Maximizing The 5 Years Before You Retire With Emily Guy Birken

Updated: Jul 31

AER 3 | Estate Planning

Would it be helpful to have a step-by-step guide leading up to retirement? If you answered yes, then this is the episode for you. On this episode of Agent Exit, Renee is joined by best-selling author Emily Guy Birken. Emily is author of five financial wellness books including The 5 Years Before You Retire and her upcoming release, Stacked: Your Super-Serious Guide to Modern Money Management. She’ll give some specific tasks you should do before you retire, offer some great tips on budgeting for “natural spenders”, and share some retirement strategies every real estate business owner should know.


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Maximizing The 5 Years Before You Retire With Emily Guy Birken

Emily Guy Birken is here with us. Emily, welcome, and thank you so much for having this conversation with us.

Thank you so much for having me. I'm excited to be here.

I wanted to let you know that I am honored to have you as a guest. I have been stalking you a little bit. I went through some old podcast episodes that you recorded. I have ordered your books. I'm pretty excited about the resources that you offer for our readers. How did you get here? How did you get started?

I fell backward into writing about money. I'm an English teacher by training. I taught high school English for four years. My husband and I moved and I had an inconvenient time baby all the same summer. That first year after we moved, I knew I wasn't going to be teaching because the baby came right at the beginning of the school year. The plan was for me to take a year off and I was still paying off my student loans at the time. I was trying to get a little bit of money coming in so I could keep paying for my student loans. I have always been a writer. I was looking for places I could freelance and one of the first places that hired me was a personal finance website. That sounds completely out of nowhere, “You are an English teacher. Why you are writing about money?”

My dad was a financial planner. Growing up, I grew up in that industry. I have always been a bit of a money nerd. As a kid, my dad was having these big opinions on things like life insurance and taxes. I was paying attention, listening and taking it in. I took a chance on that first blog that I was writing for. My editor liked my work and passed my name along to his friends. I was invited to a conference for financial media. I found myself creating this new second career that I never expected to have. In a lot of ways, it’s perfect. I have always been a money nerd so I love thinking and talking. In my background as a teacher means that I'm in a good place to be able to make this stuff both more interesting, palatable and easier to understand for the layperson. I’ve got fourteen-year-olds through Romeo and Juliet. I'm teaching grammar to people who don't care. I can figure out how to make money. It makes sense for those who feel a little antsy about it.

How many books have you written? Have you got five books?


Get in the habit of doing something very small that’s helpful to you.

I've got the list here. I've got The 5 Years Before You Retire, which is the one that we are going to talk about. We've got Choose Your Retirement, Making Social Security Work For You, End Financial Stress Now. I love the title and Stacked: You're Super-Serious Guide to Modern Money Management.

I wrote that one with my good friend Joe Saul-Sehy of The Stacking Benjamins podcast as a funny guide to money. It's a guide to money from soup to nuts, whether you have no idea what you are doing and getting started or you feel you've got things pretty figured out but you want some help or even if you are pretty far along but would like some detailed information about different stuff. It can help anyone in those situations. If I say so myself, it's funny. Joe and I cracked each other up throughout the entire writing process. Our entire goal was to make it playful because money can seem overwhelming and serious, like life or death. We wanted to help people find a way to have fun with it, play and enjoy themselves while they are learning how to manage their money better.

Money is a tool that we use but we do get emotional about it. To be able to engage with it in a fun way, that makes it a little bit more palatable is a great concept. Kudos for that. I'm looking forward to reading that. We are discussing The 5 Years Before You Retire, what made you decide to write that particular book?

One of the things that are interesting about retirement is that there are a lot of information out there for people who are far off from retirement. There are a lot of advice for people who are in their 20s and 30s and that's good. It's needed because people generally aren't saving enough and the earlier you start saving, the easier it is for you to be prepared for it. It’s one of the reasons why there's so much information out there for people. On the other side of it, you might have some advice on how to draw down your assets and what to do when you are retired.

