April Fool’s Day is all about jokes and pranks, but when it comes to retirement planning, getting fooled can cost you real money. Today, we’re uncovering the beliefs that fool retirees and pre-retirees into making bad financial moves.
Important Links: Website: http://www.yourplanningpros.com
Call: 844-707-7381
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Transcript:
Speaker 1:
It's time once again for another edition of Plan With The Tax Man. And April Fool's Day is around us, all abou...
April Fool’s Day is all about jokes and pranks, but when it comes to retirement planning, getting fooled can cost you real money. Today, we’re uncovering the beliefs that fool retirees and pre-retirees into making bad financial moves.
Important Links: Website: http://www.yourplanningpros.com
Call: 844-707-7381
----more----
Transcript:
Speaker 1:
It's time once again for another edition of Plan With The Tax Man. And April Fool's Day is around us, all about the jokes and the pranks, but when it comes to retirement strategies, we want to make sure we don't get fooled in a way that can cost us any real money. So let's talk about that this week here on the show.
What's going on everybody? Welcome into the podcast. This is Plan With The Tax Man, with Tony Mauro from Tax Doctor Inc. Serving folks all around the Iowa area. If you've got some questions, some concerns, need some help, please check him out and go talk with a qualified professional like Tony online. You can get some time on this calendar@yourplanningpros.com. That's yourplanningpros.com, or you can call him at 844-707-7381. We'll have information of the podcast if you'd like to click on those as well. Tony's got 30 years of experience helping people get to and through retirement, and a great resource for you to tap into. So, Tony, it is April Fool's Day-ish at the time we're dropping this. I think we're dropping this like maybe a few days beforehand, but are you a big prankster?
Tony Mauro:
I'm a huge prankster.
Speaker 1:
Are you?
Tony Mauro:
It's my second favorite holiday, yeah.
Speaker 1:
Oh, okay. All right. So does your wife get tired of it?
Tony Mauro:
My wife gets tired of it, my son, my dad, everybody.
Speaker 1:
Okay.
Tony Mauro:
But they play them on me too, so yeah, we have a lot of fun with April Fools.
Speaker 1:
Good. That's good. Yeah, my dad was pretty bad about it when he was with us. He was always pulling something on his family members, so it was like, all right, now you had to be on guard whenever it rolled around.
Tony Mauro:
Absolutely.
Speaker 1:
You knew he was up to something. But let's talk about a few categories here from a financial standpoint where we don't want to get fooled, Tony. We want to make sure, and look, it's super easy right now. Right. I mean, between the news headlines, social media, the polarization of people, whether you're left or right, you like the administration, you don't like the administration. Everybody's got an opinion every six seconds of the day. Right. And so it's very, very easy to see a bunch of stuff that maybe kind of gets you all worked up. Right.
So we want to make sure that we're not just stepping in something just because we're having a visceral reaction to some sort of media bombardment or whatever. So let's start with the high returns since obviously right now, Tony, we had a choppy March, right? So the markets were choppy. I think it's easy when we find it, we all love it when it's high, right? So we all love the market when it's doing well, and we've had a pretty good market for, let's be honest, we haven't really had a prolonged downturn, right? Since 08, 09. If you think about it, we're closing in on 20 years since we've had a sustained prolonged downturn.
Now we've had blips, we've had the COVID downturn, and we had different things. 22 was rough for a little bit as well, but it's not been sustained more than a couple of months, right? So I think people that are kind of get lulled into the, Hey, the market's beating you up, let's get you into this product that's got guaranteed high returns. Be careful of that, right? Make sure you're really doing your diligence and reading the fine print.
Tony Mauro:
Yeah, you do have to have that, because it is, and I always know when maybe the markets are possibly too high, when everybody, especially people that are just tax clients, aren't wealth management clients are saying, "What do you think about this stock? What do you think about that stock?"
Speaker 1:
Right.
Tony Mauro:
And,-
Speaker 1:
Or should I get into an annuity or whatever?
Tony Mauro:
Yeah.
Speaker 1:
Yeah.
Tony Mauro:
All that kind of stuff, because they think that because where we've been for the last 20 or so years, returns are easy and there's some foolishness to that, I would say.
Speaker 1:
Some fool, yeah, fool's goal, I think that's a good way. Yeah.
