The US is facing a retirement crisis. Still, several retirement income models will help you to save for a happy life as a retiree. What are the benefits of different retirement plans, and when is the best time for retiring?

…the only person that's going to take care of your older self is your younger self.

In this video interview, Tom Hegna, retirement and financial expert, author, and speaker educates consumers on different retirement income models. He explains the inflation impact on retirees and shares practical tips on how to start saving for retirement.

Here are the main point discussed with our retirement expert:

What Factors Affect the Retirement Age?

Ailar: Please tell us a few words about yourself and your experience as a retirement expert.

Tom: I'm originally from a small town of Minnesota. I've written five books on retirement and a couple of white papers. I have a PBS TV special that's played in over 80 million homes in the US and Canada that's called Don't Worry, Retire Happy! I've trained over 300,000 financial advisors around the world and I've delivered over 5,000 live seminars in all 50 states on the subject of retirement. So that's what I've been doing with my life.

Ailar: As of today, the average retirement age in the US is 65 for men and 62 for women. What factors affect their retirement age? Why do some people retire later?

Tom: Some people retire later because they want to, and some people retire later because they have to. The age of retirement is up to each individual person. The factors that affect it are how much money you have saved and what's your health. Some people have to retire because they're in bad health. Others have to retire because they got laid off. They don't have any other job prospects.

The key is to set yourself up for success in retirement.

I'm about 75% retired. I'm 61. I chose to retire basically at age 60. I wasn't trying to become the richest guy in the cemetery. I wanted to live the richest life. I'm 75% retired. I am doing a little work virtually like I'm doing with you. I'm doing a little bit of travel for work, but not a lot. I've just chosen to enjoy my life.

I've joined two country clubs. I play golf four to five days a week. I play pickleball a couple of times a week and I've built the lifestyle that I want. And that's what I want for everybody else, to build whatever retirement lifestyle you want. You can build that. We're in America. You can do anything you want. I'm trying to help baby boomers retire the optimal way.

How Does High Inflation Influence US Retirees?

Ailar: Is there a retirement crisis in the US? How is high inflation influencing the US retirees?

Tom: I do think we have a retirement crisis. The reason is that 50% of Americans have saved nothing and you can't retire on nothing. There are a lot of people who have under-saved for retirement. Maybe they didn't take it seriously. They didn't understand you got to put money away every single year, starting in your 20s. If you want to retire when you're 60, you got to start in your 30s.

If you don't start until your 30s or 40s, you're not going to really be able to retire until you're in your 70s probably.

I do think a lot of people who have under-saved don't realize all the risks that there are in retirement. There's market and inflation risk. They're going to raise our taxes. I mean, that's not even a Republican or Democrat thing. That's a math problem. You might need long-term care. You might die. You might live a long time. There are a lot of risks in retirement.

It isn't about having $1 million, or some number saved up. It's about setting yourself to have an increasing income for the rest of your life and then managing those different risks in retirement. That's what I write and speak about.

Ailar: What could be your advice to the people in their 20s right now?

Tom: I would tell the people in their 20s, the only person that's going to take care of your older self is your younger self. Younger people say, "YOLO. You only live once." No. It's not YOLO. It's YOYO – You're on your own, baby. You've got to take that seriously. I'm happy to say that my younger self helped take care of my older self. I'm in a position now where I can live the retirement that I want to. But I started that back when I was in my 20s.

How to Start Saving for Retirement?

Ailar: How to start saving for retirement? What's the average saving rate?

Tom: Well, when I started out, people said you should give 10% to charity, you should save 10%, and live on 80%. That worked for many years. I don't think that works anymore. I still want you to give 10% to charity, but I really think you need to save 15% to 20%. Throughout most of my life, I saved 30% to 40% of my income. And remember, when I started out, I was a second lieutenant in the US Army making $13,000 a year.

But you know what? I have a whole presentation. I made my first presentation to younger people, generation X, Y, and Z, and millennials. It's called ‘Who wants to be a millionaire.’ I teach young people how simple it is in America today to become a millionaire. I teach them how to make more money, how to spend less money, and how to invest their money into appreciating assets.

