Are you planning to retire in 2026? In this episode of Wise Money, we provide you with a retirement checklist that covers the most important decisions to make in the final stretch before retirement. Learn how to stress-test your plan, align your income and investments, and coordinate taxes, Social Security, and healthcare so you can transition into retirement with clarity and confidence.
Season 11, Episode 18
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Transcript: Planning to Retire in 2026? Your Complete Retirement Checklist
It’s time for wise money with Korhorn Financial Group with certified financial planners Kevin Korhorn, Mike Bernard, and Josh Gregory.
Segment 1: Welcome to another episode of the Wise Money Show with Korhorn Financial Group, where every week we’re helping you take your next wise step in your financial life. Thanks for being here, friends. My name is Mike Bernard. I am your host. I’m also one of the certified financial planners on the program. And with me in the KFG studios, my business partners and fellow CFPs, Kevin Korhorn and Josh Gregory. If you want to retire with confidence, you need to ensure all six areas of your financial life are integrated and working together. If you’re planning to retire in the upcoming year, what action do you need to take in your six key areas of your financial life? That and more on this hour of Wise Money. That’s right. Yeah. Are you wanting to retire in the upcoming year? Is that maybe is that the goal? Uh maybe is it 2027 thereafter? or even if you’re early in your career learning right now of sort of the the things that you need to do leading right up to retirement, we’re helping with that right now. If you have a question for the program, we’d love to hear from you. You can call us or text us. 574222000. That’s 574222000 online. Wisemoneyshow.com is where you can engage with us, learn more about the show, learn more about the firm, leave questions there as well. And then all of our social media, wherever you’re at, we are there as well. Search the Wise Money Show. We’re going to go through uh six to seven different things that need to be on your checklist if you’re hoping to retire in 2026. But guys, just jumping right in if you were planning to retire in the upcoming year, what’s the number one thing? What’s the first thing that you would be doing? Man, I I think most of my career whenever I hear that someone’s planning to retire in the next 6 to 12 months, my mind instantly goes to it’s time to start a dress rehearsal for retirement. If if you haven’t done that already, have you figured out what your cash flow is going to be? Have you started living on that amount of income each month? Have you had any test runs? In other words, because when you retire and and the paycheck ends, you’ve got something lined up, right? Maybe you’re turning on social security, maybe you’re blessed to have a pension, or maybe you’re going to be drawing off of your investments right away. What whatever it is, there’s going to be some amount of income coming in. And my question is, well, have you practiced living on that? I Josh, you took the idea right out of my mind. That’s exactly what I was going to say. Early in my career, I was meeting with an individual who was a physician, was a doctor, and made a a very good amount of money. And I we don’t make any value judgments. We look at folks financial situations, not impressed by the um by balances and not impressed by mistakes and failures. Well, this individual admittedly said, “Yeah, we hadn’t started saving as much as possible. We did a lot to support our kids. Um, but we’ve got about a million dollars saved up and we’re going to be ready to retire. I’m going to retire in about in about five months, six months, something like that. Well, the problem is his income on a monthly basis at the time, this is a while ago, was 25 grand a month. Nice. And he was telling me, “Well, we’re going to live on about eight grand a month in retirement.” And so I said, “Well, start doing that right now.” And he was he was trying to talk me out of it. Like, well, no, I I wouldn’t do that. And it’s like, well, listen, if that’s what you’re going to do in a couple months, just start doing it right now. And guess what? You’ll live on eight grand and you’re going to have a lot of extra money to start saving into, you know, filling up different buckets and whatever in these last few months before retirement. And and sadly, that that conversation. He didn’t he didn’t like that idea, which I’m going to say that sort of poked a hole in in the plan. But uh but yeah, I I completely agree, Kevin. First thing you would do, number one thing you’d do if you were planning to retire in 2026? Well, I you know what I would do? I would talk to a planner. I talked to a financial planner. Make sure that they’re certified and that they practice financial planning in the six areas of CFP. And I’ve talked I last week I was meeting with a client and she was telling me how they gave some information to their advisor uh who really just sells investments. Doesn’t make him a bad guy, but he just sells investments. And he took some information and put it into something and gave them oh well it looks like you can do this. Um but he even she said well he didn’t account for these various things and so this is where unfortunately great job for her to realize that to recognize that. Yeah. Right. And and she and they’re coming, you know, eventually as people get closer to retirement, they realize who do I want in the front of the plane, even even if there’s no turbulence predicted, I want the best pilot possible and helping me navigate. And I need someone who can know my situation as well as I do and create a plan that I can follow. And in the event that I’m not here, my spouse can