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There's an entire television network dedicated to doing things yourself — home renovation, landscaping, interior design, all of it. And the DIY mentality is genuinely admirable. But when it comes to retirement planning, the stakes of a bad install are a little higher than a crooked backsplash. Let's talk about what DIY planning actually looks like in practice.

Important Links: Website: http://www.yourplanningpros.com

Call: 844-707-7381

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TRANSCRIPT:

Speaker 1:

We've created an entire television network dedicated to doing things yourself. Everywhere you turn, it's DIY, this and that, home renovation, landscaping, interior design, all of it. And the DIY mentality is genuinely admirable. But when it comes to retirement planning, the stakes of a bad install are a little higher than just a messed up backsplash in your kitchen. So let's talk about that this week, the DIY movement in retirement planning and what that looks like actually in practice.

Hey everybody, welcome into the podcast. This is Plan With The Tax Man with Tony Mauro. And we're going DIY this week, Tony, little pitfalls of doing things yourself. Everybody does it to a certain degree in many walks of life. You and I both have done a lot of DIY things ourselves, but certainly when it comes to the financials, this is maybe room to pause and think about this.

Technology, Tony, has changed. It's super easy to do a lot more things. Absolutely. I'll agree with that. I'm sure you will too. But the complication of preservation and distribution, AKA retirement, is vastly different than accumulation. So let's talk about that this week a little bit.

How are you doing, my friend?

Tony Mauro:

I'm doing good. [inaudible 00:01:36].

Speaker 1:

Do you agree with my statement there?

Tony Mauro:

I agree with your statement. Yeah. And I love this topic for a lot of reasons because I think as we... Well, in the world we live in, especially with the AI advancements and whatnot, it's just getting worse and worse. Everybody wants to do everything themselves. And I think a lot of times, and I'm one of them too-

Speaker 1:

Sure.

Tony Mauro:

... I used to love doing home renovations because I enjoyed it. But now that I'm a little older and I try to preach this to my son and whoever will listen, is you need to outsource everything that you're not good at or you don't enjoy because that's going to free you up to do what you do enjoy and/or make money. And we do it at our business here. I mean, I don't touch the IT. I don't touch the phones. Now, could I, and try all that? Yeah, sure.

Speaker 1:

Sure.

Tony Mauro:

It clutters up my life too much. And I want to give it to the guys that are good at it. And so yeah, I agree with your statement wholeheartedly.

Speaker 1:

And it's one of those things where we certainly know in this world it's been more and more difficult, especially post-COVID, to get people to show up and maybe do quality jobs in different aspects of things.

Tony Mauro:

Sure. Yeah.

Speaker 1:

And so everybody feels like, "I'm just going to take on this." What's the old saying? If you want it done, right, do it yourself?

Tony Mauro:

Right. Do it yourself.

Speaker 1:

And that could be true. But I mean, my brother and I are fairly handy and we built some things around my property, Tony, but when it came time for a complete overhaul of the back deck and building a roof on it and all this kind of other stuff, I just did not feel comfortable in our skillset, so I farmed it out. Did it cost me more? Yeah, probably. But then again, maybe not because how many times might I had to double back and fix something that I didn't do right the first time because I don't have the skillset or the longevity of doing these things.

So financially speaking, I think that same thing happens. There's so many tools out there now. And growing the money... I mean, Tony, check this out. So you might know this off the top of your head, but if you don't, don't look it up. Just give me a quick educated guess. At the time we're recording right now, how much do you think the S&P 500 is up the last five years?

Tony Mauro:

Cumulative?

Speaker 1:

Yeah. Cumulative. Give me an idea. What do you think? Five years.

Tony Mauro:

Five years, I'm going to say 45%.

Speaker 1:

Okay. How blown away are you that it's 75?

Tony Mauro:

That doesn't blow me away.

Speaker 1:

Okay.

Tony Mauro:

I was thinking a little higher, but no, it doesn't blow me away.

Speaker 1:

Okay. 75. Crazy, right?

Tony Mauro:

Yeah.

Speaker 1:

Five years cumulatively, the S&P 500 is up 75%. The Dow up 50 over that same period. So it's easy for people to go, "Oh man, you can be an idiot and throw a dart at something and do well." But when it comes time for the... As we get closer to financial or retirement, excuse me, distribution, there's a lot more at stake. And I think this is where people start to find themselves at a crossroads. And do you find that? Do you have people coming in that are like, "I've been doing it myself, Tony, but there's a lot I don't know and I'm getting a little nervous. I want to make sure I don't screw this up because this is my forever money"?

Tony Mauro:

They do. And that's how a lot of people come to us. And if they've been doing things themselves, we certainly don't tear apart what they're doing, but we just try to ask a lot of questions and make sure that not only... Because a lot of people come in, "Well, I've been doing this myself and I've been averaging 10% a year or I've been beating the S&P 500."

Speaker 1:

Sure.

Tony Mauro:

And I say, "Well, okay. We really have you... Let's see, but that's good." And then the first question as I ask is, "What do you have for an emergency fund?" And they have a strange look on their face. And we start talking about that. I said, "Well, what about you... Tell me about your assets and things. And then we'll get to the part of, well, what do you have for life insurance?" And so some of that stuff they don't think about. All they're thinking about, "I throw my dart at the board. I'm investing in this. It's growing. I should be okay." And that may be the case, but there's more to a comprehensive, keyword, financial plan.

Speaker 1:

And you may be doing well, right. So think about my analogy a second ago about what the numbers have done. So let's say you had a million bucks [inaudible 00:05:37] on the S&P 500, you're up half a million dollars over five years. And you're thinking, "Man, I got this thing figured out." Great. Okay. So now you got a 1.5 million sitting in this account, you're getting close to retirement and you got to start pulling this money out. And now you don't realize the things that you're triggering. So your income strategy is going to affect some other things. It's going to affect your Medicaid or your Medicare, excuse me. So you're going to get those issues. You got to start dealing with the IRMAA situation. That catches people off guard. The taxation of the whole thing, Tony, is what catches a lot of people off guard. That's where a lot of people are going, "Okay, this is why I definitely need help. How can I be more efficient here?" And with you being a CPA and a CFP, you're thinking about the tax situation, but as well as the future planning.

Tony Mauro:

That's right. And some of those triggers you're talking about are exactly what I think a lot of people miss really with a good advisor. With us, we're looking always at, we know you want to get the most money, especially around retirement.

Speaker 1:

Sure.

Tony Mauro:

We got to do it tax efficiently because we don't want to give the feds any more than you have to. So let's think about it. And let's take everything into account, Social Security and everything else you might have coming in, to make sure that that's the case, that we're always on track with that. And don't miss that by too much because it's just ineffective. And at the end of the day, you bleed money and you don't even know it.

Speaker 1:

Yeah. I mean, I can see somebody coming in DIY or they've done well. Let's just go with a million bucks, Tony, because it's easy. They've got a million dollars in their portfolio. And they come in and they're like, "Hey, I heard Ramsey talking about taking 8%. I've done the math. I'm going to pull 80 grand out a year, blah, blah, blah. I should be good to go, right?" You know what I mean? And it's like, that's a quick back of the napkin thing. It's like, "Well, all right, the 4% rule is half of that. The guy who created the 4% rules moved it to 4.7."

But for easy math, Tony, you could sit there and go, "Well, does 40,000, if we go with the 4% rule, does it get it done? Does it drive the plan?" Because Ramsey's thing is, "Well, if the market averages 10% year over year at minimum, why not take 8%?" But of course, the downside of that, Tony, is that to make that happen, you're 100% invested in the market. And I think again, as we age, we're not really comfortable taking that amount of risk.

Tony Mauro:

No, no. And I think that's one of the flaws that a lot of DIYers end up with is they'll come in with some... We use that example.

Speaker 1:

Rule of thumb. Yeah.

Tony Mauro:

Just that rule of thumb, yeah. And when we sit down and start putting some numbers to that and their situation, most of the time... And I like Dave Ramsey's stuff about getting out of debt, staying out of debt, saving and whatnot. I don't agree with the 8% year-over-year. I think that's too aggressive based on things that happen not only in the market, because he's assuming it earns 10% every year. We know it does not, even though lately it's been way up. But what if you go through a stint right when you retire that it goes up 10% one year? And then we have a situation like from '04 through '08 where the market did nothing and go down. Each year you're drawing that same amount out on a lesser principle. You start going downhill very quickly. I think something like that is unsustainable long term. And you don't want to get into that doing it yourself and then be 75, 80 and out of money and scratching your head saying, "Man, where did I go wrong? This was supposed to work."

I think that's where a planner can lend some value. I'm not saying that...

Speaker 1:

Do you-

Tony Mauro:

Go ahead.

Speaker 1:

I was just going to... No, finish your thought, please.

Tony Mauro:

I was just going to say, I'm not saying you may not do that, but I think you should do some sort of hybrid of that. If you want a little more money out, maybe not take it out maybe in the good years. In the bad years, no. It should be 4, 4.5.

Speaker 1:

Well, that's a great point, right? So you can do the back of the napkin thing and say, "Okay, yeah, 4% might make it work." But you're going to have some lean years, you're going to have some better years, right? So it's got to be able to continue to shift and change. And that's what a good strategy and working with a financial professional does because you guys are going to do these reviews, you're going to make tweaks along the way. And sometimes people I think get hung up in the fact too, Tony, that they see these rules of thumb or whatever, like the rule of a hundred or something. They'll look that up, they'll read that and they'll go, "Oh, okay. So it says take my age and that should be safe. So I'm 60, so 60% of my portfolio should be in safe, 40% at risk."

Okay. Yeah, that's a great place to maybe start. But when you guys start diving in and really dissecting the individual or the couple, oftentimes you find that that's not good for both people. And that's another piece of this too. The DIY thing, are you taking into account both people? And does the second person share your DIY enjoyment? Because what happens when you die if you're the person doing it all and they don't want to do it and they don't know anything about it? And now you've left them behind the eight ball too. So that's something-

Tony Mauro:

You've left them a mess.

Speaker 1:

Yeah.

Tony Mauro:

We encounter that a lot because the DIYers, and I think that's one of the mistakes that they make, is the DIYer really loves to do it, for example. And the spouse does not.

Speaker 1:

Sure. Yeah. Nothing wrong with that, right?

Tony Mauro:

Nope. And then what happens is when the DIYer goes and they haven't talked about it, the spouse, you've left them with a complete disarray mess and they have no idea where to turn to. And they're trying to deal with all of this. We just talked about it on the last episode about leaving people with a mess, is you don't want to do that. So I think that's one of the mistakes that people make there for sure.

I think another one really is that they tend to get so fixated, especially when things are going good, to chasing the highest return. They always find it funny when I say, "Look, return is important, but it's not the only driver." And they look at me kind of funny like, "Well, you're a planner. You're supposed to be... I'm paying you to get me the best return."

Speaker 1:

"I want all the money, man. I want all the money. I want to stick it in my ears and go blah, blah, blah." Yeah. But that's a great point, Tony, because okay, let's say you're chasing this aggressive return because the market has been on a tear and you want this higher return. And you go through, you have the planning process with someone like yourself, Tony, and you find out that 5 or 6% return gets it done. Drives your plan, gives you more than you need because maybe you got a pension. Maybe there's two pensions in your family plus Social Security.

So you find out you really only need to be... Your risk level could be much lower and still really drive your plan effectively. But you're taking way too much risk because you want to max it out. And then what happens? Inevitably, Murphy's going to strike. We're going to have a prolonged downturn because we haven't had one really in about 17 years. So we're way overdue for a prolonged. Not a little downturn for three months here, four months there, but like a prolonged downturn. And now you're really kind of screwed. That's the concern.

Tony Mauro:

That's the big concern, is right there because it's easy when things are going good and they have been for a long time. Where I think the financial planner really shows their value... I mean, I think we should try to show value all the time, but it's when things aren't going good, you can point to, we're fine. We're still earning a good rate. And if we are down a little bit, we're not down as much as the market. And you're still on track to win your game. Don't focus on the day-to-day returns. Just, "Here's our plan. If we know we can get there and maybe even a little more, we're fine."

Speaker 1:

Well, the diversification thing I think bites a lot of DIYers in the tush too, right?

Tony Mauro:

It does. That's another one.

Speaker 1:

Yeah. So using the rule of thumbs that are out there and then the diversification thing. "Well, I know I'm diversified. I know that's important. So I've got a bunch of stocks. I've got my Schwab account and I've got a bunch of stocks and I've got five mutual funds and I bought them from different companies just so that I'm well diversified." And it's like, yeah. And most of the time you guys go through training and do your forensic analysis. And it's like, "Congratulations. You got a whole lot of large cap in these mutual funds."

Tony Mauro:

[inaudible 00:13:50].

Speaker 1:

And you got also high fees with these mutual funds. So there's just a lot we don't know when we don't do this every day.

Tony Mauro:

You don't. You don't. And just like every DIYer, I mean, every time I do a DIY, especially if it involves any type of real artistry, the pro always does it better because they're doing it all the time.

Speaker 1:

Right. Right.

Tony Mauro:

But I just had a guy come in last week and he was a tax guy and he was just kind of spouting off. He says, "You know what? I've got a couple of mutual funds." And he says, "I've been doing really well." He said, "But I'm very well diversified." Because I asked him, "How's your diversification?"

"Oh, I'm diversified. I got two funds."

And I said," Well, what are they?" And he gave them to me. Well, they're both small cap world funds that hold very aggressive stocks. I mean, they're from different parts of the world. But I said, "You're really not that diversified. First of all, it's foreign, which has a place in everybody's portfolio, but you have no large cap. You have no conservative. You have no nothing." I said," Do you have a financial plan?"

"No, I just have these funds."

I said, "Well..."

Speaker 1:

That's interesting, right? Because a lot of times we do see my analogy, which was a lot of times we see people come in and they've got a bunch of large cap because it's just-

Tony Mauro:

Large cap.

Speaker 1:

Yeah. They've got small caps.

Tony Mauro:

That's [inaudible 00:14:59] here.

Speaker 1:

Microsoft and Coke and so on and so forth. And you have four or five of those and they all have about 70% of the same exact thing in them.

Tony Mauro:

Same exact thing. Yeah.

Speaker 1:

And if it's all tech-heavy, well, what happens when tech takes a beating? Which obviously everything right now is tech heavy. So yeah, it's just, you're not as diversified as you think you are. And it's not just the portfolio, Tony, you started this earlier as well, and we'll finish with this. Part of the DIY thing that most of us just are terrified of and don't want to mess with, and this is I think probably what brings a lot of people to the door, is diversification of the portfolio and the income stream is one thing. Tax diversification is another, because that's an animal that... We're all terrified of the IRS.

Tony Mauro:

Yeah. I mean, at the end of the day, that is the truth. And I'm a big believer. I'm not anti-government, but I don't want to give them any more than we have to legally. So if we've got the opportunity within the rules that they set, let's make sure we're not doing that.

Speaker 1:

And tax diversification is a thing. Don't have it all just in the 401(k). So we've talked about this about a million times, right? So you need different kinds of tax buckets.

Tony Mauro:

You do. You need a lot of different tax buckets. And to make sure you're pulling money out, especially in retirement, as efficiently as possible, meaning trying to minimize your taxes. We've had people come in and they're just pulling money out of pre-tax money out of 401(k)s just because they didn't know any better when they have all this after tax cash sitting over here. Let's draw on that first and let's keep this other stuff growing. So it's just little things like that I think advisors lend a lot of value in this area.

Speaker 1:

Any final thoughts for the DIYers out there? Things that you've seen in your firm, people come in that maybe is the biggest kind of pain point for driving them in to see you or have we kind of covered them?

Tony Mauro:

Well, I think we've kind of covered, most of them, the pain points. I would just tell anybody out there that is starting to get nervous, if you've been doing things yourself and you're starting to feel whatever, anything, get with a planner. If anything else, and you're worried about, "Oh, well, I don't want to do it because I'm not going to use a planner," well, go in and have them charge you just a one-time fee. Have them take a look at what you've got and give you some advice. It might be worth whatever they're going to charge you to do that. And at least then you've got at least some objective opinions about what you're doing.

And who knows, maybe you want to say it, you're getting to the point where it's like, "You know what? I'm done doing this myself. I want to be involved, but I want a planner. I want somebody to help me, especially in the distribution phase to make sure that things are going good." That would be my advice.

Speaker 1:

All right. Well, good stuff today here on the podcast. Look, there's nothing wrong with doing the DIY thing. It has its place in all walks of life and even financially. But some projects are a little worth calling a professional for, especially when the mistakes can really throw you into a real tizzy for the next 30 years.

So if you've been handling your retirement on your own, a second set of eyes, a second opinion is certainly important. Tony and his team are here for just that. You may find that you've been doing a bang up awesome job, but you also may get educated, as Tony said, on some things you just didn't know about or see coming. And so it's worthwhile to have that conversation with yourself. Again, Tony's a CPA and a CFP, an EA of 30 plus years in the industry. So a great resource for you to tap into, not only in Iowa, but he's got clients all over the country as well. He's licensed to work in different states.

