There are so many emotional and financial aspects to retirement. Navigating the transition to retirement can be extremely challenging. These challenges are compounded when planning for two within a marriage. This episode is about preparing for the transition to retirement when the retiree is married.

Sam is joined by his brother, Nate Martinez who is a licensed family and marriage counselor. Nate is married and has three kids. Sam and Nate explore the complexities of transitioning to retirement within a marriage. Nate also shares three tips to navigate this transition. 

Episode Highlights: 

[04:03] Nate's primary focus is marriage. He has level one training in The Gottman Method. 

[05:29] Common contention points in marriage include finances in different understandings and meanings of what money is. If each individual's definition of money isn't communicated well, conflict often develops.

[06:12] Values can also be a point of conflict. How time is spent can be another issue.

[07:01] Often the root of financial issues lies in not communicating well. We need to communicate expectations and what we understand money to be.

[08:24] The go and the whoa. 

[09:42] There needs to be transparency when one spouse is the one doing the finances.

[11:44] The psychological effects of change in transition. The five stages to change include pre-contemplation, contemplation, preparation, action, and maintaining it.

[13:37] Change is hard, because it creates fear and anxiety.

[14:45] One of the hardest things about retirement is staying retired. A lot of value and meaning is wrapped up in our work.

[16:22] A lot of people's identities are wrapped up in their work and their work relationships.

[17:42] It's always helpful to get professional help for any transition. One of the best things to do is figure out how to communicate with each other through the transition. There needs to be appropriate speaker and listener communication.

[19:01] When the listeners summarize what they're hearing, it shows that they're hearing what the listener would like for them to hear.

[20:04] Have good self-awareness. If there's criticism, defensiveness, contempt, and stonewalling during a transition, things won't go well.

[21:20]  There are perpetual problems and solvable problems. Most problems in relationships are perpetual. These are differences in personalities, identities, or values.

[22:46] Perpetual problems can lead to gridlock. Compromising is one solution. Find the coordinate and try to be flexible.

[23:29] Communicate what you want in retirement. Be self-aware and understand how you'll react if your expectations aren't met. Identify whether you're dealing with a perpetual or solvable problem. Be good speakers and good listeners.

[24:36] Get a financial plan together when you're preparing for retirement. Talk through what you would like retirement to look like for you and your spouse.

[25:24] Don't wait for retirement to do what you would like to do.

Certified Financial Planner Board of Standards, Inc. (CFP Board) owns the CFP® certification mark, the CERTIFIED FINANCIAL PLANNER™ certification mark, and the CFP® certification mark (with plaque design) logo in the United States, which it authorizes use of by individuals who successfully complete CFP Board’s initial and ongoing certification requirements.

Resources & Links Related to this Episode

• Wealthquest Get Started

• Living a Rich Life: The No-Regrets Guide to Building and Spending Wealth

• “Unretiring”: Why Recent Retirees Want to Go Back to Work

According to Benjamin Franklin, death and taxes are guaranteed. Just because they're inevitable doesn't mean we can't plan for them. This week, Sam and Wealthquest Director of Tax Planning, Brandon Butcher, tackle the planning stage of estate taxes. They talk about how to maximize the benefits of tax planning, along with specific action steps.

They also dive into some of the most common misconceptions around estate planning and estate tax. Brandon shares how estate taxes are computed, discusses exclusions, and explains what high-end estates need to be aware of. He also explains the basis step-up, which reduces taxable gains.

Episode Highlights: 

[04:37] Estate taxes are a tax on the transfer of all of your assets upon your death. The tax amount is the fair market value on the day of your death. The total of everything is the gross estate.

[05:30] There are deductions allowed including mortgages, debts, administrative fees, property that passes on to a surviving spouse, and qualified charities.

[05:56] After the net amount is computed, the value of lifetime taxable gifts is added to this number, and then the tax is computed. The taxes are then reduced by available unified credits.

[07:06] There is an annual gift tax exclusion of $18,000 in 2024.

[08:06] The federal lifetime exclusion is $13.61 million per person in 2024. 

[10:03] Most simple estates don't require the filing of estate tax returns. 

[12:27] The exemption is expected to go back down to $7 million in 2026, so high net worth individuals need to plan accordingly and revisit their estate plan.  

[15:15] Estate taxes aren't going to affect everyone. 

[17:59] Brandon helps clear up gift tax exclusion confusion. If the limitation is exceeded, a gift tax return is filed. Anything over the limit goes into the lifetime exemption. 

[20:41] Cost basis receives a step up at its fair market value at death which reduces the tax gains the heir is liable for. 

Certified Financial Planner Board of Standards, Inc. (CFP Board) owns the CFP® certification mark, the CERTIFIED FINANCIAL PLANNER™ certification mark, and the CFP® certification mark (with plaque design) logo in the United States, which it authorizes use of by individuals who successfully complete CFP Board’s initial and ongoing certification requirements.

