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In your retirement planning, you want to understand a few things that are really, really critical as you make that next big transition from working full-time to being retired full-time. It’s a major decision. A lot has to go into that entire thought process so that when it’s all said and done, you’ve made the right decisions. You’ve done all the thinking that needs to get done before you make that decision. And once you’re there, now it’s simply enjoying that next phase of your life. So, let’s talk about a few
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things that matter when it comes time to your retirement planning because again, it’s a major decision and you often get one chance to get this right in your retirement planning taxes. You want to make sure that you understand what your taxes will look like going forward because those taxes are constantly there and they constantly have to be managed. And let’s talk about the types of income taxes that there are because we hear the word taxes, but we don’t often understand what that really means.
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So, let me just explain a few things about taxes that matter. The highest income tax rates are on what’s called ordinary income. And ordinary income is uh W2 income. Income that comes from your W2. That is what’s called ordinary income. And that is where you will pay the high the highest income tax rates. There are capital gains taxes which are lower. There is interest, some that is taxable, some that is not taxable. There are dividends. There are also qualified dividend dividends that get a better tax
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rate, a more favorable tax rate. And then there is uh self-employment tax. There’s social security taxes. There are lots of lots of taxes that will take money out of your paycheck. And one thing you want to understand is the money that have that you have in your IRA when that comes out of your IRA that is going to be taxed as if almost as if you received a W2 for that amount. You pull out $10,000 you now have $10,000 of taxable income. So when you think about your retirement planning and what needs
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to happen to really be thoughtful and methodical and make the right decisions, you want to understand the income taxes that you will be paying when you step out of your full-time role for work or for your company and as you transition into retirement and then what that income will be for you going forward and what kind of taxes that will produce for you. because obviously you have to have the income to pay those taxes, the money to pay those taxes when they’re due. And that gets me to type what we call types
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of registrations. What does that mean? What it means is when you think about the types of accounts you have out there, how are those titled? If it’s an IRA, that is one type of registration. That is your IRA. If it’s a Roth IRA, that’s a separate registration. And why does this matter? Because those different accounts, the way they are registered, the way they are titled, it impacts what happens when the money comes out of those accounts and the impact that is the biggest impact is will you pay tax on that or not? And if
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you do pay tax, how much will that tax be? So, it’s important to understand the types of registrations you have in your accounts as you as you are thinking of your retirement planning. Um, again, taxes must constantly be managed right now, today, and up until the time that you’re you take your last breath. And even then, we have to think about estate taxes um well before that time. But estate taxes also become part of that picture for many people. So, will you have a big payday when you retire? Will
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you have some type of deferred compensation? Will there be some kind of a stock payout? Uh, so all those come into play when you think about taxes for your retirement planning. And I’ll touch on estate taxes just kind of quickly here. The estate tax threshold, the law just changed in July of 2025. And now a married couple can have up to $30 million of net worth. And that first 30 million, there are no estate taxes on it. A single person can have up to $15 million of net worth. And that does not
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get taxed for state taxes either. But let’s go back to that $30 million couple. Let’s say that your net worth is $ 31 million. Well, that means at 30 million there is no estate tax. But on that extra 1 million from 30 to 31, that extra 1 million that you have there, that get taxed an estate tax of 40%. So the first 30 mil, there’s no tax on that, but that next $1 million is taxed at a rate of 40% for federal taxes. If you live in a state, a state that has its own estate taxes, like say
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Washington state, they have their own percentage on top of that 40% federal rate that comes out of your um out of the pot when it comes time to pay the estate taxes. So again, got to really understand what you have, what is taxable, what is not, and as we think about your retirement planning going forward that we’re very thoughtful on what needs to happen and what can be changed before you retire so that you end up in the best situation possible. So what can you do? Well, some of the simple things that that people will do
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or can do are Roth conversions. So, uh, if your income is going to drop substantially once you retire, or let me put it in a different way. Let’s say that you’re going to retire this year, and because you are retiring this year, you’re going to have some deferred compensation paid out. You’re going to get a big fat check. It’s a one-time check, and so your income is going to spike this year. Well, you probably don’t want to do any Roth conversions this year because your income is already
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at the highest tax rates. But maybe that sets you up for Roth conversions next year because you won’t have that spike in income. So the Roth conversion can be a really a really really beneficial tool. Again, it goes back to thinking and understanding about the income you have, when that income will get into your hands and is it going to be taxable or not, and then managing that process and planning ahead of time for that process to really have the best outcome for you. Uh sometimes when someone does
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get that big payout, they get a big a big stock payout, maybe they’re saying a board of directors, at times it’ll make sense to set up a qualified plan that year. Yes, even though that’s your last year and you’re about to retire, it might make sense to set up your own qualified plan, your own pension plan, because you can put away a big chunk of money, tax deductible chunk of money into that plan, and it helps to offset that big paycheck that you’re receiving when you retire. So, setting up a
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qualified plan can be very effective to offset any windfall compensation that you might have. and we’ve done that before. It can be extremely extremely impactful and very well worth the expense to do that. Um, you can also in terms of taxes, you can gift highly appreciated stock to charity. Why would you want to just give away highly appreciated stock? Well, a number of people have Apple stock or Google stock or Facebook stock they’ve had forever and back in the day it was very inexpensive when they bought it. Now,
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today it’s a big chunk of money and if you sell that outright, you’re going to pay capital gains taxes on that sale. Well, if you’re already a generous person and you give money away anyway, maybe it makes sense to take some of that stock and give it directly to the charity. Because let me explain what that means for you for your taxes. What it means for you is the uh the capital gain that you would have paid, you don’t pay that because instead of of of you cashing that out and putting the money
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in your pocket, you gave that stock to charity and now the charity gets the full amount of that stock and then they can sell it and they don’t pay any tax on it. So you can really have much more of an impact with your charitable dollars when you give away highly appreciated stock. So again, it’s a it’s a tool that you can use. It eliminate it eliminates capital your capital gains taxes on that gift. So again, with your retirement planning, taxes take a big bite out of your income, if not the
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biggest bite. So let’s make sure that you are thoughtful and methodical and not leaving any stone unturned when it comes time to understand what you have that has value and what you can do with it. and when that will trigger taxes and how can we offset those taxes some way somehow. So you can also do things like set up a donor advised fund for example and the tax laws may not be in your favor in in that you can set up a donor advised fund and get a big tax break for it. But what if you bunched up your
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charitable giving? Let’s say you give a h 100,000 a year of of monies away or maybe you give away $100,000 every five years. Well, instead of giving 20,000 a year, give a h 100,000 in one year. You could put that into a donor advised fund and that way you get the tax break now for it on your income tax return because you’ve bunched the five years up into one year and now that money sits in a donor advised fund and you can dole that out over the next four or five years to the charities who you want to benefit.
