Plan With The Tax Man

There are plenty of external factors that often negatively influence our chances of having a successful retirement. But often, failure comes from within. On this episode, we’ll talk about some of the common ways people get in their own way when it comes to financial planning.

Important Links

Website: http://www.yourplanningpros.com

Call: 844-707-7381

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Transcript Of Today's Show:

Host: Hey everybody! Welcome in to "Plan with the Tax Man" with Tony Mauro and myself. And we're going to talk about the secret to retirement success. We're going to let you in on the secret. Here's a hint, it's you? You're the secret. You're either going to make it or you're going to break it. And often we get in our own way. And that's kind of the focus of the podcast this week is the fact that, if we take some action and we do some things, we can have a successful retirement, but often we self sabotage and get in our own way. So that is the topic of conversation this week with Tony. What's going on with my friend, how you doing?

Tony Mauro: I'm doing wonderful. Spring is...

Host: Spring is sprung?

Tony Mauro: Yeah, we did. Well, we didn't have a spring up here, and now it's kind of almost summer, so okay. That feels good.

Host: We actually had a spring this year for a change, which has been really nice. So we've shared one before on the podcast. This is, this is episode over 65, by the way, Tony. So our podcast is eligible for Medicare.

Tony Mauro: That's right.

Host: So, and we're talking about retirement now. So, we're in two different locations and we're doing this, which is the beauty of the internet and so on and so forth. But yeah, we've actually had a really nice spring here where it's not been crazy hot. I'm down in the south a little bit and it's just now starting heat up. So at the time we're taping this, this is going to be our second one here in May. So this is about a week before Memorial Day, and we're up into the 90s now, but we had stayed away. We hadn't had a 90 degree day yet this year until this week, which is unusual for us. So looking forward to getting to the pool this weekend. I hope everybody has a good Memorial day weekend coming up as well and enjoy all that. And remember the reason we have Memorial Day, if you know, got a loved one, a veteran, make sure you say, let them know, so on and so forth.

Host: But anyway, so let's talk about this Tony, because man, right now we're getting, we're getting pummeled. There's a lot going on. We got the inflation out of control. We got gas at $5 just about everywhere in the country. It seems like upper fours, fives, chicken's out of control, the price of chicken, not chickens themselves, but the price of chicken's out of control, baby food issues. Who had that one on their bingo card for crazy things to happen? Then of course the market is just, we're finally seeing, I don't know. I just was reading something this morning, Tony. Are we into a recession yet? Have we had two consecutive quarters of not growth? There's just a lot going on. And, and when you think about our topic, which is getting in our own way, this is when people get nervous. Understandable, but this is when we get nervous and we tend to make rash decisions, especially with the market.

Tony Mauro: Especially with the market, which is why I wanted to talk about this topic today, because of all the things you just mentioned and you know, we have clients and tax clients coming in and that's... Well, the first thing generally out of their mouth is boy, everything's high, prices are high. This and that. And then, they want to talk about the market and whatnot. And I think some of the topics we're going to discuss here are relevant for what's going on today. I don't know if we're in the yet or not. You know what I mean? You turn on the news and you everybody's got their own opinion. I mean, it's starting to get the makings of one. Everybody has opinions, I'll share mine. I mean, we were flooded with money last year, with COVID relief and everything else and prices, obviously have gone up and the market's done well for a long time.

Tony Mauro: I don't know if, if we're definitely going into one, but we're definitely going to see some slow down, I got to think until they can bring inflation somewhat under control. We can sit and debate that all day, but the important thing is for our top of today is like you say, is the main, secret because everybody always wants the secret. The guideline is really us - it's you - the person, and it's so relevant, because I just got done with a tax appointment before I jumped on this call. (The) gentleman's been with me for a long time that we do his accounting. He's a concrete guy, and so, he's getting older and he's 60 years old and you know that's a tough, a tough business.

Host: Oh sure. Yeah. Hard work. Yeah.

Tony Mauro: You know, he just hasn't probably put enough away to this point, but his question to me was "What's the guideline? How much money should I have to retire?" I mean, that was literally it. Wanting this black and white answer out of me and you know, there is no black and white.

Host: There is no black and white on that one, bud.

Tony Mauro: But, some of the things, he has to think about is what we're going to talk about here today. And for him, it's going to have to be along the lines of he's got to start saving more.

Host: Well, let's start with the market for a second, because obviously it's fallen. We're down quite a bit. I think the NASDAQ is already down 25%. So they're, calling it in into the bear. I think at this point the S&P is now right around 20%, which, I guess technically could put it into a bear. So this is when we start. To the people who, the last three years, the market's been pretty good really for the last 13 years, let's be honest, but the last three years it's been really, really high. So we get greedy as people and not just... We're all greedy, it doesn't make you bad person. We just get greedy and we also get a little addicted to it. And then when this starts to happen, that's when the panic sets in and people start to want to sell. And of course, when you sell, when it's down, you're locking in your losses.

Host: Now, you still might be up overall because it's been doing so well. But how did we start balancing that, Tony? Is it, when things get really choppy like that, is it time to maybe review the plan just to make sure we're good and not necessarily make wholesale changes or, or what do we do?

Tony Mauro: I think, depending on a person's age, but which has some factors in that decision, but it's probably not a bad idea to take a quick review, but if you're meeting with your advisor once a quarter or so, you're probably coming up to maybe your second quarter review just to talk about things and whatnot. But if your goals, depending on where you're at are, are set and those are still your goals, then there's really no reason in my mind, to panic and sell off.

Tony Mauro: I do have a few clients - tax clients, not wealth clients - that are calling right now, and saying, "What, do you think I should do?" and I'm not even really their advisor, but I tell them if you think you should sell and go all to cash, because that's usually what they want to do cause they're panicking, I ask them who and when is going to alert you or trigger you to buy back? When is it? Because there is no perfect time. I always try to get them out of that. You know, you miss the best days of the market, there's been studies and studies done on that -- the "10 Best Days", "20 Best Days", all that. You lose out on a lot of returns, so to try to time it. And we've talked about it before. In my mind it is impossible for me to do. I think it's impossible for anybody to do.

Host: Yeah, it is.

Tony Mauro: Yeah. It's just a losing game. And so now if you know, you're close to retirement and you want to lock in some of the gains you've had over the last 10, 15 years and move to a more conservative perch, that's different.

Host: And that's a different approach than wholesale panicking or whatever. And so that's what I was going to ask you. At these times is when the phone starts ringing a bit more. Now those folks with a good plan in place, they typically don't panic as much. Right? They understand that they've got a strategy. There's some, there's always going to be some that they see the volatility, even with a good plan in place, even when they're working with you, Tony, they're like, "Eh, let me just call and double check."

Host: I do think that's real value that you guys bring to the table as professionals like you are, is because sometimes you just are a sounding board. If nothing else, it's Mr. And Mrs. Smith call and it's like, "Hey, we're looking it over." And you know, "Yes. I know you're nervous, but everything still looks okay. Even with this volatility, let's not panic." That's great to have that sounding board versus if you're totally autonomous and you're just some number with a big brokerage firm and you're not getting through to anybody and it's just you're kind of on your own. And that's when we start to panic and we go, "Well, I'm selling, or whatever."

Tony Mauro: Yeah, and that's generally the worst thing you can do, in general. The interesting thing too is with the retirees that we work with, most are in dividend-paying stocks and or bonds. And so we try to educate them on, if you're just looking at the Dow, well, we don't have any stocks in the Dow. So while that's a market indicator...

Host: That's a great point, though, cause everybody does look at that one, right?

Tony Mauro: Yeah. They look at that and say, oh my God, the world is falling. Well, if you don't necessarily own those securities, then...

Host: Why are you panicking? Yeah.

Tony Mauro: Don't panic so much. Yeah. Probably what you are going to own, the even if it's in funds. It's going to be down some.

Host: The Dow's misleading to a lot of people who might not really pay too much attention. They just think that they're invested with someone or they're working with someone and that's where they've got them, it's only what, 30 companies?

Tony Mauro: 30 companies in that one. Yeah. I mean obviously the S&P500 a little broader.

Host: And one of the reasons that we're seeing - and let's be fair, some of the stuff, this it's definitely choppy out there, there's definitely some problems - but a lot of what's taken it on the chin is tech, right? And so big tech has taken a hammering. And so that's why the point of diversification is there because there's other sectors that are still doing, pretty good. Overall yes, the news and the issues of the world are definitely making the market jumpy. And, and if we're being honest too, Tony, it's been over inflated for a while. So yes, corrections are natural and they are normal. We've actually had 13-year bull run, we're actually more than overdue. So considering all the stuff that the world is dealing with, it's not super surprising.

Host: So, if you've got a good plan, good advisor, hopefully that'll help a little bit. But as always, if you, if you're panicking, before you take action, folks, definitely talk with your advisor. Don't just jump in and do something crazy.

Host: Let's go to the second one here on our little, "getting out of our own way" conversation, Tony, since you are the tax man. From a tax standpoint, making a bad investment, clearly like doing something because it's getting into investment solely because of the taxes. Like you're, "I'm going to do this because it's going to help me from a tax standpoint." Is that a good idea? Do we make a mistake there as well?

Tony Mauro: I think a lot of times people do, especially in the middle income brackets. It's one thing for somebody up in the 37-39% bracket, who's just getting hammered on taxes. But tax is not a hundred percent. Never has been. I mean, it's been high at times, but to do it just for a tax motive, to me is not a very good investment decision. Now, I think in certain cases, sometimes if the math works, and your tax bracket dictates, and your appetite for risk is very low. You know, municipal bonds is always one. I have a lot of people ask me about, "Well, why wouldn't I invest just in muni bonds?" And I say, well yeah, the interest is tax free, but if you really look at your after tax return with whatever you're doing, you're actually getting more net even by paying taxes. So don't, don't do that type of thing.

Host: That's a good point.

Tony Mauro: But I do get a lot of people where they're not so in tune to that where they're more in tune to is they want to buy and sell and they want to hold stuff. Generally what they want to do is they want to sell their winners and keep their losers.

Host: And oh, sure. Who doesn't?

Tony Mauro: Where I always advocate is if you've got some kind of loss, get rid of it, keep the winners. So you can postpone paying that tax on that gain. And then let's take the loss now. but they do that a lot with properties, rentals, things like that. Everybody wants...

Host: I would think the tax one as well is when it's the standard 401k versus the Roth, too, right? a lot of us, we, because we're conditioned and we've talked about this many times, we just do the traditional 401k or traditional IRA thinking about, well, that's going to help me right now from a tax standpoint because I'm getting that tax benefit because I'm kicking it down the road. Right? Versus I have to pay out, to dole out the money right now if I do the Roth and that's kind of the standard tried and true thinking, and it has been for a long time, but again, we've talked about it many times what the tax rates being what they are, maybe it's not the best move. Maybe you should go ahead and start thinking about paying some of the taxes on some of that money now. So that later on when the tax rates go up, which they almost have to, then you maybe aren't looking at as a high a bracket.

Tony Mauro: That's right. Yeah. And with the Roth, especially in the 401k option, a lot of people, even though they may have that option, aren't that familiar with it and they just plow their money into the traditional option, which is the traditional 401k. And a lot of times, especially with a little bit higher income taxpayers, is we will try to get them to convert some of that to the Roth, pay the tax. Fill up the bracket they're in. And then, so they don't have an IOU uncle Sam later.

Tony Mauro: That's truly what you have in all of this.

Tony Mauro: Yeah. I get it. Like no one, none of us like to pay the taxes. It's like, man, I don't want to, I don't want to pull this money out and have to pay the taxes. Now that stinks. That's why we kick it down the road. We think, because we do have a tendency as humans to, "Well, I'll deal with it later..." kind of mentality in a lot of things in life, which is, I think sometimes why we're in the positions that we're in, in a lot of different things societally, but either way you get into that mode and then later on you might be right and you might be wrong, as far as where the tax brackets are going to be, but looking at the spending and looking at the deficit and so on and so forth, it's pretty good odds that we're going to owe more. So just again, don't let the tax tail wag the dog, as the saying goes.

Tony Mauro: Number three on the "get out of our own way" secret to success here: Cash, cash, cash! Tony leaving too much of it. You mentioned it earlier. People start to panic in times like these, they want to jump over to cash. They want to move to cash and they can even maybe even add justification to it right now. Because they're like, Hey, the Fed's ticking up. And you know, with the fed rate going up, I can get like one point a half percent at the bank. Woo, woo.

Tony Mauro: Yeah boy.

Host: Versus 0.1. Right? It's better. But are you sitting on too much cash and are you going people? I don't know. I don't understand why Tony. We feel like a lot of times that we have two options for our money, the market or cash. Like it seems like a lot of people think that's the only two there's other things you can do.

Tony Mauro: There's all kinds of other things, but I do see a lot of, especially the older school retirees, what I would say is that all their money's in cash and boy they're bouncing around driving around trying to find, a half percentage point on a on a local CD and it's just absolutely astounding. The lengths they'll go through, and they all understand that it's not like it was in the seventies and eighties, where those rates were really high.

Host: Let's be honest on that one. What was your mortgage rate then?

Tony Mauro: Well right. Your mortgage rate, everything else was...

Host: Everything else was up too. Has bank rates ever actually beat inflation? I don't think they have.

Tony Mauro: Not to my knowledge.

Host: No.

Tony Mauro: Over the long term, no.

Host: No, never the long term, right? Yeah.

Tony Mauro: Yeah. And so I think that for most it's mostly people that have been around a while. In other words, retirees that I see this mostly. I don't see young people, young people don't. They're spending cash faster than they can make it, and just getting them to set it aside is a different story. But I think as a retiree or a pre-retiree, if you've got too much in cash, you're really doing yourself at this service. Because there are a lot of other things out there. Besides just stocks. I mean obviously you can have dividend paying stocks, there's bonds, there's CDs I don't really care for, but...

Host: Insurance products. I mean, there's just different things. Right?

Tony Mauro: Some annuities in certain cases.

Host: But people kind of get into that. Well, I've heard bad things or whatever. And we talk all the time. Look, when you're working with somebody like Tony is who's CFP. You have the gamut in front of you. Like you've got every, every investment option out there you can work with. So don't pigeonhole yourself by just shutting something off before you find out, is it a good tool for you? That's all.

Tony Mauro: Yes. That's right. And fee only and asset based managers, they're really just going to give you the pros and cons of the different types of many of the investments that are out there and then figure out what is going to fit into what you're trying to do.

Host: Yeah. Okay. All right. So I think one more point here, I think want to try to squeeze in and we'll go, Tony, but one of the things about getting in our own way is the overthinking process which, again, we're all guilty of. So you know, we're talking right here on the podcast and people are listening and are going well, inflation's crazy. The market doesn't look good. Bonds don't look good . Cash, you just said doesn't look all that great. What you know? Oh geez. Oh right. We start to panic and freak out. And then we start thinking and we research or whatever, or we shut down and do nothing. So we overthink it to the point of exhaustion or we just lock up and make no decision at all.

Tony Mauro: Yeah. And we see that I'm going to go out on a limb and say, I think as a society we've become like this because of all this information we have in including the internet. I challenge every listener out there. How many times have you got online, and I don't care if it's been a pair of shoes or a new refrigerator, have you got online and said what's the best refrigerator or the best reviews for running shoes and you're online and you're looking and looking. Before, it you've got two or three hours in and all you had to do was make a simple decision to buy a pair of shoes.

Host: I couldn't figure out which fertilizer to get the other day because they had too many options.

Tony Mauro: Well, I tell you I'm guilty of it too. I need a new fence. And so I'm online trying to figure out, well...Should I go wood privacy like I have, which I don't like or...

Host: Vinyl final, you know?

Tony Mauro: Oh geez. It's just...

Host: Well, can you get it? That's the other thing right now, you know? That's the other thing. Yeah. Why,

Tony Mauro: You know what I did is I, on my fence, I had him come out to give me a cost. And I said, "What's your advice? I'm done looking you know fences. I don't. And he, he actually kind of sold me if you will, on the qualities of the vinyl, which is really for me, no maintenance.

Host: Yeah, exactly.

Tony Mauro: I'm just going to do what he says. And obviously if I can afford it, that's what I'm doing. And, with our money, it's the same thing. We're watching all this news. We're researching, you got all these charts you go get and all of a sudden, especially if you're trying to, trying to figure it out on your own, you don't do anything at all. And, and time tends to not be on your side when you do that. If you are paralyzed by decisions and can't do anything.

Host: Absolutely.

Tony Mauro: Tony, in our age group, there's a song by a band called Rush from Canada. And there's a line in that says, "if you choose not to decide, you still have made a choice." Right? So whether you do nothing or so you're still making a choice. Right? Right. So try to make a choice to do something for yourself. And, and that's one reason. And hopefully people do turn to professionals finding the right professional and saying, okay, I'm just freezing all up. You know, I've got ideas, I've got input. This is a collaboration between you and your financial pro like Tony. But it's just a matter of having that resource again -- that sounding board to talk me off the ledge or talk us off the ledge. If we're thinking about doing something crazy or to reinforce that we've got some good ideas and it's like, Hey, you know what? After looking at this, that makes a lot of sense. We should do the way we should put that in the plan. Whatever that might be, Right?

