Retiring in the Next 5 years? Avoid these Financial Mistakes

Episode Transcript

(00:00):
This is straight talk from the Housewith certified financial Planner Tracy Andton right here
on thirteen ten WIBA. You canlearn more about Tracy and the team at
Tanton Investment House all on the websiteTanton Investment House dot com. That's t
A N t O N investment Housedot com. Again, great website to
get to know Tracy the team.Also a great opportunity there is schedule an

(00:21):
appointment at a time and a datethat's convenient to you. Of course,
t Anton Investment House a fee onlyfiduciary with offices right in Middleton. Teleph
number for the Middleton office six SOHeight five zero one, fifteen forty nine.
That's six SOH eight five zero onefifteen forty nine. And joining us
this morning is certified financial Planner TracyAndton. Tracy, how you doing this
week? I'm doing well, Sean? How about you? I'm doing really

(00:44):
good and we've got just a fantasticconversation ahead. Let's talk about kind of
that agenda and what we're what's onthe agenda for today, Tracy, Well,
there was an article in the WallStreet Journal by Cheryl Winnaker Monk,
and the title caught my eye,and it was called retiring in the next
five years avoid these financial mistakes,and I thought, oh, I really

(01:06):
am curious what do they have tosay? So she talks about six common
mistakes for those folks who are gettingclose to retirement, and I wanted to
know what do other advisors say.But then also I thought, well,
maybe I can chime in on mytwo cents on some of these as well.
All this should be absolutely fantastic thisweek as we talk with certified financial
planner Tracy Anton right here on thirteenten, WUIBA the website Tanton investment House

(01:30):
dot com. That's t A Nt O N investment house dot com.
And again the telephone number six soeight five zero one fifteen forty nine.
That's six so eight five zero onefifteen forty nine. So, Tracy,
what is one of the most commonmistakes that were profiled here? Sure?
Yeah. According to this article,failure to maximize retirement contributions as one of

(01:51):
the most common mistakes that adults makethroughout their career. During the years when
you're earning the most, it's importantto make the most of what you put
toward retirement. According to Julie Beck, who's a financial advisor at will Spire
Advisors. She advises that folks inthis stage should aim to max out their
employee contributions, which include taking advantageof catch up contributions for those age fifty

(02:12):
and above. She says in twentytwenty four that means you could stash away
thirty five hundred and if you're setup automatic deductions from your paycheck, make
sure you're not missing out. Shesays on reaching this limit, especially if
your budget a laws fort, whichmakes sense. I mean, if you
can contribute more to the four ohone k's, that's a great thing.
You're saving is always a good thing, right. But the thing that I

(02:36):
would say there Sean that would evenbe a bit better is for her to,
you know, for it to beclear that you know, sometimes pre
tax money isn't always the best.If you're in a lower tax bracket,
you really should be doing maybe wrothfor one k if you have the option
through work, or some in pretax four one k and some in like

(02:58):
a roth IRA if your income isn'thigh, and if your income is higher
and you can't do a straight WROTH, I array be sure to take advantage
of a wrath for oh one kif they have it available. So more
and more plans are allowing for thewrath contribution inside the four O one K.
And something that I see that youknow, as we do these financial

(03:20):
plans and show people, you know, how does the money change over time
throughout the decades, you'll see thattheir require minimum distribution is quite high.
And if you have options in retirement, I always think that's better. So,
for example, you know, whatwould I advise instead of maximizing my
four O one k, maybe youwant to do you know, don't do

(03:42):
it all pre tax and maximize it, but do some pre tax and maybe
split it between fifty percent four oneK and fifty percent WROTH for one k.
Now, if you don't have thatoption, look into doing a brokerage
account as well. And even ifyou do have the option, I love
brokerage accounts because you could take advantageof the capital gains rates. Now,
of course, you know, Congresscan always change that, but right now

(04:04):
capital gains rates are lower than yourmarginal ordinary income tax rates. So it's
it's a really nice thing. Andif you pass away, your children receive
this brokerage account tax free. Sowhy do I like that? So much
because let's say you want to retireearly, Well, guess what you have