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So, it’s a strategy that we’ve used before that is a really great strategy and it might be the right thing for you or it might not be. But in your retirement planning, understanding what the options are can be incredibly beneficial to you and to the charities that you want to support. Uh so that’s a donor advised fund. You can also do things like set up a charitable remainder trust. You know, speaking of charity again, and why would you want to do that? Well, there are a lot of favorable tax laws that you can benefit
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from personally while having a an impact on the charities that you want to benefit. So, the more that you can give directly to the charity, the more they can do with those monies. And a charitable remainder trust, charitable lead trust, there are other types of charitable vehicles out there that can be used. And it’s a matter of exploring what your goal is, what the assets are, and then looking at those different vehicles and different options available to make the right choice for you so that
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you can have the impact that you want to have with your charitable giving. Um, you can also make irrevocable gifts to say your adult children. You don’t get a tax break for that. But if you’re on the edge of having a taxable estate, maybe you want to get some of those monies out of your estate now before you are in a taxable situation. I mean, I’m talking about estate taxes here. So, uh, if you’re going to sell your your company at some point and the company will be worth a lot more in the future, then it might be
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a good strategy. Now, from a tax standpoint with your with your retirement planning, it might be a good strategy to consider setting up some type of an irrevocable trust using discounting. And discounting is a key word in this whole in this whole picture. But discounting to put monies into an irrevocable trust that then will help the family, your family, eliminate or reduce the amount of estate taxes that you would otherwise have paid. And if this all sounds confusing, well, it can be. And that’s why you want
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to with your retirement planning, make sure that you have these conversations well in advance. And I would suggest two to five years before you retire. That’s when you want to begin having these conversations. Well, you want to have them 30 years ago, but I’d say two to five years before you retire. That’s when you want to make sure that you you uh revisit what you’ve already set up and set up new things if need be so that you can you can make that transition into retirement with minimal taxes and
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having the cash flow and lifestyle that you want going forward. So there there are options to consider. Uh and when I’ll talk about charitable giving again because it you know in the tax picture this can be extremely impactful. You want to understand how much do you want to give? um how involved do you want your kids to be in that giving your adult children or do you want them involved at all? Often parents want to involve the children and so you can involve them in different ways, but um a
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very common way might be to set up a donor advised fund where every year you bring the kids together and you as a family decide who’s going to get the monies for charity and you can assign tasks to them and get a little homework going there. But many people want that as part of their ongoing picture. And it’s not just because it can be good from a tax perspective, which it is, but it’s also it also can be good from a keeping the family together, keeping the family united standpoint so that you
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come together as a family to then as a family decide who’s going to get these monies, which charitable organizations will get them, uh how do you want to benefit your community? So, private foundation is another way to get there. It’s a more expensive way, a more involved way. It’s um has more strings attached, more uh more IRS rules that come into play, a private foundation. But depending on what you’re trying to get to, the private foundation might be the best choice and it might be
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the right choice for you. So again, a private foundation in this context of taxes when you retirement in your retirement planning, a private foundation can be structured and set up so that you can put a big chunk of money in there. It is a charitable contribution so you get a tax deduction for it and um it can be a tool to consider when circumstances are right and if your family situation means that it is right for you. So again, taxes must be constantly managed. Let’s talk about investments. Now, when you retire,
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you’ll hear a lot about diversification. Well, what does that really mean? It means that you don’t have all of your retirement money in Apple stock or in uh cryptocurrency or in Microsoft or in some other one thing. Because there’s an expression, don’t have all your eggs in one basket. That’s what diversification means. You want to take the assets that you have. You want to have those spread out amongst different investments so that if one of those fails, it doesn’t sink the entire ship. Sure, it’s not
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going to be pleasant, but you still can maintain your retirement lifestyle in a way that makes sense for you. So divers diversification can be very very important to minimize the risk that any one thing would be a major problem in retirement. Another term you’ll hear when it comes to investments is risk tolerance. What does that mean? Risk tolerance means how much risk are you willing to take? So if you have all of your stocks say in Apple for example and Apple goes right downhill well that
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would be horrible. But people get very excited when they see their Apple stock growing or some other investment growing and they don’t want to stop it. But that gets to the question of how much risk are you willing to take and uh that’s called risk tolerance. So you want to make sure that you back off on some of that risk in general because that keeps you in a place where again if one stock goes totally downhill or if something totally fails it doesn’t ruin your retirement and that’s what risk
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tolerance is all about in your investment portfolio as well. Really really important. I’ll just touch on taxes again just just quickly here. It’s really really important to understand what sources of of uh what assets you have that will produce taxable income and which will not. A really simple example of that is when you have monies in an IRA, every dollar you pull out of the IRA will be taxed. It’s taxable income. On the other hand, if you have money in a Roth IRA, Roth IRA, every dollar you
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pull out will not be taxed at all. So, it’s a enormous difference between these two types of IAS, which is why it’s often advisable to put some money when you’re working into a Roth IRA as well as putting some money into a regular IRA. That way, when you retire, you have choices. you can decide which account to pull from and you control what taxable income you generate when you pull that money out. Again, that’s a really simple example of the registrations and how you want to understand the impact, the
