Milestone Birthdays Impacting Your Money

by Mike Lester

Mar 15, 2021

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Speaker 1 (00:02):

Welcome to the Retirement Wealth podcast. Our goal is to help those retired or soon to be retired investors make more informed financial decisions and live an enjoyable retirement. Our host, Mike Lester, is the founder and CEO of Talon Wealth Management. Mike is an investment advisor representative of Retirement Wealth Advisors, Inc., an SEC registered investment advisor. Thanks for joining us today, and let’s get started.

Kristen (00:31):

At this point in our lives, some of us would rather ignore our birthdays. But we can’t, and that’s why I picked this specific birthday music because it’s like, “Ah, it’s our birthday.”

Mike Lester (00:42):

It’s a drag, yeah, wow.

Kristen (00:44):

Blah, blah. But Kiplinger says there are a few important milestones that we should pay attention to as we get to and through retirement, so let’s talk about some of these important birthdays, Mike. Let’s start with the big 5-0.

Mike Lester (00:56):

So the big 5-0, listen, hopefully we’re all lucky enough to get there, and some of our clients have already gotten there. And the big thing when it comes to the age of 50 is contributions to retirement accounts. The one that stands out the most is going to be your 401(k). Typically, prior to the age of 50, you’re limited to under $20,000 in contributions. You might have a match from your employer and stuff like that. But at the age of 50, at this point at least, for 2020 and 2021, you’re able to contribute another 6,500 to that, so that puts it up to $26,000 that you could make a contribution to your 401(k) on.

Mike Lester (01:33):

And that, Kristen, not everybody realizes, that’s a big number. 401(k)s can be very, very good for setting money aside. People that have been listening to our program realize that we don’t necessarily think 401(k)s are the most efficient growth vehicle. Things like sometimes high fees, or a lot of the times high fees, limited investment options, no active management. But your ability to take $26,000 off the top of your income, not pay tax on it, and then invest it to grow tax deferred moving forward is pretty important, particularly, if you’re in a position where you’re able to do it building up into retirement. So that’s pretty big deal.

Mike Lester (02:09):

Another thing is you can put an additional $1,000 contribution to your IRA or even your Roth IRA, but there are some income limits there. So just remember, when it comes to making those contributions, you can make additional contributions, and that might be valuable to you.

Mike Lester (02:24):

But again, that really gets into tax planning, Kristen. I get a question a lot, “Do I put more money in my 401(k), or should I just go ahead and pay tax on it and bring it to you, Mike, and invest it differently?” That’s the type of conversation that we need to have in person. I need to know more about your situation. We can get Jesse, our accountant, involved. He can run some analysis for you. But how much you should personally be contributing is going to depend on your personal plans and where you want to be down the road. Also, Kristen, frankly, how long you’re going to work.

Kristen (02:52):

Okay. The next age on our list is a little strange, 59-and-a-half. I mean, what’s the significance about?

Mike Lester (02:58):

You’re killing me with that music.

Kristen (03:01):

I know. That’s kind of the point. Because it’s so odd, 59-and-a-half, is it double birthday celebration with this creepy music? What’s the point?

Mike Lester (03:06):

That’s a weird government number. Why couldn’t it just be 59 or 60? But age 59-and-a-half, and this is really critical with what we’re doing with a lot of our clients, Kristen, but at the age of 59-and-a-half, typically, not all the time, but typically, you can do what’s called an in-service distribution on your retirement account at work. Now that’s most likely a 401(k), but maybe it’s a 403(b) or a TSP account, that sort of a thing.

Mike Lester (03:32):

But what in-service distribution means is even though you continue to work, you can opt to roll or take a distribution from your 401(k) or retirement plan at work over to a privately managed IRA account. Now, why is this important? Well, there’s no fee and no taxes to do that, for starters.

Kristen (03:51):

I like that.

