Originally published on Medium.
I’ve spent years talking about money on the radio and, more recently, on The Hidden Wealth Solution podcast. After more than 100 episodes, one of the biggest changes I’ve noticed isn’t what we’re talking about, but the knowledge people have before they ever speak with us.
People come in having listened to podcasts about Roth conversions, Social Security, taxes, estate planning, annuities, Medicare, and just about every other financial subject you can imagine. They’ve watched all the videos and read numerous articles. Some have done a tremendous amount of homework.
I think that’s a good development. Ten years ago, I could go months without getting a question about Medicare. People didn’t typically want to discuss taxes either. But today, people are much more aware that what they accumulate is only part of the equation. They want to understand what they’ll actually keep, what their assets can produce in retirement, and what happens to those assets when they pass them on.
The problem is that people don’t always know how to apply all that knowledge to their own situation.
Knowing About a Strategy Isn’t the Same as Knowing How to Use It
One of the limitations of any financial podcast, including mine, is that we have to talk about financial strategies in general terms. Your financial life doesn’t work that way.
Take a Roth conversion, for example. I can spend an entire episode explaining why someone might want to move money from a traditional IRA into a Roth. But whether you should convert $20,000, $200,000, or nothing at all this year depends on more than whether Roth conversions are a good idea.
How much additional income do you have? What tax bracket are you in now? What will your required minimum distributions look like in the future? Could the additional income affect your Medicare premiums? What assets do you plan to leave your children? What state do you live in? What does the next five or ten years look like?
That’s why I’ve always been more interested in coordination than individual financial products or strategies. A good idea applied in the wrong place can still produce a bad result.
Let me share an example of this problem on a larger scale. A gentleman came to us after being sold a strategy that generated a $2 million tax deduction. By the time he sat down with our tax team the following year, he had never been able to use a dollar of it. Nobody got back to him. Nobody had taught him how to implement it.
The deduction looked great on paper, but in his actual financial life, it may as well not have existed.
That’s the part of financial advice that is much harder to fit into an episode, video, or social media post. The strategy gets the attention, but implementation is where the outcome is truly determined.
More Financial Information Hasn’t Eliminated the Need for Financial Judgment
There is an enormous amount of good financial information available today. If you’re willing to do the dirty work and conduct your own research, you should get ahead.
But there is also plenty of bad information out there, and plenty that sits somewhere in the middle: legitimate concepts presented without enough context to understand when they work, when they don’t, or what else they may affect.
Tax planning is a good example of this. People often think of a tax decision as just a tax decision. In reality, changing taxable income can affect Social Security taxation, Medicare premiums, investment income, and eventually, what your heirs inherit. I’ve written before about how the new inherited IRA rules have made that coordination even more important. Most non-spouse beneficiaries now have a much shorter window to distribute inherited retirement assets, which means a decision a parent makes today can affect a child’s taxes years from now.
The same principle applies to retirement planning more broadly. As I’ve discussed in looking at tax strategy versus investment returns, reducing taxes in one area while unintentionally creating additional income or gains somewhere else can wipe out part of the benefit.
This is why I have a problem with financial advice being reduced to “Do this” or “Don’t do that.” Instead, it’s useful to see how something fits your lifestyle and strategy.
What I Want Someone to Do After Listening to My Podcast
Because I host a financial podcast, I’ve given much thought to where that line should be.
I don’t expect someone to listen to an episode of The Hidden Wealth Solution about Roth conversions and immediately start moving money around. I would rather have that person finish the episode and realize, “I need to find out whether this strategy applies to me.”
Education should help you differentiate an opportunity from a risk. It should give you enough understanding to ask intelligent questions. It should also help you recognize when somebody giving financial advice can’t answer those questions for you.
If you discover a strategy through a podcast, YouTube video, or social media post, find out who has vetted it before you do anything with it. If it’s a tax strategy, have CPAs reviewed it? Do the people recommending it use it themselves? Are there reporting requirements? Is it a listed transaction the IRS has already identified as abusive? And who is going to be there when it comes time to implement it?
I’ve had someone bring me a strategy recently and tell me he wasn’t comfortable with it. Once we looked at what was involved, he had good reason not to be.
There’s an old saying: Never trust a skinny chef. In the tax world, this advice ought to be: Don’t take tax advice from a broke CPA.
That doesn’t mean you should blindly follow the person with the biggest portfolio either. Instead, you must seek to understand whether the people advising you have enough experience with a strategy to know where the problems tend to show up.
The Missing Piece Is Usually Coordination
For years, I’ve talked about what I call the big-box-store brokerage syndrome.
Someone has their investments at a large brokerage firm. They have a CPA or accountant preparing their tax return. They have an estate attorney, and maybe an insurance professional as well. Each person handles his or her job, and the client assumes that somehow all of those parts are being coordinated.
But more often than not, they aren’t.
You can compare it to the medical world. If your cardiologist needs to speak with your primary care doctor, they can communicate, and your chart goes with you. We understand that treating one part of the body without knowing what’s happening elsewhere can create problems.
Financial planning should work the same way. Your tax professional should know what your wealth professional is doing, and your estate plan should account for what happens to your retirement accounts. Decisions about Social Security and Medicare shouldn’t be made without looking at the income those other decisions may create.
Six excellent strategies can fall apart if one strategy is missing.
Use Financial Podcasts for What They Do Best
After more than 100 episodes, I haven’t become less enthusiastic about financial podcasts. But I do believe it’s always important to be clear about their purpose.
There was a time when access to financial information was largely controlled by the financial industry. Today, someone approaching retirement can spend a weekend learning about RMDs, Roth conversions, Social Security claiming strategies, Medicare IRMAA, and inherited IRAs before ever walking into an advisor’s office.
That’s powerful and important.
It also shifts the responsibilities of the listener. More access to information means more responsibility to distinguish education from advice and an interesting strategy from one that actually fits.
My hope with The Hidden Wealth Solution has always been to educate people on the areas of their financial lives that are commonly overlooked and show them how those pieces are connected. In other words, I want to add information, education, and clarity where there wasn’t any. If somebody hears an episode and discovers an opportunity they didn’t know existed, that’s exactly what I want.
But I don’t want a listener to take my word as a guarantee simply because I said it into a microphone. Run the math for yourself. Ask how it applies to your situation. Find out what else the decision changes. Ensure the professionals involved are talking to one another.
A podcast can help you become a much better-informed participant in your financial plan, but it can’t replace the plan itself.
About Chuck Oliver
Chuck Oliver is the founder and CEO of The Hidden Wealth Solution, a nationally recognized wealth strategist firm specializing in tax-efficient retirement and legacy planning. A two-time best-selling author, national radio host and lifelong entrepreneur, Chuck has spent more than three decades helping individuals and families better coordinate the financial decisions that shape retirement.