Plan With The Tax Man

Getting through retirement can be a lot like running a marathon. Let’s talk about some of the similarities of getting to the finish line in racing and retirement.

Important Links

Website: http://www.yourplanningpros.com

Call: 844-707-7381

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Transcript Of Today's Show:

Speaker 1: Welcome to Plan With The Tax Man. Thanks for tuning into the podcast with Tony Mauro and myself. We're going to talk about the retirement marathon on this episode of the podcast, making sure that we finish the race. Many people have heard, Tony, that saying, retirement is a marathon, not a sprint, right?

Tony Mauro: Mm-hmm.

Speaker 1: So thought that made sense, and you and I used to do sports in our younger days, and I think you even did some marathoning. So I thought it'd be kind of fun to visit this as an analogy and maybe laugh at ourselves for, you and I were talking about being older today before we got started and how the body's not being as nice as it once was.

Tony Mauro: No, and I got to caveat this. I did some half marathons and barely made it through those.

Speaker 1: It's tough, yeah.

Tony Mauro: Yeah. And what we're going to talk about is I didn't plan and I didn't prepare.

Speaker 1: And it got you didn't it?

Tony Mauro: It Got me. And when you're young you can do it, but I mean I was never in them to, for any type of competitiveness, just to see if I could do it.

Speaker 1: Yeah, I gotcha. Okay. But you know what, that's a great analogy. It really is because when you're younger you can weather more stuff just like financially. So it's a really great analogy for retirement, strategy, planning, all that kind of stuff. Taxes, all of it fits really well into that kind. Really a lot of sports does. It's easy to use a lot of sports metaphors. My wife did a lot of cross country running when she was in high school and whatnot. She was definitely in the competitive, very competitive, but wound up tearing her, I think tearing one of her... What's the big muscle there in your leg? The thigh muscles there?

Tony Mauro: The...

Speaker 1: Hamstring.

Tony Mauro: Quad?

Speaker 1: Quad. Quad and hamstring. Yeah, both of those. So, but it's an interesting analogy. So we were sitting there talking about the idea of planning and preparing for long races and things of that nature. And it just hit me that it's like, yeah, makes the same amount of sense to talk about this from a retirement standpoint. So let's just jump in and roll. Planning and prep is key. You already admitted that, it's like something that you didn't do when you were younger, it kind of bit in the tush. I used to play football all through high school and so on and so forth. And it was the same thing. If you didn't have a plan, if you didn't prepare, it didn't go as well as you wanted it to. And a good friend of mine, I guess probably about six or seven years ago, Tony, decided he had to lose weight and he was going to do it by jogging and running every day. And he headed out the door and he just made the decision hardcore. I applaud him for it. He went out the door one day, just started running. The problem was, is he was fairly heavy and he didn't really kind of plan or prepare and he wound up fracturing his foot because his body wasn't ready yet. He needed to work himself into a different mode and make sure he was doing it properly and so on and so forth. And that's really pretty darn similar to retirement. You got to have a plan.

Tony Mauro: Yeah, you do. You got to have a plan. And it really comes down to just like we're using our little marathon and my half marathon debacles that we're talking about. And if you just go about it somewhat haphazardly and you're not setting yourself up with a plan, it's easy to just go out, I think, and we've talked about it before, there's so many different investment choices that you know, pick something and you just hope for the best and you don't really have much planning behind it.

And that's very similar to what I used to do with these half marathons. When I was young, I thought well how hard could it be? I can do it and I was in it competitively. But when you have to walk some and then your body's killing you for 10 days afterwards, that's not good planning and preparation. And it goes the same way with our retirement planning. And I think that, I was reading an article over the weekend when I was traveling back from a golf thing that this author was talking about having assets in different locations as the same as allocations. And it kind of struck home with me about we need to have in our plan not only good asset allocation but different locations, and I think he's referring to is tax differed, tax free, some things like that. But this plan though, too, has to be monitored. We forget about that. We start investing when we're young and we're not prepared and then next thing you know, you wake up, you're in your fifties and you're like, well, where am I really at? And that may or may not be a good place to be. So I think the moral of my talk here is to, when we're talking about planning is make sure you monitor these plans and make adjustments with your advisors by all means.

Speaker 1: And if you think about the stages or the steps of any kind of sport activity and retirement planning, the same thing. You've got to start building up. And the preparation a lot of times is, for many of us, it's the accumulation phase. You could almost call that prepping for retirement as far as building that part. But that's just one part. You've got to start looking at the other pieces. And that kind of fits to the second piece of this, which is a proper diet. If you're doing any kind of athletics, you can't just eat junk food. Junkie. Another financial advisor I chat with, Tony, he is a marathon or he's written several books about it and he actually runs, he has the Boston and all that kind of stuff. But he's an admitted hardcore junk food addict. He loves candy bars and chips and all that stuff. And he's like, so I think I run as a way to excuse my bad behavior for my diet. But when he is getting ready to train and he is in that mode, obviously he puts his diet in the proper kind of way. And if you think about moving that from that preparation stage of retirement into the next stage, that's that proper allocation, that's the proper, all the diversification, the different things we need. That's that kind of diet idea.

Tony Mauro: It really is. And I think in the retirement area, especially as you get into your fifties, which I'm there now, we need to start thinking about more how our portfolio is structured. Asset allocation, we're just not that far away. And this year has been a crazy year in the markets. And if you just aren't on top of your plan and really working with your advisor, I mean we haven't had it yet because the Marcus had a little bit of a bounce back. But we're going to have a down year. And again it's just one year, but you really can't afford to have huge losses in the 30% - 40% or more because that's really not going to fit in with the diet at all, because you're going to have a tough time making that up in your fifties and or sixties. So it pays to definitely pay attention more to your diet. And even I think as we, getting back to the actual food aspect, as I age, I pay attention more to my real diet now because you know, want to live a long time and be able to enjoy some of these things that you're working so hard and painfully to try to accumulate. But we've spent hours talking about food. I got this crazy theory we as Americans, I mean we tend to eat a little too much and

Speaker 1: Yeah, just a little bit.

Tony Mauro: And we don't really have all that good of a diet for most of us but...

Speaker 1: It's the way we process stuff, right?

Tony Mauro: It is.

Speaker 1: It's crazy.

Tony Mauro: It does go hand in hand with getting back to the financial picture. If you don't have that, you do use analogies, there are heavier people that do live a long time.

Speaker 1: Sure.

Tony Mauro: Without a good diet. And you possibly could have that in your financial situation, but the odds are...

Speaker 1: Right, you could weather some storms, you could like '22. It's funny because some people with the markets have obviously been very volatile this year and you talk to some people and they are taking a beating and then others are not, right? They could be the same age but they are like, why is one... And it's how you're allocated. It's that diet really. It is a financial diet. If you were tech heavy, man, you're taking a pounding this year. So lots of different ways to look at that and talking about the way we don't eat that great. Tony, you've been to Italy, right?

Tony Mauro: I have twice, yeah.

Speaker 1: So I was watching a guy having a chat the other day, this actor who's in ridiculously great shape, he's over 50 as well. And he's Italian and he was over there shooting a movie about Lamborghini and he was talking about, he said I was eating like crazy in Italy the pasta, it's just amazing. The food is amazing. And he said and believe it. So the person interviewed him said, But what does that do? Aren't you paleo, keto, all that kind of stuff for dieting? He's like, honestly, he's like, I ate more food in Italy than I eat here at home and I lost weight. And a lot of it is to our processes. We just put so much stuff in there that we don't need.

Tony Mauro: Yes, I agree.

Speaker 1: I thought that was interesting.

Tony Mauro: It's amazing when I go over to Italy, we're getting off the subject, but...

Speaker 1: That's okay. It's diet.

Tony Mauro: Yeah, it's diet. I've been over there twice and you look at the Italians, of course I'm Italian heritage and you look at them and you say, well, you guys, all you do is eat carbs, you eat bread...

Speaker 1: Right, exactly. You eat carbs and bread like crazy.

Tony Mauro: And I don't see a lot of heavy people. I see a lot of very old Italians walking around, but they're different than us. They go to the market every day, they cook all their own food and they walk a lot.

Speaker 1: Yeah, they walk a lot. And over here I just came back from the heart doctor myself and he is like, lay off the carbs. And I'm like, But what?

Tony Mauro: Right. So, it is weird. But it's interesting, some of the other types of nationalities or ethnic backgrounds are like that. And you just scratch your head saying, how's that possible?

Speaker 1: Well the Mediterranean diet is very, it's totally different, so...

Tony Mauro: Yes, yes.

Speaker 1: Well good stuff. So let's finish back in, I guess jump back into the marathon. I know we're kind of all over the map, but it's still a fun conversation. Get back to just finishing this up. And that's really the idea. If you're going to run a marathon for the first time, or even if you're just, like I said, like my friend who decided he needed to lose weight for our listeners, a lot of our listeners are over 50. Walking's a great idea. Maybe light jogging is a great idea to start losing weight. Any of that stuff. Don't start too fast because you're going to burn yourself out, your energy level, you kind of come out of the gate too quick. And so if you think about running a marathon, if you're a newbie, if you're a novice and you're really excited, you're amped up, your adrenaline's flowing, boom, starting gun goes off, you got to go 13 miles like you were doing the half marathon for example. And you start running, your pace is too fast, you're going to run out, you're going to run out of gas.

Tony Mauro: You're going to run out.

Speaker 1: And that's the same thing with retirement, right? There's something called sequence of returns where if you get out of the gate too fast in retirement and you're spending more and you're not managing some stuff properly, you could mess yourself up for the long run.

Tony Mauro: Absolutely. And my marathon story with this, and I got one I was running at the time, this was like a 10K and it was for breast cancer awareness. And I got to the thing late, I was running late and I was literally running to the start line. Well I didn't have time to get all the way in the back where I belonged. So I wedged myself right in the front with all the real runners. And literally I started out so fast because I was just like, well I got to keep up and I... 200 yards in, I was like, I'm dead, I'm out. I got to almost walk. And it's the same thing really in retirement. Like you said, if you don't have a plan going in and you start out of the gate too fast, it is tempting when you're younger because you always start thinking at least the clients I have that, well I want to enjoy some of this before something happens. They get going too fast, don't plan properly, and now all of a sudden they're in their mid seventies, some in their eighties saying, well, geez, I got out of the gate too fast, I spent too much money. Now I don't have all that much. So it is important at the start not to do that. And that's where I think where us as advisors can really lend some value there in the beginning and during retirement.

Speaker 1: Tony, you made a good point, you said they get to retirement, they want to do some things and they start a little too fast and because maybe time or health or whatever. And there's nothing to say that you can't do that. It goes back to topic one, just plan and prepare, right? So if you want to hit the ground running in retirement, that's great, but talk to your advisor about it so that you can structure that plan accordingly.

Tony Mauro: Exactly. I think the more conversations you have in retirement with your advisor, the better. Because that way you can bounce things off of them. And I have a client that she likes to put a lot of money in her house and she always calls and bounces things off of me, and sometimes I say, well maybe it's a little better to wait on this and because here's where you're at and if you get going too fast, here's going to happen and then let her make the decision. But it is important to do that because there are, and I'm the same way, I've got a list couple pages long already, the stuff I want to do in the beginning of retirement.

Speaker 1: But I love the fact that she bounces it off of you. I love saying this, you're not the money police, it's not your job to just say, well sorry, you can't do it, right? It's your job to say, okay, let's take a look, what's it going to do to the plan if you do that, you're going to be fine. Or okay, we're going to have to make this tweak in order for you to do... It's just a matter of making sure that you're not shorting yourself in the latter years of retirement.

Tony Mauro: Exactly. And I'm not here to be the person too that tells her, well that's a goofy idea. It's her money, you do what you want to do and I'm there to be the voice of reason and then kind of tell her the goods and bads and how it's going to affect her plan.

Speaker 1: Yeah. You're there to be the coach and say, yep, you can do this without causing yourself issues or no, you can't do this without causing issues, but we could do this there's this, this, and that'll kind of fix it later on. And to your point, you, or you could say, well that's a good idea, but let's wait like three months or something, whatever that kind of thing is just based on buckets and when you're pulling, where you're pulling, what levers are dropping, so to speak in the retirement bucket plan. So a lot of different ways to think about that and that's why it's so important to have that professional on your side, a coach. So it could be a track and field coach, it could be a football coach, it could be a golf swing coach, it can be a money coach. All kind of comes back to the same thing. A tax coach, that's what you, I mean, taxes are massively important, which is obviously why we call the show Plan With The Tax Man, because you are at Tax Doctor Inc. And you've been helping families get to and through this thing for a long time. So again, folks, if you got some questions, you need some help. If you want to make sure that you're not starting that retirement marathon on the wrong foot and you want to have that longevity there, even if you don't wind up having a longevity yourself, your spouse could be left behind or leaving things to your heirs. It's all part of that plan that you need to have for yourself. So do yourself a favor, get onto the calendar if you need some help. If you're not already working with Tony and the team at Tax Doctor Inc, stop by the website yourplanningpros.com. That's yourplanningpros.com, subscribe to the podcast, book some time with the team, lots of good tools, tips and resources. Find it all at the website. Tony, thanks for hanging out my friend in sharing your...

Tony Mauro: Embarrassing stories. No problem.

Speaker 1: Your embarrassing stories, me too. I can't even talk right now. So it's good stuff. Yeah, it's always fun to just kind of keep it, just kind of keep life normal things in there, right? Everybody can relate. So have yourself a great week. This is actually going to be our Thanksgiving episode, so this is coming out about a week before Thanksgiving. So happy Thanksgiving to you, Tony, and all the listeners.

Tony Mauro: Yes, you the same. See you later.

Speaker 1: You know what? After we eat all that Turkey, I might need to run a marathon.

Tony Mauro: Me too, yeah.

Speaker 1: We'll see you next time here on Plan With The Tax Man. Enjoy your holiday. We'll be back soon with more episodes 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.

As we approach the end of the year, saving money on taxes becomes a bigger focus for many people. But let’s broaden the scope out for this particular episode and focus on some of the most common retirement planning questions about taxes. We’ll talk about mistakes to avoid and how a proper plan can make a significant difference in someone’s tax savings.

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 episode of Plan with a Tax Man here on the podcast with Tony Mauro and myself. Talking investing, finance, and retirement. We try to bring all sorts of different topics to you. This week it's going to be common questions about taxes and specifically maybe taxes in the retirement planning phase, not necessarily the working years, but we might touch on a little bit of that too. But that's going to be the main approach this week here on the show. And who better to do that with than... Well, a tax guy. Tax doctor himself, what's going on, Tony? How are you?

Tony: Thanks, man. I'm good, thank you. Yes, finished up... Well, officially the '21 tax season. And so, this is a timely topic because it's-

Speaker 1: The '21 tax season?

Tony: Yeah, with extensions just recently-

Speaker 1: Wow.

Tony: Yeah. But still people... And people trickle in all year, but now's the time for the rest of the population to plan for '22. And so, I think there's some good topics, questions here to discuss.

Speaker 1: Oh yeah, I guess that is true. Yeah. When you do extensions, boy, it's easy how you forget that, right? It's like-

Tony: Yeah, you forget it, yes. Yeah.

Speaker 1: I hear you say '21 and I go, "What? There's no way." But it's like, "Oh yeah, that was last year." And then it was... Most of us do it in April, but then if you did extensions then yeah, okay. And you know what? There's two differences here. So you just said most of... We need to start thinking about '22, and that's tax planning.

Tony: Excuse me.

Speaker 1: That's tax prep-

Tony: Excuse-

Speaker 1: ... that's tax preparation for the calendar year. But there's also tax planning and that is year over year, especially for retirees. That's where you can make a real difference in and often a huge difference in how effective your retirement plan's going to be. Because it's not just the annual thing, it's how to be efficient through multiple years in retirement.

Tony: That's right. And you have to think big picture on a lot of these things because it takes multiple years to realize the real savings of a few of these things we're going to talk about. At the end of the day, we always make fun of the government and at some things-

Speaker 1: It's so easy to do, though.

Tony: Yeah, it's easy to do [inaudible 00:02:01] Sam. It's there with his hand out for a part of your retirement money and you want to try to minimize that as much as possible. Because obviously, that means a bigger nest egg for you.

Speaker 1: I was talking with a friend the other day, he's a CPA, he's also a financial specialist now as well. But he was talking about, and he was being very honest, he said for the first half of his careers as a CPA, he was one of those CPAs that would say, "Yeah, defer. Why would you pay taxes now? Just kick it down the road." Absolutely. And he's like, "And you know what? That's our job. As a CPA, we're focused on the current year. It's a historical review of the prior year." But he's like, "But as I got more into the retirement side and the personal financial specialist side, it became more clear that I was wrong for a number of years." It's like, "No, we've got to think about taxes currently, but also into the future and how we're going to be efficient and manage that." So that's kind of the topic today. And I thought that was a great way to hear someone who's been in the industry for 30 years realize that 20 years into it, he's like, "Whoa. I got to make a shift." So let's start with common question number one, deductions. Am I going to have as many deductions in retirement as I did while I'm working? And under the current tax code, that's probably a big no, you're probably not. But if they sunset, Tony, and go back to what they were under the Obama administration, maybe, is that fair?

Tony: Yeah, that's a fair statement. We're getting closer to that. I think it's '25 or '26.

Speaker 1: Starts in '26, yeah.

Tony: Yeah. The sun setting starts coming back. If they don't keep it... Again, you don't know what they're going to do, but I would say for a lot of us, most of the time in your earning years when you've got debt and you have some things you can deduct, those eventually go away by default because you pay everything off and there's just not much there to deduct. And with the IRS's thresholds, you have to get over to itemize and then use medical and all of that kind of thing. You really have to have a lot of it to be able to deduct it. So a lot of times you may not have those deductions, which if everything else being equal means your taxes are higher even... I mean, before the politicians do anything. So you got to pay attention to that. And we'll refer back to that as we answer some of these other ones here.

Speaker 1: Okay. Well, let's talk about the fact that I think our society, the way we're set up, whatever the case, however you want to word that, we assume that our taxes are going to be lower in retirement. Of our generation, for sure, we're in our 50s. It's like, "Hey, you get a job, you go to work. You spend 30, 40 years there, you're not going to have a pension more than likely, but you're pumping into your 401k and when you get to retirement, you'll be in a lower tax bracket." And I've been talking to advisors for years now and that is just not the norm, but yet we still think it is. How often do you see that?

