Welcome back to How to Retire. I’m Jackie Post, and here with me today is Ben Fuchs of Fuchs Financial. On this show, we talk about all of the do’s and don’ts around how to retire and ways that real people can understand and take action. Hi there, Ben. How you doing, Jackie? I’m doing well. Since we were last together, I think it’s turned into football season. It may have. You’re in the thick of it. That’s how we do it. I am a Titans fan, which means that I am in for it. A world of disappointment, but that’s okay. Do you have a team? Patriots. Oh. Yeah. So I guess we’re kind of… We’re going to move along. Yeah, we’re going to just pretend like that didn’t happen. We’re going to pretend like I’m okay with that. Okay, good. Good. Okay. Anyway, we are here in our studio in Middletown, Connecticut, and today we’re actually talking about mistakes. We all make mistakes, right? Like being a Patriots fan. Yes, and being a Titans fan. Exactly. Exactly. So I want to know, actually, do people come to you more often… they’ve made mistakes or because they want to avoid them? I think it’s a combination. I think we have people that come in because they’re just hyper afraid of making a mistake and they just want to make sure that everything is done correctly and sometimes people come and we have to tell them Not that they made a mistake, but there are other things that we can do going forward that may be a bit better. All right. I love that. I love that. So let’s talk about just mistakes as a whole. Why do smart, successful people often stumble when it comes to preparing for retirement? I think some of the smart, successful people really are used to figuring things out on their own. And a lot of people feel like financial advisors are just salespeople. And to be fair, there are some people that are just that, right? They are just, you know. but when it comes to really understanding taxes and social security and income planning and you know market sequence of returns all the things that actually need to be understood for a real retirement plan you can’t learn that in a day or two and sometimes really doing a lot of research leaves you more confused because You know, you read three articles, you get three different opinions. Which way do we go? Right. And I think it is overwhelming for people. I mean, they have so many other things going on. They have their job, they have their family, everyday life. They’ve got their parents living with them and their kids coming back home. And like everything else is happening all at the same time. And it’s like, oh, now I have to retire too? Yeah. Leave it to the experts to help you out, right? Well, yeah. I mean, listen, I’m okay with people doing it on their own, but I do feel like people should get a checkup. I do think there’s a lot of value in getting a check and saying, hey, am I still good? You know, I think everybody should get a physical from their doctor to see what they need. Right, absolutely. You can get a checkup without going to surgery. Yes, I like that comparison. So what are some of the biggest mistakes that you’ve seen over and over again in your work with retirees? They come in all kind of shapes and sizes. Sometimes it’s Social Security and taking it too early. Sometimes it’s taxes. And sometimes, you know, oddly enough, it’s being too tax-focused. I met with a gentleman like a month and a half ago, and he was so focused on not paying taxes that he wasn’t getting any return. Oh, interesting. He didn’t want to earn any money because he didn’t want to pay taxes. Meanwhile, you know, the whole idea is we want your net worth to grow over time. Right. That is the focus. And if paying taxes means that you’ve made money, So be it. Let’s just make sure that we’re making more money than you’re paying in taxes. Let’s play the game correctly. So there are a lot of really interesting mistakes. But, you know, I think a lot of it just comes down to not having a plan. And the tax thing can be incredibly confusing, I think, for a lot of people. It’s tough because people come in and they’ll, you know, my biggest concern is taxes. And I’m like, all right, we’re going to go into taxes right away in this meeting. And all of a sudden you start talking about Social Security and, you know, buying and selling stocks and taking money out of an IRA and a pension. All of those things are taxed differently. And the way that you combine their income could mean that you’re paying a lot more or a lot less in retirement. Right. And so it’s really confusing. And then when you kind of get back to the nuts and bolts of it and you start looking at all the different numbers. You just see people’s eyes glaze over. Yes. But the important thing for us is to be able to show them, listen, if you do it this way, you’re going to pay $7,000 more than if you do it this way. What would you rather do? For us, we have to break it down into what’s going to save you money and get you this result you want. The eyes glazing over, I can relate to that because you start talking about too many numbers and I feel the same. So it is good to have someone present it to you in a way that makes sense. I mean, if a doctor is telling me that I have like all, if they’d start naming the different tendons in my arm, I am. I am. I am out of luck. There’s