Growing Your Wealth with Brian Evans

Welcome to Growing your wealth with Brian Evans and Jeff shade. A show this simplifies the complexities of investments, taxes, retirement and more so you can discover how to better sustain yourself and your wealth for years to come. Brian is a CPA with 30 years experience and a financial advisor which brings a unique perspective to the financial world. This show is brought to you by Madrona financial and CPAs. Home of the routed wealth plan. One a retirement plan designed to last 30 plus years, go to Madrona financial.com. And click get started to see what the routed wealth plan can do for you. And now, here are your hosts Brian Evans and Jeff shade. Thank you so much. Welcome to Growing your wealth with Brian Evans, the show that gives you the straight talk and honest answers you need to help sustain yourself and your wealth for 30 plus years. On today's show, we're going to be discussing how to tackle inflation in retirement and what you need to know if you plan to work part time in retirement. My name is Jeff shade, and I'm just here to ask the questions for you. But the words of wisdom is solid advice comes from Brian Evans, CEO and President of Madrona financial and CPAs. Brian, how you doing today? Doing great. Thanks, Jeff. Always glad to hear that. Brian, I certainly hope our listeners are well, too. Brian, according to go bank rate 20% of Americans are delaying their retirement because of inflation. Now, do you think that that makes sense to delay retirement because of recent inflation? Well, it may make perfect sense. I mean, certainly, inflation has been devastating for a lot of retirement accounts and people with retirement plans. We think about it, I want to talk about inflation in depth during the show. It's hugely important. As far as the planning aspects of any retirement plan, because retirements about buying power. Really, when you think about it, it's not about how much money you have is a million dollars a lot or a little well, 50 years ago, it was a heck of a lot. I mean, the oh, that's huge. Now, not so much 20 years from now, it's not much at all, you know, it's it's not a big number. And so why is that? Well, millions a million, right? Well, no inflation and the compounding effects of that and the buying power disintegration, essentially that that holds for people because once you've decreased buying power, you don't get that back. And so really, if you think about retirement planning, it's not a numbers game so much is it's a buying power determination. What is your buying power now? What's it going to be in the future? And so as I think about it, and I'm just just off top my head, I mean, thought about this concept of buying power before just now. But I'm thinking, Okay, what's my buying power? If my income tax rate goes up in the future? What's my buying power look like? If inflation is baked in the oven, once it happens, it's there and it never goes away? It's yours adding on to it. And we hear reports from government Oh, inflation is under control. It's dropping? No, the rate of increase has decreased. That's not a drop of politicians love to use this I'm I'm cutting things well, no, your your your rate of increasing them isn't as high as it was at its height, you know that that's not a cut, they define things completely differently is like, you know, I'm talking about the new capital gains tax in the state of Washington, it's like, we're told a three sided objects a circle, can you call the circle doesn't mean it's not a triangle, you know, if it's same thing with with increases like that, oh, it's the rate of increase decreasing? Well, that doesn't help me because I am paying more permanently for the rest of my life, my buying power is permanently affected by what's going on. So again, we talked about tax rate increases, we talked about inflation, we talked about all these things on here. And really, at the end, it's about computing and analyzing and discovering your buying power in retirement. So you asked me, you know, 20% of Americans are delaying their retirement because inflation Well, that's that's a real thing, right? You may have to you've done the numbers and go, Wow, what has happened that's outside of my control has just taken away my ability to comfortably retire. So that that is a real thing. And that's a very good point that you made. Brian, as a lot of people are getting here. They're very happy, you know, with the electronic media news and what's coming out of our current administration, inflation was 9%. Now it's for up we're doing great, but people tend to forget how high that it was in the past, and that this is a permanent, increase the amount of money that we have to pay. So 4% is technically what we're looking at right now. What do you believe is a reasonable cost of living percent for those planning for retirement? Yeah, I want to kind of expand what you just said, Jeff, what I'm talking about is we had that inflation that happened. And just again, just because the rate of increase is decreasing, does not mean we're not permanently affected. So just realistically in in, and I could get into this whole CPI number we've been talking about for years on this show that the actual inflation is much much higher than it's ever been reported to us. I am absolutely positive to this because, you know, we were told it's transitory or we're told it's not that bad and
And we get these numbers and they say, oh, it's it's 7%. And you go, Huh, really? Now, I don't know, I just went to the restaurant. I used to pay $40 for the two of us. And now it's 70. I just went to the gas station. I paid $5 at Costco for guests this week, Jeff, and that, well, that isn't even inflation. That's tax increases there. Yeah. You just told me you're in Tennessee in the 280. Yeah. $2.80 a gallon. And they're thinking, Boy, that's a little high. It's getting close to three. But it's all because of the taxes. Yeah, taxes and inflation. And so you go to the store, and you buy things and you go, Wait a second, I wouldn't notice 7% or 8% or six, I wouldn't notice that I really wouldn't. But a lot of things we're buying at the grocery store are double what they were three years ago, absolutely double 50% 80% 100% More than they were and I am not buying off on this. Oh, we just had a little bit of inflation for a little bit of time. Baloney is baloney. We had huge inflation, trying to hire a contractor to try and build something that you thought you'd built three years ago for 10,000. They come out and they bid 2025 30,000 for it. Now, everything has gone up so much. And so it's a bunch of malarkey that we've been spoon fed, as far as the percentage increase, and that is baked in that it's here to stay. I mean, that's not going away, it's not going to drop back to where it was before. So when they say, oh, inflation is, you know, it's under control, well, I already got out of control permanently. And that's gonna affect you for the entire rest of your life and all of your retirement. By the way, let's just say we've only lost 30% of our buying power, or do a 33%. Say, and you worked 40 years where you just lost 13 years, just on that, and I'm not factoring in the tax increases that are