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effect of pulling money out of different accounts. There’s also what’s called required minimum distributions, and I’ll touch on that because uh they’re often called RMDs. That’s the acronym for retirement, I’m sorry, required minimum distributions. And the RMD is a math formula. And in general, the way it works is you look at the value of your retirement accounts on December 31 last year, whatever that value was, then you take that number times a factor the IRS gives you, and it’s going to be about
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3.5 to 4%. To air on the side of caution, I’d say take your your fair market value of your retirement accounts on December 31. Take that take that times 4% and that number is the high end in general in the high end of what you have to pull out this year from those retirement accounts to meet your required minimum distribution obligation. You must pull money out. That’s what IRS says. So, those are your RMDs. Uh, and think about that. You have to also have the cash available to pay those taxes. So, you’ve got to pull the
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money out and then you’ve got to have the money to pay the taxes to um on the RMDs that you’ve pulled out. So, that’s an important item to consider with your investments. You cannot have those investments locked up where they will not produce any cash or not be liquid. And yeah, you can certainly reregister some of those investments to take them from your from your retirement retirement accounts into your non-retirement accounts, but that can be a hassle. It can be pricey. So, you want
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to avoid that if and when possible. And let’s talk about cash flow. As we’re talking about investments, you want to understand cash flow. What cash flow? How much annual cash flow? How much monthly cash flow will you need to support your lifestyle in retirement? Well, what is cash flow? Just think about this for a second. In a month, where does your money come from that you spend? Well, when you’re working, it comes from your job, right? Typically, when you’re not working, where is it
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going to come from? It’s going to come from your retirement accounts, from your investment portfolio, maybe from your rental income, different places. So that money that you get can be dividends, it can be interest, it can be capital gains, it can be annuity income, it can be pension income, it can be rental income, just to name a few. And each of those sources of income may be taxed differently. So that’s why it’s important to understand what income will you be receiving from what source and
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what will be the tax implications on that money when you receive it. important to understand all that big picture stuff, all of it together in your retirement planning. Let’s talk about lifestyle. Lifestyle means what will you be doing when you’re retired? Are you going to go out to dinner every night? You going to go on vacation once or twice a year or once a month? What is that lifestyle going to look like for you? And some people, many people will decide to downsize their home, meaning
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they’ve got the big house. They don’t need the big house anymore. The kids are all grown up and gone away. So, why have the big home? Why have the insurance bill? Why have the utility bills? Why have the maintenance costs? Why not just sell the big house, get a smaller home? And then once you’ve done that, your annual costs can drop and your um uh your your your you might have more that you can put into your retirement portfolio to support your retirement income. So you know, do you want to travel? Will you
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eat out every night? What is that lifestyle going to be? So the way you want to take a look at that is you want to understand what is lifestyle right now today and between you and your spouse. If you have a spouse, what do you want it to be when you retire? What’s that going to look like? And then what what we will do, what what my perspective is on that is if that’s the lifestyle you want, then we have to quantify that. What is it going to cost net of taxes for you to enjoy that lifestyle? And then where do we pull
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those monies from so that you can meet that lifestyle? And maybe the lifestyle is too grand. Maybe it’s just not affordable based on your your your balance sheet and your personal assets. Or maybe it’s very conservative. What I find is that people are often very conservative while they’re while they’re working. And when they retire, they don’t suddenly go out and spend a lot of money. They they remain very conservative and they spend well under their means even though now they’re
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retired. So it’s important to understand what will that lifestyle cost you net of taxes as you are thinking of a retirement planning so that you have those numbers right. You know what to expect and you know what that lifestyle can be given the assets that you have. Now let’s talk about estate planning. Estate planning well what is estate planning? Estate planning is deciding what will happen with your stuff when you die. Who’s going to get it? When will they get it? And it also is a set
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of documents that you create with an attorney that specifies some other things as well. And let me talk about what some of those other things are. One very important item that goes into your estate planning documents is what’s called your healthcare power of attorney. What’s that? It’s the document that says if you are not able to make health care decisions for yourself, who do you authorize to speak on your behalf and who uh who are you giving that authority to so they can make decisions
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on your behalf if you’re not able to do so? I had that happen recently with a newer client. Husband was in the hospital. He was going downhill and wife had to produce that document for the hospital and the physicians so that they could see that she had authority to speak for her husband who was not able to make decisions for himself anymore. So you want to have that healthc care power of attorney. Very important document. There’s also what’s called a durable power of attorney. And power of
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attorney is often used by the the acronym the initials PO AA power of attorney. So a durable power of attorney is where you designate right now while you’re alive and you can make decisions on your own you designate if you cannot make those decisions for yourself who has authority to make those decisions for you. And that would be who has authority to sell your house who can who can pull money out of your bank and investment accounts. who can tell the bank and the investment companies what to do with your assets. You’re giving
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someone that authority. That’s only if you are not able to make those decisions yourself. That’s the durable power of attorney. There’s also what’s called a living will. And I wouldn’t get lost in the in the in the words in the semantics, but think about it like this. when you are let’s say in the hospital and you’re going downhill there um comes a time as as came with my with my with my dad when he was going downhill that the hospital asked okay if this person needs