There's that crunch time in the 5 to 10 years before you retire where it's getting to be real like, “Retirement is coming. This is not a far-off distant thing,” but you feel like, “I don't know if I have enough. Have I done enough to prepare for it? What do I do? What do I need to do to get prepared? What are the things I haven't thought about?” That is an important and underserved group of people who are looking forward to retirement. I wanted to give the people in that situation something that not only gives them all the different things they need to be thinking about because there are a lot and it can be overwhelming.

I wanted it to be something that breaks it down in a way that isn't overwhelming like, “Here are things you can be thinking about in five years, here's something you should do 4, 3, 2 years and all of that.” They talk about how you've got a big overwhelming task, it's like eating an elephant. You’ve got to do it one bite at a time. I wanted to give that one bite at time advice to my readers so they would feel comfortable with what they need to do before retirement and not continue to put things off because it feels overwhelming.

You said a mouthful because that's exactly how it feels. It’s overwhelming. I am a business owner. I'm a real estate agent. I have been a real estate agent since 2012. I have the benefit of also having had a corporate job for more than a decade. I've got a combination of 401(k) and some of the other great things that come with working in a corporate job. Now that I am self-employed, I have to think about retirement for myself. There are many agents that I worked with who are in that same situation. They have been agents for 20, 30 years. They are solely responsible for their retirement. How can realtors or someone who is self-employed benefit from this particular book?

That's a cause that's dear to my heart, particularly women entrepreneurs. My mother owned her own business. She had an art gallery for nearly 40 years. She was a savvy business owner, did incredible stuff. That planning ahead thing is hard to do. Particularly as I saw with my mom, she's raising kids so things would happen where she would have a great month, lots of sales and be flush, and then the following month would be crickets. That's one of the things that I want to help with, particularly in 2021 so many more people are solopreneurs or working for themselves. It’s much less common for people to stay in the corporate world their entire careers.

This book is going to be helpful because it's going to help people start making that list of what needs to be done. Something I have noticed particularly about women that work for themselves, you give them a list and they are on it like, “I know what I need to do, I can get it done.” The problem is not knowing. It's when something is amorphous. The retirement plan is an amorphous thing that you feel guilty about on your mental to-do list forever.

AER 5 Emily Guy Birken | Preparing For Retirement
Stacked: Your Super-Serious Guide to Modern Money Management

When you have an actual checklist like, “The first thing you need to do is look at what savings you have. Where is it? If you don't have any, the first thing you need to do is open an IRA.” That's a concrete step that's going to take 15 to 20 minutes, maybe longer if you need to look up the password and figure out where you put it. That's a lot easier. That's important for the people who are go-getters when they don't necessarily have a prescribed list of what it is they need to do. I wanted to give people that list.

One of the things that were important to me in The 5 Years Before You Retire, I have what I call the retirement syllabus, which tells you what to do when, specifically in what year, what month, even before retirement. I have a revised and updated edition of The 5 Years Before You Retire that includes a retirement-ready checklist. That can be the first thing you do. Open to that and fill it out. If you don't want to read the book from beginning to end, it tells you, “I'm going to start here with these things because I don't have much in this part of the retirement readiness checklist. I will turn to that chapter and figure out what I need to do there.” That's something that can be helpful, particularly for the folks who know that they need to do something but aren't sure what.

Thank you for doing that because a lot of times as agents, we are working diligently with clients that we don't have time to come up for air. To get a resource like this in our hands, and then be able to quickly go to where it is specifically that I need to dial in is truly helpful. I read the book from cover to cover because this is me. This is where I am. I wanted to go through the three parts. Part one is the nitty-gritty of retirement finances. Part two, the government giveth and the government taketh away. I like that. Isn’t that the truth? Part three is about family and pitfalls. I wanted to talk about one question. I'm trying to narrow it down to one question from each section or part. The first question that I have is about saving and budgeting. You have some information here about how to maximize your savings. Can we talk a little bit about how you suggest that we maximize our savings?

