9.12.22: Audio automatically transcribed by Sonix

9.12.22: this mp3 audio file was automatically transcribed by Sonix with the best speech-to-text algorithms. This transcript may contain errors.

Producer:
Any examples used are for illustrative purposes only, and do not take into account your particular investment objectives, financial situation or needs, and may not be suitable for all investors. It is not intended to predict the performance of any specific investment and is not a solicitation or recommendation of any investment strategy.

Producer:
Welcome to Money Matters with Mike with your host, Mike Zaino. Get set for a full hour of financial information and economic news affecting your bottom line. Mike works hard each day to educate Americans like you on how to reach the financial freedom they've worked so hard for. And he can help you, too. So now let's start the show. Here's Mike Zaino.

Mike Zaino:
What's up? What's up? What's up? It's Mike Zaino coming to you live from Fort Mill, South Carolina. Happy Saturday, people. What a phenomenal day to be alive in these great United States of America today. We are absolutely going to breathe in the heat yet again. The whole goal of our show is to arm you with information that you can actually use and give you plenty of meat on the bone to chew on each and every single week. I'm really excited for today's episode on how to make sure you're prepared for retirement. And once again today I have the distinct honor and privilege of being joined by the one and only Mr. Matt McClure. Matt, how are you doing today?

Producer:
I'm doing great, Mike. How are you, man?

Mike Zaino:
If I was any better, I'd be twins.

Producer:
That's right. See, that's good. That's always the way to be. I love it. Yeah, no, we get we do have a great show coming up for everybody. We've got just a lot of wonderful meat on the bone. As you like to say for for our listeners today, we're going to talk about some major misconceptions that people have about retirement. Kind of the most common ones. And we've got a list of nine of those. So there are some big misconceptions folks have. We're going to run them down. And, you know, folks see what you know and what you think you know and what you actually know might be a couple of different things. So we'll go through all of that. We'll also talk about some risks that every retiree and pre-retirees should consider when they're planning for retirement as well. And remember, folks, this is Money Matters with Mike. Of course, the website is just that. Money matters with Michael. That's all one word. Money matters with Mike. Com. Or you can give Mike a call at 704 5601573. And that rings directly to Mike Zino. He will answer the phone and if he doesn't answer the phone, he'll give you a call right back because he's that kind of guy. 7045601573. Well, Mike got a lot, as I said, coming up on this week's show. And we're going to, of course, talk about some smart retirement planning and all of that. But talk a little bit first of all, just about some things that have been going on in the markets and in the economy here recently. You know, we're still dealing with inflation. We keep I think there was this survey that came out, it was a new Gallup poll, I believe, where right around 60% of Americans now are really feeling it as far as inflation goes and, you know, suffering some sort of economic hardship because of it.

Mike Zaino:
I think we're all feeling it. I mean, everything costs more. And yes, while gas has come down a little bit, it's like still twice the amount that it was just a matter of a few years ago. Right. I remember just a few years ago, I was paying a dollar 80 for premium in gas and now it's costing me close to $4 a gallon because I have to put premium in my truck. We're feeling it at the grocery store. We're feeling it at Home Depot. People that have to buy construction materials are feeling it. And it's all because of the supply chain issues that still have yet to be fixed. While everybody is focusing on inflation and they're focusing on raising the interest rates, at least the Fed is right to combat inflation. How about fixing one of the root causes of the problem as far as the supply chain? I mean, that would be one of the things that I would fix if I had the ability to do so. I like to be able to take care of what I can take care of. And that's that's raising the bar of financial education for our listeners on this show. So I'm going to concentrate on what I know how to do and we'll hopefully elect officials that know how to do the former.

Producer:
Yeah, there you go. Well, you know, and I spoke with you probably remember a few weeks back, an economist from Georgetown University who was talking about or from George Washington University, I should say not Georgetown. George Washington University, who was talking about inflation? This was several, several weeks ago. And I asked about that very thing, the supply chain. And she's like, boy, wouldn't it be nice if that's the way we actually solved the issue of inflation was on the supply side. But she says, you know, 900 times out of 1000 is the way that it happens is the opposite. It's on the demand side. And that's why we see the Fed raising interest rates to curb high demand. And we and we've seen the effects of that. It's brought that down. It's really tamped down demand so far. And, you know, maybe it'll it'll lead to inflation coming down. But, gosh, we're just we're feeling the pain in the meantime. Everything's costing more.

Mike Zaino:
Everything is costing more. Ah, I'm feeling it, Matt. I know you're feeling it. Our listeners are feeling it. I mean, maybe the uber rich, they don't feel it as much because their pockets are so deep. But most of America is definitely feeling the pain right now.

Producer:
And now for some financial wisdom, it's time for the Quote of the Week.

Producer:
So this week's words of financial wisdom come from somebody you might have heard of a former president of the United States named Abraham Lincoln. And he said this, quote, You cannot escape the responsibility of tomorrow by evading it today. And I think at one point or another, that's something that we're all guilty of just putting off until tomorrow. What we should be taking care of right now.

Mike Zaino:
Yes, 16. That's what I like to call Abraham Lincoln. He was the 16th president of our of our great nation. 16 had some some great words because we talked about this a little on last week's show about how some people like to run and put their head and bury it in the sand like an ostrich. I know a lot of financial advisers that are doing that right now because the markets have been in turmoil this year and they don't want to face the music of the people that they have their money as far as assets under management. But as you're approaching retirement, it is extremely important to eliminate as much debt as possible. You don't want to just ignore it and hope that it goes away.