Resources & Links Related to this Episode

• Wealthquest Get Started

• Living a Rich Life: The No-Regrets Guide to Building and Spending Wealth

• Brandon Butcher

• What You Need To Know About Deaths and Taxes

• Death and Taxes Event Recap (Death)

Wealthquest's Director of Financial Planning, Megan Hammann, and Director of Tax Planning, Brandon Butcher, gave a webinar on death, taxes, and preparing for these inevitable events. In this episode, Sam and Megan give a recap of the event and focus on how to get through the transition of assets after a loss.

We talk about assets, investments, property, and estate planning. Planning objectively for the legacy we want to leave is extremely important. It involves stepping back to consider how we're going to provide for our family. We talk about the importance of having beneficiaries and planning outside of a will. We also emphasize the importance of open communication and explaining your goals and decisions to prevent misunderstandings.

Episode Highlights: 

[04:39] This episode is about making sure that we are setting up our beneficiaries for a smooth transition.

[06:35] Thinking about mortality can be difficult, but the planning needs to happen in life. Talk it over with your family and have everyone on the same page. 

[07:52] One of the biggest misconceptions people have is that everything will be taken care of if they have a will. A will isn't used any other way outside of probate court.

[08:25] The transition is so much easier if we find ways not to have to use the will. The will doesn't take effect until you die.

[09:36] The power of attorney will take care of your health care issues while you're still alive.

[10:51]  Anything that goes through probate is public record. There are also filing fees and court fees.

[11:20] Life can change so estate planning needs to be frequently or occasionally updated.

[12:18] Money is emotional. Grief comes out in different ways. We don't want assumptions made during trying times. 

[14:09] Be open and honest about your goals. Explain why you made your decisions. 

[17:06] When you have beneficiaries, it's a direct transfer of the assets. A will is a backstop, but there are a lot of things that don't get to your will.

[17:52] Money either goes through titling or ownership, beneficiaries, or through a will and probate.

[18:31] To avoid assumptions, talk to your family about your charitable beneficiaries.

[19:42] Planning can help lessen the stress.

[20:38] A family meeting can also help give clarity. Be open about your intentions. 

[22:52] Talk with your advisor or your team and make your planning in small chunks.

Certified Financial Planner Board of Standards, Inc. (CFP Board) owns the CFP® certification mark, the CERTIFIED FINANCIAL PLANNER™ certification mark, and the CFP® certification mark (with plaque design) logo in the United States, which it authorizes use of by individuals who successfully complete CFP Board’s initial and ongoing certification requirements.

Resources & Links Related to this Episode

• Wealthquest Get Started

• Living a Rich Life: The No-Regrets Guide to Building and Spending Wealth

• Brandon Butcher

• Megan Hammann

• What You Need To Know About Deaths and Taxes

Once you reach a certain age the government forces you to take withdrawals from your retirement account. These withdrawals affect your taxable income, medicare premiums, and even your ability to leave money to your heirs. I'm referring to required minimum distributions or RMDs.

Most people are familiar with RMDs, but not as many people are aware of planning opportunities that they can use to help control the effects of making required withdrawals. Sam shares practical strategies that we can use to get the most out of our distributions. 

Episode Highlights: 

[02:48] Sam shares an example of a required minimum distribution. 401k and IRA savings are pre-tax. When we take funds out they are going to be taxable.

[04:28] RMDs are required once someone hits 73 years old for this year. People are living longer, so they are moving the ages back.

[06:34] If you have multiple accounts, each one will have its own RMD. You can take the aggregate amount from any account.

[07:30] There are penalties for not taking your RMDs. 

[08:29] If you take money out, you need to pay taxes on it.

[09:39] If you put money in a 529 plan, you can save on federal taxes. You can also fund a Roth for a family member.

[10:55] Qualified Charitable Distributions or QCDs can be given straight from a retirement account to a qualified charity. This will satisfy the RMD and no one will have to pay taxes on those dollars.

[12:04] If you're already donating to a charity, you might want to consider a QCD. 

[12:42] A Roth conversion is where you take pre-tax dollars and convert them to a Roth which is tax-free. You pay taxes when you withdraw the money. Once it's in the Roth, it can grow tax-free for the remainder of your life.

[13:39] A Roth conversion is a great strategy for people who care about legacy.

[15:36] Bonus: Still working, you don't have to start taking your RMDs until you retire. 

Certified Financial Planner Board of Standards, Inc. (CFP Board) owns the CFP® certification mark, the CERTIFIED FINANCIAL PLANNER™ certification mark, and the CFP® certification mark (with plaque design) logo in the United States, which it authorizes use of by individuals who successfully complete CFP Board’s initial and ongoing certification requirements.

