Hi, I'm Ed Slott and I'm Jeff Levine.
And we're two guys who just love to talk about retirement and taxes.
Look, our mission is simple to educate you, the saver, so that you can make
better decisions because better decisions on the whole lead to better outcomes.
And here's how we're going to do that.
Each week, Jeff and I will debate the pros and the cons of a particular
retirement strategy or topic.
With the goal of helping you keep more of your hard earned money.
At the end of each debate, there's going to be one clear winner.
You.
A more informed saver who can hopefully apply the merits of
each side of the debate to your own personal situation to decide
what's best for you and your family.
So here we go.
Welcome to the Great Retirement Debate.
So Jeff, I'm not retiring anytime soon.
You are never going to retire.
Yeah, that's a given.
I'm pretty convinced that my next job will be wheeling you on stage
in a wheelbarrow at some point.
Whatever it takes.
That's it.
Gotta get the message out.
Get that information out there.
Let's say You know, uh, the Met's Win the World series, uh, Right.
This podcast grounded in reality, Ed.
Yeah, right.
Uh, you know, and other things like that.
Uh huh.
You know, man walks on the sun.
Yes.
Yeah.
Uh, so let's say I retire.
At that point, should I change financial advisors?
Good question.
So, is that the topic for today's discussion?
Should I change financial advisors when I retire?
What changes?
Well, let's start with that.
That's a good question.
A lot changes, right?
Right.
When you retire, it is a completely different ballgame.
The accumulation phase of financial planning versus the distribution
phase are incredibly different.
There's different tax planning considerations.
There's different investment considerations.
There's different health care considerations for most individuals.
Um, there's different, uh, you have new income streams that you didn't
have to be concerned with before.
I, I, there are more differences, I think, than there are similarities
between the two phases.
Not to mention.
There is a huge change in the, uh, the, the, the behavior of individuals, you
know, while individuals are working and they know they have that paycheck
coming in, everything stays the same.
Yeah.
I mean, total inertia.
You can be a longterm investor a lot easier when that's not
your source of income, right?
But all of a sudden when a lot of people retire, even people who were.
You know, the most stalwart of investors who weren't phased at all by, you know,
2008 or nine in the crash and who, who looked at, you know, the pandemic drop
in in value as a buying opportunity.
All of a sudden they retire and they're frozen.
The shortest and the littlest blip in the market creates that anxiety
that was never there before.
So beyond all the, the dollars and cents, the math behind this all,
I think it is a huge change just behaviorally for people when they retire.
Another thing that we always talk about when we talk about retirement
accounts, we always use that analogy of climbing up to Mount Everest and,
Everybody knows, I think everybody knows, people that get to the top, most
of the people that, that climb Mount Everest who die, die on the way down.
That's right.
More people die on the way down than die on the way up.
Right.
So maybe they should have had a better advisor on the way down.
Indeed.
By the way, here's another random fact for you about Everest.
Alright.
Did you know that it is so, uh, commercialized today?
That you actually, so many people walking up, you have to actually walk around
the bags of poop that people live on.
And the dead bodies.
I did see a line, I saw that in a magazine, they were actually
dead, mostly on the way down.
It is, it is, it's odd.
They don't, uh, the air or whatever, I'm no, I'm never, um, that's not for me.
But, it's a good analogy because they get, You know, the right advice.
You got to get up to the next level, whatever it is.
I don't really know what it is.
Well, you think you've reached the top, that you've reached the summit
and that it's all over, right?
Like, I made it to retirement.
I hit my number, whatever that is, but you know, there were those
commercials years ago, remember?
Like, what's your number?
Well, that's great.
You hit your number, but what about the next 30 years?
Who cares what that number was?
So, maybe, or it's that book, I forget the title, the, the, what
got you here won't get you there.
That's it.
Yeah.
Is that the book?
I think so.
Yeah.
And it's like that maybe with financial advisors.
The person to help you make all that money to get to the top of the mountain may
not be the, the person that will help you when you start distributing that money
and taking the money out in retirement.
I think you hit on a point, right?
It may not be the person.
Who, uh, who will help you?
I think the answer, of course, is, is it depends, right?
The answer is should you change advisors, uh, when you hit retirement?
To me, the answer is it depends.
There are certainly some advisors and some companies that focus much, you
know, that focus much of their time and much of their effort and their
education on the accumulation phase.