Producer:
Hungry for something that you on?

Mike Zaino:
Here is some meat on the bone. We're approaching football season. We are in the midst of football season now. Early weeks. I'm excited. Matt, I know you are right. So I'm going to give you some football terminology. You need to tackle your debt head on. I was taught to hit something with force, wrap my arms around it, lift it up and drive it to the ground. And so when it comes to debt in retirement, it is very important to get rid of as much of it as possible. Prior to now, smart people understand that there are definitely two types of debt, right? You have good debt and you have bad debt. And some people will argue that all debt is bad debt, but good debt is a debt that adds value to your life and is an investment into your future. Things like student loan debt, mortgage loans, real estate investments. If you're a small business owner and you have small business loans or small business expenses, those are all examples of good debt. And why would you pay off a loan that you're only being charged two, three, maybe three and a half percent interest on when you could invest those same dollars and earn five, seven, maybe even 9% or more on your investments. It's the bad debt that I'm talking about, right, Matt? And these things are going to include having your credit cards paid off as well as your auto loans paid off. Any personal loans if, God forbid, you took a payday loan or any other existing balances. Those are the types of debts that I'm talking about, making sure that you go into retirement with low or zero balances. Another thing to point out is that credit cards should not be used as an emergency fund, as a as a reserve. You need to have a pile of cash stockpiled just in case something comes up. And you should only use credit cards if you have the resources to be able to pay that off in the future.

Producer:
Yeah, that's a big, big point here because I know that in my past, in my previous one, I wasn't quite as quite as money conscious or as good with with my finances as I am now. And I'm still obviously I'm not perfect. Nobody's perfect. But but, you know, I've gotten better. That's what I would do. I would I would save those credit cards, have those credit cards. And I'd be like, oh, you know, I don't have the money in my account to pay for my car breaking down or whatever. So I'm just going to put it all in the credit card. And then there, there it sat, there that balance sat and it just grew bigger and bigger and bigger because what it was a high interest credit card. And so that that just compounds over the coming months and just makes the situation worse than it would have been otherwise.

Mike Zaino:
Absolutely. And a lot of our listeners out there are either over 50 or approaching 50 years of age. And so one of the biggest pieces of advice that I could give those folks is to limit taking on new debt. When you're late in your career, once you hit your fifties, sometimes life gets in the way and things happen, and you need to be prepared for the possibility of having to leave the workforce sooner than you actually thought you might. And so once you reach that point in life, you have to be extremely cautious about taking on new debt if you're able to avoid it, especially when your repayment plan is dependent upon your ability to stay employed.

Producer:
Yeah, that's absolutely right. And, you know, I mean, you get into later the later years of life and it just made me think of the you know, the fact that if you're if you're in your let's say if you're in your fifties, if you go out and buy a house, well, you're going to take on a 30 year mortgage. That's going to be a load to bear. And who knows what's going to happen over the next 30 years. I hope I hope to God you live to be 150, but are you going to be able to actually satisfy that debt before you are gone from this earth?

Mike Zaino:
Right, right, right. And it's a lot of times the answer is no. And then what happens? Right. You've got to have a plan for all these kind of stuff. Where I find it gets really dicey is I see people all the time. Matt borrowing money from their 401. Ks from their 403 B's, from their thrift savings plans in order to cover credit card debt and other expenses. Well, what happens if you have to unexpectedly leave your job? Guess what? That loan becomes due and payable. And if you can't pay it, not only does it create a reduced retirement savings, it triggers a taxable distribution because that money is treated as ordinary income. That's one of the worst things that anybody can do is pay off debt by utilizing their retirement savings funds. And so how do you get out of debt? That's the biggest question. And we've talked about this numerous times, but I was reading an article on bank rate and it had some really good advice on basically six different things that you can do. To stay out of debt in the first one, I mean, is just common sense, but common sense isn't all that common anymore and it's just paying more than the minimum payment. So whatever the minimum payment is, if you can just add $100 to it, you're going to shave off years of interest, thousands of dollars of interest and years of time, I should say, just to get out of debt sooner.

Mike Zaino:
The next way, they suggest, is to try what's called the debt snowball. And I know we've talked about this. So the debt snowball method has you taking minimum payments on all of your debts except for the smallest one, which you're going to pay as much as you possibly can toward it. And then once you get it paid off, you'll go to the next smallest one and tackle it that way. I also like to tackle debts with the highest interest rates, especially if they're egregious interest rates. They're in the high teens, God forbid, 20% or plus. I mean, I think the highest allowable by the government is 29.99%. If you have something like that, you definitely want to pay that off. But the debt snowball method can help motivate you to focus on one debt at a time instead of multiple debts. And that helps you build momentum. It helps you stay on track. And one thing that you should absolutely disregard is that if you do have one of those payday loans that I was talking about or a title loan, believe it or not, those can have somewhere between three and 400% interest rates. Those should be paid off as soon as possible.

Producer:
Yeah, I remember back in the day and this was oh gosh, probably 12, 13 years ago. I was in an unfortunate financial situation at the time and had to had to take out a payday. And it was not much it was a couple of hundred bucks, but I just needed to pay bills. And I remember, you know, making a payments on that and seeing the interest rate. When I took it out, I was like, Oh my God, I didn't even know this was legal to do this. And it shouldn't be really, honestly, just my opinion, but it shouldn't be. But yeah, I mean, it's those are absolutely ridiculous. So yeah, tackling anything with a ridiculously high interest rate like, like that or those high interest rate credit cards, personal loans especially tend to be on the higher end of interest rates. Yeah, that's, that's great because then when you see that, as you say, the progress, you see that you're making progress, boy, that's motivation for you.

