Planning For Retirement When You're in Your 40s

00:00.00

Amy

Every week. It's our goal to share financial information that helps you in both your life and financial vineyard. We hope it takes you from your roots to the journey of your binds and the influences in the air that help craft your delicious life. Like wine life and finances have different palates that should be celebrated and not judged welcome to this edition of wine and dime with Amy Irvine and Carrie been good morning Carrie as we're recording. It's morning anyways.

00:27.47

Kerrie

Good morning.

01:02.44

Amy

So Carrie I have been sharing with the team over the last couple months or weeks in June um, ah the place that's right next door to us on market street is called quincy exchange you probably remember it when you were out to visit. They are kind of a finger lakes. I would say tasting center but they're also like a little piece row. Well I popped over there and met with um with some clients the other day and I did a flight called the element flight and it's the actual owner of. Quincy exchange makes a wine that he's branded as element and I've already talked about the ries lane and I talked about the chardonnay but they also had abel francish which is a real spicy wine. It's from over in germanyauustria area depends on. What people call it sometimes it's limburger or sometimes it's bull Frankish. So I tried it and they've done a really good job in trying to recreate that now they get grapes from like various wineries in the area so they don't actually have a vineyard of that particular grape but I was really excited to have that right next door and I can't wait. And know you guys are coming to the city of for some vacation I know you're not coming to our area but at some point in time we'll have you back and we'll take you next door and and have you try that wine any new ones that you've come across that you'd like to share.

03:16.73

Kerrie

For sure. No, not lately.

04:09.22

Amy

I know you've been super busy with sports and the kids and everything like that recently so when we were planning for this particular podcast I thought it would probably be a good idea. Knowing how busy you've been and and how crazy life has been to chat a little bit about planning for retirement when you're in your 40 s it's a key time in your life. Um, you know to to really kind of hone in on the plan. Most people usually have at least None to 20 to 22 sometimes even none as crazy as that sounds to sort of you know set the stage for their retirement years. But I think it's important to talk about some of the steps that you can take especially I mean you're living that life right now right? so.

05:10.81

Kerrie

We have.

05:43.38

Amy

So let's chat just a little bit about that where where do you see the struggles right now in your life in your early 40 s just just a year over right? You haven't even needed a full year on the sun past 40 at the stage of the game. Um, where where do you see some challenges.

05:55.85

Kerrie

Definitely for us. It's conflicting goals just feels like we're in a stage of life where there's some of the bigger expenses. You know when you think about especially having kids when you think about what are my big expenses going to be throughout my lifetime. You know it's but you know buying vehicles for yourself and the kids and then sending them to college and you know I have a. 16 year old and a nineteen year old. So both driving None in college and just the overall expense of all of that. Um, and then there's just everyday life um, expenses too. You know and then. Definitely saving for retirement is something we continue to do and and are definitely saving ah a decent chunk of money in that bucket. But I definitely wish we were at a point where we could maybe maximize that and you know I think. Conflicting goals is something we talk about with clients all the time and currently living that for sure.

08:40.55

Amy

So I mean obviously there's some things that can't wait right? like the college tuition I mean you can borrow for it if you want to and we always say just just as a reminder you can borrow for education. You can't borrow for retirement.

08:20.85

Kerrie

Right? um.

09:10.60

Amy

Ah, but they can't wait. They've got the bill's got to be paid. So however, you plan it into your plan you you need to know like how that affects you long term. But if you map. Um, if you sit down and map out. Okay, here's what I need to pay right now here's I know you can't save you know the maximum that you want to and you're simple. But. How how do you make up for that. You know have you have you sat down and and mapped out and I know you have but you know that's something that we talked to clients about right? like sitting down and mapping out. Maybe not right now you can't maximize. But if you do these things then in None or five or six years that's when you can really start to maximize but you can at least do something right now right? I mean there's there's a piece of it.

10:11.25

Kerrie

Yeah, for sure we kind of just even you know I didn't do this career originally so it wasn't necessarily an area of expertise but I don't know what made us. But for some reason when we both started working. We've just always saved at least. None into our retirement accounts. So I think that habit and never really having that money to live off of in the none place was I think one of the most important things we did early on just you know setting that up and and never looking back.

11:32.50

Amy

A.