Tony: I see it. It's definitely not the norm anymore. I think that's what... When you're talking about your CPA friend, back in the day, that was the norm. It's like, "Well, the idea was kicked can down the road with the taxes, you'll be in a lower bracket because you won't be working, and then therefore you'll save taxes."

Speaker 1: And tax rates were higher.

Tony: Yeah, and tax rates were much higher. Historically, even though we don't like it, tax rates are very low compared to what they used to be. You look any charts back in the 60s and 70s and they were high even into the 80s. And nowadays, even though we don't have the pensions, people that have done well in the 401ks and are continuing to work, it's very likely that your tax rate could be the same or a little bit higher than when you were working. Depending on if you don't plan right and you have all this money flowing into your income situation that's never been taxed, now all of a sudden your income is a lot higher and boom, you're in a different bracket and you're paying more.

Speaker 1: And Tony, I think what happens here, here's the conversation about being in a lower tax bracket in retirement. I think what also has happened is we've kind of gotten to this mode of, it just happens kind of like retirement itself. I think we've been lulled into this thinking of, "Well, when I get to retirement age, I'm going to be in a lower tax bracket and I don't have to do anything about it. It just will happen naturally." Almost kind of like it's a given. And so, people might be listening and saying, "Well, I know I could get into a lower tax bracket." And I'm not saying you can't and that's where some... But you have to strategize and plan. It doesn't just happen naturally. If you want to be in a lower tax bracket in retirement, you're going to have to do some things to ensure that happens. Is that a fair thing?

Tony: Absolutely.

Speaker 1: Yeah.

Tony: Yeah, I mean you definitely have to do some things and do some planning or it won't happen. And then it's hard to change once you get that income flown in your retirement.

Speaker 1: Yeah. It's not like social security, like it's this given, right? Oh well, your retirement age, you also get here, here's a free... There's not like there's a bonus social retirement age tax bracket, right?

Tony: Yeah, that's right.

Speaker 1: You have to plan it. You want to be in the lower one, you got to strategize. Are all retirement accounts tax the same, Tony?

Tony: They're not. No. And I think that's where people kind of go arise. They just sometimes assume that. An easy example is you've been putting money into your 401k for 30 years and it's coming out pretax and then you decide to start pulling money out. None of that money plus the earnings has been taxed and you're going to be taxed on all of that. Versus, for example, you take some money out of your Roth IRA that you've been putting money into and none of that money is taxed because that was after tax money. And so, that's not taxable versus you've got maybe... You're at the age where you're taking social security in all this and part of that is taxed because of the way the rules are. So in my mind, three different things. There's no tax, which there's not that much of that. There's some tax, and then there's all of it's taxed. So you have to plan around this so that you can really take advantage of that. Because some of the mistakes I've seen people make and the biggest one is they start taking social security early when they have all this other potential income and they don't need it, they're still working and then they come to find out that up to 85% of it's taxed and on top of that they're reducing it because I'm still working and I'm not a normal retirement age and they're really giving a lot of money back. And so, I would definitely suggest you talk to your advisor or someone about that before you start taking money in retirement.

Speaker 1: Yeah, and you got to think about the types of accounts, the way they're taxed. We talk often about tax buckets, excuse me. About income buckets. Well, they're same thing, right? Tax buckets as well. Where do you want to take from? How are we taking from because what's the tax implications of those? Do we want to do conversions to lower some of our future taxable bill? And if so, how do we do that efficiently without bumping ourselves up in a tax bracket? And that's going to come into, I think, play into my next common question here for you, Tony. Is I have to touch on the fact that we see these ads, we hear these sayings, these slogans, we see these things in the mail we get. Get a tax-free retirement income, get a tax-free income in the retirement and pay no taxes. And how real is it? Is it viable? Is it actually real to think that you can get tax totally tax-free? And just what's to know here?

Tony: Well, I think the first thing is better do a lot of research. There's all kinds of things that people twist words and some of it may not be totally true, that's the first thing. But there are some ways to potentially do it. I mean, a way, and a lot of people don't realize this because they don't generally do it. But this is an area which you talk about tax-free bonds. This is just an easy one. Municipal bonds are not taxable at the federal level. If you get some from your state, they're not taxable at the state level. So theoretically, you can go out and invest all your money and that's municipal bonds, which are generally very safe. Now, they don't pay a whole lot of interest at the moment, but it's tax-free and you never have to put that on your return.

Speaker 1: Interesting. Okay. So-

Tony: That's one way.

Speaker 1: ... I guess there's a way... There's one way to actually make it true. I think where we hear this, Tony, is probably two ways and I want to have you address those. One is something like a universal life policy or something.

Tony: Oh yeah, I knew you're going to... Yeah.

Speaker 1: Yeah, that's usually one. And the other one is, like I just mentioned, so if you've got a million dollars in a 401k, so one might say, well let's convert all of that to a Roth and technically, it's tax-free in retirement. Now, you're paying the taxes now .

Tony: Paying the taxes now, yeah.

Speaker 1: But it is tax free in retirement.

Tony: It is, yeah. I mean, that's one. And that is a good strategy and we've used it before, is to, "Hey, let's start taking some money out now, converting it to a Roth, paying taxes now, but only fill up the bracket that you're in." Let's not go into the next bracket, so you got a huge tax bill. And just over time get it to a totally tax-free area versus again at retirement with Uncle Sam with his hand out there saying, "Give me some money." But you're still paying him but hopefully, we're spreading it out and we're doing it in a lower tax bracket than we think you'll be in. I think if you get into the stuff, especially with some not knocking insurance, because it has its place where you get some of that sophistication of, "Well, let's take all your money and put it into a universal life and then we're going to show you how to take money out of this tax-free." There are some ramifications there and you got to be very careful with the pitfalls and penalties and things like that with that kind of stuff. But it does have its place as long as you know that it's going to work for you.

Speaker 1: So there are some viable strategies, but again, it doesn't happen naturally. You got to work at it, you got to strategize.

Tony: No, you got to work at it, yeah. You really do to get tax-free income in retirement, yeah.

Speaker 1: Okay. And that's really the importance of working with a professional and it's not just a financial professional. So Tony, we know that there's all kinds of levels of financial professionals now. It seems like everybody can call themselves one. There's some that are just brokers only. They're stock brokers only, if you will. There's some that are insurance only. There's some that can do both sides, equities and insurance. And then there's some like yourself who are a CFP but also are a tax professional. Same thing I was talking about with the other person. There are some that are automatically I think... Because many will say, "This is a good strategy, let's do this, this or this." And then consult your tax professional to see how it's going to affect you. I like working with some... I mean, this is just my opinion, but I think there's some real value in working with someone who has all of this under one roof. Maybe it doesn't have to be the same person, for example, but they've got a CPA on staff or something like that. That's just my thought, but what do you think?

Tony: Well, I'm biased, but I do agree. I mean, at the end of the day, taxes is really where it's at. It all comes down to nobody wants to pay any more taxes than they have to.

Speaker 1: Especially in retirement.

Tony: Especially in retirement. And I think a lot of the advisors, when people will call me and say, "Well, my advisor told me to call my tax pro." And say, "Well yeah, because they don't want to... One, maybe take the risk of getting it wrong, but two, maybe they don't know." And so we want to tell you, here's the goods, here's the bads from a tax standpoint and you decide if you want to do that. But yeah, having it all in the same roof with us in that regard, that's what we do. We say, "All right, that all sounds good, but let me tell you about the taxes and how we have to work to do this and the goods and bads." And then you get to say, "Yeah, I still want to do that."

Speaker 1: Okay, and I think that's fair because whatever adage you want to put to it, it's not what you make, it's what you keep, so on and so forth. But in retirement, we're no longer having the paychecks coming in. We're turning everything we've built over the last 40 years or whatever into our money and into our paychecks. And we've got to be as tax efficient as possible because that's what's going to help us hopefully get that longevity out of the money that we're after, right? Because you're not making anymore, so you're not-

Tony: That's right.

Speaker 1: ... I mean, yeah, hopefully, you're making some in the market or whatever the case is and we want to keep up a little inflation and all that kind of stuff, but normal inflation at least anyway. So again, taxes are hugely important to the overall retirement strategy. One more common question, Tony, that I wanted to ask you. And that's the concept around the tax-free state. Well, we'll use California, we've seen this mass exodus from California for a lot of reasons, but one really big one is it's killing people from a tax standpoint, right?

Tony: It really is, the tax states, yeah.

Speaker 1: Yeah. I mean, even Elon with all his money's, he's like, "I'm out of here." And he's got tons of money. So how viable, and let me put this in this way for you. How viable is it to say, I'm going to move from a high tax state, let's say California or New Jersey or something like that, to a state like Tennessee or Florida or Texas, where they don't have any income tax. I think if you're wanting to move to that area for other reasons, then-

Tony: That's right.

Speaker 1: ... it could be gravy. Would you move solely on that reason?

Tony: I wouldn't move solely on that reason because you got to take a look at, "Okay, well, how else is this state raising its money?-"

Speaker 1: You're right.

Tony: ... Everybody's got to have money to run the state, so it's-

Speaker 1: It sounds great, right?

Tony: Yeah.

Speaker 1: But they're going get-

Tony: It sounds great, But it could be higher sales tax, could be real high property tax, could be some other types of taxes.

Speaker 1: County tax. So think about Florida, for example. Yeah, but each individual county has different taxes.

Tony: Yeah, there's local taxes and things like that. And so, you want to take a look at that plus the general cost of living in some of those cities. Is it going to cost me more to live? And so, is that really going to maybe negate some of my tax savings type of thing?

Speaker 1: It's a little-

Tony: Iowa. OH, go ahead.

Speaker 1: I'm thinking it's a little more costly to live in Orlando than it is or Miami than it is in Cedar Rapids, right?

Tony: Oh yeah.

Speaker 1: It's just the hair.

Tony: Yeah. I mean, but we've had that in Iowa, not as bad as some of those real high tax days, but Iowa was always in about the top 10 highest tax states and-

Speaker 1: Really? Okay.

Tony: ... what they've done over the years and right later on... I mean, they say that they're making money from other sources, because that's always my thing as well. If you're going to cut taxes, which they've just done. So now starting in '24, retiree's income is completely exempt from Iowa Tax. So we, as a retirees, you don't pay any taxes here. Now, if you're out working and things like that, you do-

Speaker 1: Sure, yeah.

Tony: ... but yoru just retirement income. So that's kind of a break for retirees here from a relatively high tax state down to that.

Speaker 1: That's pretty nice.

Tony: And so, try to keep them here. Because I mean, the weather is not conducive like some of the... I call those, some of those states like Florida, that's your weather tax down there. It's-

Speaker 1: True.

Tony: ... some of those other taxes. But the point is that you need to look at some other things because just the income tax... Maybe [inaudible 00:17:09] of that-

Speaker 1: It's probably not going to make or break your plan, right?

Tony: Yeah, no. But like you said, if you're planning on moving somewhere sunny or I've always wanted to be in Nevada, let's say, and I'm going to move there. Yeah, that's kind of icing on this cake.

Speaker 1: But yeah, then let's go ahead and factor that into the plan for sure. And it might help out along the way. But yeah, I don't know that it's necessarily going to just make your whole plan. It's not the one missing cog in the wheel, if you will, in the machine. And of course, I was just talking with somebody the other day about Florida, and this was obviously even prior to the hurricane, but yeah, they gotten wise too. You can't just say you live in Florida now just because you might have a second residence. They want to see a lot of... They're making you jump through some hoops to make sure that you actually live there-

Tony: Yeah, oh yeah.

Speaker 1: ... to live there and long enough to claim that as your main state. So again, those are just some common questions around taxes and retirement.Again, the biggest one is if you want to have reduced taxes, excuse me, in retirement, you've got to plan for it. You got to strategize for it. It's not going to just happen on its own through a series of... I mean, maybe through a series of the right steps that you just did and didn't realize. Sure, it's possible. But like anything, the world's changed so much that... It just really does require strategizing and planning to be as efficient as possible. And that way you can also be efficient not only for your retirement years but whatever you might leave behind as well when you move on in that legacy section, you want to be as tax efficient to the kids for the most part as that. Of course, some of you do, some of you might say, "Hey, they can pay the tax bill. I don't care."

Tony: Right, yeah.

Speaker 1: So everybody's different. Tony, thanks-

Tony: [inaudible 00:18:47].

Speaker 1: ... for hanging out, my friend, as always. I appreciate it.

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

Speaker 1: Yeah, we'll catch you next time. Again, if you've got questions, folks, around taxes, who better to talk to than the tax man, reach out to Tony and his team at Tax Doctor. And they are Des Moines' professional alternative. Of course, they have clients all over the country as well. But reach out to them, find them online @yourplanningpros.com. That's yourplanningpros.com. Don't forget to subscribe to the podcast, Plan With The Tax Man on Apple, or Google, or Spotify, whatever platform you like to use. You can find it all at Tony's website as well. He's been helping families for 20-plus years, boy, about 25 or so now, right?

Tony: Well, 26-

Speaker 1: 26, okay.

Tony: ... be 26 this year.

Speaker 1: So there you go. So reach out to Tony and get started today. If you got any questions, need some help, and we'll see you next time here on Plan With The Tax Man.

Disclaimer: Securities offered through Avantax Investment Services.  Member FINRA, SIPC, Investment advisory services offered through Avantax Advisory Services.  Insurance services offered through Avantax Insurance Agency.

Just like the lights on your dashboard can indicate if something is wrong with your car (like low tire pressure or leaking oil), there are indicators in your financial life that might point out that you have a problem that needs to be addressed.

Important Links

Website: http://www.yourplanningpros.com

Call: 844-707-7381

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Transcript Of Today's Show:

Speaker 1: Welcome in to Plan with the Tax Man, with Tony Mauro and myself here to talk about warning signs, how to spot some potential problems in our financial life. Certainly not too hard to probably spot in 2022. You're probably thinking because there's a lot been going on this year, but we're going to talk about a few things to pay attention to outside of the clearly obvious ones that are going on. And think about it like your car engine just, or your vehicle, just like lights on your dashboard can indicate if something is wrong. There's other things that you might not realize that are happening that you want to address as well. So it's not always just the most obvious. And that's the chat this week, Tony, what's going on buddy? How are you?

Speaker 2: I am good. Settling into a late fall and it's getting cooler here so it's always, sun starts setting a little sooner and then it's winter.

Speaker 1: Yep. Let the coolness in.

Speaker 2: Yeah, yeah. But weather's been good here and all is good.

Speaker 1: Yeah, it's good. Yeah. I mean it is what it is, right? Some areas don't have all four seasons. Of course you can be like most states, many of the states that I've lived in, it seems like they had summer, winter, and construction.

Speaker 2: Yes.

Speaker 1: That was the only three seasons they had, so. And we'd go from one to the next and that's kind of how it is in North Carolina a little bit. It's hot, hot, hot, hot, cold, back to hot. But let's talk about some of these warning signs, Tony a little bit. And again, think about this from a standpoint of it could be your whole financial life, but also just maybe the retirement side of things too. However you want to take this in your answers, feel free. But when people come in to talk with you or whatever the case is, no matter what their age, let's say if they're even starting early or if they're starting right up to the last minute, whatever the case might be, they often have no idea what it actually costs to fund their lifestyle. I can't tell how many advisors I've talked to that say they go to do, get the preliminary numbers from people. They're starting to help, pull information in and people often way under calculate what they actually spend.

Speaker 2: They do. And I would echo that. That's why I picked this topic was this very one right here, is I would say, I would have to guess, but I mean even on the tax side, I'd say 99% of our clients, our tax clients do not understand how much money they have going out for how much they have coming in. I mean, that's really what it comes down to.

Speaker 1: Yeah. That's massive.

Speaker 2: But in their defense, in people's defense, they don't really teach it in school. I always tell them. And they're not really teaching it in college very much. And so unless you just watched your parents, most of them don't track what their net income is and then every little thing that goes out the door. And that's why at the end of the day there many people say, It feels like I'm working harder than ever, but I just can't get ahead or I can't see.

Speaker 1: And it's interesting, if you think about. In the age that we are in with an app for everything times 50, you'd think that it would be easier. And I don't know if it's the, I'm just don't want another stinking app kind of mindset versus just the manual way of doing things. And you're right our financial education system has been horrible in this country for a very long time. I mean, back when we were in high school, in the 80s, I think we got a one hour class on how to write a check and that was pretty much it.

Speaker 2: That was it?

Speaker 1: That was it. Yeah.

Speaker 2: And I think you're right though. I think there's a lot of apps that make it easy. I think it's not the one more app as well as far as I...

Speaker 1: It can be burnout. Yeah.

Speaker 2: I don't want any more to do, I just want to live. But I think it's so important though, because the apps do make it almost automated now. They can connect to your bank accounts and kind of do everything for you. Even if you're really lazy and don't want to do anything is you can look at a app like Mint or Quicken on the mobile and you can just get a snapshot, even if you don't reconcile your bank statements and do all that, wow, I took in this much and I paid out more. No wonder I don't have anything at the end of the month. And then you can start digging in, well where the hell did it really go?

Speaker 1: Quite exactly. Well I've got another advisor friend like yourself and we were chatting and he's like, well the way I do it is because he's a CPA as well, is he's like, let's just look at your tax returns, right? We're going to look at the tax returns because that's the end all be all at the kind of, here's the data and okay, here's what was left, right? Where is it? If it's not in your savings account, guess what? You spent it.

Speaker 2: You spent it.

Speaker 1: And I have other advisors who say, hey, here's an interesting idea for folks to ponder. Again, you have to know yourself and you have to have the discipline. But what if for one month you put every single thing on one credit card, right? Or one card, right? And then looked at that and said, Okay, this is literally what went out. And then of course you can look at obviously what you brought in based on your income, on your paycheck or whatever. And obviously maybe this is a little, that's more of a setup for people who are still working. And again, got to know yourself for a discipline because don't do that and then not pay off the credit card, because you got to...

Speaker 2: Yeah, that's right.