Mike Zaino:
It is it is another way that that bank rate listed was to to refinance your debt. And what does that mean? Well, that means you take your debt that you currently have that are higher interest and you either consolidate them or you do a balance transfer to a lower interest. It'll just help you pay more money that can go towards your principal and get it paid off that much faster. And so some of them, especially I know that several people who paid the balance transfer game and they try to find the 0% offers that have 18 months somewhere between 12 and 18 months. And if you're really lucky, you can find one without a balance transfer fee. Because I tell people that play that game, you've got to be really careful because every time you're transferring that balance, most of them will have a 3 to 5% balance transfer fee on there. And so you're adding extra money to your debt in order to get zero payments or 0% interest for up to 18 months. Another way they mention is to if commit any windfall, any financial windfall you get. So if you get a tax refund, all right, instead of going out there and blowing it on a new big screen TV or a vacation or a set of golf clubs, put it towards your debt if you get a stimulus check.

Mike Zaino:
I know the government has been in the habit lately of just printing and giving out free money. Well, instead of just taking it and blowing it, take it and put it towards your debt. Because even if you can take half of it and put towards doing fun stuff and half of it towards paying off your debt, that's going to make a great difference in the long run. And then there's a couple of other options. If you're so far in debt that you really feel like you're not going to ever be able to dig out of it. You might be able to settle your debt for less by contacting the creditors and negotiating a lower payment amount. Usually that's a lot less than you owe. And while you can take care of that yourself, there are people out there, third party companies, who will offer you a debt settlement service and they normally will charge you a fee. But if you only do that as an absolute last resort, and then everybody needs to be able to reexamine their budget because there are only two ways to pay off debts. Right? You can either earn more or you can spend less. The government. All right. They have to either tax more or spend less. Which one do you think they're going to do? Okay.

Producer:
Oh, we know the answer to that.

Mike Zaino:
Yeah, we know the answer to that. So if it's. Not feasible to pick up a part time job or a side hustle. You can make adjustments to your budget and start by looking at everything you spend money on, which we talk a lot about. All right. And then arrange them based on the level of importance. Classify it as either a need, like a basic need your food, your clothing, your shelter, those are basic needs. And then your wants, your Hulu's, your Amazons, your your credit cards and see and if you can highlight any expenses that can either be reduced or completely eliminated. And so once you make those necessary adjustments to your budget, you can take the money that you freed up to pay down on those extra debts. Excuse me, pay extra on those debts each and every month. So, you know, I thought that those were really, really good suggestions, because the bottom line is you don't want to be the ostrich. You don't want to ignore it. You don't want to do as 16 said and evade today thinking that it's going to escape the responsibility tomorrow.

Producer:
Yeah, absolutely. And you know, I mean, the other kind of way to look at it, too, is that with each of those debts that you get paid off, that's like giving yourself a raise. You know, you really you have more money in your pocket. And, you know, if you if you are sitting there thinking, being all dejected, being like, I haven't gotten a raise at work and, you know, two years or whatever, then, you know, give yourself a raise, pay off some of that debt and there you go. You got more money to to go around.

Mike Zaino:
Yeah. I mean, that's 100% accurate because anything that you save money on is more money in your pocket, right?

Producer:
100%. Absolutely is. Well, great meat on the bone there for our listeners to chew on and always appreciate those the tips and the insight there because it's very, very useful stuff. And I know that I learn something every week, so I know our listeners are as well. Well, we have some common misconceptions to talk about now, Mike, and this is all about, of course, retirement, which we we talk about all the time here on the show because we want you to have a successful retirement and one in which you are thriving instead of just barely, you know, trying to get by here. And so there are some some misconceptions that people have that that we found are probably the most common. And let's run down them. And I'm going to I'm going to read each one of these off, and then I'll defer to you, Mike, to kind of explain what these mean and tell the tell the truth about each and every one of these points. Number one, the number one misconception here about retirement is that people think that their effective tax rate will dramatically decrease once they stop working.

Mike Zaino:
This is a huge misconception, Matt, because your effective tax rate may not dramatically increase. And if you don't have a plan, right, if you don't have a plan and take action to make sure that a lot of your money is in non taxable types of accounts or your income that you're going to be receiving in retirement or from non taxable accounts, then your you may not be in a dramatically lower tax rate because you haven't planned for it. Social Security, up to 85% of that is taxable. The money that you've saved in tax deferred employer sponsored plans like your 401. Ks, your 403 B's, your thrift savings plans, all of that money is tax deferred, which means that you're going to have to pay taxes on all of the distributions, presumably when you need the money. Well, when do most people need the money, Matt? When they're in retirement. So the more money that they're bringing on a taxable income side, you might not be in a dramatically lower tax bracket.

Producer:
Yeah. And so that's a big misconception that folks have, is that, yeah, they're going to be in a much better place as far as taxes go. But as you say, know not necessarily the case. Well, number two in the list of misconceptions about retirement is that people think that Medicare covers long term care costs. It covers a lot, but not the long term care.