So if you need some help, you're checking out the podcast, reach out to him, yourplanningpros.com. That's yourplanningpros.com for some time onto the calendar. Check out the tools and resources there. Subscribe to the podcast. Plan With The Tax Man on Apple or Spotify or whatever app you enjoy using, but certainly get yourself some professional help and advice.

Tony, thanks for breaking it down, my friend, as always.

Tony Mauro:

All right. We'll talk to you on the next show.

Speaker 1:

We'll see you next time. Have yourself a great week. And thank you for some time here on Plan With The Tax Man with Tony Mauro from Tax Doctor, Inc.

Securities offered through Avantax Investment Services SM, member FINRA, SIPC. Investment advisory services offered through Avantax Advisory Services. Insurance services offered through an Avantax affiliated insurance agency. Investment strategies discussed in this episode may not be suitable for all investors. Please consult with a financial professional.

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Whether you're visiting one of the 63 national parks this summer or just hitting a local trail, a lot of the best practices for a great hike apply just as well to your retirement plan. Let's “walk” through a few.

Important Links: Website: http://www.yourplanningpros.com

Call: 844-707-7381

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TRANSCRIPT:

Marc:

This week on Plan with the Tax Man, maybe you're visiting one of our national parks this summer or just out hitting the local trail. And if you are, we have some best practices for a great hike that apply just as well to your retirement plan. So let's walk through a few of these with Tony Mauro. Hey everybody. Welcome into the podcast. This is Plan with the Tax Man, with my friend Tony Mauro. How you doing buddy?

Tony Mauro:

I'm doing good.

Marc:

Yeah?

Tony Mauro:

Midst of summer.

Marc:

Yeah.

Tony Mauro:

It's all good.

Marc:

I'm telling you what, it's been crazy, incredible hot. Look folks, little FYI out there. If your AC unit fails you during the really hot months, be very, very careful because apparently mold can build in the ducts quickly when the humidity is high and the AC's not working, go figure, even though the AC's not working because the water and condensation that sits in there while waiting to get it repaired apparently turns to mold. So a little FYI because it's expensive to fix it.

Tony Mauro:

Yeah.

Marc:

And that might be a retirement expense, Tony, that you just didn't see coming, right?

Tony Mauro:

You didn't see coming. You better have to depend on the emergency fund.

Marc:

Exactly. Right. So we're always trying to provide useful nuggets of information on this podcast. But we're going to have some fun this week. Tony, I know you like to travel. I know you like to go a lot of places. Do you visit the national parks? Do you do some of that stuff?

Tony Mauro:

The reason that I want to talk about this, because I was just out in a couple of them last week.

Marc:

Oh.

Tony Mauro:

I had to go out to South Dakota for a wedding, and so we stopped at the Badlands National Park.

Marc:

Nice.

Tony Mauro:

And it wasn't really a park, but Mount Rushmore. But I have been to other national parks out. I've been of course to Yellowstone and a couple of others. A lot of them I still want to see, and they're very interesting. I will say-

Marc:

You have been at Yellowstone or not? I though you had.

Tony Mauro:

I have been to Yellowstone.

Marc:

Oh okay.

Tony Mauro:

Yeah.

Marc:

Yeah. Okay.

Tony Mauro:

I still have a few on my list. Zion and Bryce And some of those, but I do like to hike. I'm an amateur.

Marc:

Yeah. I want to go to Denali. That'd be cool.

Tony Mauro:

Yeah, Denali.

Marc:

Yeah. Or McKinley, whatever it used to be called, either way. So look, do you know how many national parks we have, by the way? There's a lot.

Tony Mauro:

I don't.

Marc:

There's a lot. 63.

Tony Mauro:

Is that how many? 63 national parks.

Marc:

Yeah. 63 national parks. Some are really big, obviously, and some are really small. I think Hawaii's got a couple. I think California's got like six, but yeah. So there's different sizes and stuff out there. So anyway, a lot of people like to visit these things as a summer thing with the kids or grandkids maybe. So we'll talk a little bit about some analogies. I'll let you spin some financial wisdom to my setup for the park conversation. So we'll start with a map. Don't leave home without a map. I know we got these cell phones and that we're attached to them now, Tony, but you might not get signal in some of these bigger parks. And if you think about it, a lot of the gates when you go into some of these national parks, the first thing a ranger does is tell you a couple things and they hand you a map.

Tony Mauro:

That's what they did to me. Yeah.

Marc:

Exactly. And that's the same thing. It's to help keep you oriented. Same thing with a financial strategy. It's to help to keep you oriented and focused.

Tony Mauro:

It is. I mean, the financial plan, if you have a formal one, I mean, that's your backbone. That's the map itself. And just like when I was... We did a little hike in the Badlands on our own and they gave us a map to make sure we stayed on the trails and stayed on... I equate that to just like in the financial planning world, stay on track and make sure that you're following your map as best you can. So out there in the Badlands, if you get off the trails, a lot of bad things can happen quickly.

Marc:

Yeah.

Tony Mauro:

In the financial world, it's going to be a slow burn if you get off track, but over time you get off track too much, and what's going to happen is you get to the end and you are not going to be where you though you were going to be.

Marc:

Mm-hmm. Yeah.

Tony Mauro:

And so with this plan, as it changes and whatnot, it's not like a static map that you'd be holding in your hand with hiking.

Marc:

Sure. But if you get a little off course, it might help you get back on. Or even those reviews serves as almost like a check-in spot. Maybe you're going on a really long trail through the parks and it's like, "Hey, we're going to stop at this little whatever this thing is." And there's a map there because maybe they've made some changes or who knows?

Tony Mauro:

Yeah. In our annual reviews, I mean normally the plan changes a little bit every year, if nothing else, just with a little bit of goal modifications and things like that. And then of course, maybe even rebalancing.

Marc:

Well, life's going to throw something at you.

Tony Mauro:

Life's going to throw something at you. I was just telling you before this call, life threw something at one of our clients. They've got parents going into, one's got dementia and had got to go in a nursing home with no plan. And boom, all of a sudden life changes quickly.

Marc:

Yep.

Tony Mauro:

All the better to have a map and to be following it.

Marc:

For sure. For sure. Well, and unfortunately, Tony, one of the problems that we run into often when we go to these lovely, beautiful national parks because our country is full of amazing locations, is unfortunately there's other people. And people don't do the best job of always picking up after themselves. So when you go to just about every national park, there's signs everywhere. "Please do not leave your garbage. Please do not do the..." Like at Yellowstone, we were just talking about that. At the sulfur pools, "Don't throw cans in the sulfur pools," things like that. Just crazy stuff that you think, hello, common sense. We should not do this. Ultimately, the message is don't leave a mess behind. And financially, same kind of thing. I mean, when we're no longer here, are we leaving a mess for our family?

Tony Mauro:

Yeah. And that's what I was just on the call with is that this family's mother and father are going to leave them a mess, and they didn't plan for it. And you don't want to leave your loved ones when you're gone. I'm already talking. I'm working through it myself with my wife at our life list. Something happens to one of us, we don't want to leave a mess for our son. And that means knowing where everything's at and how to close things out and what's going to go where.

It's hard enough for loved ones when you're gone dealing with all the emotions. You don't want to leave them with a financial mess. And that goes from everything from no will to outdated wills, no beneficiaries on certain things, keeping all your stuff secret. I think you need to be more transparent with your heirs to make sure that you don't leave them with this and let them know what the plans are. You don't have to share every detail of every cent that you have, but I think you should leave something for them to help them when the inevitable happens. And then you're not going to be blindsided.

Marc:

Yeah. Yeah. I mean, and sometimes there's a lot of little things too. Unfortunately, big situations like the one you're currently dealing with there, but there's the little things people can do to not leave a mess. I mean, even something as simple as your TODs or PODs on some of your different accounts. A lot of times people don't even think about that. They got a bank account, maybe they got 50, 60, 70 grand sitting there and they forgot to put transfer on death to their spouse or whatever. So just a mess. Just make it easy when we pass on, because we're all going to pass on. Try to make it as easy as possible and leave no mess behind.

The scenic route. A lot of times we go to these national parks, we love to do the scenic route. Lots of things can get in the way. It's fun to do the scenic route, but sometimes you're just tired. You want to take the quickest route too. And I think when you're thinking about retirement, sometimes it's easy, Tony, to be like, oh man, what's the fastest way to get me some more income or take advantage of this crazy market run that we've been on or whatever. So the scenic route could be the way to go. Sometimes the faster way is the way to go. It just depends.

Tony Mauro:

It does depend. And it depends on going back to the first thing we talked about is your map and really what's going on. What we see mostly is clients wanting the fastest way. And you hit it on the head is what's the fastest way I can get to X amount because they think that's... And what they end up doing is, without a good plan, they could end up taking a lot of risk. They could end up really shooting themselves in the foot a little bit because there's all kinds of things out there. Anything from the volatility in the markets, what's going on in the world politically. And then of course dumbing it down a little bit, just not dumbing it down, but shrinking it down to what's going on in their personal lives. You're going to have things that pop up at you that scenic route may be the better route.

Our jobs as advisors is trying to mesh the scenic route with the fastest route and get the best of both of them according to whatever that person is after. Because most of the time patience and the discipline win the race rather than trying to shortcut and use time to market, for example. And then the next thing you know, you've lost a lot of money.

Marc:

Yeah. I mean, patience and discipline right there. Whether you're hiking and out in nature or dealing with your finances, it's important. You get too ahead of yourself out on the trail or you get too irresponsible, you could come across some wildlife that's not happy to see you, you could lose your footing and tumble down a hill or whatever. So certainly want to be careful there. And pack light, Tony, where you can whenever you're hiking. Anybody who's ever gone hiking or whatever knows that the more you weigh yourself down, the slower it's going to be, the more tired you are. So you keep the clutter to a minimum. And as we age financially, we start, I think not only just financially, but in every aspect we're like, "Ugh, we got too much crap. Let's start getting rid of some of it." And I think financially that happens too, right? Maybe consolidation becomes a higher priority and whatnot.

Tony Mauro:

I think so. I think as you get closer to retirement, you definitely want to start packing a little lighter. And it's funny because we were just out on, like I said, when we hiked last week, and I'm an amateur hiker. We don't do anything too strenuous, but we're still up on some rocks and things. I'm thinking to myself, I'm getting older. I need to slow down a little bit, make sure I assess these risks because I'm not 25 anymore.

Marc:

My wife would love to hear you say that. She does risk assessment for a living. Anytime someone says, "I got to assess some risks," she's very, very happy. So kudos to you.

Tony Mauro:

Yeah. And we're just looking at each other, it's like we're off the edge of a cliff here. And if we were to loose rocks or something, then we have an emergency.

Marc:

Yeah. Or it's over.

Tony Mauro:

Yeah, or it's over.

Marc:

Right.

Tony Mauro:

But I do like, when I hike, I do like to pack light. And I would say getting that over to the financial arena really is, as you age, get a little closer, it's a good thing to work with your advisor to consolidate accounts. Obviously try to get rid of all high interest debt if you can. I like to say to people, "You want to be debt-free by 65. Maybe you've got some old policies just like you got some old subscriptions that everybody always talks about that you're paying for that are no longer a use to you." All these exercises to clean up your financial life and make it as simple as possible when you retire so you know where everything's at, income's coming in predictably, and you don't have to stress out about it.

Marc:

Yeah. There you go. God stuff for sure. So consolidation and pack light financially is certainly a good idea. The final piece of this conversation, Tony, is that sometimes people will say, "Look, you just said there's 63 of these things. And if you've seen one of them, you've seen them all." Yosemite and Denali are completely different, right? Acadia and Zion, so on and so forth. And the itinerary outlined on the travel books, it may work for one park, but not for another or one family and not for another. And that's a super easy way to do a comparison to retirement. Tony, you've helped a lot of people retire and you could probably easily say, "If I've built one retirement strategy, I've built them all. They're all the same," but they're not because everybody's totally different. Yeah, taxation. Yeah, social security. Yeah. Income. There's the big ticket items you got to certainly do in every plan, but how you do it and in the ways that you do it is unique from person to person, just like a park.

Tony Mauro:

Just like a park. I mean, for those that say, "Well, we're going to use a robo-advisor or just pick some things out." Well, that's just generic. And will that work? Potentially, yes, but you really don't know if it will. And I believe that there's still a human touch in all of this. And what works for somebody on one end may be completely different for somebody else because, A, they may not have the same resources and income and assets, and maybe they don't even want all that. Somebody else might want something totally different. So I think that's where the planner can be of some value and that's why you're paying them is to lend that kind of thing and really create a plan for you rather than just everything's the same. Because I've only been to a few national parks and I can tell anybody that hasn't been, outside of, make sure you visit a few, they're completely different.

Marc:

Yeah.

Tony Mauro:

And they're completely unique. And I usually don't plug the federal government, but I will say that the parks that I've been to, including this one, are extremely well ran, extremely clean, and extremely just organized. And so why wouldn't we want to have that in our financial life as well? We've been talking about it for this whole call. I mean, that's what it's all about.

Marc:

Yeah, here, here. Well, look, the people who get the most out of their vacations, their national park trips, whatever it might be, aren't the ones that show up and figure it out the gate. Maybe. And maybe that just like retirement, it's such easy to make these analogies. You might, "Hey, we're going to go to the national park and just wing it today." And if you're 25, you can probably pull that off with ease. But when you're 65, you do not do that, right?

Tony Mauro:

No.

Marc:

You've probably done the research, mapped the trails, or at least know what you're going to be getting into before you get there. And retirement clearly, again, works the same way. A little prep goes a long way to making sure that you get the things out of it that you were hoping to get out of it. And that could not be more true when it comes to a financial strategy.

So as always, if you need help folks, reach out to qualified professionals like Tony. He's a CPA and a CFP and an EA of 30 plus years in the industry. He helps clients all over the place, not just in Iowa. He helps clients all over. He's got clients in different states as well. So if you're checking out the podcast and you need to have a conversation for yourself, reach out to him, have a chat, see if he's a good fit for you and vice versa. You can find him at 844-707-7381, 844-707-7381, or go to yourplanningpros.com. That is yourplanningpros.com. Lots of good tools, tips, and resources there. And don't forget to subscribe to the podcast, Plan with the Tax Man. Lots of podcasts out there, but we try to hopefully provide you with some fun, a little bit of humor, a little bit of educational content, some nuggets of good information to help you get along your way towards retirement.

And with that, Tony, thanks for hanging out, brother, and breaking it down as always.

Tony Mauro:

You bet. We'll see you on the next one.

Marc:

We'll see you on the next time here on The Plan with the Tax Man with Mr. Tony Mauro, Des Moines Professional Alternative at Tax Doctor Inc. We'll catch you next time.

Securities offered through Avantax Investment Services SM Member M FINRA SIPC Investment advisory services offered through Avantax Advisory Services Insurance services offered through an Avantax affiliated insurance agency Investment strategies discussed in this episode may not be suitable for all investors. Please consult with a financial professional.

View Details

Over the past year, one retirement video on YouTube pulled in 3.7 million views. The title: "Sell These 5 Things Before You Retire." We thought it was worth a conversation — not to tear it apart, but to react honestly. Do we agree? How often do we actually see this play out with real clients? Let's get into it.

Important Links: Website: http://www.yourplanningpros.com

Call: 844-707-7381

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Transcript:

Marc:

Over the past year, one retirement video on YouTube pulled in 3.7 million views, the title, Sell These Five Things Before You Retire. We thought we would talk about those five things this week here on the podcast and break it down a little bit with Tony here on Plan With the Tax Man.

Welcome into the podcast, folks. Thanks for hanging out with Tony Mauro and myself, as we talk investing finance and retirement. And yeah, the top video of 2025 for retirement was 3.7 million views, Tony, and it's Sell These Five Things Before You Retire. So, we'll keep that in mind as we're breaking these down. I want to get your take on each of these, and does it make sense to you? Do you see that often? Just let us in on your insights as a planner who's been doing this for many years. So, this should be fun. How you doing, my friend?

Tony Mauro:

Yeah, I've been doing good, been doing good. This is a good topic because I think we as planners get asked these things a lot. This was a really good video. And I did view it, I agree with most of it.

Marc:

Yeah, I do too, yeah.

Tony Mauro:

We'll break it down a little bit and have some fun.

Marc:

Yeah. Well, let's start with the biggie. The oversized house. I think this is a huge question for obviously many, many people. Obviously, it resonated with lots of folks because yeah, I mean, it could maybe free up some significant money. Now, however, depending on what you want to do, housing prices are still pretty high. So, but I do agree overall with this concept. If it's this big place that the two of you don't need anymore, well, that's something to consider.

Tony Mauro:

It is, and all of these topics really I would preface with saying it begs the question to at least discuss with your planner, because they're selling... In the video they're saying, "Okay, yeah, do this, this, and this." I don't agree with it all the time, but at least you're asking the question. But the theory here is, is obviously if you've got a big house, only two of you in it, no mortgage, maybe don't want to take care of it anymore, have had it a long time. Could sell the house, take the tax-free gain most of the time, and then either downsize and possibly have more money in your pocket to do something else with.

