Why Retirement Planning Ain’t What It Used To Be

Plan With The Tax Man

Let’s explore how a good financial advisor helps people overcome the additional challenges of today. Our parents and grandparents may not have had to face these things, so just relying on the experiences of family members might not be enough to help us achieve our own financial success.

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Transcript Of Today's Show:

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

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

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

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

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

Tony Mauro: Yeah.

Speaker 1: Yeah.

Tony Mauro: Yeah.

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

Tony Mauro: You're in good shape.

Speaker 1: Yeah.

Tony Mauro: Absolutely.

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

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

Speaker 1: Happy birthday to him.

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

Speaker 1: Right. Yep.

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

Speaker 1: Yeah, exactly.

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

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

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

Speaker 1: Well maybe.

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

Speaker 1: Right.

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

Speaker 1: Yep.

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

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

Tony Mauro: Wow.

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

Tony Mauro: Yeah.

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

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

Speaker 1: Yeah.

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

Speaker 1: Going crazy. Yeah.

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

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

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

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

Tony Mauro: Yeah, just...

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

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

Speaker 1: Yep.

Tony Mauro: And it is a principle for him.

Speaker 1: Yeah.

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

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

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

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

Tony Mauro: Well, yeah.

Speaker 1: That happens too.

Tony Mauro: Yeah. You get that way.
Speaker 1: That is true. And you earned it, so that's okay.

Tony Mauro: That's right.

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

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

Speaker 1: Yeah.

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

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

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

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

Tony Mauro: Yeah.

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

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

Speaker 1: Right.

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

Speaker 1: Yeah.

Tony Mauro: With some of that.

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

Tony Mauro: Yeah.

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

Tony Mauro: Yeah.

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

Tony Mauro: Yes.

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

Tony Mauro: Yes.

Speaker 1: So.

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

Speaker 1: Yeah.

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

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

Tony Mauro: No. No.

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

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

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

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

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