Episode 199 – What is the 4% Rule?

This week on On the Money with Secure Money, Brian Quaranta explains the simple rule for calculating how much money you’ll need for retirement.

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Announcer 00:00

Investment advisory services are offered through Foundation Investment Advisors, LLC. an SEC registered investment advisor. Brian Quaranta and his guests provide general information not individually targeted, personalized advice, they’re not liable for the usage of information discussed. Exposure to ideas and financial vehicles should not be considered investment advice or recommendation to buy or sell any of these financial vehicles. This information should also not be considered tax or legal advice. Past performance is not a guarantee of future results, investments will fluctuate and when were deemed to be worth more or less than when originally invested. Any comments regarding safe and secure investments and guaranteed income streams refer only to fixed insurance products, they did not refer in any way to securities or investment advisory products, fixed insurance and annuity product guarantees are subject to the claims paying ability of the issuing company.

Brian Quaranta 00:44

We often hear words of wisdom when it comes to retirement planning today, we’re gonna highlight three quotes that could help you plan for the kind of retirement you’ve always wanted. You don’t want to miss this when we come right back with On the Money with Secure Money.

Announcer 01:06

And now, On the Money.

Brian Quaranta 01:08

Any good retirement plan starts with the foundation,

Announcer 01:13

Asset protection, tax reduction, holistic planning,

Brian Quaranta 01:16

These are the things that start to move you towards having a retirement plan.

Announcer 01:20

Retirement doesn’t have to be complicated.

Brian Quaranta 01:23

You think that’s the difficult part? That’s just getting started.

Announcer 01:27

And now On the Money with Secure Money.

Steve 01:34

We are back On the Money with Secure Money Brian Quaranta here I’m consumer advocate, Steve, Brian, of course is President CEO, Secure Money Advisors. He is also an author of the book Right Track Your Retirement a Simple Planning Strategy to Help You Reduce Risk, Build Income and Provide Peace of Mind. We’ll learn more about that book by visiting righttrackyourretirement.com. Brian, what’s going on? Seems like it’s been a while.

Brian Quaranta 01:56

Yeah, hi, no, man. It’s been a great summer. Very busy summer. But a lot happening. You know, the question isn’t at what age I want to retire. It’s at what income? I love this.

Steve 02:08


Brian Quaranta 02:09

I mean, this is, you know, I wish I could get you know, I’ve been screaming at the top of my lungs for the last 25 years. About it’s not about anything other than how much income do you want to be able to retire with? And most people just don’t know how to figure that out. They’re so focused on what the balance of the retirement account is.

Steve 02:30


Brian Quaranta 02:31

And it’s the opposite. It’s how much money can the very tired account balance that you’ve accumulated? How much monthly income can that account produce? And,

Steve 02:43

And for how long?

Brian Quaranta 02:45

And for how long. So I’ll give you a great example.

Steve 02:47


Brian Quaranta 02:48

Wall Street has used a rule of thumb called the 4% rule. And, and so an easy way to figure out how much money you need based on how much income you want is very simple. So all you have to do is take the amount of annual income that you want, and you’re gonna divide it by 4%. Now, some of you might understand why I’m saying 4%, some of you might not. The reason I say 4% is because Wall Street has always said that the most simple way to generate income from an investment account is to simply take no more than 4% a year. So, if you need $50,000 A year divided by 4%, you’re gonna need about 1.3 million. Now, that means you’re gonna need all 1.3 million to generate $50,000 a year. What if there was a way that you only needed to use 40% of your money to generate 100% of your income-

Steve 03:38

I’m in.

