Brian Quaranta highlights the top lessons we learned from 2020 and retirement strategies to consider for a smoother 2021.
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featuring Pittsburgh’s wealth, financial, and income coach Brian Quaranta
Coming up on Retirement You Radio increasing your financial IQ with BrianQ, we’re going to talk about learning some lessons from the year that wouldn’t go away, 2020. And we’re looking forward to 2021. And in doing so, we will learn lessons and we will implement some things along those lines. So that’s what we’re doing today. And Brian Quaranta is here, of course, Brian, what do you think?
Brian Quaranta 01:00
Steve? I’m hoping and I know a lot of people are hoping to a smoother 2021. before we get too far down the road, let’s highlight some lessons we learned from 2020 that more on today’s show and we come right back on Retirement You Radio.
And welcome, everybody. This is Retirement You Radio increasing your financial IQ with BrianQ. Brian Quaranta is who we’re talking about he is president and CEO of Secure Money Advisors, he’s an IRA specialist, he’s a fiduciary, he’s got over 20 years in the business. Hey, Brian, how are you?
Brian Quaranta 01:50
Steve, how you been? Good. Thanks.
Good, you know, happy new year and all like that. I know, we’re into the month a little bit. But hey,
Brian Quaranta 01:56
I know. I know. I know. You got you. And I got a little bit of a break here over the holidays. Yeah. You know, got to take a little bit of time away from the radio station, which was nice. But it’s good to be plugged back in. Yeah, I think this year is actually going to be a great year. I really do.
Okay, good. Let’s talk about that. What makes you say that?
Brian Quaranta 02:12
Well, first off, I think we’re definitely seeing the markets flooded with capital right now just due to all the stimulus. But more importantly, is that the big thing and this is so important for people to understand, I think we’re starting to see the beginning of a permanent shift of how consumer behavior is going to look in the future. And that is, you know, if you look at the industry, Titans, you know, energy, you know, airlines, things along those, those, those titans of the industry are struggling. But if you look at technology, like Zoom, or Facebook, Amazon, Uber, DoorDash. You know, electronic vehicles, like our electric vehicles like Tesla plug power, I mean, there is a tremendous opportunity in the tech sector right now. And a lot of money being made in the tech sector right now. I mean, there’s individual stocks up 500%, 600%, 700% in a matter of eight or nine months. And so, it’s just going to be a different looking year, it’s a great opportunity to look at reallocating the portfolios, because there’s been such a shift in consumer behavior. But before you get too bogged down in the details, it’s also important that we talk about fundamentals.
And that really is something that I think is so often overlooked. And it became clear to me that, you know, in doing shows like this, there are things that we talk about that we just assume everybody knows, and they don’t.
Brian Quaranta 03:38
Right, right, like retirement, if you look at retirement planning, you know, today, versus 30-40 years ago, things have really changed. And the reason is, if you go back 30-40 years ago, it was pretty simple to retire. You probably knew exactly when you were going to retire to because your employer promised that if you gave them 25, 30, 40 years that they would pay you something called a pension. Remember those?
Well, I don’t have one, but yes, I recall. Yeah.
Brian Quaranta 04:07
And you know, what’s the 85% According to AARP, 85% of people retiring today, do not have a pension. So, if you go back 30-40 years ago, when you retired, you got a pension, and you also applied for Social Security. And of course, just between those two income sources alone, that was probably enough money for you to maintain your lifestyle. Now, if you wanted some additional money, maybe to go on vacations remodel the home, or just some extra cash on a monthly basis. You probably didn’t even have to put that money in the stock market because you could go down to the local bank. And if you look at what people were buying at the local banks at that time, they were buying something called a bank CD. And the reason why they were buying bank CDS is because bank CDs 30-40 years ago, you know what they were paying Steve any idea?
Well, a lot more than they are. Well, I know my dad was happy because Utah asked about CDs. And that’s a long time ago.
