Retirement Roadmap

Time is Flying in 2025: Have You Caught Up With Your Financial Goals?

Mark Fricks Season 3 Episode 21

We examine essential mid-year financial steps that could help you finish the year strong and brighten your financial future. Time flies by quickly, making it crucial to check in on your financial goals periodically rather than putting them off indefinitely.

• Consider saving for retirement early, even if in small amounts, to harness the power of compound interest
• Check your workplace retirement plans - many now offer automatic enrollment at 3%, but experts recommend aiming for 10-15% contribution rates
• Consider taking advantage of catch-up contributions at age 50 ($7,500 extra in 401k) and the new higher limits between ages 60-63 ($11,250 extra)
• Are you planning for a potentially 30+ year retirement, as people are living longer but retiring earlier?
• Consider Roth accounts for tax-free growth - even opening one with minimal contributions starts the important 5-year clock
• Have you developed a tax strategy for retirement as most retirement savings are in tax-deferred accounts requiring future taxation?
• Are you prepared for healthcare costs averaging $165,000 per person during retirement?
• Have you ensured your estate planning documents are current and properly prepared?
• Is it time to rebalance your investment portfolios to match your risk tolerance and time horizon?

Schedule a complimentary consultation at masterplanretire.com or call 770-980-9262 to get comprehensive retirement planning reports that show if you're on track.

Have a topic or question you'd like Mark and Evan to address in a future episode? Email us at info@masterplanretire.com or call 770-980-9262.

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Advisory services offered through MasterPlan Retirement Consultants, Inc., a Registered Investment Advisor in the state of Georgia. Insurance, tax and commodities services offered through Fricks and Associates, Inc. dba MasterPlan Retirement Consultants.  The aforementioned are affiliated companies.


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Evan:

Are you caught up with your mid-year financial goals? Hi folks, thanks again for joining us. Welcome to Retirement Roadmap with Master Plan Retirement Consultants. My name is Evan and with me, as always, retirement Planner Mark Fricks. As hard as it is to believe, we are halfway through the year. During the show, we're going to examine some mid-year 2025 financial steps that could help you finish the year strong and brighten your 2026. I tell you, Mark, I think I'm avoiding the calendar. I don't want to know that it's halfway through 2025.

Mark:

I cannot believe it is halfway through 2025. And you know, great show, I think for the time it is, but again, time flies. It's amazing. We'll be singing jingle bells here before we know it.

Evan:

No kidding, and I think it's important to have a show like this to check in, because, especially when it feels like time is just going quicker and quicker and I have two little kids at home, so it also feels exponentially fast to me- Not so little anymore, though. Four and six. But you know they say what's the saying. My wife reminded me last night of the saying and it's the days are long and the years are short.

Evan:

And that's kind of how it feels, you know, when you got the little kids, all the responsibilities. Sometimes it can feel, I mean it's beautiful, but sometimes the days can feel like, oh, my goodness, I don't know how I'm gonna get through the end of this day. But then, before you know it, another birthday for a kid.

Mark:

It's wild. Well, you know the saying. What's that? Life is like a roll of toilet paper. The closer you get to the end, the faster it spins.

Evan:

That's true. That's good, actually.

Evan:

Write that one down.

Mark:

Maybe we can put up a diagram of that or something.

Evan:

But it's a great thing to do is to check in, because time does get away from us and especially with financial goals, it's so easy to say "I'll start, I'll start next month or "I need to put away more. Or I need to check in on my investments or I'll. I don't have time right now, I'll think about it next month and then, pretty soon, we could be years down the road and there are also very specific things to accomplish each year that you can get behind on, and if you stay on top of them, they can exponentially really set you up for a strong retirement.

Mark:

Well, I can say from personal experience, just talking about time, you know, when I was in my twenties and thirties and had my first corporate jobs and began starting some businesses and I'm like, first of all, I'm probably not going to make it to retirement, right, that's kind of your feeling when you're younger. But more importantly was, it's so far away and I've got priorities. Now I've got little kids at home, like you're talking about, I've got a new house payment, I've got you know, all this kind of stuff going on. And then that turns into ooh, my kids now have cars and I have insurance. Oh, now, now my kids are in college and it's just, it's not good.

Mark:

If you put it off because of those kinds of reasons, you'll never do it. So go ahead and just start small. Start with, you know, 2% at work or something. If you get a raise, at least take half of that and put it into something at work or personal account or whatever. I have a short-term savings and then the long-term savings, short-term being for that air conditioning is going to go out, right. The long-term is, like I said, is for retirement and hopefully your employer or if you're self-employed, you can do your own thing.

