Episode 122 – Inflation Protection Strategies

From gas and groceries to dining and travel we’ve all been impacted by inflation one way or another. On this week’s episode of Retirement You Radio, Neil Mager provides various strategies on how to protect yourself from inflation in retirement.

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Radio Show Transcript

Announcer 00:00

The Information provided is for illustrative purposes only and does not constitute investment, tax, or legal advice information has been obtained from sources that are deemed to be reliable, but their accuracy and completeness cannot be guaranteed. Neither Brian Quaranta nor his guests are liable for the usage of information discussed always consult with a qualified investment, legal, or tax professional before taking any action.

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Asset protection, tax reduction, holistic planning featuring Pittsburgh’s wealth, financial, and income Coach Brian Quaranta.

Steve 00:42

Welcome, everybody this is Retirement You Radio increasing your financial IQ with BrianQ, but BrianQ is taking the day off, a well-deserved day off; filling in as always is Neil Mager. Neil is a senior adviser with Secure Money Advisors. He is another fiduciary independent, all of that in more Hi, Neil, how’s things?

Neil Mager 01:01

Good. Steve, how are you today?

Steve 01:02

Very, very well. Thanks. You know, Brian took a little time away, which he needs to do, right?

Neil Mager 01:08

Absolutely. He’s, it’s not as fun as it may sound. He’s actually on a business trip this week. But oh, you know, he’ll be back with us next week. But you know, he’s still out in sunny Arizona. So, I still at this time, it might be a little too hot out there.

Steve 01:25

Well, yeah, I work with an advisor in Phoenix. And you know, when he says, Yeah, I’ve only got up to 115 today.

Neil Mager 01:32

Yeah, that’s unbelievable. To me. It is definitely a little bit a little bit hot out there, for sure. A bit warm.

Steve 01:38

Well, what also was warm, Neil, is inflation. And we’re certainly seeing a lot of it in the headlines. And it seems to be you know, we’re seeing what could be a huge, I mean, a pretty good increase in the COLA for social security. We don’t know that officially yet. But it’s all based on inflation. So, what are your what’s your take on that?

Neil Mager 01:57

I mean, it’s all anybody’s really talking about right now. Right? I mean, because we’re all experiencing it, it doesn’t matter what age category you’re in. We’re all experiencing inflation. I mean, think about gas prices, groceries, going out to dinner, travel, building materials. I mean, we’ve all been hit in the pocket with the increase the cost of goods. You mentioned social security and the cola, I read an article recently that there’s the potential that the cost-of-living adjustment on Social Security this year could be over 6%. Wow. Now, that’d be really great for people that are on that fixed income, you know, whether it comes to fruition or not, who knows, but it’d be nice to see a significant increase like that, because they need it with the cost of goods right now hovering around 5%. You know, that’s pretty significant. And, you know, if you’re on a fixed income, how do you overcome that?

Steve 02:49

Right? Well, and again, I guess that’s kind of how we’re what we’re gonna get into here today. And that, you know, there are ways to sort of combat inflation, or at least make sure we’re not losing money when it comes to our retirement accounts. But we’ve got to be aware of what to do and how to do it.

Neil Mager 03:04

Yeah, exactly, Steve, and there’s a bunch of different ways that you can go about to make sure that you protect yourself, it’s all a part of building a very sound retirement plan, in general, you want to make sure that you account for the cost of goods going up, and to make sure that your sound in all areas, now there’s a number of different things that we can do. I mean, number one, you know, save maybe even more than you think you’ll need, you know, with the purchasing power of the dollar falling, you need more dollars to buy things. So, you know, as you need more dollars, saving more gives you a cushion to fund higher than expected living expenses. And the sooner that you increase that savings contributions, the more compounding that you’ll get, and the bigger financial cushion that you’ll have in retirement. So, starting off, you know, let’s be all be very, very cognizant all the listeners about, you know, saving, want to make sure making sure that you, you know, plan for those rainy days and those unexpected things that could happen. That’s obviously a big, big key. Right? So, start there.

Steve 04:08

Well, um, you talked about compounding, because through all of this, with inflation, going crazy, so to speak, the market seems to be just chugging along doing what it does. I mean, there’s ups and downs, certainly, but as a whole, it’s on the up.

