October 31, 2024 • 19 mins
In this episode of The Great Retirement Debate, Ed Slott and Jeff Levine discuss whether or not it is a wise choice to change financial advisors upon retirement.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
Hi, I'm Ed Slott and I'm Jeff Levine.
And we're two guys who just loveto talk about retirement and taxes.
Look, our mission is simple to educateyou, the saver, so that you can make
better decisions because better decisionson the whole lead to better outcomes.
And here's how we're going to do that.
Each week, Jeff and I will debatethe pros and the cons of a particular
retirement strategy or topic.
(00:22):
With the goal of helping you keepmore of your hard earned money.
At the end of each debate, there'sgoing to be one clear winner.
You.
A more informed saver who canhopefully apply the merits of
each side of the debate to yourown personal situation to decide
what's best for you and your family.
So here we go.
Welcome to the Great Retirement Debate.
(00:43):
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 nextjob 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'sWin the World series, uh, Right.
(01:05):
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 Ichange financial advisors?
Good question.
So, is that the topicfor today's discussion?
(01:26):
Should I change financialadvisors 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 acompletely different ballgame.
The accumulation phase of financialplanning versus the distribution
phase are incredibly different.
(01:46):
There's different taxplanning considerations.
There's differentinvestment considerations.
There's different health careconsiderations for most individuals.
Um, there's different, uh, you havenew income streams that you didn't
have to be concerned with before.
I, I, there are more differences, Ithink, than there are similarities
between the two phases.
(02:07):
Not to mention.
There is a huge change in the, uh, the,the, the behavior of individuals, you
know, while individuals are workingand they know they have that paycheck
coming in, everything stays the same.
Yeah.
I mean, total inertia.
You can be a longterm investora lot easier when that's not
your source of income, right?
(02:28):
But all of a sudden when a lot ofpeople retire, even people who were.
You know, the most stalwart of investorswho weren't phased at all by, you know,
2008 or nine in the crash and who, wholooked at, you know, the pandemic drop
in in value as a buying opportunity.
All of a sudden theyretire and they're frozen.
(02:48):
The shortest and the littlest blipin the market creates that anxiety
that was never there before.
So beyond all the, the dollars andcents, the math behind this all,
I think it is a huge change justbehaviorally for people when they retire.
Another thing that we always talkabout when we talk about retirement
accounts, we always use that analogyof climbing up to Mount Everest and,
(03:09):
Everybody knows, I think everybodyknows, people that get to the top, most
of the people that, that climb MountEverest who die, die on the way down.
That's right.
More people die on the waydown than die on the way up.
Right.
So maybe they should have had abetter advisor on the way down.
Indeed.
By the way, here's another randomfact for you about Everest.
Alright.
Did you know that it is so,uh, commercialized today?
(03:32):
That you actually, so many people walkingup, you have to actually walk around
the bags of poop that people live on.
And the dead bodies.
And the dead bodies.
I did see a line, I saw that ina 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'mno, I'm never, um, that's not for me.
But, it's a good analogy becausethey get, You know, the right advice.
(03:54):
You got to get up to thenext level, whatever it is.
I don't really know what it is.
Well, you think you've reached thetop, that you've reached the summit
and that it's all over, right?
Like, I made it to retirement.
I hit my number, whatever thatis, but you know, there were those
commercials years ago, remember?
Like, what's your number?
Well, that's great.
You hit your number, butwhat about the next 30 years?
Who cares what that number was?
So, maybe, or it's that book, Iforget the title, the, the, what
(04:15):
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 maybewith financial advisors.
The person to help you make all that moneyto get to the top of the mountain may
not be the, the person that will help youwhen 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.
(04:37):
Who, uh, who will help you?
I think the answer, of course,is, is it depends, right?
The answer is should you changeadvisors, uh, when you hit retirement?
To me, the answer is it depends.
There are certainly some advisors andsome companies that focus much, you
know, that focus much of their timeand much of their effort and their
education on the accumulation phase.
(04:57):
And that's fine.
Because that's how they would train.
That's right.
Make people more money.
Everybody likes peoplewho make them more money.
I like more money.
Right.
But, where I said the person that got youhere may not get you there, if you lose
it on the way down, what have you done?
