Rebecca Powers 00:22
Brian, welcome to this week’s edition of On the Money with Secure Money with Brian Quaranta. Brian created Secure Money Advisors because that’s what it’s all about, securing your hard-earned money. We’re just going to jump in because he’s over here with toys, and it’s too cold to bring the kids to the beach. What’s going on with the buckets?
Brian Quaranta 00:45
Well, they definitely are buckets we could bring to the beach, but for today, they’re going to demonstrate the powerful planning process that we have at Secure Money Advisors. So, let’s walk through this. I love it. Let’s have some fun. So, let’s first define what these buckets are. So, our red bucket here is our risk money bucket makes sense. Our green bucket is our pension bucket, safe income pension bucket, and then our blue bucket is just our bank money. Okay, now we’re going to take Steve and Angela here for a moment, okay? And the first thing we’re going to do is we’re going to organize their investments based on which bucket they should be in, okay? So, if we look at their first portion of money, which, this is a bank CD worth $100,000 so we would want to make sure that this goes into the bank. Okay, the next account that they have is an IRA worth $50,000 invested in mutual funds. Rebecca, where do you think this goes? I don’t know, for risk, right? The next portion of money they have is another Ira of $600,000 invested in stocks and bonds, red bucket, the red bucket, that’s right. And then they have a 401(k) with $500,000 invested in mutual funds. Where do we think that goes? Red bucket. The red bucket, that’s right. So, we’ve got 500,000, 600,000, so that’s 1.1 million, plus another 50,000, that’s $1,150,000 in the red bucket. And they’ve got roughly $100,000 in a CD at the bank. Okay, now, where is the most of their money at. Which bucket is most of their money at?
Rebecca Powers 03:14
In all the risk.
Brian Quaranta 03:15
In all the risk, yeah. And they’re 62 and 64, years old and want to retire? Yes, I see now, is this possibly a problem? Yes, yes, because is the market going to cooperate 100% of the time? No, no. Now let’s suppose they do nothing and they want to start withdrawing money exactly the way it currently sits. Okay? So, they withdraw money from their red bucket. Now, keep in mind, we don’t know how this is going to perform, because it’s in the stock market. It could be up, it could be down, all right, but they want income to live off of, right? Yeah, so we start paying them income from this bucket, because this is the way they want to do it, right, or this is the way their current advisor is recommending they do it. So we start taking income. Well, what happens when we take income out of this bucket? This is IRA money and 401(k) money taxes, which means it was tax deferred, okay? Which means now I got a tax deduction for putting the money in, but when I pull it out and take income, I have to pay taxes. So here you go. There’s your half to live off of, and the other half goes to the IRS. Got it Yes, so remember, they had 1.1 5 million in this account, knowing that every time we take money out, we have to give a piece to the IRS. How much? Much of that, 1.15 million is theirs. Not a lot, not a lot. I would tell you that if they took it all out at once, it’d put them in about a 40% tax bracket. So, do the math, they’re paying close to $500,000 in taxes. That’s almost half, yeah, half of everything you’ve got, of everything they’ve got. So, the reason I am sharing this with you is because for those of you that have large Ira balances, large 401(k), balances, any balance in your IRA or 401(k), you must come to terms whether you like it or not. Most of that money is not yours. Don’t believe me. Take it all out as a lump sum and then see, and then see. So now this is not the way we want to approach retirement. Okay, this is- it’s a bad idea to have all of your money in this red bucket. Terrible, terrible idea. Why? Because that would mean that the market needs to perform all the time. It needs to cooperate 100% of the time. If it doesn’t cooperate, and we’re taking money out now, we’re compounding our losses, because the market’s going down, plus we’re taking money out, plus we’re paying taxes. It’s like a triple whammy. It’s a triple whammy. Folks, you’ve got to read my book Right Track Your Retirement, because I talk about all of this stuff in there. All you got to do is go to OnTheMoneyOffer.com. Don’t procrastinate on this, please. This is very important stuff. I don’t think people really realize the magnitude of the problem here. The big box firms do a really good job in helping you accumulate money. They do not do a good job in helping you distribute your money. You’re not getting the advice you should be getting. I see it every day at our office, and you deserve better. I know it’s hard to break up with people, but I tell you how to fire them in here, and at the end of the day, remember, it’s your money, not theirs. And if they haven’t even talked to you about the five key areas of income, investments, taxes, health care and estate planning, that right there should tell you it’s time to go. Now when we come back, we’re going to talk about how to do this the right way.