Tony Mauro:
Because you got to look at it this way. High returns do come with volatility and some risk. And so whether it's in a stock or you're locking yourself up in an annuity, which is a whole different type of product, then you certainly got to understand what those risks are and have that explained to you. And if that's not your appetite for obtaining that return, which we always work off, we're trying to get you the best return based on how you want to get to point B, so to speak, with the least amount of volatility and the least amount of potential tax consequences. Now that may not be, and even come close to say S&P 500 returns, but for you that might be good, but for somebody else,-
Speaker 1:
Good point.
Tony Mauro:
It might not be.
Speaker 1:
Yeah.
Tony Mauro:
But don't just say, well, I want the highest return out there because there's always something new. Nobody, in my opinion, can accurately predict what the market is going to do tomorrow in the short term. Now, a lot of them, obviously, it's pretty easy to say, well, over the long term, that the market's the place to be.
Speaker 1:
Oh, the market always comes back, right? I just saw this earlier today. We were just chatting about it, you and I, before we jumped on the podcast, and it was like, people are freaking out. "Oh, I'm losing my retirement because of this 10% correction we've had in March." And it's like, okay, first of all, and the immediate comment from someone is, "Well, don't worry. The market comes back." And they freak out and they go, "Well, I don't have time to wait for it to come back." Well, if you didn't have a strategy in place and you were planning on retiring and a 10% correction crippled you, then you weren't in good shape to begin with anyway.
Tony Mauro:
No.
Speaker 1:
Right.
Tony Mauro:
And you shouldn't have been in the market if you're ready to retire or you should,-
Speaker 1:
Not at 10%. Yeah. Yeah.
Tony Mauro:
Not there. So it is,-
Speaker 1:
Exactly.
Tony Mauro:
We constantly battle that with tempering and making people understand and get their whole plan in front of them, just so they're not so focused on what's going on today,-
Speaker 1:
Right. Right. Yep.
Tony Mauro:
In the news.
Speaker 1:
Yep. Which is the point of this podcast this week is, the April Fools, not that it's April Fools that they're pulling a prank, so to speak, but it's just kind of being fooled into things because of the constant bombardment of the media. You and I talked on the last podcast that in the course of the same day that we were chatting, the news cycle ran from the sky is falling earlier in the morning with the market to, oh, the outlook is looking pretty good because the inflation numbers came in and were down a half a point or a point.
Tony Mauro:
Yeah.
Speaker 1:
So they just run with whatever's going to get them eyeballs. So just make sure we're, I think we all know that, but whenever we start to panic a little bit, that's when that little devil on our shoulder kind of creeps up and taps us and says, Hey, be worried. So let's talk about the next one, which is the tax time bomb. Getting fooled into underestimating taxes on your account. And here's the angle I wanted to take on this, Tony. So again, regardless of what your political slant is, if you find yourself, and here's, let me set this up. It's going to take a second, folks, but I think it'll, hopefully it'll make sense.
I'm one of those people, Tony, that my personal health and the family history says I'm going to probably pass away young, right, in my 70s. Now I could totally plan to liquidate and blow through all my money and have big fun and spend it all by 72 when I think I'm going to croak. But if I'm wrong, right, I'm going to be screwed. I'm going to be screwed, right, because I'm not going to have anything. Well, if you're right now, if you're all excited about the no tax on social security, no tax on tips or the conversation about abolishing the IRS or getting away with, great. Look, if that happens and they get rid, I think I'm sure we'll all be dancing in the street if they get rid of the IRS.
However, if they don't, don't you think you should have a strategy for dealing with the tax time bomb that you're probably sitting on, right? And that's my point, right? If you've got a million dollars sitting in a 401K, don't just kind of like go fool's gold and think, Hey, Trump's going to eliminate all the taxes and Bob's your uncle and you're going to get to keep all that money. Be smart in the event that you still have to pay your RMDs or whatever.
Tony Mauro:
And I mean, you look back through all of history. Now, keep in mind what I tell people when they start talking like this is, tell me where you think that this, the biggest arm, the only arm almost for collecting the accounts receivable for the US government is, which is the IRS. They're going to go away. How do you think the government will function? Now, maybe they'll, like you said, maybe they'll come up with something over time.
Speaker 1:
Sure.
Tony Mauro:
And,-
Speaker 1:
Maybe the tariffs will be the end of the solution, whatever, right?