Tony Mauro: I'll just touch on this final point and we'll wrap up. That's why you turn to professional versus turning to your buddy or your cousin or, or your grandma or your whatever. And they're all sweet people. And they all love you. And they all probably want the best things for you. But I saw, I saw a message from a guy the other day, Tony. And he was like, my neighbor and I are the same age and he's going to cash. He says I should too. Why? Because you're the same age? That makes no sense. What on earth would make you think that because you guys are the same age and you live in the same neighborhood that you should go to cash together because the market's volatile? His situation on your situation could be completely different. So just don't blindly take information, water cooler talk. Right?

Tony Mauro: Exactly. I always ask people because we get that all the time -- more in taxes than on the wealth side. But they'll say things like that. "Hey, I'm not getting this deduction" or what they'll say to us is, "Well, my buddy makes about the same as I do and he's paying less taxes" or he'll get advice from his buddy. And I always say, well, what does your buddy do for a living? And they'll say, well, he's a baker. And I say, "Well, what qualifies him to give tax advice?" So you do have to be careful of that. I mean, it's good to talk about it. Right. And then it is good to ask your advisor, which they are doing, but we have to kind of tell them, Hey, look, every situation's different.

Host: You don't know what his write offs are. You don't know what he's in. And just because you say you make about the same money, again, how many people are totally showing their hand to their neighbor or even their cousin. I mean, my brother and I are like best friends and we hang out every weekend, but I have, I have no idea what the man makes, and he has no idea what I make and he's my brother and we're, like best of buds. So at the end of the day, sometimes we have to be honest and realize that we're not, we're not the most forthcoming when it comes to money in general.

Tony Mauro: Yeah. For sure.

Host: Absolutely.

Host: So that's the secret to success. Nothing crazy, right? It's really just us and either taking the right steps or taking the wrong steps. So I guess maybe you might be a little disappointed. You might have been thinking we were going to drop some secret sauce of knowledge, but there is no true secret sauce other than just (A) taking action for yourself; and (B) making sure that you're not self sabotaging and working with a professional that can help you navigate the complexities. And as what we're seeing and this, and it could be Tony, we don't know, it could be a prolonged downturn. We haven't had one in a long time. We could be looking at -- God, hopefully it's not like a lost decade all over again, like 2001 to 2009, but we just don't know what we're in for, because there are a lot of problems out there. So do yourself and your retirement, a favor, talk with a qualified professional.

Host: Even if you've got a plan just to double check, to get a second opinion, whatever it might be as always, you can reach out to Tony, if you need that help. If you're already working with him, great, you probably already have those things scheduled. But even if you're nervous, make sure you reach out to him before you take any action. But if you're not working with him, consider having a conversation or share the podcast with someone who might benefit from the message. It is available on Apple, Google, Spotify, so on and so forth. It's "Plan with the Tax Man" and you can find it all, keeping it simple for you at Tony's website, YourPlanningPros.com. That's YourPlanningPros.com. Tony is a CFP and an EA at Tax Doctor, Inc. So Tony, my friend, thanks for hanging out and chatting with me.

Tony Mauro: All right. We'll see you later and have a great weekend coming up.

Host: Yeah. Have a good weekend this weekend as well as Memorial day. And we'll see you guys in June for more of "Plan with the Tax Man" with Tony Mauro, from Tax Doctor, Inc.

Disclaimer: Securities offered through Avantax Investment ServicesSM. Member FINRA, S.I.P.C. Investment advisory services offered through Avantax Advisory Services. Insurance services offered through an Avantax affiliated insurance agency.

Sure, life insurance is one of the more boring topics to cover on a podcast. And a lot of what you hear is going to warn you why you should NOT get various types of life insurance. But our goal on this episode is to focus on the positive and analyze the reasons why you should get life insurance, or at least consider it. Many people think that once the kids are out of the house, you don’t need insurance anymore. But there are some other reasons why life insurance can be a useful part of your retirement plan.

Important Links

Website: http://www.yourplanningpros.com

Call: 844-707-7381

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Transcript Of Today's Show:

Host: Hey, everybody. Welcome into another edition of Plan With The Tax Man. It's Tony and myself, hanging out, talking about investing, finance, retirement and life insurance. Don't turn off the podcast just yet. I know life insurance can get a little boring, but these are reasons maybe you should get life insurance. And a lot of what you're going to hear out there is warning you why you shouldn't get life insurance. But our goal on this episode is to really just focus on some of the positives and analyze the reasons why it could be beneficial to at least consider it anyway, because we tend to think of things that, especially with life insurance, we have a narrow frame of that sometimes. So that's the topic today. Tony, what's going on with my friend? How you doing?

Tony: I've been doing well, getting into the warmer months now and excited to get outside and be outside.

Host: Yeah. It's late April now, as we're dropping this podcast. So it's definitely nice to have hopefully, fully Spring as we get ready to turn into May here, pretty quickly. But Tony, life insurance, we tend to... I always love that joke, why they don't call it death insurance? Well, because nobody would buy it, right?

Tony: Yeah. That's right.

Host: Doesn't sound very good. But we tend to think of it like, "Okay, I'm in my thirties, I've got young kids. If I get in a car accident and injured or die or something like that, that way things can get paid for." Income replacement, so we don't tend to think about it as a retiree. We go, "Well, I don't really need that stuff anymore." But it still could be a tool for income replacement even for a senior, because we're still going to lose a spouse at some point.

Tony: That's right. And I love talking about life insurance, even though, like you said, a lot of people turn their nose up at it, and it is so useful of a tool. Whenever we start a financial plan for somebody, we have to know if they're covered or not and try to educate them a little bit about it, because as you said, people tend to get that feeling of, "Well, I should just buy a term and invest the difference." There's been firms for years have been touting that, but you look at most people with any type of, toward the end wealth, they've used life insurance in some form or another to its fullest benefit. But income replacement is one of them, because a lot of people just think, "Well, I'll buy some term and if I die, then my spouse will obviously get the proceeds and she'll be able to pay off all the bills."

Tony: But what they don't think about is the income replacement, which we try to talk to them about. Because if you're 40 years old and you're earning $100,000 a year and you all of a sudden unexpectedly die, that $100,000 a year, that income would probably need to be replaced or at least a portion of it, because the spouse that's still living is going to... You've adjusted to a certain lifestyle and how are you going to make that up? Yeah. And so, it's important to talk about that when you're talking about life insurance, not just paying off bills, because as you said too, I tell my wife this, at some point, one of us is going to be alone. We just don't know when.

Host: Yeah.

Tony: And it's going to happen. And so, we want to make sure that if it does come earlier than expected, that we can get some of that income replaced so the other living person doesn't go backwards in not only your lifestyle, but-

Host: Yeah. Even as a senior, because it could be, if you didn't select the spousal option on a pension, if you were lucky enough to have one or social security benefit, whatever, we only get one, we don't get both of them when the other person passes. So we get the higher of the two. So again, it could be a tool to use for income replacement, even as a retiree. What about estate liquidity, Tony, from that estate standpoint, maybe there's a lot of taxes that could be involved. Life insurance could help with that too, correct?

Tony: That's correct. Because state liquidity is extremely important, especially if you've got things that you're going to owe a lot of tax on. And here in the Midwest, you think of farmers that, the land has been in the family for a long time possibly. And there could be a lot of capital gains due. Now, there are some tax laws, the other steps up and basis and all that, which we won't get into, but it could be needed to cover taxes that the estate and/or the heirs are going to be responsible for now. In these parts, with the estate tax exclusions being so high, it's not as prevalent used for that, but I have a client that's well above that and we're doing all kinds of things with trust and using life insurance to hopefully pay those estate taxes. So the rest of the money goes to the heirs. So it's definitely needed for that. That's one of the biggest uses that I see.

Host: With the life insurance, yeah.

Tony: Oh yeah.

Host: So I'm going to hop around, because I want to keep it with that same topic of the family and the estate. So I'm going to go to number four actually on my list here, which is transferring family wealth or maybe using it for a generational tool. We talked on the prior episode when we were doing the birthdays, that there's changes now with RMDs and things of that nature. And if you've got a 401k and you leave it to your heir, we've talked about the removal of the stretch IRA. So life insurance could be a way to build generational wealth, yeah?

Tony: Yeah. Well, it could, because with the elimination of some of those things and with the right types of planning, you can leave your beneficiaries all this money, and it's simplest form, it's all tax free to the beneficiaries. A lot of people don't know that.

Host: That's a great tool.

Tony: Yeah. What a great way to leave them money, especially if you use some of the trusts and some things like that, and you maximize your estate tax exclusion. Because some of these states that are rather large, they're going to need some sort of life insurance to either help pay the tax or provide for the errors and then use the estate money to pay the tax, one of the two. But again, when you're starting to build wealth, this stuff can become extremely important, but especially for the transferring of the wealth. But the easy one is yes, the proceeds are tax free.

Host: Yep. Got to like that. All right, Tony, you're a business owner. So business succession, that could be another one. So let's just hypothetically, you and I own a business together and one of us passes. Well, having life insurance could be a way that your spouse... Or the other business owner, excuse me, uses that money to buy off the spouse from the person who passed away, correct?

Tony: That's correct. Yep. And I have two younger brothers and we own some businesses together and that's exactly what we have. We have a lot of real estate in them and we have a buy/sell and the buy/sell is funded with a life insurance policy on each of us, because, we have decided, well, we need to buy out the spouse. And we are all in agreement that we love our spouses, but the other people don't want to be in business with the spouse. And so, the idea there is to, well, for relatively inexpensively, we can fund these life insurance policies. If something happens to one of us, the spouse gets the value of the proceeds, again, tax free, and they don't have any rights to the business. So a lot of things are accomplished there. So it's something though, that I see a lot of businesses that we work with on the accounting side, that if they have partners, they haven't even thought of it. And they need to start talking about a succession plan by/sales, funding it with life insurance, because it is inexpensive to do it that way.

Host: Mm-hmm (affirmative).

Tony: And it prevent a whole lot of problems down the road with spouses and things like that.

Host: Yeah. Because they may not want to be involved. They're just like, "Hey, buy me out. I'm done", whatever the case might be. So again, it could be a useful tool when we're talking about life insurance, a lot of little extra ways, not just, I've got the basic insurance that when I pass something happens, my family get it's the death benefit or whatever. There's lots of other little nuances that you could use it for. Similar I guess, in thought but still, they can go towards different things, business being one of those. Now Tony, we'd be remiss if we didn't bring it up because we see these commercials, we hear these ads. There's all this stuff out there, use life insurance for a tax free income, in retirement and this is not dying. They're marketing as, "Hey while you're alive, get a tax free income through insurance." So can you tell us a little bit about, what is it they're saying, what is that all about?

Tony: So a lot of people don't favor the cash value life insurance policies today, but they can be a useful tool to provide, not only of course protection, but some cash, or a tax free income, because the idea there is you're paying more premium in dollars than what you're buying in life insurance. And the extra goes into the cash value, starts building up over the years and there could be some great tax advantages to use that cash value as a supplement to tax free income. It's probably not the end all depending on how much you've got in there, but there are certain policies that still build up relatively good cash value-

Host: Okay.

Tony: That you can take out while you're living and basically use it. Now, you have to understand the rules and everything that goes with it. But a lot of people don't look at it like that. They just think, "Well, that's overpaying. That's not a good deal." But once you take a look, it's not too bad. I have one myself and I happen to have one that's a participating dividend paying policy, but I don't know, it's got quite a bit in it, cash value. I've pulled it out a couple of times to basically, buy something. And then I pay myself back, which I love because I'm using my own money. I don't have to rely on a bank. Right. And in my case, they tr treated it like it never left. So I continue to earn my little dividends, but there's some things you can do with some of those. So it's definitely worth a look there.

Host: And that's the point of the conversation of the podcast this week is, there's different little nuances that can be done, but again, you need to talk with a qualified professional because just like everything. Look, every tool's not for every situation. And the elimination of every tool, if you're a repairman shows up and he just has no hammers in his toolbox and he needs a hammer, well then that's not going to be good. Anybody who's ever tried to hammer something with the backside of a Crescent wrench knows that's not the greatest tool for hammering. You want to have the proper tools. So again, sometimes people will hear certain things and they'll just shut down immediately, because, "Well, I don't need life insurance." So these are just some other little ways that it could be, or should be something to at least ponder. Now, long term care is on my list as well. Tony, obviously that seems like a no brainer, something maybe with an accelerated death benefit, something like that we hear a lot about for helping with those healthcare expenses.

Tony: We do. And I think people need to look at life insurance for that, because of the cost of long term care insurance, which I am a big fan of, so to speak. I think you need to at least take a look at that as part of your financial plan. But a lot of times, if people wait too long, the long term care coverage may not seem like it's affordable. And a lot of these life insurance policies have long term care coverage or writers on them that you can access this money while you're still living. Now yes, it does reduce the death benefit, but you can use it for long term care. So you can feel like, "Well, at least if I needed to go in, I've got some coverage there.

Host: Right.

Tony: And it might be less expensive than a traditional policy. But again, got to do some looking and make sure you're comparing apples to apple with benefits, things like that. But it is there, which is a great tool again, like you said.

Host: Yeah. And of course it can help with some of the healthcare expenses while you're still around, but then also provide that death benefit as well. So again, different options, different nuances, lots of little things in there that can be a useful tool. So don't just eliminate something, just because you've figured that at a certain age I don't need or whatever stigma you might have with something. And so, that's going to be it this week, keep it short and sweet. Just talking a little bit about life insurance and reasons to ponder it, at least. And if you've got questions about how it might be helpful with your estate or how it might be helpful with transferring family wealth or growing family wealth or business succession or whatever the case might be that we talked about, definitely reach out and talk with a professional before you take any action.

Host: Tony is an EA and a CFP. So he's been doing this quite a while, helping families get two and three retirement, and you can reach out to him online at yourplanningpros.com. That's yourplanningpros.com. Don't forget to subscribe to the show on whatever platform you like to use. While you're there, you can find all that information. Also, we're on Apple, Google, Spotify, iHeart, Stitcher, and so on. This has been Plan With The Tax Man, Tony, thanks for hanging out, talking a little life insurance and I'll let you get back on with your day.

Tony: All right. We'll talk to you soon.

Host: I appreciate you. We'll see you in a couple of weeks as we move through May and we get sir two Memorial Day. So have a great one. We'll talk to you soon, here on Plan With The Tax Man, with Tony Mauro.

Disclaimer: Securities offered through Avantax Investment ServicesSM. Member FINRA, S.I.P.C. Investment advisory services offered through Avantax Advisory Services. Insurance services offered through an Avantax affiliated insurance agency.

There are certain age milestones where you should really pay attention to your retirement planning progress. On this episode, we’ll look at the most important birthdays as you approach retirement and cover the exact things you should be checking off your to-do list at each age.

Important Links

Website: http://www.yourplanningpros.com

Call: 844-707-7381

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Transcript Of Today's Show:

Speaker 1: Hey everybody. Welcome in to the podcast. Thanks for hanging out with Tony and I here on episode number 63 of Plan with the Tax Man. We're going to talk about birthdays. There's nothing special, I suppose, about 63, Tony, but we're going to talk about retirement planning, birthday milestones, whatever you want to call them, things that we might want to know. Since our last podcast actually, became old enough to get social security, at least early, this one's 63. We're going to get into some of these fun stuff today and have a little chat and maybe enlighten people with a few things. Some stuff's probably going to be well known, but just in case, we're going to shine a little light there. What's going on, my friend, how you doing?

Tony Mauro: I'm doing good. I'm fresh off of tax season as we're recording this. Spring is here and getting back to normal work schedules and things are good.

Speaker 1: Well, good.

Tony Mauro: If the weather was better here it would be nice, but that's a whole different topic.

Speaker 1: I tell you what, at the time we're taping this, the whole east coast got just a lot of snow, surprise snow, for all up and down. From North Carolina to Michigan, people were posting pictures and "I can't believe it's snowing." I guess technically the time we're taping this yesterday was the close of official tax season. It was the 18th. We had that little extra day because of Good Friday. Yeah, people were like, "It's taxes and it's snowing, this isn't fair."

Tony Mauro: It was snowing here on Easter Sunday.

Speaker 1: Yeah, there you go.

Tony Mauro: It was cold.

Speaker 1: All over the place, man. Mother Nature is crazy. But anyway, let's talk about some of these birthdays, Tony. I turned 50 last year, and so that's like the first milestone. I like to say that it's the official kickoff to retirement. Like Memorial Day is not officially summer, and 50 is not officially retirement, but you start getting in the mindset for it when you turn 50, I think. The government helps with a little something there. What's going on at 50? What's an important thing about that?

Tony Mauro: The biggest one really is once you turn 50, you're eligible for retirement catch up provisions in either your IRA, or your 401k, simple IRA, pretty much all of them. In plain terms, really it allows you, if you want to and are able to, to stash more money away in those things to help you. The government says, "Hey, you're getting closer. We're going to give you a chance to get more money in there". Probably from their standpoint, you're not going to be dependent on us, but so you can have the kind of retirement you're looking for.

Speaker 1: For the contributions for 2022, for your regular 401k, they bumped it up to $20,500.

Tony Mauro: Yes. Up from-

Speaker 1: 19,500.

Tony Mauro: Yeah, 19,500. That's just a regular one. That's just the inflation one, but then you've got a catch up on top of that that jolts it up. I'd have to look it up here because I don't have it in front of me, but it's like 26, $27,000 maybe?

Speaker 1: You can do the additionals, which is 6,500 on top of that, for making it a total of 27,000 for 2022. You might say, "Well, $7,000, Tony, that's not a whole lot of money." You figure, again, let's just say 50, right, this is when you can start doing this, so $7,000, and you go to 67, full retirement age, 17 years, $7,000 a year, that's not chicken feed either.

