Making Smart Decisions During Major Life Events - a podcast by Tony Mauro

Let’s explore some of the things you should be thinking when you encounter some of the most significant events in your life.

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Transcript Of Today's Show:

Marc Killian:

It's time for another addition of Plan With The Tax Man, with Tony Mauro and myself to talk about making smart decision during, smart decisions, excuse me, during major life events. Tony, some of these things are going to happen to us probably, well, at least one or two are going to happen to everybody, possibly multiples. And it's easy to do, it's easy to get wrapped up in kind of losing sight of something when you're going through major life events and something falls through the cracks. And so hopefully we can have a conversation around how to avoid some of those pitfalls and just some things to think about. And hopefully you've got a financial professional and you've got other professionals that can help you through some of these events. That's going to be the topic this week on the show. How are you my friend?

Tony Mauro:

I've been doing good and as I look out the window here, it's snowing today and it's winter now.

Marc Killian:

There you go. Well, it's here. It is December.

Tony Mauro:

Yeah. I know.

Marc Killian:

So, we are into December, so hopefully. You may have a snowy holiday. I probably won't, but it is where I'm at, but it's a little, it is cooler so it's not too bad.

But yeah, these life events, man. Tony, I've gone through a major one a couple years ago. We've all gone through different things. I've got five here that really kind of affect us financially. There's definitely others. But I wanted to talk through a few of these and get your insights because I'm sure you've worked with people and helped people work through various ones of these in your career. You've been helping folks for 25 plus years, so I'm sure you've seen a few of these.

So let's talk about some pros and cons, I guess, not pros and cons, but I guess just ideas and things to think about should you be going through something, like the first one, for example, a job change. And if you think about our listening demographic and your client based demographic, all of these, I want to view from the, I know you help people of all ages, but primarily you do help older folks. Kind of that standpoint of what it looks like. Because let's be honest, a job change when you're 25 can stink, but it's a lot worse if you're 55, right? Or 50 or whatever. And whether it's you choosing to change the job or they chose for you...

Tony Mauro:

Yes.

Marc Killian:

There's some things to think about that can be a major event. Financially speaking. What's some things you think we should pay attention to?

Tony Mauro:

Well, I think with all these that we're going to talk about, we see it all the time. And it's so different now that again, I'm in my fifties and this stuff affects us. We all think we're just going to cruise right along through life and nothing is going to really happen. And that's, I think, sometimes wishful thinking. So I think we need to plan for, I don't want to say the worst and hope for the best, but we definitely need to plan and job change is one. It isn't like the old days. I mean, like you say, referencing it for somebody maybe a little further along in the forties, fifties is a little different than somebody's 25, 26. Because a lot of times these days now with some of these big companies, you know don't know, you could have been there for 15, 20 years and they say, okay, we're consolidating, move everything to somewhere and you're out. And now you've got to face some issues financially basically of, we'll skip the whole am I qualified to do anything else type of thing. But now it's like, well, I'm in my forties or fifties and I've got to go try to find something else. What am I qualified for? What am I going to do for benefits? Where am I?

Marc Killian:

Yeah, are they the same? What's the lag period?

Tony Mauro:

What am I going to do with my retirement plan? And hopefully you're working with your advisor if you have one of these things but it's laid off or you're actually just changing jobs and trying to find something better to see if this works out in your overall plan. And if not, then obviously you need to work with your advisor to change your plan a little bit. It's not the end of the world, especially if you're getting laid off. But it definitely is a major impact on monthly expenses obviously, until you find something else. I mean, there's just all kinds of emotions going on if you have something like that versus just changing a job. Most of the time people are changing jobs, obviously they feel like the grass is green or they're either better benefits, better work life balance, more money, something like that.

Marc Killian:

And it could be.

Tony Mauro:

It could be.

Marc Killian:

But make sure that you're taking the proper steps because there's a lot more to take care of at 50. Again, you want to make sure that you're not having any lags in that medical coverage that we talked about. You got to make sure that you're not leaving accounts behind, those stray 401ks, things of that nature. And that you're also still not deviating from hopefully the plan you're building. Because from 50 to 60, I mean we can get a lot done to our retirement accounts. We can gain a lot of ground in that or even 50 to 65.

Tony Mauro:

Yeah. Especially, and we're going to talk a little bit about it here at one of the topics as an empty nester, if you're at that point, you are able to shove a lot of money into some of these accounts to possibly catch up or to get that much further ahead. And it's amazing to me how many clients come to me. And I just had one my accounting manager come to me because she's going to be eligible for our retirement plan as of January 1st. She said, I've got three or four 401ks just kind of sitting out there and people do, they accumulate them from all over the place and she's never really talked to anybody about, well, you have these, are they in your set of goals? Is it part of your plan or is they just sitting out there? And a lot of times they just, I just did it to be doing it. Now they're sitting there.

