Financial Planning Tools & Strategies For Every Stage of Life with Chris Willis – Ep 101

Financial planning is a lifelong process that evolves with each stage of life. Yet many people either start too late or focus on the wrong priorities and miss key opportunities that could significantly impact their long-term financial success. Without a clear roadmap, it’s easy to overlook critical strategies that compound over time.​

Today, Derek Gregoire is joined by SHP Financial Advisor Chris Willis to walk through the financial priorities everyone should consider at each stage of life. From early investing habits to retirement income strategies, Chris shares practical insights drawn from both his own experience and working with clients across multiple generations.​

Together, they discuss several key strategies, including leveraging compound interest early, optimizing tax efficiency in your 40s and 50s, and navigating critical retirement milestones such as Social Security, Medicare, and required minimum distributions. Throughout the conversation, they highlight the importance of proactive planning at every stage, which helps build wealth, reduce stress, and create a more confident path as you approach retirement.

In this podcast interview, you’ll learn:

• Why investing early creates a massive long-term advantage and how small monthly contributions can grow into significant wealth over time.
• Why investing in yourself can increase your long-term earning potential.
• The key financial priorities to focus on in each stage of life.
• The importance of life insurance and estate planning to protect your family’s future.
• Why tax planning becomes critical in your 40s and 50s and the importance of diversifying your assets from a tax perspective.
• How Social Security timing impacts your overall retirement plan and strategies to reduce taxes on retirement income and distributions

Inspiring Quotes

• “Sometimes people are so worried about their asset allocation, but they should really be worried about their asset location.” – Chris Willis

• “ If you want to retire at 55, don’t automatically think that you’re gonna roll a 401(k) into an IRA because you might lose that ability to access that money the second you move it to an IRA.” – Chris Willis

•  “There’s so many things you can do in your 40s and 50s to reduce the tax burden. Everyone thinks about diversification of their portfolio. But you want your portfolio to also be diversified tax wise.” – Derek Gregoire

Interview Resources

• Social Security Administration
• Medicare

[INTERVIEW]

Derek Gregoire: Welcome everyone to another edition of the SHP Retirement Road Map podcast. We’re super excited to have one of our own advisors, Chris Willis, here. Chris, welcome.

Chris Willis: Yeah, happy to be here.

Derek Gregoire: Yeah. Well, at our firm, we always try to bring different content to the podcast. And we’re talking today about like almost a different timeline, so it doesn’t matter if you’re retired or if you’re young, or if a lot of our clients that may be retired want to take you through different timelines of what you should be thinking about in your 20s, in your 30s, as you’re getting in your 40s and 50s, thinking about getting close to retirement, and then in retirement, kind of like the different phases of life within the financial world.

It’s funny because I was talking to my son as we start talking about the younger generation. He’s only 17, my oldest son, and believe it or not, he has some friends that he goes to school with that listen to this podcast. I know. I said, well, if you were 17, when I was 17, I didn’t have podcasts and I’m not sure if I’d be listening to them. But I’m pretty impressed. He’s like, yeah, because Pax isn’t sure if he wants to do finance through to something else. He’s definitely not sold on the finance side, doing what dad does. But his friends are like, oh, you have this– I would love to have an opportunity and blah, blah, blah. I can’t believe you’re not taking advantage of it.

But they listen to podcasts and I’ve talked to a few of his friends over the years just giving advice. So, people in their teens are actually really thinking about this. We’re going to start, like, look in your foundational years, Chris. So, if someone that’s in their 20s, or if you’re listening and you have kids or grandkids in their 20s, what’s that phase of life from a financial standpoint look like?

Chris Willis: Yeah. I think that’s exciting too because even myself, like I’m a young guy. I’m only 27. So, it’s kind of cool because I get to educate my friends, right? Or people that are younger than me, kind of just like the power of investing, right? And it’s almost like when you are in your 20s, like the power of your dollar is honestly just so powerful. You know what I mean by that? It’s almost like maybe something that I have that you don’t is just more time, right?

Derek Gregoire: True.

Chris Willis: You know what I mean? So, just kind of like, especially when you’re young, just a very, very little amount over an extended period of time, just the ability to compound interest is just like absolutely amazing, right? And I try to educate my friends, people that are younger than me or even people in their 30s and 40s. Just like a very little amount over a long run honestly goes so far, right?

