3134: Your Retirement Checklist by Mike Ballew of Egg Stack on Financial Freedom and Money Goals

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[00:01:00] This is Optimal Finance Daily – your retirement checklist by Mike Ballou of Eggstack.com. As you approach retirement, it's important to take inventory to make certain all of the necessary arrangements are made. Once you make the big leap, it's too late for a do-over. You need a checklist and what follows is a good start.

[00:01:25] Pay off debt. The best case scenario is to be debt-free when you enter retirement. Debt is a necessary evil when you're young and first starting out, but by the time you retire, you should have outgrown it. Loan payments are not something retirees should be dealing with. The biggest favor you will ever do yourself is to get a 15-year mortgage. You pay off your mortgage in half the time, but the payments are not twice as much.

[00:01:54] If you already have a 30-year mortgage, you can achieve the same result by paying it off at the higher 15-year rate. Retiring is a little like traveling to Mars. Another component to being debt-free is to put car payments in the rear-view mirror. When you pay off the vehicle that you currently own, keep making car payments, only make them to yourself.

[00:02:18] You can put the money in a savings account, and over time, you will accumulate enough to purchase your next vehicle. Keep making car payments to yourself in this manner, and you'll never have to make a real car payment again. What's the difference? This puts you on the receiving end of interest rather than the paying end. Plus, that money in the bank can serve as part of an emergency fund to help bail you out when life deals you unexpected circumstances.

[00:02:48] Adjust your investment strategy When you have many years left until retirement, you can afford a certain degree of risk in your investment strategy. You have time to recover if things go south. That is no longer the case once you retire. You need to minimize investment risk in retirement as much as possible. Those high-flying stocks that propelled your portfolio to new heights need to be replaced with slow and steady investments.

[00:03:17] Think, goodbye Tesla, hello Procter & Gamble. Adjustments need to be made in terms of asset classes too. During periods of high growth, chances are your portfolio doesn't have a bond in sight. A more conservative approach is a mix of stocks and bonds. This lessens the chance that you'll be wiped out when the next market crash hits. Life on Mars Retiring is a little like traveling to Mars.

[00:03:46] If there's not enough fuel in the tank, you're going to get stuck there. Similarly, if you retire with too little savings, by the time you find out, it may be too late. You may be too old and feeble to start working again. Retirement is too important to guess how much money you need. And relying on rules of thumb is a fool's errand. Free online calculators use rules of thumb and they all ask the same three questions.

[00:04:14] What's your current age, income, and retirement savings? They don't ask if you'll still have a mortgage when you retire or if you pay state income taxes. They don't ask about your living expenses, tax filing status, pensions, annuities, life insurance, and so much more. You need to sit down with a financial advisor or avail yourself to sophisticated retirement planning software that can analyze your situation and determine how much retirement savings you really need.

[00:04:47] It's important to enroll in Medicare when you turn 65 years of age. Open enrollment is held each year from October 15th to December 7th. There's also a lot to Medicare in terms of deciding about supplemental coverage and other various options. For more information, check out our article titled Medicare Explained. End of Life Plan An end of life plan includes your last will and testament, medical power of attorney,

[00:05:17] and account-specific information to aid survivors in carrying on after you're gone. A will designates who you want to oversee the disposition of your property, as well as any specific instructions regarding who should get what. A medical power of attorney indicates who may make medical decisions for you in the event you're no longer able to do so. Specific account information should include securely stored logon credentials

[00:05:45] for retirement accounts, bank accounts, and life insurance policies. The last word. Who knew retirement could be so much work? It might seem overwhelming, but time spent planning for retirement is time well spent. After all, it's the last 20% of your life. It could be a hoot or something less. The choice is yours.

[00:06:13] You just listened to the post titled Your Retirement Checklist by Mike Ballou of Eggstack.com. The origins of this podcast were once just a dream. That dream turned into the podcast and business you're listening to today. Starting your own business is a dream lots of us share, but too many of us let it remain just a dream. Don't hold yourself back thinking, what if I don't have the skills? What if I can't do it alone?

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[00:07:38] It's the automated investing and savings app that handles the work so you don't have to. While they build and manage your portfolio, you build and manage your weekend plans. While they make it easy to invest for what matters, you just get to enjoy what matters. Their automated tools simplify the complex and put your money to work, optimizing day after day and again and again. So go ahead, take your time to rest and recharge.

[00:08:08] Because while your money doesn't need a work-life balance, you do. Make your money hustle with Betterment. Get started at Betterment.com. That's B-E-T-T-E-R-M-E-N-T dot com. Investing involves risk. Performance not guaranteed. Something that I haven't even begun to wrap my head around is a drawdown strategy for retirement.

[00:08:35] I've got a ways to go before I start thinking about that. I'm in the accumulation phase, so super focused on growing my nest egg. But at a certain point, I'll need to shift from focusing on growth to focusing on preservation and making sure that my money will last me for the rest of my life. The most knowledgeable person I know on this topic is Frank Vasquez over at the Risk Parity Radio podcast.

[00:09:00] Frank is an expert on asset allocation for DIY investors and talks about how the goal for retirement is to construct portfolios that are robust and can be drawn down on in perpetuity. He also explores how to maximize projected safe withdrawal rates regardless of projected overall returns.

[00:09:22] I imagine that when I'm working on a drawdown strategy, I'll consult a flat fee advisor to help me account for the tax implications of pulling from my different investment buckets. I'll be pulling money from my Roth IRA, traditional IRA, HSA, and after-tax brokerage account. And so I'll need to figure out the optimal strategy of how much to pull from each account and when.

[00:09:48] There are also required minimum distributions to consider. This means that age 70 and a half, the IRS requires that you start taking distributions from certain accounts, or you'll have to pay a penalty. This applies to employer-sponsored retirement plans, including 401Ks, 403Bs, and 457Bs, as well as traditional IRAs and IRA-based plans like simple IRAs.

[00:10:15] That's because you weren't taxed on your contributions and Uncle Sam has waited long enough. And note, this doesn't apply to Roth IRAs as you contribute to these post-tax. So all that being said, drawdown strategies can be a bit complex. And while many DIY investors come up with their own plans, it doesn't hurt to have another pair of eyes on it in the form of a flat fee advisor. And that should do it for today.

[00:10:45] Have a happy rest of your day, and I'll see you on the Thursday show tomorrow, where your optimal life awaits.