Speaker 1: But I mean people do, they come up, they find these different ways to do it and some people love Excel and some people want to use spreadsheets. But if you are not diligent about it, and most people aren't, you just really kind of, I think our world is so designed now, Tony, that we're getting nickel and dimed and we just don't even realize it. So when someone says, well here's what it costs me to fund my lifestyle. When they come to see you for the first time, they're telling you the car and they're telling you the mortgage and they're telling you the approximation of the electric bill. Well it's roughly $200 a month and you know what I mean? That kind of thing. But how many times, did you tell how many times Amazon comes a week? We know all that kind of little stuff. Or how many times you stop by the burger joint or the coffee shop or whatever?

Speaker 2: Yeah. And one of the... well, with our financial planning clients, one of the first exercises we do after we go over goals and things is we go over this and we use software. So we kind of do the heavy lifting for them. But yeah, they'll do just that. They name off the big stuff. It's like, okay, well you, that's that. But what about how many times did you go out to eat? How many times did you buy clothes, go golfing? Whatever it is you do. And we got to get all that in there. I mean every single dime needs to be accounted for 'cause it's either spent or saved at the end of the day, for most people it's not saved. So we have to go through that exercise. But we do talk a lot about this and once their eyes are kind of opened, a lot of them will say, well how can I track this without going to a lot of trouble? And so we have to be able to offer them some things there. But you got to start here if you're going to improve your financial life.

Speaker 1: And we're not talking about living on a budget, right Tony?

Speaker 2: No.

Speaker 1: We're not trying to say you have to be restricted, but if you're trying to... again, the topic here is how to spot problems in our financial life, not understanding what your lifestyle's costing you is a huge problem. So if you go in and say, my plan, if we make $5,000 a month in retirement, Tony, we're going to be okay. And if that's not the actual real number, you're actually spending seven grand a month, guess what? You're going to run out.

Speaker 2: You're going to run out. And we can't help you if...

Speaker 1: If you run out.

Speaker 2: If that happens. Right? Yeah.

Speaker 1: We got to fix it before you run out. So a gain, that's a huge one to focus on. Another one is that I wanted to talk about is the arbitrary number. People who focus, and again, you could be doing this while you're working, you could be doing this for whatever reason, but the arbitrary number of an account balance or a net worth, right? Well when we get to 30,000 in savings, then we can this. Or when we get to 500,000 in the 401K, then we can that, right? So kind of applying this arbitrary number and often the one we see Tony really is, well I need to get to a million to retire. Once I get to a million I can retire. And it's a big round sexy number and we get to say we're a millionaire and I get it all that. But what if 700,000 would get it done and you got to leave work three years earlier than you wanted to, right?

Speaker 2: I agree. And I think people do, they focus on this number. I think most of our clients focus on too low of a number and they don't realize how fast that number is going to disappear or be spent.

Speaker 1: That's a great point. But that kind of goes back to the first one, right? Because...

Speaker 2: It does.

Speaker 1: ... you're under calculating that, first [inaudible 00:08:32] so anyway, keep going.

Speaker 2: So that's kind of the thing which it does. It ends up going back to the first point. But when you can sit down with them and ask them that and then say, okay, well let's take your number for example and let's start subtracting out some things. How long is that money going to last? And maybe let's not focus on the number so much as to what type of income or how much income do we need to generate every month, let's say in retirement. And then work backwards into whatever that number needs to be. Because for you it might be 700,000 and you can retire earlier. Maybe for somebody else it might be 2 million. And so it's worth it to not focus on the number, at least in the beginning. I like to focus on the monthly income and then back into that number, because...

Speaker 1: Yeah, absolutely.

Speaker 2: Otherwise, I think again, it could back you into a corner, you get to that number and then if you're at retirement, let's say that might not work depending on your lifestyle.

Speaker 1: Yeah. And I love that you mentioned the underfunding because that is what happens. I also think that what happens was when folks come in, they've finally gotten the nerve up to come see a financial professional like yourself maybe for the first time, they're nervous about it. And I think sometimes we have this thing as humans where we want to be told we did a good job or we want to put on a face, if you will, that we've got our stuff together even though we're turning to someone to help us. And so you may go in under kind of guessing that number. Well, it's only going to take us, technically we can get by with $3,500 a month, right? And so that'll be like, yeah, we need 3,500 to make the plan go. And to your point, you're way under guessing. And then maybe that arbitrary number is, well we could do it on a half million when really it's actually the 750 or the one million or the two million, whatever it might be. So that's a great point. I'm really glad you brought that up in there as well. People often tend to do that. And I think it's just, again, it could be any number of human emotions that kind of causes to do it. And speaking of emotions, this third one here, Tony is kind of an interesting one. I think this is a nice take for people to ponder when it comes to spotting problems in your financial life. It's the conception or the mental image that you've built in your head that you've had forever about what your parents did or did not do. For me, I know my dad never talked about saving for retirement. It was never brought up. He wasn't retired long before he passed away, but it just seemed like, well he didn't do anything and it just kind of worked out, right? And so a lot of people I think do that same thing. They go, well, my parents, especially if you're like, again, you and I we're right around the 50 age, so we're kind of teenagers of the 80s. I think our parents that we saw just before us there, it's kind of like they just didn't do a whole lot and yet they somehow were retired. So I guess I'll be fine too. You know what I mean? Does that make sense?

Speaker 2: Yeah. Makes sense. And I think that's a fallacy if you...

Speaker 1: Oh for sure.

Speaker 2: Let that go too long, because my parents were the same way. My mom didn't work and my dad did and he didn't even ever, ever that I remember talked about, thought about or saved until he was in his 40s. And he kind of got lucky and got into a government job and then started putting a lot of money away. And then of course he got IPARs and some things like that. Otherwise, I don't know where he would've ended up. Now he's pretty well off, but yeah, they did not do that. And I don't think we, and even people younger than me, my own son should have those images. They really need to think about things because one, we're living a lot longer now. The younger people going to live even longer more than likely. Healthcare is really high. And you got to kind of take a peek at again what your lifestyle's like. Because I know my lifestyle, my dad really didn't even quit working until he was 78, but I think he kind of let retirement pass him by a little bit and it's like, boy, I don't know if I want to go that route. And I think a lot of people are the exact opposite. It's like, boy, sometimes I still hear people say, I want to retire at 57. It's like, wow, how are you going to do that because... That you may not have what you think. Back in the day when people retired younger, they weren't living as long. They had pensions, they had all kinds of things that we don't have now. And so a lot of thought needs to go into this. But yeah, I definitely wouldn't base that image on what our parents had for sure.

Speaker 1: Yeah. And the world has definitely changed so much Tony in the last just 30 years. You and I can definitely att... anybody can attest to that, right? And just watching what's happened from the 80s up till now, I guess that's 40 years. I'm showing my age myself. But things are... they're pretty tough and they're pretty interesting on how they look and on some ways it's supposed to be better. But I mean, thinking about what you just said a second ago, your mom didn't work and your dad kind of late start if you will. But somehow you guys were fine. And that's pretty hard to do nowadays. I mean if you don't have two families working or two people working in the family, especially in those, when you're in your 30s, I think it's tough to get by. And of course inflation right now is making that really tough.

Speaker 2: Really tough, you don't see as many, I mean generally women not working like they used to back when I was a kid and it's a two, and my wife and I have always been a two person income.

Speaker 1: Mine too. Yeah.

Speaker 2: It was always, at first it was a necessity and now it's like, well I'm glad we still have that. Now you have more income and getting to a point where you can do more of what you want.

Speaker 1: Right? Yeah. It's all about having that right mindset for sure. All right, so let's see if we could do a one or two more here before we wrap up. This one's easy to do. If you're stressing out on the regular because of the current world events and you're worried about how it's going to affect you. And granted, you're human, we're all dealing with that right this minute, but you've got to moderate that somehow. Otherwise, you are going to send yourself crazy with the... I mean the market has been super volatile obviously in 22. The bond markets down, inflation rates are up. Excuse me, interest rates are up, inflation is... so we are in a heck of a pickle right now. So you got to figure out a way to moderate this.

Speaker 2: You do. Well, if you're prone to getting worked up then you're probably about ready to blow a gasket with all these.

Speaker 1: For sure. It's not good for your ticker, right?

Speaker 2: Yeah. It's not good for your ticker and there's so much coming at us and we've talked about it before with the news. It is easy to get worked up and really have some anxiety about in the short term what's happening and you lose your focus on if you're saving for retirement and you're ways away focusing on the long term. And if you're in retirement and you are properly diversified and invested well yeah, your portfolio might fluctuate some, but the income's not going to change and nothing's going to happen there. But at the end of the day, you just kind of see all this negativity in the news and that's mostly what it is, unfortunately is, yeah, it's hard to keep on your plan and keep positive.

Speaker 1: It really is. Yeah. Well I think that's... so somebody's said, well you kind of said it because somebody listening might go, well great, yeah, it's hard to do. So what do we do? And you mentioned it, the plan is one thing. If you don't have, well I guess we should flip that question. What are you doing? If it's nothing except for watching this stuff and getting weirded out and getting upset, then you're not helping your own situation. Have you talked with someone, have you put together a strategy? Right?

Speaker 2: Yes. Yeah. Because that's really what it comes down to is if you don't have a plan, well then you need, obviously probably need to get one if you have one and we've been talking to our clients and there has been some minor changes we've made but it isn't like we're saying, well the market's been down, let's just go all to cash or...

Speaker 1: Right, wholesale changes.

Speaker 2: Yeah wholesale changes. 'Cause when somebody asks me that, I said, okay, if what you're telling me that's what you want to do is you want to go all to cash. I said, then who's going to make the decision of when to go back in the market? Is it going to be you then the next news that you see? Or because I've stopped trying to do that because I told you before, we don't market time. I mean, who's that? What's going to trigger that? And then they don't know what to say as far as that goes. So I think most prudent investors, you want to stay invested at all times, when times are tough, especially saving for retirement. I always tell my clients, I say, really you should be investing more, that this is the best time. Generally the crowd's running for the exits when bad things happen short term. And if you're investing regularly then it's a moot point. It's easy for me to sit back and say, don't pay attention to the news. But in reality that's hard to do. You do get sucked up in it a little bit.

Speaker 1: Oh for sure. Yeah. And that's saying to not, and that's why I said moderate it, right?

Speaker 2: Yeah you got to moderate it.

Speaker 1: Because if you're freaking out at every single thing that goes on right now, there's a lot and you're really going to make yourself sick. So you got to have a strategy to deal with that. And I think to your point right there, it's like if you're still working, 'cause my wife, she's like, hey, obviously my 401's taken a beating. What should... should I cut back on my, how much is being taken out each paycheck and going in? I'm like, no, because your dollar cost averaging, right?

Speaker 2: ... cost averaging.

Speaker 1: If you're still working, just keep doing what you're doing, because you're right now you've still got some of that time on your side and you're buying while the market's down, it's so funny, Tony, the market is the only place no one wants to buy on sale.

Speaker 2: They don't want to buy on sale, they want to buy high and sell low.

Speaker 1: And that's completely opposite.

Speaker 2: You got to pay attention to the news. But also, you definitely don't want to rush into things. And I sometimes if people push me too far, I say, well, you're still working. Our style of life is so good. And I say, if you're that upset about it, well let's take a philosophical view. Let's go down to the hospital and visit the sick kids that are dying and the homeless. I mean, there's always somebody that's way, way, way worse off and...

Speaker 1: Oh, for sure.

Speaker 2: So you got to step back and say, count your blessings and kind of go from there. Put it in perspective a little bit.

Speaker 1: Absolutely. Yeah. We all suffer from first world problems, right?

Speaker 2: Yeah. That's what it is.

Speaker 1: And everybody, hey, your problems are understandable. They're stressful to you, not trying to make short of that, but there's always going to be something a little bit worse. And this is something, yes, we can't control the stock market, we can't control the taxes of the inflation, but we can control how we're we react to it and if we're taking any action within those parameters to do something. And so if that's the case, these are some ways to spot some problems in your financial life. Certainly those two big ones right there at the top though are certainly big ones. Do you understand how much it's going to cost to fund your lifestyle now and later? And are you focusing too much on or too little on what that number might be? So get yourself a conversation with someone like Tony. Have a chat. Make sure you're doing something for yourself and your retirement. You can always reach out to him if you've got questions. If you're not working with him already, stop by the website yourplanningpros.com, that's yourplanningpros.com, subscribe to the podcast Plan with the Tax Man on whatever app you like to use, like Apple, Google, Spotify, so on and so forth. Tony, thanks for hanging out and chatting my friend. We'll talk soon.

Speaker 2: All right, sounds good. It was a good conversation.

Speaker 1: Absolutely. I always appreciate your time here on Plan with the Tax Man with Tony Mauro from Tax Doctor Inc.

Disclaimer: Securities offered through Avantax Investment Services.  Member FINRA, SIPC, Investment advisory services offered through Avantax Advisory Services.  Insurance services offered through Avantax Insurance Agency.

Want to know the secrets to experiencing satisfaction in retirement? We’ve discovered five key situations to which your financial plan needs to lead you. If you can key in on these five points, you’ll have a high chance to achieve retirement satisfaction.

Important Links

Website: http://www.yourplanningpros.com

Call: 844-707-7381

----more----

Transcript Of Today's Show:

Speaker 1: Back for another edition of Plan With The Tax Man. Thanks for tuning into the podcast with Tony Mauro and myself to talk about getting some satisfaction or as Mick Jagger said, "Can't get no satisfaction."

Tony Mauro: Can't get no.

Speaker 1: That's right. Can't get no. Or can we? So, we're going to talk about some secrets to experiencing satisfaction in retirement. If you want to know what those are, we've got five we've identified. They're different for everybody, but these are five to maybe pay a little attention to and see if they might help you improve your chances for retirement satisfaction. What's going on with my friend? How're you doing?

Tony Mauro: I'm doing good. How about you?

Speaker 1: Pretty good. Pretty good. Are you a Stones fan at all? Do you like the Stones?

Tony Mauro: I do like the Rolling Stones. I never did appreciate them when I was young, but I do now.

Speaker 1: Yeah. [inaudible 00:00:40]. Classic song. Right? Can't get no satisfaction. Great, great song from the Stones. So, I think most people... We probably won't play it here on the podcast just for those reasons that we can't. But I think soon as you hear it, most people just kind of already hear that da, da, da, da, da, they kind of already hear that guitar part going in their head. So, no worries there. But listen, we got these five items here, Tony. Let's run them down real fast and see how the process of going through and working with an advisor, maybe can help achieve some of these or at least improve some of these. And they're pretty wide range here, like the first one's peace of mind, certainly something we want to have in retirement, have some satisfaction there with peace of mind. But regardless of what's going on in the stock market or even in the world, the idea is to be able to retire in any economy, in any environment, because you never know what's going to happen. You never know if a pandemic's going to happen or a war's going to break out or the market's going to crash. It's not ideal, but we want to be able to do it regardless. So, peace of mind comes into play. And that's, I think where the planning process can help because you guys can stress test and show scenarios.

Tony Mauro: That's right. And these five we're going to talk about really are the whole basis in my mind of any financial plan, whether we do it or anybody else, it should be the same in my opinion. Because these are the five things that if you have these going for you and you can constantly address them and say yes to, you're going to have a great financial plan and it doesn't have anything to do with the things that make up your portfolio. I think if you just have some investments in your portfolio and you haven't analyzed any of this, I would say you don't have a plan. You may have a lot of money in those portfolios, but may not have these things and you need to get to them to really achieve what I call the financial success.

Speaker 1: Well, if you got $10 million, I mean, you're going to say, "Hey, I'm totally great." But depending on how you live your life, does that $10 million give you peace of mind without a plan? Because maybe the way you live, $10 million doesn't get it done.

Tony Mauro: Exactly. And for me, peace of mind is, like you said, you know that your portfolio and everything else about your plan does not... I mean, somewhat depends on what's [inaudible 00:03:04] going on in the market, but short-term. But long term, you're not really worried about the news of the day, the war of the day, I mean, because it goes on, it's going on right now as we speak, politically, and the war Ukraine and everything else. There's always doom and gloom on the news. So, without getting into that whole conversation, you want to have peace of mind that your portfolio and your plan, you're going to be okay.

Speaker 1: Yeah. We've talked about retirement in various political environments. God willing, if you're walking into retirement, let's say this year or next year, you're going to see multiple administrations. It's not just what's happening with this current one. Sure, it affects a lot of things, but there's always going to be the next administration, then the next one after that, tax changes, rule changes, whatever the case might be. So, if you're looking at a 30 year retirement, which many of us are, bound to be a few things happen, so you got to make sure you got some peace of mind to ride through most of it, as close to peace of mind as you can get. You mentioned diversity, so let's go to that one because that's the second one we talked about income streams. Diversity of those income streams are super important, but we got to be careful not to be too reliant. It used to be just pensions and social security and we called it a day, but that's not the case anymore.

Tony Mauro: No, it's not. And we try to strive for three to five different income sources in our plans, and the more, the better. But if we can get that, then it leads us to what we just talked about, more peace of mind, more of feeling good about I've got money coming in from all these different sources. So, if one source is not particularly en vogue at the moment, it's still producing some income for us, but may not be what it was, but it'll be back. And it is not going to alter our lifestyle at all if we've got that normal and good diversity, I think. I see too many clients come and basically they have two, they have social security and a little bit, and I'm talking a little bit, of just savings or some retirement. And if that's all they have, then that's all they have. And then it's the conversation of you have to do as well as you can with what you have.

Speaker 1: Well, then your options are just more limited, right? [inaudible 00:05:21]. So, the option is to try to save more, spend less, reduce your lifestyle. That kind of brings things into focus there. I like how you brought in en vogue there a little bit. So, you brought in another song reference to our Can't Get No Satisfaction, although it's Madonna, but that's okay. We'll let it roll. How about number three on our list? Confidence. If you're trying to get satisfaction in your retirement journey, confidence goes a long way. As humans, we need it in just about every aspect of life. That's a crucial one. We talked on our prior podcast a couple weeks ago about the psychology of some things, Tony, and I think confidence goes a long way into that conversation too, because even if you've done a great job and have been a diligent saver, if you don't have a good strategy and a good plan, you may not feel confident that you can even enjoy this money you saved.

