Throwback: The worst two words when planning for the future

Read The Transcript Below:

Steven (00:06):

Hello everyone and welcome back to the Least Boring Tax Podcast, sometimes known as the Retirement Tax Podcast. I am one of your hosts, Steven Jarvis, CPA, and with me as always, the incredible Benjamin Brandt. Ben, welcome back.

Ben (00:21):

Always happy to be here, Steven. Can’t wait to start planning our next vacation together. Our last one was a blast. You drove to my neck of the woods. I think I only owe it to you to drive to your neck of the woods. I’ve never been anywhere north of L.A. so I’m excited to see that part of the country.

Steven (00:36):

The Pacific Northwest is beautiful. If I can convince you with a van load of eight people to drive all the way out here, we can have a lot of fun.

Ben (00:42):

Well, my wife and my oldest two daughters did want to venture to, where is Twilight in your neck of the woods?

Steven (00:49):

That would be Forks, Washington. Yes.

Ben (00:51):

Yes. And we realized that was about 17 different flights from Bismarck. So that’s not going to happen. 

Steven (00:56):

That’s a little rough to get there, but hey, never say never. That’s actually what we want to talk about today is Ben, I think the text you sent me was that these are your two least favorite words when it comes to retirement planning, which are “never” and “always”. So tell me why the disdain for these words, Ben.

Ben (01:13):

Yeah, so I picked this up. This wasn’t a fully original idea to me, but I had the great fortune to listen to your podcast. This is your advisor-facing podcast. This is consumer-facing with Roger Whitney, who’s a close friend of mine. He’s The Retirement Answer Man. He and I have been in a mastermind group for years and years and can never bring up Roger’s name without giving the context of everything that I’ve ever done on the internet. He has a zero behind it and he’s also done so he’s much more prolific than I am, and I remind him of that all the time. That’s why I often refer to my show as your second favorite podcast because his show is great. But he talked about “always” and “never”, and I gave some time to think about that and “always” and “never” are, I think the worst words in retirement planning because what we’re talking about is personal finance, not everybody finance.

(01:56):

And so if I were to say no one should ever buy an annuity, no one should ever get a reverse mortgage, no one should ever use the 4% rule. No one should ever, you’re applying an everybody finance, not a personal finance brush to some of these things. I could go on and on. Nobody should ever click Social Security at 62. Everyone should wait until 70. And there’s so many examples of, and you see this in the Talking Heads, the blogs that are, they’re really just made to drive clicks. You see that sort of inflammatory language because people say, well, I had kind of thought about buying an annuity, but this says never. I better read this article and give them their Google AdWords and their page views. So what I wanted to talk about is why we’re limiting our options and we say “always” and “never” and why, maybe there’s a better word, a better four-letter word that we could apply to give some of these decisions a little bit better context. So that’s the retirement planning world. Steven, I think in the tax planning world, there’s probably even more examples of “always” and “never” how they’re helpful.

Steven (02:59):

Well, there’s a reason that almost every tax answer starts with “it depends” because it does to your point, it needs to be personal “always” and “never” are red flags for me. But you’re right, they come up all the time and one of the reasons I’m glad we’re talking about this is because I’m sure there’s episodes of this show that people listen to or they’re thinking back on and thinking, well, wait a second. Ben and Steven always talk about Roth conversions and they always talk about planning over multiple years. We’re getting slightly semantic on some of these things, but that’s why we want to come back and talk about it because even as we talk about these topics that we are really passionate about and we think are a good fit in a lot of situations, we do still try to come back and give the context of for the people we work with for the personal situations we’re dealing with. Even as we talk about something that comes up all the time like Roth, I’m a huge advocate of considering this in nearly every situation. That doesn’t mean we’re going to execute on it in nearly every situation. And so even for other topics, you’ve heard Ben and I talk about these principles hold true that if we’ve ever suggested that something is always the case or should never be done with rare exceptions like committing fraud, that wasn’t our intention. There is more nuance to this.

Ben (04:08):

That’s a great reminder. I’m closing in, I think on 400 episodes. In 300 newsletters. I’m certain that I have said always or never. So this is a great reminder to me to say, well, do you really always mean always and never mean never? Because that means no one on the history of current humans that exist this would appropriately apply to. And that’s, I haven’t done personal financial plans for 330 million Americans, so there probably is that red herring that this would work for. So I have to remind myself not to be so authoritarian or whatever the word would be about “always” and “never” because there’s almost always going to be a case where a reverse mortgage, somebody does need a reverse mortgage. They need to access equity from their house no matter how much fine print and how unkind some of the terms can be. They need equity cash from their house and they aren’t in a position to sell their house.

(04:52):

So they need that. Someone needs an annuity, whether it be a variable or index annuity. It’s not how I prefer to plan, but there might be someone out there that needs cashflow that is completely risk intolerant and wouldn’t have any capacity to learn about or take on extra risk. So when I say no one should ever buy an annuity, I am excluding and doing a disservice to that 0.1% of the population that would be a perfect fit for. I just have to remind myself that there’s things that I don’t like for certain reasons, and there are certain clients that I serve that are in and of themselves very unique. You’ve got to have a certain tax complexity. You have to have a certain, have saved a certain amount of money, you have to be a delegator that’s probably less than 10% of the total population. So I have to remind myself that there are people listening to this podcast that aren’t suited to be my clients just based on whatever their life circumstances is, and I still want to provide value to them. So a good reminder to me why we should never say never and always not say always.

