Hello and welcome back to How to Retire. I’m Jackie Post here in the Fuchs Financial Studio in Middletown, Connecticut, along with Ben Fuchs. Ben, great to see you. I feel like I haven’t seen you in a while. I know. You’ve been hanging out with everybody else. I’m glad that we get to… I know. We finally get to connect again. I love it. It’s all I ever wanted. I know. Me too. Me too. Today we actually have three stories, three very different situations, but all of them touch on something that I think a lot of people wrestle with. Tell me about… the first client story that we have here. So we can’t use anybody’s real name, so we’ll call her Jane. Jane is somebody that has been a really, really good saver. She has a pension. She has Social Security. She’s paid off home. She’s done all the right things. And for her… struggle is spending her own money. She, for whatever reason, when she first came in, she was like afraid to take vacations, afraid to go out of things, afraid to do things. And for us, that was a big hurdle that we had to overcome. Okay. I mean, how is that even possible? I love a vacation. Oh, yeah. And spending. I’m going to stay away from that. That sounds like a conversation for your husband. Yes. No, I and my wife. All right. But I think that there’s a couple of things. I think. You know, what happens is that it’s common with really good savers is that they’re used to not buying anything that isn’t a necessity. And when something isn’t a necessity, they look at it as frivolous. And so for them, it’s very hard to like overcome that obstacle. And there are times when I’m telling my clients, hey. You have back issues. Why don’t you fly first class? And they’re like, I could never do that. And I’m like, OK, but maybe we should look at it. And then we have conversations about where that money goes. I had a client recently send me a picture of a car that he bought. This client has. Plenty of money will never run out. His kids will never run out of money. But he bought a new car and he’s saying, oh, I got to live on rice and beans for the next two years. I can’t possibly handle this. And so what we like to do is we like to go through certain analysis so that, you know, in order to break through that conversation, we want to really show them, OK, here’s where your money is. Here’s how much you can spend. If we get. this normal rate of return that you’ve been getting for the last 20 years. If we get less than that, if we have market crashes, you can still afford to do all of this stuff, you can still afford to do it, but we do that through our software so that they can see what the numbers are. I can’t tell anybody to do anything and have them follow what I say. What I can do is I can show them the numbers, I can show them the impact, I can show them the taxes, and then they can make the decision that they’re okay. And then we have a basic conversation. What happens when you’re not here? Who inherits this money? And how careful do you think they’re going to be with this money that you spent the last 50 years building up? And so when you start to put it like that, that’s when people start to turn the corner. You know, I tell everybody, I’ve told the story a couple times. When my mother was looking for a house when they were moving from one part of Florida to another, she was looking at one house and saying, oh, I really love this house, but it’s way too expensive. I couldn’t possibly be. I’m going to go with this other house that’s a little less expensive. I’m like, mom, you’re in your 70s. You have plenty of money. You have two options. You can either buy the new fancy nice house that’s going to make you happy. Or I can show up to your funeral in a brand new car. Wow. Those are the options. Cut to the chase. I like it. I mean, that’s the reality. So she’s like, yeah, I’m going to get that. Because I think what people don’t realize is, hey, if I don’t spend this, my kids will. Right, right. And, you know, who deserves the money? Who earned the money? Who worked hard to get to where it is? And a lot of times the children really don’t appreciate it the same way. 100%. You should definitely enjoy it. So what does the research actually say about how retirees spend? Because I think people might assume that they’re going to blow through their savings, right? So what we find is that typically in the 80s, people start to slow down their spending. So that research kind of says that at that point, they begin to slow down, they begin to hold back. And that was kind of thought to be common knowledge. And a lot of cases were built off of that assumption. But what actually happens is that people that are still able to spend in their 80s… still continue to spend in their 80s. And so we like that. And for us, we have a lot of people in their late 70s, early 80s that are still going, still going on cruises, still enjoying themselves, still spending their money. And for us, we want to keep them comfortable being able to do that. Who knows how long you’ll be able to? So while you can, you do it. Absolutely. Life