Tony Mauro: That's right. And this is where the accountant in us comes out with our clients, because we do in this area, sit them down. We do go through the exercise of let's see what you're spending, what your bills are every month in retirement. And you're going to sit down and you're going to help me write them out. And we're going to make sure that we add those up, compare it to the different income sources you've got coming in, so that you'll see that, hey, you've got the confidence, that you're going to be able to pay all your bills. And hopefully you've got extra, so you can take that and go do other things. So, I think that's the most important thing because us as advisors, we could tell them, "Oh yeah, you'll be fine. You'll be fine. But I think we have to show you. Here's your bills, here's your monthly income coming in, you truly are going to be fine." And even we take it a step further, we let the computer software do it, tell them, "Well, even if your income goes down by X amount or you live X number of years, you're still going to be in great shape and not run out of money"

Speaker 1: Most of us are visual, so I think we do need to see something and in black and white. And it kind of helps sink it in. We're like, "Ah." We get that "aha" moment going.

Tony Mauro: I think the key there is for us as advisors is not to throw so much data at the client because they tend to get lost. So, we try to keep it simple, but it's still very powerful. I mean it's based on fact [inaudible 00:07:34].

Speaker 1: Yeah. Oh yeah. Because then your head's spinning and how much do you retain and so on and so forth. Okay. Number four, security. And this could be in any aspect of the plan, but security clearly important. Maybe for some it's the security of that income stream that you just talked about. Maybe it's the security of a long-term care strategy.

Tony Mauro: I think yeah, both four and five are this security and being able to know that whether it's my long-term care plan or my healthcare plan, any other plan that you have is going to be there and cover what you need when you need it. Normally, what we tend to do is review every year or every year and a half, their healthcare coverage, long-term care coverage, see if there's any gaps and if they want to try to change something or fill those, just so again, they can build the security that I know that if something happens to me, that I'm going to be all right and everything's going to be paid for. With long-term care, of course, a lot of them talk about being a burden on their family if something happens.

Speaker 1: Yeah, that's true. Nobody wants to be the burden. Right? Having that strategy in place, so having that security goes a long way with getting that satisfaction in retirement. And the last one is independence. You mentioned four and five being probably pretty big ones. And independence could be a number of things. Whatever side of the political spectrum you find yourself on, I think all of us would like to have a certain level of independence from government. We don't want to be more reliant on them than we have to, I think most of the time. But it also could be something as simple as independence from our family, Tony. My mom lived with my wife and I, a number of years early on in her retirement. And she was not happy about it, but it just was a situation she found herself in. And it took a while, but then eventually she was able to get into a senior... She was on a waiting list, she got into a senior apartment complex. And while there's things about that that frustrate her, she does often return to the fact that she feels better having some level of independence. We'll say, "Hey mom, do you want to spend the night?" And she'll come over and spend the day, do some things. Do you want to stay the tonight here? And she's like, "No, no, no. I feel better at home. I feel more comfortable in my own surroundings." So, she likes that independence.

Tony Mauro: Yeah. It's funny because my own father talks about it a lot. It seems like lately here in our own family, we've lost some relatives and whatnot battling Alzheimer's and dementia, things like that over long periods. And of course he says all the time, he does not want to go into some home. That's his biggest fear of losing his independence and having to rely on either family assistance. He has a great long-term care policy, so again, we're back to, he's confident, we've made him confident that he's secure in his plans, but he definitely wants to be independent. [inaudible 00:10:21].

Speaker 1: Doesn't want to give up that independence.

Tony Mauro: No. And we were up at... My son actually got married a couple of weeks ago up in Sioux Falls, and so some of his and our friends come up and their aunts and uncles, they're in their eighties, and you could definitely tell that they're really starting to change some, mentally. It's sad to see and hopefully they've got some of this taken care of because then it becomes a worry for the person that's going through it. And I don't think they should have to worry about that.

Speaker 1: And that's not healthy. Yeah. That adds to the... Reducing our mental stress in any form in any time of life is always a good idea, stress levels, period. It kind of goes a long way towards helping our health, but certainly as we've become seniors. So yeah, independence. That's the fifth one, folks. So, five, pretty wide, but also very crucial pieces to finding satisfaction in retirement, getting peace of mind, having that diversity, understanding you've got confidence in the plan and the strategy, security in the different aspects of it, and just our own personal independence in retirement, so we still feel like we are in control of ourselves, if you will. Those are five crucial components to a good strategy. And if you need some help with that, definitely make sure you're talking with a qualified professional. If not, Tony, certainly someone, but he is available for you. If you'd like to reach out to him, stop by his website at yourplanningpros.com. He's got 25, 26 years of experience helping folks get to and through retirement. So, a great resource, not only in the Des Moines area, but all around. He's got clients all over. So, reach out to him online, yourplanningpros.com. That is yourplanningpros.com. Don't forget to subscribe to the podcast on Apple, Google, Spotify, whatever platform you like to use, Plan With The Tax Man is the name of the show. You can find all the information again at Tony's website. My friend, thanks for hanging out with me. Great conversation this week. I think we'll have to go listen to some Stones now.

Tony Mauro: I think so too. Then we have to do it.

Speaker 1: Yeah, we have to crank it up a little bit. Have yourself a good week, my friend. And I will see you next time here on Plan With The Tax Man with Tony Mauro.

Disclaimer: Securities offered through Avantax Investment Services.  Member FINRA, SIPC, Investment advisory services offered through Avantax Advisory Services.  Insurance services offered through Avantax Insurance Agency.

We always talk about the money side of financial and retirement planning. But what about the mental aspect of that big life change? Today we’ll break down an article written by a Licensed Professional Counselor (Kate Schroeder) for Psychology Today, titled The Psychological Investment In Retirement.

Important Links

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Call: 844-707-7381

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Transcript Of Today's Show:

Speaker 1: Hey everybody. Welcome into the podcast. It's time for another edition of Plan With the Tax Man with Tony Mauro and myself and we're going to talk about retirement planning from a psychologist's point of view. Often we talk about the X's and the O's, but sometimes it's important to talk about the opposite side, not just the money side of things. And so we've got an article here that we're going to reference, and we'll throw that in the show notes as well if folks would like to check that out. The Psychological Investment in Retirement, that is the name of this book by a licensed professional counselor, Kate Schroeder, hope I'm saying that correctly, of Psychology Today, so that's on topic this week on the show. Tony, what's going on, buddy, how are you?

Tony Mauro: I'm good. Rolling into fall. Getting a little cooler here, and days are getting shorter.

Speaker 1: Yep. It's that time of the year, it's winding down, but that's okay. I think a lot of us are looking for it, for '22 to be over.

Tony Mauro: Some people are.

Speaker 1: It's been a challenge, across many platforms.

Tony Mauro: Yes it has.

Speaker 1: We'll see how it goes. And this is a challenge today because for some reason, you and I were laughing, I can't seem to say psychology very well. I keep tripping over it, but that's our topic today. And it's actually a pretty good conversation piece because the transition from what you've been doing all your life for many people to something totally new is tough. And you guys have to tackle this stuff as well, as financial professionals. We've got some key points to analyze from this article in the podcast. Let's just dive in because there's a few of them, Tony, and run through some of these. So few people consider the consequence of walking away from the life, the routine that maybe defined them for a long time. And you've been doing this a long time. You've been doing this, what 25 years or so?

Tony Mauro: Yeah, 26.

Speaker 1: 26, so I know you probably encountered a fair number of people who you can kind of identify that, that hurt, that's really bugging them. They're really struggling with, this is who I was. The guy or gal that went to X job and did X thing, that's who I was. Now, who am I?

Tony Mauro: Yes. And to speak to the article, I've read the article and for those who are inclined to go out and read it. But the interesting thing is, is this is a psychologist, not an investment professional, who's writing these articles and they're seeing it in their own profession. And we see it too. But people say, "Oh, you guys are all the same. You all say that." This is somebody outside the industry, that they see this and this is what we see a lot, all these things we're going to talk about is what we see a lot of. And it doesn't have to do with the numbers per se. But to your point, you just picture yourself, you've done something 30, 40 years. It's a routine, whether you're in business or working for somebody else and all of a sudden, boom, that stops, and now it's... People come to us, a few months into retirement, basically saying, "I need help because I don't know what to do with myself. And my routine is not there anymore. I don't have the same type of meaning. Feels like life is going on without me." And so we try to work with people to try to deal with that before this happens, to kind of let them know from this psychological standpoint, that some of these things are going to happen and it's normal to feel this way.

Speaker 1: Sure, yeah.

Tony Mauro: And you've got to work through it and plan for it, just like you were planning for all of your numbers is what we tell them.

Speaker 1: Yeah. It's just like thinking about your child going off to college. Everybody's going to be different. There's some parents that struggle heavily when their child goes off to college. We all miss them of course. But there's some that really take it, have a hard time with it. And then there's others who are totally fine. I thought for sure, my wife was... We have just one child, so I thought for sure, and they're super tight. I thought she was really going to have a heck of a struggle. And she didn't. She was like, "Wow." she's smart, I trust her, we've raised a good kid and she did not struggle like she thought she was going to. Same thing with retirement. Some people will get there and they're like, "Hey man, I'm totally ready to let the old me go." And others can't seem to do that. There's definitely some psychology to that conversation piece. That's a great point. That's the first one. The author also talks about, says the research, show that the number one thing that retirees struggle with, is finding that consistent, genuine or lasting, maybe meaning or purpose. We talk about the number one financial fear is running out of money. Well, it seems as though the number one mental fear is, what do I do with myself? I need something purposeful. And I think you and I have talked many times about, Tony, retiring to something, instead of from something.

Tony Mauro: Exactly. And it's an important part of the planning process as well, to at least get some ideas in your mind about what you're going to do to find meaning, whether it's doing some work just for some, what I usually use the term mad money, just to have, or maybe it's volunteering at charities, maybe it's traveling, maybe it's spending time with family or a combination of those obviously hobbies and things like that, stuff you always wanted to do, but maybe never had the chance to do in your routine and in your work life. And maybe there's an opportunity to do some stuff like that. We make clients make a list of some potential things that they may want to do and we keep it and we talk to them about it when we're doing reviews. And some of them say, "Well, no, I decided I don't want to do that." We just X that out and go on. But it's important, it's almost like holding them a little bit accountable. They don't have to do anything if they don't want to, but then they start losing that meaning of life and some of them get depressed and things like that and that's definitely not the way you want to spend retirement, assuming you got your health and everything.

Speaker 1: Yeah, I think we view it... Well, my mom's almost 81 and she views, she's like, "Well, when I lose the ability to drive, I'm just going to sit around and wither away," kind of thing. Same kind of idea, when I think when we first get to retirement, we feel like the purpose is or at least that's been the norm. I think that's been the big fear, is that we feel like it. But I think the modern retirees, were much more active. There's much more going on. There's many more things to do. We're living better overall, so I think a lot of that does get dissipated. COVID certainly brought that back to the forefront with lockdowns at the time, because I know they weren't necessarily prevalent in your area, but still, feeling as though, "Well, I can't go anywhere," kind of thing. I'm going to move around a little bit here on the list just to, in the interest of time. But because I feel like the next point was pretty similar to the one we just talked about. But many people kind of view that break, that time off, as a stressful period because they're not productive in something. And again, when we talked about retiring to something, it doesn't necessarily mean, there's a lot of folks want to retire and they're like, "Hey, I'm going to sit on my butt and do nothing because I've earned it," and that's cool. But I think most of us find after maybe a couple of months max, we're like, "Okay, I'm bored. How much longer can I do this? I got to have something to do." Whether it's a project you've always wanted to tackle, that you just haven't had time for or volunteering or whatever the case might be, but eventually as humans, we crave some kind of structure.

Tony Mauro: Yeah we do. And it's that, I say three months max, I think you're pretty close on that, that I see people coming back when they say that, because everybody, especially during tax season, if you're getting close to retirement. They say, "You know what? I need a break. I've been working for 35, 40 years. I just want to see what it's like to do nothing." And within three months, even if they're not a wealth or financial client, they're calling saying, "I am bored. I've got to do something."

Speaker 1: I cannot cut the grass one more time.

Tony Mauro: Nope. For me, I was just playing golf this weekend with some buddies. They are a little older and I was telling them in retirement, I don't think I could play golf seven days a week. I love the game, but it's just too much of one thing for me. But the important thing really is to try to, again, come up with some of this stuff before you retire so that you might be able to take a couple months off, yes, but then you've got to find some things to do and give yourself some purpose.

Speaker 1: Yeah. Well just like saving money, the earlier you start, the better, in this transition, this mental hurdle of switching over in life. Let me ask you a couple of follow up questions here from just this information. And again, we're going to post the link to the article if you'd like to read it folks, but how it relates to what you've seen. How have you seen clients mentally prepare anything? You've been working with a client and you're like, "Wow, that's a good little idea they had." Or anything that kind of jumps out at you is that you've seen for a person transitioning from the working years to the retirement years?

Tony Mauro: Well, we try to advise them, we start if they will do it, a couple of years before retirement. Let's start making a list, just throw some stuff on a piece of paper, we're going to get it in your file. And we'll massage it over time as you get a little closer. And you'd be amazed at some of the ideas that people pop up with. One lady wanted to raise bees and be just a beekeeper for a hobby.

Speaker 1: I've heard it's much easier than we originally thought it was, growing up.

Tony Mauro: I think it actually is.

Speaker 1: Yeah, I've heard some people say it's actually a lot easier.

Tony Mauro: She wanted to do that. Another lady wanted to, and she's actually retired now, but her number one thing is, is she loves to put her time into her home and she joined a few groups. I don't know, retirees that are looking to improve their homes. It's a odd little group, but everything from gardening to just kind of little fixed up's here and there, but it's more social than anything else, but she's found her happy spot, so there's things like that. There's the hobbies of golf, travel, things like that. For me, I know one would be to immerse myself more into one of my passions, which is wine. It kind of gets put off, type of thing, but we try to get them started a couple years before and then as they get closer and closer, really try to whittle it down to stuff they really think they want to do, and then they go out and try it, and some of it is, "Now, I don't like that. I don't like that at all," and that's totally fine.

Speaker 1: Well, you think about, I know many advisors will say, "Hey, listen, as we're getting closer to retirement, let's try to..." You set up the budget or for lack of a better word, you set up the spending plan and you go, "Okay, let's try to really watch this and live as though we're in retirement, almost a trial run." Many advisors say, "Let's live in retirement, let's live a few maybe months or whatever beforehand, in retirement." Maybe try thinking about that from the mental aspect as well. The aspect of, what am I going to do if I'm not going to the job every day? Just kind of think about that. Have you seen clients that do struggle though? Have you had the ones that you've really had to help them through that hurdle of, "I don't know who I am, Tony, without my job," and what did that look like?

Tony Mauro: I'd say probably 50, 60% that fall into this, that struggle with the transition. At least our clients and what pulls a lot of them out is as soon as they either go back to work part-time, even if it's just, I hate these words, mindless job, but not a lot of responsibility, but something that gives them meaning or they find a hobby or something that they can do, that's what pulls them out. Generally, our role is to kind of just be there to lean on and say, "Well, you had this on your list. Why don't you try it? Give it a shot and let's talk about it." There's nothing to do with money. It's really just, are they happy? And that's kind of the role we play, so really I guess, just a sounding board, see what they like and once they find something, you could tell they like it, because all they do is talk about it, and I don't have to say anything.

Speaker 1: Yeah, you have to wear multiple hats and counselor is one of those sometimes. Did you think you would be intentionally including this or including this kind of, I suppose softer side, if you will, of planning alongside the financial elements that you do, or was this something that kind of caught you by surprise as you started doing more and more with your practice through the years and realizing, I need to help them with the mental hurdle as well?

Tony Mauro: Yeah. I think for us as advisors, when I was young, I never dreamt that I would be talking about this kind of stuff with clients, but-

Speaker 1: It's just X and O's, right?

Tony Mauro: Yeah. As I've aged and as they have, I realized, well, this is what they're looking for. And to really round out the process, in my mind, it makes sense to help them with this as part of the whole process. I don't see why we would say, "Well, we can't help you with that, you've got to go somewhere else."

Speaker 1: Yeah, no. It's just not something that you expected, right?

Tony Mauro: Yeah. And definitely not something I expected though. Yeah, its definitely something-

Speaker 1: I think we all find that with any job, wow, this is an aspect of it I did not expect to have happened, but there it is, good stuff. Anything else that I think as we wrap it up this week, that'll do pretty well. I think folks, like you said, check out the article, certainly very interesting. And then think about just your own, if you're getting close to retirement or you're a couple years out, think about what that transition looks like. Are you going to feel okay when it's no longer your routine? I think the routine and the identity that gets wrapped up in it, is the big one.

Tony Mauro: It is. And if you are working with an advisor, I would encourage you to make sure that you start asking about some of this stuff and use them as a sounding board.

Speaker 1: That's true, because they've seen a number of people retire, whereas hopefully this is our only retirement. Hopefully we're doing it once where you've helped hundreds of people do it. A little bit of insight there. Cool, good conversation this week, a little different. Thanks for hanging out with us here on Plan With the Tax Man. Folks, don't forget to check out the article, again, we'll add it to the show notes. It'll just be a link there you can click on. And if you've got questions or concerns, need some help, as always, please check with a qualified professional like Tony and you can find him online at yourplanningpros.com. That is yourplanningpros.com. You should always check with a qualified professional before you take any action on something you hear from this show or any other, so make sure you do so. And again, you can find more information about Tony Mauro and his team at [email protected]. That is yourplanningpros.com. We'll see you next time here on Plan With the Tax Man.

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

This is a mailbag edition of the show where we answer some questions that have come in from listeners. Today we will be discussing if it's a good idea to pull money from an IRA for home repairs, some rate of return expectations, and when to hire a financial advisor.

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 for another edition of Plan With The Tax Man, and it's a mail bag edition where we're going to take some email questions that have come into the podcast and share those a little bit on the show to go through these scenarios that might be similar to something you're going through. Of course, all emails and questions get answered when you reach out to Tony and his team at Tax Doctor inc., but we take some from time to time and put them on to the podcast. So if you'd like to submit your own or have questions, stop by Tony's website, yourplanningpros.com, drop them a line, again at yourplanningpros.com. All the good tools, tips and resources, and information there at the website. Don't forget to subscribe to the podcast as well while you're there, Plan With The Tax Man, again at his website, yourplanningpros.com. That's yourplanningpros.com. Tony, what's going on, buddy? How are you?

Tony Mauro: I'm good today. Thank you.

Speaker 1: Yeah, we're into late August.

