facebook twitter instagram linkedin google youtube vimeo tumblr yelp rss email podcast phone blog search brokercheck brokercheck Play Pause
5 Things Executives Must Do 5 Years Before Retirement Thumbnail

5 Things Executives Must Do 5 Years Before Retirement



Transcript


[00:00:03] Melissa Liranzo: Good afternoon, everyone. Thank you for joining our webinar, 5 Things Executives Must Do 5 Years From Retirement. My name is Missy Liranzo, and I handle customer support for our team. Our speaker today is Antwone Harris, Chief Planning Strategist with Platinum Bridge Wealth Strategies. As a retirement income planning specialist with over 20 years of experience, Antwone has helped hundreds of people successfully transition from their main career and into the next phase of their lives.

[00:00:30] He holds an MBA in finance from Georgetown University. He's a certified financial planner and a retirement income certified professional. He's been featured on CBS, ABC, NBC, Fox, The Washington Post, Bloomberg, The Financial Times, Kiplinger Magazine, and other media outlets. Please post your questions in the Q& A tab at the bottom of the screen.

[00:00:54] We will be answering questions periodically throughout the webinar, and please welcome Antwone Harris.

[00:00:59] Antwone Harris: Missy, thank you so much. I appreciate everyone today and thank you for your time. I know you all are very busy, so we're going to get started. As Missy said, I've been doing this for a very long time, and I've had literally thousands of retirement planning- Interviews or I've helped thousands of people with their retirement planning challenges.

[00:01:22] And one of the things that has consistently come up is that people come to me too late in the process. And I always think to myself, I wish we had a conversation a few years ago, before they actually came to me with their whole retirement planning picture. So what I'm going to focus on today is really some areas that you should be doing right now to help prepare yourself and optimize your situation for retirement to promote success for the rest of your life after you transition from your main career.

[00:01:56] So, let me share my screen here.

[00:01:58] This is based upon one of my actual clients. I changed her name. I changed the details and I changed the entire situation, but this is something that we're working on for her right now. So I have a client that was a very successful professional. She is an executive with a pharmaceutical company.

[00:02:18] She actually made a very strong income. She saved a few million dollars for retirement and she's retiring early. She's retiring at 60 and she needs $10,000 a month to live on. It's actually more than that, but I made it $10,000 a month for simplicity. So she's in a unique situation. She's an executive. She's retiring and she has longevity in her family. So she's concerned that she may outlive her money at some point, despite the fact that she has millions of dollars saved for retirement, she's also single. So she has a life partner. She lives with a man that's older than her, but it's very likely that he will pre decease her.

[00:02:57] So she's concerned about what her lifestyle is going to be like as she gets older throughout retirement. She's also very concerned about our healthcare expenses and she knows that they've been growing exponentially over time. She wants some ideas on what we can do to help mitigate some of those healthcare expenses in retirement.

[00:03:14] She's also concerned about reducing her tax burden. Now, when we're thinking through the retirement picture, people have worked for 30/40 plus years, and they've done a good job. They've been putting money away, saving money. But when you transition from having that dependable study income coming in that you can plan around prepare for and start to make provisions around and you go from that to a fixed amount of money that has to last for some undefined period of time. We don't know how long you're going to live and there's other contingencies. So as you evolve and get older, your needs change, your wants change. You may decide that, "Hey I'm living in Maryland. I may want to move to California to be closer to my grandchildren."

[00:03:58] So what does that look like? All these different things that are coming into this equation and it's a dynamic situation. Over some undefined period of time, it promotes a lot of anxiety. It's a puzzle that we're trying to solve for and there are a lot of unknowns and there are a lot of variables that could upset the retirement plan.

[00:04:17] So what we try to focus on, you're going to hear me repeat today- there are things that are under our control that we can do to help reduce the risk and help prolong the useful life of your assets and that's what the retirement income planning picture looks like. We're trying to take things that are under our control to improve this entire process.

[00:04:38] Now, oftentimes when people come to me, they're concerned about the market volatility, the market going up and down. That is something that's on my radar screen, but on the continuum of things that I'm concerned about the market going up and down is at the very bottom. So this is a chart of the S&P 500 going back to 1937.

