Smart Tax Planning for LGBTQ+ Retirees; Plus, Emergency Funds with Rod Griffin of Experian

TPIR Ep 94 Full Show.mp3: Audio automatically transcribed by Sonix

TPIR Ep 94 Full Show.mp3: this mp3 audio file was automatically transcribed by Sonix with the best speech-to-text algorithms. This transcript may contain errors.

Speaker1:
Any examples used are for illustrative purposes only, and do not take into account your particular investment objectives, financial situation or needs and may not be suitable for all investors. It is not intended to predict the performance of any specific investment, and is not a solicitation or recommendation of any investment strategy.

Speaker2:
Welcome to Take Pride in Retirement, the podcast dedicated to helping members of the LGBTQ+ community protect and grow their hard earned money. Get set for a show full of education and insights with your host and advisor, Matt McClure. We recognize every family is unique. The goal of the show is to help you achieve financial freedom so you and your loved ones can have the retirement you've always dreamed of, a retirement you can take pride in, no matter who you are, where you're from, or who you love. So now let's start the show. Here's Matt McClure.

Speaker1:
Hello, and welcome to another edition of Take Pride in Retirement. Matt McClure here with you, your host, your advisor, your friend, your pal and your confidant. I really, really appreciate you taking the time to join little old me here on the pod or on the YouTube or wherever you might be watching. I really do appreciate it. Watching, listening, whatever you like to do, if you like to see my smiling face, I'd appreciate it if you would like this video and that you would follow the channel. Subscribe to the channel. Um, you know, give us a good review on the podcast platforms and all the things that would help. So, so much as we spread the word about LGBTQ plus retirement issues. And that's what we talk about here on the show. It's all about giving you the education and information that you need to make more informed decisions. And then if you want that deeper dive into your retirement plan, your own specific retirement plan, see where you stand. See where you could be standing. If you, uh, took a different approach, I would be glad to go over everything with you. Go through it with a fine tooth comb. Do a deep dive analysis of your current financial situation, and then have a situation after that where you can actually have the retirement you can take pride in. I mean, it's a pretty simple concept, but finances are not always simple, right? Because as you can probably attest.

Speaker1:
Um, so a couple of things that you can do. Go to take pride in retirement, take pride in retirement. Com click on the Get Your Plan page. You can also click on the contact page or schedule a consultation. We'll get all the ways for you to get in touch with me about your plan. And the easiest thing to do probably is just get your plan. Easiest thing to remember and take pride in retirement. Com and schedule a free consultation with me. I really would love to go over your situation and help you see if I can help you, you know, make things better so that you can have that retirement you can take pride in. You can also give me a call (855) 246-9211. So we're going to talk a lot about tax efficiency today. We're going to talk about rollovers kind of in that same sort of like concept. Um you know the whole thing. It's all it's all about taxes. And where are you going to pay more taxes now or in the future or what? Like what makes the most sense for you? And the answers there are not cut and dry. So we're going to talk about that over this next little bit. Also going to have a special guest on the show from Experian in just a little bit. He will talk to me and to all of you about how you can go about building emergency savings if you don't have emergency savings just yet, and a lot of people don't.

Speaker1:
We'll talk about the stats about who doesn't have emergency savings. You might be a little surprised. You might not. I kind of thought that the number was going to be bigger of people who didn't have an emergency fund in this particular survey that that we're going to discuss later. But yeah, there are ways that if you are part of the still very large group of people who don't have emergency funds built up, there are ways that you can go about it without feeling overwhelmed. So we'll talk about that and we'll have a great discussion there. So what if it's taxes and not the market that does the most damage to your retirement taxes and not the market can do a lot of damage to your retirement. And it's for LGBTQ plus retirees. You got to think about this, especially because there's a higher likelihood that you are in a single file or household, right? A lot of older folks who are LGBTQ plus go into retirement either being partnered but not married, or being just a single person, period. And so that affects your your filing status, right. And so there are gaps in like survivor planning as well. If you if you do have a partner or a spouse or whatever, Medicare and Social Security interactions matter the way that those two things, uh, kind of talk to each other and one can affect the other.