Marc Killian:

Yeah.

Tony Mauro:

So you got to take all that into account.

Marc Killian:

Well, we'll just jump to move around on the list. That's fine. We'll go right to the empty nester one then we'll circle back around. It is a major life event for people. I think for most of us we do realize it's a good thing. Obviously some parents struggle more with letting their children grow, go grow and go I guess, than others. But ultimately they have to grow, they have to move on, they have to start their own adulthood and things of that nature. My wife and I mean I'm 51, we've been empty nests for a while because she went off to college and then she went into the Navy. So we haven't had her at home for quite a bit and it's pretty darn cool, Tony. There's a lot of nice things about it, right?

Tony Mauro:

There is a lot of nice things.

Marc Killian:

There's not nearly the mess in the house, there's not nearly the food bill and so on and so forth. So to your point a minute ago, there's a lot of room to really sock away some things from a money standpoint, no longer having the kids. But you got to be careful. Just because they're not in the house doesn't mean that they're still not going to try to get money from you.

Tony Mauro:

Yes.

Marc Killian:

And that's fine, we all want to help our children, but do not let it become a crutch for them and you because it will bite you when it comes to your retirement longevity.

Tony Mauro:

I agree and I see that the most often. And that was going to be my main point is some parents, and I'm an empty nester now too, and have been for, well, since 2014 pretty much. And it is nice and all that stuff, but I see a lot of parents try to sacrifice or help their kids so much that they're putting their own plans maybe aside or on hold. And while again, at the end of the day, that's their decision. I think sometimes that could be a mistake. But barring that, now's the time, if you don't have the unfortunate job change or layoff, health's good. A lot of times people come to me too and say, well now that I'm an empty nester, maybe I should take it easy and maybe I'll retire early. And I say, well okay, if that's your plan, let's take a look at that and see what that looks like. But a lot of times this last 10, 15 years of the earning cycle is usually the highest. Your bills are down a little bit. You can put more money away or you can enjoy some things along the way and still do that. So I think there's a lot of things to talk.

Marc Killian:

That's a great point actually, Tony, because it is tempting when you become that empty nester, especially if you're really into it and you're enjoying it, you know love and you miss your kids, but it's like man, you start going, wow, where did all this extra money come from? And it is tempted to go, well maybe I should treat myself to this, maybe I should. And hey, if you need to or you have to or whatever the case is, that's fine. But if you are also saying to yourself, Hey, maybe we could retire early, then you got to be smart about that. And if you're working with a professional, you can go in and say, okay look, I really want to retire early. How much do I need to be pumping into these different things? What can we be doing to hit that goal? And then you'd know if you had that little extra money for that, maybe that treat for yourself or whatever the case is. It's all about choices.

Tony Mauro:

It's all about choices. And I find it funny now, I go and I just had this happen at this charity golf thing I was at, because as I'm getting older, people will ask me, especially if they're a little older than me, well, are you retired? And I say, no. And they say, well, why not? And I said, well, because it's not really part of my plan. I could, but it's not part of the plan that I want because I want to be able to stock some money away for the next 10, 13 years. So the plan that I think I want will come about. But obviously different things change that and some of these other things of course that we'll talk about could have definitely changed that.

Marc Killian:

And I think it goes a long way to loving what you do too. And you own your own business and so there's different factors that we certainly know are going to play into that. Some people can't wait to retire early because they work for someone else or they're not as crazy about their job as they once were. Right?

Tony Mauro:

Yeah, exactly.

Marc Killian:

A little different I think a lot of times for self-employed business owners, especially if you have a business that's doing well. It makes it a little easier for sure.

All right. Well, let's go to some of those. The job change and then empty nester, they can actually be positives, right? A little maybe more positive than negative. The next couple ones, maybe not so much. So let's go to a divorce. Unfortunately, great divorces is something, they're a term, they are happening more and more. That's people getting a divorce after the age of 50 and there is a lot more to divide. Again, a divorce at 25 is a totally different animal or 30 than at 50.

Tony Mauro:

It is. And with these great divorces, people, I see them 25, 30, 35 years calling at quits. I just had a set of parents that went well, their child went to high school with my child, but they're about our age. They call them up to say, Hey, let's go to dinner. They're like, well, we're really not together anymore. And they have significant assets. So it's much, much different because of that. Generally you've got a lot more assets, you've got a lot more things going on, depending on what state you're in, how things are divvied up and how that is then going to affect your plan. Because now you're by yourself and now you got to figure out, well, I thought we were going to do this, but now everything's changed so I got to go back to the drawing board and come up with a new plan and will what I have when we split everything up generally be enough. And so that's a huge issue that I think you need to, after you go through the legal ramifications, talk with your advisor on what is potentially happening.