[00:04:58] These are large US companies: Microsoft, McDonald's, General Motors, Google, et cetera. 500 of the largest US companies going back to 1937. When you take the lens back a little bit and look over time, any 10 year period since 1937, so 1937 to 1946, 1938 to 1947, any 10 year period, the market has a probability of a positive returns of over 97%.

[00:05:27] When you look at a 10 year period, any rolling 10 year period since 1937, when you go out to 12 years, it's 100%. Even 5 years is 93%. So I'm not so concerned. I know that over time, the market goes up into the right. But there's a derivative of this situation that I am concerned about and I'm going to talk to you a little bit about that going forward.

[00:05:49] There are 18 major risks that retirees face. I'm going to focus on four of them today. One is longevity risk. One is sequence of return risk. The sequence of return is based upon market volatility and I'm going to talk about why that's a different concern for a retiree. We're going to talk about liquidity risk and health expense risk, and some strategies that we can use to help mitigate these risks in retirement.

[00:06:14] As I mentioned, the stock market goes up and to the right. The challenge is if you are one of those people, one of the unfortunate souls that retires right during a major market downturn. So you retire in the year 2000, then we have the dot com bubble or you retire in 2008. Then we go through the global financial crisis where the market fell 57 percent peak to trough, right?

[00:06:37] So the challenge becomes- we know that the market will recover over time. As I showed you, when you have a long time horizon, you're fine. The challenge becomes when you're withdrawing money from your savings, your retirement savings during a market downturn. That's called sequence of return risk. You have a bad return scenario right when you need the money.

[00:06:59] So how do we plan for that risk? How do we mitigate that risk? We also talked about longevity. So there's some women on this particular webinar and this is a unique challenge for women in particular, because on average, women live five years longer than men. So this is a challenge for all of us.

[00:07:17] When we're most of us on this call are in our fifties and sixties, and people are planning for retirement of say, hey, 30 years, right? That's the typical retirement planning time horizon. My grandmother was in her 50s. She probably expected to live until her late 60s or her early 70s, because that was considered old age at that time.

[00:07:39] Now, it's not unusual to know someone that is over age 100, right? So I have an aunt that's 101 years old. My grandmother, who thought she would probably pass in her 70s, lived to age 94. So with advances in health care, etc. It's very likely that many people on this call may live it past 100. So if you retire, especially if you retire early, it's very likely that you may need money for 40, maybe even 50 years in retirement, which is a very long time.

[00:08:15] So one of the things, one of the most critical areas that we need to plan for is that longevity risk. How can we mitigate the longevity risk that you may outlive your assets?

[00:08:25] This is very important. If you get nothing else from this presentation, you should probably take notes on this slide. These are the basic foundational elements of a very strong retirement plan. The first thing is we need two years of cash available, whatever you plan to withdraw to help maintain your lifestyle as you start retirement, we want two years of that in cash at all times. The next thing, and this is one area where I see a lot of people making a mistake, they're saving a lot of money. They're doing everything that they can to save money within their 401k accounts. They're adding the IRA accounts. They have restricted stock. They have stock options. They have corporate executive compensation plans. They're doing everything that they can within their job or within a savings plan for their business to save money, but they're not building up enough money outside of these company based retirement programs. So there's something called just a regular taxable brokerage account, a non retirement account.

[00:09:27] Before you retire, we should aggressively start to fund these non retirement accounts, because it gives me a lot of planning flexibility on the back end to help reduce your taxes. So I'm going to talk about this in more detail. These things are foundational. So we need the cash. We need these non-retirement accounts build up very aggressively.

[00:09:46] We need to take advantage of Roth accounts. So with a Roth account, a Roth IRA, or a Roth 401k, any money in those accounts, when you pull the money out, you do not pay taxes on those withdrawals. So part of what we're trying to solve for is promoting increased viability for your retirement plan. We need to promote the longevity of the assets that are available to you.

[00:10:11] One way to do that is reduce your tax burden. So if you have access to a Roth IRA or Roth 401k account, we want to start to take advantage of those assets. Now, most people on this call make too much money to contribute to a Roth IRA account. But if you have access to a Roth 401k, you can contribute to that regardless of how much money you make.

[00:10:34] And it's very important to get some Roth account set up. If you don't have access to a Roth 401k, we can do something called a Roth conversion, where we convert money from a regular IRA account to a Roth account, and then that money is available for you to come out tax free. This is also important because most people do not have long term care insurance.

