Transcript

[00:00:00] Voiceover: Welcome to the Life Unlimited Podcast with Larry Heller. You deserve complete financial advice so you can confidently live your life your way for life. Now let’s get into this week’s podcast episode. 

[00:00:19] Matt Halloran: Hello and welcome to another Life Unlimited Podcast with your host Larry Heller. Today we’re going over the seven common financial planning mistakes and how to avoid them.

Alright, Larry, we got a lot of ground to cover today. So where do we, A lot of 

[00:00:33] Larry Heller: ground to cover and, you know, so many of these that, uh, that come up when, when we meeting new clients and really kind of some of the reasons why they clients work with us and work with a fin financial planner, uh, because they’re not aware of.

These mistakes. So, uh, and these issues, so let’s kind of get into ’em. And the first one is really not knowing your tax bracket. So I, I would say we ask a lot of people what the [00:01:00] tax bracket is and 90% of ’em have no idea, and really their accounts are not really looking at their tax bracket and giving them any type of.

Planning advices, but so you can lose a lot of money by not knowing what your tax bracket is and making decisions that can minimize what you’re paying. That could be tens and sometimes hundreds of thousands of dollars over the years. So for example, you know, Roth conversions. So this has become really popular, especially after you retire and you may be in low taxable earning years before you’re taking your acquired minimum distributions, which are being pushed out now to age 73 and age 75.

So there may be some years where you can fill up some of the lower brackets, uh, by doing a Roth conversion and avoiding being pushed in some really high brackets later on. Um, forgetting about even. The possible planning [00:02:00] for the next generation. So knowing your tax bracket will help making decisions on, uh, whether you should do a Roth Roth conversion and how much should you, should you do in a Roth conversion.

So that’s one on the not knowing your tax bracket. Uh, uh, two, taking advantage of the zero capital gain brackets. Now I know these. Numbers may be low, but there are maybe some years where you fall into this for whatever reason, that again, maybe you’re retired, you’re not taking Social Security yet. Um, and if you have less than $89,250 as a married filing joint, uh, of taxable income, you can sell something that is.

Has a a, a gain in it and pays zero taxes. That’s right. Zero taxes. So don’t miss that opportunity if you’re single, it’s a little bit less, 44,625. But don’t miss that opportunity to maybe getting rid of a stock or a [00:03:00] fund that you are holding onto ’cause you don’t want to pay taxes on that. So that’s number two of, of the knowing your tax bracket.

And the last one is, you know, charitable deductions and knowing, you know, should you bunch that, should you do a donor advised fund? Should you do A-A-A-Q-C-D if you’re eligible from your IRA? So really figuring out kind of the best ways of doing the charitable deductions and knowing your tax. Bracket so you can know how much you’re actually saving by doing them.

So that is, uh, planning ideas, number one, planning mistakes that people make that they can avoid, number one. 

[00:03:36] Matt Halloran: Well, and number two is something I know that you and I have talked about before, but it’s also something that you have to pay very close attention to as an advisor. ’cause this is kind of a scary, slippery slope, a behavioral thing, which is chasing past investment performance.

[00:03:53] Larry Heller: Yes. It, it’s so easy when someone says, well, how much is this making and how much did this make in the past? And, and, [00:04:00] and looking at that and uh, people look, oh wow, it made 20% last year. I want to go in there, or it’s average 20% of the last five years. I want to go in there. And that may not be the best thing going forward, even though it was the best thing going ba in the past.

So trying not to chase that into looking at areas that may have. Not performed as well, not because it was a bad investment, because it was maybe out of favor or out of cycle, and that may be kind of what you want to get into. But emotionally, people want to kind of buy things that are doing well and sell things that are doing not well.

And a lot of times you want to do just the opposite. Um, so you, you want to kind of. Um, uh, sell high, buy low. Um, and then another thing is, you know, rebalancing. So looking at it, so even though, um, it, it’s doing well, maybe you want to take some of the profits off something and, and, and move that into something, something else.

So not looking at rebalancing. We look at [00:05:00] rebalancing four times a year, but a lot of people never rebound. I have so many people that, you know. Put their money in an allocation in a 401k and haven’t looked at it for a decade or more. So, uh, so rebalancing and making sure that you’re not overweighted in a particular, uh, asset class or a particular stock is real easy to get emotional with, with stocks and, and get it to overweighted.

So, uh, uh, chasing performance, um, I I is really one of the ones that we see as a financial planning mistake. 

[00:05:31] Matt Halloran: Yeah. Well, and we had just, just a couple of days ago, and I don’t know when that episode’s going to drop, uh, but we just had Allison on to talk about some of the estate issues, which wonderful podcast.

