This week on On the Money with Secure Money, Brian Quaranta discusses the importance of understanding expenses, behavioral finance, and strategies for a secure retirement income.
To see a full schedule of our radio airtimes, please click here.
Radio Show Transcripts
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 and are 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. As performance is not a guarantee of future results. investments will fluctuate and when redeemed may 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 do 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.
Steve 00:39
Hey, welcome, everybody. This is On the Money with Secure Money. I’m consumer advocate, Steve Brian Quaranta. Here, we are going to dig into some things this week that will probably surprise you. We’ve all known, we’ve all heard that cash is king, of course, well in retirement. It’s cash flow that rules the roost. So today we’re gonna dig into cash flow in retirement and offer some suggestions to help you maintain that current lifestyle. Brian, what do you think it is?
Brian Quaranta 01:04
Cash flow is king in retirement. You know, that’s one thing that people get wrong. They think about how much money they should have. Should I have 500,000? Should I have a million? Should I have 2 million? The bigger question is how much cash flow are you going to be able to get on a monthly basis because when your paycheck stops, all the things you want to do, that’s not going to stop. So you’re going to need a way to replace that paycheck, we come back, we’re going to talk more about how to do that with On the Money with Secure Money.
Announcer 01:32
And now On the Money.
Brian Quaranta 01:35
Any good retirement plans starts with the foundation,
Announcer 01:38
Asset protection, tax reduction, holistic planning,
Brian Quaranta 01:42
These are the things that start to move you towards having a retirement plan.
Announcer 01:46
Retirement doesn’t have to be complicated.
Brian Quaranta 01:49
You think that’s the difficult part. That’s just getting started.
Announcer 01:53
And now On the Money with Secure Money.
Steve 02:00
And welcome everybody this is On the Money with Secure Money with Brian Quaranta. I’m consumer advocate, Steve, Brian, of course and author, he’s president and CEO of Secure Money Advisors. He’s an IRA specialist. And by the way, the the author part of Brian, the book is Right Track Your Retirement a Simple Planning Strategy to Help You Reduce Risk, Build Income and Provide Peace of Mind. Hey, Brian, what’s going on?
Brian Quaranta 02:24
Steve? How are you today?
Steve 02:29
I am well!
Brian Quaranta 02:30
Good to see you man!
Steve 02:31
Yeah, this is exciting times. So I, I like this cash flow. I mean, this is kind of like right up in your wheelhouse in terms of, we talk about it every week. And the plans that you set up for people really take advantage of that.
Brian Quaranta 02:39
Well, look, I mean, we’ve got to make retirement planning a little bit easier for people to understand. It’s as simple as this money in and money out. That’s the way you run your life while you’re working. Money comes in, you get paid, money goes out because you have expenses, what’s going to change when you retire? Nothing. Money’s going to come in, money’s going to go out for expenses. The difference, though, is that you’re no longer going to have a paycheck. All the years that you’ve been working, putting money away in your retirement savings in your 401k in your IRA folks are many of you listening right now, that’s the money that’s going to have to replace that paycheck, because 85 to 90% of the people retiring today are not receiving a pension. I say this over and over. And I sound like a broken record. But if you don’t get your cash flow, right, you don’t figure out what is going to be the best time to collect social security, how you’re going to withdraw money from your retirement savings account. This is where people get themselves in trouble. And I write about this in the book, Steve, people are not running out of money in retirement, because they’re getting the wrong rates of return. They’re running out of money in retirement because they’re losing money at the wrong times. And they’re not focused on positioning money into an income phase, they’re still thinking about my job is to grow my money, which is true, but you cannot do that. All in one account, you have to break your money out into what I like to call a two-bucket approach. The first bucket is going to have enough money in it to where you’re going to get 15-20 years of income. Why do you want to set it up that way? Well, it’s really simple. Look what’s happening in the stock market right now. If you don’t have a two-bucket strategy right now, you are probably pulling money out of accounts that are going down in value, which means you are compounding those losses, locking into those losses. And now you are going to run a higher probability of running out of money, or other things that I’ll hear is people will tell me “Well, my advisor has now told me to stop taking money from my retirement accounts. And he wants me to start pulling money from my savings account.” Folks, this is not the approach you want to take. Go to right track your retirement.com re track your retirement.com get a copy of my book. Again, as Steve said, it is a simple planning strategy to help you reduce risk, build income and provide peace of mind, I talk about how to get your income, right how to build the cash flow in retirement, and how to do it at the same time to where you’re mitigating risk. So, you’ve got peace of mind and security as you go through retirement.
