Plan With The Tax Man

From time to time, we like to look at issues faced by people in other professions outside of the financial world and see what kind of retirement planning lessons we can learn from these other professions. Today, we’re seeing what we can learn from teachers and the issues they face.

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Website: http://www.yourplanningpros.com

Call: 844-707-7381

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Transcript Of Today's Show:

Speaker 1: Welcome into another edition of the podcast. It's Plan With The Tax Man with Tony Mauro and myself to talk investing, finance, and retirement, and we're going to retire with honors on this podcast. Basically, I want to do some financial planning lessons from the classroom, and we should probably insert a chorus of boos right here, because no one likes the classroom. I don't think many people do, anyway. But we always take these different analogies and ways to look at finance and retirement, and how we can draw parallels to other things in life, and so we thought why not do this? And school is kind of ending, although I guess it might have made more sense to do this when school is starting, but we're going to do it as school is ending and hang out with Tony a little bit. So, let's get into it. Tony, how are you, my friend?

Speaker 2: I'm fabulous. Early May, the weather's getting good, and like you said, the kids are getting out of school. I got a couple of in-laws that are retiring from teaching, so this is kind of appropriate.

Speaker 1: Oh, fantastic. That works out really well, then. Were you a good student or were you an average student? What kind of student were ... Elementary school, middle school Tony, what was going on there?

Speaker 2: Elementary school, middle school, and even some of high school, I always got good grades, but always wanted to do the minimum possible. I didn't really find out how I should have been doing things until college. And so, I was a good student and never had any problems, but always wanted to work ahead and basically, again, do as little as possible, which-

Speaker 1: Yeah, well, a lot of kids are that way, right? And you and I are, well, we're children of the '70s, I guess, but teenagers of the '80s, right?

Speaker 2: Yeah.

Speaker 1: And it was definitely a back and forth at that time period, for sure. Well, because that's our first one, Tony, is homework. Nobody likes homework, right? I mean, there's always maybe one kid that was like, "Oh, I love homework," but for the most part, nobody really liked homework. And some teachers, I know of several teachers, they don't necessarily enjoy giving it out either, but sometimes, it's a necessary evil. And if you think about what you guys do, you guys try to do most of the work, but sometimes you need the client or the potential client to do a little homework.

Speaker 2: Yeah, we do. And back in school, I mean even to this day, we always still talk, friends and I, of how we really wanted to work hard, so we never had homework. You always try to get it done-

Speaker 1: Just do it at school.

Speaker 2: Right, somewhere. But in the retirement planning area, in all financial planning areas, I mean, really, the people that are going to try to go at it themselves are going to be in for a lot of work, a lot of homework, and they're going to be-

Speaker 1: Oh yeah, especially the DIY, yeah.

Speaker 2: Yeah. The DIYers are going to be in for that, so you better just plan on it. Otherwise it's going to be painful. Or that's what leads, in my opinion, to a lot of people not doing anything, because they feel like it's too much work and they don't know where to start and they just don't do anything. But a good advisor basically is going to do most of the work for you, but you do have to help out some. It can't just be total hands-off, because then it's not your plan, then it's my plan. And so we want to try to make it fun and enjoyable so it's not work, and you have an interest in it, and not try to make it so complex that you feel like ... I mean, I was terrible in science and just didn't want to be there ever, and so we don't want to make it like that either. So you've got to try to think about it in those terms, especially when you're working with a advisor. They are going to take a lot of the work off of you.

Speaker 1: For sure. Yeah. They're going to try to take as much out of there as they can for you, but you've got to have that vested interest too, because let's be honest, if you're not putting in a little effort, are you even inclined to exact the plan, to go through it and follow the steps and do the things that you need to do if you don't have some buy-in? So, while we all hate homework, we certainly want to make sure that we're doing the things that we are being assigned by our financial professional, if you will, for lack of a better term. And usually that's some pretty easy low-hanging fruit, so it's not like it's a real big deal.

All right. Let's do number two here on the financial planning lessons from the classroom. Standardized testing, which has been a big topic of conversation for many years now, isn't always ideal, and I think I agree with that most of ... Overall, I think I agree with that. Not everybody learns the same way, so my wife's very analytical, I'm very visual, or whatever the case might be. And I think that's probably fairly similar in the financial world, when you think about ... To me, I guess my mind goes to the cookie-cutter, one-size-fits-all plan strategy in this regard.

Speaker 2: Yeah, I mean, it's another one. I always have to relate it back to my own experiences. I'll tell you, when I was a kid, I was like one of those guys, I hated these standardized tests. Back when I was a kid, it was called Iowa Basic Skills. Everybody had to take this, and I can't remember if it was a day or two, but literally, we were just filling out little bubbles on sheets and we didn't care. Well, if it was standardized, we always thought, "Well, we'll just make little designs and get through this," and not even really try, which is terrible. But I do think, getting back to the financial world, it's the same thing. If you just take some boilerplate financial plan, or you just take, say, one mutual fund, for example, and you're just going to put all your money in it, you're probably going to be okay. But probably, probably. There's really no plan there, and I don't think that people should just take a standard boilerplate type of plan and try to adapt it to what they're trying to do. I think it should be other way around. It should be custom to what you want to do, rather than some standardized thing. And that's where an advisor's going to be able to help you all along the way there, rather than just saying, "Here, do this. Here's a template, and if you do this, you should be fine," and never come back and see me [inaudible 00:05:57]

Speaker 1: And that's the thing, there's the operative term right there. "You should be fine," right?

Speaker 2: Yeah, you should. Yeah. Right.

Speaker 1: And it's like, "Well, I don't want to go with 'should.'" To me, that'd be like my mechanic fixing my car and saying, "Well, I put the tire back on. I think I did a good job. You should be fine."

Speaker 2: Yeah, you should be fine.

Speaker 1: Well, if I'm doing 70 miles an hour, I don't want to know that I should be fine. I want to know I am fine.

Speaker 2: That's right. And I do some flying on my own.

Speaker 1: Okay, there you go.

Speaker 2: I'm a private pilot, and boy, when it comes out of maintenance, it's like, I want to know that this thing, you didn't miss some screw on something or whatever, because I don't get a second chance, and-

Speaker 1: Right. Have you seen that meme, Tony? Well, it's a meme, it's a real picture, but they turned it into a meme where it's a guy on a ... I don't think it was Southwest. I can't remember which airline it was, but he's out there with duct tape, taping, I guess, part of the cover on one of the engines, part of the housing around it.

Speaker 2: Oh, right, yeah.

Speaker 1: And they're like, "Yeah, yeah, it'll be all right. It'll get to the next ..." and the person inside the plane that took that picture had to be terrified. Did they stay on the plane? Did they get off? Right? Be like, "Ah, duct ..." I mean, duct tape's great, but I don't know if I feel like airplane great.

Speaker 2: Yeah. When I was training, in the small plane, I walked out one day and we had duct tape on the wing.

Speaker 1: Okay. I guess it's a thing.

Speaker 2: It was a bird strike, and it cracked. And I went and asked, I said, "Geez, we got duct tape on this wing? I mean, am I going to be okay here?"

Speaker 1: Right.

Speaker 2: I mean, I'm sure I would.

Speaker 1: Well, you're a brave man if you did it, but still.

Speaker 2: I did it. I did it. He said, "No, no." He explained it all, but yeah, it is interesting because I don't think we want a lot of shoulds in retirement plan and probabilities. I mean, we want to be able to show people, based if you do this and this over this time period ... I like to use, and I don't like to share it with them, but I like to use a lot of analysis with the computer and say, "If you do this, you've got a 95% chance or 97% chance of never running out of money." That's something people can relate to, not, "Well, we hope you don't run out of money," type of thing. We want to give them some facts and things like that, so anyway, but-

Speaker 1: Yeah, some assurances are certainly ... No, that's a great point, though. It's a great analogy. All right, so number three on my list here is everything has pros and cons. Certainly that is definitely the case when it comes to education, or when it comes to what it is that you do. I mean, look, teaching, hats off to teachers. It's a tough gig. Teens and tweens are annoying, or they can be, right, because you're dealing with the unruliness and all that kind of stuff. And when you think about what it is that you guys do, whether it's a product or whether it's trying to just build a plan for someone, there's pros and cons to everything. Nothing is going to just be perfect. You've got to work your way through the situations.

Speaker 2: Yeah, and after we do a plan for somebody, and then you get to, of course the products area, how we're going to do this plan is, I like to explain that ... Obviously the pros are easy, but I like to say, "Look, everything's got a few downfalls, and here's what this is." I mean, it doesn't matter if it's a 401k, an IRA, a mutual fund, I don't like to spend two hours talking about each particular thing, but I like to point out the cons, so to speak. It's just like in work and everything else in life, there's some things about it you don't like, or may not be all that good. And then the client gets to decide, okay, well there's enough things here that I do like about this that this makes sense in my plan. Same way with our jobs. I mean, when we get kind of sick of them, just like in teaching, and I do give them a lot of credit, I do think it's a tough profession, and it seems like around here they're always cutting budgets and everything else, they just don't want to pay them, right? But that's a whole different story.

Speaker 1: Sure.

Speaker 2: But if you get sick of it, then in your job, you know, tend to leave. And obviously as an advisor, if the particular product portion of things, or the plan changes, it's up to us to advise a client, "Hey, this just doesn't work in your plan."

Speaker 1: It's just not working now. Right, yeah. And oftentimes, that's maybe an investment that's going to be with the dog investments, if you will. It's no longer performing adequately, or there's too much risk, or something like that. And that kind of walks in nicely to the strategy of laying things out ahead of time. Number four here, most teachers plan out, often they plan out, their lesson plans for the whole year. They have the guided curriculum, I suppose, from the school district, but they still kind of plan things out for the whole year. And if you think about your financial plan, that's similar fashion, right? I mean, you guys should be laying out a plan multiple years. Now, granted, you need to be flexible that it's going to change, because life's going to happen, but it's still the point of having a roadmap over, let's say, two to five years before retirement, and then the first couple years of retirement, and so on and so forth.

Speaker 2: Yeah, and today it's a lot easier than it used to be 10, 15, 20 years ago in the financial world. I remember when I was growing up with teachers, I didn't really realize why they stayed after school, and really they were working on their lesson plans and updating and things, and I'm sure they've got better tools now too, like we do. But yeah, these days I technically won't really get into a relationship with a client unless we do a financial plan beforehand. It's very easy. We can do it on the computer. At least we've got a starting point, because otherwise, it's really them just telling us facts and us just off-the-cuff giving advice, and it's like going to the doctor. I mean, there's all kinds of analogies out there, but they're not going to simply sit there and tell you what ... or how to treat you without knowing what's going on.

Speaker 1: Yeah, I mean, well, think about this. So for a doctor or even for yourself, kind of looking at the profession, you could probably walk in and say, "I've got a cough and I got this." And they probably have a pretty good idea of what's wrong with you, right?

Speaker 2: Yeah, they're going to give you something, yeah.

Speaker 1: I mean, they probably could tell you what they want you to take or whatever to get better, but to be on the safe side, they test it. They test you, they do some checks, or whatever. Well, I mean, you've been doing this a long time, Tony. When somebody comes in and they first lay out the information that they've got, what they've got saved and what different accounts, you've been doing this long enough, you could probably put together a plan on the spot. But that's not the smart move. That's not the prudent move. Your job is to really dig deep and find out and get the right plan, and I think maybe that goes back to that cookie-cutter thing. You can walk into someplace and get a cookie cutter because they've seen thousand versions of you, but yet at the same time, those are just those universal pieces that affect us all, like when to take social security. I have the 401k. How do I turn it on? That's all universal, but individually, Tony, you're different than I am, and so on and so forth.

Speaker 2: Yeah, and I think at the heart of it, if we as advisors, we're going to do that, I don't think the client's getting the value that they need, number one. And they're paying us to do this, whether it's in a fixed fee, asset-based type of thing, or even some advisors still charge commissions, but it behooves us to get to know the client and figure out really what they're trying to do rather than just blanketly advise them.

Speaker 1: I mean, you have the skillset. You certainly could identify that quickly.

Speaker 2: We could, absolutely.

Speaker 1: But that's not doing service, right, that's not providing good service, so maybe that's [inaudible 00:13:40]

Speaker 2: No. That's more of the dinner party chat. Somebody asks you something and you just throw something off-the-cuff and you're talking general.

Speaker 1: Yeah, okay.

Speaker 2: If you really want a plan, I think it has to go way deeper.

Speaker 1: Yeah. Okay. Well, let's do two more here on our retirement classroom analogy and then we'll wrap up. Age-appropriate instruction is important, certainly for teachers. You're not teaching calculus to first-graders unless they're a genius.

Speaker 2: That's right.

Speaker 1: But same thing, kind of, with you. There's different aspects of what you do where maybe not quite that diverse, but why talk about RMDs? Yes, you could can get into it a little bit and say, "Okay, we're going to put together a strategy for RMDs when you turn 75 based on the new Secure Act rules," let's say for you and I, it's 75. But if I'm only 55 and seeing you, that's probably not the main focus at that time.

Speaker 2: No, and really, a lot of the strategies that we use have to do with your age and where you're at in the whole process, because like you say, the easy part, no sense in talking to a young person about RMDs and like you said, and annuities or anything else like that. And at the same time, you get a little older, I think some of the retirees, you have to keep it basic, and you certainly don't want to be ... There's a lot of regulatory things where we have to go through of making sure that whatever we're recommending is appropriate for the client in their situation. That's on a regulatory aspect. But we should know better as advisors what a client can handle and whatnot. And you usually can tell from talking to them, and sometimes it's to their detriment. They want to be over analytical. But you want to make sure that you are being appropriate, not only for their age, but their investment knowledge, things like that, and it doesn't have to be overly complicated. I think sometimes we as advisors tend to get too much in the weeds with some of that.

Speaker 1: Mm-hmm. Yeah. No, I think that's a great point. And again, there's definitely age-related items when it comes to retirement planning, depending on how long you're ... Now, if you're walking in the door at 60 saying, "I want to retire at 62," then obviously you're going to get right into all of the stuff. But again, if you're starting with a financial professional at 45 or 48 or 50, we talked, Tony, often that we kind of ... Memorial Day's coming up, right? We're taping this in about the middle of May. Memorial Day's coming up, and it's not technically the kickoff to summer. It's technically not summer, but we all treat Memorial Day as the unofficial start to summer, right?

Speaker 2: Yeah, I do.

Speaker 1: Yeah. Everybody does, right? Well, 50 is kind of that unofficial start to retirement. We all start to get a little more serious about it when we get over 50, I think. Then our mind starts to go, "Eh, maybe I better start thinking about this stuff a little bit more heavily." So there's going to be age-appropriate instructions involved with working with a financial advisor depending on your age. Does that make sense?

Speaker 2: Yeah. I mean, it makes total sense. I think for people, especially now that I'm 55, you start really starting to think about, and so are our clients at this age, it's not only retirement, but when to call it quits? What's my monthly income going to be? And that essential question, are we going to be okay? In other words, am I going to have enough money at the end to basically do what I do now, and hopefully a little better?

Speaker 1: Yeah, there you go. All right, well, let's do the last one here, and this is just lifelong learning is a great habit to develop. All of my teachers, all the teachers I've ever come across, they're always like, "Hey, never stop learning. Never stop." And I think that's a folly of being young. We all know that. We were that way too. You see a 16 year old or a 17 year old or a 20 year old, and they think they know everything. How many of us have felt that way and said that about our own kids or grandkids or nephews or nieces or just in general? But I think a smart person, a truly smart person, realizes that life is always bringing us something to learn. And if we don't accept that and learn along the way, we probably don't grow very well as a person. And the same thing holds true with what you do. I mean, you continue to go to educational events and things. You've been doing this a long time and you pretty much know all the ins and outs, but there's always something new to learn.

Speaker 2: Always something. It always amazes me. My son has fallen into this group, although I think he's starting to get it now at 26, so hopefully, yeah, I think he listens to these sometimes, so I'll put them on the spot. But a lot of college students, they get out and say, "Well, I've got a four-year degree," or maybe even a master's, "and that's it for me. I've learned all I need to learn. I'm done with school," and they find out very quickly that I need to be learning something, depending on what type of profession you go into and whatnot. So I would say for all the young people listening, don't stop trying to learn, because in this day and age especially, life is just going to pass you by so quickly with technology and whatnot. But in the financial sector, same way. Even us, for me, unfortunately, I have a lot of masters in terms of continuing ed requirements and that kind of thing, so it's kind of forced upon me. But for clients, they need to really, at least not do too much homework on their own, because we were talking about that earlier.

Speaker 1: Sure.

Speaker 2: But if they're interested, they need to at least try to keep abreast of things and what's going on.

Speaker 1: Yeah, that cursory knowledge, for sure.

Speaker 2: Yeah, just some things. And if not, ask your advisor. That's what they're there for and that's what you're paying them for. They're going to have a lot of the answers, and if they don't, they're certainly going to be able to get it for you. We certainly want to be [inaudible 00:19:18]

Speaker 1: Yeah, we preach often here, Tony, know what it is that you have and why you have it, right?

Speaker 2: Yes.

Speaker 1: And that's still that lifelong learning, right? So, if you're thinking about getting into a particular investment, then know a little bit about it. Don't just want to jump into it because it's got a cool logo, right?

Speaker 2: That's right.

Speaker 1: You want to know a little bit about it, or whatever the case is. So that's the podcast this week. That's just kind of taking some analogies there, and I think we did a good job talking about, thinking about how we learn in the classroom, and teachers and applying that too, because really that's what you are as well, Tony. You're a teacher. It might be finance and taxes, but you're still teaching and educating.

Speaker 2: Yeah. That's what we're doing. I mean, we're basically taking the stuff we've learned over the years. It's in between our two years, and advising people, which is [inaudible 00:20:03]

Speaker 1: Yup, which is teaching, yup.

Speaker 2: Yeah, teaching.

Speaker 1: Coaching, teaching, whatever you want to call it, right?

Speaker 2: Yeah.

Speaker 1: Kind of falls in the same category. So, if you got some questions or concerns, get yourself onto the calendar, if you're not already working with Tony and his team at Tax Doctor Inc., and reach out to him, yourplanningpros.com. That's yourplanningpros.com. A lot of good tools, tips, and resources at the website there. You can reach out to them, subscribe to the podcast on Apple, Google, Spotify, all that good stuff. And we will see you next time here on Plan With The Tax Man. For Tony Mauro, I'm your host, Marc Killian. We'll catch you next time.

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.

Are you preparing for retirement but feeling confident that you have covered all the expenses? Well, think again... It turns out that many retirees overlook some crucial expenses that can leave them financially vulnerable. In this episode, we explore the retirement expenses that most people tend to forget, including skyrocketing medical bills, unexpected travel costs, taxes, and much more. We'll discuss practical tips and strategies to help you plan for these expenses and ensure a secure and comfortable retirement.

Important Links

Website: http://www.yourplanningpros.com

Call: 844-707-7381

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Transcript Of Today's Show:

Speaker 1: Time for another edition of Plan With The Tax Man with Tony Mauro, from Tax Doctor Inc. I started to say Tony Mauro Tax Doctor, like that's your whole name or something, and myself to talk investing, finance, retirement, and retirement expenses, which we might forget to plan for. So we're just going to have a good conversation about some things to keep on the radar. Some of these seem like duh moments, but there's little ways we might think about this or forget about them, so that's going to be the topic of conversation. And Tony, how you doing, my friend? You doing all right?

Tony Mauro: I am well, yeah. Everything is going good.

Speaker 1: Well, good. So you do planning all the time. It's easy to forget stuff, right?

Tony Mauro: It is.

Speaker 1: I mean, you're a human being as well. You plan to take your own trips, you plan to go skiing or golfing or something, and you forget to take something. "Oh, man, I can't believe I forgot my glove," right? My golf glove or whatever it is. So it happens. But from a retirement standpoint, forgetting to do stuff can certainly wind up being a big pain in the you know what, especially depending on how it's affecting you. And it could be a little thing, it's not a big deal, but then there could be some big things. So on this episode, let's explore some of those expenses people tend to forget, and just kind of see if there's some tips or strategies we can talk through to see if that helps. Okay?

Tony Mauro: That sounds good.

