Transcription
Hi, my name is Hans Goldstein and welcome to this class on social security and retirement optimization. Before we get started and you know we're going to talk about taxes and timing, all that mumbo jumbo. Before we get into all that, I want to introduce on my left, that's my wife, and um, her name is Michelle. And then on the right, that's my parents, and they've been in this country 45 years. I grew up here um in Wisconsin, actually. But after 45 years living in this country, they're moving back to Norway because they didn't have a plan well enough for retirement, meaning, you know, well, social security, but long-term care, and they didn't have a plan for healthcare when the cost of healthcare rises and the bills. And so they're moving. And for them, that means that they have less options because they have to. Um, and when you don't get this retirement thing right, that means that your options get smaller. And for them, it means they're going to be one whole ocean away. I get to see them less. That's why I teach this because when you don't get this retirement thing right, it could be the difference between living a life thriving, having options, or having to, you know, move or really kind of change the lifestyle.
I'm going to be going over your questions in a moment. I want to just disclaimer that I'm not part of the Social Security Administration. So this is about information today. Now, purely informational, so that you can make the best decisions. Now, here's a big one. Will there even be social security in the future? And that's a loaded question because by 2034, there is a deficit that's running dry. They have this trust fund thing, and you know, obviously, the payroll, that's not going to stop. Payroll taxes, that'll fund it, but the trust fund is going to run dry by 2034 if the politicians don't make any changes. Now, as you know, how politicians work is they need to be reelected. And who elects the politicians? Well, we know seniors are, you know, the ones that probably do the lion's share of voting. And the solutions are either changing the FRA, increase taxes, benefits, print more money. The point is is that all you can do is be more prepared, right, for that 11th hour. And that's why we do this is because it's not just good enough to hope that they're going to come up with a solution, but be better prepared so that you're making better decisions now.
Now, it all began in 1937. Lady named Ida M. Fuller. She got the first check. She'd only put in $24.75. Got a whopping $23,000 because she made it to 100. Now, making it to 100 nowadays, well, that's not the miracle it used to be. I mean, she was the miracle woman from Vermont, a newsworthy item. But today, people are living on average 25 years longer than back then. You know, back then it was a luxury to get social security. I mean, one out of 40 people got it, and the rest were working. Now, one out of 2.7, there's 2.7 people working for every retiree. And so, there are fewer workers now. And the same math, you know, which means that there's really not as much money to go around. There's more pots to fill, but less money to actually fill it.
And that's what's causing that there to be this deficit nowadays. Well, we're lucky to have 35-40% of income covered by social security for retirees when they actually need double that. So, 70-80% is what they need of what they made when they were working. Uh, think of social security as that foundation of the house. I want to get to that a little bit later on how that works. And it really comes down to life expectancy. I mean, heck, half of women, you know, unless they have like some COPD thing or some crazy disease, they're living to be 93. And then half of men that are age 65, they're living to be 90. And so that's another two, three decades longer. And that's what's causing that because what happens when groceries, gas, you know, healthcare, all those bills keep rising and the expenses don't? That's what's causing this uh income gap. How many of you actually know someone that's only living on social security? Maybe even a single person, raise your hand. Yeah. Are they thriving or just getting by? Yeah. And grandma would tell you, those expenses, they're not covering as much as they used to from the social security fund. Like I said, think of social security as that foundation of the house. You know, it's not the roof, it's not the walls, it's not the pension and the savings, but it's a start. And a lot of retirees are trying to figure out, they're in their 80s, 90s, the older they get, where the roof went. It just disappeared.