happening as we speak. You know, like I say, we're paying five bucks a gallon at Costco for gas. Now, a half of that's gotta be taxes, if they're paying 280 In Tennessee, half of that's gotta be just increases in taxes. And so we're just getting hammered on all fronts. So retirement planning now takes on a whole different look. Because it you've done your planning, you listen to add, what's your number of years ago? Oh, my numbers a million. Okay. Well, your million is now 600,000. Because tax increases in inflation. You're going oh, wait a second. I wasn't planning on that. And that's permanent. Yeah. Yeah, that's permanent. And Brian, I love the illustrations here. And you made a very good point. I mean, when you think about it, here's a practical illustration. I mean, this year, you may be paying $5 for a dozen eggs. But last year, you were only paying $4. But wait, inflation is coming down? Do you think they're ever gonna go ahead and reduce those eggs from $5 to $4? Again, I don't think so. Well, it's interesting, Jeff, when you talk about the CPI, you can go to their website. And he even says on their website, that their methodology is not well suited for the sporadic nature of purchases, and depends on fixing weights for an extended period of time, rather than leveraging real time weighting information. That's on their website, Jeff, they actually are saying, Yeah, we're not really measuring it accurately. We're kind of massaging the numbers. And of course, why are they massaging them? Well, politicians like to be reelected. And if you're in office, and you were part of the problem, then you don't want me to know that, well, it's my opinion. But we look at the CPI and we think, well, that's a real number and and they're even saying on their website is not like Wow, well, at least you're coming forth and saying it. I appreciate that now that anybody's reading this stuff on their website, I just read it to anybody listening. So now, you know, the CPI is literally something that is massaged by people that create this, these indexes to make us feel better, essentially, it's not meant to be deliver accurate information. So you're thinking that okay, well, I have a financial plan, all this stuff, I've maybe put in some percentage increase in my spending over the years. And did you put enough there is a big problem that's gonna hit I know how many 10s of millions of Americans, they did a financial plan, they thought they did their homework, most people don't even have a financial plan. So they're already at jeopardy. And then you got the ones that did it. But they had the wrong data, because they're relying on some governmental figure that you go to the website that governmental figures, you know, they say, it's not even right. So you don't even have that right in your plan you baked that in and the compounding effect of that for 30 years or your retirement, your numbers are already completely messed up. And so I'm throwing this out there because we got a big issue here with the buying power, again, of your retirement plan, putting in the wrong inflationary numbers, not having access to the products that can help you we were down the road and inflation happened and it's permanent. And how was what's my offset? What's my great offset? Well, certain products can be a great offset. Certainly investments can be a great offset to that. And so if you don't have those baked in your portfolio, and you said, Well, I'm just in bonds and stocks and stuff, that may not be enough. And so it's really important to factor that in, not to mention, like as I said before the tax increases in the future that could come about
On top of the inflationary features, and then on top of taking too much risk in the market, so think about this, Jeff, if you retired in 2022, or 2021, or whatever, and right out of the gate, you're down 20%, because the market dropped that much. And inflation or a couple years span may have dropped your buying power 25%. And then taxes went up and you're going, Wait a second, I lost half my buying power over the course of two years, I worked for two years, I think I feel like I just lost 20 of them permanently of my savings, my 401k because I didn't factor all these things in. So absolutely need a plan that accounts for inflation, decrease in buying power, increases in tax rates, and protecting against market losses to some degree. So the all this stuff works together. Brian, what I'm getting from this conversation is that inflation is really a very important thing to consider when you're doing a financial plan. Do you think that people misunderstand the effect of inflation? And it's a little bit further down on their list of priorities than it really should be? Yeah, I mean, always sitting around talking about inflation and financial planning. You know, I certainly don't run into people. That's their topic conversation, I might be talking about the other favorite football team or something a little bit more. But yeah, it's a huge thing. And part of the reason is, you know, I'm delivering some bad news here, that I think we're being lied to, frankly, we're not getting accurate information about inflation, and what's the cumulative effect on your retirement over 3040 years, it's enormous. And we're not hearing that it's real, is very real. And so because we're not getting the factual information, and if we did, it would be really scary. And nobody wants to think about the retirement be scared at the same time. So it's kind of one of those things that Let's just not talk about it. So that's why we're talking about it today on the radio, you know, if you're feeling a little antsy about it, I don't want to listen is Brian guy, he's making me feel bad about my retirement. Well, sometimes that's a good thing. Sometimes you gotta hear that if it's as important as your retirement. And you know, you gotta hear the bad news and deal with it. And while you still can do something about it, because 20 years from now you go, I remember hearing that, and now that my retirements terrible and
my buying power has been eaten away, I wish I had listened to that guy, I turned him off, because he was making me feel bad. I turned on, you know, classic rock songs on stage, I didn't want to listen to Brian, make me feel bad about my retirement planning. But in 20 years, you might thank me even if you're a little annoyed right now, well, you don't want to stick your head in the sand like an ostrich because all the rest of you is tremendously exposed. And I think the best way to handle any problem, not particularly just inflation is to tackle it head on, and really take some proactive plans to combat this. And I think that's really what you're telling us here. Brian, can you tell us about some of the strategies that you may use when developing a lifestyle plan for someone that's going to keep up with inflation? Yeah. Now, you know, I've identified the problem, I think pretty well so far in show today. But is there a solution is is it all lost? No, I there's totally solutions. And so there's basically five objectives to investments, you know, growth, liquidity, cash flow, security, and tax savings. And there's six basic places you can put your money, cash, bonds, equities, real