Mark:

But just start small. Start with something, because if not, somewhere down the road it could be 50, it could be 60. You're going to panic and you're going to be like I've not done anything or I've done way too little. And we have a lot of folks that come in here that have done a great job. We had other folks come in here that have practically nothing and they're in their 60s and we're just saying we'll do everything we can, but you're going to have to work this many more years, you're going to have to do this, and what if their health doesn't hold out? So we're not trying to scare anybody, we're just trying to talk reality here, and so I think today's show is so vital and I hope folks are listening and I hope they take it to heart.

Evan:

Yeah, it's never too early to start, and we'd like to say it's never too late, I wish that were always true.

Evan:

I wish that were always true, and that's the sober reality, you know, there are always strategies, no matter what situation you're in, but there's so much more flexibility, so much more freedom and control the earlier you take the reins on the situation, which brings us to the very first thing you said, and putting away as much as, even if it's starting small, putting away as early as possible. Keep contributing folks and stay informed. So making regular contributions to your retirement account is essential, but also staying aware of changing rules can help you avoid missed opportunities and grow your savings more effectively.

Evan:

Now the SECURE Act 2.0 has offered some new catch-up rules. There are new auto-enrollment rules. First of all. Starting in 2025, many retirement plans will automatically enroll workers at a 3% contribution rate. That's increasing annually up to 10% to 15%, but this doesn't apply to all plans, especially smaller or older ones, so you may need to enroll yourself manually, especially if you've been contributing for a while or been at this job for a while. Avoid missing out on savings and employer matches. Regardless, always try to check in, at least annually, with your plan.

Mark:

Yeah, I've talked to so many folks that didn't even realize, especially when you're younger. You graduate from college or get into the workforce. You go to work for a company and maybe you don't even realize they have a plan. You don't really realize what it's for. The word retirement is almost foreign to you because you're so young. Be proactive, check it out. If you're working for a corporation, if they haven't alerted you to their plan, ask them, do something. You will be so happy as you age.

Mark:

If you start early, whether it be small or not, the magic of compound interest is amazing. And so you know. Plus you know if a company matches things of that nature, and so you know. Plus you know if a company matches things of that nature If you start early. And, by the way, if you're checking in at work or even if you've been participating at work. Check on the Roth option. Most companies now have a Roth option. I would much rather you put your money into the Roth portion. You don't get a tax deduction, but hey, don't worry about it. You'll never pay taxes on that money again, ever, that's right. And your kids won't pay taxes on that money if and when they inherit it. So but ask, check, be proactive. Take a little bit of time out of your week and do that, and again at this six month juncture of this year might be a great time to take a day and just look at all of this stuff.

Evan:

So with that new auto, enroll at 3%, that's fantastic. However, 3% is not the finish line. So if you're automatically enrolled, don't assume that's enough. Experts suggest aiming for 10 to 15% contribution rate. That can be difficult for a lot of people, but even small increases over time can make a big difference. Just as you said, mark, you get that raise. Maybe only take half of it home and do something with the other half, or live on the same budget if you can and put away as much as you can from that raise.

Mark:

And if you are behind, there are the catch-ups at age 50 and there's a significant amount of money $7,500, I think more that you can put in. Over that $30,000, give or take that you can put in. And then certain ages ages 60 through 63, you can do up to $11,000 and some change. That's exactly my next point.

Evan:

Catch up.

Mark:

Exactly right, but the point is this is that as you get into your 50s, hopefully some of your expenses are coming off the books. Maybe the kids are getting through college, maybe you're no longer paying for their car insurance and things like that. So as these expenses fall off, don't just say, hey, now we can buy that Mercedes or whatever. It may be Not saying anything wrong with that, buy a used one, maybe, I don't know. But a little bit of sacrifice so you can have that kind of retirement that would really I don't know, just be special. I mean something maybe you thought was out of grasp just a few years ago. So use those those years. Uh, if you are behind, don't lose hope. And so go ahead and get into those numbers on what you're saying.

Evan:

Our goal for retirement for all of our clients, regardless of where they come from, is to try to get them as close as possible to peace of mind, and I and I think that should be the goal for everybody who wants to stop working and then have just as much stress or anxiety in your life when you're trying to maximize your golden years.