Speaker 1: Medical expenses. Obviously, you can say, "Well, I'm not forgetting medical expenses, but how do I know they're going to show up? How do I plan for something that hasn't happened yet?" Well, that's true, and it is kind of hard to do, but that's when you've got to start thinking about where you're going to pull money from for these things. Because Tony, I think Fidelity's most recent number says like $315,000 out of pocket for people for ... that's not what the insurance is covering. That's out of pocket. That's hefty, man.

Tony Mauro: Yeah. And people were living a long time, and I think the biggest takeaway probably from this podcast on the tips area is as we talk about some of these things, is one, you need to develop a budget, and you need to work with your advisor on your own to get a budget, and budgets change, but at least you've got an idea, so you can start setting money site or plan to take it out of one of your pots. But the other thing too is you have to write stuff down too. As we age, I mean, if it's not on my calendar ... I don't try to commit everything to memory, so don't try to remember everything, write it down or get it in a plan of some kind, so it's a lot less burden on you. But yes, medical expenses, as we age, I mean, it's easy ... I mean, they go up. We could sit and talk about that all night long. There's other expenses too with medical. The little things, I think that's what pushes that out-of-pocket up so much. Everything from dental, to over-the-counter stuff, to stuff just for chronic ailments, things like that.

Speaker 1: Dental's is a good one, because that catches people off guard a lot.

Tony Mauro: It does. And a lot of that's not covered by insurance.

Speaker 1: Or Medicare.

Tony Mauro: It's best to track all ... yeah, or Medicare, for that matter. And it doesn't have to be sophisticated tracking. I mean, that's really good if you can go that far, but it's just something you've got to ... I think with medical, because it's so big, and it's going to be at the top of the list, especially as you age, it's one of the biggest things you spend money on.

Speaker 1: I think it's third. I think, if I'm not mistaken, Tony, I think housing is first for expenses, food second, medical's third.

Tony Mauro: Yeah. And so it's got to be tracked and kind of budgeted for. And then like you said, where are we going to take this money from these intended expenses? Obviously, if they don't occur, then you know, don't take the money out, but.

Speaker 1: Right, and then you got some extra money going on. But if you don't at least talk and discuss it, how are you going to have any kind of plan or options to dip into. You said budget earlier, Tony, and people go, "Oh, my God, I hate the B word." Well, fine, call it a spending plan, call it whatever the heck you want, but just some sort of cash flow analysis in and out, whatever the case is. And then that way you could maybe bump up some categories so that you don't have these unexpected expenses coming up like our next one. Unexpected travel, for example. Well, again, someone would go, "Well, how in the world am I supposed to know I'm going to need extra money for travel that it was unexpected," but you know you're going to want to do X number of travel, fine. You're planning for that, so why not ... and I'm asking you, but why not just going to bump that number up a little higher for things that might come up? What do you think there?

Tony Mauro: I think that's a great plan, and that's what we tell people to do. And we try to get them to put little kind of imaginary folders or the old envelope system, the Dave Ramsey stuff, even in retirement, not necessarily moving money there, but come up with our budget, and then bump it up a little bit.

Speaker 1: Pad the stats, so to speak, right?

Tony Mauro: Travel's one. Yeah, pad it, because besides your travel, you've got things like, I don't know, somebody asks you to go somewhere and you really weren't planning on it, but you've got the means, you're going to go do it. My father who now has grandkids getting married, and they don't live here, so he wants to go there, and make sure that he's there for that. You've got people spread out. You've got funerals, you've got maybe going out of state to see an elderly family member, all kinds of things that's not the funnest stuff you might want to do, and so it's not on the plan.

Speaker 1: That's a great point, because it could hit you off guard. You're thinking, "Okay, I'm kind of budgeting for the fact that mom's older, she lives in a different state. I'm going to go see her [inaudible 00:05:20], let's say, four times a year." But what happens if mom has to have a hip replacement that wasn't expected, which goes back to mom not planning for medical expenses. But let's just assume that something like that happens and you got to go stay with her for a month, and help take care of her, because she can't move, right? Well, that's unexpected travel, because you yourself are in retirement. Maybe mom's 85, and you're 60 or 65 or something like that. So I mean, it's easy to see where you can get some of these unexpected travel that takes longer. A, you weren't expecting it, and B, it's maybe a lengthier thing than you thought would even happen, period. And to your point about weddings, I mean, hey, it could be something as simple as you really want to pay for your granddaughter's wedding, and she decides she wants to have that in freaking Acapulco or something.

Tony Mauro: Well, right. Getting down there and dealing with all that.

Speaker 1:

Or paying for it, and everything else, because you promised. "Oh, Papi, you promised that you'd pay for it." Oh, man. So again, planning just, I guess, pad the stats. Add a little extra in there for things that could come up so that you're not caught short.

Tony Mauro: That's right. And I'll tell you my own father, and sometimes he listens to these podcasts, but I already tell him that I talk about it. And he's one of those retirees that he's not comfortable if he has less than $80,000 in his checking account, but that's what he uses as his kind of padding besides everything else. And he's fine. He has plenty of money to live on and whatnot, and we budget, but that's what he kind of uses for unexpected, but at least he has it. It's just in his checking. So I kid him about it a little bit, but I understand why he has it, because he doesn't have to fear some of these things we're talking about.

Speaker 1: Well, I've got a couple big ones I want to tackle, so let me keep moving along here. I want to go to taxes, because you're the Tax Doctor, but are we seriously prepared for a tax hike in the future? I think everybody ... I mean we all know it. You have to know it. You cannot be an ostrich and not realize that all the spending we're doing, it's not going to be going up. And even if they do nothing, which Congress is great at doing, it's going to go up in '26. So regardless of whether they make a move, it's going up.

Tony Mauro: It's going up. If they don't do anything, it's going up, because I got to think they'll allow it to go back. Of course, as we're taping this, if there's going to be a showdown again in June about the debt ceiling, and the reason we have all this debt is because just like a business, we as a government or a nation, I should say, they spend more than we take in. So even if it's not just a, "Hey, this is a tax." They come up with things. They usually try to hide them, because they don't like to talk about them, but we have to be prepared for that. While I hate taxes, I got to think somehow they're going to go up some way in the future

Speaker 1: And think about the numbers, Tony. So if you're ... a lot of retirees right now, maybe, find themselves in the 22% tax bracket, right?

Tony Mauro: Yeah. 20, 22.

Speaker 1: Yeah. So let's just say, and I think that the 22 is when it sunsets in 2019, or excuse me, 2026, the 22% tax bracket, I believe goes back to 25. Might be 28.

Tony Mauro: It's 25, and then it goes real quick to 28.

Speaker 1: Okay.

Tony Mauro: That's what it's supposed to be now.

Speaker 1: So it's a more narrow bracket. So going from 22 to 28, that might only sound like ... I mean, 6%. Hello, right? I mean, that's going to get pretty hefty. Think about the interest rates that we've ... [inaudible 00:08:42] the interest rates, but the inflation rates we've been dealing with, and so on, and so forth, so it's going to be a little more costly than we realize, and if they do nothing. And then just what if they go, "Well, we actually need more money, so let's go ahead and make that 30%."

Tony Mauro: Yeah, it is. And even on a hundred thousand dollars of income, I mean, that's still a lot of money, and that's a $6,000 tax increase. And on a fixed income, people are like, "Well, wow, that kind of really cuts into [inaudible 00:09:08]."

Speaker 1: And over time. So again, you got to have that ... you plan for it. And again, tax efficiency and planning right there. This one's one that you maybe shouldn't forget, because right now everybody and their brother is talking about tax efficiency, because of the tax rates we're in, and that Roth conversions, obviously, are a huge topic of conversation, because you can kind of manage your taxes now versus what we expect to happen, let's say, 10 or 12 years from now.

Tony Mauro: Yeah. It's a big, big topic. Taxes.

Speaker 1: Maintenance, and repair on the home. I mentioned earlier that the home is usually the number one expense for people, at least, early on in retirement, as they're either finishing off the mortgage or maybe making some changes so that they can retire-proof it, that kind of stuff. This one I always find interesting. You were talking about your dad a second ago, and having a big chunk of cash there. People say, "Well, I got an emergency fund for if the HVAC dies." Okay, well fine. If the HVAC or the roof gets a hole in it, unexpectedly, that's one thing. Maybe that's where you tap the emergency fund. And tell me if I'm wrong here, Tony, but if not. Let's say you're 60, and you're going to retire in the next five years, and you know your roof is already 30 years old, why are you not strategizing and planning to replace that roof sometime in retirement versus getting caught off guard?

Tony Mauro: I agree. Our pre-retirees, we go over the whole home ownership thing, and if they own the home outright, what kind of condition is it in? Is it important to them that they keep it up, and start strategizing for some of these things even before retirement. Even if we're not going to set money aside for it just yet, but knowing that it's on the list, that a roof, for example. My roof's 30 years old. It's kind of falling apart. It's not leaking, but I'm going to need one at some point. Let's get that down, and try to figure that out in the big scheme of things. I think another one too is ... and most retirees homes are aging, because most of them have lived there for a long time, and most of them drive older cars. I mean, I have a love-hate relationship with cars. I like them, but at the same time, we're always having to buy new ones or do something, and you may need a new car in your retirement days at some point, and the last thing you might want to do is have a payment. And so maybe you want to strategize, and maybe save for it or use some money to buy one that could be maybe the last vehicle you'll need. But these are the questions that you need to tackle under this whole housing slash maintenance repair thing, for sure.

Speaker 1: Yeah, definitely. Some really good points there for sure, Tony. Thank you for those. And then, finally, let's talk about everybody's friend.

Tony Mauro: That's their friend.

Speaker 1: Mr. Inflation or Miss Inflation, or whatever you want to call it. Either way, it sucks.

Tony Mauro: It's high. [inaudible 00:11:48] likes it.

Speaker 1: But let's view it at this standpoint, not the current, whatever we're going through inflation, just regular inflation. I said this all the time, and I'll continue to say it, because I think it works well. Inflation is normally thought of like calories. You don't pay attention to it until it's really bothering you.

Tony Mauro: Yeah, that's right. That's right.

Speaker 1: When you're feeling overly pudgy, you pay attention to your calories, right? And when inflation's high, you finally pay attention to it. But when it's normal, you just don't pay attention to it. However, if you don't, let's say, it cost you five grand a month, and that's what your number, you've identified five grand a month for living expenses going into retirement at 65. Okay? Well, 15 years later, that five grand's now 10 grand a month it costs you. So do you have COLAs, cost a living adjustments, built into your plan?

Tony Mauro: Yeah, because that will happen. It will be exceedingly higher than the 5,000 that you just talked about. And people always ask me too, "Well, do you think it's ever going to go down?" I say, "Well, inflation, it bounces around. Of course, we can see that right now, but how many times?" I always ask, "How many times have you gone somewhere, and they say, "Well, our price is lower than it was five years ago." Boy, it's great for you, great for me." I mean, nothing goes down. So even in normal times, things tend to inch up and we aren't paying attention. And good for businesses, because they got to keep up too. But I'm saying, as a retiree, you have to pay attention to that. Because if you're thinking 5,000 today, like you said, it'll be 10,000 or so in 10, 15 years from now, and that will be the new norm. But nevertheless, you may not have the ... if you're not building this in, the same income or the same lifestyle you thought you were going to have.

Speaker 1: Yeah, I mean, you've got to address it. And it's easy to sneak up on you. Inflation is the thief of tomorrow kind of thing, so it's going to steal some stuff away. So you've got a plan for it. And hopefully, your advisor has strategized like Tony does with his plan, for inflation, even normal inflation rates. And I think that's where people also panic too, Tony, when we're thinking about where our money's at. The market's not doing well. I'm nervous. Let me maybe consider taking it out. Well, that's going to be ... it should be, anyway, your later monies that you need to keep up with inflation. So make sure you're not panicking in just wholesale. When the market does bad, that's what we do. We panic and we go, "Let me go take money out, because I don't want to lose anymore." But it's like that's your now money I think you're thinking about when it's really, truly your later money.

Tony Mauro: Exactly. Yeah. I mean, it is. I mean, you hit it right on the head. I can't even expand on that.

Speaker 1: Well, thanks. It's almost like I talk to you guys all the time.

Tony Mauro: Yeah. I think the important thing is getting back to talk with your advisor, and making sure that you're strategizing for this, because it will sneak up on you and it will get you.

Speaker 1: It will bite you, that's for sure. So hopefully that's some things that you are remembering to do. You're strategizing for retirement and you haven't forgotten these. But if you have and you need some help or you just haven't reached out to someone for help at all, then Tony and his team, of course, are here, yourplanningpros.com. That's yourplanningpros.com. I don't think families get [inaudible 00:14:56] retirement. Tony's been doing this for 27 plus years, so he's a great resource for you to tap into. He's a CPA, a CFP, an EA, all the alphabet soup of good stuff there. So reach out to him, get onto his calendar, have a conversation, and plan with the tax man. Don't forget to subscribe to us on Apple, Google, Spotify, whatever platform you like using. Tony, thanks for hanging out with us. As always, my friend, I appreciate you.

Tony Mauro: All right, we'll see you next time.

Speaker 1: We'll catch you next time right here on the podcast. Again, hit that subscribe button or heart button or whatever it is to catch new episodes, as well as check out past episodes 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.

Are you a golfer? Even if you're not, the game of golf can teach us valuable lessons about retirement planning. For example, hitting a hole-in-one might be thrilling, but it won't necessarily guarantee your overall success. And just like you need different clubs in your golf bag to play a round, you need a well-balanced approach to your investments in retirement. But perhaps the most important lesson from golf is the value of having a caddy. In retirement planning, a financial advisor can help you navigate the hazards and make the most of your financial "clubs." Tune in to this episode to learn more about how the game of golf can help you plan for a successful retirement.

Important Links

Website: http://www.yourplanningpros.com

Call: 844-707-7381

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Transcript Of Today's Show:

Speaker 1: It's time to plan with the tax man once again here on the podcast. Tony Mauro from Tax Doctor Inc with me to talk golf. We're going to spend a little time talking what golf can teach us about our financial planning or financial strategy. We're calling this for your retirement, pun intended. F-O-R-E. So there you go. What's going on buddy? How are you?

Tony Mauro: I'm doing good. You're in the throws a tax season and as we were talking about earlier, thinking about golf, thinking about the spring.

Speaker 1: I know, right? It's like, yeah, well, it'd be nice to go play a little bit, but mother nature can't quite make up her mind if she's fully ready for spring or not. So it's like, all right, well while we're waiting, let's talk a little bit goof. And as my daughter and I like to call it, call it some goof. Of course, the way I play is probably is goofing. How about you? Are you a good player? I know you like to play.

Tony Mauro: Well, I like to play a lot. Everybody's got their own version of good, so wherever you're at, you think you should be better. Right?

Speaker 1: Right.

Tony Mauro: But yeah, I mean we play a lot and I've enjoyed it for a long time.

Speaker 1: Well, are you good enough to get a handicap?

Tony Mauro: I have a handicap. My handicap right now is 7.9.

Speaker 1: Well, then I would say that's good.

Tony Mauro: Call it eight.

Speaker 1: I would say that's good then. Yeah.

Tony Mauro: Well, like I say, it depends. Everybody, if you're an eight, you want to be a four. If you're a four, you want to be scratch.

Speaker 1: Right. Well, okay.

Tony Mauro: If you're a 20, you know.

Speaker 1: If I play 18, I'm shooting in the upper nineties, so you're better than me.

Tony Mauro: Well, I mean it's all about getting out there and having fun. And it's picked up a lot of popularity.

Speaker 1: Oh lord, yes. It's massive. Although pickleball is the thing that's took over everybody, I'm like, good lord. Pickleball's everywhere.

Tony Mauro: It really is. I can't believe the interest, even as people are getting a little older, they're wanting to go out and play pickleball just to get a little bit of an exercise in.

Speaker 1: Yeah. Oh yeah. No, they're digging it.

Tony Mauro: Yeah.

Speaker 1: Well, let's stick with golf for right now and we'll jump into it. And even if you're not a golfer, I think you can still enjoy the lessons. Most people have enough basic golf knowledge and of course, depending on the retirement. And of course it's perfect for retirement because how many retirees like to play golf. A lot. So let's start with just breaking down a couple points here. I got some fun ones. I want to chop them up and have a little fun with the analogies. And I'm going to tell a story along the way, Tony and I encourage you to do the same. I'm sure you've probably got several as well since you like to play. But we're going to start with hitting a hole in one and thinking about this from a financial standpoint. I mean, a hole in one is super exciting. I mean, even in putt putt we get...

Tony Mauro: It is.

Speaker 1: We're like, yeah, I got a hole in one. But here's kind of how I want to go with it. It has an interesting effect on it. So for example, I was playing golf a number of years ago with a couple, me and a friend of mine. We were in our early forties, I guess, maybe late thirties, and they were in their early seventies and we're on this par three. And he knocks the ball, he tees off, and lo and behold, he gets a hole in one. I'd never seen one live. It was awesome. And so I think it was maybe the third hole, it was a par three, something like that. And of course his wife and she was, the whole day, she was like 125 to 145 yards straight down the fairway. Every single shot she made, she'd chip up on one, she'd putt, she'd one putt, so on and so forth. But anyway, he makes this hole in one and for the rest of the day, the rest of the 18 holes, he is just super cocky, super arrogant. And this is a 70 year old guy. He's feeling it, right?

Tony Mauro: Yep.

Speaker 1: Well, my friend and I are terrible. We're all over the map. They're laughing. But at the end of the day, guess who won of the four?

Tony Mauro: One of you guys or his wife?

Speaker 1: His wife.

Tony Mauro: His wife. Yeah.

Speaker 1: Because she was slow and steady and rock solid the entire way, right?

Tony Mauro: Yeah.

Speaker 1: So, I thought that was an interesting lesson. And he got the hole in one. He was like, I am feeling it. I have got this game figured out today. And she was like, I'm going to go with the tried and true principles. And she ended up winning. And that made me think of financial planning, the hole in one, or I guess a big hit, I guess some sort of big windfall, picking a stock or something that does really well. It's exciting. But slow and steady or the tried and true principles is what's going to get you where you want to go.

Tony Mauro: No, it is. And I haven't had any hole in ones in my life. I know a lot of people that have, my father's had two, my brother Tim has had two, and I witnessed one of his. And it was the ugliest thing you've ever seen. It was a ground ball hole in one is what it was from tee to green. But it went in. But you ask the PGA players and they have multiple hole in ones, but they're out there playing for a living and doing it all their life. But like you were mentioning, I mean, even for them, most of the time you see it on TV, somebody will have one in one of those rounds on TV, but very seldom are they the winner at the end of the day. But they can control their games much more than the rest of us, obviously. But for us, I think as it pertains to financial planning, it is like that. Everybody's running around saying, I want the next big thing, or I want to really cash in on something. And every once in a while they'll get lucky and they'll make some money. But if they're going to follow that philosophy from start to finish until they retire, most of the time they're not going to end up very well off. And right now, it's even more prevalent. I mean, as we're taping, the Silicon Valley bank just went under and people were a little nervous and the markets haven't been doing very well lately again, and they're asking for the same thing. Now it's, well, what can we do that's safe? And I could still make money.

Speaker 1:

Yeah. Right. Well, yeah, that's an interesting point because the SVB thing, certainly a one-off and a unique situation I think. Do you see that as something systemic? No one's got a crystal ball. I don't think it will be. And they were not a traditional bank in the normal sense. They had a very select clientele, all tech heavy, tech companies laying off and they got into bond. They got... A lot of the stuff they did, it really burned them. And I think that's, actually, it's almost an interesting lesson in that itself, in still being diversified. They did, as a bank, they did a little too much of the same thing. And it bit them in the hind end. Right.

Tony Mauro: It did. And they did it probably at a bad time.

Speaker 1: Well, the perfect storm. Bad time. Yeah.

Tony Mauro: Scrap the fact that what were they doing and all that. I'm sure it'll all come out. But back to our analogy, I mean it really is the case for diversification and trying to develop an overall plan as we're talking about retirement planning and trying to stay the course and modify along the way, but not relying on hitting that long or in this case, the hole in one.

Speaker 1: Yeah, well I was going to say, yeah, you could jump metaphors here. We could go baseball. Same thing, right? The home run. The home run kings are also usually the strikeout kings.

Tony Mauro: It is. Yeah. So I mean, it's fun to play with. I think the lesson here is make sure that you're developing an overall strategy just like you would... As your golf game improves, you try to strategize your way around the course, not just try to knock it as far as you can. I think that it lends itself to a good plan.

