Retirement Regrets

Mr. Stillman's very dramatic job well. John, the skidoo will be heard. Steve Graham's entire first time on this. Just well podcast welcome myself. I was quite the opening until it's a 40 year radio veteran when you know it's just a matter of the tools of the trade. For instance, you know, you've probably seen a carpenter do his job and he takes a nail and hammer in one pound and the nails and well when you do what we do will you try to perfect tools of your trade. So over the years of book reading medical books to learn how the esophagus and the diaphragm and taking vocal lessons to know how to get to the notes by pushing the air in your nose you've learned how to do things like ministers to sell things like I had a voice and diction class in college that I probably didn't pay quite enough attention, but it was interesting. We talked about a lot of that biology stuff to our anatomy. Whatever it is was a good instructor in broadcasting school which I once took what I was going to college for auto body design, but I always wanted to be a broadcaster, so went that direction, and he used to roll up Billboard magazine and used to hit me upside the head if I couldn't say WW so you know they're just some things in life you practice long enough in you may not be great at it but they become naturally well I'll try not to hit you with a rolled up newspaper today like a naughty peas on the floor. Let's get wanted to let you do all the hard work and what you do most of the ministerial little bit and then working to get some good nuggets that I found you in this in this podcast today and you can pass along to you know all of our great clients. So… So let's do that retirement it once we made some decisions you know you gone in a direction or down a fork in a row and you look back a couple years later and you man I wish I would gone this way which there's probably hard to avoid having no regrets about your retirement plan which what your advice. How can we, how can we avoid maybe those pitfalls. Well that is a good old quote from somebody I care who it is. But the quote is basically paraphrasing here, but smart people learn from their mistakes and geniuses learn from other people's mistakes right enzyme Ottoman Einstein." Get credited Einstein, let it not what the idea here is it we have the opportunity to help clients who are retiring are getting close to retiring.

We have the opportunity to help them learn from other people's mistakes because we see other people make mistakes in years past, and so the collective wisdom that were able take from folks. A lot of people come in our office with sort of a mess that they made in their coming to us to help them fix it so we get the perspective of the mistakes they made which we can then pass on other people.

Hey look out for this now. I wanted to ask you about taking funds from some places to finance other things okay for instance robbing Peter to pay Paul a call. I want to buy me checks okay so I'm an need some funding and I figure I could tap into my possibly my IRA to do that or maybe even my life insurance that has cash value is is that it good idea or not. Well, that's a great example of something that could be a regret down the road if you didn't do it with a plan in place that shows you all right, if you're going to take this money out here is why it's not going to hurt you when you're 85, because he ran out of money, so there was actually pull the USA Today published not too long ago that listed retirement regrets, and one of them was premature. IRA withdrawals now for you. We don't think of it as being premature because you pass that magical age of 59 1/2 and just last week he passed that it don't feel a day over 40 so you've passed that age and you can take money out of your IRA with no penalty. It still taxed as income. But you don't have that 10% penalty well premature IRA withdrawals were a lot of people would be then taking it out at 53 to pay for something they're paying tax and the additional 10% penalty. So any time you do that you almost always look back and regret it. But it could be a premature IRA withdrawal from the standpoint of its immediate reach 59 1/2 but you taking the money out before you should relative to your income plan so I guess that we don't want to be taking out money to buy a boat or in your case a beach house paying the taxes on that money and maybe cutting our IRA by 10% or 15% and that's money that were going need growing, 15, 20 years down the road so that our income in our later years of life are covered. So if you're going to be taking a big chunk out other tax-deferred account like that.

We want to be sure we understand the implications of that withdrawal 20 years in the future. NRP good earning years.

You know that's we can. I think to spend it. What we make and when you're saying I'm making as much money as I ever did now so I'm going to enjoy my vacations. I'm going to buy a new car every three years and I think we often think that we can keep making that kind of salary or income for ever. But at some point going downhill with the Inca little phenomenon called lifestyle creep right so as your income increases your lifestyle creeps up to match that income and the people that I've seen the most successful are the people who keep their lifestyle at a certain point, no matter how much their income increases the great example is doctors who go to med school and their living like poppers when in med school and then when they get out of med school essay on the doctor to get this new card is big house and yeah, I've got $365,000 of med school debt but I'm going to live the doctor life, whereas the people who get out of med school and continue living from a lifestyle perspective, as if they're in med school, and they put all that extra income to their student loans and the student loans are gone less than five years. Those of the people who really help themselves out on the road as opposed to people who keep the student loans around for 20 years right and so same thing when you're in your prime earning years is very tempting to like you said to spend that money on cars and vacations and things like that. But the reality is that's a very important time in your life where if you can keep your lifestyle the same. You really have the opportunity to set up orgasm. The fire from a saving standpoint) so kids are probably gone hopefully are done paying for college now you have the chance to make a lot of money.