no way that I’m going to get through there. But if they say we have to fix this and you’ll be better in six weeks, good. That’s all I need. Right. A hundred percent. I get it. I get it. Okay. So mistake number one, we’re going to talk about mistake number one, not having a plan at all. So what happens when someone enters retirement without a written plan? There’s a lot of things that happen. so people try to coast as long as they can without trying to touch their retirement money so if they have money on their savings account typically they draw that down they want to pay as little in taxes as possible but then they have to take everything from their taxable accounts and there is no other way around it they’ve drained all that resource when you don’t have a plan that involves where you’re getting your money from how much you’re paying in taxes when you take social security medicare estate planning all the things that are really important to people you kind of lose sight and you don’t really make changes and sometimes you get really caught off guard because you’re not making smart informed decisions you could panic sell when the market goes down there are a lot of things that really could catch you off if you’re not doing Following a plan. What are some of the things you’ve seen in that regard? If someone doesn’t have a plan written down or is working with a professional, what are some of the biggest problems you’ve seen as a result of that? One of the things that we’ve seen a lot lately this year is that when the tariffs went into effect and the market fell by over 20% in two months, where did that come from? And the people who are reliant on this money are saying, I need to sell. I can’t take any more loss. So by having a plan, by setting up where your money that can be at risk, where your money should be safe, where the money that’s generated income, by separating those things out, it keeps you from having to panic sell. I would like to think about my clients as like having a cup of tea while the world is going crazy around them. I love that. They’re relaxed. They’re hanging out because they know that they’re protected. And that’s the most important thing. Because they have been on their side. Okay, so what elements should every solid retirement plan include? What are some of the elements people need to think about? The most important thing for me is understanding what kind of lifestyle you want. I met with somebody the other day, hyper-focused on taxes. And taxes are great, but, you know, you want to spend $12,000 a month, you’re going to pay taxes because you need a fair amount of income coming in in order to generate that $12,000 a month. And it doesn’t matter to me, I’m happy with it, but let’s focus on you. Doing the things that you want to do in retirement. You’ve worked so hard for 30, 40 years. Let’s not focus so much on just taxes or anything else. Let’s make sure that you can do the things that you want to do first. And we set up a plan that way. And then taxes are a byproduct. Because it doesn’t make sense for me for somebody else to have to change their entire life just to pay taxes and not do the things that they’ve worked so hard for. I feel like that is where people get into trouble. Okay. All right. So we’re going to mistake number two here. Understanding. or underestimating, I should say, health care costs. That’s always a big issue, I think, for people once they get into retirement. So how big of a financial burden can health care really be in retirement? I think I’m going through this now with my own parents where, you know, they’re trying to figure it out. And it takes a long time to figure that stuff out and to figure out what works for you and what you can pay for and afford, right? Yeah, absolutely. I mean, I met with a woman the other day whose husband just diagnosed with dementia. And now, you know, she’s in her late- and you know after years and years of marriage she’s contemplating do i need to get a divorce from my life partner to protect my assets wow and you know what kind of trust do i need to for the money that we share together And how do I protect myself? And what are the ways that we go about doing this so that I don’t have to drain all of my own savings if he goes into a nursing home? And those are real conversations that are difficult and they have to be planned for. But we have a team and we have attorneys that we work with. We’re actually working together with her attorney to really come up with a financial plan that fits the estate plan together. So she’s not going to be, I mean, it’s brutal no matter how you look at it, but the financial side of things will be okay. Yeah, I mean, my heart just sank thinking about that. I mean, that’s got to be a really difficult decision for someone. So preparing for health care costs can really make a difference. What are some of the strategies people can use to, as I just said, prepare for the medical and long-term care expenses? So there are different types of trusts that can protect assets where you’re no longer the owner of those assets. And depending on how they’re set up, there are different tax… uh i would say benefits and negatives to them but there are things that if if this is something that’s really important and you want to protect it there’s