[00:10:56] So when we're planning for some of those- the healthcare risk on the back end for a retiree, your end of life expenses can become very expensive. So, we typically plan that a woman will need three years of some kind of long term care toward the end of her life. That whether that's someone coming into the home to help or going into a facility, it's very expensive.

[00:11:20] When we're doing the plans now, we're planning for several $100,000 per year when we account for inflation over time, say, in 30 years, what it will cost to have a long term care event. We're planning for several $100,000 for those events. So this is something that if you do not have long term care insurance, which most of you do not, I'm not a big fan of long term care insurance products for the most part. That means we have to self insure. So these Roth accounts being that they're able to grow tax free and you pull the money out tax free is an excellent way to self insure your long term care needs later in life. So we want to preserve these Roth accounts to the end of your life and then pull that money out tax free to take care of any long term care expenses that you may have and the last point is establish a home equity line of credit while you are still working. If you actually own a home, it's important to establish a HELOC, a home equity line of credit as a break the glass emergency contingency plan so that we do not have to deplete our valuable retirement savings if there's an emergency.

[00:12:34] Or a contingency or the root caves in, or you have a family member that needs help, or someone is has a health issue that you have to write a big check for. We want to be able to break the glass and have a home equity line of credit available so that you do not have to deplete your retirement savings.

[00:12:52] I'm going to show you why, but this is something that is important to do while you are working, because when you go to apply for a home equity line, they want to see that you have income. So when you retire is very difficult to have a home equity line set up and that's why it's so important.

[00:13:09] Now, I talked about having 2 years of your withdrawals in cash. In the example that I gave for Carol, she wants $10,000 a month to start her retirement. So that means she needs $240, 000 to support herself for the first two years of retirement. Now that's a lot of money. That's why I'm saying these are things that you need to start to think about before you retire.

[00:13:33] So the way this works is we have two years of cash available throughout your retirement, the entire retirement phase. We want two years in cash. I want three to 10 years in a bucket that is outside of your retirement account. Outside of a 401k account outside of an IRA account to replenish this bucket.

[00:13:53] So in the 3 to 10 year bucket, we're going to have bonds, things that are more conservative, things that are more safe, things that are more predictable bonds that have a maturity date. I'm going to get some interest on those bonds. The interest pays back to replenish this bucket. I may have some conservative stocks here, dividend paying stocks, the dividends go to replenish this bucket as those bonds mature.

[00:14:18] Then we take those bonds and replenish the bucket as well. Now, what happens is because I have two years of cash available and I have another backup bucket with three to 10 years of conservative investments. I'm able to weather periods like this. So this is how we protect against that sequence of return risk.

[00:14:37] You're retired. And the market tanks, but we're not selling any stocks at fire sale prices to help you live to give you money to live on. What we do is opportunistically when the market is up, we're selling stock and replenishing this cash bucket so that the interest is going into this cash bucket.

[00:14:58] The dividends are going into this cash bucket as bonds mature. It goes into the cash bucket, any stocks in this bucket when the market is up. Okay. We can opportunistically sell those stocks in an upmarket and replenish this bucket. We want two years of cash available to you at all times for the rest of your life once you retire.

[00:15:18] And this long term bucket, this is where we're going to hold most of the money in retirement accounts. This is where the money will be for the Roth accounts, the 401k accounts, the IRA accounts. We want to set this up and set this up systematically over time.

[00:15:33] I also mentioned that you should be very slow, very reluctant to part with lump sums of money. So when you retire, you start to think in different terms of how you view your assets. So you do not want to write big checks in retirement if you can avoid it. So you don't want to write a check and just pay off a car.

[00:15:53] Typically, you typically do not want to pay off a mortgage. Typically you want to have that home equity line of credit in place. In case you need money, you need a lump sum so that you're not depleting your assets and here's why. Here's an example why. One question I get, should I pay off my mortgage in retirement?

[00:16:11] Let's assume we have a mortgage at $500,000. Now, our choice is we could take $500,000 from our investments, and pay the mortgage off all at once. Or I could apply for a mortgage for $500,000 and simply pay the monthly payments. Now what happens is right now, interest rates have come up. So say the mortgage right now is 7 percent and say you're getting 5 percent on your investments.