Speaker1:
The Social Security income can make if you make over a certain threshold, total combined income, um, at a certain point in life, then that can cause your premiums for Medicare to jump as well because of something called Irma, which we've spoken about recently on the show. And, you know, I mean, so retirement taxes, they can be super confusing. They can be overwhelming. And if you feel that way, you are definitely not alone. Um, you can schedule that complimentary consultation. We can just have a conversation, go through some planning, see if your situation can improve. Chances are it can. Chances are it can help you along the way. Take pride in retirement or (855) 246-9211 is the number. So first topic of discussion as we sit and muse over taxes and other things. Um, I know the, uh, is tax drag. Now, I'm not talking about, like, RuPaul. Uh, kind of drag. Now, that's the fun kind of drag. This is not a fun kind of drag because your if your portfolio is not as tax efficient as it could be, then you're going to be experiencing tax drag, the bad kind of drag, it's dragging you down and it's can be really like a silent killer of retirement, kind of a silent drain that compounds over time. Because if you don't understand going in, how the decisions that you make now affect the taxes that you pay, not only now but later, then you gotta potential for the, uh, you know, retirement situation to not be as good as it could.

Speaker1:
You could be overpaying in taxes. Maybe later on you could be, um, you know, paying, uh, You know, maybe not paying as much now, but then later on future you is not going to be very happy because you could have had a lot more money to begin with. You know, you could have had a lot more money, uh, to, uh, have in your possession and your income. And it could have been tax free income potentially as well. So you just got to understand kind of the different tax treatments of different types of accounts. And so one of the things that you want to do is make sure that you don't have taxes dragging you down, and you want to even, you know, you want to avoid even a kind of a small ish sort of a tax drag, 1 to 2% on your retirement, because that can mean shortening your retirement. We we sort of talked about, um, on the last episode and if you missed that, go back to it and and take a listen, because we talked a lot about fees and how fees can drag you down. Taxes, same thing. And that can result in the same sort of a deal shortening your retirement potentially if the taxes that you have to pay on that income mean that there's not a lot of income that still gets to go home with you when there could have been more.

Speaker1:
So it can also increase stress. Boy, can it increase stress. The amount of taxes that you have to pay. It can trigger Medicare premium hikes. That's that thing called Irma that I, uh, talked to you about. And we'll go into that more in a little bit of detail in just a second. But RMDs, by the way, are also something that you need to keep in mind because they are required minimum distributions. That's a good IRS term RMDs. Now what is an RMD? Well, Uncle Sam has said that if you have a 401 403 b tsp, that kind of a thing, something that you have put away for retirement money that you've put away for retirement, but it's been money that has come out directly out of your, your pay and, and or employer match whatever the situation is. But you haven't paid taxes on that yet. Well, you reach the age of 73 now. Eventually it'll go up to 75. Right now it's at 73, you reach the age of 73. And it's, you know, that that tax, um, sort of treat that tax benefit, the, the lack of paying taxes to Uncle Sam that you've enjoyed for so many years. You reach the age of 73 and Uncle Sam's like, okay, show me the money.

Speaker1:
And the government makes you take out a certain amount, a minimum amount. It's the required minimum amount as a distribution from that retirement account that you haven't paid taxes on yet. So they force you to take that money so that Uncle Sam can get his due. Right. So you can pay those taxes. Social security is also subject to taxation up to 85% of your Social Security. Now, don't be confused. Don't think that. Oh, I can have up to 85% taxes that I owe on Social Security. No. Up to 85% of your Social Security can be subject to taxes. So you could pay tax on up to 85% of your Social Security income. That does not mean that you'll pay an 85% tax rate. No, that's not what that means. But that can have a big impact as well. And then there's Irma surcharges, the income related monthly adjustment amount on Medicare. It's an Irma surcharge. That's what that that acronym is income related monthly adjustment amount. And it means that the Medicare the good folks at Medicare CMS, the centers for Medicare and Medicaid Services, they obviously have access to your Social Security. They have access to your income information and all that. And if you make above certain thresholds combined, well, then two years later, if you are then taking Medicare because Irma has a two year lookback, two years later, if you make over a certain threshold, that could mean that you pay a higher Medicare premium for certain parts, like A, like a part B, for example, like your your doctor.

Speaker1:
Uh, basically your doctor visits and all that stuff. That stuff comes with a premium. Part A does not come with a premium that you have to pay after you start receiving your Medicare benefits. But part B does for, um, a lot of people and a lot of people are going to be paying a lot more because they make over a certain amount of money. And again, you got to keep that two year lookback, uh, in mind as well, because it doesn't matter what you made this year, what you make this year, it's two years prior. That's what matters. And so a lot of people aren't thinking that far ahead. But you got to in that situation. And then of course if you are single, even if you're married, but if you're single, it sort of tends to matter more the sequence of your withdrawals in retirement. Like what do you do? You draw from a taxable account. Do you withdraw from a nontaxable account? Do you withdraw? What do you draw from first? That order can can matter and can make a big difference. And so generally speaking you want to do the taxable first tax deferred second, tax free last, so that that tax free bucket of money has the longest time to grow. But it could be different for you.