Meet Joe. He earned 80K last year and now with social security, he's only going to get $30,000. Doesn't have any other check coming in. And so the question is, what is that 60K consisting of? I mean, is it helping that extra 30K? Is it helping his daughter? Is it helping um his wife? Is it just covering the extra vacations and extracurricular activities? Is that all that it's doing? Or is that extra 30K that he's missing, is that going to cut into essentials? I mean, that's the reason why he wasn't able to save more is that his bills are 60K net when he's making 60K after the taxes. So, if your bills, right, your budget was cut in half, is that going to cut into the essentials or would that actually, you know, just be lifestyle that you're not able to, you know, do do quite as much anymore? And so the question I have for you guys is, what would you do in this situation? I mean, what what are you going to have to cut? In that second class, we can go over for you, what really is that uh what really is that income gap? Because that's the problem that folks have to solve, seniors have to solve. Unless and if they don't solve it, it solves them. In our second class, we can go over ways that you can not have to use inflation, that just leaving money in the bank or putting in that roller coaster on the stock market and without doing anything risky like that.
Now, as you're aware, we talked about payroll already that for many of you guys, you already paid into the system. But did you know that you can actually get taxed one more time, right? And it's up to 85%. Now, just there's some newsworthy things going on right now with what they call the big beautiful bell. Um, you know, some people call it beautiful, others don't. Um, but but basically, there are some deductions that are coming out of that. It's for some couples, it's up to $6,000. It's only a three-year plan uh that would have to get renewed. So, it's TBD on that. It's a bit early to to know exactly what's going to happen, but basically folks are getting taxed up to 85% on their main accounts. So, what counts towards this? Well, it's um all the taxable accounts, you know, think IRA, income, etc. The only ones that don't count are, you know, loans, re meaning like reverse mortgage, you know, certain life insurance type of policies, anything non-taxable. And then probably the big one is Roth, right? That one's not. Um, just imagine that your social security check is that boat. It's going through the seas and you pull out some extra cashola from the IRA and boom, that means that your check just disappeared a little bit, right? And that's what why we call it the torpedo. Um, because it can really have an impact, literally less money because you get taxed.
Now, what gets taxed is the thresholds. And um, for as you can see, as a single filer, a lot of folks, they might not make enough, you know, it's half of the um social security check plus other taxable incomes. That's what they call provisional income. And that's the the threshold that uh dictates whether there's tax or not. So, for example, uh married filing jointly, uh if you, your joint social security is $60,000, married couple, and then you have another $60,000, $120, then half of the social security, that would be $30. $30 plus another $60, that would be well over the, you know, $44,000. Anything greater than $44, and boom, there's a tax. So, a lot of folks, they don't know that. And so they're just taking money out of their accounts, not knowing when it's going to tax them, and then they find out next year that they have less money. And so, I want to ask you guys, how many of you actually knew that not only did you get taxed once, but you can get taxed yet again, many times? Yeah. Anyone here? So, like I was saying earlier, for that couple that had $60,000 of uh social security, another $60,000 from uh an IRA, they could get taxed to where they have $10,000 less because again, up to 85% of the $60,000 can get taxed that portion, and then yet again, their taxable account, in this case, the IRA. So, they're looking at shy of $10,000. Now, if that same couple had gotten, you know, they were doing an like some sort of structured loan account or from a life insurance policy or Roth, you know, policy, and they'd maybe converted over the Roth many years before the um, you know, from 59 and a half until 67 and they'd converted over year after year after year and then paid the tax man before, they wouldn't be taxed at all, right? And they wouldn't have any impact on their social security. So, in our second class, we can go over what that means to you, to Roth or not. Um, what your tax bill will look like, and what kind of tax torpedo might be coming your way, especially so you're just aware of of the landscape. You're not just surprised by a tax torpedo coming your way.
