Capital Investment Advisors

#203 – Answering Your Top Retirement Questions: Part 2

On today’s episode, Wes welcomes Producer Mallory to the studio to tackle more questions from the hypothetical Retire Sooner conference. They analyze options for when to take Social Security, examine the idea of downsizing or relocating in retirement, review three habits that many happy retirees seem to incorporate into their lives, and discuss which tax considerations retirees might want to keep in mind when planning for the future.

Read The Full Transcript From This Episode

(click below to expand and read the full interview)

  • Wes Moss [00:00:03]:
    I’m Wes Moss. The prevailing thought in America is that you’ll never have enough money, and it’s.Wes Moss [00:00:09]:
    Almost impossible to retire early. Actually, I think the opposite is true.

    Wes Moss [00:00:13]:
    For more than 20 years, I’ve been researching, studying, and advising american families, including those who started late, on how to retire sooner and happier. So my mission with the retire Sooner podcast is to help a million people retire earlier while enjoying the adventure along the way. Free to be one of them.

    Wes Moss [00:00:32]:
    Let’s get started.

    Wes Moss [00:00:35]:
    Welcome back to the retire sooner conference, part two. Mallory Boggs joining us here on the retire Sooner podcast. Are you feeling like we’re at a conference?

    Mallory Boggs [00:00:47]:
    Yeah, you know, it’s great in the background when, like, all the energy of the people, it’s. You know, it’s so funny. I feel like conferences, it’s one of those times when you get up early and, you know it’s gonna be a big, long day, and you get there and you’re just like. You get so hyped and you get the bad coffee.

    Wes Moss [00:01:02]:
    I think this coffee is pretty good.

    Wes Moss [00:01:04]:
    I’m simulating the comforts. I went to the buffet line. I got a banana.

    Wes Moss [00:01:07]:
    Oh, I usually do light.

    Wes Moss [00:01:09]:
    I just do a banana, maybe a little bit of fruit, and then coffee throughout the entire morning.

    Mallory Boggs [00:01:13]:
    Oh, yeah, you need the coffee on these days. And I’ll be real with you. It’s the sweets they get me. I’m like, I gotta stop and get a pastry.

    Wes Moss [00:01:19]:
    Oh, that’s the only place you actually.

    Wes Moss [00:01:21]:
    See the round pastries with the jelly in the middle.

    Mallory Boggs [00:01:25]:
    Danish? Yeah, the Danish.

    Wes Moss [00:01:26]:
    You don’t ever see those unless you’re at a conference.

    Mallory Boggs [00:01:28]:
    100%. And, like, you can’t go to brunch in this world.

    Wes Moss [00:01:32]:
    Solid sugar. It’s terrible for you.

    Mallory Boggs [00:01:34]:
    That’s why I love them.

    Wes Moss [00:01:36]:
    But you’re also on a conference, so you’re technically out of your routine.

    Mallory Boggs [00:01:40]:
    Yes. Yeah. It’s so funny how it’s like, you know, you just, like, remove like that. Like, one normal part of your day, and you’re like, well, I might as well get a little wild and eat as much sugar as possible, right?

    Wes Moss [00:01:50]:
    And here’s Mallory, after I get a banana in the line or the buffet line. Hey, hey, we gotta get up on stage.

    Wes Moss [00:01:55]:
    We gotta go.

    Wes Moss [00:01:56]:
    Remember, we have a couple more questions to answer here for part two of our retire sooner conference, so we’re gonna.

    Wes Moss [00:02:02]:
    Tackle a couple again. These are all hugely important questions to try to answer.

    Wes Moss [00:02:07]:
    One, when should I take my Social Security? We’re going to start out with that as number one.

    Mallory Boggs [00:02:13]:
    I feel like, that’s such a popular question. It’s such a tricky and very personal one that I know we get that question a lot.

    Wes Moss [00:02:20]:
    Tricky and complicated.

    Wes Moss [00:02:22]:
    But I have a couple ways to.

    Wes Moss [00:02:24]:
    Think about it to almost distill down.

    Wes Moss [00:02:26]:
    How I think you should think about.

    Wes Moss [00:02:27]:
    This in simpler terms. How about this one? What tax consideration should I keep in mind during retirement? Is downsizing? We’re relocating in retirement a good strategy for stretching my retirement savings?

    Wes Moss [00:02:42]:
    So these are all hugely important topics.

    Wes Moss [00:02:44]:
    We’re going to cover them right now here on the retire sooner podcast.

    Wes Moss [00:02:48]:
    So let’s start with Social Security.

    Wes Moss [00:02:50]:
    When you think of. And you’re a. I guess you’re an older millennial.

    Mallory Boggs [00:02:54]:
    Actually, I’m just about right in the middle.

    Wes Moss [00:02:55]:
    So you’re an older millennial?

    Mallory Boggs [00:02:56]:

    Wes Moss [00:02:58]:

    Mallory Boggs [00:02:59]:
    Medium. I’m mid range. We’re gonna go. Listen, don’t age me here.

    Wes Moss [00:03:02]:
    But in your thirties, where you still.

    Wes Moss [00:03:03]:
    Are, do you really even think about Social Security as something that’s gonna make a difference in your long term future?

    Mallory Boggs [00:03:09]:
    Absolutely not.

    Wes Moss [00:03:10]:
    You really don’t.

    Mallory Boggs [00:03:11]:
    You don’t count on it. It’s just not. It’s one of those things where now, I will say, having worked here for as long as I have, I do, I expect for it to be around, but I don’t take it as, like a major part of my retirement planning.

    Wes Moss [00:03:23]:

    Wes Moss [00:03:24]:
    Now, however, a huge percentage of the.

    Wes Moss [00:03:27]:
    United States relies on Social Security almost exclusively. And then. But it moves the meter more than most people think. And I think when you say, and this is.

    Wes Moss [00:03:39]:
    I get this a lot, which is.