Speaker1:
And that's why personalization in all of this really is key. There is no one size fits all strategy. There's going to be just absolutely bang on for everybody. You know, it's not going to be a tax strategy that says, oh, well, I need to um, because I heard this random dude on a podcast say that, um, you know, a Roth account is great that, oh, I'm moving everything to Roth right now. No, it's got to get some personalized advice here on the podcast. Yes, I am some random dude on a podcast here on the podcast, I'm not giving you fiduciary advice. I'm not giving you advice that's in your own personal best interest. What I'm doing is educating you, trying to talk about different things that matter to you and can matter and can make a big difference in your retirement. But it's not that personalized fiduciary type advice that is with your best interest in mind when you meet with me in person. I can go through everything with you, go through all the stuff with a fine tooth comb, do a deep dive analysis, and then show you what you could have if you don't make any changes, and then show you what you could have if you do make some changes. And if I can help you, I would love to help you take pride in retirement. Com is the website. Take pride in retirement. Com or (855) 246-9211. So you know speaking about I just wanted to mention because I mentioned it there really quickly and I hadn't planned on really focusing on it.

Speaker1:
But we're talking about taxes. I do want to talk about the only two tax free investments for retirees. Truly tax free, like you say, not mutual funds. Mutual funds that we'll talk about momentarily. But think about municipal bonds. Those are often seen as tax free. Not necessarily. They could be, in certain circumstances, subject to taxation, both on a federal, state or local level. So municipal bonds, get that out of your mind for a second, sometimes tax free. Not all the time. So the only two true tax free investments for Americans today are Roth accounts, Roth IRAs, um, something that you can, you know, establish on your own or with the help of an advisor like myself. Um, you can establish that as a tax free option. You just, you know, put in post-tax money and it is never the growth is not taxed ever on it. The money that you put in because you've already paid taxes on it is not taxed ever. You take money out in retirement. It's completely tax free. So put money in a Roth. Yes. Um, could you know what about converting to a Roth? Well, if you've got a traditional IRA, if you've got a 401 K, whatever other type of, you know, tax deferred type of account, then you know it could make sense for you to start converting some of that, maybe a little each year to a Roth.

Speaker1:
Now you got to keep in mind that money is going to be taxed as, you know, as income in that year that you do the conversion. And so you've got to watch out for those things like the Irma surcharges that I talked about. It could make your Medicare premiums go up, all those things. So you've got to pay attention to that. It's got to be right for you. It's got to be right for your situation. And so let's make sure that we bear that in mind. The other tax free, truly tax free investment available to Americans today life insurance. And you say life insurance. I thought that was just a death benefit. Um, and a lot of times, of course, there is a death benefit with life insurance and it's tax free and it goes to the beneficiary. And that's that's kind of that. But there are also other uses with particular kinds of life insurance where you can actually take loans from the policy that are loans that you never have to pay back in, you know, as you live, you know, can be paid out later on from the death benefit or whatever. You know, balance there is. So it's a little bit more complicated way to get tax free income in retirement. But it is possible if you want to know more about that, take pride in retirement comm and reach out.

Speaker1:
But then there are other things that we want to talk about when we talk about, uh, rolling over, I was mentioning, you know, Roth IRAs and rolling over from traditional IRAs moment ago. And it can be good for you, but and it can feel empowering, but it can also be costly if you don't do it the right way. So a lot of LGBTQ+ workers will change jobs more frequently. I, you know, was in that boat. I've been in I've been in my job now for a few years, for several years. And I love it. So there's there's that. But yeah, I've been in that situation previously. A lot of LGBTQ plus workers may become self-employed. They may retire without pensions. Most of us do that. Whether LGBTQ plus or not, these days, an employer plans will often use lower cost institutional shares in their investments. Iras often use higher cost retail shares, so it can be a good thing for you to make sure that you are getting the most bang for your buck. I talked a lot on the last episode, and again, go back and listen to it. On the fee structure that's underneath your it's kind of underlying your investments. And this is sort of another layer to add on to that not so tasty cake of, uh, of fees, because you got to watch out for those underlying investments.