For folks who are in the corporate world, it's simpler because you often have a 401(k) match and things like that. It gets a little bit more complex when you are working for yourself and you have either solo 401(k), your IRA or whatever it is. For me, it's about trying to figure out the most that you can save in a way that is going to work best for your current budget. For a lot of people, you might think to yourself, “I can't squeeze any blood from a turnip, there's nothing I can do.” For that, micro habits are a helpful thing. That's something I learned from James Clear. He's a habit and productivity expert. That is getting the habit of doing something small.

For instance, this is particularly helpful for people who are a realtor or like my mom. Where you don't know from month to month what your income is going to be but you could set up a weekly or monthly transfer of a small amount of money that you know you will have. It could be $100 or $10. That will always be going to your IRA, your 401(k), month-in, month-out without you having to think about it. You might be thinking, "What's $10 a month going to do? What's $10 a week going to do?" It's money that you don't have to think about. It's also momentum. Momentum is very important. We think of money as just being dollars and cents, addition and subtraction. If you know how to balance a checkbook, then you can do money but it's also psychological.

If you are doing something like sending week-in week-out $10 to your IRA or month-in month-out $100, then you can remind yourself, I'm the person who is saving for my retirements no matter how little. That's something that changes the mindset so that when you do have a flush month, when you do have a big sale, you can say to yourself, “I'm a person who's saving for my retirements. I've got that $100 going every month. What can I spare from this commission to go towards retirements?” Turn that corner in your head from, “I can't spare any money. I don't know how to do this too I'm the person who does this. Let's figure out how.” It makes a huge difference.

It all starts with that little micro habit of sending a little bit that comes out of your account, month-in, month-out, week-in, week-out. The other thing is like, “$10 a week is little. It's $520 a year. That's not a whole lot of money.” It does help. No matter how small that amount is, it's something that you can do that helps change your mindset and also helps build that nest egg even if there are some months where that's all it goes in.

Find a budgeting method that works for your money personality.

I’m taking a deep breath as you are saying all of that. There is hope. I can learn to be a better saver. I'm great at helping other people. Operations come naturally to me. Processes, systems, making calm out of chaos come naturally to me. Saving money does not. It's just not a natural state for me. It is for my spouse. He's a natural saver. I'm a natural, enjoy life spender. I don't buy small things like shoes. I buy big stuff like houses and trips. I'm good for a multi-thousand vacation. He's saying, “That's our retirement money.” I'm like, “I’ve got to enjoy my life until I retire.”

Hearing you say that I can change my behavior in a way that will help me become a saver or thinking like a person who is saving for retirement. That’s an a-ha moment for me. I had to take a breath there because I want to have a good retirement. I want to save. It's counter-intuitive to my being but I know that I need to do it. You just gave me a good step on how I can do that. The next thing I want to talk about is budgeting. Budgeting in my house is a dirty word. Not for my husband but it is to me. I want to read this real quick. Your book says, “All any budget does is track two things, where your money comes from and where it goes. It is then up to you to incorporate the budgeting action step, spend less than you earn. Until you know exactly what you are bringing in and where it's going, it can be almost impossible to figure out where to cut your spending.” How do we do that?

For people who are not natural budgeters and there are a lot. This is common for people to tell me budgeting is like a four-letter word to me.

Let’s address it in business and personal because we are business owners. We probably have the same habits in our business that we have at home.

For a lot of business owners, it's easier to incorporate more budgeting actions at work than it is at home because you recognize my business depends on this. Whereas at home, it will come out in the wash, it will be fine. That's something that I liken budgeting to doing your laundry because we often tend to think of like, “I'm going to sit down for five hours on a Saturday and figure out where all my money went last few months and figure out all of that and then I'm done. I have done a budget.” That's not exactly how it works. Budgeting is an ongoing process. In the same way, you can't do all of your laundries and then be done forever. If you start to think of it as an ongoing process like laundry and recognize you are going to have to do things to keep it up, if you do a little bit at a time, it's a lot easier than waiting until you are in dire straits, either because you have no money or you have no clean clothes.