is short. Well, that’s interesting to hear. What about, so this particular client is actually wrestling with something else, giving money to her kids? Yeah. It’s the flip side of the conversation. She also, she wants her children to be okay. And she wants to be able to take care of her children while she’s alive. Right? I think that’s the goal is I want to see them benefit from this money. But the concern for me is at what point do we draw the line and say, hey, if you take this money. and you give it away, then you’re leaving less for yourself. So it’s trying to figure out where that balance is. And so what we’ll do is we’ll create different simulations for her. If we give X amount of money now, X amount of money later, she wants to give more money in one lump sum up front. And I will say it would be better if… We could generate all of that income, all of that money for you. And instead of giving the principal, the thing that’s generating the money, we give all the interest that it’s giving off. And that way you can continue to give over time without fear of running out. You can do it however you want to. It’s your money. It’s your decision. I’m happy for you to do whatever you want to do. But this is the recommendation that we’ll make. And so there’s some tools that you can use in this way as well. So what are some of those tools? Yeah, so there’s the annual gift tax exclusion, which is pretty straightforward. You know, there’s a certain amount of money that you can give every year, which is $19,000 a year now, where you’re not paying any taxes on that gift. If you’re taking it from the IRA itself, you’re going to pay taxes when you remove it from the IRA. But, you know, for money that you give as a gift, you don’t really pay taxes on that. That’s what people worry about a lot is how much can I give per kid per person the reality is Right now federally you can give something like 15 million dollars Without paying any taxes at all and so if you exceed that gift giving limit that $19,000 and let’s say it’s $50,000 you just take that extra $31,000 you say this goes against my 15 million and most people really don’t have to worry about inheritance because of that because it’s such a significant inheritance and so what happened for a long time is that in Connecticut You know, if you had over $2 million in your inheritance, you had to pay a fair amount of taxes. I remember the difference between having $2 million and having $3 million back in the day was like $72,000 in taxes out of pocket. But a lot of that’s gone away. So a lot of that estate planning that needed to be done. It doesn’t need to be done the same way anymore. And so, again, it’s a conversation that needs to be had with your financial advisor and your attorney. Right. So it’s a choice of give now, give later. It’s really how much can I give without compromising what you need to live in retirement, essentially. Right. And I think for us, it’s where we find that balance. You know, how do we make sure that we’re OK? I mean, listen, I’ve got three kids. I love them. If they have issues, if they have things that they need, you know, for me, it’s. What am I going to do that, like, when am I going to say no to my kids? I think that’s a tough one for me. I don’t know how exactly that works. But I can tell you that we can come up with a system and give them real analytics and have them understand. The other thing is, you know, I’ve got people that want to pay off all of their kids’ student loans, which I think is wonderful and admirable, and I’m not really going to fight you on it. But we will have a conversation about them having another 40 years to work and you not. right and so if you give that money that will if if it’s going to impact the way that you live you should know about it absolutely so we just want to have that conversation out of time so they can plan accordingly. I’ll teach you how to say no to your kids. Really? Yes, I will. Well, I don’t know. My husband might disagree with me. I’ll be honest. I have no problem saying no to my children. Oh, okay. But if they were to bind, but if they want like ice cream, I’m like, oh, no, no, no. I have no problem being the tough parent. They will go to mom because they know that they’re more likely to get a yes that way. I was just going to say, I actually, I don’t do that either. So anyway, all right, well, we’re going to write all this down and there’s lots more stories to come. So this is How to Retire, brought to you by Fuchs Financial in Middletown, Connecticut. If you have the resources, but not the confidence to enjoy them, that is exactly the conversation they’re built for. No pressure, no pitch. Call Fuchs Financial. We’ll be right back. Congratulations, Nancy and Mark. You’ve been chosen to play the retirement game. All right, first question. How long will you live? Too slow. Spin the longevity wheel. Nancy, will inflation eat your savings alive? I hope not. Let’s spin the slot machine and find out. Which strategy will you pick? At Fuchs Financial, we don’t spin wheels. We build