Speaker 1: Exactly. Yeah. I mean, they're sexy. A hole in one is sexy, no doubt about it.

Tony Mauro: Oh it is.

Speaker 1: But hard to come by. And again, I love the lesson that I was taught that day. It was like, okay, you young bucks can hit the ball a mile. Of course you hit it in the wrong direction.

Tony Mauro: That's right.

Speaker 1: But she hits it nice and straight 130 yards and whipped our tails. So little fragile, little looking. She's a tiny little thing, little 70 year old lady. And she just beat us into the ground. If we'd have been playing for money, I'd have been broke because she didn't just beat us, she crushed us.

Tony Mauro: Yeah.

Speaker 1: All right. But so let's go on to number two here and what golf can teach us about financial planning. Unless you're Happy Gilmore, you probably want more than two clubs in your bag. You probably want more than just the driver and the putter because I think that's pretty much all he played with, if you've ever seen that movie.

Tony Mauro: Oh yeah.

Speaker 1: So you need that diversification of a couple of different kinds of clubs. So think about it in that same manner. You're probably not going to use your driver in the fairway, and you're certainly not going to use it in the rough.

Tony Mauro: Right. And I think too, and I've been through a lot of different clubs in my day, and remember when you first started golf, people can probably relate to this is you do only have a few clubs in your bag because you can't hit the other ones. And even now, depending on your handicap, some clubs are hard to hit. But nevertheless, if you're really going to get good, you have to have a full set to really bridge those gaps and distances. That's why we have 14 clubs and you see the really good players. I mean you could get a guy off PGA tour and probably beat me with two clubs. He probably could have two clubs and beat me.

Speaker 1: Oh sure. But he's a pro.

Tony Mauro: Yeah, he's a pro. But for most of us it's the game's not enjoyable, but tying it into the financial planning is, you need some diversification, as we just talked about. You need to make sure you're into different types of investments, generally speaking, not just all cash or all a bond. It serves it itself well with the overall plan, which is what we do with people is once we get all of their financial data, it is saying, okay, based on this and when you want to retire and what you want to do, here's some suggestions. And it's fairly well diversified. I mean, there's some different types of investments because as we see right now in the market, bonds, the rates are up a little bit, more than they ever have been. But that doesn't mean rush out as a 30 year old put all your money into long term bonds. Back to Silicon Valley.

Speaker 1: Back to Silicon Valley. Yeah, exactly.

Tony Mauro: Maybe that's not the best case. But I think that's the main lesson here is you got to have different asset classes, you got to have some different types of things and then monitor those classes because something's always going to be in and out of favor. But by doing that, you really can set yourself up well for a lot less headaches and a lot less tinkering down the road.

Speaker 1: And I've got some interesting stats here on the SVB while we're talking real quick on this. We can, and we'll jump right back in. And these come from bankrate.com and Bloomberg and New York Post. But it basically said, if you're, it's for people that are really worried, a couple of things to just keep in mind, especially with one of the bottom line pieces here, and this is actually from a CFO as well. This is just kind of remember that most large national banks deposits, they diversify their deposits. We were just talking about diversification. And they have kind of a more regulated system and less exposure to investments. And that's really what hurt SVB. They had roughly 56% of their deposits were locked up in securities compared to somebody like Bank of America who only runs it around 28%. So completely different risk profile.

Tony Mauro: Yeah.

Speaker 1: Right. And you could take that lesson to your individual self. So if you are putting way too much, like if you work for a company and you get your paycheck there and they give you stock options there and you have a bunch of invested in the company, and let's say you've got 70% of your life, your income tied up in this company. Well look, think about Enron from all those years ago. Same thing. You have way too much tied up in there and it goes under, guess what happens to you? You go under too.

Tony Mauro: Yeah. It's no different than us. I remember, this actually happened on the golf course. This was before the collapse of '08, '09. I was out golfing in Arizona and I happened to get paired up with a guy who seemed very high up on the chain at General Motors. I mean, flying in the corporate jet. And you can just tell this guy was high up.

Speaker 1: He was fancy. He was rolling.

Tony Mauro: Yeah. And he was mentioning at the time he had all of his retirement and he was probably in the sixties at the time, invested in General Motors stock. And when we got back, it wasn't a year and a half later, I don't know what ever happened to the guy. General Motors filed for bankruptcy. Maybe he got out and was given some things, but couldn't help but think of that guy that's like, because that happened and who knows what could have happened to him. But that could happen to you in any of these types of different types of investments, especially if you're just concentrated in one particular thing.

Speaker 1: Yeah, absolutely. So again, clubs in a bag, diversification, SVB, we're trying it all together today.

Tony Mauro: That's right.

Speaker 1: We're bringing it all full circle in here. So let's do the last one. Have you ever had the opportunity to play with a caddy?

Tony Mauro: I have when I've traveled and it's fantastic.

Speaker 1: Everybody I've talked to that's done it said, wow, it's really impressive. So this one's a pretty easy analogy, right? Because you're paired up with a guy or gal who's a pro and knows that course or whatever the case is, and they help you do all these little things, like reading your line and reading the green and how the putts could break and best choices for this, that, and the other. Well, that's what you do in a sense, Tony, right? As a financial professional, you help with the hazards.

Tony Mauro: We help with the hazards, I mean, we are the financial caddy. And when I played golf at some of the, you go to some of these travel resort type courses and some of them make you get a caddy. Obviously most of us don't play with a caddy in our everyday rounds. But it is a ton of fun because like you say, they know the course like the back of their hand, they're going to be able to tell you from watching you hit two swings, what you should hit on this particular thing. And most of the time they are correct. Every time you say, ah, this guy doesn't know what he's talking about, I'm just going to do what I always do. And then you don't turn out so well on the golf course. I think a lot of it is the same way in the financial area is that can you do it yourself? Can you play without a caddy? Sure. But you're generally going to end up much better off and much more at ease with someone helping you, coaching you around a little bit in your financial life, however that may look for you. So not that you can't do it yourself, but I definitely think you're going to be much more efficient. You're going to probably end up, some people equate it, well, can you get me a better return than I can by myself? That's not really the gist of it, because I can't answer that. It's more along the lines, can we maybe do it or do something good for you in a tax advantage status? Can we make sure that you're on track to hit the goals that you set out to get?

Speaker 1: Yeah, how's your income going to play with social security? What's the best social security strategy for you? How are you going to be tax efficient? Right? It's so much more than just, well, like I guess if you were playing with a caddy and you just wind up saying, Hey, what's the best club for me to use on this hole? Well, there's so much more he has to offer you than just that. If you ask him that same question every time, you're not really maximizing what that caddy can do.

Tony Mauro: No, absolutely not. And like I said, on the course, those guys are fantastic. Besides having a lot of fun, they know the game. They're in the game every day just like we are as planners rather than just guy coming out a couple, well, in my case, traveling.

Speaker 1: Yeah. It's not your cousin Eddie walking out with you going, all right, here's what you want to do.

Tony Mauro: Yeah, no, no, these guys know the game. And if you let them hit a ball for you, generally they're really good players. So I think it goes back to the financial case. It's just like everything else, the people that do it every day are probably going to be better at it than you. And it might be wise to listen and come up with a plan and to work with an advisor.

Speaker 1: Yeah, absolutely. So there you go. There's a little analogy with golf. We even touched on the SVB thing a little bit. And of course folks, if you do have concerns about what's happened this past week, the time we're taping this, we're in the middle of March, we'll be dropping this podcast here this week. With what's going on with these banks, before you take action, don't panic that. That's one thing we don't need to do is people start panicking and running and taking money out of any banks. And that can certainly be what causes issues. So make sure you reach out to your advisor and just make sure that things are okay and have a conversation. As always, there's no crystal ball, no one knows what the future holds, but we want to also not make things worse by creating more panic than it needs to be. I think that was also where they kind of shot themselves in the foot. The minute they reached out to their investors and different tech companies and said, don't panic, that's essentially the time to... That's when they panicked, right?

Tony Mauro: When they panicked. Yeah. And I've been telling all of our tax financial monthly accounting clients and wealth clients that same thing. Don't panic. I mean, yeah, everything's good until it's not. But most of us don't have, I mean, as an accountant, I like to look, but most consumers aren't going to go and review and understand the bank's financial statements. But I'm telling clients, talk to your banker. Just ask them, Hey, what do you think I should be doing to mitigate my risk if I've got over $250,000 or whatever. I don't know if you want to go in and say, explain all your financials to me, they're not going to have the time to do all that.

Speaker 1: Right. Right.

Tony Mauro: And even if they're not in good shape, they're probably not going to be, Hey, we're in real bad shape. But I think proactively, like you say, keep an eye on it, ask your advisor, ask your banker. And I don't think you should be running out and just pulling all your money out. Absolutely not.

Speaker 1: No. And I think based on, I've talked with a bunch of advisors already this week, Tony, and they've all said the same thing. There doesn't seem to be any evidence there that this is a systemic problem.

Tony Mauro: No, no.

Speaker 1: Yes. We've had two at the time we're doing this, one on the west coast, one on the east coast, but they are both very specific banks to very specific things. I think the New York Bank really being hurt by the crypto, being too heavily heavy leveraged in crypto. And of course, SVB wound up being too heavily leveraged in bonds they took out, and then they didn't have the stock assets to cover it. So.

Tony Mauro: Nope.

Speaker 1: Yeah, and bank failures, folks, they happen more often than you realize.

Tony Mauro: They do. They do.

Speaker 1: Yeah. It's an interesting chart. We've actually had like 300 plus since the great financial impact of '09. We've had about 300 plus bank failures, and you don't really hear about all of them. You only hear about a few at a time. Especially the really big... You heard it around the financial crisis, obviously in '08, '09, that's what most of them were.

Tony Mauro: Yeah.

Speaker 1: But I think there's been 12 since 2019, and I don't think you've heard about any but this one.

Tony Mauro: Yeah, I've only heard of one other one since and well, it's probably been, yeah, four or five years. And that was just a minuscule little thing. I mean, you could ask clients about it. They'd never heard of it.

Speaker 1: Yeah, exactly. So again, you never know. There's always chance for things to happen. We certainly want to keep our eyes and ears peeled, but we don't want to panic. So if you do have questions, definitely reach out to someone and have a conversation before you take any action. And of course, Tony's here to help, he and his team at Tax Doctor Inc. You can find them online at yourplanningpros.com. That's yourplanningpros.com. He's got 27 plus years of experience as a CPA, CFP, and an EA. And he is, well, he's a tax doctor. Tax Doctor Inc. So check him out online and we will see you next time here on Plan with the Tax Man. Thanks, Tony.

Tony Mauro: All right. We'll talk to you later.

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.

Are you confident that your financial plan is complete? Many people believe they have a solid plan in place, only to realize later that they've missed important areas. From not accounting for long-term care expenses to overlooking the impact of taxes on retirement income, there are many ways a financial plan can be incomplete. On this episode, we'll be pointing out the most common areas people overlook when planning and provide actionable tips to ensure that your plan is as comprehensive as possible.

Important Links

Website: http://www.yourplanningpros.com

Call: 844-707-7381

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Transcript Of Today's Show:

Speaker 1: Welcome into another edition of Plan With The Tax, with Man Tony Mauro and myself here to talk about the incomplete financial plan. Are you confident that your financial plan is complete? Most people believe that they have a solid plan in place only to realize a little later on that maybe they've missed a few important areas. So that's what we're going to do in this episode. Point out some of the most common areas people overlook when planning and hopefully provide a few actionable tips to ensure that your plan is as comprehensive as possible. What's going on, Tony? How are you buddy?

Tony Mauro: Not too bad. Coming out of the busiest time of tax season. Still got some ways to go, but-

Speaker 1: It's early March, time we're dropping this. So you still got a few weeks, right?

Tony Mauro: We still got a few weeks left and we trickle into the summer months with some extensions and whatnot.

Speaker 1: You're right, and the heavy throes of it right this minute. So as always folks, do your CPA, and your financial professionals, and tax preparers a favor, try to get that stuff to them as early as possible. Don't be like me and wait till April the 12th or something. They don't like that so much. But if you need some help reach out to Tony and his team at yourplanningpros.com. They are obviously Tax Doctor Inc. Is the name of the company. They are a Des Moines professional alternative, and you can find them online yourplanningpros.com. So let's jump into a list here. I've got a few different things to run through, like I said. Maybe you have some of this going on and it might make your financial plan incomplete. So the downturn we've experienced in '22, that was a rough year obviously for the market. And when it's the early stages of retirement, Tony, it's more detrimental and people [inaudible 00:01:38] are aware of that and why that is something called sequence of return. So let's talk a little bit about why it is a bigger problem if you are retiring in a down year, like in the early days of your retirement versus later.

Tony Mauro: And in simple terms really, say you decided to retire at the end of '22. And we did have a down year, although years before, this is different because we've had such a run-up, but if you retire and in the early part of a long prolonged downturn, presumably you've generally got some years left to live and it's going to be very difficult, because you're going to need this money to supplement your living to make that up without taking a lot of risks. And so generally, you don't want to be overly aggressive, I would say. And obviously if you're 90 years old and you have a downturn, it's pretty easy to see. It's a lot different if you're than you're 65 or 70, because you're a little closer to the end. But really you want to make sure that, again, in these early years that you, as you're getting into retirement, even before that, you're switching things up. So number one, hopefully that doesn't happen or if it does not really going to affect you too negatively. But we do see that a lot.

Speaker 1: Oh, for sure. And so basically, because, correct me if I'm wrong on this, Tony, but it's like you're basically, if you're going through a major drop, if you're going through what, I don't know what we were doing, let's say 22% or 20% last year or whatever. In the early days of your retirement, it's really going to scramble up your picture, because you're tapping your portfolio as it's losing or after its lost value. And then you're having to sell more investments to possibly raise money to fund part of your lifestyle, whatever portion of your financial plan that needs to do. So it's this double whammy. So you're draining your savings more quickly, but you're also leaving fewer assets in those set accounts that can also regenerate more growth. So it's almost maybe even a triple whammy.

Tony Mauro: It is a little bit of that because, yes, with that, if you're already down say, I don't know, 15, 20%, then you're taking out 5 or 6% or whatever that might be, really starts to drain the portfolio quickly. And if that's your main source of retirement income, you have to make sure, well obviously the big one is you're not going to run out of money but it's, again, being different. If you're 90 and all of a sudden you have a little downturn that's not as detrimental.

Speaker 1: And downturns do happen. We can ride these out, but just something to be aware of, which again is where the planning comes into place. Because people sometimes will say, "Well, when you're setting up your income strategy, which horse are you going to ride first? The social security horse or your own horse." So some people will say, "Well, I want to wait social security to maximize it at 70," but maybe the strategy looks better depending again on the environment as you're getting close to retirement to maybe take social security a little earlier and right ease off of going into your own accounts until later. Again, it's all timing and it's all strategy.

Tony Mauro: It's all strategy especially with the incomes that you can't outlive, which are few and far between today. Social security and then some of us have pensions that we can't outlive, but most don't now. It's social security and whatever you've accumulated in your 401ks or savings. And so it takes a little more savviness to come up with a good plan.

Speaker 1: So sequence of return risk can certainly be a problem if you don't have that taken care of and you have it in complete financial plan. And then of course we can add to that conversation we just had by saying the lovely inflation effects over time, even normal inflation, Tony, let alone what we're dealing with right now.

Tony Mauro: So I think this is another bad whammy, if you will, especially as we're recording this, we all know what inflation has done for the last year and a half or so.

Speaker 1: I think it actually, if time we're taping this or we're just happened a little bit, I think the January, oh, that's right. It was January's numbers. We don't have March's yet. Oh, excuse me, February's yet. It was back up a half percent so.

Tony Mauro: It was just about, yeah. And it's trickling back down, but again, take the scenario of a retiree, they could be down 15, 20%, they're trying to take money out and by the way, now stuff costs a lot more.

Speaker 1: Yeah. So you're down 15, you're pulling out 4, let's say you're using the 4% rule or whatever, and then you're paying 7% more at the grocery store. It's just not-

Tony Mauro: It hurts you.

Speaker 1: And you wonder why people are stressed, right?

Tony Mauro: Yeah. This is why people are stressed and this is why, although I try to make a case for people that you got to try to outpace inflation a little bit, even when it's low and it's hard to do now and be conservative because it's kind of high.

Speaker 1: Trying to find some vehicles that'll help you do that for sure. So yeah, you've got to have it. So again, if you're putting a plan together, you've got to be working with an advisor who's taken into account normal inflation, just at least nothing else they're planning for. Because if we can go into that simple conversation of, hey, if it costs you $5,000 a month to get by now, and even in normal inflationary times, well in what? 12 years? That's going to double, right? 10, 12 years, that's going to double. So then if you have a 30-year retirement, that's going to triple. So you got to make sure that you've got something in there helping those accounts grow to deal with inflation. And then medical cost is going to be number three on there and that typically outpaces regular inflation. So you certainly got to have that accounted for.

Tony Mauro: Yeah, you do. And it seems like as I'm looking through the list here, nothing's good, but we'll talk about anyway, because I think it's important to people understand some of these potential things that could become quite catastrophic and medical I would think would be one of them. Obviously as you retire generally your medical costs are going to go up. People are living a long time today where they're keeping us alive. And even my own father, his medical costs are up, he takes a lot of pills and things and I still think he's fairly healthy at 81. And so his costs are up. And so that eats again into his disposable income or his monthly income coming in. And again, just pile that on with everything else we just talked about, which we've got more here. It's something that you got to start thinking about because, and that's not even including some of the people that are in poor health and whether it's hereditary or something else, it adds up quickly.

Speaker 1: Well, and then of course number four is the possibility of tax increases. So just like inflation or whatever, we want to be able to try to retire in any environment, because we just never know what's, again, if you live 20 years or 30 years in retirement, you're going to see multiple administrations, which means you may see multiple tax code changes and we all know we're broke, the country's broke and we're spending money like it's water. So the likelihood of tax, even if they do nothing, Tony, the taxes are going up '26. So if you're not addressing future tax increases with your financial strategy, you are leaving an incomplete plan on the table.

Tony Mauro: And I do think it'll be interesting, we're still a few years away from '26, but unlike you, if somebody's just going to ask me, I think that they'll let a lot of these things expire and taxes will be going up in some form or another. And like you say it and as the time we're taping this, they just have been fighting over and delayed till June or, I don't know if they delayed it, I can't remember on the debt ceiling, but I think it comes due again in June or something. And some people want to keep borrowing, some want to cut. Obviously we spend more as a country than we're taking in. And I think we've talked about it a little bit before, the politicians never want to talk about, hey, it's like any other business. We don't take in enough to pay our bills. We either need to stop spending, or we need to increase our cost, or tax us more. So I can't imagine them going down anymore, but I'm usually wrong whenever I say that, I got to think they're going up in the future. And like you say as retirees, or in the rest of us, it's going to hurt you, because again, there's another little piece coming off before you get to spend anything.

Speaker 1: Yep, absolutely. More than likely it's going to be the case probably for quite a while. So we may not see rates this low again for a very long time. So you want to take advantage of it, which leads into number five, because you may want to take advantage of the tax rates now because there are challenges that present themselves with RMDs. Obviously we've talked a little bit about the SECURE Act. We're going to do a bigger, more in depth one later on, but they've pushed the age back again, so now it's 73 for those of born before '59, those born after '59, it's going to be 75. But a lot of people are in good shape and they don't want to take these Tony, they're like, "Well, I don't want to have to take money out." But they require it to require minimum distribution, so maybe taking advantage of the tax rates and doing Roth conversions, which is why that's been a very popular conversation piece for the last two years.

Tony Mauro: It really has. And we're talking about that more and more with people that do have sizable amounts is going a little bit against the grain and saying, well, even though you don't have to do it until 73 or 5 now, maybe we want to, at least filling up the tax bracket you're in, so that you can pay it at a lower rate, because that way it's now already been taxed and we can figure out something else to do with it. But if taxes go up and then all of a sudden you got to start taking money out, well again, that that's less in your pocket. And I think that's a mistake if you just blindly say, well, I'm going to wait because I don't want to do it right now and pay taxes. Sometimes it's actually better to pay a little than more later.

Speaker 1: And the likelihood, number six, that we're going to have a long-term care event just continues to grow. Two out of every three people, seven out of every 10 are going to have some event. It doesn't mean a nursing home, Tony, but it certainly means some sort of an event. It could be a short-lived event, it could be a longer event. It could be someone just coming out to your house for a few weeks. But either way, you may have to look at some sort of coverage on that. And it is expensive. People start looking at different alternative life insurance policies or different kinds of ways to possibly fund this.