Now, where I disagree with this a little bit is because housing is the way it is, it seems like a lot of times when people go to sell property, at least in the Midwest, down the coast, maybe if you can make a lot of money that's a different story. But they find out, well, I make two or 300,000 on it, and then I go to find something even though it's smaller and I got to invest all of my proceeds plus the gain because things are up from when I bought, and they don't really get as far as they thought they would. But the theory is good because if you're, like in my own case, I have a fairly large yard and I talk with my wife right now. I was like, "As we age, do we really want to take care of this?" And we own the house already and it's too big just for the two of us, but I don't know. I don't know if I want to leave. So, it's a good question to talk about with your advisor, for sure.

Marc:

Yeah. I mean, and it could, to your point, I mean, obviously add some significant capital to a retirement plan depending on, again, what you were going to do. Are you going to just maybe rent? Were you going to get a condo or a townhouse? But those have gotten really pricey lately too. So, it's a worthwhile exercise for sure to see what it could-

Tony Mauro:

That's right.

Marc:

... do to your overall retirement plan.

Number two on that list, Tony, was supporting or financially supporting the adult children, sell this item. I absolutely agree with this one, me personally. But I mean, and it's hard for parents to go against the instinct of helping, but you can't finance retirement, Tony.

Tony Mauro:

You can't, and I agree with you and with this point too. It is hard, I go through it with my own kids. Now I have a grandchild, and that's although I'm going to do whatever I want with her, but... And there's books been written about it about the... And I think it was from The Millionaire Next Door, I think it was from the book, but somebody was saying that that's economic triage. And then what happens is if you start supporting them, then they expect it. And like you said, they're going to have to go out and build their own [inaudible 00:04:29]-

Marc:

And they've got decades still to do it, you don't.

Tony Mauro:

They've got a lot of time, yeah. And you're running out of time. And so, I would limit this if you're going to do it at all, and try not to do it. Just for nothing else, hopefully they can figure things out on their own and become their own financially responsible adults, but obviously we're there as parents if they really fall, but I strongly urge my clients, yeah, not to do this.

Marc:

Yeah. You made an interesting point too, if they really fall, yes. But I mean, look, at the same time, no, because you're going to have to sometimes, you got to rein it in, especially if your plan is just barely getting you the retirement that you needed or not even the dream retirement but just getting you into it and through it, allowing you to stop working or whatever, every situations are different, you can't sacrifice that to help them. I mean, I know it's tough, but sometimes you just got to bite that bullet or they've got to bite that bullet. But isn't it funny though how like throughout time it's some weird thing like, "Oh, well this is the grandkid and the grandkid is now more important than you. Sorry, bye."

Tony Mauro:

I tell you what, it's hard. It really is, because you get like... I never thought I would be like that, but yeah, and you want to ensure their future. I don't know why.

Marc:

Well, maybe because they're little and it's like it takes you back to when yours were little. And of course, we're typically in a better position when we have the grandkids to help them out. So, that probably has something to do with it too.

Tony Mauro:

That has something to do with it, exactly.

Marc:

Yeah, yeah. Good stuff. All right. Number three, expensive toys that become expensive burdens. Some of us spend a lot of years, Tony, the 30s to mid 50s collecting those toys and doing things that we like. And then you just one day go, that's a lot of crap.

Tony Mauro:

It is, and I admit it.

Marc:

Do I want it? Do I need it? Right?

Tony Mauro:

Yeah. And we've all been guilty of it, whether it's a boat, you name it, a classic car.

Marc:

Yeah, a travel trailer, whatever.

Tony Mauro:

If you've got money, yeah, airplane, something like that. If you're not using this stuff and really don't enjoy it, you do have to start asking yourself is, do the cost of these things sitting around actually match what the enjoyment that I get out of them? For me, a lot of things is not. Things don't interest me as much as they did when I was younger. And now that you, most of the time you get a little closer to retirement, in retirement, you have the money to pay for them. But it's like, yeah, just because I can do it, I don't really necessarily get enough enjoyment out of it to just have it sitting around. Then I've got maintenance and everything else and it just freaks me out. But this is something to talk about with your advisor, especially, if you're looking at all of your assets, which your advisors should know about, not just your investments. He or she should know about everything you have.

Marc:

Good point, yeah.

Tony Mauro:

They may be able to advise you, "Hey, do you still enjoy this? If so, let's keep it in. If not, well, what can we do with that money to get you more enjoyment?"

Marc:

Good point. And in that list, and you could have maybe put point number four here in point number three, but maybe not. I get where they're going from this, but I have a real hard time with this one, Tony. So, this will be fun to-

Tony Mauro:

I do too.

Marc:

Yeah, this will be a fun debate here. It's the second car. Now the argument is without the commute, two cars sitting in the garage maybe costing more than they're worth in insurance, maintenance, and so on and so forth. And granted, at a certain age, maybe this becomes more realistic, right? But you think about retirement, people are more active, they're more healthy in early days of retirement. The loss of freedom to an American is a huge deal. I mean, think about our country, our identity for, God, since the '50s has been tied up in the car, right? When we built the interstate system and all the vehicles and everything, I mean, this is a big country. And when you want to jump in the car and go someplace, even if it's down the street to the store, you want to be able to have the freedom to do that, right?

Tony Mauro:

You do. And I don't have many clients, they talked about it on the video. It might be from a strict, strict planning standpoint, might be something to consider. And again, I maybe asked the question, but you hit it on the head with the word freedom, is that less Americans, at least me I know and almost everybody I know, do not want to give up that freedom of I can go, like you said, get in it and go wherever I want.

Marc:

Yeah. Well, Tony, you travel a lot to Europe, right? You were just talking about that on our last podcast, right? Europe is designed differently. They walk everywhere.

Tony Mauro:

They're different.

Marc:

Right.

Tony Mauro:

They walk everywhere and they have trains, like high speed trains. So over there, yeah, the whole culture is different, and maybe there it might make some sense.

Marc:

And depending on where you live here, if you're in a larger metropolis, sure, walking might make more sense, but I'm sure where you're at, where I'm at, it's five miles to the nearest little convenience, like the little convenience store. I'm not walking five miles in 99 degree weather.

Tony Mauro:

Yeah, [inaudible 00:09:21].

Marc:

I'm taking a car, right? So this one's tough for a lot of people, I think.

Tony Mauro:

Yeah, I think it's tough. I've only known one person and she actually worked for me, my admin person, she was about 70 and now she lived close to the office, but they got rid of one of their cars and it was her car, and she always told me, "I just feel like I walk home from work," because she lived real close, "And then I'm stuck there unless I take an Uber or something," and so she never did. And I was always like, "Why did you guys do this?" And of course, that was their rationale. "Well, our plan was real tight and we felt like we didn't need that car and it's saving us some monthly cash flow." And [inaudible 00:10:02].

Marc:

Yeah. I mean, I guess depending on the car and... I mean, there's so many factors to this one too, Tony, right? If your vision's starting to go, and granted, that happens when we get older and reflexes, I could see where for some couples it makes sense. Maybe not the financial sense, because I don't think a second car nowadays should probably going to make or break things for a lot of people, but I mean, unless you're talking about a really expensive, nice car or something. But yeah, I think there's certainly mitigating circumstances.

Tony Mauro:

I think there are. And I think if you own it outright, why not keep [inaudible 00:10:34]?

Marc:

Yeah, how much is it costing you, really? Yeah.

Tony Mauro:

Yeah. I mean, it's minimal after that, so.

Marc:

Yeah. I guess if it's still a six, $700 a month payment, you got two of those, right? You're spending like almost two grand a month or 18, 16, 17, $1,800 a month on car payments and you're not really using it a lot, then I could see that argument too, so.

Tony Mauro:

Yeah, yeah. There's a little bit of an argument in there. Yeah.

Marc:

Okay. All right. Well, this last one, Tony, you can't sell it on eBay or any of the sites that are out there now, right? So this one's a little different, and it's the work identity. And you and I talk about this often anyway, and so I certainly agree with this. The argument is that sense of self once you no longer have that professional title or whatever. I mean, whether you were working an auto line or you're a doctor or whatever you might be, so many people tie their identity up in what they've done for 30 years. So who am I now, kind of thing.

Tony Mauro:

Yeah, and I struggle with this one because I'm in that category of, for me, you work all these years getting, in my case, financial designations. And it's like it's part of who you are and you've had to take and spend tons of time at CE, which is continuing ed, and trying to hone what you know. It's going to be hard for me when you say, "Okay, enough's enough. Why do I want to spend the money to keep these active?" But the biggest thing is the time factor of continuing ed with all that time when you don't have much time left and you're not even earning any money from it. And so, but there's a part of me, I got to admit it, that I don't want to give them up.

Marc:

Well, you're the Tax Man.

Tony Mauro:

Yeah, I know. And someday I'm going to think, "Gosh, what am I, really?" I tell clients, "Don't do this," and here I am, clinging to these things that I don't need anymore. But so it is hard, but I think the video's point was when you retire, whether you're a doctor or whatnot, and you got to keep some of this stuff up, and then there might be even insurance if you're going to do something for anybody, E&O and malpractice stuff and all that, is you got to let it go and it is difficult for people.

Marc:

Or just build a new identity, right?

Tony Mauro:

Or build a new one.

Marc:

If you're walking away from whatever, we've said many times, walk towards something else because humans need something else. Right?

Tony Mauro:

You need something, yeah. You can't just sit. But for me, it's probably going to be continuing to... Well, I like wine and learning about that. So I like online stuff with that, I'm not looking for designations or to make money, but that's what interests me. That, flying, golf, and a little bit of travel. So, everybody's different. Somebody might be, I don't know, crafts, somebody might be working on cars. Who knows?

Marc:

Yeah, yeah. Well, I like, we're going to steal from their framework here, their questions. They had a couple questions at the end. And I'm really going to just wrap both of them up into one that I think were most pertinent. And I like the way they put this and just put, if you're thinking about any of these five points, ask yourself, does this still serve my new life? Does it serve my new life, or does it serve my old life? And if I do let this go, what becomes possible? I think those are really good ways of thinking about that.

Tony Mauro:

Those are the best two lines out of the whole video, and that's why I wanted to go over this topic because if you just use that, that's going to guide you in a lot of decisions [inaudible 00:13:57].

Marc:

No matter what in retirement, right?

Tony Mauro:

Yeah, no matter what.

Marc:

Like you could just say to yourself, "Does this serve my retirement or does this serve my old me?" Right?

Tony Mauro:

Yeah, yep. Exactly it.

Marc:

And that's a struggle I imagine for most people.

Tony Mauro:

It's a struggle. I know it's a struggle for me because you just get set in your ways, but I think the video really, if you haven't watched it, you should go out and watch it, because I do think-

Marc:

We'll put a link by the way in the show descriptions for folks so they can check it. Yeah.

Tony Mauro:

Yeah, because it is good, it's done well. It touches something that what I feel is real. And I think that we're all going to face these decisions, so start wrapping your head around it a little bit.

Marc:

Yeah. I mean, 3.7 million people watched it for a reason, right? So it's not just about the things we accumulate, sometimes it's about also what we're willing to let go of. I think many of us, when you get over 50, we start to feel a little bit of a pull towards declutter. Maybe some people are, they like to hoard the things and some people like to let them go, right? So, it starts to shift a little bit as you get older, but I think it's worth the thought exercise certainly and talking with your loved ones about that as well.

So again, we'll put a link in the descriptions, but if you'd like to go check it out on YouTube again, it's just called Sell These Five Things Before You Retire. Just search that.

Tony Mauro:

You'll find it.

Marc:

Yeah, and you'll find it.

So Tony, thanks for hanging out as always and breaking it down, we always appreciate you. Folks, thanks for being here and if you need Tony's help when it comes to adding these things to your list of conversations or any others when it comes to building your strategy, they are here to help at yourplanningpros.com. That's yourplanningpros.com. And with that, we will see you next time here on Plan With the Tax Man. Thanks, Tony.

Tony Mauro:

All right, we'll see you on the next one.

View Details

Summer's here. And somewhere between the excitement of planning a big trip and the anxiety of what it costs, a lot of retirees end up doing something that surprises us… they feel guilty about it. They worked hard, they saved, they planned for decades, and then they second-guess a beach vacation. Today, let's talk about how travel fits into a real retirement plan and how to enjoy it without guilt.

Important Links: Website: http://www.yourplanningpros.com

Call: 844-707-7381

----more----

Transcript:

Marc:

Summer's here and somewhere between the excitement of planning a big trip and the anxiety of what it costs, a lot of retirees end up doing something that surprises many. They feel guilty about it. So today let's talk about how travel fits into a real retirement strategy and how to enjoy it without all that guilt.

Hey everybody, welcome into the podcast. It's another edition of Plan with the Tax Man. Tony and I are back for more content as we talk about investing finance and retirement. And we are going to talk about, again, that guilt-free vacation, planning, strategizing ahead of time so that you can enjoy some of the things that you really worked towards in your retirement years. And Tony, this works out well because you've had a bit of travel yourself, took a couple of vacations. And how you doing, my friend?

Tony:

I'm doing wonderful. Yeah, I'm back from vacations and I like this topic because it is as people get closer to retirement, I think about a lot of these things too, so I'm anxious to talk about it.

Marc:

Well, I think a lot of people have heard and probably know and admit, Tony, that most people will spend more time planning a vacation than they do their retirement. That's pretty common in this field. But when you're thinking about what you guys do, strategizing, putting these plans together, when you're building those out for people, is travel and vacation something that actually makes it into the plan? I know some advisors do, some don't. I feel like it's something that you've got to take into account and be budgeting for. And I'm sure that you guys do. What are some reasons why and how does that help the end user?

Tony:

Yeah. For a lot of our clients, it's one of the first questions I asked when we get to the point of, okay, what do you want to do in retirement? And if I don't hear, I mean, for a lot of people they say, "Well, I want to travel." But then we try to get a lot more specific with that. But if I don't hear it, I'll ask it. But what a lot of people do is the ones that don't think about it, they plan for everything else and they don't really plan for fun because once we get through everything, it's like, okay, what do you want to do that's fun? Because that's the whole reason for retiring and enjoying the last part of the game of your life.

And so that's one thing I ask them and see if travel comes in there. And I think some people, they feel like they've never traveled a lot in their life so they don't feel like,... They want to do it, but they don't feel almost like they're worthy of it, like they haven't earned it yet, which I think is a mistake because obviously you have.

And if they haven't planned for it, a lot of times then it gets kind of stressful and that's what leads us to, well, let's start planning for it. I mean, everybody's got different budgets and different thoughts about what their travel is. So what's great for me is not going to be great for a client or somebody else, but they just need to get it in their plan and obviously we can throw it out later or we can massage it, do whatever we want. But I definitely think that if it's important to them, we got to get it detailed.

Marc:

Well, and I think that some people probably seeing it on paper in their plan makes them feel like, "Okay, yes, I can spend this." Because like you said, they're so busy thinking, "Do I have enough to survive? Do I have enough to live on? Am I going to run out of money?" The classic things there. And it's like, no. And even with the vacation spending in your plan, you're not going to run out of money. I think that gives people that ability to do that more guilt-free.

Tony:

Absolutely. That does. And once they know that, yeah, they can ease up a little bit and feel a little more calm about talking about it and actually trying to plan something. It's fun to see when people haven't traveled a lot and they get to do some stuff that they never dreamt they would do.

Marc:

And I imagine that budget would change over the years. Like maybe you're budgeting 20,000 or 25,000 over the early couple years and then that tapers down a little bit because I'm assuming that there's a natural rhythm to how retirees spend. And we've all heard the terms about the go go and so like that. So obviously early on, most people are probably wanting to do more because A, free from work, I'm free from the time clock. But also B, I'm feeling good enough to go do it.

Tony:

Yes. And I used to think that too. I used to think that my retirement was going to be just the same from the beginning till the day you die. And as I've watched people over the years, that's so far from the truth because you're exactly right. Most of the time, as soon as people retire, they want to hit the travel and hit the stuff on the big bucket list as soon as they can for the reasons you mentioned. And then we see about 75-ish and beyond, things slow down. Your body isn't moving quite as fast. The mind isn't working quite as fast. And so they don't want to be so far from home in case something happens. And so it really starts to slow down. And then you get over most of the clients I see anyway, over 80, 82 years old, it's really gone to where those days are over.

It's really just visiting family and trying to stay closer to home. So your travel budget does, it starts out high and then it starts going down, which even I think is more of a comfort to people to get them to take and do things while they're a little bit younger in retirement because you're not going to do this forever.

Marc:

Right, right. Yeah. And everybody, again, situation is going to be a little bit different. I imagine you often have to, and we've talked about this many times in other aspects of the retirement strategies, you have to put on that therapy hat, for lack of a better term, because I imagine there's many couples that don't see eye to eye on travel spending, right?

Tony:

There's a lot. Yeah.

Marc:

You got to balance some of that. What are some things to think about there?

Tony:

Well, generally, if we're on that page and somebody they can't come to an agreement, we definitely try to talk it out with both spouses usually and let them know that they are going to have the money to do it. Now, if there's some other reason that they don't want to go, then we can get that out in the open. But really we just try to convince them that you are going to have the money and you don't have to worry about that. Now, if you're averse to travel planes or something like that, I can't really help them with that, but it's really not the trip itself. It's just really kind of talking through, seeing on paper, reassuring them that, "Hey, this is able to be done." And see what they do. Sometimes they compromise, sometimes they don't. It's kind of funny to watch, but it's kind of interesting.