Mike Lester (03:52):

The next thing is a lot of times you can lower your fees on the accounts because typically the 401(k) accounts or retirement plans at work, they can be pretty pricey. So a lot of times we can reduce the fees. Almost every single time, Kristen, we can have more investment options. Typically, retirement plans at work have limited investment options, and our listeners know this, right?

Kristen (04:13):

Mm-hmm (affirmative).

Mike Lester (04:13):

They go in there, and they go, “Well, gee whiz, I can pick some target-date funds or I can pick a large cap, a mid cap, a small cap, or a bond fund, or essentially like a money market.” A lot of times there just aren’t a lot of investment options. And the problem with that is there’s not a lot of efficiency there. Markets move. We’re active managers of portfolios. It’s hard to actively manage a 401(k). So if you have the ability to do that in-service distribution, and then hopefully the ability to lower fees, get a higher average rate of return, and reduce risk, that’s going to be beneficial.

Mike Lester (04:42):

So again, 59-and-a-half, that’s an important age. If you’re 59-and-a-half, and you plan to continue working, definitely look into that in-service distribution model. And again, if you’ve got that old 401(k), let’s not forget those orphans out there, Kristen, those orphan 401(k)s, those little orphans.

Kristen (04:56):

Poor little orphans, just by themselves, forgotten, left behind.

Mike Lester (04:58):

Yeah, just sitting back there in some investment option, and they’re not being looked at. I mean, a lot of us are guilty of that. Don’t forget the orphan 401(k)s. Because if you’re not working for that employer anymore, regardless of age, you can also have that actively managed.

Kristen (05:11):

Let’s move on to our 60s, Mike. Any moves we should be thinking about in that decade?

Mike Lester (05:16):

Well, when it comes to age and when it comes to money, you’re going to be looking at a Social Security when it comes to your 60s. So the earliest you can take Social Security, unless, there are some other ways. So disability, for example, you can take it early.

Kristen (05:30):


Mike Lester (05:31):

But assuming you’re not disabled, the earliest you can take Social Security is age 62. And so what the Social Security Administration is going to do is they’re going to go back and calculate the number of years that you worked, and then how much you got paid over those years. And they’re going to come up with a number as far as what your benefit is going to be at the age of 62.

Mike Lester (05:48):

Now, this is the smallest benefit you would get. It’s been reduced because you haven’t waited for what they call full retirement age. But for a lot of people, it just makes sense for them to go ahead and take it at 62. I think the biggest issue with Social Security planning, Kristen, is we would know exactly when you should take Social Security if we knew exactly how long you’re going to live. Problem is none of us know that, right?

Kristen (06:08):


Mike Lester (06:09):

And not knowing that just means a lot of times it makes sense to go ahead and take the money. As you’re taking the money for income, what that’s going to do is reduce the amount of money you have to take out of your portfolio to supplement income. So take an example, we do this every single week, but just look at Steve and Debbie, right?

Kristen (06:26):


Mike Lester (06:27):

We did a plan for them and some analysis for them here the other week. And they were in a situation where Steve had a pension of about $50,000 a year. They had combined Social Security, taking it early, of about $36,000 a year. So 50 plus 36, they had about $86,000 a year in income from pension and Social Security. And they had about $100,000 a year in expenses, and they had about a million dollars set aside in 401(k)s.

Kristen (06:53):

Sounds like they’ve done a pretty good job.

Mike Lester (06:54):

They did a pretty good job, right? And so, I mean, the easy math would say, well, if they need a hundred and they’ve got 86 coming in, they got to bridge that gap somewhere. So they needed an additional $14,000 a year that would, at that point, have to come out of the portfolio.

Mike Lester (07:07):

So they’re looking at several things. One is how do I invest my million dollars to make sure that we can generate the income that we’re going to need so that it doesn’t run out taking that $14,000 out for the rest of our lives? The other issue they have is they don’t know how long they’re going to live, so the rest of their lives is kind of a moving target.

Kristen (07:23):

Of course.