a state planning that we can do that may be less expensive than buying a big insurance policy one of the tough things about aging and retiring is that we solely feel like we’re giving up control you know as we get older and our health deteriorates choices are taken away from us i want my clients and my people to be able to have control for as long as they possibly can and to feel like they’re the ones in control of their destiny So speaking of those trust plans, it’s good to do it at a certain time, right? There’s a five-year look back on, yeah, so it’s called an irrevocable trust. And when you do something like that, you are no longer the owner of the asset. So, you know, you’ve got a son that’s a freshman in high school. I don’t think you want to take your house and put it into an irrevocable trust and have him be the trustee. I don’t want to do that, no. So it’s like, then you’ve got to ask him if he can sell it. He would take my room is what he would do. I don’t blame him. It’s his now. Sorry. But, you know, there’s a time when, all right, because we’re not going anywhere. We want to make sure that this house goes to the next generation. We want to make sure that these assets, whatever they are, are protected. That’s when the trust will come in, and that’s when it makes sense. But it really is a decision that should be made with an estate planning attorney that does this next to you. When should people meet with someone to think about that? Because there’s a period where it just gets too late, I think, right? I think that at any point in time, it’s always good to get real professional advice from somebody that’s dealt with their situation before. And so, you know, if it’s an estate planning attorney, if it’s a financial advisor, if it’s any kind of other professional, I think it’s always good to get advice because sometimes people may think it’s too late and it’s not and they could hurt themselves even further. So, you know, we offer the free consultation so that people can have a conversation with us. and not have to have any kind of like anxiety about it. Like it’s a free consultation. And I like doing that because that takes all the pressure off. And that’s the goal. We’re not here to like sell you something. If we can put you in a better position, that’s what we want to do. If this conversation is bringing up more questions than answers, call Fuchs Financial at 860-461-1709. And I have more questions and Ben has more answers. So we’ll be right back. We know the market is going to get worse from here. This is the biggest monthly decline in 10 years for people’s 401ks today. My investments are tanking. My retirement isn’t going as planned. I can’t believe I let my kid talk me into buying crypto. I mean, what is that anyway? This was the fourth worst contraction in history. So how are you two doing? Your financial future doesn’t have to be uncertain. Plan your retirement right. Call now for your own complimentary portfolio review and tax analysis. Welcome back to How to Retire. Today we are talking about mistakes that you can make heading into retirement. So we are on mistake number three, claiming Social Security too early. All right, Ben. So why is timing so important in terms of claiming Social Security benefits? First of all, I think… whatever reason, this is a scenario where most people will take the advice of the person at the coffee cooler and water cooler instead of, you know, like a real human being that can create an analysis. People are like, oh, I’ll take it at 62. I don’t know how long it’s going to last. Let me get it as early as I can. And some people will say, I’m going to wait till 70 no matter what. And I feel like that is wrong. There are. analysis that we run there are scenarios that we run for each person that comes in the door if taking it at 63 versus 64 versus 68 makes sense for them and why depending on when you retire and when you need the money and how much money you want to leave behind people make a lot of mistakes when they talk about taking social security and then if we’re talking about a specific example you know there was well there was a gentleman that i met with a long time ago who was still working, making about $50,000, $60,000 a year, and he decided to take Social Security at 62. Well, when you take Social Security early, before what’s called your full retirement age, you have to give back some of that Social Security that you got if it’s over a certain amount of money. Yeah, it’s like the number, I think, in 2025 is right around $23,400, $24,000. Okay. And back then, it was even lower. So he ended up having to give back most of that Social Security, and he just didn’t know. The other thing that we see a lot of is after your full retirement age, after 67 for most people, you can collect Social Security and work as much as you want without any penalty. You’ll still pay taxes on it, but there’s no penalty. So we see a lot of people taking Social Security at 67 because they can get that more income and still work. But what happens is… They’re taxed so much on it, they don’t take home as much, one. They don’t really need the money in a lot of cases. And then three, if they had waited an extra year or two, they’d have gotten an extra 8% or 8% compounded, another 8% on top of that, getting