real plans. Personalized, adaptable, and clear. Welcome back to How to Retire. I’m Jackie Post with Ben Fuchs. Ben, we have another story about one of your clients and we’re withholding names, but we’ve got like Jane Doe and John Doe. Is that the investigators? We’re financial investigators. Financial law and order. Yeah, exactly. Retirement law and order. Cue the music, right? So tell me a little bit about this client who’s at a very different crossroads than the previous client we talked about. you know she’s about to go through a divorce for the first you know and be alone for the first time in her life and she’s you know having the conversation about splitting assets what is she can actually get um and this is tough i mean this is you know one of the most stressful things that you can go through some of the most bitter things that you could this is not a particularly bitter one which is great but it is one of those things that we have to deal with and that we have to have the conversation of all right, should I get the house? Should I give up the house? Should I give up part of the 401k? What’s best for me? And again, we need to have those conversations. And it can be, like you said, a very emotionally charged time. It can be easy to make a wrong move. So what do they need to think about in a situation like this? Well, in a scenario like this, some of the biggest mistakes that you can make are rushing into things, right? Feeling like you have to make a financial decision right away, feeling like you have to move quickly. If you have to buy a house, you have to invest all the money, you have to go crazy. And what we really need to do is slow down and let things settle and see where we are. And OK, maybe we don’t buy a house right away. Maybe we just rent for a little while and see where we are. And, you know, if we get X amount of money. Is all of that money going to go to a new house? Right. Does that mean that I have nothing else to live on? Does that mean that I need to rent somewhere else? Does that need to change? Let’s just let things settle for a little bit. Let’s get used to life before we make some of these big financial decisions that could have really long lasting impacts that maybe you don’t want. That is really hard to do, but there are some strategies here. So we’ve got the do nothing strategy, which can be really hard to follow. Why is that? Because you want to put something behind you. like you you’ve just crossed a hurdle right you just and like i want to get done i want to move as fast as i can okay well the first thing that we can do is really create a plan i think and i might say it a million times but we really want to map everything out okay i don’t care how old are we we’re 50 55 60 65 doesn’t matter how much longer are we going to work how many more years are we going to put things away what do we need to live on what are we going to get from social security are we getting any pension from the quad you know what is what are what are we getting right let’s figure that out let’s write down what we have in terms of assets and let’s write down what we need when we’re fully retired and from there we can map out how much are we going to save what do we expect that to earn and then what are we going to have at the time of retirement same thing for everyone can you retire on this money is it enough and then we start figuring out every piece from there Getting a professional to help you. Well, I mean, listen, there’s a lot of reports that we run, right? We run a lot of reports on the income, on the investments. We run reports on the taxes, you know, and how you put that money, where you put that money is going to have a big impact. People at 55 might say, I don’t want to be that aggressive right now. We might have a recommendation that would be more aggressive than they would think because if they’re not going to retire for at least 10 years. We know that they can withstand certain swings of the market, and overall they’re going to be better off taking a little bit more risk. If they don’t want that, we’ll help them other way. But for us, we need to help them see the bigger picture. And once you see the bigger picture, then it’s easier to take smaller stops. A pause is a great thing to do in any scenario is what I’ve come to realize, right? You take a pause and then figure it out, right? As somebody that deals with the emotions of nine-year-olds and four-year-olds, just taking a pause, taking a deep breath and counting to four. I do that a lot with my kids. That is true. All right, so then we have the three-bucket strategy. So what is that? All right, so when we’re creating any kind of retirement plan, we’re always putting things into three separate buckets. And the buckets are very straightforward. We have… a safe bucket market crashes we need to pull money from someplace it has to be from that safe bucket the middle bucket is the income bucket that’s what we see people have the least of right replacing that monthly income how do we generate interest from the investments how do