(04:24):
the brokerage account you can you cantake money from and you don't have to
worry about the tax consequences which couldaffect your social security. How much is
being taxable there? It could affectmaybe you need you need insurance, and
so taking it from the brokerage accountis less expensive. So there's all these
reasons why if you have built buildin some flexibility to the kinds of vehicles

(04:48):
that you're using for retirement, that'swhat I would say is an even more
one up decision. So is ita mistake to do it all pre tax
Well probably not. But in someways, if you're looking at those rm
ds and they're heftier later and wedon't know where marginal tax brackets are going
to be, might have been betterto do some money in a brokerage account

(05:11):
as well as a four to oneK. And again, if you can
take advantage of that ROTH four ohone k, please do So. It's
pretty amazing when we talk about havingdifferent options, and of course, as
we talk with financial planner Certified financialplanner Tracy Anton this morning here on thirteen
ten, WIBA it's always best tohave those in tracy real quick before we
get to get to the next one. Is when you were mentioning two about
maximizing retirement contributions. You obviously meetwith people eaching every day. If you

(05:35):
ever met somebody that said, boy, I wish I saved less, well,
you know, it's really interesting becausewhen I do the financial plans,
first of all, they all say, oh, this is such a good
idea. Thank you so much.Most people thank me for showing them how
their money changes over time. It'samazing because seeing big picture, it's really

(05:55):
hard to get your mind around thosebig pictures right, And the power of
compounding is real. It really isreal. So what I usually hear sean
is huh, I'm better off thanI expected, or I need to spend
more money, or you know,it's usually more optimistic then they anticipate agree,
So I don't. I usually don'thear people say yeah, I don't,

(06:16):
I shouldn't have saved so much.But they usually say I can retire
earlier than I anticipated, or youknow, it's usually on the positive side.
Now, every once in a whileyou'll find someone who isn't and they
say, I gotta get going,you know, but it's I gotta hurry
out. But mostly I think it'sit's you know, it's hard to put

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because there's so much fear about changeand in retirement and expecting your money to
work for you when you're you're notworking, and changing that paycheck into how
do you create an income from yourportfolio? That there's so much fear around
that that sometimes people go over overboardand then they don't they don't know how
to use it. So it's Ithink I think it's important to do a

(07:01):
plan. It's such a great positiontoo. As you talk about having the
plan, what a great position tobe in having that plan and having those
options. As we talked this morningwith certified financial planner Tracy Anton here on
thirteen ten WIBA, talking this weekabout if you're retiring the next five years,
avoid these financial mistakes. What's theother common mistake that both near and
current retirees often make. Tracy,So this article pointed out that not analyzing

(07:26):
and identifying the best social security optionsfor your situation, and I would agree
with that. They say you canstart receiving social Security as early as the
age sixty two, but your fullretirement age could be anywhere from sixty five
to sixty seven, depending on whenyou were born, And they said waiting
a bit longer can potentially be asmart move, And again they quote Julie

(07:47):
Back here, who was an advisor. She says she shared how her mom
apparently started taking Social Security at sixtytwo without talking to her first, Oh
my goodness, which she said permanentlylowered her benefits. And Julie said she
explains that while some people might wantto start getting benefits as soon as possible
because they've been paying into it forso long, waiting could pay off big

(08:13):
time in the long run. Andagain, sometimes it seems it might seem
like a good idea to start sosecurity, she says, but you know,
waiting off could really be important becausepeople are living longer these days,
and that's true too. Back explainsthat many clients don't expect to live into
their nineties, but it's a possibility, so it's smart smart to be ready

(08:35):
for that. And she said puttingoff so security could mean having more money
later on to cover these things likelong term care, other unexpected expenses,
or even fun for stuff like travel. So my take on this, though,
is when I talk to clients andwe do a financial plan together.
You know, that question comes up, well, I'm going to retire at

(08:58):
sixty two, that's my goal.And we'll run that plan and they'll say,
you know, now, should Iwait to take SOLD security. It's
like, well, okay, butif you wait to take SO security,
that means the dollars have to comefrom somewhere, right, and so we
have to take it from your investmentsif you're going to if you're not going
to take SoSE security, and oftentimeswhat happens if you're going to retire at