Now, the next part is this second tax bomb. It comes at 67 for the old folks. Yeah. Uh, excuse me, 70 and a half for the older folks born 1949 or or before. And then it comes at 75 for anyone born 1960 or older. So, those folks, if they're born after a certain age, 75 is sort of like the new 67 or 70. Um, excuse me. It's the new 73. And there's a divisor that plugs in. This is the new numbers, by the way, a divisor that plugs in um to your total retirement account. And it's called RMD, Required Minimum Distribution. Some people, they call it Retirement's Minimum Donation. And if you miss it, well, hey, they hit you with a 25% penalty. So, they actually hit you with an extra tax if you don't pay this. And and so that it's a double double one because you have to pay the tax anyways. So, this divisor plugs into whatever balance you have on your retirement statements, and that's the one that you end up having to withdraw from your accounts. And like I said, if you don't take it, think of it sort of like, you know, you're going to your 75th birthday, you take that piece of cake. If you don't take that cake, well, they'll take the cake anyways. And then an extra slice. And then the Uncle Sam, he'll say, "Hey, see you next year." Especially if you don't do anything about it.
Now, Joe, he's one of the older guys. He gets taxed at uh 75, uh 73. I mean, he has $500,000 in his IRA account, and he's got to take out, this is the old numbers, by the way, but it's shy of 19K. If he doesn't take it, he's going to be taxed an extra or penalized an extra $5K. And what that means is that he has to pay, of course, his social security, extra social security taxes. That's going to be increasing his taxable amount on social security, likely, but sometimes also Medicare premium that will bump him up two years from now into the future. It'll bump him up into a higher Irma, so that he has to pay higher premiums on his Medicare possibly. And then of course, he's going to have to pay taxes. Whether that means that now he's in a 22% bucket class of taxes, depending on what else he's got going on. Really depends. But it can not only increase, you know, he has to pay the taxes on it, but increase his tax bracket. And that's where the danger zone is. But think of it as three forces trying to take money out of your pocket. Both social security taxes, the Medicare, the Irma, and then the tax bracket or the actual taxes. Sort of like a tug-of-war, the three pulleys. And for most folks, Joe was aware of his tax, but what he wasn't aware was those extra forces trying to pull money from his account, which um which go three ways. And that's why we call it the tax time bomb because it's really the question of it's not if it's going to happen, it's when it happens. Who's taking extra money from Joe's account? In our second time meeting, we can actually look at what your tax time bomb would look like and what you can do about it. You know, to Roth or not, would Roth cause more trouble? Um, but at least then you know what's going to happen before and then look at, you know, what would be the best strategy moving forward.
Now, a lot of folks aren't aware that their social security check, that's actually not their pension in full. Did you know that Medicare Part B actually takes $185 bucks right out of the check? Meaning $2,220 just comes right out every single year. And every year it actually increases. Think of it sort of like HR at your workplace. Like if you had HR, they just take some money right out of the check without you even thinking twice. And you're like, "Hm, I wonder why that was less than I thought it was." So, how many of you were actually aware that you have to pay this Medicare Part B and it comes right out of your check? Were you aware that the money doesn't come in full? Yeah.
Now, here's the kicker. Say, you know, Mary Joe, they get a total amount of $3,000 from their medic from their social security check. So, meaning their net is $2,630. So, that would be like the normal amount for for 2025. Let's say two years ago. So, they do a look back two years that either Mary, she may have, you know, totally annihilated it over at the casino. I mean, she just went there and won and won, and maybe she lost a little bit, or Joe. He's pulling all this extra money from his IRA. He's like, "Hey, it's here. I'm going to take it." And they, they're they're rolling in multiple six figures two years ago. And then they hunker down again. Don't do it. Um, their their actual social security check two years later is going to look like more like $2,000 because the look back, if they did greater than, if you see here, $334,000 and $1. If they did better than that, that means each they have to pay an increased amount of $295.90 each, which means they're looking at $480 each. So, meaning it's almost $2,000 they're out with. Now, if they planned ahead and limited their winnings or staggered it or figured out, okay, well, we're not going to make these uh crazy different numbers every single year, um, they could have had a much more reasonable uh premium amount from their Medicare Part B and it wouldn't impact their check. Of course, these numbers change every year.