Tony Mauro: And this could be a whole topic in and of itself as many of these could. But I would say just off the cuff, the best way to do it is try to protect, depending on where you're at of the income spectrum, with some sort of insurance while you're young enough where it's still relatively affordable. If you're waiting until 70, 75, if you can even get longer term care types of insurance, it's going to be extremely expensive. But a lot of people buy it when they're young and a lot of people now are using it to stay out of the home, the nursing home that is, is assisted living, people coming into your house and at least providing some benefits there where they can at least age in place and hopefully stay there. But yeah, if you don't have this accounted for and you have to go in, even if you're coming out and we're not talking nursing home here, but just for some care, it's like the medical costs, extremely expensive to do. And a lot of times Medicare doesn't cover a lot of this, so they're going to be looking for other insurance policies or your pocket.

Speaker 1: Absolutely. So you got to have all these pieces in there to get that financial plan in a complete status versus having some of these little pockets or holes that can certainly derail things. And Tony, we were talking a little bit about inflation and we were talking about economic times that we're in right now, this is March's episode of '23. There's still a lot of conversation about tons of tech companies, Walmart, a lot of places have laid off, Amazon, I guess that's retail and or tech. They've let a lot of people go already in the first quarter of this year. So the possibility of a job loss and what it could do to your retirement plans, especially if you're a couple of years away, let's say you've got five years or left and you think, "Okay, hey, as long as I can hang on to this job for the next five years, we're [inaudible 00:13:41]. But you never know, something could happen.

Tony Mauro: Yeah, it could. I'm in agreement. The people listening to this from around here will know what I'm talking about. But we have a huge Wells Fargo presence here in Des Moines and I don't know, 18, 20,000 people here total. And they've always been downtown. Well, they just came out and said, "We're moving everybody out to the western suburb campus and we're getting rid of these buildings," but they are laying off a lot of people. And of course, it's like 4 or 500, which doesn't sound like that many if you're talking about these giant companies. But here in Des Moines it's anywhere, it's a lot of people that, like you say, if some of these people were five, eight years from retirement, then thinking they were going to have this, well, it's like, "Okay, now what do I do?" Yeah, 55 60, nobody wants to hire me and I don't have an income. Maybe my skillset newer employers want. And that poses a real, at least, concern. Best way to combat it is obviously keep your skillset up, assuming you still want to work and stay nimble enough where you know can get out and get something else, but I don't think it's easy. The other way to do it too is have the emergency fund. We talk a lot about in planning of three to six months, or maybe even a little more to help you decide, get you through paying the bills until you can at least find something. But...

Speaker 1: Definitely got to have that, you got to have that emergency fund in place. Hopefully, if nothing else, COVID maybe taught, hopefully, many folks that it was going to be important to have some emergency funds sitting there if they unexpectedly lost a job for 2, 3, 4 months. So definitely-

Tony Mauro: I got-

Speaker 1: Go ahead.

Tony Mauro: Sorry for the interruption, but I was going to say the other thing too, how many of us out there, probably a lot of people can resonate. I been on my own for so long, I've forgotten what it was like, but gone are the days that people go to work and can feel like, "Well, if I work hard here, I'm going to be here for 50 years and I'm going to ride off into the sunset," because a lot of times it's companies, they just say, "Well, you know what, we're all about the bottom dollar and well, we're going to cut that department, or we're going to consolidate and do this." It doesn't seem like people have that safety anymore that they used to, and-

Speaker 1: It's definitely more rare. Pensions have been dying since the early '00s, late '90s, early '00s. And I think longevity in corporations, 30 and 40 year jobs have been taking that kind of hit for the last 20 plus years as well. And it's a big jobs market or it has been. Emerging markets and industry and all different kinds of things, but we also like usual, we oversaturate in some areas, other areas get to suffer and then they start to balance out. But it's certainly something to think about. And I think one thing I tell people all the time is, if you're really worried about something and you have any mechanical inclination skills, we sorely are going to be in source or shape for electricians, and carpenters, and plumbers, and things. It may not be the sexiest sounding thing, but I tell young people all the time, "Hey, if you don't think college is right for you, pay attention to in that industry sector, because a good contractor's worth their weight in gold."

Tony Mauro: We have a lot of commercials airing right now. I know we're getting off the subject, but if you can come and work hard, I think it was for heating and air conditioning. You become a journeyman, you can make a good living, a real good living, and you're always going to be in demand. But I think that, yeah, you're right, here, these industries are suffering. They can't find people that want to go do it. Everybody gets-

Speaker 1: They don't want to get their hands dirty. There's a young gentleman here in my area, he's been doing concrete for about seven years and he's only like 27 years old and he is just killing it. He's just making money hand over fist, because he does a great job, he and his, team and they show up and they get the work done and he's like, "Yeah, I don't have student loan debt and I don't have all that stuff." As a matter of fact, he's living in a half a million-dollar house and he's 27 years old while his best friend has got $300,000 in school debt.

Tony Mauro: Yeah, I've always said there's a ton of different ways to make money, make a living. And if you're good at business, if you're good at that kind of stuff, and you can run a good business, you can make as much as, or probably more and have a different type and a great lifestyle than somebody works for corporate.

Speaker 1: But entrepreneurship is not for everybody.

Tony Mauro: Not for everybody.

Speaker 1: You got to know who you are. You got to certainly know who you. And that goes a long way towards a good complete financial plan, whether it's a financial strategy while you're still working or in retirement, knowing who you are and being honest about some of those things can certainly help you and your advisor plan accordingly. We got a little sidetracked, but I think it still brings back in the nature of the beast of just money and how we take care of ourselves and how we strategize for the future, so. Last one, we'll just do it real quick and just that's passing assets as smoothly as possible to future generations. That's really just being tax smart, tax efficient with whatever you've got. So if you're wanting to leave that 401(k) behind to your kids, well the Stretch IRA removal from the first SECURE Act may say that you need to change that strategy a little bit. Things like that.

Tony Mauro: And that area alone should be enough where you should be talking to your advisor, especially if you know want things to happen a certain way. And on top of that, you got taxation and some other things. So to go about that blindly, I think you're really, to make it short, going to be in for real surprise depending on how you do it. So please go out and get some advice on, well on all these, but that one for sure.

Speaker 1: Yeah, tax efficiency in retirement. Some people say, "Well, I'm going to leave my," joke and say, "I'm going to leave my kids a tax bill," or "I'm going to leave them a credit card statement," or something like that. But I think at the end of the day, we all truly just want to, if we're going to leave a legacy, we want to leave it as efficient as we can, because God willing, we lived a long life and by the time we're leaving something to our children, they might be grown adults in their prime earning years. They might be in their 40s or even 50s in their earning years. And so you don't want to hit them with putting them in a higher tax bracket if you can avoid it. So again, efficiency is the name of the game, strategy is the name of the game. So if you want that complete financial plan, make sure that you're checking off some of these items on today's list. And if you need help, as always, stop by Tony's website, get in touch with he and the team at Tax Dr. Inc. You can find them online at yourplanningpros.com. That is yourplanningpros.com. Don't forget to subscribe to the show on Apple, or Google, or Spotify, whatever podcasting platform app you like to use, you can find our show there, Plan with the Tax Man, and that just lets you catch future episodes as well as check out some past ones. Tony's been helping folks for 27 plus years, great resource. He's a CPA, CFP and an EA, so certainly got a lot of good skillset there to help you out. Tony, thanks my friend. As always, I appreciate you. I hope you have a lovely start to March and good luck with those taxes, bud.

Tony Mauro: All right, we'll talk to you next time.

Speaker 1: Yep. We'll see you in late March 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.

Retirement can come with a lot of tax questions and concerns. From understanding the tax implications of withdrawing from your retirement accounts to minimizing taxes on investment income, it can be overwhelming. On today’s episode, we’ll break down the top ten tax questions retirees are asking in 2023. Before you file your 2022 taxes and plan ahead for the rest of the year, make sure to listen to this episode as we’ll discuss some important tax questions that retirees should ask themselves to ensure they're making the most of their retirement savings and minimizing their tax burden.

Important Links

Website: http://www.yourplanningpros.com

Call: 844-707-7381

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Transcript Of Today's Show:

Speaker 1: Welcome into another edition of Plan With The Tax Man with Tony Mauro and myself, here to talk about the top 10 tax questions for retirees, 10 or so, somewhere in that neighborhood, for 2023. I mean, hey, it makes sense to go ahead and have this conversation with Tony. It's Plan With The Tax Man for Pete's sake. We got to get into that conversation with him. Tony is a CPA and a CFP, an EA of 27 plus years in the industry. We're going to go through this. Right of fact, it's right in the middle of tax time. We're taping this on Valentine's Day. Hopefully everybody has a good Valentine's Day. It is getting ready for tax time, but Tony, let's break down a few of the top questions and just help folks with a few things to think about to get themselves ready for not just the annual tax prep, but also the actual year long tax planning and things as we move further through retirement, not just the history look of that thing. How you doing my friend?

Tony Mauro: I've been doing good. You say Valentine's Day today and-

Speaker 1: That's right.

Tony Mauro: Got a lot of people coming in, dropping off their taxes. Now that everybody's starting to get most of their documents, their focus is-

Speaker 1: Oh yeah.

Tony Mauro: And of course we just had the Super Bowl. With all the ads on the Super Bowl, everybody's thinking about it now all the sudden.

Speaker 1: Yeah. True. Very true.

Tony Mauro: Busy.

Speaker 1: And in what you do, because you have both sides of the coin really, because you are a financial planner as well as a CPA, you look at really this stuff through multiple lenses, which I think is a nice benefit as well. And tax prep is that annual thing, but most CPAs look at, that's history, right? It's like the year-

Tony Mauro: That's right.

Speaker 1: That was. Whereas I think working with someone who does financial planning and the CPA, they're not only taking care of the past year, but they're really looking at how things are going to affect future years. So let's dive in, talk about some of that from that aspect. Let you give us, 'cause there's a lot of them here so we'll see how many we can get through, but tax implications of withdrawing money is number one from different accounts. This is important because we talk about bucket strategies. People are used to hearing that. Well there's also kind of tax bucket strategies if you will.

Tony Mauro: Yeah there is and all of these things we're going to talk about I would caveat right off the bat is to make sure, especially as a retiree, you're talking to your advisor, whether it be your financial advisor, your tax advisor, or both.

Speaker 1: Right.

Tony Mauro: 'Cause all of this really can affect your taxes negatively if done improperly, which I have seen a lot, but taking money out of retirement plans, the IRS doesn't make it easy for us 'cause they have different rules for almost everything.

Speaker 1: Right.

Tony Mauro: And depending on which type of retirement plan you take it out of, for example, say you're starting to pull money out of your 401k and it's just a traditional 401k, that money's never been taxed. So that's going to be added to your taxable income, which you're probably not going to have any penalties on it if you're above 59 and a half, but you want to make sure that you're not just blanketly pulling a bunch of money out and then you've got other money coming in as well and all the sudden you got a huge tax bill. That's the other thing. A lot of this leads to surprises at tax time if not done properly. So you have to pay attention to that 'cause the 401ks are different than the roths. They're different from just pulling money out of a taxable type of investment account, things like that. All of this should be taken into account with some tax planning.

Speaker 1: Well how you, and where you, pull money from is going to affect number two, which is social security benefits being taxed. People still get very confused by this. So can you explain to us some of the rules on this, on how it works because this is a thing. It can happen.

Tony Mauro: It can happen and a lot of people get confused on them reducing your social security versus taxing your social security. And so if you are full retirement age, and it depends on all of us now or depending on when you were born, but once you're full retirement age, they can't reduce your benefits, but they can and will tax it depending on how much other income you have coming in from other sources like we just talked about in number one or maybe you're still working, things like that. So what happens is is in a nutshell, if you make a little too much money from other sources, then all the sudden they have this kind of backdoor tax, they start taxing your social security. They're not taking your social security, it's just like income. They're just taxing it. The tax is not 100%. So it isn't like you're being robbed completely, but it does make a difference because a lot of people aren't withholding anything from their social security benefits. And then if they add it to their income, then all of the sudden, again, they have that surprise tax bill and they're asking us, "Well, hey, what happened?" And then we say, "Well your social security, part of it's being taxed or they can tax all the way up to 85% of it."

Speaker 1: Yeah.

Tony Mauro: Again, people get confused, "Oh, my God. My tax rate's 85%." No. They're just taxing 85% of the benefit at whatever your tax rate is.

Speaker 1: Right. And so it's based on income. So how you're pulling money out of your other retirement accounts. So there's ways to be strategic so that we're not getting too crazy and not hitting that highest number on social security, right?

Tony Mauro: That's correct. There's different ways to pull money out and then at least fill up certain, well we call them tax brackets or buckets because-

Speaker 1: Yeah.

Tony Mauro: Unfortunately for us, there isn't just one tax rate. For every filing status there's five to seven. And so it's very easy to jump into the next one and then get a bunch of money taxed at a little higher rate. So-

Speaker 1: Yeah.

Tony Mauro: That's where the planning comes in is trying to maximize that.

Speaker 1: Yeah. I think most people still get confused by that too. If you're, let's say, in the 22% tax bracket, not every dollar you have coming in is at 22%.

Tony Mauro: It's not.

Speaker 1: It's incremental. Yeah.

Tony Mauro: Yeah. It's incremental. And so you got your marginal tax rate, which is the tax on the next dollar you receive. And then your effective tax rate's kind of the average. But even for somebody that's single, let's say, the top 22% rate's about 89,000 for '22, but anything over that, any dollar over that, then everything's 24 and then it jumps all the way up to 32.

Speaker 1: Yeah.

Tony Mauro: So it can get taxi in a hurry.

Speaker 1: Yeah. Gets heavy. Yeah. It starts to hurt.

Tony Mauro: Yeah.

Speaker 1: All right. Number three, taxation of pension. Is that different at all? Is there anything for folks to think about there or know there?

Tony Mauro: Well, again, it's a technical thing depending on what type of pension you have.

Speaker 1: And some states waive this, right? Depending on where you live, yeah.

Tony Mauro: Iowa now on the state level is not taxing pension income for retirees. Yeah. They just passed this, by the way, for '23 and beyond. I think it's a way to, because they always tax retiree income before maybe to try to keep people here in their retired years. But, some of it though is even taxable at the federal level. For a lot of our big pension, which here is IPERS, some of distribution is taxable at the federal level and some of it is exempt. And of course that's up to IPERS. They figure all that out for you, but if some of it's taxable at the federal level, again, you've got that same deal of now all the sudden we got to make sure that we're not getting a tax surprise and we don't have enough withheld from our pension incomes.

Speaker 1: Okay. All right. Number four, the Secure Act, the first time, and also the Secure Act 2.0 passing. Anything there that could affect income and taxes? Obviously they moved the RMD age so it does-

Tony Mauro: RMDs, yeah.

Speaker 1: Give you a little bit of wiggle room for some other strategizing. Anything there you want to enlighten us on?

Tony Mauro: Well, I've been talking to a lot of people about the RMDs with the Secure Act, which I think for a lot of my clients really is going to benefit them 'cause a lot of them don't really need or want to start taking the money out. And so if they can postpone it, I think that's an advantage, truly of course. I think too though, they've changed some things with the Roths and some incentives to participate, but as far as retirees go, I talk to them mostly about possibly deferring some of this and keeping it growing a little bit longer if they can.

Speaker 1: Yeah. I know there's lots of different little things in there. So it's certainly wise to. And since the Secure Act 2.0 is still pretty new and they're still trying to decipher a ton of what they put in there, it's certainly worth making sure that you talk with your financial professional and CPA as to anything that might change for your scenario. Any special tax deductions or credits that are available for retirees at all?

Tony Mauro: Well, they are and backing up to the Secure Act, I think we were talking about last time possibly doing a podcast on that 2.0 Later in March, April, once kind of some of this dust settles.

Speaker 1: Yeah, we can do that.

Tony Mauro: It can get technical, but we don't want to get too far off in the weeds with it, but something to think about, but tax deductions or credits for retirees, there are some. The tax deductions, of course, a lot of retirees, depending on what their other income is, they have a lot of out-of-pocket medical. They are paying for a lot of supplemental health insurance that we see, at least in our client base, is enough to trigger deductibility on some of that. So we always tell them to make sure that they're keeping track of that, where the younger people, they can't get over the thresholds very much. There's those. There's some credits if you're disabled. Oh, of course if you're blind and things like that that you might be able to take advantage of. Again, if you're even remotely asking, I wouldn't be afraid to ask your advisor. It doesn't matter if you think it's kind of ridiculous. There could be some deductibility there. So I would definitely ask if you've got some kind of situation.

Speaker 1: Yeah. And they increased the standard deduction, correct, for '22?

Tony Mauro: They did again based on inflation here, just looking at that. For married filing joint now it's up to 25,900. You do get an additional 1,404 if you're 65 or older. So that kind of bumps it up a little bit for you too.

Speaker 1: Gotcha.

Tony Mauro: It's theirs and same way with being blind, but I think the biggest thing that we see besides that of course would be the medical for most of them. Another one too, I don't even know if it's on our list. Let me look down. Yeah it is. It's actually number eight, but we could talk about it a little bit 'cause a lot of retirees like to make contributions to charity. It seems like moreso than maybe the younger people. And so I always encourage them to keep track of that, both cash and non-cash because-

Speaker 1: Yeah.

Tony Mauro: They do add up and a lot of them are very, very charitable.

Speaker 1: Yeah. Tax benefits for charitable contributions also. QCDs, which could help you with your RMD, satisfying that goal. So yeah. That was going to be on the list so that's good you touched on that one as well. So that's certainly something you could look at. How about moving? So that's another one to consider. So maybe if you're getting close to retirement or maybe this is the year you were going to retire and you're considering, or maybe it's next year, and you're considering moving, I don't know if I would let the ultimate decision be that I'm moving to, let's say, Florida just because the tax is different. I'd be going because I'm cold and the tax is different.

Tony Mauro: Right. And the tax. It's an added bonus.

Speaker 1: It's an added bonus, but it is something to consider.

Tony Mauro: It is. And again, Iowa is now, of course I've been here all my life, but now all the sudden it's a little more attractive as a retiree, other than the cold, is that you've got this non-taxability of retirement benefits, which for most retirees, it's like a state like Florida. Now the difference is any earned income in Iowa, if you're retired, you're still going to pay taxes on that. Whereas Florida and some of these states with no state income tax don't have that. So again, you got to kind of take a look, weigh all the options there.

Speaker 1: Okay.

Tony Mauro: Because I don't know. A lot of retirees in Iowa, they kind of just work for what I call mad money to have, and here that still is taxable, but without having their retirement income taxable and social security now they're still kind of elated, but it is important.

Speaker 1: Yeah.

Tony Mauro: Yeah.

Speaker 1: Yeah. Something to factor in there. I think they're going to get their dollars one way or another. You think it's like, "Hey, I'm moving to this state 'cause there's no income tax," but it may have a higher cost of living or it may have different kinds of things. A friend of mine moved to Colorado and he's like, "Wow. I can't believe how expensive it is out here." And it's just some of the little things that he was surprised by like tagging his vehicle and the insurance on the car. There's massive difference versus his prior state. So always little things to consider in there. Let's see. We're talking about charitable contributions. What about gifting money? Any tax considerations there if you want to gift money to kids or grandkids?

Tony Mauro: Yeah. This is an area another, just like social security, I think with a lot of confusion. People always ask, "How much can I gift to my kids without paying income tax?" And I say, "Well, if you really want to know, the threshold's extremely high," because they kind of confuse the gift tax exemption every year, which I believe is like 16,000, but I got to refer to my charts-

Speaker 1: I think it is. Yeah. I think it's either 16 or 17 that you can give per person. Yeah.

Tony Mauro: Yeah. So I tell them, I said, "Well, you can gift that much per person to avoid the have to file a gift tax return." But all the gift tax return really is is a filing of the return telling the government that you used up a little bit of your lifetime exemption, which I believe is for a married filing joint about 22 million.

Speaker 1: Yeah. It's crazy high right now. Yeah.