Steve 05:14
I like that. So, we were talking about cash flow. And so you kind of went into all right, we gotta have income sources, we got to know where that money’s coming from, to cover those expenses that aren’t going to stop. That forces us to make a budget, which is an important piece of the puzzle.
Brian Quaranta 05:28
Yeah. And you know, before we talked about budgeting, which, by the way, I think is a dirty word, I hate that word in retirement, because what we’re really talking about is creating a plan that you can live with, right. And, you know, I think the word budget means that we have to sacrifice and we’re not going to be able to do the things we want to do. What we’re really talking about here is building a written plan. So we know exactly what’s coming in, what can go out so we can comfortably spend our money without any anxieties or worries. But before we talk about how to get clarity around that plan, we’ve got to talk about understanding your expenses, because that’s equally as important. Okay, it’s essential to have a clear understanding of your regular expenses, such as housing costs, health care, expenses, transportation, food, and there’s a lot of other discretionary spending that you might be going to have to do, the best thing to do, where you can really get your arms around us is to actually put everything you can on a credit card, that you will put everything on a credit card, that’s crazy. Well, it’s not because you’re going to pay it off at the end of the month. And if you’re responsible, you can actually use the reward points that the that the credit cards companies give you. And that can be a benefit in retirement. However, if you’re putting everything on one credit card, you’re capturing all your expenses in one place. And that’s going to allow you to have a better idea of what is being spent on a monthly basis on average. For example, how many times has a friend called you out of the blue? Would you like to go to dinner tonight? Sure, we go to dinner. Well, that was an unexpected expense, or, Hey, we just got invited to a wedding, we gotta buy a wedding present, we got to take a road trip, we got to get a hotel to stay in. Those are unexpected expenses. But if you put that all on one credit card, you’re going to capture that stuff. And now you’re going to have a pretty accurate picture almost to the penny, of what you’re really spending on a monthly basis to many people. When we talk about expenses, say, Well, my gas bill is x, my car payment is x, my mortgage is x, well, that’s great. But there’s a lot of other discretionary spending going on that most people do not think about getting your arms around that and getting clarity around that is going to help when we go to build a cash flow plan for you. And that means that you’re going to have a plan that actually works because we’re picking up all those additional expenses. And now you’re going to have a plan that gives you a high probability of not run out of money, because you’re not going to be taking money out on an as needed basis where you go, Oh, we got to go to a wedding, we’re going to need an extra $1,000. Oh, we want to take a vacation we’re going to need an extra $2000, this planning process in retirement is critical to making sure that you get retired, but much more importantly, stay retired.
Steve 08:00
Right. And again, their concern with that comes strategies. And I know that you have a number of strategies, I know you outline a number of them in your book as well.
Brian Quaranta 08:09
Yeah, I mean, Right Track Your Retirement is all about giving you exactly what our strategies are. And again, go to righttrackyourretirement.com you get a copy of my book right there, I send it to you for absolutely no cost, we pay for the shipping and handling, all you have to do is go to the righttrackyourretirement.com fill out the online form. And literally we’re going to ship this book to you at absolutely no cost. And again, like I said, I mean people aren’t running out of money because they’re not earning the right returns, they’re running out of money because they’re losing money at the wrong time with the wrong monies. And so in my book, you’re going to find out why a plan that got you to retirement might not be able to get you through retirement, you’re gonna learn how you can stay in the market without jeopardizing your income. I’ll show you how to implement these simple strategies that can keep you earning the returns, while at the same time, significantly reducing your risk exposure. So the right track your retirement.com, get a copy of this book, or Steve, they can even call and get a complimentary no cost appointment where we can go through the right track process with you. And my promise is if you take advantage of this complimentary appointment, nobody at my office, whoever tried to sell you anything, you’re not gonna be pressured to do anything you’re going to come in and you’re gonna have a very eye opening meeting with my team and you’re going to learn things that you probably don’t even know about that.
Steve 09:18
That sounds fantastic. Folks, if that appeals to you, I would say make that call right now. 800-656-8616 800-656-8616 You’ll, the next 10 callers right now, we’ll get that comprehensive financial plan showing you where you are today. 800-656-8616 800-656-8616.