Brian Quaranta 05:02
Well, my grandfather used to talk about all the time, my grandfather had a repair shop. And I remember going to the bank with him. And he used to always tell me when we go into the bank, he said, Brian, someday you’re going to work very, very hard for your money. And you want to make sure you protect it. And all you have to do is protect the principal. And you can live off the interest, right? And that’s all we’re trying to do. But when we were going to the banks, all he was doing was taking money that he accumulated and putting it into a bank CD, because they were paying between 10 and 15%. Back then, you know, and if you look at retirement planning today, obviously, you’re not going to find CDs paying between 10 and 15%. I don’t think so. Although if they were, although if they were I personally would probably take all of my money out of the stock market and buy a CD paying 10 or 15%. I mean, yeah, you know, I mean, really, I mean, what do they say the stock market only averages maybe eight to 9%, over a 10-year period, right. So, but anyway, so if you look at retirement planning today’s Steve, it’s changed a lot. Because, again, number one, we’ve got 85% of the people retiring. Without pensions, people are still entitled to receive Social Security. But the grand experiment is that employers replaced guaranteed pensions, with retirement plans, like 401ks and 403, B’s and 457 plans. And if you look at a 401 K plan, or you look at a 457 plan, or a 403 B plan, and you look at the options, inside of those plans, they’re all risk options, and you only have a few options, maybe in a 401k, you might have 2530 options at best. Whereas in the open market, you got 5000 plus different places, you can put your money as far as investments go. But the fundamental challenge that everybody’s going to be dealing with is that they no longer have this other guaranteed source of income called a pension. So, they’re going to have to create a pension, they’re going to have to create a pension. So that 401k that you have, that you’re rolling the dice within the market that you’re contributing to, and maybe your employer is putting a little bit of money into it four to four, also, that is your pension, that is your pension. So, it’s okay to take risk with that money during your working years. But as you start to get closer and closer to retirement, you really have to get smart about how you’re going to process, and you have to start to think about carving off some of those of that money and setting that aside and building a guaranteed pension with it. And this is why if you if you look or read about any retirement planning models, they’re going to talk a lot about bucketing strategies, you can do a two-bucket strategy, you could do a three-bucket strategy, if you do a three-bucket strategy, it might look something like this, where you have 1 to 3 years’ worth of cash flow and bucket number one, and then you have three to 10 years in another bucket where you can take a little bit more risk with it. And then you can have a 10-year beyond bucket. But Steve, this is why we always at Secure Money Advisors offer the opportunity for callers to schedule an appointment to come into our office. And for the next 10 callers who call in right now we’re going to create a one-page financial review that is going to indicate whether or not you’re in need of a full-blown financial plan. This is our Right Track Retirement System. Now, here’s what it’s going to do. Most people I talked to they’ll say, you know, Brian, I just feel at this point in my life, maybe I’m taking a little bit too much risk, and I can’t afford to take a big loss at this point. You know, they’ll tell me that they wish they had a pension, and they want to know how to create one. Or they’ll tell me that they’re afraid they might outlive or outspend their retirement assets. You know, they don’t know how long their money is going to last. Right? They don’t know when to be they don’t know when to begin taking Social Security. And so these are the things that people want to know. And this is really going to determine, you know how well your portfolio is currently set up if you can answer those questions appropriately. So, for the next 10 callers who call in right now, that’s our Right Track Retirement System that we’re going to give away at no cost. We’ve seen others charge up to $1,000 or more for similar features, or offers, but we’re going to give this away to you at no cost, no obligation, and it’s going to take the mystery out of financial planning. It’s going to help you map out where you are now and where you need to go. Again. That’s for the next 10 callers who call in right now.
800-656-8616, 800-656-8616 you’re going to get that comprehensive financial review. You’ll see where you are today, but more importantly, you will have them 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. You want a shortcut? Here it is text BrianQ, all one word, to 21000 Brian gets that direct, text BrianQ 21000.
Brian Quaranta 09:48
The number one fear of retirees is running out of money. When we come back, we’re going to talk about ways to prevent you from running out of money too early.
We’re back on retirement you radio increasing your financial IQ with BrianQ. Brian Quaranta of course is who we’re talking about. I’m consumer advocate, Steve, Brian is president, CEO of Secure Money Advisors, fiduciary 20+ years in the biz, you have got it all. Brian, I like what you’re talking about here, not running out of money, but your Right Track Retirement System. Let’s get on board with it.
