Indicator #4…Tax Planning

One of the most important things to me is to help you get to and through retirement with confidence. There are some indicators we’ve been talking about that may tell you that your advisor is not the right advisor for your retirement, and that maybe you need a second opinion. We’ve talked through three of these indicators, but we saved the best for last. It happens to be one of my favorite topics.


Several years ago, there was an article from SmartMoney Magazine back when they printed magazines. The article talked about advisors and the headline was something like, “Why Your Current Advisor is Probably Not the Advisor to Get You through Retirement.” The whole focus of the article was that most financial advisors are trained to help you grow and accumulate your money, but retirement is a completely different game. It’s much more advanced, and there are issues that come into play other than just growing your money. You need to protect your money, create a stream of income, manage your healthcare, deal with taxes, and so many other things.


Just like you move on from a pediatrician to a regular doctor when you transition into adulthood, so your financial advisor may need to refer you to a retirement advisor. Many of them don’t do that, so you’re stuck doing it on your own.


We’ve talked about three of these indicators already. If you’re retired, or you’re nearing retirement, your advisor should focus on protecting your assets, helping you with income planning, and helping you with healthcare planning.


In all these areas, if you have to go to your advisor and ask them about it, you may have the wrong advisor. You’re paying your advisor to advise you. A good retirement advisor is going to check in with you regularly and bring these important topics to your attention.


I heard this the other day from someone who wanted to retire in six months. They had an advisor, so I asked them what their advisor’s plan was. Their advisor hadn’t talked to them yet about creating an income plan. As an advisor myself, I would question whether that person’s advisor is the right advisor for their retirement. I believe an advisor should be putting together an income plan for you well in advance of retirement. Since when is it your job as the paying client to teach your advisor what to teach you?


The next time I saw this person they told me they’d talked to their advisor between visits, and their advisor had said, “Oh, you know what? Glad you brought that up. You’re a step ahead of me. That was on the agenda for our next meeting.” Of course, it was on the agenda for the first meeting right after they brought it up. This is all happening six months before retirement and it’s something this should have been worked out long ago. I feel that advisor was most likely the wrong advisor for this person’s retirement.


I’m not saying we’re the right ones, but you need someone who actively brings these important topics to your attention.


Indicator number four is one of the most important topics and is something that very few advisors focus on. If you’re like most people, you probably have a lot of money saved for retirement in a 401K, 403B, or IRA. This is money that has never been taxed. If you watch us on YouTube, you can see Benny the tax monster in our studio. We’ve been joking about how Benny the tax monster is kind of like the Cookie Monster. The Sesame Street Cookie Monster grabs those cookies and chops them to pieces. That’s how Benny views your 401K, 403B, or IRA.


The harsh reality is that for many families, taxes in retirement are larger than you ever thought they would be. The good news is that you have more control over your tax planning in retirement than you probably had when you were working. Is your advisor helping you get as close as you can get to a place of zero tax in retirement? When you have those regular meetings with your advisor are they aggressively moving money out of these problematic accounts into something that will be tax-free in retirement?


When it comes to taxes in retirement, how much will you be feeding Benny the tax monster? Are you arranging your affairs to feed him the smallest amount possible?


Our job is to put Benny on a diet. Is your advisor sitting down with you and having a meeting specifically to do focused tax planning and working on a way to quickly get you to zero tax in retirement?



It’s all about knowing the tax code. Instead of just sitting there and taking it, we want to use the tax code in our favor instead of letting it work against us. That might mean Roth conversions, conservation easements, or even charitable giving. Are you using donor-advised funds for your charitable giving? If you’re not, why not? Is it because your advisor is too lazy to learn the tax code and they’re not telling you about it? If you do your financial planning yourself, especially when it comes to taxes, you don’t know what you don’t know. There are so many opportunities that you may miss.


There is value to paying professionals at this stage of your life, but make sure you’re getting value. As we wrap up, here are all four indicators that your advisor is the right advisor for retirement. If they fail on any of these, I believe you might need a second opinion.


Indicator #1: Does your advisor focus on protecting your assets? Do they take action and not just talk? They should be moving your money out of the markets when markets are going south not just telling you to buy and hold.


Indicator #2: Is your advisor focused on income? In retirement, it’s not about how much money you have, it’s about how much income you have.


Indicator #3: How much do they help you with your healthcare? Do they know about Medicare, especially in the context of long-term care? It’s important that your advisor understands how it works and has someone on their team that can take care of it for you.


Indicator #4: Are you visiting with your advisor every year to proactively manage taxes? They should be helping you get as close as possible to a zero-tax bracket as quickly as possible.


If any of these four things are not happening with your advisor, you should consider getting a second opinion.
















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