Brian Quaranta 03:39

-that’s exactly. Yeah, well, that’s exactly what we do here at Secure Money Advisors, I’m showing people and I’ve been doing this for over 20 years where I’ve showed people how to use less money to generate more monthly income. And this is not rocket science. This is the use of income annuities. And, you know, annuities tend to get a bad rap. And, you know, I’ve been a big fan for over 20 years, and they get bad raps from people like Ken Fisher, “I hate annuities and you should too.” Well, Ken Fisher, just quite frankly, isn’t telling the whole story. There are annuities that are subpar. You know, my, my hate that I have for annuities is with something called the variable annuity. But when you look at the fixed income annuities, I mean, they’re, they’re outstanding. I mean, if I can take, let’s say if I need $50,000 A year, here’s a great case I just worked on it. Guy comes in says I need 50 grand a year he’s got about 1.4 million. I said well look, I said we could use all 1.4 million we could diversify in the market take 50,000 out a year but here’s the problem. Your portfolio goes down you lose $200,000. And then on top of that we take 250,000 out or we take we take 50,000 out now we’re down to under 50,000. I said or we could take $500,000 of your 1.4 million. You still have $900,000 We can invest in the market but we could take 500,000 of it, put it into an income annuity and in five years that thing will generate over $50,000 a year in Income, we’re using about 35% of his money to generate over 100% of his income. And by the way, that is guaranteed for his life if he dies guaranteed for his wife’s life. And if she dies, any balance in that account is paid to the kids. Now think about this. Wall Street’s always told us that in order to be successful in the market, we have to be in it for the long term. Well, how the heck are you going to be in it for the long term, if you start taking money out on an annual basis, so the way you do it is you break it out into two separate accounts, or what we call a bucketing strategy. So bucket one is creating the pension, that’s where you’re gonna generate the income. Bucket two is going to be your long-term investment money. And that’s how you build a plan that can absorb volatility, and all kinds of different weather conditions. And there’s many other strategies in retirement that can be used above and beyond just the annuities to generate income. But this is the most simple, most effective way to use a small amount of income and generate the most and I always say, Look, we insure everything in our life, we insure our cars, we insure our health, we insure our homes, why in the world wouldn’t you’d insure the most important thing that we all need, and that’s our income. And the reason people don’t do it is because they say, Well, I don’t want an annuity. Are you crazy? Would you say I don’t want health insurance? Would you say horse car insurance? I mean, no, folks go to righttrackyourretirement.com get a copy of my book, I write about this in detail, you can call the 800 number too, Steve will give you, call in, you can schedule a time with us. We can sit down with you one on one, go over your situation and see if there’s some ways that we might be able to help you.

Steve 06:20

800-656-8616 Is the number. Now you gave us the quote Brian, but you didn’t tell us who said it. So the quote to remind everyone though, “the question isn’t at what age I want to retire, it’s at what income.” Who said it?

Brian Quaranta 06:32

Well, that was George Foreman. Yeah.

Steve 06:36

Yeah. Well, he’s quite the businessman and entrepreneur, if you will.

Brian Quaranta 06:40


Steve 06:41

He’s been very successful.

Brian Quaranta 06:43

That he’s been extremely successful. I mean, gosh, didn’t you have the George Foreman grill? I did.

Steve 06:47

Everyone did. Yeah, of course, I’ve had several over the years.

Brian Quaranta 06:51

Yeah, I know. I mean, look, I mean, the George Foreman grill, you know, I lost weight eating chicken off the George Foreman grill.

Steve 06:56

I think- that’s right. That’s what we all did.

Brian Quaranta 06:57

You know, so, but yes, I mean, even George understands the most simple part of planning and that is, what, at what income do you want to retire? And that’s the question, we all should be asking ourselves, how much income do I want to retire with. And that’s how you should be figuring out how much money you need to put away how much contributions need what rate of return, it drives everything.

Steve 07:18

Alright, and again, on that note, let’s go and take a quick break Brian, and invite folks to call let’s get that calendar filled up.

Brian Quaranta 07:24

Yeah, folks tell you for the next 10 callers who call me right now, I want to give you the opportunity to come in and take advantage of a complimentary Right Track Retirement planning session with us where we will go through your situation. And we will look at the things that are concerning you, the things that we typically hear are, you know, I’m not sure when to collect my Social Security, I don’t have a pension. And I want to learn how to create one. I don’t know if I have enough money, I don’t know if my money is going to last the rest of my life. I’m not sure how taxes are going to affect me or, or inflation are gonna affect me, if those are the things that are concerning you. Those are the things that we solve here at Secure Money Advisors, we use the right track planning system that includes five key areas that we focus on its income, investments, taxes, health care, and your legacy strategy. So again, for next 10 callers calling right now schedule your one-on-one meeting with us here at Secure Money Advisors. We look forward to seeing you at the office. And my promise to you always is this nobody from my office is ever going to try to sell you anything. Nobody’s going to press you to do anything. When you come in, it is completely educational, your eyes will be open to a lot of different things that you might not even have thought of. So take advantage of the right track appointment.