Mike Lester (07:23):

And then, they’ve got things like inflation and taxes, all of that built in. As we build out that financial plan and do the analysis, it’s my job to say, “All right, Steve, Debbie, if you take Social Security at 62, and you’ve got the pension and these expenses, this is how your portfolio needs to be invested to accomplish your goals throughout retirement.” And their goals very specifically were to protect and grow their nest egg, in their case a million dollars, over time. And then, whatever’s left over when they’re gone, goes to their beneficiaries.

Mike Lester (07:54):

So that’s a pretty simple plan, but Kristen, that’s also pretty much what we’re talking to most people about is protecting and growing their assets over time, helping them be successful in retirement, and just connecting the dots for them to show them how it all works.

Kristen (08:08):

Now, Mike, some of our listeners may be retired by the age of 70 and some may still love what they do so much that they keep working. Either way, what are some of the financial steps that those in their 70s should be considering?

Mike Lester (08:21):

Sure. So a couple of big numbers in your 70s. First of all, at the age of 70, that’s when you would maximize your Social Security distribution. So if you opted to work longer and not take Social Security until later, or maybe you wanted to wait and let that Social Security benefit for the longest period of time possible, the most that it’s going to grow is to the age of 70, and that’s when you’ve maximized your benefit.

Mike Lester (08:43):

There’s several reasons for doing this. A lot of times, an individual may have a spouse and they want to make sure that they’re maximizing the benefit for their spouse in case they pass away first. Other reasons would be they’re working and they don’t want to pay tax on additional revenue. But no matter how you slice it, by the time you get to the age of 70, you might as well go ahead and take that Social Security benefit because it’s maxed out, it’s not going to go up if you wait, and you’re just losing the money if you don’t take it.

Mike Lester (09:06):

And then, another big number that’s critical, and this is kind of a moving target, Kristen, because there was a recent change is your required minimum distribution. So for a very long time, your required minimum distribution had to be taken at the age of 70-and-a-half. And it was a little confusing to people about how to calculate that number. Calculating it was also very important because if you didn’t take it, the penalty was 50% of what you didn’t take, so it was something that people were very fearful of.

Mike Lester (09:32):

Now, there’s been a shift. It’s no longer 70-and-a-half for individuals. It’s now going to be 72. Now, we didn’t have to take the required minimum distribution in 2020. I don’t know that we’re going to have to take the required minimum distribution in 2021. That remains to be seen. That’s all a part of our financial planning process, Kristen, these ages, anything like having to take your required minimum distribution and making sure you get it in the right amount is part of the process, and it’s just part of working with a fiduciary and a fee-based advisor.

Kristen (10:00):

Make sure that you understand what you should be doing and the milestones that are vitally important on your way to and through retirement. Set that up virtually, Janet Yellen, she’s back.

Janet Yellen (10:14):

Without further action.

Kristen (10:16):

Okay, there we are. President Biden’s Treasury Secretary pick is a familiar voice, and she is urging lawmakers to go big on stimulus.

Janet Yellen (10:25):

Without further action, we risk a longer, more painful recession now and longer term scarring of the economy later.

Kristen (10:34):

I bet she is just a blast.

Mike Lester (10:43):

Oh my gosh, we’re going to have four years of this? We’re going to have audio clips.

Kristen (10:43):


Mike Lester (10:43):

Just galore, all right.

Kristen (10:44):

Janet Yellen supports Biden’s idea for an additional $1.9 trillion relief package. Should we be worried about another recession? I mean, adding all of this up here, that we are being told we need to pump more money in, does that mean that a recession’s on the way?

Mike Lester (11:01):

Well, eventually, Kristen, I mean, markets are cyclical. I mean, we’re in a phase right now that I think things are going to go pretty well here, certainly for the first quarter, probably second. And 2021 might look pretty good. I mean the Democratic Party isn’t exactly known for being fiscally responsible.

