Episode 115 – Retirement Planning Errors to Avoid

On this week’s episode of Retirement You Radio, Brian Quaranta discusses how to identify common retirement planning mistakes and tips for how to correct them.

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Radio Show Transcript

Announcer 00:00

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.

And now, Retirement You Radio

Asset protection, tax reduction, holistic planning

Featuring Pittsburgh’s wealth financial and income Coach, Brian Quaranta.

Brian Quaranta 00:38

In today’s show we’re going to dig into some retirement planning errors to avoid and offer some tips to potentially help correct them. When we come back right here on Retirement You Radio.

Steve 00:53

It’s Retirement You Radio, increasing your financial IQ with Brian Q. I’m consumer advocate Steve. Brian is of course, President and CEO of secure money advisors. He’s a fiduciary, he’s got more than 20 years in the business help getting help getting folks to and through retirement. Hey, Brian, what is new today,

Brian Quaranta 01:10

Steve, Happy Day to you. How about retirement planning? no easy task? No, it is it is not an easy task. I mean, generally, the right plan is about timing, opportunity and not following the myths that can destroy your retirement. So, you know, if we if we look at some of those number one is not having a true written plan.

Steve 01:31

That’s the key, isn’t it? It’s written plan, it’s got to be written down?

Brian Quaranta 01:35

Well, I think there’s a lot of planning going on out there that has a lot to do with brochures and selling financial products. But I don’t think there’s a whole lot of problem solving. And one of the things that we’re really good at secure money advisors is we’re problem identifiers. And then we are problem solvers. But not starting the retirement planning process is one of the biggest retirement mistakes you can make. Because you know, 85% to 90% of the people retiring today are not going to be retiring with a pension. So, people need more planning today than ever, because retirement is not as easy as what it once was. 3040 years ago, when you retired, you probably got a pension from your employer, and you got a Social Security check. So, it was pretty simple to have the monthly income that you needed. Nowadays, when you retire. Heck, they don’t even have retirement parties anymore, because nobody knows when they can actually retire because they haven’t figured out whether or not it’s possible for them to even leave working because they don’t know how to replace the paycheck that’s going to stop when they leave. And so, you should determine what you want your future to look like. As well as how much money you can realistically set aside. And then you want to find a plan of how you can get there. And that’s kind of the retirement planning roadmap that we’ve put together. And people have heard us talk about this all the time as the Right Track Retirement system, it’s all about giving you turn-by-turn directions and making sure that you are on the right track to achieve your goals and get to retire when you’d like to.

Steve 03:07

I like the sound of that, Brian, in order to accomplish some of these things. You know, you talked about not having a plan or written plan. That’s important, obviously, but then you kind of know what you need. I mean, you know, it’s one thing to say, Okay, I’m going to retire. But it’s a whole nother thing to say, Oh, wait, where’s that income coming from?

Brian Quaranta 03:23

Well, yeah, not knowing how much you need retirement. I mean, if you’re nearing retirement, you know, you have to take a look at your current salary, add up your expenses, minus your your medical costs, and so on and so forth. And the basically the way that we do it for our clients here is we have a cash flow worksheet, and that cash flow worksheet, we can see each of the individual income sources that you have. So, we have might have your employer’s income, then we might have Social Security, then we might have a pension of exist. If you’re married, we’d have your wife’s employer, her Social Security, her pension if she’s getting one. And then what we can do is we can look out ahead of time and say, Okay, let’s say you want to retire in five years, well, we know that your employment income is going to drop off, maybe your wife wants to retire at the same time. So, her employment income is going to drop off. And now we’re going to have two social security checks. So, what’s the income drop? You know, maybe it goes from $100,000 of income, down to $50,000 of income. And you say, Well, you know, we’re going to need 70 or $80,000, a year to live on. And so now we start to identify what we call the income gap, or how much income are we going to need to generate from the retirement savings. And then of course, we have to look at the impact of taxes. So, we’ve got a minus out taxes from the income and then we’ve got a minus out expenses. And then we have a disposable income that’s leftover. What we want to see is that that disposable income is a positive number. So when we come in, we make that process very visual for you and very easy for you to see all the moving income data points so you can see on what year income is going to change and then you can actually then what we can do is we actually can roll up our sleeves and start to look at the math of how we’re going to solve those income shortfalls based on those years.