I only had one couple where, and that's a real trouble where one of the spouses, she just didn't want to travel at all. I mean, it doesn't matter what the other spouse or I said. They had plenty of money and so he ended up kind of doing some things by himself and she was okay with it, but that was a rare instance. Most of the time they come up with something.

Marc:

Yeah. And again, how you've lived leading into that, my wife travels a lot for work so I know that she's going to want to do a little less than... And I don't travel. I don't leave the house at all very much because I can work from my home. So like a lot of people have done, so I imagine that adds an interesting dynamic too where one wants to go, one doesn't want to go. So you got to kind of find that balance. One wants to spend, one doesn't want to spend. So finding that balance. And a good way of thinking about this, Tony, is the plan itself might become the referee, right? Because then when it's in the plan and it's structured out and you go, look, you can see it. And then it maybe diffuses some of those arguments.

Tony:

It does. Yeah. Because once that time period comes up in the plan, everybody's ready for it. There's not any real surprises and they know they have the money. And yeah, it does ease the stress of it again.

Marc:

The tensions a little bit. Yeah. Yeah. Do most people think far enough ahead when it comes to planning for travel? I mean, I imagine most don't, right? I mean, there might be somebody who's a bit of a big planner, "Hey, I want to take this really big family trip three or four or five years out." But I imagine most people probably don't do that.

Tony:

They don't. I see this so often that they want to travel and then it's like, well, let's do something in six months. And then, okay, you could do that, but I think you need to focus on, especially in retirement, come up with a plan. I get a friend of mine because he always laughs at me because I do plan three, four, five years out even now for travel. I've got it already down for the next four years. At least what we think we want to do, obviously you can change it.

Marc:

Yeah, but it gives you time to kind of build in the funds and kind of see what you're going to do. I mean, things pop up like a popup wedding destination or something like that, sure, but a little bit of structure could help.

Tony:

It certainly can help. And I tell you, the shorter term planning, to me, I don't like surprises and most people don't. And I think some of that time leads to surprises, if you will, in stuff you didn't think about. And for me, I don't really care about that or I shouldn't say that I don't care about it. I don't care to think about it like that. And I don't know, for me, I try to get them to plan, let's just put a big picture out there, let's put it on a piece of paper. It's just garbage anyway, you don't have to do it and let's see what happens.

Marc:

I'd imagine you could also, maybe for the saver in the situation to our prior point, you could kind of say, "Hey, look, by doing this ahead of time as well, well ahead in advance, we could probably save some money because I mean think about the closer you get to a timeframe, the more the airfare goes up." So if you book something like two years out, it's going to be much cheaper, I would assume.

Tony:

It'd be much cheaper. Especially if you're doing tours and things across the continents and whatnot, they always have things that go on sales, you got to keep your eyes open so at least have the plan so if something you want to do pops up, you can save some money, you can get on or at least put a deposit down.

Marc:

Yeah. Yeah. And it got me thinking a minute ago when we were talking about the first point, you mentioned something about sometimes people get worried as they're aging, something might happen when they're traveling. And so I was going to ask you, what are some travel costs that tend to catch people off guard? That's a fantastic one. I mean healthcare, right? Medicare doesn't... Most people don't realize this, but it's not like Medicare follows you wherever you go.

Tony:

It doesn't follow you where you go and I think that's a big issue as people get older and older is they're worried about something happening when they're on vacation. I typically recommend some sort of travel insurance. I personally use a policy that I renew every year, just like my auto and home.

Marc:

So you've seen that be very, very helpful then?

Tony:

Extremely helpful. And if you're traveling a lot, it's a lot less expensive to just do the yearly policy than one by one because I think they overprice those a little bit. I've got a 24-hour line and I don't feel if something happened abroad, they're going to ship me home right away, but that's something to plan into the plan, number one, because if you do have something bad happen, which I had a friend who got sick down in Cabo and it was life-threatening and she was not able to get back. She almost died down there and it's just a mess and just a mess and then it ended up costing them a fortune to get her out of there. And if she just would have had travel insurance, that would have solved all of that. I think that's one issue. The other issue is, and I try to budget this even when we go on our trips is how much are we going to spend when we're there because you know you're going to do something.

Marc:

And then double it.

Tony:

Yeah. And then add some percentage points because stuff comes up that you see that you want or go to some... Whatever it's a show or something else. So that has to be planned in. And then other than that, really, as I age, now that I have my first grandchild, I'm longing for the years where I can go somewhere in the winter, maybe she can come visit me. And obviously I'll pay for that, so that has to be factored in as well. So all that kind of thing I think are some of the hidden costs people don't think about unless they're having some talks.

Marc:

Yeah. No, that's some good thoughts right there. Yeah, I mean things can always get... And it's not even just like the spending that gets more when you go someplace, taking in a show or some bigger items. The little stuff will nickel and dime you to death too. I was talking with somebody a couple years ago and they text me and they're like, "Worst mistake ever at a Hawaii resort, no sunscreen, had to buy it from the resort." And he was like, "It was like 40 bucks for like this bottle of sunscreen." He's like, "You've got to be kidding me." But they got you. They've got you by the you know what, right? You're not going anywhere.

Tony:

Oh, you do.

Marc:

You spend the money, right? So little things like that can just sneak up and granted, not that 40 bucks should make or break a trip, but it's just the idea that everything can get out of control if you're not careful.

Tony:

It is. When I was just on vacation and we went to France and I'd been there before and so I knew this, but the first time I went, I was unaware. This time I was a little more prepared because what they don't do is when you're tipping them, they don't put it on the credit card like we do here. And so I had euros. I usually don't travel with a lot of cash. I think that's a whole nother topic, but I did have some euros because I wanted to be able to tip in the way they wanted it and it's just again, one of those little things that make it a little less stressful.

Marc:

Yeah, that's a good point. And circling back real fast, we're going to wrap it up here, but another little thing I think when you're talking about the getting out and doing things and traveling while you're still feeling good enough to do it, especially if you're thinking about doing some of those countries and some of the European stuff like you were just talking about, it's a lot more walking than I think people realize and there's no AC and not the AC anyway like there is here.

Tony:

It doesn't work quite the same. Yeah.

Marc:

It doesn't work quite the same. So keep that in mind. Yeah.

Tony:

There's all kinds of loads of little weird things you could talk about. Yeah. It's just different cultures and so it would behoove you to learn a little bit about that just so you're not shocked with different ways people live.

Marc:

I can't tell you that how many times I've talked to somebody who's gone to like Italy or something in the summer and they're like, "Oh my God, there's no AC." And it's not like they don't have it, but they don't have it everywhere like we do, right?

Tony:

No, and then they're used to it. So it doesn't bother them.

Marc:

Exactly. That's the point, right? So anyway, so look, you didn't save for decades so you could sit at home and do nothing unless that was the plan. And if that's what you want to do, then that's okay too. But a good plan for travel makes things a little easier, a little more worthwhile, saves maybe some arguments and some headaches. So make sure you're talking with your advisor about putting that and strategizing that into your overall plan because I think that, again, seeing it in black and white gives people the freedom to feel like, "Hey, I can do this comfortably without the guilt." It serves as that good referee between you and the significant other so you're not jaw-jacking back and forth and making each other mad about piddly things. So it just kind of comes down to just put it in the plan, strategize it out and work with your advisor on doing that.

Get a little ahead of the game and I think that'll serve you very well. So thanks for hanging out with us here this week on Plan with the Tax Man with Tony Morrow. Of course his team's here to help you if you need that help, yourplanningpros.com is where you can find them online, yourplanningpros.com. Again, your planningpros.com. Subscribe to the podcast on Apple or Spotify or whatever app you enjoy using. This is Plan With the Tax Man with Tony Morrow. Tony, my friend, I'll see you next time.

Tony:

All right. We'll see you next time. Have a good one.

View Details

Quick question before we get started... which Easter candy are you most looking forward to this year? Whatever your answer is, we're going to use it. Because today we're building a financial Easter basket and matching some of your favorite candies to the products and tools that belong in a solid retirement plan.

Important Links: Website: http://www.yourplanningpros.com

Call: 844-707-7381

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Transcript:

Speaker 1 00:00

Quick question before we get started, which Easter candy are you most looking forward to? Yeah, that's my opener for the podcast this week, because we're going to talk about financial Easter baskets. So we're going to talk about candy and what they might say about you here this week on plan with the tax man. You

Speaker 1 00:35

everybody. Welcome into the podcast. This is plan with the tax man with Tony Morrow from tax Doctor Inc, at your planning pros.com that's where you can find them, online. Your planning pros.com, and Tony, we're gonna talk candy, because you and I are in our 50s and we love candy, but it don't love us as much anymore.

Tony Mauro 00:53

That's right. And I grew up eating candy and all these things, although my favorite Easter candy is not on there.

Speaker 1 01:00

Okay, we'll add that. Get to that at the end. Yeah, we'll add that in. So what are we going to do here? Is, I want to give you some, some, you know, Easter candy in lieu of the, you know, the end of the month here and Easter upon us. And we'll do a little financial Easter basket, and let you kind of give me some sort of, we'll do some sort of an analogy. I'll set you up with something, and I'll let you kind of talk about it, so we'll have a little bit of fun. So, are you a jelly bean kind of guy? Easter time? Do you like some jelly beans? You know? I like the kind of, what I would call those artisan jelly beans that they now have come out with, you know? So I do like them. But we always used to get just to run the mill stuff. Oh, yeah. Like, like, you know, I don't know Apple Cinnamon, or, you know, I don't know pumpkin spice or something, yes, although they probably do make a pumpkin spice Jelly Bean. And people are probably like, no pumpkins for October, not for, you know, April, but so, all right, the Jelly Bean, so, lots of colors, lots of combinations, right? And so maybe you're, maybe the analogy here is the 401 k right? Maybe, maybe some combinations, or some, some different things, some variety, potentially, yeah.

Tony Mauro 02:08

I think the biggest thing for, you know, the anchor of most retirement plans is either, you know, 401 K Sep, simple, you know, you name it as the anchor for what you're trying to do as you get toward the end.

Speaker 1 02:23

True and jelly beans are probably a good staple, a good anchor in the basket, if you will.

Tony Mauro 02:27

Yeah, you know, good anchor in the basket, you know. And you find them in every basket. If you don't have this, you know, you need to be starting it. Most employers are offering something these days, and you need to get started. I can't. We're in the midst of tax season, and I'll say this as a public service announcement, I and I've been doing taxes for 30 years. Is I always when I'm reviewing a return, look at somebody's w2 and look in box 12 and see what they're contributing or not contributing to their retirement plan. And many times I see the box check that they the company offers one, I see nothing being contributed, or I see a little bit, which is better than nothing, yeah, but you got to get it going, because it's one of the best deals on the street. It's usually some free money in there. And I think you need to start those early, the use time and compounding and everything else, so that you've got this anchor for when you you know, are at the end,

Speaker 1 03:22

yeah, I don't know why. I just got hit with it. You're talking about, you know, out there on the street, I'm thinking jelly beans in the street. And also I'm like, could you imagine a funny little world where we're out there dealing jelly beans on the corner? Hey, man, right, I got some, I got some pinks. I got some yellows. I got some of those, those terrible black ones. They're those are never very good. I'm not a big fan of, maybe it's just the, maybe it's just the, like black liquors, not very good

Tony Mauro 03:47

to me. I never did like the black ones. But I think, though, to your point, with the different colors, once you start contributing to one of these, then you need to have some diversification. Most, most retirement plans will offer you, you know, an array of different choices, which is, you know, probably behooves you to work with your advisor and come up with a strategy as to what those choices should be.

Speaker 1 04:09

Now, the Jelly Bean choices in the 401 k are, it's not crazy assortment of colors, right? So, like an IRA, you're going to have a lot more to choose from, you know, because you're kind of stuck with whatever they you know, the company goes within those 401 K options. So some people, Tony, often think about, hey, look, from a workplace plan, get that match, get that free money. But then maybe let's do some contributing to an individual account or something we set up so we have more control or more options. How do you feel about that strategy as well?

Tony Mauro 04:39

I like that strategy a lot. Well, that's what we generally will say, is, is somebody comes in, we tell them to start with their 401, K, get that company match. You could certainly continue to max that out if you want. Yeah, absolutely. And then one. Once you get to that point, then you've got to turn to outside. It might be a Roth, might be a traditional something like that. But yeah, if at least get the match. And then if you want more control, total control, then you have to go to an IRA or Roth. The only, the only drawback is, is you are limited on your contribution. So if you want to do more, you got to stay in that retirement plan with some of that. But yeah, they're all three are good ideas.

Speaker 1 05:17

Okay, all right, so moving on here with our Easter basket analogy, things you might find on the Easter basket and the candy, and then how that, you know, might correlate to something. Let's talk about peeps that teach the nasty. And if you like peeps, don't yell at me yet. I'm gonna give you I'm gonna do pros and cons here. But, you know, look, when you're a kid, man, they're colorful, they're fluffy. They're marshmallowy. A lot of kids like peeps, right? They're just kind of fun. You're kind of play with them. You stretch them out a little bit, you chomp on them. They're sticky on your fingers. But as you get a little older, I don't know, they're kind of nasty, right? And they're kind of a pain a little bit. But, you know, some people grow up and they still really love them. And this, to me, is got to be life insurance, right? Because it's kind of like when you're younger, you kind of dig it, right? And then you get older, you think, why do I like this? Or why do I do I even need this anymore?

Tony Mauro 06:08

Yeah, and, and just like peeps, and I don't like peeps anymore. I used to like them, right? Just like you life insurance generally, when we start talking about planning, is not very well, I would say, understood number one or used. So it's not everybody's first choice, that's for sure. And when we start talking to them about it, you know, everybody you know is going to die. And when you're younger, obviously, you know, especially today, term insurance is peanuts to get and protect your family. My son, who's 30, you know, got a new daughter. And, you know, home, and, you know, start accumulating debt, because they're just getting started, it's important that they have coverage. Yeah, for the family, in case one of them, you know, goes down. And yes, you can get some coverage through your employer, which obviously you want to take advantage of that. But it generally is not near enough to what you need, especially as you are younger now, as we age, we get in their 50s, like me, and I'm looking at my life insurance, and as some of this kind of is set to expire in the next five or 10 years, I don't need this much anymore, because I'm, you know, I'm closer to the end, all my bills are paid off, you know, it's in my other financial You know, situation is intact. So you may not need that. Now, some people say, Well, you know what, I don't care if I don't need it. I want it. I want to know if i i think a perfect scenario is I'm at retirement. This is me talking personally. I know that if I pass away, I can, I can, while I'm living, enjoy some of my money I've worked so hard for and I know that, okay, my son, if I'm going to pass money on to him, is gonna be taken care of through life insurance. And some people like, like, like, that angle as well,

Speaker 1 07:49

just like peeps, right? I mean, in some people love it, and it's not everyone. Some it's not everyone's first choice sometimes, right? So, but it could be a useful tool, right? As far as the life insurance thing, right, to pass on that wealth. So at least consider the conversation, have a chat and discuss it, because, again, life insurance is one of those pieces of the retirement strategy that, you know, it's, it's, there's some more wiggle room in there, but there it could be, or life insurance products in general, there could be some aspects of those tools that can be beneficial. So again, talk with your financial professional about that. And of course, Tony's here to help if you've got those questions as well. All right, inside the financial Easter basket, diving back in. Here we go. Here, robin's eggs. Okay, now, we didn't get these often, but occasionally we did. We get these interesting little candy, right? Kind of a divisive candy. Some love them. Some can't stand them. Kind of like peeps, really hard shell the speckled colors, right? Designed to look like a robin's egg. Some people just, my mom just used to use them for decorating. She'd be like, yeah, don't, you guys don't eat those, right? But maybe this is an emergency fund. Maybe this is kind of the analogy there, right? Where some people kind of feel like, you know, they don't really necessarily need it, and other advisors are like, it's a mandatory, you know, pillar of the retirement strategy?

Tony Mauro 09:01

Yeah, and I'm of the camp of, it's a required pillar of the strategy, because, and I think everybody should have one. You know, we tell our individual clients the goal is three to six months of income that you kind of hear that out on the streets in our business, with our business clients, we do accounting for, we're constantly harping on them for cash flow purposes is that you need to have 10% of your gross in your operating or OPEX account, yeah, generally at all times. And it's if it's not there yet. It's a goal. You work towards it. But everybody needs to have it. Because what happens when you have this emergency funding, whether you're individual or business, is it prevents small problems from becoming large problems. And in both cases, you know, on the individual side, you could lose your job, at least you've got a cushion till you find something else in business, you know, a product section or big client leaves, you've got a cushion until you build it back up. So I. Think you really take a big risk by not having one. And I think, as financial advisors, you know, we're trying to mitigate your risks, and so we, you work with me, you'll hear us harping on that that doesn't have to be go into the poor house until you get it built up. No, we're not saying that. But, you know, we want, we want a little bit of money going into that until we reach our goal. Yeah, it's very important.