    Wes Moss [00:03:40]:
    When you say, when people say, I’m not really counting on it, I think they mean a couple of things. One, the connotation there is, it’s not gonna be there. That’s not, that’s not accurate. It will be there largely even in 2035. We’ll go over some of these numbers. The projections are around 80% of where it is today. What you’re getting on that green statement you used to get in the mail, now you can just go into SSA dot gov, log in and get your most current statement. So that’s, to me, not a huge issue.

    Wes Moss [00:04:09]:
    I think it absolutely will be there, largely or in large part. The other thought is that it’s not that much and it doesn’t really. It’s not going to really pay my bills.

    Wes Moss [00:04:18]:
    That’s not overly accurate either, particularly if you wait.

    Wes Moss [00:04:22]:
    It can really be a lot. I have families I’ve worked with for a long time that have one spouse is getting over $4,000. A month. The other spouse may be getting. They could be getting something similar, but it’s not that uncommon that I see people getting five, $6,000 combined a month, and that’s a big deal.

    Wes Moss [00:04:41]:
    If you think about $6,000, you’re talking.

    Wes Moss [00:04:43]:
    About 72 grand a year.

    Wes Moss [00:04:45]:
    It really does move the meter. It’s a very big deal, especially if.

    Mallory Boggs [00:04:49]:
    You’Ve got lower bills, you don’t have a mortgage payment, maybe you probably don’t have kids. At that point, you’re bringing in all.

    Wes Moss [00:04:56]:
    The habits of the happiest retirees, which.

    Wes Moss [00:04:59]:
    We may get to as well. Or I’m going to do a consolidated.

    Wes Moss [00:05:02]:
    List of that here on part two.

    Wes Moss [00:05:04]:
    Of the retire sooner conference.

    Wes Moss [00:05:06]:
    Maybe we’ll start with the way I look at this, as kind of just the two ways to look at this.

    Wes Moss [00:05:12]:
    And here’s my bottom line on Social Security. If you can afford to, if you can afford to and you think you will live a long time and you’ve got some real longevity in the family and you’re healthy. And the other big consideration, if you are married with a spouse that may have a low Social Security payment, then you really want to lean towards waiting, waiting, waiting as long as you can.

    Wes Moss [00:05:36]:
    To take Social Security up all the.

    Wes Moss [00:05:38]:
    Way to the age of 70, if you can make it that long. Remember, the windows start at 62, when it’s going to be the least amount, and waiting until 70, if you can make it that far, where you’re going to get the maximum, maximum amount. So lean towards waiting at least till.

    Wes Moss [00:05:54]:
    Your FRA, your full retirement age.

    Wes Moss [00:05:57]:
    For example, if you’re born 1960 or later, that’s going to be 67 years old. That’s the FRA, the full retirement age again, age 70 is even better if you can make it that long and it works financially. Number two, and here’s, I think, the.

    Wes Moss [00:06:11]:
    Other way I look at this, if.

    Wes Moss [00:06:13]:
    Not taking your Social Security payments or not turning on the switch, and if.

    Wes Moss [00:06:19]:
    It makes your withdrawal rates sky high.

    Wes Moss [00:06:21]:
    Meaning that you really having to rely on a heavy percentage of your retirement assets to live, your spending, if that’s 8% or 10% or 15%, that’s how much you need to pull out of your savings in order to live, because.

    Wes Moss [00:06:34]:
    You haven’t taken Social Security yet.

    Wes Moss [00:06:37]:
    And if you have to take that high of a percentage in any given year, then it makes sense to turn on the spigot and turn on payments again once you stopped working.

    Wes Moss [00:06:47]:
    That’s the way I look at this.

    Wes Moss [00:06:48]:
    It’s very much about trying to get.

    Wes Moss [00:06:51]:
    Your, when it comes to overall long.

    Wes Moss [00:06:55]:
    Term financial planning and trying to quell all your mental fears of money running out, we want to get down to an appropriate withdrawal rate, which is in the four to four and a half percent range. We call it the 4% plus rule.

    Wes Moss [00:07:07]:
    So if Social Security gets you to.

    Wes Moss [00:07:10]:
    The point where you’re taking less of your assets and it gets you down to the four, four and a half percent range withdrawal rate, then it’s okay.

    Wes Moss [00:07:18]:
    To start taking Social Security. And in a lot of cases, people just have to.

    Wes Moss [00:07:23]:
    But let’s do some math on how much we earn if we wait.

    Wes Moss [00:07:27]:
    So, Mallory, I’m going to use an.

    Wes Moss [00:07:29]:
    Example here of Jim and Nancy. Both are 62, and they’re considering turn it on Social Security. And let’s just assume they’re not working and they’ve got some savings. Or they’ve got a lot of savings. Jim’s social at 62 would be 1800 bucks a month. Nancy’s $1,500 a month. What happens and how much does it grow to? If Jim waits from 62 up to age 67, the math is a little shy of 7% a year. That payment grows the longer you wait.

    Wes Moss [00:08:03]:
    So let’s assume he goes from 62 all the way to age 67, just doing the math. Around that 1800 bucks a month turns into almost $2,400 a month. But again, he’s not getting that until in the future, he’s waiting five years. And then if he waits from 67 all the way to age 70, then he gets an approximate eight percentage bump.

    Wes Moss [00:08:25]:
    For every year he waits on top of that.

    Wes Moss [00:08:28]:
    So now you’re looking at another 8% per year on $2,400 a month, it ends up his payment climbs to just shy of $3,000 a month if he.

    Wes Moss [00:08:38]:
    Waits all the way.

    Wes Moss [00:08:39]:
    If he waits all the way to age 70.

    Wes Moss [00:08:41]:
    So think about this.

    Wes Moss [00:08:41]:
    $1,800 a month or $3,000 a month.

    Wes Moss [00:08:44]:
    A huge difference. Of course.

    Wes Moss [00:08:46]:
    However, he has foregone those payments for.

    Wes Moss [00:08:49]:
    A lot of years.

