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If you’ve ever ridden the subway in London, you’ve probably seen the “Mind the Gap” signs warning you to be aware of the gap between the train door and the station platform. Let’s talk today about minding the gaps in retirement planning. Important Links Website: http://www.yourplanningpros.com Call: 844-707-7381 ----more---- Transcript Of Today's Show: Speaker 1: Hey everybody, welcome back into another edition of Plan With The Tax Man with Tony Mauro and myself and we're going to be talking about minding the gap this week on the podcast, and so you need to stick around for a second and figure out what that means, minding the gap. But if you've got questions and need some help when it comes to retirement, Tony has been doing this for a long time at Tax Doctor Inc and they're here to help you at yourplanningpros.com, that's yourplanningpros.com. Don't forget to subscribe to the podcast and all that good jazz and we're going to get into our conversation about minding the gap here in just a second. Tony, what's going on buddy? How are you? Tony Mauro: I'm good. Thank you. Just got back from my vacation and things are going well. Speaker 1: So fancy France. Tony Mauro: Fancy France. Went over for some wine tasting. Speaker 1: That's awesome. Tony Mauro: Yeah, it's unbelievable. Speaker 1: I bet. So obviously you had a great time, I don't even know why I'm asking. Tony Mauro: We did. I do like Europe, this is my second time over there. And, I don't know, I guess there's something about it, the different culture and everything, it's something to see. Speaker 1: Well, there's a lot of very old architecture, a lot of very old things to see, versus maybe we got some old stuff here in our country but not really, right? I mean, the way we kind of think of it but not some of that stuff. I mean, you're talking about Paris has been around for a really, really long time. Tony Mauro: Yeah. It's weird when they think, yeah, that we're just youngsters as a country because- Speaker 1: We're babies. Tony Mauro: ... Yeah. They've been doing things and wine being one of them for a long long time. Speaker 1: Yeah. We're still in our diapers compared to some of these other countries. So have you ever been to London? Tony Mauro: I've never been to London. No. Speaker 1: Okay. Well, I don't know about Paris so I'll talk about what I know, but there's the subways, right? We have subways as well, they call it the tube, right? Over in London, and they have little signs up when you're kind of stepping from the platform between the train door onto the subway cars and stuff, there's a little sign that says, mind the gap, okay? Because they don't want you to just trip and fall or there's that gap between the platform and the train, right? So I thought, well, let's talk about minding some financial gaps in retirement because we often think of just my first one here but there's several other gaps we need to identify so that we can be mindful of them, right? So I thought that'd be the topic this week, that will be a little bit of fun. I wasn't sure if they had something similar over in Paris but I was like, well, maybe he's been to London too so I took a shot. Tony Mauro: Yeah. Speaker 1: But anyway, let's talk about the first one, the obvious one Tony, that's the paycheck gap. At some point we no longer get a paycheck, how do we fix that gap? Tony Mauro: Yeah. And a lot of people that gap becomes very forefront when that paycheck stops because a lot of them think, well, my social security or pension is going to cover all that. And if you haven't taken the time to figure that out, you're going to be in for a surprise because most of the time it doesn't, it only satisfies part of that. And so then you've got to figure that out and for most people it has to come from savings or other investments, or they have to go back and get that paycheck or some kind of part-time job and retirement planning to fill that gap. So it's important that you understand what that gap might look like long before you get there and so then working with your retirement plan, that's the whole point of it, is to fill that gap and make sure you've got enough to live on. So. Speaker 1: Well, many people wind up saying, we know this, right? That's kind of basic stuff, we know we've been saving towards it, so on and so forth, but then they go, well, how do I do it though? How do I actually use it? Because you just want your mailbox money, right? At the end of the day or maybe I'm showing my age or you just want your EFT money, right? You just want the money transferred to your account, direct deposited, whatever, that's all we're thinking about, we're not necessarily thinking about how do we convert it into that. We know we've built it up but how do we access it or use it. Tony Mauro: Yeah. And you've got to make that change as you approach retirement too from the mindset of, well, we don't necessarily need to continue to get a lot of growth on it although you do need some. Now it's in the mode of, how do I take this money at set intervals and of course today's technology makes it fairly easy to get it set up on the set it and forget it even with your investments, which is nice. But you'd have to take some time to figure that out because otherwise even though you might have the money and if it's not getting to you so you can pay your bills and do what you want, that's not good either. So. Speaker 1: Yeah, I think that's a great point. The technology does make it easy but it still comes back to a lot of times the strategy of when and where and how, which bucket or which set of funds, how much do we take, when do we take them, so on and so forth, that's where the strategy starts to kind of come into place, especially when you start talking about social security, the spouse, and if you're married, both of yours, when to turn it on, when to activate this person's versus that person's, the pension options and on and on and on, all the things that we cover and talk about on the regular here on the podcast and that's because there are so many moving parts. Tony, I started doing these shows, radio shows and financial podcasts and stuff, six, seven, eight years ago and when I first started I was like, how much can there be to talk about? But there really is. Speaker 1: It was kind of eyeopening to think about the facets of how many things can