Mike Zaino:
I might have listed this one at number one, because, I mean, in retirement, most folks depend on the government sponsored health care program, Medicare. You got to be at least age 65 before you qualify for Medicare. But guess what? People it does not cover long term care costs. And people have this idea that the government is going to take care of them. And you can't you absolutely cannot depend on the government taking care of you, because that's simply not the case. Medicare does not cover almost hardly anything from a long term care perspective. What it does cover and what it's really designed to do is cover health care. You have Medicare Part A, which is your hospital costs. You have Medicare Part B, which is your physician's. Costs. You have Medicare Part C, which is known as a medicare Advantage plan, which will pick up with part A and part B don't. But then guess what? There's Medicare Part D, which are your drug costs, and you have co-pays and you have coinsurance and you have deductibles with those Medicare costs. And that's why most people will choose to either pick up that Part C plan, which is known as a medicare Advantage plan, or they'll pick up what's called a supplement, which has its own monthly premium. But that will also reduce or eliminate those extra costs that you have. So health care costs are definitely something that you need to consider. And that's why smart health is why we also consider that plan part of a smart financial plan as well.

Producer:
Yeah, and that's one I think Medicare is probably one of the most confusing things to to people in retirement because, you know, it's it's I I've often thought that maybe they should have instead of part A, maybe they should have named it Medicare Part H or something. Okay, that's hospital. All right. We got a hospital, Medicare Part P for physician costs and things like that. The only one that really makes sense is part D for drug costs. That's the only one. But that is it. Well, yeah. So Medicare big, big cause of confusion for a lot of folks. And there is help out there, everybody to to make sure that, you know, the difference between all of this, what is covered, what's not covered and what the possibilities are. And, of course, you can call Mike Zaino to find out more about Medicare, about all these issues that we talk about here on the show. 7045601573. That's 7045601573. Now, as we continue on with our big list of misconceptions about retirement that folks have. Number three is that people think that the key to retirement is acquiring one big magic, number one big lump sum of money. And if they reach X amount of dollars, then then they're all set, right?

Mike Zaino:
It used to be, hey, you know, the commercials that they'd have the people walking down, I forget which company it was, but you'd see people walking down the road and they'd all have these numbers floating above their head, whether it was $1,000,000 or $2 million or $3 million or whatever the number is. Honestly, retirement is more about income than it is about getting just to one big nest egg number. And you need to make sure that you're generating that retirement income through a number of different tax buckets. And so the best kind of money in the world is free money. The tax free money. The next best kind of money is tax deferred money. And then obviously taxable money would be the least preferred in retirement. And so that's where the smart tax portion of our smart financial plan begins to matter, because you need to have a dependable income stream during retirement without the IRS holding you back too much. And so one of the ways that you can generate tax free income is from a Roth IRA. Another would be to generate tax free income from a specific type of life insurance. That's a more advanced form of life insurance designed to provide you with income as a loan against the death benefit, by the way, a loan you never intend to repay. And then also, if you're in your forties or your fifties or your sixties, and you want to figure out how you can get tax free income, and I'm talking completely tax free income. Obviously, you know who to call, right? It's not Ghostbusters. It's Mike Zino. We're happy to help you figure that out and show you a roadmap in order to be able to do so.

Producer:
Yeah, right. And you know, as we've been talking about during our, you know, Smart Retirement Plan series that we've been doing and we'll continue, of course, next week, we've been discussing that sort of roadmap, right, to get you, because the first step is knowing where you want to go and then all the other steps are how you get there. And so, you know, this is a this is a big one is, you know, tax consequences of what your investments might be or what your retirement plans might be. And so, yeah, absolutely, tax free is the absolute best. So yeah, that's a big thing. And folks, money matters with Mike Dot com, by the way, is the website I meant to mention that a minute ago as well. But Money Matters with Mike Dotcom is the website and you can reach out there for a free full financial consultation. Well, a number four on the list of big misconceptions here, Mike, has to do with Social Security. And it is that some people actually think that all seniors receive the same Social Security benefit that is just, you know, a check that's like same amount for everybody and that goes out once a month and that's it.

Mike Zaino:
Yeah. So that's absolutely not the case. Matt. In fact, Social Security benefits are generated based on your highest 35 years of earnings. So. A year where you're in your fifties or sixties and you're hopefully earning more than you've ever earned in the past. That is going to replace a year when you were in your teens, your twenties, your thirties, where you probably weren't making as much money. So the more average income you've made during your top 35 earning years, the higher your Social Security income benefit will actually be.

Producer:
Yeah, and that's great news because I didn't know that in my teens and twenties. Ooh, I didn't make a lot of money. So it's good to know that they count those 35 highest, not the 35 lowest, which would be a different kind of story, the lower. Yeah, amen to that. All right. So that's number four. Number five also has to do with Social Security, and it is that people think that they're stuck with the same Social Security benefit, like throughout their lives. Like they'll say that, oh, okay, the first payment that I received, that's going to be the payment that I get for the rest of my life. There's no change in that. And or I reach a particular retirement age and I have to start taking my benefits then. And that's when I get that amount and it's that's going to stay the same. Yeah. Talk about that because that, that I think can be a confusing one for people.

Mike Zaino:
Yeah. And that is absolutely not the case. It's not true. In fact, your first eligible to claim Social Security benefits when you hit the age of 62 unless your Social Security disabled, you can claim it earlier. All right. But if you take it at age 62, you're only getting $0.75 on the dollar. That that is a discount that you are allowing the government to give you. You're not taking what is owed you. And if you would just wait a few more years until your full Social Security retirement age, then your benefit is going to go up. And if you can even delay it farther up into a maximum retirement age of age 70 as it currently stands, that is going to typically be many hundreds of dollars more than had you grabbed it at age 62. So the bottom line is, is that every year you delay taking Social Security, it actually goes up by 8% a year and we're talking compound interest. So that makes a significant difference. The other thing is that Social Security is known to do what are called COLA adjustments, cost of living adjustments. All right. That's what a COLA is, a cost of living adjustment. And so I know that the government has just approved a COLA for this coming year. So those of you who are drawing Social Security, you're going to see a higher benefit, mildly higher benefit than you did this year. Hopefully, that will help to combat those inflationary costs that you're incurring. All right. And that's the end goal of why they give you the cost of living adjustment.