Brian Quaranta 09:39
Behavioral Finance is a field of study that examines how human psychology and behavior can affect financial decisions and outcomes when it comes to retirement planning. Behavioral Finance can have a significant influence in several areas. We’re going to take a deep dive when we come right back with On the Money with Secure Money.
Announcer 10:00
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 800-656-8616 or text keyword Brian Q to 800-656-8616. We’ve made it easy, folks, all you have to do is call or text the keyword Brian Q 800-656-8616. And now On the Money with Secure Money.
Steve 10:50
Hey, welcome back, everybody On the Money with Secure Money. And Brian Quaranta. That is the show. I’m consumer advocate, Steve. Brien, of course, and author, he has written the book, Right Track Your Retirement a Simple Planning Strategy to Help You Reduce Risk, Build Income and Provide Peace of Mind. And it’s available at no cost to you at righttrackyourretirement.com All right, Brian. So behavioral finance, this is a fascinating world to me to understand how much you know, our upbringing and our attitudes and all of that, to, to that guide us that really lead our life in terms of money, right?
Brian Quaranta 11:28
Yeah. Well, I mean, understanding what makes us tick financially can be complex and quite confusing, for sure. So you got to look at the areas of behavioral finance, because it tells us a lot about how to get on the right path. You know, like, for example, understanding biases, right?
Steve 11:46
Well we’ve all got em’ right? Especially with money.
Brian Quaranta 11:47
We do have biases. Yeah. I mean, I always say some people have a very unnatural relationship with money. But that’s a whole nother- that’s a whole nother show. That’s a whole nother show. So you know, but, but behavioral finance helps retirement planners and individuals identify and understand biases, that essentially can impact the financial decision making process. So, you know, for example, a great bias is overconfidence. I mean, we saw that over the past few years where, you know, you had how many people on Wall Street bets, young kids, older folks, making money, left and right, lots of money, market was going up like crazy. People became overconfident. And I know a lot of people that lost a lot of money trying to do that stuff on their own. And they risked money that they weren’t really able to afford losing. So other things are loss aversion and anchoring, but these biases really can just lead to, you know, irrational investment choices such as, taking excess risk, like I just talked about, or overly, you’re being too overly cautious with your investments.
Steve 12:57
Oh that can happen too can’t it?
Brian Quaranta 12:59
Yeah, there’s two extremes to it, you know, tuck it under the mattress, put it in a coffee can. But being aware of these biases really can help retirement planners and yourself make more rational, informed decisions when it comes to managing retirement behavior. There was a study done by Vanguard, which is a very large mutual fund company. And they wanted to look at what the difference was with an individual working with a financial planner, versus somebody that’s not working with a financial planner. And there was a study before Vanguard had done this a while back through a company called DALBAR. And they had looked at the average return of the average mutual fund, which was about 10%. And then they looked at the average return of the average investor, which was 3%. So what’s the difference? If the average return, the average mutual fund was 10. But the investor was only getting three? What was happening? Where was the difference? And what they found was it all came down to behavior. And so what they found is that by working with an advisor, you can increase your return because essentially, you have a coach talking you off the ledge during times when you may want to buy what you may be wanting to buy when things are too high. And you may be wanting to sell when things are too low. Remember, we want to sell high and buy low. Unfortunately, Steve, a lot of people do the opposite.
Steve 14:19
They do exactly. Well, folks, if you’d like to get turned around and headed on the right path to retirement 800-656-8616. That’s the number you can call. So what about the framing and perception? In other words, are we influenced by what someone says to us?