Unfortunately, too many people are putting their money into depreciating assets, cars, boats, jet skis, handbags, shoes, clothes, iPads, and iPhones. All of those are depreciating assets. They go down in value every single day. I'm not saying they're not important, but that's not where you want to put the majority of your money.

You want to put it into appreciating assets, things that go up in value, things like real estate and stocks. I even use life insurance and annuities. There are other products you can use.

You want to put your money into things that are constantly going up in value, not going down.

Unfortunately, that's not what our culture teaches. The culture teaches, "Have a new car. You deserve to go to Sandals and spend a bunch of money on the beach. And you need that new handbag and those new pair of shoes." No. You really don't. But that's for everybody to determine on their own.

If you want to become wealthy, wealthy people don't blow their money. They are very conscious of how they spend their money and they put their money into things that go up in value.

What Are the Popular Retirement Income Models?

Ailar: What are the popular retirement income models? How to choose which one to use?

Tom: I tell people, if you ask 50 different financial advisors how you're supposed to retire, you're going to get 50 different opinions. If you dig into the research, retirement has been studied by PhDs all over the world. People like Dr. David Babbel of Wharton, Dr. Moshe A. Milevsky of Toronto, Dr. Menahem Yaari of Israel, Dr. Michael Finke, Dr. Wade D. Pfau of the American College; Nobel Prize recipients: Dr. Robert C. Merton, Dr. William Sharp, people like Roger G. Ibbotson.

Well, guess what? I've read the research. It says there are not 50 ways to retire. There's one optimal way. That's the one I write and speak about. There are many ways you can do it. If you listen to your stock broker, they're going to say, "Put your money in stocks and take money out every month." That is not the optimal way to do it.

The optimal way is to cover your basic living expenses in retirement with a guaranteed lifetime income. Number one, you want to figure out how much money you need to live your normal retirement life. How much for your food, housing, clothing, cell phone, and internet? That should be covered with guaranteed lifetime income.

What counts as guaranteed lifetime income? Social Security counts. Why? Because it's a lifetime income annuity. It's a guaranteed paycheck for life. The second thing that counts is a pension. Why? Because it's a lifetime income annuity. It's a guaranteed paycheck for life.

You take your normal living expenses, subtract out your Social Security, subtract out your pension, whatever you're still short, that's where an income annuity fits because you want to cover those basic living expenses with things that don't go up and down with the market.

Once you've done that, your next step is to optimize the rest of your portfolio to protect yourself against inflation. That's where stocks, real estate, and crypto can fit. You can put other things in there, but you want to have things that go up over time to protect yourself against inflation.

You must have a plan for long-term care, and the most efficient way to pass wealth to children, grandchildren, and charities is with life insurance.

I tell people all the time, don't leave your kids any money. You're not supposed to leave your kids a single penny. You're supposed to spend all your money. Leave them life insurance because you can do that for pennies on the dollar. I use myself as an example.

We got four kids. One day we're sitting around saying, "How much do we leave the kids?" My wife said, "I don't know. What do you think?" I said, "Well, if we bought a $1 million second-to-die life insurance policy, named the four kids of the beneficiary when we're both gone, they're going to get $1 million tax-free." That's 250,000 apiece tax-free plus whatever's left over. I said, "Let's start there."

So we bought a $1 million second-to-die life insurance policy and named the four kids beneficiary. That policy is completely paid up. Do you know what the total cost of that million-dollar policy was? $150,000. Think about that. For 15 cents on the dollar, we get to transfer $1 million tax-free to our kids.

The best part is who gets to spend the other $850,000? We do. What I try to do is show clients how to get the most for the least because that's what it's all about. There's no dress rehearsal. There's no second chance. By the way, I don't sell any financial products, annuities, life insurance, or long-term care insurance. What I do is I take the research of the top PhDs and share that with people. This is what the research shows that people should be doing.

What Are the Main Types of Retirement Plans?

Ailar: What are the main types of retirement plans? What are their differences and how to choose the one that is right for you?

Tom: There are all kinds of different retirement plans. Your parents had a pension. They'd work for the company, and that was called a defined benefit pension plan. The company put money into the pension. Then when you retired, you got a specific amount of money guaranteed for the rest of your life.