Resources & Links Related to this Episode

• Wealthquest Get Started

• Living a Rich Life: The No-Regrets Guide to Building and Spending Wealth

What options are available regarding Social Security, and how do we determine the best time to access these benefits? As we enter our 60s, we encounter irrevocable decisions about our future, including those related to Social Security. The goal for most of us is to maximize these benefits, considering both tax and estate planning. 

Sam, along with Wealthquest's Director of Financial Planning, Megan Hammann, delve into three practical aspects to consider when navigating your Social Security options. We talk about whether Social Security will be here in the future and possible ways to remedy future shortfalls. We also talk about your options and what should be considered in your decision. 

Episode Highlights: 

[02:28] Megan is extremely knowledgeable about Social Security. 

[03:02] Should Social Security even be included in your financial plan? According to current data, by 2034, only 75% of Social Security revenue will be covered by current Social Security taxes. 

[04:27] Ways to solve this revenue shortage would be to generate more taxes, push back the retirement age, and reduce benefits.

[07:00] The main goal of Social Security is to supplement losses in income. 

[07:33] Social Security was created in the 1930s as a type of social insurance that would create economic stability.

[08:30] Full Retirement Age or FRA is the age when we can collect our full Social Security benefits.

[09:41] There's a reduction in benefits when you take Social Security early.

[10:31] After full retirement age, there's an 8% benefit increase every year up until age 70.

[11:14] You can claim on your own work history, as a spouse or an ex-spouse, or survivor benefits.

[13:38] Start in advance to apply for benefits. 

[14:50] Look at your own personal health, longevity, and how you want to care for your spouse.

[15:31] You need 40 credits to be eligible, and you can earn four credits a year. Your benefit is based on your highest 35 years of working history.

[17:13] Consider your health when choosing to delay your benefit. If you live longer, you may want the higher benefit. If you have poor health, it may make sense to take it earlier.

[18:12] It's also important to look at your cash flow needs.

[18:45] We also need to consider our loved ones, because when one spouse passes the other spouse becomes eligible for survivor benefits.

[21:42] We need to weigh the pros and cons of what's more important. There isn't always a cut and dry answer.

Certified Financial Planner Board of Standards, Inc. (CFP Board) owns the CFP® certification mark, the CERTIFIED FINANCIAL PLANNER™ certification mark, and the CFP® certification mark (with plaque design) logo in the United States, which it authorizes use of by individuals who successfully complete CFP Board’s initial and ongoing certification requirements.

Resources & Links Related to this Episode

• Wealthquest Get Started

• Living a Rich Life: The No-Regrets Guide to Building and Spending Wealth

• Megan Hammann

• Social Security Administration

Sam and Wealthquest President David Kern continue their insightful dialogue on giving and generosity in this episode. They delve into tax-deductible methods of giving, highlighting the benefits of donating appreciated shares to avoid capital gains taxes. The conversation also explores the types of shares that may not be ideal for donation. 

Furthermore, they discuss the advantages of donor-advised funds, combining charitable giving with effective tax strategies. This episode emphasizes the importance of integrating generosity with a comprehensive financial plan, ensuring flexibility and tax benefits in your philanthropic efforts.

Episode Highlights: 

[02:55] We're now shifting gears to gifting to nonprofits or charities. This would be any 5013c that doesn't pay income tax.

[03:11] You can be charitable and benefit these organizations and get a tax benefit in the process. 

[03:26] Gifting shares or assets to charities. If you sell a stock that has increased in value, you'll have to pay income tax on it. If you gift that stock to a charity, neither of you pay taxes on it.

[04:00] You can also record this on your Schedule A to see if it works for you this tax year.

[05:08] You don't want to donate shares that have lost value. You want to donate shares with the lowest cost basis or the greatest amount of appreciation.

[06:27] Think of a donor-advised fund like a holding pen for charitable donors. This fund can also receive appreciated securities.

[09:53] Bunching is two years worth of giving in one year. 

[12:27] Qualified charitable distributions or QCDs. Required minimum distributions RMDs. 

[14:19] If you're already charitably inclined and you're going to give a certain amount, use a QCD instead of paying taxes on your required minimum distributions.

[17:25] You can also make charities the beneficiaries of your accounts. If you leave an IRA to a charity, they won't have to pay taxes on that. 

[18:47] Bonus: Specific to Ohio. Scholarship granting organization SGO is a new Ohio based tax scholarship program. It receives contributions from donors and grants scholarships to eligible students.

[20:11] Giving to an SGO will reduce state tax liability.

Certified Financial Planner Board of Standards, Inc. (CFP Board) owns the CFP® certification mark, the CERTIFIED FINANCIAL PLANNER™ certification mark, and the CFP® certification mark (with plaque design) logo in the United States, which it authorizes use of by individuals who successfully complete CFP Board’s initial and ongoing certification requirements.