Speaker 1: That's not chicken feed, and you throw the earnings on top of that.

Tony Mauro: Right.

Speaker 1: That's a big plus. I would say to people, too out there that are listening to this that are younger, ideally what you like to try to do till you get to 50 is try to keep upping these contributions, so you're at or around your maximum when you turn 50. It's not easy.

Tony Mauro: Right.

Speaker 1: You got to start small. You got to learn to live without it, because it's very difficult to just go from well, I'm not putting any money into it. I'm putting 19,000, $20,000 in there because you know that's going to be difficult to do, you have to work with your advisor and work on that.

Speaker 1: Well, you know what, treat your future self like a bill. You know, when you're paying your mortgage, you're paying your stuff. When you're in your thirties, pay your future self like a bill. Set aside something each time and say, nope, this is a mandatory bill I got to pay for my future self, and then that way you've got some money there. That's the first thing on our milestone birthdays, important birthdays. Let's go to 55, Tony. This one might be weird to people. A lot of people don't know there's some things you can do at 55.

Tony Mauro: At 55, and there's a lot of people that don't know about this, we talk about it to tax clients every year, so it's fresh on everybody's mind since we're just coming out. If you leave your job after you turn 55, you can actually take withdrawals out of some of these retirement plans without any penalties. You're still going to pay the tax, but you're not going to pay that dreaded 10% tax penalty for taking it out early. You know that's the 59 and a half. You can only do this when you leave your job. Like me, I'm turning 55 this year. I can't just keep working and then start taking it out and avoid the penalties. There are some people that are leaving work early, that this could be very beneficial to just to avoid the penalty.

Tony Mauro: I would say though, before you pull this out again- That's with all of these, you know, you need to talk to your advisor and figure out what the plan of action is, because 55 is to me, is still a young age. Of course I say that, because I'm turning 55. You got a lot of years left. Is that going to be the right move for you, to start drawing on that with, with everything else you might have in your life going on? It's a good catch there.

Speaker 1: There're some caveats, right? Like you said, so you still got to pay the taxes on it, of course. You don't have to pay the penalty. Now we think about this typically as the 59 and a half, the caveat there is, this is from the job that you were just leaving. It's not like some other one you had laying around. It has to be from the one you are leaving at the time of 55, correct?

Tony Mauro: At the time, yes. That's correct. Yeah.

Speaker 1: All right. Of course, then I mentioned 59 and a half, because it's basically the same thing as 59 and a half, Tony. It's just that it's got that caveat about being the job you're walking away from currently. So you could kind of tap into it early, but most of the time we think of the 59 and a half

Tony Mauro: That's the magic number in the retirement world there, because at that point you can withdraw without penalty and you could still be working, still making as much money as you want. Be able to pull money out of those without penalty. Again, generally for most people, it's a little bit before normal retirement for most. They're thinking hard about it, but I don't see a lot of our clients, even on the tax side that are pulling money out that early, unless they just really need it.

Speaker 1: Extreme circumstance. You do have the access and it is without the penalty, but you still got to pay taxes.

Tony Mauro: Yep, you got to pay taxes.

Speaker 1: Bear that in mind. All right, so then we go to the magic old 62. We all know what this is. We can start early social security, but is it the right move? That's the big question.

Tony Mauro: That's a real big question, and it has a lot of tax implications, especially if you're going to continue to work. You really need to get with your advisor, get some stats from social security themselves, because a lot of people don't realize this. A lot of people come in on the tax side say, "Well, I'm getting out. I'm I'm out at 62. I'm going to take my social security", which by the way, it's just a safety net anyway. A lot of people don't ever look. Right now they've got it online. You can go in and get yourself a login and see what your benefit is going to be at 62 65, all the different ages. And what a lot of people don't realize though, is they think they're going to take social security at 62, keep working and still get the full benefit. That's not the case. They do reduce it based on how much other income you have and are earning. Once you're over a limit, then they're going to reduce those benefits. It could bite you a little bit, if you aren't careful, and you're not aware of that. You got to keep that in mind, but if you do need it, it is there and you're eligible at that point. Again, work with your advisor to make sure that's the move you really want make.

Speaker 1: Well, that's the strategy, right? That's when you really got to start thinking about what kind of strategy do you want in place? Don't just turn it on because the government owes you or whatever that kind of thought process is. We've talked about that many times. Make sure it's the right move. If you need it, you need it, but just make sure it's the right move. Then next milestone birthday, Tony is 65. You mentioned retiring early, obviously 65 is Medicare. Retiring early, that's going to be the big gap to fill for a lot of people, but anyway, 65 we get Medicare.

Tony Mauro: You get your Medicare, which is a big milestone for those that are getting ready for it. Transitioning over to that. It used to be the magic number for retirement age. Getting social security, they have started to move that up because they are short on money. Some of us have to wait a little longer to get the full benefit, but you can still take your social security at 65 and see what that is. For a lot of people, that still I think sticks in their mind as to when they want to call it quits. There's all kinds of things you need to have some help with there to make sure that you're getting ready.

Speaker 1: Yeah definitely. Taking the right stuff. You can technically start this, you can actually do this early. Right? So for Medicare, what is it like 64 and some change or something like that, where they allow you to start getting everything ready?

Tony Mauro: Yeah. I think it's 64 and a half ish and you need to start contacting, be proactive with this Medicare stuff.

Speaker 1: Cause it takes a couple months and everything.

Tony Mauro: It does. I takes some time. They don't work that fast.

Speaker 1: It's a government entity. What are you talking about? They're not fast?

Tony Mauro: Give them some time. I remember my dad going through it. It's fairly straightforward. They do a pretty good job. It's just, you got to stay on the timelines.

Speaker 1: Exactly. All right, so that's 65. We all know that one. 66/67, this is the FRA. What's that?

Tony Mauro: This is the full retirement age now for people. Even in my age group, it's about almost 67 for me. What social security's done, government's bumped back the full retirement age, because again, the funds are a little shorter than they used to be. Now for someone like me to get the full retirement benefit, I can take it then. What it also is, once you get to your full retirement age, then that whole thing that started at 62, you can still work, make as much money as you want and they cannot reduce your benefit. They still tax it though, and they tax it up to 85%, but that's not taking any money from you. It's just being taxed. You got to understand what the difference is there. I think for a lot of us, that's kind of the magic, we're really starting to think, "Okay, it's here now."

Speaker 1: You've got the bump, right? There's a decent bump there going from 62 to 67, full retirement age, as far as the money from social security. Then of course there's 70, which I don't have on my list, but we could do it real fast. 70 is that max out. We get questions from time to time. Even if you keep working past 70 Tony, there's nothing else you can do. You need to go ahead and be taking this at this point, because it's not like it's going to continue to grow from 70.

Tony Mauro: Right. It won't continue to grow. You should start taking it. The biggest question we get of course is, well, when should I take social security? We could talk out on that.

Speaker 1: I just wanted to highlight, because some people actually say, "Well, I'm working and I'm 71. I want to keep contributing." It's like, well you can't.

Tony Mauro: No, it's over. You might as well take it.

Speaker 1: You've hit the top threshold, so just pull it out. If you still want to work still work, that's fine.

Tony Mauro: Still work, yeah, still work. It's just that people, you know, they're always convinced they want to try to beat them. In other words, "Well I want to make sure that I get all of my money." Nobody's handing us pink slips saying when you're going to check out. It is a little bit of some calculations, family history, and then you got to do what's best for you.

Speaker 1: Definitely. Of course that's 70, that's the absolute max on the social security. Then there used to be a 70 and a half, which another one of those goofy halves, which I still don't understand why in the world they ever did that with the 59 and a half or the 70 and a half. Either way, they moved the 70 and a half to now 72.

Tony Mauro: And this is now where government's saying, "All right, now you have to start taking out what they call required minimum distributions out of some of these accounts." Not all of them, not the Roth and a couple of things, but they're saying, "Hey, we've let you defer taxes long enough. You need to start taking out required minimums." That way, of course they're going to get a little tax money and it's going to force you to pull some money out of these. A lot of people ask me, How much is that going to be?" The companies will of course calculate that, but generally it's based on your life expectancy. They're going to say, "Okay, this is how much you got to take out every year." You don't have to spend it. A lot of people think I got to go spend it. No, you just have to take it out and get it out of that type of account.

Tony Mauro: That's the first thing. The other thing is, you got to make sure you do them because there's a stiff penalty if you don't do them believe it or not . A real big one. The IRS is pretty lenient with it. If there's a mistake or something, but if you're intentionally not doing it for several years, they could come back. I think it's still 75% penalty, so it's a big one. You don't want to miss that.

Tony Mauro: The other thing too is, as you get to that age, I think you need to start taking a look at what do I think the rest of my life expectancy is going to be, making sure you have all your things in order, because this money, if you don't get it all out of there, it's going to go to your heirs based on who you have in the contracts themselves. It takes a lot of planning. It seems like it gets easier as you get older, but actually there's a lot of stuff to think about.

Speaker 1: You have to take these out. Even if you don't want the money, the government's tired of waiting. They want their tax dollars on it. There's things you can do, you can't get out of it. You got to do it. You can look at the strategies earlier on of maybe moving some of that money out of those types of accounts, into different accounts so that you can avoid that kind of thing. You can look at doing something like a QCD, a qualified charitable distribution to like your charity of choice. Right, Tony? That's something else you could do where you send it directly to them. There's different, but yes, basically you can't get around them. The government wants their money.

Tony Mauro: No, and if you really want to try to get around it as much as you can, legally, you need to start planning before this happens.

Speaker 1: Yeah exactly. Start Roth converting and whatnot earlier, right?

Tony Mauro: Yep, the conversions, the trust, things like that. It'll help you some, but it's not totally avoidable.

Speaker 1: You got to do it wisely. Otherwise, you kick yourself up into a higher tax bracket, too.

Tony Mauro: That's correct.

Speaker 1: Those are some important birthday milestones to remember. Make sure that we're doing some of these things. As Tony said, some of those penalties can be hefty. The various different things. Of course, it's just good to know when you're putting a strategy together, hey, at this age I can start doing this, at this age I might want to start doing that, so on and so forth.

Speaker 1: If you've got some questions, make sure as always you check out Tony and talk with him before you do anything. You can find him online at yourplanningpros.com, that's yourplanningpros.com. At Tax Doctor Inc is where you can find him most days, unless he's out playing golf or something like that. Reach out to Tony and get started.

Speaker 1: Don't forget to subscribe to the podcast, folks, on Apple, Google, Spotify, iHeart, Stitch, or whatever platform you like to use. He's been helping families for 20 plus years. He's an EA and a CFP. That's going to do it this week. We'll catch you next time here on Plan with the Tax Man. Tony, thanks for hanging out my friend.

Tony Mauro: All right, well talk to you soon.

Speaker 1: I appreciate your time, as always. We'll see you a little bit later here on the podcast.

Disclaimer: Securities offered through Avantax Investment ServicesSM. Member FINRA, S.I.P.C. Investment advisory services offered through Avantax Advisory Services. Insurance services offered through an Avantax affiliated insurance agency.

When it comes to your money, you might have several different voices in your head—maybe the voice of greed, or the voice of fear, and sometimes the voice of wisdom. Let’s look at some things we might hear from the voice of greed so you know how to recognize it when you hear it.

Important Links

Website: http://www.yourplanningpros.com

Call: 844-707-7381

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Transcript Of Today's Show:

Speaker 1: Back here for more of Plan With The Tax Man. Thanks for tuning into this edition of the podcast. We are into the middle of March. Hope that you're having a good spring is on its way. So hopefully you're having a good March already, and there's a lot going on in the world. A lot of things happening that certainly have our attention, but this week on the podcast, we're going to talk about the fact of how to recognize the voice of greed, our own voice of greed, and maybe how to fight against it. Maybe the world's helping us Tony with this because over the last few years, it's been easy to be greedy because the markets have been very nice.

Tony Mauro: Yes.

Speaker 1: The last two or three years. But lately the start this year, obviously been quite choppy. So we're going to get into some of that, but first how you doing my friend?

Tony Mauro: I've been doing good.

Speaker 1: Yeah.

Tony Mauro: Been getting ready for spring, turning the clocks forward and looking for that more daylight.

Speaker 1: Yeah. Well you are fully in the throat of tax season now, right?

Tony Mauro: Yes.

Speaker 1: Mid-March.

Tony Mauro: Yeah, we are.

Speaker 1: Yeah.

Tony Mauro: Yeah. And it's back to other than on the IRS side somewhat normalcy as far as the due dates. The last couple years have been crazy.

Speaker 1: True. Yeah. Yeah.

Tony Mauro: With moving the due dates all over the place, but yeah.

Speaker 1: Yeah. Have you been seeing some of this a little bit because people are coming in with returns, 21 was a good year for the market. Right. So they're coming in, they're doing their 21 taxes and greed, it's easy to get greedy when markets are good.

Tony Mauro: And they've been good for a long time and everybody now with the current events that are going on, are wondering with this choppiness in the markets especially, is this the time? But I have seen a lot of what I would call greed on people's minds over the last probably four or five years for sure.

Speaker 1: Okay.

Tony Mauro: Which is interesting.

Speaker 1: Yeah. Well, I mean, again, good markets are easy to do that with. Right. And then we kind of get lulled to sleep. We really enjoy those returns. And then when something happens, like we're experiencing now here in 22, we get really panicky a lot easier because we're thinking, oh man what's, and this market's been that way. Right. We've been talking to Tony for a while on the podcast, by the way, this is number 62.

Tony Mauro: Wow.

Speaker 1: Yeah. So it's eligible to file for social security.

Tony Mauro: That's right.

Speaker 1: But anyway, we've been talking about various different things for a while, but this market has been pretty durable, right. For 12 plus years, we're talking about this bull run and then we kind of get lulled to sleep a little bit and we kind of get, it's easy to get greedy because you're like, Hey, I want to keep getting these good returns. So now we're starting to get a wake up call a little bit. But anyway, let's talk about how to recognize that I've got some statements here that might come from that kind of greedy aspect. Maybe you find yourself folks feeling like this, or you said this yourself, maybe it's good to reevaluate. Reach out to an advisor and say, Hey, am I doing the right things? Am I maybe taking too much risk? Whatever the case might be. So I got a couple of them here for you, Tony. We'll just talk through them.

Tony Mauro: Okay.

Speaker 1: Number one, the market is doing great right now. Well, okay. Not right now, but it was. Right. So this was something you were certainly hearing from last year. It's a good time to invest a little more aggressively so you can take advantage of that growth. And I think a lot of people, it's a smart move maybe if your situation allows for it to try to take advantage, but at the same time you also want, if you're going to be a savvy investor, Tony, while it's down, it's a good time to think about growth too. Right. You're getting in while it's low versus high.

Tony Mauro: It is. And I would say, and you hit it on the head when you were talking earlier, is all of these statements revolve around, you probably should check with your advisor before.

Speaker 1: Oh for sure.

Tony Mauro: Doing anything, because we hear a lot of that, I've heard over and over the last four or five years is people want to be more aggressive. The market's doing great and - 

Speaker 1: Right.

Tony Mauro: We try to remind them that hey, the plan is this. We stick to the plan and because markets obviously go up and they go down and nobody really knows what and when. I mean, every other day something's on the news and lately it's been Russia with Ukraine and oil and everything else, inflation and they move the market short term. So you can't get lulled into that. And if you're not an aggressive type of investor, and if you're on plan, it may not make sense to maybe take advantage of that. But on the other hand, depending again, age and your factors and situation, maybe it is time.

Speaker 1: Yeah.

Tony Mauro: But key there is to sit back and really analyze that before you just go out and do something which could end up hurting you.

Speaker 1: Yeah, exactly. So what happens is we wind up getting a little greedy because we're enjoying them. We're seeing these higher numbers. We want to get on it. It's that fear of missing out, that FOMO.

Tony Mauro: Yep.

Speaker 1: And then of course, if you're doing that over the last couple years, you're buying when it's high. Right. So you're going against, those emotions are creeping in and you're going against the strategy of buying lower and selling higher. You're actually kind of buying high. So you got to be able to look at the opportunities sometimes when we are having some of these downturns. Yes. It's no fun to see, but if you've got a good portfolio and a good structure and a good plan, a lot of times that's your later money. And so you're not getting beat up when we're seeing some of these dips and maybe you do take advantage of that again, by talking with your advisor to make sure it's the right move for you. All right. So another voice of greed we might hear is the big talking heads, not the little talking heads like us, but like the big talking heads, that guy on blah, blah, blah, blah, blah, knows what he is talking about over there on MSNBC or whatever it is that you watch. And maybe I should jump on this before it takes off.

Tony Mauro: Yeah. I have CNBC on every day in my office.

Speaker 1: Okay.

Tony Mauro: Just for the markets. However, it's always on mute because I can't take what they're saying. Every probably 20 minutes somebody new is on there talking about something new, generally it's about a different type of investment or a company generally is what it is.

Speaker 1: Yep.

Tony Mauro: And I think that it would be out of all of these things, probably one of the worst things to do is to watch too much of that, get sucked into what's happening because that's all current and short term type stuff in my mind. And you'd be best to make sure that that really fits with your goals before you go out and do that because these people on there, I mean, you got to take at least my opinion news, all types of news with a little bit of grain of salt and what they're trying to do with that.

Speaker 1: Yeah.

Tony Mauro: And...

Speaker 1: Well, and lately it's crypto. Right. Let's be honest.

