DIY Retirement Planning: What Can Be Overlooked?

Key Points – DIY Retirement Planning: What Can Be Overlooked?

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What Are Some of the Things That Are Oftentimes Overlooked When DIY Retirement Planning
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11 Minutes to Read | 23 Minutes to Watch

What Can Be Overlooked When DIY Retirement Planning?

Are you someone or do you know someone who takes a DIY (do-it-yourself) approach to retirement planning? We understand that it can be easy to be passionate about managing your own finances. But are you truly prepared for retirement? That includes how to maximize Social Security benefits, understanding tax efficient withdrawal strategies, and so much more.

On America’s Wealth Management Show, Dean Barber and Bud Kasper frequently talk about the things that you need to build a solid retirement foundation. They don’t want you to let your hard-earned money slip through the cracks. So, pay close attention as they share some of the dangers of taking a DIY approach to retirement planning. Retirement planning is a complex process. Even the most experienced DIYer can struggle with it. It’s our goal to get you heading in the right direction for retirement.

Why Is Working with a Team of Financial Professionals So Critical?

Anybody can invest money. It’s easy. Anybody can build a 60-40 portfolio where they put 60% of their money in the S&P 500 and 40% in BND, the ETF that mimics the bond aggregate. If anybody can do that, why is it necessary to work with a team of financial professionals?

If you want to increase your probability of success, working with a team of professionals like the one we have at Modern Wealth Management is pivotal. You need to work with a team of professionals that focuses on helping people achieve their personal goals. The internet has given everyone a wealth of resources to help with so many different things. But at the same time, it can almost be an overload of information.

Our team at Modern Wealth wants to make sure that you don’t feel overwhelmed and/or conflicted throughout the retirement planning process, all while still getting the critical information you need to make informed decisions.

Dean and Bud are going to play a quick game to explain what can be overlooked with DIY retirement planning. They’re going to listen their top three things that they think people miss when DIY retirement planning. Bud is going to go first.

The Top Three Things That Bud Thinks People Miss When DIY Retirement Planning

The impact on taxation of Social Security that portfolios create.
The impact on IRMAA.
A plan needs to be as comprehensive as possible with inflation factored in.

Bud was short and sweet with his top three things that he thinks that people miss when DIY retirement planning. Dean agreed with all three of Bud’s points and saw a little bit of overlap on his list. He went into a little more detail, so let’s see Dean’s list.

The Top Three Things That Dean Thinks People Miss When DIY Retirement Planning

1. Tax Planning

Tax planning involves a forward-looking tax plan that’s done by a CPA. If you’re working with a CFP® Professional, they’ll create the financial plan. Then, the CPA comes in and does the forward-looking tax plan. That tax plan can range anywhere from a tax efficient withdrawal strategy, Roth conversions, staying below the IRMAA tax, avoiding Social Security taxation, etc.

2. Maximizing Social Security

The average 62-year-old couple will have more than 600 iterations on how they can claim their Social Security. Based on the same earnings history and life expectancy, the difference in total Social Security benefits can exceed $100,000 of additional income. If you’re DIY retirement planning, do you know how to maximize your Social Security? Do you know how to calculate those 600-plus iterations to get your extra $100,000 out of Social Security. It has nothing to do with investments.

3. Spousal Involvement

This ties right into Dean’s second point. Remember that the surviving spouse is going to get the higher of the two Social Security benefits. If you can maximize at least one of those by going out longer in terms of the maturity or when you’re going to start taking Social Security, it can be a significant difference in the outcome of the survivor of the spousal relationship.

Spousal involvement with retirement planning goes far beyond claiming Social Security (even though that is critical). Oftentimes, one of the two spouses will make most of the couple’s financial decisions. The other spouse usually isn’t very involved. Both spouses need to be integrated into the decision making throughout the retirement planning process.

While you’re starting to accumulate some wealth, are you coordinating with your spouse in terms of what the end result is going to look like? This is what comprehensive long-term planning can provide to a couple.

There’s More to Financial Planning Than Your Investments

Dean and Bud have worked with many people who have done their own investing, which is fine, but still engaged them with financial planning assistance. Why? Because they know that there are things that are outside their wheelhouse. Even if one spouse does have a good grasp on financial planning, if the other spouse isn’t involved or have as good of an understanding on their financial planning needs, what if the spouse with most of the financial planning knowledge passes away?

