost you or what you even have now if you want it new. And so those are the things that we're trying to get people to start thinking about. And I think the way you wait out this podcast today is
Speaker: huge because a lot of people, I mean, we're getting this almost weekly now. It's that trifecta. How do I, how do I file for social security? Do I downsize or move houses? Ours is outdated. We don't really want to put the money into it. We want a smaller footprint. Our friends are moving, you know, it's that type of stuff. And then, you know, when, when do I actually punch out and walk away from my job? Those are the three major
Speaker: questions that we seem to be getting a lot. And in our feeling, like as you've heard today, maybe tackling the house decision first while you're still working is maybe the wiser thing to do. And handling that when you still have all your income is, in our opinion, a good thing.
Speaker: Nice. Well, if you have any other questions, we would love to just hear from you, schedule your 15 minute call and just kind of talk about your specific situation. Hopefully that would help. But, you know, you've been listening to the Uncommon Life Project. I love doing these. Great job today, Brian.
Speaker: insightful for you. And again, anytime you have any questions, we're just a phone call or email away. We're right here for you. We want you to go down this uncommon path for you and nobody else. And so we're grateful for you. Thanks for listening. And we are out. Cue the music. Let's go. Cue the music.
Speaker: That's all for this episode of The Uncommon Life Project, brought to you by Uncommon Wealth Partners. Be sure to visit uncommonwealth .com to learn more about our services. Don't miss an episode as we introduce you to inspiring people who are actively pursuing an uncommon life.