Tony Mauro: Yeah. It really is. It's crypto.

Speaker 1: And just about everything on there is going on about crypto this, crypto that, and it certainly gets people interested and enticed, but it's like, is it the right fit for you? A lot of times for retirees and pre-retirees maybe not, at least it hasn't been yet anyway. And it's definitely, if you're interested, that's something Tony, as the advisor, as the professional, as the CFP, come to you and say, Hey Tony, I'd like to get into some crypto, what's a smart way to go about it? And that's when you can then work that out.

Tony Mauro: Yes. Yeah. Because just doing it just because you heard it on TV, especially that kind of thing, which is complex is a recipe for some potential disaster. And more and more people, even tax clients, you only see once a year asking about, well, maybe I should do that. It seems like people are making money and.

Speaker 1: Sure.

Tony Mauro: And again, they just see it or hear and fear, well, why not get in on it? Again, it goes back to that a little bit of a greed thing.

Speaker 1: A little FOMO.

Tony Mauro: You don't want to miss out. Yeah. Yeah. So I think you just got to be careful with that. Very, very, very careful. And if it fits in your plan, great. If not, I would stay away.

Speaker 1: Yeah. And it's hard to do Tony, when you see things like today at the time we're taping this, it's up 274 bucks. And so it's at 43,000, Bitcoin, I'm talking about Bitcoin.

Tony Mauro: Yeah, Bitcoin.

Speaker 1: It's up about a half a percent today when the market itself is not doing so great today, right?

Tony Mauro: Yeah.

Speaker 1: So it's easy to see this kind of stuff, but you got to think just what three months ago it was over 60, then it fell to 30. It was in the 30 range just a month or so or two ago. And then it's up, now it's up in the mid 40, like it's all over the place, right?

Tony Mauro: Yeah.

Speaker 1: There's wild swings there. And again, if your portfolio and your stomach can handle that and your plan says that you can invest in some crypto, well then talk to your advisor, but don't do anything until you do. Don't just wing it. Don't listen to that little, remember those cartoons, little devil on one shoulder.

Tony Mauro: Oh yeah.

Speaker 1: Angel on the other, that kind of thing. All right. So let's keep moving along here. Maybe you find yourself feeling greedy because you are seeing what's happening with your loved ones or neighbor or something like that. A lot of us get in that situation where we're chatting with someone we know or next door folks or whatever the case is, and you realize, maybe they're in better shape than you. So you feel like you got to take some of those chances, kind of leads back to the prior conversation of pushing too hard in the market when it's maybe not the right time for you and your life. Maybe you're 60 and you're a couple years away from your retirement plans call date of hitting it, let's say 66 or 67. And we do have a big downturn. Like you handled it in 08, 09 when you were 50 or 48, but are you going to handle it now when you're 60?

Tony Mauro: Yeah. And I think this is when everybody falls victim to at some point or another, it's just human nature. You look at your neighbor or your family and they have things, whether it's the guy next door has a boat and you're scratching your head saying, how does he do it? I'm smarter than -

Speaker 1: Yeah, I want a boat.

Tony Mauro: Him or her. And that's not fair, blah, blah, blah, blah, blah. And so it is and that goes on all the time. And you do have to really watch yourself, that you're not just going to go out, especially when you're doing retirement. And again, take more aggressive chances. So especially if you're behind, you feel like you got to catch up. I mean, you got to work with your advisor, stick to your plan. And if you need to adjust that plan, if your goals, let's say you want to change your goals. Well, then that's good, as long as you work through your plan and do that. But if you saw something next door and thought, well, just like we were just talking about, I'm going to go out and invest in some crypto.

Speaker 1: Yeah.

Tony Mauro: Because I think I can hit it big in 12 months. And then the next thing you know the bottom falls out briefly, but at the wrong time for you.

Speaker 1: Sure.

Tony Mauro: And then it's just spells a lot of pain for you so.

Speaker 1: Yeah. Your neighbor rolls up with a brand new, $100,000 RV, don't run out and get one. And sometimes I think people hear that. They say, well, I shouldn't have to check with my advisor for permission. You're not checking with them for permission. You're checking to make sure that you're own retirement can sustain it. Right. Tony, your kind of like the, I don't know, your kind of like the librarian, right? You can kind of say, Hey, here's the numbers, here's the information. You could check this out, but it might not be the best idea. You could take the 100,000 out and go buy the RV, but here's what might happen if you do.

Tony Mauro: I just had a client this week, actually was late last week. He called, he was moving back here.

Speaker 1: Okay.

Tony Mauro: He wanted to take $1.3 million out of his account and to pay cash for a house and then put it back in when he sold his other house. And so he was at least, I don't want to say asking permission, but I was serving as that role. And I said, no, don't do that.

Speaker 1: That sound board.

Tony Mauro: Just put in, I mean, and I told him why. And I said, I mean, you can. At the end of the day, you're the captain of the ship but -

Speaker 1: Sure. Yeah. There you go.

Tony Mauro: Here's what could potentially happen. You're going to sell some securities. You're going to take a loss. You're going to, then when you put it back, who knows where we're at, if securities are up, we're going to have gains to pay it. Just do a subject two or work with the realtor or just borrow, and then we'll do something else. But yeah. So it's good that he asked, he did the right thing. And it's not for my benefit that he doesn't do it. It's really to help him.

Speaker 1: Exactly, exactly.

Tony Mauro: Avoid a huge mistake.

Speaker 1: Yeah. And I like your metaphor better. They're the captain of the ship. I don't know. Maybe you're the navigator or the first mate.

Tony Mauro: Well, right. Right.

Speaker 1: Versus my terrible librarian one.

Tony Mauro: At the end of the day I'm going to do what you're telling me. Yeah.

Speaker 1: Right. Exactly.

Tony Mauro: But.

Speaker 1: Yeah. Yeah. The navigator can say, here's the path we should take as a navigator. And the captain can either choose to take it or go his own way.

Tony Mauro: Just go his own way. And I tell him to tell the clients is you're paying me for the advice and this is what I see. Here's the goods, here's the bads and here's what, if you want me to tell you what I would do, then I will, but if you don't, then at the end of the day, you got to make the decision.

Speaker 1: There you go. And that brings me to my final one, really, which is, that voice of greed saying, Hey, I can do this all on my own and save some extra money by not pay an advisor to help me with that. And again, the last few years, market doing well, pick an index, you probably did okay. The DIYers, it makes a lot of sense until you start really looking at how all the components work together for and into retirement. Growing the money is one thing, hanging on to it and spreading it out over retirement and doing all the little nuances is a totally different one.

Tony Mauro: It's totally different. And I would add to that keeping you on track for the goals you want and helping monitor it, but I agree. I mean, with all the products and things out there today, you certainly can go out and pick an ETF or a variety of mutual funds, whatever you want within reason. And the saving and investing is not the hard part. It's like you say, it's keeping, what are my goals? Am I on track? Will I with set amount of nest egg run out of money if I live 20 years? All those things that you might need somebody else's assistance with is where the value of the advisor comes in. And yes, you're going to pay them, whether it's asset based, fee only, or some other way. They're no different than anybody else, they're no different than me acting as an accountant, an attorney, whatever, but I think it's worthwhile if you really are serious about having a goal and feeling like you got somebody on your side.

Speaker 1: No, I agree with you. And I think if nothing else, what we just talked about with that prior client example is the sounding board value is just, to me, it just it's worth its weight right there, because it's-

Tony Mauro: Yeah.

Speaker 1: I've got these things. I'm thinking about doing something, but I'm just unsure. Let me check with my guy or gal, let me check with Tony and see how this is going to rock the boat. And if it's going to make things a little too choppy, then maybe it's not the best idea, but if not, then hey, or we could strategize for it. You could come back and say, Hey, that's a great idea. Let's see what we can do. I think we can make that happen over this time period. Or we adjust a little here. We're going to be okay there. So on and so forth. Right.

Tony Mauro: Yeah.

Speaker 1: So to me, that's where a good chunk of value can certainly come in. Just helping us not be our own worst enemy.

Tony Mauro: Yeah.

Speaker 1: By giving-

Tony Mauro: And many times, that's it.

Speaker 1: That's it.

Tony Mauro: Yeah. It really is.

Speaker 1: Yeah. Because you've got the knowledge, you've got the you're in it every day kind of thing. Whereas most of us, are just occasionally dipping in or doing the DIY thing or kind of on the outer skirts. And it's like, I've got this great idea and you might find it's not that great idea or it really is. And that's some value that an advisor can bring. So how to recognize the voice of greed, I think that's the biggest step. Just being able to say, okay, maybe I need some checks and balances in this. And if you've got some questions, you need some checks and balances, reach out to Tony and have a conversation. Before you take any action you should always check with a qualified professional anyway, like Tony, who is a CFP, a certified financial planner, as well as an EA.

Speaker 1: He's been doing this for 20 plus years in the industry. And you can find all the information you need at his website, yourplanningpros.com. That's yourplanningpros.com. Stop by the website, get on the calendar, check him out. Lot of good tools, tips, and resources. Subscribe to the podcast on whatever app you like using Apple, Google, Spotify, so on and so forth. And if you got questions, you can always call him at Tax Doctor Inc at (844) 707-7381. Tony, thanks for hanging out. I'll let you get back to it today. And I will talk to you in April.

Tony Mauro: In April. It'll be spring, in the middle of it. I can't wait.

Speaker 1: Yeah. And you'll really be rocking and rolling with the taxes at that point so.

Tony Mauro: That's right.

Speaker 1: We'll see you then my friend. Have a good one. And we'll talk to you next time folks right here on Plan With The Tax Man with Tony Mauro.

Disclaimer: Securities offered through Avantax Investment ServicesSM. Member FINRA, S.I.P.C. Investment advisory services offered through Avantax Advisory Services. Insurance services offered through an Avantax affiliated insurance agency.

Most people, when trying to plan their retirement, have to guess about the answers to some important questions. Let’s talk about some of those questions and why you need to have a better answer than just a guess.

Important Links

Website: http://www.yourplanningpros.com

Call: 844-707-7381

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Transcript Of Today's Show:

Speaker 1: Hey everybody. Welcome into the podcast. It's Plan with the Tax Man, with Tony Mauro and myself talking about investing finance retirement. And this time on the podcast, when guessing at retirement's most important questions goes wrong. Most people when trying to plan their retirement have to guess about some of the answers to some important questions, especially if you're not working with a professional like yourself, Tony. So we're going to talk about that this week. How you doing my friend?

Putting together a solid retirement plan isn’t just about dollars and cents. We need to determine what really matters to you.

Important Links

Website: http://www.yourplanningpros.com

Call: 844-707-7381

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Transcript Of Today's Show:

Speaker 1: Hey, everybody. Welcome into another edition of Plan with the Tax Man with Tony Mauro and myself, talking, investing, finance, retirement, and why values-based planning is essential. We often talk about the Xs and Os, Tony, but it doesn't always have to be just about the dollars and the cents, sometimes it's other things that really matter to you in retirement. That's going to be the topic today. How are you doing, my friend?

Tony Mauro: I'm doing well. Looking forward to the spring here, coming up. It's going to be right around the corner.

Speaker 1: Hopefully. Right? Yeah.

Tony Mauro: Hopefully.

Speaker 1: Yeah. And now, at the time we're dropping this, this will be shortly after Valentine's Day. We are taping this before Valentine's Day, so Tony, you've got plenty of time to get something put into place there for yourself.

Tony Mauro: Yes, I do.

Speaker 1: Are you working on something good for Valentine's Day this year?

Tony Mauro: I am. I've got a couple of things. I can't say, just in case my wife is listening.

Speaker 1: Sure. Right. Yeah.

Tony Mauro: But yes, I do have a couple of things.

Speaker 1: Got some stuff up your sleeve. All right. Well-

Tony Mauro: [crosstalk 00:00:53].

Speaker 1: ... hopefully, folks, when you listen to this, hopefully, you had a lovely Valentine's Day, if you go in for that sort of thing. So, thanks for hanging out with us. Let's talk about some values-based planning. What is that?

Speaker 1: Well, what's important to you, right? Not just the dollars, not the normal, "Well, I want to make sure my money lasts as long as I do" kind of thing. But some of the other aspects. Maybe it's family. That's typically number one. That's a kind of an easy, low-hanging fruit for us, Tony, to talk about. Everybody is probably going to say what's important to them is their family.

Tony Mauro: That's right, and for most, that comes up number one. And I think even, well, for myself, is you want to take care of your family. You want to make sure that your heirs ... I think, as most humans, you want them to have it better than you had it-

Speaker 1: Sure. Right.

Tony Mauro: ... without spoiling them. That's always number one, I don't think we give it enough thought on the family, because I think to plan properly, there needs to be some discussions with your advisor on that, not just say, "Well, I'd like to just take care of my family."

Speaker 1: Yeah. Right.

Tony Mauro: Well, what does that really mean to you?

Speaker 1: Yeah, because then I think that also brings into the mortality questions, right, and the mortality conversations.

Tony Mauro: Yeah.

Speaker 1: And you're like, "Well ..." We talked about it on the last podcast. We are typically reactionary versus proactive, so whatever happens, happens, and whatever's left is left kind of thing. Versus, "Let's do a little planning," or "Hey, whatever's left, we're going to leave to the kids. That's great, but they can deal with the taxes," where a little bit of planning on your end early on, it may not even cost you anything, could save them a ton of taxes down the way. Right? Again, what's your values when it comes to your retirement planning conversation? If it's family first, then how can we be as efficient with our money with that as possible? Correct?

Tony Mauro: Yeah, that's exactly it.

Speaker 1: Okay. Maybe it's faith. Right? I'm going to link two together. I'm going to move them around a little bit, Tony. Maybe it's faith or charitable giving.

Tony Mauro: Mm-hmm (affirmative).

Speaker 1: There's some people out there, and I know I've talked with advisors, and I don't know if you have a story or anything to share or something along those lines, but people will say, "Hey, I'd like to make sure my portfolio is investing in companies or doing things that align with my morals." Right?

Tony Mauro: Yeah.

Speaker 1: Maybe I don't want to have different kinds of companies, because I don't like what they stand for, or something like that. Do you come across that, where their values in life also affect how they want to talk about their financials?

Tony Mauro: I do. I get it a little more in the clients that are ... And I don't have as many, this is as high on the list as some of the others [crosstalk 00:03:34].

Speaker 1: Sure. Of course.

Tony Mauro: It probably should be, but everybody's got their own goals. But most of mine come, and they'll say ... And you could tell because they're extremely passionate about it, is ... "They don't come to me about investing in certain companies.

Speaker 1: Okay.

Tony Mauro: It's more of, "I want to make sure this bunch of my estate goes to this particular charity-"

Speaker 1: Gotcha.

Tony Mauro: " ... because I'm so passionate about it that I want to make sure that that happens. And how do we make that happen?" They're very into that. I have a client who's extremely into feeding the hungry here in this city.

Speaker 1: Okay.

Tony Mauro: And he is just-

Speaker 1: That's great.

Tony Mauro: ... really wrapped up in that. It gives him a lot of purpose, a lot of cause, and he does devote a lot of his retirement to that, but he's planned it so well that he's got plenty of money for him to live.

Speaker 1: Right.

Tony Mauro: And this is what he likes to do, and he can depart knowing that the rest of his money is going to go there.

Speaker 1: That's [inaudible 00:04:36].

Tony Mauro: He has no heirs.

Speaker 1: Yeah.

Tony Mauro: [crosstalk 00:04:37]-

Speaker 1: Okay. Yeah. Yeah.

Tony Mauro: ... so that's a little different.

Speaker 1: And we see that often. Right? A lot of the times we will see that with folks who maybe don't have any heirs, they want to leave a chunk, or even if they do have heirs, they want to leave a chunk of their nest egg after they're gone to their church, or a favorite animal group, or maybe they were affected by some sort of an illness. They want to leave it to The Heart Association-

Tony Mauro: Yes.

Speaker 1: ... or cancer research, or something along those lines. Again, where does that fall on your values based planning system? Or does it? Right?

Tony Mauro: Yeah.

Speaker 1: It doesn't mean it's wrong if it doesn't, it just means that there's some other things that are more important to you.

Tony Mauro: Yeah.

Speaker 1: Everybody's a little different. Maybe it's career, Tony, that seems a little different now in light of the pandemic. I think maybe-

Tony Mauro: Yes.

Speaker 1: ... from 19 and on earlier, I should say sometime before the pandemic happened, maybe it was a love of career that was a bit more dominant. Right now. I think because of the world changing so much, we're kind of like, "Hey, this is what really matters more to me," but maybe it was career. Maybe it still is. Right? They don't see themselves ever retiring. I mean, I guess, small business owners ... Tony, like yourself, would probably fit into this category pretty good, because the big business is like another child.

Tony Mauro: It really is. And for most of us, it's all we do. And you're just so passionate about it that you can't turn it off.

Speaker 1: Right. Yeah.

Tony Mauro: Yeah. A lot of us business owners, or my clients, especially, and I talk to them about it, about what's the end game for you? I mean, and a lot of them say, "Well, I'm just going to keep working, because I really don't have anything else that I like to do." And I try to at least introduce them to something just like we talked about in the last podcast, is there are some other things maybe you want to do in your life as you get older, but at least maybe organize things in the systems in the business to make it as sellable as possible. So, if you ever want to call it quits, you can. I know for myself, I mean, assuming people still want to deal with you, and you have a viable business-

Speaker 1: Right.

