Radio Show Transcript
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
Saving for retirement is important, but it’s not a plan. Right. And now what we want to talk about as a plan on today’s show some ideas of how to turn your savings into success with a great retirement plan when we come back right here on Retirement You Radio.
Welcome, everybody, this is Retirement You Radio increasing your financial IQ with Brian Q. I’m consumer advocate Steve, Brian Quaranta is here. Of course, he is president and CEO of Secure Money Advisors. He’s a fiduciary and independent, over 20 years helping people getting to and through retirement, especially in that transition from that saving to the distribution preservation mode. Hey, Brian, what’s going on?
Brian Quaranta 01:17
Steve, how are you? That’s right, you know what accumulation versus distribution we talk about all the time, some people say savings, right, versus income, yep. Savings versus preservation. But the terms we like to use is accumulation versus distribution.
I like it.
Brian Quaranta 01:33
And, you know, as we accumulate money, it’s a pretty simple concept. We’re just trying to save as much as money as we can. While we’re working in the hopes that when the day that retirement does come, we’ve got the biggest pile of money that we can possibly have. And, you know, once we have that pile of money, now, retirement planning really starts in a phase called distribution planning, which is exactly where Secure Money Advisors specializes.
And again, I think that’s important, especially if you’ve been saving for all of your career, and you’re getting, you know, in that financial red zone, that 5052 years old with that category, that’s the time to really sit down with you, Brian, and start mapping this whole thing out. And I think one of the things that comes to our mind, just because it’s been drilled into us for so long as the 4% rule, but not necessarily so good today,
Brian Quaranta 02:18
I know and I wish I could stand on top of the mountain and scream at the top of my leg, which I think I do every weekend, every weekend, every weekend, every time during the week between the radio show and TV show about I’m on the top of the mountain screaming at the top of my lungs about this 4% Rule during the retirement years. So, income distribution, it’s the retire, it’s a retiree’s biggest concern. And also, the biggest concern in retirement, Steve is running out of money, of course. And it you and it used to be that this 4% rule now that mostly fallen out of favor among many advisors, Dr. David babble, Professor of Finance at the Wharton School, puts it this way, if you have a stock portfolio, and you withdraw a fixed amount per year, such as the standard rule of 4%, plus inflation, you have a 90% chance of running out of money in retirement.
I don’t like the odds, Brian.
Brian Quaranta 03:10
Steve, this is the fundamental mistake that most people make. And I see advisors all over the country still planning this way. And it always amazes me that people take this advice, because all you have to do is Google the 4% rule. And you can see the fundamental problems with it. This is why you have to have your money diversified in different asset classes, right, and you got to separate it, we’d like to call it in different buckets. And this means that you would set aside, you know, into income producing vehicles to lowest amount necessary to produce the monthly income you need above and beyond social security. Because when we build an income plan, Steve, typically when we look at a husband and wife, you know, their only source of income in retirement is going to be social security, very few have a pension anymore. And if they do have a pension, it certainly isn’t the amounts that we used to see in the past. So, there’s this income gap, you know, you’ll hear that fancy term thrown around a lot to where this income gap could be 25,000, 30,000, $40,000, a year that you’re going to need to generate from your retirement savings. And this is why I’ve always called the 401k. The grand experiment, because nobody knows how this is going to work out, employers replaced something that was guaranteed a pension with something that’s at risk in the market, a 401K plan. And now they’re not even teaching the appropriate ways to distribute that money. And that’s where people are going to get themselves in trouble. But this is why it’s Secure Money Advisors, we’ve focused for the last 21 years on that distribution phase to show people how to properly generate income from their portfolio, but still maximize the growth of the portfolio. And of course, you know, when it comes down to building income, we want to build it in a way that you don’t have the fear of running out of money.
Oh, that’s the big fear. Exactly. And as we start to go through this plan, we’ve got to talk about tax mitigation and that is something else that you guys, at Secure Money Advisors, you’ve got a handle on that, and you can help us.