Steve 08:32

800-656-8616 That’s the number to call 800-656-8616. You know, there’s no cost no obligation just like Brian said, it’s a great way to get a handle on your own financial situation. Find out what your investments are really costing you. Maybe there’s fees that you don’t know about commissions. What about future tax implications, how much income you can securely generate from that, once you move into retirement, call us and find out 800-656-8616 800-656-8616 Quick, quick break but we’re coming right back and continue On the Money with Secure Money and Brian Quaranta.

Brian Quaranta 09:06

Baby boomers 2024 is being called Peak 65 That means more Americans than ever will reach the age of 65 Wow. That’s unbelievable. If you’re among them stick around because we got some steps to help you navigate the very crowded financial red zone we come right back with On the Money with Secure Money.

Announcer 09:35

We believe in better a better way to invest a better way to serve you and a better result. We can help you determine how much risk you’re taking red flags that could be potential problems for you how much you’re paying in fees or commissions, potential tax liability or even how to address social security call Brian Quaranta and his team at Secure Money Advisors at 806 568 be 616 or text key word Brian Q two 800-656-8616 We’ve made it easy folks. All you have to do is call or text the keyword Brian Q to 800-656-8616. And now On the Money with Secure Money.

Steve 10:24

We are back On the Money with Secure Money. Brian Quaranta here on consumer advocate Steve. Brian, of course is the president and CEO of Secure Money Advisors. Find out more by visiting the website, securemoneyadvisors.com securemoneyadvisors.com Learn more about the team about really what they do how they do it. And then righttrackyourretirement.com is where you pick up a copy of Brian’s book, right track your retirement a simple planning strategy to help you reduce risk, build income and provide peace of mind. And you’re still giving that away, Brian.

Brian Quaranta 10:57

We are it’s absolutely free. All you got to do is go to righttrackyourretirement.com We send the book to you. We package it up, we ship it out, no cost to you whatsoever and you get a book that is a very simple read that will teach you the basic fundamentals behind growing your wealth and then distributing your wealth to you and creating an income plan that is simple and easy for you to understand. But most importantly will give you the peace of mind that I believe we all deserve in retirement.

Steve 11:22

Absolutely. So we’re gonna, we’re gonna, we’re gonna go for a little- One more quote Brian. What do you think?

Brian Quaranta 11:26

Let’s do it. All right, so let’s do it. Do you want to read it? Or do I want to read it?

Steve 11:30

You want to read it.

Brian Quaranta 11:31

I want to read it?

Steve 11:32

Yeah, sure.

Brian Quaranta 11:33

All right. So the quote is, “retirement is like a long vacation in Las Vegas. The goal is to enjoy it to the fullest, but not so fully that you run out of money.”

Steve 11:44


Brian Quaranta 11:45

Jonathan, Jonathan Clements,

Steve 11:46

Yeah, you know who that is?

Brian Quaranta 11:48

I don’t. Who is it?

Steve 11:49

He is the guy behind Humble Dollar, humbledollar.com. And it’s his it’s a newsletter that has millions of subscribers. And it’s one of those things where kind of like a call it a drudge, because it’s sort of that that amalgam of a whole bunch of different stories about retirement and living longer.

Brian Quaranta 12:10

Yeah, I’m on it right now. I’m on it right now. I mean, it’s, it’s, it’s really neat.

Steve 12:13


Brian Quaranta 12:14

Again, that’s, what was it humbledollar.com. Folks, if you want to go there. That’s a nice, Steve, thanks for sharing that with us. That’s a good one.

Steve 12:21

It is a good one. So I like, I like the code. He’s pretty good that way, too. You just don’t want to run out of money in Las Vegas. Nope. I’ve seen guys that have it’s really not pleasant.

Brian Quaranta 12:32

No, I’ve done it one time, I had to go up to my room and turn the TV on and but then again, you know, this was back in my college days. You know, when, when, when you went to Vegas? I mean, you ate for free, you, you drank for free. It’s not like that anymore.

