Better Financial Education
Larry was born in Duluth MN, and grew up in Cloquet MN. He has a B.S. cum laude in Physics from the University of Minnesota and a Master's Degree in Business Administration (MBA) from the University of South Dakota with a concentration in corporate finance and investments.
Larry retired in 1994 from the United States Air Force as a commissioned officer after a career as a Command Pilot where he flew helicopters, high performance acrobatic jets, and internationally to 47 countries on five continents with large multiengine aircraft. He was also a contingency and war planner during his career as a field grade officer. In addition to flying, Larry served on the Joint Staff at US Southern Command in Panama forming contingency plans for ousting Noriega, is a veteran of the First Gulf War 1991, and served as a Contingency Mobility planner at Scott AFB IL during Haiti, relief operations in Somalia, and Bosnia-Herzegovina.
Larry has years of financial planning research and real-life experiences showing people personal finance choices that are focused on how to make smart decisions to work towards growing and protecting their wealth, not income. Rather than make things complicated, his work has been focused around simplifying the complexities of prioritizing simultaneous financial planning issues, and their related calculations, so the person's living is sustainable.
A Registered Investment Advisor and a Certified Financial Planner™ practitioner, Larry is also the author of Wealth Odyssey, a book designed to help people make sensible plans for a successful retirement and pursuing their other goals by understanding how financial planning issues are related to each other through wealth. He has research published in the Journal of Financial Planning related to retirement planning.
Larry has served on the Board of Directors for the Financial Planning Association of Northern California, and has appeared in nationally syndicated articles and on nationally syndicated radio. He currently has syndicated columns that appear online at Forbes, Morningstar, The Motley Fool, Business Insider, the Online Investor, and many more.
Larry is a member of the Academy of Financial Services. Larry is also a member of National Association of Personal Financial Advisors (NAPFA), a national association of Fee-only advisors.
His hobbies include reading and travel, especially to El Salvador where he met his wife, Rosa Maria Cáceres. They live in Rocklin, CA and have four children and seven grandchildren.
They speak spanish in their home. Ellos hablan español en su hogar. Larry's blog can be found here.
BS, Physics, University of Minnesota
MBA, Corporate Finance and Investments, University of South Dakota
Assets Under Management:
Disclaimer can be found here.
Congratulations on your pending retirements!
Most people think about taxation in retirement rather and think about drawdowns as secondary. It actually is the reverse. Taxation is already baked into the cake based on where you focused your savings while working. TSP, 401k and 403b's all are deferred while working - and then taxed once you begin withdrawals from them. Roth conversions may play a part is spreading taxation over a number of years, however work best prior to reaching age 70 1/2 (each of you have separate Required Minimum Distributions (RMD) from each different type of retirement account).
Taxation is a function of your standard of living. If you need to withdraw dollars to support your living expenses, then those withdrawn dollars, added to your pension(s) and Social Security (are you CSRS or FERS? Social Security WEP and GPO are factors for CSRS retirees) move you through both Federal and State income tax brackets accordingly. Most retirees I work with come with retirement taxes similar to what they had working because their standard of living expenses are similar, with small differences based on their spending choices after retiring. Thus, the strategy isn't so much tax minimization, but looking at where you are in your tax brackets to strategize between how much you spend overall (to put you in each bracket) and possibly Roth conversions to the top of your current bracket (which reduces the balances post age 70 ½ which reduces the RMDs).
All this said about taxation, structuring your portfolio allocation overall to optimize the withdrawals for drawdown is actually more important. Asset efficiency, where the money works as hard as it can (not the same as getting the highest returns; but, an efficient return and volatility combination based on withdrawals maximization together) is important so that you don’t have to spend more dollars because assets aren’t deployed efficiently relative to your ages in retirement (allocation changes slowly as you age so this should be reviewed annually).
Now to your question about advisers. First, I suggest you search for a Fee- ONLY adviser near you (that also meets the below specifications) via https://www.napfa.org/ (National Association of Personal Financial Advisors – NAPFA). They are fiduciaries without bias by sales agendas). Second, search for an adviser who has 1) the better part of their practices constituting Federal retirees, and/or 2) have had Federal service themselves (example: I’m retired military which a lot of experience working with Federal civilians during that time – and currently work with Federal and State retirees). Finally, looking at who you’re considering closely online helps narrow your search. Here’s an example of many things to look for while evaluating your adviser choices you come across https://blog.betterfinancialeducation.com/business-structure/credentials-and-process/ (not a solicitation, but what I’ve put together in one place that answers what kind of adviser I am AS AN EXAMPLE for you).
Finally, yes there are advisers who specialize in drawdown. In fact that is my specialty based on working with retirees, but more importantly contributing to the body of knowledge on this relatively new topic via academic peer-reviewed published research https://www.betterfinancialeducation.com/larrys-contributions-retirement-research-body-knowledge (again as an example for you to guide what kind of questions you ask of those your considering hiring to work for you as your adviser).
As a closing thought, pension choice is very important for retirement planning because of the ramifications of lost income for the survivor (either of you). Social Security has an automatic pay cut for either survivor (lowest benefit automatically goes away regardless of who goes first; with potential implications if WEP and GPO apply). Retirement consists of three(3) phases: Phase 1, you’re both here (the phase most people ONLY thing about); Phase 2, either of you are here (survivor planning is critical during Phase 1 to avoid surprises here); Phase 3, neither of you are here (where Estate Planning is important. Drawdown strategies typically have unspent resources because the goal is to now outlive your money (assets) so keeping this phase current is important all along the way too).
I hope this helped focus your thoughts as you transition into retirements. Congrats again!