Brian Quaranta 04:59
Well the big mistake Make people make two is not doing any tax planning. And you know, let’s take a real simple example here. Let’s say you’re going to take $1,000 a month out of your portfolio for retirement. Well, for most people, that money that they’re going to be withdrawing from a retirement plan is probably in some type of qualified tax deferred account, like an IRA, 401K, 403 B, which means when you take that $1,000 out, you gotta pay taxes on it. So, let’s just say you’re in a 20% tax bracket. So, you take $1,000 out, you pay 20%. That means you’re only going to net $800 after you pay taxes. Well, what if tax rates go up? What if tax rates go to 30% 40%? Let’s say they go to 40%, that same $1,000, that you’re taking out isn’t going to net you $800 anymore, it’s going to net you $600. And this is the biggest rotor of wealth for a lot of people in retirement is not only inflation, but it’s taxation. And so, a tax mitigation plan, the IRS doesn’t lose interest in you when you retire. In fact, the portion of your Social Security, a portion of your social security may be taxable, depending on how much other income you have. Therefore, it’s important to continue to find ways to reduce your tax bill. Instead of micro tax planning, you need macro tax planning, focusing on the big picture of what your tax deferred accounts are going to cost you over your lifetime. And at secure money advisors, we offer the portfolio analysis to be able to look at all of these different areas. And there’s always five key areas that we focus on, we do a portfolio analysis for somebody, we focus on income, because without income, you’re not going to be able to retire who the day comes that the paycheck stops, bills, taxes, and of course, all the things that you want to do your bucket items, right the lifelong goals that you’ve wanted to accomplish, whether that be traveling, join a country club, buying an efficient boat, buying another second home, whatever it might be, those things aren’t going to stop. And so, you have to be able to replace that paycheck. So, income planning is all about replacing that paycheck, when it stops. How do we replace it? And how do we do it in a way that you don’t run out of money? Number two is Let’s pay the least amount of taxes. If we’re going to retire and start taking money out of our accounts, let’s pay the least taxes and three, we better have it a very efficient investment strategy that mitigates risk and also mitigates taxation for his health care. Because if you retire before the age of 65, you’re going to need health care. So how are you going to do that, and then beyond 65-year-olds are going to be required to have a supplement. And then of course, the fifth one is legacy planning, which this is where we want to keep the IRS out of your back pocket during retirement. But also, when that when the good Lord decides to take you home, we want to make sure that your kids get most of the money. So, for the next 10 callers who call away and we are going to give you a complimentary portfolio analysis our rat right track retirement portfolio analysis, I’ve seen other people charge up to $1,000 or more for similar features. But what this is going to do is it’s going to take the mystery out of financial planning for you by mapping out where you are now and where you need to go. We’ll look at a fee report, we’ll look at a tax analysis. I’ll show you how to build proper income and short we’re going to take all the guesswork out of it for you. We’re going to keep it very simple. So, for the next 10 callers, that’s a comprehensive financial analysis that we’re going to give away complimentary with no obligation.
Hey, that sounds fantastic. Brian, folks don’t miss this opportunity. It really is a great way for you to begin the process of putting together that financial roadmap Brian and his team at Secure Money Advisors are there for you. They understand it, they can help break it down, make it clear, make it easy to understand, it’s your chance to get a true practical financial review. If you’ve never done it before, no time like the present, don’t procrastinate another day, simply make that phone call 800-656-8616 You’re going to get that comprehensive financial review, plus all the extras that Brian just talked about. And then when you walk out the door, you’ll have that roadmap that guide that can help get you to where you need to be when it comes to retirement 800-656-8616 again 800-656-8616
Brian Quaranta 08:57
We often talk about the importance of a written financial income plan for a successful retirement. If you’re in the financial redzone that plan is critical. Some tips to help, when we come right back, right here on Retirement You Radio.