Steve 12:49

Oh, no.

Brian Quaranta 12:50

You know, I mean, everything, all the buffets and everything. I mean, I’m going back into the mid-90s here. So Vegas has changed a lot today, I could actually survive out, we could survive out there in the mid-90s. With no money, right? You could go everywhere and eat for free. You run out of money in Vegas, right now you’re gonna starve alone, might not even be able to get home. So. But you know, I want to say this. You don’t want to be so worried about running out of money in your later years that you don’t enjoy yourself after you’ve worked hard for so long. You also don’t want to be left with no cash in your late 70s or 80s. When you can’t go back to work. I mean, you just physically can’t. AARP did a study a number of years ago, and they interviewed or surveyed 1000 people. And the question was, What do you fear most, running out of money or death? And 90% of the people that answered the survey said they fear running out of money more than they fear death. And that means, you know, you got to be responsible about your spending in retirement. But, but here’s the biggest mistake that people make. And I see it all the time, after almost 25 years of doing this is, is they go into retirement without a plan. They go into retirement without a spending plan. They have no idea how to execute withdrawals? They not, they’re not aware of what the best strategy is for where to take the money from first. And what I mean by that is, you take it from your IRA, do you take it from your 401k? Do you take it from your Roth IRA? Do you take it from your non-IRA accounts first? Do you take it from your savings account? Do you think, do you take it from a combination of a number of different accounts. But you have to have a plan. And everybody’s situation is so different that it’s got to be a plan that’s customized to what you personally need. And so going into retirement without a plan, especially without a withdrawal strategy. I can tell you will make you very nervous, because it’s the number one reason why people come to the office that just say look, you know, I’ve been working with this advisor for some time he’s got me invest in all this stuff, but I don’t have a plan with this. I mean, he’s, he’s, you know, he’s got all these investments that he bought, but he hasn’t shown me a plan. I get statements but there’s no plan behind it and, and I want to emphasize, the investments are important. But if you don’t have a written plan that actually shows the impact of withdrawals, or, you know, if the market doesn’t cooperate, or if different, you know, economic scenarios take place, you know, you got all kinds of risks got legislative ratio, political risk. I mean, you got inflation risk, you got longevity risk. I mean, there’s all kinds of risks in retirement that you have to prepare for. And again, growing your money during your working years. That’s the easy part. When you get to retirement, and you need to start distributing your money and making sure that it lasts the rest of your life. This is where you have to have a well-executed plan. I mean, think about it, like, like building a home. I mean, you would never just start buying lumber from Home Depot to build a home and just see where it goes. Unfortunately, that’s what my industry has done to a lot of people. And, and Steve, it, the reality of it is because if you go back 30-40 years ago, when people retirement pensions, back then we had stockbrokers and so, you know, if you had a pension and a social security check, you just needed a stockbroker to buy you some stocks, they didn’t have to worry about planning, but when, when the pension went away, the stockbrokers have died off because people are like, well, you know, I don’t need a guy just buy me individual stocks. No, I need somebody actually providing me with a plan. You know, and as a fiduciary firm, Secure Money Advisors, our job is to do that exactly that to provide you with a plan, a well written plan, well thought out plan and we have a system and process to do that. Go to righttrackyourretirement.com you can get a copy of my book, it’s absolutely free. Call the 800 number right now, schedule, your complimentary Right Track Retirement appointment. You know, if you’re not sure when it takes off security, you’re not sure how taxes are going to impact you. You’re not sure if you’re gonna have enough money. If you’re not sure if you’re investing the right things, this is what this appointment will help you uncover. So again, go to righttrackyourretirement.com, get a copy of the book, you can schedule appointment there, or you can call the 800 number that my friend Steve will tell you about right now.

Steve 16:52

800-656-8616 That’s 800-656-8616 it’s a great opportunity for you come on in sit down get that financial roadmap put together once and for all, a chance for you to get a true practical financial review if you’ve never done it before, no time like the present. If you’re looking for a second opinion and I know a lot of you are give us a call 800-656-8616 Brian and the team do second opinions all day long, right? I mean, you do a lot of those don’t you Brian?