Derek Gregoire: Well, yeah, think about like you– everyone’s heard it. Oh, if you start earlier more. But give us an example of what that actually means because I think everyone, when you’re in your 20s, you’re like, yeah, it sounds good, but I’m never going to be 60.

Chris Willis: Yeah, exactly. Yeah. And that’s what’s true. Even like myself, I’m sure with that because, again, 27, I know I have a long career ahead of me. So, to think about like, how do I build for 60, 65, it sounds like foreign. You know what I mean? But I kind of ran like a little bit of a number to kind of give the audience just like an idea of what does compounding just mean, an example of it, right?

So, I took a very basic example of someone who is in their 20s, right? Maybe they just graduated college. Their first job maybe aren’t as earning as much as they might want to or hope to. And if that person put away $200 a month, right, nothing crazy, just $200 a month, earned an 8% return and did it from age 20 to 65. Okay? The amount that they actually put in over that, call it 45-year time frame, was about 108 grand. And again, just assuming an 8% return, which I would say is relatively conservative, the S&P does maybe a little bit more than that, that individual would have about $1.05 million.

Derek Gregoire: You’d be a millionaire. Get at, for $200, just $200 per month. Not even per week, per month.

Chris Willis: Yeah. And it’s craziness too, because think about it that way, like you contributed, you personally took your own money. About $108,000 turn into a million, right? So, 900 grand of that is truly just the ability to have compound growth. And it’s really hard because when you’re young, your dollars aren’t going to compound quickly. It takes 10, 20, 30 years to see that money really work for you.

Derek Gregoire: Well, you know how fast $200– let’s say, $200 disappears easy. For people who want to go to get food all the time and spend money on coffee and coffee’s like $6. You would have coffee and lattes, whatever they call. But now, let’s say, in your twenties, you say, I’d rather have the coffee and latte every day. And I’ll wait until my 30s and start saving $200 a month.

Chris Willis: Yeah. So, I ran the same thing. It’s like the opportunity costs, you know what I mean? Because it is easy to go to Dunkin Donuts every morning or whatever that may be. So, I ran that same exact scenario, right, and said, “Okay, well, $200 a month at 8%.” But what if you didn’t do it when you were 20? What if you waited until you were 30? And you always said to yourself, “Hey, I’ll invest when I have more income,” right? “I’ll invest when I get a raise, when I get that promotion,” right? And if that same individual who, again, same $200 a month from age 30 to 65, right, that person, rather than having $1.05 million, would’ve had $458,000.

Derek Gregoire: Which by the way is still good.

Chris Willis: Yeah, still good. Yeah, exactly. Still good.

Derek Gregoire: Still start saving.

Chris Willis: Yeah, exactly. Exactly, yeah.

Derek Gregoire: I mean, you look at Person A at 20, they contributed $108,000. They have over a million bucks. Person B started at 30, contributed $84,000. Pretty close, but they only have $458,000, which again, is still good. But like, what’s the lesson there?

Chris Willis: Yeah. That’s kind of like what I’m trying to get away is like the time, obviously, it’s hard when you’re young, right? You still need to have an emergency fund, still don’t want to have high interest debt and stuff like that. But basically, the time is now, right? Very like, again, $200 a month, we’re not talking significant dollars here, but like $200 a month is just so significant because like to your point, like Person B who waits till 30, they only contributed roughly $20,000 less or $24,000 less, yet at 65, their portfolio was $600,000 less just because they waited 10 years. You know what I mean? It’s craziness.

Derek Gregoire: The quick you get started, and Chris did take a dig at me if you heard. He threw it in my face that he is only in his 20s. But remember when we started the company, I was 23 and now I’m 46. So, it does happen. It does happen fast. So, outside of investing in the market, what’s something else in your 20s to get prepared for just the rest of your career and build up in your career? What else do you recommend?

Chris Willis: Yeah, good question. So, a lot of it, because I use that example of $200 a month, which again, in the grand scheme of things, is not a significant amount, right? Obviously, there’s some people who can do more. Some people are trying to get there, right? But I tell a lot of people in their 20s, like the time is now to not only just invest in the market, but invest in yourself, right? Because if there’s a time to take a risk, it’s in your 20s. You know what I mean? Maybe you don’t have a family yet. Maybe you’re not a homeowner just yet. So, investing in yourself. And I’ll pick on Aiden, who works with us here at SHP. Aiden is 24, maybe 25. And he just passed the CFP. You know what I mean? It’s unbelievable.