Keep your lifestyle where it is and maybe max out your 401(k) for the first time ever, or an IRA or contribute some money to an after-tax account that you haven't before really build up your emergency fund or money market maybe pay off the house of the house is paid off. That's yet another reason that you can save even more so. I've seen a lot of people who have saved as much money in the last five or six years of their working life as they did the 20 years before that and so a lot of cases you get your mid 50s late 50s and you sort of feel behind from a saving standpoint which is logical. You know you been raising kids things like that.

A lot of expenses that have come a long way but now your past that stage of life. It's a great opportunity to really save a lot.

So get caught up in lifestyle creep of spending too much money. There's a lot of folks you have extemporaneous income you know more than they they have to do used to pay bills and so they're out buying a car and then you get a boat in the gutter, snowmobile, and most people don't pay cash for those things. Most of those they put it on some kind alone, and then the next thing you know you got it $300 car payment and hundred $50 snowmobile payment and you get payment for this and the payment for that and one day you wake up and you go. We I guess I am in debt it's and that's not the best way to be able to put money away to save for retirement when you're putting it to pay off your snow and this is kind of the lifestyle creep on steroids. Not only are you spending all your money or spending money belonging in creating that and that the problem is as you make more you have the ability to borrow more money and so if you spent your entire life in this debt mindset to pay for everything it does. It can get really bad in these years where you don't have as many obligations and you could just pay for stuff but instead of paying for stuff you acquire data. Men were either in a this push what were trying to get ourselves debt-free before we walked off into retirement or it could be that you're looking at maybe working eight or two longer because you don't want to enter retirement with all this consumer debt. Interesting. I thought about that credit scores your credit scores that are very high.

The people to have those usually have little or no debt and so you will be inundated with solicitors who will tell you, you can buy two cars three cars or two houses, three houses, whatever it is because your credit scores at high, but those people who have credit scores like that know that the reason is high and the reason they can buy whatever they want whenever they want is because they haven't been neglectful and gotten into debt or at least make sure that their debt is minimal.

Like maybe just a house payment. No cars. There's an old saying that banks are institutions that are willing to loan money to people who don't need loans and won't lend money to people who meet and it's currently talking so don't retire when you get around my age. You know you're trying to decide what should I hang it up. Should I retire now. I mean if you have the option, should I keep on working. Should I make some combination is there for what reasons would I want to retire early. Well, you know, retiring early means different things to different people suffer some people retiring early simply means retiring before full retirement age of 66 or 67 as it relates to Social Security up the some people retiring early means retiring before 59 1/2 before they can get their IRA money penalty free. So first of all we have to look at what's your definition of retiring early.

Now the reason this is a regret for a lot of people is because they feel entitled to retire so I go ahead and he quit the job have the big party. They walks off into retirement and then they get a couple years then, and they realize, whoops, I should have waited a little longer because now I have to go back to work or cut my lifestyle. In fact, that a blog post about this recently comparing it to the mishap. If you will, at the Oscars a few weeks ago right church where the guys from La La land.

They get their name announced and they come up to get their Oscar and then they find out. Whoops. No, this belongs to the folks from moonlight well same thing in retirement.

If you at least know before you retire. Yeah, you need to work a couple years longer, it might be disappointing, but it's not the same level of disappointment as if you'd retired and then found out you had to go back. It's like getting called upon the stage and sing, you won the award in the signal you have to give it to somebody else. So be sure you have that plan in place don't head off into retirement until you know that it's time because I promise you it's much more palatable to find out before the fact you need to work longer instead of learning may have to go back to work. Some people choose to retire early.

Other people had no choice in this economy and this America. In this last 10 years.

There were a number of healthy working individuals who, through no fault of their own were taken out of the job market could have been agent, it could down sizing whatever it is I can honestly say that I was laid off at mail. I won't say what age, but I haven't had and haven't been able to have a full-time job for the last six years. Unfortunately, I'm okay with that mind by didn't want to retire but I would love to at a certain point have somebody say steep.