pick up right where we left off and function. And it it it and then I have a I gotta have a plan that works. Yeah. Okay. So, here’s a question, Kevin. You’re saying if you’re going to retire in the next year, if you haven’t done it already, then get connected with a a financial advisor, a guide, or whatever. What’s the closest anyone has ever come in for their very first meeting ever to their retirement date that you guys can remember? like how how close have people gotten before they uh pull the trigger on that advice? I remember one who came in beginning of September and said, “I’m retiring September 30th.” And it was of, you know, of this year. Yeah. Of of this year. And they hadn’t done any planning. They hadn’t worked with anyone ever. They were funding a 401k, had a little bit in there, but also had a pension that they were going to cash out. And and so they had emotionally made the decision. They had already communicated the decision and didn’t even know fully if it could work. And it was it was if you tell me this can’t work, I’ll just go back to work somewhere else, but I am done done done. So my mine was, you know, in that month. I had a client once uh brand new client, they came in and said, I retired yesterday. Now, how do I make it work? Okay, top that, Kevin. Yeah. Yeah, you’re not gonna beat that. I can top that cuz I met with some folks this year that are about 8 months into retirement and have said, “Okay, we we had all this energy and excitement and enthusiasm. We had this plan and it’s just not working and so can you help us create a plan?” I’m going to call a fault there. You can’t say that they had a plan. That’s someone that came in after retirement. Josh wins if we’re declaring winners here. But okay, how does he win? He’s he’s a day after. I’m eight months after. All right. So So here we go. You’ve got to you’ve got to start working with your certified financial planner and you’ve got to start with a plan that works, a five factor retirement plan that works. So the example that Kevin shared of the individuals that he met with this week who said yeah they were working with an investment professional took some numbers threw it into a machine a machine spit out an answer and and they had the the nut the the the guts to say like I I don’t I don’t really know if you put the right inputs in to trust that result. You need to have the right inputs in. That’s the five factors. Okay. The five factors are age. What age are you going to do you want to be? Do you want to retire? How long are you going to live? So, so how long is retirement? That’s age. Second is what is your lifestyle in retirement? What do you expect to spend in retirement? This includes taxes. That’s an expense. This includes health care. That’s going to be one of your largest expenses in retirement. These are things that typically this this individual that Kevin referenced, typically investment professionals that just throw some numbers into a machine, they don’t account for all of that. Okay? You need to be very specific on what you expect to spend in retirement. Your retirement income, that’s the third factor. How are you going to optimize social security? What other sources of income do you have? Fourth, how much do you have saved up for for retirement? And how much are you going to be continuing to invest uh between now and when you retire? And then how much risk are you comfortable taking with those investments? That’s the fifth that’s the fifth factor. If you haven’t built that out yet, you need to work with your certified financial planner. You can download our guide to get started though. Uh go to wismoneyguides.com, download the fivef factor guide. It’s going to walk through those five factors and a few questions sort of prompting you to help come up with well what’s your range of answers in each of those so that you’re equipped to sit down with your CFP, build out that five factor plan, and then manage the trade-offs. Man, what you just said is so important. Do you have a range for what you want those factors to be? So, a a range of ages that you might retire. If you’re thinking that you’re going to retire in the next 6 to 12 months or so, what if you found out that man, the plan doesn’t work quite as strongly as you thought, is there any flexibility on maybe working just one more year or are you going to have to make adjustments in those other areas? But that, you know, I I go back to what Kevin said. If you know you’re going to be retiring in the next year, do you have an adviser in your life who’s helping you to to weigh those options um to balance out those factors and help make sure that your plan is solid going into retirement. Even just an adviser that can ask you some questions and help you think through and process this. I can’t tell you how many folks have come in and they’ve said, “Hey, look, we’re going to retire next year.” And I’m like, “Great. So, tell me about retirement. Tell me about your career. How long you’ve been looking forward to this?” and kind of what your plan is and like well I don’t know we’re going to be 62 next year so that’s when you retire and I’m like okay um that is that that is a way to approach it. Yeah, but I would rather approach it that hey the things that need to be checked off the list are all done. Yep. Now I’m ready. Let’s go. And so we’re going to help you with that checklist right right now. And and those five factors, they’re all interrelated. And then you’ve got to stress test them to see well does the plan work? What’s the confidence ratio? Your certified financial planner is going to help you with all of that. Okay. What are the other things that need to be on your checklist if you’re going to retire next year? We’ve got that more coming up on the Wise Money Show with Korhorn Financial Group.