Speaker 1 10:22

Yeah, you know, this is a little cheesy, but, I mean, it's kind of fun, right? So we're talking about this robin's egg thing, right? And some people, like, I said, just use them for decorating. You don't really eat them and emergency fun, right? You know, whether you love the idea or not, like the idea is that you hope that it just sits there and looks pretty. It's an account you never really have to crack into. Sorry, it

Tony Mauro 10:45

does work. And you know, I've had an emergency fund for, gosh, probably 24 or five years now, and it sat there. And I really it's at the point where I'm not, I'm not adding anymore, but I'm kind of starting to look at it and saying, Well, I wonder if I never use that, I get to retirement, right? Maybe I'll take it out and use it for a vacation fund or do something with it. But, yeah, you hope you never use it along

Speaker 1 11:06

the way. But that's a great point, though, Tony, because there is that argument, switch of the emergency fund once you are retired and you're not doing that, replacing, you know, expenses. Should you lose your job? What do you do? You even need an emergency fund when you are fully retired because you're just pulling, you know, you know, the money from the accounts and the strategy that you set up. So what do you do with that emergency fund that's, that's a great point. It is, you know, I mean, for me, I'm not going to exhaust it, because I still like to have, you know, and everybody's different, a little bit of that cushion. And, you know, just for in case something happens, right? Roof, Roof flies off, and insurance only pays a certain portion, or whatever,

Tony Mauro 11:43

right, you know, just so we've got it. Not that I couldn't take it out of, you know, my retirement income, but Right, right? I want that to be a certain level, but I, you know, the excess. I certainly plan on doing something else with it, for sure. And yes, so it's kind of a little bit of incentive that, man, all these years just sitting there, hopefully I'll, you know, I can have a chance to use some of that.

Speaker 1 12:02

Yeah, well, and of course, that's always brings back the debate too, of how much is sitting there. Let's make sure it's not being too much do this. It's being too lazy, because you're not going to get that much from the bank. So again, just kind of managing the the robin's egg, aka emergency fund, isn't something important to do. And forgive me my for my cheesy puns there. But all right, let's do one more. Then. I want you to tell me your favorite Easter candy. We're gonna do the classic chocolate bunny almost always in a basket, right, in some form or fashion, right? So, and it's the financial plan, right? It's got to be the, you know, it's the, the main staple.

Tony Mauro 12:36

Yeah, it's the main staple, because it wraps up everything we've just kind of talked about, you know, in the basket. And, you know, I think everybody needs a plan, whether you know or not, you're trying to go at it on your own or paying somebody to help you with it, yeah, I definitely think that a detailed plan that's a working, living document that changes all the time. Yeah, make it your own. You got to be your own, right? Yeah, it's got to be your own. It's got, you know, you've got to have it. That's where an advisor comes in. So you can help customize it, let them kind of keep track of you know, and coach you through you know where you're at along the journey, and making sure that you know it's going to be what your future. You know what you want for your future and what you think is your future at age 30 might be way different by the time you get to 40 and 50, and so you want to be able to change that plan. That's why I say it's always a working document. And you know, just as you go, so that you understand, you know your financial well being at all times, even if you've got assistance coming, you know, from an advisor. I've actually read a few articles lately that actually paying an advisor adds X amount of percentages over time to people's returns. And it's not by, you know, getting them better investments. It's, you know, that's not it. It's really just coaching them and keeping them invested when things are bad, not doing, you know, crazily, what I would call not your best financial decisions, uh, talking them out of some things and allows, you know, their money to work harder and longer for them. So, yeah, interesting. Behavioral management is what we're talking about, yeah, as we're talking about more than investment management, because you literally don't need us for that. There's so many options, right? And we don't have any secret sauce? I mean, you know, yes, there's some strategies and things, but it's really, it's the

Speaker 1 14:24

experience though, right? It's the it's the accumulated experience, same. I mean, it's coaching. I mean, it really is coaching. It is right? I mean, you know, I mean, after a number of years, you know, does the professional athlete still really need you know someone to tell them how, you know, did Tom Brady or Peyton Manning, need, you know, someone to coach them on how to throw the ball. No, right? They know what they're doing, but they were still coaching there to talk to them about, hey, this is this play you ran, you you kind of went off script a little bit. And here's, you know, here's probably what you didn't see and why it went, you know, belly up, you know, or whatever the case is, right? So, you know, coaching is still an important facet to. To anything and, you know, just like your chocolate bunny and your financial plan, like you said, having it being, you know, customized and built to your own, whether you eat the ears first or eat the feet first, or whatever your approach is to eat your chocolate bunny, you know, your financial strategy, you know, same thing, manageable bites, right? Is how you want to handle it, and working with an advisor who helps you, kind of, you know, dissect that and work on all the moving parts, because it's also Tony how they interrelate to each other. Like you said, there's a lot of tools out there now, but having the experience to understand that when you pull this lever, it affects six more things down the way, is also an important thing that's different in retirement than it isn't just the accumulation phase.

Tony Mauro 15:38

Yeah, it is. And I think with with an advisor. There's so much propensity today, with so much information in our fingertips, to that we're just going to do everything ourself. And then you start getting a little more, earning a little more, a little more money. It's like, I just want to pay somebody else to do this, because I don't want to take every minute of my time to say I'm going to research this and this and this. And it takes, it takes forever. You can't be an expert on everything. And so, like I tell all my business owners, and what I try to do my own business is anything that I'm not good at, I farm out and hire out, because I don't want to be an expert in that. Could I Yes, but yeah, I don't want to do that anymore.

Speaker 1 16:17

And life is, life is complicated. There's so much stuff now, and yes, and unfortunately, getting quality people to help you with things. I mean, you know, I own a bit of land. I might, you know, I've got six acres here that my house is on. And every time I try to get a contractor with something, if you kind of feel like, you know, you're not getting good service, and then you wind up, I'll just learn how to do it myself, and I'll just handle it myself. You know, the old adage, if I want anything done, you want something done, right? You have to do it yourself. Do it yourself. Do it yourself. But I think there's a few areas where, if you haven't spent the time on it to understand it and learn it, you got to be careful, right? Because you're asking for to maybe get hurt, and certainly financially speaking, I don't want to make those mistakes when I'm 55 and having issues, or 60 or 65 and got some health issues, and, you know, I don't want to, I don't have the time, or maybe the physical, you know, or mental capacity to go deal with fixing those mistakes, right? So turning to a professional in that regard makes a lot of sense. And I can build my own house at 65 right? Because I don't know enough about house building.

Tony Mauro 17:16

So no, I tell people, you know, this isn't a dress rehearsal. We only got one shot at this, right? And you know, we're not getting out of here alive. So we, you know, especially in the financial planning area, you don't have a lot of second chances, maybe a few,

Speaker 1 17:29

but maybe a few, right? But they get thinner and thinner quickly. So yeah, yeah, for sure. All right, down to it. What's your favorite candy? My favorite Easter candy I could eat a whole bag of is actually, it's just really a Reese's Peanut Butter Cup, but they shape them in eggs. You know, it looks like an egg, yeah? And, I mean, that could be the chocolate bunny equivalent. I think, because they don't, don't, they make a chocolate bunny as well. That's a Reese's. I think they do, yeah, they may, now, yeah.

Tony Mauro 17:53

And I may, I may have, what a nice, big one, because I do like chocolate

Speaker 1 17:58

peanut butter, yes, yeah. Reese's have become a staple, I would say for sure. And it could be the Reese's Pieces too, Reese's Pieces. And sometimes Reese's Pieces replaces the jelly beans in the in the bag for the color and different things. So whatever your candy is, though, right? You know, good Easter basket has a little bit of everything. And that is my analogy to, you know, just retirement strategy. You know, your retirement Easter basket, if you will, should have a little bit of everything, right? We talked about diversification Tony. It's portfolio diversification, it's tax diversification, it's maybe insurance products diversification, right? So there's a lot of pieces you can be diversified in.

Tony Mauro 18:35

There is, and I think, you know, you just want to make sure that, I would say your goal is to make sure that you're well diversified, and that you are covering all the aspects of planning, maybe not just one or two, just like you would with a good Easter basket. You got a bunch of candy in there. You don't want just one of just the Reese's. You want a little everything, especially as a kid. That's right, the more you had, the better.

Speaker 1 18:59

That's right. You want that basket stocked, and so should your retirement strategy be as well as gonna do it this week, hopefully you had a little fun with us along the way, and maybe enjoy just a little bit of Easter candy. As I joked earlier, when we get older, it's like, Man, I'd love to have some more of this, but I just don't know that my stomach will allow me to anymore, or my waistline, but whatever your case is, have a Happy Easter, and we will see you next time here on plan with the tax man. Don't forget to subscribe to us on Apple Spotify, or whatever podcasting app you enjoy using, find all the information you need to talk with Tony or to subscribe to the show or just whatever at your planning pros.com. That's your planning pros.com. And we'll see you next time. Thank you, my friend.

Tony Mauro 19:40

All right, thanks. We'll see you next time.

View Details

Nobody likes tax season. But for new retirees, it can come with a few unwelcome surprises. The rules have changed, the income sources have shifted, and strategies that made sense during your working years may no longer apply. Today, we're looking at some of the biggest tax mistakes retirees make, as discussed in a recent Kiplinger article, and whether these match what we see in the real world.

Important Links: Website: http://www.yourplanningpros.com

Call: 844-707-7381

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Transcript:

Speaker 1 00:01

Nobody likes tax season, and certainly not even Tony Morrow here on playing with the tax man. But for new retirees, it can also come with a few unwelcome surprises. So this week on the podcast, let's talk about tax mistakes new retirees make. Look up in the sky. It's a bird.

Nick 00:17

It's a plane. No, it's the tax man. He may not be a superhero, but Tony Morrow has saved many retirement plans with his extreme knowledge of tax planning strategies. It's time for plan with the tax man.

Speaker 1 00:32

Everybody welcome into the podcast. Thanks for playing tour. Thanks for hanging out with us here on plan with the tax man. If I can get my thoughts together, Tony, it is tax season. And I made the joke there in the intro that not even you like taxes, even though it is obviously something you've been doing for a long time as a CPA and a CFP and an EA of 30 plus years. But it is a it is a hectic, confusing time, for sure, every year, isn't it? It really is. And as we're taping this, we're right in the midst of it. And it seems to me, you know, I mean, we like helping clients, but this truly is, you know, compliance season, you know, and the tax planning has to go on before after this. And so what I find, ever since covid, it seems like taxpayers, our clients anyway, tend to really just kind of put it off. And, you know, we're down to kind of where we prepare tax. Most of our tax returns is March and April. It used to be kind of from mid January on, but yeah, stuff gets out later and everything's slower, yeah,

Tony Mauro 01:31

yep, yeah. So it is a hectic time. And I understand, from a taxpayer standpoint, nobody likes to gather all their stuff and they put it off and yeah, you know,

Speaker 1 01:40

yeah, yeah. So yeah. But we were just talking before we started the podcast, folks, and I was saying, I got to get my stuff over to my CPA. And of course, you know, he was like, Well, why isn't toning your CPA? Well, we're in two different parts of the country, so that's the beauty of the internet. But, but, and he's, you know, he's like, look, my public service announcement to everybody out there is, get them this information as soon as possible, so they have time. And I was like, Okay, I'll get it over there. So I got scolded. So not that, not that we, all, you know, don't do it right from time to time, Tony, but yeah, the sooner we can get it in, the better, right? But it is. Let's talk about tax mistakes for new retirees, specifically on this week's podcast. Okay, because there's a recent article from Kiplinger, we'll put a link into it there, talking about big mistakes that tax retiree new retirees make. And so we'll focus on some of those comments there, and just kind of get your thoughts on it and see how it matches up with what you see, you know, in the real world, right, from just you know, from just an author as an article standpoint, versus what you see in the trenches. So starting the conversation with ignoring the upcoming RMDs, especially if it's your first one, right? Yeah, so you got to be careful here. So talk to me a little bit about that, and some of the stuff you

Tony Mauro 02:49

see, well, some of the stuff we see, and we, you know, base what we see, because a lot of our retail tax clients are retirees or nearing retirement, and so we do see a lot of these things come up, rather than, you know, working with the younger crowd who don't have these problems yet, but they will. But yeah, ignoring the RMDs. I mean, RMD is required minimum distribution, you know, for those that are unaware. And so you you may have an IOU to the government for these, and they're going to come knocking and say, hey, look, once you reach a certain age, at 73 now and 75 for people like me, born after 1960 you need to start taking money out of your tax deferred accounts, because the government says you have to, because they want their their tax. They want their cut. That's right, they want their cut. So it's important that you work with your advisor or figure this out, because there is a large penalty if you delay this past the date you're supposed to do it, so you don't want to get in that situation, and then you have to start taking this money out every year, which creates a little bit of a tax problem, because you're going to, you're going to have some taxes due on this and whatnot. But the kind of, the hidden problem is, is the government will allow you to defer this a little bit past your full retirement age or your RMD age, but you got to be careful, because then you could end up taking two in one year if you wait till the last minute. So you want to plan this carefully,

Speaker 1 04:08

and you can do that the first time, right. Tony, you can push it back on that first one, but to your point, you'd have to take two, and that could cause you to bump a tax bracket if you're not careful, right? If you're

Tony Mauro 04:20

not careful, depending on how much you have to take out, you hate to go into the next tax bracket and pay some extra tax needlessly, when just a little bit of planning could have saved you. That Gotcha. So I would stay, you know, stay ahead of that and work with your advisor. So, you know, these important dates coming up and your options, yeah, you know.

Speaker 1 04:37

And of course, we're off conversion conversations, and are going to can fall into there. And, you know, just again, getting efficient with it and getting handled is just gonna remove some of that stress. And people are always the question always comes back, I don't need it. Why do I gotta take it? Well, we said it a minute ago. The government wants their cut, right, right? They want their cut. There's no way around it. People often ask that question to Tony. They're. Like, how do I get out of the RMDs? It's like, well, you don't, well, I heard a Roth conversion gets me out of it. No, you're just convert. You're still paying the taxes. You're just moving it to an account that you want, that your heirs won't have to deal with, or, you know, later on,

Tony Mauro 05:12

that's right. And Roth conversions really can be a really powerful tool. We use them all throughout the age brackets, depending on your stance on, you know, if you want it, you know, tax free forever, or tax deferred, and worry about it later. But Roth conversions, if done correctly, you know, and you gradually do them over, you know, especially your early retirement years. So really, what that means is, all you're doing is taking money out before your RMD, paying taxes on it now, no penalties, right? And filling up the tax bracket you're in not going into the next one, so you're not paying tax needlessly. And then you got, you've got that money out of Uncle Sam's crosshairs for the tax IOU, because it's, it's now tax free forever, the earnings, and, of course, the principal,

Speaker 1 05:57

yeah, and keep So, yeah, yeah. And definitely keep in mind, I say, like the state you're in, right, their state, lower tax, state issues. You know, people often think about moving as part of that equation when thinking about Roth's right, or the Social Security factors, Irma right, triggering the Irma cost. So just make sure that if you are considering a conversion, you're doing it correctly.

Tony Mauro 06:16

Yeah, and all of those points are good points, because all that stuff comes into play. I get a lot of seniors. Do they get tripped up on the higher Medicare costs, because all of a sudden, you know, their income is way high, and then they get a bigger Medicare bill. Course, it's coming out of their Social Security. And then they're mad. You could file some forms and do some things there to get it back lowered, but it's just more work and more, you know, and it's tricky too, Tony, because it's a two year. Look back. Two year, look back. Yeah, so it's, again, a little planning goes a long way in this area, you know, going back to my first point, all of these require some planning, but it's not difficult. It's just you got to have the conversations.

Speaker 1 06:54

Well, you and I were chatting when we first kicked things off that people are owing a bit this year. You're doing some returns, and people are, you know, and you know, and you were kind of surprised to see a few more people owing, which is interesting, because, you know, we were seeing a lot of reports in February that, you know, with the new tax law changes and things that they expect more people to get, you know, returns and so some confusion, again, around the whole social security piece. So again, as a new retiree, that's our conversation point today, getting blindsided by Social Security taxes is a thing, and unfortunately, the confusion around what happened with the passing of the Oba is still tripping some people up. Right? They did not remove taxation on Social Security. They added a senior deduction, right? Added a senior

Tony Mauro 07:39

deduction, which is helpful for the seniors who don't have a lot of other income outside of Social Security and a few other sources, but it's not as helpful to the higher income retirees, because it does get phased out. They don't mention that. And what happens? What I've been seeing this year as we were talking is I see a lot of people that are at their full retirement age or beyond, and starting to take out and spend some of their money, which is great, sure, but what they're getting tripped up on is, like you said, Social Security is not tax free. It's partially taxable with other income sources. So what's happening is is their their income they're taking from their 401, k's and everything else and their investments is now causing more of their Social Security to be taxed. And generally, people don't have taxes withheld from their social security so that their tax bill goes up. So yeah, again, I think with some planning and some coordination, you can pull money from different accounts in a particular order so you don't have that and,

Speaker 1 08:37

yeah, that's a great point. People, yeah, right. How are you pulling it, and where and when are you pulling it, to avoid those little, I guess, those little tax traps, right? Yeah, these little snafus, you know? And so, yeah, that's a big one as well. Start putting some of these things together, if you you know, if all three of them are happening, correct? And, you know, all of a sudden you got a pretty big, pretty big, good increase in there. Like, What the Hey, it just what happened here? Yeah, exactly. So, all right, and then another one that trips people up, and we'll do one more point here is forgetting to plan for the spouse or The Heirs I mentioned earlier, right? Your heirs might appreciate, you know, you leaving them money, you know, tax efficiently, right? You might think, well, that's their problem. I'm gone. I don't care. They can deal with it. But you might not feel that impact, Tony, but of course, again, like I said, Your loved ones will. And certainly, I think most people, if we're in a position to be more tax efficient with with the legacy, why not do it right? But talk to me about some of the different things dealing with, you know, when planning for the spouse or The Heirs?

