Retirement Income Planning with Brad Gotto

george grombacher 0:00
Come on one level this is George G and the time is right. Okay. Today’s guest is strong and powerful Brad Gatto, Brad, are you ready to do this?

Brad Gotto 0:19
I am. I am. Good morning.

george grombacher 0:20
Good morning. Brad is a financial advisor. He is the owner of fiyat wealth management, their firm specializing in the great areas of financial planning. Brad, tell us a little about your personal life some more about your work and why you do what you do.

Brad Gotto 0:37
Personal life I married, I married my high school sweetheart, I’m one of those throwbacks. So we 16 and a half years of marriage, I think my wife’s gonna be happy that I know the answer to that. I’ve got two boys, Liam and Hudson, they’re 12 and eight years old, and they, they’re in all the things now I live in Minnesota, we don’t do hockey. That’s a little fun fact about my family that doesn’t fit in here. Well, but I grew up in Iowa, my wife grew up in Iowa. And in Iowa, we can’t spell hockey, we spell it wrestling in Iowa. So so no hockey for the boys, but basically every other sport they partake in. So our life revolves around church, I do a lot of volunteering at church and rolling our boys to sports. But it’s great, I wouldn’t trade it for anything. business wise. My partner, Matt and I started this firm in 2009, after meeting in a big box firm, and realized we wanted to do something a little bit different. And over the years, honestly, our niches kind of evolved. But we it’s kind of have you ever seen that movie robots where they say see a need meet a need. That’s kind of where we went. Because our realization was that there are a lot of advisors out there that can help you grow your pile of money. And I don’t want to say they’re a dime a dozen necessarily, because I don’t want to take away from what they do. That said, Not a ton of advisors that will teach you how to spend it and spend it wisely, let alone take a tax bent towards that distribution phase of life. And so we chose to see you need me to need fill a hole. That’s that gray area of financial planning that you talked about. And so started the firm in oh nine been growing, Matt, and I just kind of there’s a long circuitous story that I won’t get into in today’s 20 minute podcast. But then the story is the last couple of years, we’ve really been growing and our team has gone from three to 13. And we’ll probably bring on a couple more yet here in 2022.

george grombacher 2:32
Nice. Well, certainly congratulations on that. And also appreciate utility. Certainly, like you there are a lot of people doing important work, but that you and and your partner identified an area that is underserved and in need of some more good work. I appreciate that. So why is it? Why is teach people how to spend money? How is how is that a need?

Brad Gotto 3:00
Well, behavior in life is something that adapts over time. And then habits are formed out of behavior, right. And so if you really stop and think about the life cycle of going to school, or getting an education, and then getting a job, and I mean, typically playing kind of the the broad brush strokes in your 20s. And then working for the next four decades of your life. We all become savers to a certain extent, right. And our goal over those years is to not just live our life and have fun, but also to try to put money away because we all know that at some point, we can’t work or don’t want to work. And so we live below our means to save some money. And we develop these habits, which is great. And that pile of money that you’ve been saving for 40 years, other than some, you know, economic downturns for the most part, the money if you snap a chalk line just goes up over time. And so this idea or concept that when you get to whatever your retirement age is 5560 6570, whatever it is, you now have to take that pile of money that you’ve all you’ve ever done is put money into it, and start to take money out of it behaviorally is really hard. You would think, you know, when you think about retirement when you and I think about retirement, sometimes that can seem like an off, you know, off in the distance sort of thing. But this concept of, you know, imagine, put it into real life going back to 22 years old, and you get your first job out of college and your boss hands you you’re making $50,000 a year salary, and your boss comes up to you and hands you a check for $2 million. You’re like, you know, if you should say something like, you know, why do I tell me we overpaid me? Or, you know, do I just cashed the check and you’re not as person so you say something? Because I don’t know that’s not your salary for this year. That’s your salary for the next 40 years. What are the odds that you have any money left at 65 years old? Very little at 22. It’s probably not very good, right? But the daunting task of how do I take a picture Have money and turn it into a paycheck is not something anybody’s ever had to deal with. Because we get paid as we go. And if you stop and think about that, as annoying as that can be at times, and at times of your life where you’re kind of paycheck to paycheck, we’ve all been there, right? You’re just kind of waiting on that next paycheck. But now the sudden is 65 years old, you’re stuck with this task of, I’ve got a pile of money. I’ve never spent this pile of money before. And I’ve got all these concerns relative to how do I spend it? How do I not run out of it, I don’t know what the markets are gonna look like, I don’t know, my tax liabilities are going to look like I’ve never done this before. And so what ends up happening, the default setting is nothing. People end up living on their pensions and Social Security, and the pile almost never gets touched. And so they sacrifice their lifestyle and all these dreams that they had for retirement out of fear. And ultimately, the only person that wins out of that other than your beneficiaries is the IRS because they end up with a lot of it at your death.