Mark:

And that peace of mind comes from two things. Number one is knowing you've saved enough money, and that's one thing we do with our reports. Folks can go to masterplanretirecom schedule a complimentary consultation and one of the reports we'll run is do you have enough money to last a lifetime in retirement? And we're going to include what you're saving from now until retirement as well, so you have a real clear picture. And then we will of course do some stress testing.

Mark:

Masterplanretirecom schedule now button and basically these reports will illustrate not only, hey, it will last a lifetime, but what if taxes go up? And maybe not even what if, but when taxes go up, what about higher inflation? What about bear markets? What about long-term care situations, healthcare situations, all of these things, so that we kind of know what to work on, so to speak. So a great thing to take advantage of masterplanretirecom schedule now button or give us a call at 770-980-9262. But I mean having a clearer picture of, hey, I'm headed in the right direction or maybe I need to save a little bit more. We'll again give you peace of mind now, but also, because of the planning we do peace of mind in retirement as well. That's right.

Evan:

So, speaking of those catch-up rates, so at age 50 in a 401k, you can contribute an additional $7,500 to your 401k. Also, in IRAs and Roths that are individually held, you've got an extra thousand dollars there. So that 50 and up is a really important milestone. Age of okay. I have the opportunity to put a lot more away in these retirement accounts. Am I able to do that? How can I maximize that? Now with Secure Act 2.0, there's new age contribution bonuses between 60 and 63, and it is 150% of that 7,500, which comes to $11,250 in your 401k as additional catch-up bonus. So that brings the total limit to 401ks in those age ranges to $34,750 in 2025.

Mark:

If you're able to do that now that's another question because that's a lot of money to be able to put away, but the opportunity being there is really powerful for retirees, again a great, a great catch-up time and maybe you can't do it starting age 50, but as you again get into your mid-50s, as again more expenses hopefully drop off, um, you know, maybe even at that point, as the kids begin leaving the nest, think about maybe downsizing, spending a little bit less money on your house and your, your electricity and all that kind of stuff. Maybe you know, I mean, I love new cars, I love new used cars, but maybe not having one every three to four years, maybe, like my last one. I made it last, uh, ten and a half years. Yeah, you know when I, when the dashboard started looking like christmas trees, yeah, it was time to to make a change. But you know it felt nice not having a car payment for you years type of thing, so that was extra money I could save. So it's the little things and I don't want to get up here and sound like, hey, live on bread and water or whatever, but track your spending for a couple of months and see where your money's really going. That Starbucks coffee for six bucks I can make it at home for 50 cents. Again, not fussing, not trying to make people feel bad, but if you really want to think about your future.

Mark:

It's the little things. Get those credit cards paid down. Not only do you not want that debt in retirement, but what you're paying for them while you're working. The interest rates are crazy. House payments I'm fine with You're paying interest, typically lower, on something that's increasing in value Cars, if you have to, okay, but definitely the credit cards and those high-interest loans. Stay away from those as much as you can. I'm just talking about again having a family meeting and going over your budget and saying this is really what we're spending. What do we not need to be spending money on? Not trying to make you suffer, but a little bit of sacrifice now could be a great 25, 35-year retirement.

Evan:

A couple extra notes on the employer plans and then we'll move on. There's faster 401k access for part-timers. So part-time employees now qualify for 401k plans after two years, which was three previously, as long as they work 500 hours each year, even small contributions from part-time work can compound into meaningful retirement savings. Then the last thing I'll say if you have a pension, if you are blessed enough to have a pension, know your numbers, know your projections, know your estimates, know what to expect. That's going to go a really long way, especially when you start getting down to planning your income in retirement. Next point, and we'll move away from the 401k.

Mark:

I got to say something real quickly, though. We do have a client that is I think he may be 80 now and he works part-time. Not because he needs to, they're fine. He just keeps them younger, keeps them active, gets them out of the house and he contributes to a 401k plan. At work, you have the opportunity why wouldn't you?

Mark:

And probably all of it, all of his income, is probably going into the 401k plan because he really doesn't need it. Is he maxing out the Roth? I don't remember. I hope so We've talked about it Time to schedule a meeting. Exactly. But yeah, he doesn't need the tax deduction, so certainly I've told him to put it that way. But yeah, 80 years old and contributing to a 401k.

Evan:

Yeah, that's great. So plan for a long retirement. That would be my next point. Especially right now you're about halfway through the year, many people underestimate that retirement can last potentially 30 plus years and growing. With a strategy to fund decades of living, health care, inflation, well-prepared retirees can fall short. Working a little longer can also boost savings and benefits, and I think that's the biggest thing is understanding that our time horizon, no matter who you are across the board, is typically growing. Now we have health concerns. Some people have family history where they've passed earlier, but with health care advances, technology advances, we're seeing people project their ages more and more and more higher, higher, higher. That's not going away. Hopefully it's not going away, but that's the reality we live in right now.