Tony Mauro: It's very, very high. And considering, yeah. Here it is. I finally found it. So the gift tax for '22 is 16, '23 it's 17,000 that is. So for most, what we tell them is that if you and your wife want to gift your son and his wife say money, you each could gift them, each one of them, 16,000 or 17,000, it's 34 a piece. So you're talking about a lot of money. A lot of people can't gift that much-

Speaker 1: Right. Yeah. That's pretty hefty. Yeah.

Tony Mauro: In one year. But even if you go over that, you've got some farmland or something like that, you want to gift them $200,000, you're not going to pay any gift tax on it. We just have to file a return to keep in the good graces of the government and tell them you used that much, but-

Speaker 1: This could be a nice future strategy though, Tony, if you're looking to bring down your complete total net worth because of, let's say, because of RMDs, because of maybe converting money or just reducing the estate size overall, if that's part of the strategy, this could be a nice way to do a little bit of that too.

Tony Mauro: It is. If you've got somebody with enough of an estate to possibly have estate taxes later on, the gifting and using the annual exclusion amount is a great idea along with some other things 'cause you got to get some of this money out of your estate in order to escape that and a lot of people are very content with just gifting the exemption amount every year.

Speaker 1: Yeah. There you go.

Tony Mauro: At least trying to get it out of there.

Speaker 1: Right. Okay. We talk about individuals a lot. Sometimes we should do probably more for businesses considering you are a business, but any tax things to discuss real fast for small, maybe not even a business, but maybe retirees who go into a small or a side hustle. So they're in a retirement and maybe they're selling paintings or they're selling arts and crafts that they've made. Whatever tax ramifications you'd like to share with us from a small business or side hustle kind of thing.

Tony Mauro: I would say for small business, I would keep it simple. I wouldn't go into incorporating things like that unless all of the sudden really started taking off. A lot of people confuse doing something for a hobby with trying to make money and have a profit motive. In other words, they'll come in and say, "Well I've got this business. Here's all my expenses." And we say, "Well, where's the income?" "Well I don't make any money." And I say, "Well, where's the sales?" "Well I don't even sell anything." "Well that's a hobby. You can't deduct that." So you got to have a profit motive. Not to say you can't lose money.

Speaker 1: Right.

Tony Mauro: And you can deduct that against other income, which is good. So if you are doing a side hustle, keep good records to see if you're making money or losing money. Obviously if you're losing money, it's a great tax deduction, but eventually if you're losing money, that's money going out the door.

Speaker 1: Right.

Tony Mauro: You certainly don't want to do that forever. But on the flip side, income-wise, it's going to be taxed and you will pay into social security, believe it or not, even if you're 75, 80 years old, you got to pay back in, which a lot of retirees don't like. You can escape it though with passive income like rentals.

Speaker 1: Okay. And speaking of, final one here, the number 10, any tax issues to discuss if you are looking, obviously a lot of people, the housing market went kind of crazy definitely last year. There was still a lot of things pretty high. Maybe if you sold your primary residence or something like that. Anything to consider or ponder?

Tony Mauro: Well I think the tax ramifications, here in Iowa for the most part, it may not be the same in some of the higher priced cities, but you can, for married filing joint, if you've lived in the home for the last five years, it's your primary residence, you can exclude up to $500,000 of capital gain before you have to start paying any long-term capital gains, which is still taxed better than income tax rates, but in Iowa, most people aren't making a $500,000 gain. And so they can get out of their home and take that gain and, well they can do whatever they want with it. The problem is now as prices are going up, when they move into something else, they kind of end up rolling the whole thing into something new, but at least you didn't pay tax. But, like you were saying though, if you're downsizing, that's when it's better. I sell my home for 700,000 and I paid 250 way back when-

Speaker 1: Right.

Tony Mauro: And all the sudden I got a $450,000 gain and I can go out, I got 700,000, and I can go out and buy something smaller for 350. Yeah. That extra money could go in my pocket and never pay taxes on it, which is a nice deal. That's been around, I don't know, maybe 10, 15, 20 years now, but that never used to be the case. You always had to pay tax when you sold something.

Speaker 1: Okay. So a lot of little things to think about. Again, it's all part of strategizing for just not only the past year, but also future years into retirement. So as usual, if you've got some questions and you need some help when it comes to how to get a tax strategy, to get a retirement strategy in place, make sure that you're reaching out to a qualified professional like Tony and his team. They are Des Moines Professional Alternative, excuse me, at Tax Dr. Inc. And you can find them online at yourplanningpros.com. That's yourplanningpros.com.

Don't forget to subscribe to the podcast Plan With The Tax Man on Apple, Google, Spotify, all that good stuff. And again, if you need some help, reach out to tony at yourplanningpros.com. Buddy, thanks for your time. Appreciate you.

Tony Mauro: Yeah.

Speaker 1: I'm going to let you go 'cause it is Valentine's Day, so I hope you guys have a great day.

Tony Mauro: All right. You guys do the same. Let's talk to you soon.

Speaker 1: We'll see you next time 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.

A million dollars is a goal that many people strive to earn for their retirement nest egg, but how far can that lump sum actually carry you? Today we will be looking at an article that breaks down how far a million dollars go in various states.

CNBC Article: https://www.cnbc.com/2022/12/17/states-where-1-million-dollars-retirement-savings-runs-out-fastest.html

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 another edition of Plan with the Tax Man with Tony Morrow. We are into early February here on the podcast, and we are going to do a fun little episode here on where a million bucks runs out the fastest. We'll put a link to this article on the show notes, but this will be a fun episode to look at this article that was written just before it was written in 2020, and we'll take a look at how it breaks down different states for how far a million bucks will go. This is kind of a fun little exercise, especially for those folks who think, "Well, I need a million dollars, or if I don't get to the million, I can't retire." Well, a million might not get it done in some places, and it might be just fine in others. So that's the point of the conversation. Tony, what's going on, my friend? How are you?

Tony: I'm doing good. It's tax season here. February, always the coldest month for us, and so it's just kind of work.

Speaker 1: That's true. That is true. I teed up on our previous podcast we were going to get into the Secure Act 2.0 passing there on December the 30th, I believe is when it went through of '22. We still got some more stuff we're breaking down. We're going to talk about that probably on the next episode, next episode or two. So make sure you tune back in for all the changes there. Of course, as always, if you've heard some things about the Secure Act changes and you need to make sure you reach out to Tony and have a conversation with he and his team just to make sure, especially around the concept of RMDs. We'll touch on that. Just real quick, Tony, one of the big takeaways, there was a lot of stuff in the new Secure Act 2.0 changes, but they moved the age for required minimum distributions to 73. The short of it is if you've already started taking RMDs, you're stuck taking them, so just keep doing it. But if you were turning 72 in 2023, sometime early this year, you can now wait until you're 73. So you do have a little reprieve. But again, please double-check with your qualified professional before you take any action, and then we'll break down all the rest because eventually it's going to 75 and so on and so forth.

Tony: Yeah, it's going to be phased in. Yep.

Speaker 1: Yeah, so we'll talk about some more of the stuff on that, but I wanted to kind of share that with folks real quick. All right, so let's talk about this fun article here. This was done by... Who did this?

Tony: Well, CNBC put it out, but yeah.

Speaker 1: Yeah, CNBC put it out, but Go Banking did the analysis. Based off the US Department of Labor Statistics. This is a breakdown of where, and again, we'll put the link in there so you can kind of see the color coding, but how many years would a million dollars get you in retirement savings in certain states? I don't think the top three are really shocking that are the worst for how long it's going to last. I imagine anybody could interchange them and think, well, it's going to be Hawaii, New York, and California, and it is. The top three are those. Hawaii with a whopping 11 years, Tony. So if you got a million bucks and you want to retire in Hawaii, if you got a longevity ahead of you, the million dollars is not going to do it.

Tony: Not going to go very far. And I love Hawaii and I go there every five years, and I would love to retire there, but... Well-

Speaker 1: You're going to need a lot of money.

Tony: I need a lot. It's just not going to last that long. And I'd probably go crazy because I would go...the island. But it is interesting because I think that million dollars we talked about at last episode about that, that's kind of that sweet spot. Everybody always kind of shoots for sure. I'm a millionaire and I'm good now once I have a million. And I think if you read through this article, it really gives some eye-opening things. It depends a lot on where you live and-

Speaker 1: And how you live.

Tony: And how you live.

Speaker 1: Yeah.

Tony: So I do think that these top three on the highest side don't surprise me. I think some of the other ones that are especially like Alaska and then maybe the eastern [inaudible 00:03:42].

Speaker 1: I expected Alaska to be high too, because you got to import a lot of stuff, right?

Tony: That's true. You do. Yeah. Yeah, you do.

Speaker 1: It does tend to be coastal. So when looking at this map, folks, if those of you decide not to check this out, we'll just kind of talk you through it. Basically, most of the east coast and the west coast fall in that million dollars won't go so far category. I'm sorry, with Vermont being the best of the high side. And 18 years, a million dollars if you're out in Vermont, will last about 18 years according to this. What were you going to say?

Tony: Well, I was just going to say speaking of the coast and then Hawaii, I always kid people saying that that's the fun tax, the sun tax, but that's where people like to flock to.

Speaker 1: Sure.

Tony: And so a lot of population and tends to drive prices up. So there's some reality to that. I do want to jump to the other side because my infamous state, Iowa, is number five on the list of the lowest places or where the money will go the furthest.

Speaker 1: Almost 24 years. Pretty good,

Tony: Pretty good. But notice most of those states you got for those, just listening, you got Oklahoma, Kansas, Midwestern to Southern.

Speaker 1: The Heartland.

Tony: Indiana, the Heartland, Tennessee, Arkansas, I mean the best one of course. But I believe that's Mississippi, right? MS?

Speaker 1: Is that Mississippi or Missouri? I think it is. I think it's Mississippi. MO, that's right. Yeah, it's Mississippi.

Tony: But Mississippi, it's not a place that I would think of going, but I mean it's a pretty good sized state. But I think the point of all this really is that depending on where you decide to retire, it's going to last you a lot longer if you're just taking this million. Cause I think they based this on the state's cost of living expenses for housing. If you're going to take that money and live off of it it's going to last you for quite a while.

Speaker 1: I mean, I was pleasantly surprised to see Georgia so low down, if you will. So 24 years basically for Georgia, which is a hugely popular state. Atlanta is a massive city, obviously. And I imagine that states that are probably interesting, Tony, because Atlanta probably is more expensive than Marietta, right? So the further away from the metropolis as you are in some of these states, probably the more affordable it goes. Michigan was on the lower part at 23 and a half years. Again, a pretty populous state, a lot of heavy metro centers. Then the states that aren't mentioned, they kind of fall into this range of 19 to 23, 22-ish. And that's states, Texas, kind of surprising that Texas falls into that kind of 19, that right around 20 years. That's where my North Carolina, where I'm at, falls into place. The Carolinas both fall around 20 years. So Texas kind of surprised me a little bit because so many people have been moving there. Now granted this is two years old, this survey, and that doesn't probably take into account the inflation obviously that we saw happen in the last year.

Tony: I think Texas, even though it's not the considered the beach towns in the states, but it is so large and there's so much-

Speaker 1: Massive cities. I mean Houston and Dallas are just... San Antonio's not massive, but there's a lot of people and they're really... San Antonio's a great place to visit and live as well. I have some friends there. So when you're looking at this kind of thing, you're kind of saying, okay, I've got this retirement goal in mind. And we talked, I don't know, probably a few months back about does it make it sense to move to a state that's maybe tax advantaged or that the cost of living. If you live in New York, a lot of people moved to Florida. So Florida falls in that mid-category as well, folks around that 19, 20 year mark. There's a huge reason why people moved from New York to Florida. And it's not just the cold.

Tony: No, it's not. Because I was down in Arizona golfing in November, and a guy who's lived there a long time saying they get a lot of Californians selling these massive real estate places and taking a ton of cash and then moving to Arizona, which it's not on the lowest end of the spectrum-

Speaker 1: It's around the 19 years. Yeah,

Tony: Banking a lot of money, the cost to live is less. It's still got the warmth and you don't have the beaches. I think that makes a lot of sense. But I think another thing in this article is for those that click on the link and read down, CNBC's got a good little retirement planning tool and it's highlighted about halfway down that really you can click on it, punch in a few basic things. You don't even need to grab anything. You just right off the cuff, and it's going to tell you how much you're going to need in retirement. Now, there's a lot more to it than that. That's when you need to get with your advisor and figure out, well, I'm going to be well short, what do we do? But it's an interesting little tool that most advisors, I mean, we have more complex things, but those are more inputs and more time. But I'd check that out if I were you, and of course the biggest thing that stands out to me, which we recommend too, is it's right in about the middle of the article. It says most investors are recommended to say between 12 and 15% of their salary, and many do not. It's down around, well, I get the 4% because that's what my employer matches. Well, that's good that that's better than nothing, but you need to keep going. And it gives you some ideas there in the article as well to a couple of tips, because-

Speaker 1: That's a great point, Tony. That 12 to 15%, somebody hears that and goes, there's no way. I can't survive, especially right now with the inflation we've all been dealing with. I can't survive on putting away 15% for retirement. What are you crazy?

Tony: What I tell him, I get a little sassy with him and say, oh, you can do it. You just have to re-engineer what you're spending your money on. And as Dave Ramsey's saying goes, I think in his book he says have to live like no other. So someday you can live like no other, but you got to take that to heart. You have to put this first and then engineer the rest of your life. But I shouldn't say all, but a lot of people do the exact opposite to get their life all engineering. Now I only got this much to say for retirement. So that's all it gets.

Speaker 1: Yeah, no, that's some good points because it's certainly interesting to figure out what it is that you need to do, how you need to do it. And a lot of it comes back to, we talk a lot on here, Tony, about X's and O's and you like to make the joke that sometimes it's easy for advisors to say, well, it kind of depends and you don't get super specific because everybody's different. So we try to play devil's advocate and kind of go a little bit each way, but the concept of how much you needed a total nest egg really does play in the factor how you live and where you live. Because even if you're in the same area, so let's just go with a lower state, one of the states that was, let's say 23 years, you're in someplace like Indiana, for example, or whatever. And if you're living in Indianapolis and you're going out and doing a lot of things and you're very active in your lifestyle, it's going to be completely different than if you live in Terre Haute and you do virtually nothing, or you live in the middle of nowhere. Or even in my state here in North Carolina, living in Charlotte and doing a lot versus where I live in the country is completely different costs of living. So how you live and where you live plays a huge factor in how much you're going to need for retirement.

Tony: It sure does. And I'm going through it with really right now with my own son, because he's out in Denver and they're young, got married. Very, very pricey. And they're actually all of a sudden looking... Houses out there, I mean, for what they are making at the time, boy, they just don't get much. And they're looking at them back here in the Midwest where they're both from and they're scratching their heads saying, boy, may, maybe Iowa or South Dakota, somewhere a little closer to home in the Midwest, our dollar's are going to go a lot farther. And they're not even retired. I mean, they're 26, 27, they just turned 27. So it's not about just the retirees, it's about I'm not advocating moving and getting out of your state.

Speaker 1: Sure. Right.

Tony: It's something to think about.

Speaker 1: Yeah, you definitely got to factor all these things in there, and depending on where you live, the snowbird thing certainly plays into a factor, even people in Iowa. Sure. Right?

Tony: Oh yeah. Oh yeah, Carrie'd love to get out of here.

Speaker 1: Right? Oh, it's cold. So think about that. And that's one of the reasons why Texas, Florida, so Texas and Florida are in that kind of the same range on this particular article of around right around 19, 20 years, where Tennessee is around that 23 year mark. Those three states have been very, very popular the last couple of years because of the income tax.

Tony: Yes, correct.

Speaker 1: And of course, the temperature, the weather. And then now this, the million dollars, the length that goes, certainly makes it appealing.

Tony: It does. And what Iowa's done, because we're in retirees moving here, not that appealing, or even the ones that have been here all their lives and want to get out is Iowa's just passed a law saying that the retiree income, which is social security, and then pensions and stuff, is not taxable at the Iowa level.

Speaker 1: Oh, okay.

Tony: And Trying to keep people here a little bit.

Speaker 1: And some enticement. Yeah.

Tony: A little bit of enticement. I mean, the weather is a big one as you get older, to the negative, I might add. But all these states are trying to keep people and attract people for different reasons because as we all know, I mean, Iowa's going to get their money somehow. It's not income tax, it's somewhere else.

Speaker 1: That's the thing of if you were moving someplace like Tennessee just for the tax break, that's probably the wrong decision because they're going to get you. Or Florida even, so you moved to Florida, but just for the taxes, and you're like, okay the sun's a bonus. It's still expensive to live, and it's going to be more expensive to live in Miami than it is to live in Gainesville.

Tony: Right. Exactly.

Speaker 1: They're going to get you one way or the other, local level, salt taxes, as you know they're called. To your point about Colorado, a good friend of mine moved from North Carolina to Colorado, and he is like, oh, some things are really great. And he's like, he couldn't believe what it did to his car insurance and just tagging his vehicle. He was like, holy moley.

Tony: And that's the kind of stuff, I mean, that's direct cost of living stuff there.

Speaker 1: Exactly, and that affects your total income outcome.

Tony: It does. And that's the whole point of this article, and obviously it's a slant a little more to retire there, but it's something to think about. I mean, the retirees have a little more to think about than just like somebody my son's age who's just working there. But it is interesting.

Speaker 1: Well, and that's where a strategy and a plan comes into place. And of course, when you're putting that stuff together, you can strategize for some different things. You can say, you can sit down with your advisor, you can talk with your loved one and say, where do you want to retire? And we say, oh yeah, we don't want to live in Iowa. We do want to live in Florida, or whatever. Well, you can still work with Tony and start strategizing for that, because Tony, you got clients all over the country.

Tony: We do. Yeah.

Speaker 1: So it's possible to go through and start calculating and planning instead of just winging it. You don't want to just wing this kind of thing. So it's fun little article. Again, we'll link it into the show notes if you want to check it out. We covered most of it here, but certainly ask yourself that question, where do you want to tire?Where and how do you want to live in retirement can go a long way towards getting that whatever that total number is or that total goal. And as Tony and I said on the prior podcast, really the million dollars probably shouldn't be the concept. It should really probably be how much income do you need to afford the lifestyle you want? So as always, don't forget, subscribe to us on Apple, Google, Spotify, Plan with the Tax Man. You can type that into the search box at any of those apps, or you can just find all the information you're looking for at yourplanningpros.com. That is yourplanningpros.com, where you can check out the tools, tips, and resources Tony has on the website. Schedule some time to talk with he and his team and get started today. As I mentioned, he's a CFP, CPA and an EA with 27 plus years of experience, so great resource for you to tap into. If you need some help and you're not already working with him, reach out to Tony Morrow today. Tony, my friend, thanks for hanging out, have yourself a great day, and enjoy yourself. I'll talk to you in a couple weeks.

Tony: All right, we'll see you next month.

Speaker 1: All right, we'll talk to you next time here on Plan With the Tax Man, with Tony Morrow.

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.

Another year is upon us and it’s a great time to ask yourself 10 questions to assess how ready you are for retirement to kick off 2023. If you’re retiring this year, it’s essential to have some concrete answers to these questions. If you’re still a few years from the milestone, tune in so you can start thinking about these critical conversations.

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 the podcast, it's Plan With the Tax Man time with Tony Morrow and myself here to talk about a 10 point checklist for retirement preparedness, a 2023 edition, if you will, so going to get started. Another year is upon us, so it's a great time to ask ourselves these questions and assess how ready we are as we are rolling into the new year. We're about halfway through the month already, which is crazy fast, and so we're going to bring Tony in and get this thing started. Tony, what's going on buddy? How are you?

Tony Mauro: I'm doing fantastic. Just off the holidays as everybody is and trying to get back into the swing of things and it's going to be tax season before we know it as we record this.

Speaker 1: Right, yeah, exactly. I know we're already halfway through the month as I said, it's like, what in the world?

Tony Mauro: Yeah, it goes quick.

Speaker 1: You and I were just chatting that the holiday break did not seem like it was that long of a break. It was just quick, so lots of things going on and I guess it's just our fast paced world, I guess.

Tony Mauro: Yeah, it really is.