[00:16:35] If we have a 10 year mortgage over the 10 years, the total cost of your loan is $696,650. However, the $500,000 compounding at 5 percent per year, which is very easy for me to get right now because interest rates have come up so I can get 5 percent almost risk free would grow to over $814,000.

[00:16:58] So from a financial perspective, it's in your best interest to not pay off your mortgage, to not pay cash for a house in retirement, but to keep your money in place, compounding and utilizing the law of large numbers after 10 years, you'd have $814,000 versus the 696 and total loan costs. So you'd have an extra $117,000 available to you for retirement.

[00:17:23] After 20 years, this $500,000 would grow to over 1. 3 million. The total cost of a loan would be 930. So you'd have an extra $396, 000. And then on a 30 year loan, this $500,000 would compound to over 2. 1 million. But the total cost of a 30 year mortgage would only be 1. 1 million. And you'd have an extra million dollars almost available to you 30 years in the future when you're old, you can't earn any more money and you may need that money for end of life expenses.

[00:17:56] Now I want to show you why this works. So this is, you can check this out at bankrate. com. You can use an amortization schedule. This is counterintuitive because if you look here, you say if my investments are making 5%, but the loan is 7%, How can I have more money over time with a 5 percent loan and the mortgage has a higher interest rate than what I'm earning on the money?

[00:18:20] That doesn't make any sense. Now we refinanced our mortgage when the interest rates were very low. So our mortgage rate is like 2. 8%, right? So I'll never pay that off, right? Because I can certainly earn a rate of return higher than what my mortgage payment is, but this doesn't make sense. But the reason this works is because of how amortization works.

[00:18:40] This is an amortization calculator. So a $500,000 loan for 30 years at a 7 percent interest rate. The total cost of the loan is 1, 197, 000, which is what I showed you here. The reason that happens is because the balance goes down over time. So we started with a $500,000 loan, but as you're paying the monthly payment, a portion of that goes to principal and that principle is being reduced over time.

[00:19:11] So now the 7%. Is applying to a steadily decreasing balance. So we started with $500,000. It goes to 496 down to 490. Then it's 420. Then it's coming down and down till finally, the 7 percent is applied to 9, 000 right in year 29. So the total cost of the loan is only 1. 1 million dollars. The opposite happens to this 5%.

[00:19:35] So while the mortgage balance is decreasing over time, this balance is increasing. So the 5 percent is being applied to a higher number that's ever increasing. And then the law of large numbers kicks in. So the compounding is in your favor and it's a very powerful effect. So you start with a $500,000 investment.

[00:19:57] 5 percent after year is 525, 000. Then it goes up here. So over time you end up with more money. So from a financial perspective, it probably does not make sense for you to part with your lump sums of money in retirement because of this dynamic that I'm showing you right now and the assets are irreplaceable.

[00:20:16] So once you part with that money, you can't earn it back. The money becomes more like a- it's like you're a farmer and you have four mules. That work that they're working the farm. You can sell a mule at any time and get money for it, but now you only have three mules working in your favor.

[00:20:33] You need all these mules, all the money working for your benefit in retirement that you possibly can and you may need big lumps of money at the end because of the long term care events that I talked about. Several hundred thousand dollars you may have to write some really big checks toward the back end of your retirement.

[00:20:51] So we want to preserve these assets as long as possible.

[00:20:54] All right, so the next thing that we want to focus on when you go to retire, we're going to have a financial plan and that's a binary question. Do I have enough money? The answer is yes or no. Once we decide you have enough money, we need to take it to a higher level. And say, how do I draw these assets down strategically so that I can prolong the useful life of these assets?

[00:21:17] So that's where we start to talk about- where do I place my assets? What's the best type of account for the investments that I have available? When do I take my withdrawals and which account should I withdraw from first? So once we have the non retirement account set up that I talked about, the Roth account set up, you'll have the 401ks and the IRA accounts set up.

[00:21:38] You'll have a home equity line set up. When do I start to tap these various baseline accounts? When do I do it? Why do I do it? How do I do it? And how do I minimize my taxes over my lifetime? So here's an example for asset placement. Many of you Most people have access to the S&P 500 index fund in their 401k account, right?

[00:22:01] This is just a very standard index fund that tracks the entire US stock market. Okay. If you have this in a rollover IRA account, this type of investment has very low turnover. If you make money with this index fund, you're taxed at a long term capital gains tax rate, which right now is 15 to 20%. If this pays a dividend, which it does, you're taxed at 15 to 20%.