Break 1: Hello YouTube. Thanks for being here. This is the Wise Money Show. What you’re watching right now is our weekly 1 hour talk show that airs right here on this channel 10 a.m. Eastern time every Saturday morning and also on podcast at the same time and also on a couple local radio stations at the same time as well, which is why the content is broken up the way that it is. This is a commercial break right now. We’ve got segments and so on. All that’s for radio and also it’s a talk show. So, we’re going to get into different things and and sort of meander and nothing scripted and and so uh it’s long form. If you’re looking for something more short form, more direct, even shorts or reals, we’ve got all of that right here on this channel as well. So, make sure you hit that subscribe button, turn on notifications so you’re made aware every time we drop new content. If you like the content, like the content. Thank you very much. All right. Um, I think we’re good with five factors and we can go we can Once you’ve got a plan that works, everything else is really not like sequential order. This all needs to happen at once. Okay, cool. No bonus content this time. Maybe if we’re if we’re hustling and on track, we might do one. Nope. I think that’s a blessing to the listeners. Do you have it already teed up? I don’t. No. Okay. Yeah. Well, there you go. Here we go. That’s a bonus. I guess I guess we’ll call I’ll call we’ll call the quick break a bonus. How about that? Yeah. All right. Here we go. So, what’s we’re going to number two? What’s the We’re gonna pick up having the right income plan for retirement and then the right investment strategies to feed that income plan. Those two. I love it. Assuming we have time to hit both. Here we go. Hit you.
Segment 2: If you’re retiring in the in the near term, let’s say in the upcoming 12 months, 6 to 12 months, how are you going to optimize social security? Does it fit? Does your social security decision fit with your investment strategy? Does it fit with your tax strategy? Does it fit with your Medicare strategy? Oh, we are helping with all that right now. This is the Wise Money Show with Korhorn Financial Group. Thanks for being here. My name is Mike Bernard with me in the KFG Studios. Kevin Korhorn and Josh Gregory. Stay up to date on all wise money content. Find us online, wismoney show.com, and then all of our social media wherever you’re at. We are there as well. Just search the Wise Money Show. Talking about if you’re planning to retire in the upcoming year, 2026, what do you need to do? You need to start with a five factor retirement plan that works. Not just a back of the napkin analysis, not an online calculator, not just, oh, I heard at a water cooler someone else that did my same job, they retired when they were this age, so I’m going to retire at that age. A five factor retirement plan that is stress tested and has a confidence rate that is high enough where you can say, “Yeah, I don’t know the future, but I have confidence heading into that uncertainty that I’m on the right track.” That’s what you want to have a confident and successful retirement. Then you need to build out. So then there’s a lot of other items. We’re going to fill up your checklist and these are all this is not a sequential like list. It’s all hey, this all needs to happen at sort of the same time. But you then need to build out an income plan that fits within that fiveactor retirement plan and also fits within your investments. So, this is where you’d optimize social security, where you’d set up the right sustainable withdrawal rate, all that sort of stuff. You need to build out the right income plan. Do you guys remember we used to use some spreadsheets to model this stuff prior to software getting as sophisticated as it is and everything? Confession. You still do? I love it. I I do too. I You basically have I know, but the software we use is just a spreadsheet. I know. I know. I know. But the the the visibility to look year by year almost treat every year as a column on the spreadsheet if you can picture it. But do you know where your income is going to come from each and every calendar year? And yeah, one of the line items is social security. And for a lot of people, it kind of forms the base of their income strategy. Um hopefully it’s not the only thing that you’re going to try to live off of because social security was never really meant to be your entire livelihood in retirement. But if it gives you a base of dependable income that you can’t outlive, yeah, that’s key. And the question is, well, when do you turn on that stream of income? Because if you started early and maybe take some sacrifices, you take some haircuts on that benefit because you’re under your full retirement age, you’re going to collect longer, more years, but you’re giving up a permanent benefit for the rest of your life, maybe even for your spouses if you uh passed away. But the the point is if you look at what your lifestyle need is and then start taking inventory of all of your income sources, you’re going to find you have to supplement social security by drawing income or drawing distributions out of your investments. And the question is what’s the best way to do that? Do you frontend load the investments and postpone social security? Do you start social security right out of the gate? And in my opinion, this is where the that sophisticated software comes into play. you model different versions of the story to figure out well which one is going to optimize or help uh you have the highest probability of success given the fact that you don’t know what the future holds right and and so to me when you get into at a granular level do you know where your income’s going this is the nerdy stuff that your financial advisor uh loves to do and can really add value in your life so that you’re not wondering so I one of our um financial planning coordinators Tom Fouts on the team. He’s been on that with us at KFG for a long time. Love Tom and he’s fantastic at what he does. And we were doing some collaboration. This is a few years ago on someone’s retirement. And so I was sort of casting the vision like hey the five factor retirement plan that you’re helping build