You would receive either benefit, but not both. Your benefit letter may tell you which benefit you're receiving. It wouldn't hurt to schedule an appointment (https://faq.ssa.gov/ics/support/kbanswer.asp?questionID=3881 )at your nearest SSA office for them to explain what benefit you're receiving and if there may be another benefit you may be eligible for. Or you might try their "Benefit Eligibility Screening Tool" http://ssabest.benefits.gov/ .
You see, Social Security Administration (SSA) doesn't know, or contact you, to tell you what benefits you may be eligible for. You need to go in and have them evaluate your situation to see if another benefit may be available based on when you started your current benefits, what benefit that might have been, and what other factors may apply now that you are over your Full Retirement Age. There is no way to answer this without knowing all your life's details and how those may affect any, or all, benefits. SSA can tell you.
"How do Social Security benefits and Supplemental Security Income (SSI) payments differ?
The two programs are financed differently.
Employment taxes primarily finance Social Security retirement, survivors and disability insurance benefits.
Generally, we pay Social Security benefits to eligible workers and their families, based on the worker’s earnings.
Meanwhile, general taxes fund the SSI program, which serves the needy. SSI eligibility depends largely on limited income and resources."
In a word, no. This is one of the better articles on pros and cons.
She is already getting tax deferral through the IRA outside of an annuity. Being 88, the surrender period for the annuity may outlast her. Who knows, she may become more comfortable with less aggressive investments if the economy and markets get better. If she’s in the annuity, she won’t have that flexibility to change her mind later. Best she stays in something more liquid. She has the money now and the years for growth are behind her. She may have concerns to grow it more for her beneficiaries. However, they can invest it as they desire once they inherit their share. This sounds more like a case where the commission to the adviser is outweighing advice in your mother’s interest. If she wants a second opinion from someone local, you can find a fee-only fiduciary adviser at http://www.napfa.org/index.asp using the Find and Adviser function on the site. Wishing your mother all the best and many years to come.
The Consumer Financial Protection Bureau (CFPB) has a good short description as to the difference.http://www.consumerfinance.gov/askcfpb/127/Whats-the-difference-between-a-prequalification-letter-and-a-preapproval-letter.html
Within that article is a link to their discussion as to what happens to your credit http://www.consumerfinance.gov/askcfpb/2005/What-exactly-happens-when-a-mortgage-lender-checks-my-credit.html
I quote their article in its entirety here for you so you don't need to try to find it:
"What exactly happens when a mortgage lender checks my credit?
The credit check is reported to the credit reporting agencies as an "inquiry." Inquiries tell other creditors that you are thinking of taking on new debt. An inquiry typically has a small, but negative, impact on your credit score. Inquiries are a necessary part of applying for a mortgage, so you can’t avoid them altogether. But it pays to be smart about them. As a general rule, apply for credit only when you need it. Applying for a credit card, car loan, or other type of loan also results in an inquiry that can lower your score, so try to avoid applying for these other types of credit right before getting a mortgage or during the mortgage process. Learn more about credit scores.
You can shop around for a mortgage and it will not hurt your credit. Within a 45-day window, multiple credit checks from mortgage lenders are recorded on your credit report as a single inquiry. This is because other creditors realize that you are only going to buy one home. You can shop around and get multiple preapprovals and official Loan Estimates. The impact on your credit is the same no matter how many lenders you consult, as long as the last credit check is within 45 days of the first credit check. Even if a lender needs to check your credit after the 45-day window is over, shopping around is usually still worth it. The impact of an additional inquiry is small, while shopping around for the best deal can save you a lot of money in the long run. Note: the 45-day rule applies only to credit checks from mortgage lenders or brokers – credit card and other inquiries are processed separately.
You can check your own credit with no impact on your score. When you check your own credit – whether you’re getting a credit report or a credit score – it’s handled differently by the credit reporting agencies and does not affect your credit score. If you are applying for a mortgage and haven’t already checked your credit report for errors, do so now. You can get a free copy of your credit report at www.annualcreditreport.com. If you find any errors, get them corrected as soon as possible."
Wishing you the best as you investigate your home purchase options.
You wouldn't be filing for his benefits. You would claim spousal benefits on your ex-spouse’s record. Divorcees’ spousal benefits are typically 50% of the full retirement benefits of the ex-spouse who qualified for such benefits. You must be at least 62 and not remarried and your marriage had to last 10 or more years (which you say it did). He doesn't need to have claimed his benefits (Social Security realizes spiteful spouses may try this - but, they can't).
The benefits of your ex-spouse must be higher than your own when you begin claiming yours. As with surviving spousal benefits, this claiming strategy allows you to collect some income before claiming your own full benefit at 70. However, if you don't have your own benefits, then your spousal benefits max out at your Full Retirement Age (FRA - see https://www.ssa.gov/planners/retire/retirechart.html ).
If your ex-spouse dies before you do, you may also qualify to collect his or her full survivor benefit instead of the 50% spousal benefit because your marriage spanned at least 10 years. Keep this in mind should he predecease you in the future.
I recommend that you start this process at least three months before you want to start collecting these benefits. You will need your late or ex-spouse’s Social Security number and date of birth, and your marriage and divorce documents.
Here's Social Securities website for more info: https://www.ssa.gov/planners/retire/divspouse.html
Clients born on or before January 1, 1954 may still file a restricted application for spousal benefits when they turn FRA (Section D(2)(b) of GN 020.002). Individuals born after January 1, 1954, may no longer get around deemed filing by filing at FRA or later. IF you have your own earnings record, this strategy works by taking the lowest benefit first and let the higher benefit continue to grow (but you need to wait until you reach your FRA). If you file for any benefits prior to your FRA, then you will be deemed to file for the highest benefit your are eligible for at that age of filing.