Brian Quaranta 14:34
For sure, yeah, I mean, behavioral finance, will recognize that information that’s presented or framed can impact a decision making, for example, our retirement options are presented, such as terms of gains or losses can affect how an individual perceives their choices and make decisions about retirement planning. So I’ll give you a great example. So, you know, financial advisors like to say, well, you know, don’t worry about losses because over time, we’ll make that money back. And they, they basically frame the losses as not being a big deal, because over time, we’ll be okay, the individual that’s retiring today is not going to do okay, if they take losses very early on retirement, it’s proven. The science shows it, the data shows that they’re not going to do well. What else is very bothersome to me and a lot of us financial planners out there is that we’ll hear financial advisors say, Well, I don’t have a crystal ball, we don’t know what’s going to happen. But in the second breath, they’re going to tell people when they lose money, don’t worry about it, hang in there, you’re in it for a long haul, everything’s gonna be okay. So we have to understand that there is a structure or a strategy that you need to use when it comes to retirement planning. Back in the day, when you would get a pension, you really didn’t have to think about this, because when you retired, you got your Social Security check, you got your guaranteed pension from your company. So any money additional monies you saved, you could take risk with. Because if that didn’t, if that risk didn’t go, Well, you still had your pension, your social security to fall back on. Today, that’s not the case, the only guaranteed source of income that most people have is going to be social security. So if you gamble away all of your retirement savings, and you put it all at risk, that could cause you some big problems down the road. And this is why we see that there is a probability of people running out of money in their later years of retirement. And this is why our right track retirement system is so powerful, because it’s a comprehensive wealth planning strategy that encompasses five key areas, we go over the income, the taxes, the investment strategy, your healthcare strategy, and your estate planning strategy. So, savings for retirement, I say this all the time, it’s so much different than actually having to live off your your retirement savings, cash flow, what you and I were talking about the beginning, right, most of us had been taught to save in a retirement plan, like a 401 K or an IRA. But the strategies for saving for retirement are not the same strategies used in retirement, when you need to start utilizing your money. If you’re going to retire, you must have a system, a process that you need to follow. If you think you’re just going to start pulling money out of your investments and live off of it with no plan, no process, no system, think again, this is where many people go wrong. That’s why we always offer an educational right track retirement analysis. And if you go to righttrackyourretirement.com, you get a copy of my book, we’ll send it to you absolutely free. But you can also schedule your complimentary right track review right there, which is also complimentary. And my promise is if you come to the office, nobody from my team is ever going to try to sell you anything, or pressure you to do anything we know coming in and seeing advisor can be a very intimidating process. But I don’t want you to feel that way coming to Secure Money Advisors. And you can also call the 800 number, which I’ll let Steve tell you how to do that.
Steve 17:55
Absolutely, Brian. 800-656-8616. It’s as simple as that, you’ll get that comprehensive financial review. And again, no cost, no obligation, just make that phone call today while you’re thinking of it 800-656-8616 That’s 800-656-8616.
Brian Quaranta 18:12
Retirement planning can be fulfilling and enjoyable. But it’s important to be mindful of how you manage your money to make it last throughout your retirement years. And we come right back, we’re going to highlight some ways to do that we come right back with On the Money with Secure Money.
Announcer 18:31
And now On the Money with Secure Money.
Steve 18:38
Welcome back, everybody. This is the final segment On the Money with Secure Money. And Brian Quaranta I’m consumer advocate Steve. Hey, Brian, this is again, we’ve got some great questions from listeners, lots of, lots of curiosity this week. And this first one is from Arty. Arty is wondering, you said do loan repayments count toward contribution amounts in 401k calculations?
Brian Quaranta 19:02
That’s an easy one. See, that is no.
Steve 19:04
No, just that simple.
Brian Quaranta 19:05
It’s just that simple.
Steve 19:06
All right. But again, well, I can I think that’s a fair question. Because it makes I mean, again, if you happen to have a loan out on your 401 K, is that gonna take away anything that, you know, from the future? And the answer’s no.
Brian Quaranta 19:18
Yeah, yeah, it’s good. I mean, it’s good to know, I think it’s a fair question. But that yeah, they do not. So you can still make your other contributions that you’re making your employer’s making, it’s just a repayment of something that you promised would be paid back.
Steve 19:28
Sure. All right, already. There you go. 800-656-8616. Gerald is wondering, he says, my wife’s father passed, and she was left quite a bit of stock. All of the stock is in a single company that is a standard bearer. We don’t need access to the funds and plan to leave the principal to grow. Is there a better way to grow the money right now? As opposed to leaving it all in stock?
Brian Quaranta 19:55
Yeah. Well, I mean, there’s a lot of things. I have additional questions on here. Yeah, I mean, is it in a qualified account or non-qualified account, it’s in a non-qualified account, good for them, you know, they’ll get a step up in cost basis, you know, in the in on the date of the father’s passing. But I mean, this also is a good time to explain concentration risk. I mean, if this is all in one single company, depending on the amount of money that’s in there, you may want to diversify out a little bit. I’ve seen so many people hurt that have a concentration risk in one individual stock. Better ways to grow the money. I don’t know what stock it is, I don’t know what the history of the stock is. So it depends on what your parent, you know, comparing it to? Are you trying to grow it with the same, you know, risk levels that the stock is are you trying to grow it with less risk levels? So, there’s a lot of questions that I have here. But overall, I think my big takeaway from this question is really spend some time thinking about whether or not you want an entire lot of money in one individual company stock, that’s usually not the best course of action.