11:30.30

Kerrie

So I'm I'm proud that we did that and you know over time. Our income has increased so that 10% has increased um actually this year we we I think we bumped it up to 11 So we're both getting you know a little bit better and it's one of those things you have to.

12:34.70

Amy

You have to work at it. Yeah and I mean if you take into consideration that you're also getting the company match right? So you're putting away 10% you're getting the company match which might be 3 It might be you know, whatever it is. That's.

12:08.33

Kerrie

Just make sure you're doing at least something. Yeah.

12:37.35

Kerrie

Me.

13:11.52

Amy

13% and if you're doing 11 now that's 14 we typically say tart try to target 15 so you're within like in your situation. You're within a 1% gap of what typically we you know, suggest people do anyways. But have you sat down and then said okay we know we're gonna have these competing goals here's where they are here's where they're gonna fall what about beyond some of those like I have to spend this money now goals have you thought about and I know I like I'm saying this like I know you have you and I have talked about this. But.

13:49.49

Kerrie

Yeah, yeah.

14:22.54

Amy

Um, when we're working with clients. We often ask them the question about okay we understand these are priorities to you and we're gonna help you plan for this. But then when the kids are out of college and the cars are Done. You know you know all of the expenses that you mentioned are sort of finished. How do you. Quote Unquote make up for some of the retirement savings. What's that number look like I'm not asking you to share your number but just in general like I think knowing that is very helpful. Like just mapping it out and saying okay I know that right now I've got these priorities but in the future here's how I can make retirement savings a priority. You know that's kind of an important part of the plan is there thing is there are there conversations that you.

15:25.51

Kerrie

Oh.

16:02.28

Amy

You've had with clients or even within your own household around that particular topic.

15:41.87

Kerrie

Yeah I think for us, it's you know, thinking about your options to your employer and and what we have and things like that for us, it's talking about sort of those buckets of money. Um, obviously we've been saving in the the pre sort of pretext bucket of money and and Alan actually has a roth option through his employer and we've we've put a little bit of that. But I think once sort of these conflicting goals calm down a little bit.

17:05.90

Amy

Yeah.

16:55.84

Kerrie

We will be able to maybe max out that pretax bucket but then also look at the roth option and then we do have ah a taxable ah like brokerage account that we're putting a little bit of money into each month that I hope I think we will beef that up. Maybe.

17:58.40

Amy

And.

17:33.75

Kerrie

Some of these other things get taken care of and and the kids get older. So That's definitely a goal because something we talk about all the time and actually something I was not.. It's just not something. You're super aware of or at least I would say a chunk of people are not aware of it are those. Different buckets of money and what they mean and why they're important wasn't anything that anyone ever taught me or I knew of before I became a financial planner.

18:57.72

Amy

So let's chat about that for a few minutes. What are those different kinds of buckets or savings vehicles that we try to chat with our clients about and and help get them educated about or that we're utilizing ourselves.

18:57.11

Kerrie

So definitely It's you know 3 3 buckets of money the pretax which is you know saving into your retirement account and and not being taxed on that until you pull it out. And then there's the roth option which can get a little bit more complicated. Not everyone can have ah like a roth ahra but a lot of employers are starting to offer roth within the none case so filling up that that none bucket of It's still really considered retirement but it's at you know it's going into the account after tax. So whenever you pull it out. You won't pay taxes on it. Um, and I'm sure there's an episode somewhere out there over roth iras we could go into that for a really long time but filling up that. Roth or tax-free bucket as much as you can um and then the taxable or brokerage account I really like that option because it's not necessarily tied to an age like your retirement account and the and the roth option. And sometimes we just don't know what life it's going to bring at us. So especially if someone wanted to retire early. You know, retiring before age none which is the number right now and that's always an option to be changed. But if you retire before 50 none having a. Bucket of money that you can pull out of that's not tied to those retirement accounts is so important.

22:37.30

Amy

Yeah I think because we also often use that sort of as the emergency fund too right? So when we talk to people about saving for long term saving for emergencies. We always want people to have some some cash.

22:21.49

Kerrie

And this.

