How Age & Wisdom Play Into Financial Planning

There’s an old quote that says, “Age is the price of wisdom.” Let’s talk about how that applies to the financial world.

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Transcript Of Today's Show:

Speaker 1: Hey everybody, welcome in to this edition of the podcast. This is Plan With the Tax Man with Tony Mauro hanging out with me as we talk investing, finance, and retirement. We are going to talk about age and wisdom and how they play into financial planning. This is actually podcast number 49, which is what I am, Tony. I'm going to be turning 50 here in about a month or so, so I guess pretty good topic for that time period when we're about to turn 50, right?

 

Tony Mauro: Yeah, that's right.

 

Speaker 1: How are you doing?

 

Tony Mauro: I'm doing good. Just back from vacation out in Wyoming.

 

Speaker 1: Nice.

 

Tony Mauro: Spent some time out there. The weather was beautiful and it's beautiful out here now, early August, so can't complain.

 

Speaker 1: Yeah. Well, and even if you did, nobody would listen.

 

Tony Mauro: That's right.

 

Speaker 1: Well, I'm glad you guys had a good time. Wyoming is beautiful, absolutely. My in-laws live out there and it's quite gorgeous. So yeah, as I mentioned, we were going to talk a little bit about this. Like I said, I'm turning 50, and so let's talk about just, what is it, age is the price of wisdom, something like that, right?

 

Tony Mauro: Yeah. Oh, yeah.

 

Speaker 1: I think we all agree as we get older, we tend to get smarter, I think, overall, for the most part. Although some of the things we see right now in the world maybe suggest otherwise, but that's another conversation for another day. Let's talk about from a financial perspective, how do you see your clients changing in their perspectives as they age?

 

Speaker 1: So, I don't know, I imagine your demographic is probably 50 and up, right? You probably have some younger folks as well too, but maybe primarily. As they're kind of moving through their 50s or into their 60s or whatever, do you see them kind of changing their thoughts and perspectives about money?

 

Tony Mauro: They do, quite a bit actually. Most of what we see really, and yes, most of our financial advisory practice is 50 and up. That doesn't mean we don't have people younger than that, but the younger people tend to be on the tax side. Yeah, they're not really that focused on their wealth or money or anything like that, my son being included, he's 25, perfect example.

 

Tony Mauro: As they cross that 50 line, people start to say, "There might be more behind me than there is ahead of me," and they start changing their views quite a bit, especially if they have not saved and they feel like they're behind. So they all of a sudden, and I have a younger brother who just turned 50, and all of a sudden now he's very conscious of the end and the retirement and everything else, and he wants to talk about it, whereas before it didn't even phase him.

 

Speaker 1: Yeah, it didn't bother him, and now since he's aging, it's changing, right? And we all do that. And I think obviously because, well we all know our time horizon is shorter and that we're kind of a little bit more, I guess, afraid of missing out on something or losing something or whatever that case might be. So is there a kind of a constant message or a consistent message maybe that you hear people say that they feel that they wish they had done earlier? Not that it's going to help us, but hopefully it will help sharing that for someone else who's in that spot. I imagine primarily it's I wish I would've started saving sooner. That's usually the one.

 

Tony Mauro: Exactly. Yeah. That's the big one right there. And so hopefully the younger people listening might take that advice and at least start with something, whatever you can afford as a younger person. The next thing I hear a lot of is, "Well, I just wasn't making any money back then." And to that I'd say, "You can always find a few bucks to stash away somehow, some way." And you always have to do that. You always hear the old adage pay yourself first. It's a lot easier said than done. But I do hear that one. I hear a lot of people my age and older that they felt like they were too conservative, that they didn't seek advice or have a plan, that they just kind of stuck some money away, mostly in savings types of vehicles, and they didn't really execute any type of plan is what I hear.

 

Tony Mauro: And again, you can't go back and I try not to draw on the past with them and beat people up about, "you should have done this, should have done that," because obviously we can't change that. But you know, basically I say, "Well, let's chart where we're at and let's see what you've got and where you want to go from there." And you still may be able to do some of the things you've always wanted to do.

 

Speaker 1: Right, that's true. Yeah. I mean, hopefully that's the case. And even if you did start late, and we've talked about many ways that there is to kind of catch up or to do some things, the continuing putting it off, "Well, I've waited too long. I might as well just... what's it matter now," that's just never a good way to go. So there's definitely things that can be done, but you can't keep putting it off. And so as people approach retirement, Tony, do you find that they worry more or less about some of the financial struggles than they did when they were younger? For me, it feels like the kid raising era would be the most frustrating or maybe worrisome, but I haven't gotten to retirement yet, so I can't speak to that.

 

Tony Mauro: Yeah. I mean, I find that they worry more about things than they did when they were younger only because they feel like, especially if they're behind, that there's going to come a time where I can't work and earn money and then I'm going to be living on X amount and that really scares them, especially if that [crosstalk 00:05:13].