“It’s OK if people want to invest their own money, but do they really understand what they’re missing? People get caught up in not wanting to pay a financial advisor a fee because they can do it on their own and not pay a fee. So, they think that means that if they don’t have to pay the fee, they’re going to make more money. My mantra has always been that fees will only ever be an issue in the absence of value. If that CFP® Professional that’s working alongside a CPA can’t add value, then don’t pay them.” – Dean Barber

You shouldn’t have that problem if a CFP® Professional is doing their job. But if you’re not working with a CFP® Professional, be wary of anyone who is calling themselves a financial advisor, especially if they’re mainly talking to you about investments. The only time that a CFP® Professional should be having a conversation with you about your investments is after your plan is completed.

Covering the Things That Are Missed with DIY Retirement Planning in Our Retirement Plan Checklist

There are other many other things that can be missed when DIY retirement planning too. We’ll cover more of those things shortly, but you can really take a deep dive into those things in our Retirement Plan Checklist. It has all the important dates and information that people need to know that that comes to retirement planning in 2023. We update it each year as well so that it will be current in 2024 as well. You can download your copy of the Retirement Plan Checklist below.

Retirement Plan Checklist

Forward-Looking Financial Planning

Our Retirement Plan Checklist also has 30 yes-or-no questions that gauge your retirement readiness. It’s a resource that truly shows what all can be missed with DIY retirement planning and how important it is to work with a CFP® Professional.

“It’s the compounded benefit that people sometimes miss. Maybe you did a Roth conversion this year. Was that the wisest thing for you to do? Or maybe you’re considering doing a conversion? Should you do that? Let us show you the outcome of that predicated upon your personal situation, your tax brackets, and how this integrates into the future income that you’re having. Most people missed that because they live in the now. They don’t live in the future. The future is how the quality of life you’re going to have at the slowest part of your life.” – Bud Kasper

If you’re going to do financial planning correctly, you need to step into the future. Then, you reverse engineer back to today to give you the answer of what you should be doing now. That’s the only way you can do it.

A Few More Things That DIYers Can Miss When Retirement Planning

While Dean and Bud went through their top three things that they’ve seen some DIYers miss when they’re going through the retirement planning process, there are a lot more than three things that they could have listed. We’re going to go through a few more of those things and elaborate on a few of the things on their respective lists as well. Their combined longer list of things that DIYers can oftentimes miss when retirement planning include:

Inflation
Spousal consideration
Social Security optimization
Tax planning
Health care and long-term care expenses
Asset allocation
Investment confidence
Longevity
Risk of RMDs
Estate planning
Social aspects of retirement

Covering All Your Bases with a Financial Plan

There are a lot of things that the DIYers overlook when retirement planning. And we’re not making a blanket statement that every DIYer overlooks all these things. These are just some things that we’ve seen DIYers miss.

“I think the other part of it is that people save in different ways. Obviously corporate plans are a big part of that—IRAs, Roth IRAs, etc. But have you gone through and done an examination that if you follow the path you’re on for the next 10-15 years or however long it may be, is it going to result in what you need to have at that point in your life when you’re no longer getting a paycheck from a company and now are on your own? That can be a scary time. A lot of times when people see the plan, that’s the only way they can come to terms with the issues that they have. You can cover your bases with a financial plan and by working with a CFP® Professional.” – Bud Kasper

The Working Relationship Between a CFP® Professional and CPA

And as we mentioned, it’s not just working with a CFP® Professional. That CFP® Professional should also be working side-by-side with CPAs and estate planning, risk management, and investment strategy specialists. Let’s focus on the working relationship between a CFP® Professional and CPA for a minute.

“There is magic that happens when a CFP® Professional completes the plan and then a CPA sits down with the CFP® Professional goes through that plan. That is a fun process to watch because the CPA sees that plan through a lens of minimizing taxation over a lifetime. They just have a different point of view. It’s great to have a CFP® Professional and CPA in the same room with our clients. That’s why the number one thing I said that the number one thing that DIYers can miss with retirement planning is tax planning. There’s no book on it because everybody’s personal situation is different.” – Dean Barber

It’s important to realize that tax preparation is a commodity. When you visit with our CPAs at Modern Wealth, we find that more than 90% of the people who visit with us for the first time are overpaying their taxes. And it’s not because they’re preparing the tax return wrong or that their current tax professional is preparing the return wrong. It’s because they’re missing opportunities and not understanding that if you live in the United States and either have money or make money that taxes are going to be a fact of life. There’s almost no financial decision that you make that doesn’t at some point end up on your tax return.

Looking at a 2022 Investment Trends Survey

As we begin to wrap up this article on what DIYers can miss when retirement planning, we want to review a 2022 investment trends survey by eMoney. It showed that as DIYers are building steam, but financial advisors are still a mainstay. There was one part of this survey that Dean found to be very fascinating. It was that 30% of the people in the survey said that they rely on family and friends for financial guidance.