Tony Mauro:
Maybe it will.
Speaker 1:
Right.
Tony Mauro:
But history points to, it's probably not. And many, many of us, I can't remember how many trillions is probably in the 401Ks right now, but we have,-
Speaker 1:
That's a lot. Yeah.
Tony Mauro:
We all have an IOU.
Speaker 1:
Oh, yeah. It's almost 40 trillion, Tony. I'm glad you mentioned that.
Tony Mauro:
It's 40 trillion?
Speaker 1:
Yeah. Because the debt's 36 trillion, and they're always talking about the target that is, the retirement accounts is about 40 trillion out there.
Tony Mauro:
We got 40 trillion. It's all in traditional 401Ks and of course,-
Speaker 1:
A lot of tax money.
Tony Mauro:
A lot of tax money. The IRS wants it. We all have an IOU to Uncle Sam with that money. And they know that and they want pieces of it. Hence, they're changing rules as we speak, that nobody seems to pay attention to when somebody dies and you inherit some of this stuff because they want their money.
Speaker 1:
Yeah. Oh, yeah. And look, regardless of your stance, if DOGE does a good job and gets rid of some of the debt and some of the spending and our national debt's able to come down, maybe we don't have to tax ourselves into oblivion. Maybe that's the upside, right? Instead of going, we're in historically low tax rates, right, with the TCJA.
Tony Mauro:
Just going to say that. Yeah.
Speaker 1:
And at the time we're here taping this, Tony, we still don't know if that's going to get extended or not, right? Maybe it does, that's the prevailing wind, but maybe it does, maybe it doesn't. But at least if nothing else, if it does, then we don't have to necessarily go up in taxes. But you're still going to have to have a strategy for being tax efficient, because that's a big chunk of your retirement money.
Tony Mauro:
And that's what we focus on, is trying to be as tax efficient as possible, especially from the tax angle side, from being tax people that we want to make sure that they're not getting any more than they have to.
Speaker 1:
Right.
Tony Mauro:
And so you have to, especially on the distribution stage, really be strategic about it and make sure you're following the rules and that you're not overpaying just because you don't know any better. And I think that's really the gist of it. And I would also encourage anybody go out and google the history of the tax rates. And you're right, we're at historically low tax rates compared to where we were just even in the 80s.
Speaker 1:
Oh, yeah.
Tony Mauro:
And so,-
Speaker 1:
Well, even during the prior administration. If the TCJA expires, right, we're going back to what it was under Obama administration tax code. So even that goes up a little bit, so.
Tony Mauro:
But that goes up. Now one could say, well the way to fix all this is just raise taxes. Well,-
Speaker 1:
And nobody wants, I mean, look how we whine about,-
Tony Mauro:
Nobody's going to do it.
Speaker 1:
Yeah. I mean, we get all bent out of shape about the stock market dropping 10%. You want to pay 10% more in taxes? Of course not.
Tony Mauro:
Yeah. No. Nobody wants that. Nobody politically seems to want that. And of course, if you can't, it's like in business, if you can't control your spending, it doesn't matter how much you bring in.
Speaker 1:
Yep. That's what,-
Tony Mauro:
Right. I mean,-
Speaker 1:
Right.
Tony Mauro:
You got to do something.
Speaker 1:
Isn't it wild where we're at as a society? We all know we got to control spending, yet when you get somebody in there that starts doing it, they start screaming foul and going, why are you cutting spending? It's like, because we have to. We're $36 trillion in debt. That's crazy.
Tony Mauro:
That whole thing is,-
Speaker 1:
We're in the goofiest time period.
Tony Mauro:
Hours.
Speaker 1:
Yeah.
Tony Mauro:
Yeah. It's just crazy. But we have to, as advisors and as the public, we got to work with what we have.
Speaker 1:
Right. You got to play by the rules. Yep.
Tony Mauro:
We got to make it try to work for us and I think that's importance of planning.
Speaker 1:
Yeah. I've said forever and a day, that it's their chessboard. We have to play by the functioning rules of the chess piece, right? If we're that chess piece is able to move one step at a time, then that's all we can do, right? So,-
Tony Mauro:
We're done.