george grombacher 5:54
Got it? Well, that certainly doesn’t make sense. And it’s interesting, you know, you put it a perfect way, like we are accustomed to knowing that, okay, I don’t like this, I’d rather spend it all now. But I’m a responsible person. So I am putting this money away, putting it away, putting it away and put it away. And I do that to your point for 40 years. And now here I am. I’m at 65. I’m not working anymore. I’ve got all this money. Now, what do I do? Like we have very little education on the whole accumulation site other than we’re supposed to do it? Yeah, next to none. And what do I do now?

Brad Gotto 6:29
Well, and I think part of that falls on my industry, honestly, it’s the average. And it’s the way I was trained, the average advisors trained to help you grow your pile of money. I mean, that’s, and when people think of advisors, that’s the primary thing they think of is like, Oh, this guy is gonna help me or gal is gonna help me grow my pile of money. This idea or thought of Who in the world is going to teach me how to spend it. I don’t just get a check every two weeks or once a month, or however it was that you were paid it, I’ve just seen it again and again. And at the end of the day, what I’ve realized is, people are not living the lives they want to live in retirement, it’s not because they don’t have the money to do it, the average person that we interact with, has plenty of money. That’s not the problem. The problem is all the fear around spending it and everybody’s fears are a little bit different. But at the end of the day, it all kind of boils down to a handful of things, right? I don’t know how long I’m gonna live, I don’t know, the economy’s gonna look like I don’t know how to tax efficiently pull this money back out. I don’t understand the impact of that. I don’t know a safe withdrawal rate. I don’t, I don’t I don’t I don’t I don’t. And my industry is not out there pounding the drum of this is how you spend your money. This is how we’re going to teach you to do it. And so internally, you know, externally on the website, everything if you go to fiat WM comm you’d see, it says right there on the tagline, we teach our clients how to spend their money. Internally, I’ll tell you, the language that we use is we teach our clients how to party.

george grombacher 7:59
Nice. And so that means hey, let’s let’s actually enjoy the money that we’ve done such a diligent job of saving.

Brad Gotto 8:09
So you saved it for right. Yeah, I mean, if that if that wasn’t what it was for the only other possible reason you could say it is because you wanted to give it away, which is great. But that is another way to spend it, if you will. And just as many pitfalls when it comes to trying to give it away and disinherit the IRS as much as possible. You know, it’s a, it is interesting, how the the leat, the less planning you do in these areas of your life, the more the IRS ends up with typically. And so the larger the benefactor, you want the IRS to be in your life, just do less planning. They’ll just naturally get more. It’s funny how the money just kind of flows that way.

george grombacher 8:49
It that is a funny thing, for sure. Alright, so So how do I learn? How walk me through that process of how you teach people how to how to spend money?

Brad Gotto 9:02
Yeah, it’s, uh, education is a really big part of what we do. And so we have a lot of public education that we do through we have our own podcast that we do called everyday as Saturday, which is paying homage to the type of lifestyle that we’re trying to teach people how to live. And every day is Saturday, mindset, not Friday, because you actually had to work that day and like a half the day off not Sunday, because you dread Monday, right? And your mind’s already going there. But Saturday is the best day. And so we do a lot of education in our podcasts. We do public education through webinars, that doesn’t matter where you live in the United States. We’ve got clients in Alaska, we’ve got clients in Florida, you can tune into those webinars. And then we have something we call the inner circle workshop that we do once a month. If you’re part of our bloodstream, and we’ve got we know where to send an invitation, an email address or something like that you can get invited to these inner circle workshops that we do. And then if on an individual level you choose to partner with our firm I would say on average, there’s Six to seven visits that we spend together on the front end. In a very educational way, teaching you how to do exactly it is what you’re trying to do. And then if you want to help maintain that plan over the years, we can do that too. But we can definitely, we have a lot of avenues that we’ve created for that very purpose of educating people how to do these things. And last but not least, I decided to write a book on the topic. And so some time, I’m gonna, I’m gonna put this in kind of quotes, because you know, when you write a book, you don’t really know the day it’s going to be released. But I think in probably April or May, the transcripts done, it’s an editing and the name of the book is spending money and having fun, A Practical Guide to a free retirement. And so, again, just more opportunity for education on how to spend your money in retirement.

