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As a result of reading HD, I have become fascinated with certified financial planner videos on YouTube, some are pretty good, others not so much.
Often one thing strikes me as ironic. Some presenters look more like they will be starting college in the fall, than experienced experts and none of them look anywhere near retirement age – maybe they will FIRE, but I digress.🤑
My real curiosity is when they show a spreadsheet to see if a hypothetical couple can afford to retire. They usually start by showing the couples needed monthly income- their spending. Often that is quite a modest amount (they should tell us where they live).
Then they list income sources, like SS, annuities, pension, drawing down investments or whatever.
When the math works when income equals or exceeds the spending needs, and they proudly demonstrate the couple can retire and their probable success rate is X%. They will be fine we are told.
What’s missing? Taxes! I have yet to see one of these presentations talk about net income after taxes. So when you match desired spending with gross income, the picture is rosy, but it seems to me the bloom is off when you use net income. The last I tried to pay bills with 20% or so less than I had it didn’t work.
When I compare my working income to retirement income it’s gross amount to gross amount. Taxes always reduce both. If you are looking for the income that will pay bills, shouldn’t it be net income?🤑
Our CFP FA includes net income after taxes in his projections. (He also includes tax planning). I don’t watch CFP videos on YouTube other than The Retirement Answer Man and The Retirement and IRA show occasionally. I regularly follow Rob Berger who is not a CFP, just a smart guy with practical, mostly DIY, information.
Yes! Tax planning is so important, even if you have a “lower” income like we do now that we are retired. It is good not to pay more taxes than you have to. Chris
Try James Conole CFP on youtube
Consider that the goal of these videos might not be giving full fledged advice but just enough to get people to subscribe and pick up pointers. Subscribers at a certain point can be it’s own business model.
How about property taxes? We have stayed in the house we bought for $45,700 in 1977. We’ll be “lucky” if our tax bill doesn’t exceed $18,000 this year. And no way to estimate the future. The city raises our sssessment each year (this year by $115,000), and the more than 45,000 university students in Madison have never seen a spending referendum they don’t like.
In the example, I assume property taxes would be included in the monthly spending needs.
Absolutely— but how? I’d guess they’ve more than doubled in the 10 years we’ve been retired. To be honest, we never tried to estimate spending before we retired, I don’t think we’d ever included this kind of tax jump.
I don’t know about where you live but here a tax bill can’t go up just because the assessment does.
When that happens the tax rate per hundred or thousand of assessment goes down. so taxes stay the same.
Of course, at some point the tax rate will go up for everyone.
Right— except I stated that spending was also increasing. When both huge increases in both assessments and mil rates occur, taxes do go through the roof!
You need to move to NJ. There is a percentage cap on how much a town can increase the taxes. 😎
Except we also have one of the highest property taxes in the country.
Or maybe Cape Cod. When we bought in 1987 the annual tax was $700. 38 years later it is only up to $2700 a year.
Actually, I don’t think NJ’s is higher than Madison’s. WI does have a cap, but it can be overridden by local referenda.
Good point. Retirees must also account for taxes when making withdrawals from non-Roth accounts.
How about sharing a couple of these video URLs? I often find the info in these videos to be on the thin side as well. If the presenter is indeed a CFP or a CPA, I think it would be unlikely that they would forget taxes. So, the taxes might be in the spending amount.
The other thing to remember is how extraordinarily low tax rates are for seniors. With a $33k standard deduction for an over 65 married couple in 2025, the tax on the first $56850 is only $2385. And, the 12% bracket in 2025 for them goes up to $126950. So a $72000 income would generate only $4200 in Federal tax.
Doesn’t work as well for singles. Especially those taking RMDs. My marginal rate is 24% and I’m paying IRMAA.
All the married couples find this out when one dies. Of course, your friendly government has a solution…..(this next part is intended to ba a joke). Just find yourself a partner….get married 🤓
But what is your effective tax rate? Mine is less than 20%
When I completed the CFP curriculum in 2014 it included a full semester on taxes and tax planning. There were plenty of tax questions on the certification exam. So anyone claiming the CFP marks should be well versed in taxes and tax planning. As bbbobbins commented, all professional FP software programs have tax models built in. Without any links it’s impossible to evaluate the criticism.
IME most financial planners use a proxy composite income tax/capital gains rate for the purposes of illustrations. You can clearly model in detail depending on the sophistication of the model you use and that may have a significant influence on the manner and order in which you draw from various resources.
You need to bear in mind that youtube videos are likely not the whole steak but a bit of the sizzle to introduce the concepts and get referrals/sales of their software etc. They also become rather boring quite quickly if they become a detailed exploration of taxes at an individual level
Obviously consumption taxes like sales tax, VAT/GST, property taxes etc will be specific to an individual’s expenses and should be well known if an individual is budgeting cashflow.
Edit to add: In actual fact most financial planners will use a software platform that automatically calculates and weighs in income taxes. You can easily see this if you play with different levels of income on the free online versions available. And yes you get “kids” doing it because it’s simply maths and inputs/outputs – none of which need decades of grizzled experience.
If you are retired and your income is modest, your income taxes will be very low. A retired couple with $40K in combined SS and $20K in ordinary income will pay little or nothing in Federal income tax.
Good point, but the last one I watched the spending needs was $6,000 a month.
Prior to retiring I did my own planning and included taxes as an expense. I wonder if the people in the videos you watched were really CFPs.