Steven (05:44):

If we’re going to never say always and always skip say never. You mentioned a four-letter word that is more helpful if that’s the wrong way to think about it, what’s a better way?

Ben (05:52):

So the most helpful four-letter word that I’ve been using a lot more often in my vocabulary is the word “even”, so “even” is such a powerful word. If I said, Ben and Steven are going to work on your financial plan and we’re going to help you save on taxes, what the context is is you have not done any work on your taxes and you’re overpaying and you’ve done a really poor job and we’re here to save you. But if I said Ben and Steven are going to work to save you even more money in your taxes, that is positive and uplifting, it recognizes the work that you’ve already done and it’s saying, here’s some improvements that we can give to you to make it even better. So when we talk about creating a spending plan for clients, here’s how we can make it even better when we talk about taxes here so we can make it even better. You’ve got some great plans outlined in your return plan, how can we make it even better? So rather than discarding the work that you’ve done, I can use my expertise and say, how can I help you make it even better? So it’s a complimentary word that we can build on from there versus the hard line in the sand of “always” and “never” being two of the least productive planning words. The word “even” I think might be the most productive planning word. So I wanted to look at how those come together as stark opposites.

Steven (07:02):

There is an example there for our listeners who are working with advisors, but I think even for our DIYers, this is a helpful frame of mind as you try to wade through all of the different headlines and articles and social media videos, whatever it might be, that it can be really easy to see a headline about a tax strategy and think, oh man, I’ve done everything wrong. I’m not doing that piece of it. What if I’ve blown everything to this point? But if the context of the lens we’re looking through is, well, could I do even more? Then we’re giving ourselves credit for what we’ve done to this point and we’re looking to expand the plan, not constantly criticize all the hard work we’ve put in to get to this point.

Ben (07:38):

Well, and I know a large part of our audience don’t currently work with an advisor or plan on never working with an advisor, the DIY investors. And so when you’re researching a certain thing about let’s say Roth conversions or something and you see those “always” or “never” words in an article or a white paper, that’s a great chance for you to improve your education and challenge yourself to say, this advisor, this expert says never in this instance, I wonder if I could maybe just do a brainstorm, find an instance where it would be, I want to be kind of the devil’s advocate because you’re going to learn some things about the circumstances where that would work and then you can apply that to your own situation. So you can actually take one article and have it be used for two purposes. And if you’re do it yourself investor, you are the person responsible for doing that research for yourself similar to what an advisor or an accountant would do, and then how you can change that method to your own personal circumstances and apply those lessons. So a couple extra things that you need to do, but if you’re listening for those red flag words, like“always” and “never”, it’s just kind of a fun thing to tune your ear to so that you can find those things and say, okay, well that’s a red flag. It might be appropriate for me, but let me spend some extra mental calories on this red flag and see if it really is for me or not.

Steven (08:49):

Ben, something that brings to mind for me is a frequent question we get from listeners, which it comes in about both financial advisors and tax professionals of looking for ways to screen for good professionals to work with. The reason this comes to mind for me is that a question that I like to ask, even for myself personally, if I’m looking to work with someone new or if I’m looking at even the new online resources is something I want to trust, is to ask the question of can you give me examples of when you wouldn’t recommend that? And if you’re not talking to a person, that might just be a question that you’re asking as you’re going through an article about a given topic. If again, to the always and never, they might not be explicitly saying always and never, but if there aren’t any examples of when this would be a bad idea or when this might not work, again, that’s going to raise red flags for me because always and never these superlatives are not helpful.

(09:38):

Life is too complicated and a nuance for that. So whether I’m working with a person or reading an article or trying to find a new resource for a particular topic, I want to make sure that this is a resource that can show me both sides of the coin of here’s when it would be a good idea, and I can evaluate if I fit in there, but also what’s the trade-off? When is this a bad idea? Because I have real hesitancy about working with or trusting sources that seem to tell me that their answer is the right answer all the time.

Ben (10:05):

Well, it’s also a great way for you to test their depth of knowledge. If they’ve only ever used hammers, they’re not going to know the proper application of screwdrivers. What’s the counterfactual, if that’s the right word? And then that gives you even better context to make that decision. So if someone says never annuities, well have them explain when annuities are appropriate and are they able to sell annuities. Would they have to find you somebody that would, and if you’re going to a Ford dealership, don’t expect them to sell you a Chevy. We just have to understand that conflicts of interest exist. So you want to find somebody that can give you good advice that can explain the counterfactual and also has some skin in the game. I think we talked about this a little bit on the last episode, but taking tax advice from someone that has no skin in the game at all.