like that’s that’s the high level. But then after that you know this client I think was about to retire. So, we were then building this income plan and he was like, “Mike, I’m not really an analogy person, but I feel like this is like you’re in an airplane and that five factor retirement plan that works, that has the right confidence ratio, like that’s your approach.” Like you’re you are you are approaching your uh I don’t know what is that that um the runway runway. Thank you. I don’t know why that was just giving me, but so so that’s your approach. You’re you’re directionally in line. Okay, now you’re starting your descent. That’s the income plan. Like now you okay, we know the plan works, but we’ve got to hit the runway with the wheels down and everything. So, we’ve got to start our descent. Where are we going to pull the dollars from? Where are we going? Like, when are we going to turn on social security? Like, let’s get it all mapped out. And then the month that you retire, the month after, turning on those income streams so that you’ve got the right income popping up right as your paycheck goes down. A lot of people struggle with this because social security is a couple months delayed. Um, sometimes you get some paychecks that spill over. Sometimes you should live a little bit off of cash, whatever. So he’s like, and that’s sticking the landing is having all of that stuff turned on at the same time for the right time. What a great right analogy from a leftrain guy. I know. But here’s the thing. So Josh, you you started with social security and we are not a one-sizefits-all approach that it makes a lot of sense for a lot of people to draw Social Security right away. There are some circumstances where it may make sense to delay until the beginning of the next year for tax planning reasons. I mean, just think about the power of delaying your social security from whenever you’re planning to retire until January. That pushes that income into the next tax year and it opens up a lot of tax planning opportunities. maybe delaying to full retirement age, maybe delaying all the way to 70. There’s no one-sizefits-all. But here’s why that decision is so important. I think sometimes people listen to financial adviserss and they want to arm wrestle about, well, which one is best? And yeah, there’s some arm wrestling there you might need to do. I would do it objectively with the numbers. But here’s why it’s so important. Social Security is the only source of income that you have in retirement that slays all three retirement income dragons. First, market volatility. No matter if the market’s up or we’re in a recession, that’s a steady paycheck. Two, inflation. And you might argue with it. You might say, “Yeah, but that’s garbage inflation. They don’t even adjust it by the right amount.” I know, but they at least adjust it. It It There’s some calculation. I say it wounds that dragon. It doesn’t completely slay it. Okay. I think it like it might chip one of its scales. I mean, at best. All right. You stick with your story. Got it. Then and then third longevity. It’s and that’s that’s what you emphasized Josh that it’s the social security that income is going to be there as long as you live. And think about those things. Now there are other you’ve got to surround your retirement income um plan with other sources of income that maybe do a better job at any one of those. Right? So your investment portfolio should really crush inflation. Right? That’s the one. If if social security wounds inflation, your portfolio should just crush it. But social security is unique in that it addresses those three areas. And therefore, it’s a crucial decision, not just an emotional one. Yeah. And so if you said, what is it that is going to slay all three of those? It has to be my portfolio. Like my portfolio has to slay all three of those dragons. And and I and I I’m getting the finger from Mike. No, no, no. I think you’re taking us right where I would want to go because because the portfolio you might say no no no because it’s subject to market volatility and that makes me very nervous if my portfolio goes down 20% or 25%. Then am I going to be able to draw out sustainably the right number? And you can you can so that the next thing you do after or in concert with building the right income plan is building the right investment strategy, your investment strategies that can feed that income plan and fit within your retirement plan. Right? Because you’re going from accumulation, and you might say, well, 100% of my portfolio was focused on accumulation to not all of my portfolio is any more focused on accumulations. I I’m flip I’m toggling the switch for a portion of my portfolio to focus on withdrawals. And so I’ve got withdrawals where I don’t care about market volatility, market risk, and everything. It’s so funny to me how quickly um people you’d want to talk about taggling taggle from you know the market was down 20% in 2022 and people were were very pessimistic and the the the market has really been ripping since September of 2022. And if you’re a pessimist or you’re looking for reasons to be cautious, I mean the the the price toearnings ratio, we don’t have time to unpack all that. Price to earnings ratio right now just surpassed where it was at the end of 21 that sort of led to this really frustrating investment experience in 2022. So guys, like that’s the thing. If you’re looking to retire in the next 6 to 12 months in in the year 2026, it’s very possible you are going to retire into a into a headwind with the markets. You have to have the right investment strategies so that you have confidence even if we face that headwind. You have confidence if the sequence of return risk is working against you. Now, a few weeks ago, I think it was November 8th, we did a an entire Wise Money talk show about different retirement investment strategies, evaluating pros and cons of each. I would go check that out if you haven’t. It’s on podcast and the YouTube channel. Catch up on that. This is sort of a teaser to that, but you do want to make sure that you’ve got a wise investment strategy for retirement. All right, we’ve got more coming up here on the Wise Money Show with Korhorn Financial Group.