You built a savingsaccount for the government.
Yeah, that's no good.
Whether it be taxes, or poorinvestment decisions, etc.
Matter of fact.
(05:18):
I just happen to have,where'd that come from?
This book of mine, I have one, it'scalled the Retirement Savings Time
Bomb Ticks Louder, but there's oneline that I put on the back cover.
It says, Unlike losses inthe stock market, money lost
to taxes never recovers.
It's true.
And that's where you may need adifferent kind of advisor to help you
(05:38):
get that money out and manage the taxes.
You manage the investments generallyon the way up, on the way in, and
you manage the taxes on the way out.
Yeah, I think, I think the key point isthat it's a different phase and whether
you change your advisor or not, youhave to make sure that that advisor
has the knowledge and or the resourcesto turn to, to understand the nuances
(06:03):
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 thinkabout social security planning?
And your advisor looks at youwith 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 yousaid, here's the next stock to buy.
(06:24):
Yes.
Right.
Like there's not that that's, youknow, not that the investments aren't
important, but that, you know, That'salmost the table stakes, right?
It's like you have to have a goodinvestment portfolio, but beyond that,
you need all the specialized knowledgeof the tax planning, the, the, the
decumulation phase of life, how to managethe portfolio so that it doesn't run
out of money before you run out of life.
(06:44):
Right.
And I've had clients that hit,just like you said, I hit my
number or whatever it is, got allthe 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, ifwe're, if someone's out there and they're
thinking, do I need to change advisors?
(07:05):
Am I okay with my same advisor?
What should I be looking forfor 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 dependswhere your money is.
Now, we're assuming, since thisis retirement, the money's in an
IRA or a 401k or even a Roth IRA.
(07:25):
Yeah.
Where most retirement money is these days.
But some people have it in regulartaxable accounts, so that's different.
If most of the money is in an IRA or401k, 401k or even a Roth IRA, you need
somebody that's educated on the taxrules, especially RMDs, beneficiary
rules, tax planning, using the brackets,getting that money out, especially in a
(07:46):
traditional IRA where generally all thatis coming out taxable and it's forced out.
You don't even get a choice after age73, you're forced to take that money out.
All right.
So number one thing we'relooking for is education.
So a fair question to an advisor wouldbe, How do you maintain your education?
Yes.
Changes going on in the, uh,you know, in the tax world.
(08:07):
How do you stay on top of your gamewhen it comes to managing the taxes
that will apply to my account?
Not only for me, maybe, but alsofor my heirs when I no longer.
Well, it's a fair questionto ask your advisor.
And in fact, in some of my books,I have, uh, think 10 questions to
ask your financial advisor, but theyall revolve around the taxes today.
Even the rollover rules, moving money.
(08:29):
Uh, some people might just say that.
didn't have the tax knowledge orfinancial, I might just say, Oh, roll
it to an IRA and they miss a companystock tax break or something like that
because they didn't know the nuances.
I'm not going to get into it hereof the NUA net unreal, uh, and
net unrealized, appreciate it.
Uh, net unrealized appreciation.
I appreciate that you, uh, got that out.
(08:52):
Uh, see, it's even hard to say.
But you need to have an advisor thathas education, and that, to me, that's
critical because if a lot of that money isin 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?
(09:12):
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 toexplain it to you clearly because these
rules are not only, and this is the toughpart of all the tax rules revolving around
(09:33):
IRA distributions, they're among the mostcomplex 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 givesyou the right answer the first time.
Alright.
I think that's important.
I also think no one canknow everything, right?
(09:55):
Right.
So to me, another step in that is, whenyou 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.
(10:15):
Look, Ed, you and I spend ourlives going through the tax code.
And training advisors.
And training advisors.
And half the time when some, well,not half the time, but there are
often times, it's not unusualfor 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 pointtoo, is like, what are your resources
when you don't know what to do?
(10:36):
Well, you have to, you know, I alwayssay you shouldn't invest with an
advisor that doesn't invest in theireducation, especially in the tax area.
You shouldn't invest with an advisorwho doesn't invest in their education.
What did I say?
I just wanted to clarify.