Steve 05:07

Okay, well, that makes sense as well. 800-656-8616 is the number you can call to get things started. And I know this is sort of kind of out of left field, but incorrect beneficiary designations, that estate planning part of a retirement plan is often overlooked, forgotten about procrastinated. And it’s really one of the more important things that should be done, because once it’s done, it’s done.

Brian Quaranta 05:29

That’s right. I mean, especially with the secure act being signed the law, I mean, there’s been a lot of changes on how beneficiary is going to be able to receive money. But unfortunately, for a lot of people out there, when we look at their beneficiary designations, they don’t realize it, but the IRS is some of their largest beneficiaries. That I don’t think they mean to do it may nobody means to do that, let’s just face it, I mean, it’s just something that’s overlooked. And it’s not something being talked about in planning. But a real financial plan also has to deal with the, the beneficiary designations be incorrect in the event of your passing, you don’t want to leave a financial mess behind your family. And you can avoid this problem by making sure that the retirement plan beneficiaries and the designations are listed in your will, and that they’re agreed upon, and that they’re also listed correctly on your beneficiary forms. And remember, when it comes to beneficiary designations, your beneficiary forms for your IRA accounts for your 401k accounts for your life insurance accounts. Those beneficiary documents are going to overwrite any legal document you have, I’ve seen before where people got remarried, and they had changed their will to reflect their new spouse, but they never changed the beneficiary document on their 401k plan. And then they died, and the ex-spouse wound up getting the money. So that’s how powerful these beneficiary documents are. And the courts will rule in the favor of the beneficiary document itself. So, there’s anything you take from today’s show, make sure that you do check your beneficiary forms, those are very, very important forms. But this is why we offer the right track retirement system here at secure money advisors, I’ve taken 21 years to build out what a real retirement should look like and the things that you should buy identifying and the areas that need to be covered. And the five key areas that we cover here at our practice our income, taxes, investments, health care, and legacy planning. Those are the five key areas that if you make sure that every i is dotted and every T is crossed in those five key areas, you will have a solid financial plan now, for the next 10 callers who call in we’re going to give you a right track retirement complimentary meeting, no cost, no obligation. I’ve said this before I’ve seen other people charge up to $1,000 or more that we’re going to do complimentary at no with no obligation to you. For the next 10 callers who call in right now. It truly is going to take the mystery out of financial planning, it’s going to help you map out where you are and where you need to go. We’re also can look at what fees you’re currently paying, we can see if you’re paying any unnecessary taxes, or we can show you how to be more tax efficient once you retire. Whether that be a year from now, two years from now, five years from now, I’ll show you how you can build an income plan that literally can turbocharged your income so that when you stop working, and that paycheck stops, we’ll show you how to replace that paycheck in a way that maximizes your income but also puts you in a position of strength to where you don’t ever run out of money in retirement. So again, for the next 10 callers that’s a comprehensive financial review. It’s the Right Track Retirement meeting that you’re going to get it complimentary, no obligation for the next 10 callers.

Steve 08:44

800-656-8616 you heard Brian; 10 callers right now get that comprehensive financial review. You see where you are today. But more importantly, you walk out the door 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 When

Brian Quaranta 09:05

we come back on today’s show, we’re going to continue to offer you tips on how to retire the right way when we come back right here on retirement.

Announcer 09:15

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 Brian Q 800-656-8616 or text BrianQ to 800-656-8616. Call or text BrianQ to 800-656-8616

Steve 09:57

We are back on retirement you radio increasing your financial IQ with Brian Q, Brian Quaranta, of course, is who we’re talking about, I’m consumer advocate Steve. And Brian is President and CEO of Secure Money Advisors, he’s a fiduciary independent been helping folks get to where they need to be in retirement for more than 20 years. And so, let’s just continue down this path of fixing mistakes or perhaps avoiding them entirely. We talked about beneficiary designations. And I know we talk about this often, Brian, but right now it’s so important, take advantage of that match, if your employer offers one in your 401k.