more and then being taxed less on that money. People have all these basic equations that they use. You know, when is my break-even point? It might take 10 to 12 years from, you know, if I wait to take Social Security before I break even. Sure, but let’s bring taxes into the equation. Let’s bring penalties into the equation. Let’s look at your scenario and figure out when you’re going to run out of money and see if you don’t run out of money, if we just wait a little longer to take Social Security or take it early. Right. Do you think people are nervous about it running out? For sure. You know, I think that’s kind of there’s this fear, this general fear, whether it’s, you know, warranted or not, that they’re just worried it’s going to run out and they’re not going to get it. And I think that’s fair. But the very skeptical part of me, and I’ve said this a few thousand times, so I’ll say it a few thousand more. I’ll say it more. As I feel like, and you tell me if I’m wrong, that most politicians’ goal is to get reelected. Yes. And if they cut the income of the largest voting bloc, they are less likely to get reelected. Right. And I just don’t see that happening. It could. I think what could happen is that we may, that people that haven’t collected yet may get less, but I don’t see somebody that’s already taking it, having that reduced. Okay. I see that as extremely unlikely. And we can’t really have a scenario where somebody that, because the last report came in, said in 2033, it could drop by 24%. I’ll make 25% to make my math easy. But that means somebody getting $3,000 a month is now getting $2,250. Right. Don’t listen to the headlines is kind of the point, right? Go to someone who’s an expert and knows the intricacies of what’s happening. But also, if that’s a big concern for you, let’s plan for it. Right. Let’s say that, let’s build that into your portfolio, right? 2033, your social security drops about 24%. Can you survive that? And then maybe you decide to work the next year because then it’ll take your anxiety away. Or maybe we can just show you that it won’t affect you and you can still retire whenever you want. But I’m not here to say that your concerns are unwarranted. I’m here to plan around what’s important to you. Planning, planning, planning. That’s the key. All right. So can you give an example of how much income someone risks losing by claiming to? soon? Absolutely. What is the number? There’s a graphic that we’re going to show you. Okay. But, you know, it basically shows that what you’re getting at 62 is about 70% of what you’d have gotten at 67. And what you get at 70 is 124%, it’ll be on the graphic, of what you’d have gotten at 70. So the longer that you wait, you’re getting a lot more income, right? If you take it at, if you’re going to get, I think it’s $3,000 a month at 67, you’d be getting $2,100 a month at 62. So $900 a month, $10,800 a year. This is the math in my head. Yep. For the rest of your life. Okay. What is important to you, right? When do we need that money? At the same time, if we’re retired at 58 and we can get extra income at 62 because we’ve been doing it all on our own for the last four years, maybe we do that, right? Maybe we take it at 62 and take some of the pressure off of our investments. There’s different reasons for different people. There’s no, I get very frustrated with cookie cutter answers. I don’t know if you noticed that. I did notice that. I picked up on it, Ben. That is a thing for me. So, you know, to me, it’s just always important to make sure that we’re doing the planning for the individual in front of us and not what their co-worker is doing down the hall. Absolutely. Do not listen at the water cooler or don’t be overtaken by headlines. Generally speaking, the water cooler is wrong. Yeah, exactly. I said it here first. You said it. All right. So mistake number four, ignoring taxes in retirement. How do taxes catch people off guard once they stop working? There are a lot of scenarios where we talked earlier about somebody being overly concerned about taxes. But the other piece is not understanding how different pieces of income work together. If the majority of your income is coming from Social Security, you might not be taxed at all. by the federally or by the state at all on Social Security. The more other income you add changes the equation and now you could be taxed both on the Social Security and on that other income that you’re taking. So that really catches people off guard. The other thing that can catch you off guard are required distributions when people are forced to begin taking money out of their accounts and be taxed on that money and they have to take a greater and greater percentage every year. That can really set people off guard because We’ve had a number of scenarios where people retire at 65, live off of Social Security, touch none of their other income, pay almost no taxes. And then when required distributions come in, required RMDs, required minimum distributions come in, they’re at a higher tax bracket then and for the rest of their life than they ever were while they were working. Interesting. And there are a lot of things they could have done in the meantime between 65 and 73. where they could have done Roth conversions, other planning to reduce