    Wes Moss [00:08:50]:
    How long does it take for Jim to break even? And by the way, it’s the exact same math with Nancy. Hers goes from $1,500 a month. If she waits to 67, it would go to about two grand month. If she waits to age 70, it would go to about 24 80 per month. Call it almost $2,500. But in both cases, because mathematically, it works out to be the same on a break even basis, it takes about 147 months for Jim to get that money back before he’s now to the financial good. Over that whole period of time, 147 months is a little over twelve years. Call it twelve and a quarter.

    Wes Moss [00:09:25]:
    So if he waits till age 70, it takes him. And if Nancy does the same thing, it takes them until age 82 in order to have gotten all that money back. And now they’re to the financial good moving forward. And the longer they live, the better that decision to wait was.

    Mallory Boggs [00:09:43]:
    So really it’s a little bit of, you have to bet on yourself to a certain degree if you’re going to delay taking Social Security. And I can see how the, it seems like that, just taking it early, if it can really help supplement your everyday budget and, you know, because it’s a continuous payment, it never stops. Right?

    Wes Moss [00:10:02]:
    It never stops.

    Wes Moss [00:10:03]:
    Now, it’s not guaranteed to go up with inflation, but if I look over the course of economic history, it has largely gone up with CPI. In fact, people got huge raises over.

    Wes Moss [00:10:13]:
    The last couple of years.

    Wes Moss [00:10:14]:
    We had huge inflation. They needed it, Americans needed it, but we also got huge increases in Social Security. So one year was around 8%. People got an 8% bump in one year on their Social Security amount. So it’s not guaranteed. But over the course of economic history, it has kept up well with inflation.

    Mallory Boggs [00:10:35]:
    So I can see how taking it earlier so that you can just have that peace of mind, especially if you’re not sure what your future looks like. Maybe you don’t have a great family history with longevity, but I can also see it’s very tempting to wait because those numbers do grow. They grow dramatically. That’s incredible.

    Wes Moss [00:10:53]:
    Now I’ve seen in a lot financial plans that if you, if you really want to wait, and that’s fine, because I think it makes the most sense, particularly if we live a long time. But if you’re really depleting your savings at a rate way beyond the 4% rule, and let’s say you need to take ten or 15% of your money each year, then I think it’s really difficult to hit the pause and grow button.

    Wes Moss [00:11:16]:
    That’s what we’re doing at age 62.

    Wes Moss [00:11:18]:
    If you don’t take it, you’re hitting pause and grow. It’s the pause and grow.

    Wes Moss [00:11:21]:

    Wes Moss [00:11:22]:
    So here are some reasons that you might want to take Social Security early. Yes, financial necessity, of course, that’s probably the most compelling reason to start social.

    Wes Moss [00:11:32]:
    If somebody retires or is unable to.

    Wes Moss [00:11:35]:
    Continue working due to health issues or job loss, and they just don’t have enough savings or other income sources, other.

    Wes Moss [00:11:42]:
    Income sources to cover life, just daily.

    Wes Moss [00:11:45]:
    Living expenses, then early social benefits, that can be obviously a lifeline too. Health concerns, as you mentioned, if you don’t think you’re gonna live till 85 or 90 years old, then maybe it leans towards taking social a little early.

    Mallory Boggs [00:12:01]:
    It’s kind of back to that whole philosophy. You can’t take it with, you might as well enjoy it.

    Wes Moss [00:12:06]:
    A lot of families I’ve worked with.

    Wes Moss [00:12:07]:
    Over the years, that’s kind of their attitude.

    Wes Moss [00:12:09]:
    But here’s a reason not to take it early, which is it’s, quote, not gonna be there. That is not a reason to take Social Security early. The projections for 2035 and beyond, it’s estimated that Social Security, even if the trust fund runs down to zero, they will still be able to pay 79% to 80% of the promised benefits. Now, that’s still a big, it’s still.

    Wes Moss [00:12:33]:
    A haircut, but it is the vast.

    Wes Moss [00:12:36]:
    Majority of what those numbers are projected to be. Remember, there’s revenue coming in. There’s continued revenue into the Social Security system, and that’s not going away.

    Wes Moss [00:12:47]:
    Those are Social Security taxes.

    Wes Moss [00:12:48]:
    They’re not going to stop. In fact, legislatively, we’ll see what happens there. Nobody wants taxes to go up, but it’s not inconceivable that FICA taxes, which fund Social Security, maybe the percentage rate doesn’t go up, but what we’ve seen happen in the past, and I could see this happening legislatively, is that more of people’s income, the income cap on how much we pay FICA on that.

    Wes Moss [00:13:13]:
    Could go up pretty dramatically or even a little bit.

    Wes Moss [00:13:16]:
    In search to solve the math equation, we did a whole podcast with Mary.

    Wes Moss [00:13:19]:
    Beth Franklin, who’s a Social Security expert.

    Wes Moss [00:13:22]:
    Here on the retire Sooner podcast. One of the reasons she says that social is kind of mismatched and it is running low, is that the number, the maximum amount we get taxed on FICA was just underestimated when Congress made.

    Wes Moss [00:13:37]:
    This part of the legislation.

    Wes Moss [00:13:38]:
    So they didn’t account for how dramatically so many people would increase their income over time. And that’s part of the reason they’re not bringing in as much, quite as much money as they should to keep things in balance.

    Mallory Boggs [00:13:52]:
    Oh, that’s really interesting. And actually, I’m looking out in the crowd of the conference, and I think I see Mary Beth Franklin right over there. Let’s give her a wave. Hey, Mary Beth.

    Wes Moss [00:13:59]:
    She’s doing a fist pump.

    Mallory Boggs [00:14:00]:
    She is so excited.

    Wes Moss [00:14:01]:
    And then just public support.

    Wes Moss [00:14:02]:
    Social Security is, even though we hear, oh, it’s not going to be there. It’s not that big of a deal.

    Wes Moss [00:14:07]:
    Once people start getting Social Security it’s.

    Wes Moss [00:14:09]:
    A very big deal.

    Wes Moss [00:14:10]:
    And the outrage that we would see in this country if we had a dramatic change to what seniors were getting paid here in the country. I mean, we’re talking pitchforks and riots on Capitol Hill. It would not be good. And that’s why I think it’s going to be really tough for people.