Producer:
Yeah. And I actually did put together here recently a little piece about that that I would like to share with our listeners right now. And that's about the the COLA, the cost of living adjustment in Social Security and how high it could be next year for folks. But some unintended consequences of that potentially. So let's take a listen to this. We'll talk about it on the other side. Social Security will get a big cost of living adjustment next year, but there could be some consequences you might not have considered. I'm Matt McClure with the Retirement Radio Network. Powered by a married Life. A new report by the Senior Citizens League says Social Security beneficiaries could see a cost of living adjustment or COLA as high as 10.1% next year. The reason? Inflation running at a 40 year high.

Mary Johnson:
This is a very, very unusual and unprecedented pattern of inflation that we're experiencing.

Producer:
Mary Johnson with the nonprofit group, told WPTF TV that surveys show inflation has caused about half of Americans to spend their emergency savings and people are carrying more debt on their credit cards. So the highest jump in Social Security payments since 1981 would be a good thing, right? Well, Johnson says it's better than no increase, but there are some things to be aware of.

Mary Johnson:
In fact, you can get penalized if you think your tax liability is going to be 10% more next year than you're paying now. You could be penalized if you don't send in estimated payments or have more money withheld.

Producer:
She told the TV station the increase would not be enough to cover a jump in Medicare Part B premiums, which are taken directly out of Social Security checks. And she says higher incomes mean some seniors could no longer be eligible for some other government benefits.

Mary Johnson:
And then a whole 15% were made in eligible because they were their incomes increased over the income limit for food stamps or rental subsidies or the programs in their area.

Producer:
So what should you do? Johnson says. Prepare now. Talk to a financial advisor to help you get ready ahead. Of time and contact local nonprofits if you need help paying bills. So are you prepared for the unintended consequences of a larger Social Security check? That's a key question to consider as inflation impacts all our lives. With the Retirement Radio Network powered by a micro life, I'm Matt McClure.

Producer:
You're listening to Money Matters with Mike. Listen closely because money matters. Here's Mike.

Producer:
So you just heard there about the cost of living adjustment in Social Security for next year and, you know, could be seeing some more money, you know, dollar for dollar. But a couple of questions then. Is it going to keep up actual, you know, the actual pace of inflation? And number two, could it then throw you into higher tax bracket and you end up behind instead of ahead?

Mike Zaino:
Yeah, we think that just because they're giving us a cost of living adjustment. Hey, great. Right? It's more money for us, but it might not be if that throws you that whatever they've added, it throws you into the next highest tax bracket. Well, now what you mean by being behind is when you're in the next highest tax bracket, you're being taxed more on all of the money that you've made for that year. So your net is a loss as opposed to a gain. Gee, thanks, Uncle Sam. I hope that doesn't happen to the majority of you out there, but for some it is a definite pitfall to be aware of.

Producer:
Yeah, definitely so. Well, that is a look at Social Security and the cost of living adjustment there. And as we continue on, we're continuing with our list of misconceptions, the top misconceptions that we hear a lot about retirement. And number six on that list is that people think that taxes will remain flat during their retirement years. We we mentioned taxes a minute ago, and I know where they're going. And it's not it's not staying flat.

Mike Zaino:
Government has two choices. Spend the less. Yeah, right. Or tax more. And so, yes, this is also a very, very big misconception that we hear. Did you know, Mat, that between 1960 and 1963, the current 24% tax bracket was actually 56%. Can you imagine.

Producer:
That? Ouch.

Mike Zaino:
Imagine if this was the case today and you were in that tax bracket and you wanted to take $10,000 out of a retirement vehicle to take the family on a great vacation, that $10,000 at a 56% tax rate, the government would keep 5600 of those dollars and all you would be left with would be $4,400. So you need to do everything that you can to tackle the misconception that taxes are going to remain flat during retirement. And once again, that's why the smart tax plan is part of our comprehensive smart financial plan.

Producer:
Yeah, and we talk a lot about taxes and for good reason. You've got to keep in mind those tax consequences, potential ramifications of exactly how you are taxed in retirement and and know and plan for taxes to go up in the future, because that is historically where things have gone. And, you know, that's where most economists believe that things are headed in the future as well. Yes. Well, number seven on our list of misconceptions about retirement is that people assume that they're going to die before the age of 90. So they only plan to live that long. Well, and I and I have to say, this was this is a couple of weeks back now, but Queen Elizabeth, the second, just passed away not all that long ago at the age of 96, 96 years old. And so people are people are living longer, not just the, you know, British royalty, but, you know, ninety's not all that rare anymore these days.

Mike Zaino:
The worst thing that somebody could do is say, I'm not going to live to 80 or I'm not going to live to 90. And then they see their 81st or 91st birthday. Congratulations. You're alive and you're broke.

Producer:
You have your no.