(10:47):

You’re totally on your own, but if your financial advisor is giving you advice and they are licensed to do so and they’ve got errors in emission insurance and your accountant is willing to sign on the bottom of that tax return and they’ve got their own malpractice style insurance, they’ve got skin in the game. So you can be more assured, not that they’re always going to be correct, but more assured that there’s going to be service after the sale if something isn’t right. So I’m looking for, can you explain the counterfactual and is there skin in the game? Are you going to be here after this is all after the ink is dry?

Steven (11:14):

Ben, another thing that comes to mind as to why always and never can be so harmful to include in our vocabulary is that especially on the tax side, the rules constantly change. And so if we make a plan and we get locked in on here’s my plan and this is always going to work for me, or I skipped this strategy over here because that’s never going to be a fit, well maybe, but the tax code is written in pencil and Congress can change it any anytime we want. I mean, we’ve talked even this year about the rules around secure 2.0 and what that means for inherited IRAs. And so we know these rules can change over time. And so if our approach has always been to defer taxes as long as possible, I might’ve shared this on the podcast on a previous episode, but on this topic of inherited IRAs, if we’ve always thought about deferring forever, that could cost you six figures in taxes. Just the difference between evenly distributing an inherited IRA over the 10 years they give us versus taking it all in one year. And so “always” can get us in a lot of trouble and can cost us a lot of money if we get so locked in on a strategy at a point in time that we don’t stay aware of how things are changing or what might be different even if the laws don’t change what might be different in our personal situation over time.

Ben (12:28):

Yeah, the laws, the personal situation, like you said. So it might make sense in almost every case to defer to social security as long as you possibly can until your personal circumstances change. You get some bad news with your health or your spouse does some kind of diagnosis that you don’t like or something changes in your income. What might’ve been the exact right solution five years ago when you made your retirement plan could be totally different today could be a legislative thing. I always say when you play baseball with the government, they can change the rules in the seventh inning. It’s hard to win. That is a lot of the things to think about. Circumstances do change, so “always” and “never” don’t allow for those circumstances to change. And you don’t want to stick to a plan that’s no longer true to what your goals are just because we wrote an “always” and “never”. We want to build some flexibility in because you might not know what you’re doing at 70 or 80 or 90. You might have a general idea, but plans change too. So family dynamics change. Give yourself some flexibility in your plan “always” and “never” getting those words out helps.

Steven (13:24):

Well, we kicked off the episode saying, Hey, we talk about Roth all the time. That doesn’t mean it’s always the answer, but as you talk about flexibility, that’s one of the things that I tend to come back to with the value of Roth is that it creates that flexibility from a tax standpoint because I mean, we’re highlighting some of the negative things that might come up unexpectedly, but there’s also positive things that might come up unexpectedly. You might get into retirement and realize that, hold on a second, sitting around my house and gardening or whatever I thought was going to be my daily hobby, that doesn’t excite me as much as I thought it would. I do want to take this three-month trip to Europe. I do want to get an RV and drive to Alaska. And by having flexibility in our plan, flexibility in our tax situation, by suddenly making these pivots and saying, wait, no, I want to lump some bunny all at once and I don’t want to get killed on taxes on it because my plans have changed and I want to enjoy the rest of my life that I want to enjoy this great investment portfolio that I’ve created by my diligence and by my commitment. And now it’s time to live the life I’ve always wanted.

Ben (14:23):

Right? Plans change, cash flow needs change. That’s why no one should ever buy an annuity. Oh, dang it, I did it again.

Steven (14:29):

Did it again. Well, we can tell which side of the fence that you fall on on that.

Ben (14:32):

Yeah, I have a tendency to break my own arm, patting myself on the back sometimes, right? But yeah, we all have our own preconceived notions and conflicts of interest too. So I fully recognize that. But I’m sticking to the theme “always” and “never” are bad, the red flags. It doesn’t leave us room for flexibility. Think about how we could instead put the word “even”, how could we take something good and make it even better? That’s better than a red flag because it allows for that flexibility. It also brings in that sense of optimism, thinking bigger, lifting our gaze and seeing what other options are out there, and then taking advantage of that flexibility. So to sum up to the worst words, “always” and “never”, those should be red flags, and we should really encourage ourselves to never use them and then the word “even” makes things even better.

(15:16):

I will say though, that there is another word that you shouldn’t say, and this is really more marriage advice. I don’t remember where I heard this, but if you want to tell your wife that she looks nice, you should say, honey, you look nice today. Now, you shouldn’t say that. You should stop talking after the word nice. And this is a mistake that I’ve made in the past because when I say, honey, you look nice today. The response is, what did I look like yesterday? So one word, like the word even can have a really uplifting aspect of the word like today can have the exact opposite effect. So we’ll leave you with a little bit of levity on today’s show. Tell your spouse they look nice. No words after that. And I hope you have some good results. So that’s what we got prepared for you this week. And until next time, don’t let the tax man hit you where the good Lord split you.

Steven (Disclaimer):

Hi everyone. A quick reminder before you go. While Ben and I feel very strongly about the information we’re sharing on this podcast, it is for educational purposes only and should not be taken as specific tax, investment, or legal advice. You need to make sure that you are working with a professional to evaluate how these concepts apply to your specific situation before you take action.