Here are a few more survey results that Dean was alarmed by. Twenty-seven percent of the people surveyed said they rely on a bank or credit union for financial guidance. And then 25% of the people surveyed rely on the internet, while 20% of those surveyed rely on their employer.

Why Financial Planning Needs to Be Forward-Looking

A CFP® Professional should be looking at every aspect of you and your spouse’s financial lives and beyond. Why should you be worried about the “beyond” aspect of it if you’ll no longer be here. Well, it’s just like we highlighted earlier with the possibility of you passing away before your spouse. Or vice versa. What about your kids and grandchildren?

“Maybe there’s a possible inheritance in your future. Maybe you’re going to sell your business at some point. What are the implications of that? How does that change your tax bracket? What happens in 2026 when we revert to the tax rates from 2017? If you don’t know that, that’s happening. We’re planning around it today.” – Bud Kasper

With tax rates set to go up on January 1, 2026, what are you going to do between now and then? Tax planning and estate planning are crucial. Nobody likes to talk about end-of-life planning and how your estate is going to pass.

Family Meetings to Review Key Aspects of Estate Planning

We have helped people go through the process of grieving a loved one, settling estate, and making sure that everything is done properly. A good CFP® Professional is going to have a family meeting with the client and client’s family.

“That family meeting is critical. If you look if you can do this yourself, then do it, but there are a lot of people that are very tight lipped about what they have. The family meeting is not designed to say, ‘Here’s where mom and dad’s money is. Here’s how much money they have, etc.’ The purpose of the family meeting is to talk about the wants and wishes of the people who are going to pass the money. What values are important to them? What is the process going to look like? Who does the family member contact? How does the process work?” – Dean Barber

Dean and Bud have been in a few of those family meetings already this year. They can see the peace of mind that surfaces with the adult children knowing what the plan was. The DIYers can miss that aspect of retirement planning.

An Example of Legacy Planning

Bud likes to refer to it as legacy planning. It puts into writing exactly what you want to happen after you pass away. How are your assets going to be distributed? Bud had a client who has since passed away and didn’t have any kids of her own, but her sister did. However, she didn’t have a lot of faith in their ability to handle money.

So, inside her trust, she put in instructions that upon her death, 10% of her net worth will be distributed equally between her niece and nephews, who were in their mid-30s two boys and a girl. Then, at the end of three years, they were going to receive 20% of the of the corpus.

“What she did was stage for her own benefit in protection of the ones she loved the most to keep them out of their own way and destroying something that could provide them a wonderful benefit for the rest of their lives.” – Dean Barber

The Bottom Line with What DIYers Can Overlook with Retirement Planning

So, let’s review what we’ve covered with what DIYers can overlook with retirement planning. There are a lot of people that can invest their own money and that’s fine. But that’s not financial planning. Unless the DIYer has been trained to do so, they can’t do their own financial planning.

“What we do is far too complex for somebody who hasn’t taken the decades of studying that we’ve done and are still doing, especially when it comes to estate planning and tax planning. If you want to get serious about financial planning, you still need to work with a CFP® Professional, CPA, and a team of other financial planning specialists.” – Dean Barber

You can see for yourself all the things that a DIYer needs to consider during the retirement planning process by using our industry-leading financial planning tool. It allows you to see what forward-looking financial planning looks like for you. And you can do this all from the comfort of your own home and at no cost or obligation. Just click the “Start Planning” button below to begin building a plan that’s unique to you.

START PLANNING

We also want to give you an even better idea of what it’s like to have a team of financial professionals that’s working for you. We can elaborate on the things DIYers can overlook while retirement planning and address your retirement planning questions during a meeting with one of our CFP® Professionals. To schedule a 20-minute “ask anything” session or complimentary consultation, click here. We can meet with you in person, virtually, or by phone depending on what’s easiest for you.

DIY Retirement Planning: What Can Be Overlooked? | Watch Guide

00:00 – Introduction
01:35 – The Internet and Financial Advisors |
02:36 – Top 3 Things DIYers Overlook
05:27 – Involving Your Spouse
11:38 – More Items DIYers Overlook
13:07 – The Power of a CFP® & CPA Combined
15:17 – A DIYer Survey on Financial Planning
17:36 – Planning for Your Heirs and Estate
21:07 – What We Learned Today

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Investment advisory services offered through Modern Wealth Management, LLC, an SEC Registered Investment Adviser.

The views expressed represent the opinion of Modern Wealth Management an SEC Registered Investment Adviser. Information provided is for illustrative purposes only and does not constitute investment, tax, or legal advice. Modern Wealth Management does not accept any liability for the use of the information discussed. Consult with a qualified financial, legal, or tax professional prior to taking any action.