Neil Mager 04:22

Yeah, absolutely. And, you know, that’s, that’s something that, you know, is kind of interesting to all of us, you know, the market keeps increasing and doing really, really well. And, you know, that’s part of having an overall investment strategy in retirement. Because, you know, what people tend to do is they want to get safer as they get closer and closer to retirement, right. I mean, everyone talks about, you know, lower, lowering your equity exposure, making sure that you have a good nest egg set aside to generate and build cash flow for yourself. But how do you go about doing it? You can’t put all of your money under the mattress? No, and that’s never a good idea. And think about right now with where inflation is Steve, you know, let’s say you have $100,000 in the bank earning nothing. I mean, technically, at the end of the year, you’re down to 95, because you’ve just lost $5,000 5% very safely.

Steve 05:18

And that’s just kind of sad when you think about it.

Neil Mager 05:21

It is because you know, so many people have such a comfort level at the banks, and I can totally understand and appreciate that. But as inflation and the cost of goods increase, we really have to make sure that that plan is well designed to really kind of do everything that we need to do. And growth is an important factor.

Steve 05:40

So bucketing strategy, I know that’s something that you guys do at secure money advisors is sort of segment that money to make sure that there’s always some money that’s safe.

Neil Mager 05:50

Yeah, I mean, we believe in the bucketing strategy. First and foremost, in our planning, you know, we call them now soon, and later buckets. Okay, so our, our now bucket is simply going to be our short-term funds. And most for most people, that’s going to be the money that they have down at the bank. It gives us peace of mind knowing that if we have an emergency, it’s easily accessible to us, enables us to pay our bills, things like that right short term. Like I said, we sometimes call it losing money safely, because we’re not going to earn anything there. But it’s, it’s safe. And it’s available. Right? Yep. Next, we want to have our soon bucket. Now our soon bucket is how we start to develop our retirement plan for cashflow in retirement. And really that bucket there, we want to get a safe reasonable rate of return on, you know, if we can get four or 5% but not lose any money there. That’s a perfect scenario, we want to generate our cash flow from this bucket. And what we want to do is really have 10 to 15 years’ worth of income available in that bucket, because our third bucket is going to be our later bucket. And that’s where we’re going to take our long-term money and invest it in growth. And what we did there by having the first two buckets is something very, very important. And that is we bought ourselves time.

Steve 07:14

And that’s important as well. And again, so you know, again, these are the kinds of things that you talk about every day with people. And in fact, Neil, why don’t we go ahead and invite folks to call right now get on the calendar and have that conversation

Neil Mager 07:25

yesterday for the next 10 callers that call in right now. We’re going to provide our right track financial review, no cost, no obligation. The question we hear from the most people that are coming into the office is are we on the right track? This right track Financial Review entails the five key areas of retirement planning, income investments, health care, tax planning, and legacy planning to see if you are on the right track. If you weren’t on the right track, when exactly would you want to know this complimentary meaning is designed to take the guesswork out of your retirement plan and get you on the right track or at least gives you the peace of mind that you are on the right track. We will do a portfolio analysis, a cash flow distribution plan and identify key solutions to minimizing your taxes. no cost or obligation for this review, but you will leave the office understanding exactly the direction of your current plan. Please do not hesitate folks pick up the phone. schedule your complimentary Right Track Financial Review available to the next 10 callers.

Steve 08:27

800-656-8616 you heard Neil, 10 callers right now. We’ll get that comprehensive financial review plus all the extras, and you will see where you are today of course, but more importantly, you’ll find you’ve now got a roadmap, a guide that’s going to help get you to where you need to be when it comes to retirement 800-656-8616 again 800-656-8616

Neil Mager 08:50

We spend years building up the balance in our 401k. But what happens when we retire? On today’s show we’ll dig into how a 401k works after retirement.

Announcer 09:02

When should I take my Social Security, how much risk can I tolerate, I’m afraid I’m overpaying my taxes, Did I save enough? I can’t keep up with all these rules. There are a lot of components to your retirement planning, and it can seem overwhelming. It’s time to establish a partnership with a professional who can provide you with a written plan the proper strategies and then be there with you along the way. Call BrianQ 800-656-8616 or text BrianQ two 800-656-8616 Call or text BrianQ to 800-656-8616

Steve 09:43

and we are back on the Retirement You Radio increasing your financial IQ without BrianQ today Neil Mager’s here, I’m consumer advocate Steve, Neil is Senior Advisor at Secure Money Advisors and so much more. So, Neil again first time we’re talking about inflation. That’s a big deal. And so now this, I like this because a lot of us have a 401 K been saving it for years. And then when it comes time to retire, what do you do with that behemoth or fright? I mean, you’ve got to do exactly with it. And you can help us understand what we can do and how to maximize the benefit of that. 401k.