Speaker 1: Next thing you know, something new is going on, but we got 10 on here, Tony, so let's go ahead and start diving in, check to see if we can get these checked off, so we don't go too long with this podcast and talk about some of these. Most of these are pretty major indicators that you need to have on your strategy or plan, and I think that's going to be the overarching theme is, having a plan's going to help you get prepared for these things that are coming fast and furious. Number one, do you know exactly how much income you need every month in retirement? And I think there's two ways of looking at this for things, Tony. When they're coming to see a financial professional like yourself, if they're really anxious to get to retirement sooner than later, they maybe low ball this number because they want to make the math work, so that you'll say good things, "Yeah. You guys can retire." And when you do that, you really hurt yourself in case you're not being accurate or you truly just look at the big ticket items, mortgage, cars, utilities, and you don't truly realize how much... This is a nickel and dime world. We all spend money a lot more than we realize. Do you know how much income you're going to have? Probably not. You're probably wrong. What do you think?

Tony Mauro: Yeah, in general it is, and the whole reason that I even wanted to talk about this topic, this month is, starting a new year. I'm getting a lot of course, and I always do, especially tax clients, whether they're close to retirement or not, start asking some of these questions. Then, when you get in your fifties, you really start asking this.

Speaker 1: For sure. Yeah.

Tony Mauro: I think that most tend to focus on the nest egg and not how much that nest egg may or may not throw off every month and then they have no idea what their bills really are every month. And that's lack of really just trying to, paying attention as to, like you said, all the little nickel and dime stuff we all spend money on throughout the month. If you don't really have a good idea and they're tracking that, you probably should start because I generally like to start with people as to this question, how much are you going to need a month? Rather than, well, you have 500,000 or 700,000, to make this work. We got to start at the end and then work backwards to see if the numbers support that. And I think most planners are going to do this-

Speaker 1: I think that's a good point. I was just having this chat the other day with somebody. It's an interesting point, back in let's say the '50s or even the early '60s when most people had a pension, they weren't focused on a total asset number, it was about the income because you had a pension, you had Social Security, and so if you had a modest savings and somewhere along the way, probably the '80s, we started shifting gears from how much income it is, to how much is our nest egg worth.

Tony Mauro: Yeah, and I think a lot of that's because a lot of these pensions have gone by the wayside-

Speaker 1: Yeah, for sure.

Tony Mauro: ... because they're just too expensive-

Speaker 1: And the greed I think. Well, everybody wants to say, "Now, well, I'm a millionaire," because it sounds awesome and I agree and it doesn't take as much as we thought it used to, to be a millionaire. As a matter of fact, we're going to have fun on our next podcast about which dates a million dollars will go the farthest in, so check out that one as we come out. But I think that's what happens and we singularly focus on something, this big ticket number versus what do we need to just make this thing work, so we can be happy in retirement?

Tony Mauro: Yeah and I think sometimes when you sit people down and we say, "Okay, your nest egg is X, let's sit down and go through this," and they're just floored about, "Well, wow, that money, if I want to plan to leave some or all of it to somebody else or if I'm even spending the principle, then it's a crapshoot of when I'm going to die and hopefully I have enough left." So a lot of variables in that.

Speaker 1: Yep.

Tony Mauro: You got to ask the question right off the bat.

Speaker 1: Yeah, you got to focus that income down and you got to get the number by going through that process because again, most of us tend to low ball that figure and then that can bite us in the tush later on in retirement. All right, number two. You've got the collection of stuff, you've got the accounts. Which one do you pull from first and how much? So, that's number two on the checklist.

Tony Mauro: Yeah. And this makes a big difference tax wise because most of us have taxable accounts and then most of us have, if you've got 401ks and then you've even got Roth's and things like that, is the tax man is there with their handout saying, give me some tax. And you've got to decide and plan what's the most efficient way to take this out without increasing the tax bill. Because again, that cuts into the money that's available for you to go out and have fun with. And I think a lot of people don't give this much thought. They just say, "Well, I'll take out of my taxable one first and save the other for later." And then here come the RMDs when you get a little older and all kinds of things that could hit you if you're not at least talking about deciding which is the best and the least tax invasive I should say.

Speaker 1: Yeah, for sure. And so it is important to figure out which accounts to pull from and when and where because it's going to affect. And these first three really do play all in together, really, they all play together. But number three is Social Security. When do you take it? Well, that's going to maybe depend on how much income you need and which accounts you have and where you're pulling from. It all plays together because maybe it makes sense to delay Social Security and tap into your own buckets or maybe it makes more sense to take Social Security and delay your buckets, everybody's different.

Tony Mauro: Everybody's different. And you know what? I got to say too, people who listen to the podcast probably say, "He never really gives me any straight answers. He always just gives me a lot of options," but it's hard to give a straight answer because this like the other ones, is the same thing. I do a whole webinar on this, taking Social Security and it's about an hour long that I tend to get people on to really go in depth with this because there is some technical things to this, but in the big picture, if you've got money coming in from other sources are still working, it may behoove you to delay taking it, because the monthly benefit does go up. And if you calculate that out as a return, it's not a bad return. But a lot of it depends on longevity in your family, other income sources, just a lot of variables like you said. It's worth, again, spending time there as well. All of these is worth spending time on, but these first three especially.

Speaker 1: Well, and number four is the great multiplier to everything else that's on the list as well. And that's longevity, because unfortunately, it is what it is. Look at inflation right now, we've been dealing with this for the last half year or more, and the longer you live, the more everything gets compounded. And I realize we don't know exactly how long we're going to live, so that's why you've got to stress test your strategy and your plan to go, "Okay, well what if I'm 75? What if I'm 85?" So on and so forth.

Tony Mauro: Yeah. And fortunately now, most planning software has the modeling in it that can do a lot of these calculations extremely quickly to do worst case based on where you're at now and how much you're taking out to give you percentages of, "Well, if I do it this way, I've got an 80% or 90% chance of never outliving my money." And to you, that might make a lot of sense. Well, that covers a lot of scenarios, but if you run some scenarios and it only says 60 or 70% chance of never running out of money, well now it's a little more, well, I may need to adjust some things, but longevity is an important factor. I know with my own father whose now 81, he's concerned about, he's got plenty of money, but I always have to reassure him that his sustainable withdrawal rate, which he's taking, he's never going to run out of money and he could live to be 100 and he'll be totally fine, but a lot of people aren't thinking about this again in the plan. And you sure certainly hate to run out of money and only depend on Social Security for the last part of your life, at least in my opinion.

Speaker 1: Right. Ideally, that's not the situation we want to end up with, so you need to strategize so that you know how to handle that. And longevity, if we all came with an expiration date, it'd be super easy, but we don't.

Tony Mauro: Yeah, it would be super easy. Yeah, absolutely.

Speaker 1: Number five, market volatility. Look, are you prepared for it? Many people found out last year or got reminded, whoops, this happens, it goes both ways.

Tony Mauro: It does go both ways. And I was just on a call today with a wealth client, she's 76 and she's invested pretty conservatively with dividend paying things. But the son was on there with telling me, "Well, maybe we should look at something a little more growth oriented because the market is down." And I said, "Your mom's 76, she needs this money for retirement. The volatility, she may not be prepared for that." And of course she's immediately spoke up, "No, I don't want to do any of that." But I think that people tend to, especially of course the sons and younger people, "Well, let's go ahead and invest a little bit more aggressively," but we're talking more retiree end here, which you do have to pay attention to that, because even dividend paying stocks took a hit last year.

Speaker 1: Right. And of course, bonds didn't do well. Volatility, and as a retiree, you can't just throw volatility to the wind, right, Tony? I mean, you can't go, well, now that I'm 70, I never want to experience volatility again. Unfortunately, that's just not realistic either.

Tony Mauro: I don't think that's realistic in today's market because the next one I know we're talking about here is inflation, because that creeps into this because if inflation, and of course it's high now, we might as well just get into it is, inflation eats away at your purchasing power and you never really think about it as a younger person. But as you get older, you start seeing about, I remember the day when this cost only this, and you can see it. And if you're sitting there-

Speaker 1: We all love to do that little, "Oh God, I remember when a Snickers bar was this," or whatever, as we age. But at the same time, regular inflation, we also typically ignore it, even as we do age. This crazy inflation we've had for the last six, nine months, has certainly reminded everybody as well. It's like, "Oh..."

Tony Mauro: Yeah.

Speaker 1: This isn't cool.

Tony Mauro: No, if you don't have enough to outpace inflation on your earnings, that is, you're going backwards and over the course of 20, 25 years, and I always tell tax clients when they complain about taxes and we're in a historically low tax rate, but nothing generally goes down, that I see. If you're going to be in around in retirement for 20, 25 years, you got to think that things are going to cost more, especially health insurance and stuff like that. I think inflation needs to be a big part of the plan.

Speaker 1: It's got to be, and it's going to continue to be there as well, even in normal numbers. You've got to have some exposure to the market or some sort of a growth vehicle, if it's not the market, it's got to be something, that maybe is linked to the market, tied to the market, whatever the case is. You've got to have some growth in your accounts and you've got to have some safety, some liquidity, all these different pieces we need, that make up the retirement puzzle. And number seven is tax increases. Tony, as a tax professional, that's a big part of what you do as well. It doesn't matter what rules they put in place, yes, that affects everything. But you're still going to have to deal with taxes. And there's a good shot that we're going to go up. Even if they do nothing else, they are going to go up. In '26, they return back to the old prior administration.

Tony Mauro: Prior administration, yeah. And I've been preaching for a good 25 years that we're in a historically low tax rate compared to the '60s.

Speaker 1: So take advantage while you can.

Tony Mauro: Yeah. And of course I've been wrong, because I keep saying, "They got to go up," and I have been wrong. But what they do, the politicians are crafty, they engineer, and that's probably not the right thing to say, but they engineer tax increases, so the public doesn't figure them out because it's suicidal to come out and say, "Well, I'm just raising taxes." They'll cut this itemized deduction or put limits on this. And in effect, that's a tax hike. It affects certain people, people don't really realize it because it's buried in their tax return and they're out of sight out of mind. But tax increases, we see it every day, they can hardly fund the government, not even getting into where they spend it all, but it's going to be something that's always there and they tend to creep up over time, whether it's the federal level or the state level. And so I think that's got to be a part of the plan too.

Speaker 1: Yeah, and like I said, in '26, they're going back up to the Obama administration tax code, if they do nothing else. And I agree with you, sometimes you say, "They got to go up," and they do something, but I think we can all pretty much agree that in some form or fashion, which is why the Secure Act, passing, Secure Act 2.0 that just passed at the very, very end of '22, there's some things in there, there's a lot of helpfulness I think for getting prepared for retirement, which is great, but I think the message in that, Tony, and we'll probably do a podcast here probably very soon in the next couple of weeks on the Secure Act 2.0 and some of the changes, but I think the message in that was resoundingly, here's some more tools to get prepared for retirement. You better do it. You know what I mean? Because we're telling you ahead of time, this is going to get tougher, start strategizing and start doing some things. Here's some more tools to help you save for your own retirement because we're not going to be be able to help as much or something. It just seems like the focus is there to tell the American people, start taking this on, your responsibility for yourself because that's where it's going.

Tony Mauro: That's right on. And that was my take from it too, because we all know that I think in the year 2035 that the Social Security fund, it's not going to be totally broke, but they're going to be paying out well more, than they're taking in. They're going to have to try to fix it. I think this is Congress's message saying, "Guys, you're America, you need to start saving more. We're going to help you by trying to change some limits and whatnot because-"

Speaker 1: As we creep up to that number, yeah, to 2034. '25, '35.

Tony Mauro: I agree with that totally, that that's a hidden message.

Speaker 1: And some of the stuff in the Secure Act 2.0, Tony, I think also could pave the way for changes to Social Security. Somebody has to be the, I don't know, the bearer of the bad news or that stands up and says, "Okay, here's what we're going to do. It's political suicide. They're going to kick that can as much as they can.

Tony Mauro: Yeah, absolutely.

Speaker 1: But at some point, they will have to make some changes to Social Security. This could just be another stage of that and again, we'll do an episode coming up pretty soon on some of the breakdowns and some of the different things and how they might affect you. But for now, let's keep going. Number seven was, again, tax increases, future tax increases. You got to be able to retire in whatever economy, whether taxes are high or low or the market's high or low, so that's what a strategy is there to help you do. You also need to address healthcare costs on this 10 point checklist, this is number eight. Again, it's crazy expensive as well, but you got to do something, the longer you put it off, the more expensive it gets.

Tony Mauro: You do. And it's eight in the list, but it's as important as any of them because this is the one that goes up probably the most in your retirement days is this. And I don't see any end in sight for these things going down. And so you definitely, it's going to be part of how much you need every month. This is going to be a big part of it, and I don't think this should be ignored. And you certainly can't afford to go without, so you got to have something and Medicare provides a lot, but you are paying for it out of Social Security, they would withdraw that benefit or that premium, I should say, out of your Social Security. But there's gaps and you're going to need other things, that's not a catchall.

Speaker 1: Yeah, no, that's true. And you've got to look at different ways to fund it. Look at different concepts, not just any one particular thing. There's multiple ways to deal with it, but you've got to deal with it, that's the biggest thing is, you can't just keep avoiding it. Number nine, legacy plan. Have you got it nailed down? Do you have one? Do you want one? If you don't, the state will probably do it for you, and that may not be the best one for your heirs. And I get this, some people want to leave virtually nothing, and that's fine. Some people want to leave a ton and some want to leave something in the middle. But either way, address it, get a plan put, it's pretty easy to do.

Tony Mauro: It is easy to do. It just takes some time. And a little bit of advice from, well, the planner, possibly an attorney, just to make sure that even if you are willing or want to spend down everything or close to, you've got a plan at least, hopefully if you've got relatives to handle things when you're gone and make it a little easier for them. But if you are planning to leave some things depending on the size of your estate and whatnot, you want to make sure that that is nailed down. You don't want the state deciding that for you. And it could be as simple as just, I've got a good will and I've went over it and I keep it updated. And two more elaborate things like I want to trust for my son until a certain age or whatever the case may be. But I think this should not be overlooked, for sure. Should definitely be discussed with your planner.

Speaker 1: I agree. Number 10, we have multiple things we could go with. I think I'm going to go in the direction of this one, with this podcast, Tony, it's what do you want to do with your time in retirement? Everything else we did was about the X's and the O's. Number 10 on this retirement checklist for the new year could be, if retirement's coming up within the next year or so, have you sat down and really thought about how you want to spend it? If nothing else, many people, you can attest to this because obviously you do this for day in and day out. A lot of folks really struggle with, "Wow, I don't know what to do with myself. I can't party every day." Whether that retirement party is travel or taking the grandkids someplace fun or whatever the case is, you can't do it every day. You can't golf every single... You might for the first year or two.

Tony Mauro: Yeah. I agree. And when we sit people down and just say, "All right, let's just spend 15 minutes deciding what's going to fill up your day, each day and every day?" And I use myself an example, I like to golf. I said, "Even if I golf every day, okay, that's done by 10, 11 o'clock. Take yourself through a day. Now what? Okay, I go maybe do a little exercising. I'm done by one. Now what?" and all the way through. And then you're not going to do all that every day.

Speaker 1: No, exactly not.

Tony Mauro: I do think it makes some sense to try to figure out maybe what kind of purpose you might want to have, maybe it's getting a little part-time job, maybe it's volunteering, spending time with family. I do think you need to come up with a plan, that's something totally unrelated to money for the most part. But it's something to think about that you want to have some structure and some purpose still in life.

Speaker 1: And it adds some fun back into this checklist because some people may look at the checklist and go, "Ah, I don't want to figure out taxes. I don't want..."

Tony Mauro: That's a lot of work.

Speaker 1: Right and it's like, "But this is the point of it. This is the reason the other nine exists, is to help you enjoy number 10."

Tony Mauro: That's right, because by the end, this is the whole reason for all of this work, is to find something fun to do that maybe you've put off or just spend the last days of your life doing. To me, that's what this whole planning is for, because otherwise, you don't really need any of this, assuming you can pay your bills.

Speaker 1: Yeah, exactly. That's our 10 point checklist there. Anything on there that you need some help with or strike your fancy or hits a cord, whatever the case might be, definitely reach out and talk with your financial professional. If you don't have one, of course, Tony is here to help you. You may already be working with him or you may not be, but either way, you can reach out to him for a conversation at yourplanningpros.com. That is yourplanningpros.com. Tony is a COA, a CFP, and an EA with 27 years of experience in the industry, so a great resource for you to tap into. They are Des Moines Professional Alternative at Tax, Dr. Inc. And again, you can find them online at yourplanningpros.com. Don't forget to subscribe to us on Apple, Google, Spotify, all that good stuff. And thanks for hanging out with us here on Plan With the Tax Man. Tony, have yourself a great week. I'll talk to you soon.

Tony Mauro: All right, take care.

Speaker 1: We appreciate your time as always on the podcast, don't forget to hit that subscribe button on Apple, Google, Spotify or whatever platform you like to use, and we'll catch 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.

Saving in your 401(k) can be an easy and painless way to build your retirement savings. But because it’s so easy and painless, it can also be easy to ignore for long periods of time, which often leads to mistakes. We’ll cover at least the top 5 mistakes people make in their 401(k)s.

Important Links

Website: http://www.yourplanningpros.com

Call: 844-707-7381

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Transcript Of Today's Show:

Speaker 1: Welcome into another edition of Plan With The Tax Man, with Tony Mauro, certified financial planner, CPA and EA at Tax Doctor Inc, serving you here in the Iowa area. Of course, he's got clients all over. Thank you so much for hanging out on the podcast with us. As we're going to about today, the top five 401(k) mistakes that you need to avoid. We've got some good tips here for you to consume this go around on the podcast. Tony, welcome in my friend. How are you?

Tony Mauro: I'm good. How are you?

Speaker 1: Doing pretty good. Looking forward to having this conversation with you. We are into a new year. So amazingly enough. So thought this would be a good way to kind of kick things off because hey, the 401(k), it's a great financial vehicle. I mean it's very easy, it's painless, it's a fantastic tool to help build. And I think that's probably going to be the key word, Tony, help build retirement wealth or retirement savings, I should say. But because it's also so easy and painless, it also is easy to forget about it. That can lead us to mistakes. There's other probably ... there's easier ways, I think, to extract money than a 401(k). They have a few hoops sometimes that make it a little bit more complicated. So we're going to just talk about some of the mistakes to keep on the radar to hopefully avoid when dealing with a 401k. I don't want it to sound like we're bashing the 401k, because again I think it's a great vehicle.

Tony Mauro: It is. It's a great vehicle. It's probably for most, the most important retirement vehicle they're going to have.

Speaker 1: Yeah, yeah, absolutely. So, we don't want to beat it up, but we just want to highlight a few areas to pay attention to. Okay. So that's what we're going to do. So let's just jump right in. The first one is, just don't leave them behind. You often hear things like stray 401(k), just don't leave those behind. Because you give up control by leaving an old 401(k) at an old job.

Tony Mauro: You do. It's ironic because tonight I'm meeting with my sister-in-law, we're talking about this because her husband died a long time ago and so she's been a widow for a while, but she's getting ready to retire. But the company that she left it with is now been taken over by some other company and they're basically saying, get it out of here, or we're going to invest it in this new company's 401(k). And of course she doesn't know anything about the funds or anything. But it's this exact case of she's left it there in the old company for a long time. And the reason why you may not want to do that, I think a lot of times you don't want to do that is because like you were mentioning, if you get into a rollover IRA, you've got much more control, you've got much more options for your particular investments in it. And it's not under that little 10 and 12 funds that the company used to have and fees and everything else. But we see it a lot. I mean, people will ... I call them orphans. They bounce around so much, they get these little balances all over the place and they kind of forget about them.

Speaker 1: Yeah, no, and we do see that. And so you'll have to share the podcast with her after. Be like, "Hey, listen to this." Of course, you're going to talk to her anyway.

Tony Mauro: I don't have to tell her she was on.

Speaker 1: There you go. That's right.

Tony Mauro: I mentioned her.

Speaker 1: But yeah, it's very true. To your point, I mean typically there's not a lot of options in the 401(k). Of course you're no longer there to keep an eye on it. You're no longer putting money into it actively anyway. So it just makes more sense to get rid of that 401(k) and roll that over to an IRA where you do have more control, a bigger smorgasboard of options to go through. So that's the first one. Second one, and '22, we're now into the new year, but 2022 certainly taught us that failing to rebalance often enough could be problematic because '21, you were totally fine with things. Then if you didn't do any rebalancing going into '22, you might have paid for that last year.

