Don’t Fumble Your Retirement In The Financial Red Zone

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

Important Links

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

Website: http://www.yourplanningpros.com

Call: 844-707-7381

Transcript Of Today's Show:

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

 

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

 

Marc Killian: To eat.

 

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

 

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

 

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

 

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

 

Tony Mauro: Exactly.

 

Marc Killian: Now it really stings.

 

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

 

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

 

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

 

Marc Killian: Oh, absolutely, yeah.

 

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

 

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

 

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

 

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

 

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

 

Marc Killian: No.

 

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

 

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

 

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

 

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

 

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

 

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

 

Tony Mauro: Missing out, yeah.

 

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

 

Tony Mauro: Exactly.

 

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

 

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

 

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

 

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

 

Marc Killian: We have a collection of stuff.

 

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

 

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

 

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

 

Marc Killian: Right, right. Yeah.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Tony Mauro: Right.

 

Marc Killian: Yeah.

 

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

 

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

 

Tony Mauro: Yeah.

 

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

 

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

 

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

 

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

 

Marc Killian: And that costs.

 

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

 

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

 

Tony Mauro: No, not free.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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