Make It Last – Ep 93 – Assisted Suicide Legal Update & Common Retirement Mistakes

Make It Last – Ep 93 – Assisted Suicide Legal Update & Common Retirement Mistakes
February 20, 2019 jersey Uncategorized 0 Comments

Assisted suicide has been a controversial topic for years. Some believe it is every person’s right to choose when they are going to end their life, while others believe it is morally wrong to end someone’s life, no matter the circumstances. Listen this week, as Victor goes over some legal updates that could allow terminally ill patients to choose when they would like to end their life.

In the second half of the show, Victor goes over some common retirement mistakes and how to avoid them. Remember, planning in advanced, will always help avoid any mistakes!

Make It Last with Victor Medina is hosted by Victor J. Medina, an estate planning and Certified Elder Law Attorney (CELA®) and Certified Financial Planner™ professional (CFP). Through his law firm and independent registered investment advisory company, Victor provides 360º Wealth Protection Strategies for individuals in or nearing retirement.

For more information, visit Medina Law Group or Palante Wealth Advisors.

Click below to listen to the full episode…
https://www.makeitlastradio.com/ep-93/

Click below to read the full transcript…
[background music]

Announcer: Welcome to “Make it Last,” helping you keep your legal ducks in a row and your nest egg secure, with your host, Victor Medina, an estate planning and elder law attorney and certified financial planner.

Victor J. Medina: Hey, everybody, welcome back to Make It Last. I’m your host, Victor Medina. I’m so glad you can join us this Wednesday morning for another fun edition of the only show where you can get the best of both legal and financial retirement planning advice.

This is the only show that has got a host that is an expert in both of those areas. That’s me. I’m so glad that you can join us for another great edition. I’m really excited for today. We’re going to cover two topics.

The first topic we’re going to cover is regarding an introduced bill in New Jersey to see whether or not we can grant assisted suicide or helping terminally ill people end their life. I want to talk to you about the details about that, give you the straight dope on what that is.

Then we’re also going to cover some common mistakes that people make that could impact their retirement. I want to help you understand what those mistakes are and, then, help you avoid them. It’s going to be a really good show.

If you don’t already have a pad and paper handy to take notes, then you might want to do that, especially as we get to the second and third segment for today. A quick reminder. If you can’t join us when we broadcast live, then one of the things you can do is subscribe to the podcast.

We are going to have an opportunity to send this to your phone. When it arrives, you’ll get not only this episode and all the future episodes, but you can even go into the podcast software and go backwards and look at other episodes as well. There might be a topic in there that you want to learn more about.

I also have a couple of speaking engagements that are coming up. Tomorrow at 4:30, at CareOne Hamilton, I’m going to be speaking with a gentleman named John Walsh who’s actually been a guest on the show. His company’s called the Walsh Senior Solutions.

He helps people get theirselves ready for that next phase in life ‑‑ downsizing, getting their stuff together, getting it prepared to move ‑‑ either downsizing it into a smaller living space or just getting ready for that next phase, getting their home and living situation going there.

He got some experience dealing with that with his parents, which he shared on a prior episode. If you’re interested, you can look backwards, listening to that. Listen, we are going to cover how to get your legal affairs in order as well at this talk. That’s going to happen at 4:30 in the afternoon at CareOne Hamilton.

If you’re interested in joining us for that, that is an open speaking engagement. We’ll welcome you there. Again, that’s Thursday, February 21, 4:30 at CareOne Hamilton. Myself and John Walsh will be speaking. Then, next Wednesday I’m going to be doing part two in a two‑part series at Homestead at Hamilton.

Last Wednesday, I spoke a little bit about getting your legal ducks in row as part of part one and part two of a two‑part series. This second part is actually focusing on retirement financial matters.

If you’re interested in joining us for that, you can reach out to Kelly Astbury at Homestead in Hamilton. They’ll give you the information about that talk. That begins at 6:00 PM. That’s right off of Kuser Road. Again, we’re going to talk about how to ensure your nest egg is around as long as you are. That is part two. You are welcome to join us, even if you missed the first part.

Listen, I want to talk to you about common mistakes that happen in retirement. Before I do, I want to talk to you about a new bill that was introduced and want to give you the information around that.