(09:22):
that age, you're going to haveto take it from Social Security and some
from your investments, which again isno big deal because that's the goal,
right, You're using your assets.But I find that you know this idea
of okay, well just keep waitingand waiting and waiting. Well, you
can't wait forever. If the goalis to retire at sixty two, right,
it's like you got to start usingso security. Now. Maybe one

(09:43):
person could take it and the otherperson who has the higher benefit waits to
take it. That's one option,and that can make sense for some people,
but again I see a lot ofpeople it's like we just want to
be done, you know, canwe be done at this age? So
we run the numbers and if socialSecurity earns the same amount, now,
sociecurity is guaranteed, and you know, I would be a big mistake for

(10:09):
me not to tell you that itis guaranteed and it goes up by eight
percent every single year. You waituntil age seventy. But if your investments
can do eight percent on average,then taking them from social security versus retirement
now one's guaranteed once not I getthat, But sometimes we need the money

(10:31):
to live off of. And soI think that's what this article and articles
like it always miss. It's like, well, what are we going to
live off of them? You know? And if one of you passes,
you don't get both, you know, the person who's left behind, they
don't get both soci securities. Theyonly get the higher of the two.
And so when you take a lookat it, it might make sense to

(10:52):
take your social securities now, andthen still you might still need money from
your investments. That's okay. Now, if your money is earning very low,
yeah, then that doesn't make sense. I did see somebody recently and
they were really conservative, and theyhad quite a bit of money in CDs
and they're pretty they're okay with itright now. I think they were getting

(11:13):
like three to four percent and intheir CDs and things like that. But
I mean in their case, yeah, I wouldn't take it from Social Security.
I'd take it from the investments becauseyou're not going to earn eight percent
on those investments. So there isthese one off situations. So do I
agree with the article, Yes,you should analyze it, but I also

(11:35):
I also don't think you should apply. Yes, always waiting is always better
because I think it depends on yoursituation. Really important distinctions there. As
we talk with certified financial planner TracyAnton right here on thirteen ten WIBA,
they have a chance check out thewebsite yet now is the time Head on
over Tanton investment House dot com.That's t A N t O N investment

(11:58):
House dot com. If you're lookingfor money menagemental portfolio management. Tracy makes
it really easy to schedule appointments rightat the website Tanton Investment House dot com,
or you can pick up phone callthe office right in Middleton six h
eight five zero one fifteen forty nine. That's six h eight five zero one,
fifteen forty nine. So, Tracy, as we talk about some of
the financial mistakes to avoid, whatis something people should try to avoid as

(12:20):
their approaching retirement. Well, thisarticle pointed out that accumulating significant debt can
seriously disrupt retirement planning. Financial advisorstypically do advise against taking on unnecessary debt
or making hefty cash purchases as retirementapproaches. So while purchasing a home after
retirement could be reasonable in certain situations, they point out they say, accumulating

(12:43):
substantial credit card debt or splurging onthe items that lose value quickly can seriously
impact your financial stability. And ofcourse, you know, I mean,
if you're going to put money oncredit cards, that doesn't make sense.
So I think that's kind of ano brainer. They go on to say,
also, be cautious about taking ourdebt that you won't be able to
sustain, like buying a large housewith a hefty mortgage that relies on the

(13:05):
income you're used to. That will, according to Jamie Cox, who's the
managing partner at Harris Financial Group inRichmond, Virginia, he says that will
torpedo your retirement plans. Faster thananything else. So I often don't see
that. What I see for peopleis they'll they are planning. A lot
of people plan to move in retirementor they want to build a house,

(13:28):
but they've been planning and saving fora long time, and oftentimes they've accumulated
money in a cash account for thatpurpose, at least part of it,
and then they plan to take asmall mortgage or half of a mortgage or
something like that. So I usuallydo see people that are making changes,
and I think that's, you know, more power to them. And I

(13:48):
think that's part of the fun offinancial planning is to look and see,
Okay, what what are our dreams? Yet? What you know, in
our last chapter here, what dowe want to do? Do we want
to have, you know, buildon our on our land that's up north
and we want to put a nicecabin there. What does that look like?
So I don't see people torpedoing it, but I'm sure across the country,