[00:22:26] However, if it's in an IRA account, when you go to access the money and you pull it out of here, every dollar that you pull out of an IRA account or a 401k account, you're taxed at your income tax. So most of the people on this call, they're high earners. They're in a high income tax bracket. So by holding this investment, in this type of account, I've turned a 15 to 20 percent tax into a 32 percent tax, potentially, or 37 percent tax, potentially, right? So I need to think about where I should hold certain types of investments to optimize those investments for my business tax perspective. I basically doubled my tax liability because I had this type of investment in the wrong account.

[00:23:12] So what needs to happen as you retire, we need to start to think about where your assets should be placed. We need to do a full audit and then optimize the placement of those assets so that we're able to be as tax efficient as possible. Having a tax efficient retirement income plan can prolong the useful life of your assets by up to six years. So this is very important. I'm going to spend a little bit of time on this. This applies for people that have company stock within a 401k account. If you have company stock that you've purchased within a 401k account, your ear should perk up right now because there's a way for you to save quite a bit of money on so simply stating, if you do have company stock in a 401k, you need to take this NUA treatment- net unrealized appreciation treatment, while it's still in the 401k.

[00:24:05] If you apply this treatment to this company stock while it's in the 401k, you can reduce your tax liability by a significant amount. Once you roll this money over when you retire and roll money out of your 401k, say to a rollover IRA account, which most people do, which most people should do but once you roll this out, this company stock, it's too late. You cannot take advantage of this favorable tax treatment. So here's how it works. If you have, you paid $50,000 for that Microsoft stock, it grew to $300,000. If you're in the highest tax bracket and you pull that money out of an IRA account, you're going to pay $111,000 in taxes.

[00:24:48] The stock grew to $300,000. You're in the 37 percent tax bracket. That's $111,000 in taxes that you owe. If you apply this NUA treatment while it's in the 401k account, you're able to reduce your tax liability. So you would pay income taxes only on the $50,000 that you invested in your company stock, but all of the growth would be taxed as at long term capital gains tax rates, which if you're in the highest tax bracket is 20%. So 20 percent of this growth to 50 is $50,000. If you're in the highest income tax bracket, 37%, 37 percent of 50 is $18,500. You'd pay a total of $68,500 in taxes. If you apply this NUA treatment to it versus $111,000 in taxes.

[00:25:38] So you'd save yourself over $42,000 in taxes by simply knowing that if you own company stock in a 401k, you're able to apply this tax treatment to it, but you have to do it before you roll it over. There are a lot of moving parts here. If you have an individual question about this, ping me later. I'm not going to spend too much time on it, but I wanted to make you aware that this was available for some people.

[00:26:01] The 3rd option that we're going to talk about or area that we're going to talk about is really how do we start to mitigate your health care expenses. So we know that these are growing exponentially over time and it's one of the major calls that people experience when they retire.

[00:26:16] So the thing that you need to be aware of is that the health care premiums, the insurance premiums are income based. Once you retire, so if you retire early, you may be eligible for the Affordable Care Act, because if you retire before 65, you really would have to go out and try to find some kind of private insurance, which can be very expensive.

[00:26:39] Now, the client that I highlighted earlier, she is a multimillionaire. She has several million dollars, but because we set up those various accounts, I'm able to hide income. I'm able to show very little taxable income for her, and she actually qualified to be a part of the Affordable Care Act; for the subsidy.

[00:26:59] So in the state of Maryland, if you make less than $58, 000, then you qualify for a subsidy for the Affordable Care Act. So despite the fact that she has several million dollars, we're able to qualify her for that program. Once you turn 65, you're eligible for Medicare and that's also based upon your income.

[00:27:19] So what you need to know about the Affordable Care Act and Medicare is that it's based upon your modified adjusted gross income. All that means is- this is your income before you take your deduction, your standard deduction or your itemized deductions and if you have some tax free interest, they added back, etc.

[00:27:39] But the main thing to know is that is based on your modified growth adjusted gross income. So when we're looking at opportunities for planning for clients, you're working, you're making a lot of money as a young retiree. There's typically an opportunity here where you're going to be in an artificially low tax bracket, so you have no more income coming in.