23:15.82

Amy

On hand whether you're retired or whether you're working or no matter what we want you to have some cash on hand but where that cash is located can be in various locations. It can be your savings count. It can be a brokerage account and and beyond that we want people to try to invest for the long term as well. So. Often I know for our clients they look at their brokerage account and they don't think of it as their emergency fund or their cash cushion. But in reality that is something that we could take into consideration as a positive note right to to have that money sitting there and and right now I know we've got some clients. That are actually approaching us saying should we put that cash to work with the market being you know, lower than it has been in a few years for sure. Um, you know they're they're asking those questions but but going back to the types of savings vehicles. I think we we talk a lot about having a none a none a none if possible. But why would we recommend that like what are what's the benefit of that in retirement if people do that.

25:02.33

Kerrie

I Think the first thing that comes to my mind is taxes and being able to plan out your life in a way that you can think about pulling from you know what bucket is most appropriate for that time in your life. Um.

25:38.32

Amy

And.

25:40.39

Kerrie

Not that you can control everything. But if you can and plan things Out. You know for your personal life I think having the option to pull from a tax-deferred bucket or a tax-free bucket or even even that brokerage Taxable account bucket. Man that gives you a lot of options.

26:45.82

Amy

Yeah, the taxability side of it is twofold right? So one side is like let's say that in your first year of retirement you worked part of the year because typically people don't retire on December thirty first no matter what financial planning.

26:53.53

Kerrie

Just.

27:21.46

Amy

Software likes to think how so how nice and easy that is most people don't retire on December thirty first I have very few clients that actually pick that date for their retirement. So let's say in that first year of retirement you have some earned income so we may look at that and say you know what for the rest of this year maybe you want to pull from um the after tax brokerage account because that could mean that your taxable income this year your cash flow is the same but your taxable income goes down significantly. Maybe even allowing for your capital gains. On your portfolio to be taxed at a zero percent capital gains rate well that sounds fun I get to keep my cash flow and I pay less in taxes. So that's an ideal situation or maybe it's a year where you don't have any income second year of retirement now where do we pull income from. Well that year it might be from your pre tax money because again, no taxable income. You're maybe you're not taking social security yet so we can fill up the none bucket if you want to call it that with pre-tax money very low tax bracket. We supplement that with you know, potentially either the roth or the brokerage or both of those to give you the same cash flow so on and so forth. So we get to we get to really do some what I would call low hanging fruit planning with regards to distribution strategies. And that's something I know you and I have run a lot for our clients to sort of map that out and and get them ideas and suggestions around that I think the number None thing that we've often seen Carrie is that people push taking pretax money and down the road until they have to. And then what happens.

30:49.91

Kerrie

Well I Think if you've saved you know and this is one of those things if you don't know you don't know but you know as a kid I remember being pounded into my head like save as much as you can into your retirement max it out which we believe in. But something that people don't think about is when you do hit that age of you know which ah keeps changing but right now it's you know when you're in your like around 72 you've got required minimum distributions and.

32:11.78

Amy

2 Yeah.

31:57.19

Kerrie

You don't get to decide exactly that number that comes Out. You're sort of told by calculation you have to take at least this much out and then obviously you're going to be text on that. So knowing that and thinking through that which a lot of people they may know that you have to do that. But knowing the consequences and what that means you know and understanding what your tax bill's going to be at that point.

33:16.26

Amy

Yeah, and I think too What people don't understand is know sometimes they okay that might make their social security more taxable that might like their Medicare premiums go up. There's a lot that they don't take into consideration when they think about pushing it down the road and.

33:12.43

Kerrie

Um.

33:53.90

Amy

For our clients that live in New York state sometimes that means that it affects their enhanced star eligibility in some cases. So it's not just it's not just about the savings piece. It's also about the distribution piece.

33:55.31

Kerrie

Yes.

34:27.42

Amy

So I think I think it's really important you know I think it's super important to talk about that now. Let's talk about moving on real quick talking about how to maximize let's let's say you're let's see your six years down the road right? and now the kids. College is done. You know you're you're looking at I won't say a windfall but you're you're looking at the budget easing up just a little bit. How do you suggest people think about maximizing the next fifteen or twenty years of saving for retirement or planning for retirement.