Rebecca Powers 07:42
That’s right. We want you to have the confidence and clarity. That’s what this show is all about. Again, here’s Brian’s book. Right Track Your Retirement. Very quick, quick read OnTheMoneyOffer.com. Not only is it free, no charge to you, Brian even pays for the postage. So go do that during this quick break, we’ll be right back.
Brian Quaranta 08:01
Market losses aren’t the only risk in retirement. One of the biggest and most overlooked could be the tax bill on your qualified assets, your 401(k), your IRAs, etc. As tax rates change, so does the value of your retirement income. A Roth conversion may help reduce your exposure and create more predictability, but timing and strategy matter. Want to see if a conversion could be a right plan for you? Take the Roth conversion quiz today. It’s free, and it could help you make a more informed decision about your financial future. Scan the QR code on the screen or visit RightTrackRoth.com to take our Roth conversion quiz today.
Rebecca Powers 08:47
All right, hopefully you had a chance to go to OnTheMoneyOffer.com to get this book so we can pop it in the mail to you at no charge. Let’s get back to the buckets. Let’s get back to the bucket. Too much risk, all red. We know that.
Brian Quaranta 08:58
Yeah, so, we know about what? 90% of their money is all in the red bucket?
Rebecca Powers 09:01
At risk, high taxes.
Brian Quaranta 09:06
Right, right? And their number one thing they need is income. And what do we have here? We have no bucket here that they have money in that generates income, because this here is all growth. You don’t retire on growth. You can’t get income from growth. As a matter of fact, if you’re taking money out of a growth portfolio, shame on you. But I still love you, because you just don’t know. But the reason I say that is because you are ruining one of the most powerful things that we all have access to, it’s called compounding interest. And so, when you start taking money out of here, not only are you impacting the overall return, but you’re this. Disturbing the compounding effect. And so to do it right, we say, okay, you’ve got 1.15 million in your red bucket. You got $100,000 in your bank bucket. All right, great, fine. I’m happy with the bank bucket. Everybody needs some money in the bank. Okay? What I’m not happy with is that they have all their money here. So, we need to generate about $60,000 a year in income. So how are we going to do that? Well, let’s go into our bucket here, and all we need to do to generate $60,000 dollars- did I say 60?
Rebecca Powers 10:44
I think so. Yeah, I’m still entranced with the colors of the book.
Brian Quaranta 10:47
All we need to do to generate $60,000 a year or more is take about $500,000 and put it right in this green bucket. And the green bucket, folks, is your private pension. You just by doing that, created your own pension that the companies used to give us, but don’t give us any more, but you can do it yourself in the open marketplace, there are companies that provide these private pensions, also known as income annuities, in my opinion, one of the greatest products ever designed for retirees. And if anybody tells you differently, I would encourage you to do your research, because you’ll realize what I realized 25 years ago, and that was we were being lied to. Because the income annuity solves a major problem. It insures your paycheck. It insures your income. Insurance means it never runs out. So, if we start taking money out of this bucket, right, this bucket is guaranteed for your life if you die, guaranteed for your spouse’s life. But here’s what’s even better, if we live a long time and this bucket is empty, the insurance company says you have now reached the point in which all of your insurance credits are going to continue to pay you. So here you go. Here you go, every single month, every single month, even though your bucket is empty. We promised you, by law, by contract. Lot of you are afraid of contracts. Don’t be contracts are one of the best things you can sign in your life. Why? It’s a legal, binding document. So even when the bucket’s empty, Rebecca the money just keeps coming every single month. That, in my opinion, is peace of mind. Yeah, right. And I want that for you. I want you to have peace of mind. I don’t want you sitting over here in this red bucket worried all the time whether it’s going to work or not work. Do you really want a retirement where you’re constantly looking at the market, walking on eggshells, like, oh my gosh, can we spend the money? Can we not spend the money? When you get the green bucket, it gives you permission to spend your money. It gives you permission to spend your money, because you can never run out. That’s what we’re all looking for. Again, if you go to OnTheMoneyOffer.com, you get a copy of my book, I talk about the five key areas your income, your investments, your taxes, your health care and your estate planning. Folks, those five key areas are what make up a retirement plan. If you have statements that are diversified stocks and bonds, it’s showing that, great. You have an investment strategy, but you don’t have a retirement plan until you have taken care of your income strategy, your investment strategy, your tax strategy, your health care strategy and your estate planning strategy. We do all of that for you at Secure Money Advisors, so, OnTheMoneyOffer.com go there right now, get a copy. And when you’re there, you can also schedule time to sit down complimentary with the team.