Mark:

Well, and you're seeing really both ends of the spectrum. People are living longer, but they're also retiring earlier, yep. So now you get another two to five years retiring earlier. In many cases I know federal workers who we work with a good bit.

Evan:

People retiring in their 50s. That's half your life.

Mark:

They can retire at 56, 57 years old, if they have enough years in with a full pension and full benefits. That's a long time. And then you live longer and you know, maybe or maybe not, those last few years may not be the best years because we are living longer, but they're. You know this is causing more complications Alzheimer's, dementia, mobility you know problems as well, which means more health costs, and so it's really expanding a problem. That and social security is. You know it's not really keeping up with inflation. So there's just a lot of things to look at and that's where those reports come in as well. The complimentary consultation reports will reveal all of this, and so, again, you'll know not what to worry about. It's like going to a doctor. They tell me I have high blood pressure. I can go home and worry about it. I can say, all right, doctor, tell me what to do about it. That's what I want to do, as opposed to just kind of hiding my face, closing my eyes and hoping for the best.

Evan:

Yeah. Do you have an income plan? Have you began projections on an income plan? Have you even considered that? Start by taking stock of your retirement income sources social security, do you have a pension? Do you have a 401k, iras, roths? Where can you create income where there currently is none in your retirement? Have a plan. If you've not done that for yourself, I highly recommend you go to a retirement professional. Obviously, we'd be happy to have those reports ran for you, but an income plan is, by and large, one of the most important things as far as your longevity in retirement is concerned, and make sure you go to someone that is a true retirement planner, not just an investor, not just an advisor that manages your money.

Mark:

They really need to understand all the areas of retirement. I've counted between 12 and 15 different areas that need to be addressed in retirement. Not everyone applies to everybody, but most of them do apply, and so you got to look at all these areas because they all fit together. I used the illustration the other day with a client that it's like these old 500 piece puzzles that my mom used to put together when I was a kid and she'd leave it set up for weeks on a card table. She'd come by and put in three or four pieces at a time, just when she wanted a break or something. But your retirement picture is very similar. It's a puzzle and all the pieces have to come together and the worst thing is basically If you miss them two or three pieces. It's pretty frustrating when you finish the polo. So anyway, it is many pieces coming together. So make sure. The whole point is make sure that you have somebody that can sit down and run all these different reports. Don't leave anything out.

Evan:

One of our favorite words Roth. Okay, do you have a Roth? Are you currently contributing to a Roth? You're halfway through the year. You have Roth contribution limits for the year. Are you able to maximize those? Are you able to take advantage of this year as much as you can? You have until, technically, until April of next year to contribute for 2025. Are you maximizing your Roth If you do not have a Roth? If you can't, even if you are unable to contribute to a Roth, at least open a Roth. Why is that, Mark,?

Mark:

You want to start the clock ticking, okay. So there are certain penalties in a Roth in the first five years. So if you get it open, put $100 into it or whatever, just to get that date of it opening. Then the five-year clock starts ticking. After five years it's totally penalty-free if you're 59 1⁄2 and older, okay. So even if you're 50 or whatever, I'd open one and start putting $25 a month into it or something, just to get that ball rolling.

Evan:

But there is a clock ticking that has penalties on it, and the Roth is just a small portion of the overall tax strategy. Do you have a tax strategy in retirement? Have you considered that for yourself? Have you looked at what your projected tax bracket will be in retirement? Whether you look at it or not, I guarantee you one thing you don't know what it's going to be. We need a tax strategy in place. We need a conversion strategy. The simple truth of the matter is the majority of baby boomers and retirees for the next 10 plus years or more all have a tax problem because the vast majority of workers in today's American workforce society have put away their money in tax-deferred vehicles, meaning every withdrawal that they intend to take in retirement is going to be taxed at whatever rate they are at at the time, and every withdrawal adds to that total income tax burden.