estate, insurance, company products, and alternatives. Now, all of them can play a role in the seven steps to successful retirement. And so they can play a role offsetting inflation, too. There are certainly fixed index annuities designed for increasing lifetime cash flow is one or you know, I was just having a conversation with somebody. Yesterday, I was reminded that this person that had worked for the city, their whole life came to me, she said, I don't get it. I've been putting money in just like the people next to me, they're all retiring with a million dollars in their account, and I have under 200,000, I don't get it, why can't I retire? And they are and I said, What are you in, she's a cash, I'm afraid of the market, I've been afraid of it for 40 years, I'm gonna, that's why you put 180,000 into your 403 B, and you have 180,000, essentially, and you didn't get the market gains. So the part that's in the market needs to grow, again, growth, liquidity, cash flow, security, tax savings, the part that's in your safe money, and you're guaranteed lifetime cash flow should be an increasing guaranteed lifetime cash flow, the part that's in your real estate, you're producing rents that can increase over time to offset inflation, you know, there, there's all these different aspects of investing that can offset the known that we have then known that inflation happened, and it took away our buying power permanently and it's going to continue to erode our buying power, we have to offset that somehow, someway. So the financial plan has to take into account all the different areas that we can invest in, that can work simultaneously in concert with one another to provide the five things we want from our investments. But one of them, you know, cashflow needs to keep up with inflation. And so that's a integral part of a financial plan is to have all these things working together.
And frankly, most of the things that I think of and here's, here's a very important point I want to make most of the things that I know of that can combat inflation or decades and decades, the average consumer cannot invest in on their own. They're prohibited from investing in these because you have to go through a licensed financial adviser or licensed insurance person to get increasing lifetime cash flow to get Delaware statutory trust to get private, non traded equity and debt REITs to get all these different products that I use, or we use as a firm for our clients, you came in do on your own. So that's why it's is really important to understand, I think we understand the problem. I think we've done a good job today identifying what the problem is, but the solutions are also available, but they're nit just not available to the do it yourself investor. So we need to work together. And we work together to put together the right plan, identify the issue, looking forward, identify the solutions to those issues, and finish the seven steps to successful retirement. Brian, I'm really so happy we're having this conversation today. Because I think a lot of listeners do not understand the impact of inflation. And the fact that the 4% just isn't as accurate as you might hope that it would be. But before we keep going, I want to take a moment to invite our listeners to give us a call so that they can request their rooted wealth analysis so that they can proactively plan for their future with a cost of living adjustment to help offset inflation. So if you're listening to us right now, you want a lifestyle plan that may be able to help you retire sooner than expected, then call 833-673-7373. and request your routed wealth analysis. That number once again is 833-673-7373. It won't cost you a dime. But it could be just what you need to help achieve your financial goals. Now you must have at least $500,000 in investable assets to qualify, but those who call and are qualified as a bonus are going to be sent Brian's brand new book seven steps to a successful retirement at no cost whatsoever. That number one more time is 833-673-7373. That's 833-673-7373. Right, I'm gonna go back to an earlier question and ask it again, what do you believe if 4% is not the reasonable rate to put in as far as an inflation rate goes? What do you believe is a reasonable cost of living percent for those that are planning? Yeah, that is a tough one. Sometimes, because it's more than just the cost of living, you also have to factor in how much your investments are going to grow. And so that offsetting that and so as long as you tie those together, they're pretty much tied, they kind of cancel each other out, and you're properly invested. And that's a big if I was not an but if because most people are not, if you're just in stocks and bonds, or you just said annuities is probably not going to work real good. Most people need to have a combination of all the six areas talked about that we can invest in to make this the planning work, because we can't account for all the things that can and will happen in the future. But when you have all six of the areas, and most people only have two or three, but when you have all six of the areas, then whatever happens, you see, can ride out that storm, your deeply rooted wealth plan kind of thing, or you write out the storms that happen and have been happening, gosh, in the last few years, you know, COVID recession and tax increases and inflation overnight, and then the Fed throwing all the cold water on the economy and warn Russia lots of bad stuff happening. And how did you write that out? And so you asked me about what is the rate of inflation? Well, it's important to have a number probably higher than what we've projected in the past, because I think it's it's here to stay, I don't think the Feds gonna get it down to 2% ever, like they say, but, you know, monitoring the projected increases relative to the inflationary impact of your spending is hugely important. So put some cushion in there for things that could go up in the future. And that isn't even including tax increases. So definitely want to account for a lot of things that maybe you're not aware of today, but you might be five to 10 to 20 years from now, unfortunately, Brian in the past, we talked many times about the vast and deep toolbox that you have there at Madrona financial with lots of tools to combat things such as inflation. I've heard that annuities offer fixed income rates that don't keep up with inflation. Is that necessarily true? They can keep up in certain times and then other times they won't. So certainly they've been keeping up the years prior to the current administration. They were doing just fine. They were ahead of inflation, generally speaking, the ones that have increases now there's a lot of annuities sold, they're not even designed for increases. In fact, most lifetime annuities are lacking. People get these annuities, they Oh, I'm going to make 2000 a month that's going to take care of things. And that was 10 years ago, and now they're still getting 2000 A month ago while my 2000 is only worth 1000 now and relative to what it was and so yeah, and it's gonna be