Neil Mager 10:19

Yeah, absolutely. Steve in the bulk of the folks that we’re seeing in our office nowadays, I’d say, probably close to about 85% are no longer entitled to the monthly pension from their employers. So that’s really changed things when it comes to the retirement savings. Because, you know, 30, some years ago, most people probably about 85%, were entitled to a monthly pension from their employers. And so, retirement looks pretty good, right? You, you retired, your company continued to pay you a check in the form of a pension, you were able to claim your Social Security benefits. And things weren’t much different than when you were working, except for you no longer had to trade your time for money. But nowadays, things are a lot different. Because without that guaranteed monthly pension, you know, folks are coming in saying, you know, what exactly is the right direction for me to go? How do I go about building that pension that I’m going to need in retirement. And there’s a lot of roles and things that you got to think about, you know, when you retire and get closer to that age, you know, there’s that magical age of 59 and a half. So, a lot of different things. I think that the listeners will really, as we kind of go through this checklist, get a lot of good information out of Sure.

Steve 11:31

And again, one of the ways that we do that is, you know, you know, once you turn 59 and a half that opens the door. I mean, most of us are still working at 59 and a half, but it does open the door to doing a pretty big deal with your 401k. Let’s break that down.

Neil Mager 11:46

Yeah, exactly. Steve, I mean, so at 59 and a half. First of all, you’re eligible to begin taking distributions from your 401k. Without that 10% early withdrawal penalty. So, what does that mean? Well, if you’re retired, and you need to generate some income or cash flow, from your retirement account, you have the ability to do so without having to pay a 10% early withdrawal penalty. So that’s important to what most people are coming into our office are doing is they might have a retirement date in mind, maybe it’s 62, maybe it’s 65, maybe it’s 70. And they want to get situated, even though they’re still working with their current employer for retirement, they want their portfolio set up in a way that they start to minimize risk that they start to have cash flow distribution in mind. So, at the age of 59, and a half, most, not all, most, I would say about 99%, what you’re eligible to do is rollover your 401K, 403B, whatever it might be with your company, to an outside institution’s IRA.

Steve 12:52

And that’s a big deal. Because you’ve got so many more options, especially working with somebody like you, Neil, because you’re independent, you’ve got the universe out

Neil Mager 13:00

there. That’s exactly it, Stephen, that that would be the great advantage to somebody rolling their money over to an organization like ours, because within your retirement account at your current employer, you might have 2025 options, maybe 30 options available to you of what to pick within your retirement account. And those might be good options for you. They may or they might not. And at secure money advisors, as an independent fiduciary, we have the ability to shop the entire marketplace, to put you in the positions that are going to work for your for your individual situation. And those options can be, you know, really beneficial as you move forward to a very important time in your life retirement.

Steve 13:42

Well, I mean, that can go right back to inflation. I mean, that’s a way to essentially hedge against it. And that’s really what we want to try and do.

Neil Mager 13:49

That’s exactly it, Steve, you know, all those key areas that we always talk about, you know, what we want to do is start working with you. And the earlier the better. Because, you know, we focus on the five key areas here at secure money advisors. And we think that if you miss any of those five key areas, what we always say are little mistakes that you’re making end up causing you big headaches down the line. So, what you want to focus on is income planning, investment planning, healthcare planning, tax planning, that’s a big one tax planning. The earlier you can start doing that the better. And then the fifth and final is legacy planning.

Steve 14:25

Sure. Well, one, so 59 and a half, we know that the 10% penalty automatically goes away at that stage. But there’s something called the age of 55 rule talk about that, because I think that’s something certainly in the last year and a half people have found themselves without work retiring sooner than they thought. And they may not be anywhere near retirement age. But what’s the fifth age 55 rule?

Neil Mager 14:46

Yeah, this is definitely a good one for us to talk about on the radio because I would say most do not understand this role. So, the age 55 role if you retire or lose your job, when you are age 55 but not yet 59 and a half, you can avoid the 10%, early withdrawal penalty for taking money out of your 401k. This only applies to the 401k from the employer, you just left money that is still in an earlier employer’s plan, it’s not eligible for this exception. And keep this in mind, Steve, nor is money available in an IRA. So just to kind of give you an example, let’s say that we had a client come in, who just retired at the age of 50, not 55. Okay, what we want to do if they’re going to need money over the next four and a half years, what we need to do is leave some money back in that 401 K, to make sure that their income needs are met. We don’t want to roll it all to an IRA, and then have them facing that 10% early withdrawal penalty.

Steve 15:49

Right, exactly. And this is one way to avoid that. And again, it can be very, I don’t know, I think it just can be very effective in someone’s retirement. Yeah, exactly.