On February 7th, the State House held a hearing, basically taking testimony from both an opponent and a supporter around a bill that would let terminally ill patients end their own lives. At the end of that, by the way, the senate panel essentially approved the proposal the next day, on Thursday, maybe a few days later after that.

Look, there are still additional procedural hurdles that remain in place for legalizing what they call medically‑assisted suicide. The latest vote at least raises the possibility that the measure could become law after maybe one or two attempts to enact it fell short. What do you need to know about this proposal?

The first thing we want to talk about is what patients would be eligible for medically‑assisted suicide. The way New Jersey has crafted its law, it would allow a terminally ill, yet mentally competent, adult resident of New Jersey to request and use prescription for lethal medication.

Let’s tear that apart. Terminally ill is something that would be determined by two physicians who have examined the individual and sworn that they have less than six months to live.

Mentally competent has two elements to it. Certainly, it’s the very common understanding, which is they have to have their faculties about them. We’re not going to let people without mental capacity to do that.

It’s important for you to understand that that precludes somebody that has so succumbed to their disease state that they can’t make rational decisions, so it’s important that we’re focusing on people that still have the ability to make decisions and aren’t so overwhelmed by their disease that they can’t engage in normal conversation and be rational people. That has to be there, too.

The patient would have to ask for medication three separate times, twice verbally or orally and once in writing before receiving it. The written request would have to be witnessed by two people, including someone who is not a family member, a beneficiary of their will, or the physician who is examining them and attending to them.

After that happens, the patient would then be required to self‑administer the medicine if he or she decides to take it at all. This is not something they ask for and then are injected with, given, or forced to take. That’s something they would take of their own volition.

The witnessing of the written request, it’s important that we don’t have anybody who is interested. I know that sounds cold to talk about, but has some form of an interest in whether or not that patient lives or dies.

We want to make sure that least one of the subscribing witnesses is somebody who’s completely unrelated to what’s going on ‑‑ not a family member, not a beneficiary of the will, and not the attending physical.

You might be wondering, do other states have this? Yeah. It’s been in place since 1994 in Oregon. Then, in 2008, Washington State next passed the law. Then, after that, they have laws like this in each of California, Colorado, Hawaii, and Vermont.

A 2009 court decision basically cleared the way for this to be in Montana, though it’s not the law, and California’s law is currently being subject to a legal challenge. There is a form of traveling that people do to try and fit under the rules of those states because they don’t have it where they’re at.

As you can see, the only place on the East Coast is in Vermont. New Jersey would be the second place to do that.

What are the arguments for and against this? Let’s present it in a very neutral way because people have very emotionally charged reactions to this. By the way, they’re strong on both sides of it. There are people who are as strongly against this as they are strongly for it.

People who support a measure like this often cite that there is a painful and prolonged death of loved ones. They argue that the people who are already dying and who basically have no chance of recovery should have the right to end their suffering on their own terms. The people who support it are not necessarily always people who say that they would do it, but they would like the option.

They see the chance or the freedom to make that decision on their own as part of their right to self‑determine the course of their own care, the course of their own life including the end of their own life.

Opponents attack this from several different angles. Many doctors feel that helping patients end their lives go against their Hippocratic Oath to do no harm, to be a healer. Doctors oppose being in a position where they might have to compromise their agreement to be helpers.

Then other critics worry that medically assisted suicide is incentivizing insurance companies to pressure patients into taking lethal mediation over more costly treatments.

They worry about the influence that a for‑profit structure would have over the course of somebody’s care if they have it as an option to approve and therefore promote people ending their own lives in a way that’s less expensive, and therefore drives more profit to the insurance company. Then that would be something that would cause them to be against a measure like this.

Then there are even people that are worried that there are not enough safeguards under the law to protect from an abuse and argue that making suicide acceptable for the terminally ill will cause the instances of suicide to spike in the general population as well.

What’s next for this bill? The New Jersey proposed bill has already been approved by committees in both the Senate and the Assembly. In order for it to become law, it still has to be passed by the full Senate and a full Assembly.

Then signed into law by the governor, Governor Murphy, by the way who has not made any public statement that I’m aware of indicating whether or not he supports or opposes the proposal.

As I mentioned earlier, this had been proposed a couple of different times in 2014 and 2016. In those efforts, it had passed in the Assembly and then never quite made it out of the Senate. This time around though, Senate President Sweeney has been quoted as saying he’s very close to having enough votes to pass it in the Senate this time around, so we’ll keep an eye on this and let you know.