worth $500.10 years. So now and $250.20 years from now, because of inflation and so forth, my buying power has been decreasing. There's so many people out there that bought annuities lifetime guaranteed income, and they didn't factor in the inflationary aspect of that, because they don't even have one. Most annuities don't even have that built in many pensions, bowing pensions and etc, don't even have an inflationary feature to them. And so it's kind of a misrepresenting what your retirement is going to look like, really, when you do a retirement plan based on a fixed payout. So you asked if the annuities can keep up? Well, most cannot, because they're not even designed to have increases, some are and those are the ones we would look at for our clients. Is it enough to even keep up with inflation? Or sometimes it isn't? Sometimes it is not. However, I'd rather have something that is designed to increase over my lifetime than something that's not it's like, do I either just sign up for a loss? Or do I sign up for something that gives me the potential of combating inflation to whatever degree maybe it's 100%? Maybe it's 80% of inflation? Maybe it's 60%? Whatever it is, I having some inflationary component to my annuity is better than having nothing at all. Brian, you talked about annuities, there are variable fixed and fixed indexed annuities, how does the income vary according to these different types of annuities? Yeah, that's a good question there. So we'll start with variable annuities, most variable annuities that I've seen, it's they have a lifetime income component is it's a fixed payout. And so absolutely, will will not help you to combat inflation. Now, the biggest issue with variable annuities in my world is two things. One is extremely high internal fees that you do not see they do not listen for you. So you know, it's a tight market out there, it's hard to get certain returns out there. And when you're paying 234 percent internal to a product annually compounding that over years and years, you're losing buying power, big time there. So this is a discussion of buying power again. And then when you do turn on the annuity, you lose buying power, because it's fixed for its period of time. And then on top of that we're taking market risk, because variable annuities are invested in stock and bond markets. And now we've got all kinds of risk in that variable annuity, so we don't sell them. Next one is fixed annuities. What's a fixed annuity? Well, that's most closely associated with like a CD, it's a guarantee by insurance company, we're going to pay you X percentage per year for a period of time. And you may say, oh, you know, I'm making x percent it's, that's really good. And it may be given the current times, will it combat inflation, maybe, maybe not. And it combats, maybe the CPI that's reported, but not their CPI that you're experiencing in your household. And so that that can be an issue with that, but it is safe money in its place to park money for a period of time. And finally, fixed indexed annuities, they can offer as I mentioned, guaranteed lifetime cash flow, it can be fixed, which I'm not a big fan of or it can be increasing guaranteed lifetime cash flow, which can be a very integral part of a financial plan because of you know, you factor in Social Security or rents, your dividends interest, your fixed index annuities coming in for your lifetime. That can be huge aspects. So that is something that we absolutely want to have a discussion about for most people to decide whether they want increasing guaranteed lifetime cash flow. That sounds pretty good to me those words. Oh, yeah. Increasing lifetime cash. Leon, it's not it's not a terrible thing. So don't be afraid to have that discussion with us as it relates to fixed indexed annuities. Brian, for all of our listeners who have joined us today, and they're interested in a retirement plan that can help them retire sooner than expected, even with the current inflationary problem, I want you to listen up dial 833-673-7373 right now and request your rooted wealth analysis at no cost, you must have at least $500,000 of investable assets to qualify but when you call, you're gonna get a friendly voice on the other end of the line, who will gather some basic information from you so that your local trusted Madrona adviser from Madrona financial and CPAs will be able to call you back early next week. Now this analysis is an open conversation intended to help you uncover financial blind spots or what we like to call shallow roots and help you discover potential solutions that can potentially help you retire now, even with higher than normal inflation. So call Madrona financial and CPAs right now and request your routed wealth analysis. That number again, is 833-673-7373. One call can make all the difference. If you're just joining us. This is growing your wealth with Brian Evans. I'm Jeff shade, and we've just finished discussing how to tackle inflation in retirement. If you want to hear the show again, don't worry, we are a podcast. Just go to wherever you get your podcast and search for growing your wealth with Brian Evans. You'll get this show and weekday takeaways so that you can stay on top of your wealth and how to grow it. We're going to take a quick break and we'll come back we'll be discussing what you need to know if you plan to work part time in retirement. Stay tuned for more growing your wealth with Brian Evans the show you can't afford to mess around
I'm tired of only getting half the story. That's why it's so important to get your financial information from a CPA and an advisor like Brian Evans. Now let's get back to some of the most comprehensive financial information around. You're listening to growing your wealth with Brian Evans. Welcome back to the show. I'm Brian Evans, CEO of Madrona, financial and CPAs. And in this segment, we'll be talking about what you need to know if you plan to work part time in retirement. And Brian, according to Forbes 46% of retirees plan to work part time in retirement. So Brian, why would someone want to work part time? And what do people need to know about working part time in retirement? Yeah, there's a lot of reasons why someone might want to work part time, certainly a lot of my clients find that right when they retire, they're not sure what to do with their time. I mean, they usually have a honey do list or a certain number of things for three to six months that they've been putting off. But a lot of them kind of start missing their job in certain aspects. They don't miss the grind, necessarily the full time aspect of it, but they miss you know, having a purpose other than just getting up and going golfing or something like that every day. So they miss purpose. They miss intellectual conversations with their co workers and that kind of thing, or their their customers, whatever it may be, they miss the money, they miss not having a paycheck and they feel nervous about it. You know, I've been working I get a paycheck every two weeks, it's pretty good paycheck and all sudden, my paycheck is nothing. I haven't turned on Social Security or my annuities and I have zero coming in. It makes me really nervous. That's another reason. And finally, when we think about what is the purpose of your life, what is your life look like? It came to me during the