In this episode, Alex and Wade discuss tax-efficient retirement strategies, specifically focusing on tax diversification. They explain the three broad types of tax treatments in the tax code: taxable accounts, tax-deferred accounts (such as IRAs and 401ks), and tax-exempt accounts (such as Roth IRAs). They highlight the importance of having assets in each category to provide flexibility in retirement planning. They also discuss the characteristics and advantages of each type of account, including tax treatment, liquidity, and growth potential. Additionally, they touch on the different methods of tracking cost basis in taxable accounts. In this conversation, Alex and Wade discuss tax-efficient retirement distribution strategies. They cover the different types of retirement accounts, including tax-deferred accounts (such as traditional IRAs and 401(k)s), tax-exempt accounts (such as Roth IRAs and Roth 401(k)s), and taxable accounts. They explain the tax advantages and disadvantages of each type of account and discuss the importance of considering your current and future tax rates when deciding where to contribute. They also touch on the backdoor Roth contribution strategy and the concept of required minimum distributions (RMDs). Overall, the conversation emphasizes the importance of tax efficiency in retirement planning.

Takeaways

• Tax diversification involves having assets in taxable accounts, tax-deferred accounts, and tax-exempt accounts to provide flexibility in retirement planning.
• Taxable accounts are the least tax-efficient but offer advantages such as preferential income treatment, step-up in basis at death, and liquidity.
• Tax-deferred accounts, such as IRAs and 401ks, offer tax deductions on contributions and tax-deferred growth, but have required minimum distributions and early withdrawal penalties.
• Tax-exempt accounts, such as Roth IRAs, offer tax-free growth and tax-free distributions, but contributions are not tax-deductible.
• Tracking cost basis in taxable accounts can be done using methods like average cost, first in first out (FIFO), or specific identification of tax lots. Consider your current and future tax rates when deciding where to contribute to retirement accounts.
• Tax-deferred accounts (such as traditional IRAs and 401(k)s) provide a tax deduction now but are taxed upon withdrawal.
• Tax-exempt accounts (such as Roth IRAs and Roth 401(k)s) are funded with after-tax dollars but provide tax-free withdrawals in retirement.
• Taxable accounts have no tax advantages but offer flexibility and liquidity.
• The backdoor Roth contribution strategy allows high-income earners to contribute to a Roth IRA by making a non-deductible contribution to a traditional IRA and then converting it to a Roth IRA.
• Required minimum distributions (RMDs) are mandatory withdrawals from tax-deferred retirement accounts starting at age 72 (or 70.5 for those born before 1960).
• Tax efficiency is an important aspect of retirement planning and can have a significant impact on your overall financial situation.

Chapters

00:00 Introduction and Excitement for Tax-Efficient Retirement Strategies 01:26 Tax-Efficient Retirement Distributions as a General Theme 03:01 Understanding Tax Diversification and the Three Types of Tax Treatments 04:20 Advantages and Considerations of Taxable Accounts 15:11 Benefits and Limitations of Tax-Deferred Accounts 25:14 The Advantages of Tax-Exempt Accounts 26:04 Methods of Tracking Cost Basis in Taxable Accounts 00:31 Overview of Retirement Accounts 08:43 Tax-Deferred Accounts 18:30 Tax-Exempt Accounts 25:14 Taxable Accounts 28:47 Backdoor Roth Contribution 33:44 Required Minimum Distributions (RMDs) 38:26 Tax Efficiency in Retirement Planning 45:11 Retirement Tax Cliff 47:09 Conclusion

Links

The Retirement Planning Guidebook: 2nd Edition has just been updated for 2024! Visit your preferred book retailer or simply click here to order your copy today: https://www.wadepfau.com/books/

This episode is sponsored by McLean Asset Management. Visit https://www.mcleanam.com/retirement-income-planning-llm/ to download McLean’s free eBook, “Retirement Income Planning”