Now, before you, and by the way, this is the second big, big kahuna question is, hey, when do we even take this social security thing? And before we even get into that, it's really important to understand when your full retirement age is because for some of the older folks, it would actually be more like 66 and change, right? A few months. But if you're born 1960 or older, at 67. And so for most, 67 is the new full retirement age. If you take early, there's a massive reduction. It's probably the most expensive decision you could make is taking early, or the most profitable one that's guaranteed is waiting. So, you get an 8% increase every year you wait till 70, and then it's up to a 30% reduction if you take early at 62. And of course, you can take later on. You take a reduction as well. Basically, the closer you get to God, the more they're going to take.
Just imagine three triplets. Okay. So, everything's the same, pretty much. You know, they had the same mother, the same lifetime income, the same factory job. Um, you know, pretty similar lifestyle. Just everything was similar. Because Joe, he waited the longest. John, he's the one that says, "You know what? I'm going to take early. I'm 62. I've worked hard. I get it now." And as you can see, he's winning for years. Blue, blue, blue, blue, blue. That's where he's getting money. His brothers haven't gotten caught up to them. Okay. And he he's getting $8,400 per year. Of course, this doesn't quite include inflation completely, but um at 2.7%. But basically, he's winning for the bulk of the beginning years. And then his brother Jim comes along and he says, "You know what? The full retirement age, the common age to do it. I'm going to do like most folks, wait till I'm 67." He gets $12K. And then his uh late bloomer brother Joe, $14,880. $14,880. That's what he gets for waiting till he's 70. Now, over a 20-year period, Brother Joe, he actually didn't even show here. $2,500, $250, $2,960 is what he gets over only a 17-year period. Now, Jim, middle brother, he gets a whopping 240. Pretty similar, but he's done 20 years. John, on the other hand, six, you know, 16 years it's in the 134, but $126, but over 20 years, it's only $168,000. So, as you can see, before he really starts to feel that 20-30% drop. And how many of you guys actually know someone that took it early because, yeah, maybe they thought social security would run out of funds, anyone if they knew that they could get a 20-30% increase? Heck, maybe even 40 if they waited longer, right, by 70. But at least a 30% increase. Do you think now with gas, groceries, all the cost that they feel like, you know, they could have used that extra money? Yeah, we see we hear that a lot that, you know, folks that take it early now with the cost of goods, they're feeling that pinch. And that's what we want to make sure doesn't happen or where they're not feeling that income gap unnecessarily.
Now, John, he was that early hair, right? He got out first. He was the the hair. But Joe, on the other hand, he's the tortoise. Yeah. He waited longest. And now at 86, he cashed in $252,960. Yeah. In this case. So, who do you think of these triplets is the one that's going to be paying for dinner on their 86th birthday, right? It's not John. He's out of cash. It's either going to be Jim or or Joe, right? Normally triplets, they fight over birthday cake, not who's getting more money in social security. But you got to imagine that they're all 86. They might not make it to 86. And that's the big assumption. See, after age 82 and a half, that's when it wins big to wait. But before then, hey, it might win to take earlier. The hair has an advantage if they don't live as long. And tortoises, inherently, like in an actual reality, they live to be in their hundreds. So, it's a really case-by-case situation with everyone has a unique situation here. Some of you, they might have spouses that have extra earnings. Um, some of you might have lower taxes, higher taxes. Some of you might have a health history that's limiting and might dictate, you know, what's smart. And then others of you might have a spouse that relies on you financially. And so that even if you have less health genes, that waiting longer so that they, and we'll we'll talk about that in a bit, they can actually keep your higher social security check if you wait might be advantageous. That's what my dad did. So, we can go over that for sure.