35:15.51

Kerrie

Well I the none thing that comes to my mind is making sure you're maxing out your savings I won't necessarily say all 4 None k but for us it it probably will be with with Alan having that ro shop roth option. I think working with you know, a financial planner and figuring out okay should we be should we put everything in the you know everything we can in the roth option should you do none? but for us, it'll be that let's so okay, what can we do to max out a retirement savings and with taking the roth can.

36:45.36

Amy

Session.

36:33.10

Kerrie

Into consideration and then making sure that we are saving in that that taxable Brokerage account bucket as much as we can you know doing some budgeting or or reverse budgeting as we like to talk about and just making sure we're saving into that.

37:17.70

Amy

Okay.

37:06.31

Kerrie

That additional bucket.

37:37.70

Amy

Yeah I think that's pretty important so looking at running projections right? What if I say in None in the roth and pretax and then another you know portion into the brokerage. How does that make my plan look.

37:22.35

Kerrie

Month.

37:42.29

Kerrie

Um.

38:13.96

Amy

When is the crossover because the problem with I mean you guys saving right? now is very helpful in the roth component the problem when the kids are all out of the house and your highest likely to be your highest earning years is it's also your highest tax bracket years.

38:13.47

Kerrie

Come with.

38:46.94

Amy

So you know you want a really bad save in that None and k pretax because it lowers your taxes right now but there is usually a crossover as to when paying higher taxes now benefits you in retirement.

38:48.33

Kerrie

Um.

39:19.60

Amy

And running those projections I think is pretty important to decide how much should I put in pretax and how much should I put in roth and how much should I put in the brokerage so kind of running scenarios is early as your mid 40 s to see where your buckets need to be redistributed at that point in time to see if you have. And here's where we try not to talk in general terms. But if you let's say you traveled for your whole career and when you retire you're like I'm not traveling anymore I'm gonna stay home I don't play in my garden I'm gonna read my books you know I am just I traveled out. Well your lifestyle at that point in time.

39:54.75

Kerrie

Um, from this.

40:37.16

Amy

Is probably going to require less resources. So maybe it does make sense to put more in pretax right now in that situation versus somebody who has said no I mean I want to spend more money in retirement I Want to travel I Want to um, you know do um.

40:23.41

Kerrie

Are.

41:16.74

Amy

I Don't know maybe relocate or do the snowbird thing or you know whatever it might be then you might require more cash flow and it might make more sense for you to to have some additional funds in those supplemental Buckets. So. I Don't think there's a onesize fitts all answers for that I do think it comes down to those projections and scenarios to see when the crossover is too. What are there Any tips that you would give to people that are in you know your and I mean this. You know, like in such a loving Way. You know that like so I would say state of chaos and I I do really truly mean that in a loving Way. You're just being pulled in a ton of different directions. Your life is super busy and I don't mean chaotic by disorganized I Just mean you're on the go you know and and.

42:24.91

Kerrie

I know.

42:59.72

Amy

And a lot of I mean you definitely think about finance often. But a lot of people don't they're focused on other things in their lives is there None or 2 tips that you would give them to just kind of maybe. Maybe it's a task that they do to put on their calendar or something like that they would just bring them back to their finances maybe once or twice a year. Even.

43:23.21

Kerrie

Ah, for me I think set it and forget it I think that's probably the best thing that we've done as far as saving for our future and we're honestly set and forget and we we're putting into each of those.

43:58.30

Amy

Um, and.

43:59.95

Kerrie

3 buckets. It's not what we want to be. You know it's not the most that we can put in there but we've kind of set up. You know where we're putting some into each of those buckets and it's something we don't think about anymore and so set it and forget it and. You know, obviously review it annually and if you can do more do more Um I would say that's probably the number None thing that people can do and it and there's not ever going to be a great time even when you're young, you know and you're not in your 40 s you feel like oh I've waited. You know to make money and I'm going to live now but starting small or you know we talked to a client the other day about hey let's just start with fifty bucks a month. They're really young their cash flows really strapped but let's just start there because I think starting somewhere is really important and then.

45:38.36

Amy

Yeah.

45:51.48

Amy

You.

45:43.15

Kerrie

You know as your income increases you know bump that up and just forget about it I mean obviously you need to think about it and go in and see how you're invested in all those fun things but but set it up and and move on I think that would say that's probably the number 1 thing the other thing that comes to my mind.

46:41.30

Amy

Under my tip.