She was absolutely fantastic. And the things you’re going to cover today were some of the big points that she said are huge financial planning mistakes. 

[00:05:51] Larry Heller: Yeah, so a lot of, during the first year when clients come aboard, one of the things that we do is we, we take a look at their estate planning documents, their wills, [00:06:00] their, um, power of attorney, their healthcare proxies.

Uh, because a lot of times people go to their, their attorney, they get their wills and they put ’em in drawers, and it’s years again before they, before they look at that, which is one of my other planning, um, mistakes later on, but. You know, going through these and making sure that you have the right time, first of all, making sure that you actually have all these documents.

A lot of people, you’d be surprised, even, you know, people older with children don’t have these documents. ’cause again, they haven’t taken the time to do that. So making sure that you have the right documents, but then making sure that you, that you update these when you’re suppo, when you, um, have.

Potential changes, um, whether you need to change an executor or a beneficiary. So looking at your planning documents and making sure that they’re, they’re up to date, and then also the beneficiary, making sure that you have the correct beneficiaries. Um, we, we’ve seen times where they’re [00:07:00] missing a, a child at one of their beneficiary, adult child, um, or there’s an ex-spouse is is there.

So making sure that your planning documents. Are really up to date accurate. Um, so that’s one of the kind of planning, planning mistakes that we, that we see, the not having them or having ones that are need to be updated. 

[00:07:20] Matt Halloran: Uh, yeah, I, I never actually shared this on this show, but uh, when I first got into financial services consulting, uh, it was meeting with one of my first clients and we were just going through their business model and all of that sort of stuff.

And one of the things that he had asked me is this next, this next, uh, mistake. Which is making sure you have liability coverage. And Larry, I called, my insurance agent, said I need liability insurance. And she’s like, nobody has ever called me and asked me for this. And I was like, look, I know, but I just, I just talked to this person and they told me how important it is.

So, um, I’m not going to take this topic, but you, you want to elaborate on that? 

[00:07:57] Larry Heller: Yeah, I mean, this is kind of a quick one, but there’s [00:08:00] to important features in, in, in here is really, you know, having enough. Liability coverage. No one are we talking about here. Uh, we’re talking about if you get into a car accident and get sued, somebody slips in your home.

Yes, your home is going to have certain coverage. Your auto is going to have certain coverage. I. But you, you are potentially liable and could be sued for the value of all your assets. So do, how do you protect those assets? And one of the ways is having a liability coverage, what’s called an umbrella policy so that the, all of your assets can be protected by having a policy.

And it’s usually not very expensive or costly to have this, but making sure that you have the right amount and, and a lot of times, yeah, people may not. Have, they may have some, but they don’t have the proper amount. Um, and there’s one key area in these umbrella policies that one of the property casualty, um, um, a actually the, uh, an [00:09:00] attorney, um, that the, the, um, what is the attorney’s names that they, uh, sue for?

Um. For injury, personal injury, personal injury attorney. So who actually kind of, you know, brought this up and said, make sure that all your clients in their umbrella policies have an uninsured motorist clause. Because it may be in your auto policy, but it may not be in your umbrella policy. And if somebody hits you and in a car and there’s millions of dollars of.

Medical and, and, and, and things that, and recoveries that are not covered. And your umbrella policy doesn’t have that for you could be on the hook for that. So making sure that there’s uninsured motorist clause in your umbrella policy. Yeah. 

[00:09:49] Matt Halloran: Now this next one here is something that, um. Is being talked about a lot in, in financial services that a lot of [00:10:00] conferences right now is this great wealth transfer.

And, and so there’s up to $80 trillion that’s going to be passed down over the next 30 years from baby boomers to the next generations. And, and, and your financial planning mistake here, I think is the crux of what most financial professionals aren’t doing, uh, which is making sure that the heirs really, truly know.

On and, and, and you even have a story surrounding this, so, so let’s dive into this one. 

[00:10:29] Larry Heller: Yeah. So I have a, a few stories, but it’s, it’s sometimes it’s not even just the hes, but it’s the. Financial spouse who may not really be interested and, and there’s one spouse that takes care of everything. And when that person passes away either the spouse or their children, now they need to kind of become a detective.

The detective has. Where’s the insurance policy? Where’s the wills? Um, where are all the investment statements? Um, we actually had [00:11:00] one, uh, long time ago, a client actually came in wheeling three boxes, and they dumped the boxes out on our conference room table because they, they didn had no clue where to start.

And that was everything. That, that was everything that they had. Um, we’ve had still, we’ve had a, an instance where, um, a child almost paid for their par their, their mother’s funeral for a second time, that their father had actually prepaid for their funerals. Never. Told somebody. And literally right before the, when the mother had passed away, there was an aide.