Spousal benefits. This is a big one. We'll also cover exes as well. But the gist is that you get half of what your spouse got for their full retirement age. So, meaning that if they're at full retirement age, meaning like usually 67, in this case, $2,500 is what Jeremy got. Samantha, she would get topped up 50% of his earnings. So, $1,250 in that case, meaning that if she, you know, worked a school teacher's job, if she was a homemaker, or she just had an S-corp and just basically didn't pay very much into the system, uh, for whatever reason, this could mean that she gets topped up. So, even if she paid some in, she gets topped up to 50%. Means that if they're both taking at full retirement age, they get one and a half times earnings on the social security paid insurance amount. Now, that is if they take at 67. Both if they take early, there's going to be a reduction. So, just for simple math, let's say that one partner gets $1,000. Well, if the other partner takes early at 62, they'll get $325, not the full 50% or 50%. But if they take later, there's absolutely no benefit. Now, granted, you still as a spouse have to wait for the other spouse, the higher income one or the one that paid more into the social security payroll to have claimed first. You can't just suddenly, you know, claim just because your spouse didn't. You still have to wait, or you take your amount early. So, let's say you'd paid into some, you would get, you know, the 20%, 30%, you could claim yours and then take your spouse's when they claim. That's also possible.
My mom, she made a big mistake. Uh, see, my parents, they're actually one and a half years apart. And she thought, oh, because uh Walter, he took it early, or he took it late, excuse me, that I should take it at 70 as well. She just thought that she didn't know, understand full retirement age versus delaying for him didn't equate to her, but she just assumed it was the same. And uh, she actually took 1 and a half years late. So, what she should have done was as soon as my dad claimed, she should have claimed as well because she's 1 and a half years younger. What happened was she missed out on one and a half years of checks. So, it cost her $25,000. And by the way, she's not, she didn't get that money back. Second one that's probably a big boo boo as well is if you were married before age 60. Let's say you're 59 and a half, right? For for ex-spouses, because my parents are still married, but I think they will always be married, by the way. But if you remarry before 60, you lose your ex-spousal spousal benefit. So, it actually pays or it's smart that if you're going off to your honeymoon at 59, wait, get married at 60 instead of 59 because it can impact your options for sure. And by the way, for those of you, because I looked it up, for those of you that that already did that, well, you have to be divorced for 2 years um after. So, you can't be married in order to take the benefits. And by the way, you have to have been married 10 years um in order to to to make a claim. Uh, you can't have been remarried, divorced for at least 2 years. Like I was saying earlier, your ex must be at least 62 years old, or claiming SSDI. If your ex marries, has no impact on you, hooray. Good news, you don't have to talk to them. You don't have to tell them you're going to get this benefit. You just call up to the Social Security office and ask them what your benefits are. And then if you've been married more than once, hey, well, this is the time not to hold grudges anymore. You take the one who earned the most, take their benefit.
This one's more sad because widow's penalty means smaller checks and more taxes. They don't tell you about that one. It's already hard enough on the toughest day of many spouses' lives. And then boom, there's more more to that death and taxes. And it's similar that at 67, that's the full benefit amount of the survivor, right? You. So, basically, what happens is whoever earned the most, that's the check that lasts for social security, and then the other, the smaller check disappears. And if you take at 67, you get that full benefit. And again, there's no benefit to waiting, you know, to 70. It's not like you're going to get some boost for waiting to be 70 to get that full retirement survivor check. But if you take early, you can take as early as 60 and get a pretty big reduction. So, same principle applies. Like let's say that you were going to get topped up 50%. Um, might benefit you to take your benefits early. If you at least work some, take your benefits early, and then at 67 or, you know, later on, at least take the spousal benefit because that one might be bigger. And then that way you can get 50% advance earlier in certain scenarios. Of course, if there's a big age gap, that can become, you know, an income gap problem, of course, as well, because they don't pay before then. Now, it can make a difference when in this case Jeremy claims it can impact what Samantha gets as well in this scenario because if he claims early, 63 and a half, he gets $1,927. Claims late. It also conversely benefits her. Well, $3,100 a month. Um, and the survivor benefit for her would be also $3,100 a month. Now, she wouldn't get half of $3,100 while he was alive, though. She would get, you know, the $2,500, what we were talking about earlier, half of his um social security. But then regardless of what option Jeremy chose, um, she would lose her check in this case, her, uh, original $1,250 check. And that means that $15,000 is completely gone.