george grombacher 10:51
Nice. Well, I certainly appreciate that. And I love that every day is Saturday, because when you do retire theory to theoretically speaking, that you’re no longer earning an income from work every day is Saturday. And that’s that’s both good and bad. It could be awesome, because Saturdays are great, you’re going out to eat, you’re spending time with friends, you’re doing your favourite things don’t really have too many worries or concerns. Or if you are, remember back to the time in your life where you were broke, and you didn’t have any money at all. Well, then Saturdays weren’t quite as fun. Right? It sounds like if I don’t have a confident if I don’t have a confident spending plan, that it’s going to be more of a crappy Saturday than it is an awesome Saturday.

Brad Gotto 11:37
That’s exactly right. Yeah.

george grombacher 11:39
So and having that confident plan, that means that I’m not that I’ve done the work to alleviate the fears of, of what happens when the market crashes? What happens if the economy goes down? What What about inflation? What if I live a lot longer than I expect? It’s checking off all of those boxes, and addressing all those very, very human concerns. So that you can just essentially get past it and just live.

Brad Gotto 12:08
That’s, I mean, you nailed it. That’s exactly what we talk to clients about every every day is, if you’re worried about all the things that you just named off, you’re not living the life you dreamed, nobody thinks about retirement the future and thinks, gosh, I hope when I get there, that I’m concerned about the election, or I’m concerned about how the markets are going open on Monday, or I’m concerned about a long going to live because I can’t afford to live beyond, you know, 85, or I don’t know how to turn my Social Security on. And this is awfully confusing. And you know, I don’t know when the right time to take it as nobody thinks of that all they think of is they don’t have to go to their nine to five. Right. And so what they do think about is all the things that happen on the weekends, and all the things that they’ve wanted to do that they keep putting off, because they have these responsibilities of this job. And I see it in our partnership with the families that we serve as our job is to educate them on all of those unknown areas. So that they can do exactly what they wanted to do, which is get rid of the nine to five, spend more time with grandkids, travel, watch prices, write everyday, I don’t know, whatever. Everybody’s dreams are a little bit different. But make sure that they get to do those things and not worry about everything that you were naming off. earlier.

george grombacher 13:22
I love it. There’s got to be a some percentage of the population of people who are actually interested in going and looking at the stock market every day and, and trying to figure out how to spend down and to figure out what those percentages are of okay, this year, I’m going to take out 5% Because the market did you know great or next year, it’s going to be a little bit less? Is that 1% bread? Is that is that 2%?