The question for you would be, how does this affect your planning? Certainly, of course, if you are already suffering from a terminal illness, you’re contemplating your options, but that’s a minority of the population. Everyone else that has a form of an estate plan in place…

Part of what needs to be in the discussion is just an awareness of whether or not this becomes an option in the future and better communication amongst your family members about whether or not you support or oppose that kind of decision.

I’ve always taken the position that the more people are aware of what your preferences are, the harder it is for them to go against that in a moment of crisis. People tend to rise to the expectations that you have set for them, especially around behavior that is for someone else.

Good people will tend to respect the wishes of others when they’re put in a position where they’re essentially in charge of those, but they need to be aware of ’em. They can’t be in a position where they’re guessing as to what your decisions would be.

Now, we talk about that in the context of advance healthcare planning or, if you become incapacitated, what you would like your money used for, talking to your power of attorney agent.

This measure is a little bit different. This measure is different because it could only be enacted when you are still mentally competent. We’re not asking somebody to make this decision for you. You’re going to have to be able to make this decision for yourself if this becomes law, but there’s still an opportunity for family strife.

If you took advantage of this and you said, “This is what I want,” if you hadn’t properly communicated that with your family members, there is a distinct possibility that the people that are close to you that know that this is what you want would be fine with it, and then the people that are not would feel left out of the decision.

They would be very confused and the only people that they could blame for it would be the people that you left behind. If this moves forward and if you’re somebody who’s in favor of taking advantage of it in the right circumstances, then you probably owe it to your family members to have great communication around it.

Too many times we get very fearful of the concept of mortality and whether or not we would want to end our own lives or what that looks like at the end and what those final moments look like. It’s very, very scary and I know that.

If you don’t take advantage of speaking to your family members about what it is you’d want in those scenarios, both in the circumstance where they’re making decisions for you as well as your making a decision to possibly end your own life, you’re missing an opportunity to have very healthy communication with everyone around you so that they’re aware of what your decisions are.

Perhaps the reasons for them as well.

As I mentioned, we’re going to keep an eye on this and we’ll let you know when it becomes law if it, in fact, does become law. Then we might have some special steps that we want you to take as part of it.

All right. Listen, we’re going to change gears here. When we come back from the break we’re going to talk about common mistakes that could impact your retirement. There are a lot of components that should be addressed when building a game plan for your retirement.

Aside from all the decisions you have to make such as when you’re going to retire and what you’ll do with your time when you retire, you want to develop a strategy for your investments and paying down debt that you have and developing a paycheck if you need one.

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Victor: These are only a few of the big retirement challenges that you face, but the point is that it’s very easy to make a mistake that could have a long lasting impact on your financial future.

When I come back from this break, I want to cover some of the common mistakes I’ve seen people make that could potentially be avoided. This is something that you’re not going to want to miss. Join us when we come back on Make It Last after this quick break.

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Victor: Hey, everybody, welcome back to Make It Last. We’re talking today about the common mistakes that people make coming into retirement. These are things that I see all the time, specifically in the way that people use their money in making decisions that can affect their financial lives.

I want you to know that it’s very important for me that you don’t make these same common mistakes that other people have made. It’s very much human nature to want to learn from the mistakes others make so you can avoid the same outcomes.

What’s holding you back? Probably, the concept that you don’t know [laughs] what these mistakes are. You don’t know what to focus on. You’re not aware of what I believe are most common areas is in financial and retirement planning where people fall short.

While you could have claimed ignorance before this show, now, after this show, you are no longer allowed to claim ignorance of the problem. Unless, of course, you just shut off the show which is not a good decision. You want to listen to the rest of it. In fact, you probably want to share it with a friend.

Those of you that are in or nearing retirement have friends that are also in or nearing retirement. You don’t want to be in a position where you know more than they do and they fumble and make a mistake that you avoided because you listened to this show, so share it with them.

It’s available as a podcast. If you’re listening live you can give somebody the instruction to go on to Apple iTunes and search for Make It Last, put in my name, Victor Medina and then subscribe to it and then say, “Look at it. This is the episode I want you to look into, February 20th, Common Mistakes. I know how to avoid them. I want you to avoid them as well.”