And the aide actually found the document right before the, the child was going to pay for the funeral for a second time. Um, and then we actually had, this is an interesting one. Uh, I called the doctor story. It, it came actually because of my, my mom, is that, um. My mom was being rushed to the hospital and she wasn’t able to communicate at the time, [00:12:00] and they asked me, who’s a personal doctor so they can get all the information on her.

And I’m like, uh oh. I had no idea who my mom’s personal doctor was. So, uh, so knowing who maybe your spouse’s personal doctors are or your parents’ personal doctors, in case you’re in that situ, in that situation. Um, and one of the things that we do, and one of the kind of benefits of working with us is we have, we’ll call a client portal, an online portal, and one of the.

Uh, places on the portal is our key information sheet where you can write down where your doctors are, who your accountant is, who your insurance person is, uh, with contact information, and of course the, um, the whole portal has. All the different investments, where they are, where they’re located. It just will make life so much easier for the next generation.

And I can’t tell you how much feedback we get from clients that say, this is unbelievable. This is great. I’m so relieved that there’s a place that, um, that my [00:13:00] children can come to in case something happens. So, uh, so, you know, uninformed errors. Um, just makes life so much more difficult, uh, and we’ve seen it happen so many, so many times.

And, 

[00:13:13] Matt Halloran: and if you are not a client of hell or wealth management right now, and, and your advisor hasn’t had that discussion with you, they’re, that’s, that’s not a cool thing to have happen. And I also need to just go back and say, you know, please don’t bring in three boxes full of stuff and pour it onto Larry’s table and say, I don’t know what to do with this.

Even though he is totally qualified to do that, that’s not, that’s not like a super fun day for the firm. So, alright. Uh, so the, the next one. Is is a huge behavioral thing. And I know that you have, uh, lots of training in this and you have lots of experience in this, which is, um, improper spending. And this can go two ways, right?

So it can go that people are overspending in retirement. I. Or that they’re underspending an on on retirement. Let’s, let’s break [00:14:00] both of those down 

[00:14:00] Larry Heller: please. Yeah, we’ve, we’ve done a couple of these podcasts about retirement planning and doing that, but a lot of times when people come in and they’re, they’re thinking about retirement, um, and, but.

They have no idea how much money they need in retirement. And usually the first thing is that we ask is, well, how much are you going to spend? And we get vague answers, oh, I think it’s this. Or, I mean, there are a few professions engineers who come in, come in with spreadsheets exactly to the penny, what they’re going to spend.

But, but most people, they don’t, you know, they don’t know. And, and you can’t really put a. Uh, uh, a retirement plan together without knowing what your expenses are going to be. So the first thing is really making sure you kind of know what your expenses are are going to be. Um, so once you know what the expenses are going to be, we, you can figure out how much income that you’re going to need at that and when you’re, where you’re retiring, tiring.

Um, so. Then figuring out kind of what the income is going to be [00:15:00] from your Social security and other pensions. So you can, you can create a cashflow analysis to see, okay, based upon the investments that I have and the income I’m going to make, is it going to meet my expenses or is it not going to meet my expenses? So really knowing those things and it, it.

I don’t even know how you would retire without knowing all these things. But there’s a lot of people out there that don’t, and I guess that’s why they, sometimes they worry a lot. They have peace of mind, uh, don’t have any peace of mind, and a lot of that they start, they underspend because they’re fear that they’re going to spend too much.

So when we go through this analysis. And we’re able to do this now, I would say that they’re, um, almost all the time when we do that they, they can spend more money that they’re actually planning on spending. So, so, you know, making sure that you’re, you know, properly prepared, making sure that you have a withdrawal strategy.

Mm-hmm. Uh, because once you figure all this out, [00:16:00] where are you going to take the money? Do you take the money from your taxable account? Do you take your money from the Roth account? Do you take your money from a qualified account that you haven’t paid taxes on? So not planning and not planning for the most tax efficient withdrawal strategy is a huge one and a lot, uh, and we spend a lot of time figuring out how to maximize the withdrawal strategy to minimize the taxes that you’re going to pay.

[00:16:23] Matt Halloran: Yeah, I wish I would’ve, uh, uh, been a better podcast co-host ’cause I would’ve grabbed those episode numbers because I remember specifically doing, you know, spending too much and not spending enough. So, please make sure that you go back, uh, on wherever you’re listening to this episode and find those episodes.

’cause they were really, really complete. They were really, really good. They were really good ways for you to have this conversation, especially with your significant other, uh, because a lot of times it’s actually a, that’s the issue more than anything. It’s also really important to look at it from a money relationship and how you, you know, what your feelings are and how you were raised around money, um, your emotions [00:17:00] surrounding all of that.