In this episode, Alex and Wade introduce a new arc on tax-efficient retirement distributions. They discuss the importance of tax planning and how it can add value to your bottom line. They explain the concept of marginal tax rates and how they differ from average tax rates. They also touch on state income taxes, filing options, and the different federal income tax brackets. Additionally, they mention other types of taxes, such as social security and Medicare payroll taxes. In this conversation, Wade Pfau and Alex Murguia discuss various aspects of income taxation and deductions. They cover topics such as ordinary income, non-qualified annuities, qualified dividends, long-term capital gains, above-the-line deductions, adjusted gross income (AGI), below-the-line deductions, standard deductions, itemized deductions, and preferential income stacking. They also touch on strategies like deduction bunching and gains harvesting. The conversation provides valuable insights into the complexities of the tax code and the importance of tax planning in retirement. Listen now to learn more!

Takeaways

• Tax planning can add value to your bottom line and is an important aspect of retirement planning.
• Understanding the difference between marginal tax rates and average tax rates is crucial for making informed decisions.
• State income taxes, filing options, and federal income tax brackets all play a role in tax planning.
• Other types of taxes, such as social security and Medicare payroll taxes, should also be considered in retirement planning. Understanding the different types of income and how they are taxed is crucial for effective tax planning in retirement.
• Above-the-line deductions, such as contributions to retirement plans and health savings accounts, can lower your adjusted gross income (AGI).
• Below-the-line deductions, such as mortgage interest and charitable donations, can reduce your taxable income.
• The Tax Cuts and Jobs Act of 2017 increased the standard deduction, making it less likely for many people to itemize deductions.
• Preferential income, such as qualified dividends and long-term capital gains, have their own tax brackets and can be taxed at lower rates.
• Strategies like deduction bunching and gains harvesting can help optimize your tax situation.
• Understanding the nuances of the tax code and working with a tax professional can help you make the most of your retirement income.

Chapters

00:00 Introduction to Tax-Efficient Retirement Distributions 04:28 The Basics of Marginal Tax Rates 15:44 State Income Taxes, Filing Options, and Federal Income Tax Brackets 23:38 Considering Other Types of Taxes in Retirement 27:11 Understanding Different Types of Income and Their Taxation 29:42 Exploring Above-the-Line Deductions and Adjusted Gross Income (AGI) 36:10 Utilizing Below-the-Line Deductions to Reduce Taxable Income 43:02 The Impact of the Tax Cuts and Jobs Act on Itemized Deductions 47:13 The Importance of Tax Planning in Retirement

Links

Join the waitlist for the next Retirement Income Challenge by visiting http://www.risaprofile.com/podcast

The Retirement Planning Guidebook: 2nd Edition has just been updated for 2024! Visit your preferred book retailer or simply click here to order your copy today: https://www.wadepfau.com/books/

This episode is sponsored by Retirement Researcher https://retirementresearcher.com/. Download their free eBook, 8 Tips to Becoming A Retirement Income Investor at retirementresearcher.com/8tips

The Retirement Income Challenge is a four-day event that helps individuals create a retirement income plan. Day one focuses on the Retirement Income Style Assessment (RISA), which analyzes two factors: probability-based safety first and optionality versus commitment. Day two introduces the funded ratio, a balance sheet approach to financial planning that compares assets to liabilities. The funded ratio helps individuals understand if they have enough assets to meet their retirement goals. Day three explores how the RISA and funded ratio work together to fill income gaps and create a comprehensive retirement income plan. The conversation covers the Retirement Income Style Awareness (RISA) framework and the Retirement Income Challenge. The hosts discuss the importance of reliable income to cover essential expenses in retirement and the role of the RISA framework in providing alternatives to fill income gaps. They emphasize that shooting for 100% on the RISS percentages is not necessary and that it's important to have reliable income covering essential expenses. They also mention the non-financial aspects of retirement and the importance of planning for what you want to do in retirement. The hosts highlight the interactive nature of the Retirement Income Challenge and the value it provides in helping individuals gain clarity and confidence in their financial plan for retirement. Listen now to learn more!