Kristen (11:18):


Mike Lester (11:19):

Right? I mean, historically that’s just a fact, and historically, it is true that more often stock markets do better under the Democratic Party sort of leadership than under Republican leadership. But if you look at the reason why, it’s because of all the spending.

Mike Lester (11:35):

And so, going back to your question about a recession, well, yeah, I mean, when does this end? Because eventually you can’t spend any more and the economy has to survive on its own and you have to ask yourself, who’s going to pay for this? It’s just nutty. I mean, writing checks with nothing to back them up is always a problem, right? It always eventually comes back to bite you. I mean, the government relies on its ability to tax to pay that debt off. And so, at some point in time, they raise taxes. And then, the issue with raising taxes is potential recession.

Mike Lester (12:05):

So when we apply this to management of portfolios, it’s something that we’re very cognizant of, and we have to guide our clients through conversations, through management of their portfolio. It’s pretty hard for people to be committed to this market right now when they look at all the spending that’s going on. But if we cut through all the fog here and just go, “When the dust settles, what’s likely to happen?” The path of least resistance is up.

Mike Lester (12:29):

So I would say if you’re looking at your portfolio, make sure you’re positioned to take advantage of that. But there’s a lot going on in government that certainly gives us cause to be concerned about. There’s nothing wrong with being worried about it. I mean, this $1.9 trillion relief package on top of what we’ve already spent, that’s a problem. And then, how is it going to be spent? That’s the next problem.

Kristen (12:50):

It’s like a kid is in Toys R Us, I don’t even know if that exists anymore, but he has mom and dad’s credit card and just spending and spending, spending, spending.

Mike Lester (12:57):

Whatever they want. Yeah. Well, I mean, the PPP was great for… Paycheck Protection Program, it was great for certain businesses. But if you go back and look at what actually happened, there were businesses all over the place taking money that didn’t need it. I know of companies in our industry, Kristen, that took it. We didn’t take any of it. We were okay. We weren’t losing employees.

Kristen (13:19):


Mike Lester (13:19):

But think of all the money that businesses that were really hurting didn’t get because businesses that weren’t really hurting got it. Personally, I hope they go back and get it from the businesses back.

Kristen (13:30):

That didn’t need it.

Mike Lester (13:30):

That didn’t need it.

Kristen (13:30):


Mike Lester (13:31):

And give it to the businesses that really do need it. But trusting government to be efficient in distribution of any of this stuff is a problem. And I do think eventually, certainly, we’re going to have a recession, and it’s very likely that all of this spending will be a big part of that. So just understand your portfolio, understand what’s likely to happen moving forward. And don’t be what’s called static. Don’t just hang in there. Make sure you’re either doing it yourself, being active in the management of your portfolio. But if you don’t feel comfortable doing that, reach out to an advisor that’ll do it for you.

Kristen (13:59):

Find out more about Mike, the entire team, what they do, how they could possibly help you and your family, visit

Kristen (14:09):

What has generally been one of the most relaxing sounds is now starting to really stress me out. I logged into Netflix the other day.

Mike Lester (14:19):

That’s not relaxing by the way.

Kristen (14:20):

Yes, it is.

Mike Lester (14:21):


Kristen (14:21):

It’s like, “Ah, I’m going to binge something, and nobody’s going to bother me.” Well, for me, it is.

Mike Lester (14:25):


Kristen (14:25):

But when I logged into Netflix the other day, I got a lovely message that popped up letting me know that my rate is going up again. It’s not just me. The standard plan is now $14 a month, and the premium package went up $2 to $18 a month. I checked, the last time they raised prices here in the US was the beginning of 2019. And I know that this is minor, I get it. Kristen needs to calm down. But I’m taking a step back, and I’m trying to assess if the value is worth me continuing to pay a higher price. Am I the only one feeling this way?

Mike Lester (14:59):

Where did you land on the value part of it?