their taxes to not have such a big burden later in life. But they just didn’t do it. So many confusing things with the taxes. Okay, so this is actually great. What are some proactive moves that retirees can take to reduce their tax burden? There are different pieces. We talked about Roth conversions just now. A lot of things that we’ll see are capital gains and dividends. Isaac lays it over. Capital gain, yeah, glazing over. So if you have a stock outside of a retirement plan and you sell it, you’re paying either, you’re paying a capital gain. Got it, got it. Depending on how that capital gain is or how much is in that capital gain, we may be able to control some of those taxes. Stocks and mutual funds will give off income every quarter. Okay. Called dividends. Got it. You’re paying taxes on that. Some of them more often, some of them, you know, whatever. But you are paying taxes on that. we will often see ways that we can get out of some of those income things that cause you to have higher income investments and change those to other types of investments that don’t tax you as much. Also, a lot of people have a lot of money in the bank. It generates a lot of interest. Sometimes it makes sense to move it out of the bank and stop taking that interest and move it to a tax-deferred place where they’re still getting the same interest. They’re just not paying taxes on it at that time. So there are a lot of different things that we can do to legally. manipulate the taxes, still get you a very solid rate of return. In most cases, in a lot of cases, a better rate of return. But we have to do that by looking at the tax return, by analyzing the situation, figuring out what’s important to you, making sure that everything is done the way that works for you and for your estate planning and for everything else down the road. It all works together. Yep. Okay. Mistake number five, taking too much or too little risk. This is a big one. What are the dangers of investing too conservatively or too aggressively? in retirement there are studies that show that people need to take a certain amount of risk in retirement to have their money last longer and by taking all of the risk off the table you are making it more likely that they will run out of money in retirement wow that’s one when people are too aggressive we had uh 1997 1998 1999 we had almost like 20 returns in the s p 500 so the major stock market index went up by like 20 a year And I remember meeting with somebody in like 2013 who had initially retired in 1999. And at that time, the broker told him, not me, but his other broker told him, you know, hey, you know, it’s been going up by 20%. If we only get 10% a year, you’ll be great. So in 2000, it went down. The SOP didn’t go up by 20%. It went down by 10%. In 2001, it went down by another 13%. And in 2002, it went down by like 23%. Wow. And then everything kind of went up a little bit. And then 2008 came and it went down by 38%. So when you have everything at risk and you’re retired and you are reliant on this money, market crashes, you’re in trouble. You’re scared. And then you have to go back to work. And we saw that during that decade, that people had to go back to work. And I would say that is one of the biggest fears that a lot of retirees have. It’s having to go back to work. It’s being a burden on their kids. It’s not knowing what they don’t know. So you can’t take too little risk. You can’t take too much risk. There is a balance, but it’s different for every person. How can retirees find the right balance between growth and safety? Where is that balance? It’s different for every retiree. It’s different for every person who’s getting close to retirement. But the most important thing that we do is first figure out what they need from an income perspective. Most of our clients want to generate that income and maintain their principal, not have the balance go down just because they’re taking out money. So we set up the investments in such a way that we can generate that. And then we have the safety net behind that. And once you’re taking care of the income and the safe pieces, then we can do more growth and more aggressive pieces. No. First of all, I’m not built for rock climbing, but if I was. You never know. No, no. I am not built for rock climbing. But if I was, there better be a sturdy harness. There better be a thick rope. There better be a carabiner that can hold my 250 pounds. I need all those things to make sure that I’m not going to fall. Retirement is the same way. We need to have those safety checks in place before we go. Right. I love that. That’s great. Well, those are the five mistakes that we’ve discussed pretty thoroughly, and you’ve had some great answers, so we appreciate that. If you had to give one piece of advice to help people avoid mistakes, which isn’t always possible, what do you think that would be? Find somebody that does what you are looking for. And if you’re concerned about taxes, make sure that they do taxes. We have an accountant on staff to help our clients specifically with taxes. It’s not just the advisors. We have somebody else. And if we’re worried about health care, we have somebody that does retirement health care benefits. But for us, we did that so that we can help as many people as possible and