Takeaways

• The Retirement Income Challenge helps individuals create a retirement income plan
• The Retirement Income Style Assessment (RISA) analyzes two factors: probability-based safety first and optionality versus commitment
• The funded ratio is a balance sheet approach that compares assets to liabilities to determine if individuals have enough assets to meet their retirement goals
• The RISA and funded ratio work together to fill income gaps and create a comprehensive retirement income plan The RISS framework provides alternatives to fill income gaps in retirement and ensures reliable income covers essential expenses.
• Shooting for 100% on the RISS percentages is not necessary; it's important to have reliable income covering essential expenses.
• Planning for the non-financial aspects of retirement, such as what you want to do, is crucial.
• The Retirement Income Challenge is an interactive session that helps individuals gain clarity and confidence in their financial plan for retirement.

Chapters

00:00 Introduction to the Retirement Income Challenge 09:57 Day One: The Retirement Income Style Assessment (RISA) 11:33 Day Two: The Funded Ratio 23:37 Day Three: Integrating the RISA and Funded Ratio 25:33 The Role of the RISA Framework in Retirement Planning 28:40 Shooting for 100% on the Funded Ratio: Is It Necessary? 30:55 Planning for the Non-Financial Aspects of Retirement 39:25 The Value of the Retirement Income Challenge

Links

Registration for the next Retirement Income Challenge is OPEN: Learn more and join us for this LIVE 4-Day event starting on August 26th-29th, 2024 from 12:00 -2:00 PM ET each day by visiting risaprofile.com/podcast

The Retirement Planning Guidebook: 2nd Edition has just been updated for 2024! Visit your preferred book retailer or simply click here to order your copy today: https://www.wadepfau.com/books/

This episode is sponsored by Retirement Researcher https://retirementresearcher.com/. Download their free eBook, 8 Tips to Becoming A Retirement Income Investor at retirementresearcher.com/8tips

In this episode, Alex, Wade, and Jason discuss what to expect in retirement. They cover several major lifestyle changes that occur during retirement, including the loss of work identity, increases in unstructured time, changes in social connections, shifts in physical health, adjustments in daily routines, and the need for financial planning. They provide insights on both the positive and negative aspects of these changes and offer suggestions on how to navigate them. In this conversation, the hosts discuss the importance of structure and routines in retirement. They highlight the difference between structuring time and developing routines, emphasizing the need for both to maintain a sense of purpose and productivity. They also explore the challenges of spending more time with a spouse or partner in retirement and the importance of communication and finding a balance between shared activities and individual interests. The hosts also touch on the impact of social connections and the need to build new networks outside of work. Lastly, they discuss the health and aging process in retirement, emphasizing the importance of managing physical and mental health and avoiding negative feedback loops.

Takeaways

• Retirement involves major lifestyle changes that can have both positive and negative impacts.
• Losing work identity and a sense of purpose can be challenging, but it also presents an opportunity to create a new identity based on personal interests and passions.
• Having unstructured time in retirement can lead to boredom and unhealthy habits, so it's important to establish a new routine and pursue meaningful activities.
• Maintaining social connections and building new relationships is crucial for overall well-being in retirement.
• Physical health may change in retirement, and it's important to prioritize self-care and engage in regular exercise.
• Adjusting daily routines and finding a balance between relaxation and productivity is key to enjoying retirement.
• Financial planning is essential to ensure a secure and comfortable retirement.
• Each individual's retirement experience is unique, and the impact of these lifestyle changes will vary.
• Retirement is an exciting opportunity for personal growth and exploration. Structure and routines are essential in retirement to maintain a sense of purpose and productivity.
• Spending more time with a spouse or partner in retirement requires communication and finding a balance between shared activities and individual interests.
• Building new social connections outside of work is important to combat social isolation in retirement.
• Managing physical and mental health is crucial in retirement, and avoiding negative feedback loops is key.
• Creating a financial plan that addresses retirement income style and funded ratio is essential for a successful retirement.