Brian Quaranta 17:22

Well I always say you can’t get a second opinion from the person that gave you the first opinions.

Steve 17:25


Brian Quaranta 12:26

Yes, we are good at giving second opinions.

Steve 17:30

800-656-8616 is the number to call great opportunity for you. You will find out where you are today and you will then get that roadmap that we talked about that can help get you to where you need to be when it comes to retirement 800-656-8616 800-656-8616 Quick break we’re coming back we got a lot more here on the money with secure money and Brian Quaranta.

Brian Quaranta 17:52

Attention baby boomers this one is for you don’t miss this you don’t want to miss what’s coming up. We come right back with On the Money with Secure Money.

Announcer 18:06

Are you fighting for financial knowledge? Don’t let that advice be a punch in the gut to your retirement. Take advantage of a complimentary no cost, no obligation consultation with a local trusted financial coach called Brian Quaranta and his team as secure money advisors 300-656-8616 800-656-8616. And now On the Money with Secure Money.

Steve 18:44

We are back On the Money with Secure Money. Brian Quaranta here I’m consumer advocate, Steve. Easy for me to say. And so we have. We’ve been covering a lot of ground today. Brian has spent a lot of fun. I love the, I love the quotes. Those are good.

Brian Quaranta 18:57

A lot of good stuff today. A lot of good stuff today. Yes, I have to give you credit on those quotes. They were really good. You deserve credit for finding those. I don’t know how you found them. But they’re really good.

Steve 19:07

Well yeah, I mean, you know what I did? I searched a Google for retirement quotes. Approach the works.

Brian Quaranta 19:17

It is right. I mean, it’s amazing how good Google is, isn’t it?

Steve 19:21

It is amazing. Yeah. The- Alright, well, let’s well, let’s jump into a couple of questions. We haven’t done questions in a while. Let’s start with Rick. Rick says I’m past my full retirement age and continue to earn income from various consulting product projects. Now I’m thinking of filing for Social Security since my business is well slow to non-existent. Is there a maximum annual earning amount penalty? And will my benefits continue to increase until 70 If I continue to have annual income?

Brian Quaranta 19:53

Yeah. Well, first off, what a great question, because there’s a lot of entrepreneurs out there and business owners that, you know, don’t really have a great succession plan in place. And usually, they’re the ones that still have their businesses getting past their full retirement ages. And then the big question is, what do I do? I’ve got work income, or in his case, maybe not a whole lot of work income. But should I collect my Social Security? And you know, most people don’t understand the rules around social security, especially the penalties.

Steve 20:26


Brian Quaranta 20:27

So there are penalties for Social Security, if you make over $18,000 a year in income, it’s a little, a little bit higher than 18,000. But, but once you are past your full retirement age, Social Security will allow you to make any amount of money and your Social Security is not penalized. So that’s a great thing. Now, the other question you always get is, if I’m earning income, why I’m collecting my Social Security? Will my benefits continue to increase? And the answer is yes, they will. That’s the short answer. Long-

Steve 21:03

Yeah, that’s a good answer.

Brian Quaranta 21:05

Yeah. The long answer is, the math equation for increasing your benefit is quite unique. And it does get added in but it gets out of date and in a very slow way, but just know that your benefits will go up. So great question Rec. And I would tell you, for anybody out there that is struggling with the question of when do I collect social security, maximizing your income and retirement is one of the biggest things that you want to accomplish, and you want to get your income as high as you can, as quickly as you can, as safely as you can. And if you have accumulated money in a 401 K plan or an IRA, even though Social Security has taken away a lot of the strategies to where we could really increase the amount of money we got you remember, Nancy Pelosi close those loopholes with Social Security quite a while ago. But if you’ve accumulated money in a 401 K, or IRA, there are still some maximization strategies that you can use by combining what you’ve accumulated in your in your 401 K and IRA to maximize the amount that you get from Social Security or vice versa. So great question, Rick, I would tell you go to righttrackyourretirement.com get a copy of my book schedule a time to come in, we’d love to talk to you.

Steve 22:23

800-656-8616. There’s another way to reach out now and connect with Brian. Let’s see Clint is up next. And he says should I consider investing in an annuity or stick with my long-term stocks if I don’t like the unreliability of the market?