break that always talking about diversified portfolio, you know, there's five things money can do. There's six places but your money, there's seven steps to successful retirement, a truly diversified portfolio has investments in it that you can't do on your own. There's a whole slew of them out there, you know, private non traded equity and debt REITs, Delaware statutory trusts fixed index annuities for guaranteed increasing lifetime cash flow, universal life, whatever it is, there's all these different investments. And we call that a truly diversified portfolio as opposed to 6040 stock bond split. Well, a lot of people live in their life in a 6040 work, not work split. And when you take the work out of that equation, and you're just left with, okay, sleeping and eating, and what else you got going on. And if you say a lot, I'm not really sure what defines my purpose going forward? Well, there's a big reason you don't have it, maybe a diversified lifestyle, you know, you think about it, and lifestyle planning is part of retirement planning. So what are you going to do with all those 4050 hours a week that are no longer accounted for through work and you go, I don't know, I've never had to fill that kind of time up. And all of a sudden, it's real. And you're sitting there in retirement going, Wow, this is a real thing. So a lot of people decide to fill in some of it with work, you're going back to her part time. And so I get it, because that is a lot of hours to fill. It sounds like well, gee, we shall have such problems, you know, an extra 50 hours a week when you count the commute and all that stuff. Well, it is a problem. Because we're not used to filling those hours with something purposeful, and certainly maybe working 1520 hours is part of that equation. But we'll also talk about other things to help you build a diversified lifestyle plan. And to that point, Brian, I think that some people, you know, there's a large percentage of people who become depressed in retirement, I think that the figures around 30%, they become depressed in the first year of retirement. And it's because I think many times they don't have any sense of worth, you know, when they were going to work and doing what they were so good at, they had this great sense of worth, but now that they're not doing that they have a low self worth. And I think and correct me if I'm wrong, and give me your opinion on that. That is why it's so important to look inward at yourself and ask yourself who you are. And not just I'm a plumber, I'm a banker. I'm an accountant, but who am I outside of just the work that I do? Ya know, I was just having this conversation yesterday with someone my agent, we're talking to who's doing great things post retirement, and we were talking about living a purposeful life and what that looks like, and it's not work or not work, you know, your work could be something you don't get paid to do which this person was a donates his time to causes that help society. And that's what he does he executive director of a nonprofit, unpaid, 100% volunteer position with a lot of stress, you know, like, why would somebody do that? Why would somebody take on a lot of stress, work at it hard job and deal with difficult situations and then not get paid for it? Well, because it's that person's purpose, and they have a big purpose. Another thing he did, he became a deacon in his church. And so again, huge purpose. I helped a lot of people. God has an enormous heart and his life is meaningful. And we talked about, you know, when he passes away, he you know, he wants to make sure that his organization continues on when he's not here. So this is these are things he's talking about.
So this is somebody living for beyond themselves. And that is huge. And what a successful retirement that he's having. I see this with other people that I know, we're talking about working part time, it could be working part time at a nonprofit, I'm not talking about getting paid necessarily, it could be working part time taking care of your grandkids, it can be working part time being a mentor, there's so many things that a person could do. So let's expand the meaning here in this conversation, what working actually means it doesn't mean getting a W two, necessarily at the end of the year, it's about having meaningful purpose to your life. Retirement Planning should involve that and a lot of people you know, they plan for their retirement, but putting money I put enough money away, I'm gonna have a successful retirement. Well, that's part of the equation helps. Definitely. I want to make sure you have enough money in your retirement, no question about that. But have you taken the steps to start identifying your transition years from when you're going to start slowing down and transitioning into what what are you going to do thinking about what that looks like? What does that look like five years from now? 10 years from now? How does your life look, when you're living for more than just your own pleasure, whatever, I'm gonna golf in retirement, well, that's fine. That's great. That's part of what your your plan is, but you're probably not going to golf that 50 hours a week. So what else what else is there and so retirement planning should be looked at beyond just the finances of finances or piece of the pie. But I know a lot of kind of miserable retirees that have a lot of money. And you know, it's life is about so much more than that. So when we talk about working retirement, again, I just want to stress that doesn't necessarily mean getting a W two, it could be joining charitable boards, donate your time, donate your time to family, mentoring people, all these other things that we just mentioned, that could be part of that retirement plan. And I know the fellow that you're talking about he is getting a very rewarding nonfinancial paycheck in the world is better for his efforts. But Brian, let's talk about the financial side of working part time in retirement, are there any limits or caps that you have to consider when working part time in retirement? Yeah, the biggest one relates to social security and when to take it and so many people that I know, and there's been a lot of mistakes made, when Social Security, they retire and they go, I'm sick of my job, I'm out of here, I'm never gonna go back to work again. And then they file for Social Security. And they're 60 views 6364 or whatever. And then invariably, because of the labor shortage, and the talent shortage, frankly, out there, it's not necessarily just a labor shortage, it's really a talent shortage that we have going on in this country, we have enough people to do work, but are they able to do it at a high level? Well, that's where the wheels start coming off for a lot of folks. And so if they had a talent, almost invariably, they get called and say, Hey, can you sub in? Can you work part time? Can you subcontract and, and you know me, you know, that's, that's not a bad idea. I'm one of those 30%, that's a little depressed in my retirement, I could use a paycheck coming in a little bit of money extra, I could use something to do and kind of get my head back into something for 15 hours a week, 20 hours a week, whatever. And you