Brian Quaranta 10:25
Well, you know, Steve, the reason why we call it the Right Track Retirement System is because that’s exactly what people want to know, are they on the right track? It’s probably the number one question that we get, you know, every single week when people come to the office, and we sit down, we say, you know, over the next 45 minutes, to an hour that we spend together, what’s the most important thing that you want to try to accomplish in the meeting, and people will tell us that, you know, they just really want to find out whether or not they’re on the right track. And you know, the biggest concern that a lot of people have, not only is it being on the right track is, you know, are we going to have enough money? Is this money going to last the rest of our lives? In order for you to determine that here’s the steps you have to take, understand that you really can’t start thinking about what financial products are the right financial products for your situation, until you understand the basic fundamentals behind what drives purchasing a financial product. So, for example, what I mean by that is, number one, and most importantly, are you going to need income from your investments, when you retire, most of the people that we talk to on a daily basis are going to need some type of income from their investments. So, there are three interest rates that you need to solve for. Number one interest rate that you need to solve for is what we call the spin down interest rate. Now this interest rate is the interest rate that you need to figure out what rate of return does your portfolio need to do in order for you to take out however much money you need on a monthly basis, let’s say it’s $1,000, or $2,000, whatever it might be, if you were to take that much money out on a monthly basis, what interest rate would you need that money to do in order for that money to last you the next 30 years or 25 years. So that means the last check we would write would be to the Undertaker, that’s to spend down interest rate, then the next interest rate that you have to figure out is what we call the preservation rate. So, if you’re going to be taken $2,000 a month out of your retirement accounts, what rate of return do you need to do just to preserve the principle just to preserve the principle so that means you can take 2000 hours a month out of your retirement account? And you’re not touching principal? What rate of return is a portfolio need to do in order to do that? And the third interest rate is what we call the legacy rate. The legacy rate is what rate of return does the portfolio need to do in order for you to take the money you want out on a monthly basis, but also continue to grow that money? Now? Why is it important to figure out the math? Well, the math is going to determine what level of risk you really need to take with the portfolio to accomplish your goals. So, you know, if you only need a 3% rate of return to preserve your principal, because you’re not going to take a whole lot of money out or you don’t need hardly any money at all, then why would you be buying aggressive tech stocks and potentially jeopardizing? You know, 30-40 years’ worth of work, once we have figured out what those interest rates are? Now we can start to look at ways to actually generate that cash flow. Now, there’s a lot of different ways that you can generate cash flow, you can generate cash flow by utilizing annuities and annuities can potentially be you know, a great addition to a portfolio. Now, there’s a lot of different types of annuities. You know, this Steve, right, I mean, oh, yeah. You know, there’s, there’s, there’s good ones and not so good ones.
Right, but the thing is annuity is not a bad word.
Brian Quaranta 13:39
It’s not a bad word. No, no, it’s not it’s not a bad word. You know, but you have to understand the difference between them. You know, there’s three basic types out there. There’s a fixed, there’s a variable annuity, and there’s an indexed annuity, now, the one that I personally stay away from that I don’t purchase myself is the variable annuity. I just I don’t like it. There’s a lot of people that don’t like it. Ken Fisher doesn’t like it, right. I hate annuities. You should too. Suzie Orman hates it. There are all these all these all these guys hate it. But it’s usually that variable annuities typically high-end fees. You know, there’s some unnecessary benefits that people are paying for. But a fixed annuity, an indexed annuity can potentially be a good option. A fixed annuity is really simple. It’s no different than a bank CD. You know, you can get anywhere from three to 4% Guaranteed interest on those on those annuities. And an indexed annuity. I mean, you could do an indexed annuity that gives you some interest if the market goes up, but you don’t lose any money if the market goes down. You can also add a guaranteed income rider to those that you know, those potentially could pay anywhere from seven to 10% depending on which ones you’re buying. But those types of annuities you maintain control your money, but they can provide a guaranteed stream of income that you can never run out of. So that’s one way that you could generate cash flow, and you could simply do a two-bucket approach where you could actually split the money out, you know, let’s say you got a million dollars, you could take maybe three to 500,000, put it into a guaranteed annuity, use that to generate your cash flow. And then the money that you actually keep in the risk bucket or the stock market bucket, that money could actually be invested a little bit more aggressively, because you’re actually buying time back on that money by not having to generate income from it. So, the one fundamental mistake that people make Steve is that they try to take money out of a stock portfolio that can go up and down in value. And what folks don’t realize, and this is a lot of research has been done on this, recently by the Harvard School of Business, Wharton School of Business have done a number of white papers on this, where what they’re finding is that people that are running out of money, too early in retirement, before they die, are suffering from something called sequencing risk. And this is what happens when you try to take money out of a stock portfolio. So, for example, you know, let’s say that you’re taking $2,000 a month out of a stock portfolio, but that month, the stock market goes down and you lose $5,000. So now you take your $2,000 out, but this market