Kristen (15:01):

I’m addicted. I’m probably going to keep paying it.

Mike Lester (15:03):

See, now they’ve got you. [crosstalk 00:15:04].

Kristen (15:03):


Mike Lester (15:06):

Well, it’s not like the ’80s when you could get black market cable, right?

Kristen (15:09):

Do it for your neighbor.

Mike Lester (15:10):

Paying somebody to come over and… Neighbor, just do whatever, [inaudible 00:15:13]. I guess you can only… I don’t know.

Kristen (15:15):

People share logins all the time. Think of all the platforms out there.

Mike Lester (15:18):

I’m too by the book, Kristen. I’m afraid to share logins and then wind up [crosstalk 00:15:23].

Kristen (15:22):

So how many do you have at the house? How many different things are you paying monthly for besides cable?

Mike Lester (15:26):

Certainly that, then the, what? HBO Go.

Kristen (15:29):

Max, yes.

Mike Lester (15:30):

Max, HBO Max. And then, we’re probably going to wind up having to get the Disney one.

Kristen (15:34):

Oh, yeah, yeah, kids, it’s a must.

Mike Lester (15:36):

Yeah, I got the kids. So it’ll be expensive no matter what.

Kristen (15:38):


Mike Lester (15:38):

But, yeah, I think-

Kristen (15:40):

Is it worth the value, though, is the question. And as we wrap up today’s show, it does make me think that on a much bigger scale, we need to assess if the value we’re getting, that we’re paying with fees on our investments and to our advisor, if it’s really worth it. Because it may be that you’re not using it as much, or they’re not doing as much for you, or the account’s not performing as well as you would like, or maybe you find out that you are getting the value.

Mike Lester (16:03):

Well, I think the first step there, Kristen, is knowing what you’re paying in fees. I mean, that’s the biggest part. So I think that a lot of people want to make sure, I mean, you would want to get value, whatever you’re paying in fees, you want to get something out of it. You need to understand what you’re getting for what you’re paying.

Mike Lester (16:18):

I mean, that’s a good analogy with Netflix, right? You understand what you’re getting? You’re going to get certain programming and everything else. Well, when it comes to investing, what are you getting for the fees? So it starts with understanding what they are. I’d say most people aren’t aware necessarily. They probably assume their fees are less than they actually are. An advisor might tell them that they’re paying them 1% in fees, but then, you have to look at the portfolio expenses and everything else. So on average, people are probably paying more than 2% in fees. And if you’re really not getting your money’s worth, that’s a problem.

Mike Lester (16:47):

Another huge fee issue, Kristen, is going to be annuities. We see people promoting annuities all the time, but nobody talks about how expensive they are. They’re incredibly expensive. I’d love to go down that wormhole at some point-

Kristen (16:58):

Well, we don’t have time today.

Mike Lester (16:59):

But we don’t have time today. But as we wrap it up, just understand your fees, understand your portfolio. And if you’re looking to find out what a fiduciary and a fee-based advisor might be able to do with you, we’d be happy to have that conversation.

Speaker 1 (17:13):

If you would like to have a comprehensive financial plan and an analysis of your current portfolio, go ahead and visit our website at, and we can do that for you complimentary.

Speaker 1 (17:29):

Thanks so much for joining us on today’s show. Be sure to subscribe to our podcast, visit our website at for more free retirement planning and investment resources. Thanks for tuning in to today’s show, and we’ll see you next time on the Retirement Wealth podcast.

Speaker 1 (17:47):

Exposure to ideas and financial vehicles discussed should not be considered investment advice or recommendation to buy or sell any financial vehicle. This information should not be considered tax or legal advice. Individuals should consult with professionals specializing in the fields of tax, legal, accounting, or investments regarding the applicability of this information to their situation. Past performance is not a guarantee of future results. Investments may fluctuate, and when redeemed, may be worth more or less than originally invested.

Mike Lester

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Milestone Birthdays Impacting Your Money