You should not invest your funds withan advisor that hasn't invested his or
her own funds in their own education fortax planning, especially if most of your
(10:59):
money is sitting in a taxable IRA taxdeferred, but eventually taxable IRA.
I agree.
All right.
So that's two.
How about one more?
What's one more thing that someone shouldlook for in a decumulation advisor?
Well, somebody that knows the wholepicture, too, because your IRAs,
you may not, you might not onlyhave IRAs and Roth IRAs, and it
(11:22):
may tie in other professionals.
You may need to use more than one.
It may, you may want to beinterested now in estate planning.
You know, as you head to retirement,you start looking beyond the horizon.
So you might want to talk toan attorney and you may want
people working together for you.
So I still think the big itemis going to be tax planning.
(11:43):
But there's also you need somebody thatunderstands 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 anythingmore important than that.
Yeah.
If the money is sitting in an IRA.
Yep.
Well, listen, even when it's not, we seelots of, you know, times where people
will, you know, in a taxable brokerageaccount, they, uh, you know, will sell
(12:07):
an investment at an inopportune timeand 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 morethat 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 isenga, uh, rather, uh, aging.
Aging.
Thank you.
That's the word I'm looking for.
(12:27):
Yeah, that's a great point.
That's a right.
Uh, I know, uh, when Istarted out planning Mm-Hmm.
for clients that were much olderthan me, I was in my thirties.
They were in their sixties.
Same.
Yeah.
They like that because I wasyounger and That's right.
And they used to introduceme to their family.
Mm-Hmm.
Their beneficiaries and said, you'llbe working with Ed and they would,
you know, have bring in the, the.
(12:47):
kids, kids are not a baby.
I mean, they're 30, 40, 50 years oldthemselves, and they like that idea.
I found most clients did notwant 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'sgoing to happen when I'm not here?
I do too.
The, uh, the, uh, most advisors,right, their, their clients are within
(13:12):
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 asyou 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 effectivelywhat your, uh, what your, your, your
(13:35):
cumulative, what they call book ofbusiness, which I hate that term, but
what your group of clients look like.
Most of them are within about 10years older or younger than you are.
But if you think about that,that means when you're getting
ready to retire, your advisor isprobably 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?
(13:56):
So again, that doesn't mean thatyou shouldn't work with an advisor
who's close to your age, but youneed to understand what does their
transition process look like?
If they're not here, whether bychoice 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
(14:16):
even older, when you're not in thesame position to go out there and vet
new advisors, and you don't have thesame mental faculties, and you don't
want to spend all that time explainingevery circumstance that you've had.
What does the continuity look likefor you as a client of that advisor?
What is their plan when something,or if something happens to them?
(14:36):
You know, I talked about the taxplanning, which is key, but this may
be even, well, on the same plane.
I was going to say more important, becauseif you want that continuity, especially
to your beneficiaries in the full estateplan, like I was talking about, Uh, your
beneficiaries, You should have advisors.
They still have to have the knowledge.
That doesn't go away.
(14:57):
The tax planning, the estate planning.
But it's probably better off somebodyaround the same age as your, uh, children.
And I, again, adult children,you know, 40s, 50s, 60s, 70s.
So the 6 year old financialadvisor is not going to be taking
over the account that he takes.
Yeah.
Most times.
Although, uh, some of themcould be good stock pickers.
(15:17):
We could have like a Doogie HowserMD, you know, we could have like
Doogie Howser Financial Advisor.
No, but I did the same thing.
Over the years, I changed trustees on mytrust to younger people, the, uh, the, uh,
successor beneficiaries, things like that.
Yeah, I think that's critical.
And look, again, uh, It'snot to be, um, ageist, right?
You can have your 70 year oldor 80 year old even financial
advisor or CPA or attorney.
(15:39):
You just need to know ifsomething happens to them, what
does the next thing look like?
How well prepared are they fortheir eventual either forced
or voluntary transition?
And as they, I'm gonna followyour same lead there, not to be
ageist or whatever the word is.
That's the word.
How careful are older advisors stayingup to date with all the new rule changes?
(16:03):
Right, it can be very easy asyou 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 advisortraining programs, uh, that have been with
us for over twenty years that are in theireighties and nineties sharp as a tack.
It's you know some of them.
(16:24):
I do.
Yeah.