    Wes Moss [00:14:28]:
    Social Security payments to get cut, final verdict.

    Wes Moss [00:14:32]:
    Wait until you’re finished working, or at.

    Wes Moss [00:14:34]:
    Least you’re full retirement age, especially if.

    Wes Moss [00:14:37]:
    You’Re working and under your full retirement age, because there is an earnings test. If you’re collecting Social Security and you’re working and earning a wage, your Social Security payment gets dinged a dollar for every $2 you earn beyond about 21 grand a year.

    Mallory Boggs [00:14:55]:
    Well, and since so many of our happy retirees tend to pick up these later in life, you know, second act careers, I can imagine this would really impact a lot of them.

    Wes Moss [00:15:02]:
    It could.

    Wes Moss [00:15:03]:
    But almost the perfect part time job would be to make 2025 grand a year and take social. So your Social Security payment is not dinged.

    Wes Moss [00:15:12]:
    Now, you do, by the way, if.

    Wes Moss [00:15:14]:
    You do get hit by that earnings test and your Social Security payment gets clipped, you do make that back up. But they essentially tack it onto your payment adjusted for your life expectancy over.

    Wes Moss [00:15:26]:
    The course of your entire retirement. So you do get it back, but very, very slowly, so you don’t want.

    Wes Moss [00:15:31]:
    To get hit by that earnings test.

    Mallory Boggs [00:15:33]:
    So, just so I’m clear. Cause this is a little confusing to me. It’s if you’re earning and you’re taking Social Security at the same time, if they pull it back after you stop earning as much or stop working, they’ll tack it back on just like slowly.

    Wes Moss [00:15:45]:

    Wes Moss [00:15:45]:
    Once you hit your FRA, your full retirement age.

    Mallory Boggs [00:15:48]:
    I love that we have so many acronyms in this industry.

    Wes Moss [00:15:50]:
    It’s just hard to say every.

    Mallory Boggs [00:15:55]:
    I don’t know another way to do it that’s fair.

    Wes Moss [00:15:57]:
    Retirement age. Full retirement age.

    Wes Moss [00:15:58]:
    And then, number two, take social even early, if waiting forces you to take out more than ten or 15% of your retirement assets in any given year. I just think there’s too much anxiety when you’re depleting your assets at that rate, especially beyond a year or two. Now, again, going back to the big.

    Wes Moss [00:16:20]:
    Picture, your Social Security really should be.

    Wes Moss [00:16:23]:
    There to help get your overall retirement withdrawal rate down to the 4% range. Four, four and a half percent. We call the 4% plus rule. And if, let’s say, you can get.

    Wes Moss [00:16:32]:
    Away with a 6% withdrawal rate for the first year or two because you.

    Wes Moss [00:16:36]:
    Still haven’t taken social, I think it’s okay. And then after a year or two or potentially three, your Social Security payments.

    Wes Moss [00:16:45]:
    Help drop you back to the 4%.

    Wes Moss [00:16:47]:
    Range, then waiting for a little bit longer. I think that can be okay. We keep hearing that inflation is coming down, but the past three years, the common man inflation gauge is still up over 20%.

    Wes Moss [00:17:02]:
    Thats necessities like food, gas, utilities and shelter. How can you possibly keep up?

    Wes Moss [00:17:07]:
    Well, one option is income investing. Thats using a combination of growing stock, dividends, bonds for more cash flow, and other areas that can be a hedge against inflation. Look, inflation is tough. Let us help you overcome it. Schedule a time directly with our Dot thats your Let’s go to the next question here.

    Mallory Boggs [00:17:30]:
    Oh, perfect. I think this came in from the audience. Is downsizing or relocating in retirement a good strategy for stretching my retirement savings?

    Wes Moss [00:17:39]:
    Yes, absolutely it is.

    Wes Moss [00:17:41]:
    It’s an amazing strategy. I’ve seen people, lots of people do it. Lots of families do it over the course of the last 20 some years.

    Wes Moss [00:17:47]:
    Think about it.

    Wes Moss [00:17:48]:
    You’ve got this giant house, 4000, 505,500 sqft. Your kids are no longer in the house. It’s just you and your wife or you and your husband. And you’re thinking, we don’t need all this space. We don’t need all these property taxes. Let’s sell this place and we’ll move.

    Wes Moss [00:18:02]:
    To a ranch house.

    Mallory Boggs [00:18:03]:
    I feel like property taxes tends to be a big reason I keep hearing everybody wants to downsize and even switch counties sometimes. I know there’s certain counties that have, like, better, right?

    Wes Moss [00:18:14]:
    There are a lot of counties in the United States. And once you get to 62 or 65, depending on the county, you get breaks and you get, you no longer have to pay school tax and your overall property taxes can go down.

    Wes Moss [00:18:25]:
    And then there’s plenty of places where.

    Wes Moss [00:18:27]:
    You don’t get any tax break at all. And if you have to keep paying full millage on a property that has continued to appreciate over time, then your taxes continue to balloon. In fact, if you’re a homeowner and you’re listening right now, the great news.

    Wes Moss [00:18:44]:
    Is your home price is up probably.

    Wes Moss [00:18:46]:
    Around 100% over the last eleven or twelve years. The downside to that is your property taxes are probably up 100% over that same period of time. I know mine are. I’ve lived in the same neighborhood now.

    Wes Moss [00:18:57]:
    For over a decade.

    Wes Moss [00:18:58]:
    And guess what?

    Wes Moss [00:18:59]:
    My property taxes are double today than.

    Wes Moss [00:19:02]:
    They were when I moved in. So downsizing to less space, lower property taxes.

    Wes Moss [00:19:07]:

    Wes Moss [00:19:08]:
    It makes all the sense in the world with one giant caveat.

    Mallory Boggs [00:19:11]:
    Is it. Is it that you actually have to move? Because moving is the worst a.

    Wes Moss [00:19:15]:
    You actually have to pack up and move.