Here’s the thing. Sometimes I wish that retirement was easier for people. I really do. When we meet with folks, it’s often a huge transition ‑‑ the goal from working, earning a paycheck, and saving as much as possible in in that life, to retired and no paycheck, and likely a reversal in a sense that you’re no longer saving any more money, but you’re spending money.

The first common mistake you might make is not realizing that, along with these changes, you may also need to change how you approach your financial decisions. You’re aware, of course, that this is what we help people with all the time.

More and more people reach out to us looking to get their financial lives in order as they approach retirement just to make sure that they don’t make a mistake along the way. The value that we bring is we traveled this road with other people before, successfully.

The idea is that we could have you learn or take advantage of what we’ve learned working with people through that transition and taking the very best in class thoughts on what to do with your planning around finances and legal and estate planning to making sure that your ducks are in a row as you enter retirement, and you don’t have the same mistake.

If you’d like to know more about how we do that, certainly you can reach out to us. The financial company that I have started is called Palante Wealth Advisors. You can reach us at 609‑818‑0068. We’re located in Pennington, New Jersey. All we do is help people with retirement.

You can schedule a complimentary consultation with us. We’ll examine your financial situation and help you ensure that you are properly positioned so that you aren’t making some of these common mistakes we’re going to talk about during today’s show.

Here’s the thing. I like to split retirement into five categories. If you’re with a pen and pad, I want you to start to take these notes. If you’re driving, pull over.

If you want to take notes, do not take notes on your phone as you’re driving because then we have to deal with your probate administration. You can still have your family hire us for that. It’s not nearly as much fun, so pull over and take notes if you’re driving.

Listen, five general categories. The first one is income planning. The second one is investment planning, what you’re going to do with your money. The third one is tax planning. The fourth one is estate planning. The fifth one is health care planning. There are potential questions and concerns that you might have in each one of these categories.

For example, if Social Security is not going to be enough income, where are you going to get additional income from? What’s going to happen to your spouse if you die before them? Will they be OK? How is your tax bracket going to change when you retire? Will you own more or less tax on an annual basis?

Don’t underestimate how important every facet of retirement is and the importance of avoiding common mistakes in order to help achieve some long‑term financial goals. Again, we can help you with that.

Those are the five categories. Income planning, investment planning, tax planning, estate planning, health care planning. There are five areas. What are the common mistakes that we see across all five of those? The first biggest mistake is underestimating what your needs are.

Now, you might think that the mistakes that I’m going to talk about have mostly to do with investments and losing money during volatile periods in the market. Yes, I’m going to talk about that a little bit, but I see more mistakes made by people who simply don’t prepare the right way, don’t prepare enough or at all. You get the point.

The first thing I want to cover, because it’s the most important, is just how crucial it is to understanding what your needs are and what your retirement savings will actually have to support in retirement. The reason we want to go through this is twofold.

Certainly, it’s great information to know. Just on a base level, you’re grasping in the dark if you don’t have a handle on these two elements. More so than that, the goal of answering these two questions, “What are you going to need?” and “What is your retirement savings going to have to support?” is so that you can gain confidence in your strategy.

There is a behavior element. You don’t want to be living this last third of your life worried about what retirement is going to bring, like, are you going to have enough money? Do you have to change the way that you shop? Can you live one way in the first part of it and a different way afterwards?

I don’t mean in terms of your confidence level. I don’t mean just protecting a portion of your savings from potential losses in market cycles that are very natural about what’s going on there.

I want you to focus on dealing with other concerns that I see retirees commonly have, like the concern of running out of money before they die, or the concern that they’re going to have to go back to work after they have already retired. The first common mistake is all about your needs and how some people tend to underestimate what they’re going to need for retirement.

Specifically, what am I talking about? I’m talking about doing some very basic budgeting and to know what your expenses are. Then planning to make sure that you have enough income every month to cover your bills.

Even if it’s not an enormous amount to be traveling the world, gaining confidence that you’ll be secure in retirement because you’ve got enough income to cover your expenses. When we go through that, we do start to separate out the difference between necessary and discretionary expenses.

It’s important to distinguish between them, and if we’ve got more time in the show, we might go into that. Really what we want to do it quantify what those expenses are going to be. If I ask you, “On average, how much money do you spend on a monthly basis on everything?” do you know the answer? Some people have an idea of it.