Break 2: There’s more to pick up there. Well, I’m trying to send you guys uh you guys know this like it’s very very clear we’re financial planners by day and like not professional YouTubers or radio personalities. Some people like have totally flipped the switch and they really are good at it and we are mediocre on our very best days. But that uh November 8th that show I’m not not sure what we titled it. Uh that was I I thought that was a good show. Like I felt like it was very very helpful content. So if you haven’t if you are think if you’re looking to retire soon in the next year or even the next couple years how you structure your investments it’s as crucial as anything else maybe even more crucial. So you just need to know well what are the options? what option or or combination works best for you and we lay out all five of them. Um and in in that episode, so I’ I’d go check that out November 8th. Okay. So, a little fun bonus content. The top five companies in the S&P 500 represent nearly blank percent of the index. Well, okay. So, we’re recording this early. This is airing about a month after we’re recording it. So at the time of recording it is a record. We are now at the top 10 have surpassed 41% or about 41% of the overall index. We’ve never had a company represent one company represent more of the index than we have right now. That’s Nvidia. I think it’s 8%. Uh the top three companies uh roughly represent about 20% of the index. Yes. And um typically it’s the top 10 that will represent about 20. So, we are as topheavy as we’ve ever been. And let me let me scare you. Lucky guess. I I know. I Yeah. Well, it’s really fun to play guessing game with you, Michael. Let me let me really scare you. So, concentration builds wealth. Okay. Diversification helps preserve it. And you’ve never been more concentrated in your S&P 500 index as you as you are right now. So, that that is either great or or not. But here’s the thing. You might say, “Oh, that’s all AI.” Open AI is not publicly traded. I know. Well, a Palanteer is arguably the most expensive stock ever in history right now based on their forward or based on their sales. It’s unbelievable. I think 86 times sales. Look at what Michael Barry did though. I know. They sure. But listen, here’s the thing. I think, hey, I put a dollar in my 401k and I want diversification, so I’m going to just put it in the S&P 500 index fund. Just that gives me some sort of safety. Okay. That dollar the you according to you, the 20 cents of that dollar went into three companies. Mhm. 8 cents of that dollar went into one. Yeah. And so you have this machine, this retirement planning machine that is feeding these beasts and they are just getting money. And Apple was in that uncomfortable position not too long ago and what they decided to do was muff their AI strategy and kind of take themselves out of the top whatever. Uh so and it’s interesting because it appears as though um Meta is struggling as well. All right, here we go. We we’ll pick back up on investment strategies. We’re not going to go through all five again, but I think we should at least tee up the personal pension plan. Just talk talk about that for a little bit and then we’ll get into Medicare. So I I did foreshadow that in talking about switching from accumulation to withdrawal mode, but not I mean this to me the thing that I want to point out is it’s not my whole portfolio that needs to go into withdrawal mode. 100%. Right. 100%. All right. Here we go.
Segment 3: One of the biggest decisions, financial decisions that you’re going to make in all of retirement and and it’s crucial as you get close to retirement, you decide how do you calibrate? How do you structure your investment portfolios to to provide consistent income, a competent retirement in the face of an uncertain stock market? We’re helping with that right now. This is the Wise Money Show with Korhorn Financial Group. Thanks for being here. My name is Mike Bernard. With me in the KFG studios, Kevin Korhorn and Josh Gregory. Every episode of the Wise Money Show is on podcast. Wherever you listen, just search the Wise Money Show. Subscribe to it there. Rate the program there as well. We appreciate it. We’re talking through the checklist, the things that you need to do if you’re planning to retire in the next year, 2026. And let’s be honest, if you’re planning to retire a year after that, a couple years after that, this is all critical information that you need to know about. So, this shows for you as well. The the you need a plan that works, a five-factor retirement plan that you’ve stress tested and that works. You then need an income plan that fits within that fivefactor retirement plan. And then you need an investment strategy, a an investment calibration to feed that income plan. We shared recently uh about five different investment strategies you can have in retirement. But there’s one Kevin, you mentioned it earlier uh or you referenced it earlier where when you retire, a lot of times people think, okay, well now I’m going to start drawing money out of my portfolio. Therefore, I need to shift my entire portfolio to very safe or most of it to sha safe. A lot of target date funds will do this as well. and instead, no, you need to parse it out based on time horizon. Yeah. Uh you’re referring to what we call a personal pension plan, but this essentially bridges the gap between the investment decisions that you’re making and how you’re going to get income in retirement. How you’re going to supplement things like social security or pension or rental income. Whatever your streams of income are, they’re probably not enough to cover your whole lifestyle. And so you’re going to be placing some kind of demands upon uh your overall portfolio. And so the way that you ought to be structuring in our opinion uh your retirement portfolio is into three different buckets. Each one having its own separate uh purpose. The first one is very liquid, very safe, and its goal or its purpose is just to uh pay out money to you on a regular basis like a paycheck kind of a paycheck replacement or or simulator. So that might be a thousand bucks a month, maybe it’s 2,000 a month, maybe more for you. Just depends on the the size of your portfolio, but you want to have probably a year to as many as three years worth of cash or or distributions in that bucket. Then the second one is more of an income generator. This is where you would be investing in maybe uh the more traditional investments that your mind goes to things like CDs, bonds, fixed annuities, stuff that doesn’t fluctuate in value, but it is there to generate some steady income for you. Predictability is what we’re shooting for in in that bucket. And that might represent years uh 8 through 10, let’s say, or 7 through 10. It’s a number of years that you just know it’s going to keep replenishing that paycheck bucket. And what that does, that can’t represent your entire portfolio, though. Because the problem with both of those first two buckets is they are very vulnerable to inflation. They’re not growing. They’re not going to keep up with lifestyle. And