Tony Mauro: Yes.

Speaker 1: Summer's winding down. We're getting close to Labor Day. I think the time we're going to drop this one, it'll probably be about a week or so before Labor Day. So summer is a-winding down. So hopefully you have-

Tony Mauro: State fair time here.

Speaker 1: Oh, okay. State fair thing.

Tony Mauro: Yeah.

Speaker 1: Yeah. Well, hopefully everybody had a good summer. Hot one, that's for sure, all across the country. Man, it's just been blazingly hot all summer. But anyway, let's jump in and take some email questions from folks. I've got a couple of good different types of things here. Interesting situations from folks they've sent in. This question comes in from a listener named Johnny and he starts it with this, Tony.

Speaker 1: He says, "I have a weird situation. I've been very aggressive," he says, "about funding my IRAs and my 401ks over the years, so I do have close to 2 million in these accounts."

Tony Mauro: That's good.

Speaker 1: That's great. He says, "I'm 54 though, and suddenly find myself needing major cash for a major home repair that was not expected. I kind of feel poor because my emergency fund you guys talk about is less than five grand in the bank, because I, again, put all my money tied up into these retirement accounts. I was very aggressive, as I said." So he wants to know, "Should I take money out of the IRA and eat the penalty and the taxes to pay for this home repair?" Because obviously he's well aware of that. Or do you have any other thoughts for Johnny on this situation, Tony?

Tony Mauro: Well, couple things. One, it would be congrats again on the $2 million, right, at age 54. I mean, that's really going to be good if you can let that keep going till you decide to retire.

Speaker 1: Yeah. I wish he would've shared how much the home repair was, but he didn't.

Tony Mauro: Yeah, I know he didn't share that. So, depending on that, I would say, what you need to do, it's easy to say what you should have done, but I think you already know what you should have done is, obviously have a fund for repairs set up in addition to emergency fund. For me, I have a fund for home repairs that just goes into that, because these things pop up from time to time. They never...

Speaker 1: I get the feeling that this is maybe something really unexpected and really outside the norm. So let's touch on a couple things. He knows he's got to eat the penalty and pay the taxes. So based on that, let's just say, he's got to pull out $50,000, Tony, for the sake of the argument. He's got to pay tax on that, right, in an IRA, plus he's got to pay the 10% penalty because he's under 59 and a half.

Tony Mauro: Right. And we don't know what his tax bracket is, but I'm assuming it's... I'm going to use 20%.

Speaker 1: Okay.

Tony Mauro: So there's another $10,000, and that doesn't even include the state. And so-

Speaker 1: [inaudible 00:03:26].

Tony Mauro: ... and cashing out, I guess to a degree in the dip, if the market happens to be down. And what is that 50,000 going to cost you in earning if you left it invested for the next 10 or 15 years? So my advice would be to try to work with him and say, look, do you have any equity at the home? Maybe you could take out a home equity loan. Rates are extremely cheap.

Speaker 1: I mean, they're ticking up, but they're still not bad.

Tony Mauro: Yeah. They're not bad. It's not going to be a 30% tax yet. That 30% what you're going to get hit here-

Speaker 1: With the... Oh, that's a great point. Yeah.

Tony Mauro: So you could spread it out, so it's not going to be a big event, and pay it off quicker if you need to. That would be my first suggestion. Second suggestion would be even just a conventional loan possibly, before I would take this money out, because besides the tax hit, I always look at that 50,000, in this example-

Speaker 1: Like a personal loan or something.

Tony Mauro: Yeah. Is, take that 50,000, use a... What do you call it? Compound interest calculator, and calculate that out. Even at 5%, over 15 years, what that is going to be. And you don't have that anymore. Your two million now is $50,000 lighter. I think that's too big of a hit if at all possible.

Speaker 1: That's a good point. I'm really glad you brought that up because... So it really is like, let's run some numbers and see what it costs you more to pull money. Because a lot of times we look and we go, "Well, I've got it." He's like, "I got the two mil." Again, I made up this 50,000 because I don't know, but, "I got the two mil. So if I pull out 50 grand, I mean, yeah, okay, fine. But I still got 1.95, right." But it may be more like an additional 30 on top of that, to your point. So that's a really interesting way of looking at that, versus maybe just getting a home equity line, with a slightly higher interest rate than it was six months ago, but even at that, it may still be a cheaper option, and that's why it's important to run the numbers and really have an advisor, right, so you can say, let's do some math, and then look at the tax too.

Tony Mauro: Look at the tax. Yeah. At least bounce it off somebody because they're going to be able to give you the numbers on all three sides of that, and then, obviously you can make the decision, but I think by pulling it out, especially when you factor all that in, you're going to see, wow, that's really going to cost me a lot more than 50,000. A little more pain than I want to take maybe, more of a haircut. Well obviously, Tony has reached out to Johnny in this scenario, or is reaching out, because we're talking about this on the show, but I wanted to share this because people do find themselves in these kinds of situations where it's like not thinking through the easiest way to do something. Because often it's like, "Well I've got the money, technically." It's just a matter of how efficient are you with and where do you get it from? Same problem that people face in retirement. Tony. It's what bucket to use at what time.

Tony Mauro: Yeah. And that's why it's important to have the buckets in the first place.

Speaker 1: Yeah. That's true. If you don't have the buckets, can't use them. Yeah. Well, Johnny, obviously a great question. Thanks for submitting it into the podcast. Thanks for letting us use it on the show. We certainly appreciate it. And good luck with the situation as you get it worked out with Tony and the team. All right.

Speaker 1: So let's check out Rowland and see what he's got to say. He says, "Tony, what rate of return should I be getting on my investments these days?" Ah, one of the old, what should I get? "I haven't been pleased with my accounts for several months this year." Well, many people have not been, Rowland.

Tony Mauro: No.

Speaker 1: So, Tony, this is the thing. We get these a lot of times. You hear this, I'm sure, often. "Hey, what rate of return should I be getting?" I think the question is, what rate of return do you need?

Tony Mauro: Yeah. I mean, that's the question, because I mean, I could spout out some number here and every one of them are going to be wrong, really. And so it's hard to say, right? I would say-

Speaker 1: Well, and somebody might say, "Well I need 12." Well, do you really need 12 just because that's what you've been getting the last couple years? I guess, what do you need to make the car go? What do you need to make the retirement plan work? And then anything over that's like gravy, right?

Tony Mauro: It is. I think if Rowland is in retirement or near retirement, I mean a general rule of thumb, I'd say, on average again, and you got to look at your timeframe, is this is not going to happen every year. A five, 6%, you get anything higher than that, I think, depending on your risk tolerance, and it's great, but people have gotten to a point where they think that these great returns are going to happen year in, year out. And we're finding ourselves in a market that's not probably going to happen this year. And you got to take that a little bit and factor that into the average, type of thing. And I think if you're not doing that, if you're chasing returns, you're going to be way worse off.

Speaker 1: Yeah. And I think that's where... And again, not to pick on you, Rowland, that's been easy to want to chase returns. '19, '20, '21, the market made it fairly... I mean the last 12 years really, right.

Tony Mauro: Yeah.

Speaker 1: Kind of made it easy to want to chase returns, because it's been fairly favorable, especially, I mean, some of the numbers that the market had ended up on in '19, '20, '21, I mean you could throw a dart at an index and you probably did pretty darn good.

Tony Mauro: Pretty darn good. I would say if he's in retirement then he should be talking with his advisor and really not be so concerned about the return. That's an important component, but am I getting the income, like you said, that I need to run my life?

Speaker 1: Yeah. Run the life, make the plan go.

Tony Mauro: Be satisfied. Yeah. If that's 12, 15% and you're in retirement, I think that's unrealistic.

Speaker 1: That's for sure.

Tony Mauro: [inaudible 00:08:54]. That's just hard [inaudible 00:08:55]. You can't sustain it.

Speaker 1: Yeah.

Tony Mauro: And so you'll be... Like we've talked about on previous podcasts, you will probably run out of money if you're going to do something like that, or portfolio's going to go down the tubes.

Speaker 1: Don't chase the returns, buddy. Don't do it. Get a plan, get a strategy, find out the number that you need, build a plan to guarantee some of that coming in to get those numbers that you need. And then, gravy's gravy, so.

Tony Mauro: Yeah.

Speaker 1: All right. Great question though, Rowland. Thanks so much. Thanks for letting us pick on you a little bit here on the podcast as well.

Speaker 1: Final one, Rita has one for you. And she says, "Tony I'm 61 years old, never had a financial advisor. I do enjoy the podcast, but I've made it this far on my own, so I feel as though I can make it the rest of the way by reading books and learning things, listening to stuff, so on and so forth." I mean, it's not a bad thought. She's 61, Tony. So she's been a DIYer and she thinks she can make it the rest of the way. And this is the folly, I think, that again, favorable markets of the last 12 years has done to the DIY type of person, right. Because it's been pretty successful. So if we go back 12 years, Rita was 40 what? 48, right? 49? Little different animal, when you're growing money from your late 40s to your early 60s than it is when you now got to live on it for the next 30 years.

Tony Mauro: I would agree. And I picked this question because it's kind of vague, because we don't know enough about her. I would say to her, surely, if you can make it the rest of the way, right. I would say, yeah, hey, absolutely. You certainly can. But if you were in my office and we were discussing working with each other, first thing I'd ask her is, "ell, what are your chances of running out of money?" And just be [inaudible 00:10:37] and ask her some questions. And if she couldn't answer those really well... Let's take it the other way. If she could, I'd say, "You really got this. You do have this figured out. You don't need to pay me to help you."

Tony Mauro: But many, many never can answer those types of questions. And then I say, "Well, so yeah. Will you be all right? Well maybe, depending on how much you have and what you want, but there are a lot of things that maybe you could be doing better. And you'll have to decide if that's worth hiring an advisor for."

Speaker 1: Well, and again, Tony, the accumulation part, the building of the wealth, it's a lot easier.

Tony Mauro: It's a lot easier than the distribution.

Speaker 1: Than the distribution, the tax conversation, the conversions, the... Again, we have a collection of stuff, right, when we get to retirement. We get to Rita. She's 61, she's got stuff. She's doing pretty good, she says. How do you make them all work? But more importantly, how do they all work together? Because this affects that and that affects this and blah, blah, blah, blah, blah.

Tony Mauro: Yeah.

Speaker 1: I mean, it's...

Tony Mauro: It would be worth Rita having a conversation-

Speaker 1: To see what you don't know.

Tony Mauro: To see what you don't know. And then maybe you're going to get that, "You know what, you are right on it and you don't need any help." And I would hope any advisor would be willing to say that to somebody that really got it covered because, I mean-

Speaker 1: Most advisors, yourself included, Tony, you offer complimentary consultations and reviews for just that reason.

Tony Mauro: Right.

Speaker 1: Right. It's like, okay, let's take a look. Let's sit down and chat. There's no cost, there's no obligation. After looking this over, Rita, yeah, you're right. Spot on, right. Shake hands, pat on the back, on your way.

Tony Mauro: Exactly.

Speaker 1: But many people get there and most of them wind up with a... And not a complete overhaul, right, I mean, I'm sure that's a lower number, but you're going through it and you're like, "Hey, you've done a pretty good job. There's a few places where we could make some tweaks." And have you thought about X, Y, or Z? And that's usually when the light bulb comes on and the client goes, "Oh no, I didn't think about that."

Tony Mauro: Exactly. Yep.

Speaker 1: So, strategy, planning.

Tony Mauro: That's what it is. Strategy and planning. There's plenty of advice out there. I think still, I think it's worthwhile, especially you get to the retirement and the distribution stage, to pay an advisor to help you, especially if they're as active as we are in running numbers and making sure not only not do you not run out of money, but other things in your financial life are taken care of as well.

Speaker 1: Yeah. I mean, do you want to pay the government the most you can absolutely pay them or would you like to pay them the least that you can pay them, legally, efficiently, right? Those kinds of things. Do you want to leave a legacy? Do you want to have something set up to where you're leaving that legacy tax efficiently or whatever the case might be? I mean, there's just like a ton. Long term care healthcare. Rita, are you by yourself? We don't know. You didn't mention a spouse. I mean, there's about a million variables that go into it. And so when someone says, "Can I do this on my own?" Yeah. Inevitably, technology has made that a lot easier, Tony, but at the same time, it's also, man, it's a lot more convoluted and the tax laws and the retirement thing rules, they're changing all the time.

Tony Mauro: Oh, they are. And I think if you try to cope with that on your own, well, you could do it, but in my mind, it's almost like, well, do I really want to spend all my waking hours doing this?

Speaker 1: There you go. Do I want a second career as my own financial planner? That's true.

Tony Mauro: Or do I just want to pay somebody? I mean, that's what I do, you know?

Speaker 1: Yeah. I mean, I like to do stuff, but I don't really want to... I know I decided not to build my own deck because I didn't want to spend all my time doing it, so I paid somebody to do it. That's a great point. Rita at 61 getting close to retirement, do you want to do all the things and learn the things that you may not know, probably don't know, and will need to know, to be as efficient as possible in retirement? Or do you just want to spend time with your grandkids and have fun or whatever the case might be?

Tony Mauro: Yeah, exactly.

Speaker 1: Yeah. It comes down to, what's your time worth, right?

Tony Mauro: At the end of the day, yeah, that's it.

Speaker 1: That's true. That's a great point. Well, there you go. Great email questions, guys. Thanks for all of those coming in. We had other ones, obviously. We let Tony pick the ones that he wanted to speak to. So if you'd like to submit your own or just have questions and you just want to talk with a qualified professional, like Tony Mauro, who is an EA and a CFP of almost 25 years, or 25 years getting folks to and through retirement, then reach out to them. Get started with a conversation. As I mentioned earlier, most advisors do, no cost or obligation. So it's worth it to find out where you stand in your retirement journey.

Speaker 1: Stop by the website yourplanningpros.com. That's yourplanningpros.com. If you're already working with Tony, obviously you're enjoying the services, and you haven't subscribed to the podcast, or if you're not, and you're enjoying the podcast, please consider subscribing. No cost or obligation to that, obviously. It's just a podcast. So you can click on a little button, the little heart button or whatever it might be on whatever app you use, like Apple podcast or Google podcast or Spotify. So that way you can catch future episodes as well as past episodes. And I think this one was number 70, Tony.

Tony Mauro: Wow.

Speaker 1: So our podcast can max out its retirement now.

Tony Mauro: Yeah, that's right.

Speaker 1: For social security.

Tony Mauro: Social security. Yeah.

Speaker 1: It can get the full... There's no reason for it to work any longer.

Tony Mauro: Nope.

Speaker 1: It can't add any more to that social security number. So there you go. Well, thanks for hanging out, my friend, and answering some questions. I appreciate you.

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

Speaker 1: We'll catch you next time here on the show. This has been 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.

Finding yourself between jobs can be frustrating—whether you were fired, laid off, or just had to step away of your own choosing. But it can also present some opportunities. Let’s discuss some of the challenges and opportunities that you need to consider if you’re between jobs.

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Transcript Of Today's Show:

Speaker 1: Back here for another edition of the podcast. It's Planned With The Tax Man with Tony Mauro and myself. And we're going to talk about planning considerations if you find yourself between jobs for whatever reason that might be, whether it's being fired, laid off, had to step away of your own choosing. We've seen this great resignation over the last year, lots of people just choosing to leave jobs or look for something different. And when it comes to getting closer to retirement, how might this affect things? So let's say 50 plus, some people are doing this. They have walked away or are being forced to walk away or whatever the case is. So we're going to talk about some challenges and opportunities that you might want to consider if you find yourself with a gap between jobs, again of your own choosing or not of your choosing.

Speaker 1: So Tony, what's going on, my friend? How are you?

Tony Mauro: I'm doing great. Just back off the road from a little vacation out in Napa.

Speaker 1: Well you probably ran into some of this then because service industry for sure is very, very volatile, lots of people moving constantly.

Tony Mauro: I was. And it's fun to talk to people around different parts of the country and just kind of hear their stories. But from out there what I did tend to see is there's a lot of people 50 and over, like you were saying, that have left tech jobs in the Bay area and San Jose and this and that, just kind of got out of the rat race for whatever reason.

Speaker 1: Right. Burn out, whatever. Right.

Tony Mauro: Yeah. Just sick of it. Were making good money and now all of a sudden they're pouring wine and they're just talking to people and [crosstalk 00:01:35].

Speaker 1: But they may not have the stress.

Tony Mauro: Yeah. They don't have the stress.

Speaker 1: Yep.

Tony Mauro: And of course the money's not the same, but I think this going on all over the country.

Speaker 1: Definitely.

Tony Mauro: I mean, we see it here in the Midwest where it's hard to find employees. Hospitality industry is really hurting. And so I thought it would be fun to talk about a little bit from that standpoint.

Speaker 1: Yeah, absolutely. Well, that's a great place to start. Is it time for a new career? Are you burnt out? Again, whether you wanted to leave or they wanted you to leave, either way maybe it's a chance, an opportunity, to get into something that is less stressful. Maybe it's a whole new field. Like you said, maybe you've been in tech and you're like, "Heck with that, man." I just want to, whatever. I just want to work at a dog grooming place and just pet dogs all day. Whatever, right?

Tony Mauro: Yeah. I mean, when I was in the corporate world, it's been a long time because I've been out on my own a long time, but I think you should always have this in the back of your pocket. Always be thinking a little bit, if they asked me to leave or I was laid off, what am I going to do rather than facing it when it happens. Hopefully you've got an emergency fund, but that's another conversation. But, yeah. I mean, for a lot of people, again just talking to people last week, it really was just "I'm going to go do something else." In their case, burnt out, they're getting a little older, COVID is got them thinking about longevity and things and they seemed very happy. I think on the big picture though, everybody's doing that. Nobody could find any employees, but.

Speaker 1: There's a downside. Yeah, and I want to talk about some of those. You mentioned the emergency fund. If you are making a change, hopefully COVID did teach us if you got laid off for a while or whatever the case is, you've got to have some funds available to sustain yourself in between there.

Tony Mauro: Yeah. You absolutely have to. It's one of the first things we talk about with clients is that, assuming they're in the workforce, work with them to try to build that even as they go. Because in the corporate world, you never know. And even for people like me in business for yourself, I still think you need one because you don't know when your business is all of a sudden not going to be attractive.