 

Speaker 1: That's fair, especially if you know you're behind. But it seems like even folks who are in better shape than they realize still have some of those fears though.

 

Tony Mauro: They do, they do. I mean, they always feel like they're going to run out of money. My dad is one and he has plenty and he's 80 now. But he always feels like I shouldn't spend any of my money because I might run out. And even if you show them, you constantly have to show them, as long as you stay within these parameters, you're never going to run out. But they worry about that. They worry about their health. They worry about, if they have family long ways away, that they're by themselves. And then they have a worry about the eventual, the real end, and are they prepared for that.

 

Tony Mauro: They've got a lot on their mind. You wouldn't think so, especially in retirement. Everybody thinks you're just living carefree and waking up and just going out and having all kinds of fun. And a lot of times they worry a lot.

 

Speaker 1: Well, and the idea is that hopefully by working with an advisor and getting a good plan in place and a good strategy that you can kind of pull some of that worry off the table because the numbers there will hopefully, and the reinforcement, the confidence, a lot of the things that we discussed, will help you not worry as much and take some... where you can. Life is life. We're going to worry. That happens. But try to remove some of that extra strain if we can.

 

Speaker 1: Do you find, Tony, that people change their opinions about the legacy aspect and that's the leaving something behind to the kids? We were just joking the other day, my daughter's doing really great in life, much better than I was doing at this young age, serving in the military and hence we were teasing, I was like, "Well, your mom and I are going to spend all the money now. Since you're doing so great, you won't need it by the time." And she was like, "Wait a second." We were having fun, but do you see people kind of... As a matter of fact, I was talking with another advisor, Tony, who said he was going through the legacy planning with a client and when they got to the bottom number, he's like, "What's this number here?" And the advisor said, "Well, that's what you're going to have leftover to leave to your kids." And he's like, "Whoa, that is way too much. I want to spend some more of that."

 

Tony Mauro: I see. Yeah.

 

Speaker 1: Which there's nothing wrong with that, right?

 

Tony Mauro: Nothing wrong with that.

 

Speaker 1: He's like, "My retirement's a half a million and I'm leaving the kids a million? No, no, no. Let's flop that number."

 

Tony Mauro: Yeah. Yeah. And I do see people, they really get concerned about leaving some sort of legacy as they age. I mean it comes across everybody's mind. And so they want to know really how am I going to be able to live and what kind of lifestyle am I going to have and then am I going to have enough to leave something to my heirs? Now there's all over the board opinions with that, like you were getting into with that other advisor, but most people do want to leave them something if they can.

 

Tony Mauro: The real astute people have a kind of thought in their brain of doing, "I want to do this, this and this. And I want to make sure that not only it goes to my kids, but my grandkids," and they've really thought it out. And that's where you need some real help with an advisor and maybe even an estate planning attorney, depending on what's involved, to make sure that you have exactly what you want to legacy. I know I have. I mean, I didn't start thinking about it until I was about 51 52, but ironically, on vacation last week, my wife and I were talking about, "We need to get kind of our little, what we call our life book, finished up and updated," just so in case we both go at the same time or one of us dies suddenly, the other one knows what to do. And the legacy is important to us. We want to make sure that that gets passed to our son.

 

Speaker 1: I think that's where a lot of people feel like. I don't know, Tony, maybe there's no right answer to this, but maybe at the end of the day, a fair or healthy answer is enjoy what you've built, whether you're solo, or together, or whatever the case is. And then if there's something left over, then leave that to the family, or at least at their minimum, don't sacrifice anything more for yourself, because we all sacrifice for our kids all through life. And I get that that's part of it and some people might say, "Well, I want to continue to do that." And that's totally your prerogative, but I think once we get to retirement, maybe we've earned the right to no longer sacrifice as much, to me anyway. You know what I mean?

 

Tony Mauro: Yeah. And I would agree with that. Again, everybody's different, but you work 40, maybe 50 years doing all kinds of things and you're finally able to, like you say, retire, you've got some health left, you've don't have a ton of worries other than what we just talked about. There's some ways that you could... but you got to think about this when you're a little younger, is if you do want to leave your kids something is using life insurance and some other things and saying, "All right, if I spend every dime, I'm still going to go knowing that you're going to get something because the life insurance is going to pay out."

 

Tony Mauro: So there's all kinds of ways to tackle that, but yeah, I would agree most people, I think they continue to want to sacrifice even in retirement, maybe a little too much so, the ones that I work with.

 

Speaker 1: And finally then I guess if you're talking about just the opinions of money and the changing, all that kind of stuff, and legacy, I guess really it comes down to, Tony, how the risk plays into it. You know, all of the fears to me always circle back around to the entire risk factor and certainly the last two, basically we're now going into two years, has just been nothing but risk, upon risk, upon risk in all aspects of life, and so it becomes really hard to manage it.