They are, they are incredible people.
And, and you want to make sure thatyou're working with an incredible advisor.
So whatever, you know, what, howeverpath you go down, you just want to
make sure that when you reach thatinflection 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 accessto the right resources.
(16:45):
Someone who has the right,uh, succession plans for them.
And someone who's going to continueto keep your best interest at
heart, no matter what happens.
I think I would add somebodywho's, who's going to get along
better with your beneficiaries.
That's true too, yeah.
Someone who not only can workwell with you, but hopefully
with your beneficiaries.
Because as, as we know it, so many ofthose mistakes are made, uh, not when
(17:07):
you're alive, But, in that moment afterdeath, when that transition occurred,
so many of those mistakes and so manyof those irrevocable mistakes occurred.
Oh, yeah.
There's no question.
If you remember when we were writing ourtraining 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 thebeneficiaries can mess it all up.
(17:30):
Maybe they, they have their own advisor.
Maybe it's one of their friends whoonce read a book about it or something.
You know, that may not work.
And these rules, we've had situationswhere 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 wealthyperson, but a little by little, $600,000..
(17:53):
The beneficiaries took over andsaid, Ah, my dad was so conservative,
we're taking it out, we're gonnainvest in, in really hot stocks.
They took it out.
They had a tax on six hundred thousand.
They blew the whole thing becausethey didn't know one key rule.
A non spouse beneficiarycannot do a rollover.
They took the money.
That's it.
Fatal error.
The whole thing was taxable.
(18:13):
So, uh, the beneficiaries can getthemselves in trouble as well.
No question about it.
Well, Ed, I think we've reachedour 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 thatmagic point you can make the best
decision for you and your family.
That's right Jeffrey Levine is chiefplanning officer for Buckingham
(18:37):
wealth partners This podcast is forinformational and educational purposes
only and should not be construed asspecific investment accounting legal
or tax advice Certain informationmentioned may be based on third party
information which may become outdatedor otherwise superseded without notice.
Third party information is deemedto be reliable but its accuracy and
completeness cannot be guaranteed.
The topic discussed in correspondingarguments are those of the speakers
(18:58):
and may not accurately reflectthose of Buckingham Wealth Partners.
Hi, I'm Ed Slott and I'm Jeff Levine.
And we're two guys who just loveto talk about retirement and taxes.
Look, our mission is simple to educateyou, the saver, so that you can make
better decisions because better decisionson the whole lead to better outcomes.
And here's how we're going to do that.
Each week, Jeff and I will debatethe pros and the cons of a particular
retirement strategy or topic.
(00:22):
With the goal of helping you keepmore of your hard earned money.
At the end of each debate, there'sgoing to be one clear winner.
You.
A more informed saver who canhopefully apply the merits of
each side of the debate to yourown personal situation to decide
what's best for you and your family.
So here we go.
Welcome to the Great Retirement Debate.
(00:43):
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 nextjob 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'sWin the World series, uh, Right.
(01:05):
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 Ichange financial advisors?
Good question.
So, is that the topicfor today's discussion?
(01:26):
Should I change financialadvisors 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 acompletely different ballgame.
The accumulation phase of financialplanning versus the distribution
phase are incredibly different.
(01:46):
There's different taxplanning considerations.
There's differentinvestment considerations.
There's different health careconsiderations for most individuals.
Um, there's different, uh, you havenew income streams that you didn't
have to be concerned with before.
I, I, there are more differences, Ithink, than there are similarities
between the two phases.
(02:07):
Not to mention.
There is a huge change in the, uh, the,the, the behavior of individuals, you
know, while individuals are workingand they know they have that paycheck
coming in, everything stays the same.
Yeah.
I mean, total inertia.
You can be a longterm investora lot easier when that's not
your source of income, right?
(02:28):
But all of a sudden when a lot ofpeople retire, even people who were.
You know, the most stalwart of investorswho weren't phased at all by, you know,
2008 or nine in the crash and who, wholooked at, you know, the pandemic drop
in in value as a buying opportunity.
All of a sudden theyretire and they're frozen.
(02:48):
The shortest and the littlest blipin the market creates that anxiety
that was never there before.