And that's fine.
Because that's how they would train.
That's right.
Make people more money.
Everybody likes people who make them more money.
I like more money.
Right.
But, where I said the person that got you here may not get you there, if you lose
it on the way down, what have you done?
You built a savings account for the government.
Yeah, that's no good.
Whether it be taxes, or poor investment decisions, etc.
Matter of fact.
I just happen to have, where'd that come from?
This book of mine, I have one, it's called the Retirement Savings Time
Bomb Ticks Louder, but there's one line that I put on the back cover.
It says, Unlike losses in the stock market, money lost
to taxes never recovers.
It's true.
And that's where you may need a different kind of advisor to help you
get that money out and manage the taxes.
You manage the investments generally on the way up, on the way in, and
you manage the taxes on the way out.
Yeah, I think, I think the key point is that it's a different phase and whether
you change your advisor or not, you have to make sure that that advisor
has the knowledge and or the resources to turn to, to understand the nuances
of the decumulation phase, right?
If you start asking questions about, uh, you know, Hey, you know, how do
you manage taxes on the way down?
Transcribed What do you think about social security planning?
And your advisor looks at you with kind of like that, uh, you
know, deer in a headlights look, it's probably time to change it.
Or if the advisor says, whatever you said, here's the next stock to buy.
Yes.
Right.
Like there's not that that's, you know, not that the investments aren't
important, but that, you know, That's almost the table stakes, right?
It's like you have to have a good investment portfolio, but beyond that,
you need all the specialized knowledge of the tax planning, the, the, the
decumulation phase of life, how to manage the portfolio so that it doesn't run
out of money before you run out of life.
Right.
And I've had clients that hit, just like you said, I hit my
number or whatever it is, got all the money I need for retirement.
And they would tell me, they say, I'm not looking for the next hot
stock or next hot fund anymore.
I just don't want to lose money now.
Alright, so let's talk about like, if we're, if someone's out there and they're
thinking, do I need to change advisors?
Am I okay with my same advisor?
What should I be looking for for someone to help me in the
decumulation phase of life?
What are like, three, you know, two or three things that someone
should look for in an advisor.
Well, first, it depends where your money is.
Now, we're assuming, since this is retirement, the money's in an
IRA or a 401k or even a Roth IRA.
Yeah.
Where most retirement money is these days.
But some people have it in regular taxable accounts, so that's different.
If most of the money is in an IRA or 401k, 401k or even a Roth IRA, you need
somebody that's educated on the tax rules, especially RMDs, beneficiary
rules, tax planning, using the brackets, getting that money out, especially in a
traditional IRA where generally all that is coming out taxable and it's forced out.
You don't even get a choice after age 73, you're forced to take that money out.
All right.
So number one thing we're looking for is education.
So a fair question to an advisor would be, How do you maintain your education?
Yes.
Changes going on in the, uh, you know, in the tax world.
How do you stay on top of your game when it comes to managing the taxes
that will apply to my account?
Not only for me, maybe, but also for my heirs when I no longer.
Well, it's a fair question to ask your advisor.
And in fact, in some of my books, I have, uh, think 10 questions to
ask your financial advisor, but they all revolve around the taxes today.
Even the rollover rules, moving money.
Uh, some people might just say that.
didn't have the tax knowledge or financial, I might just say, Oh, roll
it to an IRA and they miss a company stock tax break or something like that
because they didn't know the nuances.
I'm not going to get into it here of the NUA net unreal, uh, and
net unrealized, appreciate it.
Uh, net unrealized appreciation.
I appreciate that you, uh, got that out.
Uh, see, it's even hard to say.
But you need to have an advisor that has education, and that, to me, that's
critical because if a lot of that money is in a 401k, that may be rolled to an IRA.
Mm-Hmm . Or you're leaving a job, you're about to retire yet, you
now have distribution options.
Do I leave it in the plan?
Yep.
Do I roll to an IRA?
Do I take a lump sum distribution?
Do I convert to a Roth IRA, that advisor?
has to be educated on the pros and cons, benefits, drawbacks, whatever you want
to call it, of each option and be able to explain it to you clearly because these
rules are not only, and this is the tough part of all the tax rules revolving around
IRA distributions, they're among the most complex in the tax law, but to make it
worse, they're also the most obvious.
Rigid and unforgiving.
You don't get a lot of second chances.
No.
