Should retirees "work" in retirement doing something they love? How does that affect your Social Security income? Is paying off your mortgage before you retire a good idea or are you better off with the extra cash cushion? What should you do when you inherit an IRA from your spouse?
Those are just a few of the questions we'll answer in today's podcast. You asked them and we're answering.
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There are two aspects to retirement planning. First--and this is the one that often gets the most attention--is the numbers. It's about how to ensure you have enough money to retire and that you make financially sound money decisions. But the second aspect is what most current and future retirees really want--how to enjoy life without worrying about money.
We cover both topics in today's episode.
As a leadoff, we start the episode talking about a recent book by our friend Steve Moeller titled, Endorphinomics: The Science of Human Flourishing. And Bill gets put on the spot as Steve asks him questions about a concept from the book called the "happiness tipping point." Did Bill rise to the challenge? Listen to find out...
Five Insights in This Episode From Bill Keen1. One of the keys to flourishing in life is to maintain a "positivity ratio" of at least 3 to 1.
We're bombarded by negative stories in the media on a daily basis. And if you fill your day with all the bad stuff going on in the world, well, you probably won't be very happy. World renowned researcher Dr. Barbara Fredrickson has discovered how maintaining a 3 to 1 ratio between positive emotions and negative emotions can help you live a healthier, more vibrant, and flourishing life.
Interestingly, the government penalizes you for double dipping, meaning, you will be penalized if you receive Social Security income and work income. Here's how it works. Until you reach full retirement age, Social Security will reduce your benefits by $1 for every $2 you earn over a certain limit. In 2016, this limit is $15,720. In other words, if your earned income during retirement is greater than $15,720, then your Social Security benefits will be reduced by $1 for every $2 above $15,720. Once you reach full retirement age, this penalty ends. While each situation is different, you may want to avoid taking early Social Security if you continue to earn a solid income during your early retirement period.3. Should you dip into savings to payoff your mortgage before you retire?
I think it's great being debt free but let's be clear, there's good debt and there's bad debt. Bad debt is things like credit cards that aren't paid off monthly costing up to 20% interest or car loans on cars that are quickly depreciating in value. By contrast, a home mortgage could be a good debt. Again, each situation is different but it might make sense from a tax standpoint to carry some mortgage debt into retirement rather than cashing in some investments and paying a hefty tax bill to pay off the mortgage. I would never come on here and say there's a one-size-fits-all with respect to this, but for sure I don't want to see somebody get hit with a huge tax bill in these higher brackets just to pay the house off all at once at retirement just to be "debt free" a little sooner than later.
First off, I'd just like to say I'm sorry to hear that someone has lost a spouse. Secondly, when you inherit an IRA from your spouse you're able to treat it a couple of ways and it can be complicated. I'll try to simplify it. One option is to roll the IRA into the surviving spouse's IRA. Now, if we roll the IRA into the remaining spouse's IRA account, it maintains its tax deferral but it would be subject to the 59 1/2 rules. This means you can't touch the money under certain circumstances without having to pay a 10% penalty until age 59 1/2. A second option is to leave it in what's called an inherited IRA. This might make sense if you were under 59 1/2 and you wanted to access the money. In this scenario, you can access the money before 59 1/2 without paying a 10% early withdrawal penalty.
While it's beneficial to answer questions like this from our listeners, I'd love to have some listeners come on the show live so we can have some back and forth and clarify each question a little deeper. So there's my call to action for our listeners. If you are interested in coming on the show, either live in our studio in Kansas City or by dialing in on the phone or Skype, just send me an email at firstname.lastname@example.org.
Bill Keen on being intentional...
I'm seeing more people come to the table that want to talk about being proactive and living life in an intentional way.
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Bill Keen is a CHARTERED RETIREMENT PLANNING COUNSELOR℠ and independent financial advisor with more than 25 years of industry experience. As the founder and CEO of Keen Wealth Advisors, a registered investment advisory firm, he specializes in providing personalized retirement planning designed to help people thrive before and during their retirement years. With a passion for educating others, Bill regularly blogs about retirement planning, hosts the podcast Keen on Retirement, and has contributed to U.S. News and World Report, Reuters, Wall Street Journal’s Market Watch, Yahoo Finance, and other publications. Based in Overland Park, Kansas, Bill and his team work with clients throughout the greater Kansas City area and across the nation. To learn more, connect with him on LinkedIn or visit www.keenwealthadvisors.com.
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