Mark:

And just so we're clear. You know you're saying well, have I put money away in a tax deferred? If you're in a 401k traditional, if you're in a traditional 403b, a traditional thrift savings plan, a traditional 457, these are all pre-tax accounts. You get a deduction but you're going to pay taxes, as Evan said, as it comes out. And, by the way, over those 30 years, 40 years, it's grown very large as well. Even if you don't need that money, the IRS slash government forces you to start taking it out between the ages of 73 and 75, forced taxation. And so again, those Roth type accounts, whether it be a traditional Roth or some other accounts that we use, that money is coming out tax free and they don't force you to take it out. So if you do need it, it doesn't matter what your tax bracket is, it's coming out free. So they're so powerful, that's right.

Evan:

Another point rebalance your portfolio with age. Everyone has a different time horizon. When are you going to retire? What's your risk tolerance? Are you going to be using your investments immediately in retirement, or are they going to be able to season longer because you have other sources of income at your immediate retirement? Everyone's got a different situation. Everyone has a different time horizon for their investments, but you need to make sure that your portfolios are rebalanced to your risk tolerance and your time horizon.

Mark:

Yeah, and that's something that you probably need help with. Again, that's something we can help you with. It's not just as simple, and most accounts, or 401ks, things like that, will have what we call life cycle funds or freedom funds or whatever.

Mark:

Target date funds Target date funds and you just say, okay, if I'm going to retire in 2040, I'm going to put all my money in the 2040 fund. Nothing wrong with that. I think that's probably a nice choice if you don't pay much attention to your account. If you do pay more attention or you need more help, I think there are better ways. But that's definitely better than just sticking in a money market or two or three funds or one fund and just letting it ride. So we help our folks every day with their at-work accounts, making sure that they are properly allocated.

Evan:

Two more points. We're going to try to rush through these while still keeping some good information in here. Number one you've got to plan ahead for health care costs, and again, that's just saving and putting away. Many retirees underestimate out-of-pocket medical expenses. We've said this before. The average is about $165,000 over one lifetime, so that's $330,000 for a couple. That's healthcare costs alone, not including long-term care costs, which is a whole other conversation. Both of those healthcare and long-term care need a strategy. Some of the older strategies no longer work, so talk with a professional. That has to be part of your overall retirement plan and then finally have open legacy conversations. Talk to your loved ones about your financial values and legacy wishes. Start with general goals. Expand the conversation over time. Include your financial advisor to ensure alignment and clarity. Ensure alignment and clarity. Here's a question, a check-in for the mid-year for you Are all of your estate documents current? Do you have estate documents? If not, that needs to happen.

Mark:

Yesterday, you know, one of the things we see all the time when folks come in to see us is if they have documents. They were created back when their kids were little or they were getting ready to take a trip or something like that. Now their kids have it Now their kids are yeah, exactly, and so the documents have old language. They don't have the right tax language. They don't have today's language about digital. You know items, how you can get into somebody's bank account things like that.

Evan:

I had a conversation with someone the other day who also and a lot of people believe this still believe you can just write something on a piece of notebook paper and have it notarized and that that counts as a will. There are so many wills getting kicked out of probate these days. Make sure you do it the right way. Don't cut corners on something as important as your estate documents.

Mark:

And even documents done by an attorney if they're not a specialist in estate planning. We're seeing mistakes there as well, and it's not just the documents. You need to plan around the documents, by the way, get documents, but we build the plan around to make sure beneficiaries match up with your wishes, to make sure we reduce taxes, reduce probate which reduces probate cost and problems and your will being advertised all over the place. So have a plan around it as well. We do that as part of our holistic planning, so don't put it off. That's really important. I'm glad you brought that up. As far as the documents Don't leave your family a mess, you may think you have a long life ahead. I hope you do, but I could walk out tomorrow and pass away and I want to make sure my stuff's together.

Evan:

That's right.

Mark:

That and pass away, and I want to make sure my stuff's together. That's right. That's your mid-year checklist for 2025, folks, thanks for joining us. Glad you did join us and until we see each other again, plan well and prosper. Take care. This was Retirement Roadmap Radio with Mark Fricks of Master Plan Retirement Consultants. To schedule a complimentary consultation, go to masterplanretirecom or call 770-980-9262. Thanks for listening and remember plan well and prosper.

Speaker 3:

All matters discussed during this show are for informational purposes only. Each individual situation may vary and the opinions expressed here may not apply to everyone. Materials presented are believed to be from reliable sources and no representations can be made as to its accuracy. All ideas and information should be discussed in detail with one of our qualified representatives prior to implementation. Advisory services offered by Master Plan Retirement Consultants. A registered investment advisor in the state of Georgia, mark Fricks, and Master Plan Retirement Consultants are not affiliated with or endorsed by the Social Security Administration or any other government agency.