    Mallory Boggs [00:19:18]:
    Oh, and, like, going through a house that you’ve been in for more than, like, a year, I’m convinced, is just pure torture. Cause it’s amazing how there’s, like, so many small things that walk in over time that you don’t pay attention to. And then you go to, like, start moving things out, and you’re like, oh, oh, that’s right. But do I need the second baking dish that I’ve used twice?

    Wes Moss [00:19:36]:
    I took a picture of our garage.

    Wes Moss [00:19:38]:
    Just to memorialize what it looks like. I’ve only been in this house for four and a half years, which is not that much. But when you have four kids or.

    Wes Moss [00:19:47]:
    Four boys, the way our garage looks today, which again, by the way, does.

    Wes Moss [00:19:51]:
    Not fit a car because it is.

    Wes Moss [00:19:53]:
    So full of gear.

    Mallory Boggs [00:19:54]:
    You are not alone in that, I’m sure.

    Wes Moss [00:19:57]:
    I’m in awe of what it would take to clean it up. I mean, I need help to do.

    Wes Moss [00:20:01]:
    This because I’ve got lacrosse bags and I’ve got some road bikes.

    Wes Moss [00:20:04]:
    Back when I used to actually do road cycling, we’ve got mountain bikes. I’ve got kids bikes and different size kids bikes because they grow out of them. Football helmets, buckets of lacrosse balls, snowboards, snowboard bags.

    Mallory Boggs [00:20:18]:
    It’s essentially an activity center.

    Wes Moss [00:20:20]:
    It’s an activity center, but it’s a total mess. Just the thought of cleaning that out, and that’s just one room, this one little room.

    Wes Moss [00:20:29]:
    So it’s a really big project.

    Wes Moss [00:20:30]:
    Not to mention doing all the things you’ve probably not done to the house.

    Wes Moss [00:20:34]:
    In order to sell it.

    Wes Moss [00:20:35]:
    Your house may have appreciated, but has it really appreciated as much as you think? If you haven’t updated something, or the floors are bad, or the paint’s terrible.

    Wes Moss [00:20:44]:
    Or the tiles are cracking.

    Wes Moss [00:20:45]:
    So it’s a really big undertaking to move. And here’s the catch in all this.

    Wes Moss [00:20:50]:

    Wes Moss [00:20:51]:
    If you can downsize, and it’s possible, it can be a great strategy in retirement, and it can improve your rich ratio, lower spending. Let’s say you’ve got equity in the house, either no mortgage or a small mortgage, then by all means, if it’s possible, downsizing can be a home run. But today, I think it’s a long shot. And nearly 80% of all baby boomers, they want to stay in their homes for the long run. They don’t want to go, they don’t want to downsize. And of course, we know that interest.

    Wes Moss [00:21:25]:
    Rates are really low for a period.

    Wes Moss [00:21:26]:
    Of time during COVID and the vast majority of homeowners that had mortgages refinance.

    Wes Moss [00:21:32]:
    To really low rates.

    Wes Moss [00:21:33]:
    So if you’re a boomer and you’re in your sixties or seventies, you’ve likely either paid off your house, you’re getting closer to paying off your house, or.

    Wes Moss [00:21:43]:
    Even if you’ve got a bigger mortgage.

    Wes Moss [00:21:44]:
    You may have locked in one of these amazingly low rates at 3% a year. So your payment is very manageable.

    Wes Moss [00:21:52]:
    It just makes it really hard to.

    Wes Moss [00:21:54]:
    Pick up, pack up, renovate, even lightly renovate, and then move.

    Wes Moss [00:21:59]:
    Because guess what?

    Wes Moss [00:22:01]:
    Even though your house is appreciated 100%.

    Wes Moss [00:22:04]:
    So has pretty much every other house.

    Wes Moss [00:22:06]:
    On the block, in the neighborhood, in the state, around the country.

    Wes Moss [00:22:11]:
    So it’s a tall order.

    Wes Moss [00:22:12]:
    And it just doesn’t make sense for most people right now. It doesn’t unless you can dramatically decrease the cost of living. And I think that’s hard to do.

    Wes Moss [00:22:21]:
    I went back because it’s hard to.

    Wes Moss [00:22:23]:
    Even fathom these numbers when you think about your home, which is arguably the.

    Wes Moss [00:22:27]:
    Biggest asset for most retirees, and to think about the value of that doubling.

    Wes Moss [00:22:34]:
    I’ve got to see the data on it.

    Wes Moss [00:22:35]:
    But if you go to Fred, which.

    Wes Moss [00:22:37]:
    Is federal reserve economic data from the St. Louis Fed, you look at S and P. Corelogic K. Schiller 20 city composite Home price index. That’s a mouthful. Sorry, I didn’t have an acronym.

    Mallory Boggs [00:22:48]:
    I was gonna say, well, there’s a couple acronyms in there I already mixed in.

    Wes Moss [00:22:52]:
    I go back and I look at the level, July of 2013. So call it eleven years ago.

    Mallory Boggs [00:22:58]:
    That was eleven years ago. God, can we just talk? That seems like yesterday, what 2013 does. Yeah, yeah, I remember.

    Wes Moss [00:23:04]:
    You remember the good old days? The good old days, the level was.

    Wes Moss [00:23:07]:
    At 159 on the index. Today it’s at 322. You do the math on that. That’s up 101% over that period of time. I think the other thing that makes this so hard to conceive that prices are up this much is that if.

    Wes Moss [00:23:23]:
    You go to before COVID the home.

    Wes Moss [00:23:26]:
    Price index was only around 200. So it had only appreciated in that long stretch, 13 to 2000, by about 25%. So most of the gain over the past eleven years has been post COVID. We’ve seen home prices shoot up, and.

    Wes Moss [00:23:44]:
    That’S why we look collectively here.

    Wes Moss [00:23:45]:
    And from July of 13 until Jan of 2024, the index essentially went up 100 in 1%.

    Wes Moss [00:23:53]:
    So it’s a tall order.