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
We are back on Retirement You Radio increasing your financial IQ with Brian Q, Brian Quaranta, of course who we’re talking about Brian right there. I like this, you know, you talk about that financial red zone, something that we refer to often. And basically, that’s if you’re, you know, if you’re 50, year 52, somewhere in that in that ballpark, that’s the financial red zone, you’re, you’re, you know, kind of coming in on the on the end, here, and ready to jump into retirement. And there are things that you’ve got to talk about things you’ve got to understand. And, you know, the next one is, so when do you want to retire? What’s that look like?
Brian Quaranta 10:26
Yeah, what’s your time horizon? Right? I mean, your current age and expected retirement age, create the initial groundwork of an effective retirement strategy first, the longer time between today and retirement, the higher the level of risk that one’s portfolio can withstand. You know, as you get closer and closer to retirement, you want to reduce as much risk as possible. Additionally, you need returns that can outpace inflation, so that you can not only grow your money in total, but also against your future purchasing power. I mean, look at the cost of fuel right now. Look at the cost of bread right now. Look at the cost of lumber, my gosh, oh, yeah. So, you know, we have to make sure that we’re building a plan that can not only generate current income, but also if we have to continue to increase that income, we have a plan that’s continuing to grow to keep pace with an inflationary environment. So, one is figuring out what your time horizon is, and what that’s going to look like. And of course, you know, the strategies and techniques that got you to the red zone are not the same strategies that are going to get you through the red zone and actually into retirement, you really want to work with somebody that focuses on distribution. That’s exactly what we do here at secure money advisors, we understand the redzone we understand how to get somebody through retirement, we’ve been doing it for a long time. We’re very, very good at it. But we also had need to look at expenses, right? What are your spending requirements. Now, I personally think budget is a dirty word in retirement. Because, you know, people don’t work all their lives to now become on a budget just to get their time back. And if you think about it, that’s what we’re really doing. Right? We right now, if you’re working, you’re trading your time for money, what we want to do is we want to build a plan, where you no longer have to trade your time for money anymore. But you can still do all the things you’ve been doing while you’re working. So, what are your spending requirements, having a realistic expectations about post retirement spending habits will help you define the required size of the retirement portfolio that you’re going to need, it also is going to help you determine what rate of return your portfolio is going to need to do in order to generate the cash flow that you need. And that’s very, very important. You know, there’s three interest rates that we look at here at secure money advisors, the first one we look at is the spend down rate. So, if I have a certain amount of money, and I want to take a certain amount out every year, what rate of return would I need to get every single year if I wanted to spend that money down to zero by the age of 95. The second interest rate we look at is called the preservation rate. So, the preservation rate is if I have a certain amount of money, and I want to, and I want to generate that money on an annual basis, what rate of return would I need just in order to preserve principal, right? So very, very simple preservation rate. And then of course, we have the legacy rate. So, if I want to take a certain amount of money out each year, but I still want to grow my money, what rate of return is the portfolio need to do? Now it’s important, very, very important to understand what those rates of returns are. Because this is part of putting together the turn-by-turn directions and giving you a map and giving you a track to run on. Because it’s going to require that you get at 9, 10, 11, 12% rate of return to be successful retirement, you might want to rethink retirement, because the probability of getting those types of returns consistently on an annual basis are very, very slim, the odds are against you. So, understanding what return your portfolio needs to do is very important and in how you’re going to go about allocating the assets. In retirement, obviously, the less of an interest rate you need to take, the more conservative portfolio can be and the more successful your retirement is going to be. But understanding how much you’re going to need for spending. So, we’re looking at a cash flow model that we build out. And this is all part of our Right Track Retirement system. When you come in when we do the analysis, we’re going to look at your cash flow plan, and we’re going to determine how much guaranteed income you have that could be from social securities and pensions. And then we’re going to and then we’re going to see how much you actually need. So, let’s say between social security and pension, somebody has $50,000 But they need $80,000. To live off of now. We know we need $30,000 A year from the portfolio. And so, we have to look at that over a 10-year period. We have to also look at over 20-year period, assuming no inflation if I were to just take 30,000 and times that by a 20-year retirement Steve that’s over a $600,000 income shortfall in retirement. That’s a monumental task in front of people. Goodness gracious, yes. The other