So, Aiden, he’s an animal, but like, just investing in himself, he’s kind of setting himself up for the future because when you have those certifications, when you have those designations and you kind of have a little bit more credibility to yourself, your income will just naturally go up through time, right? An employer is going to want to pay you more and they know what you’re worth and all that stuff. So, it’s almost like I tell people to invest in yourself in your 20s because basically by the time, if you’re able to do that, you can put more money away as long as you stay disciplined. Just because you make more money doesn’t mean you have to spend more money. But almost like investing in yourself is kind of something that I’ve tried to do in the process of doing. Obviously, some of our employees already do it. So, that’s kind of the biggest takeaway I tell people is take that time, invest a little bit in yourself, and you’ll definitely get paid off in the future.

Derek Gregoire: Yeah. And you have a great perspective because you get to work on Matt’s team with a lot of his clients that are retired and have done really well and you can kind of learn some of their secrets of how they did it over the years and then teach that to yourself and your friends. Same with Aiden on Keith’s team. So, you guys get a good perspective. All right. So, let’s say you get to, now we’re in our 30s, which you’re going to hit that pretty soon.

Chris Willis: Yeah, get close then.

Derek Gregoire: And what does that phase look like?

Chris Willis: Yeah. So, that’s a little bit different because, again, it’s kind of cool because I’m approaching there. My older brother’s in his 30s. He’s got a little girl. He’s got two little girls coming on the way. So, he’s kind of in that stage and I joke like he knows exactly when I’m driving to work. He’ll call me for free financial advice all the time, but…

Derek Gregoire: You got to start charging him.

Chris Willis: I know, I know. But in you 30s, like that’s where lifestyle comes to come in or life events start to come in. You know what I mean? You probably remember, but…

Derek Gregoire: Same thing in my– you talk in my life.

Chris Willis: Yeah. Like, you have kids or maybe you’re thinking about getting married or are married, right? Maybe you’re a homeowner trying to become a homeowner, right? So, things like that, it’s not necessarily, because like– and in your twenties, we kind of talked a lot about investing and saving, investing in yourself and stuff like that. But in your 30s, life does happen, right? So, it’s almost like when you hit those milestones, what are things you have to do? And it’s not just investing, you know what I mean? And I say that because I do say, when you start to get to that point, almost pay yourself first a little bit, right?

Derek Gregoire: One of those things, like increase your savings if you can.

Chris Willis: Yeah, exactly.

Derek Gregoire: Again, we’re talking $200 a month at 20 and 30. Imagine if it was $400 a month, the $500 or whatever you can put, it goes up quick. But besides that, now that you are potentially getting married, you have more responsibilities. Again, your 20s, it’s almost like my life 20s didn’t have much responsibilities. Keith, Matt, and I took a risk and started this in our early 20s. But that time we were 30, we were all married. We all had kids. Different part of our lives. And so, what are the things people should be considering at that point?

Chris Willis: Yeah. So, a lot of things that I see get taken for granted, people don’t really think about, they’re like, that’ll never happen to me. It’s not to be morbid, but death. And life insurance is one of the most important things. It’s almost like the second you sit down with someone in their 30s and maybe they have young kids. Almost as a financial advisor, my personal opinion is the first thing you should ask them is their life insurance. What do you have set aside?

Derek Gregoire: If something happens to the spouse, if they’re both making a career, if one’s making it…

Chris Willis: Correct, yeah.

Derek Gregoire: It’s a huge, huge, huge, huge loss to that.

Chris Willis: Exactly, yeah. And I think a lot of people get stuck because most people get life insurance just through their employer, just through a group plan. So, I think, they often think that’s enough, right? They say, okay, well, I have a one time is my salary through my job, right? But often, it’s not. If you’re carrying a big mortgage, you need to account for your mortgage, your loss of income. In some certain circumstances, maybe, it’s a stay-at-home dad or a stay-at-home mom. You know what I mean? And there is one, “call it breadwinner,” you need to account for not just your debts, but what about that loss of income, right, if something were to happen.

Derek Gregoire: Term life, pretty cheap, to cover it or not.

Chris Willis: Yeah, exactly.

Derek Gregoire: So, life insurance is to consider. Disability, obviously, you got to keep it. If you get disabled, you need something to protect you. What about like an estate planning?