Speaker 1: Or have a dry spell. Yeah, exactly.

Tony Mauro: Yeah, or people don't want your product or service anymore and then you're out too.

Speaker 1: Any stage, in any I guess decade of life maybe is a good thing. Whether you're 20, 30, 40, 50, you got to have some money set aside, a little bit, something to help yourself out in the event that happens. Well, you mentioned working for yourself. That is what has definitely happened for many people since COVID. Some have said, again we're trying to look at this through the lens of 50 plus, okay? So you know what it, yeah. I don't want to go back to the office. I don't want to be exposed to potentially whatever, or I'm using an excuse because I'm just tired. I'm finally tired of the rat race and I've always wanted to have my own thing. You said you were in the corporate world, but you've been working for yourself for a number of years.

Tony Mauro: I have. For me, it was always, well, I always could do it better and I think that's what a lot of entrepreneurs end up doing, but.

Speaker 1: You got to have the right spirit, the mindset for sure.

Tony Mauro: You got to have the right mindset. But at 50 plus especially, you probably do have, in certain cases if you're willing to work at it a little bit, a skillset to do things that 25, 30 year olds may not have and [crosstalk 00:04:50] consulting.

Speaker 1: It could be a blessing in disguise. Could be consulting. Yeah, very good.

Tony Mauro: All kinds of things. It could be just something that's been a hobby for you or maybe even a side hustle that you are making a little bit of money on that you want to take full time. I think in today's economy, especially in the gig type of economy and I just told my son this, that 25 years ago, 30 years ago when I was doing it, brick-and-mortar locations and things like that were hopping. Now, I think that's hard, hard to do in today's economy. Not impossible, but I think something you got to think about before you leap into that full time.

Tony Mauro: But again, a lot of 50 pluser's I'm seeing are going to work in less stressful jobs. But the ones that go out on their own, they want to do service type stuff where they're not a lot of overhead, a lot of inventory to keep track of, complex dealings. But that certainly would be something to talk to your advisor, go out and get some advice on before you make that leap I would say full time. Because so many people come into my office of all gamuts and I have what I call discovery calls with them all the time and they've thought about it and they're under capitalized. They have no plan. And we try to talk to them through some of this and they don't have it. And nobody's teaching this.

Speaker 1: Well, that's true too.

Tony Mauro: So I would definitely get some advice on that but it is fun to think about.

Speaker 1: Well, those are a couple of, I guess, the mental or emotional angles to ponder in this conversation on the podcast. Let's look at some of the financial ones. We touched on the emergency fund for sure, having some sort of a base to bounce from, if you will. But what are you going to do about health insurance? Okay, so if you find yourself walked out the door or you walked out the door, if they were covering your health insurance, Tony, what's your options now?

Tony Mauro: Yeah. Now what? Because you don't want to go without this.

Speaker 1: Again, 50 plus conversation, right? You got a long way to go to get the Medicare.

Tony Mauro: You got a long way to go. So you're going to have Cobra until you find something new for a while, that could be expensive but at least you've got some options there. You've got the marketplace as well, which is the government program. If your spouse is working, they might be able to get you on their plan.

Speaker 1: That's a good point.

Tony Mauro: If not, then you've got to go out and buy some health insurance. It's going to be expensive. And the coverage probably isn't going to be very good, but at least probably would cover some major medical, but definitely [crosstalk 00:07:16].

Speaker 1: And that comes back to that emergency fund. Right? Because if you're paying for this yourself, that's going to be dipping into this whatever funds that you may have. Maybe it's going to be dipping into some retirement accounts you've built. So maybe a conversation then, Tony, is this a good time to roll that 401k over? It probably is whether you left or were walked out the door, should be no reason to leave that money behind.

Tony Mauro: Yeah. I would say most of the time we talk to clients about moving it into and rolling it into an IRA. It's going to give you a lot more control, a lot more flexibility, meaning that your investment pool has expanded greatly other than just that company's batch of mutual funds. And it could be a lot of things as well, could be might not be that efficient, in other words, the expenses are kind of high.

Speaker 1: Right, yeah.

Tony Mauro: And you can't really, like I say to me, I want to have more control over it about what comes in, what comes out. Maybe you want to buy some stocks or bonds at some point, so generally we advise that. But we want to take a look because maybe it's worth leaving there, but you got to look at that.

Speaker 1: I would say most times, is it a fair statement to say, most times it is not beneficial to leave it there just for those number of reasons you've already left?

Tony Mauro: I would say, yeah. Most times it's probably not.

Speaker 1: Well, the options typically in our 401ks through a company, it's whatever the company's set up with the sponsoring plan and they're not going to be nearly as wide as something you can do with your own IRA.

Tony Mauro: Exactly.

Speaker 1: I mean, it's just an infinitely more possibilities. So definitely something else to ponder, make sure that you're rolling that over into something you've got better control over.

Speaker 1: Maybe you get lucky enough, Tony. I just saw a story not long ago about one of these, I believe it's one of these crypto companies out in the California way that was really tired of the negativity. Obviously we've seen a lot of this in our society here lately. There was a lot of, I don't know, it's become fashionable or whatever to brow beat the employers over your ideologies, whatever they may be if you don't feel like your company is treating a certain thing the way you want it to. And this particular gentleman just said, "You know what? I've had enough. So here's what we're going to do. If you're not happy working here for whatever reason about the company's culture," he was offering a severance. He was saying, "I'm going to pay you a severance to leave, go find something else that does make you happy." So whether it's an interesting situation like that again or you've been asked to leave or whatever the case is, you may have a severance option, which is kind of like a pension option. They may say, "Hey, we're going to give you an X amount of money. Here's the door or you can take the monthly payment." So what's the best option? How do you go through that process?

Tony Mauro: Yeah. And it's another thing that you need to get with your advisor, your tax advisor, your financial advisor, or one and the same to talk about it. Here in Des Moines, we have several large employers and this happens a lot. They'll just consolidate departments and say, especially that mid-management, "Okay you're out. We're going to give you a year's worth of pay. Here you go. And out you go." And a lot of times, they're willing to break it up into monthly installments over the year or you can take it all at once, but that money's all going to be taxable. So you've got to decide, A, how I'm going to pay taxes on that? Am I going to use this to live while I'm looking for a job? Which I've seen some people do. They kind of take a year off because, well, they don't need the money. Others, they had to double dip. They say, "Well, I'm going to go out and find something right away. And then this is just extra money for me," which is tremendous. And they could use that somewhere else in their portfolio or whatnot.

Tony Mauro: But it's important to think about this when this comes up. Because if it's large I look at it from a tax standpoint, first of all, and say okay, you got to at least put aside the money for the tax or have them withhold it because that's going to be important. Plus I think what a lot of people don't realize is if it's lump sum it could bump them into a much higher tax bracket all of a sudden, and if they don't withhold the right amount, they're going to be [crosstalk 00:11:25].

Speaker 1: Yeah. And that's a double whammy. Right? So if it bumps you, they don't hold it. They just give you the funds because you're going to have to pay it at the end of the tax year and you don't have a good emergency fund, you wind up spending it and then the tax bill comes due, ouch. So, yeah.

Tony Mauro: Yeah, I've had that happen twice to people with well over a $100,000 dollars and they didn't have them take out the tax. Kind of took the year off, spend it, and then they had a large, large tax bill. Had to go into a payment plan with the IRS because they had no money to pay it and they had no funds set aside to pay it, so important to get with an advisor on that one.

Speaker 1: Very much so, it's a great point there. Thanks Tony, for bringing that up. Glad, I mean, not that happened to the folks, but that real world experience to kind of share. So final one here, taxes, you mentioned it so let's finish on that note. What kind of tax planning should you be doing? Does it make a difference when you're separated, Tony, like calendar wise? Are there tax implications to think of, just even if there wasn't a severance, just from a they let me go ... Okay let me throw out a scenario, I guess. So they let me go in May, let's say. And you now decide to roll over the 401k that you had at the company and maybe even do some conversions on some of that money into a Roth or something because you didn't have one. Would that create a taxable scenario or could it?

Tony Mauro: Roth conversions, which I like, it's going to create some sort of tax change if you will. I mean, because basically you're taking pre-tax money, converting it to taxable, paying the tax on it then and then it's tax free of course in the Roth.

Speaker 1: And based on when you left, your income might be lower for that calendar year or higher?

Tony Mauro: Or higher.

Speaker 1: Okay.

Tony Mauro: Depending if you got a severance. So if it's lower then what we try to do is work with the clients to fill up the existing tax rate and not go over that and say, look-

Speaker 1: The steps, right?

Tony Mauro: Let's stop now because otherwise you're going to be wasting tax dollars and then do the rest next year or a little bit next year, a little bit next year type of thing if you're doing rollovers. So there are some strategies out there that you can take advantage of. You have to get some money and pay as little as tax as possible for the opportunity for it to grow tax free forever. And so I think that there's those types of things going, that's one thing. The other thing too, is like I mentioned previously, is if you do get a lump sum, it could throw you into a very high tax bracket which might require some planning and or withholding as well. So definitely want to keep it in mind.

Speaker 1: We should probably do a podcast on the steps of the tax, because you were talking about filing up a certain bracket.

Tony Mauro: You should. Yeah.

Speaker 1: Yeah, because I don't think most of us don't understand that on how it works. Right? So if you're in a 22% tax bracket, it's not necessarily everything you make is at 22% correct?

Tony Mauro: That's right, because it's progressive. And so while it starts low, what we mean by filling up the bracket is in the 22% bracket depending on your filing status, goes from X amount of income up to X amount of income. And so every last dollar earned or taxed is going to be taxed in that bracket, so we try to fill up that bracket but not go over. So in other words, more of your money's going to get taxed at the next highest level.

Speaker 1: Right.

Tony Mauro: And so we want to kind of keep that to a minimum to save taxes, but it's better shown than talked about. It's a lot easier when we put it on a screen.

Speaker 1: That's true. It is tougher to maybe do it on a podcast where we're trying to walk through it because it can get a little convoluted there, so it might be a little tougher to do. But we'll work on trying to break something down that makes a little sense from the audio standpoint.

Speaker 1: All right, well there you go. So there is some things to ponder. If you find yourself between jobs, for whatever case, whatever the case might be, whether you choose to or they choose to or whatever. And a lot of people have been doing that. We've had a lot of folks, crazy numbers over the last 18 months, walking away from jobs and doing different things. Multiple reasons why obviously since the pandemic. So if you need a little help, if you need a little planning, if you find yourself or you're thinking about, "Hey, I'm thinking about stopping the rat race at 52 or 50 or something but I can't retire yet, but I want to go into business for myself or I want to see if I can step down to a less stressful job," make sure that you're working with a qualified professional, like Tony and his team at Tax Doctor, Inc, so they can help you through some of these questions, some of these conversations, looking at some of this stuff. Especially if we can get some planning in place, it's going to go a long way. He is an EA and a CFP of 20 plus years, like 25 years about now, somewhere now in that neighborhood now, right?

Tony Mauro: Yeah. 25. Yeah.

Speaker 1: Yeah. So been doing this a while. So, if you need some help folks reach out to Tony Mauro at Tax Doctor Inc. Find him online at yourplanningpros.com. That is yourplanningpros.com. And don't forget to subscribe to the podcast. You can find that info there as well, Apple, Google, Spotify, iHeart, Stitcher, all that good stuff. Tony, thanks for hanging out. Good conversation. Thanks for sharing some good tips. I appreciate it.

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

Speaker 1: We'll catch you next time 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.

Don’t dread this as much as you hated hearing these words as a kid, but it’s time for a pop quiz! We’re putting retirement planning preparedness under the microscope with 5 critical questions to which you need to know the answers. So sharpen those pencils and let’s see how ready you are for retirement.

Important Links

Website: http://www.yourplanningpros.com

Call: 844-707-7381

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Transcript Of Today's Show:

Marc Killian: Hey, everybody. Welcome to the podcast. It's time to plan with the tax man, with Tony Mauro and myself and it's pop quiz time. Can you get an A on our retirement planning quiz? Now don't panic. It's only five questions and it's multiple choice. We want you guys to play along with us, have some fun with this and see how well you do. Tony, what's going on my friend. How are you?

Tony Mauro: I'm doing well. Thank you.

Marc Killian: Yeah? Did you like pop quizzes in school?

Tony Mauro: No, I didn't like them, especially if I didn't know about them obviously, which I think everybody is like that. You don't want to be put on the spot.

Marc Killian: It's pretty universal answer, so far I haven't found one person that said, I love pop quizzes.

Tony Mauro: Yeah, I know.

Marc Killian: It seems to be a universal. And I could never hear pop quiz anymore without hearing Dennis Hopper in the movie Speed, back in the 90s' going, pop quiz, hot shot.

Tony Mauro: Yeah.

Marc Killian: That's all I can think of now whenever I hear the term pop quiz. But I've got, like I said, I've got five questions for you here, Tony. They're multiple choice. What we should do is you give the best answer from the selection and then just give us a quick work through as to why that might be, or if you completely disagree, then give us an answer for that too. Okay.

Tony Mauro: Okay.

Marc Killian: All right. Let's jump right in. Yeah. Number one. At what age, Tony, should people start saving for retirement? A, when they begin working. B, after they buy their first home. Or C, once they've paid off all their debt.

Tony Mauro: Well, and so I'm going to, as the normal accountant would preface all this by saying, this is my opinions. So somebody may disagree with this, but I will explain the other ones as well and then, obviously people can form their own opinions. But I believe it should be when you start working, because I don't think it's ever too early to start saving. I think it's going to give you the best roadmap to meet your goals or the best chance for success, come retirement. Now that's hard to do in theory, because when we're young, we're not thinking about retirement.

Marc Killian: Not making as much.

Tony Mauro: [crosstalk] we're not making any money and yeah, so that's hard to do, to get disciplined with that. But if you can do that, even if it's just, 50 bucks a month and then, start growing it from there, I think that's the best route.

Marc Killian: Yeah, it is the best route. And it makes a huge difference. B, after you buy your first home. Not the worst. Especially if you're younger and you get your first home in your late twenties, maybe early thirties, something like that. Of course now we could put the spin on it right now, Tony, that prices are so high.

Tony Mauro: Yeah.

Marc Killian: The housing prices are boom. It's still boom, it's still going on. And now loan rates are going up. So it could be challenging for young people.

Tony Mauro: I think it's really challenging. My son, who's 26, he's going through that right now. They're just getting married. They want to buy their first home. And then all of a sudden things start to tighten up. I think if you go with my answer, if you start disciplining yourself young, before you get all this, you're learning to live without the money already.

Marc Killian: Yeah. And you won't miss it. Right.

Tony Mauro: Yeah. And you won't miss it. And then you've got to factor that in. I would say maybe the second best would be after you buy your first home, but it's going to be harder for you to start that discipline.

Marc Killian: Yep.

Tony Mauro: After that and of course, usually that comes a little later and again, it cuts down on your time to save.

Marc Killian: It does. And when you paid off all your debts, look, when is that right? When does that happen? That's a never ending excuse that we could all make. Well, once I get the, well, once I get that. It's always something.

Tony Mauro: Exactly.

Marc Killian: Yeah.

Tony Mauro: And I think, even if you follow the Dave Ramsey strategy, which I think is a great strategy is, live without any debt. It's hard to get there. And that could take you till you're 40, 45 before you get to that point.

Marc Killian: Yep.

Tony Mauro: And by that time, well, if you waited that long to start, you're really at a disadvantage just due to time.

Marc Killian: And it's possible. It's still possible. We talk all the time about advisors all across the country, don't start seeing people until they're, maybe in their fifties, but a lot of times they've been saving in some form or fashion, but they haven't gotten serious about how it all works until after 50. But yeah. Not even starting at all. And I'm actually, I'll throw myself under the bus, I'm one of those that had barely started at all until after 40. And so, it's definitely a bigger heel to climb. And now that I do this for a living, it's certainly been eyeopening as to the things I missed out on. So I've taught my daughter the opposite way.

Tony Mauro: Yes.

Marc Killian: All right, so good stuff on number one there. Number two, Tony, on our pop quiz, which of these is the best estimate of how much income you might need in retirement. A, 50% of your income, current income. B, 85% of your current income. C, 100% of your current income. Or D, none of the above.

Tony Mauro: Well, in my opinion, I would say, I'm leaning towards B, 85% of your income.

Marc Killian: [crosstalk] That's kind of the standard answer, right?

Tony Mauro: Yeah.

Marc Killian: We hear that a lot.

Tony Mauro: Again, you could do it in retirement on 50% of your income. Again, everybody's different. Depends on what your plan is.

Marc Killian: But do you really want to cut your lifestyle?

Tony Mauro: But yeah, do you want to cut it down to 50%? Plus, some things are going to be a lot higher. Some will be lower. Health insurance being one higher. And so I think, the 85% for us, at least when we plan, that's what we try to shoot for, because we feel that like that's a sweet spot of, okay. you're going to be able to live and enjoy some things in your retirement and still not have to worry about not only paying your bills, but outliving your money.

Marc Killian: Now, that's a tried and true number, but do you think Tony, maybe playing devil's advocate here, in the modern era of the last even decade, not even considering the inflation we're dealing with now, but early on, is that an average across a whole retirement? Because it would seem like early on in those "Go-go years", you may need a hundred percent or more.

Tony Mauro: Right.

Marc Killian: You know?

Tony Mauro: Well, exactly. If your plan calls for say, a lot of travel or maybe a lot of charitable giving or whatever the case may be, maybe just buying things you've always wanted.

Marc Killian: Right.

Tony Mauro: But most people associate it with the younger part of retirement, with traveling, doing things you want before the body starts [crosstalk]

Marc Killian: So, kind of higher, then and then maybe a little lower as we move through.

Tony Mauro: Yeah. And then, it dwindles down to the 80, 85 and then.

Marc Killian: Okay.

Tony Mauro: You get up into your eighties, nineties, if you can make that far. You're not doing all those things anymore. 50% might make a lot of sense at that point.

Marc Killian: Okay. So maybe a sliding scale, so to speak. Okay.

Tony Mauro: Yeah.

Marc Killian: All right. Very interesting. But fundamentally 85 is the number that people tend to start from a planning standpoint, anyway.

Tony Mauro: Yeah.