Mike Zaino:
Man expired when you thought you would expire. So it's always best to have a plan that goes well beyond and I'm talking about at least a decade beyond where you think you're going to be, why people are living longer. Advancements in technology, advancements in medicine, in procedures. There are things that they're doing now that we never in a million years would have thought was even possible even 50 years ago. And did you know that the human life expectancy over the last 200 years has now more than doubled in the United States of America? People are living longer. Also, I found it really interesting that the CDC, the Center for Disease Control, says that if both spouses live to be age 65, it is highly likely. Highly likely. At least one of them is going to live to be over 90 years old. And see, that is why we have to plan for our retirements to last well beyond when we. You think we are going to last? And that's definitely something that we talk about in our consultation because the last thing you want to do, the biggest fear of most folks going into retirement is running out of money.

Producer:
Yeah, we've talked about a couple of times on the show about, you know, budgeting and having more money than month and not more month than money. Well, you certainly don't want to have more life than money, right? You want to have more money than life.

Mike Zaino:
You know, but nobody wants to live off of government cheese. They can plan and avoid it.

Producer:
Not not too tasty. So that's number seven. Number eight, on our list of misconceptions about retirement is that when it comes to portfolio allocation or your retirement planning in general, people sometimes will say, as the old infomercial said, I can set it and forget it. But that's not quite what you need to do.

Mike Zaino:
Please, please, please don't do this. There are some things that you can set and forget. You know, if you're if you're going to be an automated saver, somebody that that can set a specific amount to come out of their paycheck every month or every pay period and save it or invest it. Yeah, that's something that you can set and forget. But we always encourage everyone to inspect what they expect about their retirement futures, why things change, life happens. And hope is not a strategy, right? Nobody could have planned in March of 2020 for the world to shut down. But guess what? It did? And people's lives were affected. And so we can help make sure and help you make sure that your portfolio is managed properly, because we want to have your money working as hard for you as you worked for it, because I know that people out there work hard for their money, and I bet you worked even harder to save it. Right? So why not protect it?

Producer:
Yeah, 100%. And this one kind of goes hand in hand with that. Mike, it's our last one, number nine on the list of retirement misconceptions. And that's that people assume that they can handle their retirement planning by themselves. I know that with given everything that we've even just talked about on the show so far, there are so many different things to consider, so many options out there that you might not even know are out there if you think that you can handle it yourself. I feel like, at least for me, I would just sort of get overwhelmed and and not necessarily know what all to do and hope and pray that I was doing. But but as you said, hope is not a strategy.

Mike Zaino:
Hope is not a strategy. You know, if I have a toothache, I'm not going to start getting my neighbor's dental tools. He's a dentist and pull them out and start just poking and looking at myself in the mirror and sticking stuff down there. Because why? What am I going to end up doing? I'm going to cause myself more pain. I'm going to cost myself a lot of blood, tears. It is not my area of expertise. I'm going to go to somebody who does this day in and day out and is familiar with all kinds of scenarios, because that person has dealt with thousands upon thousands of folks that are in your identical situation. Also think about this. If you pass away and you had been personally handling all of your own retirement and financial planning, all of a sudden if you're married now, your spouse has the responsibility of settling all of those affairs and taking care of all of that planning and trying to pick up the pieces and put together the puzzle that you have left them. And if you didn't leave it in an extremely comprehensive and orderly fashion, then he or she will be lost.

Mike Zaino:
So we need to do everything we can to set both spouses up for success, not just one spouse, but both spouses up for success during retirement. And we believe that the right way to do that is to start working with somebody while you're both still around, you're both still alive and kicking and can comprehend this so that we can establish a plan that both of you have buy in into, and it ensure that you're both taken care of during your golden years. So there are reasons that you want to have this stuff in a plan put together that is tied up in nice and neatly presented to a surviving spouse. And the main reason is you don't want to leave them lost and just trying to pick up the pieces, they're already going to be distraught, full of grief. The last thing they're going to want to have to do is deal with a headache that you've left them because you've failed. Let's be honest. You failed to take it as your responsibility and take it seriously to get your ducks in a row by speaking to a professional.

Producer:
Yeah. Set yourself up for success in in retirement in the later years. But you're you're not always going to be around. So set your loved ones up for success as well and make sure that everybody is in the loop on everything there. So yeah, absolutely. Great. Those are some common misconceptions about retirement, nine of them. And I hope that that our listeners all learned something there. I know that that I did listening to that list. And you might be sitting there, folks, and say, well, oh, of course I knew that one. But actually, you know what? I didn't know that one. So it's you know, it could be a little bit of a hit or miss kind of situation. But if you have any questions about any of that that we've been talking about or going to talk about on the show, hey, call Mike Zaino. He is available all the time at 70456015737045601573. And I say all the time, but, you know, he might not appreciate a 3 a.m. call, but you know what? He'll call you when he wakes up. There we go. Money matters with Mike dot com is the website as well.

Mike Zaino:
I promise I will not answer my phone at 3 a.m.. Nothing is that important, my wife says. But what if somebody did? And I'm like, They're not going anywhere. They'll still be dead when I wake up at 730 in the morning.

Producer:
It's true. But when the alarm goes off, still dead. Yeah. There we.

Mike Zaino:
Go. I'll still be there.

Producer:
Right, right, right. Exactly. There you go. And I will get my sleep. All right. Well, well, you know, we talked about some misconceptions about retirement. Let's talk about some risks that retirees and pre-retirees should consider. And these are some reasons here, Mike, that it's important for folks to have a smart plan going into retirement. The first one is really talking about market risk and that's, you know, systematic and unsystematic risk. So so talk about the risk of being invested in the market and what people need to have in mind.

