Getting it Right: Irreversible Financial Decisions

But have you back on Mr. Stillman's opus package for you today John. Here are two anything decisions of fact to go back and change that I wish that's going to be the title of my memoir from to get done things differently.

The Johnstone story surely can't be that bad. Wealth and finance honestly know this, but there are some key things that you have to get right the first time. I know of so much of what you do it briefly would write a mean you're always evaluating a client's needs and cover life situations and you can make a lot of changes throughout the course.

Once retirement but there are handful things that you really need to hone in on and make sure that you have a proper strategy for ahead of time.

Yeah, and it's like the old putting the toothpaste back in the tube idea.

So I remember when I was a kid hear the preacher talk about how you can put the toothpaste back in the tube about the message was essentially like once you say something like, but words have done damage. You can't take them back right hip of the toothpaste back in tubes. Of course he had the toothbrush and toothpaste up at the pulpit, me like squeezing the toothpaste everywhere, making a big mess.

The harder you can't put it back, but whatever. I remember the point here 25 years later. So I guess it was effective.

But yes, there are lots of things like that in your financial life.

Yes, I today I think with Internet you really can't put the toothpaste back in the tube ever. In many cases, right never forgets what you learn that lesson the hard way.

A lot of times it's irreversible there, but with money hi we go ahead and and highlighted for four things today. I know this probably a few more than this, she might mention. And maybe you'll wrap up with a thought or two, but I got for that I think are most important, earliest ones we want to make sure that you pay attention to now so if you have questions again to reach out to John afterwards but I will not pop into Social Security first know the coal increase. Now a lot of people are thinking maybe it's a good idea is to go ahead in and started early. Take advantage of this increase because it's so significant. Once again, but Social Security is one thing that you have to make sure that you know why you're claiming it when you are and that you're doing it to maximize your benefits because this truly is one thing that you really can't go back on. Yeah, I see a lot of people who have started their Social Security at age 62, simply because they can. That's when their first eligible in this The Fall process as well. I can have this money now. I am might as well write and that's not always the wrong decision. There are times where I have recommended that people should start their Social Security at 62, just depending on their life circumstances, but more often than not it's going to make sense to wait put off to a later age and get more larger monthly benefit whenever you do start problem is if you started the 62 and then he realizes 65, you know what I should've waited well too late. There's no undoing that decision. Now there is some weird provision where if you like eight months in and you you want to reverse it. You can pay the money back to Social Security and then you know decide to start it later if you want. I think it has to be within a year of starting your benefits that you can actually undo the decision but you know you've got one have the cash that actually pay the money back to now you have to deal with the Social Security ministration three times right leg. Normally you would just deal with them. Once, when you wanted turn the benefit on and that you know dealing with then usually is excruciating enough just doing one time really that many other pay it back and then you start again later. Now you just created all this headache for yourself.

So bottom line is just have a plan before you start your Social Security really important that you understand the tax implications of it, how it fits into your overall tax picture.

Don't just start it because you can do your point about having to pay back that money.

And in having that money I would assume that most people that are claiming their benefits right at 62 are probably doing that because they want to use that money somewhere. I would imagine they're not claiming it just to sit in the bank correct right so they probably don't have yeah a lot of liquid cash later in back with not a fun feeling either the have to pay back money. The binder was that so again, something about Social Security again. Don't be under the skull increases probably got a lot of people extra people. Think about it right. Yeah.

I mean, do we had a big increase coming into 2022. Then there saying the cost of living adjustment going into 2023 is going be the biggest probably in history so yes, it is tempting but you still just need to have a plan.

I don't how often you deal with clients that pensions for now.

John and I don't know how many businesses around North Carolina are still holding that practice for their employees. But for those that still do and if she knows it winds down on the you still come across some the the option to elect your spousal benefits on your pension. How does this play into it and why is this irreversible, so this one. Unlike Social Security where if you get a couple months in the decide who I made a mistake I can pay it back. This is like the next day like you receive that first check, there is no undoing this decision so you have a pension and often there are like six different options so you could take just a straight life payout is going to pay out as long as I'm alive and no more.

Or you could do up a spousal continuation where I'm to get a little bit less, but now it's going to pay out for my entire life for my entire spouse's life, whichever is live the longest. I know there is other little permutations of that like it'll drop in half. Once you die and then payout at half while your spouse's life and so they're all these different things you can elect but once you pull a trigger.

There's no going back. So the most catastrophic example of this that I saw was that this guy is retired military and he I think you got like 32 years in the military so he retires. He takes his military pension and then 10 days later he calls into my radio show and wants to come in and talk about his overall financial picture. So he comes in he like I don't I think is probably late 50s at the time and he's talking about this pension got which was a big pink like he was pretty high up in rank. He was getting like $11,000 a month from his military pension while and again he just started not even two weeks before and so were talking through things. He's let's say 58. His wife is 11 years younger than him. She's 47 and he what he done he taken $11,000 a month with no spousal continuation. So he's going to start is going 11,000 a month when he dies, and statistically he's going to die like 14 years before her right because one women on average lived about three years longer. Anyway into. He's 11 years old or so statistically she was about 14 years, and for that entire 14 years.

She's going to have an income gap to fill at least $11,000 a month.

That outcome that he used to be getting, and shall no longer be getting and so he comes in he started about all the stuff he's saying you know what, maybe I should've made a different choice on the military pension yeah you should have.

I wish you'd come in like three weeks ago before you pulled the trigger on that the way we end up solving the problem in his case was with the combination of life insurance so she get a payout from that when he passed on, assuming he does go before her and then some other investments that words can put aside and let those be the slush fund that he'll tap with a chill tap when he's gone and that that pension goes away, so there are ways you can overcome the bad decisions, but it sure would've been easier and less stressful.