also takes $5,000 away from you. So now when you take that money out, not only do you lock into the loss, but you compound the loss, so you’re not down 2000, you’re down $7,000 in that month, that takes a while for that money to recover. And that’s called sequencing risk. And there’s a lot of research been done on this. And this is what causes people to run out of money too early in retirement, the most dangerous thing that you can do folks is generating cash flow from a stock portfolio that can go up and down in value. But the right track Retirement System, Steve, is what we’ve created for 2021 for people to come in and take advantage of now. The Right Track retirement system really is all based around all the concerns that all of our listeners always have. And here’s what I always hear people will come in and say, you know, I don’t really have a written plan. You know, I’m not really sure what my retirement looks like, I would really like to have a written plan in place, or they’ll tell me, I think I’m taking too much risk with my money. You know, I don’t want to take this much risk, because I can’t weather another bear market or market correction or take a big serious market loss, people will tell me I wish I had a pension, you know, to have peace of mind that I’m not going to run out of money. And I want to learn how to create one, you know, they’ll tell me they’re afraid that they might outlive or outspend the retirement assets. That’s why we created the Right Track Retirement System. And for the next 10 callers who call in right now, we’re going to give you and create a one-page financial review that will indicate whether or not you’re in need of a full-blown financial plan. Now, I’ve seen other people charge up to $1,000 or more for similar features and offers that we’re going to give you at no cost when you come in. So again, for the next 10 callers. That’s our Right Track Retirement System that’s going to address five key areas is going to address your income, your investments, your taxes, your healthcare, and your legacy. Take advantage of folks, you got to do your part. You can’t kick the can down the road, pick up the phone, give us a call and schedule an appointment with us.
800-656-8616 you heard Brian the next 10 callers get that comprehensive financial review showing you where you are today. Yes, but when you walk out, you will be on the right track. Oh, thanks to the right track Retirement System. 800-656-8616. Again, 800-656-8616, or just text BrianQ to 21000. All one word, BrianQ to 21000
Brian Quaranta 18:15
maximize your returns and reduce your risk. Is it possible in 2021. When we come back, we’re going to talk about the best ways to maximize returns and reduce risk at the same time.
We are back on retirement you radio increasing your financial IQ with BrianQ. Brian Quaranta, of course, we were talking about I’m consumer advocate Steve and we’ve had a great discussion so far today. But while you really got my attention this time, Brian, you know, maximizing our returns and essentially minimizing risk? I mean, how do we do that? You know…
Brian Quaranta 18:53
You do it through technology. That’s the way you do it.
Brian Quaranta 18:57
Well, look, the bottom line is, first off, we got to understand where you’re at. So how do you know where you’re at what the potential return of your portfolio is, if you have never done an analysis on it, and this is why you can’t get a second opinion from the people that gave you the first opinion. So, we use a very powerful third-party software that will help you determine what your risk score is. Now that risk score is going to help us dive into very specific details of your portfolio. So, for example, when we run the portfolio analysis for you, it’s actually going to show us what the probability of success of the portfolio is. It’s going to show us what the potential maximum return is. It’s going to show us what the maximum loss or drawdown is, it’ll show us what the potential annualized rate of return will be the fees, the dividends, so on and so forth. Now, you have an unbiased data-driven analysis of where you currently are now, if you look at most portfolios out there today, traditional retail mutual fund portfolios, you know, traditional asset allocation models. Here’s what we’ve got understand a lot of the technology out there that’s being used today is very antiquated. And what I mean by that is this. If you look at just the traditional, you know, portfolio that most advisory firms put together for a client, it might look something like this, that, you know, let’s say the client comes in. And we’ll just do something really simple for basic math, let’s say, you know, guy comes in with $100,000. But what do you do? Well, here’s what most firms are going to recommend, they’re going to recommend that you take that money, and you split it up into maybe three to five different mutual funds. And maybe you’re going to buy some large caps, and mid-caps, some small caps, some international, maybe some bonds, depending on what the client’s age is. This is what we call asset allocation. All right. And the idea is, you’re gonna take a little bit of money, and you’re going to put a little bit of money in each of those buckets. And the reason is, is because you want to diversify out those sectors, you don’t know whether large caps are going to be doing well, whether small caps are gonna be doing well. So, one, one area portfolio might be going up, one might be going down, one might be going sideways. And then what people are told is that the firm is going to watch that money, that the firm is going to make recommendations based on the economic environment. And when they see things changing in the economic environment, they’re going to come in and they’re going to make changes to the portfolio. Well, that all sounds great in theory, but it doesn’t really happen in practice. And you know, just think about it like this, folks, if an advisor has 100 clients, heck, if they’ve got 25 clients, how are they going to go into these portfolios every day, every month and make changes to these different mutual funds that they’ve purchased for you? It’s a very antiquated way of doing it. And who’s to say even if they make the changes, that it’s the right changes with how quickly the market moves. This is where we can use technology to our advantage if you look at the market today, Steve 70% of the market is being traded through algorithms. Steve, you know what an algorithm is, right?