So beyond all the, the dollars andcents, the math behind this all,
I think it is a huge change justbehaviorally for people when they retire.
Another thing that we always talkabout when we talk about retirement
accounts, we always use that analogyof climbing up to Mount Everest and,
(03:09):
Everybody knows, I think everybodyknows, people that get to the top, most
of the people that, that climb MountEverest who die, die on the way down.
That's right.
More people die on the waydown than die on the way up.
Right.
So maybe they should have had abetter advisor on the way down.
Indeed.
By the way, here's another randomfact for you about Everest.
Alright.
Did you know that it is so,uh, commercialized today?
(03:32):
That you actually, so many people walkingup, you have to actually walk around
the bags of poop that people live on.
And the dead bodies.
And the dead bodies.
I did see a line, I saw that ina 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'mno, I'm never, um, that's not for me.
But, it's a good analogy becausethey get, You know, the right advice.
(03:54):
You got to get up to thenext level, whatever it is.
I don't really know what it is.
Well, you think you've reached thetop, that you've reached the summit
and that it's all over, right?
Like, I made it to retirement.
I hit my number, whatever thatis, but you know, there were those
commercials years ago, remember?
Like, what's your number?
Well, that's great.
You hit your number, butwhat about the next 30 years?
Who cares what that number was?
So, maybe, or it's that book, Iforget the title, the, the, what
(04:15):
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 maybewith financial advisors.
The person to help you make all that moneyto get to the top of the mountain may
not be the, the person that will help youwhen 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.
(04:37):
Who, uh, who will help you?
I think the answer, of course,is, is it depends, right?
The answer is should you changeadvisors, uh, when you hit retirement?
To me, the answer is it depends.
There are certainly some advisors andsome companies that focus much, you
know, that focus much of their timeand much of their effort and their
education on the accumulation phase.
(04:57):
And that's fine.
Because that's how they would train.
That's right.
Make people more money.
Everybody likes peoplewho make them more money.
I like more money.
Right.
But, where I said the person that got youhere may not get you there, if you lose
it on the way down, what have you done?
You built a savingsaccount for the government.
Yeah, that's no good.
Whether it be taxes, or poorinvestment decisions, etc.
Matter of fact.
(05:18):
I just happen to have,where'd that come from?
This book of mine, I have one, it'scalled the Retirement Savings Time
Bomb Ticks Louder, but there's oneline that I put on the back cover.
It says, Unlike losses inthe stock market, money lost
to taxes never recovers.
It's true.
And that's where you may need adifferent kind of advisor to help you
(05:38):
get that money out and manage the taxes.
You manage the investments generallyon the way up, on the way in, and
you manage the taxes on the way out.
Yeah, I think, I think the key point isthat it's a different phase and whether
you change your advisor or not, youhave to make sure that that advisor
has the knowledge and or the resourcesto turn to, to understand the nuances
(06:03):
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 thinkabout social security planning?
And your advisor looks at youwith 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 yousaid, here's the next stock to buy.
(06:24):
Yes.
Right.
Like there's not that that's, youknow, not that the investments aren't
important, but that, you know, That'salmost the table stakes, right?
It's like you have to have a goodinvestment portfolio, but beyond that,
you need all the specialized knowledgeof the tax planning, the, the, the
decumulation phase of life, how to managethe portfolio so that it doesn't run
out of money before you run out of life.
(06:44):
Right.
And I've had clients that hit,just like you said, I hit my
number or whatever it is, got allthe 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, ifwe're, if someone's out there and they're
thinking, do I need to change advisors?
(07:05):
Am I okay with my same advisor?
What should I be looking forfor 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 dependswhere your money is.
Now, we're assuming, since thisis retirement, the money's in an
IRA or a 401k or even a Roth IRA.
(07:25):
Yeah.
Where most retirement money is these days.
But some people have it in regulartaxable accounts, so that's different.
If most of the money is in an IRA or401k, 401k or even a Roth IRA, you need
somebody that's educated on the taxrules, especially RMDs, beneficiary
rules, tax planning, using the brackets,getting that money out, especially in a
(07:46):
traditional IRA where generally all thatis coming out taxable and it's forced out.
You don't even get a choice after age73, you're forced to take that money out.
All right.
So number one thing we'relooking for is education.