Chris Willis: Yeah. And that’s, I got another thing. Estate planning is just so important, right? Because estate planning, some folks I feel like get a little bit nervous when it comes to estate planning because they think it’s very complex. And it can be complex. You and I know that it can be complex, but just like basic wills, right? Getting a power of attorney done in case you’re incapacitated and you can’t handle your finances. So, get a power of attorney, get a healthcare proxy, right, things like that, that aren’t super expensive but are essential, right?

And I also tell people that goes swept under the rug is if you’re young and you have children, focus on guardianship, right? Because God forbid, if something happened to you and your spouse, who do you want to look after your kids, right? So, I think just having that, and again, those things like that aren’t going to make you a millionaire or get you retired earlier.

Derek Gregoire: Just dotting the I’s and crossing the T’s.

Chris Willis: Yeah, literally. Yeah.

Derek Gregoire: So, 30s are a little bit different now. We’re getting more mature hopefully. We’re getting more responsibilities. We’re getting our estate documents in order. And maybe, a lot of times, a lot of our clients’ children are in that age that we work with, so a lot of times we’re helping them like 529s plan, stuff for the kids, if they’re educationally inclined and so forth. So, that’s your 30s. And now, we’re kind of, as we’re flying through the decades here, 40s and 50s. Now, we call this the peak earning years. Obviously, and again, I feel like you wrote, this is a well-written document because like, it’s kind of how I thought and how I think. Now, you’re in your 40s and 50s, you actually start thinking like, oh, retirement is still far away, but it’s a real thing. I have to really start dialing things in. So, what are things people in their 40s and 50s should be thinking about?

Chris Willis: Yeah, I think you made a good point. Like usually, that is your peak earnings years, right? That’s where you’re probably making the most money you’ll ever make right before you start to shift down towards retirement. So, things like that, like obviously, in our 20s, 30s, you and I talked about like making sure you’re saving, making sure you’re doing the 401(k), the Roth IRAs. And when you kind of reach those peak earnings, like I could think of a few clients that we have who are in their mid-40s and they’re like, “Chris, I’ve done those things. I’m doing those things. I’ve maxed the 401(k). I’ve done my IRA contribution. What more can I do?”

Derek Gregoire: We talked about this off there. What are the things people start thinking about now, the 40s, 50s?

uChris Willis: Yeah. A lot of people, what they start thinking about is early retirement, right, in the sense that if you’re doing those things, you might be on pace to be where you want to be. You know what I mean?

Derek Gregoire: But also, taxes.

Chris Willis: And taxes, yeah.

Derek Gregoire: Taxes are becoming like, wait a minute, I’m starting to figure this taxing. What’s going on? I’m making this money. This much taken away. I’m noticing my retirement accounts might be all pre-taxed. And they start thinking about the tax benefits of if you do things today correctly in your 40s and 50s, because retirement now seems like, all right, it’s really coming up. I can see it in the horizon. Maybe like, often the distance, the little shot of dim light that you can kind of start seeing in your 40s, in your 50s, it gets a little brighter potentially. But as you’re getting to that road, you start thinking about the impact of taxes. And there’s so many things you can do. In your 40s and 50s to reduce the tax burden in your 60s and 70s.

Chris Willis: Right, yeah. I use it. I use, like my quote, I say a lot. I got it from somewhere else. I forget where, but I say sometimes people are so worried about their asset allocation, but they should really be worried about their asset location, right?

Derek Gregoire: That’s a great point.

Chris Willis: Yeah. Meaning like where is it? Is it in an IRA? Is it in a Roth IRA? Is it in a brokerage account? Is it in a savings account? Because it’s almost like, to your point, like 40s and 50s, that’s where retirement is like, wow, it’s not that far away, right? So, kind of like, okay, well, when you are 60 years old or whenever you want to retire, understanding the underlying tax status of your money is so important because you’re going to start planning now of, okay, what is my liquidation strategy call it going to be?

When I start pulling that money out, because it’s funny, when you’re, say, an individual who’s making $200,000 a year in their peak earning years, they definitely don’t see $200,000, right? So, it’s almost like when you reach retirement, you want to be able to, I guess, “see” as much of that money as possible. So, that’s kind of where it’s like understanding the taxes of your money is so important at that peak earning years.

Derek Gregoire: I like the location versus allocation. The way I always tell people is everyone thinks about diversification of their portfolio. But you want your portfolio to also be diversified tax wise.

Chris Willis: Yep, exactly.