(14:11):
you know, you might find that. And in the in the mass
number of people I happen to see, you know, just probably a select
select group two that's pretty prepared.He've been smart for so long, and
of course continue that as you asyou work your way through retirement as well.
Yeah, I mean, you know, Sean, what I see sometimes
there's a problem is people who havea hard time spending. They have a

(14:31):
hard time because they've accumulated money theirwhole life. I even talked to one
gentleman and he wants to buy aPorsche. But he said, I wonder
how much what my brother will think, you know, And he said he
and he and he's worked really hard. He's worked He's somebody who's worked really
hard in his life. And Isaid, I think you can afford it.
He goes, I feel guilty,you know. So that's the reality

(14:52):
of it, too, is thatsometimes we work so hard we build it
up that it's like we need someoneto give us permission right to say it's
okay to live your dreams. AndI'm here to tell you it's okay to
live your dreams. Hopefully, hisbrother says, nice car, I hope
that's what his brother. Sure,his brother will that's the thing, right,
I mean, it's all in ourheads sometimes, you know. I

(15:13):
really think that if he's anything likehis brother, the brother's gonna say,
hey, give me a ride.Yeah, that's really exciting. Stuff as
we talk with certified financial planner TracyAnton. Interesting perspective as well as kind
of as far as that mindset.As we talk with certified financial planner Tracy
Anton here on thirteen ten dou wuib A. If you have met to
the website recently, check it outTanton Investment House dot com. That's t

(15:35):
A N t O N investment Housedot com. That's off a number for
the office right in Middleton, sixoh eight five zero one, fifteen forty
nine. That's six oh eight fivezero one, fifteen forty nine. We'll
continue our conversation with certified financial plannerTracy Anton. We will do that next
as straight Talk from the House continuesright here on thirteen ten double U I
b A. This is straight Talkfrom the House with certified financial planner Tracy

(15:58):
Anton here on thirteen ten dollars WUIBA. Hope you had a chance starting the
break to check out the website.If you haven't been there yet, head
on over now Tanton Investment House dotcom. It's a great opportunity to get
to know Tracy and the team,learn a little bit more about Tanton Investment
House. Also prime opportunity if you'relooking for money management or portfolio management against
schedule appointment right at the website TantoninvestmentHouse dot com. Of course you can

(16:19):
always pick up phone as well,call the office right in Middleton six eight
five zero one fifteen forty nine.That's six soh eight five zero one fifteen
forty nine. Talking about if you'reretiring the next five years and some financial
mistakes to avoid and Tracy, let'stalk then about as we kind of get
into some of these mistakes, whatare some other another investment mistake that folks

(16:40):
do as they're nearing retirement. Well, according to this article again Sean,
they said, a common mistake observedamong near retirees is taking on risky investments
as if they were still in theirtwenties. Well, we all think we're
in their twenties, right, Andthey said, as retirement draws near,
some investors forget that they don't havethe luxury of time to cover from investment
losses. According to one advisor,Jamie Cox, she shares a story about

(17:06):
an investor close to retirement who boughtseveral rental properties right before the two thousand
and eight housing crash. Ouch Well, when the market tanked, he couldn't
rent or sell the properties without takinga hit, and he didn't have enough
cash to cover the mortgages. Hehad to sell off the properties bit by
bit, forcing him and his wifeto work longer than planned. So Jamie

(17:27):
Cox again this advisor, he says, to avoid similar situations, suggests He
suggests that those nearing retirements steer clearof risky investments and instead focus on stable
options like dividend paying stocks and bonds. You want to put your money into
things that will support your income duringretirement, he advises. And so I

(17:48):
would say, of course, youknow, you want to have a portfolio
that's not, you know, allgrowth oriented when you're about to retire.
Now, whether you're five years out, I don't know. I mean,
is there a magical number that youchange. I think I think you have
to take a look at what's happeningin the market. You know, we've
just had a big correction. Idon't I don't you know, I don't
have the tea leaves here. Ican't predict what's going to happen. But