Now, I have a question for you guys. How many of you think that if a spouse that you have or family member in your home passed away or was gone or didn't contribute anymore, um, that their bills would, you know, just completely change your total bills, right? For a lot of folks, their bills stay pretty much the same. I mean, sure, yeah, if there's some long-term care costs or, you know, and they need someone to help bathe them, dress them in their later years and, you know, they're getting constant help, that's different. But for the most part, what most people find is that their bills stay pretty much the same. And in this case, Jeremy Samantha, Samantha's at a loss of $15,000. Now, she has to pay for real expenses. Let's say that Jeremy Samantha and Samantha had, you know, they were pulling $30,000 from their uh retirement account and, you know, they were getting a total amount of $3,750 for their monthly benefit. So, you know, between the two, around $80,000. And now, well, now she's down $15K, that's not coming anymore. And so, basically, she to be whole again, has to take another $15,000 out. But little does she know that that $15K is going to be first of all taxed. Second of all, could increase her tax rate, making her jump from a 12% to a 22% bracket. But not only that, her social security tax bracket, like we were talking earlier, singles have a smaller bracket than couples. So, pays to be married to keep more of your money. So, meaning that for her to be whole, she'd actually have to have more than $15,000, an extra $2, $3,000 in order to really be whole, possibly even. Uh, because her taxes is going to cost her an extra $2 to $3,000. That's why in this um next time when we sit together, if you'd like to kind of review your situation, we can go over, hey, what is that plan for survivorship? Um, what what bills would be different? And if not, what can you do about it?
Now, next piece is cost of living adjustment. That's where folks finally feel a little bit of excitement because that means there's more money in the future. Not so fast. See, COLA is not the real inflation. Buying power since 2000, the year 2000. So, folks that were getting social security back then felt like that was going 30% further than it is now. Now, a lot of those people, they're dead, so you can't even check on them. But they felt like it was. You ask any, you know, 100-year-old person, they probably tell you that, hey, that grandma, great grandma says that check went further back in the day because the cost of living adjustments only increased 2.7%. Last year it was 2.7% by chance. That's not always the case. Sometimes it's zero, sometimes it's 8%. But on average, it's it's it's that amount. Well, true inflation is around 6%. And of course, that's debatable, that 6% number. But in general, it means that there's less money coming in. In real sense, it's sort of like the government tipping a nickel when the cost of eggs went up a buck, right? You think of Mary, in the year 2010, she got $2,000 and now $2,500 in 2025. It just buys less. So, think of Mary. She's going up the down elevator. She's trying to go out with the COLA cart and she's getting that resistance. That's what it's like.
Now, the next piece is only relevant for those folks that are thinking, "Hm, maybe it would be smart for me to work while I take social security part-time or full-time." Well, listen up, folks. If you earn $23,400 and take social security at 62 to 65, let's say 66. Um, yeah, because the year you reach retirement, it's one out $1 for every $3 in earnings. But the first five years, it's actually going to be $1 for every $2 of earnings. So, meaning if you went $10,000 over, half of that would be deferred. Basically, the IRS says, "Okay, you made over the $23,400. We're going to withhold this." So, you go, you work one extra shift at Costco and your money goes on a diet. Think of it sort of like, you know, you're going into Uncle Sam's barber shop and instead of cutting hair, he's cutting your check in half. How many of you guys know someone that worked and then they thought, "Oh, well, that check went on a diet." Or just someone that actually worked and then they were taking social security at the same time. Anyone here? Yeah. And here's the thing is if they call into social security, the social security office is going to say, "Oh, well, don't worry about that. Your check will come back. You'll you'll get that money back later." Sure, you will. Somewhere between age 90 and the Death Star of the universe, you will. And that's exactly the problem is because that deferred earnings means that perpetually that money gets trickled out and you don't really see that in true value, even though on the math scale they might show that.