Resources & Links Related to this Episode

• Wealthquest Get Started

• Living a Rich Life: The No-Regrets Guide to Building and Spending Wealth

• David Kern

• The Power of Strategic Giving to Individuals - Part 2

• What Motivates Generosity? - Part 1

• Ohio SGO

This is the time of year when we think about giving and generosity. This episode is the second in a three-part series on the topic. Sam and David Kern, president of Wealthquest, discuss strategic giving to individuals in this episode. They will then explore ways to give offering tax benefits in the third part of the series, airing next week. We discuss the emotional and psychological benefits of being generous and the two key ingredients of generosity: action and attitude. We also talk about identifying 'circuit breakers' that prevent us from being generous.

Additionally, we explore how creating an 'abundance fund' can foster a generous mindset. David encapsulates this idea by saying he's never seen an unhappy generous person, underscoring the importance of giving. Next week, we’ll focus more technically on the quantitative side of generosity. We're going to discuss strategies and tools that you can use to be more generous, increase efficiency, and achieve better tax benefits.

Episode Highlights: 

[05:59] Giving and generosity towards individuals is usually non-tax deductible. Generosity for entities that we do get tax benefits from.

[06:58] The lifetime gift and estate tax exemption is 13 million dollars. The yearly threshold is $17,000. This is the annual gift tax exclusion.

[08:28] A form 709 or gift tax return is required for any amount over that $17,000. The numbers change every year, so they need to be double-checked.

[10:27] Cash gifts with those strings attached or wonderful. Even if the money is used in frivolous ways people are learning.

[10:42] You can open a Roth IRA for a child or grandchild if they have income and gift a contribution on their behalf. This can jump start their retirement and get them investing.

[11:43] 529 or educational savings accounts are also very popular. All of the growth of these accounts can be used tax-free as long as it goes towards educational expenses.

[12:53] You can also pay medical or tuition expenses on behalf of someone else. When you pay directly to the institution it doesn't count towards the lifetime gift exemption.

[13:35] You can also give appreciated shares of stock. You're transferring shares and transferring the tax burden.

[15:24] Paying directly to an institution for medical or tuition is not tax deductible.

Certified Financial Planner Board of Standards, Inc. (CFP Board) owns the CFP® certification mark, the CERTIFIED FINANCIAL PLANNER™ certification mark, and the CFP® certification mark (with plaque design) logo in the United States, which it authorizes use of by individuals who successfully complete CFP Board’s initial and ongoing certification requirements.

Resources & Links Related to this Episode

• Wealthquest Get Started

• Living a Rich Life: The No-Regrets Guide to Building and Spending Wealth

• David Kern

Sam dives into a Wall Street Journal article that discusses the findings of a study conducted by the Mercer CFA Institute on global retirement systems. The study assigns the US a grade of C+, indicating that Social Security and 401(k) plans leave Americans less secure than retirees in other parts of the world.

The study ranked 47 countries, with the US finishing in the middle at 22nd place. It considered factors such as benefits, government debt, demographics, and home ownership. Sam elaborates on how our retirement systems stack up against those of other nations and offers insights on major pitfalls to avoid as one approaches retirement.

Episode Highlights: 

[02:10] This episode is inspired by a Wall Street Journal article called The U.S. Gets a C+ in Retirement based on a study that ranked 47 countries on retirement. 

[04:16] They looked at the public sector and the private sector or Social Security and company sponsored retirement plans.

[04:32] Two to three decades ago the private sector mostly had pension plans or defined benefit plans. All of the responsibility for providing retirement fell on the employer and their plan.

[05:54] We've now seen a big shift into 401(k) plans or defined contribution plans. Employers often match. The burden has now shifted on to the individual.

[06:48] The public sector is largely Social Security.

[07:37] The US has shifted from defined benefit plans to defined contribution plans, whereas other countries haven't made that shift.

[08:25] In the US, the main way we're going to have retirement is from what we save. Social Security is a supplement. Some people may also have a pension plan.

[09:06] In other countries, a government pension is the main source of retirement.

[09:26] Pros of the US system include many great savings options and autonomy. The cons include the benefit of retirement falling upon us.

[11:22] When the responsibility falls on us we have more fear and more worry which can create panic and bad decisions.

[11:53] The antidote to fear and worry is having a financial plan that will give you some certainty.

Certified Financial Planner Board of Standards, Inc. (CFP Board) owns the CFP® certification mark, the CERTIFIED FINANCIAL PLANNER™ certification mark, and the CFP® certification mark (with plaque design) logo in the United States, which it authorizes use of by individuals who successfully complete CFP Board’s initial and ongoing certification requirements.

Resources & Links Related to this Episode

• Wealthquest Get Started

• Living a Rich Life: The No-Regrets Guide to Building and Spending Wealth

• The U.S. Gets a C+ in Retirement

• Mercer CFA Institute Global Pension Index 2023