Brian Quaranta 22:40

“I hate annuities. And you should too.” Who said that, Steve?

Steve 22:43


Brian Quaranta 22:45

Yeah, let me tell you who it was. It was Ken Fisher.

Steve 22:47


Brian Quaranta 22:48

And he’s doing the American public a disservice. Because it’s like, who was uh, Paul Harvey, what’s the rest of the story and the rest of the story, right. He’s not telling the whole story there. So should I consider investing in an annuity? Well, the answer is, most likely, if you’re retiring today, Clint, it’s a high probability that you might not have a pension. If you don’t have a pension. An annuity can be a great way to create a pension, like income. And that’s essentially what you’re doing. When you’re buying an annuity. You’re just building yourself your own private pension. I mean, heck, Social Security is an annuity. It’s designed to pay you monthly for the rest of your life and a pretty darn good one, all things considered. Absolutely. Here’s the great thing about the income annuities that we really like at Secure Money Advisors, and we were talking about this a little bit at the beginning of the show. So, if any of you are just tuning in, you know, I had an, I had a, an individual come in, with a little over 1.4 million. She said that you needed about $50,000 a year in income said he was just going to start taking that money out of his 1.4 million, and that his 1.4 million was all invested in the stock market. The problem is if he starts taking money out and the market goes down, he’s going to compound his losses, meaning the market is going to take money away, but then he’s going to take money out to live off of so you’re compounding those losses, you’re making those losses bigger. I showed him how to take about 35% of his money, which was about 500,000 and generate $50,000 a year off of $500,000 for the rest of his life if he died for the rest of his wife’s life. And if she dies, any balance in the account is paid to the kids. So you don’t ever lose control of the money in these types of income annuities and the rest of his money can stay in the stock market. So you know, again, everybody’s situation is a little bit different. And you should consult with a financial professional, preferably a fiduciary to see if something like an annuity would be a good choice for you.

Steve 24:51

Sure. Well, and again, let’s, let’s just invite folks to call one last time, Brian before we run out of time.

Brian Quaranta 24:58

Yeah, folks go to righttrackyouretirement.com Get a copy of my book or call 800-656-8616 and schedule a Right Track Retirement appointment today where we can help you determine whether or not you’re on the right track. Let me ask you, if you weren’t on the right track, when would you want to know, a lot of people tell me I’d like to know sooner than later. If you don’t know when to collect your Social Security. Maybe you’re not getting a pension. Maybe you’re going to need income and retirement not sure how to do it. Maybe you want one of your biggest fears is running out of money. Maybe you’re not sure how to create a more tax efficient strategy in retirement and you want to pay less taxes. Call today and schedule a complimentary it’s free, folks. I don’t know anyone else to say it. It’s absolutely free to come in, sit down with us. It’s time out of your day. That is it. And go to righttrackyourretirement.com And get a copy of my book.

Steve 25:46

That sounds fantastic Brian. Folks do take advantage of what we’re offering here today. It’s a great way to be able to get your own plan put together that’s the goal is to help you make the best decision for you. If you’ve got questions about what we’re talking about how it might be apply in your situation, call 800-656-8616 800-656-8616 Brian as always a pleasure to be here fun, but this show goes by so quick.

Brian Quaranta 26:09

It does Steve it was great seeing you. Folks, thanks again for listening. We’ll see you again next week right here with On the Money with Secure Money have a great week.

Announcer 26:22

Investment Advisory services offered through Foundations Investment Advisors, LLC, an SEC registered investment advisor. the content provided is intended for informational and educational purposes only the views statements and opinions expressed herein are those of the individual speakers and not necessarily those of foundations and its affiliates. The information contained herein does not constitute an offer to sell any securities or represent an express or implied opinion or endorsement of any specific opportunity offering or issuer. Any discussion of performance or returns is not indicative of future results. Each individual investor situation is different and any ideas provided may not be appropriate for your particular circumstances. Foundations only transacts business in states where it is properly registered or excluded or exempted from registration requirements. Registration as an investment advisor is not an endorsement of the firm by securities regulators and does not mean the adviser has achieved a specific level of skill or ability. No legal or tax advice is provided. Always consult with a tax professional. All rights reserved.

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