Absolutely. That’s amazing to think about,
Brian Quaranta 21:49
well, this is the technology that we can use to our advantage. And this is something that can help us maximize returns and potentially reduce more risk. So, you know, for those of you don’t understand an algorithm, let’s take Facebook, for example. So, let’s say you’re just scrolling through Facebook. And let’s say that you see something interesting, well, what’s gonna happen is, you’re most likely going to slow down the pace in which you’re scrolling at Facebook recognizes that and it captures a data point. Well, what happens if you stop and look at something that’s another data point, what happens is you click on something, that’s another data point, what happens if you purchase something, that’s another data point. And as it continues to collect all these data points on you, if you like cooking, you’re probably going to see more things in your Facebook feed about cooking. If you like fishing, you’re probably going to see more things in your Facebook feed about fishing, YouTube’s the same way, if you go on there and watch videos about how to create, you know, make fishing flies or how to, you know, cook, you’re probably going to get more videos about that type of stuff. So, in the investment world, it works the same way. Algorithms are built around the economic cycle. So, the algorithm can use the data based on the economic cycle based around money supply, interest rates, volatility, and it can automatically start to make decisions within the portfolio of where to move that money to. So, a great example, you know, you go back to March, or February and March of 2020, when most people lost 30% of their portfolio, if you were in an algorithm-based portfolio lost less than 10%, because the algorithm picked it up quickly sweep the money from the volatile positions into a more protected position. And as soon as the market recovered, it was able to sweep that money back. Those are the advantages of utilizing technology. We’re in a marketplace today, that moves so quickly, that a lot of the old ways of doing it are just not dynamic enough to be able to keep pace with how fast the market moves, it’s nothing for us to see 1000-point gain or drop in a day anymore. It’s not a big deal anymore. But what’s doing that’s not the average investor making that happen. That’s algorithms selling big shares, big blocks for hedge funds, and big institutions that are moving monies very, very quickly. How nice would it be to have a portfolio that’s based around that level of technology, that it can move money in and out for you in the right positions based on what the algorithm is determining? You think that algorithm is going to be a little bit smarter than Bob, the financial advisor?
I think so! I can just see Bob, in my mind, too. There you go.
Brian Quaranta 24:18
Yeah, this is the technology that people aren’t being told about. So, at Secure Money Advisors, this is the (unknown) that we’re doing, and this is why the Right Track Retirement System that we’ve created is going to help you look at better ways to approach retirement to help maximize those returns and potentially reduce risk. And again, the Right Track Retirement System is all based around the things that we hear on a day-to-day basis. People need to know certain things and number one thing they want to know is Am I on the right track. Am I doing the right things? Am I making the right moves with money right now? Could I be doing better? You know, if you thought that for yourself, Could you be doing better? Could you be paying less in fees? Could you be making more money? Could you be taking more money on a monthly basis without potential be running out. These are the things that you want to find out. This is what our right track retirement system is going to do for you. You know, when people come in Steve, a lot of the things that the Tommy let’s say, you know, I just feel like I’m taking too much risk at this point. I can’t afford another bear market or market correction, they’ll tell me they wish they had a pension, they want to create one, you know, they’ll say, you know, I’m afraid of out spending and outliving my retirement assets, you know, they don’t know when their money will run out. They don’t even know what rate of return they need from their portfolio. This is what the right track retirement system is going to help you uncover it covers five key areas, income investments, taxes, health care, and legacy planning. Folks take advantage of it for the next 10 callers who call in right now, we’re going to create a one-page financial review that really is going to indicate whether or not you’re in need of a full-blown financial plan. It’s the Right Track Retirement System that you’re going to get at no cost, no obligation, we’ve seen others charge up to $1,000 or more for similar features or offers. But again, we’re gonna give this away at no cost, no obligation, but you’ve got to do your part. You’ve got to get up. You’ve got to pick up the phone, you got to call my office, schedule an appointment, come in, sit down with us for 45 minutes to an hour. Don’t procrastinate. Don’t kick the can down the road. That’s not how you make change. Folks, we look forward to seeing you again for the next 10 callers who call in right now. That’s the right track Retirement System at no cost or obligation to you.