Marc Killian: Okay. Number three, which of these do you find that retirees fear the most, this one's probably going to be pretty easy. A, not leaving enough money to the kids. B, running out of that money. Or C, needing some sort of nursing home care.

Tony Mauro: Yeah. This is an easy one. Hopefully everybody's that's listening is going to pick B, running out of money. Because that's all I hear from retirees, but followed by second, needing nursing home care.

Marc Killian: Of course if you have enough money.

Tony Mauro: Yeah. If you have enough money.

Marc Killian: Then you could take care of all three of those things.

Tony Mauro: Yeah. You really could. Most people don't, when I talk about leaving money for the kids, a lot of people tell me, no, that they're on their own or they'll be fine.

Marc Killian: We're getting that way more and more. Yeah. And I don't think that's necessarily an unhealthy viewpoint. Hey, if there's something left over Tony, once I've lived the way I want to and taken care of myself and my spouse, cool. They can have what's left kind of thing.

Tony Mauro: Right. Yeah. Yeah. It's that type of thing. But retirees are always concerned about running out of money. They're all living longer for the most part.

Marc Killian: Sure. Yeah.

Tony Mauro: They know that they've got a limited income now that they're not working and that's always a concern. That we go through it right now. My retirees as clients right now, they're definitely noticing the uptick in prices on everything.

Marc Killian: Oh, heck yeah.

Tony Mauro: And they're feeling it a little bit.

Marc Killian: Yeah. And it doesn't matter really what lens you want to look at inflation through, it's still there. It's still affecting us. So we still got to deal with it. And so running out of money, even somebody who with a good plan, that's been working with and an advisor such as yourself for years, you're going to have, if you've got 10 people that all have just great plans that they love them, they've been very happy with them, even during times like these though, one out of 10 calling and saying, hey, I'm nervous. Or two out of 10, is the plan still good? There's nothing wrong. It's just simply saying, hey, the nerves are getting to them. And I think that's the beauty of having a professional like yourself, Tony, because they can call up and go, Tony is the plan that we've been enjoying, is it still good? Are we still okay?

Tony Mauro: Is it still good. Yeah.

Marc Killian: Yeah. And you could tweak, and you run some numbers and, let's check, right?

Tony Mauro: Yeah. You got to run some numbers and most of our retirees' portfolios are so heavily income oriented, the prices of their portfolios don't fluctuate all that much, but they do in these types of times.

Marc Killian: Right. Because these are obviously extraordinary. Yeah.

Tony Mauro: Yeah. I mean, many are calling this a bear market and they always, you turn on the news every day and they're talking about how long it'll last and this and that. And then I have to mute it because I can't take it.

Marc Killian: And you've got the inflation and you get the terms like hyper inflation and it's a lot. I mean 9.1%, the last numbers that came out.

Tony Mauro: Yeah.

Marc Killian: So, pretty scary. Okay. So, well, speaking of that, speaking of the plan or speaking of the investment side of things, question number four, which of these examples best represents a diversified retirement plan, Tony? The traditional mix of 60-40 split? Excuse me, 60% stocks, 40% bonds. That's A. B, three rental homes along with a significant amount of cash. So basically having some rental income and a good emergency fund in the bank. Or C, 10 to 12 different kinds of mutual funds or D, none of the above.

Tony Mauro: So I'm calling this trick question. I'm going to explain all three because--

Marc Killian: Okay.

Tony Mauro: I think that there's--

Marc Killian: You spotted it.

Tony Mauro: Yeah. Some goods and bads in all of it. The traditional just blanket response, if you ask most advisors, probably going to be A.

Marc Killian: Yeah, 60-40.

Tony Mauro: 60-40, but if you break it down a little bit, that could be a little deceiving [crosstalk]

Marc Killian: Exactly. Well, 40% bonds right now is, bonds are kooky.

Tony Mauro: Yeah. They're very, very much, I don't know if I would be that heavily weighted in bonds right now.

Marc Killian: Right.

Tony Mauro: It depends on where you're at, of course, in the spectrum and your tolerance for risk and all that. So I think that's, without really knowing, but that's the easy answer there. B, with rental homes, I've owned them for years and along with, other things as well. I think that the flaw in that is one, a significant amount of cash in the bank's not going to earn you anything.

Marc Killian: Right.

Tony Mauro: Rental homes are a good for capital appreciation over the long haul. However, you got to work them, you got to collect rents. You got to keep them up and cash flow wise they're not tremendous along the way. They might be at the end if you sell them, and have some nice gains. But I think that would be a part and then see 10 to 12 mutual funds again, if they were diversified along many sectors, I'd say, yeah, that's pretty good. If they were all in tech companies.

Marc Killian: They often are though, right? Tony they're often in large cap.

Tony Mauro: Yeah. They're all, all over the place. That might be an answer. My answer would be, I think over time, need to work with your advisor and do a little of all of it. Maybe not the rentals if you're not, entrepreneurial.

Marc Killian: Right.

Tony Mauro: But if you are, that's not a bad diversifier.

Marc Killian: Yeah. You put them all together and that could be a more diversified. So it's probably D, none of the above, because there's better ways to go than all three of these. Okay.

Tony Mauro: I think so.

Marc Killian: Okay.

Tony Mauro: But at least gives people a little bit of insight on just some of that blanket stuff.

Marc Killian: And we do hear that, because it is easy to go. How many times have we seen people come in, hey, I've got 10 mutual funds I bought them from five different companies, five different brokerage houses or whatever. And I'm super diversified, and okay, let's dive in. And it's like, no, you've got 10 mutual funds, you've got eight versions of Microsoft, for example.

Tony Mauro: Yes.

Marc Killian: Whatever the case might be. And of course, that goes back to the 60-40. It gets a little skewed there as well. So that's the standard number we hear, but it's just really not always the fit anymore. So I'd say D, none of the above, is a good choice on that one. And that's why you got to get this customized strategy. That's why you got to work with somebody. Again, you can do lots of rules of thumb Tony, and this next one is going to point this out. But at the end of the day, your specific strategy's probably going to differ a little bit from general rules of thumb. It's a sliding scale gets you started, but not really probably where you want to stick to this point. Question number five, final one, to make sure you do not run out of money in retirement, Tony, only withdraw blank percent from your portfolio each year. A, 1%. B, 4%. C, 6%. Or D, just find a different strategy altogether.

Tony Mauro: Yeah. And this is going to pertain really to, well, I would think everybody, but any retirees for sure. Because they're always asking this as well. And of course the general rule of thumb, most advisors are going to give you without really delving in is B, 4%.

Marc Killian: Yep.

Tony Mauro: That could be a sustainable amount for most people, depending on what you're invested in. But I think 1% is [crosstalk]

Marc Killian: It seems crazy, right?

Tony Mauro: Why do it?

Marc Killian: Right. Yeah. If you got a million bucks, if we use that as a number, and you say, yeah, I can pull 1% per year. Okay. That's $10,000. Can you live on 10,000? Maybe if you had a pension, right.

Tony Mauro: If you have a pension, [crosstalk] pull all you wanted.

Marc Killian: Right. Pulling from your retirement accounts, but probably not. But Tony, we've heard so much that it's really not even 4 anymore. It's like 2.9 or 3.1 or something like that.

Tony Mauro: Yeah. And again, it depends on the person, what they have and what they're willing to do with the money. But these days you still can get, if you're willing to have some of your portfolio in retirement in higher dividend yielding stocks, it's not uncommon, we do it, to get 4, 4.5, Even 5%. The dividend, the yield is going to be there. The prices are going to fluctuate along the way. That's what you have to learn to live with, but they don't fluctuate all that much, but in bear markets, your portfolio's going to be down. But again, you've got a million, $2,000,000 and if your portfolio's down 8%, you're still getting your 5% yield, especially over the last 10 years where it's run up so much. It really is [crosstalk]

Marc Killian: And that's a misnomer though, right? Because people are seeing that now. It was easy the last couple years we got a little spoiled. When we go, hey, I'm making 8 or 9% or 10 or 12 or whatever, year over year for three years in a row. We think, hey, we're going to keep that forever. So no.

Tony Mauro: No, it's an average and you got to be willing to look at that. But this would go back to the same thing you were just talking about is, you really need to work with your advisor to come up with that strategy. That's going to be pertinent to you and your situation. Because that's real personal.

Marc Killian: Yeah. And pension and social security. There's other factors that can dictate how much you're pulling from set retirement accounts to live on, to make up the difference. Right?

Tony Mauro: Right.

Marc Killian: So it's all part of that strategy that go together. So how'd you do folks with our little pop quiz? Obviously it was designed to just say that there's rules of thumb out there, these types of things that we all hear, and it may or may not be the right fit. Oftentimes it's not, it gets you started, but you want to really dive in specifically to what you need to do with your specific situation and lifestyle needs. Because what Tony might need, where he's at, is different than what I need, where I'm at, and so on, and so forth. So plan with the tax man. That's how you get it done. You get on Tony's calendar, if you're not already working with him and the team at Tax Doctor, Inc. Just stop by the website. Find it at yourplanningpros.com. That's yourplanningpros.com. Don't forget to subscribe to the podcast on Apple, Google, Spotify, iHeart, Stitcher, all that good stuff. You can find it all there at the website. Tony's been helping families for 20 plus years get to and through retirement. So reach out to them at Tax Doctor, Inc. Online again yourplanningpros.com. Thanks for playing the game. My friend, appreciate your time as always.

Tony Mauro: All right, sounds good. We'll talk to you next time.

Marc Killian: Yeah, we'll see you next time here on the podcast. This has been Playing 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 how a good financial advisor helps people overcome the additional challenges of today. Our parents and grandparents may not have had to face these things, so just relying on the experiences of family members might not be enough to help us achieve our own financial success.

Important Links

Website: http://www.yourplanningpros.com

Call: 844-707-7381

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Transcript Of Today's Show:

Speaker 1: Hey, everybody. Welcome back in for another edition of the podcast. It's Plan With The Tax Man with Tony Mauro and myself, and we're going to talk about retirement planning isn't what it used to be. And obviously that's pretty common, right? We figured that out. We don't have to be a genius to figure that one out. It's a lot different. But I think when we say that Tony, we tend to think of, yes, our parents and grandparents, it's definitely different than it was 30 or 40 years ago, but retirement plannings different than it was just 10 years ago at this point. Right?

Tony Mauro: Yeah, it is. It's amazing how much it's changed because of some of these things we're going to talk about and,

Speaker 1: And technology has made a huge difference and the lots, I mean, there's just, it's a never evolving thing, right?

Tony Mauro: It is. It really is. And I mean, nowadays with people living longer, like you say, the technology, all this stuff that it really makes it, well, you got to do more planning. At the end of the day that's really what you have to do.

Speaker 1: Right. It's more complex for sure.

Tony Mauro: Yeah.

Speaker 1: Yeah.

Tony Mauro: Yeah.

Speaker 1: In some ways we think a lot of the technology out there makes our life simpler and nowadays you got all these apps that can help you do a lot of things. Absolutely. But there's also a lot more complexity to the rules, the nuance and the self-funding and yeah, the longevity right in itself is going to make everything more complicated. So we're already touching on these things. So we'll just rock right on along with that and say, it used to be very simple, right? The milking stool analogy, if you will, three legs. Right. You had a pension, because most people had a pension 30 years ago. A lot of people had a pension anyway, 30 years ago and then social security. And then if you saved a little bit, well you're in pretty good shape, right?

Tony Mauro: You're in good shape.

Speaker 1: Yeah.

Tony Mauro: Absolutely.

Speaker 1: And plus you died at 70, 68, 70, 72, 65. Well now, clearly the life expectancies are in the 80s. Pensions are super rare unless you're probably a government or state employee and you have to self fund a lot more.

Tony Mauro: A lot more. And it's interesting because today when we're recording this, it's my dad's 81st birthday.

Speaker 1: Happy birthday to him.

Tony Mauro: Yeah. He, but I was just thinking about driving in it's like boy, 81 years ago, what was it like in 1941? You had a war and all kinds of different things going on and even his parents. So it is different now because of some of those things you mentioned. I mean, nobody's going to work today and almost nobody I should say, and having the old fashioned pension where you can't outlive it and everything you work for the same, and who works for the same employer for 20, 30 years anymore? Nobody hardly does that.

Speaker 1: Right. Yep.

Tony Mauro: And so those are kind of long gone. Social security is still around, but if you don't do any saving outside of that, that's going to be, I mean, that's just a safety net. That's not going to be a very well off type of retirement.

Speaker 1: Yeah, exactly.

Tony Mauro: Or fun retirement by any means. So you've got that, you've got the fact that, like you said, we're living so long now, that we're outliving our bodies really I think.

Speaker 1: Oh no, absolutely. We definitely are.

Tony Mauro: And the government is not just is going to throw us out in the street and just let you just pass off. So,

Speaker 1: Well maybe.

Tony Mauro: Yeah. So, you've got more years you've got to worry about. And obviously as you get older, the health tends to deteriorate some and,

Speaker 1: Right.

Tony Mauro: But you still have to have money to live and pay for things, pay for your healthcare and things like that. So that's a challenge, just those two things right in and of itself are huge challenges that my dad's kind of, he's obviously, statistically closer to the end than I am, but I mean, he didn't have to worry about that quite as much. But his family though, although he's pretty much set, but he's got brothers that are in their 90s, so he's got some longevity there, but he's really thankful that he did plan and saved and did what he needed to do. Because he doesn't have a pension, his social security's mediocre. What he did get, because he was in some government work for a while, so he does have an IPERS type of pension, I guess I should say. And then he was able to save and he put away a nice nest egg. So now he's got so much money he can't really outlive it, but if you're not doing some of that and planning,

Speaker 1: Yep.

Tony Mauro: Obviously you've got some issues there.

Speaker 1: And the longevity was on my list as well. So since we just touched on that, we'll move on. But it is the great multiplier as well because everything about living longer makes everything else go up and so therefore that kind of compounds everything as well to go along with the fact. Yep. So we had on here, this is, we got to update this a little bit, but interest rates were lower. Right. So you weren't really saving much. Although I did see, it's funny with the ticking up, the slow tick up the Fed is doing currently, I saw a bank advertising a CD the other day, Tony, and it was 4%. I was like,

Tony Mauro: Wow.

Speaker 1: I know. I was like, when's the last time you saw that? Like 12 years ago, 10 years ago.

Tony Mauro: Yeah.

Speaker 1: 15 years ago, like 2005 or six, somewhere in there.

Tony Mauro: Yeah. It's crazy how low rates have been for so long. And a lot of the retirees now they and my dad included, he remembers the days, and I do remember the days in the 70s and 80s where money markets were paying eight, 9% and those days have been gone for so long. Those people that are at the retirement age and well into it, they're always looking for that. They're bouncing around having CDs and moving money around if they can scrounge out an extra 10th of a percent. But if you're young there's, unless rates really went up and stayed up for 35 years, there's almost no way that you are going to be able to have a great retirement by just keeping money in a savings account. Unless you can just throw a ton of money in there, your own principle.

Speaker 1: Yeah.

Tony Mauro: Because the earnings aren't going to be there. And so that coupled with the fact that everything always goes up, my dad's complaining about that too. We've got prices going up everywhere, gas.

Speaker 1: Going crazy. Yeah.

Tony Mauro: He won't go out and buy, even though he is got the money, he won't go out and buy a new golf club. He's 81 years old. He wants a new golf club, but oh boy, they're too high. But I always tell him, how often do things go down in price? I mean...

Speaker 1: Yeah. Once they get them there, yeah they don't get to, they typically don't remove them. Right.

Tony Mauro: No, they don't remove them. And so that along with us living longer, it takes the retirees more money to live because prices keep going up and rates are low. So you've got to make sure that when you're in retirement, that you're getting what you feel comfortable with as far as your risk tolerance goes, good return on your money.

Speaker 1: Yeah. And I imagine that's an interesting challenge, not only with your dad, but with people in general sometimes. And sometimes it is the principle of the thing. Right. It's like, look, you're 81, you got the money, just get your golf club. Right. Enjoy yourself. But.

Tony Mauro: Yeah, just...

Speaker 1: It could be the principle too. He's like, no, I'm not going to...

Tony Mauro: No, he's not. He refuses to do it.

Speaker 1: Yep.

Tony Mauro: And it is a principle for him.

Speaker 1: Yeah.

Tony Mauro: Yeah. It just comes down to that.

Speaker 1: Yeah. But getting retirees in general sometimes to let loose of the cash, I know that's a big challenge in the industry anyway, even when they have it. Right. Because they've either been conditioned or whatever or they still do have some fear, but a lot of times I think if you're still having that fear about spending your money, then maybe that's a sign that you're not quite comfortable with the plan or the strategy's not resonating with you as good as it could be maybe.

Tony Mauro: Yeah. I think a lot of times that is. And if you could sit down with your advisor and discuss some of that stuff, it would certainly probably ease your mind. Especially if your advisor can let you know, we'll look and here's where we're at and here's what you're taking. And there's no way that you're going to, even if the most dire circumstance comes up, you're covered.

Speaker 1: Yep. Or it could be like my dad who's just plain stubborn. Yeah. So.

Tony Mauro: Well, yeah.

Speaker 1: That happens too.

Tony Mauro: Yeah. You get that way.

Speaker 1: That is true. And you earned it, so that's okay.

Tony Mauro: That's right.

Speaker 1: All right. So we're talking about retirement planning being more difficult, not exactly the way it used to be obviously. The technology, we touched on that a little bit and the technology is, it's everywhere and maybe it's helpful, but maybe it's also counterproductive as well because it ends up being a little, I don't know, fearful.

Tony Mauro: Yeah. And with all the technology at are fingertips, you tend to and even somebody like my dad's age, but I, so I'm probably done throwing him under the bus today. So we'll move on to my sister-in-law, who's actually 63 and she is not really very techno, but she tries to read and make informed decisions, but she overdoes it. She analyzes so much that she basically can't make a decision and she's starting to look at maybe getting out and starting to think about retirement and she's overwhelmed. And she was doing it on her own. She's a widow. And she came to me and said, look, I got to have some help. I don't understand any of this. I've researched this. And the further she gets into it, the more confused she gets and she's afraid, everybody's afraid to make the wrong decision. Right.

Speaker 1: Yeah.

Tony Mauro: Everybody's afraid of that and...

Speaker 1: Yeah. And you kind of have that paralysis moment where you're just like, okay, well, I've read all I can read and now I'm more confused than ever or whatever. And I just don't want to do anything. Yeah.