Tony Mauro: That's right. And a lot of times people in 401(k)s at these bigger companies, there isn't an advisor in ... sometimes there is, they'll give you a little bit of help. But a lot of times they're not. You're just putting money in from your paychecks, probably not watching very close and all of a sudden, what you used to be invested in, because most people will pick more than one fund. It might be too heavily weighted based on, well number one, maybe your goals. But two is maybe that sector is all of a sudden out of favor and you may need to rebalance. But I suggest to people they should look at it once a year, rebalance one time a year. They kind of look at you look that odd look in their eyes and say, "Well, I don't even know what that is."

Speaker 1: And some of these, they will auto rebalance, right?

Tony Mauro: Yes. Some of them will. They will. If you've got a good one and you check the box, and then I would've recommend that too if they offer it, is to make sure it auto rebalances. Because then you don't have to worry about it while you're there. You still need to take a look and work with your advisor on if it still fits. But the key is, is you're still putting money in, it's just now you got to manage what's in there a little bit.

Speaker 1: Yeah, okay. Yeah, so definitely rebalancing is certainly a good idea, talking with your advisor just about doing that. Here's probably the biggest culprit in the reason why, Tony, which is number three on the list. Which is a target date fund. So it's the easy, low-hanging fruit that most of us wind up checking because we don't know a lot of things. So you go get the job, you've acquired the job, you're all happy, you're filling out the paperwork, it's HR day, they have you go online or whatever to do the 401(k) set up. And I don't know what to pick, say you pick the target date, oh, I'm going to retire in 2040. So I picked the 2040 fund, boom, now I've got me a customized plan. And that's the misnomer, you don't.

Tony Mauro: You really don't, no. And target date funds in them of themselves, I don't think are bad. But I think it's a misnomer to just, like you said, just pick that or have somebody tell you, "Well if you don't know, just pick the target day fund."

Speaker 1: It's better than nothing, but they have issues too.

Tony Mauro: They have issues. Yeah. And to me the biggest issue is I think if you really look inside the target day fund and how they're investing and as you get a little closer to retirement, to me, they get a little too conservative, I think.

Speaker 1: Okay, that's interesting. Yeah.

Tony Mauro: Yeah. I mean I just feel like they kind of do. If that's your investment makeup, then that's great. But if that's not you, then maybe the target fund ... I think it could be part of your 401(k). But I think you should have some other things besides that, for sure.

Speaker 1: Yeah, and typically they do have quite a bit of fees.

Tony Mauro: Yeah. They have fees is another one. You're right. Yeah. I missed the fees.

Speaker 1: They definitely have quite a bit on those ... oh sorry, go ahead.

Tony Mauro: Yeah. No, I was just going to say they do have quite a bit. That's another thing that nobody talks about that when you're going into the target date fund. But something to take a look at, especially if you can find it a lower net cost alternative.

Speaker 1: And it's kind of generalizing again, that customized portion is not really true. You think, well yeah, okay great. Because that's 2040, I'm going to retire in 2040. It's also a general wide smattering of people that are going to retire in 2040 versus just being customized to your specific needs. I find that interesting though that you said about getting conservative, because many will say the other thing with that because as they go down, as you get closer to the target date, they are supposed to get more conservative. I think the misnomer also is that people think that they go way, way down. But most of them don't drop below 50%.

Tony Mauro: No, they don't. They don't.

Speaker 1: So if you're thinking, okay, the risk, I'm at 70 and then I get closer and then it goes to 60 and then 50, 40. Most of them don't drop below 50% from the portfolio stance as far as risk versus safety. So yeah, I mean it's a nice simple idea. Again, we're not going to try to totally bash these. But there could be better options for you to do.

Tony Mauro: Yes, yes. True.

Speaker 1: And I think that's probably the end of the day. So you think about the 401(k), I think a lot of advisors, Tony, would say, "Look, definitely take advantage and get the match." Because that's what you're really after, is that free money. But then anything over and above that, maybe we should talk about something else that we have more control over.

Tony Mauro: Yeah. I know it's going to be one of my little bonus mistakes.

Speaker 1: Oh, okay. Yeah.

Tony Mauro: I guess what I see the most of is ... especially doing taxes, is I see people that they have 401(k)s at their work and they don't participate. I talk to them about it all time, I say, "That's the best deal on the street. You really need to throw some money in." If they start saying, "Well, I really can't afford." I said, "Then you've got a different problem we need to fix." And that's fixable.

Speaker 1: That's a great point. Yeah.

Tony Mauro: You've got to take advantage. But then the second one is they'll say, "Well yeah, I'm doing it." I'm putting in ... they'll just use a percent, "I'm putting in the max, I'm putting in 3%." And I said, "Well, that's not the maximum dollar amount, that's the maximum." I said, "That's for the match." And they said, "Oh yeah, yeah, that's for the match." I said, "And the match is great." But I always tell them, "Did you know you could put so much more in if you want to go past the match?" Because it's still tax deferred or if they're choosing the Roth option, there's all kinds of things. But I tell them, especially if you start doing some math with them, you're a little 3%, let's use a little future value calculator and figure out what that's going to be in 30 years. I show it to them and I say, "Well, is that going to be enough?"

Speaker 1: Or what's 6%? Yeah.

Tony Mauro: Yeah, then they start, "Well what's 6%?" I said, "Forget this percent, let's talk dollars."

Speaker 1: Oh okay.

Tony Mauro: And let's start getting some dollars in there and then we can have some fun with it. Then we just do that for tax clients just to show them. So even if they're not in a planning client, we could say, "You need to go talk to somebody." Or, "Hey, we're here for you, but this is the kind of stuff that we do."

Speaker 1: Yeah, no, those are great extra tips too. So thank you for pointing those out. Because the last two I had were a little bit ... they're not quite as ... well, the one is dramatic, I suppose. But this next one is just kind of not forgetting the fact that ultimately us, as the participant, we're not the client. So the plan administrator or the plan ... their client is your boss, is your employer. Whoever you're working for and getting the 401(k) from, that's really who their client is. So they're making decisions based on that relationship, more so than they are on us as the participant.

Tony Mauro: Well they are. And in most places, unless you have a really good HR, you're not getting the advice and help because the 401(k) itself is not going to help you. They'll defer to your employer, which is their client, like you said. The employer, a lot of times nowadays they don't want any liability either. They're saying, "Well, you need to talk to your financial advisor because we don't want to say anything that could get us into any kind of trouble." Then you're stuck with, well, if I don't have an advisor or-

Speaker 1: What do I do?

Tony Mauro: I just got to go out and do some research.

Speaker 1: And you're [inaudible 00:10:42]-

Tony Mauro: Try to figure this out.

Speaker 1: Yeah, exactly. So just keeping that one in mind. That's a little lesser mistake. But still something that sometimes people overlook. Then of course, we talk a little about fees, I won't beat it up too much. But just assuming that the fees and costs are minimal, especially when we don't see them. That's kind of the little trick too, is that unfortunately ... I mean, first of all, who reads the prospectus on a regular basis anyway? Most people don't. And some of them, they just don't have to disclose.

Tony Mauro: They don't. And yeah, people will ... from the 401(k)s that we have some people in, they'll call and say, "I got this prospectus, what does it say?" I always tell them, "Read it over, read it from cover to cover tonight, let me know." Most of them would rather set themselves on fire probably than to read through that.

Speaker 1: I made it through two paragraphs and they passed out.

Tony Mauro: Yeah, I'm out. But it's buried in there and it's all disclosed. Like you say, most people don't read that. They count on us to tell them that. We don't beat the fees up too much, but we like to let them know, here's what this is and here's how it's taken from you. Because they don't just send you a bill and have you pay it like your utility bill. So that's why it's kind of invisible, but it's still taken out [inaudible 00:11:52]-

Speaker 1: But it's worthwhile to find out how it's impacting your overall strategy. For sure.

Tony Mauro: It is. For sure.

Speaker 1: And finding out whether there's better options, if there are better things to do. That's really where it kind of comes back to the conversation and especially some of those extra ones that Tony just shared is finding out what's the best way to do. Definitely getting the free money is paramount, you need to do that. But then over and above that, have a conversation. Maybe it's worth doing six or 10% to Tony's point. Or maybe it's worth doing an IRA, getting the match and adding some money over there or a Roth. So just lots of ways to think about it when it comes to just 401(k), some little mistakes that can help us save some money. Okay. Anything else? Did we miss anything or are we good? I think we get it.

Tony Mauro: Well, we could talk about this topic for a long time, but those are the major ones. I think with everybody's New Year, New Year's resolutions, I'd say to everybody, one of them, make sure you take a look at your plan, make it a part of your life to say, this year I'm going to review the plan or I'm going to get a plan.

Speaker 1: There you go.

Tony Mauro: And get something started. Because you're doing it with everything else. The first part of the year, everybody does it. But at the end of the day, unfortunately, especially when we're talking about 401(k)s, nobody's going to do it for you now. The days defined benefit plans are gone for the most part, and it's all up to us.

Speaker 1: It is so easy to set it and forget it, as I kind of led off with. Instead of doing a resolution, make it a goal, folks. Because resolutions get thrown out the window pretty easy. So my goal is to get my finances straight, my goal is to shore up my 401(k) mistakes, whatever that might look like. Put that on your calendar for the beginning of this year. And that'll do it for the podcast. So thanks for hanging out with us. We certainly appreciate it. Hopefully you found this useful. And of course, if you need some help, reach out to Tony and his team at yourplanningpros.com. That's yourplanningpros.com. Again, Tony is a CPA, CFP, and an EA of 27 plus years helping folks get to and through retirement. Des Moines Professional Alternative at Tax Doctor inc is where you can find him. And of course, that's online at yourplanningpros.com. Don't forget to subscribe on Apple, Google, and Spotify, all that good jazz. You can find us on all those major platforms. Tony, thanks for hanging out and shedding some light on this topic with us.

Tony Mauro: All right, thank you. We'll see you next time.

Speaker 1: Yep. We'll catch you next time 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.

Even if she wasn’t directly talking about money, Grandma said a lot of smart things that we can apply to financial planning. Let’s take some classic Grandma sayings and see how they relate to our financial lives.

Important Links

Website: http://www.yourplanningpros.com

Call: 844-707-7381

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Transcript Of Today's Show:

Speaker 1: Welcome to another edition of Plan With The Tax Man, with Tony Mauro and myself to talk investing, finance and retirement. And since this is the holiday season, this will be our final podcast of the year. Here it's Christmas time. We're going to do some financial wisdom from Grandma and maybe sing Grandma Got Ran over by a reindeer. I don't know. That works well for a Christmas eve kind of song. That was always a funny one as a kid, right? Yeah.

Tony Mauro: It was.

Speaker 1: Kind of liked it but thought, well that's a strange song. But anyway, how are you doing, Tony?

Tony Mauro: Doing good. Getting ready and pretty much ready for the holidays.

Speaker 1: Are you set? You got your stuff done?

Tony Mauro: I think I'm set. Yeah, I got all my stuff done. I got a little wrapping to do and I'm ready for.

Speaker 1: Nice, nice. Well you know what, it's a great time of year. Hopefully we can get together with family. Hopefully some of us still, I don't have grandparents anymore, but some folks do or maybe you are a grandparent, right? So...

Tony Mauro: That's right.

Speaker 1: A lot of our listening audience probably are grandparents. So it'll just be a little fun to look at some of these things that grandmas or moms would say, or dad's as well, right? However you want to spin it. We just let it be fun to say Grandma, since it's the holiday thing. And take a look at some of these old axioms and then see how do they apply to the financial world. So we'll have a little fun on this podcast with Tony. So let's start with grandma wisdom number one, when it rains it pours. And we've all heard that and 22, Tony gave us a good amount of downpour throughout the year.

Tony Mauro: Yes. Definitely some wet months I would say.

Speaker 1: Yeah, good news comes in waves, right? So does bad news.

Tony Mauro: Yeah, it does. And 22 is a perfect example and every day we've talked about it before with so much news out there all the time, that it's easy to get drawn in by that. And when we have political turmoil and things going on around the world, it goes on and on and on. So there are some, I don't want to say bad times, but turbulent times.

Speaker 1: Well, think about 22 in just the perfect storm that has financially been created because of the COVID things and so on. So you have COVID, right? You have shut downs, you have supply chain issues, that creates inflation. You have the gas issues, you have the war going on overseas, which is adding to the gas issues. So then we've got to figure out how to combat inflation. So now we're raising the rates, which is causing the bond market to not do well. So it rains, it pours, right? It's just a whole bunch of stuff and it's tougher to navigate that and it's certainly understandable when people get nervous about it. But again, that's where a good strategy can come into place because it does seem hard to find a bright spot with all that.

Tony Mauro: It does. And on top of that, don't forget that with the whole COVID thing, the feds doled out billions and billions to try to help keep businesses alive.

Speaker 1: Which added to our inflation. Right.

Tony Mauro: It's just adding to this, we're starting to see the remnants of that. But with all that going on, and of course the news always focuses I think on the negative, it's more prevalent than ever. So stick to your plan and visit with your advisor or advisors and make sure that you're still on track. This is not one of those years where there's performance numbers are not going to be probably great, but although we have managed to make a little bit of a comeback, but I think the key there is we're going to have some of these and you got to stick to your plan and massage it as you see fit and get some new goals for the upcoming year.

Speaker 1: Yep. Exactly. So yeah, been tons of stuff going on. Now in the next one here we've got from grandma, it's the, well, you never know, right? And it's probably true that we'll never know with 100% certainty. They're talking about inflation for example. We were just talking about that. Well it's transitory. Well then they come back and they were like, okay, we were wrong. So you never know, right? Now we got November's numbers, Tony, at the time we're taping this podcast and it's down a little bit. The official number is down to what, 7.1%. I still think most of us feel a lot more than that in our pocketbook depending on what you're buying. But again, you never know is very true. It's a very true grandma thing that can certainly apply to the financial world.

Tony Mauro: It is. And I think with, if you have a good plan in place and you're willing to spend some time with your advisor and talking through things and making sure that the plan's still on track to meet whatever goals that you have. Because and really the idea of every plan at the end of the day, besides hopefully creating the life you want, is trying to balance that risk, that uncertainty, the stuff that happens, the bad stuff that happens. And just mitigating that, keeping it to a minimum when these types of years happen. And if the market always went up, you know what would happen. We wouldn't have any problems.

Speaker 1: And I think we thought it did for a while until it reminded us that it did not, right?

Tony Mauro: And that something, yeah, up until this year, it's like, boy, everybody wanted a piece. But...

Speaker 1: Well, with so much uncertainty in the financial services world in general, even in normal times, there are some things that we do want to have some certainty about and that's income streams for example, right? So we got to have some of those things in place to help when we do have so much uncertainty in other areas. And that's usually the idea of having a proper portfolio so that when the market is down you have some other things and so on and so forth.

Tony Mauro: Yeah. And we'll talk about it here in a second, but to have some diversification in your portfolio is exactly spot on as far as hopefully you've got some things in there that are doing well right now. And that's the whole idea of having somewhat of a balanced portfolio rather than just, well I want to shoot for the stars all the time because when bad things happen or when it rains, like we talked about, that's really going to be tough to recover from. And if you're close or in retirement, you really got to watch things because you can't afford to do that at all.

Speaker 1: Yeah, well you're talking about the diversification. So that goes to grandma number three here with a bad apple spoils the whole bunch, right?

Tony Mauro: That's right.

Speaker 1: So you're going to have the proverbial dog from time to time in your investments, or you're going to have a down market. And I mentioned earlier with the raising of the rates cause the bond market to go down, but the old traditional thinking was, well it's a rough stock market, we'll go to bonds, right? And that's proven to be problematic this year too.

Tony Mauro: You know what I've seen a lot too in this area. I've had a lot of tax clients come to me and they're mid to high level executives in some of the bigger companies in town and are saying over the years, I'm just starting to look, believe this is what they're saying and they're in their late fifties, and my whole 401K or retirement plan is in my company stock, as they just keep giving it to me. And then of course now all sudden they're starting to get a little more worried because they're in there, they know what's going on. They don't want to have just all their eggs in one basket, so to speak, in case the company starts to falter a little bit. And I've been telling them, well you need to diversify, you need to get rid of some of this and get some diversification. So if that happens and you're 65 or 70, you go to call it quits, you're not going to be on the short end of the stick.

Speaker 1: Yeah. Yeah.

Tony Mauro: So it is interesting.

Speaker 1: Well [inaudible 00:07:36] and diversification, it's such a difficult animal sometimes for various different people to grasp. So somebody might say, well hey they've come in to see you. And they go, well Tony, I went and I bought six different mutual funds from three different companies so that I would be diversified. And we've heard those kinds of things before and unfortunately that's just not diversification. I mean, maybe it was, but typically once you go in and look at those six different mutual funds, there's so much overlap that they basically have the same thing, right?

Tony Mauro: Yeah. They have the same thing and it's going to be better than just being all into one particular, maybe let's say equity or stock.

Speaker 1: Right. Yeah, if you had four versions of literally the same stock.

Tony Mauro: The same stock, but there's a lot of overlap in there. It might not be as tax efficient as they want. It might not meet what they're looking to do. But you know what I think the biggest thing about diversification, and I kid with clients, I tell them you don't like it because you don't think it's sexy. It's boring. And sometimes they just get crazy and say, no, I want this because I want to go for something.

Speaker 1: I want some sizzle.

Tony Mauro: Yeah.

Speaker 1: Yeah. Some little sizzle on the side. Yeah.

Tony Mauro: But I say well, the non-sexy stuff works over time and that is the way that we try to point them and then have some fun with the [inaudible 00:08:56].

Speaker 1: Yeah, because if you do have those multiple mutual funds like say, and they were all tech heavy and tech took beating this year, well that's tying that back to grandma there with that bad apple. So tech was a bit of a bad apple this year and it might as fold a whole bunch. So that's why you got to have a little bit more diversification. All right, let's do number four. What can you do with, I heard it straight from the horse's mouth. That's a classic one that your grandma might say. She's like, well I heard it right from the horse's mouth, that such and such and such and such.

Tony Mauro: That's right. Well there's a lot of different ways to go with this in the investment world. Really sometimes what I see is, especially in some retirees, that they tend to get, I hate to use the word sold things, that they have no idea what it is. And that they're basically getting some information that may or may not be quite as accurate as it needs to be. And they really need to I think ask questions basically if you can from the company, but you got to get all the facts. You want to make sure you that everything's disclosed, everything's out front and you feel comfortable with what you're doing in this kind of thing.

Speaker 1:

Well a lot of times you guys actually do that as well, right Tony? So if somebody comes in and they're saying, hey, I've got this investment and it's whatever they think it is, you just call the company directly and find out for sure. Don't go through the person that sold it to you, let's actually call the custodian and find out exactly what's going on. And a lot of times that happens around fees. People will think that they have a product that they have no fees or something or whatever the case is. And you really have to just go straight to the horse's mouth, so to speak.

Tony Mauro: You do. And fees usually is centered around, a lot of people don't know what fees they are paying and fees do come into play. There's nothing for free. But you want to at least know what you're getting into, especially if it's going to somehow maybe lock your money up and you didn't know that. So you want to have that out in front of you before you make a decision.

Speaker 1: Okay. All right. Final grandma piece of wisdom here, or mom or dad or whoever you heard this from, super classic. We've all heard it growing up, if your friends all jumped off the bridge, would you do it too? And from a financial standpoint, this could be that hot item. We could just look though further than talk about FTX, right?

Tony Mauro: Exactly.

Speaker 1: Or whatever the case might be. And crypto really has probably been this item for the last couple of years for many people, to your point earlier about being sexy, right? I need something more sexy. Well-

Tony Mauro: That's the sexy right now. Yeah.

Speaker 1: I wanted to get into crypto. Well what's crypto taking a as... Take FTX off the table and it's still taking a beating this year. I think at one point Bitcoin was what, at 60 grand, now it's at 30 or something. It's like cut in half.

Tony Mauro: Well we had a tax client last year, and he's a younger guy, but his losses were tremendous in crypto. Just tremendous.

Speaker 1: Well you see all those memes and jokes, right? Hey, I'm a crypto millionaire. And then the next day, oh I'm crypto broke. And the next day, hey, I'm a crypto millionaire. Oh, I'm crypto broke.