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a feeding tube if this person needs a tube in his throat so that he can breathe are you giving us authority to do that for your loved ones on. That’s what the living will does. It It’s where the person is alive today and they say what they want. Do they want to be kept alive by machines? Do they want to just let their life run out without making use of those machines? So, that’s just the reality of how many people um go today because these these are real decisions. They’re not easy decisions to
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make and they’re not easy decisions to think about with your estate lawyer either. But in your retirement planning, you have to look at where you are today and think about the rest of your life and and think about when that life ends. All these things matter in your retirement planning. And this is an important component of your estate documents. What do you want to have happen? Do you want people to put a tube down your throat to feed you? or do you want them to put a breathing tube down your throat so that you can breathe with
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the assistance of a machine? If that is not what you want, then in those estate documents, that’s where you say what you want or what you don’t want. And that’s why these are important. These, as you can see, can be very heavy conversations. They are not fun conversations at all. When you’re married, you’ve got to have these conversations with your spouse, of course. And then you have to meet with an attorney because the attorney will draft these legal documents for you. And
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the attorney needs to be licensed in your state, the state that you live in. They’ve got to be licensed in that state because each state has its own laws, its own estate laws, and its own laws. So, the lawyer has to be licensed in that state. the lawyer who drafts these documents for you in order for those to be valid within that state where this is taking place. So, uh let me talk
now about trust. There’s a lot of misconceptions about trust that people seem to have. And there’s this whole
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divide I’ll start with first. With a trust, there are basically two in essence two major categories of trusts. Now, I’m not an estate lawyer. I was a licensed CPA over 30 years and I’ve worked with clients for many many years with their estate documents. So I am not a lawyer. I’m not speaking as a lawyer. What I am doing is I’m speaking from a very practical matter for you and your family when you do your estate when you get your estate documents done with your attorney. There’s this divide on
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basically two types of trusts. One is called a revocable trust. The revocable trust is a trust that you set up today and you can change it tomorrow. There’s also what’s called an irrevocable trust. The irrevocable trust is just what it says. It is not revocable. It is permanent. When you make that decision to create an irrevocable trust, you can’t change it. Now there are things like trust protectors and things that come into play as well. But as you think about your estate planning, think about
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that general category of revocable trust and irrevocable trust. And let me talk about the the revocable trust first. The revocable trust is not asset protection. The revocable trust is for when you are alive. That’s what it’s for. when you’re alive and it is not to protect your assets, but it’s to designate things. You set them up so that when you die, those assets will go to whom you said you want them to go in those trust documents. I’ll flip to the irrevocable trust for a moment. And you’ll hear
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attorneys talk about irrevocable trusts. I like to say it irrevocable because to me, I can pronounce it easier and I understand it. to me it’s more clear. So the irrevocable trust that irrevocable trust can be said for lots of different reasons. That type of trust in general is asset protection. So, think about your own trust documents that you’ve already set up and if you think those are for asset protection, meaning if you get sued because you have these trust documents, now the uh person
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suing you cannot get those assets. If you think that what you have is set up for asset protection, then you want to take a look at your documents because if that if those documents are a revocable trust, that’s not asset protection. If you’re not sure what those documents are, call your attorney and ask them, hey, just say, hey, you set up my estate documents for I know we set up a trust, but I want to be clear. are my assets protected from a lawsuit because I’ve set this up with you now and see what
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the lawyer says. There’s a second part of that that’s really really critical and that is what’s called funding your trust. What does that mean? What that means is now that you have a trust set up, did you take your assets and retitle them in the name of the trust? That is called funding the trust. You took the assets that you have and you put them into that trust by changing the name the title on those tr on those assets. So is your car in your personal name or in the name of your trust? Is your house the
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house that you live in? Is that in your personal name or in the name of your trust? If the house is the name of your trust, then you have funded the trust. And that’s what you’re supposed to do. Often lawyers will not fund the trust. They’ll give you a big fat three- ring binder with all these legal documents and you feel pretty good getting that because you finally got these documents done. But often there’s a covered letter in there that the lawyer wrote and the lawyer says to you in that cover letter,
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okay client, here’s what you have to do to complete these documents. And one of those things is funding the trust. So, you’ll need to go to your bank account to your bank and change the title on those bank accounts. You’ll need to change the title on your investment accounts. You need to change the beneficiaries on your bank accounts, on your investment accounts, on your life insurance policies, on your IAS. So, all this stuff still needs to get done otherwise you haven’t completed the documents and
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you haven’t funded your trust. So again, it’s important to understand what kind of a trust you have. And the major divisions are revocable and irrevocable trusts. And um you want to fund it. You want to make sure to retitle assets the way your lawyer wants you to. And if you’re not clear on what the lawyer on what the lawyer wants in terms of how your assets are titled, email the lawyer. And with an email, it’s kind of nice and neat because you can email that out to them and then they will tell you
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in an email back exactly what to do. If you call them and they tell you over the phone, it might not be clear or understandable because lawyers have a habit of speaking like lawyers. So you and me, we don’t always understand what what they’re telling us. So we have to ask them more questions so that it’s more clear because they have a habit of speaking like lawyers. And that’s great if you went to law school and you understand that language. But for those of us who did not go to law school and
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we don’t understand that language, it’s important that we ask enough questions so that we can make informed decisions about our own estate documents in our retirement planning. So uh let me talk now about protecting your family net worth which is also called asset protection. How do you protect your overall net worth? Well, there are three major ways that I’ll say you want to do that. You do that by having the right types of entities, the right types of trusts, and the right types of