and the way that you deal with inflation then is with the third bucket in this personal pension plan, and that’s the growth portfolio. This is where you have a long-term horizon. This is money you’re not going to touch for at least 10 years and um you want it growing. You want it compounding for you. So, you can’t be too safe with this money. This is where you need to be able to accept a little bit of risk because risk is what provides the growth engine for your portfolio. And as it grows, then you and your certified financial planner will make decisions on when do we pull some gains or some chunks off of that growth uh bucket to replenish the earlier ones that I was already describing. Yep. That’s that’s how you overcome the sequence of return risk. That’s how you overcome the emotions, especially early in retirement, of oh my goodness, I can’t stay retired if my portfolio if the market’s going to perform this way. That’s how you that’s how you how you build out a stratified investment uh approach that fits your retirement income plan and that five-factor retirement plan. All right. Now, next, and again, this is not really in sequential order. This all needs to happen at once. And really, the education with this next one really starts maybe well, right now, a year before you’d want to retire. And that is having a game plan for your health insurance and retirement. If you’re retiring before age 65, that includes creating a bridge to Medicare. If you’re retiring at 65 or after, it’s got a it’s getting a plan for making the biggest health insurance decision of your life. Are you going to go with traditional Medicare part AD and a supplement or go with a a Medicare Advantage plan, Medicare Part C? You’ve got to build that out. That’s the next big decision you need to make right now or start getting that that learning and getting the right professional team in place if you’re planning to retire in 2026. What else would you say guys on Well, okay. So, what is that professional team going to be doing for you? Um to me when it comes to your health insurance decisions either right on the eve of retirement or let’s say after age 65 when you go on Medicare and have that Medicare supplement everything. Yes, that is a it’s an insurance decision or a protection planning decision that you need to make. Are you comfortable with the level of risk that you’re going to keep on your own shoulders versus transfer to an insurance company? But it’s also a cash flow decision. like this is a major line item in the retirement budget and unfortunately uh it’s also a tax picture because your tax situation or your overall income picture could influence how much you end up paying for this insurance. So, it’s a line item that has the potential to skyrocket on you if you’re not careful. And so this is where uh your team, your certified financial planner, your CPA, they need to be collaborating with you to identify well where is your income going to fall and are you going to be approaching any of the thresholds of income that cause things like Medicare Part B or Part D premiums to jump on you. You you get essentially I’ll use the word penalized for having bigger income. And uh all of a sudden what’s a big line item before can become huge. Um, and so you need to be managing that. It’s it’s a really critical decision that affects your overall retirement success level. So here’s the thing, Josh. You you made a key point that this is a health care. This is an expense for your retirement. So really from the first time you build out your five factor retirement plan, which should be in your 30s or at the latest your 40s. Okay? This needs to be a line item. Not that you’re having big discussions about what you’re going to do and and understanding all of the inner workings, but you’re at least aware and you’ve got kind of preset line items built in there. But typically, I would say maybe three years before you retire, that’s where your certified financial planner should take 15 minutes or so in one of your one of your meetings and just start teaching teaching well what your options are if you’re going to retire before age 65. All right. Well, so there’s Cobra. here’s the pros and cons of going with Cobra. There’s healthcare.gov. Here are the pros and cons and planning opportunities. Here are share plans. They should start teaching that so that it’s not a shock or a surprise or all of a sudden you’ve got this decision to make and you feel totally unprepared. Okay? Uh or teaching Medicare, that big decision, traditional Medicare or Medicare Advantage about three years before start that conversation. a two years before go a little bit deeper and then a year before that’s where you start planning out okay who’s the health insurance expert that you’re going to be working with what team when do you want to sit down with them what’s the tri like what’s the initial idea are you probably going to do this does it probably make the most sense to do that so you have it all teed up and then typically three months before you retire that’s when you’re going to have your first meeting with that health insurance expert you’ll probably meet with them two times maybe three between that 3 months and the time you retire. And the reason why your certified financial planner needs to start and is you know the the three key words we pull out of our mission statement are educate, advise, and serve. But you the education piece is so important because it’s not what you might think. Yeah. That impacts which medical, you know, health insurance fill in the blank you’re going to use. And I think there’s going to be some hopefully some changes coming. The Affordable Care Act, as it turns out, hasn’t been as affordable as we had hoped. And so it appears as though there needs to be some meaningful subsidies in order to make it work. Well, so are they are we going to keep subsidizing that care or are we going to uh scramble the eggs and take a different approach to healthcare? We we there are some big decisions that need to get figured out. Yeah. and and you might have some really strong opinions on that as as I I’m I’m sure everyone does. The the point is though, what’s your plan? What’s your plan? And and what makes sense for your situation given the range of options and uh and looking at I mean this this dovetail Josh, you took us there, but doves dovetailes right into the next thing that you need to have coordinated when it comes to if you’re going to retire in the next year, and that is having the right tax planning, right? looking at what your tax planning strategies are for your last year of earned income, but also the first several years of retirement. That’s going to inform just sort of merging these together. That’s going to inform a little bit well, what should your health your your your health insurance strategy be if you’re retiring before Medicare? Is there a way to have your income very very low so you’d get some of these subsidies or does that not make sense in your situation? Work with your CFP on that. All right, we’ve got more coming up on the Wise Morning Show with Korhorn Financial Group.