Tony Mauro: ... maybe it's something you just work part-time, which I could seem myself doing is [crosstalk 00:06:39].

Speaker 1: You're the senior consultant at that point. Right?

Tony Mauro: Yeah. And the staff deals with as much as they want, maybe they're even buying you out, but you're working maybe 10, 15, 20 hours a week. I could see that. But people do tend to, especially as business owners, want to just keep working. Of course, we're all complaining right now, and you can pick on the millennials a little bit, but maybe they have it figured out and we don't, as far as, you can't find anybody that wants to work.

Speaker 1: No. It's still a problem.

Tony Mauro: And I hear it in the restaurant industry. I mean, every client I have is saying the same thing. It's like, "Where'd everybody go?" But I think people are, like you said, they're reevaluating what's important to them since this pandemic. Some of them have been forced to work from home, and figured that they could do that just as well, all kinds of things.

Speaker 1: Oh, yeah. We talked about this a few weeks back, but situations like my brother's, for example, who is closer to retirement. Right. He's in his early sixties, and his plan calls for him to make it to full retirement age before he activates social security. Right. So, having a structure in place, he needs to go a couple more years, but he's like, "Hey, the working from home has been amazing in a lot of ways," and of course with inflation. Right? He's saving on taxes because it was like a 40 minute commute, and that's what a lot of people have been seeing, so his thought changed to, "If they force me to go back to the office, I'm probably going to retire early."

Tony Mauro: Yeah.

Speaker 1: "But if they let me keep working from home, I'll continue to do this until I hit the goal that I have for myself." A lot of people find themselves in that spot.

Tony Mauro: They do. My admin office manager, Donna, has been with me ... This will be her ninth year, just turned 65 in October, and even though she has always told me, "Yeah. I'm going to go until seventy." She's kind of starting to say, "Hey, look, maybe two more years or so," and I want to, again, I want to live the last few years of my life with my grandkids."

Speaker 1: Right.

Tony Mauro: "And just do some other stuff."

Speaker 1: Yeah.

Tony Mauro: How can you blame her?

Speaker 1: You can't. To our point, right, so her values changed. Her value based-

Tony Mauro: Yeah.

Speaker 1: ... planning for her retirement has started to change a little bit. She's been enjoying the career, still enjoys the career, and probably will for a couple more years sounds like, but family is starting to creep back up in there.

Tony Mauro: [crosstalk 00:08:48] creep back in.

Speaker 1: Yeah. Everything shifts, maybe it's education, Tony. I know some people, and I'm sure you've come across some of those that education was not something in the family and they've made it their goal and their passion to make sure that every one of their heirs that comes along has money set aside for college. Right? It's been a hot topic, obviously. The last couple years we've gone to the fact that with the price of schools out of control, and maybe it's not for everybody, but there's still those folks who say, "Hey, I don't care. I want to make sure, Tony, when you're helping me with my plan, that my five grandkids all have money for college."

Tony Mauro: Yes. And I can relate that to many clients, myself included, who did not have the traditional college experience because my dad didn't save, didn't have the money, and you're working your way through college the hard way. I, from the day my son was born, had been saving for him, and was able to put him all the way through college, and he didn't have to pay for it. And now it's kind of flipped. My dad is now saying, "Hey, I want to put some money aside for the grandkids, so that when I go, they can use it for education, and whatnot"

Speaker 1: His values changed as well. Right?

Tony Mauro: Yeah. His values have changed. All of a sudden now he wants to do that, and he has that in place. We have that in place. I think, yeah, for many people, and yeah, we could beat up the educational thing for a long time.

Speaker 1: Sure. Yeah.

Tony Mauro: Is it worth it or not? And I think we have in the past, but nevertheless, it's something, and I think a lot of people do tend to look at it like they want to give something that maybe they didn't or couldn't have.

Speaker 1: Right. If it's important to you, and it's on your list, then hey, it's on your list. Right?

Tony Mauro: It's on the list.

Speaker 1: But just, let's not forget the final one. When you're talking about the values based planning, how you're structuring your retirement, how you're structuring your plan for retirement, where is fun on that list? Right?

Tony Mauro: Yeah.

Speaker 1: For some people, Tony, all the other stuff is not as high up as fun is, because dang it, they've worked for it. They've worked hard. They've had a long, hard career, or whatever the case is, and now it's our time. Right? That's the kind of the beautiful sentiment sometimes we talk about with retirement, "Hey, it's our time to not have to worry about family anymore, to not have to worry about career anymore, to not have to worry about education. It's our time to boogie." Right?

Tony Mauro: That's right. That's right.

Speaker 1: Nothing wrong with that.

Tony Mauro: There's other wrong with that. And, to me, fun ranks high. I mean, family and these other ones do too. For me, it's I want to have fun before the end. In other words, you were talking about George Carlin-

Speaker 1: Yeah.

Tony Mauro: ... earlier, that if you could live life in reverse and do all the fun stuff when you're young, when your body could take it, whereas-

Speaker 1: Right.

Tony Mauro: ... at the end-

Speaker 1: Right.

Tony Mauro: ... a lot of times our bodies can't really take it, so sometimes we work too long, we wait too long, and then fun isn't quite as fun anymore. I try to encourage clients to start taking and looking at it in their fifties, even though, yes, we're still on plan to retire at X, and do things, but you need to start having some fun now, and into retirement. But it definitely shouldn't be on the back burner, because why are we doing this and putting ourselves through this for 30, 40, 45 years-

Speaker 1: Yeah.

Tony Mauro: ... if you're not going to have some fun?

Speaker 1: Yeah, exactly. I'll share a little bit of this real fast, tony, if you don't mind.

Tony Mauro: Yeah.

Speaker 1: Since we talked about it on two episodes, in case folks don't want to look it up, I won't go through all of it because it's George Carlin, and he definitely has some not safe for work comments here.

Tony Mauro: Yeah.

Speaker 1: But he says, "In my next life, I want to live my life backwards. You start out dead, so you get that out of the way right off the bat."

Tony Mauro: Right. Right.

Speaker 1: "Then you wake up in an old folks' home, and you get to feeling a little bit better every day."

Tony Mauro: Yes.

Speaker 1: "They eventually kick you out for being too healthy. Then you go and you collect your pension, and you enjoy some things. Then, when you start to work, they give you a gold watch and a party on your very first day."

Tony Mauro: Yeah.

Speaker 1: Because you're going backwards. Right. So, "Then you work for the next 40 years until you're young enough to enjoy your retirement. You party, you drink alcohol, and you generally act out and act wild, and then well, you're ready for high school, and then you go to-"

Tony Mauro: Yeah.

Speaker 1: " ... primary school, then you become a kid, and you just play and have no responsibilities until you're a baby, and you go back."

Tony Mauro: That's right. I tell my wife, in retirement, I want to be a child again.

Speaker 1: Yeah.

Tony Mauro: Because they wake up every day, and just say, "What can we do fun today?"

Speaker 1: Exactly.

Tony Mauro: Again, all these other more important things we just talked about need to be planned for first, but hopefully once that's in place-

Speaker 1: Yep.

Tony Mauro: ... you are able to do some of that.

Speaker 1: Exactly. Well, that's our podcast this week, folks. What is your values, and how do they affect your planning, and why it might be essential? It's not always just the Xs and Os, the dollars and cents. Yes, we want to make sure we can fund our retirement, but we also want to fund it towards the things that mean something to us, family, faith, career, education, charitable giving, fun, whatever that list happens to be and in whatever order.

Speaker 1: If you've got questions and you need some help, as always, if you're not working with a financial professional, like Tony, make sure you reach out and have a conversation with him. If you enjoy the podcast, consider subscribing to us on whatever podcasting platform app you might be listening to, Apple, Google, Spotify, iHeart, Stitcher, so on and so forth. You can find it all at Tony's website as well as get a hold of him at yourplanningpros.com. That's yourplanningpros.com, maybe share the podcast with those who might enjoy the show as well and the content as well. So, feel free to consider doing that. And Tony, thanks for hanging out with me, my friend. I hope you wind up having a great Valentine's Day with your lovely Misses.

Tony Mauro: All right. You do the same. And we'll talk to you next time.

Speaker 1: We'll see you here in March on Plan with the Tax Man with Tony Mauro from Tax Doctor Inc.

Disclaimer: Securities offered through Avantax Investment ServicesSM. Member FINRA, S.I.P.C. Investment advisory services offered through Avantax Advisory Services. Insurance services offered through an Avantax affiliated insurance agency.

There are certain things in life we just can’t predict. If we knew the answers to some of these questions, planning for retirement would sure be a lot easier. So let’s see how you go about constructing a plan that addresses the kinds of questions to which you can’t possibly know the answers.

Important Links

Website: http://www.yourplanningpros.com

Call: 844-707-7381

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Transcript Of Today's Show:

Speaker 1: Hey everybody, welcome into the podcast. Thanks for hanging out with Tony and I here on Plan With The Tax Man. That's Tony Mauro, of course. He's the tax man. You can find him online at yourplanningpros.com. That's yourplanningpros.com. Maybe you came here through a newsletter or email blast or whatever the case might be. Make sure you check him out at the website, yourplanningpros.com. Don't forget to subscribe to the podcast, Plan With The Tax Man, on whatever platform you like to use. We got a fun show today. We're going to talk about planning for things that we cannot predict, how we go about doing that. We're going to get into that in just a second, but Tony, what's going on, buddy? How are you?

Tony Mauro: I'm fantastic. Very cold here in the Midwest right at the moment.

Speaker 1: A little chilly.

Tony Mauro: Yeah, a little chilly. Getting ready to start tax season. It's that time of year.

Speaker 1: It is. We are in early February. We're dropping this podcast. I imagine you were going to be ramping up here pretty quickly for the next couple of months. You stay busy and rocking and rolling. We'll get into this and knock it out today for you.

Speaker 1: Taxes is actually on my list. We're going to talk about that, so it's appropriate for planning for things that we can't predict, because, Tony, we all know, right, life is certainly unpredictable, Murphy's Law, whatever you want to kind of roll with. There's always something, the unknowns that just come out of nowhere. When it comes to retirement planning, I've joked with many advisors, and you and I, I think, have even talked about this. If we all came stamped with an expiration date, you could make the most awesome retirement plan, right?

Tony Mauro: That's right.

Speaker 1: If you knew when we were going to pass away, if we knew down to the minute, you could make a perfect plan. Well, but we don't know that. There's a lot of things we cannot predict for and account for. Let's talk about some of these. As an advisor, I talk to different people all across the country, and they all say the same thing a lot, that people will find out what they do for a living and they'll go, hey, when do you think the next market crash is going to be? Do you get that?

Tony Mauro: Yeah, I get it all the time. I've gotten it lately with kind of this rocky January that the market's kind of had, bouncing all over the place. Everybody's starting to ask is this the next 2008, 2009? Of course, my answer is, well to all these questions we're going to talk about is, I have no idea. I don't think anybody does, number one. I mean, there's a lot of news, a lot of people making money off of talking about it. But, I don't really think that they know for sure because, otherwise, they would have everybody beat.

Speaker 1: Sure.

Tony Mauro: It really is [crosstalk 00:02:24].

Speaker 1: There's indicators, right? I mean, we have market history, but I think that's the confusing thing about this one, Tony, is we're talking 12 years here of a bull run. I mean, yes, we've had some dips, but no prolonged downturn in over 12 years.

Tony Mauro: No. I mean, basically not. Just little dips here and there. It's had all kinds of [crosstalk 00:02:42].

Speaker 1: Toss the history out the window, right, because that's-

Tony Mauro: Toss that out.

Speaker 1: I think that's where it confuses people.

Tony Mauro: I think so. I think that the gist of it is people, for the most part, need to stay the course on what they're doing with their advisor and, you got to keep invested, of course, because that's the only way time is going to help you. If you're trying to time things... I mean, studies have been done. I think we've talked about it before. You miss the best so many days and what it does to your returns. I don't want to sound nonchalant about it and say it really doesn't matter, don't worry about it-

Speaker 1: But it should. In a way I'm like don't you want to be able to retire in any market, in any economy? Isn't that the goal?

Tony Mauro: I think so. I think you'd want to. That is the goal. I think that if you've got the good enough plan, then you're going to weather these types of things when they happen depending on where you're at and how close you are.

Speaker 1: Sure. That's the hiccup, right. That's the great unknown. I mean, if you were 57, 58, 59 in 2008, it was not good.

Tony Mauro: Not good.

Speaker 1: I mean, you didn't have time horizon. Now, if you were 50, it still wasn't great, but at least you had, maybe, let's say 17 years from 50 to 67 to recover. Well, we've had 12 years of a bull run since then, so you probably have recovered nicely from the '08, '09 down turn. It's time horizon. It's all these kinds of things, but you got to have a good strategy or plan to whether any market because if you live long enough in retirement, typically, Tony, what do we see, five years or so, and we have these ebbs and flows. It's typically a five year cycle, I guess they call it.

Tony Mauro: I mean, it mostly cycles five to seven years. You're going to see something, hopefully, if you're close to retirement right now, you've got your plan in place where it's more conservative, and it's not going to feel a lot of the effects if something prolonged happens for a length time. But, again, it goes back to you got to have the plan. Then, you got to monitor it. We've talked about it before.

Speaker 1: The key here... We're going to talk about this on things we can't predict is we're going to be living a little while, hopefully, in retirement, God willing. Therefore, you're going to see a number of things come and go, and you want to be able to weather those, whatever the case might be. When's the next market crash going to happen? Who knows? As the old joke with advisors go, nobody has a crystal ball, and if they do, it doesn't work.

Tony Mauro: It doesn't work.

Speaker 1: You got to just have a good strategy in place, and you do the best you can. Then you let that plan flow and adapt and change to what's happening in the world. Also, thinking about the market crash or any kind of market downturn, typically that's going to be your later money, hopefully, anyway. The way you've got a plan structured and set up is that's going to be your later money, which does give you some of that time to maybe recover. That's the first one on things we can't predict or planning for things we can't predict.

Speaker 1: The second one, Tony, is healthcare costs. Now these next three I have, just like the market one does have those indicators and that historical stuff, but that's kind of been out the window because it's been so crazy. Of course, the pandemic and the feeding of the government money has kind of changed all those parameters. These next three that I want to wrap up with, and I want to do for the podcast, I think there are some more tried and true indicators that say what may happen with these. But even so, you still want to have a good strategy. We're going to talk about that.

Speaker 1: Let's go to healthcare costs. What's it going to look like in the next 20 years? I think it's a safe bet, do you, to say they're going up? Everything's going up.

Tony Mauro: They're going up. Exactly. Everything. I mean, name something that goes down because I certainly don't know. I mean, there isn't isn't much even-

Speaker 1: Not my waist line, that's for sure.

Tony Mauro: I mean, even pre-pandemic, healthcare costs were high, and as we start living longer and many people are already there, it's got to be higher because they're just taken care of so long.

Speaker 1: Right. We're living longer.

Tony Mauro: We're just living longer and whatnot. I think in your own financial picture, I think you've got to not only budget for what you're currently paying, but add some in for these inevitable increases in your healthcare costs because not only the cost going up, but, obviously, the easy one is as you age, generally you need more care. The machine starts kind of breaking down a bit.

Speaker 1: I mean, it has to go up. We're living longer. The cost for everything are more exorbitant, right, and it's continuing to stay that way. Maybe we have some things that come into place, but I think the safe bet is... Here's the thing, Tony, we're talking general healthcare. We're not even talking about long-term care.

Tony Mauro: No. Just general.

Speaker 1: I just saw something. Every 65 seconds somebody is diagnosed with Alzheimer's in this country, every 65 seconds.

Tony Mauro: Yes.

Speaker 1: You know what I mean? That's really hefty care.

Tony Mauro: That's really hefty care. There's so many seniors that are starting to get diagnosed with that. My dad's real worried about that. He's 80, and it runs in his family.

Speaker 1: Okay.

Tony Mauro: Of course, he's all worried because at 80 you can't remember what you did when you were 30 even though you don't have Alzheimer's. He is funny to talk about, but many, many are very worried about that. If most are like him, they say they don't want to go in a home. They don't want that at all, but-

Speaker 1: So plan, start structuring, right, so that you can, hopefully, deal with that. That's the big miscommunication is it's not only the avoidance of it, but then think about what happens to the other person. If you're married and you do pass or you do go into long-term care first, it's often the second member of the family, the spouse that suffers. Whether it's the man or the woman that winds up with the long-term care event, the other person's retirement can be greatly altered if it depletes those funds.

Tony Mauro: We have an employee who works for us that that just happened about six months ago, and he had to quit because... He's not that old. He's 75 and his wife had starting going downhill. He finally had to put her into a home because she has such severe dementia. I mean, literally, within a year, it kind of turned his retirement really completely upside down. Now not only has he kind of lost his spouse because she doesn't know who he is and dealing with all of that is the financial burden.

Speaker 1: Sure.

Tony Mauro: From the old school, they didn't have long-term care, so they had to put her in a different unit. Long story short, it's just not good that, and so for the younger people out there, definitely start planning.

Speaker 1: Even if you're older. Don't keep waiting. Don't wait another day. What's the old saying, when's the best time to plant a tree, 20 years ago. When's the second best time, today.

Tony Mauro: Now.

Speaker 1: Do it right now. Okay. Healthcare costs, they're probably going up. Make sure you're addressing it. Don't do the ostrich thing. Don't put your head in the sand, and just not talk about it because that's certainly going to be a recipe for disaster a little later on.