    Wes Moss [00:23:56]:
    And I think that the two reasons that would really push me to move beyond just the downside and the lower costs, which, again, can make sense if you can find it.

    Wes Moss [00:24:06]:
    But the reality here is we want.

    Wes Moss [00:24:07]:
    To do two things. One, if we’re going to move and.

    Wes Moss [00:24:11]:
    It’S going to be towards our children.

    Wes Moss [00:24:13]:
    Or to get closer to the adult kids and the grandkids, and it doesn’t.

    Wes Moss [00:24:17]:
    Look like they’re going to be able.

    Wes Moss [00:24:17]:
    To move back to you and your state, then I think it’s worth packing that messy garage up and the kitchen to do it, number one. Number two, it’s also so important not to think of your home as a house, even though we feel comfortable in our homes. And I think it’s more important to think of it as the community that you’re in. That’s why the number two choice for boomers, besides staying in their current home for as long as they possibly can, is to go into a 55 plus retirement community. And maybe I think the word retirement’s not even the right word there. It’s just a 55 plus community that’s super active. I’ve seen huge success there.

    Wes Moss [00:25:00]:
    We all know of the story of the villages.

    Wes Moss [00:25:01]:
    That’s maybe an extreme example. Not everybody wants to go where there’s tens of thousands of retirees that have 37 core pursuits and they’re fully scheduled between volleyball, water polo, pickleball, and five rounds of golf, and then followed by happy hour every single day all year long. But most 55 plus communities are just somewhere in between where you’re living today in your neighborhood to just a more active version of a lot of neighborhoods.

    Wes Moss [00:25:33]:
    Because everybody is 55 plus.

    Wes Moss [00:25:35]:
    The majority of people have stopped working. And you don’t move to a 55 plus community unless you are somewhat social and you have the desire for that socialization and we know as habits of.

    Wes Moss [00:25:46]:
    Happy retirees that may be paramount to a happy retirement.

    Wes Moss [00:25:51]:
    So think of the community you’re moving to if you’re trying to downsize or even do a lateral financial move.

    Mallory Boggs [00:25:58]:
    Speaking of similar to your acronyms, you have so many habits for these happy retirees, it’s hard to keep up with. We got it. You gotta help me out here. I mean, you know, you’re talking about spending time with the grandkids, you’re talking about, you know, the financial side of downsizing. I mean, in your first book you had what? Like it was 16 1718. And then in the second book you had, I think we got up to 30. And then I mean, you brought it down to ten, but, like, come on, you gotta give me your. Give me your top three.

    Mallory Boggs [00:26:23]:
    You gotta break it down a little bit more simply.

    Wes Moss [00:26:25]:
    And you’re saying, if I were to take all of these books and just say, what are the three most important.

    Wes Moss [00:26:30]:
    Habits of happy retirees?

    Mallory Boggs [00:26:31]:

    Wes Moss [00:26:32]:
    Just three.

    Mallory Boggs [00:26:32]:
    Just three.

    Wes Moss [00:26:34]:
    No, you’re right. There are a lot.

    Wes Moss [00:26:36]:
    I’m looking at the opinion.

    Wes Moss [00:26:37]:
    You’re right. There really are a lot.

    Wes Moss [00:26:40]:
    They have the happiest multiple streams of income.

    Wes Moss [00:26:42]:
    Core pursuits, 3.6.

    Wes Moss [00:26:44]:
    Some of the top core pursuits are travel volunteering. Number six. On average, happy retirees have 2.5 kids.

    Wes Moss [00:26:48]:
    Number seven, the very happiest retirees live.

    Wes Moss [00:26:50]:
    Near at least half their kids. Adult children. Over educating your kids.

    Wes Moss [00:26:54]:

    Wes Moss [00:26:55]:
    Number nine, kids should get married and get out. Number ten, retirees are four and a half more times likely to be unhappy if they’re not married. That’s an unhappy retiree. For, in fairness, some of these are unhappy habits that you want to avoid. Look, I know it’s a lot, and I do think about that. If I were just to boil it all down and choose three here. Here would be my three. And they’re a little bit loaded on each one, because we’re talking about the.

    Wes Moss [00:27:22]:
    Rest of your life here.

    Wes Moss [00:27:22]:
    Money, lifestyle. It’s not flipping a light switch.

    Wes Moss [00:27:26]:
    It’s a recipe.

    Wes Moss [00:27:28]:
    It’s an old italian pasta recipe that’s been passed down from generation to generation. And there’s a lot of ingredients, but the three core main ingredients are one. The financial side, you’ve got to have a liquid retirement savings. The median number we know, this is our research and adjusted for inflation, median liquid retirement savings 700,000 average 1.25 million homes are generally mortgage free, are approaching mortgage free to reduce financial stress, and they have multiple streams of income, as many different income streams as you can get.

    Wes Moss [00:28:04]:
    You put all that together, that’s the financial security side of the happy retiree. And by the way, that group, they’re not just savers, they’re investors, because it’s.

    Wes Moss [00:28:15]:
    Really hard to even get to those liquid retirement amounts by just saving alone. There are savers and investors. Number two, I think it’s got to be. And I’ll combine these, because they do, to some extent, go hand in hand. They have multiple core pursuits and social connections.

    Wes Moss [00:28:33]:
    Close social connections.

    Wes Moss [00:28:34]:
    So call it close social connections. So call it 3.6 core pursuits, hobbies on steroids, and three plus close life connections as socialization. A lot of times, those core pursuits include the socialization as well. So they really do go hand in hand. Core pursuits are hobbies on steroids, and they provide joy and they provide a sense of purpose. And that list should always be evolving and expanding. One court pursuit goes away, another one pops up. And aatrops.

    Wes Moss [00:29:07]:
    Happiest retirees prioritize relationships. They stay connected with friends, they stay connected with family because they know just how important that is to their overall wellbeing. Maybe this one, put very simply, it’s three words. Travel with friends kind of does all.

    Wes Moss [00:29:30]:
    Of that for you. You take a couple trips a year.