Marc Killian:

And I would say, Tony, get yourself a team. If you know that you're going to be going through a divorce, if that's starting, get a financial professional along with your divorce attorney, right? Because they're not always thinking about, they're thinking about trying to get you whatever it is they're going to get you, but maybe not necessarily the implications. And sometimes we wind up, we just want it over or we have different feelings or whatever. And you may give away something that has more disadvantages than advantages versus if you had two accounts. If there's a $100,000 in a traditional IRA and there's a $100,000 in a Roth and you might say, well, you just take one, I'll take the other and that might not be the best move, right?

So lots of difference, because one's the taxable. So there's lots of, or some people, a lot of times, especially for the lands, they often just say, well look, just give me the house because maybe there's still a kid that's close, maybe they're still in college or they're still at home or whatever and you'll trade away retirement accounts for the house. May not be the smartest move.

Tony Mauro:

Exactly. Yeah. So I mean there's a lot of that goes into the divorce thing. For sure.

Marc Killian:

For sure. And it's tough. When you're dealing with major life events, they often come with tons of emotion obviously. And so that's why having a professional team to help you, because they're not going to be as emotionally invested obviously because it's not their life. But of course as their client, they're trying to do their very best for you. So that kind of helps have that sounding board there.

What about if we've lost someone and we're getting an inheritance, so maybe an aunt or an uncle or even a parents passed away and they're leaving us some money. Now we have the emotional side obviously of losing of someone that we loved. But on the other side, many people really, they struggle with what to do with the inheritance. I think we either fall into two categories, we either fall into that, woo hoo, I got some money and I blow it, or I got this money and I want to be a good steward or honor the person that left me and I don't know what to do with it and I've just kind of frozen. Right?

Tony Mauro:

And those are the two things. I mean you hit it right on the head there. I see most the people that we run across in this is they struggle with that. So we try to talk to them about, well, if you want to go out and do something nice, maybe just take a small part of it and then be as good steward with it. But it has to fit into your plan and where you're at. Most of the people that I see that inherit some sizable amount, their plan isn't very good. And so I try to recommend to them, Hey, if you want to be set in retirement, you probably should take this and use it for that or save it for that.

But again, everybody's different. And it's a lot of emotion there after the emotional setting of losing your loved one is what do I do with this money? Because a lot of people that want to go out and buy something, then immediately they feel guilty. It's like, man, I just blew whatever amount, $50,000, whatever, $100,000. And I feel very guilty about that because they worked all their life to gather that. Especially parents of people my age who didn't grow up with a lot. If they accumulate a lot, it was through really, it wasn't like today where we have 401ks and all this stuff and everybody's kind of educated about these people. Grew up with no financial education. Most of them.

Marc Killian:

Oh yeah. Well, we don't have a lot now either, but yeah, it's better for sure, but definitely not where it should be.

Tony Mauro:

And so I think that that's again another one that you'd really need to take a hard look at, get some sound advice, some objective advice, and come up with a good plan there.

Marc Killian:

Absolutely. Well, the final one, since we talked about possibly losing a parent or something would be, unfortunately losing our spouse, right?

Tony Mauro:

Yes.

Marc Killian:

It is inevitable. We're all going to pass at some point, right? As much as we would like to deny it to ourselves, many times we're all checking out of this hotel at one point or another. And so it's a huge component. And so let's touch on some of the financial things because we obviously know that the emotion is there. Let's touch on some of the financial things that just get overlooked when dealing with major life events.

And probably the big one, Tony, since this is what you guys do a lot as well, is the tax component. It comes out of nowhere for many people. If you've been married 30, 40 years, you're just so used to filing married jointly or whatever, that going to single tax status really rocks the plan.

Tony Mauro:

It does rock the plan because taxes definitely could go up depending on what type of income you've got coming in. And so that's one huge issue. The other issue is I think, and everybody needs to go through this exercise is I believe you need to break it out with your advisor is, okay, if my spouse dies, what am I going to have from them? Life insurance, pensions, 401k. And then what's my plan going to be going forward from there? And then do it for the other spouse as well, because you might find out, and what I found out with a lot of them is one spouse is going to, if the other dies, might be okay and pretty well off. The other one, not so much.

And it's kind of eye opening when you kind of take a look at that and say, well geez, I'll give you an example and let's say that I died and I didn't have anything and my wife's left with just working and just with her own wage versus she dies, I can continue on, get some life insurance out of here, I'm going to be in great shape. Again, taking all the emotion out of it. I think it needs to be looked at for both spouses there and exactly what is going to transpire. Because a lot of times, especially in the working years for those of us in our fifties and sixties, we lose an income. Now all of a sudden we went from one lifestyle to, boy, we don't have quite as much income coming in now, again, if both of us are working.