[00:28:00] This is before your social security starts. You haven't started your required distributions from your retirement accounts yet. Your 401ks and your IRA accounts. So you're typically in a very low tax bracket right here. If we have these non retirement accounts set up, I'm able to keep you in this low tax bracket.

[00:28:18] If all of your money is in a 401k account, every time I pull money out to give you money to live on, that's considered taxable income. So in this example, we said that she needs $10,000 a month. That's $120,000 a year, but I need to take more than that out of the 401k because we have to pay taxes on it, right?

[00:28:38] If I have money outside the retirement account, There's no taxable income to show right? We have 2 years of cash in that bucket. I'm just giving you your money back. So you need $10,000 dollars. If you have $10,000 and savings, I'm just giving you that money. It's showing zero income. Despite the fact that she had- she has several million dollars available for retirement. We're showing almost no income for her besides any interest that we're generating and any dividends that we're generating. She qualifies for the Affordable Care Act here, but this also may be an opportunity for us to convert some money. From an IRA account to a Roth account, we talked about the Roth IRA account being tax free.

[00:29:21] The regular IRA or 401k account, you have to pay taxes. When you pull the money out, you can convert money from a 401K IRA to a Roth, but that's a taxable event. So if we convert, say $50,000 from an IRA account to a Roth account, you have to pay taxes in the year that you convert. But if you're in this artificially low tax bracket, we're going to pay taxes at a very low rate.

[00:29:46] You'll probably be in a very low income tax bracket and that may be an opportune time to start to convert some of that money. The next milestone we look at. Is when your social security kicks in. Once that kicks in that, we're going to start to have more income coming in. You're going to be in a different tax bracket.

[00:30:03] Ideally, for most people, it makes sense to delay your social security. We want to use other resources while you're in this very low tax bracket and use that to fund your lifestyle and delay your social security as long as possible. Each year that you delay social security, you're going to get an 8 percent boost to your income stream and the social security is indexed for inflation. So when we're talking about ways to offset some of the longevity, you outliving your money. If I can delay your social security, and I know that you're going to get an 8 percent increase each year that we wait and that money is available for the rest of your life, regardless of how long that you live and is guaranteed.

[00:30:47] Antwone Harris: That's a way for us to mitigate the fact that you may live longer than you anticipate. Then we have the required distributions that kick in later in life. Now, this is a different milestone because you'll have your social security that's kicked in and then these required distributions that from the 401k and IRA account, many clients will be in a very high tax bracket once this happens.

[00:31:09] We need to be mindful and project what your tax situation looks like in the future. There may be opportunities for us to reduce the taxes that this phase by taking advantage of your low income tax bracket at this phase. Here's an example. So we talked about Carol. She retired at 60, say she retired with 2 million and her 401k account, if this grows at five and a half percent a year, that 2 million would grow to over 4 million by the time she's 73, this is the age right now when you're required to take money from your iRA or 401k account. So it doubled in 13 years, right? The 401k is a tax time bomb because oftentimes it is growing very quickly because the law of large numbers is applying to it.

[00:32:03] Most people have tried to put a lot of money in those 401k accounts but you may not need all of the money when you're required to take it out. So basically you're taking money out of here and is putting you in a different tax bracket. So when she's 73, she delayed her social security. She's going to be getting over $4,000 a month in social security.

[00:32:22] This is going up with inflation. So our social security is over $50,000, but her required distribution is also over $146, 000. So her gross income is $197,000 in year one in retirement. That's gonna put her in the 32% tax bracket, and it increased her Medicare premiums. So your Medicare pre premiums are income based. So if your income's less than a hundred, $3,000, you pay $174 a month if you're single, once you get over 193, your monthly Medicare premiums go up to 559, right? So we want to try to reduce your income in retirement as much as possible so that we can keep these Medicare premiums as low as possible and also have you in a lower tax bracket.

[00:33:09] So alternatively, if we had not 2 million in the 401k, but say we had a million in the 401k and a million in the brokerage account, the non retirement account, she still has 2 million dollars. But now the 401k only grows to 2 million. She still has the same social security payment, but this required distribution is cut in half.

[00:33:31] So that reduces her income from 197 down to 124. It reduces her tax bracket. So she's paying less in taxes. It also cuts her Medicare premiums per month by over 200. So again, these are things that are in our control, right? I rather have the money in Carol's account than an uncle Sam's account. And by doing these things, by being smart about how we place our assets, how we start to structure these different accounts, how we start to draw these assets down, we're able to prolong the useful life of the assets by a number of years and that makes a big difference when we're planning for the risk in retirement.