Speaker1:
And we, I mean, with the IRAs that we use that are, um, you know, the structured sort of, uh, investments here. Um, those are not going to be as high a cost as a lot of your workplace plans, because we don't use a lot of mutual funds. We'll use a lot more ETFs. We'll use those type things that don't have the fee structure. That's nearly what, you know, like a traditional portfolio with mutual funds and all that. So the same fund could have very different costs. You just got to make sure you know what you're paying and how you can cut those costs. And then, you know, rollovers, they're not bad by any stretch. I mentioned the benefits of them, but there are just things to watch out for. They can if you go into it blindly, it can be a risky thing. So before you roll over a single dollar from a traditional IRA or a 401 K whatever into something like a Roth. Before you do that, let's make sure it's actually going to help you and not not hinder you, not hurt you. And so I'm going to be super happy when you reach out. I can see the smile on my face already when you reach out, because I'll be so happy to review things for you. Review that fee structure. Review what you could be paying. Review your options all at no cost to you whatsoever. 855246921185524692 11.

Speaker1:
Or take pride in retirement. Com. Well, nearly 1 in 4 Americans have no emergency savings at all and would struggle to cover an unexpected expense. That's according to Bankrate. And having an emergency fund is really, really an important thing because we never know what's going to happen in life after all. Joining me now to talk more about that is Rod Griffin. He's senior director of consumer education and advocacy at Experian. Rod, thanks so much for taking some time for me. I really appreciate it, sir. Well, thanks for having me. Well, no problem at all. It really is crucial to have some sort of backup, some sort of safety net, right? I mean, but a lot of people, as we just said, that, that, uh, statistic there from Bankrate. 1 in 4 Americans almost have absolutely no emergency savings. Why is it so difficult for so many of us to save money right now? Yeah, it's life is expensive. Uh, and when you look at where inflation was over the last several years, coupled with the holidays just being, you know, just passed and people have what I kind of call the holiday hangover with their debts. You know, they're trying to pay down those credit card bills and debts they may have taken on during the holidays. Um, that puts a pinch on, on the bank account and can make it hard to set aside savings when it feels like all of your money is consumed and just paying the the day to day expenses and reducing, uh, you the debts you may have.

Speaker1:
So, um, that makes it hard. Uh, and it's, it's difficult to get started, uh, because of that. Yeah. It really is, uh, very difficult these days, as you say there. And, I mean, you know, how much should people save in an emergency fund? I know that I've. I've heard different things from different folks, sort of, you know, general guideline is like 3 to 6 months of expenses. Some people say up to a year. Some people say not quite so much. What would you say is a good kind of goal for people to set for their emergency fund? Yeah, and you're right. The rule of thumb has been for many years, 3 to 6 months of sort of your daily of your monthly living expenses, really. So things like your utility bills, your rent, your mortgage, food costs, those sorts of things. And that can be a really daunting number if you're trying to, you know, set a number to it and reach that goal. The problem with a goal that's large like that can be that it becomes discouraging. And so you, you emotionally kind of check out and give up. And that defeats the purpose. So my recommendation is start small and you maybe don't put a large number on it. Maybe it's I'm going to save $10 a month or $20 a month, whatever you have sort of cushion to do and start setting that aside.

Speaker1:
And over time it will build toward that larger amount. The key is to be able to stay motivated, to build that habit of savings, so that you are just kind of naturally putting savings aside over time. Um, the other thing that is important to focus on is finding ways to reduce your expenses, because that gets in the way of saving. And, you know, that means tracking your expenses, knowing where your money is going, where it's coming from. You know, I kind of think about, you know, you should be in control of your money. It shouldn't be in control of you. But that's the way it often feels. Uh, and so if you track your expenses and know where they are and then look at ways you can reduce those expenses and not just the don't buy coffee once a week, which is kind of the common one. But think about just the regular bills you have every month. When people think of Experian as a credit bureau, which we are, but we're much more than that today. And one of the things that we kind of think about and aspire to be is to be a person's big financial friend. Meaning we want to help them take control of their finances and to reduce the costs of everyday life. So we have, for example, a service that can help you reduce your auto insurance payments each month.

Speaker1:
We have a service that can help you identify streaming services that perhaps you've forgotten about, or other subscription services and signed up for for a sporting event or a movie that you wanted to watch and then just didn't use it again. But it's still, uh, you know, being deducted every month, and it's an expense. We can help you find those and cancel them. We have a service that can help you negotiate. Regular monthly bills, things like utilities for many people to reduce those monthly costs. We have a credit card marketplace that can help you find credit cards that would be at a lower interest rate or lower fees that perhaps you could transfer balances to and pay them off faster. So you know. Think of Experian as more than just a credit bureau. It's really about your overall financial health. And saving means having money to set aside to save. And that requires reducing your your monthly expenses. Yeah. Absolutely. Right. And I sort of always think of it as, you know, pay yourself first. Right. It's like your future. You will thank you. If if you do that. And an emergency fund is a big part of that. And of course, one of the ways to that I often hear about, you know, sort of makes makes things easier. You were just talking about, um, the subscription services and things like that that we all sign up for, and then maybe we forget about, uh, you know, after a certain amount of time, the same thing could be true in a positive way though, if you kind of automate some savings, right? Just have a certain amount go into a savings account or whatever it might be.