keep them comfortable and not having to go to outside sources that they don’t trust. Love that. And, you know, it is good to be able to come to one stop, right? Fuchs Financial, one stop where you get all of it. So what is the very first step someone watching today should take to get on the right track? So if they’re watching this and saying, oh, geez, I’ve made some of these mistakes, what do they need to do? I would say. you know the most non-invasive way to get help is to just set up a phone call yeah we have taxes and income.com and i’ve had fuchsfinancial .com but taxes and income.com is a lot easier to remember so we got that love that and you know you can go on that website you can schedule a phone call with one of our advisors and you can talk about your situation and they can tell you if they can help or not and then if it makes sense they might bring you into the office or i set up a zoom for another complimentary consultation to look at what we can do to help to put you in a better position. I think a lot of people feel like they need to come with all of their problems and know what they are. Most people don’t know the things that they should be fixing. That’s what we’re here to help you with. So I would say that’s the first step. Go to the website, check us out, see what we can do. Taxesandincome.com. You got it. Easy peasy. All right. Well, this has been super enlightening, so we really appreciate it. And you know I love a game, right? I do. I love games. Let’s play one on the other side of this commercial break, okay? Can’t wait. All right. We’ll see you in a bit. Congratulations, Nancy and Mark. You’ve been chosen to play the retirement game. All right, first question. How long will you live? Too slow. Spin the longevity wheel. Nancy, will inflation eat your savings alive? I hope not. Let’s spin the slot machine and find out. Which strategy will you pick? At Fuchs Financial, we don’t spin wheels. We build real plans. Personalized, adaptable, and clear. Welcome back to How to Retire with Fuchs Financial. And right now we’re going to play a little game. All right, Ben, you ready? You ready for this? And I think it can actually help think differently about retirement because every story is different, which is kind of what you’ve been saying throughout this entire show. I’m going to describe a person and you tell me how they might retire. You got it. The late bloomer saver, age 50, career restaurant manager, making $50,000 per year. Quirk is that they only started saving at 40 and they have $75,000 in retirement accounts. They’re worried it’s too late. Okay. So in this scenario, we want to, we’re less concerned about the Roth 401k. For the person at 50, we might want to get that tax deduction now. It might be worth more to them now. Also, how long can you be in the restaurant industry? Are you going to be there at 75? Probably not. You know, so how long you’re going to work in that is going to change. But again, you probably want to switch to the traditional at that point because you don’t have so much in the account. It’s not going to cause such a huge tax burden later. There are reasons. But again, you know, we have a scenario where we started late. Really, the focus is putting literally as much as you can to give yourself more control and allow yourself to leave when you want to and on your terms. You got to play catch up. That’s the whole goal. Yep. The tech high earner. 32 years old, software engineer, making $150,000 per year. High income, but spends heavily. So has a luxury apartment, travels a lot, has a car lease. They’re only saving 8%. We see this one a lot too. And we see them not just as 32-year-olds, but also as like 60-year-olds. I mean, I’ve had a number of people who have made $300,000, $400 ,000, $500,000 a year and basically just put in whatever the match was into the 401k their entire time. and then wanted to live at that same lifestyle that they had and cannot. Am I okay with people spending money? Absolutely. I’m not someone that shakes their finger and like, oh, you’ve done well. Don’t get anything. Go drive a 40-year-old car. No, I don’t believe that at all. In a scenario like that, what we can do is we can show you, if you put away this much money per month, here’s how much you’ll have at 55, at 60, at 65, if you want to retire early. Here’s how we can do that. And if you don’t, Here’s what you’ll have, and here’s when you’ll run out of money. What do you want to do? I’m not somebody that wants to tell you what to do. I want to show you how the numbers work. Right. And I think the best way that I can help anybody, let me show you what the numbers do, and then you can make your decision whether or not you want to make the sacrifice and if it’s worth it or not. OK, I feel like we could get a lot more out of this game, but for now we have to go. Unfortunately, we’ll do it again. We’ll do it again. All right. Well, thanks so much for spending the time with us. And we know you have worked hard. You’ve saved. But when it comes to retirement planning, it is easy to feel talked over, rushed or sold something you don’t need. Make sure you find a retirement planner who listens first and makes a plan that fits your life, not their agenda. We’ll be back with more on how to retire next time. See you then.
