Mistakes to Avoid When Planning For Retirement

Eric, CJ, and Shawn talk about the mistakes people make when planning for retirement.

Episode Transcript

(00:00):
This is Money in Motion with ClassFinancial, a fun and informative show designed
to help you get answers to allyour retirement questions in one place. At
our phone. Minds are open foryou right now six oh eight three two
one thirteen ten. That's three twoone thirteen ten. Love to have you
join us this morning as we chatwith our retirement planning professionals from Class Financial,

(00:23):
Eric Schwartz and CJ. Closs.Of course that loss Financially. You
can learn more about them on theirwebsite. Great website and resource Class financial
dot com that's k l aas Financialdot com. From the website, not
only can you get to know theteam, you can learn about the separate
divisions at COSS Financial. You canalso sign up for the weekly Market Pulse
newsletter as well as listen back tothis in previous shows podcast. So much

(00:45):
stuff packed onto one website. ClassFinancial dot com. That's k l aas
Financial dot Com. At the telephonenumber six oh eight four four two five
six three seven. No charge forthat initial get to know your appointment at
Class Financial. It will be complementaryto you again the telephone number six oh
eight four four two five six threeseven and to get on the air,
just call our regular studio line sixoh eight three two one thirteen ten.

(01:07):
That's six oh eight three two onethirteen ten. CJ. Are you ready
for Christmas? I'm just about Sean, I'm almost there. What about you?
I probably much like you. I'vegot a double check with my wife
to see where things stand. Butyes, you won't know until I ask
her. Yeah, exactly, I'mthe same way. Eric. How have
you been great to have you along. I am doing I'm doing great.

(01:30):
I am looking outside and I'm notseeing it look at all like Christmas yet,
So we'll see what we get inthe next few days. Quick question
for you. Would you rather haveno snow on Christmas or three feet?
Ooh, I'm going to go withthree feet. I'm with you. CJ.
How are you in the three footgrouper? I am. Yeah,
I'm a white Christmas kind of aperson. But I know a lot of
people are cringing right now, yeah, not having this, so yes they

(01:53):
are. We've got an We talkabout really important things that we discussed on
the program. Always have a littlebit of fun as well. Well.
We've got a great conversation I hadabout some of the mistakes folks make and
how to avoid them when it comesto retirement planning. This is going to
be one of those shows that youdefinitely want to make sure you're paying close
attention to for a number of reasons. The biggest one, of course,
it's fantastic information, but also agreat opportunity coming up a little bit later

(02:15):
on the program with the Class Quizquestion league. Typically both the question and
answer to the Class Quiz question theleak come up during the program. This
week, our friends from Class Financialhave provided a fantastic prize as always,
a twenty five dollars gift card toAmazon. Again, listen closely to the
program, oftentimes just about every timethat question and answer come up during the
program. And before we get rollingon this week's topic about retirement planning and

(02:38):
some of those mistakes to avoid,let's actually take a look back at last
week's show and get the Class Quizquestion week question and answer there as well.
Yes, so thank you for everyonefor listening last week, and quick
congratulations to our winner last week,who was William of Madison. The question
was true or false. Looking aheadto twenty twenty four, IRA contribution levels

(03:00):
will rise from six five hundred dollarsto seven thousand dollars for persons under fifty.
And the answer to that is true, really good stuff. And that
was a great program also, andyou can always listen back at Clossfinancial dot
com. That's k l Aasfinancial dotCom. Gratulations to William. You two
can be like William a little bitlater on the program, we'll do the

(03:21):
class quiz question the week again achance to win a twenty five dollars gift
card to Amazon. Talking this weekabout mistakes, ten mistakes specifically you should
avoid when it comes to retirement planningand CJ what should we be aware of
when it comes to our own planning. Yeah, being that we're retirement planners,
ideally we help people avoid the mistakesthat we're going to go through here.