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insurance. In general, that’s how you protect your overall net worth. So in this part of the conversation, I’m talking about estate planning and that will come to the trusts part of it. Some common misconceptions about about trusts. Uh we just I just touched on one. Uh you might say that everything is in your trust because you created these documents with your lawyer. Well, I would ask you go back and look at your stuff and make sure that it was titled in the name of your trust and that you
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funded that trust. And if you did this 10 years ago or 20 years ago, well, your life is different now. Your net worth is probably more. Your kids may be adults. They’re not kids anymore. Uh you may have grandkids that you want to include in your trust documents. So, if your estate documents are more than five or 10 or 20 years old, you probably want to update those. And if I were working with you, that’s what I would say you need to do. Let’s go meet with the estate lawyer. Let’s get these
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documents updated because the laws have changed and your life and family have changed as well. So, have your estate documents current. Um, people seem to think often that all trusts are the same. They are not the same. They are not the same. All trusts are not the same. Each state sets up its own laws and some states have an estate tax, some states don’t. Some states allow certain types of trusts, some states don’t. So, it’s important that when you think about the whole estate planning component in
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your retirement planning, you take a step back first. Take an inventory of what you have, you know, and I would say create a personal balance sheet, but take an inventory of what you have and think about the people who you love and care about and the charities who you want to support, how you want to have an impact for them. And then just jot down in plain English what you want to have happen with your stuff. Who’s going to get it? When are they going to get it? And what about those charities? How are
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you going to support them as well? But I would think about that first. And then after you’ve thought about that, then it’s time to maybe meet with the estate lawyer and have that conversation because that estate attorney is going to ask you to do just what I said you want to do. They’re going to ask you about your adult children, about grandkids. They’re going to ask you about the assets that you have, and they’re going to ask you what you want to do with them. Um, they might also ask you to make some
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choices that might not be clear to you. And I’ve had this happen too many times where the attorney says to the client when I’ve been in the room with them in in the in the lawyer’s office where the attorney says to the client, “Okay, on first death, do you want this or do you want that?” With no explanation as to what this or that is and what it really how that really impacts the family. So, it might make more sense. What we do with our clients is we have these conversations
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with them first and we talk about what we want to have happen. And in your retirement planning, you want to have that conversation with your spouse first as well. And just talk with them. Talk with the spouse about what you want to have happen. Come to some kind of an agreement before you go see the attorney. Attorneys often charge by the hour. They’re not cheap. So, the more you can do ahead of time before and be ready before you get to the lawyer, the less it will cost you to have that to
00:37:48
have that done. Um, all trusts are not the same. People will often go to Nevada to set up a trust for a couple of reasons. One big reason is anonymity. So, you can live in Arizona, California, or any number of other states and you can still set up a trust in Nevada. Why would you why why why why might you want to do that? Well, anonymity, meaning people won’t know who owns that trust. So, if you set up a trust in Nevada, their state laws allow for anonymity and they also allow for creditor protection
00:38:27
much more so than a lot of other states. So, people will often go to Nevada for those reasons. I’m not a lawyer. I’m not telling you how the laws are in Nevada. What I’m telling you is if you are concerned about anonymity and you are concerned about um about um other parts in your state planning that that might be relevant to Nevada, then you want to speak with an attorney who is licensed in Nevada who can tell you the details of how their laws work and then you can value whether it makes
00:39:01
sense to create your trusts in Nevada or not. other states that are that are unusual in terms of the 50 states out there, Wyoming, Tennessee, Delaware, South Dakota, and others as well. But states can offer different things. Some states do not have a state income tax. Florida, Texas, Tennessee, Nevada, they don’t have a state tax. So, in some situations, it’s worth it to set up your your trusts in one of these other states that does not have a state income tax, even though your state where you live
00:39:40
may have or does have a state income tax. So, different reasons why you might want to consider a diff a state other than where you live in your retirement planning and in your estate documents so that you can get some benefits there. Um, you can also set up these domestic asset protection trusts. You can set up some uh Nevada um incomplete non-gratory trusts. There are lots of varieties of trusts. That’s why you want to get with an attorney who understands what you’re trying to get to and who understands
00:40:14
what these other state laws provide as well because it might make sense for you. For most people, I would say for most people, having a trust in your own home state is probably going to be just fine. But if there are unusual things or you if you are going to if you have a company say that is going to have a tremendous exit and I’ll talk about that a little further along here. But if your company suddenly or maybe not suddenly but your company is worth a lot of money and you’re going to sell it and maybe
00:40:46
that’s going to be in the newspapers, maybe it’ll be even be leaked out how much you sold your company for. You might want to have that anonymity that Nevada provides. You might want to set up your trusts now so that they are credit or protected. You might want to uh be clear on who is the trustee and the beneficiary of your trusts. And you might want to set things up for your adult children as well and or your grandkids as well in advance of that liquidity event of your business. So again in your estate planning for your
00:41:16
retirement planning a lot you want to understand. Um, question I hear often also is, “Do I need a trust?” Well, you might not. Maybe your situation is simple and the assets are are are few enough and simple enough that maybe you don’t need a trust, but you might. Um, you can also title bank accounts in a way, payable on death and transfer on death, where it’s clear to the bank who gets your account once once you die. And that’s what those registration titles are for. So with your retirement
00:41:53
planning, there’s a lot to consider as you think about. It’s not just I’m going to retire. I’ve got 5 mil in my portfolio. Now, what do I do? It’s not it’s not as cleancut as simple as that. There’s a lot more that gets involved and gets in that picture. And that’s why you want to start well in advance of retirement so that you have time to think about the choices. You have time to plan. You have time to get legal documents drafted. You have time to transfer assets from one place to