They have an idea because they run everything through a single account. They know how much money comes in. They know whether or not there is enough money at the end of the month, they’re accruing a balance upwards and saving money, or whether or not they are going down. I will tell you something. Really most of our clients are accumulating money at the end of the end of every month.

That’s why they hire somebody like us to help them manage it because there actually is money to manage. We don’t really work with a lot of people that don’t have any money. What I will find is that people have a good idea that they’re saving every month, but they don’t know how much. They know it’s in the right direction, but they can’t tell you in detail exactly what that number is.

Other people, we’ll start to add up their normal bills and add all of that up. They think they know how much, but, when they sit down and they go through it in detail, they’re a little bit off. You might think that that’s not really a big deal, but it can directly impact the potential for your income to last as long as you do. I find this to be fascinating.

We use a piece of software in our practice that projects out given certain market returns and an investment profile, a way of positioning our clients’ assets that we use very routinely. It’s strategies that we’ve talked about in prior shows, may get to a little bit here today.

What we do is we set them up with the best in class ideas for retirement. Then we project them out for their life expectancy. We use the software to hypothesize the degree chance to will they be successful in retirement or will they have to make changes.

What I found really interesting, in a very nerdy way, about the math is that a very small change in the requirement for their monthly income can have a very drastic change on their chances for success. Just one or two hundred dollars per month in either direction can materially increase or decrease appropriately what their chances for success in retirement look like.

You might get somebody that has got a 68 percent chance of success move to 85 or 90 by simply reducing their amount that they need on a monthly basis by one or two hundred dollars. What they ended up doing was changing that number very, very slightly. By doing that, they ended up getting a much greater chance of success.

That’s why it’s super important to make sure that your monthly budgeting is as precise as possible. I stress this time and time again. It’s important to know, to determine with a degree of detail and certainty how much money you’re going to spend.

By the way, if you’ve got to be making guesses, I’m telling you, you want to be making guesses on the high side of it every single month. What I don’t want to have happen is you don’t want to be the person who realizes that, if they stay retired and keep living the way that they are, they could run out of money.

That’s a very stressful position to be in. Depending on if you discover that too late in the process, it can have really serious ramifications. That’s just the first mistake, is underestimating your needs.

The second mistake is panic selling. There’s a unique mindset change that occurs for people when they leave the workforce and they enter retirement, and it is unavoidable. Most people don’t realize it until something negative happens in the market.

I remember, I was in a position where I was going to acquire another law firm. I was growing and there is a law firm where the owner wanted to retire, knew me and my reputation for building successful businesses and having a great model, and so he came to me. He said, “I’m actually thinking about selling my practice, but I want to sell it to you and retire.”

This was back in 2008. What happened in that period of time, there’s a downturn in the market, but here was his reaction. His reaction was he no longer had enough to retire. The fact that something negative had happened in the market changed his entire emotional and rational mindset off of it.

Should he have sold his practice? Yeah, probably, but he couldn’t get around the idea that there was something that was going on negative and it changed his mindset.

Considering that there’s a whole slew of people that have retired within the last 10 years in what has been one of the best bull markets in history, the idea of a 2000…The fourth quarter of 2018, where we lost all of the gains in the entire year, it was a wake‑up call that jolted people into realizing that handling market risk is a whole new animal when you retire.

It’s easy to understand why people’s mindset changes so much. When you are working and you have what amounts to years, maybe decades before you retire, risk is easier to handle and easier to ignore because the money that you’re pulling from is not the thing that’s being affected by the market at that time.

You might understand and know that markets are plummeting and you’re losing money, but you’re OK with it. You can’t spend the money anyway if you’re under 59‑and‑a‑half and it’s a tax‑qualified account and you’ve got time for the market to rebound and for your accounts to make money back.

You fast forward into retirement and the opposite is likely to happen during the fourth quarter of 2018. You become like that lawyer who I was going to pry the practice from. When the stock market experiences volatility for the first time in a decade, investors begin to panic.

Probably the majority of those who panicked were those who were retired and have no more contributions being added to their portfolio and who were living off of their retirement savings and spending what they had.

They saw their source of income that helps maintain the security of their lifestyle going down on a daily basis and it probably messed with them. It was disconcerting. Thus, they may have chosen to sell.