Come and join us full-time, but it didn't happen. So what what about people who been taken out of the workforce and had no choice and been forced to retire early what your advice to the well accepted friends, who wrote a book called forced to retire, which is about that very thing.

You get the early retirement buyout or you just get laid off in your sort of in no man's land because you're old enough that you do not really ready to launch a new career and nobody really wants to hire you for a 15 year position when you're in your late fee or you can have the entrepreneurial spirit begin want to start a come right exactly and so you're young that are you're old enough that it's hard to launch a new career, but at the same time, young enough that you can't legitimately retire and be done working on together.

So in a lot of cases were kind piece things together between maybe a little bit of part-time work supplementing from your investments a little bit in many cases it's actually all right like once you get to a certain point if you can just make a few more years without drawing down on your savings if you make just enough to live on. It's all right, but you're not contributing to your savings anymore. In a lot of cases. So, again, it all just goes back to having the plan, being sure that you have all mapped out.

You understand where your paychecks are going to come from what it cost you to have the lifestyle you want and out from there you can make the right decisions.

I'm thinking about tax season and am thinking about every year when I'm doing my taxes and I am thinking that tonight I'm looking like I'm going to have to pay something because I'm making my own income on the side and in when I get to that point. Looking okay.

I have gone to take and put money away in my IRA in order to drop my tax liability down to zero or I like but what They do that. I'm putting it in the IRA with after-tax money in the first place. And so when I take it out of Munich text on it again, but in the meantime, I've shifted the tax burden from this year to several years down the road might take up to 70 1/2 at least that a bad strategy. Well that's very much a case by case situation and if you ask a CPA CPAs are very biased toward the deduction in the present year. It seems like in some most CPAs.

From my experience seemed like to push you toward the go ahead and contribute and get the deduction this year. On the whole premise of that argument is that you'll be a lower tax bracket in retirement and so you know you'll be taking that money out in paying a lower tax rate on well to problems with that. First of all, most people once they get into retirement. They want to keep the same income they have other working so that's the plan is set up there, not in a lower bracket to if tax rates go up, down the road you could actually be in a lower bracket and have a higher rate in a like we get the 15% bracket in the 25% bracket in the 28% bracket will you could be in the 25% bracket now and income wise BM once. Currently, the 15% bracket, but who knows maybe that's being taxed at 28% 20 years from now. It looks so ignoring Roth IRAs is another regret that I see a lot of.

In fact, this is probably the number one regret that I see people have when they come in is they wish that they'd save more than their Roth over the years instead of their 401(k) and their IRA.

It's very rare that I see anybody with more than say 10 or 12% of their total savings in a Roth. And so for me at age 33 I'm all in on the Roth right because I got four years of tax-free growth on that, but that's probably the biggest regret. I see Steve's man I wish I'd sucked it up, paid the taxes on those years and now had more tax free moving for his irreverent time when when you would recommend taking an IRA and converting it to a Roth.

Certainly, there are times must the younger you are, the more sense it makes, because more years of tax-free growth that you're going to create. By doing that, the better. If you're 59 and you need the money when you're 65. It probably doesn't make a lot of sense because you don't have that many years of growth, but if it's money that you don't need for 20 years. It could very well make a lot of sense, this is Mr. Stillman's opus.

There's another thing, though, that guy also comes to mind when you talk about being in a lower tax bracket when you're getting ready to take out your IRA, you're most likely not in a vacuum, but probably got a spouse who also was working and then could be making much more than you're making. So you're already in a hyper surrogate so you got any time you take it out.

You may have the same consequence and you just put your finger on the pulse of why we have to evaluate everything case-by-case. Right because we just can't give blanket answers anything because we really have to look at your situation. What makes sense for you right now John Stillman. This podcast is for you and we hope that you have been able to take a couple of nuggets in rental around there.

Think about your plan. You got with John and then make sure that that you're in touch and I'm sure you will be right you got you your following up with for those clients and let them know. In doing this service so that they've got some new information to at least think about and their plans, which are all case-by-case basis. As you mentioned, Mr. Strong's opus that will you that esophagus on the road again with the diaphragm esophagus you were on the road again. You see, esophagus and talking, not really. I guess trachea is not a vegetable place that esophagus.

I will broil it with a little garlic salt and butter apartment a little olive oil sprinkled on and with my mashed potatoes and roast the delicacy okay well were hungry.

So it's time to go like to say thanks for having me join you. John pleasure to see my friend LB another podcast of Mr. Stillman's office sometime in the near future and I invite you to make sure