That's one thing that I tell people about budgeting. The other thing and unfortunately, I didn't have room to go into it in The 5 Years Before You Retire but in my book End Financial Stress Now, one of the things I talked about is finding a budgeting method that works for your money personality. For me, I am one of those weird people who enjoy tracking my spending. I've got a color-coded Excel in rainbow order because that's how I do things. I enjoy it. I love doing that. I recognize that makes me a weirdo. I am not a normal person. That's one of the things that can be problematic about budgeting is this, it's often described as there's one way to do it. If you are not doing a color-coded Excel worksheet, you are doing it wrong. That's simply not true.

There are many ways to budget. There are many ways to do it successfully that works with your psychology. If you are not going to be someone who tracks extensively, you could use an app, Mint or something like that, that will do the tracking for you. There are methods of budgeting where if you are pretty good about not overspending, you could transfer your spending from savings to checking once a month, and then check in every couple of weeks to make sure you are not going over. There are so many different ways to do this. There is no one right way. If cash envelopes work for your cash, great. If keeping money in your bra works for you, that's great.

AER 5 Emily Guy Birken | Preparing For Retirement
The 5 Years Before You Retire: Retirement Planning When You Need It the Most

However, it works and as long it's legal and ethical, I would say, go for it. That's the other thing to remember, if there is a budgeting system that works for you in your business, it's okay for you to do that at home. If there's something you do at home, it's okay to do it in your business as long as it's legal. It gets a little bit funkier there because you do need to be able to keep track and records in your business but that's something that a lot of people do mistake about budgeting. They think that there is one way to do it. It's the money nerd way. If you can't do that, you are doing it wrong. You might as well not do it at all. That's simply not true.

I love how it's laid out in the book because it makes it simple and easy to understand and easy to do. You make us feel like we have muscles on our teeth when it comes to money. These books are written well that I feel I can do it. It’s helpful for me. I want to shift gears a little bit and go to part two, the government giveth and taketh away. Tell me a little bit about those of us who are entrepreneurs or real estate business owners. We are subject to those pesky self-employment taxes. Social Security and Medicare, we are responsible for doing that ourselves. We don't have an employer who's going to be taking that out for us.

I always suggest for all of the agents that I do operations work for that, they have to have a CPA who is responsible for doing their bookkeeping because, for every commission check, you are required to take and set aside those taxes. I wanted to get your thoughts a little bit on one, how should we be managing our self-employment tax? If you have any thoughts on that? Two, at what point should we be considering tapping into Social Security or Medicare benefits because I know that there are some rules around that and we will have you come back and talk about your Social Security book. For now, can you touch on it a little bit?

One of the things that I am most glad that I did when I first started working for myself, early on when I was first doing freelance writing, was getting $25 or $30 per post. It was a very little bit of money. Even with those tiny amounts, I would make $500 in a month. With each paycheck I received, I would set aside a portion of it, about 25%, into savings account for my quarterly estimated taxes. That is something anytime I speak to someone who is striking off on their own to become an entrepreneur, a freelance writer, to open their own business is, “Start that habit first thing of setting that money aside.”

The big benefit for it was I made so little early on that I didn't owe taxes. I ended up having this nice chunk of money the next year that I used to reinvest into my business if I needed a new laptop or things like that. As the years went by, I continued to put that 20% to 25% aside so that I would have it for quarterly estimated taxes. That's something that I highly recommend for anyone who owns their own business to get in the habit of doing whenever you can because I have seen it. I know that scrambling of like, “Quarterly estimated taxes are due next week. I owe a chunk.” It's nice to know that you have it for when that is needed.