Rebecca Powers 14:45
And when you come in for that complimentary consultation, that’s when you ask the question that I asked when I first understood how he does things, is, how do you know how much risk you’re in? How do you know which bucket your money is in? That’s what we’re going to talk about, right? That’s right. Right, exactly right. It’s like a baseline at the doctor’s office. All right. Go to OnTheMoneyOffer.com, get your book. It is free. He even pays for the postage. We’ll be right back.
Speaker 1 15:15
The work never seems to end until the day it finally does after nearly a lifetime on the job, you should be rewarded for all the time you spent working, whether that’s crossing off items on your bucket list, learning a new passion, or rekindling the love of an old one. After all, life isn’t over when you stop working. It’s the start of an all-new chapter, the one where you’re the writer and you get to choose how your story will go. A way to achieve that is by having a clear financial plan to sustain your golden years. The biggest fear most retirees have is if they’ll have enough money to maintain the lifestyle they’ve always enjoyed. Having a plan to help protect you against the curveballs life often throws will help to maintain your lifestyle. Call today to get your free written financial plan so you may live every day to the fullest and enjoy the retirement of your dreams.
Rebecca Powers 16:07
All right, confidence and clarity. Brian is so good at making things simple, breaking them down, definitely at the heart of a teacher. We talked about the bucket strategy, and that red bucket being so much risk. How do you know how much risk you’re in? Yeah, yeah. So many people don’t I bet.
Brian Quaranta 16:24
No. And let’s do- let’s define risk, okay, let’s define risk. If it can go up in value or down in value, it’s risk. A CD is not risk. It can only go up in value, yeah, a bond is risky. Why? It can go up in value. Can go down in value, yeah. Matter of fact, most people don’t realize that bonds are companies raising capital. I didn’t know that. Yes, so a company is issuing a bond to raise capital from the public. Why? They need money. And usually to get a higher yield, you have to use junk bonds, right? Well, what does that mean? I don’t know. That means you’re lending money to companies that are in serious trouble. I don’t like that, no. But if you look at most bond mutual funds, they’ll have a portion of it in junk bonds, and people don’t realize that, yeah, wow, wow. Is Right, yeah, you know, I mean, this is where they keep people in the dark. Yeah? 100% you start to lift up the hood and look at the engine. It gets scary, yeah? But it doesn’t need to be. You know, think about this, folks at this point in your life where you are right now, would you want a sure thing or a maybe? Most people I talk to will tell me, Brian, at this point in my life, I don’t have time. I need a sure thing. I can’t, like, hope that maybe this works out or doesn’t work out. No, I’m not willing to flip a coin. And here’s what happens. People continue to do the same thing over and over. They don’t make the change. Why? Because it’s scary, how do I know this is the right thing? But I’ve been working with Bob for 20 years. He’s been really good to us. He sends me a Christmas card every single year, right? But whose money is this? Is it yours or is it the person that’s advising you? Every one of you will understand what I mean by this. You sit down with your advisor, and everything sounds good when you’re there, but then you leave and you go, I’m confused. Or you leave and you say, I just I got a feeling in my stomach that something’s not right, right? Yeah, you know, your stomach is your second brain, your gut feeling. A lot of people will ignore that. Want to know why they ignore it? Because they’re scared to break up with people.
Rebecca Powers 19:21
It’s true. That’s also in the book. Break up with your current advisor.
Brian Quaranta 19:25
You know what Mike Tyson said?
Rebecca Powers 19:29
What? So many funny things that guy,
Brian Quaranta 19:31
Everybody’s got a plan until they get punched in the face, right? And that’s what happens to people in retirement. Eventually they get punched in the face, and then they go, Oh…
Rebecca Powers 19:8
Dang.
Brian Quaranta 19:48
Dang.
Rebecca Powers 19:50
This is a family show.
Brian Quaranta 19:52
Yeah, I should have done something different, yeah. You know, so folks, what I’m trying to tell you is. You can have a really great retirement, a retirement that gives you more than enough money every single month to go live the life that you want to live, more than enough money that you don’t feel guilty about spending it. Right? There’s nothing better than just having a paycheck come in every single week, just like when you were working,
Rebecca Powers 20:30
but you’re not working, but you’re not working. That’s the best, right?
Brian Quaranta 20:34
I mean, it’s mailbox money, yeah? Who wants to, who wants to build a plan where you have to withdraw money from a stock portfolio, and you’re going, geez, you know, we need $5,000 a month every single month, and the market’s down this month. Are you going to, all of a sudden say, You know what, I’m not going to take my $5,000 this month because the market’s down. No, you are not going to do that because you need that money to live off of. And this is where the danger comes in, because once you start a cash flow plan, you are never going to put it on pause. Now a lot of advisors will say, Well, look, if the if the markets down the next year, we’ll, we’ll take the money from cash. Well, you don’t know if the market’s down until the year is over, right? I mean, so it’s a very, it’s, it’s, it sounds good, until you really start to analyze it, and then you realize it’s the dumbest thing I’ve ever heard.