Derek Gregoire: You see a TV show all the time, like you want to have different buckets of, obviously, if you can have all tax free, but it’s not always realistic. So, some of the things we look at here, and because I’m doing some of these myself from a tax standpoint, are direct indexing. So, a lot of our clients in their 60s and 70s, basically, it’s a very tax efficient way of investing to be in the market and so forth, but to be able to create losses and offset gains. And without getting down the rabbit hole, it’s a really good tax efficient strategy that a lot of our clients that have decent assets and also a decent income take advantage of.

Municipal bond strategy, we have an awesome individual muni bond strategy where dividends are tax free. We look at what makes sense to, when you’re contributing, does it make sense to do some after-tax contributions or like Roth contributions to your 401(k)? Depending on income levels and projections, again, we work with clients on those regards. So, there’s a lot of different things that you need to do, like now, and then as you’re starting to make more money, now we might start looking into like, does the estate planning need to be stepped up? Before maybe your estate was under a certain amount, now we might have to add the complexities you talked about that. When you’re in your 30s, ah, just a basic will, maybe a trust, not even, maybe not even a trust, a healthcare proxy, power of attorney, you’re good. Now, you’re looking at additional planning.

So, 40s and 50s is a huge window of opportunity. It’s a great window of opportunity that if you just fly through it and don’t do anything, you know how many clients, well, you know, because you see them all. But so many clients that come in in their 60s and 70s, even though there’s a ton of planning we can still do, they’re like, “God, I wish I came here 15 years ago. I would’ve had been in such better position by getting ahead of it.”

Chris Willis: Yeah, it’s almost like I feel like a lot of our clients that they see is there. They feel like they’re in tax jail a little bit. You know what I mean? They’re like, okay, I want to take that money out of my IRA to take that vacation or whatever that may be, or maybe it’s in a brokerage account, but they never sold it, didn’t do direct indexing, didn’t do any tax loss harvesting or whatever that may be. And they have this nest egg here and they want to do things with their family, whatever. Yeah, they’re afraid to because they’re afraid of the underlying taxes, right?

Derek Gregoire: Yeah, I can’t touch my money because it costs too much money. Well, that’s why you saved it.

Chris Willis: Yeah, exactly.

Derek Gregoire: It’s a weird feeling, like, I don’t want to touch that account. Well, that’s still money you save, granted you have to pay taxes to get it out, but yeah, there are things you can do to get ahead of that.

Chris Willis: Yeah, exactly.

Derek Gregoire: So, now, let’s dive into the weeds of retirement. This is a great timeline of 20s, 30s, 40s, 50s. Now, we’re kind of like 50s to 70s, probably, late 50s I would say is on it. Some clients retire at 45 or 50, but I’d say the majority of our clients, when they come, start really thinking about actually pulling the trigger in their late 50s. Again, there’s someone all over the place. There’s different numbers, but usually, late 50s to mid-60s is kind of the sweet spot that we see. So, basically, if you’re in your late 50s, 60s, as you get to 70, what do you see some big opportunities for you financially wise?

Chris Willis: Yeah. And I think that’s big because I think like when you’re in your 20s, 30s, 40s, right, it’s almost like you’re looking at a very broad horizon, a little bit. But when you get to your 50s and 60s, it’s no longer broad and like literally, maybe every year, every other year actually is like a significant event, right? I mean, like 55 means something, 60 means something. It’s almost like when you’re in your 20s and 30s, it’s pretty broad that we’re kind of talking about right here. But when you get into your 50s and 60s, it’s very specific. And every year, you need to consider something, right?

Derek Gregoire: 59 and a half.

Chris Willis: Correct.

Derek Gregoire: 55, 60, 62, you can take. So, all these different things, you have these numbers, like a different strategy for each year.

Chris Willis: Exactly. So, like, one, for example, I’ll just start at 55, right? And the reason I– it’s called like the rule of 55, where it’s an important rule because you mentioned like some folks, like if they’re in a successful situation, they can consider retiring early, right? And a lot of people are very, very familiar with the 59 and a half rule, where 59 and a half is, you can start to take out any IRA accounts without any penalties anymore. So, some people will circle age 59 and a half on their calendars and wait for that day because they can actually start to take that money out, right?