(03:43):
So hopefully our listeners will hear thesepotential mistakes and then as you're getting
near or in retirement, you know, alarm bells will be going off as
you start to head towards these thesetopics. So here are the the ten
mistakes that we're going to go throughthat people in or near retirement should try
to avoid. Mistake number one isstaying too aggressive in your portfolio. So

(04:08):
a lot of people try to makeup for lost time by getting aggressive at
the very end of their career.Now Eric and I meet with literally hundreds
and hundreds of people, So wehave about a thousand households we work with
across the nation. Eric and Ialone work with about two hundred households a
piece, and so we're meeting withpeople all the time in all different phases

(04:30):
of retirement. And just because you'reclose to retirement doesn't by definition mean that
you have to back off your risk. But what you do not want to
do is be behind on your savings, and as you get close to retirement,
try to make up for that bygetting aggressive. Because listen, there's
some things we can control in thisworld and there's some things we cannot,

(04:53):
and the global stock market is oneof the knots. So what we say
to people is it's good you wantto control the controllable. So your desire
to have some control over the futureis good. That means you're thinking about
it, you're proactive, but don'tthink that you can control the global markets.
It's just not going to happen,and you can run into a bad
sequence of returns that can really putyou even further behind. So mistake number

(05:16):
one to avoid is staying too aggressivein your portfolio as you get close to
retirement. Mistake number two is retiringwithout considering your health insurance options. So
we talked about this on the showbefore, but the most common age that
people retire is actually sixty five orright around sixty five, and it's because

(05:38):
that's when government subsidize health insurance knownas Medicare kicks in. Now again,
I find it interesting when we saygovernment subsidize because between you and me,
government doesn't generate revenue. So weneed to remember taxpayer subsidized health insurance is
what we're really referencing here. Butwhen we say that, you have been
paying into this Medicare benefit over yourintien higher working life, and so when

(06:00):
you get to sixty five, youget to benefit from that Medicare health insurance.
So, long story short, mistakenumber two here is retiring without considering
your health insurance costs or options.Because this is a huge component to retirement.
It could be waiting till sixty fiveto retire to get Medicare, It

(06:23):
could be retiring, you know,maybe twelve to eighteen months before retirement and
using something called COBRA. COBRA generallyapplies to all group health insurance plans of
employers with twenty twenty employees or more. You could jump onto your spouse's health
insurance. If you're retiring before sixtyfive, you could you if you're a

(06:44):
veteran who served with Honor, youcould potentially enroll for VA or Veterans Health
Insurance. And then finally, there'salso something known as the Affordable Care Act.
This is for people who are noteligible for COBRA, or they're not
sixty five, or they're you know, a kid who's going off of their
parents' plan and they don't yet havea group plan. The Affordable Care Act
offers individual health insurance plans for peoplethrough healthcare dot Gov. Now, remember

(07:11):
healthcare or the Affordable Care Act isa subsidies driven health insurance plan. So
if your income is low enough,you can qualify for pretty good insurance.
It depends pretty decent insurance, dependswhat plan you're getting on, and sometimes
you can have a lot of subsidiesthere. And then finally, there's also
things known as medical sharing arrangements,which are another option that are out there

(07:32):
for people who are part of religiousorganization. So long story short, you
just don't want to retire or stopworking where you have a group health insurance
plan without clearly knowing what your planwill be. To address that moving forward,
talking this morning with our retirement planningprofessionals CJ. Closs and Eric Schwartz.
They come to us from Class Financial. The website Class financial dot com

(07:55):
that's k l Aasfinancial dot com.Great website and resource to learn more about
Class Financial as mentioned, also aplace to subscribe to the weekly Market Pulse
newsletter as well as subscribe to thepodcast or listen back all at Clossfinancial dot
com and the phone lines are openthis morning. Six soh eight three two
one thirteen ten. That's six oheight three two one thirteen ten. What's

(08:16):
mistake number three? C J?Yeah, this mistake number three is not
being tax wise. So we've referencedthis again on multiple multiple times on the
show. But we we, likeDave Ramsey and Financial Peace University, we
believe in keeping your finances simple andtrying to pay down your debt as you
get closer to retirement. It trulyis both in concept and in practice one