Chapters

00:00 Introduction and Overview 02:03 Chapter 1: Navigating the Loss of Work Identity in Retirement 11:39 Chapter 2: Managing Unstructured Time in Retirement 15:10 Chapter 3: Maintaining Social Connections in Retirement 18:13 Chapter 5: Adjusting Daily Routines in Retirement 20:47 Chapter 6: The Importance of Financial Planning in Retirement 26:38 Building New Social Connections in Retirement 32:58 Managing Health and Aging in Retirement 39:59 Creating a Financial Plan for Retirement

Links

Registration for the next Retirement Income Challenge is OPEN: Learn more and join us for this LIVE 4-Day event starting on August 26th-29th, 2024 from 12:00 -2:00 PM ET each day by visiting risaprofile.com/podcast

The Retirement Planning Guidebook: 2nd Edition has just been updated for 2024! Visit your preferred book retailer or simply click here to order your copy today: https://www.wadepfau.com/books/

This episode is sponsored by McLean Asset Management. Visit https://www.mcleanam.com/retirement-income-planning-llm/ to download McLean’s free eBook, “Retirement Income Planning”

In this episode, Wade, Alex, and Jason discuss the meaning of retirement and the factors to consider when deciding on a retirement date. They explore the idea that retirement is not just about leisure activities like golfing, but also about personal goals and relationships. They also touch on the possibility of working in retirement and the importance of financial independence. The conversation highlights the need for careful planning and consideration of health, financial, and personal factors when determining the timing of retirement. In this conversation, the hosts discuss the different factors that can influence retirement decisions, such as health, career changes, and financial stability. They emphasize the importance of asking the right questions and setting goals to create a comprehensive retirement plan. The hosts also mention the upcoming retirement income challenge, where participants can learn more about retirement planning. They end the conversation by teasing the next episode, which will focus on the changes that occur in retirement. Listen now to learn more!

Takeaways

• Retirement is whatever you decide it to be, and it can look different for everyone.
• Working in retirement or pursuing new ventures after retiring from a career is becoming more common.
• Retirement should not be solely focused on leisure activities, but also on personal goals and relationships.
• Financial independence is a key driver of retirement, as it provides the flexibility to do what you want.
• The timing of retirement should be carefully considered, taking into account health, financial, and personal factors.
• Retirement plans may need to be adjusted if health issues or unexpected circumstances arise.
• Retirement is a transition that requires planning and preparation to ensure a smooth and fulfilling experience. Retirement decisions can be influenced by factors such as health, career changes, and financial stability.
• Asking the right questions and setting goals is crucial for creating a comprehensive retirement plan.
• Investing in relationships and health is important for a fulfilling retirement.
• The retirement income challenge is a valuable resource for learning more about retirement planning.
• The next episode will explore the changes that occur in retirement.

Chapters

00:00 Introduction and Small Talk 03:45 Working in Retirement 06:47 Beyond Leisure: Personal Goals and Relationships 09:38 The Importance of Financial Independence 12:25 Timing Retirement: Health, Financial, and Personal Factors 20:31 Adjusting Retirement Plans for Unexpected Circumstances 22:35 Retirement as a Transition: Planning for a Fulfilling Experience 25:15 Asking the Right Questions for Retirement Planning 28:01 Investing in Relationships and Health for a Fulfilling Retirement 37:40 Join the Retirement Income Challenge 41:21 Next Episode: Changes in Retirement

Links

The Retirement Planning Guidebook: 2nd Edition has just been updated for 2024! Visit your preferred book retailer or simply click here to order your copy today: https://www.wadepfau.com/books/