go into this whole strategy and planning process because the accumulation it's a bit easier, right? You can get a couple of accounts, dump the money in there, for the most part you're kind of okay. But it's the transition and how to use it and when to use it that becomes the bigger challenge, so that's kind of the gap concept and the gap conversation to have there. So that's the first one Tony, that's the one everybody thinks of, paycheck gap. So let's talk about the second one I've got on my list which is social security and or Medicare gap. And this really falls into place especially for people who want to retire early and that's been happening more and more and this can be a huge gap to fix. If you decide to retire, let's say at 60, you've got some strategies to plan, right? Because you can't touch social security for at least two years and you can't touch your medical for five. Tony Mauro: Yes, so that becomes a huge issue. And I see that a lot with retail tax clients. A lot of people maybe not happy in their jobs, they've been working a long time, can't wait to get out and they want out at 60, 61. And first question I ask is, well, what are you going to do between now and the time you get your social security? And sometimes you get blank looks and I think to myself, you mean you haven't even thought of that? I mean, that's something that they don't know, number one, they don't have a plan for it, number two, and then many of them find out that, well, that's not going to be a very good existence until the social security starts. I'm a believer in delaying a little bit of social security if you can and have the plan in place to do that just to get the benefits pumped up a little bit. Tony Mauro: But the other story though is the big one is with the way healthcare costs are now is, if you retire before 65 many employers are going to say, all right, enough with the benefits, and so now you're stuck trying to find some insurance which is really expensive. And my actual admin person, she's actually turning 65 in October and so she's been on our health plan, our group health plan, but she's excited to kind of get off and get on Medicare because it's actually going to be better for her, less costly but she's going to have to do some things with filling in the gaps with Medicare, but she's been smart enough to stay on our health plan until that Medicare kicks in. But those can be some things that could really creep up on you so you got to really work with somebody on that kind of stuff as you're thinking about this. Speaker 1: Yeah, absolutely. Especially on that medical stuff because that can get really expensive. I was talking with somebody not too long ago, they wanted to retire at 58 and it's like, man, that's a lot of insurance you're going to have to carry so make sure that you're ready to fund that because that can make a pretty big dent in the income that you're planning on using or whatever over that time period. So just definitely make sure you're planning at minding that gap in that arena. All right. So let's do number three, and this is our old buddy, our good pal, Mr. inflation, the inflation gap. Okay. That sounds a little strange because like, oh, well wait a minute, I'd love to have a gap and inflation where we don't have any, but it's really more the other way, right? Speaker 1: So it's the fact that you know it's out there and you know it's going to continue to chip away at your savings. And Tony, I don't know about you but I think this is a huge indicator about what's going on with inflation, the fact that they are going to do a substantial social security adjustment, I believe it's this year or maybe it's '22, I can't remember which one, but they've already announced and it's going to be something like 4%, between four and 6%, that's the first time they've done that in a really long time, that big of a number, if that doesn't say that cost of living adjustment that there's some real inflation happening, I don't know what does. Tony Mauro: It is. And with this, this is what that invisible one that does creep up on you. And a lot of people I hear say, well yeah, but that really doesn't apply to me, and it's because you can't see it, it's there. But as soon as you start asking people about, well, what was this price 10, 15, 20 years ago versus what it is now. Even my accounting prices, I mean, what I charge now is more simply because of inflation, it costs more to do business and everything else. And I always tell people, nothing is going down, if anything, it's going up. And so if you constantly are not looking at this and especially when you are in retirement and if you've got your retirement savings in things like say CDs, money market, which you're not getting very good interest on, and inflation is more than that, you're actually going backwards and if you've got any longevity you're going to really start to feel that type of thing. The other thing too, is social security and they haven't been giving very many or very large adjustments lately. Tony Mauro: And I don't know what's driving that, I admit, probably some politics there of somewhat but they're the same way, they don't adjust for the real cost of living and it's difficult to do. And I was actually talking to my payroll person today and we were just coming out of a conference, a payroll conference, they were talking about employees and how to pay employees a little bit more and keep up with the cost of living. But a lot of times even us employers don't think about that, it's like, we just give them the same amount of money. Well, their costs of their living go up too and unless they are on some kind of performance-based pay, you don't want to, as an employer, say, no, your salary is your salary. But things do go up and everybody feels it, especially I think in retirement with some of this stuff and the way insurance is going and things like that. So. Speaker 1: Oh yeah. And it's hard for self-employed or for smaller businesses as well in that arena because you want to do that, you want to be able to help people out but at the same time, your costs are going up also. So it's a vicious cycle, that's for sure, and we know it exists but we don't often adjust for it so we just have to bear that in mind when we're talking about these different kinds of gaps. Another one is the long-term care gap. You might think, well, we could tie this into the social