Neil Mager 15:59

I mean, all these little, you know, tiny things that you that you need to be aware of, are so important, right? Because if you leave the money in there, you don’t have any 10% withdrawal penalty. Now, that’s important. Right, right. You know, being able to roll your money at 59 and a half to an outside institution’s IRA, that’s important as you approach retirement, you know, retirement is not a dress rehearsal. And you know, people want to make sure they get it right. And so that’s why they’re so interested in working with, you know, an organization like ours, just to make sure that they get things done and done correctly.

Steve 16:33

Sure. Well, and again, we’re up against the clock already deal. But let’s continue this conversation on the other side of the break. Let’s go ahead and invite folks to call right now.

Neil Mager 16:39

Yes, Steve, for the next 10 callers that call in right now. We’re going to provide our right track financial review, no cost and no obligation. The question we hear most people coming into the office or are we on the right track. This review entails the five key areas of retirement planning, income, investment, healthcare, tax planning and legacy planning to see if you are on the right track. If you weren’t on the right track, when exactly would you want to know this complimentary meeting designed to take the guesswork out of your retirement plan and get you on the right track? We’ll do a portfolio analysis, a cash flow distribution plan and identify key solutions to minimizing your taxes. no cost, no obligation. But please don’t hesitate, pick up the phone right now for your chance at a complimentary right track Financial Review available to the next 10 callers.

Steve 17:29

That sounds fantastic, folks, take advantage of what Neil is offering here to date 800-656-8616. You’ll get that comprehensive financial review; you’ll see where you are today. But more importantly, you’ll wind up with a roadmap that can help get you to where you need to be when it comes to retirement. 800-656-8616 again, 800-656-8616

Neil Mager 17:51

Sometimes we have to face things head-on long-term care is one of them. When we come back, highlight some innovative alternatives to long term care.

Announcer 18:03

You see a doctor for your health, sometimes a specialist, a mechanic for car problems, anyone under 20 for your smartphone. You need to look at retirement that way you need help and setting up a plan that avoids pitfalls and provides lifetime income. You need a retirement that you can enjoy without the worries. You need someone who can help take the mystery out of retirement you need BrianQ call 800-656-8616 or text BrianQ to 800-656-8616 Call or text BrianQ to 800-656-8616.

Steve 18:45

We are back on Retirement You Radio increasing your financial IQ with BrianQ, I’m consumer advocate Steve. Brian Quaranta is not here today. But Neil Mager is, and Neil is a fiduciary Senior Advisor at secure money advisors as well. And we kind of touched on some long-term care things. And there are a couple others that I think are worth mentioning. And I know people don’t want to talk about long term care, I get it, but let’s just give them a couple of highlights. What do you think?

Neil Mager 19:10

You know, Steve, I mean, like I had mentioned in our previous segment, it’s hit close to home for most people. So, it’s a major concern as they, you know, move into retirement, you know, what, what would happen if you know, myself or my spouse went into long term care, how would I go about, you know, paying for that care? Now, here’s the thing, Steve, long term care is very difficult to get nowadays in insurance companies really want the healthiest people getting approved. So, a significant portion, I think it’s close to about 80% actually get rejected when they apply for long term care. So that in itself provides a challenge. You know, obviously, people have concerns about, you know, having to go into a long-term care facility and how they’re going to pay for it. And now I’m telling them that a good chance a good portion of people are going to get rejected based on health. So, it’s quite a challenge. Now, the one policies that we like to utilize at secure money advisors are really hybrid policy, okay? Now, these policies are a hybrid of life insurance, long term care insurance. Now, basically, what they do are you pay upfront over, typically a five-year time period, and it’s a pretty significant amount, typically, right around $10,000 a year for those first five years, and then you don’t owe anything again. But why we like those here is one, if you went into long term care facility, they’re gonna give you a monthly benefit, right, so they’re gonna help pay for the cost of care to an extent too, if you never end up going into a long term care facility, they’ll pay out a death benefit to your family in the form of life insurance, wow, now, it’s not a significant amount of life insurance, it’s not your typical, if you put in $50,000 is going to be a death benefit to 50. But your family will get the money back plus some. So that’s a nice aspect of it, in the third way, is that if at a point in time you decide that you need your money back, they allow you to pull your money back out. Now, obviously, you still have to be healthy enough to get approved for insurance like that. But that’s really a decent direction to go in today, with where long-term care policies are. Now, the second solution that we typically identify with folks here at our office is really, is there a way that we can self-insure? And what I mean by that is, okay, so if we build this plan, and we have your cashflow, needs met, and we build it out in a way that we have a good portion of our money, safe and protected, generating cash flow, but it’s so important that we have that risk money to for long term growth. And if we see long term growth on that money that will help us position, if we did have bad things happen, like have to go into long term care, and have to pay for it. Right. So, it’s really, it’s not only about, you know, potentially thinking about options available, but it’s really about building a really solid retirement plan that focuses on those five key areas to make sure that we’re positioned properly, for bad things to happen. And that’s really how we look at it, Steve, expect the unexpected. Expect the unexpected, you know, one of the things that you have to think about, you know, what, if your spouse passes away, you know, what’s the loss of income, so we just need to make bad things happen on paper and identify them before they happen. So, we’re very prepared.

