My (Mother’s) Biggest Retirement Mistake: Listening to the Wrong Financial Pro

“What?” Mom replied. “Social Security is taxed?”

After fretting for a few weeks, she called me, sheepish and anxious. I explained how up to 85 percent of her Social Security benefits could be taxable if her overall income exceeded $34,000. (Up to 50 percent of benefits can be taxed if you’re a single filer and your income is $25,000 to $34,000; below $25,000, Social Security is not taxable.)

The guy who handled her rollover neglected to mention that, depending on her other income, $12,000 a year from savings withdrawals could push her over the threshold and greatly increase her tax bill.

Chastened, she contacted Joi Whitley, a local tax accountant. (She was recommended by a former VA colleague who’d also gone into private therapy practice.) Whitley had Mom set up an S Corp, a business entity that can have tax advantages for a sole proprietor, and helped her claim work expenses on her taxes.

Mom had plenty of those from her first year of working independently — for business creation, continuing education, legal paperwork, travel costs, advertising and more. All that got her income below $34,000 and, all told, saved her $2,500 in taxes.

Whitley still works with Mom and keeps her financial anxiety in check by communicating regularly.

Caryl Gobel is following her retirement dream of working as a therapist.

Cassidy Araiza

“I work with your mom all year, and I send her monthly and quarterly statements. It helps her with knowing how much to put aside for taxes,” Whitley says. “If she's made more than we expected her to make, we discuss opportunities to save on taxes to keep her from going above income levels for higher Social Security taxes, such as spending a little bit more on business meals or networking."

In my mother’s defense, she didn’t have a lot of experience with this stuff. As with many couples of their generation, my late father had handled the family finances.

“I never looked at my bank accounts until after he died,” she says. “I wanted to finally be independent, but I still should have listened to my daughter. It doesn’t make me dependent to learn a little bit from her or my accountant.”

What the pros say

What Mom didn’t understand is that the financial professional she was taking advice from was probably an investment broker, not a financial planner. Brokers handle the buying and selling of investments and earn commissions on those transactions.

To Mom, who wasn’t paying the commissions, this was free help, “but everyone has to get paid somehow,” says Paul Brahim, a managing director at Wealth Enhancement Group and 2025 president of the Financial Planning Association (FPA), a membership organization serving certified financial planners.  “When choosing among financial professionals, ask how they are getting paid, such as commissions from CDs they are recommending.”

Financial planners get paid by charging fees to clients and offer a broader range of services. They can help you set overall retirement goals and strategize to stretch your nest egg and avoid tax surprises.

“While you may be able to get investment advice without a direct charge, creating a financial plan with a full view of your financial picture can take hours,” says Jason Washo, founder and owner of Washo Financial in Scottsdale, Arizona.

You can expect to pay at least $300 for a one-off financial plan, Washo says. For ongoing service, planners “may also charge a percentage of the overall account for management,” typically 1 percent to 3 percent of the balance.

“If I had to do it over again, I would have gone to a financial planner,” Mom says, “but I didn’t know the difference and didn’t want to take the time away from my purpose and activities I enjoy to learn.”

To shop for advisers in your area, try the FPA’s PlannerSearch database or the Let’s Make a Plan tool operated by the CFP Board, which sets the standards for the certified financial planner designation. If you can’t afford to hire a planner, the FPA offers pro bono services such as free financial planning days through its 77 local chapters.

During tax season, the AARP Foundation’s Tax-Aide provides free assistance from IRS-certified volunteers for people ages 50 and over with low to moderate incomes.