Mike Zaino:
Well, short term, people that have a shorter time horizon need to be especially concerned with market risk. And whether it's systematic risk, unsystematic risk, both the stock market and the real estate market, they go up and down right through periods of volatility, through periods of uncertainty. And the last thing that you want to see have happened to you is that the year or the few years after you retire, your money is tied up in the market and you just experience a huge downturn. Why? Well, your money is never going to last as long as it would have had you experienced a few years of growth before the downturn. Because if you lose 50%, you actually have to gain 100% just to gain back to even where you were before and then you've lost time. So market, whether it's systematic or unsystematic risk, market risk is something that any pre retiree and especially retirees should be very, very aware of.

Producer:
Yeah, and it's definitely something that, let's say folks who retired in about 2008, 2009, they they definitely know about that. Talk about interest as well. You know, interest rates are big in the headlines right now. We just talked about them earlier.

Mike Zaino:
Right. So so interest rate risk is another risk that you need to be hugely aware of because interest either works for you or for those who understand it or those who don't guess what it works against you. And all interest rates are subject to change and adjustments have shown to have significant effects on American families and the economy as a whole. So if interest rates rise and it causes you to pay more for your money or pay more for your goods and services, that's a detriment. If they rise in your on the investment side, well then that's a good thing. But you always have to be just aware of interest rate risk.

Producer:
Yeah, well, and speaking of paying more, inflation is the next risk that we want to talk about. And it's something that now, unfortunately, we're all familiar with.

Mike Zaino:
Absolutely. So inflation risk, what is that? And that's people who have money in CDs, people who have money in cash type funds, whether it's in a 401. K or like the G Fund, the gut, which is the government fund for for government employees, they are safe, but safety comes at the price of what earnings? Right. Typically, when when something is safe, they're not going to pay you a lot of money. And so the risk in lies is that when your money is growing at, say, 0.2 5% or 0.5% and inflation is at. 8%. Heck, if it's just at their target of 3%, you're still upside down. If you're earning a half a percent, you're upside down 600% if inflation is at 3%. So you have to be aware that safety typically comes at a cost. Now, there are vehicles that that allow you to enjoy reasonable rates of return and guaranteed safety. And I'm sure we'll get into that here a little later.

Producer:
Yeah, absolutely. There are solutions to that issue where you can see a bigger return on those retirement dollars. Well, public policy, we've talked about this as well in the show, but it's also we talk about it as as a, you know, sort of under the banner of of risk, because things change all the time as far as public policy goes. And therein lies the risk, because, again, you don't have a crystal ball.

Mike Zaino:
You don't have a crystal ball. But one of the ways that people can can at least have a say is to exercise their vote. Public policy, right. This is controlled by those that we have elected and put into office. If you don't want taxes just ridiculously raised, then don't vote for people who run on the fact they're going to raise your taxes because that is the one that most notably can affect American family budgets for sure. But November is coming up. Midterms are coming up. Get out there and vote. I don't care who you vote for, but exercise your vote.

Producer:
Yeah, that's the thing. Participate. Otherwise don't complain because you got no right to complain if you don't make your voice heard. And if you don't make your vote count. That's the thing I had. So my nervous more than anything is I hate what's going on in Washington or I hate what's going on in state capitol or whatever. And you're like, Well, did you vote last time? Well, no. Then why are you.

Mike Zaino:
It won't matter. You know, I'm just one person. Well, think about that. If 200,000 people think that they're just one person, that's 100,000 votes that could have been cast and actually meant something. So please, please, please. Your vote does count. Yeah. Get out there and vote.

Producer:
Absolutely. 100%. Well, so that covers public policy. Here's a big one, I think, for people. And we touched on this. We're talking about market risk a minute ago, but timing is huge as well.

Mike Zaino:
Sure, you can't control when the markets go up or go down. So you have to consider what would you do or what should you do when the market is either in a bear market and everybody is hating life like going what is going on or if it's in a bull market, right? So timing is everything and most people can't time the market. We don't have the crystal ball. And so therefore going into retirement, you don't want to take unnecessary risk and have the chance that a significant portion of your portfolio just gets eviscerated by a down bear market.

Producer:
Yeah, well, and one thing I think that people also need to keep in mind in going into retirement is is liquidity and being able to actually have access to your money.

Mike Zaino:
Yeah. The last thing you want to do is tap into retirement type accounts. If you just need some extra money because something came up, an air conditioning unit or a heat pump went out or your water heater blew or your car dropped to transmission, you need to have sufficient access to your savings. And we're not talking about retirement savings, but to be able to fund those expenses and help meet your goals. So if if you don't have that liquidity, you're risking having to tap into your retirement assets to do so and obviously not the best case scenario.

Producer:
Well, sequence of returns is something else that we want to talk about here, and that's so closely related to the timing thing. But talk about sequence of returns and how that could be a, you know, something that has a huge impact on folks.

Mike Zaino:
Yeah, we have spoken about this before in one of my Meat on the Bones segment. So if you if you missed that Meat on the Bone segment, I urge you to go back and listen to that podcast and you can do that anywhere, podcast or broadcast. But the sequence of returns is just the order in which your money either earns interest or loses interest. So if you're going into retirement, I just mentioned this during the timing segment and you go to retire and then the market loses money, loses money, loses money, loses money for those first three, four or five years, whatever, and then starts regaining. You will never have enough money to last through retirement. If, on the other hand, you gain money for a few years before you start losing money, you might have an. But there are better ways to avoid the sequence of returns risk altogether and not have to worry about that. And we'll talk about that a little later.

Producer:
Yeah. And this is also something that we sort of touched on earlier. But longevity is a risk as well because, you know, people are living longer.

