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When Your Advisor Fees Are More Than Your Tax Bill · How to Retire on Time

• 0:00
  Mike: Hey. Thanks for joining. Here's a question I was recently asked on my show, how to retire on time. Take a look.
• 0:05
  David: Yeah. And and so you have to I guess the trick is finding an adviser that can help walk you through all this. But the, they all have these disclosures that say, oh, well, we don't do tax planning.
• 0:16
  Mike: Yeah. So now what? Which I don't even know where that came from, honestly. Yeah. Like we don't give tax advice.
• 0:22
  I get that they don't give tax advice as in they cannot legally represent you into the IRS. You have to be a tax attorney, an enrolled agent, or a CPA to do that. So that I get. Sure. But I think the disclosure got out of hand.
• 0:36
  David: Yeah. Maybe they're just trying to be too safe. I don't know. I don't know.
• 0:39
  Mike: Yeah. But you know what's kind of ironic about all of this? People are concerned about taxes, and tax planning is very important. But let's let's hold the phone for a second, and just look at things objectively. Let me do it just a quick calculation.
• 0:52
  Okay? Alright. So two people, they're both there's a million dollars that they saved in their IRA, couple, that's it.
• 0:59
  David: Alright.
• 1:00
  Mike: Okay? And we're gonna do we're gonna do Texas. I'm feeling been thinking about brisket lately, so Kansas City, we got the you know, pork barbecue. But Texas has a good brisket. Let's let's call it as it is.
• 1:15
  Okay? So they're gonna take 45,000. So not the 4%, not the 5% rule. 44.5%. So 45,000 as an IRA distribution, and they're gonna get 60,000 from their Social Security benefits.
• 1:31
  Alright. Okay? So total income, 105,000. Adjusted gross income, we're looking at 77,000 or so.
• 1:39
  David: Mhmm.
• 1:40
  Mike: Okay? Some some social security calculations in there, and then you got the standard deduction. So they're getting tax total on about 45,000 is tax. So they're gonna pay about $5,000 roughly speaking
• 1:53
  David: Mhmm.
• 1:54
  Mike: In federal income tax. Okay? But you know what they're paying their advisor?
• 2:00
  David: Are they paying them a percentage?
• 2:01
  Mike: $10,000.
• 2:02
  David: Oh. 1%
• 2:04
  Mike: on a million dollars is $10,000. Yeah. They're paying their advisor twice the amount that they're paying the government, and if they did nothing, they just did a basic stock bond fund portfolio, or they did a one time plan with an advisor, and they just follow that system, They get rid of a $10,000 bill that's just hidden because it's only 1%. And it comes out secretly from the portfolio. Right.
• 2:28
  I feel like Milton from the office space. Give me my stapler. But it's $5,000 if you did no optimization. You can get a one time plan, someone gives you the ingredients, the recipe Mhmm. On how to do it, and you just implement it yourself.
• 2:45
  Or you can pay $10,000 to try and lower a $5,000 bill. How is that right?
• 2:50
  David: That's illuminating.
• 2:54
  Mike: So, I I look, I've been doing this a long time. Oh, well, there's the the behavior aspect of your your financial advice. We're financial advisors. That's the irony. We don't do 1% on fees, but oh, well, you know, there's there's the behavior factor.
• 3:09
  You know, the advisors watching it. It's gonna prevent you from doing something stupid. Well, if you have a system and you revert to the system, you just follow the system. If you can be systems based, then that goes out the window. And well, well, you know the tax efficiency, you gotta watch out the Well, if you have a plan that tells you the tax efficiency, then that's solved.
• 3:24
  Yeah. Like we talk about the Advisor Alpha. Forget where our sheet is. It's somewhere over here. Advisor Alpha is a real thing, but it's not contingent on your codependent relationship to pay an advisor twice as much as you're paying in a tax bill.