800-656-8616 That’s the number to get things rolling 800-656-8616 you heard Brian the next 10 callers are going to get that comprehensive financial review, help create that Right Track Retirement System that he’s been talking about. Yes, it is a phone call away. 800-656-8616 again, 800-656-8616. Better yet, just text Brian directly. That’s BrianQ to 21000. Text BrianQ to 21000.
Brian Quaranta 26:47
It’s that time against these questions, questions, questions. When we come back, we’re going to answer your questions and more when we come right back on Retirement You Radio.
And we are back on retirement you radio increasing your financial IQ with BrianQ, Brian Quaranta, of course, who were talking about. Secure Money Advisors is where you find him and his team, great team of folks, Brian, that you’ve put together there. And really that that says a lot about you.
Brian Quaranta 27:18
Yeah, well, you know, I mean, I’ve been very fortunate to surround myself with some really great people, we have a lot of dedicated people that are just, you know, they take a lot of pride in the work that they do. So, you know, we get a lot of compliments from new clients, existing clients. We’re very proud of it. I appreciate the recognition for it, Steve.
And again, so let’s jump into some of these questions. While we have some time, I think got some good ones for you today, Phil is asking, he says I have an employer sponsored 401 K and a rollover IRA, and I’ve transferred much of the 401k balance to the IRA. He says I’m approaching 72. Now under the 401k, I can defer the RMDs. So long as I continue to work and maintain ownership in the business less than 5%. His question, though, is may I also defer RMDs from the
Brian Quaranta 28:08
IRA? Unfortunately, you can’t. Okay. You know, that’s just kind of like that. No. But yeah, you know, that’s, that’s, you know, he brings up a good topic, because everybody thinks that it’s just this great idea to roll money out of your 401k immediately when you retire. And, you know, 95% or more of the time, that probably is but you know, I’ve got clients that want to retire early, that have large 401k balances, that if we would have rolled that money out, you know, they would be subjected to the 10% penalty, because they’re under 59 and a half, because just like he can defer it right, and he doesn’t have to take the RMD 401k is also can help you actually retire early, because they have what they call a 55 rule, meaning you can actually start pulling money from a 401k at the age of 55. And avoid the 10% IRS penalty for taking the money out.
So, what’s the requirements to do that? What do we have to do?
Brian Quaranta 29:05
We just have to keep the money there; we just move it to a self- that you can’t tell- you can’t move it to a self-directed IRA. So, so when you’re planning for retirement, especially if you want to retire early, I mean, you know, looking at the 401k can potentially be a good option, but in his case, Phil’s case, you know, keep in mind, you can’t just keep your money in your 401 K and start deferring your, your RMDs. The catch there is he has to still be working, okay, for that same company, right? You still going to be working for the company. So don’t think you’re just going to leave your money at your 401 K company and say, “Oh, I don’t have to take my RMDs now,” which by the way, folks, make sure you’re taking these RMDs because remember, it’s your responsibility. It’s ultimately the IRS says it’s your responsibility. You have to do the right calculation, and you have to figure out how much needs to come out and make sure you do the correct calculations. You can go to the RMD calculator on the IRS website, or you can just Google RMD A calculator spreadsheet and it’ll show you what, what calculations need to be done. It’s actually a divisor number that needs to be divided into your total retirement amount. So, so for example, you know, at 72, I think the divisor number is somewhere around like 27.4, somewhere around there. So, let’s say you’re retiring, or let’s say you’re 72, you got to use your December 31 account balance. So, if we’re figuring out someone’s RMD, for this year, for 2021, we have to use December 31, 2020s, account balance to do the calculation. So we would take you know, let’s say that the account balance for the for an individual is $500,000, well, we’d have to take 500,000 divided by 27.4, that’s going to work out to roughly about $18,000, that money has to come out of the IRA, you don’t have a choice that has to come out of the IRA, it’s going to count as income, you have to pay taxes. Why is it a problem? Well, because that $18,000 could push you into another tax bracket, it could cause your Social Security to become more taxable, it could cause your Medicare to become more taxable. So, these are all things that in retirement planning have to be looked at and addressed. Now, there’s some really neat things that you could do with your RMDs to this year, right. One is that we can give them the charities and you don’t have to pay taxes on them. How cool is that for tax planning?