think, Well, I'm but I need to make 100 bucks an hour or whatever it is. And so they get that and they go, oh, wait a second, I just added $50,000 to my income. And I have to give back all of my social security. I took all that sucks. Can I still get my raises? It's been a year in a day since I started. So security. Oh, I can't undo that. Oh, and I lopped off my raises, and I have to give back all my social security that I should have waited. Even people say there's absolutely no way I'm going back to work. A lot of times I hear a few months later, wow, I reconsidered or six months later, well in sync came up that I couldn't say no to and it pays. And if it pays more than about 20 grand a year, that's trouble if you took Social Security. So think about delaying Social Security for a while after you retire, think about even if you think you know the answer to what your future holds, you may not know exactly what your future holds. So if I'm hearing you correctly, Brian, that means to consider how much money that you're going to be making. If you have taken Social Security. There is an earnings cap on that. Yeah, that earnings cap is your full retirement age. So you, you know you can take Social Security as early as age 62. And for a lot of us our full retirement age is 66 and so many months or 67 years old, and so if you're not sure if you're gonna go back to work part time or not, wait until your full retirement age once you hit your full retirement age, in my case, age 67 Once you hit that, at that point, then you can take full security and you don't have to give any back no matter how much you make. So I fully anticipate he honed in Brian's life that I loved what I do I'm gonna keep doing it and so I'm putting off so security because I don't want to take it I don't want to have to give it back and I will be you know working into those years in the future because again, I love it I do so I will be part of this that I'm talking about right now the people that have a diversified portfolio of life. I'm a you know, multiple doing my work thing.
and hopefully doing this radio show for years and years to come. But you know, I have multiple charity boards, I got family things, you know, mentoring things, scholarship committees, you know, whatever it is that I'm on lots of financing, I really looks like a finance person on their board of directors. So I'm on a lot of those. And you know, whether it's helping various charities for people less fortunate, or my alma mater, college, or rotary, or whatever it is. So I feel involved and have a, again, a diversified portfolio of things that I do in life. One of them involves work and education, and you know, doing the show and helping people plan for successful retirements and so forth. And I think that's really important. That's, that's gifted with whatever, we're gifted. And that's, that's one thing I certainly was gifted with. And now I want to share that with people. So there's different ways to look at your retirement, certainly, but involving what is the purpose of your life, I think is critical to that to more successful retirement as much as getting your finances right. And Brian, you talked about that Social Security cap, well throw this in for 2023, it's $21,240. And Social Security will deduct $1, from your benefit payments for every $2 that you earn above that limit. So keep that in mind, Brian, before you keep going, I want to take a moment to invite our listeners to give his call so that they can request their router wealth analysis and see the different ways their retirement could unfold. If you're listening right now, and you want different ways to help maximize your quality of life, then call 833-673-7373 and request your routed wealth analysis. That number again, is 833-673-7373. Now you must have at least $500,000 or more in investable assets to qualify. And those who call and are qualified as a bonus will also be sent seven steps to a successful retirement at no cost. That number once again is 833-673-7373. One call could make all the difference. Brian, we talked about the non financial side of a part time job in retirement, let's continue to talk about the financial side in particular taxes. How are IRA contributions affected if you plan to work part time in retirement? Yeah, so if you're working part time, you may be working for somebody else. But a lot of people all of a sudden they you know, they've been working someplace for their life. And then they're offered a consulting gig and and they're gonna be self employed. And so things change, all of a sudden, now, now you're running a business. And you know, you and I, Jeff have had these conversations. Without doing anything, you're gonna put that on Schedule C self employed individual, even if you don't file for business license or anything, you're earning money, it's taxable. So it goes on Schedule C, you can deduct expenses on Schedule C related to your working as a consultant, or whatever you're doing, you will pay self employment tax as he tax pharmacy, where you pay both halves of Social Security and Medicare. And that's over 15% of your net, you're eligible to hire your spouse, which can affect your you can get health insurance, perhaps through there and Abbott partly deductible through there, obviously, that affects your tax bracket. And again, as I mentioned, you have this extra self employment tax that will count towards Social Security earnings. So you may have an issue there. So there's a lot that goes on when you are a consultant, and you're not being W tude, that they're just paying you on a 1099. So there's questions there. Now a lot of people that are self employed, they'll set up an LLC, electing S corp status or an S corp themselves. And they'll try and get like to have some of their income taken out as wages and some as shareholder distributions. And that can avoid self employment tax and, and knowing what those limits are and what you can do. That's where you need the advice of of your CPA to give you credible advice on that. I've heard all kinds of different things. In fact, as that fellow I was just talking about, he was talking about how he was told by a CPA that he couldn't do that anymore, as immediately. I said, Well, you need a new CPA. So yeah, and so is it. Yeah, you're probably right about that. Even CPAs sometimes don't understand what the limitations are, they feel like they should but not all do, because I keep hearing that. Sometimes they don't, you know, you can get advice. That's real, super safe and careful. And basically what the IRS wants you to do, but you know, I'm not prone to follow what the IRS necessarily thinks I should do. And so not saying I don't do what the IRS says to do, but the IRS puts out guidelines and so forth, but they don't necessarily tell you exactly percentages or what's allowed. It's, there's so much gray area in the tax code. So it's our job to figure out okay, what's allowable, what isn't what court cases said about different things and so forth, so that we can come to get solutions for the benefit of our clients. But yeah, we opened up a whole can of worms with working part time working by yourself as a sole proprietor or self employed that kind of thing. And there's all kinds of limitations we can possibly get into how much you can put away in retirement plan to that is something to consider. If you are working part time you might want