So a fair question to an advisor wouldbe, How do you maintain your education?
Yes.
Changes going on in the, uh,you know, in the tax world.
(08:07):
How do you stay on top of your gamewhen it comes to managing the taxes
that will apply to my account?
Not only for me, maybe, but alsofor my heirs when I no longer.
Well, it's a fair questionto ask your advisor.
And in fact, in some of my books,I have, uh, think 10 questions to
ask your financial advisor, but theyall revolve around the taxes today.
Even the rollover rules, moving money.
(08:29):
Uh, some people might just say that.
didn't have the tax knowledge orfinancial, I might just say, Oh, roll
it to an IRA and they miss a companystock tax break or something like that
because they didn't know the nuances.
I'm not going to get into it hereof the NUA net unreal, uh, and
net unrealized, appreciate it.
Uh, net unrealized appreciation.
I appreciate that you, uh, got that out.
(08:52):
Uh, see, it's even hard to say.
But you need to have an advisor thathas education, and that, to me, that's
critical because if a lot of that money isin 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?
(09:12):
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 toexplain it to you clearly because these
rules are not only, and this is the toughpart of all the tax rules revolving around
(09:33):
IRA distributions, they're among the mostcomplex 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 givesyou the right answer the first time.
Alright.
I think that's important.
I also think no one canknow everything, right?
(09:55):
Right.
So to me, another step in that is, whenyou 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.
(10:15):
Look, Ed, you and I spend ourlives going through the tax code.
And training advisors.
And training advisors.
And half the time when some, well,not half the time, but there are
often times, it's not unusualfor 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 pointtoo, is like, what are your resources
when you don't know what to do?
(10:36):
Well, you have to, you know, I alwayssay you shouldn't invest with an
advisor that doesn't invest in theireducation, especially in the tax area.
You shouldn't invest with an advisorwho doesn't invest in their education.
What did I say?
I just wanted to clarify.
You should not invest your funds withan advisor that hasn't invested his or
her own funds in their own education fortax planning, especially if most of your
(10:59):
money is sitting in a taxable IRA taxdeferred, but eventually taxable IRA.
I agree.
All right.
So that's two.
How about one more?
What's one more thing that someone shouldlook for in a decumulation advisor?
Well, somebody that knows the wholepicture, too, because your IRAs,
you may not, you might not onlyhave IRAs and Roth IRAs, and it
(11:22):
may tie in other professionals.
You may need to use more than one.
It may, you may want to beinterested now in estate planning.
You know, as you head to retirement,you start looking beyond the horizon.
So you might want to talk toan attorney and you may want
people working together for you.
So I still think the big itemis going to be tax planning.
(11:43):
But there's also you need somebody thatunderstands 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 anythingmore important than that.
Yeah.
If the money is sitting in an IRA.
Yep.
Well, listen, even when it's not, we seelots of, you know, times where people
will, you know, in a taxable brokerageaccount, they, uh, you know, will sell
(12:07):
an investment at an inopportune timeand 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 morethat 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 isenga, uh, rather, uh, aging.
Aging.
Thank you.
That's the word I'm looking for.
(12:27):
Yeah, that's a great point.
That's a right.
Uh, I know, uh, when Istarted out planning Mm-Hmm.
for clients that were much olderthan me, I was in my thirties.
They were in their sixties.
Same.
Yeah.
They like that because I wasyounger and That's right.
And they used to introduceme to their family.
Mm-Hmm.
Their beneficiaries and said, you'llbe working with Ed and they would,
you know, have bring in the, the.
(12:47):
kids, kids are not a baby.
I mean, they're 30, 40, 50 years oldthemselves, and they like that idea.
I found most clients did notwant 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'sgoing to happen when I'm not here?
I do too.
The, uh, the, uh, most advisors,right, their, their clients are within
(13:12):
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 asyou 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 effectivelywhat your, uh, what your, your, your
(13:35):
cumulative, what they call book ofbusiness, which I hate that term, but
what your group of clients look like.
Most of them are within about 10years older or younger than you are.
But if you think about that,that means when you're getting
ready to retire, your advisor isprobably 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?
(13:56):
So again, that doesn't mean thatyou shouldn't work with an advisor
who's close to your age, but youneed to understand what does their
transition process look like?