Steve 21:20
Okay, well, that makes sense as well. And so, Gerald again, give us a call. We’d love to hear from you. 800-656-8616 is the number. Let’s see, we got time for another one. Let’s go to Lacey. Lacey says, retiring in about a month at the age of 62. Good for her, I have a small pension after 22 years of employment, they moved us all into a portable pension, I was grandfathered into the original plan. So in addition to that pension, I was offered a lump sum of which I could roll into an IRA. Or I could get monthly installments for life. What’s my play here? Lump sum or monthly installments?
Brian Quaranta 22:01
Yeah, well, the best thing to do is to figure out what percentage withdrawal rate they’re given you. So for example, you know, you got to compare that to the lump sum amount. So, you know, you go okay, well, if they’re given me a lump sum of, you know, let’s say, a million dollars, and, you know, I’m going to be able to generate $40,000, a year off of that, the question now becomes, how much would they give me every single year, if I were to stay there, let’s say what they were going to give you 70 or $80,000 a year, well, that’s a seven to 8% withdrawal rate on a million dollars, you might be better off leaving it there versus taking it out. Because now, in order for you to generate, you know, 70 to $80,000 a year, you’re going to need a 7-8% rate of return. That’s going to be tough to kind of, you know, remake in the in the private marketplace. So figuring out what your withdrawal rate is, is the key to figuring out whether or not you take a lump sum, or you, or you leave it there and take the pension. Some other things might be what, what is your family situation? Like? You know, do you have money that you want to leave the kid because maybe, maybe they’re off and you’re really high withdrawal rate, but if you die, you know, the pension dies with you have you got no, you know, they’re not going to pay the remaining balance out as a lump sum. And maybe you’d have some kids that you want to leave money to. So maybe you forfeit the higher payments, because now you can get a hold of a million dollars. And if you die, you know, there’s a lot of money there that can be passed on to the kid. So there’s a lot that goes into determining whether or not to take the lump sum pension, or to keep it there. And you know, over the last 25 years of me planning, there’s been many cases that I can remember where we calculated the benefit of the lump sum versus the payments that would come directly from the company. And there are many cases where not taking the lump sum was the better option. Everybody thinks taking lump sums, the best option is just it’s just not you really have to spend time calculating the math. And then of course, you also have to take into account what what is the industry that you’re in? I mean, if you’re in the car industry, or you’re in the financial industry, meaning like if you work for a bank, or you work for like a Ford or a GM, you know, what’s the stability of those companies long term? Could they potentially reduce their pensions because their pensions go away. So these are all things that need to be weighed. And these are the important things that need to be considered. And this is why working with a fiduciary financial firm, like secure money advisors is so important because we have the tools that can help you solve these more complicated questions and get a really clear picture of what to do. And if you go to righttrackyourretirement.com, get a copy of my book, I talk about the different options for pensions in my book, what to think about, how to handle that. And the also there while you’re there, you can schedule a time to come in and take advantage of a right track review with the team where we can answer some of these questions for you or answer any questions that you have about your specific financial situation. And one promise we always make is nobody’s going to sell you anything. When you come in. We’re here to truly help. If we can help or share with you what we can do. If we can’t help we’ll let you know, keep doing what you’re doing. You’re on the right track. But how good would it feel to know that you’re on the right track? If you are and if you’re not, I always say when would you want to know so again, righttrackyourretirement.com get a copy of the book and you can schedule a time to come in.
Steve 25:42
Fantastic. It’s 800-656-8616 do take advantage of the opportunity folks. A comprehensive financial review is in the offing. There’s no cost, there’s no obligation. All it takes is a phone call to get things started 800-656-8616 Again, 800-656-8616. So Brian, as always a pleasure to talk with you and I love the information.
Brian Quaranta 26:04
Steve another great show and folks we’ll see you again next weekend. Same time right here with On the Money with Secure Money have a great week.
Announcer 26:17
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 foundations and its affiliates. The information contained here and 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 transact 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.