(08:39):
of the best ways to retire withno required debt service payments. But sometimes
people take that concept out of context. And so what I mean by that
is they'll they'll get very near retirement, they'll go, you know, I
just don't want this mortgage, andso I'm going to take two hundred thousand
dollars out of my four oh oneK plan to pay off the mortgage right
before I retire, and we go, WHOA have you looked at the tax

(09:03):
consequences of that? So now that'sjust anecdotal. There's a multitude of examples
of how you would not you maynot be tax wise as you get close
to an enter retirement, but thepoint being, you are going to want
to be aware of the tax consequencesof the decisions that you make leading up
to and throughout retirement. Listen,I know that what we're talking about here

(09:26):
is we're going to go through abunch of mistakes to avoid and really what
it leads to is we would highlysuggest that you have either an advisor or
an accountant who is a trusted personin your life who you can sit down
with and address each of these topicsbecause it's a lot I mean, Eric
and I can attest we are learningevery single day. I learned something new
every day, and I do thisfor a living. I've done this for

(09:50):
twenty years and I'm still learning newthings every single day within our industry.
And so it's just if you're aconsumer trying to do this on your own,
God bless you, because I don'tknow how you would do it.
So again, just just consider tryingto find a good partner to help you
avoid these mistakes. Talking this morningwith CJ. Class and Eric Schwartz,
our retirement planning professionals from Class Financial. Always enjoyable talking with them. It's

(10:13):
always great opportunity as well. Tostart that conversation. All I gotta do
is give them a call six oheight four four two five six three seven.
No charge for that initial gets newappointment at Loss Financial. It will
be complimentary to you again their numbersix oh eight four four two five six
three seven. The website Class financialdot com. That's k Laasfinancial dot com.
And join us on air this morningwith your retirement related question. Love

(10:35):
to hear from you six oh eightthree two one thirteen ten. That's six
oh eight three two one thirteen ten. Well to do our conversation with CJ.
Eric and take your call. Nexthas Money in Motion with Class Financial
continues right here on thirteen ten WIBeight. This is Money in Motion with

(10:56):
Class Financial, a fun and informativeshow designed to help you get at here
do all your retirement questions in oneplace, talking with our retirement planning professionals
CJ. Closs and Eric Schwartz.Of course, they come to us from
Klass Financial, the website class financialdot com. That's Closs k l aa
S Financial dot com and their telephonenumber six oh eight four four two five

(11:18):
six three seven. No charge forthe initi you'll get to know your appointment
tech Loss Financial. It will becomplementary to you again their number six oh
eight four four two five six threeseven to join us this morning, I
get to just pick up your phonesix oh eight three two one thirteen ten.
That's six oh eight three two onethirteen ten. We'll get you right
on the air with CJ and Erictalking this week about mistakes to avoid when

(11:39):
it comes to retirement planning and uhwe were talking for the break about of
course health insurance and understanding that aswell as being tax wise, and what
about when it comes to things likeyour pension if you have one of those
options and the potential mistakes you couldavoid with that decision. Eric. Yeah,
So, people who will have apension in retirement, this is a

(12:03):
really important topic to be aware of. When you're making a decision around a
pension and what type of benefit todraw. It's generally an irrevocable decision.
So once you've made that choice,you've made that choice. So if you
do have a pension coming to inretirement, first of all, be grateful
because pensions are becoming more and morerare these days. But secondly, just

(12:24):
make sure you slow down. Sowhen people are going through the process of
retiring, there are generally one hundreddecisions to make. You we've talked about
some of them today. What areyou gonna do with health insurance? Where's
income going to come from? Andgenerally they'll get to the decision around the
pension, and in a rush tojust kind of get things done and move
on to the excitement of retirement,people will make really hasty decisions and just

(12:48):
kind of fill out the forms andmake a big decision really lightly. So
take this part slowly, really lookat the options that you have regarding your
payout choices, your survivors options,because the big decision you're making is do
you want a monthly retirement benefit fromyour pension so I think lifetime income as
long as you live, or doyou want to take a lump sum,