• 3:39
  That doesn't make any sense. And if you're paying 1.5% for a better fee, you know, your advisor better be consistently beating the S and P 500 or a general stock bond fund portfolio consistently year over year to rationalize the fee. Because in a normal situation, you have an advisor who's bought and hold a typical portfolio that you could literally hire him for a month and then leave and just keep that allocation because it's buy and hold with, you know, you got your large cap, your small cap, your mid cap, you got your bond funds over here, maybe a little international exposure. You could just do that yourself. Or robo investing, I don't love robo investing, but you could do that too.
• 4:17
  Yeah. It's just the industry doesn't want people to admit. I'm curious. Put in the chat for the many people that are here. Put in the chat if you even if this resonates with you, but this the conversation people don't want to have.
• 4:31
  Because it's the obvious illogical conclusion in the seventies and eighties. Yeah. You had to call someone, you had to place those trades, it was hard to move money. Now you do it on your phone. Yeah.
• 4:43
  Here's the takeaway, then we're gonna get to your questions. We've been getting a lot of questions popping in here. But tax planning is for everyone. But your asset level is going to suggest a completely different strategy. So don't fall, AUM was a rip off.
• 4:59
  Thanks, Steve. The levels are contingent on those strategies. And if you follow a system, not sentiment, then you're able to be prepared. I mean, I say this in the book, a prepared reaction is better than a risky prediction. It's okay to buy and hope.
• 5:20
  David: Mhmm.
• 5:20
  Mike: But you gotta have your prepared reaction. Markets go down, what's your plan b? That's why I talk about chapter four of the book. You haven't read it, go to retireontime.com and download it for free. That's retireontime.com by the way.
• 5:31
  Okay. Couple of things here before we get to your questions. We are we've got in September, we have seven retire on time classes we're holding. Seven. It's a lot.
• 5:46
  These classes, the next week, I should say next week, this week, depending on we're listening to it, we're doing tax leaks. So tax leaks to patch your retirement plan. I'm gonna actually show you, I'm gonna share my screen, I'm gonna show you different ways like when IRA to Roth conversions may make sense, and when when they don't. I'm gonna show you, here's what your ten forty looks like. If you see these numbers, this is what it means.
• 6:06
  Here's how you lower your taxes on your ten forty. Here's how you reposition your portfolio. I'm gonna show you about how tax planning works with income planning and health care planning. This is a conversation for tax planning so you can get a taste of it instead of just arbitrarily hearing some talking head on YouTube or whatever your podcast channel is or on radio or and so on. Alright.
• 6:24
  It's on September 2 at 06:30 Central Time, and that September second Wednesday is gonna be 250,000 to a million dollars. That's our cohort that we're gonna be working towards. Then on September 3, I'm gonna do it for a million dollar plus. Completely different conversation. You're welcome to come to both.
• 6:40
  David: That'd be interesting.
• 6:42
  Mike: But we're gonna do tax planning strategies. We call them tax leaks. How are you slowly dripping nickels? You're get you're losing money to the government because you don't have a keen eye on what's going on. And your ten forty, that tax return, that summary, that's the the map of it all.
• 6:58
  So we wanna find and identify the leaks and then patch them to help you get more out of your money. You can go to retireontime.com/class. So retireontime.com/class and you can RSVP for free to any and all of these classes. We've also got on September 16, the Social Security ripple effect. Too many people are saying, well, how do I get the most out of social security?
• 7:19
  That's the wrong question. It's how do I use social security to elevate my overall goals? It's often we're put we're jumping over dimes to pick up pennies when social security optimization is considered. September 23, we've got 10 ways to build a retirement play paycheck. Okay?
• 7:35
  Yeah. It's not just annuities to generate income. Many ways you can generate income retirement. That's September 23. September 24, we're gonna do an annuity math night.
• 7:45
  Annuities are just a tool, they're often misunderstood. And the purpose of this is to talk some people who have been sold them out of an annuity, and those who have hated them, to understand how they work. And what's funny is some people say, I came here thinking I'd buy one, now I know I don't need one. And other people say, I swore them off, but now that I understand how they work today, not how they work ten years ago, I kinda might want one. Yeah.