They felt like they had to. They felt that there was no other choice in their eyes. They sold because, if the market continued to drop and things got worse, they might have to go back to work. They might have to change their lifestyle. They might not have much to spend on and so they sold, even though they probably shouldn’t have from a very academic textbook standpoint.

When emotion and fear take over, regardless of what fundamentals and economic data pointing it one way or another, regardless of what an analyst says, what the experts say, or what the smart money thinks, people make irrational decisions, which can be the wrong decisions.

When you panic and you sell, you immediately eliminate the potential to make back what you lost in a timely fashion. You also force yourself into another decision. That decision is the one where you have to decide whether or not the markets are right to get back into.

You made a tough decision getting out, now you’re going to make another tough decision to get back in. By the way, if there’s a single financial adviser out there telling you that they know what that timing is, they’re a liar. They have no idea.

Do you want to know a great secret? I am a fantastic financial advisor. I have no idea. I don’t know when it is the right time to sell and I don’t know what the right time to get back in.

What’s the solution? The solution is not to avoid hiring a financial advisor. You need a guide, but you need a guide who can help you navigate the ups and downs because your plan takes them into consideration.

Then, that person’s role is to assist you in holding to and sticking to your plan so that your instinctive behavioral reactions don’t cause you to make decisions to submarine the plan in the first place. That’s the value of having a great advisor.

They are, at once, an expert in a very concrete set of skills, like how to position your retirement portfolio to weather the ups and downs of a market, but they are also very adept at behavioral finance in coaching you through sticking with the plan.

A second solution is to consider a more conservative allocation if you are one of these people that was very concerned during that fourth quarter volatility that the stock market experienced. If it caused you to think differently, then perhaps you should be in a position where the movement of the markets are not going to cause that emotional response.

I put a big asterisk on that because your retirement plan may require you to take risk beyond what that tolerance is, but it should be done in conjunction with the plan that generates for you the income that you need that, in the short term, that volatility does not cause you to panic because the plan itself incorporates how to achieve your retirement goals.

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Victor: We’ve gone through two mistakes so far. We’ve gone through underestimating your needs and panic selling. When we come back, we will finish up the rest of the mistakes that you can make in retirement. You’re not going to want to miss this. Stick with us. We’ll be right back after this quick break.

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Victor: Hey, everybody. Welcome back to Make It Last. We’re talking about the common mistakes that you make in retirement and how to avoid them. We’ve gone over two so far, underestimating your needs and panic selling. The third one is also one of these things you can learn and you need to know about.

The mistake is not knowing what happens when you take money out of an account. This one requires a little bit of basic knowledge on the taxation and the treatment of each of the different kinds of retirement accounts. I see a lot of people who are lost here. It can impact your retirement income in a big way.

Let me make it simple by saying that what you see is not always what you get when it comes to withdrawals from your retirement account. You must make sure that, when you plan on spending your retirement money, you understand the tax impact of withdrawing money from certain accounts.

Let’s take a traditional 401(k) for example or an IRA. These dollars are usually pre‑tax dollars. What that means is that you contributed them into the account before you had an opportunity to pay tax on them. They were contributed on a [laughs] pre‑tax basis. Because you didn’t pay the tax on the way in and you have not paid the tax as the money has grown, guess what?

You have to pay the tax on the way out. By the way, couple of things. You’re going to owe federal and possibly state income tax on the money you withdraw from the accounts, and, even though it’s been in that account for years, years and years, it’s likely that you’ll have to pay ordinary income tax on the money that you take out.

I’m going to give you a couple of wrinkles to that in a second, but, just to make sure that we’re clear, if you take a $5,000‑a‑month withdrawal from the account, you can set up that account that $5,000 ends up in your checking account.

You can set it up that every dollar that you withdraw ends up in that account, but, if you’re not careful, that can come and bite you. The reason why it ended up all in your account is you did not withhold any taxes.

You’re still going to owe the taxes. Just because you didn’t withhold it, doesn’t mean you don’t owe it later. Then you ought to consider where you’re going to come up with that money when you have to pay taxes in the future.

I told you that there’s going to be [laughs] a little wrinkle. Sometimes, people are surprised at this. It can be the case that you contribute most of the money into your 401(k) or, in this case, an IRA on a pre‑tax basis, but that you are also contributing post‑tax dollars.