Brian Quaranta 10:31

Yeah, if your employer offers to match your 401 K contributions to a certain percentage, and you don’t opt in, you’re leaving free money on the table. So, make sure that you contribute at least the amount your employer matches each month. Now, I will say this sometimes in planning, and it depends on where each individual is at, and everybody’s situation is different. And as a fiduciary, our job is to do what’s in the best interest of our clients. And it’s important to understand though, that in planning, if you’re, let’s say, a year from retirement, or two years from retirement, maybe three years for retirement, and maybe you still have some debt, maybe you’ve got a mortgage still, maybe that you’re paying $1,000 a month, or $1,500 a month, or one of the things you may want to consider is not contributing to the 401k at all, and redirecting that money to paying down the mortgage. Now, here’s why I recommend that because if retirement planning is all about maximizing cash flow, which ultimately it is, because every single one of us, including myself, what we need in order to live on a monthly basis is a monthly income, there’s no way that we can do it without it. So, we have to get as much at monthly income as we can. Because number one, we want to in retirement, do everything that we promised ourselves, we were going to do travel, spend more time with the kids, take the kids grandkids, do all kinds of things and maybe join the country club, buy a fishing boat, whatever it might be. And you’re going to need money on a monthly basis to be able to do that. So, if we can redirect the money that you were paying into a 401k to pay off the mortgage, that means if that mortgage is gone, by the time you retire, we no longer have to pay that $1,500 a month and that mortgage expense. That means we pick that up as cashflow. Now that’s guaranteed, because let’s look at the opposite of that. Let’s say that you were to say, well, let me get an additional $1,500 a month in income from my 401k. Well, the money that you’re contributing, how much money would you have to contribute? And what how much what interest rate would that money need to grow out, in order to generate $1,500 a month in income, you have a higher probability of getting $1,500 a month in additional income by paying off the mortgage debt, then you would invest in it in the 401k. So, there are times when maybe not taking the match can work to your advantage too, especially when you’re closer to retirement.

Steve 12:44

Alright, interesting insight. I appreciate that. I hadn’t thought of it that way. 800-656-8616 is the number to call. Alright, let’s keep going here on this list. This is a good one. And I know, you know Social Security. Yes, it’s a cornerstone for a lot of people in their retirement. And that’s guaranteed income. And we understand that. But it shouldn’t be the only income we count on in retirement.

Brian Quaranta 13:05

No, I mean, Social Security can provide some financial security. But you shouldn’t be relying on Social Security checks to fund your retirement. I mean, Social Security benefits represent about 39% of people’s income. And that’s really all it was designed to do was replaced about 40% of the income. But, you know, and by the way, that’s according to the Social Security Administration. So, trying to retire on Social Security has a lot of hidden costs and risks. There’s not a whole lot of people that can do that. So, when you think about the retirement plans that most of us have through our employers today, folks, those really are your pensions. My concern for people, though, is that the one thing people get wrong in retirement is they don’t understand that they’re moving from an accumulation phase, to a distribution phase, the accumulation phase is very simple. We try to put as much money away as we can. And we hope that we’ve got the biggest pile of money possible when we get ready to retire. But the accumulation strategy is not the same strategy that we use in retirement because now we have to take the money that we’ve accumulated. And again, assuming you don’t have a pension, which a high probability is if you’re listening to this show, you probably don’t have a pension. Or if you do, it’s probably a small pension. That’s what I’ll see a lot of times, especially from the airlines, the steelworkers’ unions. You know, a lot of the corporations in Pittsburgh, they might have had a pension at one time, but maybe they froze it and then they went to a 401k. So, we got to realize is that these employer sponsored plans 401Ks, 403B’s, 457 plans, those are your pensions. The problem is, is that people are taking risk with something that needs to provide them income for the rest of their lives. Now, I don’t have a problem taking risk with money. But most people don’t know how to design a distribution plan. They think that they’re just going to continue to keep this money invested in the market, and they’re going to pull money out on a monthly basis when they need it. Well, if you look at the data out there and you look at something called sequencing risk, sequencing risk is the order in which you receive returns when you’re taking money out. So, imagine this, let’s say you plan on taking 2-3 thousand a month out of your portfolio. And let’s just say that the year that you’re taking money out, let’s say you need to take out $30,000 a year, and in that same year, the market goes down and you lose 50,000. So now you took 30,000 out for income, but to market took away 50,000, now you’re down $80,000, you’ve just locked in those losses. And you’ve compounded those losses. And now the portfolio needs to work even harder to try to just even maintain principle. And if you look at the map and the data on a lot of times, what you see is under those circumstances, people run out of money before they die. What we teach you at secure money advisors is how to build a true distribution plan. A distribution plan is based around fundamentals, put out by many, many different planning firms that talk about how to separate things into different buckets, we always want an income bucket where we can generate income or what I call the buffer account or distribution bucket. And then you will all also want a growth bucket. Now, the reason why you want to set it up into two separate buckets is because we need to have time for money that we’re taking risk with. Anybody will tell you, your friend to you when you’re taking risk is time, the more time we can give it so how do you give money time if you need to start withdrawing from it? Well, you have to have a bucket of money that you build a distribution from and you have to have a bucket of money that you have grows from. And those are all the things that will teach you when you come into secure money advisors. And my promise to you when you come in, is that you will leave more educated than when you came in. And you’ll have some aha moments with us as we demonstrate to you visually to give you the clarity that you need of how a real retirement plan should look. Retirement Planning isn’t about just talking about rates of returns, or performance or asset allocation. Retirement Planning is really rolling up your sleeves and looking at a number of key factors. But you got to do your part, you’ve got to pick up the phone, you’ve got to call us and schedule the appointment. We’ve seen people charge up to $1,000 for what we do complimentary, and the Right Track Retirement System truly is going to take the mystery out of financial planning for you. We’re going to show you how to run a tax analysis. I’ll show you how to build and maximize your income. Most importantly, we’re just going to take the mystery and the guesswork out of financial planning. But again, you got to do your part for the next 10 callers. That’s a comprehensive financial review that we’re going to give away complimentary with no obligation