Speaker 1: I mentioned taxes earlier, right, Tony. Obviously, this is your heavy tax season. You're getting started. Again, like I said, God-willing, we're going to live for a while in retirement, and we're going to see administrations come and go. What's the tax rates going to look like three presidents from now. Well, who the heck knows, but the indicators are pretty darn good that they have to go up here pretty soon. I certainly don't think anyone would be on the side of the fence saying, well, we might see them go down. I just don't think that's going to happen.

Tony Mauro: I don't think so either. Everybody loves low taxes. Who doesn't? Doesn't matter what political affiliation-

Speaker 1: It might get you in the office, but it can't stay that way.

Tony Mauro: It can't stay that way forever. If you really dig down into the numbers, the government, even lately with them spending so much money with the COVID... But before that, the previous administration, taxes are very low, people like that. But, frankly, the government can't pay for its own business that it runs. They do print money and do a lot of things. But, eventually, I got to think taxes have to go up. They try, as politicians, to kind of sneak them in, so it's not just what they call a tax hike because that doesn't win elections, I think. But it has to be done at some point. I think, for us, especially as we enter retirement, we have to make sure that we're taking that into account because Uncle Sam's got their hand out for a little bit of every dollar we take, and we have to make sure we're planning properly.

Speaker 1: Exactly. Well, think about this, Tony, and, obviously, you'd know this. I'll share this with our listeners. But, we have $30 trillion in debt. You go check out the debt clock, you can see we're $30 trillion.

Tony Mauro: Oh, yeah, the billboards.

Speaker 1: There's $40 trillion in retirement accounts out there. They got a big giant on those. We've seen a lot of changes already because Uncle Sam wants those tax dollars. A lot of that is in something like traditional 401ks or IRAs where it's been deferred, and they're waiting. They got their hand out, or they're going to start taking it. I don't want to be too inflammatory, but like the stretch IRA, for example. That rule change is kind of forcing us to pay that tax sooner than versus stretching that out.

Tony Mauro: That's right. That's the kind of things they do. Some of those types of strategies where that's not as mainstream as just coming on and saying we're raising taxes on everybody, sorry. We got to pay our bills. But, yeah, they try to eliminate stuff that they feel is too anti-tax or that defers them collecting, and that does affect us as investors. I think that, again, we got to keep our eye on that and plan properly.

Speaker 1: Well, and a tax professional, to your point, the rate that we're in right now, which is why so many people have been saying, hey, is a conversion right for me? Should I start moving some of this tax deferred money and paying the taxes now while I know what the rate is.

Tony Mauro: Generally, we've kind of been talking about that with a lot of clients over the last two, three years is possibly starting that and showing them the benefits of what that could look like. Of course, what it costs them in taxes now versus the long-term savings. A lot of times, it's quite a bit assuming that they're around and whatnot. But I got to think that with the traditional IRAs and the 401ks, so much money is there with that IOU to the government, they're licking their chops on that amongst other things.

Speaker 1: Strategize. Strategize about tax efficiency now, as well as even what you think you might be looking at, leaving it to heirs or whatever the case is. Again, we can't predict these things, Tony, but we can try to plan with knowledge that we have today and be as efficient as possible.

Tony Mauro: That's it. Keep monitoring, yep. That's what you got to do.

Speaker 1: Monitor ebb and flow. That is the case, for sure because, again, hopefully we're going to live long enough. We're going to go through some things. If they do nothing, the taxes will change in '26, they'll sunset, and they'll revert back to what they were during the Obama administration. If not, between now and then, something may get done. I mean, I saw California is considering trying to get something pushing through 15% as the state income tax, and we wonder why so many businesses and people are moving to places like Tennessee and Texas and Florida.

Tony Mauro: Exactly.

Speaker 1: 15%.

Tony Mauro: I was just out in California. I was out there for a conference, but visiting some wineries. Of course, the wine owners are complaining as Californians do. I always call them... They're farmers at heart, really.

Speaker 1: Sure.

Tony Mauro: The taxes are high out there. It's a lot to live.

Speaker 1: It's brutal.

Tony Mauro: Some of them even say once I retire and sell this, I'm going to move somewhere where the taxes aren't so high. I think you're right. High tax states, Iowa being one of them. Iowa's in the top 13, I think.

Speaker 1: Okay. Okay.

Tony Mauro: The government here right now is trying to reduce and eliminate the state tax because they want to try to keep people there. I don't know how we're going to pay for it, but-

Speaker 1: They'll try anyways. Of course, that, hopefully, attracts other people. I mean, because you think about that. Even in the current federal rate, let's say you're in that 22 or 24% tax bracket, and you're in California and they pass that. Well, now you're adding 15 onto your 24. Now you're at 39% for your state and federal. But then if the Feds do go up... Even if it sunsets, and you go back into that 28% tax bracket, right. Now you're at 28 and 15, right. I mean, now you're looking at what is that, 43%? I mean, that's hefty.

Speaker 1: I'll move on the next one here real quick. I saw an old episode of a Twilight Zone. Remember the old classic TV show, right?

Tony Mauro: Oh, yeah.

Speaker 1: It was an episode where a couple had a pawn shop, and they found a bottle and, of course, it wound up being a genie in the bottle. They asked for a million dollars, and they got the million dollars from the genie. They started giving some of the money away. They were super happy, people coming to pawn shop. Well, one of the people that came to the pawn shop was the IRS. The tax man came. He said you owe us $900,000. Well, this was a 1960. If you go back and look and you think, wow, $900,000 on a million dollars, that's 90%. Well, the tax rates were, at one point, 90%.

Tony Mauro: Yes, they were. If you go back and look at the charts, yep.

Speaker 1: Mind boggling. Basically, they lose all the money. They wind up getting this million dollars. Basically, they give it all away, or they give it to the taxes. They're left with five bucks because, typically, the Twilight Zone had some sort of moral, right?

Tony Mauro: Yeah.

Speaker 1: The genie says to him at the end, he says, well, you didn't ask for the money to be tax free.

Tony Mauro: That's right. That's a good one.

Speaker 1: So Roth conversions, these are why those conversations have been very popular right now is to start... It's not tax free, but the account is because you're paying the taxes now versus paying it later. Maybe that is right for you. That's a way that you can plan for things that we "can't predict".

Speaker 1: Final one, Tony, longevity. I just attended my uncle's funeral yesterday. He was 85. But, for the most part, the men in my family don't make it that long. My brother died at 57, my father at 63, my grandfather at 60. Typically, the males of my family don't live that long, so if I just go off of indicators in a family history, I don't think I'm going to see much past my late 60s or early 70s. However, I'm not planning financially for that because I don't want to be 85, and have no money.

Tony Mauro: Exactly. Exactly. I think, and we talk about this a lot with clients. I like to talk about it at a time, and it would be so nice as you said, in the beginning, if we all had a pink slip, and we knew when the end was, and how would we live our life?

Speaker 1: It would kind of suck. You have this stamp on because you'd feel like you're always under pressure to get something done. But, at the same time, it could be a heck of a motivator.

Tony Mauro: It could be a heck of a motivator unless it was tomorrow.

Speaker 1: True.

Tony Mauro: But, if you knew that, obviously, you'd probably live your life differently. You could plan exactly what you need to do. Obviously, we don't have that, and we need a plan anyway. But I think going back to even retirement, I think people don't look at it correctly. If the typical man lives to 80, let's say, and most of us are going to retire at 65-ish to 70, you're only really living less than maybe 20% of your life doing what you want on your terms, living the life the way you want, and the whole other 80 has been learning, working, and dealing with life-

Speaker 1: Growing, building, yeah.

Tony Mauro: ... and, boy, that's just reversed. It'd be so nice if it was the other way around. Somehow there's-

Speaker 1: There's a great quote from a great short story or short little thing from George Carlin, the legendary comedian who's since passed away, talked about when I come back, he says, I want to live my life in reverse.

Tony Mauro: In reverse.

Speaker 1: He goes through and kind of explains it out, and it's really kind of quite funny.

Tony Mauro: It is?

Speaker 1: Take a look. Look it up on online, if you'd like folks, but it's really pretty funny. But that's a great point. We have these family indicators, but they're not the be-all, end-all, especially with the technology. Like we said, we're living longer. Now the brain, if you go back to the long-term care, we're keeping the body healthier longer. We're still having some trouble figuring out the brain section so far. But, either way, you've got to plan because, again, also with the spouse component, Tony. Again, my male family history says I might pass away early. Well, if I go blowing all the money, or my wife and I go hog wild, and then I'm wrong, or even if I'm right, I've left her with nothing.

Tony Mauro: Right. I think that goes back to not only planning with your advisor, but also planning with your spouse and your loved ones about what's going to happen should these things come about. I know my wife and I both have a life book. We talk about it a lot. If something happens to one of us, what the other one's going to do to keep them going and whatnot. But, I don't think most people that I talk to give any thought to that, outliving the life expectancies even though maybe the indicators show otherwise. I'm finding a lot of people seem that you ask them, well, when's it time to call it quits, and they just say, well, I don't know.

Speaker 1: I don't know.

Tony Mauro: Well, have you ever thought about that? It's a deep subject, and you can get into a lot of different avenues with it. But I just think people need to start taking a look.

Speaker 1: At least penciling it in, start thinking about... because a lot of us wind up, sometimes we just are reactionary through life versus proactive. We just kind of react to the things that are happening to us versus planning ahead and planning is tough.

Speaker 1: Sometimes as humans, we, because best laid plans, right, a lot of times they go awry. But, when it comes to your retirement and things of that nature, we've got to, at least, get some of these things and some of these structures in place to help mitigate and make things easier. Of course, that's why you that's why you have a career. That's why you do what you do. Folks, if you've got some questions on how to plan for things that you can't quite predict, well, there are ways to still strategize.

Speaker 1: Make sure that you reach out to Tony. Have a conversation if you find yourself in this kind of area right now, and you're thinking about a lot of things with life. Stop by the website, yourplanningpros.com. That's yourplanningpros.com to have a conversation and a consultation. You can get on the calendar that way. You can subscribe to the podcast through the website as well, whatever platform you like to use, Apple, Google, Spotify, so on and so forth, Plan with the Tax Man. Of course, Tony's been doing this for 20 plus years. He's an EA and a CFP, so a great resource for you to tap in.

Speaker 1: Tony, thanks for hanging out. We went a little along today, so I'll wrap it on up. But thanks for spending some time with me today.

Tony Mauro: All right. You bet. We'll talk to you next time.

Speaker 1: We'll see you next time. It's going to be a little after Valentine's Day. We're dropping this one about a week or so before the Superbowl, so if you're a football fan, enjoy that. We'll catch you in a couple of weeks here on Plan with the Tax Man.

Disclaimer: Securities offered through Avantax Investment ServicesSM. Member FINRA, S.I.P.C. Investment advisory services offered through Avantax Advisory Services. Insurance services offered through an Avantax affiliated insurance agency.

In football, teams are extra careful not to make a mistake when they get within about 20 yards of scoring points (known as the Red Zone). They’ve typically worked hard to get to that point and don’t want to cost themselves by throwing an interception or fumbling the ball and giving it to the other team. On this episode, we’ll explore the financial equivalent of the Red Zone and discuss how you can really mess things up if you’re not careful during this phase of your life. If you’re approaching retirement, this is a fundamental conversation you won’t want to miss.

Important Links

Forbes Article: https://bit.ly/3G2lCo9

Website: http://www.yourplanningpros.com

Call: 844-707-7381

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Transcript Of Today's Show:

Marc Killian: Hey, everybody. Welcome back in to Plan With The Tax Man. Thanks for hanging out with Tony Mauro and myself here on the podcast as we talk investing, finance, and retirement and not fumbling the retirement in the financial red zone. It is the playoffs, we are into late January here, closing in on super bowl time if you were a fan of football. And even if you're not, you may have heard the term, the financial red zone before. But we're going to do a little analogy here and a little conversation about not fumbling our retirement, because it's that time, right? When we're getting close to it, where everything is heightened. If you're a football fan, you certainly know what that means. And we're going to explain some more of that in just a second, but Tony, what's going on my friend? How you doing?

Tony Mauro: I'm doing good. Getting ready for the super bowl myself a little bit, and I don't do much for it, but I always sit around and watch it and use it as an excuse-

Marc Killian: To eat.

Tony Mauro: Have chips, to eat, yeah. And do a little bit of something.

Marc Killian: That's right, it's a great excuse to sit there and have some nachos or whatever the case might be. Hey, what is the financial red zone? Because the football red zone is the 20 yard line to the goal post, right? So what's the financial red zone? What's the equivalent there?

Tony Mauro: Well, the equivalent is probably the last 10 to 12 years before you retire and then the first five to 10 after you retire. So it really is, acquainting it to football, is you're really focused like on the football game, they're in focus once they're inside the 20 of course, getting in to the end zone. And same way with the retirement planning is, 10 years out you really start to need to look at some things, start really doing some planning because it's coming and it's going to come fast. And so you want to get your plan set up and then as you ease into it, once you cross the goal line, you want to make sure that as you get started, get used to this new way of life and how things are going to go in the first few years of retirement. So that's generally what we talk about when we talk about that.

Marc Killian: Okay. So we'll say the 10 years before, the 10 years after, right? Kind of that crucial period. And if you think about from the football analogy, when you get inside the 20 yard line with a team, it's typically harder to score, right? The field is condensed, the defense is tightened up. It gets harder to kind of, again, kind of punch the ball in. And so if you think about this from a retirement standpoint Tony, people need to pay attention once they get to this point in life because it gets harder and everything is magnified, right? At this point, making a mistake is not something you want to do. If you were let's say 50 in 2008 and nine, right? And you lost 50% with the great turn down there that we had with the housing bubble. '08, '09 and you were 50, it sucked, right? I mean obviously if you lost 50%, it stung pretty good. But now we're 12 years past that and 12 years into this kind of bull run, if you lost 50% in another downturn, well now you're 60.

Tony Mauro: Exactly.

Marc Killian: Now it really stings.

Tony Mauro: Now you really don't have time on your side.

Marc Killian: You do not have the time. Right.

Tony Mauro: And it's going to be, it will affect your retirement greatly if you, at this point... And the markets continue to do very well, but everybody knows that at some point we're going to have some kind of downturn, we don't know how severe it'll be. But you certainly don't want to end up at, yeah, between 60, 65, I say even 55.

Marc Killian: Oh, absolutely, yeah.

Tony Mauro: Really taking that kind of hit. Not that you should not be in equities or anything like that at all, it really should be starting to plan though for the end and pay attention, be more conservative with that end goal in mind. Because yeah, you won't be able to make it up.

Marc Killian: The time is just not there. Yeah.

Tony Mauro: And I think a lot of people, they don't understand, if you have a $100,000 and you lose 50%, if you make 50% the next year, you do not get back to $100,000.

Marc Killian: Right. You're not at a hundred grand again.

Tony Mauro: You're not at a hundred. So you got to even have more then. And how many times has the market returned 50% in one to two years, or three years? It doesn't happen that fast.

Marc Killian: No.

Tony Mauro: So that's why we say you really got to pay attention and you've got to make sure you're working with your advisor on your portfolio or whatever your plan is to make sure that, that doesn't happen to you.

Marc Killian: Yeah. So you're kind of thinking about it, we'll stay with this football analogy. So if you're in pretty good shape and you're closing in on retirement, you're into this financial red zone, the market, again, Tony over the last little bit, it's enticing, right? I mean, it's been turn, it has been turning. '21 had some amazing returns, right? And so, their predictions are, they're not too bad for '22, they seem to think it's still going to be fairly up. Who knows? It's all predictions, it's just speculation.

Marc Killian: But the point is, it becomes enticing and if you're in good shape, maybe it's time to look at taking the victory formation, right? In football, when they've got kind of the game one and the team's back on offense, they start taking a need to run out the clock. Right? Because they're not risking a pass or a fumble and turning the ball back over to the other team. Same kind of thing, if you're in pretty good retirement shape, to your point, you want to still have something in equities. You still want to outpace inflation, but maybe it's time to pull some of that off the table and re-look at the allocation and how much you have at risk.

Tony Mauro: Yeah. And I think that's one of the biggest mistakes most people make is, they take too much risk number one, and like you say, it's especially enticing in this kind of market. I hear a lot, I just heard it, I was in a class last night and these people were a little bit younger, but it was funny to hear them talk. They're talking about day trading and cryptocurrencies and all this stuff and one guy said, and he might be right, that he bought a Tesla and he bought Tesla stock and he said that he made enough money to pay for his car. And I'm thinking, wow, well that's probably great if you really did that, but nobody ever talks about all the money that they lose day trading and this cryptocurrency.

Tony Mauro: And I'm sure if we opened up the mic or the phone lines, we would get a lot of people that say that they've made a lot of money in cryptocurrency, but it's not a place where you want to be in my opinion, closing in on retirement, because that is chalk full of risk. Very difficult to understand. And that's just one area, but going back to my point of taking too much risk, it's all over the place of people making money doing this or that. And it's enticing that, Hey, well maybe I should just try that.

Marc Killian: Right. Because we all suffer from FOMO, fear of missing out. Right? We don't-

Tony Mauro: Missing out, yeah.

Marc Killian: I want get in on some of that or so on and so forth. And that's okay Tony, we've talked about that before on the podcast. Hey, look, if you're in a pretty good spot for retirement and you've got a good sound plan, you're working with Tony or you got a good strategy or whatever the case is, and you want to have some of that play money. I mean, almost think of it like Vegas. Right? If you want to have some of that speculative money that you want to dip into crypto, or you want to dip into some emerging kind of technology thing or something cool, just don't risk the retirement. Plus, the spouse might not be happy about that.