Brad Gotto 13:50
I don’t know, I haven’t found any of those people yet. So I might be zero. You know, for the 1000s of people I’ve interacted with I found people that that do have a they find some joy in little areas like that, right? They really do love. You know, I’ve even got people that I’ve met that literally still look at the Wall Street Journal, you know, and are looking at ticker symbols in the paper. So they exist, but the idea or concept of taking that information and putting it to action and worrying about it every day. To that extent I’ve not met people that want to basically DIY the entire building of their financial home in retirement. And usually after we interact with them, they want to do it even less because they realize and I don’t mean this in a negative way, but they just realize they don’t know what they don’t know. And that’s one of the scariest areas to be in life, right is when you’re unconsciously incompetent. Right? It’s one thing to be consciously incompetent and just know you don’t know. But that’s why the education is just so important because at the end of the day, it’s far less confusing in my opinion to be a saver than it is To be a spender, because in your savings years, which is I’m in right now, right? The best thing you could possibly do over simplification, but I think it’s true, put as much money away as you can afford to put away, save until it hurts, I think you should save until it hurts. And I think you should give until it hurts. And if you’re not doing those two things, don’t thinking you don’t think you’re living your best life. So if you’re, if you’re saving till it hurts, and you’re giving to Earth, put it in the market by spy, and close your eyes, if you don’t have an advisor, just close your eyes and let the market do what the market does. The idea of concept of pulling it back out, you run into all these complexities you just don’t have as a saber. And those complexities are the thing that can kind of make or break not just the financial outcome, but your attitude and your experience through that. And so whether that’s as a couple examples, I don’t want to be too pie in the sky, one of the things that we get all the time is Social Security, your security is taxed at a federal level. And depending on the state that you live in, it could also be taxed at the state level. We live in Minnesota, we work with clients all over the country, but in the state of Minnesota, they do tax your social security. But it’s based on this thing called provisional income. And there are people out there getting their Social Security tax free. There are other people that are paying taxes on 85% of their benefit, and everywhere in between. If you don’t understand how your Social Security is taxed, and how to possibly get your Social Security tax free, you’re missing the boat. We have clients and families that we work with that live on six figures of income in retirement, and pay no taxes on their social security. Because taxes are one of those things in retirement, that it’s not about how much money you live on, that’s going to determine your tax bill. It’s where your money comes from. Right. So if you have different piles of money, you’ve got pension, you got Social Security, you’ve got Ira 401k monies you got after tax brokerage accounts, you’ve got Roth money, maybe you have life money socked away in a life insurance contract. The question is, how do you put it all together? Where do you take distributions from to create the most efficient paycheck for yourself. Because as much as we like to focus on beating the market or doing well in the in our returns, are not losing a ton when the market goes backwards, we can control some of that stuff. But people get lost in this idea of Oh, yeah, I have this, you know, debt to the IRS from a tax perspective. And if I don’t pay attention to that I could not only have to pay my fair share of taxes, but you’re leaving the IRS a tip every year, and a significant one. And so finding practical ways to build out this plan, we call it a map and build a map just like any map would do. You’re in Phoenix. I’m in Minnesota, if you call me and said, Brad, where do you live in Minnesota, I want to get to your house. Now with modern technology, you just punch it in your phone and tells you exactly how to get there, you don’t have to worry about it. There’s literally no concern you’ll get in your car 1000 miles from my house. And never look at the end result. You don’t even have to look to see, okay, I want to get a general sense of where Brad lives because I need to kind of get a sense of where I’m going. And we don’t do that. We’re just like, Okay, I have a turn by turn direction in my car. It’s going to tell me exactly how to get there. And in fact, if I make a mistake, it’s going to fix me, it’s like, okay, I’ll reroute you don’t worry about it. And we have this ultimate trust in this little machine. Because it’s a map. It knows where it’s going. It’s very quantifiable write. It is that is possible in retirement to kind of map out this income stream so that you can understand what you’re doing, give you the freedom to spend your money. It’s that old saying that there’s no true freedom without boundaries. You’ve got to know where the boundaries are you feel free to get in your car and drive to my house halfway across the country, because you have these boundaries that are going to keep you on the road that you need to be on.

george grombacher 18:43
I love it. It’s well said. Well bred people read a few different speaking tip, what do you have for them?

Brad Gotto 18:49
People don’t save a pile of money to have a pile of money. They save it for a specific purpose, or for a specific outcome. You just have to define what your true north is build that map so that you feel free to chase the dreams you actually have.

george grombacher 19:05
That’s what we do. Well, I think that that is great stuff that definitely gets Come on. Read. Thank you so much for coming on. Where can people learn more about you? How can they engage with you? Ah,

Brad Gotto 19:15
our website’s going to give you everything www.ca dot fia@wm.com some of you’re probably wondering where the name came from the stories on the website has nothing to do with the car that said our podcast links or their or blogs or their access to our inner circle workshop is there scheduling visits directly with a fiduciary advisor office it’s all on our website via WM comm

george grombacher 19:38
Excellent. Well if you enjoyed this as much as I did Showbread your appreciation and share today’s show with a friend who also appreciates good ideas go to fiat w m.com. That’s foi a Twm comm check out the everyday is Saturday podcast and keep an eye out for bread’s new book a little later this year. Thanksgiving read thank you and until next time keep fighting the good fight we’re all in this together

Transcribed by https://otter.ai