This episode is sponsored by McLean Asset Management. Visit https://www.mcleanam.com/retirement-income-planning-llm/ to download McLean’s free eBook, “Retirement Income Planning”

In this episode, Wade and Alex discuss the evolution of messaging in the financial advisory industry and the importance of retirement income planning. They highlight the transition from brokers to investment managers to wealth managers and the shift from accumulation to decumulation. They emphasize the need for comprehensive financial planning that considers both the asset and liability sides of the balance sheet. They also discuss the challenges of retirement income planning, including longevity and liquidity risks, and the importance of addressing these risks in a client's financial plan. In this conversation, Wade Pfau and Alex Murguia discuss the signs of a retirement income advisor who is knowledgeable and focused on the specific needs of retirees. They highlight the importance of advisors addressing concerns and risks faced in retirement, such as sequence risk and longevity risk. They emphasize the need for advisors to have a well-thought-out approach to retirement income planning beyond just investment diversification. They also discuss the significance of advisors having specialized retirement income certifications, such as the RICP or RMA designations. Additionally, they stress the importance of advisors having a clear and specific messaging that resonates with retirees and solves their unique retirement income needs.

Takeaways

• The financial advisory industry has evolved from brokers to investment managers to wealth managers, reflecting a shift from transaction facilitation to comprehensive financial planning.
• Retirement income planning is a distinct field within financial services that focuses on managing assets to meet liabilities in retirement.
• Comprehensive financial planning considers both the asset and liability sides of the balance sheet, taking into account the goals and risks of retirement.
• Retirement income planning addresses challenges such as longevity risk and liquidity risk, ensuring that clients have sufficient resources to meet their expenses and unexpected spending shocks in retirement. A knowledgeable retirement income advisor will address concerns and risks faced in retirement, such as sequence risk and longevity risk.
• Advisors should have a well-thought-out approach to retirement income planning beyond just investment diversification.
• Specialized retirement income certifications, such as the RICP or RMA designations, can be a good indicator of an advisor's expertise in retirement income planning.
• Advisors should have clear and specific messaging that resonates with retirees and solves their unique retirement income needs.

Chapters

00:00 Introduction and Acknowledgments 02:51 The Shift from Accumulation to Decumulation 06:12 Comprehensive Financial Planning: Managing Assets and Liabilities 10:13 Addressing Longevity and Liquidity Risks in Retirement 22:08 Signs of a Knowledgeable Retirement Income Advisor 24:12 Beyond Investment Diversification: A Comprehensive Approach to Retirement Income Planning 27:19 The Importance of Retirement Income Certifications 31:23 Clear and Specific Messaging: Key to Effective Retirement Income Planning

Links

Join Alex and Wade for our workshop "Elevate Your Practice: Workshop on Marketing Mastery for Retirement Income Advisors" to discover how to better market yourself as a retirement income advisor so you can stand out, attract prospects, and turn them into loyal clients. Register to attend LIVE on August 6th or 7th at www.risaprofile.com/marketingworkshop

The Retirement Planning Guidebook: 2nd Edition has just been updated for 2024! Visit your preferred book retailer or simply click here to order your copy today: https://www.wadepfau.com/books/

This episode is sponsored by Retirement Researcher https://retirementresearcher.com/. Download their free eBook, 8 Tips to Becoming A Retirement Income Investor at retirementresearcher.com/8tips

In this conversation, Bob French and Rob Cordeau discuss ESG (Environmental, Social, and Governance) investing and its growing popularity. They explore the different ways investors can align their portfolios with their personal values and beliefs. They also address common misconceptions about ESG investing, such as it being solely for liberal investors. The conversation highlights the importance of understanding the impact and potential trade-offs of ESG investing, including the potential for lower expected returns. They discuss different approaches to implementing ESG investing, including using funds and ETFs, separately managed accounts, or donating the difference in returns to charities. The conversation concludes with advice on how to approach the decision of whether ESG investing is right for an individual.