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I think you do have to payattention to what's happening in the markets as
well. So I wouldn't just sayautomatically, you know, five years out
you need to move from your onehundred percent stock portfolio to you know,
a sixty forty percent portfolio from youknow, stocks versus bonds. I would
say in this case, maybe ineighty twenty would be appropriate, or perhaps

(18:32):
you know, definitely I agree withsome dividend paying stocks and not just all
gross stocks. I think that makessense. And I just did a financial
plan. Was helping these clients out. I've known him a long time.
Pretty excited for them. They he'staking advantage of in his four oh one
K where the rule of fifty fivewhere they he will be able to take

(18:56):
from his four oh one K withouta ten percent penalty. So even though
he's not fifty nine and a half, he doesn't plan to roll the IRA
out. He's just going to leaveit in his borrow and K and he's
going to start taking distributions for that. And what he's going to do is
on the then he's going to changeinto like a free lance He's going to
do freelance work. So it's prettyexciting for him. But what he needs

(19:21):
also to do is he needs torealign his portfolio so he can't be one
hundred percent gross stocks and then youknow, because he'll be taking probably fifty
thousand from his portfolio, you know, every year, So he needs to
move to something a little bit moreconservative so that in case markets fall,
that he will be able to takefrom, say, you know, a
bond fund for example. So hedoesn't have to be uber conservative, but

(19:45):
he has to be conservative enough,if that makes sense. So I would
agree with them as far as youcan't. If you're going to retire early,
then you know, look to shiftingyour portfolio a bit. Another advice
there, Julie back. She alsorecommends that near retirees start building up their
cash reserves. So this was interesting, she said, using extra money they

(20:07):
come across, like tax refunds orbonuses. She suggests having at least two
years worth of cash saved up tocover essential expenses. This way, you
won't have to dip into your investmentportfolio if the market takes a dive,
she explains. And I like that, and I often tell people, you
know, especially if they're retiring onthe earlier side and it's harder to get

(20:29):
at the IRA without penalties, thenI would say make sure you build up
the cash reserves. So that youhave enough dollars outside of that IRA to
touch if you're looking at early retirement, and in this case, it is
nice to have a little extra moneynow. I also I also wouldn't go
overboard. If you're making one hundredgrand, maybe I wouldn't put two hundred

(20:51):
grand in cash. I probably wouldn'tbecause when you have bonds in the portfolio,
that should Now it's not guaranteed theydon't always up act opposite of stocks,
but oftentimes they do, so Iwould. And you have dividend paying
stocks, so your portfolio is goingto create an income as well, So
I would say I will. Iwould build up the cash a bit and

(21:14):
then also make sure some bonds anddividend paying stocks in the portfolio. Little
cushion never heard as we talked thismorning with certified financial planner Tracy and Ton
right here on thirteen ten WI bA. The website Tanton investment House dot
com. That's t A N tO N investment House dot com. The
telephone number six so eight five zeroone fifteen forty nine. That's six eight

(21:36):
five zero one fifteen forty nine.Talking if you're retiring in the next five
years, some financial mistakes to avoid. What are some other common mistakes among
individuals as they're nearing retirement. TracyWell, according to this article, they
said overspending on children. They said, as retirement approaches, it becomes increasingly
crucial not to spoil your children.According to Robert Strauss, an estate planning

(21:57):
attorney at Weist Mansion in Los Angeles, he says, well, the desire
to be generous with your kids isunderstandable. It can seriously impact your financial
security in retirement, he warrants.Streus shares a story of a client who
has spent so much money on hisadult children that he was forced to work
longer. He's basically using his salaryto support himself and one of his kids.