Speaker 1:
We have to do those different pieces. So again, no matter what your political slant is, the point of this is you don't want to kind of fall for any one thing, one side or the other. You want to have a good strategy in the event that it does come through, or the event that it doesn't come through. Because you want to make sure that you can hopefully retire as efficiently as possible in any administration or any economy or whatever the case might be. So final one, we'll wrap it up this week just on a couple of things to be careful with, because we knew these were going to be some big ticket items Tony, is Medicare misunderstanding.
We'll switch gears and go to this one. Especially for the folks that are getting close to retirement, their first time stepping into it. My brother just got to 65. He's trying to get his bearings with understanding Medicare and the different things that it does. My mom's 80, in her mid 80s and she's quite used to it, so she's trying to school him on some things, but there's a lot of miscommunication out there on what it covers and what it doesn't.
Tony Mauro:
There's tons of it and it's very complex. And then you add on to the top of it the federal government bureaucracy, and it makes it kind of a nightmare for a lot of retirees. But I can tell you this, it certainly doesn't, do not be fooled, it does not cover everything in retirement.
Speaker 1:
Correct. Right.
Tony Mauro:
You've got to make sure that you have some of these gaps and things covered.
Speaker 1:
Yeah.
Tony Mauro:
And that's where what I do is I have a Medicare specialist that I consult with for clients because I can't keep up on all those rules and he helps me with clients. And now of course, if he ends up selling them some insurance they need, well, obviously that's how he gets paid. But nevertheless, he really has the ins and outs of what it does and doesn't cover. And then also, okay, if something's not covered, are you willing to spend X to get it covered? And,-
Speaker 1:
Good point.
Tony Mauro:
Like everything else, you got to make a decision. Do you want to keep that as a gap and take that risk, or is that risk too big? But boy, Medicare, I mean, it serves a good base, but it does not cover everything and you really need to be on that.
Speaker 1:
Yeah. Even within the same category too. And don't forget that they changed the way it's set up and providers can shift too. Like my mom recently, I think in the last couple of years she's gone through three different dentists because something happens with the program and the dentist she was going to says, "Well, we no longer accept it." Right. So, which is, I didn't think you could do that, but apparently you can. So different places can accept different things at different levels. So you have to kind of see who's in network, right, and who's out, all that kind of stuff.
Tony Mauro:
My dad's like that. And like I say, he's 83 and he is over insured in this area because he like buys everything just because he doesn't want any gaps. And I think he, we tried to get him not to do that and because he's actually kind of wasting a little money.
Speaker 1:
Sure. Sure.
Tony Mauro:
But sometimes it does work in his favor.
Speaker 1:
Makes him happy, right? So,-
Tony Mauro:
Makes him happy.
Speaker 1:
He walks in and he's covered, I guess, so.
Tony Mauro:
He's covered. Yeah, I mean, he's got coverage, but to your point, sometimes it changes and then he sees a lot of different doctors and whatnot, not because he wants to, because like the plan change covered and they say, "Nope, you got to go over here now."
Speaker 1:
Yeah, exactly. She sees the same thing. So a lot of misunderstandings when it comes to Medicare as well. So just make sure that you're working with some professionals who can help you. Most advisors, offices, if they don't have a Medicare person on staff, they usually have someone they refer people out to so they can kind of, especially someone who does this in and out every day, they kind of know the nitty-gritty a little bit better. So if you need some help with that, as always, make sure you're reaching or any of the stuff that we talk about, make sure that you're talking with a qualified pro like Tony and his team at Tax Doctor Inc. You can find them online at yourplanningpros.com. That is yourplanningpros.com.
Don't forget to subscribe to us on Apple or Spotify here at Plan With The Tax Man. Simply type the name of the podcast into the search box. You can find it that way. Or just go to the website, make it easy on yourself, yourplanningpros.com. We'll have links in the descriptions below. And as always, we appreciate your time. Tony, thanks for hanging out my friend. And don't be too hard on folks when you pull some pranks on them in April.
Tony Mauro:
Oh, no. No, I'll just get my family and we'll see what happens. I'll let you know on the next podcast.
Speaker 1:
All right. Let me know how it goes. Yeah, my dad was crazy. He would pull something that got a little mean-spirited sometimes. It's like, all right, now you need to back it off a little bit there, bud. So have yourself a good one, folks. We'll see you next time here on Plan With The Tax Man.
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.
