By Alan Schoonmaker, Ph.D.
Parts One and Two of this article said that arrogance was the primary cause for dying broke, and they discussed nine mistakes. This post will recommend steps you should take to avoid that grim fate.
Start a Retirement Savings Program NOW
Don’t think, “I’ll save money someday.” Regard retirement saving as an expense, just like your rent or car payment. If you start now, relatively small, regular contributions plus compound interest will build the funds you need to live comfortably in your final years.
For more than eighty years the federal government has forced and encouraged people to save for retirement. Social Security forces people to save, and many programs encourage saving.
Because these programs let you deduct your contributions from your taxable income, the government essentially adds money to your account. The government increases its subsidy by not taxing your interest, dividends, and other profits until you retire. Since your income tax rate will be much lower then, you’ll pay less tax. You’ll also get the money when you need it much more than you need it now.
These programs usually include severe penalties for early withdrawal. These penalties will discourage you from raiding your program when you run short of cash, and many poker pros occasionally run short.
The government wants to give you money. Take it!
Get Professional Financial Planning Advice
Good retirement planning is like good poker planning. “It depends on the situation.” There are many retirement savings programs, and the government constantly modifies them. The right program depends upon your income, net worth, age, family situation, and other factors that only a professional can apply skillfully.
You also need professional advice to select investments. You couldn’t succeed as a pro if you weren’t very smart. But poker is your game, not investing. You have often heard that the most important poker decision is Game Selection. Don’t play games you don’t play well.
Don’t Play Other Casino Games
The principle of sticking to the right game applies even more forcefully inside casinos. Even if you make some investment mistakes, saving regularly should build an adequate retirement fund. If you play the wrong casino games, you’ll probably go broke, and you may do it again and again.
Many poker pros lose heavily at craps, sports betting, and other games. They know these games are negative EV, but can’t accept that reality. They arrogantly believe they can beat unbeatable games, and their pathological need for action overwhelms their logical brains.
The same craving for action causes some great tournament players to be huge cash game losers. They may swear off playing cash games, but don’t have the discipline to wait for the right tournament. They need action now, especially right after busting out of a tournament. So they move to a cash game, and it costs them dearly.
Keep good records. Whenever you feel an intense need to play a game you haven’t beaten, don’t lie to yourself and pretend you’ll beat it now. Don’t pretend that you won’t repeat the mistake you’ve made so many times. Get away from that irresistible temptation. Leave the casino IMMEDIATELY.
Don’t Cheat on Your Taxes
Cheating is tempting, but extremely stupid. You probably think, “The IRS can’t know how much I win in cash games.”
The IRS knows immeasurably more about how to how to catch cheaters than you can ever know about how to cheat. You can probably get away with cheating, but the risks are so huge that it’s extremely -EV. You may pay massive penalties and fines, and you could spend years in prison.
The most visible and memorable example of imprisoned tax cheaters was Al Capone. The police, FBI, and other organizations couldn’t get him, but the IRS proved that he couldn’t maintain his expensive lifestyle on the income he reported. They might make the same case against you, and you’d go to prison.
I don’t like paying taxes any more than you do, and I take every legitimate deduction. But, as I said earlier, the government rewards you for obeying the law, and punishes you for violating it. If I hadn’t paid taxes and Social Security and contributed to tax-sheltered retirement programs, I wouldn’t have a comfortable income from my Social Security and IRA, nor would I be eligible for Medicare.
If you don’t pay Social Security for ten years, you don’t get Medicare. As you get older, your medical costs normally increase enormously. Without Medicare you’re not just risking going broke. You’re gambling with your health and life.
You may believe you won’t get Social Security or Medicare because the programs will go broke. That fear is correct actuarially, but naive politically. If current trends continue the system will go broke, but the politicians won’t let it happen.
It would be political suicide, and politicians’ top priority is getting elected again and again. Old people are a large and ever-increasing percentage of the population. They and their children would vote against any politician who didn’t protect their pensions and Medicare.
Buy Health Insurance
Medical costs have destroyed the bankrolls of many pros, and these costs aren’t the only reason to buy insurance. Insurance companies and Medicare will help you to stay healthy because it’s much cheaper than treatment.
They will pay for checkups and other actions that you wouldn’t take if you had to pay for them. If you have health insurance, you’ll be healthier, play better, and live longer.
Switch to a Healthier Lifestyle
Many pros neglect their health. They eat too much of the wrong kinds of food and don’t exercise enough. So they have higher medical costs and don’t feel well enough to play their A-game. They win less money and die too soon.
You have absolutely no excuse for an unhealthy lifestyle. There are hundreds of books and articles, and you don’t even need them. You already have a good general idea of what you should do. You just won’t do it.
Stop denying reality about your health. Commit yourself to eating wisely, exercising regularly, and seeing your doctor twice a year, even if you feel great. Routine health screenings have saved countless lives, and they could save yours.
Get a Straight Job
Every well-trained financial planner recommends diversification. And you don’t need that advice. You’ve repeatedly been told, “Don’t put all your eggs in one basket.”
That principle applies to any basket, but it’s especially true for poker. Swings and losing streaks are inevitable. If you depend too much on your poker profits, several bad things will happen:
- All your income and assets will always be at risk.
- You’ll increase your psychological vulnerability. When you’re running bad, you’ll feel much worse than pros with more balanced lives. The worse you feel, the worse you’ll play. You can easily go on tilt and lose everything.
- You can’t be as selective about where and when you play. If you need money for your expenses, you’ll play when the games too tough or you don’t feel well enough to play your A-game.
- Your effective bankroll will be smaller. You’ll have to take the risks of playing above your bankroll or reduce your profits by playing in smaller games.
When I suggest taking a straight job, many pros are horrified. They think it’s admitting that they don’t play well enough to make it.
Some very successful players have straight jobs, including Bobby Baldwin, Dan Harrington, and three of my friends: Linda Johnson, Jan Fisher, and Roy Cooke. Despite being excellent players, they all recognize the danger of being total dependent upon poker. They play winning poker, but have solid incomes from other sources.
Linda and Jan run Card Player Cruises, work as tournament directors, and helped to start the World Poker Tour. Roy is a very successful realtor.
Stop pretending that you’re so special that you’re not in danger. Too many pros have died broke. Don’t become one of them. Start preparing for a comfortable retirement and old age NOW!
This blog is based on the third column in a Card Player Magazine series. At cardplayer.com you can read about 200 of my columns.