Sue is surprised. She works, gets $1,500, works part-time, earns $33,000, and then she gets $1,500 from the Social Security Administration. So, her check went $6,600 over, and of course, it gets cut in half. $3,300 is what's lost. And so, she calls in and she's like, "Hey, what, where's my $18,000? I thought that's what I was going to get." Oh, yeah, sure. Not a problem. $14,700. Well, you'll see that rest of the money later. Well, she wasn't signing up for that. And so, what she learned was that, hey, if I work early, that means that my check will shrink. And so, next year, she might try to fix her mistake and work less. So, for you, we can go over what is your situation. Do you have to work? Do you have to take social security? What, what, what is the best thing for you?
Now, the last piece here is regarding general retirement. And for many of you, you have equity somewhere, you know, money saved up, a house, so on. And so the problem in retirement are two things: volatility and longevity. And we call them the go-go years and then the no-go years. And in the no-go years, um, and there's there's slow-go years as well. Um, in the no-go years, that longevity becomes very pricey. But let's just talk about the first, let's just say even keel numbers. 5% is not being withdrawn from the account. 10% is not being withdrawn from an account. Two brothers, they were just, you know, putting money into the stock market. $87,000. Uh, they Okay. No, they start with $100,000. That's what it is. Both of the brothers start with $100,000. And one has horrible sequence of returns where it's really bad in the beginning, and then the other one has good sequence of returns in the beginning. It's really good in the beginning, and then it's really bad at the end. Well, if they're not drawing money from it and just leaving, parking the money there, they don't have any, you know, refinancing of house or having reasons to draw money from it or paying for kids' college, no problem. They can just leave it in there and at 8%, boom, they're they're doing good. Fine and dandy.
Now, the same brothers, they keep it going. The same pattern except now it's flipped. It's flipped the other way. So, retirement is going the same way. So, the same pattern happens again actually at 66, but now they're withdrawing income. Just because it was really, really bad in the beginning, and then was good again, it means that brother number A, his portfolio just gets totally wiped out, and at 82, he's completely broke. Brother number two, well, he's a multi-millionaire at the end because his sequence of returns were much better. So, that means that, you know, if he has some huge end-of-life costs or wants to leave money behind, he could, right? And you know, if he has long-term care costs, no problem. He can pay with it with $2.6 million versus brother number one, he's dead broke. So, who do you think's going to be the one trying to get help from in retirement? It's not the second brother. He's not asking for money, and brother number one is. See, that's why the sequence of return is a huge risk when you stretch it over time and when you're taking money out of the accounts. And that's the problem in retirement. See, over a 5-year period, a 10% drawdown could mean that 44% needs to be boomeranged up in order for you to see that money back. And then on the other side, just to break even without, you know, doing anything, let's say you just left the money in there for 5 years to get whole again, you need 43%. To actually see the original. So, you need an extra increase over a 5-year period to get whole again. And then 85% in order to actually, you know, be able to take out money. These are almost impossible returns.
We have this lost decade, what they call it. It was from the year 2000 to actually 2013. So, it was 13 years, but you know, 13 isn't as catchy. So, they say lost decade, 10 years. And what that meant was that the there were two tops that peaked and they were about the same. And so, it really got expensive for those people that took tops at at both ends. The question is, what's next? Anyone that tells you they know what if it's going up, down, sideways, they don't know any really any better than anyone else. Although qualifications, it's all just mumbo jumbo. Nobody knows. Um, there could be unknown events. COVID happened, right? There was a blip then. Nobody could prepare for that. Um, so the question is, when is the next downturn? Because you lose money to inflation, and that's really the danger here is that if you get it wrong, it could be very expensive.