[00:34:11] The final point I wanted to talk about is really lifestyle post retirement. So, a lot of times you'll have people that retire and then they start to really think about different things that they want to do and the retirement piece. I rarely see people just stop working and just full on retire where they have nothing else going on. They're relaxing sitting at home and just enjoying themselves. Typically, it's a phase 2 that they enter into and that really means reduce commitments. You're not going to meetings all the time. You're not working 50 to 60 hours a week. You're able to enjoy your passion, your lifestyle, your family, et cetera, but you're still doing something that reflects your passion and the fact that you are a seasoned professional in a certain area.

[00:34:58] I had a client that was an attorney and he was a partner in a law firm for a health- he was a healthcare attorney, and he was working like crazy and he wanted to retire, and he had enough money to retire, but he was concerned about losing the connections and losing the comradery, and then having something to wake up to every day.

[00:35:16] So what I did was I partnered him with a nonprofit that I managed money for that dealt with health care incidents for people in underserved communities, and we were able to match his expertise with that nonprofit. So he was able to continue to do what he loved, but do it at a reduced scale and still have a purpose and a passion.

[00:35:35] So the reason I'm bringing this up is that I talked to a lot of professionals that want to consult in retirement. But they start the planning process too late. And once you retire, those connections that you have those potential customers, all that dries up very quickly. So I think it's very important to map that out in very great detail while you're still working several years before you retire.

[00:35:59] So if you plan to kind of transition into something like that, you have everything lined up in a row, and you're not winging it post retirement, because things change very quickly. I also have clients that really are not sure where they're going to live if they're going to keep the big house.

[00:36:15] Once they retire, if they're going to buy a condo, if they're going to have a vacation property, it's very difficult to plan effectively when all that is open ended to the extent possible, you want to map that out. Think through things like, will I want to be closer to my grandchildren?

[00:36:31] Do we want to have the burden of a second home or are we going to just Airbnb in retirement? Because all these things have a dramatic impact on the budget and our ability to plan effectively and reduce some of the risks that you're going to have as you're retired. I want to go back to a slide here because this is the most important part of this presentation is right here is really establishing these buckets right here is very important.

[00:36:58] The 2 years of cash building up outside the 401k account. Converting some money over to a Roth account, some type of Roth account, then having that home equity line of credit. That's going to give me as a planner, maximum planning flexibility when I'm trying to reduce your taxes and prolong the assets over time.

[00:37:17] So this is very important. It's also very important again to be aware of what your tax bracket is now as you retire, take advantage of opportunities when you're in a very low tax bracket so that you can offset taxes later in your life. All right.

[00:37:34] I just wanted to show this slide. I mentioned there are 18 major risks faced by retirees. I'm not going to spend a lot of time here, but I mentioned that you outliving your money is one of the major risks that you face. We had a situation where inflation was up over 8 percent a couple of years ago.

[00:37:48] Inflation where you're losing your purchasing power, taking too much money out. This happens when we haven't been able to put together an effective budget and these, all these different expenses are coming up that you hadn't thought through. This can really upset the plan, healthcare expense risk. Long term care risk liquidity risk where you have a nice net worth, but a lot of the money's tied up in assets that are not readily accessible.

[00:38:11] We talked about sequence of return risks. Some people think they're going to work in retirement and they are not able to work. Some people are forced into retirement because their business went under or they got laid off. So there's a lot of things that we need to plan through as we're talking about you as a potential retiree.

[00:38:28] If you have any questions about anything, my website is platinumbridgewealth. com. You're able to get a free assessment. We do a complimentary 30 minute review of your situation. I have a million dollar minimum for new clients. And when you go to my website, you can just get your free assessment right there.

[00:38:44] These are the four retirement building blocks, two years of cash for whatever you need to withdraw each month. You want two years of that available. You want to build up money outside of that 401k account. You want to have some money in some kind of Roth account, and you want to have a home equity line of credit as you go into retirement, but you need to apply for it while you're working because it's hard to get once you retire.

[00:39:06] I thank you all for your time today. Again, my name is Antwone Harris with Platinum Bridge Strategies and I'll talk to you soon.