Speaker1:
Um, and just really, you know, set that up to just automatically happen. Maybe you forget about that. And then before you know it, you've got enough saved up for your emergency fund, right? Right. It's the old out of sight, out of mind thing. Uh. And out of sight. Out of mind can be good if you're automating those deposits and they're automatically going into a savings account. You don't think about it, and it just becomes habit. And you work with then living within the means that you have the funds that are left over. Uh, and but it could also be bad if it's out of sight, out of mind. And I'm just not going to think about the bill I have to pay. Forgot about it. And then I didn't pay it. Um, that's exactly the opposite. Now, you you're damaging your credit history. Potentially. Uh, you're reducing your access or making access to financial services more expensive. So, um, automating payments, uh, and automating savings can be a great tool for building that, that habit that sort of becomes natural over time. Yeah, absolutely. Right. Well, just about time for us to wrap things up.

Speaker1:
But anything else that you wanted to mention, rod, that we haven't touched on that comes to mind? Yeah. Well, I mean, being, uh, you know, the retirement radio network. Think about saving for retirement. If you work for a company that offers a 401 K, for example, and they have a match, never forego that match. Make sure you take advantage of that. If it's pre-tax, you can save potentially tens of thousands of dollars over your career. Uh, if you're taking that match and putting money in the 401 K, and if it's pre-tax, it likely won't affect your take home pay or will have very minimal effect. Uh, so if you are not doing that, um, it could cost you a lot of money over, over the 20 or 30 years. So, you know, make sure you're taking advantage of every savings opportunity you have, not just what we think of as an emergency savings, but also retirement savings as well, because they play a part in that, too. Yeah, 100%. I always tell people if you're not taking the the match with your employer, if it's offered, you're telling me you don't like free money. And I don't believe that for a minute. So there we go with you on that one. Rod Griffin, senior director of consumer education and advocacy at Experian. Thank you so much, rod, for spending some time with me. I really do appreciate it.

Speaker1:
Great. Thank you. Glad to be here. So you see, it doesn't have to be overwhelming to, uh, get an emergency fund going. Really appreciate that, uh, interview there that that really appreciate rod for spending some time with me on that. All right. Well, that is just about do it for this edition of Take Pride in Retirement. I really do hope that you've gotten something out of this episode and out of each episode of the show. I really do appreciate you and all of the things that you inspire me, uh, with and for and about and all that. Because you're my inspiration for the show, really, if you're listening, if you're watching, you are why I do this. And I just want to say thank you again all the time. I want to keep saying it and keep saying it and keep saying it, because I really do mean it. Right? So go to take Pride in retirement.com, reach out for that free consultation, take pride in retirement, give you a financial plan to your 95th birthday. Show you what you have now, what you could have if you work with me and compare the two. And if you want to work with me, work with me. All right. That's as simple as it is. No pressure, no cost, no obligation at all. 8552469211855246 9211. Or take pride in retirement. Com well that'll do it for this time as I said. And until next time take pride in yourselves and take care of each other. We'll see you then.

Speaker2:
Thanks for listening. To Take Pride in Retirement. Members of the LGBTQ plus community deserve to work with a fiduciary financial advisor who puts their needs first. To schedule a free, no obligation consultation with Matt McClure and the team at Active Wealth Management. Call (855) 246-9211 or go online to take pride in retirement. Com investment advisory services offered through Brookstone Capital Management LLC. Bcm, a registered investment Advisor, BCM and Active Wealth Management Incorporated are independent of each other. Insurance products and services are not offered through BCM, but are offered and sold through individually licensed and appointed agents. Matt McClure and Active Wealth Management are not affiliated with or endorsed by the Social Security Administration or any other government agency.

Speaker1:
Information provided is not intended as tax or legal advice and should not be relied on as such. You are encouraged to seek tax or legal advice from an independent professional. Registered investment advisors and investment advisor representatives act as fiduciaries for all of our investment management clients. We have an obligation to act in the best interest of our clients and to make full disclosures of any conflicts of interest. Please refer to our firm brochure, the ADV two, item four for additional information.

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