Steve 17:32

800-656-8616. 10 callers right now get that comprehensive financial review showing you where you are today. But more importantly, you end up with that roadmap that can help get you to where you need to be 800-656-8616 again, 800-656-8616

Brian Quaranta 17:50

Retirement planning is no easy task. Generally, the right plan is about timing. When we come back, we’re gonna continue to talk to you about tips to help you retire the right way right here on Retirement You Radio.

Announcer 18:04

You see a doctor for your health, sometimes a specialist, a mechanic for car problems. Anyone under 20 for your smartphone; “well, duh,” you need to look at retirement that way. You need help 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 Brian Q. Call 800-656-8616 or text BrianQ to 800-656-8616 Call or text BrianQ to 800-656-8616.

Steve 18:46

And we are back on Retirement You Radio increasing your financial IQ with Brian Q, Brian Quaranta, of course, is here, I’m consumer advocate Steve, and this has been a really fun show Brian, and we’ve covered so much ground, but we’re not done yet. And so, I think it’s important that we just continue down this list. And I know we touched on that a little bit earlier about beneficiary designations as part of estate planning but again, having the incorrect transfer on death payable on death the TOD, POD designations. Boy, that’s a critical piece of the puzzle too. And it’s so easy to do it beforehand and impossible to do after something happens.

Brian Quaranta 19:23

Yeah, if you have a trust or estate plan, fidelity recommends double checking your transfer on death or Tod and payable on death pod designations to ensure that they will match. Look, I don’t think people really realize how important the titling of your accounts are. I mean, the titling near your accounts could mean the difference between probate and no probate, and who wants to go through probate that no that’s a process right. So yes, checking your account titling, Steve are very, very, very important. And, you know, it’s just again, part of the process, but with thorough financial planning, these are the things you’re going to be talking about.

Steve 20:10

Right. And again, that estate planning, and I know we’ve done a show on this in the past about estate planning and how important it is, and boy, that’s so true. You know, and you talk about, you know, just getting that a state in order to make sure that you can get to where you need to be and not have any surprises when something happens. I’ll tell you; I just went through something with, you know, my wife ended up in the hospital, and we knew that she was going to go in for surgery. And so, we finally got off our butts and put the estate thing playing together. I mean, so you shouldn’t let it come to that. It shouldn’t be done. Good. That horse that

Brian Quaranta 20:41

No, and you know, what, and take Steve’s advice, don’t do it, you know, during a crisis situation like that, because guess who else did it in a crisis situation? I did. Right? I had I had an emergency a personal emergency that I had to go in for. And this was probably I don’t know, maybe 10 years ago, and I didn’t have any of my estate planning documents done. Right. And I’ve been doing this for 21 years. It’s the shoemaker thing, right? Yeah, it’s the cobbler’s kids got no shoes, right. But it’s so important, because really, there’s just some basic documents, you know, financial powers of attorneys living wills, basic will, right, a lot of people don’t really need a trust. Depending on your situation, most likely your beneficiary documents are going to get the job done. Sure. That’s not for everybody. But yes, basic legal documents are very important. And they are part of that, those five key areas that we talked about, right, the fifth area that we talked about, and retirement planning here at secure money advisors is the legacy planning piece. And this is where we talk about how do we get this money to transfer to your loved ones, without the IRS getting a large portion of it, or getting caught up in probate or getting taken from nursing homes. These are the processes that we go through to help you solve identify and solve these types of problems.