Steve 22:48

I like that idea of being able to budget, you know, essentially self-funding, but that long-term care. That’s a that’s a pretty innovative approach to

Neil Mager 22:57

Yeah, I mean, at the end of the day, as concerned as people are about long-term care, they really don’t want to spend $50,000 for each of them over the next five years, not so much. So much. So, they also don’t want to pay a monthly expense, that’s going to increase them as time increase on them as time goes on. Right. So sure. You know, it’s a really great way and if we’re able to self-insure great, but it’s definitely an option.

Steve 23:22

All right, well, good. And so, folks, if you got questions about long term care, you want to find out if maybe there’s an option out there for you. 800-656-8616 is the number you can call. Alright, let’s get a just got one question in any way before we have to go? You’re good with that?

Neil Mager 23:37

Yeah, let’s do it.

Steve 23:38

All right. So, let’s start with Jane. Jane writes and says, I called the Social Security office, they want to argue that I cannot suspend my social security retirement benefits. I started taking benefits at 62. I have already reached my full retirement age at 66 and two months. So how do I get past the bureaucracy?

Neil Mager 23:57

Well, I mean, I can certainly understand your frustration. You know, a lot of people have reported getting the same misinformation, as you apparently did. So, it sounds like Social Security may have a training or hiring problem, you know, which is certainly understandable. You know, we hear that a lot. And there’s in their defense, there’s a lot of information that those folks need to know. And sometimes it can get a little fuzzy. In any case, you are allowed to voluntarily suspend your social security retirement benefits between your full retirement age and the age of 70 Regardless of when you started drawing your benefits or when you were born, okay, so that Jane, right. Oh, Jane, so I hope that helps you. But you know, try and be patient, you know, with people. It seems like a lot of people are doing two- or three-people’s jobs right now. And you know, it’s stressful for everyone and, and hopefully they get that worked out. But we’ve been here and those same types of questions.

Steve 24:57

Well, again and again, I think one of the solutions is just to give you a call. Come on in, and because you’ll talk about Social Security not a problem as part of an overall retirement plan. And if that’s something that that comes up, then you can help.

Neil Mager 25:08

That’s absolutely, it’s a key area, Steve. I mean, you know, what we want to look at is income planning. And most people that are coming to our office, want to know when’s the best time to collect social security?

Steve 25:19

Sounds great. And folks, if that means if that’s of interest to you, now’s the time to give Neil a call, get on the calendar and just begin the conversation.

Neil Mager 25:26

Yes, Steve, for the next 10 callers that call in right now. We’re going to provide our right track financial review, no cost, no obligation. You know, this is really- entails five key areas of retirement planning, income investments, health care, tax planning and legacy planning to see if you are on the right track. Now, if you weren’t on the right track, when exactly what you want to know, this complimentary meeting designed to take the guesswork out of your retirement plan, and get you situated and on the right track. We’ll do a portfolio analysis, a cash flow distribution plan, and an identify key solutions to minimizing your taxes. no cost or obligation. But folks, please pick up the phone right now. schedule your complimentary right track Financial Review. It’s available for the next 10 callers.

Steve 26:11

800-656-8616. Again, 800-656-8616. Neil, as always, a pleasure to be here and just to chat with you. The information is so important for people to hear.

Neil Mager 26:22

Yeah, Steve, thanks for your time today. I had a great time talking with you. I hope people got a lot out of that show.

Steve 26:27

And we want to thank everybody for listening and we’ll be back again next week we’ll have new topics new questions and a whole lot more right here on Retirement You Radio.

Announcer 26:40

Information provided is for illustrative purposes only and does not constitute investment tax or legal advice. Information has been obtained from sources that are deemed to be reliable, but their accuracy and completeness cannot be guaranteed. Neither Brian Quaranta nor his guests are liable for the usage of information discussed. Always consult with a qualified investment legal or tax professional before taking any action.

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