Now, here’s the little wrinkle on that. When you did that, you did not get a tax deduction. You didn’t get it off of your income taxes, the amount that you contributed above the limitation that was done on a post‑tax basis.

What gets confusing is that when you combine these accounts together and you start to withdraw money out, you can have a pro rata amount that is a return of principle. Therefore, the gain that is taxed on that is, in fact, long‑term capital gains and a pro rata amount that is taxed as ordinary income.

Are you confused yet? Yeah, me too. The thing is that, if you’re not tracking this information, if you’re not tracking what amounts are coming out, you don’t know what the tax is going to be at the end. That’s the mistake. The mistake is not knowing the impact or what is going to happen when you withdraw money.

By the way, I see this a lot with people who get a pension as well. If you have a pension, you might be looking at an illustration from your employer that shows you what your monthly benefit is when you start collecting that pension.

Let’s say that it’s a little bit more than $4,000 a month because that’s your lifetime pension. [laughs] Guess what? That entire paycheck is taxable. If you assume that you might owe 12 percent to the federal government and another five percent to your state government, you will not going to get $4,000. You’re going to get 17 percent less than that. That’s what we call a gross payment or gross withdrawal versus a net payment or net withdrawal.

Make sure that you and your adviser are converting gross figures to net figures so that you understand what amount you’re going to be able to spend every month. You can’t spend the federal government’s tax money. They will not let you do that.

You want to make sure that you have a tax‑efficient retirement income withdrawal strategy. That, by the way, can come together a number of different ways. If you have a Roth IRA or if you were lucky enough to get the opportunity to contribute to a Roth 401(k), you might have a bank of dollars that you can take out income tax free.

If you have money that you have saved in a brokerage account, you might be able to take that money out at long‑term capital gains rate, 15 percent. You want to be able to pull from the various different buckets so that you can manage your income tax going forward.

This is also the case, by the way…I covered this in a chapter in the book that I wrote called, “Make it Last ‑‑ Ensuring Your Nest Egg Is Around As Long As You Are.” There’s a chapter in there, chapter five I believe it is, called “Proactive Income Tax Planning.”

The time for you to be doing income tax planning is not in the January to April before you filed your taxes. You needed to do your income tax planning the year before. A good adviser is going to help you navigate through that so you’re aware where you are on the taxes.

By the way, one of the recommendations might be for you to take more out of your IRA than is the required minimum distributions or even what it is that you needed to live. Depending on your tax bracket, if you’re married or if you don’t make enough to get to a certain top of a tax bracket, you might want to take more out and lock in the tax rate of that.

You might want to turn that into a Roth conversion, if you want to do that. Again, it becomes important to be thinking about this on a proactive basis.

The next and last mistake that I see people doing is listening to a “hot tip.” I am fond of saying that the biggest competition that I face out in the world is not from another adviser or, in the context of our legal planning, from another lawyer. That’s not my competition.

My competition seems to be the advice that you all share when you are on the golf course, at the hairdresser, shopping in the store, at a family dinner and you get a piece of information that you feel that you need to act on it.

I don’t know why it is that you do that. There could be some element of it that you grant a certain amount of credibility to the people that are giving that. There is a need to know certain information, and so you say, “Well, if that person knows that, then that’s got to be something that I have to know, too.”

There are lots of things that starts to influence that, but most of these should be avoided. Of course, I can’t say universally because I don’t know what they’re telling you, but most of that. What could happen?

Steve’s brother got a tip from his colleague at work that he should buy a hot stock that’s going to take off. They do that well, by the way. This actually happened. It happened on Facebook. Somebody had posted about the decline of a retail.

They were commenting that a parking lot that was previously used for Kmart was now used for staging Amazon vehicles there, a whole fleet of white vans that were all part of Amazon logistics. They were saying, “Look at the way that retail has gone.”

What followed afterwards was very amusing to me because people ended up posting specific stocks that they had determined were going to be good things to hold in their portfolio. They would say, “Well, I have been looking at company A, B, or C and here are sound fundamentals. I think that these are going to be the ones that defy, essentially, the downturn in retail.”

That’s a fine guess. You want to play with your money, you want to gamble with your money, and put a lot of eggs in one basket, who am I to tell you not to do that? I’ll tell you why. I’m an advisor that says it’s not a good idea. Anyway, you want to go and do that, that’s fine. Not the point of the story. [laughs]

The point of the story was, the next comment that happened afterwards was, “Hey, I think that I’ll pick up some of that stock, too.” Granted, the person who gave the advice is guessing. The person who took the advice needs to know that they are following a guess and, yet, they took advice from that source.