Marc Killian:

Right. Yeah.

Tony Mauro:

So all kinds of issues there that you definitely need to take a look at to try to get some guidance on going forward.

Marc Killian:

The income streams get altered, obviously the tax brackets get changed, you got to go through the different insurance deals and medical stuff and there's just a lot of moving parts that come. And if you don't have any documentation in place, it becomes even harder. So whether, I mean, most of the saying is, if you have a will, great, but it just means you will go through probate. So lot of times there's that to deal with or maybe is a trust going to be right for you to make things easier? Or do you even just have a professional on your side?

Because Tony, for many, many people, usually for many couples, one person is into or more into the financial side than the other. And then typically that person passes first because that's just Murphy's Law. And then the person left behind is like, I don't know where to turn or I'm too emotional to deal with this. So to me it just seems like I'm happy, I know I've got a lot of issues. I know I'm going to pass before my wife and I'm like, here, here's all the information you really need to know. She's got obviously account information and all that stuff, but the biggest thing is there's the business card. She knows who to reach out to and call, which is our financial person to say, all right, help me through this. Right.

Tony Mauro:

You do. And really to work with us, I haven't really talked about it on the show before, but if you are nearing retirement, I won't take you as a client unless you promise we'll do it with you to generate what I call the life book, which is some of the things you're talking about, the names of the professionals, where everything is at, and each person has to do it. And even if it takes us a year or longer, we have it so that the other spouse can take a look at it and start getting down that road. Because if not, in today's techno world with stuff all over the place, it really puts a burden on the survivor. And one of us is going to be left alone at some point. And like I say, I won't take them on as a client if they refuse to do it. I just tell them we can't be involved because it's too hard to try to work a plan and then we don't have this in place and we know somebody's going to go. I always tell my wife that.

And then we have one is that unless we die falling off some cliff hiking together, one of us is going to be alone at some point. We always think it's going to be the woman, but in some cases it's the man. And then I find the men are less prepared than the women.

Marc Killian:

Yeah. Well, they're better at, I think, at planning things than we are a lot of times. They do such a great job on so many of those avenues. But it does tend to find statistically, which is always struck me as odd, that the ladies typically run the household and they've managed all kinds of budgets through the years, especially for children and yada, yada, yada. But yet when it comes to the retirement, typically the man kind of has a lot of the stuff there.

Tony Mauro:

Exactly.

Marc Killian:

Not to be sexist, it just is. It's just the statistics, right? But it's not always, but it is the statistics. And then again, like I said, Murphy's Law, we pass away first and we've known for years in the industry that ladies are underserved. It's been getting better all the time. But I think it's still great to have that person to turn to go, Hey, I'm in an emotional state. And sometimes maybe that's also having one of your children aware of this stuff too, Tony, right? So that if you are too overwrought with emotional issues, that the child that's going to help you through a lot of that stuff, whatever child that might be or multiple or whatever, is reaching out to the finance professionals saying, Hey, mom needs help, or Dad needs help, and how do I help them? And I'm sure you've run through that too.

Tony Mauro:

We have, yeah. And a lot of times, as some of our parents and stuff get up there, it's the kids that have to start the conversation a little bit.

Marc Killian:

Yeah, for sure.

Tony Mauro:

Yeah, that somebody needs help.

Marc Killian:

Well, major life events, they're going to happen. Like I said, at least one or two of these are going to happen to all of us. So you've got, and maybe more, so you've got to have a plan for it to deal with some of these things. And if you don't have one, reach out to Tony and his team. Get started with the team at Tax Doctor Inc. Find them online at yourplanningpros.com. That's yourplanningpros.com.

I know the years winding down, but don't let that be an excuse not to have a chat. If you need some help, at least reach out. You could always get something scheduled for even the first of the year if that's the case. There's nothing wrong with kind of planning a little bit, a few weeks ahead. It's not that far away at this point. Really just a couple of weeks.

Tony Mauro:

Yeah.

Marc Killian:

So if you got some questions, need some help, reach out to Tony. As always, he and the team are here to help you. He's been helping families get to and through retirement for a long time and a great resource for you to tap into. yourplanningpros.com.

Tony, thanks for hanging out my friend. We'll see if we can knock out one more of these before the Christmas holiday. And you have yourself a great week.

Tony Mauro:

Yeah, you do the same.

Marc Killian:

Yeah.

Tony Mauro:

Thanks for having me.

Marc Killian:

Absolutely. As always, we'll catch you next time here on Plan With The Tax Man with Tony Mauro.

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.

 

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