(13:13):
roll it over to your IRA andinvest it yourself and take withdrawals as you
need. Now, a big partof that decision of whether or not to
take a lump sum or an annuityare things like it does the pension have
a cost of living adjustment? Right? So are you going to be able
to have that income stream keep upwith inflation or are you going to lose

(13:33):
purchasing power over the years, becausethat would make the monthly benefit less valuable.
The other part of it would beare there survivorship options available on the
pension? So if you are topass away, does your spouse or family
member receive benefits after your death?Because again, that would be a situation
where you might consider the lump suminstead. So really, not only slow

(13:58):
down when you make these decisions,but seek out the help of a professional.
Like CJ was saying, we dothis every day and we still are
learning things all the time. Well, mistake number five, Eric, Yeah,
this is a big one. Andit probably seems obvious, but we
see it a lot. So mistakenumber five is not maxing out your company

(14:18):
match in your four to one Kor retirement plan. So this is this
generally drives us crazy because it's literallyjust leaving free money on the table.
So oftentimes employers will make contributions toyour retirement plan based on a match formula,
which means you don't automatically get thecontribution. You have to make a

(14:39):
contribution and then the employer will we'llmatch all or some percentage of it.
So let's say, for example,that your employer matches fifty percent of your
contribution up to three percent of yourearnings. Well, that means that you
have to put in six percent inorder to get the full three percent.

(15:00):
And when people are working a job, families, we have responsibilities. It's
really easy to forget about these thingsor just over time not keep up with
changes to how your employer is makingcontributions or whatever it might be. So
just take a look at your employerretirement plan and make sure that you are

(15:22):
getting all of the contributions that youremployer offers. And also, as we
go through the years here inflation adjustmentsto contribution limits are constantly happening, and
as we are looking at maxing outcontributions to four on one k's if you
are able, generally that limit increasesa bit year to year, so make

(15:45):
sure that you are making changes toyour four oh one k contribution to keep
up with that. Really So yeah, really, that's it, really good
stuff, Eric, Really important stuffas well. Eric Schwartz and CJ.
Closs our retirement planning professionals joining usthis morning from Class Financial, the website
class financial dot com. That's kl aas Financial dot com and their telephone
number six So eight four four twofive six three seven. What about social

(16:08):
Security? Eric, I've got aguess there's something involved with that in this
list for sure. Of course,Sean, you know we love social security
and we talk a lot about iton the show here, So listeners know
that deciding when to take your socialsecurity benefits is a really really difficult decision,
and honestly, there's there's not alwaysa perfect answer to it, because

(16:30):
frankly, we don't know how longwe're all going to live, right,
And that's that's really what it comesdown to. If you're trying to decide
the most advantageous option for Social Security. But in some cases we see generally
when we have clients come to usthat have already retired and they didn't work
with an advisor when they well,when they turn sixty two, we see

(16:52):
that people will just sign up forSocial Security because they're eligible to draw it
at sixty two and they say,well, I might as well start collect
But they're they're not considering that numberone, that is generally an irrevocable decision,
and number two, they're not thinkingabout things like, you know,
what other income sources do you havein retirement, and what's your family history

(17:14):
of longevity, and beyond that,you know what how many how much do
you have in retirement savings to actuallysupplement your Social Security and all of these
things kind of come into the wholediscussion to decide what is the best age
for you to start Social Security.So again this kind of goes back to

(17:34):
the pension. Just slow down andthink through these decisions. Don't just try
to check the box and move onto the next thing. Really important and
really strategic decisions to be made.And it's a great thing about chatting with
our retirement planning professionals from Class Financial. Maybe something's kind of sparked in your
mind as we were talking this morningabout some of the mistakes to avoid.
If you ever want to have thatconversation, don't forget. All you got

(17:56):
to do is pick a phone,give a call a Coss Financial six O
eight four four two five six threeseven. No charge for that initial get
to know you appointment tech Coss Financial. It will indeed be complimentary to you
again their telephone number six SO eightfour four two five six three seven.
Learn more online Coss Financial dot com. That's Coss k l a a s
financial dot Com. We'll take itdown the home stretch next as Money in