But 55 is actually a unique or maybe something that a lot of people aren’t aware of. And that’s 401(k)s. Okay? And the main difference there is if you are looking to retire early and you have 401(k) funds and you actually leave your employer, you can access 401(k) money at 55, whereas an IRA is 59 and a half, right? So, that’s kind of crucial because I think just naturally, there’s a lot of advantages to moving money from 401(k) to IRA eventually when you retire. But if you are in that stage where you’re like, hey, I want to retire early, it’s almost like don’t automatically think that you’re 54 and you won’t retire at 55. Don’t automatically think that you’re going to roll it to an IRA because you might lose that ability to access that money the second you move it to an IRA.

Derek Gregoire: Exactly.

Chris Willis: See what I mean?

Derek Gregoire: And that’s a good point. At 50, you can start doing the catchup contributions, 401(k)s, IRAs, and so forth. 55 is the difference here. What’s the– and I’m drawing a blank. I probably should. We’ve done it with clients before. If they do an IRA, there’s another thing they can do between 55 and 60. There’s another– I’ll try…

Chris Willis: Oh, it’s probably the substantially equal periodic payments (SEPP). Yeah, exactly.

Derek Gregoire: So, you can actually do like a– if you pick, so one of our clients retired, had rolled to an IRA or whatever the case was, and we did, as long as it’s like a certain specific percentage that’s equal for five years in a row. And there’s another name for it that I’m working on.

Chris Willis: Yeah. So, it’s fine. I know, I have a client, they’re on like year five right now.

Derek Gregoire: Yeah. We’re past five with ours, but the point being here, and I see as I get older, I start getting these exact details, but there are additional strategies. Don’t just be like, oh, I can’t touch it, and that’s it. Sometimes that may be the case, but a lot of times, there are other strategies that you can use if you want to retire early.

Chris Willis: Yep, exactly.

Derek Gregoire: And at 59 and a half, if you’re still working, a lot of folks, that’s when you can roll your 401(k) to an IRA. Sometimes it makes sense because in a 401(k), you’re limited to what that fund offers. In an IRA, you can explore the entire universe and have it professionally managed if you want. And usually, depends on situation, but sometimes there’s advantages to doing that. It could be disadvantages, but a lot of clients like the flexibility of having to be able to do that at 59 and a half.

Chris Willis: Yeah, and I use the analogy a lot, because folks ask me a lot, if you’re new to this, like what is the difference of a 401(k) versus an IRA? Like, I don’t really get that. They’re taxed the same, so why would I change it? And I use the analogy a lot and I tell this a lot to a lot of people I meet for the first time and I said, you think of the 401(k) as like a restaurant menu, right? If you’re going to an Italian restaurant, they’re going to give you a list of 15 to 20 things you can choose from, right? Chicken parm, whatever that may be, vodka pasta, whatever that may be, whereas if you go to an IRA, the analogy I use is you’re no longer at that fixed menu at the Italian restaurant. You’re now in the supermarket.

Derek Gregoire: That’s a good point. Yeah.

Chris Willis: And you can choose anything you want, right? So, that’s kind of the main differences. And at 59 and a half, that’s a big opportunity to your point.

Derek Gregoire: 27-year-old’s full of wisdom.

Chris Willis: That’s it. I listen to a lot of podcasts is what it is.

Derek Gregoire: All right, so if for contributing, we talked about age 50, you can start doing catchup contributions. 60 to 63, you can do super catchups, right? So, you can start, instead of being $8,000 extra into 401(k), you can add $11,250. And you also want to start considering, like at that age, depending on income level, Roth conversions start coming into play. We do a ton of them for our clients that are retired or approaching retirement by trying to keep the conversions within a specific income window, an income bracket, try to take advantage if there’s a window of $50,000 and a certain bracket. We’ll probably do that, so have more tax-free money in retirement. We can create that additional diversification. So, also 62, we have all these. Let’s get into the Social Security ages.

Chris Willis: Yeah. So, 60, so Social Security scares a lot of people because I joke with people, you can only elect Social Security one time, right? So you want to make sure you do it right. 62 is the youngest age you can collect Social Security, right? And it’s almost like a lot of folks automatically think they have to wait till 67 or their full retirement age or whatever that may be. but 62, you actually can do it. It is a pretty big reduction, right? It’s roughly about a 30% reduction in comparison to your full retirement age, they call it, right?

And in some circumstances, that’s where you kind of really just sit with your advisor, say, does it make sense to start at 62? Should I wait till 65 or 67, or whatever that may be? Just because it’s very, very specific to the person, right? And we’ve seen people start at 62, only because they did retire early and they may be taking a lot out of their portfolio because they have no other sources of income, right? So, maybe sometimes, it does make sense to say, okay, well, let’s start at 62 because obviously, you get more income now, but it also de-stresses your portfolio a little bit.