Very punitive Right.
You have to have an advisor that gives you the right answer the first time.
Alright.
I think that's important.
I also think no one can know everything, right?
Right.
So to me, another step in that is, when you don't know an answer, what do you do?
Like, where do you turn to as an advisor?
What are your resources?
What are, like, what, what sort of, you know, I don't want to say back
office, but effectively, like, what, when you don't know an answer, how do
you go about figuring out that answer?
Because no one knows that.
Look, Ed, you and I spend our lives going through the tax code.
And training advisors.
And half the time when some, well, not half the time, but there are
often times, it's not unusual for someone to ask a question.
We go, you know what?
That's a really good question.
Right.
Let me take a look at it.
So, I think that's an important point too, is like, what are your resources
when you don't know what to do?
Well, you have to, you know, I always say you shouldn't invest with an
advisor that doesn't invest in their education, especially in the tax area.
You shouldn't invest with an advisor who doesn't invest in their education.
What did I say?
I just wanted to clarify.
You should not invest your funds with an advisor that hasn't invested his or
her own funds in their own education for tax planning, especially if most of your
money is sitting in a taxable IRA tax deferred, but eventually taxable IRA.
I agree.
All right.
So that's two.
How about one more?
What's one more thing that someone should look for in a decumulation advisor?
Well, somebody that knows the whole picture, too, because your IRAs,
you may not, you might not only have IRAs and Roth IRAs, and it
may tie in other professionals.
You may need to use more than one.
It may, you may want to be interested now in estate planning.
You know, as you head to retirement, you start looking beyond the horizon.
So you might want to talk to an attorney and you may want
people working together for you.
So I still think the big item is going to be tax planning.
But there's also you need somebody that understands where you're coming from.
The relationship is important, but you still need somebody
that's educated on the tax rules.
I can't think of anything more important than that.
Yeah.
If the money is sitting in an IRA.
Yep.
Well, listen, even when it's not, we see lots of, you know, times where people
will, you know, in a taxable brokerage account, they, uh, you know, will sell
an investment at an inopportune time and either trigger more of a surtax or
Alright, the tax planning outside the IRA.
Sure.
There's plenty of that to be done.
Absolutely.
I also think, I think there's one more that I might throw in there too, and
that's What does continuity look like?
You know?
Oh, that's a good point.
The advisor profession is enga, uh, rather, uh, aging.
Aging.
Thank you.
That's the word I'm looking for.
Yeah, that's a great point.
That's a right.
Uh, I know, uh, when I started out planning Mm-Hmm.
for clients that were much older than me, I was in my thirties.
They were in their sixties.
Same.
Yeah.
They like that because I was younger and That's right.
And they used to introduce me to their family.
Mm-Hmm.
Their beneficiaries and said, you'll be working with Ed and they would,
you know, have bring in the, the.
kids, kids are not a baby.
I mean, they're 30, 40, 50 years old themselves, and they like that idea.
I found most clients did not want to keep working with
somebody the same age as them.
That's right.
Well, it, what's interesting is, uh, as you get older, you start to have
that mindset of like, well, what's going to happen when I'm not here?
I do too.
The, uh, the, uh, most advisors, right, their, their clients are within
about 10 years of their age, right?
Okay.
They're the primary.
I don't know that for a fact, but you.
Yes.
Take my word for it.
Okay.
I'm not here to lie to you, Ed.
So most advisors, right, they are either, they're, most of their clients are, you
know, 10 years younger, 10 years older as you grow because it's your friends, right?
It's your network.
And it's people who you.
Hang out with and so forth.
So the, uh, that becomes effectively what your, uh, what your, your, your
cumulative, what they call book of business, which I hate that term, but
what your group of clients look like.
Most of them are within about 10 years older or younger than you are.
But if you think about that, that means when you're getting
ready to retire, your advisor is probably not too far behind you.
That's a, an excellent point.
And you know, even if they live, right, they're, they may not be working.
And what does that transition look like?
So again, that doesn't mean that you shouldn't work with an advisor
who's close to your age, but you need to understand what does their
transition process look like?
If they're not here, whether by choice or by accident, what is
the continuity look like for you?
Because the last thing you want is.
To spend your life with an advisor, and then when you're 70, 75, 80, or
even older, when you're not in the same position to go out there and vet
new advisors, and you don't have the same mental faculties, and you don't
want to spend all that time explaining every circumstance that you've had.