00:42:26
another. But you have time before it’s time for you to actually retire. Um people often think that trusts are for rich old people who were about to die. Well, no. Therefore, people who have needs for a trust, it doesn’t mean that you’re old, doesn’t mean that you’re rich, it doesn’t mean that you’re about to die, but there might be uh people you are trying to protect, people you’re trying to care for, and in that regard, I’ll talk about what’s called a special needs
00:42:58
trust. So, if um you have a child who is autistic or maybe has Down syndrome or some other some other life um uh something going on in his or her life where they will always need you there or an adult to help them along the way, then you may need a special needs trust for them where you set this up. Now, you put some you put some assets into it. You designate a trustee. you specify how that trust is going to take care of your of your adult child long after you were gone. That’s what a special needs trust
00:43:35
is for. But a special needs trust can also be used for a spouse. It is not uncommon for a a married couple in their 60s where one spouse gets Alzheimer’s and now that spouse needs 247 care. So, as long as the one spouse, say you, is still healthy and able to take care and and and uh make decisions for them, great. But who’s to say that you’re going to live long enough for that to happen? That might be a situation where a special needs trust for your spouse would make perfect sense, that you can
00:44:14
fund it. you can designate everything about who’s going to be the trustee. Make it clear who the beneficiary is and how you’re going to take care of them long after you’re gone just in case your time is sooner than you expect. So, there are lots of types of trust and that special needs trust has a place in your retirement planning or it may have a place in your retirement planning. But in the broad picture, when you think about your estate documents in your retirement planning, what you want to
00:44:41
think about is what are you trying to accomplish? What is your goal? Who are you trying to protect and who do you want to help? Again, this is in the very big picture, and then it’s up to the attorneys and and the the wealth adviser and that to maybe have conversation so they can get that structure set up. And when it comes to trusts, again, these are legal documents. An attorney must draft that document for you. And I would not recommend getting online, finding a trust mill, paying a flat fee, and
00:45:21
getting these documents. I would not recommend that because again, I want to make sure and you want to make sure that the trust document that you have that it is legitimate in your state, drafted by an attorney in your state, who is licensed in your state, who’s going to stand behind that trust if need be in your state. And when you buy things online, a trust document online, are you getting that? Well, the answer I would say don’t do it. I would not do that myself. I would not recommend that you do it. Um, some
00:45:59
people do, but I would rather work with a lawyer who I can see who’s going to sign his or her name on that document, who is going to help protect my family or my assets because that’s what you want as well. Correct? So, let me now shift to insurance. in your retirement planning insurance. Think of insurance like this. I heard an insurance a insurance uh agent describe it this way once and he said insurance is a source of capital if you need it. I love that definition. And the reason that that definition strikes
00:46:35
home to me is if your car is wrecked and now you need $30,000 to replace it, well that insurance policy is a source of capital. you suddenly have that $30,000 to buy that car to replace it. That’s what it is. Lots of types of insurance. I’ll talk about them very quickly. Health insurance. Why would I talk about health insurance in your retirement planning? Because a health issue can be extremely expensive. And because people don’t have health insurance, that is often a common cause for bankruptcies, for them to file
00:47:13
bankruptcy. So, you want to make sure that you have health insurance. And yes, Medicare is required at age 65. There are are rules around that as well that I won’t get into now, but you want to have that health insurance. And even if you are on Medicare, you want to have supplemental policies that will fill in those gaps that Medicare does not cover. If you have Triricare because you are former military, great. That’s a great insurance policy to have. Uh if you don’t have it, well, then you’re going
00:47:42
to pay more for your insurance. That’s how because Triare Triricare is really affordable. Anyhow, you must have health insurance in your retirement planning. Make sure that you’re aware that at 65 in general, at age 65, that’s when you have to sign up for Medicare and get that along with supplemental insurance. Disability insurance that matters when you’re working because you may need to replace your income. I had a physician once, an an orthopedic surgeon who in her late 30s had a an illness, some kind
00:48:17
of a disease, and she could no longer practice. Well, if you know anything about surgeons, they get paid a lot. They typically make more than a million dollars a year. And imagine being a surgeon who say had not even reached age 40 yet. She’d barely begun her her career making that kind of money, but she would have worked another 20 25 years making more than a million a year and all of a sudden she can’t work anymore in that line of work and that income suddenly drops dramatically. That’s when a disability insurance
00:48:51
policy would be a fantastic thing to have because the idea of a disability policy is if you become disabled and you cannot do that work anymore, then what’s going to provide the family income to replace it? That’s what a disability insurance policy does. Um, long-term care insurance. Long-term care insurance is designed in your retirement planning. It’s to provide for the expense of long-term care. So, if your spouse or you have Alzheimer’s and you need to be um you need to have 247 assistance so
00:49:30
that you can continue with your life. Well, that’s where a long-term care insurance policy can be a real lifesaver. And it wouldn’t be the first time if this if this happened to you and you had a policy, it wouldn’t be the first time that that long-term care policy really was a lifesaver to help save the the the the finances of the family and help the loved one continue life with that disability. Um, so long-term care insurance in your retirement planning, do you have it? Do you need it? Do you want it? Do your did
00:50:05
did a a parent have Alzheimer’s or dementia or some other illness or cancer or something? Is it going to more likely be in your future or not? Who’s to say? But that’s why having the long-term care insurance policy as part of that thought process before you retire, that’s why it needs to be considered in that picture. Uh other types of insurance, there’s what’s called property and casual casualty insurance. Well, that insures your stuff, your cars, boat, jet ski, that kind of stuff. That’s property and
00:50:40
casualty insurance. And there’s also homeowners insurance. Well, homeowners insurance is there to if something happens to your house, to repair the roof or to uh fix the the walls if there’s a flood or if the house burns down. That’s what a homeowner’s insurance policy is for. And the way homes have become much much more valuable because of inflation and otherwise. Because of that, you certainly don’t want to lose the value of that asset because you didn’t have the right insurance on it. So, as you