(22:19):
If he didn't have to support them, he could have retired by now,
Strauss explains, And I think thatmight be a different story here in
the Midwest. I don't. Imean, I find people, you know,
work for their kids, and youknow, help them with babysitting and
do all kinds of other things,and if they're well to do, they
might do the gifting per year.But I don't find that they are changing

(22:41):
their plan based on their children.So I wonder if it's a Midwest thing
versus not. But don't I don'tknow, I don't see that very often.
Really important though, as we talkabout that stuff, and of course
we're going to get to this finalone here, which is a biggie,
and we'll get to that in justa moment. In the meantime, if
I'm been to the website t AntoninvestmentHouse dot com, head out over right
now again it gets no tracing theteam. You can also listen to the

(23:02):
podcast, write a Tanton Investment Housedot com and schedule appointment at a time
and a date that's convenient to youif you're looking for money management or portfolio
management. Again, the website TantonInvestment House dot com at the telephone number
six h eight five zero one fifteenforty nine. That's six h eight five
zero one fifteen forty nine. Seemslike we're saving the best for last here,

(23:22):
Tracy. How should people start planningthen for retirement? Well, according
to this article, it said,ensuring a comfortable retirement requires thoughtful planning as
we age. They said, Unfortunately, many individuals overlook the importance of envisioning
and preparing for their ideal retirement lifestyle. Ultimately, jeopardizing their ability to live
the fulfilling life they envisioned. Thiscan lead to a situation where they either

(23:47):
haven't saved enough to do what theywant, or are they're too worried about
spending the money and end up notjoin themselves. According to one advisor,
Mary Anne Caswell, who heads upPark Avenue Securities in New York, she
has seen firsthand with relatives who saveddiligently but hesitated to dip into their savings
for fun activities like short trips aredining out with friends, and her advice

(24:12):
was to start planning or spending afew years before retirement so you feel financially
confident to do what makes you happy. And I love this. I thought,
you know, it's really pretty accurate. What I see is when we
do a financial plan, and Ijust encourage everybody get your financial plan done
because it's not that big a deal, it's not that overwhelming. You just

(24:33):
come up with a few numbers foryour advisor and look at it and see
you'd be surprised at how over thedecades the money will change. And it
projects the taxes, it projects youknow what interest rate you want to assume,
and you can assume multiple interest rates, you can run it multiple ways.
But by doing that, it reallybrings forward this whole thing about how

(24:56):
do you use the money? Howdo you spend the money that you've worked
so hard? Which vehicle do youuse first? The brokerage account, the
IRA? What about rock conversions?What about all these things? It all
it's all in this financial plan,and it works so well that in the
end I have heard so many peoplethank me. They just say, thanks

(25:17):
so much. This really helped becausewhat it does is it helps you envision
how it looks financially, and thenyou get a big relief. It's a
big kind of emotional or spiritual,I don't know whatever it is. It's
a relief that comes across to thembecause it's a big jump to retire from
retirement and not. It's also abig jump for people like I just did

(25:38):
one for somebody who was losing theirspouse. They knew they were in hospice,
and it was like she knew she'dbe fine, but then when she
saw the numbers, she was justlike you could tell, like some stress
left her. And I find that'strue a lot for couples. One person
will be more eager to retire thanthe other. But the other is more
concerned or nervous or you know.One person said, I don't want to

(26:00):
pay for health insurance. Well nobodydoes. However, that's an option.
You can pay for it you havethe money, or you can't. But
that's your choice and there's no wronganswer. But this is how the money
looks like, and this is whatwe can assume, and we use conservative
you know, right to return.So it's just a really great way to

(26:22):
help yourself to envision what does itlook like to retire? And it's different
for different people, it really is, but the money looks pretty similarly.
How does it change over time?What does it look like? And based
on your tax structure and based onsome other you know, assumptions, it'll
it'll really help you. You'll feelreally good about it. It's interesting we

(26:44):
talk a lot about savings plans,I think a lot of us think about
it, but also the importance ofhaving that spending plan as well as we
talk about planning. Certified financial plannerTracy Andton would love to talk to you
for money management or portfolio management.Tracy makes it real easy to set up
that appointment at a time and adate that's going to be it to you.
I'll gotta do is head on overto the website Tanton Investment House dot
com. That's t A N to n investment House dot com. From

(27:07):
there you can schedule appointment right onlineor pick up a phone call the office
right in Middleton six oh eight fivezero one, fifteen forty nine. That's
six oh eight five zero one,fifteen forty nine, Tracy. It's always
so much fun, great getting agreat insight from you. You enjoy this
beautiful day. Thank you, Sean. Take care