• 8:09
  I don't care what the outcome is. I just want you to define tools correctly, because too many people are looking at hammers, thinking the hammer is how you cut wood. That's not how a hammer works. And then we've also got September 30. These are all 06:30 Central Time by the way.
• 8:25
  September 30, how to retire from rentals because too many people have become servitude. They're moved into a servitude position. Their properties own them. Yeah. They can't sell them.
• 8:36
  The taxes are holding them in. It's just there are ways to defer your taxes to get out of your properties tax free. And keep, if not increase that cash flow. And so many more. That retireontime.com/class is where you're gonna get a month out of just classes, RSVP to any of them.
• 8:55
  David: And these are all on Zoom?
• 8:57
  Mike: All on Zoom with open q and a. Ask me anything on there. It's fun. It's live. We're having a good time.
• 9:02
  David: And you really mean that too. Right? When you say ask me anything, like literally, just ask. Yeah. It's on your mind?
• 9:08
  Mike: Well, here's here's what's different. So everyone here listening, you have received an invitation to a steak dinner. Oh, yeah. Which is an annuity sales pitch.
• 9:16
  David: Right.
• 9:16
  Mike: You have received invitations to libraries, which is an, you know, an an AUM pitch or something like you have you're receiving in the mail. We are killing trees galore Yeah. With all these invitations so you can get sold a product. Mhmm. My opinion is you've got AI.
• 9:34
  You've got Google or DuckDuckGo.
• 9:37
  David: Yeah. Thank you
• 9:38
  Mike: for Yeah. You're welcome, So, if I can help you ask better questions, and you were already going to do this on your own, it's a win. If I can help you ask better questions, and you realize you could do this on your own, which anyone can, but you don't want to do it on your own, that's when people hire us for a one time fee to build a one time plan, or they hire us at a flat fixed monthly fee that's independent of their asset size. Or that's when people get a one time plan and then go into our subscription model, and they just there it's like guided retirement. It's this new thing we invented.
• 10:14
  You get a one time annual review, and every month you're getting checklist. You're doing most of the work Mhmm. Which is why the cost is so low. And then you get a one time annual review just to check-in. And like, when you see your doctor once a year Yeah.
• 10:24
  Just checks a few things, give you some tips, you're good to go. Yep. But there's at least enough of a relationship there. Yeah. That's that's the guy to retirement.
• 10:31
  So we have all these these resources there. But you don't pay for things you don't need. Yeah. I know how to fix the engine of an old car, not a new car, an old car. Uh-huh.
• 10:42
  But there's no way I'm gonna try and actually do it again. I'm gonna hire a professional to do it. That's my opinion. Yeah. But oil change, I might hire that out, might do it myself.
• 10:51
  You pay for things you don't want to do. Mhmm. But you still need to understand. So the point of the class is is to help you ask better questions, to help educate you on how things work, so that you can actually make an informed decision on how you wanna proceed. Because the reality is, you can't say yes to something unless you understand how to say no.
• 11:09
  It's manipulation if the only answer is yes, you need me. No, it's not. You got acorns. You got Robin Hood on your app. You got you can place trades on Schwab, Vanguard, all of it on your phone.
• 11:20
  David: Right.
• 11:20
  Mike: So let's stop pretending that you need an advisor. No. Let's let's only work together if you want it. Yeah. The classes are a lot of fun.
• 11:28
  We call we figured more of a public service than anything. Alright. Here's the poll we made. This will be interesting. So one of the largest concerns taxes going up from our audience today.
• 11:40
  And then the other one, the second highest is running out of money and health care costs. Very interesting. I always find those polls interesting. Thank you. Hey, If you're just joining us, this is how to retire on time.
• 11:52
  Don't forget to grab a free copy of my book today at retireontime.com to help you prepare to retire on time.