Takeaways

• ESG investing allows investors to align their portfolios with their personal values and beliefs.
• ESG investing can involve adding or subtracting certain stocks, industries, or sectors based on values and beliefs.
• ESG investing may result in a slightly lower expected return compared to a globally diversified market portfolio.
• Investors should carefully consider the impact and potential trade-offs of ESG investing before making a decision.
• Different implementation options for ESG investing include using funds and ETFs, separately managed accounts, or donating the difference in returns to charities.

Chapters

00:00 Introduction and Setting the Stage 07:37 Implementing ESG Investing: Adding or Subtracting 09:41 The Impact and Trade-Offs of ESG Investing 14:04 ESG Investing: Not a Boycott or Punishment 20:01 ESG Investing and Portfolio Performance 26:58 Implementation Options: Funds, SMAs, and Donations 39:37 Making the Decision: Is ESG Investing Right for You? 41:50 Conclusion and Final Thoughts

Links

The Retirement Planning Guidebook: 2nd Edition has just been updated for 2024! Visit your preferred book retailer or simply click here to order your copy today: https://www.wadepfau.com/books/

This episode is sponsored by McLean Asset Management. Visit https://www.mcleanam.com/retirement-income-planning-llm/ to download McLean’s free eBook, “Retirement Income Planning”

In this conversation, Wade Pfau, Alex Murguia, and James Matthews discuss retirement income and the Retirement Income Style Awareness (RISA) framework. James shares his background in the retirement income space and his realization that traditional retirement planning advice was lacking. The conversation touches on the limited investment options in 401(k) plans and the need for a holistic view of retirement income. They also discuss the importance of risk management and the gaps in the current financial planning curriculum. Overall, the conversation highlights the need for a more comprehensive approach to retirement income planning. The conversation explores the need for a strategic approach to retirement income planning and the limitations of traditional retirement income paradigms. It emphasizes the importance of maximizing living standards in retirement and the need for open-mindedness in exploring different methodologies. The conversation also discusses the role of the Retirement Income Certified Professional (RICP) designation in addressing the gap in retirement income planning education. It highlights the shift towards a more client-focused and personalized approach to retirement planning and the potential applications of the RISA framework in other retirement decisions. The conversation concludes with a discussion on the importance of finding an advisor who embraces an open-minded and client-centric approach.

Takeaways

• Traditional retirement planning advice often lacks a comprehensive approach to retirement income planning.
• 401(k) plans typically offer limited investment options and lack clear mechanisms for converting assets into retirement income.
• The Retirement Income Style Awareness (RISA) framework provides a more holistic view of retirement income planning.
• Risk management is an important aspect of retirement income planning that is often overlooked.
• There is a need for improvements in the financial planning curriculum to better address retirement income planning. Retirement income planning requires a strategic approach beyond traditional paradigms.
• Maximizing living standards in retirement should be the primary goal.
• The RICP designation addresses the gap in retirement income planning education.
• A client-focused and personalized approach is crucial in retirement planning.
• The RISA framework can be applied to other retirement decisions.
• Finding an advisor who embraces an open-minded and client-centric approach is essential.

Chapters

00:00 Introduction and Background 09:59 The Retirement Income Style Awareness (RISA) Framework 23:21 The Importance of Retirement Income in ERISA 30:40 Applying the RISA Framework to Other Retirement Decisions 37:05 The Importance of Finding an Advisor with an Open-Minded Approach

Links

Join the Retirement Researcher team for "Travel in Retirement: New Options and Opportunities," with Dan Veto, CSA, to learn how travelling in retirement is different from the vacations you took while you were working - and how you can make the most of these differences. Register to attend LIVE on 7/23/24 at 1:00 PM ET by visiting risaprofile.com/podcast.

The Retirement Planning Guidebook: 2nd Edition has just been updated for 2024! Visit your preferred book retailer or simply click here to order your copy today: https://www.wadepfau.com/books/