Tony Mauro: But I think that if you can keep it simple and you can make sure that, well, at least for us, with our clients, talking to them about some of this stuff and letting them know while there also a lot of tools out there and if you come across something, run it by us or ask and we'll tell you. Because the last thing you want to do as you're getting closer to retirement or in retirement is spend all your time agonizing over that, at least in my opinion. You want to get out and have some fun.

Speaker 1: Yeah, definitely. And it's okay. Again, it's understandable. So we just have to, as things change and evolve, and I think the pandemic obviously forced us to get more comfortable. I mean, you could even go as simple as saying, initially retirees were like, I don't want to get on Zoom and share my financial information because I'm worried about getting hacked or whatever. Right. But I think we started to learn, we didn't have a choice. So we started to learn and become more adaptable to that technology. So it's got its pros. It's got its cons that's for sure.

Tony Mauro: Yeah.

Speaker 1: All right. And then the final one, obviously it seems like with each passing year, the volatility of the market is more pronounced. Maybe it is, maybe it isn't, maybe it's just the technology that we just mentioned showing it to us every single day, where we just didn't used to pay that much attention to it. Maybe that's part of it.

Tony Mauro: I think yeah, I think that that's it. I mean, it's in front of us, on the TV, on our phones, on our tablets. It's everywhere that you can get this information. And will you just turn on any of the news outlets amongst the eight million channels we all have now.

Speaker 1: Right.

Tony Mauro: That we all pay for. And it's kind of crazy because that it makes you nervous a little bit. And I think the volatility is a little more pronounced. I think it's because more and more people are now actively investing. You've got the cryptocurrencies, you've got all kinds of things going on and then plus just world events and things like that. So to me, it's important to make sure that you're working with your advisor to make sure you're working your plan because if you're working your plan, the volatility while it might be there a little bit, it really shouldn't affect you all that much depending. And you got to try to put that money or those thoughts aside,

Speaker 1: Yeah.

Tony Mauro: With some of that.

Speaker 1: Yep. Good point for sure. Yeah. And so, I mean, the market's going to do what it's going to do. It's funny. We also get very lulled to sleep. So, we're seeing all this volatility this year and we're seeing, it's not been a fast drop, like we're seeing, it's been dipping for, but it's been dipping fairly slowly. Right. It'll drop a percent and then it'll go up a half a percent and then it'll drop two, then it'll go up a half. Yes. So it's down what? Some markets, some indices are down 20, some down 17, 15, somewhere in that range.

Tony Mauro: Yeah.

Speaker 1: But that stuff is normal. We get very complacent and we got very addicted to and used to the second longest bull run in history. Right.

Tony Mauro: Yeah.

Speaker 1: So 12, 13 years, you're just like, ah, cool. It's just got to... And especially all the stuff that it had to overcome. Right. The market has been getting back up like I've joked many times like a prize fighter getting knocked down. It's been getting back up over and over through a lot of volatile times like social times in the last five years, but we've also been pumping a lot of money into things too. Right. So,

Tony Mauro: Yes.

Speaker 1: There's some falsities there. There's some false floors if you will, or false ceilings. So it's easy to kind of feel like it's worse than ever, but at the same time the market does what it does. And so we have to be a little bit wary of those things to not let it totally fuel us into like this fear factor of jumping in and out and making more rash decisions. I think I saw something not long ago Tony said that Morningstar had put out a little thing out saying that due to the fear of just something scaring them and feeling like it's not going to work, typical investors lose about two and a half percent annually to just jumping in and out and just trying something new because what they have is not working in their mind.

Tony Mauro: Yes.

Speaker 1: So.

Tony Mauro: Yeah. And there's all kinds of studies on that and which is why we advocate depending on whatever plan that you are trying to implement, is trying to stay invested because you bounce in and out.

Speaker 1: Yeah.

Tony Mauro: And you are going to miss and your returns aren't going to be there. You're going to be not happy. You're going to be just always anxious. So yeah. That's definitely something you don't want to do.

Speaker 1: Yeah. Yeah. Little tweaks. I mean, your plan is not stone, right?

Tony Mauro: No. No.

Speaker 1: So, you're going to definitely, it's going to make some tweaks. You're going to make some changes. That's what those reviews are for. But wholesale big changes in times of turmoil and panics tends to be the wrong choice. And that's why you have that advisor there to help hopefully balance you out. And that's some ways how retirement planning is just not as easy as it used to be. So that's why you need to turn to a professional. You need to work with folks like Tony and his team at Tax Doctor, Inc.

Speaker 1: So make sure you subscribe to the podcast, make sure you stop by Tony's website if you're not already working with him. You can visit the website, schedule some time, a lot of tools, tips, resources, things like that at yourplanningpros.com. That's yourplanningpros.com. As I mentioned earlier, Tony's got many, many years in the industry. He's a CFP and an EA. So a great resource for you to tap into there at Tax Doctor, Inc. Tony, my friend, thanks for hanging out. This is our late June episode. So I will talk to you sometime after the fourth and I hope you have a good holiday.

Tony Mauro: Hope you can do the same. We'll see you later.

Speaker 1: Absolutely. We'll catch you next time here on Plan With The Tax Man with Tony Mauro.

On this episode, we’ll give you some red flags to be aware of, teach you how to spot them, and illustrate the difference between an advisor who does the bare minimum versus one who goes above and beyond to work in your best interests.

Important Links

Website: http://www.yourplanningpros.com

Call: 844-707-7381

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Transcript Of Today's Show:

Marc Killian: Hey, everybody. Welcome to the podcast. It's Plan With the Tax Man with Tony Mauro and myself, and we're going to talk about red flags and maybe how to spot those if you are shopping for an advisor or thinking about getting a new one, a first one, whatever the case might be. We're going to go through some content that might give you some insight as to whether it's a red flag or not, and maybe it's not. Maybe it's just something to ponder, but some could be more dramatic than others, so we'll see how that goes. Tony, what's going on, my friend? How are you?

Tony Mauro: I'm doing well. Thank you. It's starting to warm up here at the beginning of June and all is good. Looking forward to summer.

Marc Killian: That is true. That is true. We are into our June podcasts. This is the first of early June here. We're dropping this. We're doing this one quick today. We're doing this one today. It's the ninth, and we're going to put it out today on the ninth as well, so we are hopping and bopping right along. Red flags, Tony, they're out there in just about every walk of life, right?

Tony Mauro: Yes.

Marc Killian: We see them on all sorts of things, and usually we're pretty good at spotting these things. Let's go through a few financial ones and see if we can discuss whether or not they are a red flag or at least something to have an eye on. Okay?

Tony Mauro: All right.

Marc Killian: You've been doing this a long time, right? As an early advisor, earlier on in your career or whatever the case is, maybe this applies to more people, this first one, that advisor or that professional who works with people of all ages and all levels of wealth. I kind of see this one as it could be red flag and it might not be. There's a couple of ways you could look at this. If they're young and they're starting out, they are trying to work with everybody. They're trying to get a book of business going, so on and so forth, and maybe that is a red flag. But then again, it could be an advisor who has been doing this a long time. They've got a lot of retired clients, but then they're also helping those retired clients, their kids and maybe even their grandkids.

Tony Mauro: That's right.

Marc Killian: So it's kind of a little catch 22, but what do you think about that concept of an advisor who works with all ages, all wealths?

Tony Mauro: I do think, like you say, it's definitely there's two ways to look at that one, for sure. And I remember when I was young in the business, and of course, back then it was a lot different.

Marc Killian: Oh sure. Yeah.

Tony Mauro: Advisors were basically selling.

Marc Killian: And fewer and far between, right? Everybody's an advisor now.

Tony Mauro: Yeah, yeah. Back in those days, as a young advisor, you were looking to work with anybody because you didn't have any clients.

Marc Killian: Yeah. You got to eat too, right?

Tony Mauro: Yeah, you got to. Yeah. Nowadays, it's a lot different. There's fee only, there's asset-based ways that we as advisors get paid. But I think on the side of maybe a potential red flag if you're looking for an advisor is you probably want to ask some questions and look for somebody that's got some maybe specialties and whatnot. You certainly don't want an advisor who comes at you and says, "Well, if you don't have $250,000, we're not interested" type of thing.

Marc Killian: Okay.

Tony Mauro: But you definitely want to check them out and see what types of clients that maybe they have, and see what they generally are doing for their clients. I certainly wouldn't turn away a young person that's just starting out, because obviously, you got to start somewhere as-

Marc Killian: It's like the old credit card thing. Remember when we were first younger and we're first trying to get our first credit card, just so we can-

Tony Mauro: Yeah.

Marc Killian: Because they'd say, "Well, you need credit to buy a car," and you'd say, "Well, okay. Well, how do I get credit?" "Well, get a credit card" or whatever, but then nobody would give you credit. It's like, "Well, how do I get credit if I can't get credit?"

Tony Mauro: Yeah, yeah. And if young people want to have somebody in their corner, definitely I wouldn't turn them away. I know that. But some advisors do that, and I get it a little bit, as far as that goes, but I also get that we don't want to just... As advisors, we're always looking for landmines with the clients, and clients, who this talk is about, looking for landmines with a potential advisor, is that if they're all over the board and they just don't really seem to have any, I don't want to say specialty, but vision.

Marc Killian: Kind of that niche, right?

Tony Mauro: Yeah.

Marc Killian: Because if you're a retiree, you probably want somebody who's done this a few times. And you could think about it this way, Tony. Up until this recent downturn with the market, we've got advisors out there who've been in business 10 years, which sounds fantastic, but they've never seen a prolonged downturn in the market because it's been up for 12 years.

Tony Mauro: Up for 12 years. A young person comes in my office, I'm going to be 55 this year, and they could look at me and say, "Boy, this guy, he's too old."

Marc Killian: Yeah. "He doesn't know what he is talking about." Right?

Tony Mauro: Yeah. "He doesn't know what he's talking about," or "Boy, he's not going to be around."

Marc Killian: "He's not into crypto, so he's not my thing."

Tony Mauro: Yeah. "He's not your thing." And/or they could look at it and say, "Well, you know what? The guy's been around a while. He's seen a lot of things, a lot of-

Marc Killian: Exactly. Yep.

Tony Mauro: Three recessions for me. And so they're looking at that that way as well, but-

Marc Killian: Yeah. I kind of think this is almost like soccer. It's like a yellow card.

Tony Mauro: It is.

Marc Killian: Not a red flag yet.

Tony Mauro: Yeah, not a red flag.

Marc Killian: Okay.

Tony Mauro: Just kind of, I would say, yellow.

Marc Killian: Okay. I like that. All right. The good news advisor, and I'm going to combine this one, actually, in number four. I had top five, but I think I can combine these two together, and actually, we'll just do a top four. The good news advisor or the advisor that says, "Oh, don't worry about the market. It always comes back," well, that is true. Yes, the market does historically come back, but what is your time horizon? My brother is 63, Tony, and he was joking the other day. He's like, "I'm getting ready to retire and this economy is not as good as it was, obviously." He's like, "Boy, I wish I would have just been a few years older and I would've retired in like 2012 or 2013." Because through that bull run we were just talking about, that'd be a great time to retire versus retiring... If you retired in 2012, the next 10 years were pretty darn good, but if you retired in 2007, you weren't too happy about those next three.

Tony Mauro: No, no. I would say that this is a flag, because we all are going to experience some sort of downturns. Granted, yes, over time, the market does always come back and that's easy to say, but that's not easy for clients to hear when-

Marc Killian: Right, but you got to be able to tell them that. That's that good news portion. I want to work with somebody who's not afraid to say to me, "Hey, Mr. Killian, you came in. You're looking to get retired in three years. Got to tell you, I don't think it's going to happen, and here's why," versus maybe kind of sugarcoating it. I'd rather have the straight truth. Go ahead and hit me hard, and then tell me how we fix it versus dancing around.

Tony Mauro: Exactly. And when we work with clients, generally the only way we work with them is if we can get them in here to go over goals, go over and actually do basically where they're at now and where they want to be in whatever time horizon they're thinking. Then I have to break it to them sometimes that, "With what you're doing and how you're doing it and the time you have left, it's not going to happen, so we either accept what will happen or we got to make some changes" type of thing.

Marc Killian: Yeah, yeah.

Tony Mauro: Definitely don't want to just tell everybody, "Well, yeah, everything's going to be fine as long as you just keep putting money away."

Marc Killian: Right.

Tony Mauro: Well, if you're 60 and don't have anything, that's not the same as a guy that's 20.

Marc Killian: Yeah, exactly. Exactly. Yeah. My mom and I both go to the same cardiologist office. She sees one advisor who is very, everything is... He's always very soft spoken and he talks to her in such a way that, "No, you're doing great. Everything's fine." Even when she's scared about something, he's very uplifting which is great, because she needs that, but then it didn't work for me. So I see a different guy in the office who's like, "Hey, put the cheeseburger down, dude." He's a lot more direct with me, which I appreciate. So there's also that delivery style, I think, when you're shopping for an advisor, finding that person that's that right balance for you of communicating effectively, but also in a way that you're going to implement that stuff.

Marc Killian: And that leads me into my next one here on our list, which is the technical conversation or the jargon. Every industry's got it, Tony. I don't think a lot of advisors mean to talk over people's heads. There are some out there, I'm sure, that try to do it with some of the language to make themselves look smarter or whatever the case is. But I think for the most part, you just get into the habit of saying these things. So when you're looking for an advisor, you got to find the one who has a good balance of the technical, but also can make it understandable and relatable.

Tony Mauro: Yes. If you have an advisor that's always just talking about technical jargon, charts and alpha graphs, I'd definitely say big red flag. Not to say it may not work, but we all have technology and things. I have it on the accounting side. We definitely have it on the investment side, where you could do a lot of a number-crunching very quickly, but really, we like to present it to clients. Obviously, it's easy to say, but in a way that they can understand is, "Here's where you're at now. Here's what you want, and here's how this is or is not going to happen," just with some simple numbers.

Tony Mauro: Now, all of the technology in the background gave us those numbers, but we don't want to generally share a lot of that with the clients. I'll generally bring out a chart or two, but that's it. Most of it's just, we actually go in the conference room. We're writing it on a whiteboard, because I think they can relate to that quite a bit more than just seeing fancy charts and all this stuff.

Marc Killian: Right. Yeah.

Tony Mauro: It's like showing clients financials. They don't really care about that. They want to know, "Do I have any money or not?"

Marc Killian: Yeah. And because also, if you're talking about the strategy, the plan, if it's a little too convoluted or overly technical, is the person going to even implement it, because they're going to maybe get lost in it? If you need to use some of the big terms, if you need to do some things to kind of show, I don't know, the impact or the importance, great. But then also, again, it's that ability to do both the technical as well as the keeping it simple so that we can relate it and implement it. That's the sweet spot. Since you like golf, that's the sweet spot.

Tony Mauro: That's right. That's the sweet spot.

Marc Killian: All right. Since I combined those two, let's go to our last one here. God gave us two ears, as the saying goes, and one mouth so we can listen twice as much. Yes, on the podcast, you and I are talking a lot because it's just you and I. Otherwise, you're tuning into dead air. But when you have a potential new client coming in, Tony, you're asking some questions, but then you basically should just be listening, because you need to get to know me or us, the client or potential client.

Tony Mauro: That's right. And we ask questions and take a lot of notes, and I really try to let them do as much talking as possible. It's amazing, and everybody's like this, people like to talk about themselves. They like to talk about their own problems and whatnot, and everybody knows that guy or gal friend or colleague or advisor of any kind that just won't be quiet, and you just want to... Well, for me, it's like I got to get away from them type of thing. But I think with an advisor relationship, you want somebody that's going to ask you questions. You want to pay attention to, are they really listening to what I'm saying or do they constantly keep talking?

Tony Mauro: I'll tell you a pet peeve of mine, and I hate this, is I'm talking, and my wife will do it every once in a while, and she'll start talking before I'm done. It's like, "Well, you didn't really even listen to what I said, so how..." I try not to do that with clients, with anybody, really, but we're all guilty of it from time to time because we always want to talk. I think we do, as everybody needs to, take a little more time to listen. Because boy, you can't have a good advisor-client relationship without us as advisors listening to what you truly want, because every client's different.

Marc Killian: Yep. That is for sure. And if you think about these things, Tony, they're kind of universal.

Tony Mauro: They are.

Marc Killian: It's some basic stuff that we all feel about these things, and that's when you got to start to get to the nitty gritty. Our gut goes a long way for things. So when you're looking for an advisor, if you're shopping for that first time person or maybe looking to get a second opinion because you don't feel like you're getting the service that you need or want, or something's changed or whatever, do your homework. Do some of the credential checks and things of that nature. But also, when you go in for, most advisors do free consultations, just get a vibe and then listen to your gut. Sometimes the gut's a pretty good indicator. Now, some people who are listening are probably like, "Oh, I've got a terrible gut," but you get the idea.

Tony Mauro: Well, like I said at the beginning, I have a question listed when a new client or prospective client comes in that I'm asking them, and I am listening, but I am looking for, like I say, my own, what I call landmines, as, "Will this client be a good fit for me as well?" While I'm gathering information, I'm generally trying to make a good vibe decision on, are they going to listen to me? Are they going to be calling me every day just because they saw something on CNN? Because you can get those vibes both ways and it has to be a good relationship, but you as the client need to do the same thing a little bit and make sure that the person's right for you.

Marc Killian: Exactly. So there you go, some possible potential red flags to look for when shopping for an advisor. Hopefully, that helps you out a little bit. If you've got some questions, need some help, or just want to do the little shopping of your own and sit down with Tony if you're not already working with him, well then, stop by the website, yourplanningpros.com. That's yourplanning pros.com. Tony is an EA and a CFP with over 20 years of experience in the industry at Tax Doctor, Inc. And of course, again, you can find him online at yourplanningpros.com. Don't forget to subscribe to the podcast, Plan With the Tax Man, on whatever app you like to use. You can also find those links on the website as well. Tony, thanks for hanging out, my friend. I appreciate your time as always. Hope you have a good week.

Tony Mauro: All right. Well, take care.

Marc Killian: Yep, absolutely. We'll see you next time. And again, make sure you're sitting down, having those conversations that you need to do for yourself, and watch out for those red flags. This has been 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.