Break 3: That was three, right? That was three. So, we’re going to tuck these last two together. Tax planning and then cleaning up your balance sheet. I’d love to get to any non-financial items that make the list. We might we might not have time, but we’ve got to hit at least these two. So, here we go. Short break. Good. Four segment. Land on the plane.
Segment 4: Many people under underappreciate that in the year you retire or leading up to retirement, the tax planning strategies that are about to go away that that you have an opportunity to do some things right before you retire. Many people overlook that just looking to retirement. We want you to capture those tax planning opportunities and the tax savings that can come with it. We’re helping with that right now. This is the Wise Money Show with Korhorn Financial Group. Thanks for being here. My name is Mike Bernard. with me in the KFG studios, Kevin Korhorn and Josh Gregory. Every episode of the Wise Money Show, as well as a lot of other content is on the Wise Money YouTube channel. Go to YouTube, search the Wise Money Show, subscribe to it there, turn on notifications so you’re made aware every time we drop new content and you can leave comments there, questions there as well. You can share it real shorts, uh, and lots of different content. So, go to YouTube, search the Y20 show. All right, helping you get get that checklist for if you’re planning to retire in the next six months, 12 months, even 24 months, what should be what should be on your radar screen when it comes to your financial priorities. I’m going to say simultaneous to everything else that we’ve talked about is having the right tax planning. And and as I mentioned, many people overlook this in their final year or final couple years of uh of of their working years before retirement. But if you do, you can bypass you can overlook a lot of significant tax planning strategies. For example, if you are entering retirement and you have, for one reason or another, have built up maybe more cash reserves than you really need. That’s a comfortable position to be in for retirement. That that’s fantastic. However, I have seen it oftent times where people say, “Well, okay, we calibrated and said, well, yep, you’re holding a lot of cash. That’s great. Yep, that makes me feel confident.” You’re not funding the Roth IRA. use some of that cash to fund the Roth IRA, a backdoor Roth, something like that in those final couple years. You’re not maxing out your retirement plan. I know, but my retirement plan works. We built that five-factor plan. It works. I know, but there’s some tax savings here. Meeting with some individuals this past week where we we did that and it was the plan was, well, by the time you go semi-retired and go part-time, you really don’t need to save up for retirement, but my guess is you’re going to because of the tax savings. And we built the plan as if they weren’t going to. They semi- they were semi-retired for 3 years. He maxed out his simple IRA every single year. Every single year just because of the tax advantages. Mhm. So making sure that you got the right tax planning. And the reason why it it behooves you if you’re three or five years out from retirement to meet with your certified financial planner is to look at what is what the mix of different investment um uh I’m going to say ownerships are. So if I have all qualified retirement plans and everything that I’m going to access in retirement is taxable, I am kind of locked in to what to any income management strategies. Whereas if I pile up some after tax money someplace else, now I’ve got a choice. Now I can mix a cocktail of non-retirement and retirement assets to get myself in the right income spot, especially if I’m retiring before 65 because my income is going to drive what I pay for my healthcare. Yeah. So, so having options is the key. But then when you have options, you have choices to make and you can still mess up the choices. Uh you could withdraw out of the wrong accounts at the wrong time or get that cocktail um you know mixed incorrectly. And so there needs to be an overall philosophy or game plan that you’re approaching this with because yes, we want you to get to retirement with diversification of the types of accounts that you hold. So do you have traditional IRA accounts and Roth accounts? Do you have some taxable accounts as well? Allowing you to have to basically um adjust the mix of taxable income that you’re going to have from year to year. That just gives you a flexibility because you don’t know how the tax laws are going to change. In fact, I would even argue that that should be part of uh your overall tax strategy. How are you going to stay up on the changes that are happening within the tax code and what it means for your overall plan? This is not how I’m sure you’ve envisioned your retirement going, that you’re going to study the tax laws. And so having the right team around you in retirement I think is a really critical component of your retirement readiness. Yep, I completely agree. And and then the last reason why you need to make sure tax planning is part of your your like the year right before you retire is you’re going to get a preview working with your CFP of what the postretirement tax planning strategies should be. This is a multi-year tax projection. you should be looking and your CFP should sort of be priming the pump for, okay, in the first year of retirement, we’re going to likely be doing Roth conversions of this amount and we’re going to do our withholdings from this area. You’re going to draw income from this area and it’s all going to be calibrated. And again, like that year you retire, the year before you retire, starting to talk through those things so they’re not a surprise. That’s all part of the tax