(18:18):
Motion with Coss Financial continues right hereon thirteen ten WI b A. This
is Money in Motion with Class Financial, a fun and informative show designed to
help you get answers to all yourretirement questions in one place, talking with
our retirement finning professionals CJ. Clossat Eric Schwartz. They come to us

(18:41):
from Class Financial. The website CossFinancial dot com. That's k l aa
S Financial dot com. Really goodwebsite to learn more about Coss Financial their
separate divisions. Of course, learnmore about the team at Coss Financial as
well as sign up for the weeklyMarket Pulse newsletter. Again, all available
to you at Cossfinancial dot com.It's Klaasfinancial dot com. Their telephone number

(19:03):
six oh eight four four two fivesix three seven. No charge for that
initial get to know your appoyment dechloss Financial. It will be complementary to
you again their website six oh eightfour four two five six three seven.
Talking this week about some mistakes toavoid when it comes to retirement planning and
as mentioned, kind of taking itdown the home stretch here, what are

(19:25):
some of the other other mistakes weshould be avoiding? CJ. Yeah,
So we're talking about the top tenstakes mistakes to avoid as you head into
retirement, and I am on themistake number seven, which is planning to
work indefinitely. We hear this quiteoften people say, oh, yes,
I am, I haven't saved enough, but that's okay, I will just

(19:48):
work forever. And I think weall know intuitively there's a problem with that.
Not only is it, oh,you haven't saved enough, but additionally
it's like will you be able toso fifty three percent of workers expect to
work beyond age sixty five to makeends meet. And this is according to
a Trans America Center for Retirement Studies. And while while that's their intent,

(20:10):
a Pew Research Center did a pollon this and they found out that only
one in five Americans age sixty fiveand over, which is around twenty percent,
are actually employed. So catch onto that. Fifty three percent say
I will work beyond age sixty fiveto make ends meet, but only one
in five actually are employed after agesixty five. Now, when you get
down into the metadata on this,there's a lot of reasons why layoffs.

(20:33):
You lose job skills so you can'tget reemployed, or you were making too
much money and you won't accept alower compensated job over sixty five. On
and on and on goes the list. But you get the idea. If
you plan to make ends meet byworking beyond sixty five, you may be
surprised that you can't mistake. Numbereight is putting your kids first before your

(20:56):
retirement. Boy, oh boy,this is a big one. Listen,
you can't borrow to retire successfully,right, so think about that. I
can't borrow to retire successfully. ListYour kids can get a loan for their
homes, They can get loans fortheir education. They can make their own

(21:17):
choices, but you cannot borrow forretirement. And the reason we point this
out is because if you are spendinga bunch of money to pay for weddings
and down payments on your kids' homesand their full college education, they may
or may not appreciate that later on, and then you will or won't be

(21:37):
able to retire based on your savingspatterns. So just remember you need to
make sure that your own goals andretirement plans are on track before you go,
you know, blow a bunch ofmoney on the kids. Please don't
mishear me. I have three children, I love them dearly. I am
doing everything I can to try tomake sure I help them with college and
to even help them with future expenses. But what I am not doing is

(22:00):
saying, ah, to heck withmy retirement. I'm just going to give
it to the kids. You can'tborrow for retirement. Mistake number nine is
carrying too much debt into retirement.Listen, we already talked about this earlier
in the show, but it's botha concept and a reality that we see
play out, which is, ifyou have no debt, entering retirement ideally,

(22:22):
and I realize that can't be thecase for everybody, but if you
can retire with no debt, itreally truly does make life simpler. So
within your control, do everything youcan to try to eliminate or at least
reduce debt as you head into retirement. So listen, we have the saying
around our firm, which is ourclients get to retire once we get to

(22:47):
retire hundreds of times. I wantthat to sink in for people listening right
now. Clients get to retire oncewe get to retire hundreds of times.
What we're getting at there is writtire with our clients hundreds of times,
if not thousands, over a career. Now why does that matter? Well,

(23:08):
because we get to see all thethings that go well and don't go
well. We get to see theconcepts turned into reality. Right. So
when you say I think I shouldspend X, we say I'm quite confident
you should spend Why And it's nota concept for us? We go,
well, what you're talking about isa concept to you. To us,
it is a reality we have seenplayed out hundreds of times. And this