If they're not here, whether bychoice 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
(14:16):
even older, when you're not in thesame position to go out there and vet
new advisors, and you don't have thesame mental faculties, and you don't
want to spend all that time explainingevery circumstance that you've had.
What does the continuity look likefor you as a client of that advisor?
What is their plan when something,or if something happens to them?
(14:36):
You know, I talked about the taxplanning, which is key, but this may
be even, well, on the same plane.
I was going to say more important, becauseif you want that continuity, especially
to your beneficiaries in the full estateplan, like I was talking about, Uh, your
beneficiaries, You should have advisors.
They still have to have the knowledge.
That doesn't go away.
(14:57):
The tax planning, the estate planning.
But it's probably better off somebodyaround the same age as your, uh, children.
And I, again, adult children,you know, 40s, 50s, 60s, 70s.
So the 6 year old financialadvisor is not going to be taking
over the account that he takes.
Yeah.
Most times.
Although, uh, some of themcould be good stock pickers.
(15:17):
We could have like a Doogie HowserMD, you know, we could have like
Doogie Howser Financial Advisor.
No, but I did the same thing.
Over the years, I changed trustees on mytrust to younger people, the, uh, the, uh,
successor beneficiaries, things like that.
Yeah, I think that's critical.
And look, again, uh, It'snot to be, um, ageist, right?
You can have your 70 year oldor 80 year old even financial
advisor or CPA or attorney.
(15:39):
You just need to know ifsomething happens to them, what
does the next thing look like?
How well prepared are they fortheir eventual either forced
or voluntary transition?
And as they, I'm gonna followyour same lead there, not to be
ageist or whatever the word is.
That's the word.
How careful are older advisors stayingup to date with all the new rule changes?
(16:03):
Right, it can be very easy asyou 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 advisortraining programs, uh, that have been with
us for over twenty years that are in theireighties and nineties sharp as a tack.
It's you know some of them.
(16:24):
I do.
Yeah.
They are, they are incredible people.
And, and you want to make sure thatyou're working with an incredible advisor.
So whatever, you know, what, howeverpath you go down, you just want to
make sure that when you reach thatinflection 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 accessto the right resources.
(16:45):
Someone who has the right,uh, succession plans for them.
And someone who's going to continueto keep your best interest at
heart, no matter what happens.
I think I would add somebodywho's, who's going to get along
better with your beneficiaries.
That's true too, yeah.
Someone who not only can workwell with you, but hopefully
with your beneficiaries.
Because as, as we know it, so many ofthose mistakes are made, uh, not when
(17:07):
you're alive, But, in that moment afterdeath, when that transition occurred,
so many of those mistakes and so manyof those irrevocable mistakes occurred.
Oh, yeah.
There's no question.
If you remember when we were writing ourtraining 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 thebeneficiaries can mess it all up.
(17:30):
Maybe they, they have their own advisor.
Maybe it's one of their friends whoonce read a book about it or something.
You know, that may not work.
And these rules, we've had situationswhere 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 wealthyperson, but a little by little, $600,000..
(17:53):
The beneficiaries took over andsaid, Ah, my dad was so conservative,
we're taking it out, we're gonnainvest in, in really hot stocks.
They took it out.
They had a tax on six hundred thousand.
They blew the whole thing becausethey didn't know one key rule.
A non spouse beneficiarycannot do a rollover.
They took the money.
That's it.
Fatal error.
The whole thing was taxable.
(18:13):
So, uh, the beneficiaries can getthemselves in trouble as well.
No question about it.
Well, Ed, I think we've reachedour 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 thatmagic point you can make the best
decision for you and your family.
That's right Jeffrey Levine is chiefplanning officer for Buckingham
(18:37):
wealth partners This podcast is forinformational and educational purposes
only and should not be construed asspecific investment accounting legal
or tax advice Certain informationmentioned may be based on third party
information which may become outdatedor otherwise superseded without notice.
Third party information is deemedto be reliable but its accuracy and
completeness cannot be guaranteed.
The topic discussed in correspondingarguments are those of the speakers
(18:58):
and may not accurately reflectthose of Buckingham Wealth Partners.
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