Brian Quaranta 31:22
Most people don’t know that you can actually give your RMDs charity, don’t have to pay taxes on it. So, a lot of people give the charity as it is, right. But they’re taking money out of their bank accounts or do it where now you could just take it out of your IRA, and not even have to pay taxes on it. That’s pretty nice. That is so but getting back to the reason why you have to take these RMDs if you don’t, you know, let’s use the example that I just laid out, you know, the $18,000, that has to come out. If you didn’t take that out, that is a 50% penalty on the money you should have taken out. So that would be a nice, yeah, that would be a $9,000 penalty that you’d be paying to the IRS $9,000 penalty. So, folks, make sure you get the RMDs. Right, there’s a lot to know, I know, Phil just had a little question about deferring them. But it was a good opportunity for me to speak a little bit more in-depth about all these moving parts with the 401k is the RMDs the tax benefits of the charitable contributions. So, there’s all kinds of different things you need to do. And I think this is the real benefit in working with the experience that we have at secure money advisors and the fiduciary responsibility, we have to provide the planning that we do, because we need to take these deep dives to look for any little twists or turns in your plan that may either be a red flag or be an advantage that we can take. Take advantage of and maximize your tax situation, maximize your income, your returns, so on and so forth. All right, great.
And Phil, again, it’s 800-656-8616.
Brian Quaranta 32:53
And again, folks, this is all been designed around the things that we hear after 21 years of helping people, people always say, I just feel like I don’t have a plan. Brian, I want to know if I’m on the right track. I don’t even have a real written plan. You know, I feel like I’m taking too much risk. At this point. I can’t afford another market correction. People will tell me they wish they had a pension, they wish they could- they want they want to create one, you know, they’ll tell me that they’re afraid of outliving or outspending the retirement assets. They don’t know when their money will run out. They tell me that they need to begin taking income. And they want to know the best ways to be able to do that. That’s what the Right Track Retirement System is going to help you uncover. And if you could relate to any of those things that I just shared with you take advantage of it, folks. It’s for the next 10 callers who call in right now. We’re going to create a one-page finance review that’s really going to indicate whether or not you’re in need of a full-blown financial plan. That’s the Right Track Retirement System. It includes five key areas that we’re going to look at for you, income investments, taxes, health care, legacy planning, folks, you got to do your part. You can’t kick the can down the road. You got to get up, pick up the phone, call our office, take advantage of it. It’s no cost, no obligation to you. We look forward to seeing at the office.
Hey, that sounds fantastic. This is the last opportunity today folks go ahead and give Brian a call. Get on the calendar and come on in sit down let that let them begin to put together that financial roadmap that we keep talking about take a lot of complex financial world make it clear make it easy to understand it’s 800-656-8616 You heard Brian the next 10 callers get that comprehensive financial review and the right track retirement system and you see where you are today but most importantly, you’ll know you’re on the right track as you get close to retirement 800-656-8616 Again 800-656-8616 or text BrianQ to 21000 That’s BrianQ all one word to 21000 Brian, what a great show. A lot of fun today a lot of great information and it’s really important stuff
Brian Quaranta 34:53
Steve, always a great show and it’s super important stuff folks. Take advantage the offer, the Right Track Retirement System. We look forward to seeing you next weekend. We look forward to a great 2021. We’ll see you again on Retirement You Radio.
Information provided this 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.