 

Tony Mauro: And people's opinions, obviously, people can kind of figure this one out, as you get older, generally people get more conservative with their money because it's that whole, "I don't want to lose it because I don't have any time to make that up and I don't need to take on a lot of risks," which is okay. I think though if you don't have some sort of plan and you're not monitoring the plan, you could be cutting yourself short in terms of what you can earn on your money, depending on what the plan is, versus just sticking it in a bank account so to speak. And I'm not saying that that's all bad, but it's probably all bad if all of your, in money, for lack of a better word, is there, because you're not going to be able to draw a whole lot on it.

 

Tony Mauro: I have a couple of clients though that they said, "You know what, I don't care about that. I'm just going to draw on my principle and when I run out, then I've got this pension over here and then that's it." And for them that works. But a lot of people don't like to do that. They want to live off of the earnings and dip into the principle once in a while, give money to the kids. But generally, it's more conservative.

 

Tony Mauro: I don't have a lot of clients that I work with that really watch the TV like the young people do.

 

Speaker 1: Well, that's good.

 

Tony Mauro: I mean, they watch it, but they're not in my office like my last tax client was in here saying he wants to buy some Robin Hood. Well, "Okay why," I asked him. "Well, I don't know. It looks good."

 

Speaker 1: Well, let's talk through that, right?

 

Tony Mauro: Yeah. We need to talk through that a little bit.

 

Speaker 1: And that's the value. To me, at the end of the day, Tony, that's always the value of working with a financial professional such as yourself is you're just not going to get that from... the relationship is there so you can like ring up you and go, "Hey, I'm thinking about X, Y, or Z and I think it's a cool idea. Tell me why it is or isn't." You're not going to get that from a robo service or maybe even some other really large big brokerage houses. Not to say that you can't, but I think we're a bit more numberized when we go there.

 

Speaker 1: It's like, "Well, this is Nr. K5743216. You know, they've got this file number or whatever. And granted, we all do that in every business, but I think there's certain industries where just still being able to ring up somebody and say, "Hey, Tony, what do you think about me trying to buy a 1969 Chevelle? How's that going to mess with my retirement plan?" And you're like, "All right, well let's look at the best ways to get that money for you to get that."

 

Tony Mauro: Yeah, and most clients that we work with obviously, as most advisors do, we use some financial planning software and the plan generally is out there in the Cloud, so we're always updating it and whatnot. And so, yeah, it's easy for them, the clients, and us to take a look if something like that happens and you want to do that.

 

Speaker 1: Yeah. Because it's all about efficiency too, right? I mean, you may have the money, and I think sometimes when we think about a one-off thing has come up or happen and we really want to do something unique or special or whatever, and that's what the retirement money is for, hopefully we're in a position where we can do that. But don't go grab it willy-nilly without talking with your advisor because often I think what it affects, Tony, is the whole longevity aspect.

 

Speaker 1: Well, the plan was going to work for you to get to 95, but because you went and spent $50,000 on this '69 Chevelle without working with me on the best place to take the money, well that's going to shorten you up to about 84. So that's the kind of things we have to look out for. And I mean, it's our money at the end of the day. If we want to do it, we want to do it. But that's the value and the beauty I think of working with an advisor who can say, "Okay, this is the goal, so let's figure out how to be the most effective and the most efficient so that we can still keep that 90 number or that 95 number for longevity."

 

Tony Mauro: Yeah and the other thing in there with that besides longevity generally is taxation.

 

Speaker 1: Right.

 

Tony Mauro: And if you go start pulling a bunch of things out the wrong way, then you're going to be hit with unnecessary taxes, which is going to eat into that longevity.

 

Speaker 1: And that's that efficiency factor, right?

 

Tony Mauro: Yeah. Yeah.

 

Speaker 1: Okay.

 

Tony Mauro: You got to watch that.

 

Speaker 1: So with age comes wisdom and sometimes... I mean, my mom's 80 as well, Tony, and sometimes she acts more like a teenager than she does an 80 year old. So I think that's okay as well, but that's why we have to have a sounding board and bounce some things off and that's one of the reasons we do the podcast to hopefully share some nuggets of information. Because for many of us, maybe this is, like me, like I said, I'm not retired yet so I don't know really what to expect and there's hopefully some insight in there for people. And if that's the case with you and you need some help or you've got some questions, well, a couple of things you could do, you could subscribe to the podcast, catch more episodes as they come out, or you could just stop by the website and book some time with Tony or learn some more.

 

Speaker 1: Lots of good information at yourplanningpros.com. That is yourplanningpros.com and that's how you can get in touch with Tony, book some time. You can find all the podcast information. There's a lot of good tools, tips, and resources. So all of that's available to you. Make sure you reach out and take some action. Before you do anything, you should always check with a qualified professional like Tony Mauro, who is an EA and a CFP at Tax Doctor, Inc.

 

Speaker 1: All right, my friend, I'm going to let you go. Have yourself a great day and a great week and I'll catch up with you a little bit later on this month.

 

Tony Mauro: All right. Sounds good.

 

Speaker 1: Appreciate your time as always folks here on Plan With the Tax Man with Tony Mauro. We'll see you next time.

 

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