In his case if he just taken $9800 a month instead of 11,000 take 9800, and let it payout for his wife's lifetime to greatness.

A great example in man that's got to be difficult feeling and I guess it's a good reminder to that effect.

If you do make a mistake and you realize it don't compound those mistakes right like okay this Don was done as Don Bliss go talk to someone and see what can be done because in many cases, like you slid out. There are some things that can be done to the correct data release to put you in a better position going forward.

Even if you do regret maybe pre-decision you made so love that story. I imagine life insurance.

Life insurance, then so I the first check in counter, Stan why there irreversible, but explain to me why like your decision on whether to get life insurance is one that's irreversible well this is it guaranteed to be irreversible right but if you say yeah I should probably have some life insurance in place, maybe for income replacement if something happens to you or maybe just for estate planning purposes like the example I just gave. If you determine that you should get life insurance going get don't drag your feet on that. Because what happens if you drag your feet for two or three years and in that time you have a cancer diagnosis or you end up with diabetes or something like that. That's either going to make you not insurable at all, or it's going to make the life insurance so expensive that you're gonna want to not get so I've seen this a couple cases where you know folks have had cancer. It was pretty minor.

They got over it and their finder help us find their you know 18 months out. No big deal, but the life insurance company is still going going to make them have a waiting period before they'll ensure them because there two recent of a cancer patient so there are a lot of things that can happen that like as it can either make you uninsurable or make your premiums so high that you might as well be uninsurable. So it's another example of something that you should talk about get some advice of do I need life insurance are not a lot of times people don't. A lot of times people have life insurance that they've had for years and they need it for a time and I'm single. You don't really need that anymore.

Why don't you just stop paying the premiums and save that money and invest that money. Instead, you know, your kids are grown and done with college and that's what you bought that particular life insurance for the first place so we don't need it for that application anymore. What are we keeping for it so you just need to assess periodically to have the right amount life insurance. Should I scrap it altogether or do any more than I currently have my need for a different use and I'm currently using for just couldn't stay on top of those things. I know this is any different for everyone, but what what IG typically discussing should be having the conversation about life insurance is any certain ranges usually come targeting really depends on what you're using it for right so if it's income replacement. Let's say somebody is the primary breadwinner in the house and weeds want to make sure that the families taking care of if something happens to them. Okay will that's most important in your 30s, 40s, 50s, we still have kids on the payroll and spouse.

Once you're in your 60s. Often what were looking at is either something like military guy where we have to replace his pension because he made a bad choice on that or an estate planning thing where we say look in all the kids can have a lot of IRA money that they inherit.

That's going to be a big tax timebomb that's going get passed on to them. What if we take just a little bit of money out of the IRA each year while were still alive fund a life insurance policy with that and then the life insurance policy will pass on tax free to the kids. So now they've got some tax-free dollars to work with.

In addition to the taxable money so you can use it for estate planning applications like that those conversations usually aren't happening until at least your 60s.

So really just depends on the use that last one you got phoria for decisions you want to get right. Choosing retirement date and maybe maybe this one isn't irreversible in the sense that you can't go back to work and this is one that you don't want to ever have to reverse right but even so, I even if you do have to go back.

It can be difficult to to find a job that you want it and make the money that you may be left the workforce with so this is our last one, but I think you nailed it in that there is no rule or law that prevents you from going back to work.

If you realize you retired too early, but man I can't think of anybody who wants to do that now. Certainly there are people who have retired and gone back to work, not for financial reasons, just because they miss me at work you do that, that's fine.

But for a lot of people who say well on the go and retire and I can always go back to work if I have to.

I'm wracking my brain.

I can actually think of a time where somebody has, let's say, retired at 63 and then realize a year later. All you know what I was too early and then happily gone back to work right like it is. If you retire and then you have to go back for financial reasons like it's the end of the world so don't put yourself in that position before you pull the trigger and walk away just understand what you at what we find for a lot of people is that if we can identify and inundate and you know what your walkaway day is it makes your remaining working days that much more palatable because you know that there is an end in mind as opposed to just I don't know how long I need to work. I sure hope for 66 is old enough. Well if if we have a definitive inundate. You can do almost anything for a year or two years or whatever. Or it could be the kind of thing where maybe you'll realize okay well I could retire any day and it would work. We could make it work.

I don't really want to retire just yet.

I don't love my job but I don't hate it. They pay me enough to you know make it worth the headache's son to stick around for a while but boy it sure is nice to know in the back of my mind I could walk away if I wanted to.

That also makes the remaining days more palatable. Just because you I don't have to sit here and take this. I can leave if I want well you don't have the confidence of knowing that unless you actually done the work to do the plan and understand what life looks like. If you do retire now or in the year or in three whatever does your situation so just do the work when I say work cannot do that much work we do the work you're answering some questions right in thinking about what your you want your life to look like so reach out if you have questions on any bad and we will figure out how to get you on the right track.

Look at stuff John Gray breakdown on all these things. And again, when I will plan for everything you do with these are really important in the grand scheme of things. So if you if you don't have a plan in place for these again did that with John growth wealth management.com is the website Lisa hi John enjoyed this conversation as always begin here and complete careful with the toothpaste back got it.

Thanks for listening to Mr. Stone's office about them except Carolina welts towards doing business as Rosewood wealth management is a registered investment advisor in the state of North Carolina. The material presented is intended to be general and should not be construed by any consumer is the rendering of personalized investment advice