00:51:14
enter that retirement phase, you think about that and you’re thinking about your retirement planning. You want to you want to make sure that you thoroughly revisit your homeowner’s policy. Is it really what it needs to be? It does a cover for replacement value, replacement costs, all of the components of that home that make that home a home for you. And if it’s just too expensive to ensure it, to heat it, to cool it, to repair it, to maintain it, well, maybe that’s a good reason for
00:51:43
you to sell it and get into a smaller home that will cost less for all of those things. There’s also what’s called an umbrella liability policy or an excess lines policy and that is intended to cover risks that are above the normal insurance policy amounts. So that covers in in excess of your normal homeowners policy in excess of your uh policy on your car. Those are called excess lines and umbrella policies. If you have say five or six rentals, rental properties, then that might actually require a
00:52:23
commercial insurance policy to cover those rentals. You might not know that, but that’s often how that works. So, if you have five or six rentals, you want to make sure that the insurance company insuring those knows that those are rental properties, and you might need a commercial umbrella insurance policy to cover risks related to that. So, you really want to have a thorough review as you think about your retirement planning, a thorough review on all of that insurance to make sure it’s right
00:52:54
before you retire. And your costs might go up. You might have some surprises there that might change the picture and you might need to make some changes as you think about the retirement picture. Uh but it’s really important to understand what you have and is it insured properly because it all has to come together with your cash flow, your lifestyle, your taxes that you pay. All this has to come together so that when you retire it all makes sense. You are at ease, you are comfortable and you can
00:53:24
live the lifestyle that you want. So the last two pieces about insurance, I’ll talk about annuities. And why would I talk about annuities when I’m talking about an insurance category in your retirement planning? Because insurities or I’m sorry, annuities are insurance products. Just like a life insurance policy, an annuity is a product that is offered by an insurance company. So some of those are actually securities. It’s a variable annuities, but most of the annuities out there are
00:54:00
not securities products. They are instead insurance products. And annuities can have a lot of value when you retire because study after study after study shows that the happiest retirees have a steady recurring monthly check when they retire. That’s what makes for the happiest retirees. Well, if you don’t have a pension and you don’t have enough coming from social security, how do you get that steady monthly check? Well, sure, you can set up a portfolio that pays you dividends every so often. That
00:54:33
can be steady recurring income. You can set up a portfolio of treasuries or CDs or other bonds that pay you a steady recurring income as well. Uh, and you can also get that steady recurring income from an annuity. And that’s what an annuity is. the word. Sometimes people look hear the word annuity and they totally dislike that word entirely. But forget the word and think about what it is. It is a steady paycheck that you receive. I’ll repeat that. It is a steady paycheck that you receive. That is
00:55:12
incredibly valuable in retirement. And you want to get that from somewhere. Like I said, pension, social security, rental income, dividends, interest. And if those are not enough or if you want to add another component, that could be an ins an annuity that is that is issued by an insurance company, typically a life insurance company. So that’s what annuities are. There are also in the insurance space life insurance policies. Those can be designed for a death benefit or for a a cash accumulating
00:55:51
policy. They’re really two different two different buckets for life insurance there. One of them is if you die during a certain time, then your beneficiary gets a chunk of money. And a term life insurance policy really, I would say, from my perspective is a must-have when you are younger and you have young kids at home. when you’re older, if your asset base is large enough, does the term insurance still make sense or not? Maybe, but it depends on the situation. But, uh, often retirees will have these
00:56:25
policies, life insurance policies that accumulate cash and they become, um, just another bucket of cash that you can dip into and pull down from in retirement. So in your retirement planning, if you have a life insurance policy that has cash value, that is another source for you to get a steady monthly income. And you do it typically through loans from the insurance policy, the life insurance policy. But that’s why people will set those up when they’re younger, so that when they retire, that chunk of money can be used
00:57:00
to help support your retirement lifestyle. and in your retirement planning, it can be an extremely useful tool. So now we’ll talk about exit planning because for you who owns a company, when that company is your largest asset, then you’ve got to make sure that when you exit that company, when you step out of it, that you exit in a way that puts you in the best place. Meaning that you’ve minimized those taxes. you’ve helped to maximize the value you get from the company when you sell it and it puts you in a
00:57:35
position that your retirement from this point going forward is really what you want it to be and it can support it can support the lifestyle that you want. So in your retirement planning you want to make sure that you are planning for your exit from that business. Um what we will often do well well we will for what we we will always create a personal balance sheet but what we will often do with that business is we get an assessment of the value because we need to understand what your company is worth and really
00:58:07
the value of your business it’s worth what someone is willing to pay you for it. And if on paper the value should be X but they buy it for Y great. Hey, if they offer you a bigger check, take it. Right? So, when it comes to exit planning for your business, when you’re thinking about your retirement planning, you want to think about what you want that exit to look like. Meaning, how much cash do you want to have after tax? Uh what do you want to have happen with your business when you sell it, when
00:58:38
you’re done with it? What do you want to have happen with your employees? And what does it mean for you and your family and your lifestyle going forward? And typically you only have one chance to sell your company when you retire. You you have one chance to do this right and your family depends on it. And the charities that you want to support, they may also depend on this exit as well. So you want to assemble your dream team so that you can be fully prepared for exit. And you want to do this two to five
00:59:09
years before that exit for your company. And the reason being you may have to restructure. You may have to build up certain systems in your company. And when I talk about your dream team, who is on your dream team when it comes to exit for the business owner? Who’s on your dream team? It’s your wealth advisor. That’s the role that we sit in because we look at the broad picture of your family, the company. We look at many facets. Uh your dream team also has your M&A attorney. That’s your merger
00:59:40