I've just loaded up on retirement savings if you can't afford it or you may need that money to live on so that that's another aspect of the financial planning. Prior to it occurs to me that if you're electing to work part time in retirement, really you can go two ways as you said, you can go to work for somebody else, you know, welcome to Ace Hardware, you know, you get a W two for that. But there are some people who turn a hobby into a part time business. Let's say for example, that I start Jeff's old car carburetor rebuilding business in my garage, how do I know when I need to go from doing a sole proprietor, you know, Schedule C to doing an LLC? Yeah, there's a couple of reasons why someone would do an LLC, it is more expensive, you got to file another tax return as a pass through entity. But one of the reasons is liability protection. As a sole proprietor, you don't have any, you got to buy your own insurance, malpractice insurance or business insurance and make sure it covers every eventuality that could happen that could go wrong, which you may not know what it is, as opposed to an S corp or an LLC, where you have liability protection built in. It doesn't protect the business assets, but it can protect your personal assets. So a lot of people do it for liability purposes. And secondarily, if you're making a fair amount of net profit and your taxable incomes fairly high, you may want to decrease the self employment tax both halves of Social Security Medicare tax over 15% can be saved a portion of that can be saved by filing as an S corp and paying yourself a distribution as opposed to wages. So there are techniques to save money. But certainly a liability aspect is a huge reason why somebody has set up an LLC or an S corp. So once again, I think the word of advice here is consult your CPA and ask those questions, because it's a lot easier to get it right the first time that it is to get it wrong. And then to go back and try to correct mistake. Brian, we're talking about working part time in retirement when you reach the age of 65. Of course, you get Medicare. So let's talk a little bit about Irma, and how much your Medicare premiums will change. If you're age 65 and working part time. Yeah, Medicare premiums can change quite a bit. I mean, they can go up to Gosh, close to $500 a month extra depending on how much you make for a married couple. It's right around 180,000 a year, where it kicks in. And it's single people like 90,000 a year, that kind of thing. But that can be a sizable hit for a lot of people that they weren't expecting. And so it's just something to factor in. I know when we do retirement plans for people, we do factor in individual columns for just medical expenses, anticipated medical expenses. And so we'll have both people's arrma increase Medicare premiums, they have to add monthly based on their prior income. And we'll also have anticipated out of pocket as one of the line items for projecting expenses in retirement because we think about what are your biggest expenses, whether three, there's your housing potentially, or not, if you get house paid off, maybe it's just your property taxes and insurance. So there's housing, there's income taxes, and there's medical expenses. So those are kind of the big three long term care might be part of that too, depending but those are big issues. And so with Irma, you know, they're gonna look at your income, and they're going to adjust your Medicare premium based upon that. So just something that we want to think about, there are situations where if you've been working India or your mid 60s, and let's say you retired at the end of your 64th year and you and then they say you, you owe all this money, you go, Hey, wait a second, I'm not making anything. Why is that? Well, you can challenge for a period of time and say you shouldn't be paying that because they're basing it on what you earn when you were 63 or 64. And it was a two year lag. And you're saying, Well, I'm not earning that anymore. So you can challenge that and potentially not have that additional expense. But as years go by, then of course, if you have a higher income year, two years later, they're going to drill you on your Medicare premium. Brian, we've been talking about considerations if you are working part time in retirement, what happens when someone decides that they don't want to work part time in retirement anymore when that was originally part of the plan? Well, Jeff, you bring up an interesting idea about what if something changes? Well, I might switch that around and go, something will change. I mean, I've even said to people, you realize that I did that we did this plan. We had hundreds of variables, we had all of your assets put in here. We projected all of your expenses annually for the next 3040 years whatever we projected rates of return inflation income tax brackets into the future cost of living adjustments, future health care plans, future housing plans, future gifting plans, all of these variables are Oh rate of return on investments of various different kinds of investments. So we have all these variables and the reality is tomorrow this plan will be wrong, but it is as accurate as we can get at the at the point in time that we make it and so we need something it's more accurate than guessing. That's for sure. And so we need to have these plans but
understand they're fluid that they will change, they change that, again, the day after the market is going to adjust. And now I have new numbers for all of your assets. They're different than they were the day before. And they're going to be different tomorrow. Is it substantially different? Probably not. But over the course of weeks, months and years, it can be very different. And so we make it a point to adjust the financial plans to current data periodically. So we can be on top of this. This is not a one and done. You can't tell me. Well, I had a financial plan done or when? Oh, 22 years ago? Did you pull it out? And look at it? No, but Well, if you did, I'm guessing is probably not all that accurate today. And then yeah, you're right. It said I was gonna have to work. I'm 70. But I don't feel that way. I'm like, No, you don't. I just did a updated plan for you. And it says that, that you're fine now. And we can look at that. And then just it's so financial planning is critical. But it's not an exact science. There's a bit of an art to it. Because there's a lot of variables that we don't know, gotcha. But there's one I can think of how long are you going to live? Yeah, how's your spouse going to live? What's your health going to be in your retirement? Are you going to be active or not? Are you going to spend money or not? You know, there's variables we cannot answer. So we didn't do the best we can. And but the the biggest point of this is to have that document, it's a living document. That's why our clients, our ongoing financial planning clients, and they expect to be able to review that as the years go by updated and to see how if they're on track, or if they're ahead of