Rebecca Powers 21:38
Yeah. Well, you mentioned, you know, compounding interest and how powerful it is. Einstein said that it should be the eighth wonder of the world, because compounding interest is really like a miracle. Those who understand it earn it and those who don’t lose it. So, flip that upside down. Compounding loss is just as power, but, even, in a negative way, obviously.
Brian Quaranta 22:01
Yes. Look, when you’re retired, every dollar lost is $1 you no longer have time to replace, right? And you just have to understand that being in risk investments requires you to have a time horizon. You got to have at least a 10-year window, right? That’s why, when we use the buckets, if I have money in that green bucket, the money that I do have in the red bucket, that now becomes long term money, and now I can win in the market, yeah, because I’m not disturbing the compounding interest, right? I’m not taking money out when the market’s down. I’m doing exactly what every professional investment planner tells you to do with your stock accounts, leave them alone, don’t touch them, and be in it for the long haul. Now, if you think about the long haul, all right, you know, and I’m going to tell a story that I talk about in the book, but you know, the guy that changed my life was a guy by the name of Jim, and I’ll never, I’ll never forget this. I’m working at the big box firm, and it’s my first week on the job. I, you know, passed my securities exam. I was excited, you know, to help people. This is right around ‘99, 2000 tech bubbles bursting, and my first day at the office, they tell me, Hey, kid, you’re gonna, you’re going to be on the you’re going to be on the phones today, answering the phones. So, you can imagine the tech bubble is bursting, the markets dropping like a hot rock, and the phone calls that I’m taking are from panicked people. Yeah, but the one that impacted me the most was this guy by the name of Jim. And he calls in and he says, I need to get out of the stock market today. I can’t afford to lose any more money. And I said, Okay. I said, Who’s your advisor? He told me his advisor’s name. So, I go to the advisor’s office, and I said, your client, Jim, is on the phone. Are you okay if I liquidate his positions? He says he can’t afford to take any more losses. And the advisor, who had been there for 25 years, says to me, Brian, I know you’re new here, but you have to understand, we don’t sell I want you to get back on the phone with him and let him know that everything is going to be just fine, that it’s just a paper loss, and just tell him to hang in there. He’s in it for the long haul. Now. I thought about it for a moment, and I’m going, how am I going to tell this guy this? Because you know what? The other side of this is, they tell us. Every investment advisor will tell you, Well, I don’t have a crystal ball. I can’t tell you what is going to happen, yeah. But now when the market, but now when the market’s dropping, all of a sudden, you have a crystal ball. You just know everything’s going to be fine. Is that what you really want me to believe? I mean, think about how ridiculous this is, folks, and every single one of us has bought into it at some point in time. So, like a good employee, what do I do? I go back and I tell Jim, Jim, I talked to your advisor. He says, everything’s gonna be fine. It’s just a paper loss. Don’t worry about anything. Hang in there. You’re in it for the long haul. He says, Brian, I’m 75 years old. How much damn long haul does this guy think I’ve got left? This is every bit of money that I have, and I need it to live off of. And if it goes to zero, I am out of money, and I will be living on the street.
Rebecca Powers 26:05
That’s life changing for you.
Brian Quaranta 26:09
Life changing. Why? Because what I realized that in that moment was that is not what I wanted to do for the rest of my life. To tell people cookie cutter phrases just to manage their emotions. You’re not even telling them the truth. Yeah, you’re just managing his emotions, and they’re gonna go, Okay, well, I guess you’re the professional, I should listen. Well, the professional is lying to you because you think that professional knows that it’s going to come back and he’s going to just be fine. He doesn’t know that. You know how many people I’ve met in 25 years that have run out of money because somebody got paid to keep their money at risk. Somebody got paid to continue to convince them that risk was the right thing for them to do at that point in their life, and those people trusted that person. Folks go to OnTheMoneyOffer.com, get a copy of my book. I want you to have the best retirement possible, and this book will help you get there. Also, when you’re there, schedule a time to come in to complimentary meeting, no cost. There’s never any sales pitch. We’re there to be on your team, sit on the same side of the table as you, and build a plan together for you that will last.
Rebecca Powers 27:35
Thank you so much for joining us. We love you. Go to OnTheMoneyOffer.com. It’s free. See you next time.