Less than 4% of Americans have that pension anymore. It was just too expensive for companies. People were living longer. They didn't know what these obligations would be. They have to pay all these people till they die. It was crazy.

So they came up with this 401(k) plan. This is where you get to put money in. The company can match it. Sometimes, they do. Sometimes, they don't. It grows tax deferred until you take it out. Then you can take it out as a lump sum. You can turn it into income. There are all kinds of things you can do.

Not everybody has a 401(k). Some people have a 403(b) plan if you're a teacher or a nurse. There are other 457 plans. There are TSPs for the government. They're all very similar to a 401(k). You put money in, it grows tax-deferred, when you take money out, it's taxable.

I would urge caution with putting too much money into all these pretax plans. I would focus if I was given my recommendation to put money into a Roth 401(k) or a Roth IRA, or if I was sitting down with somebody, I say, "Does your company have a 401(k)?" They say, "Yes." "Does it have a match?" "Yes." "Explain the match." "Well, if I put in 4%, they match it with 4%." Good. I would do that. That's a 100% rate of return.

Beyond that, I would not put another penny into a 401(k) or 403(b), or 457. I would put the rest of the money into a Roth IRA or a Roth 401(k). Or if you don't have those options, I put mine into cash value life insurance.

You might say, "Why would you use cash value life insurance?" Because I can take money out of there prior to 59 and a half, and I can take money out tax-free. Tax-free income and retirement are going to be one of the most important things you can have. I have been converting my 401(k)s and IRAs to Roth, and most of them are in an income annuity.

So I will have tax-free income for the rest of my life. Then I've got my cash value life insurance. I'll be able to take money out of there tax-free for the rest of my life. Having an increasing tax-free income for the rest of your life is one of the best things you can do to set yourself up for success in retirement.

Ailar: Are there any additional costs or taxes associated with retirement that consumers should know?

Tom: You always want to ask, what are the costs? What are the fees? One of the bad things that annuities get hung with is that they say the fees are too high. Most annuities are not even fee products. A single premium immediate annuity is not a fee product. If you're guaranteed $2,000 a month, that's exactly what you're going to get. A deferred income annuity is not a fee product. If you're guaranteed $2,000 a month for the rest of your life, that's exactly what you're going to get.

A fixed annuity and a base fixed index annuity are not fee products. They're called spread products. The insurance company guarantees you X. If they don't make more than that, they lose money. It's up to them to make money. They're not taking money out of your account.

Variable annuities do have fees. The fees are higher than a mutual fund. People may not want to go with a variable annuity. But why are the fees high? Because they have guarantees. You're not going to lose money in the stock market. How valuable is that? I would say, yes, you've got to be careful about fees and you do want to watch taxes because our country is over $30 trillion in debt. That debt is climbing by over $4 billion every single morning.

There are over $200 trillion of unfunded obligations for Social Security, Medicare, Medicaid, government pensions, and military pensions. Taxes are going to have to go up. As I said, it's not a Republican or Democrat issue. It's a math problem. We need a math party. We need a party that can actually add and subtract because neither one of these parties can figure it out.

I'm telling you taxes are going to have to go up, and that's why I would not want to have a lot of my money in a 401(k) or an IRA. I would want to have it in Roth 401(k) or Roth IRA or cash value life insurance, things where you can get money out tax-free. I think you'll be very well-served if you follow that.

What Is Rule 72(t)?

Ailar: A lot of people are talking about this Rule 72(t). What is exactly its function and how does it work? What are the benefits and how to decide whether use it or not?

Tom: With Rule 72(t), you need to be very careful. Rule 72(t) says you can take money out of your IRA and 401(k) prior to 59 and a half without a penalty. If a young person wants to take money out of your 401(k), there is a way to do it without a penalty, but I would be very careful.

There are three methods: annuitization, amortization, and RMD. If I were an advisor to a young person, I would say number one, try not to do it because you should not take money out of your 401(k) or IRA prior to 59 and a half if you can avoid it. But if you have to, you have to take it as substantially equal payments based on your life. You don't necessarily have to take it for the rest of your life, but the calculation needs to be based on your life.