Tony Mauro: Exactly.

Marc Killian: If you mortgage the farm so to speak, right?

Tony Mauro: Right, right. And yeah, there's nothing wrong with that. And most advisors though are not probably going to recommend that, but, and most, and if you're like me, I would say, you know what? That's fine, you go out and you do that, but you're kind of on your own there. And in fact, I know enough about the crypto for tax purposes, but boy, I have not, as an advisor, really done a lot of education, educating myself on, for me it's, I don't know, maybe call me old school now. I just, I'm not into it. But I'm not saying-

Marc Killian: It's still the wild west right now, that's for sure.

Tony Mauro: Yeah. It couldn't be good, but... I just think you got to be, like I say, you got to be careful and really make sure you're understanding that. But the other thing too is, in this red zone or when we think we're in it, another mistake I see is people don't have a plan. They have a masked money and they know they want to retire at some point, but then they, that's it, they say, well, I think I'm good.

Marc Killian: We have a collection of stuff.

Tony Mauro: Yeah. I think you got to, in this red zone, you got to start planning and understand what life's going to look like when you finally say enough is enough.

Marc Killian: Well, I think a big question that people, and tell me if I'm wrong here, Tony, because obviously you're the professional, you're the advisor. But the big question I think people have often is, well, I do have all this stuff, but I don't know how to do, like how do I activate it? Kind of like, how do I turn this, I have money in these accounts, but how do I turn them into the income streams that I do need? And again, our demographic is primarily 50 plus. So that's when we're starting to think about these things and that's so obviously the red zone.

Tony Mauro: Yeah. And a lot of people, they don't even know how to call whomever has the money and say, "I need some money."

Marc Killian: Right, right. Yeah.

Tony Mauro: And a lot of them come and say, "Well, obviously I got to have money every month to pay my bills, how do I set that up?" And so that I've got basically an income coming in, just like I did when I was working that I pay my bills and then I've got a little extra to do what I want to do with. So there is just some logistical things there. And of course with today's technology, the good news is you work with your advisor, everything can be set up and you have it teed into your account, which makes it very nice. But it is a process and if you haven't been paying attention other than, well, I know I have this money, but I have no idea how to access it, that's, something you need to talk about.

Marc Killian: Well, so for those that are paying attention and being proactive, why is retirement planning a little bit easier once you do get to the red zone? Give me a couple of bullet points here.

Tony Mauro: Well, the first thing is, you probably, like me, you have a retirement agent in mind, at least in mind, that that's when you're going to call it.

Marc Killian: You kind of penciled it in, right?

Tony Mauro: Yeah. And if things go the way you want between now and then and you've done some projections, that's what you're going to call good. You've also done an enough planning where you know, or at least have projected your income streams from whatever source, could be social security, your 401ks, pensions, and and savings that your income streams are going to be X and so you feel pretty good about that. You've got enough money to live on and do what you want to do. More than likely, you're probably not going to have any or very little debt, so that's a great place to be as well. It takes all the pressure off of not having to be under that and pay bills, those bills every day. And most of us that are kind of in this red zone that have done any planning, you kind of know what you want to do with your life. I mean, I think I know what I want to do right now.

Marc Killian: Yeah, that's a big one right now.

Tony Mauro: [crosstalk 00:10:38]... 15 years out.

Marc Killian: How many people come in, don't know. Right? They're just like, "Yeah, well we're going to retire Tony, but then what?"

Tony Mauro: Right.

Marc Killian: Yeah.

Tony Mauro: Yeah. And obviously that does change as you get a little older and of course health dictates some of that. But you at least you've got to have something, all of this is subject to change, but [crosstalk 00:10:55].

Marc Killian: Sure, and that's the fun part too.

Tony Mauro: Yeah.

Marc Killian: But having at least a rough structure, and we've done podcasts on that in the past too folks. So definitely by subscribing and getting the episodes as they come out, you can also go check out past episodes on Tony's website at yourplanningpros.com. But with Tony, we've talked about having some goals in mind in retirement, and that's really important to definitely strategize with in the red zone. I think wine and golf is on your list, right?

Tony Mauro: That's on my list, but I'd like to travel to do that.

Marc Killian: Yeah. You love to do that. Yeah.

Tony Mauro: So that's kind of what we're thinking is, traveling even more, and especially in the early years of retirement.

Marc Killian: And that costs.

Tony Mauro: Doing some of those things on the culinary side, and then golf if I could still swing. And I like to hike, so I like to be out west and be outside, see that sun and those rocks and mountains and whatnot. But everybody's different, but at least I've got something in mind.

Marc Killian: Right. Yeah. But it does cost money. Retirement, as we said on the prior podcast, free time is not free.

Tony Mauro: No, not free.

Marc Killian: Because you typically find something to do. I mean, hiking, you go, well, Hey, hiking's free Marc. It's like, well, yeah, but staying at a hotel someplace where you're at or camping or paying camp, ground fees, I mean, there's always something, right? There's always some kind of cost. So when you get to the red zone, you got to have a plan in mind. And again, if you are kind of proactive and paying attention, you probably have some of those things already checked off that Tony and I discussed. But if you don't, that's the beauty of working with an advisor, is they're going to help you walk through this stuff. And even the daydreaming part, they're going to kind of help you with.

Tony Mauro: That's right. And that's the funnest part. It's the funnest part for me when we, we set the numbers aside and just talk about, well, what do you want to do? And just kind of chit chat about that and kind of go down different roads and have some fun with it because the way I look at it and again, personal opinion, but you've worked for what? 30, 40, maybe a little longer years. And if you're lucky enough to have your health and whatnot, shouldn't you want to have a little, what everybody wants at retirement? The goal at the end of the rainbow is have all this free time and do what you want for one thing in life. I always tell my staff, I want to be a child again, wake up and say, "what am I going to do fun today?" And not a lot of worries, but there's no guarantee that's going to happen. But if you don't plan, you're almost surely not going to have the retirement you're looking for.

Marc Killian: Yeah. Yeah. I want to be a child again, but I don't want to have to eat my Brussels sprouts, I'm just saying.

Tony Mauro: Right. You don't want to do that. Well, you do what you want.

Marc Killian: There you go. Well, that's our fumbling in then the red zone conversation here, the financial red zone. Don't fumble your retirement, make sure that you are working with a qualified professional who can help you with a lot of the X's and O's to stay with that football analogy. Because look, DIY process has been very popular in the last few years, it's so much easier. We've done shows on that, we've talked before in the past. It's a lot easier to grow the wealth and to build it up than it is to understand how to preserve it and distribute it throughout retirement, throughout those golden years. So there's a lot of little moving parts.

Marc Killian: So make sure you're doing yourself and your retirement a favor and having the conversations that you need to have with a qualified professional, like Tony Mauro, his team, Tony's an EA and a CFP with 20 plus years experience. So a great resource for you to tap into if you're not already. And course you can find all the information, you could subscribe to the podcast, you can learn more about Tony and his team. You can schedule some time at yourplanningpros.com. That's yourplanningpros.com to talk with Tony Mauro and the team at Tax Doctor Inc. Tony, thanks for hanging out with me, my friend. I appreciate it.

Tony Mauro: All right. well talk to you on the next one.

Marc Killian: Yeah, we'll be back soon. And in February, we'll probably be talking about Valentine's day and finance as well. So it'll be that time of the year. The year is already off and trucking. So we'll see you next time here on Plan With The Tax Man.

Disclaimer: Securities offered through Avantax Investment ServicesSM. Member FINRA, S.I.P.C. Investment advisory services offered through Avantax Advisory Services. Insurance services offered through an Avantax affiliated insurance agency.

Droves of workers are retiring early or taking a break from work as they change career paths. It’s become known as The Great Resignation. On this episode, we’ll highlight some of the key takeaways of a recent Forbes article and explore a lot of the impacts on retirement planning from across different age groups in the wake of this massive workplace shift that’s underway.

Important Links

Forbes Article: https://bit.ly/3G2lCo9

Website: http://www.yourplanningpros.com

Call: 844-707-7381

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Transcript Of Today's Show:

Marc Killian: Hey everybody, welcome back to Plan With The Tax Man. Thanks for tuning into the podcast as we talk investing, finance, and retirement. We are into the new year and Tony and I are back to do more podcasts, and this first one is going to be about the great resignation. I don't know if you've heard this term or not, but how it might impact you or a loved one's retirement. It has been all the conversation here the last couple of weeks, the great resignation. So we're going to get into that with Tony. What's going on, my friend? How are you doing?

Tony Mauro: Doing good. Fresh back from the holidays and feeling pretty good. Had a great holiday along with my family, and so hopefully everybody had the same. It was a lot of issues if you were traveling and, and everything else going on, but hopefully everybody got to have some fun.

Marc Killian: Yeah. We were chatting, a little bit of a bug going around. I got a head cold on New Year's Eve. So not that I had any big plans or anything, but I was like, "Well, I'm not going anywhere."

Tony Mauro: Yeah. That's actually when mine started.

Marc Killian: Oh, was it? That's funny.

Tony Mauro: I was under the weather, yeah.

Marc Killian: Yeah, a little bug going around. But hey, we're doing our thing, we're hanging in there, we're getting stuff done. And this is episode number 57, so we are on our 57th podcast. So we're not quite yet eligible to withdraw from those accounts early at 59 and a half. The podcast is not old enough for that yet, but it's getting there. So hey, listen, have you heard about this or have you been talking with clients about this great resignation? Droves of workers are retiring earlier, taking a break from changing their career paths. Obviously the last two years, all this COVID stuff has changed people's perspectives. It's put all kinds of different things in play. And so on this episode, we're going to talk about some of the stuff from this Forbes article, and we'll put a link to it as well for folks, if they want to check that out. But really kind of talking about the impacts that it has on the retirement planning world across different age groups. Have you had people come to you, Tony, and say, "You know what? I'm done. I'm out. What can we do?"

Tony Mauro: We've had it both from tax clients just coming and telling us that as employees, and then of course on the accounting client side that we service as our clients, we've been talking about it for about a year and a half, that they just cannot find employees. And they've got plenty of work to be done, and it's going on all over. It's going on in my own industry on the accounting side. We talk about it at every association meeting, trying to find good qualified people. And it isn't like people are interviewing and can't find people, it's just, there's nobody to interview.

Marc Killian: Yeah. It kind of started out, we were all seeing the stories and realized it was happening with some of like the lower-paying industries, fast food jobs, things of that nature. People were like, "Hey, I'm not going to kill myself for this kind of pay." Especially when everybody's ordering food, picking up at drive-throughs, because no one's going into restaurants and all that kind of stuff. But lately it's been of all kinds of industries and all kinds of age groups, not just the lower paying stuff. To the point here, I got a couple of key points, Tony, 4.2 million people quit their jobs in October of '21. I mean 4.2 million people. They didn't get fired. They didn't get downsized. They quit.

Tony Mauro: They quit. Yeah.

Marc Killian: Now it's unknown also how long people are going to stay out, so if you choose to walk away, there's some big takeaways that could impact your retirement planning or things of that nature. There's even people in their forties, early fifties that are like, "Hey, you know what? I can't take it anymore," or, "I'm afraid to go to work," or whatever the kind of mentality is. And so let's look at some impacts, some takeaways to think about if you are stepping away from a job for any length of time, think about some of the other things that this could do to you. So for example, social security, Tony. Talk to me a little bit about taking a break from paying in, what that does to your long term benefits.

Tony Mauro: Well, and I'll address that in just a second. Kind of going back to what, what we're seeing, I think some of it, and this is all personal opinion. Some of it is like you said, people, when they were home, they have reconfigured their personal lives somewhat and either expenses, things like that. And figured out, "Well, maybe I don't need to work as much and I'm surviving." But I think a lot of them haven't looked at what we're going to talk about here, and it's the big picture.

Marc Killian: And it got good to a lot of us too, which is understandable, right? I mean, my brother's 63, so we're talking about social security. He didn't want to turn it on at 62. His plan calls to wait until 67, but he's sitting there saying, "If my job tells me I have to go back to the office and drive again," because it would be an hour drive for him, he's like, "I think I'm going to be done." But he's like, "But if I can stay working from home, I'll do it."

Tony Mauro: Yes. And that's the other big buzzword, is remote work. And we, even in my own company, we've always wanted to offer that, but it has accelerated that as a benefit. And we kind of pivoted a couple years ago, and we're going to continue on. I just sent out a video yesterday about the tax season coming up, the days of in-person appointments are kind of over for at least our firm. Because we found that we can work more efficiently and produce the same type of product for that particular thing.

Tony Mauro: But anyway, that's getting down in the weeds. But back to the social security, really if people are going to start taking off from their job, obviously when they're not working, you're not paying into social security. Now, if this is just going to be a short term thing, it's not going to be that bad, but you should talk to your advisor about how it's going to impact social security benefits, and how long you're thinking about maybe being out of the workforce. Because eventually it's going to impact your average 35 highest earning years if you stay out for a while. It could, anyway.

Marc Killian: Right. And a lot of people don't realize that, right, Tony? It's an average look at your highest 35 earning years. And if you're in your fifties or late fifties, and maybe you're in my brother's situation or something like that, you could be in your peak earning years. You could be affecting those numbers big time.

Tony Mauro: You could, because that's when most of us are earning the most, is 50-plus where you finally got to that point. And so granted, social security is not the end all, I understand that.

Marc Killian: Right. But it is sizeable.

Tony Mauro: But it is something. And so you want to make sure that you understand that before you go making a I'm done forever type of decision, in my opinion.

Marc Killian: Yeah. Even walking away for six months or a year, I mean, maybe it wouldn't make a huge impact, but again, it could. If you step away from work for, let's say a year or two, think about the ladies a lot of times. Early on in life, if they step away for a number of years to have the children and raise the children, maybe stay at home for the first 6, 7, 8 years of their life, which is one of the reasons why we see often that women don't have the same. There's also the pay gap, which has been getting better, but at the same time, they step away from the workforce. And so when it comes to retirement age, the numbers are not the same from social security as it would be for their male counterpart.

Tony Mauro: Yeah. That's exactly right. And in today's world, when we have the software and social security's website doesn't do a bad job, but there's additional software out there that you can kind of go in. If you've got your social security statement of your earnings and things, and you can go out and get those from Social Security Administration. You can kind of calculate, if I step away for a year or two, how that's going to affect my benefit and whatnot. And so I would urge you to go take a look at that before you decide for a long period to step away.

Marc Killian: Yeah, good point. Takeaway number two from this article, Tony, was the 401k. It's not just a rainy day fund, right? It's for retirement. And so talk to me about a couple of bullet points or some key points as to maybe using this as your stop gap, if you were transitioning for a little while or something like that, what it might be doing to you.

Tony Mauro: Well, and we saw it a lot last tax season, and I would agree. I know you gave me the stat, about 30% of the people who have at least $50,000 in their 401ks, took out money in 2020.

Marc Killian: Yeah, took out a loan against it.

Tony Mauro: Either a loan or withdrawals, and I would agree with that. We, we saw at least that percentage of our tax clientele. And so I would say that's fairly accurate, probably across the nation. And you definitely, if you're going to step away for a length of time, you don't want to use the 401k as your I'm going to live off of fund. Because otherwise, again, it's going to affect your overall plan, and you're going to get to 65 or whenever you think you're going to retire. And all of a sudden now all these numbers that you may have planned on are going to be drastically different. And so again, that goes back to, I think you need to meet with your advisor if you're going to talk about using that as your living fund. Because if you do, I think your retirement's going to be affected pretty much [crosstalk 00:08:52].

Marc Killian: So what are some of the negative kind of impacts to that? So if you take money from your 401k, obviously if you're under the appropriate age, if let's say you're in your early fifties, you're paying the tax, you're paying the penalty to get to this stuff. But you're also losing the compounding over, let's say another 15 years, right?

Tony Mauro: Right.

Marc Killian: That's the real damage.

Tony Mauro: That's the real damage. Yeah. In our annual tax-only type clients, I would say probably somewhere north of 35%. We see it every year, where they're withdrawing money out of their 401k and they're still working. And these aren't even loans. These are just, "Well, I needed the money."

Marc Killian: Oh, wow. Okay.

Tony Mauro: So they don't realize. So on top of that, they sometimes get a a very stingy or stinging tax bill, and they're mad about that. And then on top of that though, the bigger picture, like you said, they don't realize every time you're pulling money out, you're pulling money out and you're losing time to make that up because you're getting older. And so we try to educate them a little bit on that and tell them, "This is not a rainy day fund. This is supposedly for your retirement," obviously, but I think it goes back. What I see with most that do this is their personal financial plan is not in a good spot, meaning they don't have an emergency fund. They don't have a fund for spending and they just use this like that. And I don't think that's a good thing.

Marc Killian: Yeah, definitely. So again, just be careful with this. It's not the rainy day fund. Now, speaking of the 401k, Tony, if you are going to step away, if you are walking away from one job, maybe you take a little while off, then you go to another one. Or because there's so many jobs available, maybe you kind of take your time, you're head hunted, whatever the case might be. Take that 401k with you. Don't leave that joker behind.

Tony Mauro: So as I was saying before, taking the 401k with you could be a good idea. I would definitely though, take a look, because sometimes fees are a little higher if you leave it there. Sometimes they're not, but it's worth an ask because you definitely don't want to necessarily do that. The other thing is most 401ks, obviously if you go to an employer with a 401k, it's a fairly easy process to transfer it. So once you have all the facts, you can get that stuff going.