Other pieces of information that can happen. Jesse’s sister hates annuities, so she does, too. Warren’s neighbor thinks that the buy and hold strategy is pointless since everybody already knows that anyway, and that an actively traded portfolio is the only way to go.

Then he convinces Molly to abandon her index funds and to hire his advisor, who has promised the 20 percent returns on an actively traded portfolio.

Here’s the thing. There could be some truth to any one of those statements. The guy who was promoting, pimping that retail stock, it could skyrocket. Jesse’s sister could have purchased an annuity that was completely unsuitable for her needs, the wrong thing. Warren’s neighbor might have an advisor who’s actively managed strategy has, in fact, outperformed the market.

How are you to compare and base their experience and their situation in a similar way to yours? Should you assume that something won’t work for you because it didn’t work for somebody else?

I often refer to the hot tip as what’s called the herd effect. The herd effect is that when someone else follows the herd and simply does what the herd is expecting, they want to experience the same results. Sometimes they do and sometimes they don’t.

By the way, this is rooted in a little bit of truth. The herd often tends to be the safest place to be. If you look out in nature, herds are far safer than being out alone. Just the way that it is. Not always, [laughs] as we know that herds of lemmings can run off of a cliff to their doom and sometimes do, but, often, the herd is a safe place to be.

What we need to do is take in information about what that herd is doing and who that herd is. There is another herd out there that is doing smart retirement planning. I don’t have the largest client base in the world, but I’ve got a herd of [laughs] clients that are doing the right thing. If you followed us, you’d likely be in a pretty safe position with respect to your retirement planning.

What’s my suggestion to you if you’re not going to become a client of ours? Take in as much information as you choose to. Talk to whoever you want, but form your own opinion on what might be best for you and your situation.

You might be missing out on an opportunity by eliminating a particular strategy or financial vehicle from your options without giving it a fair chance, especially when you eliminated it solely on the basis of what someone else told you or said.

Last week, I talked about a “Wall Street Journal” article that said that lots of people don’t like annuities because they see them as unfair. The study basically weeded out financial literacy and said it didn’t matter if you were financially literate or not. Your sense of fairness determine on whether or not you would buy an annuity.

What I challenged in that was the concept of financial literacy. When you educate about a particular financial product, all of a sudden, people’s mood shifts. Their sense of fairness shifts. That could, at that point in time, become a very good strategy for you. Don’t follow where the herd is going.

Formulate your own opinion about the person that you want to trust and follow because there’s probably a lot of benefit in following a guide. I don’t want you to make these common mistakes, the stuff I talked about today.

By the way, there are other stuff I didn’t get to talk about. Hey, there’s a radio show that goes an hour. Next week’s a good chance, might get to those as well.

These things that we talked about, they’re avoidable. Completely avoidable, for the most part. I believe that you need a plan, an unbiased approach from a professional who can help guide you to make the best decisions for you, your family, your money. That’s what we’re here to do.

If you want us to do it, call us, talk to Palante Wealth Advisors. Talk to us at 609‑818‑0068. Again, that number is 609‑818‑0068. We’ll set you up with a complimentary consultation, help you identify the steps that you need to make to help ensure that you’re walking the right path based on your individual goals and objectives. That’s what I want for you.

I want someone for everybody that’s listening. I want you to be on the right path, avoiding these common mistakes, and making sure that you have the tools that you need to be successful, to be at peace in retirement today and for the rest of the future.

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Victor: Listen, we are out of time for today. I can’t even tell you to go and find a podcast and share it with a friend, which is how I close with every show. Go do that, and we will catch you next Wednesday with more great legal and financial retirement advice.

This is the only show where you can do that. This is Make It Last, where we help you keep your legal ducks in a row and your financial nest egg secure. Catch you next week. Bye‑bye.

Announcer: Investing involves risks including the potential loss of principal. Any references to protection, safety, or lifetime income generally refer to a fixed insurance products, never securities or investments. Insurance guarantees are backed by the financial strength and claims‑paying abilities of the issuing carrier.

This radio show is intended for informational purposes only. It is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual situation.

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