Tony Mauro 09:36

Yeah, when, when you have a one of the spouses passing, a lot of people don't think about how this shifts so quickly. Why would you right? 40 years you're finally married filing jointly, all of a sudden, yeah, boom, you know, now you're filing single, which is a different and generally higher tax rate on the same income. Your Medicare thresholds drop. One of your social securities goes bye, bye, and disappear. Years. Now you can file on the higher one, but you're not going to get two. You're going to get one, possibly a pension too. Goes bye, bye, if you didn't select the option right and select the option, we see a lot of people not knowing their options. When they select an option and they hire, they choose the highest option, and then they're dumbfounded when the spouse dies and it goes away, you know, and then really just kind of becomes, you know, more of a burden, I think, if that starts happening, adding to the other you know, things we just talked about with this increased in tax so even though you're gone, you know, your your loved ones might be filling a tax bill, but they probably gonna have the money to do it. But again, they're needlessly wasting money, and all it would take is just a little bit of planning. And most of this stuff isn't going to cost you a dime. Might cost you a little tax if you do Roth conversions, but hopefully you're minimizing that, and you can really save a lot of money, even trickling down to your heirs if you if you pass away.

Speaker 1 10:57

Yeah, and I think again, tax efficiency comes into the conversation. You know, we talked many times here on the podcast about the removal of the stretch IRA, right? So when leaving money, if you've got that IRA, you gotta, you know, we'll just make it easy. Math here, you got that million bucks, then an IRA, and you want to leave it to whomever, unless it's going to the spouse that's going to have to be taken out in 10 years. Now, because they got rid of the stretch Ira used to could go to the kids, and the kids could stretch it out over their lifetime. They can't do that anymore, right? But if it goes to the spouse, right? It becomes basically their own IRA. So in that regard, that's still fine.

Tony Mauro 11:30

That's still fine, yeah, and at least you can, you know, stretch it out a little bit, type of thing. But like in, in my father's case, he's still living. He's got a rollover IRA, and his spouse is gone. My mom is gone, and so we will, you know, if he's got any left in that, we'll have to take that out over the next 10 years, right? And pay our taxes.

Speaker 1 11:47

Finally, speaking of the government finally gave you guys guidelines on that, right? They put that into play, what, five years ago, and they're just now, you know, the last, last maybe year and year and a half, they're going, Okay, here's what we meant,

Tony Mauro 12:00

yeah, I think the whole covid thing affected a lot of that, you know, and they're just kind of starting to get back on their feet a little bit with that. And, you know, yeah, we're just now getting guidance on that. So it's still kind of a weird area, murky

Speaker 1 12:12

waters, yeah, yeah. So again, there's lots of different things you need to think about when leaving, you know, planning for a spouse. And again, we're talking about taxation today, obviously leaving a legacy. In general, there's a lot of things to think about, but just tax mistakes, new retires. New retirees can sometimes trip up on the big one being ignoring those RMDs that we talked about, Roth conversions not done at all or done wrong, and, of course, getting blindsided by Social Security. So if any of those things are pain points that you're concerned about make sure you're having a conversation tax mistakes and retirement are rarely about being careless Tony. They're just usually about not knowing what you didn't know, right?

Tony Mauro 12:49

Not knowing what you didn't know. And yes, and I would you know, strongly suggest now you do have a little bit of information those that are listening, but it's one of the things that an advisor who's a tax guy or gal has to talk about, versus maybe, you know, someone that doesn't, is the tax efficiency of how you're going to plan and, you know, take money from your retirement.

Speaker 1 13:12

Yeah, a lot of financial professionals are like, Hey, let's make sure you consult with your CPA. You know, whenever you're, you know, whatever these things that we're doing. And don't get me wrong, a lot of financial advisors have a lot of tax knowledge, they do, but you have both, because your CPA and CFP, right? So, you know, that's you kind of have everything under one roof there. So if you need some help, you know, again, get some help. Because the good news about all of this, right? Is a lot of this stuff is avoidable. With a little planning and a little bit of guidance, you can kind of knock some of this stuff out. So if you need some help, reach out to Tony and his team at your planning pros.com that's your planning pros.com he's got 30 years of experience plus helping people with all of this stuff. So you know, start planning with the tax man today at your planning pros.com and don't forget to subscribe to us on Apple or Spotify or whatever podcasting app you like using. Just type that into the search box, plan with the tax man, or just again, go to his website. Your planning pros.com. Tony, thanks for hanging out. Breaking it down. I will let you dive back into your stack of taxes to work on, and we will see you next time, my friend. All right, we'll

Tony Mauro 14:14

see you next time. Thanks.

Walter Storholt 14:21

Securities offered through avantax investment services. SM Member FINRA, SIPC investment advisory services offered through avantax advisory services, insurance services offered through an avantax affiliated Insurance Agency. Investment strategies discussed in this episode may not be suitable for all investors. Please consult with a financial professional.

View Details

For many business owners, retirement savings don’t show up neatly in a 401(k) or IRA. They’re tied up in the business itself. Today’s listener question comes from a couple facing a sudden transition from “almost nothing saved” to managing a large lump sum late in the game. And they’re wondering if it’s enough.

Important Links: Website: http://www.yourplanningpros.com

Call: 844-707-7381

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Transcript:

Speaker 1 00:00

For many business owners, retirement savings doesn't show up neatly in a 401, K or an IRA. It's tied up in the business itself. Well, this week, we're going to tackle a question from a listener dealing with the possibility of selling a business and what that might look like for their retirement. Look up in the sky. It's a bird,

Nick 00:22

it's a plane. No, it's the tax man. He may not be a superhero, but Tony Morrow has saved many retirement plans with his extreme knowledge of tax planning strategies. It's time for plan with the tax man.

Speaker 1 00:36

Hey, everybody. Welcome into the podcast. This is plan with the tax man, with Tony Morrow from tax, dr, Inc, find them online at your planning pros.com that's your planning pros.com where you can drop a line into the team and get yourself some time onto the calendar, and, you know, ask your questions, get some things answered. And we're going to take a listener question here this week on the program Tony, about selling a business. And I know you've as a business owner, you've also got a lot of business clients, and so a lot of people do find themselves in this position in America, a lot of small business owners. So we're going to tackle this here a second. But first, how you doing? I've been doing real well. You know, I like this topic because it's near and dear to my heart, and we have a lot of clients that I've seen experienced this exact thing we're going to talk about. So I'm excited to talk about that. And Spring is almost on us, so things are good, good. Well, yeah, let's dive in. Let's because there's quite a few additional pieces that is kind of a lot of lot to unpack here for if we want to dive in. And we'll try to keep this within our normal timeframe here, but see if we can help some folks out, if they might be in a similar situation. So here's the setup. The listener says, Look, I'm 60 years old. My husband's 58 we're definitely behind when it comes to retirement savings, because we have basically nothing saved, but we put it all into the business, and we're going to be selling our business soon for just under a million bucks. I'm very nervous about dealing with this large sum of money, since we don't have any investing experience. Wondering where should we start, and Will this be enough to retire? On any pointers you can help would be great. So I guess we can start with a couple of pieces of this Tony. So when you're, when you're selling a, you know, a business, and you've not saved anything, I mean, it is very it's awesome that the business is, first of all, I guess, sellable, enough that you're, they're selling it and making this money, right, right? That's the first step. I think for a lot of business owners, it's like realizing, hey, is this valuable? Is it sellable? You know, is there value there? And then, if you do sell it, now, what do you do? So what's some things to think about here?

Tony Mauro 02:27

Well, I think the first thing to think about is, and we see this a lot, is, I'll tell you, what they all say is, when we start talking about retirement and whatnot, they all that's what they say is, look, I'm not saying for retirement. My retirement my retirement is gonna be my business, and I'm putting all my money into the business. And so when we that's how the conversation starts. And then in this case, you know, I'd love to know more about it, but I'm gonna make an assumption here that they are gonna be at a million. I don't know what just under a million means. Yeah, let's, let's round it off for easy. Yeah. We'll just, yeah, we'll round it off. But what a lot of people don't realize is, if it's a service business like mine, or they don't owe anything on it, you sell a business for a million and you have no basis, which is kind of like, you know what you paid for your stock, then all of that potential money could be taxable, and if you're getting or giving up, say, 20% of it to the feds, another three or four to the state, you could end up with maybe 750,000 total after taxes. And then you also, you know, you got to factor in selling costs and things like that. So I'm just going to use 750,000 so it's not the million you think, because you're going to owe some taxes. Now, there's a lot that goes into that, because that capital gains, Tony, that's capital gains, yes, capital gains, taxes, and so you know, at first glance, you're 60 years old, and you've got 750,000 net to to, let's say, you know, save for retirement. Are you going to retire now or not? Or because I don't to me on the surface this probably, I don't know if it's enough or not. Depends a lot on their lifestyle and what they want out of life. Well, I don't know, yeah, what enough means?

Speaker 1 04:10

Let's break that down for a second. Okay, so based on your question, there is a million enough, or even 750,000 Well, first of all, the ages were 60 and 58 so you can't even access social security yet for either person, and you certainly can't access medical. So those are two pieces that certainly have to pop up, and if you've done no saving at all, then you're basically rocking this 750 grand for at minimum two years before the first person can turn it on for Social Security, Tony and and five for medical right? So that could be a huge problem. You know, in eating away that 750 may not last for someone's lifetime of 20 years more, I definitely don't think it'll last person's lifetime for sure, because if you know it just isn't going to work again, unless you're going to what you. Retirement to you is, you know, 3040, $50,000 a year total. But let's say, like you were saying, You got to go two or three years with spending, let's say 50,000 including, you know, paying for your for your medical and all of that. Well. Now you're down to, you know, 600,000

Tony Mauro 05:18

and you know, you're, yeah, or less. And you know that's not gonna last you 20 years. You know it just won't even at 50,000 a year. Even if you're earning, say, four to 6% on it, it's it's definitely not gonna be enough. I think it's good. You might know that now, yeah, and hopefully, if maybe the sale is not final, right now you're just thinking, maybe you keep it for a while and build it up and or save and then sell it later. That's a possibility. But I think let's say they're going to sell it now anyway. I think what you definitely need to do is get all these numbers with your advisor and start thinking about, you know, spending. I think you should think about, well, what are we going to do for the next 10 or 15 years? Because we really can't, other than this, we don't have any more income coming in. How are we going to save more?

Speaker 1 06:11

Because, yeah, you've got to get a plan together. I mean, you just mentioned, like, if you're making 4% off of the 750 that'd be the first question for someone like this, who doesn't know even where to start. Where do they park it? To get seven, you know, to get 4% right? So you want to get with an advisor. Are you looking at maybe some in an annuity? Are you putting some in the market, you know? Because you need to be a bit more aggressive, because you don't have any other money saved. I mean, there's a, this is where a financial strategy really comes in handy.

Tony Mauro 06:37

I think so. And I hit on a good point I was going to mention, is, I'm not a huge proponent of annuities, but they have their place, and this might be one of them, if, you know, you talk with your advisor and you figure out, I need an income I can't

Speaker 1 06:51

outlive, right? That's what I was thinking. Was the guaranteed income putting, you know, I don't know, you know, 200,000 or something of that into something that generates income. Yeah, it

Tony Mauro 07:00

generates income, and, you know, you can't outlive it, because I think that's the biggest fear with this couple, or biggest threat, I should say that they'll face is outliving this income. And if you've got nothing else coming in, eventually it's just gonna be down to Social Security, which is a meager existence, right?

Speaker 1 07:18

Yeah, so and that. So the whole question of what's Enough? Enough? Well, that's lifestyle. And, you know, all those pieces go into it. So, Tony, if you were, if you if this person came into your office and said, help us out, right? So you would start with, you start putting, kind of the, you know, the strategy together. Start putting an income piece and expenses right. Is, do they is, do they have a home? Is it paid for? That? That changes things, right? Changes things so there's a lot of data that would then go into hopefully helping somebody like this kind of see in black and white, are, where are we? Are you behind? Do you have a shortfall? And how much

Tony Mauro 07:52

exactly a client like this? This is why I love this topic. This is a very, I want to say, complex, but a very in depth conversation you need to have with somebody, with your advisor, because you have to lay all this out, and then you as the client got to be able to picture this. This is what it's going to look like. I've seen it before. And are you okay with that, or do you need to make us, you know, maybe make a change. But I think if you're going to go through it, that you really got to, you know, buckle it down. And, you know, figure this stuff out, the income needs, the expectations on longevity, all that kind of stuff. And so you are not going to get there. And because I've seen this happen too, where they didn't plan. And boy, are they really, I don't want to say upset, I guess the right word is disappointed that they worked all those years, sold the business. Of course, they didn't save anything, and they didn't plan, right? And then they're they're too old, they can't go back and

Speaker 1 08:50

go to work. Yeah, yeah. Well, so it's a temptation for folks like this could be as well, not everybody, but you haven't saved. Well, again, to this person's you know, question, you now have this big chunk of money, and we'll just call it the 750,000 the temptation could be, well, we're behind. Maybe we should go ahead and put a we should get aggressive with a bunch of it and swing for the fences right to make more money to get ready for retirement. So that could be a dangerous place to be, especially if you're not real savvy in what you want to do. Hopefully you don't take, you know, half a million dollars and go dump it into the market, you know, in in an aggressive, you know, portfolio,

Tony Mauro 09:27

yeah, I definitely think you need to start talking with your advisor and discuss the risks of that and diversification. And, you know, why that kind of strategy, you know, that's, that's risky. I mean, it's easy to see to say, you know, hey, these last few years in the market, especially saying, well, we dump 500,000 of this into the market, we get 20% back. That'd be great, yeah, and it would double itself, say, in even if we got 7% double itself in roughly about seven, seven and a half years. Okay, now we're. At a million. But what if that doesn't happen, and we go through a prolonged period of of downturn, even in just a few years, going to be devastating? And, you know, it's just, it would be a bad situation to go into that, if you're going to go into something like that, you better, better

Speaker 1 10:16

know all the Yeah, and that's kind of why I was asking, you know, that question earlier. You know, for somebody like this who's not real savvy, first of all, find an advisor, right? So I guess the first two things would be, take a step back, breathe like, let's Okay, let's, let's assume that deals going through, you're getting this money, you pay the taxes, whatever the case is, you know, don't rush to make an immediate decision, but certainly, take a little time. Do some, you know, do some vetting, and find a financial professional that you can talk to, go talk to a couple, right? Have those interviews and find out the right person for you, and then start discussing the strategy sessions of of what you know, what do I need to know, you know, and what would my Social Security look like when we do get there, like? Because that's going to factor into the strategy, right? So we don't know if they were paying them, if they had this business for 30 years, were they paying into Social Security properly? Is it going to be low numbers, mid numbers, high numbers, like all of those things, are going to factor in Tony to the overall next 25 year retirement strategy? Yeah.

Tony Mauro 11:13

I mean, all that's going to factor in. And I would say, On a different note, I was thinking about it when you were saying that is if we have younger business owners on this, the one thing I would say, and this little conversation frames it is the one thing our government does, I think, extremely well. I hate to even say that, but I'm gonna say it is, they have so many things for us, business owners to save for our retirement. I mean, from cash balance plans all the way down to Roth IRA 401, KS, everything in between. So if you're younger, try not to get to this point. I mean, in other words, you know, start saving through retirement.

Speaker 1 11:53

We talked about even a set, right, a simple anything, yeah, because

Tony Mauro 11:57

you could stash so much money in it and not have this. Then when you sell the business, then it's this million dollars less, less taxes, 750 is just an add on, and not your overall plan. But yeah, so, I mean, I it's not just for the for the people just getting ready to sell. I think it's younger people can have, have get some benefit out of this conversation.

Speaker 1 12:18

Tony, I tell me, if I'm wrong here, you know? I mean, I'm just the host, but, I mean, I've been talking about this stuff with advisors for 10 years. I feel like, you know, the first place that someone like this has to start, obviously, is, like we said, we'd have to, you have to find an advisor that you're comfortable talking to, that you get a good feeling about. And then you got to start asking, this is where the proper diversification is really going to come into play. How much should we put in the market? How much should we be a little bit aggressive with? How much should we have in safety and protection? How much should we set aside on an emergency fund? What you know, what's the House Situation look like, and then obviously dealing with the medical gap that's going to be coming up as well. Those, to me, those are all like the four or five main pillar pieces that I mean, honestly, that's the same for anybody, whether you worked for a company your whole life, or you worked for yourself in your own business, these are the standard pillars of retirement strategies.