Tony Mauro: But the other thing you got to watch though, is if you do some potential company matches in your 401k and you're not fully vested, you need to know how much you potentially could be leaving on the table there if you leave before it's vested. And so it's a good idea to research that before, if you've got a significant balance, of course, right before you leave or something like that. But they are portable. You can take them with you. A lot of companies will allow you to leave them there. I think a lot of our clients don't like the fact that they may have six or seven of these floating around and they kind of lose track, over employers over the years and they try to consolidate them.

Marc Killian: Yeah. I mean, we've talked about that before, right? Not leaving those behind. There's lots of reasons, the fees, you've got more options and so on and so forth. And if you are changing, you can roll that over custodian to custodian and not have to worry about any kind of taxable events. So if you've got the old one behind, just talk with your advisor or work with the program to get that switched over. As long as you're not basically putting your hands on the money, you're good to go. You're just transferring and not making an taxable event.

Tony Mauro: That's right.

Marc Killian: Okay. And then the fourth kind of takeaway from this Tony, and then we'll wrap up, is obviously this great resignation seems to be, and the working from home thing, it seems to be kind of tailor made for those early retirement dreamers. But just a couple things to be aware of, a couple of bullet points we've got here. Just kind of want you to address those a little bit.

Marc Killian: Because again, if you are of a certain age, let's say you are 55-ish or up and you're thinking about, "The job's going to make me go back and this office building is full of people and I don't want to be around people." And you've got some paranoia or you've got some health concerns, or you've got some whatever you want to put to it, or like my brother, you just don't want to drive anymore. Whatever the case is, if you're thinking about pulling on the trigger early, beware of a couple of key points that it's going to cost you. So just look at some of these things. So give us some of these big bullet points here, Tony, as to why you want to kind of keep an eye on this, if you decide to leave early.

Tony Mauro: Sure. It's really for the people that are, I would say below 59 and a half, for sure, and we have a lot of them. And I'm 54, going to be 55 coming up in June, so yeah. You start kind of thinking about it a little bit, but the first thing is of course, if you're my age or somewhere in between here, you can't qualify for social security. So that payment is not going to be there for you yet. And in my case, I'll relate it to my case, I have my health insurance coverage through my wife's work. Now I would still be able to be covered, but you may not be able to, to have that. If you decide to quit and you're carrying the coverage and you don't have it anywhere else, you're going to have a real issue there. And healthcare is extremely expensive, or healthcare coverage is, out on the open market. And so you're going to have to think about that because that's a big one.

Marc Killian: Yeah. And that's 65 and under, right? Because you're not going to get-

Tony Mauro: 65 and under, yeah. Because you can't get on Medicare. And so that, I think by itself may be a hindrance, on top of everything else. But then there, you've got some tax issues, some potential tax issues with some tax efficiencies. I mean, if you decide to get out of the workforce, obviously your tax rate could potentially go down. But you're going to have to take a look at that with your tax person, just to see if there's going to be any odd thing, especially if you're going to take money out of a 401k or something like that. You definitely want to understand what the tax ramifications are going to be.

Tony Mauro: And I think the last one that that's probably as equal as healthcare really is, how are you going to survive? In other words, how you going to replace this income from this gap you're that going to have?

Marc Killian: Right. Exactly, yeah. Kind of a big one, right?

Tony Mauro: [crosstalk 00:14:57] that's coming in.

Marc Killian: Yeah. It's like, "Hmm. I got to keep the lights on, what am I doing here?" And obviously we've hopefully saved, and that's back to the point of some of these different accounts, but that totally changes the structure of what you're planning to do, Tony. Because you you've now added the longevity multiplier into this thing, because maybe your plan all along was to retire at 65 or 67 or whatever. And you've stress tested this joker out for 30 years. Well now, you know what? You're pulling the trigger at 55 because of this great resignation, you've just added another almost decade to that. That could cause some big wrinkles.

Tony Mauro: Cause some big wrinkles, and more than likely, if your health is at all good, you're going to want to get out and do things in this decade. So your monthly expenses could actually go up. And that's what I've thought about is, I still want to personally keep going, keep investing, keep working so that I can hit my mark at the age that I want, but it's well after retirement. But the allure is there, though. Thinking about, hey, if I could survive. But I can't tell you how many people tell me, "Yeah, I've retired. I just want to survive". And I guess it depends on where you fall in that. For me, I want to do a little more than just exist, but that is an option. But obviously like you said, if you have your investments and your plan in line and you've stress tested this, you've got to add a whole nother 10 years on this thing, so you better double check the calculations.

Marc Killian: Yeah. More free time, it's not free.

Tony Mauro: It's not free. No.

Marc Killian: Doing nothing, I guess is free, but more free time is not free. Because we tend to just want to go out and do things. Or even if again, if you're back to some of these COVID concerns, you're still going to want to do something. You're going to take up a hobby. You have to, right? I mean, your brain is going to require it. Your body is going to require that you can't just sit and be a couch tater. So you definitely want to make sure that you're thinking about some of these key takeaways when it comes to the great resignation, this mass Exodus we've seen over the last six months of people leaving their job voluntarily. Some of it also non-voluntarily, the downsizing and things of that nature, whatever.

Marc Killian: But however you kind of fit or fall into this category, if you have some questions or you want to make sure that your plan is there and is going to be stout and you want to stress test it for whatever your situation might be, that's why it's a good idea to get with a qualified professional like Tony and his team at Tax Doctor Inc. Because you can go through the planning process and you can say, "Okay, here's what happens if we this. And here's what could happen if we that," and so on and so forth. You can look at the social security scenarios from one spouse to two and different things of that nature. So all of these things are available, but you got to take the action and have the time, do it. So if you're not working with Tony already, consider stopping by the website and checking him out at yourplanningpros.com. That's yourplanningpros.com. If you've got questions or concerns, get onto his calendar.

Marc Killian: Subscribe to the podcast. It's complimentary to do that. Obviously it doesn't cost anything to join up with podcasts. You can find it on all of your favorite podcasting apps, whichever ones you might use, like Apple, Google, Spotify, whatever. Typically those are already pre-installed on your phone nowadays. If you're an Apple user, for example, it's already on there. Apple Podcasts, just type in Plan With The Tax Man in the search box on the podcasting app and you'll find it that way. But again, you could find it all at yourplanningpros.com. That's yourplanningpros.com. Tony, thanks for hanging out with me, my friend. I hope you get to feeling better soon and I'll talk to you in a couple of weeks.

Tony Mauro: All right. Sounds good. Take care.

Marc Killian: We'll catch you next time here on Plan With The Tax Man, with Tony Mauro from Tax Doctor Inc.

Disclaimer: Securities offered through Avantax Investment ServicesSM. Member FINRA, S.I.P.C. Investment advisory services offered through Avantax Advisory Services. Insurance services offered through an Avantax affiliated insurance agency.

We see a lot of people who aren’t getting the kind of advice and service from their financial advisor that they should be. In a lot of cases, the advisor is only “managing the investments,” but not providing guidance in other areas. Let’s talk about some of the things that your advisor should be doing.

Important Links

Website: http://www.yourplanningpros.com

Call: 844-707-7381

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Transcript Of Today's Show:

Speaker 1: Hey everybody, welcome back to Plan With the Tax Man with Tony Mauro. It is mid- to late November here on this episode of the podcast. Thanksgiving is just around the corner and we're going to talk about advisors who might drop the ball, or maybe in this case, drop the turkey. That'd be bad juju. You don't want to do that. So Tony, what's going on, my friend? How you doing? You all right?

Tony: I'm doing good.

Speaker 1: Yeah?

Tony: Getting ready for the holidays and Thanksgiving here. So-

Speaker 1: Yeah, I love Thanksgiving.

Tony: ... on my end.

Speaker 1: It's my favorite holiday, I think, Thanksgiving.

Tony: Oh, Thanksgiving is?

Speaker 1: Yeah. What about you? You got a favorite?

Tony: I like Christmas, but I do like Thanksgiving as well. I just like to hang out with the family and sit back and just know that the rest of the world pretty much is doing the same thing. And it's nice.

Speaker 1: True. I feel like Thanksgiving is Christmas-ish without the pressure. Christmas gets a little pressure-y. The gift giving and holiday parties and this, that, and the other. I think it's a little pressure-y. I kind of like Thanksgiving. It's the beginning, I guess, of that cycle. I think after Thanksgiving is when we start to feel the pressure, so maybe that's one of the reasons I enjoy it. That, and of course, let's be honest. The food.

Tony: Yeah. Well, I think this Christmas is going to be very much different because of the whole supply chain and people hoarding.

Speaker 1: Well, it's par for the course at this point.

Tony: It's going to be crazy, I think, this year.

Speaker 1: I mean, last Christmas was weird, no get-togethers. And then this Christmas is weird.

Tony: Yeah.

Speaker 1: We'll see. But anyway. Well, I guess that's maybe the world dropping the ball, if I want to use for a cheesy segue way there. But we're going to do that to get into our topic of financial advisors who, well, I don't know if drop the ball's a good term, but there's just a lot of people out there that aren't getting the kind of advice or service from their advisor, Tony, that maybe they should be.

Speaker 1: In many cases, I guess we tend to think of, or the general public tends to think of, an advisor as someone who just manages investments. But there's a lot of guidance in other areas that you do as a certified financial planner. You don't just manage the investments. There's a lot of other things. I got a list of some stuff that an advisor should be talking to you about. If they're not, maybe they're dropping the ball. I'll let you expand upon these, Tony. And if there's something I miss, feel free to chime in with it.

Speaker 1: Tax returns, obviously. Clearly, the show's called Plan With the Tax Man. You definitely review tax returns, but is that something that most or all advisors should at least be doing?

Tony: I think all advisors should be doing it to an extent, yes. And they may, at the end of the day say, "Look, you need to check with your tax advisor," especially if they're not a tax pro.

Speaker 1: Sure.

Tony: Some aren't and that doesn't mean that they can't advise you.

Speaker 1: Looking at things with a tax slant, right?

Tony: You got to look at it like that because everything revolves around tax. It really does. Everything we do. And so if they're just not doing that, I think that they're not giving you the full service that you're paying for because they should at least be able to recognize things that maybe you're overpaying taxes on or give you some ideas on how to cut them even if they say check with your tax advisor, if they're not that guy. And most of our clients' cases, I'm that guy, so it's just kind of natural for us, but they should be doing that, yes, because there's a lot of things on there you might be overlooking.

Speaker 1: Okay. And so that's one that can ebb and flow if they're not a tax professional as well, but they should still be looking at things through a tax lens and then, to Tony's point, referring you out if need be.

Speaker 1: Evaluating fees and costs seems like a no brainer. Every advisor should be doing this, but maybe sometimes brokers just aren't. They're kind of just, "Hey, I'm just transactional, so let me put you in X, Y, Z product." And they're not really taking a look at the fees and the costs.

Tony: Yes. I think that the client needs to look at that, but the advisor really should be transparent about this because there's no shame in me telling you, I get paid just like everybody else, every other advisor, "Here's what it is." And that way, you know how it is, you know how I'm paid. But at the same time, we've got to work to try to keep costs down so that we're not just basically decreasing our return, I should say, unnecessarily. So it is an important point. We make it a point to bring it up every year. Here's what our investment fees were in the last year. Here's the percentage. And they seem to still be in line and then let the client take it from there. I think it's something that both clients need to ask and then I think more advisors need to divulge.

Speaker 1: Well, depending on how they're getting paid, right, Tony?

Tony: Yeah.

Speaker 1: So if it's a situation where the advisor... If you do better, I do better kind of situation, then yeah, they're going to want to be keeping those costs and fees down as well because the more money they make their client, then the more they're doing as well.

Tony: The more they're making. Which is the case for asset based management, is that, you get a very small percentage, but does the advisor fee grow over time? Sure, when the sure portfolio grows, just like you said. You have a vested interest in that. And when it goes down, and there'll be times that it does, well, then the advisor shares in that some as well. Most advisors are moving that way. It used to be in the days where you never want to talk about fees because you didn't want to tell people, "Oh, my God. Look how much money I made. I really didn't even provide anything." And it's changed now. We're providing year-round service. Not only advice, but managing the plan, doing the investments, things like that. It's just something to be aware of.

Speaker 1: Okay. All right. So speaking of plans, since you brought that up, if we're talking about making sure that it's more than just managing the investments... Well, you do got to talk about income. Now, Tony, you work with people who are retirees, but do you also work people who are still working? Pre-retirees or even some younger people discussing and planning, we'll just say, income, period, is important.

Tony: It is important. And everybody we plan with, even if they're in their twenties or thirties, we're still taking them through a plan, a financial plan, to start so we have a roadmap. It may not be as complicated as somebody that's 50 or 60, but we at least are having conversations about why are we doing this, what's the end game and based on where you're at now, because you ask young people, they have no idea of what I want in retirement, but it gets them thinking early on. But you've got to have those conversations and if your advisor's not, I think you need to have them no matter what your age is, because that's where the value really comes in. It's really not managing the investments, the pros do all that. It's trying to keep you on track and making sure that you get to where you need to be.

Speaker 1: Yeah, definitely. And that way... Because you got to have the income, folks. I mean, the income is the outcome. So if you want retirement to be whatever you want it to be, without that flow of dollars coming in, you're not going to have the retirement that you want.

Tony: Yup.

Speaker 1: Number four, clarifying the target and/or the goal for your invested dollars. This is that whole put your money to work for you kind of thing, right?

Tony: It is. And like I said, with the last point, really is... A lot of people, especially if they're young, they just start throwing money into an account and it's supposed to cover everything. Retirement, emergency fund, kids' education. They don't segment it out. And you need to have that and the different goals, and I think the different funds, to accomplish those goals. The more you can keep it separate inside the big plan, the more clarity you're going to have on where you're at towards that target, rather than just throwing everything together and hoping for the best. That's something that a good planner's going to do for you.

Speaker 1: Yeah. Long gone are the days of throwing it in a coffee can and just taking it back out later on and thinking, "Hey, I've got all this money" because, especially right now, inflation is just eating away at that.

Tony: That's right.

Speaker 1: You want to clarify the target of what you want your dollars doing. You got your now dollars, you got your later dollars that kind of thing. That way that they're working as efficiently as they can for you. And that's all part of getting a good strategy in place with your financial professional.

Speaker 1: And then, finally, Tony, where advisors drop the ball, especially if they're really just more about accumulation, is there's virtually zero conversation about the family goals or even the legacy planning. So whether you're still working or talking about leaving things behind or whatever the case is, you're not even really scratching that conversation piece often with some advisors depending on, again, the type of advisor they are. That's that fifth piece that many people want to finish with when they're putting all this plan together is, okay, here's what we got, here's what might be left. How do I give this to my family efficiently?

Tony: Yeah. And this is more prevalent with people, I would say, at least starting to think about it, maybe 40, 45 and older. Even they don't have a real vision of that yet, but it's good to get them to start thinking about that. And of course, especially as you get a little older, in your fifties and then sixties, because it's so important to have all that so that as you age, number one, there's no pressure to be worried about it, that it's all set up and you know it's ready to go in case something happens to you. And eventually it's going to happen to all of us. That way, you can feel at ease, enjoy retirement, and know that your wishes are honored as far as that goes.

Tony: We spend a lot of time with our retirees, even besides just the legal stuff, the wills and the advanced directives and stuff. I think I've mentioned it before, we try to get them to do what we call a life book, meaning that... Something online that's going to be accessible by either spouse, that you know exactly what to do, where everything is at, all the way down to what you want said at your funeral. And then some of the goals after that. How are you going to live on one income? Is it going to be enough after the dust settles after all of that. Something I think everybody needs to think about before they're 70, 75, because you never know what could happen suddenly in your forties or fifties. It doesn't happen often, but it's out there. It's possible.

Speaker 1: Very true. Yeah. So these are some things advisors should be talking with you about. If they're not, if they're just talking about the investments only, well, then you might not be working with the type of person that you need as you're approaching into your golden years. So make sure that you're working with a kind of advisor that serve those needs.

Speaker 1: And of course, if you're already working with Tony, maybe you know someone who is not, and they're in a similar situation that you might have been at one time and they need to start talking with somebody who is looking at the whole picture, not just the accumulation of the money. Make sure you share the podcast with them.

Speaker 1: Of course, you can subscribe to the podcast, or anybody else can, by simply going to yourplanningpros.com. You can find it all there. There are a lot of good tools, tips, and resources at yourplanningpros.com. That's Tony's website there. He's been helping families get to and through retirement for 20-plus years here in the central Iowa area. He's an EA and a CFP. Of course, he has clients all over the place. Don't let the location hold you up, reach out to him if you've got some questions, subscribe to the podcast, get some help if you know you need it or if you think you might need it.

Speaker 1: And you should always check with a qualified professional before you take any action. So we'll get up out of here this week. Tony, thanks for hanging out, my friend. Have a great holiday. I hope you and the family enjoy your time.

Tony: Yeah, you do the same and will talk to you next month.

Speaker 1: Yeah and we'll see you in December here on Plan With the Tax Man with Tony Mauro from Tax Doctor Inc.

Disclaimer: Securities offered through Avantax Investment ServicesSM. Member FINRA, S.I.P.C. Investment advisory services offered through Avantax Advisory Services. Insurance services offered through an Avantax affiliated insurance agency.