plan, hopefully, and keep that going. So if you're going through life, and you say, Well, I do not have an updated financial plan. I mean, this is a great question to ask, because remember, I think last week or week before I talked about if you think your financial advisor is doing tax planning with you ask yourself, has your financial advisor ever asked for your tax return? If not, they aren't doing proper financial tax planning with you. Here's another thing, if you can honestly say I haven't updated financial planning, great if you say, hmm, I don't know what that looks like. I don't know where it is, I can't remember the last time I did it, or anybody asked to do it, then you probably don't have it. So if you don't have it, it's one of the most critical things I think everybody should have an updated financial plan does have to be updated in last week. No, but sometime in the last year or two would be nice that you can see if you're on track. So if you do not have a updated financial plan, that is a reason to reach out and definitely get that ball rolling. Brian for listeners are wanting to see what their retirement could look like with or without part time work so that they can potentially maximize their quality of life. And I want our listeners to pay attention to this message because it is for you dial 833-673-7373 right now and request your rooted wealth analysis at no cost, you must have at least $500,000 or more of investable assets to qualify. When you call you'll get a friendly voice the other end of the line who will gather some basic information from you so that your local trusted Madrona financial advisor from Madrona financial and CPAs will be able to call you back early next week and schedule your appointment. This analysis is an open conversation intended to help you uncover financial blind spots, or what we like to call shallow roots and help you discover potential solutions that can help you retire with a lifestyle that you want and desire. Remember, even the mightiest of trees can fall if the roots aren't deep enough. That's why the root of wealth analysis is so very important. We can help you grow deeper financial roots so that you're better prepared for future financial storms. And as a bonus, qualified callers will get a copy of Brian's latest book seven steps to a successful retirement at no cost. So call Madrona financial and CPAs right now and request your routed wealth analysis. Once again, that number is 833-673-7373. That's 833-673-7373. One call can make all the difference. So we're talking about working part time or retirement having a financial plan. And it occurred to me I was going to think of a story about somebody that maybe worked too long. And I realized that virtually every client meeting I have people intend to work longer than they have to work. I mean, almost always. And so as I think about it, the importance of doing these financial plans use AI Yeah, Brian, you keep saying do a financial plan, have it updated and make it current. But it's hugely important, especially as you approach retirement because your limiting asset isn't necessarily your money. It's your time in retirement. I mean, you're you're in your 60s, you're going well how many good years do I have left? It's a finite number. And do you want to spend 2345 of those years working in a job that you did not have to work at because you just had bad information on a piece of paper that you put together yourself? I put together a spreadsheet it looks like after work five more years? Well, if you get it done right with all those variables I've been talking about during this segment you may find and I often find this that years are added back to your enjoyment part of your life and taken away from the part that you don't want to do anymore because of good information. So this is life changing stuff here that we're talking about and
And a lot of people kind of put this stuff off, I'm certain that a lot of guys listening or gals listening, you know, they spend more time following the cracking than they do or the Hawks or whatever then they did on their financial plan this year. And so I just encouraging you, it could be life changing. If you get the right data and take that data and do something with it and then do something with it is the five things that money can do the six places to put it in the seven steps to successful retirement, get that right and know you're, where you're at, and where you're going and where you're headed, and then make your life decisions from that. And then we added in this segment about having a diversified lifestyle plan. So having that lifestyle plan where you're maybe it's part time work, maybe it's charitable work for nonprofits, and maybe it's volunteering at your church or an animal shelter or farmers market or helping educate people that need that or spending that time doing that important kind of work, as opposed to just spending more time at work because you have bad information on a piece of paper that said that you need to work more than you actually had to work. Thanks, Brian. Once again, I want to encourage our listeners to request their routed wealth analysis. Do it today, if you can 833-673-7373 so that you can see what a comprehensive financial plan that's designed to sustain your quality of life for 30 years looks like that number once again. 833-673-7373 Brian Well, once again, we're out of time for this week. I want to thank you for joining us today. And for our listeners. Don't miss a show by subscribing to the growing your wealth podcast with Brian Evans. You can get it wherever you get your podcast or simply just Google Brian Evans growing your wealth and it'll come up right there. Brian, thanks for your time. Thanks to our listeners for joining us from Brian Evans. I'm Jeff shade get out. Have a great weekend. We'll talk to you again next week with another edition of growing your wealth and until then, stay well rooted. No statements made during the growing your wealth show should constitute tax legal or accounting advice you should consult your own legal or tax professional on your individual information. Ryan Evans and Madrona Financial Services is licensed to offer investment advisory services through Madrona Financial Services LLC an SEC registered investment advisor insurance products are offered through Madrona Insurance Services LLC, a licensed insurance agency and an affiliate of Madrona financial services. Past performance is not a guarantee of future results. Investors cannot invest directly into indexes. No investment strategy, including asset allocation and diversification guarantees a profit or guarantees the avoidance of loss financial planning is an important tool that does not guarantee specific outcomes. Pst investments are only available to accredited investors at opportunity through the issuers offering documents. The DSD sponsor determines whether to accept any individual subscription documents. Madrona financial and CPUs is a registered trade name used singly and collectively for the affiliated entities Madrona Financial Services LLC Madrona and Bauer Evans Inc. PC Power evidence and best advisory services are provided through Madrona CPA services are provided through Bowery