Tony Mauro 13:08

That's it, I mean. And it would have to be the conversation with this couple, for sure, but anybody else, I mean, it's pretty much the same conversation we have, like you're saying, with all of our clients, because at the end of the day, that's what really matters. And I think if they're not looking at that and at least getting a big picture idea in which, I think is where the advisor can become valuable, is to kind of keep them grounded and on task. Yeah, there you go. You know, that's worth the fees that you pay, in my opinion. But certainly,

Speaker 1 13:38

yeah, that 58 and 60 they, you know, getting an advisor now and starting to help, you know, helping them work with this large sum of, sum of money. You know, there's a lot of those, lots of little moving parts and things they can help them with over time. To your point, I kind of getting started now, making tweaks along the way. You know, that's, that's a great point, right? So, yeah,

Tony Mauro 13:57

so I hopefully they'll, they'll sell it, you know, and, you know, live happily ever after and but they will need to do some planning, because if they just sit on it, it's definitely, in my opinion,

Speaker 1 14:09

not going to last. Yeah, you know, you just said that sell it made me think of, well, they're going to assume that they did this, Tony, but for those that are out there listening, that are, they're like, Hey, I've got a business. I'm con, you know, contemplating this, hopefully they went through like a business broker, right? You know? Because, I mean, you could sell your business just kind of like selling a house, where it's for sale by owner, and you might be fine, but there's a lot of nuance to selling a business. And do you find that, would you recommend people, if they're thinking about selling a business, to work with a licensed professional in that in that space?

Tony Mauro 14:39

You know, most of the time, I think so, unless you're selling it to an employee or, you know, something like that, like an insider or a family member, okay? Because I think they're gonna be able to bring you a lot of different, you know, options and whatnot, and they're gonna be realistic, as business owners tend to. And I do the same thing. A lot of us think our businesses are worth more than they are, and. A lot of times, you may get buyer, but they want to spread it out over time, which is not a bad tax strategy from a seller standpoint, but it does delay you getting all your money as well.

Speaker 1 15:11

Well, that's a good point too, right? So are you doing owner financing for this deal, or are you just hoping for that one big fat check, because you kind of need that, right? So that plays into all that as well. So lots of stuff to unpack and deal with when you're thinking about selling a business. And to me, I feel like that's where there's so many little places you could step in it and mess up that, you know, certainly seek the guidance of some professionals in that space. You know, with financial like I said, a business broker certainly finding a financial advisor, maybe even if you don't have one, get one before you sell a business. I don't know if this couple here, they may already be in the in the weeds on that, but certainly get a financial professional before you sell your business. So they can kind of start giving you some things to be on the lookout for as well. So I would agree,

Tony Mauro 15:53

and I would say the last person in there sometimes too is an attorney to look over the deal. Oh yeah, definitely. You know, just, just to make sure that it, you know, you're not missing something on a legal standpoint, especially if you're if you're doing some financing, yeah,

Speaker 1 16:07

great point. Yep. You need a team. You need a financial team, for sure, when you're going through this. I mean, we need it in in everyday life. When you work for somebody for 40 years, you need it when you own business, too. So it's the world we created. It is what it is. But better to make the pay the it's worth it. I think the money to pay those little extra pieces to make sure you're, you're doing the CYA, right? You got everything covered, all right? Well, good stuff. Thank you so much for breaking it down, Tony. We appreciate it. Thank you for the question as well. Folks. Good luck to you. Of course, Tony's teams reaching out to them anyway to ask if they need some further in depth questions and things answered. But if you're thinking about selling a business or a home, or, you know, got an inheritance coming your way, or you just need a strategy in general for retirement. Get with Tony and his team at your planning pros.com today and start talking about how to plan with the tax man. You can subscribe to the podcast on Apple or Spotify or whatever app you like, and we certainly appreciate it, and hopefully you enjoy the content and catch some useful nuggets along the way. And with that, we will see you next time here on the program for Tony Morrow, I'm your host. Mark Killian, we'll see you next time.

Walter Storholt 17:13

Securities offered through avantax investment services. SM, member, FINRA SIPC, investment advisory services offered through avantax, advisory services, insurance services offered through an event tax affiliated Insurance Agency. Investment strategies discussed in this episode may not be suitable for all investors. Please consult with a financial professional.

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Everyone’s got an opinion about money (especially the people with a book deal or a TV show). Some of that advice is useful. Some of it sounds better on a stage than it works in real life. Let’s break it down.

Important Links: Website: http://www.yourplanningpros.com

Call: 844-707-7381

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Transcript:

Marc:

Everyone has got an opinion about money, especially people pushing a book deal or a TV show. And sometimes maybe that advice is useful and sometimes it's not, it works better on a sound stage than in real life. Let's break it down and have Tony react to some controversial financial takes here on Plan With The Tax Man.

Hey, everybody. Welcome into the podcast. This is Plan With The Tax Man with Tony Mauro, here in Des Moines professional alternative at Tax Doctor, Inc. Hanging out with me to do a little reaction type podcast this week, Tony, we'll get your take on some interesting hot takes from some financial talking heads out there and see what you think about it and practice in the real world. Because you see clients and help people every day and of course are governed and have rules that you have to follow where a lot of these talking heads don't, they can say whatever they want. We'll talk about that a little bit this week.

How are you doing, buddy?

Tony Mauro:

I've been doing good. As were taping this, we're getting into our tax season so getting busy with a lot of new tax changes and whatnot that's hitting everybody.

Marc:

Yeah, a lot of changes with the OBBBA. You got to be on your toes, right?

Tony Mauro:

Mm-hmm.

Marc:

And we talked a lot about that on some of the prior podcasts.

Tony Mauro:

We did, yeah.

Marc:

Yeah. If you guys aren't a little sure about some of those things, make sure you go check those out and you can find us at whatever podcasting app you like, Plan With The Tax Man. Just type that in the search box or just go to yourplanningpros.com. But if you need some help, of course, reach out to Tony as tax season is upon us again at yourplanningpros.com.

All right. My friend, let's dive in and have some fun with these.

Tony Mauro:

Sure.

Marc:

All right. You're probably familiar, maybe a lot of our listening audience is with Robert Kiyosaki. A number of years back, he wrote Rich Dad, Poor Dad. Really good book, actually. Quite helpful.

Tony Mauro:

[inaudible 00:01:51] yes.

Marc:

Yeah, quite helpful for a lot of people. But he's since gotten a lot more aggressive and interesting in some of his stances and takes. And again, a lot of that is the demographic I think he's marketing himself to and pushing and things of that nature. But let's talk about this take here more recently. He said people shouldn't work for a company and save in that retirement plan, instead should launch their own startups or maybe buy gold, silver, and Bitcoin, or all of the above. At the time we're talking, Tony, it's early February and gold and silver and Bitcoin, we're doing pretty good last year and earlier into the year this year, but not so great right this minute. At the time we're talking, there was a recent 30% downturn in gold and silver so that didn't age so well.

Tony Mauro:

No. And I think it's interesting you pick this one because I have read his books and I think by and large the Rich Dad, Poor Dad, especially the Rich Dad, Poor Dad Cashflow Quadrant are great books for people. And this strikes me because... Don't get me wrong, I like people being in business for themselves. We serve a lot of those businesses.

Marc:

Absolutely.

Tony Mauro:

And the tax planning and accounting capacity and the financial end as well.

Marc:

But I bet they got their own SEPs and things, they've got their own retirement accounts they're doing.

Tony Mauro:

We've got them in almost anybody that will listen and take us up on it, whether it's through us or somebody else. Yes, they have their own retirement plan of some kind.

Marc:

Yeah. Not saving in a retirement plan just seems crazy, especially if you are working for somebody else, Tony. Because if nothing else, take the free money.

Tony Mauro:

It's free money. And that's exactly it, it's free money if you're working for somebody else. I think depending on who he's trying to market this measures to, not everybody is cut out for having a business for themselves. They may be good at it but they don't... A lot of them tend to get themselves into trouble, whether it's tax-wise or lack of planning, lack of cash flow, that kind of thing, let alone the headaches. Again, I love small business. It's my favorite thing so it's somewhere deep in me. I say, I get it. I get what you're saying. Yeah, I think everybody should work for themselves but not...

Marc:

Everybody doesn't have the right temperament though.

Tony Mauro:

They don't. They don't. They don't have the right temperament. And I definitely think if they're working for themselves or if they're working for a company, they should be in a retirement plan of some kind.

Marc:

Yeah. And to just invest in gold, silver, and Bitcoin, come on, that's crazy. Have some if you want but...

Tony Mauro:

I agree. That goes against every financial prudent planning aspect that I know of, that's some diversification...

Marc:

150 years?

Tony Mauro:

Yeah.

Marc:

Right.

Tony Mauro:

Like you say, you can have some but I think you've got to have some diversification, you got to have a plan. I'd love to hear what his rationale for that.

Marc:

Well, I've watched some shorts and some reels he's had out there recently. And I do think he's targeting the younger generation right now, this kind of mindset of we're not going to work 50 years for somebody and then retire, we want to make all our money in our 20s by being aggressive in technology and this, that, and the other. I think he's pandering a little bit to that crowd. Maybe not. Maybe he's totally on board with it. But it just seems like a big departure from some of his previous stuff.

Tony Mauro:

It does. Yeah, it's a real departure from his books.

Marc:

Yeah. Anyway, interesting hot take there. Look, if you want some gold and some silver and some Bitcoin, hey, cool. Talk with your advisor about that, make sure being prudent though to Tony's point. Don't get crazy.

We were joking the other day. I was talking with an advisor, Tony. The Dow just hit 50,000 at the end of last week at the time we're taping this for the first time ever, right? And the comment was, "Hey, the Dow hit 50,000." And somebody goes, "Yeah, so did Bitcoin." Of course, it started at 100,000.

Tony Mauro:

Right. Right.

Marc:

Because it's not had a very good couple of weeks.

Tony Mauro:

No. And that just goes to show you the volatility there.

Marc:

Massive, yeah.

Tony Mauro:

Yeah. Having all your eggs in those three baskets, definitely very aggressive.

Marc:

It could be, for sure. Yeah. All right. Let's go to a different take here from Suze Orman, host of Women and Money, recently suggested and this is... If Robert was getting a little crazy and aggressive, Suze is maybe getting a little too conservative. Tell me what you think about this, Tony. She suggests retirees set aside three to five years worth of living expenses. Not six months, right? Not three to five months. Just in case bank accounts crash or stock market crashes, things of that nature. Three to five years, a little too conservative? What do you think?

Tony Mauro:

In my opinion, yes. I think that's far, far too conservative because assuming, again, if you're a retiree and you have a diversified portfolio, hopefully if you are in stocks that are high yielding, good quality individual companies. But most people don't have that, they have mutual funds and a variety of things. And even in a market downturn, if you look at 3, 5, 10-year periods, there's not very many that last very long. And if you take it in 10-year periods, there never is over the entire period so that seems very, very conservative.

And who in their right mind is going to take a large chunk of their portfolio and stick it in a 2%, 3% yielding vehicle when they're trying to live off of the income? I don't know where she's coming from with that at all. And again, these people sell a lot of books and whatnot. But keep in mind, I always like to point out that... And they have a lot of followers, they've made a lot of money. But sometimes if you're listening to some of this stuff, you might want to bounce it off your financial advisor as well, just see what they think because I don't agree with that one at all.

Marc:

Yeah, it's a little too... And again, if you got... I don't know. I guess if you're worth $100 million, putting aside three years worth of money is a little easier than most folks, right?

Tony Mauro:

Right. Right.

Marc:

It's three years. I can hardly put side six or eight months, let alone three years worth. And again, interesting takes. And of course, these folks are talking heads out there in the landscape and pushing their books or their programs or things. And while technically, Tony, doing a podcast makes us a talking head, we're a smaller talking head.

Tony Mauro:

True.

Marc:

But again, you're in the trenches. You're a CPA, a CFP, an EA, you work with clients day in and day out. These folks don't do that so that's a little different there.

Tony Mauro:

No. Yeah.

Marc:

Kevin O'Leary and his amazing suits, his very colorful, interesting suits he wears. This one might be the most realistic, Tony, of everything on my list today. And this one is still a little bit too much, I think. But what do you think? He insists that if you don't know your net worth at all times, you're being irresponsible with money. He promotes constant tracking, optimization, and performance measurement.

Tony Mauro:

Somewhat I agree with him because I do think you need to know your net worth.

Marc:

Indeed.

Tony Mauro:

Now, at all times and if you don't know it, you're irresponsible.

Marc:

Constant?

Tony Mauro:

I think that's a little extreme.

Marc:

A little much. Yeah.

Tony Mauro:

Yeah. But I think the point he's trying to make, if I'm reading it right, is you need to track your spending and what you own and what you owe so you do know your net worth because it is an important number. I wouldn't get so hung up on it day to day because you're just not going to be able to make significant changes to it. I think it's worth looking at with your financial advisor to see where it's headed on a yearly basis for sure. We do it with our clients. Every one of our clients, we go over that net worth. Did we grow it? Did it go backwards and why? And it's good to have that because at the end of the day, a large portion of that net worth is going to be your retirement portfolio, your investments. And so that's going to be what we're focusing on mostly.

But also in that net worth, we see a lot of times where we start to become almost a financial personal coach in that, "Hey, your net worth is not growing because you're spending more than you're making." That kind of thing. I think he has some good points there but I wouldn't focus on it. I would focus more with your advisor on the month to month, the bigger plan, and I think you'd be fine.

Marc:

Yeah. And I think a lot of times people do hire a professional, Tony, because they don't want to track it every day and keep an eye on it and it stresses them out. But I think most people, we should know our baseline numbers, we should have a good idea of what's going on, our total net worth, what's coming in, what's going out. You want a good understanding. Even if you do have a financial professional in your pocket helping you out, you still want to have a good... What is it? A 10,000-foot view kind of thing. But I think micromanaging it down to that small of a level, maybe at some point in life. But I think as we get a little older, we're like, "Okay, I need to turn this over to somebody else to handle this because it's too stressful."

Tony Mauro:

Right. Agreed.

Marc:

All right. I got two more I'm going to do and it would not be complete doing this list without old Dave Ramsey. Dave is not shy and no stranger to controversial takes like cutting up credit cards or paying exclusively in cash. And obviously, Dave has got a huge empire, helps a lot of people, and actually has a lot of good things that do seem to work on the debt side. However, on this side, Tony, this might be a little crazy. He's challenging the rule of thumb, the 4% rule. He's advocating for 8% annual withdrawal for retirees who invest 100% in the market. If over time the S&P 500 yields a 10% rate of return, he says the money should then last you throughout retirement. And while on the surface, that makes sense, 100% in stocks for retirees alone just seems like way more nausea and sleepless nights than most people probably want.

Tony Mauro:

I would agree with you. I've read Dave Ramsey's books, I think one of his best is the Total Money Makeover. As far as getting yourself started with planning, I think that's a great book for everybody.

Marc:

And the snowball thing works great.

Tony Mauro:

It works great. This, I would agree with you too. I don't agree with him at all there. I do like a little bit more aggressive withdrawal percentage than 4%, I like to use 5% with most of my clients unless they're very conservative. But 8% and all in stocks, that would be... I think as a fiduciary, that would just be wrong of us to even assume that unless the client comes and says, "This is what I want. I want nothing else." And it's up to us to say, "Wait a minute, that's too much." Because what he doesn't say here is, yes, over time it yields 10%. I would agree with that but that time period is a long time period. What happens if you've got all of your retirement portfolio, S&P 500 index, let's say, and we have an eight-year prolonged downturn? Will you run out of money? Probably not, but you will have significantly less. And if you're living off the income, well, then you either have to take less or get into the principal.

Marc:

And he doesn't really talk about, "Hey, are you willing to cut that back on the down years and things of that nature?" Because adding a little context to that, Tony, to your point, somebody could be listening and go, "Hey, man, the market last year finished at 18%. The year before that, 20 something. The year before that, 20 something. The year before that, 20 something. Making 10 back and only pulling out 8 totally seems doable the last four or five years. Why not?" Sure, you're right. But what about the 10 years where we made nothing? What about a few decades back when there was what? 15 or 18 years where it made nothing, right?

Tony Mauro:

Made nothing, right. I remember through 2000 to 2000 almost 10.

Marc:

Oh, the lost decade. Yeah.

Tony Mauro:

Oh, just a whole decade was gone. Let's say you were following this strategy then and that wouldn't have been too good for you.

Marc:

You're pulling 8% out of a million dollars, you're pulling 80 grand out year over year, and it's not making anything back. Again, it's a little too much, I think.

Tony Mauro:

I think so too. I think he might be just trying to generate a conversation there but I think he definitely got to put some context to that.

Marc:

Yeah, for sure. And again, while technically the numbers technically do make sense, can you sleep at night with that much risk? And it flies in the face of everything for people... And again, the fact that he even mentioned it for retirees is what kind of... If he would have said people in their 30s or 40s, I could have maybe rolled with that. But people in their 60s up, that's a little too crazy.

Tony Mauro:

I agree.