    Wes Moss [00:29:33]:
    It’s kind of the one stop shop for that. Multiple core pursuits of social connections all combined. And we know that in itself, traveling with friends is a big happiness booster in retirement. Number three, I would have to say the prioritization of both health and independence.

    Wes Moss [00:29:56]:
    Of course, physical health. You’ve got to prioritize that. Active lifestyle, balanced diets, all crucial for.

    Wes Moss [00:30:04]:
    Long term happiness, quality life. But their adult children, on balance, are financially independent. They’re not having to support a whole group of grown adults with paying for their kids or now their grandkids, sports, school, cars, tuition, vacations, you name it. It’s fine to supplement some of that if you really want to. But if you are really paying for your adult kids and grandkids, their lifestyle, that’s a happiness killer in retirement. So if the kids are financially independent, then you can focus on your own interests and your own wellbeing.

    Wes Moss [00:30:47]:
    So those would be the three financial.

    Wes Moss [00:30:49]:
    Security, multiple core pursuits and social connections, and three, the prioritization of health and independence for your kids.

    Mallory Boggs [00:30:57]:
    Was that so hard to get it down to three?

    Wes Moss [00:31:01]:
    I knew you would say that.

    Wes Moss [00:31:07]:
    All right.

    Wes Moss [00:31:08]:
    Do we have time for one more?

    Mallory Boggs [00:31:09]:
    Yes, just one. Just one. And then we got to wrap up this conference. I think it’s the lunch breaks after this. I think we’re going to revisit something that we touched on a little bit with the housing piece of things. But I know this is a question that comes up a lot for retirees. What tax considerations should retirees keep in mind?

    Wes Moss [00:31:27]:
    Okay, when you do a plan, and you do. Let’s call. When you do any sort of longer term retirement plan, cash flow plan, you’ve got to bake in taxes. Imagine if your girl is $100,000 a year to spend and you have a 35% tax rate. How much more you have to gross that up in order to get down to $100,000? If you have a 15% tax rate, it makes it a heck of a lot easier. So not only do taxes matter in the calculation, big time. They can also be managed throughout retirement by investing in, let’s call it areas.

    Wes Moss [00:32:07]:
    That provide lower tax rates, like qualified.

    Wes Moss [00:32:11]:
    Dividends, long term capital gains, and what accounts we choose to pull from over the course of retirement. That has a huge impact on what your overall income ends up being at the end of the year.

    Mallory Boggs [00:32:24]:
    I feel like that’s one that trips up a lot of people.

    Wes Moss [00:32:27]:
    I think of that as account location on your withdrawal strategy. What account are you pulling money out from?

    Wes Moss [00:32:34]:
    Because it really matters to your taxes.

    Wes Moss [00:32:39]:
    And we think about three different buckets. We have IRA money, we have Roth money, then we have after tax money. Think of anything that comes out of a regular IRA or 401K is a.

    Wes Moss [00:32:49]:
    Lot like a paycheck.

    Wes Moss [00:32:50]:
    Now, we no longer have to pay FICA on those withdrawals, but it’s full, ordinary income when you pull money out of an IRA or retirement account. So if you pull 100 grand out of an IRA, it’s just like you earned 100 grand and you’re going to be in a subsequently high tax bracket, et cetera. A Roth, as we know, when you pull money out of that, it is tax free.

    Wes Moss [00:33:15]:
    So it’s very tax efficient.

    Wes Moss [00:33:16]:
    You could pull, again, $100,000 out of Roth, and it’s just like you earned.

    Wes Moss [00:33:20]:
    Zero for the most part.

    Wes Moss [00:33:22]:
    Remember, taxes are super complicated here. So these are all generalizations.

    Wes Moss [00:33:26]:
    There always could be caveats to some.

    Wes Moss [00:33:29]:
    Of what I’m saying, but in large.

    Wes Moss [00:33:31]:
    Part, that’s the way a Roth works.

    Wes Moss [00:33:33]:
    And then the after tax account, if we’re careful and we’re using vehicles that are providing income that, again, are qualified dividends, or we’re pulling from assets that.

    Wes Moss [00:33:48]:
    Maybe haven’t appreciated, that are, let’s call.

    Wes Moss [00:33:50]:
    It flat or even down a little bit in value, then we’re really just taking our principle. And in a lot of those cases, it doesn’t need to count as income. If we’re pulling from an asset that’s flat or even lower than what we paid for it, and you can really manage your taxes to be super low, utilizing your after tax investment accounts.

    Mallory Boggs [00:34:12]:
    And that would just be like a brokerage.

    Wes Moss [00:34:14]:

    Wes Moss [00:34:15]:
    Just a brokerage account, a trust account, anything that’s not in an IRA or a 401K or a Roth.

    Wes Moss [00:34:23]:
    The other big takeaway here, when it.

    Wes Moss [00:34:26]:
    Comes to thinking about tax considerations in retirement, people tend to underestimate the tax drop they typically. They typically get.

    Wes Moss [00:34:34]:
    Because you think you’ve worked 30 years.

    Wes Moss [00:34:36]:
    40 years, and you’ve been in your highest earning years, usually right before you retire, you don’t know anything else but paying 25 or 30% plus FICA, which is another, call it six or 7% plus state tax, which is another, depending on your state, five, six, 7%. California, 1012 percent. You go your whole life paying 30% to 40% in taxes in a lot.

    Wes Moss [00:34:59]:
    Of cases, or it certainly feels that way.

    Wes Moss [00:35:01]:
    I know people that even though they may be paying 20%, they say, oh, I pay about 40% of taxes. But even for wealthy individuals over the course of their retirement years, when they stop their wage income and they start to really manage how they collect their income from the money they’ve already saved, it’s not uncommon to see people down in the 1012 15 sub 20% tax range. And that is a huge help when it comes to your overall long term planning. Now, enter in a couple big pieces of the equation. We know we have to start taking required minimum distributions now at age 73. That’s going to. That’s. That’s a required amount that you have.

    Wes Moss [00:35:40]:
    To pull out of your ira.