The safest way to do it would be to take your 401(k) and turn it into a single premium immediate annuity. That would satisfy Rule 72(t) and you would never have it blow up. Here's the problem. Some people will say, "Oh, no. Move it into this mutual fund. You'll earn money. And you have to take out this amount of money."

If the market crashes and you're taking out this money and you end up taking out all your money, which happens many more times than people think, you then have to go back to day one and pay penalties and taxes on all that money. You can see that it could be very dangerous if you start this thing, and then all of a sudden, you have a problem 10 years later, they go back and they make you pay tax and penalty on the whole thing.

So if I were going to do 72(t), I would work with a financial professional and I would put it into some type of fixed guaranteed payment where you're never going to have to pay the penalties. You're always going to have to pay tax on the money you take out of a 401(k) even if you take it under 72(t). It'd always be taxable. They'll make you pay a penalty if that thing blows up, and they can. So be very careful around Rule 72(t).

What Are the Common Mistakes With Retirement Planning?

Ailar: What are the common mistakes and thoughts with retirement planning?

Tom: I think people underestimate market risk and they put too much money in the stock market in retirement. I'm not against money in the market. I have money in the market. But I made sure I covered all my basic living expenses.

I've written five books. My first book was called Paychecks and Playchecks. I made sure I got guaranteed paychecks. I even have some guaranteed playchecks. I also have some money invested in stocks and real estate beyond that. I think people put too much money in the market, number one. Number two, they don't understand how long they're going to live.

They think they are going to all die at 75. Right now, the life expectancy for a 65-year-old couple is age 93. 50% of all 65-year-old couples will have somebody living to 93. Do you think people are planning on that? No, they're not. They don't plan on their taxes going up, which are going to go up. They don't plan on inflation, and inflation is here.

People don't think they're ever going to need long-term care, and 75% of them will.

So they're underestimating the risks and they're setting themselves up for failure. That's what I write and speak about. There are simple steps you can put into place that will make sure that those bad things don't happen to you.

7 Top Tips for Achieving Retirement Goals

Ailar: Could you please share your personal top tips on how consumers can achieve retirement goals and make ends meet in their senior years?

Tom: My PBS TV special is called Don't Worry, Retire Happy! Seven Steps to Retirement Security. Let me just quickly go through the seven steps. Number one, you want to have a plan and you want to work with a financial professional. Retirement is not a do-it-yourself project. You don't do your own dental work in your garage with your drill set, and I don't think you got to be doing your own retirement planning either. I use retirement professionals and I know this stuff inside and out.

Number two, you want to understand and maximize your Social Security benefits. Social Security is the largest retirement asset most people have, but most people do the wrong thing. They take it at 62. No. If you have a husband or wife, whoever made the most, that person should wait till 66 or 70 if they can cause that check covers both lives. The lower-earning spouse can claim early, but the higher-earning spouse should delay. That's a very simple tip.

Number three, you should strongly consider a hybrid retirement. What does that mean? That means don't go cold turkey into retirement. Take a couple of years where you do some things that you like to do, but you're still getting paid. It's going to reduce the amount of money that you have to pull out of your portfolio. It's going to increase your earnings, savings, and your Social Security benefits.

Step number four, you want to make sure when you set up your income that it's not just income for life, that it's increasing income for life. I share numerous ways that people can do that.

Number five, you want to make sure you cover those basic living expenses in retirement with guaranteed lifetime income. You don't want to have all your money in real estate or stocks or things that can go up and down. For your paycheck, you want to have that guaranteed.

Your paycheck can go up and down, but you need that every single month.

Step number six, you must have a plan for long-term care. No retirement plan is complete without a plan for long-term care. This is the one thing most people forget about that can wipe out their entire life's work.

Step number seven, use your home equity wisely. There are several ways you can do it. For many people, their house is one of the largest assets they have. Then finally, the most efficient way to pass wealth to children, grandchildren, and charities is with life insurance. Don't leave money. Leave life insurance because you can do that for pennies on the dollar.

If people would follow those simple steps, the research shows they're likely to be happier, and more successful in retirement, and they're likely to live longer as well. I have a free YouTube channel named Tom Hegna. My website is

Ailar: Tom, thank you for sharing!

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