46:21.90

Kerrie

Is don't ignore things. Um I think you know you mentioned the the chaos and I definitely feel like I'm a very organized person but I still feel that internal like thinking about all the directions. My money is being pulled. Not my hour money is being pulled it causes some internal chaos because you feel like Gosh.. There's so many things in life and especially right now with things being more expensive. Um it I was literally thinking the other day like man it feels like.

47:49.86

Amy

In here.

47:35.83

Kerrie

Our cash flow is so strapped right now and I'm really bad about like beating myself up like oh my gosh. What am I doing wrong and then I stand I was standing there thinking I haven't I'm not doing anything I'm not just spending None of money. It's just it's just the way life is right now.

48:39.40

Amy

It's just more expensive. Yeah.

48:15.70

Kerrie

It's so expensive to live. Um, but I don't think you should put your head in the sand and say that's just the way life is and not worry about it. You still have to think about it. You still need to project out some cash flow and look at it even if. You just pick a month or you know pick a short time period don't overwhelm yourself by trying to think about what am I going to do for the next five years you know what are you going to do for the next month what are you going to do for the next two months um I think and ah, recently we've had to replace an air conditioner unit. Inside and outside and then we have this have the same washer and dryer that we've had since before my son was born. He's sixteen so. It's no. Surprise that were yesterday ordered a new washer and dryer. But it was something I just kept putting off and putting off and it feels like you know who wants to spend their money on those kind of things but at the same time I knew it was coming so by ignoring it or putting my head in the sand about it. You know that that wouldn't have been smart either. So and I also knew eventually our air conditioner was going to have to be replaced so it's those things that we would you know as financial planners we talk about you know this is what your emergency fund is for um, but you can also kind of start planning out like. Is it really an emergency if I've known for like the last three years that my my dryer's taking twice the amount of time to dry load of clothes for the last couple of years um so no, it's I would say to set it and forget it and don't put your head in the sand about.

52:05.30

Amy

Well Carrie as always. It's it's so interesting to you know, see things from a different point of view. You know, having being a bit older and kind of you know I would say about 10 years you know, just.

51:38.97

Kerrie

Things.

52:38.60

Amy

Doing some of the things that you're talking about doing right now I will say it does get to the point where you're like yeah like I'm saving you know all of this stuff. Does happen and I always say to people you can have whatever you want you just might not be able to have it right now and mapping out some of those things and by the way I always forewarn people if you've had 2 things that you have to replace what you were saying the dryer and the air conditioning.

52:48.23

Kerrie

Here.

53:42.40

Amy

Something else will go. They always go in threes. So just be forewarned and you know if something does go today. You're gonna be like yep Amy curse me. So.

53:15.10

Kerrie

Um, yes.

54:03.80

Amy

But I think you know that's why we plan for some of these emergencies. We don't know what they are going to be if you have an air conditioner. You know an air conditioner is going to need to be replaced. That's something Brett and I are very acutely aware of down in Florida we can live without one in New York but Florida ah, you know you can't and where you live you can't like.

54:07.77

Kerrie

Um.

54:39.46

Amy

It's more important to have air conditioning than it is he so you know those are important things that you have to be sort of thinking about in advance to what could go wrong and somebody recently said to me you. Took this like assessment personality assessment and they said it seems like you live from a place of fear I said well wait a minute you gotta understand the job that I have is not necessarily that I live from a place of fear I live from a place of what can go wrong and how do I prevent that or how do I plan for that. So.

55:01.70

Kerrie

Man.

55:42.10

Amy

Wouldn't say that I live from a place of fear but a place of imagination of what I might need to come up with for money and try to plan for that and I think there's a benefit to that in the whole scheme of things as well. So. As always It's such a pleasure chatting with you and catching up on different things that are going on in your life and you know I think people are so appreciative of the suggestions and tips and ideas that you have so if. If you all would hop on over to Itunes and rate this show. We'd love for you to do that because it does bring in additional listeners once we get ranked in their system and we'd love to hear from you. What do you want to hear from any of us on the team. We hope that this podcast brings you some I would say serenity some ideas and brings a little bit of joy and laughter to your life as we chat about things that are going on in ours. We hope you continue to enjoy the show and that you share it with your friends. Thanks everyone.