Steve 22:00

Sure, so one of the things that you know, there’s the FIRE Movement that Financial Independence, Retire Early movement, if you will, but and I understand people want to retire early that work real hard, they want to they want to have a fun retirement, but that can lead to problems can’t it?

Brian Quaranta 22:15

Well, yeah. retiring early has two main disadvantages first, the early you retire, obviously the less time you have to save for retirement and to your point that that FIRE movement right; financially independent retire early. I think it’s Mister Money Mustache, right? If anybody still come up? Yeah, you know, Mister Money Mustache is, is the is kind of the pack leader in that whole movement. But you know, it’s they basically teaching you how to retire early. So, but there’s disadvantages because you’re not paying into Social Security anymore. And so, your Social Security benefit, you know, is not going to grow, because they’re making the assumption that you’re going to continue to pay into Social Security. So there are disadvantages and retiring too early to Steve.

Steve 22:59

Well, and again, absolutely. And, you know, I know we’re kind of running out of time here again, already, holy cow. But let’s talk about medical expenses. Because you got to plan for those, even though you don’t want to the numbers for 2021 are startling.

Brian Quaranta 23:14

Yeah. I mean, you know, not planning for medical expenses. I mean, according to Fidelity, 65-year-old opposite gender couple retiring this year, 2021, can expect to spend $300,000, in health care and medical expenses for our retirement. Wow, holy cow. Those are big numbers. Those are big numbers. And again, this is why it’s so important to sit down with a fiduciary planter that’s truly held to a standard of providing you with a plan because these are the exact discussions that you need to be having of how you’re going to handle not only the cash flow that you need to maintain your lifestyle, but how are we going to handle the cash flow that we need for medical expenses and things along those lines. Now, for single retirees in 2021, the estimate is $157,000. For women, and $143,000 for men now here in Pittsburgh, you can understand why everywhere you look, there’s a new medical facility being built. That’s how much money is in this per person, right?

Steve 24:11

That’s right. Oh, yeah. Well, you make a good point, because that’s very true, right? They

Brian Quaranta 24:15

know the numbers. They know, they know what’s coming down the pipeline, they wouldn’t be spending these millions, hundreds of millions of dollars building out these facilities. If they didn’t know, this was the opportunity of a lifetime. Look, we have the largest wave of baby boomers coming into retirement and through retirement and we have an aging population. It’s just the reality of the situation. And there’s a lot of money in medicine right now. And these numbers prove it.

Steve 24:38

Right. Absolutely. So again, just what the big takeaway here is what we just have to know what we’re looking for and what we want in retirement. Right. And the best way to do that is to sit down with you.

Brian Quaranta 24:47

Yeah, look, retirement really is about planning folks. It’s about understanding that you’re going to be going from an accumulation phase to a distribution phase and at distribution phase has five key areas that you have to focus on its income. It’s taxes investments, healthcare and legacy planning. If you make sure that you have every i dotted, every T clock crossed and those specific areas, you will have a solid retirement plan, your retirement plan will be on track. If you want to find out if your retirement’s on track, call us schedule an appointment and schedule a Right Track Retirement meeting with us so that we can help you determine whether or not you’re on the right track. And we can give you advice on the best moves to make to make sure that your retirement gives you peace of mind happiness, and the life that you deserve. So, but you’ve got to do your part, you’ve got to pick up the phone, you’ve got to call us for the next 10 callers that the right track retirement meaning no cost, no obligation, it truly is going to take the mystery out of financial planning. We’re really going to take the guesswork out of it all. But you have to do your part for the next 10 callers. That’s a complimentary financial review, no cost, no obligation.

Steve 25:52

800-656-8616 You heard Brian; you’re going to get that Comprehensive Financial Review. There’s no cost, there’s no obligation. And you’re going to see where you are today. Yes, of course. But more importantly, you’ll find that you’ve got a roadmap, a guide that’s going to help get you to where you need to be when it comes to retirement. Brian and the team at Secure Money Advisors are there to help that happen. help make that happen for you. 800-656-8616 again, 800-656-8616 Brian, as always, a pleasure and what a great, just a ton of great information today.

Brian Quaranta 26:27

Steve, what a great show, folks, we look forward to seeing you again next week. Keep your retirement on track, 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 discuss. Always consult with a qualified investment legal or tax professional before taking any action.

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