When it comes to self-employment tax, there's the good and the bad. The bad is that you don't have an employer to pay the employer half of your Social Security and your Medicare. The good part of it means that you are going to be eligible for Social Security and Medicare once you get to retirement age. That's something that entrepreneurs take for granted because it is a major benefit. When it comes to Social Security, there is this common misperception that anyone who's under the age of 60 shouldn't count on Social Security. I remember meeting with a financial advisor. He was a couple of years older than me. He's like, “Social Security won't be there for us once we get there.”

I have been hearing that for years, for over a decade.

Taking good care of yourself – getting exercise, adequate sleep, and right nutrition - is part of financial planning.

It's not true but I do want to make sure people know it will be there for you. You are going to get benefits. Recognizing what you pay for your self-employment tax is something that you are going to see a benefit from once you reach retirement age. The wonderful thing about Social Security is that you have a full benefit that you will receive if you wait until your full retirement age, which is between age 66 and 67, depending on what year you are born. You get a reduced benefit if you decide to take it prior to that full retirement age. Age 62 is the earliest you can take it. The reduced benefit is about 8% per year. I recommend to everyone, if you can afford to hold off on taking your Social Security benefits, please do because that 8% per year is a guaranteed increase. Even if you had excellent luck in the stock market, there's no guarantee that you are going to get 8% to 10% per year, which is historically what the stock market has done but some years it does negative 33%.

If you continue to wait past retirement age up to age 70, you get an increase of 8% per year. That means that you can get more than the full benefit that you are offered if you continue waiting until age 70. Those are things that I don't think people talk about enough in general about how to maximize Social Security and the importance of waiting. By waiting, that means that you will, for life, have higher benefits. If something happens to your nest egg, if you haven't saved enough, if you live to be 120, you can count on that higher Social Security benefits. That could be an important lifeline.

I love that you have given so much thought or done the research and wrote a book on Social Security because it's so convoluted and complicated. Depending on where we are financially. A lot of people do take the early out. They do take the benefit early without realizing how it affects them later. That's thoughtful to wait as long as you can. Many realtors are receiving a commission so they are still earning either through referrals or working then perhaps they can afford to wait a little bit longer before they draw down on the benefit. How does it work if I want to go ahead and start receiving Social Security and I'm still receiving income? This may be a question to ask when you come back when we talk about Making Social Security Work For You. How does it affect me if I want to continue working and receive Social Security? Am I limited on how much I can make in a year?

Yes, if you are receiving Social Security and you have not yet reached your full retirement age, there is a limit. I apologize, I don't know the exact dollar amount but it's somewhere around $18,500. It might be up to $19,000 and change as of 2021, where you can earn up to that much and it does not affect your benefits. Once you have reached that point, you will have $1 deducted from your benefits. If you only earn, let's say, $20,000 and the limit is $19,500, you are going to see your benefit reduced by $250 because it's $1 for every $2 so it's $500 over.

The big issue with the way that this works is that it's not pro-rated. That means you are going to have the full amount of your deduction taken away from your benefits from January. Let's say you earn a lot more. Let's say you earn $60,000 so there is $40,500. You are going to have $20,500 taken away from your benefits. If your benefit is $2,000, you are going to go January, February, March, April, May, June, July, October without any Social Security benefits, and then in November, you are going to get a reduced benefit.

The good news is that amount that you are not receiving is held onto their calculations and you will get it back once you hit full retirement age. That can make a huge difference to someone if they are not realizing like, “I applied for Social Security so I can get that extra $2,000 a month. Here I am not seeing it until November of the year.” That's important for people to know ahead of time. That's one of the things that the Social Security administration does to encourage people to wait.

Just that I make sure that I understand, let's say, I'm 70 years old, can I work and receive my full Social Security benefit and I can make $60,000 in commissions if I'm able to?

AER 5 Emily Guy Birken | Preparing For Retirement
Preparing For Retirement: A Roth IRA allows you to put money aside after you've paid taxes on it.

Yes. It's up until the year you reach your full retirement age. The year you reach your full retirement age, it's a higher limit, somewhere around $45,000. I apologize for not knowing specifics off the top