It’s very, very powerful to pay attention to and it’s something that a, a really great financial planner will be very comfortable having that conversation, uh, with you as, as Larry just kind of previewed. So, um, now we’ve gone through some of this stuff pretty quickly, Larry, in this, this last one I, I feel is.

Where we really get the rubber meets the road. I, I think the, you know, the first one here, uh, you know, um, not really knowing what your tax bracket is to, you know, chasing past performance, estate issues, especially when it comes to beneficiaries not having good liability coverage. Uh, your heirs don’t know what the heck’s going on, and then the spending component, all of this is really solved.

Or at least addressed in this final one. So, so what’s number seven? Yeah. ‘

[00:17:50] Larry Heller: cause number six kind of ties it all in because if you’ve done a number seven ties it all in because if you’ve done all the six ones, you can’t just not do ’em again. You kind, you know, you, you, [00:18:00] you want to review this. Some of some should be reviewed annually, some maybe every few years because life changes.

And your plan should change along is where life changes. So, um, you know, some of the ones that we look at are the retirement planning. We talked about that. Um, if you’re putting certain goals in, how much can you, how much do you need to save? How much do you want to save to retire at certain years?

Knowing the rules, um, about how much you can put away each year, what. The max, what’s the contributions? We’ll talk about this next year in 2025, but if you’re over, if you’re 61 to 63, you’re going to have a super catch up there. Uh, so, um, so there’s, you know, making sure that you, uh, change your withholdings, um, to make if you’re 61 to 63.

So you, you. Um, do the max for that. Super catch up. Um, you know, college planning, if you have, you know, younger children, they’re going to go to college, um, or [00:19:00] you’re on track to meet their expenses. And how do you do that? If you have a leftover 5 29 plan where kids have gone, they’ve changed the rules on that, and maybe now you can convert some of that five 20 nines to Roth for your children.

Um, insurance needs, I mean, we talked about the umbrella policy, but. You know, all your insurance policies should, should, should be reviewed each year. Um, the estate planning as we talked about, the estate planning documents, but we have a mandate, uh, that every three to five years your all your documents should be reviewed again, because things.

Things have changed in three years. We’ve actually gone in and we, we’ve looked at the power of attorney and the power of attorney had passed away, and the, and the, and the document wasn’t updated. Or the healthcare pro, oh, you know what? I don’t really think that such a great person to have is my healthcare proxy anymore.

Um, or my children are old enough, so now I, I may have my brother, but you know what? I want to make my child there. So, so going through and making sure that you update all this. Um, it is important. And [00:20:00] then on the, you know, your investments, looking at your allocation, I mentioned before the 401k plans, and when we do some seminars and we talk to 401k participants, um, and then not looking at that except, except for the first time.

And as you get older, your allocation may change. And as you’re, um, maybe in your retirement, the allocation should change as you need a withdrawal. Um, um, uh, a, a withdrawal withdrawal strategy. So, uh, so looking at the investments and, and on an annual basis, at least, you know, for yours, we look at it obviously a lot more than that, and then updating your goals and your, you know, things change.

You know, people, you know, first come in, you know that I’m going to stay in the house forever and I’m going to do this, and life changes. And now, you know what? I don’t think I want to stay in this house for, for forever. I want to move here and it’s going to cost me this. Or I want to buy a second home. And now how does that come into the, uh, into the equation and take it into consideration, um, you know, inflation and the [00:21:00] market values.

So, you know, doing all the things that we talked about in the first six sec steps and looking that on an annual basis. Yeah, man, we covered a lot of ground today. I. We did, I thought we’d take us a little bit longer, but, but it took us a little bit faster. But, you know, if, if you listen to all this, you may want to go back and listen to it again because there are so, there’s so much information in those seven steps and there’s so many things that if you’re not doing, you should be doing.

[00:21:31] Matt Halloran: Yeah. Alright, Larry, if somebody wants to reach out and find out more about how they can work with you, where do they go? 

[00:21:35] Larry Heller: Go right to our website at hellerwealthmanagement.com and you can click on the button there and you can schedule an appointment with me, one of the advisors, or feel or feel free to reach out to the office at 6 3 1 2 4 8 3600.

[00:21:50] Matt Halloran: Alright, so for Larry, uh, this is Matt Halloran  and please understand we covered a lot of ground today. This is one of those episodes you should probably listen to two or three times, but even [00:22:00] better. There are lots of people who are making these mistakes and as you heard this show, you thought to yourself, gosh, Jane has made these mistakes before.

Johnny’s made this mistakes before, or they just brought this up at dinner the last time we were over at their house. This is a perfect opportunity for you to jet. Lee provide some nice education for them without coming across as a schmuck or being too pushy. So with that, uh, I will see all of you on the other side of the mic very soon.