and acquisition attorney. This is an attorney who specializes in the purchasing and the selling of companies. This is not your regular business lawyer. This is a lawyer who is a merger and acquisition attorney. He or she is well-versed. They’ve done this many times before. And if you’re not sure if your lawyer should be part of your dream team or not, your existing lawyer, then I would call the lawyer and I would ask him or her, hey, how many business sales or business purchases were you involved
01:00:13
in? And really, I would I would just stick with the business sales. I would ask him or her, hey, last year, how many of your clients did you help sell their company? If they tell you one or two, that’s probably not the lawyer for you. You want somebody who does this a lot because they learn, they learn as they go along like everything else, right? So, you want to have an attorney who is going through this, been doing this many years because he or she is going to add the most value in this exit process for
01:00:47
you. Now, I would not look at that lawyer as just a cost. Yes, they’re going to be expensive, but they’re also going to put things into they’re going to put words into that letter of intent and words into that purchase sale agreement to protect you. And those words they put in to protect you might be worth their weight in gold. So, on your dream team, you want to have a merger and acquisition attorney. You want to have a tax CPA. You want to have an investment banker. What’s the
01:01:19
investment banker’s role? The investment banker is the one who will take your company and take it through an auction process. They’ll take it to potential buyers. They will help drive up the value and help negotiate the better the best deal for you so that the the the company that buys your company will come to you as a strong buyer who can afford to buy your company at the price that you’re willing to pay. But the investment banker’s role is to help you sell that company. That is what an
01:01:52
investment banker does. That’s why they are part of your dream team. And also in your dream team, a trust and estate lawyer attorney, especially if you have a taxable estate, which means that you as a married couple have an overall net worth of 30 million or more or you as a singleperson have a net worth of 15 million or more. that trust and estate attorney can be very important. So again on your dream team, a wealth advisor, a merger and acquisition attorney, a tax CPA, investment banker, and a trust and
01:02:24
estate attorney. And as you think about the exit of your business in your retirement planning, you want to think, you want to ask yourself, are you ready? And yes, are you financially ready? Yes, that’s one thing. If you get a high enough value for your company when you sell, then yeah, you’ll be ready, right? But what about emotionally? Are you emotionally ready
to hand over the keys to your baby, this company that you’ve been nurturing for the last, say, 30 years, just hand it over to somebody
01:02:51
else and let them run it? Are you emotionally ready to do that? And the other part of that is, are you mentally ready to step away and be engaged in other things going forward? What will you do when you’re no longer running this company? What will you do? So, you want to make sure that you as a person are ready to step away from that company and ready to to be done with that. We have an event, the Scottsdale Founders Forum. We’ve had over 200 founders come to our event. That event is all about exit for that business
01:03:23
owner who’s never gone through a sale before. And we have a white paper on that event. It’s just a one-page white paper with tips from the experts with questions that founders had. If you’d like that, reach out to me via email and I can get you a copy of that. So, in your retirement planning, talked about a lot of things in this um in this in this. So, now I’ll just summarize really quickly. You want to understand taxes when you are preparing for retirement. You want to understand taxes on your
01:03:57
income when you retire. on your income when you are retired, already retired versus transitioning into retirement. You want to understand the sources of where you have your money and what will trigger taxable income and what won’t. Uh you want to understand your investment portfolio. Where is your money? You want to understand your risk tolerance, your diversification. You want to understand how your portfolio is invested. You want to understand the registrations because those registrations
01:04:28
directly lead to what’s taxable when the money comes out of the investment portfolio. So again, you want to understand the uh how that’s invested. Cash flow, what cash flow will be generated? What is your lifestyle going to be? And net of taxes, what is that lifestyle going to cost you? And I’ll touch again, we touched on on on estate planning. So I’ll touch again on an estate planning. In your estate planning, are all of your documents in order? They need to be in order. All of
01:05:01
your estate documents and your trusts. Do you have the right types of trusts? And remember, remember I mentioned how do you protect your net worth? The right types of business entities, the right types of trusts, and the right types of insurance. So in your estate planning, do you have the right types of trusts given your family situation and what you are trying to accomplish? Talked about revocable, irrevocable trust, talked about trust in different states. You want to make sure you talk with an
01:05:30
attorney who understands trusts really really well so that he or she can give you the guidance and help you create those trusts if a trust is appropriate and relevant for you. Talked about some misconceptions about trusts as well. talked about insurance and having insurance which is a source of capital if you need it and in that insurance bucket making sure that you have gone through every to everything to make sure that you are properly insured for the home the vehicles excuse me everything else that matters there but making sure
01:06:03
everything is insured the way it needs to be. um and also touched on annuities and life insurance in that part of the conversation as well. And then talked about exit planning in your retirement planning. The exit from your business is a often a once-ina-lifetime event. You’ve got one chance to get this right. Your family depends on a successful exit from the company. So you want to plan two to five years in advance. You want to have your dream team and you want to have that dream team talking with each other about
01:06:38
you because then you get the best in the best outcome from that and in your retirement planning when you have that dream team talking then it is more likely that all of the basis has been have been covered and that you are in the best position to actually have that exit. So, in your retirement planning, again, backing up to the very big picture, what are you trying to get to? And what do you have? What can you do with what you have? Have you covered all the bases so that when you actually say that it’s time to retire and you hand in
01:07:15
your resignation or you sell your company, you want to feel great. And you will feel great as long as you’ve taken the appropriate steps. You’ve thought about everything and spoke with the people who can help you walk through and navigate that once-ina-lifetime transition from your working role to your retirement. And what’s possible is you can have that retirement you want with the lifestyle that you want that will support the charities and your family the way you want to for the duration of your life.
01:07:54
That is what’s possible when you bring in that dream team, when you engage those people that need to be part of that conversation to help guide you through this process. Hope this helps. And any questions, be sure to reach out.
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