Secret To Retirement Success: Get Out Of Your Own Way

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

Important Links

Website: http://www.yourplanningpros.com

Call: 844-707-7381

Transcript Of Today's Show:

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

 

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

 

Host: Spring is sprung?

 

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

 

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

 

Tony Mauro: That's right.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Host: Yeah, it is.

 

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

 

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

 

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

 

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

 

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

 

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

 

Host: Why are you panicking? Yeah.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Host: That's a good point.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Tony Mauro: Yeah boy.

 

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

 

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

 

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

 

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

 

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

 

Tony Mauro: Not to my knowledge.

 

Host: No.

 

Tony Mauro: Over the long term, no.

 

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

 

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

 

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

 

Tony Mauro: Some annuities in certain cases.

 

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

 

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

 

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

 

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

 

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

 

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

 

Host: Vinyl final, you know?

 

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

 

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

 

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

 

Host: Yeah, exactly.

 

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

 

Host: Absolutely.

 

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

 

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

 

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

 

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

 

Tony Mauro: Yeah. For sure.

 

Host: Absolutely.

 

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

 

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

 

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

 

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

 

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