security and the Medicare conversations, but Medicare that couldn't do you any real good there when it comes to long-term care. So. Tony Mauro: No. And if you are planning for this depending on how you want to handle it, you need to have a conversation with your advisor on if I need this, how am I going to pay for it? Because he could easily run, here in the Midwest, 70 to 90, 100 thousand bucks depending on where you're at. But if you aren't planning for this then what's going to happen is you have to go on that word Medicaid, they're going to make you sell everything, spend everything and then of course the government will pay but there's a lot of disadvantages to that. I think a lot of, oh my goodness, at least here in Iowa most Medicaid beds are in far reaches of the state and historically people say that they're not as good a care as others, I don't know if that's really true but probably somebody out there knows that. Speaker 1: Yeah. I mean, this is not an ideal, right? I think most of us would love to pick the home option, right? Some sort of home care. Right. Tony Mauro: Pick the home option, you can now age in place, pass away at your home and many people just need some assistance, maybe not full time medical care but there's a cost to that and so you've got to look at that because we're living longer than ever. Speaker 1: And we're all going to get there, right? We're all going to get to the point where, and the long-term care need is growing all the time and the costs are just totally out of control so you've got to start talking about those gaps and how to cover it. And often it's really the second person that gets the short end of the stick, right? If you're married and one person has a long-term care event, the other one can usually be the one that gets depleted the finances taking care of the first one and then now you've got a real problem on your hands. Tony Mauro: They've got a real problem, yeah. And a lot of the long-term care policies now are offering, and you pay more for it, but it's called a shared benefit so that if one person didn't use up all of their money or their pool that it could be used for the second person, so there are a lot of options out there. The key there is, if you're going to buy the insurance since you got to buy it while you're fairly young because it gets expensive quickly when you get up there. Speaker 1: Yeah. And then my last one Tony, if you're coming off of the fourth one, the longterm care gap, and you know that it's a terminal illness and at some point you're going to be losing your spouse, hopefully you're taking the steps, you're getting more prepared for the things that you're going to have to deal with. But oftentimes, right? A lot of us we can pass away suddenly, it can kind of not be expected, I mean, we all know we're going to pass away. So it comes out of nowhere and now you've got this widows gap or widowers gap, but typically widows gap and it's easy just to kind of reference it that way. But there's a couple of major components that we're probably not thinking of that need to be addressed when we go from a couple to a single. Tony Mauro: Yeah. And the first one really is social security because you're going to lose the one, usually what's the lesser of the two social security benefits, so you're going to lose that one. And then a lot of times if you didn't plan for your pension properly, in other words, set it up so that you take a little less but it covers both lives, you could potentially lose that one. And so that could be a huge chunk of the monthly overhead or not overhead, but income to pay overhead. And so you need to be thinking about that while both of you are live and make sure again, that that's set up properly so you don't, all of a sudden, you have a spouse pass away and now all of a sudden, besides dealing with all that grief and everything, now you've got a huge financial burden possibly as well. So. Speaker 1: Yeah. And often those things, we just don't think about them. If we spent 40 years doing our taxes as married filing jointly and now we're single and we're thrown into a higher tax bracket, and often we're thrown into a higher tax bracket making less money coming in. Tony Mauro: Exactly. Speaker 1: So it's like a double whammy or a triple whammy because you've also lost your partner, your spouse. So it's unfortunate but it's the nature of the beast, right? We're all going to pass away. And of course and what you do for a living, that is the sad part about your job is that often you have to deal with these situations because you're dealing with retirees and then one of them typically will pass away first. So there's a lot of little gaps out there, it's not just the paycheck, it's not just figuring out how to turn the stuff on when we transition from our working years to our retirement years, it's all these other little pieces that can reach out and take a little nibble and all those nibbles can add up. So we want to make sure that we're getting a good plan in place, we're getting a good strategy rolling and that's why we call the show Plan With The Tax Man. Speaker 1: So if you need some help, if you're not already working with Tony, you got some questions or you know somebody who might benefit from the podcast, make sure you send them by the website or stop by there yourself at yourplanningpros.com, that is yourplanningpros.com. A lot of good tools, tips and resources, great ways to get in touch with Tony and the team and get started today with your own strategy and your own plan. Don't forget to hit the heart button or whatever happens to be on the apps you're using for Apple Podcast or Google or Spotify, iHeart, Stitcher, whatever platform you like to use, make sure you subscribe to the podcast to catch new episodes as well as prior episodes. Tony, thanks for hanging out, I'm glad you had a great time overseas and stay safe, have yourself a good September, I'll talk to you, I guess next time we talk we'll be into October. Tony Mauro: October. Wow. Yeah. Speaker 1: So pumpkin everything will be everywhere. Tony Mauro: Yes. All right. Well, you take care. Speaker 1: All right. We'll see you next time here on Plan With The Tax Man with Tony Mauro from Tax Doctor Inc. Member FINRA, S.I.P.C. Investment advisory services offered through Avantax Advisory Services. Insurance services offered through an Avantax affiliated insurance agency.