(23:29):
goes for spending patterns. Health insuranceif you save into a ROTH versus pre
tax roth conversions health. I mean, just the list goes on and on
and on. This is not aconcept for us. This is a reality
that we live every day. Now. The reason I'm pointing that out is
because this goes back to my commonearlier around picking a trusted partner who actually

(23:49):
deals with us on a consistent basis. It really does make a difference,
which of course leads us to mistakenumber ten, drawing too much out of
your portfolio every single year and runningout of money before you run out of
life. Listen, I love DaveRamsey, and yet Dave Ramsey has confused

(24:11):
this topic. You can just gogoogle right now Dave Ramsey distribution rates and
there's some confusion. Again. Ilove him, I think he's wonderful,
but boy, oh boy, ishe giving some poor direction as it relates
to distribution rates. And the pointbeing that's not his thing. His thing
is around helping people live responsible financiallyand then get rid of debt. He
clearly does not do distribution planning.A target distribution rate should probably be somewhere

(24:37):
in the neighborhood of three to fivepercent from your portfolio. However, that
is dependent upon a multitude of factors. So that's a rule of thumb,
the kind of three to five percentdistribution rate, but it depends on a
multitude of factors that we can't gointo here right now. So be cautious
entering retirement with no guidance around distributionrates, or just listening to a guy

(25:00):
on a radio show give you,give you advice, and by the way,
that includes me, don't you know, don't just listen to me and
go, oh, okay, Iguess I'll spend three to five no no,
no, no no, meet withsomebody, do your own due diligence
to make sure that you know howmuch you can take out of your accounts
without running out of money. Thatindividualized word is individualized. Yeah, word
is important. It feels like I'msaying it wrong, but we're going to

(25:22):
go with it for now. Itis really important with this stuff. By
the way, as we talked thismorning through some of these mistakes and some
of the common ones, if there'sanything you want to go deeper in depth
with, I mentioned the podcast.I know a lot of these things we've
touched on and devoted entire programs tooas well. And that's one of the
great things about subscribing to the podcastis kind of keeping up not only with
what's going on this week, butgetting a chance to explore some of the

(25:45):
previous topics as well. Check outClass Financial in the podcast all online Cossfinancial
dot com. That's k l Aasfinancialdot com. Also, while you're there,
sign up for the weekly market PaulSnowsletter. The telephone number for Coss
Financial six oh eight four four twofive six three seven. No charge for
the initial gets to know your appointmentTech Loss Financial. It will be complimentary

(26:06):
to you. Again their telephone numberssix oh eight four four two five six
three seven. You can want tohold on to that telephone number as well,
because in a moment I'm gonna askyou the Class Quiz question of the
week. You'll then have twenty thirtyminutes from the here to today's program.
They call the Class Financial office righthere in Madison at six oh eight four
four two five six three seven.If you are the first call with correct
answer, win this week's prize,which is a twenty five dollars gift card

(26:29):
to Amazon. This week's Closs Quizquestion of the week is this how many
people over the age of sixty fiveare typically employed these days. Is it
around twenty percent or over fifty percent? Telephone number six oh eight four four
two five, six three seven,first call with correct answer. Win that
twenty five dollars gift card to Amazon, and again don't forget as well.

(26:49):
That's Class Financial's office right here inMadison. Six oh eight four four two
five six three seven. CE jyEric, You guys have a very merry
Christmas and we'll talk again in seven. Thanks Sean. Thanks Sean Scott from
Chalmers Jewelers joins us next here onthirteen ten Wuiva. This is Money in

(27:11):
Motion with Coss Financial Asset Advisors,LLC, a registered investment advisor registered with
the SEC. The content of thisshow is for informational purposes only and should
not be considered individual investment advice.Class Financial does not offer tax or legal
advice. Any opinion offered during thecourse of this show is the opinion of

(27:33):
that particular investment advisor representative, andnot necessarily the opinion of Coloss Financial