Marc:

All right. Final one. You might have thought that might have been the wildest take but I'll save this one for last. The world's richest man, Mr. Musk, predicts that advances in AI, energy, and robotics will generate such an abundance of resources, Tony, that all individual retirement savings will become irrelevant in the future. On a recent podcast, he said, "Don't worry about squirreling away money for retirement. In another 10 or 20 years, it won't matter anyway." There's going to be this boom that is going to just bring riches to everyone and the thing is I actually think he believes it. I will give him the credit and the benefit of the doubt saying I think that he thinks these things are true, that he can make these things happen or they're going to happen or whatever. And kudos for feeling about that. But man, there is so many holes I can punch into this. First of all, Tony, what is your thought on will it even generate that sort of money? And then who allocates it? Who doles it out?

Tony Mauro:

Well, that's what I was just thinking [inaudible 00:15:10]

Marc:

And who do you trust to make sure they don't take it and give it to you?

Tony Mauro:

Yeah, this is nirvana. I'm thinking, "Well, boy, if that's the case, sign me up."

Marc:

Heck, yeah, sign us all up.

Tony Mauro:

[inaudible 00:15:21]

Marc:

But the history of human beings have... Is there any company, person, government, anything that you would trust to say, "Oh, send me my universal check every month so I don't have to do anything." I know that's the world keeps thinking we're moving towards that but we have to be on it. Who is going to really trust someone to do that first and foremost, right?

Tony Mauro:

I agree. I just think that's... I didn't even know where he's coming from with that. I do think he believes it because I heard...

Marc:

I do. I really do. Yeah.

Tony Mauro:

But I just don't see how that's possible. Everybody that either... Let's say AI and energy and robotics have taken over everything, those are the people that are going to have... Who create that I would think are going to have the money and I don't know how that's going to be doled out to the rest of the people and why.

Marc:

Well, you're talking about what? They've been kicking around that universal income for everyone kind of thing, right?

Tony Mauro:

Yeah.

Marc:

And if you're having a computer, if you're having AI dole out the money where so therefore humans aren't touching it, therefore it's deemed fair. I guess you could make those arguments. But at some point, it just seems... All right, 20 years from now he's talking. If you're 60 years old right now listening to this and you stop, right? You stop, saying, "You know what? Elon is totally right. He's going to pull this off. This is going to happen. I'm 60. I'm not going to save another dime for retirement for the next 20 years." And 20 years comes by and you're 80 and none of this came to fruition. Well, you're screwed.

Tony Mauro:

You're screwed. Yeah, you're in real trouble.

Marc:

And he's not on the hook for it.

Tony Mauro:

No. I would say to everybody, you keep doing what you're doing, you plan like we're in this world right now.

Marc:

Exactly.

Tony Mauro:

And if something like this in your lifetime ever comes to happen, well then all the better. But I wouldn't bank anything on something like this.

Marc:

And that's where I think the questions and the interesting thing comes into the speculation of investing, right Tony? That's where it comes back to, "Hey, look, if you want to get in crypto, if you want to have some AI properties, if you want to do some of these different things because you believe in this interesting future possibility. Cool, do that. But don't risk the tried and true things that have also worked for 150 years just in case you're wrong because there's you, there's your spouse, there's your heirs to think about." And so I think that's where we... We're in this interesting space where it's like, "I want to take some chances maybe." Or, "I want to be on some cutting edges." But let's still keep it within that speculative portion I guess, Tony, of our finances.

Tony Mauro:

Yeah, very small. Very small speculative portion because that's exactly what it is. And you certainly don't want to, just like you said, risk your future on some of the speculation. Because some of it is out there and...

Marc:

And it may be possible. It may absolutely be possible but it also may not.

Tony Mauro:

It may be possible.

Marc:

[inaudible 00:18:16] I'm still waiting on my flying car. I ain't got it yet.

Tony Mauro:

I've got a client here locally, tax only, that has... He's the same way. He is invested in some Iraqi Dinari that he keeps saying that it's going to take off, it's going to be... He's been telling me this for 20 years and it's basically worth 3/10 of one cent. You don't want to get into that. I think it was a little flyer for him, I don't even know. But anyway, please consult with advisors before you do any of these kind of things and [inaudible 00:18:53]

Marc:

And again, it's easy for the world's richest man to be like, "Well, if it doesn't work, well, whatever."

Tony Mauro:

Yeah, whatever.

Marc:

Well, he's going to fly off to Mars and not be responsible anyway.

Tony Mauro:

That's right.

Marc:

But look, good stuff, fun for conversation. And I think that's a piece too, I think as humans, we're always looking to try to move forward and do some things. And of course, sometimes we're trying to sell some stuff. And of course, even in Elon's case, he's trying to promote his robotics and his AI and get people on board. And the more people that are interested and on board, the better the chances of things happening and generating.

You always have to take stuff with a grain of salt and you could simply say, "Well, Mark, you're constantly saying, Hey, call Tony." Yeah, I am. I'm saying call Tony to get a strategy and a plan in place that works for your situation based on the things you've got going on in your life, and also they're backed by years of research and data. And there's no plan that's perfect but having a plan is better than having no plan.

Tony Mauro:

That's right. I agree totally.

Marc:

Yeah. Get yourself onto the calendar, have a consultation and a conversation with licensed professionals, CPA, CFP, EA. It's what Tony is for 30 plus years. If you need some help, find him online at yourplanningpros.com. That's your planningpros.com. We're going to wrap it up this week so thanks for hanging out with us here on Plan With The Tax Man, with Tony Mauro.

Tony, thanks for engaging and having some fun with me on this.

Tony Mauro:

All right. We'll see you next time.

Marc:

We'll see you next time here on the podcast.

View Details

One of the biggest retirement decisions people make doesn’t involve the stock market at all. It’s a choice hidden inside their pension paperwork.

Important Links: Website: http://www.yourplanningpros.com

Call: 844-707-7381

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Transcript:

Speaker 1 00:00

Hey, time once again, to plan with the tax man, and we are going to talk about the biggest retirement decisions people make that doesn't involve the stock market or could make, right? So it's a choice hidden inside the pension paperwork. Let's get into it. Would you trade $600 a month to protect your spouse? Look up in the sky. It's a bird. It's a plane.

Speaker 2 00:21

No, it's the tax man. He may not be a superhero, but Tony Morrow has saved many retirement plans with his extreme knowledge of tax planning strategies. It's time for plan with the tax man.

Speaker 1 00:34

Welcome into the podcast, folks. This is another edition of plan with the tax man, with Tony Morrow from tax doctor. Inc, and you can find them online@yourplanningpros.com and again, yourplanningpros.com and Tony, this week, we've got a listener question, a variation. Anyway, I'll change it up just a little bit. And you've been getting some of these lately yourself as well. And so we want to talk about this, the pension trade off conversation. And so we'll, I'll just set it up. Let me read the email and then, and then we'll dive into it. All right, okay, all right. So with my pension, the person says I can get $3,500 a month, but the wife gets nothing when I die, or I can take 2900 a month and she'll continue to get all of it after I'm gone. As always, I'm wondering which is better and Tony. It seems cut and dried, like the spouse is sitting there, probably listening, going, duh, take the one where I get money after you die. But let's, at least, for the sake of the conversation, talk about, you know, the pros and cons of both ways. And I think that's what people need to think about when this situation comes up, right? It's not Yes, probably 80% of the time, it probably does make sense to take the spousal continuation, but maybe not always. So let's discuss it. How you doing?

Tony Mauro 01:47

I'm doing good. I've been doing good since first year. So getting ready to dwell into tax season. And we do get this question a lot. And you know what I find with tax clients is I find more of the clients that I've talked to, they actually take the higher amount not knowing. They don't read over their paperwork. Very, very well true. And you know, so I find that, you know, make sure you're before you even dwell into this read this paperwork, make sure you understand before you check boxes. And make sure that you get some advice you have any questions on it, yeah, because one can, you know, really devastate you if you pick the wrong one, but you're, you know, in this case, and this is a topic of mine, because as I get a little closer to the end, my wife has worked for the government for it'll be probably 47 years, but she goes, Oh, wow. And so we'll have this choice in our public retirement plan called IPERs, and, you know, so yeah, me, as a spouse, I'm just like you said, you know, let's take the lower amount, because I want to make sure you know that if something happens to you, that I've got this till I die, right? But the nice part about IPERs, in our case in Iowa, is, if I go first and we're at the lower amount, she can actually bump herself back up to the higher amount. Oh, it's rained or her life. So, yeah, you know, that works. But what a lot of people need to take a look at in this and make some decisions and talk to their advisors about is, you know, the very first thing is, what kind of longevity does the covered person, meaning the you know, person that's going to get this benefit, have within their lifetime? And you know, use that, you know, to make this decision, because obviously, you know, the higher payout shifts the risk to the surviving spouse, correct, and you know that that's kind of a risk. And so that's why we kind of titled this, you know, is this reduction or this $600 a month worth it? Because it does act like a little bit of insurance, you know,

Speaker 1 03:38

if, yeah, for sure, it's like a little insurance policy and that. And I guess we can skip around a little bit, because that really it's easy for us to walk to that conversation piece, because that's what a lot of people tend to think. They go, Well, why don't I take the bigger amount, the 3500 in this example, and invest that $600 difference, and I'll buy my own life insurance, right? And so that's certainly something that people think, and I in their statistics that show I can probably do better and leave some tax free money, because it'll be in a tax in a life insurance policy. And that's fine, that's totally possible, but you need to run the math first and see, and to your point about longevity, that's going to play into that. Because if you don't really have longevity on your side, and you go that route, you may not live long enough to fund that policy exactly. You may not live long enough, and you may not be healthy enough at 6570, they're even going to issue a policy another, I don't think, you know, 600 a month may not buy you a whole lot at that time, because you might, you know, hey, if you can get the policy, it's gonna be well more than that pending.

Tony Mauro 04:35

And, you know, you may not be even insurable. So again, conversation to have, but that is a that's an option, which is why you want to have these conversations, you know, which I think is good

Speaker 1 04:47

well, so you think about, Okay, a couple of different things, right? So let's just go with the standard statistics. Male passes first, the females right behind, typically goes, guys pass away first. So a couple things happen, right? So this, this the shift you talked about, the risk. Shifts to the spouse? Well, a couple of things big, big things happen right off the bat. One is you're going to higher tax bracket. You weren't expecting that, right? So you've got that. You're going to lose one social security, so you're going to go to the higher one. So if you don't have this spousal option checked in on, can you survive the lower income hit right? Depending on what your other assets and the other things you have in place. So talk a little bit about some of those things and how you've seen that. So again, this is it's case by case specific.

Tony Mauro 05:26

Case by case specific. Is exactly it, because you hit all the topics and it needs to be discussed. Because if you have the assets where none of that you just mentioned, it matters, and you still gonna have plenty of income and everything, well then maybe the higher amount, you know, is a better option for you, but more times than not, in our case, exactly what you said happens, expenses don't drop, income drops, and now all of a sudden you've got higher taxes, more you know, same expenses, less income. And you know, then you've underestimated the impact of all this, and by taking that higher amount, you still may not have enough to cover things, and then all of a sudden the whole retirement plan shifts and changes on you. And, you know, do you really want that? You know? And so that's why I think it needs to be discussed. Yeah.

Speaker 1 06:14

And there's a lot of little pieces to that, right? So there's those different pieces. And I think sometimes Tony people kind of fall into that factor of, well, they've heard it forever. Well, they're only going to need half the money coming in when one of us dies anyway, right? So, so we're good any if, even if we did take the bigger amount, because we've got plenty. But half is a misnomer. It's, it's not, it's more like 85% I

Tony Mauro 06:36

think it's, yeah, at least that. I don't. People always say that to me. I said I've never seen it happen. Expenses don't drop to half. Everybody that I've I've worked with, I haven't seen one yet at best, yeah, they dropped 10 to 15. I had one case dropped about 20, but not half. And luckily, in his case, everything else he had, it didn't really matter too much, because he was pretty well off. I mean, he had not only social security, but he had a big pension of his own and a big portfolio, you know, things like that. But I think all those other things you need to have the discussion to figure out where this fits in the rest of your overall plan, right? I mean, with everything else, because that's going to really guide you on what to take, well, you know, or which way to

Speaker 1 07:19

go, yeah, yeah, for sure. Well, how the pension fits in with the rest of the overall plan, right? I mean, that's really going to be a big key. So this is where, again, why not stress test the situation? If this is on your radar, if you're eligible for our pension, right? If you've got somebody in the in the family that's going to possibly be getting one, go sit down with somebody and say, let's look at the different options. Because Tony, just like Social Security, you well, actually, even worse than Social Security, they typically don't come with colas, and there's no do over there's

Tony Mauro 07:45

no do over on this, no. And I think a lot of us, as you get into retirement, I mean, for me personally, I like to, what I value is, I want to make sure that my and my wife's income, you know, it's monthly income, is the way I look at it, is not is going to be the same regardless of who dies first, and the remaining person can be here and have the same income coming in, you know, if one of us is gone. Now, I mean, yes, we've got the nest egg over here that's funding that income, and then Social Security and some other things. But to me that I want more certainty than, you know, a little bit higher monthly amount? Yeah, I mean that, like, say that's just me and for us, you know, I'm gonna assume I'm gonna die first, and if she can go back and get the higher benefit that for her rest of her days, my decisions made already, because, you know, we'll take the lower amount. And if she ends up living me 10 years, well, then she'll she can go back and get that higher amount for all those 10 years, which I think

Speaker 1 08:39

is good. And Tony, what if you already have, like, life insurance in place, right? So again, running these numbers because maybe it makes sense to take the higher amount because you don't need it. You've ran the portfolio, you've ran the Social Security maximizations, you've ran all these things, and you guys are going to be sitting pretty without taking the spousal option. Then fine, right? I mean, what else could you do with it? Right? Can you could spend it, I guess, however you want, while the initial person is here, yeah, and depending, life insurance is a big part of it. Now, what I find in reality,

Tony Mauro 09:11

most clients, generally don't have the life insurance. Toward the end, they usually have all this term, and it starts to run out about 65 you know. So they're past their their bill paying years and debts, and so they don't have it. But if you do, and have some big permanent policy, you know, say you're out there with, you know, 2, $3 million worth, total of permanent life that you can't outlive, meaning that as long as you pay the premiums, they're going to pay out somebody, and if that goes to the spouse when you kick off early, then you know, you could take that $3 million invest it, and probably, you know, get your 3500 a month. So, yeah, it makes some sense to take a look at

Speaker 1 09:47

that as well. Yeah, so we're talking peace of mind versus maximum income. I guess

Tony Mauro 09:51

I think at the end of the day, that's really what it is, is peace of mind, knowing that the living spouse is still going to have something I know again I keep talking to. Out my own situation, but I know, in my wife's case, you know, her hyper is going to be fairly large now. I mean, you know, if something happened to her and we took the wrong and we took the one where it ends when she dies, I'm going to be okay, but, boy, I could be a heck of a lot better, you know, if I continued to get that until, until I died, yeah, but yeah, it for me, it's peace of mind over a little bit bigger benefit. I actually had an uncle. He has now passed where he wasn't he chose the wrong one. He didn't even know he did it. And then it happens. That happens a lot, doesn't it? It happens a lot. He went back and tried to fight him on it, saying, oh, you know, no, you got to give me the one that covers my spouse. And they legally, they would not do it. And he lost that case and and then it ended when he died, which is about two years ago, a spouse still living, and he's got nothing. She got no benefit from that. So real life, real life decisions, and it does happen,

Speaker 1 10:53

yeah, for sure. Well, look, neither choice is wrong, but it does need to align with the overall values and the reality of whatever your financial situation is this decision is about deciding what kind of protection matters most in your retirement strategy, right? So you got to understand the trade off so that you can find the right answer, right? And I think that's where people make to your point about the uncle, you know, if this is something on the radar, make sure, before you elect or ignore that you run a complete, you know, breakdown and scenario to see what's going to be beneficial. Because I'm quite sure, if you go with the title that we used here, Tony for this episode, would you trade $600 a month to protect your spouse? Your spouse is probably looking at you, going, you're better. Yeah, that's right. So no matter which side it goes, whether it's male, female, whatever, but make sure that you're covering your loved one, but again, do the right thing too, because you could find it could be a better solution to go the other way, but you don't know till you run that math right. Any final

Tony Mauro 11:49

thoughts, my friend, no, I would say, as I generally do, this is an important, important decision. And make sure, especially retirees, you know, they're not sure when they read this paperwork. Get advice. You know, if you don't have an advisor, ask one of your children, but, but get with an advisor or somebody before you check the wrong box,

Speaker 1 12:07

yeah, and then make a big mistake. So indeed, well, good stuff, good conversation. And again, topical this month with our chats, because Tony's been getting questions about both of the podcasts we dropped this month. And as always, to you know, learn more, stay abreast of things, or just, you know, get some of the information you need, subscribe to the podcast, or at least, consider it, maybe share it with others who might benefit from the message as well. You can find plan with the tax man on all the major podcasting apps. All you got to do is type that into the search box, plan with the tax man, or just go to Tony's website. Your planning pros.com that's your planning pros.com lots of good tools, tips and resources there as well. Get some time on the calendar and all that good stuff. So Tony, thanks for breaking it down and being with us. We always appreciate your time, and we will see you next time here on plan with the tax man,

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