things we need to look at are what are the after-tax rate of return? Do Your needs. So again, this goes back to the beginning segment, Steve already talked about that $1,000 A month coming out and having to pay 20% in taxes? Well, that means you’re only going to net $100. So, what’s the after tax? Because if we need $30,000 A year, but that needs to be our net amount, then that means we actually might have to take out 38,000 or $40,000 to net that amount, what’s your risk tolerance, and you know, what needs have to be met, whether it’s you or professional money manager who’s in charge of your investment decisions, a proper portfolio allocation that balances the concerns of risk aversion? And return objectives is arguably the most important step in retirement planning? How much risk are you willing to take to meet your objectives? And that goes back to beginning a segment where I said, you know, if we’re figuring out your rates, and you need 10, 11, 12, 15%, rates of returns, you know, you’re gonna have to take a lot of risk in order for your retirement to be to be successful. And then the last things are like, what are your estate planning goals, and this is really the legacy part that we talk about in the five key areas of estate planning will vary. Over an investor’s lifetime, early on matters such as powers of attorney and wills are necessary. But once you start a family, a trust may be something that becomes an important component of your financial plan later on in life, how you would like your money dispersed will be the utmost importance, because, you know, we don’t have time to get into it today’s show, but we’ve talked about it a number of times, Steve was the secure act. People don’t realize that, you know, when you go to distribute your money to your beneficiaries, the IRS becomes the largest beneficiary for a lot of people, because the money that they’ve accumulated is all in retirement accounts. And all of that money is going to have to be taxed. And the IRS recently just took away the lifetime stretch IRA and said that now the beneficiaries have to take it immediately, or they have to take it in 10 years. But the Right Track Retirement system that we’ve developed here at Secure Money Advisors, is ultimately designed to help you cover all five key areas of retirement planning. That’s income, in taxes, investments, health care and legacy planning. So, for the next 10 callers who call in right now, we are going to give you a complimentary portfolio analysis, folks, it’s truly going to take the mystery out of financial planning, it’s going to map out where you are and where you need to go. We’ll show you what you’re maybe paying in fees. We’ll do a tax analysis; we’ll look at an income game plan. In short, we’re really just going to take the guesswork out of financial planning. So again, for the next 10 callers, that’s the Right Track Financial Review. It’s a portfolio analysis that’s complimentary with no obligation
800-656-8616 You heard Brian, 10 callers right now, get that comprehensive financial review that shows you where you are today but more importantly, get you to where you need to be when it comes to retirement. 800-656-8616 again, 800-656-8616
Brian Quaranta 17:51
Preparing for retirement is a daunting task saving planning and all the what ifs when we come back, we’re going to talk to you about ideas to help build your confidence going into your golden years, right here on retirement.
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.
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 that we’ve covered so much ground, but we’re not done yet. And I 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 19:22
Yeah, if you have a trust or estate plan, fidelity recommends double checking your transfer on death 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’s an expensive process right? So yes, checking your account titling, Steve are 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.
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 it shouldn’t let it come to that. It shouldn’t be done before 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. Yeah. And I didn’t have any of my estate planning documents done. Right. And I’ve been doing this for 21 years. So, shoemakers thing, right? Yeah, it’s the cobblers’ 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. And 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.
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, they work real hard, 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 the earlier you retire at that 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.
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 gotta plan for those, even though you don’t want to the numbers for 2021 are startling. Yeah.
Brian Quaranta 23:14
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 throughout retirement. Wow, 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?
That’s right. Oh, yeah. Well, you make a good point, because that’s very true, right?
Brian Quaranta 24:15
They 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 up 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, in medicine right now. And these numbers prove it. Right. Absolutely.
So again, just what the big takeaway here is one, 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 that distribution phase has five key areas that you have to focus on. It’s 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 retirements 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 at the right track retirement meeting, 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.
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
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.