Derek Gregoire: You have to look at the whole picture.

Chris Willis: Correct, yes.

Derek Gregoire: You can’t just look at it in a vacuum. You have to look at the whole picture. That’s why all of our clients, we have a full portal. We run these through these scenarios to show the impact if we take Social Security early at full retirement or at 70. Sometimes it’s different for each spouse. A lot of planning goes into it.

The other thing, obviously, at 63, you want to start thinking about Medicare because your Medicare Supplement premiums at 65 are based on what your income was when you were 63, so not to get too confusing. But the Medicare, obviously, you’re eligible at 65. You sign up for A, even if you’re still working. So, this 55, like you said, start every year or so. There’s some sort of an age to look at. Oh, what’s available now? I’m 62. What’s available now? I’m 59 and a half.

One of the other things, so at 70 and a half, I think this ability might go down a little bit, meaning like. it might not be as advantageous, still potentially, but at 70 and a half, you can do something called QCDs, which I’ll talk about in a minute, or you can fill the listeners in. But at 50, before that, and even this something that I do now is the donor-advised funds. So, people looking for tax breaks, we would have some clients and they might say, I’m giving $10,000 to church or cancer society or whatever it is you’re giving it to. And they’re just taking money out of their savings that they’ve already paid taxes on. They’re giving it to the foundation and that’s it.

And I’m like, well, instead of doing that, you bought Apple 20 years ago, we bought Apple, whatever the case is for a hundred thousand, it’s worth $800,000. We can sell appreciated shares. So, maybe, let’s say you bought something for a thousand, it’s now worth $10,000. We can use that, put it into a donor-advised fund, get the full tax deduction, and then pay that, you don’t– maybe you send $2,000 to one charity, $2,000 to another.

Chris Willis: Correct.

Derek Gregoire: You can kind of parcel it out, but it’s a way to, instead of taking good already money that’s already been taxed in your checking account or savings account and donating, this is a way to donate appreciated stock. The charity gets the same amount. They’re not losing anything. You get it right off, but you’re also getting rid of older money. And if you wanted to buy Apple again, you just buy it again with $10,000, and guess what? Your basis is now $10,000, not $1,000.

So, there’s a lot of strategies there, but then once you hit 70 and a half, it used to be the age where you’d have to take minimum distributions. Now, we know that got bumped to 73, and eventually it’s going to be 75. But at 70 and a half, explain just what a QCD is and why that’s beneficial.

Chris Willis: Correct. Yeah, so QCD, for those who don’t know, it stands for a qualified charitable distribution. Okay? And kind of what is that, right? It’s really focused on your pre-tax accounts, your IRAs, right? Because you know that at age 73, call it two and a half years from 70 and a half, you’re going to be forced. The IRS is going to push your hand to take money out of those IRAs, right? And you’re going to pay taxes on that money whether you like it or not. So, QCD is a way, it’s not necessarily a deduction, but it’s more of an exclusion, where if you say, and I’ll focus on someone, let’s just say someone is 73 years old, right? And let’s just say they’ve done a really good job saving and they have an RMD of $50,000, right?

Derek Gregoire: Maybe they have a million, two in their IRA.

Chris Willis: Correct, yep. So, they’re required to take out $50,000, right? Maybe they have great pensions, maybe they have a great Social Security. Maybe they don’t need that $50,000, but they also don’t want to pay taxes on it, right? And it’s not one, it’s not like all, so they’re not all or nothing, but like, let’s just say RMD’s $50,000, you could say, hey, I want to give $10,000 to charity, right? It’s funny, I ran into a client who I met for the first time, and he was of RMD age. And he was giving that $10,000 out of his checking account to the charity.

Derek Gregoire: Oh, my gosh. Yeah.

Chris Willis: And he didn’t know about this QCD rule. I said it actually makes much more sense to take it out of your IRA, give it directly to the charity because you won’t pay taxes on it. So, rather than having a tax event of $50,000, you only had a tax event of $40,000.

Derek Gregoire: And maybe that keeps you in a lower tax bracket.