i not reduce my principal we need to have that income bucket set up before you retire so you know where your money is coming from and then the last bucket is the growth piece so the way that it works is that 90 95 of the time you get all of your income from that middle bucket. Anything that you need from a day to day paycheck to extra money comes from that middle bucket. During that like five to 10% of the time when the market really takes a huge dramatic drop, that’s when we pull that safe bucket. We pull from that for six months, for a year, for two years, depending on how long we need it. And once we have those two things established, then we can put money into the growth. Then we can have a long term growth so that we know that even if the market crashes. It’s not going to affect the way that we live. And so whether you’re newly divorced, whether you’re worried about giving too much money to the kids, no matter what scenario you’re in, we want to set up this strategy. But how we set it up is going to be different from every person because every person has unique needs in terms of their income, in terms of taxes. So we have to set up a little bit differently for everybody. But that’s where we start. And you figure out what works for each person. I kind of like the bucket strategy. That sounds fun to me. if if this person had to do anything this week right now before she does anything else what would it be i would say the most important thing is probably to update your beneficiaries which means where’s the money going to go when you die i don’t think that you necessarily want all of your 401k or life returns to go to your ex-husband right That is true. Theoretically, I mean, maybe you do. I mean, but if there’s one thing that you should get done, it’s probably that. And then, again, go through everything that you have. Just give it a once over. Right. You don’t have to make sudden changes. You don’t have to go crazy. I do think that it’s helpful to talk with an advisor when something like that happens. so you know what questions to ask and if you have an attorney that’s recommending something for you that you might not agree with sometimes it’s nice to be able to bounce something off of you know another advisor so at least you have a competing view that maybe can help you rationalize some of what you have so i think one i think it’s important when you’re going through divorce to have the right attorney and to have the right advisor to make sure you’re not giving up the wrong thing but also change the beneficiaries make sure everything’s in place don’t make any crazy set movements Let’s just start to have the conversation. All right. And it’ll feel good before you know it, I’m sure. Absolutely. All right. Sure. Thanks so much. Well, that is the one thing. We’ll do it this week. And we’ll be right back with our… This one starts with a question everyone in Connecticut is probably asking. And just so you know, Fuchs Financial serves people going through exactly these moments, the transitions, the crossroads, the situations nobody plans for. That’s where they do their best work. Give them a call. We’ll be right back. It’s going to get worse from here. This is the biggest monthly decline in 10 years. People’s 401ks. My investments are tanking. My retirement isn’t going as planned. I can’t believe I let my kid talk me into buying crypto. I mean, what is that anyway? This was the fourth worst contraction in history. So how are you two doing? Your financial future doesn’t have to be uncertain. Plan your retirement right. Call now for your own complimentary portfolio review and tax analysis. Welcome back to How to Retire. And our last story, client story with Ben Fuchs today. And this one’s an interesting one. We’re calling it the Florida question. I’m so intrigued. You’re intrigued as well? We’re in trouble. What are we talking about? I have no idea. All right. So we’ve got John and Jane. And this is a common question that we get every time. It’s should I move to Florida? So John and Jane, first of all, not everybody should. have this question. There are a lot of reasons why people stay in Connecticut. Connecticut used to be a place that everybody just moved out of automatically, and they’ve changed the rules in Connecticut a little bit. So keep in mind that if you have under $75,000 of adjusted gross income, it’s called AGI, sorry, and you’re a single person, you’re not paying state taxes on Social Security, you’re not paying state taxes on withdrawals from your IRA, your 401k, your retirement plan, or your pension. But when you go over that, as a single person that’s when you start to begin paying taxes on this and if it’s your if you’re a married couple filing jointly same concept it’s just a hundred thousand dollars instead of 75. now john and jane in this scenario are way way above that they want to spend close to like 200 and something thousand a year they’ve done very very well they’ve earned it And I get it. So this Florida question becomes much more intriguing because when we talk about giving