Mike Zaino:
And nobody wants to outlive their money. Like I said, if you have a plan to live to 90 and you see your 91st birthday and you're broke, that's not going to be a fun situation. So we're all living longer. We want to make sure that your money lasts your entire lifetime and then some. And so, again, if that's a concern, we have a plan for that.

Producer:
Yeah. Excess withdrawal is also another thing that that folks need to think about because, you know, if you eat away too much at what you've put aside for retirement, not only are there going to be potential consequences as far as penalties that you would have to pay and things like that as a percentage of whatever that withdrawal might be, tax consequences like we talked about earlier. But you're not going to have as much money in retirement.

Mike Zaino:
Exactly. When you pull too much money out of your retirement savings, you could put the later years of your retirement at serious risk. So if I break down retirement into ten year increments, the first ten years of your go years, that's when your go going, right? You're going to see things you're visiting, places that you've never gone to because you're young enough, you're still able to do so. The next ten years of your slow go years, you may want to go back to some of the places that you really enjoyed, but you're not going quite as much. And then the last ten years are your no go years. You're pretty much just hanging around the house, reading books, spending time with the grands, the great grands, if you're lucky enough and fortunate enough. But if you go, go to hard in those early years and pull out too much money and then enter into a bear market territory where the market is just going down and down and down and you've pulled out too much and you haven't put your money in vehicles that can combat that type of an event. Guess what? There's a serious risk of running out of money in retirement. But guess what? We have a plan for that.

Producer:
Absolutely do. And you also have to plan for health expenses. That's another big risk that people need to consider in retirement.

Mike Zaino:
Yeah, we talked about this as far as medical costs and Medicare not paying for everything and the fact that you still have co-insurance and co-pays and deductibles. And so you just want to make sure that you have your health care budgeted for in retirement, because if not along with long term care type planning, they can absolutely just just obliterate retirement savings if you're not planned for it. And a lot of people are like, I have enough money. I'll just use this if that happens. All right. If this, then that. Well. Why, when, when there are better ways to where you can use a little bit of your retirement dollars to take care of the majority, if not all of that, as opposed to wasting all of that if this happens as far as a qualifying health event.

Producer:
Yeah, 100%. Well, and then a couple of other things in the couple of minutes that we have left in the show. Loss of spouse. That's, of course, something that nobody wants to even think about. But you kind of have to.

Mike Zaino:
Yeah, you do have to. Especially if that spouse was responsible for bringing in income. And I don't mean income from a pension plan, only if they're fortunate enough to still have one great. Or if they had an annuity or if they had Social Security benefits. Well, when one of the spouses passes away, so too does one of the Social Security benefits. And the surviving spouse only gets to keep the greater of the two. Well, that means that if you were used to living on an extra, I don't know, $1000 to $1500, and that was the lesser of the two. That's a significant portion of your income in retirement that you now have to figure out how to replace or significantly diminish your standard of living, which nobody wants to leave their spouse in that precarious predicament.

Producer:
Another thing nobody wants to do is go back to work in retirement. Re-employment is the last one of these risks we'll talk about.

Mike Zaino:
And this is why I tell people, don't retire on emotion. Don't retire unless you have a plan. Don't retire unless that plan has been stress tested because nobody wants to retire, only to figure out six, seven, eight months later that they don't have enough money. And it's all of a sudden it's welcome to Walmart.

Producer:
Yeah. That's that's not the kind of thing that you want to happen in your retirement years at all. And we're actually just about out of time here, Mike. Again, the show has flown by once again this week. But one of the things that we have been wanting to discuss was replacing bonds with fixed indexed annuities. And that is a subject that I know will bring up next week. So there's a big tease for our listeners out there, and.

Mike Zaino:
It's part of the smart, safe plan that we talked about as well.

Producer:
Yeah, absolutely. And so we'll pick up on that and continue our Smart Retirement Plan series next time around. Money Matters with Mike Dotcom. Once again, folks, is the website and the phone number 7045601573. Mike, it's been a pleasure, as always, sir.

Mike Zaino:
It has been. Matt, thank you for being my reliable co host. You do such a great job, folks out there in listener land. Without you, we don't have a show, so thank you. If you know anybody that could benefit from the meat on the bone segments or any of the other segments that we put out over the airwaves, please send them the money matters with Mike. Give them my telephone number. Let them give me a call if you need, help yourself. Or if your financial advisor has been the ostrich over the course of this year and has hasn't been talking to you about how much money you've either been making or losing, then give us a call and we'll get you taken care of. Okay? Have a great weekend, folks. And as always, make it a great day.

Producer:
Thanks for listening to. Money Matters with Mike. You deserve to work with a financial and insurance expert who can offer strategies for protecting and growing your hard earned money. To schedule your free no obligation consultation, visit money matters with Mike or pick up the phone and call 704560 1573 That's 7045601573 Not affiliated with the United States Government, Mike Zaino does not offer tax, legal or investment advice. Consult with your tax advisor or attorney regarding specific situations. Opinions expressed are subject to change without notice. These opinions are not intended as investment advice, nor do they predict future performance of any product. All information provided is believed to be from reliable sources. However, we make no representation or warranty as to the accuracy of any statement. This information is intended to be educational in nature. It does not provide a guarantee or a specific result. All copyrights and trademarks are the property of their respective owners. A pro life assumes no responsibility or liability for the content of this message. The information contained herein is provided on an as his basis with no guarantees of completeness, accuracy, usefulness, timeliness. Are the results obtained from the use of this information?

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