planning piece. All right. And then the last financial item on your checklist if you’re planning to retire in the coming year is use this time to clean up your balance sheet. And and this actually is connected to where we first started. If if the if there’s one thing that you needed to do right now is to if you were planning to retire in the next 6 to 12 months is start living as if you are already retired like from a financial standpoint. And sometimes this can mean well I’ve got some freed up resources. Yeah, we want to pay down that debt. We want to clean this up. We want to go take this trip. We want to do these other things. And all of that is sort of like cleaning up your balance sheet, getting you ready to retire. Wouldn’t you say that the last year before retirement, you see so much progress in people’s financial lives if they are dialed in? Because yeah, if if they’re living the lifestyle they’re going to be moving into in retirement, as you said, Mike, there might be some extra cash flow, some margin that that’s creating because your paychecks bigger than what you’re going to be living off of maybe in in retirement. that extra cash if that helped clean up any remaining debt that you have. Maybe you have a car loan that you just want to have wiped out. Maybe you’re putting the finishing touches on that mortgage and you’re you’ve been paying extra along the way and you’re on a glide path to have the mortgage done when your paycheck’s done. That’s a that’s a fun outcome for a lot of people. It might be that you need to build up some emergency funds. Um, I I’ve had people ask me,”Well, do why would you need an emergency fund in retirement?” Well, it puts some cushion in your financial life so that if you’re dependent upon drawing off of your investments and we come into an environment where you maybe want to ease off a little bit the amount that you’re pulling out of those investments, give them time to recover from a market decline or something. emergency type dollars, liquid savings that did not get squashed when the market dropped. Um, those can be a really valuable bridge to get you to uh the other side of a bare market, let’s say, or even if a a a surprise expense comes up. If every time a surprise expense comes up, it’s going to influence or impact your retirement or excuse me, your tax planning, that’s a problem. I I this year was working with some folks who were retired. they had a some surprise uh vehicle expenses. We had already done our tax planning. We had done a Roth conversion right up to the top of the 12% tax bracket and then they reached out and said, “I know this is going to mess up our tax plan, but we need five grand.” And that pushed them into the 12, excuse me, the 22% tax bracket. Not the end of the world, but if you had an emergency fund and some dollars you can draw from so that it kept your tax and your tax plan intact, that’s another reason to have that emergency fund, right? And we’re talking about optimizing cuz what’s coming to my mind is you may want to work with your certified financial planner on what convers I’m thinking of holes in the bucket or holes in the ship whatever you have and how do I patch those and a lot of times going into retirement you may need to have a conversation with your kids or grandkids and say hey listen we’re going into retirement and our life and lifestyle is going to be adjusted And therefore, you’re off the cell phone plan, you’re off the insurance plan, you’re off the whatever plan, you may need to make some adjustments. Yeah. And those are hard conversations. And I bet you’ve already been wondering, how do we do this? Like, when do we tell them, uh, hey, for Christmas this year, we’re getting you your own cell phone plan that you’re going to pay for, right? That doesn’t uh fly over too well. But when there’s when it’s tied to a big financial shift, that can be a very easy a much much uh easier conversation to have. It’s easier to have those conversations when you have to. Yeah. Which is why you want to be objective about these things. Which is why I go back to the very beginning of the show where Josh says, “All right, do the dress rehearsal. All right, I’m doing the dress rehearsal. There’s not room for these other kind of miscellaneous things or maybe even extravagances.” And a lot of times people really just kind of like doing that. Yeah. And so you might have to say no to some of the things you like doing. So here’s the question. If you’re planning to retire in the coming year, even two years out, something like that, are you confident? Where do you have peace? Are you confident that you are on track for a successful retirement? It’s got to start with that five factor retirement plan that you build out with your certified financial planner. To get started, go to wisemoneyguides.com. can download the guide and work through that workbook so that you’re prepared for your next discussion with your CFP where you’re going to build out that five factor retirement plan and do that stress test. But then you’re going to work through all these other items. Having an income plan that supports that and fits part of your investment portfolio then feeds that you’re making great decisions with social security and with Medicare. Cleaning up your balance sheet. It’s all connected. Work with your CFP on that. All right, that’s all the time we have for today. On behalf of Josh Gregory, Kevin Korhorn, all of us at KFG. Have a great weekend. We’ll see you next Saturday for the Wise Money Show with Korhorn Financial Group. Securities offered through Silver Oak Securities member FINRAs SIPC. Advisory services offered through KFG Wealth Management LLC. Join business as Korhorn Financial Group. KFG Wealth Management LLC and Silver Oak Securities Incorporated companies are unaffiliated.