away five, five and a half, six percent of our net worth and we’ll be just as happy living in another state, well, then the finance makes sense. The question becomes, will they actually be happier? I don’t know. Out of state. Well, now, like you mentioned, Connecticut is not the most tax-friendly state in the country. No. I mean, on top of the income tax, which we’ve talked about, we also have property taxes, which kind of push us over the edge. Like, that’s one of the main things that makes us not tax-friendly. And if you’re a tiree and you’re like, well, I don’t have to pay for, you know, I’m not worried about education here. Like, I don’t care. My kids are gone. Like, what do I need to pay for that for? Then it makes sense. And then you have a legitimate reason for people who want to move, especially when you rent a house that costs more. money. And so you have compelling reasons why it would make sense for someone to go to a floor. I’ve even had people want to go to Pennsylvania because, again, lower tax, lower area. It makes sense for certain people. I feel like there’s a but in there. But. But there are drawbacks, right? I mean, you know, one, you’ve built your whole life here. And are we really going to move to a whole other state and upend our whole life and our entire fund group just because we can save a few extra dollars? You know, some would argue that you’ve earned so much money that should allow you to do whatever you want and to live wherever you want. And so we have a lot of people that. have plenty of money that want to stay in Connecticut because they like this lifestyle. They like the people here. They like what they built. And so there’s an argument. The other thing to keep in mind is that generally health care here is a little bit better than it is in other places. And so there are concerns when you get into some of these areas where you have to drive way, way, way out for a hospital. You have care that isn’t wonderful. And so that’s something that really should be playing a greater role in what we do. I mean, listen, I’ve lived in states that have Very low taxes. I remember when I lived in Arizona, you know, you had a couple hundred thousand dollar house and you paid a couple hundred dollars for property taxes. Amazing. So it makes them easier to invest in and turn a profit. Right. But that doesn’t necessarily mean that that’s where you want to retire. Right. Also, you can’t just buy yourself a condo in Naples and call yourself a resident, right? There are some regulations, if you will. Absolutely. So one, you’ve got to live. It’s not just so interesting. I had Mark Boughton on, who is the tax commissioner of Connecticut, the commissioner of revenue services in Connecticut. And one of the things that he talked about was that people get into trouble in Connecticut when they don’t divorce themselves from the state. And I don’t remember exactly, but in a lot of cases, that means actually having to sell your primary residence. not just living for six months and a day somewhere else. But like actually having to sell that primary residence so that you are no longer in their specific terminology, the words I’ve forgotten, but feel free to give him a call. He’s happy to take all calls. Wow. Do you have his number? No, I don’t. Weird, he wouldn’t give it to him. Yeah, it’s weird. But very helpful, very friendly. But honestly, I mean, these are the rules, right? These are the way that the laws are written, and it’s their job to enforce those laws, which I understand. But in the state of Connecticut, it’s not so cut and dry. You want to actually, you know. remove yourself from the state so that there’s no question that he was talking about and gave some interesting examples where people thought they had done that they had not and then they owed a lot of money back to connect so wait if you sold your house and then bought a condo in connecticut that’s okay it’s different but when you keep the same primary residence you know there there are different rules that are attached to that but it’s something that if you’re going to make yourself a resident somewhere else that you should look into. All right. That’s very interesting. So what kind of money are people saving if they do end up getting in this scenario and moving to Florida or moving somewhere cheaper? I mean, it’s really different for everyone. And so one of the reasons that we have accountants on staff is so that we can run some of these numbers for people. We don’t want to give guesstimates. We don’t want to give estimates. We want to make it real dollars. What we have found is that there are a fair amount of clients that have these deferred comp plans. And so The way that it’s written, I remember I had a guy from Timex a long time ago, and he thought that he would only work at Timex back then for a couple months. And so he said when he got his deferred comp plan, just pay the whole thing out after nine months. Well, he was there for over 30 years. And by the time he left, he had over $950,000 in that plan. So when he left, all $950,000 came to him as income nine months after he left. And so if you’re in Connecticut… You’re paying 7% taxes on that. It’s almost $70,000 out of pocket. If you’re planning to move somewhere else anyway, you can do some pretty easy math on why that may or may not make sense for them. But it’s going to be different for everyone depending on their situation. The other thing to keep in mind is that as a firm, we do a lot of things called Roth conversions, which we talk about. But basically, you have money in your 401k that you got a tax break for putting money in. And when you move it into a Roth, you have to basically pay the taxes on all that money as if you earned it that year. Well, if you get the deduction while you’re in Connecticut and then you convert it while you’re in Florida, you basically negate that state tax. You don’t have to pay that state tax. You kind of get out of doing it. And so there are certain reasons with certain plans where people plan to have more income by doing this type of Roth conversion planning that makes more sense for them to go to Florida. So the numbers are going to be different for everyone, but it’s worth understanding. Yeah, it’s definitely always customized for sure. So with this particular client, you mentioned that retirement is is a choice, so it’s not really a necessity for them, but it kind of creates its own type of challenge, correct? Yeah. I mean, you know, most people have. their identity wrapped up on their work right i mean you’ve gotten to the highest point in your career you’ve you you know you’ve worked so hard you’ve gotten to the top of the of the pyramid or whatever you want to call it maybe maybe we shouldn’t call it a pyramid But you’ve gotten to the top, and everybody’s looking at you for answers, and you’ve done all that. And now you kind of go away, and that whole identity disappears. Nobody calls you for help anymore. Maybe they do for the first two or three months, but after that, it’s like, you know, what’s there? And giving up that identity is very difficult for a lot of people. You know, I joke around with my father all the time, who’s come out of retirement like four or five times to keep doing the rabbi thing because he has the knowledge and he enjoys doing it. And so, great, you should do that. You know, listen, I picked this job because, you know, it’s not construction. It’s not terribly difficult on the body. I want to be able to do this into my 70s because I really enjoy it. And I think that there’s… Some of that kind of, you know, understanding that retirement can be a choice and maybe not even the choice that you want. But I think it’s always important for people to be able to retire, to be able to walk away if it stops becoming fun. If it’s not what you want, you want to be able to make that decision on your terms. And what do you say to people like this of the world who have won the money game? They’re standing at this new threshold. What’s your best advice to them? We’re happy for them. I mean, ultimately, it’s, you know. Good job. You put in the work. I mean, people, it’s not like they just won the lottery one day. No, they didn’t buy that thing every week. They didn’t buy, they didn’t get the brand new car. You know, what we see is when people make themselves millionaires from regular jobs, it’s because they’ve been disciplined and consistent with their saving. They’re not over the top. They haven’t made a crazy amount of money. They’ve just worked really hard day after day and done the work. And so we’re really happy with them. But that sometimes does coincide with those other people that we’ve talked about that have trouble spending their money because, you know, they’ve done the right job. But ultimately, we’re happy for them. But it presents a different set of challenges. We’re not worried about running out of money. That’s not a concern at all. We are worried about how we can save money in taxes. And the only answer isn’t just move to Florida. There’s a lot of other options that we want to talk about, whether that’s charitable giving or other options. you take your income in retirement determines how much of this money you keep and those are the big conversations that we want to have okay yeah that sounds great we are happy for them ben and you always say which i it always resonates with me that retirement isn’t the end of the road it’s the start of something worth planning for so resonates with me every week words of wisdom from ben fuchs oh thank you yeah i didn’t say it but i appreciate it you didn’t someone told me you said that okay all right well that is it for this episode of how to retire coming to you from the fuchs financial studio in middletown connecticut wherever you are in this journey just starting to think about it in the middle of it or standing at the edge wondering what’s next fuchs financial is ready to have that conversation no pressure no pitch just good advice built around your life We’ll see you next time. so you may live every day to the fullest and enjoy the retirement of your dreams.