    Wes Moss [00:35:41]:
    And as we said, any money that comes out of that counts as ordinary income. So once you hit that RMD age, your overall tax rate may go up because you’re being forced to pull, call it three and a half to 4.5%.

    Wes Moss [00:35:55]:
    A year out of your ira.

    Wes Moss [00:35:57]:
    And that can be a lot. That can be. That can move the meter on your adjusted gross income. But if you’re smart about using tax efficient ways to withdraw money from after tax accounts or maybe Roth accounts, then it can help stretch your savings over your lifespan. Enter in tax friendly states. Now, we’ve all probably heard of the states that don’t have a state income tax. We know Florida, Nevada, South Dakota, Texas, Washington. Wyoming doesn’t have a state income tax, and there are a handful more of those.

    Wes Moss [00:36:35]:
    But there are also some states that are maybe even more tax efficient for seniors. As an example, my home state, Georgia, you get a sizable deduction on your retirement income once you hit age 62, and then it goes up even more once you hit age 65 from Georgia state taxes. So, for a lot of Georgia seniors, if they’re keeping their income under around 120 grand a year, they often can end up paying almost zero in Georgia state taxes. South Carolina has big deductions on retirement income, doesn’t tax Social Security benefits.

    Wes Moss [00:37:16]:

    Wes Moss [00:37:16]:
    Arizona has some real advantages. Now, barring picking up and choosing a new state, not everybody wants to do.

    Wes Moss [00:37:25]:
    There are real tax advantages of using.

    Wes Moss [00:37:28]:
    Dividends and making sure your assets are.

    Wes Moss [00:37:30]:
    Held for at least a year.

    Wes Moss [00:37:32]:
    So you end up with what are called long term capital gains because relative to ordinary income rates, for the most.

    Wes Moss [00:37:41]:
    Part, these are lower tax rates.

    Wes Moss [00:37:44]:
    So long term capital gains and qualified dividends, they’re taxed at lower rates than ordinary income. The brackets for dividends and long term capital dividends and long term capital gains, 20% is the highest. Now, there’s usually a, if you’re in that 20% category, you also have the 3.8% net investment tax. But the brackets for dividends and long term capital gains are 2015 and zero, depending on your total taxable income. Most taxpayers fall into that category. And again, that’s way lower than ordinary income rates, which we know can go all the way up to 37%. So we use a combination hold our assets for the long term. That would hold our assets for the long term.

    Wes Moss [00:38:38]:
    That would apply to after tax brokerage accounts. Mallory, like you asked about asset location, where are assets? Which account is best to take from to keep my income low? Using a Roth, those withdrawals are considered.

    Wes Moss [00:38:54]:
    Tax free.

    Wes Moss [00:38:57]:
    Tax loss harvesting, which means that we, again, if we’re really diversified in a brokerage account, you may have an up 20% year, but there’s still likely going to be some of those positions that are flat or even down. That’s the time you can use those so that you’re not even creating long term capital gains. And all of that means that we have to manage our withdrawal. So if we’re managing where we’re withdrawing from utilizing dividends, long term capital gains, we can very often keep our overall.

    Wes Moss [00:39:26]:
    Tax rate a lot lower than where it was when we were working.

    Mallory Boggs [00:39:31]:
    Well, there’s so much to consider with taxes. This is awesome. But with that, I think that we officially have to run to the lunch break. I think the crowds getting a little antsy. Wes, I’m afraid we’re gonna have to wrap this one up.

    Wes Moss [00:39:41]:
    I know you’re excited for the lunch plate. You’ve got your danishes that they usually last all day. It’s breakfast, lunch, and they even have the danishes out for dinner.

    Mallory Boggs [00:39:48]:
    Just enough sugar.

    Wes Moss [00:39:50]:
    Thanks for stopping by the retire sooner conference.

    Mallory Boggs [00:39:54]:
    Hey, y’all. This is Mallory with the retire sooner team. Please be sure to rate and subscribe to this podcast and share it with a friend. If you have any questions, you can find that’s You can also follow us on Instagram and YouTube. You’ll find us under the handle Retire Sooner podcast. And now for our show’s disclosure.

    Mallory Boggs [00:40:15]:
    This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. Investing involves risk, including the possible loss of principal. There is no guaranteed offer that investment return, yield, or performance will be achieved. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions for stocks paying dividends. Dividends are not guaranteed and can increase, decrease, or be eliminated without notice. Fixed income securities involve interest rate, credit inflation and reinvestment risks and possible loss of principal. As interest rates rise, the value of fixed income securities falls. Past performance is not indicative of future results.

    Mallory Boggs [00:40:55]:
    When considering any investment vehicle, this information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Investment decisions should not be based solely on information contained here. This information is not intended to and should not form a primary basis for.

    Mallory Boggs [00:41:14]:
    Any investment decision that you may make.

    Mallory Boggs [00:41:16]:
    Always consult your own legal tax or investment advisor before making any investment tax, estate or financial planning considerations or decisions. The information contained here is strictly an opinion and it is not known whether.

    Mallory Boggs [00:41:27]:
    The strategies will be successful.

    Mallory Boggs [00:41:29]:
    The views and opinions expressed are for educational purposes only as of the date of production and may change without notice at any time based on numerous factors such as market and other conditions.

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This information is provided to you as a resource for educational purposes and as an example only and is not to be considered investment advice or recommendation or an endorsement of any particular security.  Investing involves risk, including the possible loss of principal. There is no guarantee offered that investment return, yield, or performance will be achieved.  There will be periods of performance fluctuations, including periods of negative returns and periods where dividends will not be paid.  Past performance is not indicative of future results when considering any investment vehicle. The mention of any specific security should not be inferred as having been successful or responsible for any investor achieving their investment goals.  Additionally, the mention of any specific security is not to infer investment success of the security or of any portfolio.  A reader may request a list of all recommendations made by Capital Investment Advisors within the immediately preceding period of one year upon written request to Capital Investment Advisors.  It is not known whether any investor holding the mentioned securities have achieved their investment goals or experienced appreciation of their portfolio.  This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions.

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