Chris Willis: Not only that, but lower tax bracket and lower Medicare bracket, right? Because everyone is worried about what they’re going to pay in Medicare and those are kind of two things that offset each other. And I talk a lot about it. I don’t want to go too far, but down the tax rabbit hole, but just itemizing taxes nowadays are so hard because the standard deduction is so massive, right? So, folks are really strokes, they want to give to charity, but they can’t deduct it because they can’t itemize it because everyone takes the standard nowadays.

And the qualified charitable distribution is kind of a workaround, right? Because again, it’s not a deduction, just an exclusion of income. And that amount you get to charity, whether you itemize or take the standard deduction, is still going to come off your top line.

Derek Gregoire: Exactly. So, there’s so many things and I’m going to go back, correct myself. Was the 55 thing, if you have a 4– was it 72(t)?

Chris Willis: 72(t)s, yeah.

Derek Gregoire: That’s what it was.

Chris Willis: Like SEPP or 72(t), they’re interchangeable, yeah.

Derek Gregoire: Let’s start. We’re going back to the old, you’re 55 and retire early, there are some ways to tap into your IRAs, potentially. So, 70 and a half used to be the old age where they said, oh, you have this much in your IRA. 401(k), you have to take this much out. Now, that’s 73, and if you’re born after 1960, it’s actually 75. So, one of the things about pre-tax monies in this type of accounts is if you have, let’s say you’re 73 right now and you’re forced to take out, let’s say the market was getting crushed, right? If you have everything in a 401(k), unfortunately, you kind of have to sell low, take that distribution out at a low point if the market was low because you have to pull out a minimum distribution out of your 401(k).

If you had it in an IRA, you might say, okay, let’s say a million bucks is an IRA, maybe $300,000 is very conservative, and the other 700 is still moderate-moderate aggressive. Well, in that scenario, we say, okay, we’re just not going to touch the aggressive stuff. We’re going to pull from the conservative stuff so we’re not taking a loss. And if the market’s high, we can pull from either side. But you can create that flexibility if you have multiple IRA accounts. But if you have a 401(k), you have to pull out a minimum distribution out there.

Chris Willis: And yeah, good luck trying to get your 401(k) providers to just sell this stock and this bond, or whatever that may be. They’re probably going to do a pro rata and send you a check. You know what I mean?

Derek Gregoire: And people will say, oh, I’ll just reinvest it. Well, you’re right, but you’re losing the taxes out of it as well, so even if that’s assuming you don’t even need it. So, we all know this goes without saying, but there’s so many planning tools. We probably mentioned a hundred planning tools in the last 30 minutes. There’s so many ages and planning tools to consider. but make sure that you’re just thinking about all this, and obviously, this goes without saying all the things we talk about when people are retiring about reducing their risk. Setting their accounts up for safety, income, and growth. Kind of make sure there’s balance. Look at all the– dotting every I, crossing every T. What’s your withdrawal plan? What’s your travel plan? Let’s enjoy this. Not just get by in retirement.

But this is awesome. The thing this gives listeners kind of like a great, almost like zipping through the lifetime of like 20s to 30s all the way into your 70s and retirement and all the different planning tools that kind of come into play, more at certain years than during other certain years. Any closing thoughts here, Chris? This is obviously great stuff.

Chris Willis: No, all looks good. The only thing I would add that, out of age is almost like, I think we see a lot of people, and there’s really no age requirement, but I always tell people to always review your estate plan, right? How often do we see people who are like, hey, I haven’t seen my attorney in six years. I’m like, okay, well, did anything change? Like, yeah, well, this changed. I had grandchildren, right? Or maybe just our tax laws change on the estate side. You know what I mean?

So, I know we went through all these different ages, but last thing I would just add is, maybe every few years, just check in with your estate. Make sure everything you have in place is still the way you want it, and if there’s any tax laws, at least us or the attorney will be able to help you out. But other than that, I think, yeah, it’s been a bunch of fun.

Derek Gregoire: Yeah. No, thanks for joining. I think in closing, just from a resource standpoint. there’s a lot of, as we know, all the stuff we talk about here, we have at SHP, the reason we built what we have is we have a portfolio team. We have a planning team. We try to dot every I and cross every T for the clients that we work with. If you want more information, there’s a ton of resources and guides at SHPFinancial.com. So, I’d urge you to go there if you need anything.

Other than that, Chris, thank you so much for joining us. Thanks for taking the dig at me early on. I’m going to get you back at some point. And thanks everyone for listening and watching, and we’ll talk to you real soon.

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