Bringing it home, Grandpa and Martha, those are my grandparents. They lived to be in their 90s and that got pricey because Martha, she had dementia. She had the good old ALS and she had to survive that 9 years battling that. And Grandpa, on the other hand, he had Parkinson's. Although it didn't affect his memory, he had a little bit of that tremor. And he had in-home house help for, I think it was about 14 years. Now, what did that actually cost for him? It was $100,000 a year. And he had, he was like the successful one in the family. He had the pension, UW job. He had savings. I mean, he would always penny pinch and he'd saved up money, but still, that money ran out over time because it was the time it took. And so, what it meant for him was that, well, the last thing he had was this fancy neighborhood house in Seattle. And so, you reverse mortgage that. Now, when I look at my parents' inheritance, because I heard that number, I'm not going to go over what that was, but I don't know how long it would have lasted. And so, that was the real risk for that, not some sort of stock market risk, but it was outliving their money, their assets, whether that's a stock or savings or any type. It's different for everyone.
This is Joe. He was the one that took care of them. That's my cousin Sean there as well, to the right, and his kid and wife. But Joe, he's from Fiji. He took care of them. He was really a true family hero because we knew that if Joe wasn't around, he was, you know, always stable and he knew what to do. If he wasn't around to take charge, I don't know what would have happened. Um, he was probably the one that extended Grandpa's life for an extra 5-10 years at least. If Grandpa would have been in some sort of home, that would have killed him, I really think so. He really mattered to us and so he's a true family hero. But you know, obviously, it's not free. Uh, he has a large family to feed. Um, and you know, the last thing I will add is I asked my parents is, hey, what happens if Grandpa would have made it to 100? Would he have blasted his money? Would his money actually have run out? That's where I leave you today is that part two of the class is really about not outliving your money. I ask a few simple questions. There's going to be a little bit of one-on-one answering your questions because you're going to have some questions. The session shouldn't take more than an hour. It's really up to you what to bring. No, this is not some sort of sales pitch. How are you going to feel after it? Well, hopefully happy and well-informed. And then, we meet where it's convenient for you with the digital thing and traffic, LA traffic. Well, you know, we we figure out the Zoom thing pretty well. And then um, we have a few options on next steps. But I'm going to ask you three simple questions. What's your plan to actually double your income in retirement? What would happen to your financial situation if not only the market tanked, so it went down 30-40%, or the housing market tanked, um, or just money depreciated by 30-40% because of inflation? That's another one. And your expenses doubled, right? Because, well, what happens with inflation, too? Your expenses do double. And then lastly, what plans do you have to to address long-term care? And what plans do your kids have for you? And then as far as next steps, there are really three options. Is it either we feel like it's a fit, either timing is bad, right? And we retest this another time, or number three is that, and I always like to put this, you know, we don't like each other, call each other names, and just run away. So, that's it. That's the whole presentation. And last thing I will say is that I'm going to pass this sheet around for you guys to fill out so that I can personally answer your questions. If there was something that went over your head and you want to know more about that, that's exactly why we can go over it individually. And if there's something that's going to add value to the class right now, I want you to raise your hand and we can go over your question right now as well.
So, with that said, um, kind of the next part of the class is for those who feel it's it's really not for everyone. See, there's one type of person, they're like, you know what, I know everything. Or they're like, you know what, lose a little money? No biggie. That's not the kind of person that that that we need to talk to. But if you're like, you know, actually this is really important for me, but I want to be kind to my future self, you know, my 80, 90-year-old. I mean, hard to imagine yourself being 80, 90, 100, I know, but I want to be kind to that person. I want to do what's best for them. I want to make sure that maybe some of you guys have a spouse, make sure they're in the best spot, or kids that will be impacted. I mean, sure, it impacts me. I don't get to see my parents as much. Um, go ahead and fill that out and we can see about putting your family in the best possible position by answering these questions that you have to make sure you have the knowledge that that you know, the Social Security Administration is not going to go over with you. So, with that being said, ask your questions now. If your question gets too detailed, I'm probably going to say, "Hey, that's exactly what we're going to go over in the next part of the class." Fair enough. So, with that said, anyone questions?