What does the continuity look like for you as a client of that advisor?
What is their plan when something, or if something happens to them?
You know, I talked about the tax planning, which is key, but this may
be even, well, on the same plane.
I was going to say more important, because if you want that continuity, especially
to your beneficiaries in the full estate plan, like I was talking about, Uh, your
beneficiaries, You should have advisors.
They still have to have the knowledge.
That doesn't go away.
The tax planning, the estate planning.
But it's probably better off somebody around the same age as your, uh, children.
And I, again, adult children, you know, 40s, 50s, 60s, 70s.
So the 6 year old financial advisor is not going to be taking
over the account that he takes.
Yeah.
Most times.
Although, uh, some of them could be good stock pickers.
We could have like a Doogie Howser MD, you know, we could have like
Doogie Howser Financial Advisor.
No, but I did the same thing.
Over the years, I changed trustees on my trust to younger people, the, uh, the, uh,
successor beneficiaries, things like that.
Yeah, I think that's critical.
And look, again, uh, It's not to be, um, ageist, right?
You can have your 70 year old or 80 year old even financial
advisor or CPA or attorney.
You just need to know if something happens to them, what
does the next thing look like?
How well prepared are they for their eventual either forced
or voluntary transition?
And as they, I'm gonna follow your same lead there, not to be
ageist or whatever the word is.
That's the word.
How careful are older advisors staying up to date with all the new rule changes?
Right, it can be very easy as you get older to get complacent.
Yeah, yeah, I say, ah, that's not that important.
Well, it is, yeah.
You don't want your advisor saying it.
it's something to consider.
It is.
It's that important.
Look, we have people in our advisor training programs, uh, that have been with
us for over twenty years that are in their eighties and nineties sharp as a tack.
It's you know some of them.
I do.
Yeah.
They are, they are incredible people.
And, and you want to make sure that you're working with an incredible advisor.
So whatever, you know, what, however path you go down, you just want to
make sure that when you reach that inflection point, that retirement
point, That you're working with someone, again, I think as we've said to wrap
it up, is someone who's knowledgeable.
Someone who has access to the right resources.
Someone who has the right, uh, succession plans for them.
And someone who's going to continue to keep your best interest at
heart, no matter what happens.
I think I would add somebody who's, who's going to get along
better with your beneficiaries.
That's true too, yeah.
Someone who not only can work well with you, but hopefully
with your beneficiaries.
Because as, as we know it, so many of those mistakes are made, uh, not when
you're alive, But, in that moment after death, when that transition occurred,
so many of those mistakes and so many of those irrevocable mistakes occurred.
Oh, yeah.
There's no question.
If you remember when we were writing our training manuals, I had a section for,
uh, what to do with, uh, the client, the people who have the IRAs, and then
I would put another section in it.
It's not good enough because the beneficiaries can mess it all up.
Maybe they, they have their own advisor.
Maybe it's one of their friends who once read a book about it or something.
You know, that may not work.
And these rules, we've had situations where beneficiaries, they didn't like.
I remember one situation, we had a beneficiary.
Uh, the guy had about a $600,000 IRA, very conservative, managed, built it
up over many years, was not a wealthy person, but a little by little, $600,000..
The beneficiaries took over and said, Ah, my dad was so conservative,
we're taking it out, we're gonna invest in, in really hot stocks.
They took it out.
They had a tax on six hundred thousand.
They blew the whole thing because they didn't know one key rule.
A non spouse beneficiary cannot do a rollover.
They took the money.
That's it.
Fatal error.
The whole thing was taxable.
So, uh, the beneficiaries can get themselves in trouble as well.
No question about it.
Well, Ed, I think we've reached our time here for today.
Good discussion as always.
Thanks for joining us.
Thank you for joining us.
And hopefully you've taken away something.
Of value so that when you reach that magic point you can make the best
decision for you and your family.
That's right Jeffrey Levine is chief planning officer for Buckingham
wealth partners This podcast is for informational and educational purposes
only and should not be construed as specific investment accounting legal
or tax advice Certain information mentioned may be based on third party
information which may become outdated or otherwise superseded without notice.
Third party information is deemed to be reliable but its accuracy and
completeness cannot be guaranteed.
The topic discussed in corresponding arguments are those of the speakers
and may not accurately reflect those of Buckingham Wealth Partners.