Tony Mauro: Yeah. But it is true, people ask their friends, they ask their family no different than when they ask him about tax advice and things and they'll call us up with tax stuff and say, well my buddy's doing this, maybe I should do it. And I ask him, well is your buddy a tax account? Is he a CPA or what does he do? And they laugh, they'll say, oh no, he just got this idea. Or he heard. And then you've got on top of all that, and I think where a lot of this comes is, you can spend days and days and days on the internet searching and you get all kinds of advice. And the question is, is it credible, number one. And then even if it is, you probably should ask your own advisor, what do you think of this? Because you might have a little bit of interest in it, but I certainly don't think you should do it just because a friend or neighbor or other family member is doing it because there are situations different than yours.

Speaker 1: Yeah. Well, and no matter what grandma's saying it is, we all hear these things. There's certainly ways we can take financial wisdom from some of that stuff. And that's the point of whether you're getting some advice from a friend or a colleague or a coworker or the television or whatever the case is, or even a podcast, right? That's all great, grand and wonderful. But until you go see exactly how it relates to your situation, you're not going to know. So Tony and I, you and I could be talking about something that is not the right fit for someone listening and they won't know that for 100% until they actually put a whole plan together. And that's really the point, right, is to get that information so you can see, hey, how does this affect me and how will it affect me and my future retirement? And that's what you guys do day in and day out. The time we're taping the show, Tony, you had to delay just a little bit because you were working with a client who had a little issue you needed to take care of. And that's exactly what you do. It's all about the relationship.

Tony Mauro: It is.

Speaker 1: So folks, if you need some help as always, I know the year's winding down, but don't let that be an excuse not to reach out. You can always get onto the calendar for the first and next year probably would be anyway, considering that everyone's schedule is getting compressed here at the end of the year. But just make the call and let them know you need some help. You can find Tony and his team online at yourplanningpros.com. That's yourplanningpros.com. He's been helping families get to and through retirement for 20, what, five years now?

Tony Mauro: You know what? I'm coming up on my 27th now.

Speaker 1: 27th. There you go. So he's been doing it a while. He's an EA and a CFP, certified financial planner. So just reach out and have a conversation. Make sure you do so before you take any action anyway. And don't forget to subscribe to us on Apple, Google, Spotify, whatever platform you like to use. Again, find it all at yourplanningpros.com. Tony, my friend, have yourself a great holiday. I hope you and the family enjoy, and all our listeners as well.

Tony Mauro: All right, we'll see you next time and have a great holiday.

Speaker 1: Absolutely. We'll see you next time 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.

Let’s explore some of the things you should be thinking when you encounter some of the most significant events in your life.

Important Links

Website: http://www.yourplanningpros.com

Call: 844-707-7381

----more----

Transcript Of Today's Show:

Marc Killian:

It's time for another addition of Plan With The Tax Man, with Tony Mauro and myself to talk about making smart decision during, smart decisions, excuse me, during major life events. Tony, some of these things are going to happen to us probably, well, at least one or two are going to happen to everybody, possibly multiples. And it's easy to do, it's easy to get wrapped up in kind of losing sight of something when you're going through major life events and something falls through the cracks. And so hopefully we can have a conversation around how to avoid some of those pitfalls and just some things to think about. And hopefully you've got a financial professional and you've got other professionals that can help you through some of these events. That's going to be the topic this week on the show. How are you my friend?

Tony Mauro:

I've been doing good and as I look out the window here, it's snowing today and it's winter now.

Marc Killian:

There you go. Well, it's here. It is December.

Tony Mauro:

Yeah. I know.

Marc Killian:

So, we are into December, so hopefully. You may have a snowy holiday. I probably won't, but it is where I'm at, but it's a little, it is cooler so it's not too bad.

But yeah, these life events, man. Tony, I've gone through a major one a couple years ago. We've all gone through different things. I've got five here that really kind of affect us financially. There's definitely others. But I wanted to talk through a few of these and get your insights because I'm sure you've worked with people and helped people work through various ones of these in your career. You've been helping folks for 25 plus years, so I'm sure you've seen a few of these.

So let's talk about some pros and cons, I guess, not pros and cons, but I guess just ideas and things to think about should you be going through something, like the first one, for example, a job change. And if you think about our listening demographic and your client based demographic, all of these, I want to view from the, I know you help people of all ages, but primarily you do help older folks. Kind of that standpoint of what it looks like. Because let's be honest, a job change when you're 25 can stink, but it's a lot worse if you're 55, right? Or 50 or whatever. And whether it's you choosing to change the job or they chose for you...

Tony Mauro:

Yes.

Marc Killian:

There's some things to think about that can be a major event. Financially speaking. What's some things you think we should pay attention to?

Tony Mauro:

Well, I think with all these that we're going to talk about, we see it all the time. And it's so different now that again, I'm in my fifties and this stuff affects us. We all think we're just going to cruise right along through life and nothing is going to really happen. And that's, I think, sometimes wishful thinking. So I think we need to plan for, I don't want to say the worst and hope for the best, but we definitely need to plan and job change is one. It isn't like the old days. I mean, like you say, referencing it for somebody maybe a little further along in the forties, fifties is a little different than somebody's 25, 26. Because a lot of times these days now with some of these big companies, you know don't know, you could have been there for 15, 20 years and they say, okay, we're consolidating, move everything to somewhere and you're out. And now you've got to face some issues financially basically of, we'll skip the whole am I qualified to do anything else type of thing. But now it's like, well, I'm in my forties or fifties and I've got to go try to find something else. What am I qualified for? What am I going to do for benefits? Where am I?

Marc Killian:

Yeah, are they the same? What's the lag period?

Tony Mauro:

What am I going to do with my retirement plan? And hopefully you're working with your advisor if you have one of these things but it's laid off or you're actually just changing jobs and trying to find something better to see if this works out in your overall plan. And if not, then obviously you need to work with your advisor to change your plan a little bit. It's not the end of the world, especially if you're getting laid off. But it definitely is a major impact on monthly expenses obviously, until you find something else. I mean, there's just all kinds of emotions going on if you have something like that versus just changing a job. Most of the time people are changing jobs, obviously they feel like the grass is green or they're either better benefits, better work life balance, more money, something like that.

Marc Killian:

And it could be.

Tony Mauro:

It could be.

Marc Killian:

But make sure that you're taking the proper steps because there's a lot more to take care of at 50. Again, you want to make sure that you're not having any lags in that medical coverage that we talked about. You got to make sure that you're not leaving accounts behind, those stray 401ks, things of that nature. And that you're also still not deviating from hopefully the plan you're building. Because from 50 to 60, I mean we can get a lot done to our retirement accounts. We can gain a lot of ground in that or even 50 to 65.

Tony Mauro:

Yeah. Especially, and we're going to talk a little bit about it here at one of the topics as an empty nester, if you're at that point, you are able to shove a lot of money into some of these accounts to possibly catch up or to get that much further ahead. And it's amazing to me how many clients come to me. And I just had one my accounting manager come to me because she's going to be eligible for our retirement plan as of January 1st. She said, I've got three or four 401ks just kind of sitting out there and people do, they accumulate them from all over the place and she's never really talked to anybody about, well, you have these, are they in your set of goals? Is it part of your plan or is they just sitting out there? And a lot of times they just, I just did it to be doing it. Now they're sitting there.

Marc Killian:

Yeah.

Tony Mauro:

So you got to take all that into account.

Marc Killian:

Well, we'll just jump to move around on the list. That's fine. We'll go right to the empty nester one then we'll circle back around. It is a major life event for people. I think for most of us we do realize it's a good thing. Obviously some parents struggle more with letting their children grow, go grow and go I guess, than others. But ultimately they have to grow, they have to move on, they have to start their own adulthood and things of that nature. My wife and I mean I'm 51, we've been empty nests for a while because she went off to college and then she went into the Navy. So we haven't had her at home for quite a bit and it's pretty darn cool, Tony. There's a lot of nice things about it, right?

Tony Mauro:

There is a lot of nice things.

Marc Killian:

There's not nearly the mess in the house, there's not nearly the food bill and so on and so forth. So to your point a minute ago, there's a lot of room to really sock away some things from a money standpoint, no longer having the kids. But you got to be careful. Just because they're not in the house doesn't mean that they're still not going to try to get money from you.

Tony Mauro:

Yes.

Marc Killian:

And that's fine, we all want to help our children, but do not let it become a crutch for them and you because it will bite you when it comes to your retirement longevity.

Tony Mauro:

I agree and I see that the most often. And that was going to be my main point is some parents, and I'm an empty nester now too, and have been for, well, since 2014 pretty much. And it is nice and all that stuff, but I see a lot of parents try to sacrifice or help their kids so much that they're putting their own plans maybe aside or on hold. And while again, at the end of the day, that's their decision. I think sometimes that could be a mistake. But barring that, now's the time, if you don't have the unfortunate job change or layoff, health's good. A lot of times people come to me too and say, well now that I'm an empty nester, maybe I should take it easy and maybe I'll retire early. And I say, well okay, if that's your plan, let's take a look at that and see what that looks like. But a lot of times this last 10, 15 years of the earning cycle is usually the highest. Your bills are down a little bit. You can put more money away or you can enjoy some things along the way and still do that. So I think there's a lot of things to talk.

Marc Killian:

That's a great point actually, Tony, because it is tempting when you become that empty nester, especially if you're really into it and you're enjoying it, you know love and you miss your kids, but it's like man, you start going, wow, where did all this extra money come from? And it is tempted to go, well maybe I should treat myself to this, maybe I should. And hey, if you need to or you have to or whatever the case is, that's fine. But if you are also saying to yourself, Hey, maybe we could retire early, then you got to be smart about that. And if you're working with a professional, you can go in and say, okay look, I really want to retire early. How much do I need to be pumping into these different things? What can we be doing to hit that goal? And then you'd know if you had that little extra money for that, maybe that treat for yourself or whatever the case is. It's all about choices.

Tony Mauro:

It's all about choices. And I find it funny now, I go and I just had this happen at this charity golf thing I was at, because as I'm getting older, people will ask me, especially if they're a little older than me, well, are you retired? And I say, no. And they say, well, why not? And I said, well, because it's not really part of my plan. I could, but it's not part of the plan that I want because I want to be able to stock some money away for the next 10, 13 years. So the plan that I think I want will come about. But obviously different things change that and some of these other things of course that we'll talk about could have definitely changed that.

Marc Killian:

And I think it goes a long way to loving what you do too. And you own your own business and so there's different factors that we certainly know are going to play into that. Some people can't wait to retire early because they work for someone else or they're not as crazy about their job as they once were. Right?

Tony Mauro:

Yeah, exactly.

Marc Killian:

A little different I think a lot of times for self-employed business owners, especially if you have a business that's doing well. It makes it a little easier for sure.

All right. Well, let's go to some of those. The job change and then empty nester, they can actually be positives, right? A little maybe more positive than negative. The next couple ones, maybe not so much. So let's go to a divorce. Unfortunately, great divorces is something, they're a term, they are happening more and more. That's people getting a divorce after the age of 50 and there is a lot more to divide. Again, a divorce at 25 is a totally different animal or 30 than at 50.

Tony Mauro:

It is. And with these great divorces, people, I see them 25, 30, 35 years calling at quits. I just had a set of parents that went well, their child went to high school with my child, but they're about our age. They call them up to say, Hey, let's go to dinner. They're like, well, we're really not together anymore. And they have significant assets. So it's much, much different because of that. Generally you've got a lot more assets, you've got a lot more things going on, depending on what state you're in, how things are divvied up and how that is then going to affect your plan. Because now you're by yourself and now you got to figure out, well, I thought we were going to do this, but now everything's changed so I got to go back to the drawing board and come up with a new plan and will what I have when we split everything up generally be enough. And so that's a huge issue that I think you need to, after you go through the legal ramifications, talk with your advisor on what is potentially happening.

Marc Killian:

And I would say, Tony, get yourself a team. If you know that you're going to be going through a divorce, if that's starting, get a financial professional along with your divorce attorney, right? Because they're not always thinking about, they're thinking about trying to get you whatever it is they're going to get you, but maybe not necessarily the implications. And sometimes we wind up, we just want it over or we have different feelings or whatever. And you may give away something that has more disadvantages than advantages versus if you had two accounts. If there's a $100,000 in a traditional IRA and there's a $100,000 in a Roth and you might say, well, you just take one, I'll take the other and that might not be the best move, right?

So lots of difference, because one's the taxable. So there's lots of, or some people, a lot of times, especially for the lands, they often just say, well look, just give me the house because maybe there's still a kid that's close, maybe they're still in college or they're still at home or whatever and you'll trade away retirement accounts for the house. May not be the smartest move.

Tony Mauro:

Exactly. Yeah. So I mean there's a lot of that goes into the divorce thing. For sure.

Marc Killian:

For sure. And it's tough. When you're dealing with major life events, they often come with tons of emotion obviously. And so that's why having a professional team to help you, because they're not going to be as emotionally invested obviously because it's not their life. But of course as their client, they're trying to do their very best for you. So that kind of helps have that sounding board there.

What about if we've lost someone and we're getting an inheritance, so maybe an aunt or an uncle or even a parents passed away and they're leaving us some money. Now we have the emotional side obviously of losing of someone that we loved. But on the other side, many people really, they struggle with what to do with the inheritance. I think we either fall into two categories, we either fall into that, woo hoo, I got some money and I blow it, or I got this money and I want to be a good steward or honor the person that left me and I don't know what to do with it and I've just kind of frozen. Right?

Tony Mauro:

And those are the two things. I mean you hit it right on the head there. I see most the people that we run across in this is they struggle with that. So we try to talk to them about, well, if you want to go out and do something nice, maybe just take a small part of it and then be as good steward with it. But it has to fit into your plan and where you're at. Most of the people that I see that inherit some sizable amount, their plan isn't very good. And so I try to recommend to them, Hey, if you want to be set in retirement, you probably should take this and use it for that or save it for that.

But again, everybody's different. And it's a lot of emotion there after the emotional setting of losing your loved one is what do I do with this money? Because a lot of people that want to go out and buy something, then immediately they feel guilty. It's like, man, I just blew whatever amount, $50,000, whatever, $100,000. And I feel very guilty about that because they worked all their life to gather that. Especially parents of people my age who didn't grow up with a lot. If they accumulate a lot, it was through really, it wasn't like today where we have 401ks and all this stuff and everybody's kind of educated about these people. Grew up with no financial education. Most of them.

Marc Killian:

Oh yeah. Well, we don't have a lot now either, but yeah, it's better for sure, but definitely not where it should be.

Tony Mauro:

And so I think that that's again another one that you'd really need to take a hard look at, get some sound advice, some objective advice, and come up with a good plan there.

Marc Killian:

Absolutely. Well, the final one, since we talked about possibly losing a parent or something would be, unfortunately losing our spouse, right?

Tony Mauro:

Yes.

Marc Killian:

It is inevitable. We're all going to pass at some point, right? As much as we would like to deny it to ourselves, many times we're all checking out of this hotel at one point or another. And so it's a huge component. And so let's touch on some of the financial things because we obviously know that the emotion is there. Let's touch on some of the financial things that just get overlooked when dealing with major life events.

And probably the big one, Tony, since this is what you guys do a lot as well, is the tax component. It comes out of nowhere for many people. If you've been married 30, 40 years, you're just so used to filing married jointly or whatever, that going to single tax status really rocks the plan.

Tony Mauro:

It does rock the plan because taxes definitely could go up depending on what type of income you've got coming in. And so that's one huge issue. The other issue is I think, and everybody needs to go through this exercise is I believe you need to break it out with your advisor is, okay, if my spouse dies, what am I going to have from them? Life insurance, pensions, 401k. And then what's my plan going to be going forward from there? And then do it for the other spouse as well, because you might find out, and what I found out with a lot of them is one spouse is going to, if the other dies, might be okay and pretty well off. The other one, not so much.

And it's kind of eye opening when you kind of take a look at that and say, well geez, I'll give you an example and let's say that I died and I didn't have anything and my wife's left with just working and just with her own wage versus she dies, I can continue on, get some life insurance out of here, I'm going to be in great shape. Again, taking all the emotion out of it. I think it needs to be looked at for both spouses there and exactly what is going to transpire. Because a lot of times, especially in the working years for those of us in our fifties and sixties, we lose an income. Now all of a sudden we went from one lifestyle to, boy, we don't have quite as much income coming in now, again, if both of us are working.

Marc Killian:

Right. Yeah.

Tony Mauro:

So all kinds of issues there that you definitely need to take a look at to try to get some guidance on going forward.

Marc Killian:

The income streams get altered, obviously the tax brackets get changed, you got to go through the different insurance deals and medical stuff and there's just a lot of moving parts that come. And if you don't have any documentation in place, it becomes even harder. So whether, I mean, most of the saying is, if you have a will, great, but it just means you will go through probate. So lot of times there's that to deal with or maybe is a trust going to be right for you to make things easier? Or do you even just have a professional on your side?

Because Tony, for many, many people, usually for many couples, one person is into or more into the financial side than the other. And then typically that person passes first because that's just Murphy's Law. And then the person left behind is like, I don't know where to turn or I'm too emotional to deal with this. So to me it just seems like I'm happy, I know I've got a lot of issues. I know I'm going to pass before my wife and I'm like, here, here's all the information you really need to know. She's got obviously account information and all that stuff, but the biggest thing is there's the business card. She knows who to reach out to and call, which is our financial person to say, all right, help me through this. Right.

Tony Mauro:

You do. And really to work with us, I haven't really talked about it on the show before, but if you are nearing retirement, I won't take you as a client unless you promise we'll do it with you to generate what I call the life book, which is some of the things you're talking about, the names of the professionals, where everything is at, and each person has to do it. And even if it takes us a year or longer, we have it so that the other spouse can take a look at it and start getting down that road. Because if not, in today's techno world with stuff all over the place, it really puts a burden on the survivor. And one of us is going to be left alone at some point. And like I say, I won't take them on as a client if they refuse to do it. I just tell them we can't be involved because it's too hard to try to work a plan and then we don't have this in place and we know somebody's going to go. I always tell my wife that.

And then we have one is that unless we die falling off some cliff hiking together, one of us is going to be alone at some point. We always think it's going to be the woman, but in some cases it's the man. And then I find the men are less prepared than the women.

Marc Killian:

Yeah. Well, they're better at, I think, at planning things than we are a lot of times. They do such a great job on so many of those avenues. But it does tend to find statistically, which is always struck me as odd, that the ladies typically run the household and they've managed all kinds of budgets through the years, especially for children and yada, yada, yada. But yet when it comes to the retirement, typically the man kind of has a lot of the stuff there.

Tony Mauro:

Exactly.

Marc Killian:

Not to be sexist, it just is. It's just the statistics, right? But it's not always, but it is the statistics. And then again, like I said, Murphy's Law, we pass away first and we've known for years in the industry that ladies are underserved. It's been getting better all the time. But I think it's still great to have that person to turn to go, Hey, I'm in an emotional state. And sometimes maybe that's also having one of your children aware of this stuff too, Tony, right? So that if you are too overwrought with emotional issues, that the child that's going to help you through a lot of that stuff, whatever child that might be or multiple or whatever, is reaching out to the finance professionals saying, Hey, mom needs help, or Dad needs help, and how do I help them? And I'm sure you've run through that too.

Tony Mauro:

We have, yeah. And a lot of times, as some of our parents and stuff get up there, it's the kids that have to start the conversation a little bit.

Marc Killian:

Yeah, for sure.

Tony Mauro:

Yeah, that somebody needs help.

Marc Killian:

Well, major life events, they're going to happen. Like I said, at least one or two of these are going to happen to all of us. So you've got, and maybe more, so you've got to have a plan for it to deal with some of these things. And if you don't have one, reach out to Tony and his team. Get started with the team at Tax Doctor Inc. Find them online at yourplanningpros.com. That's yourplanningpros.com.

I know the years winding down, but don't let that be an excuse not to have a chat. If you need some help, at least reach out. You could always get something scheduled for even the first of the year if that's the case. There's nothing wrong with kind of planning a little bit, a few weeks ahead. It's not that far away at this point. Really just a couple of weeks.

Tony Mauro:

Yeah.

Marc Killian:

So if you got some questions, need some help, reach out to Tony. As always, he and the team are here to help you. He's been helping families get to and through retirement for a long time and a great resource for you to tap into. yourplanningpros.com.

Tony, thanks for hanging out my friend. We'll see if we can knock out one more of these before the Christmas holiday. And you have yourself a great week.

Tony Mauro:

Yeah, you do the same.

Marc Killian:

Yeah.

Tony Mauro:

Thanks for having me.

Marc Killian:

Absolutely. As always, we'll catch you next time here on Plan With The Tax Man with Tony Mauro.

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