On this week’s episode of On the Money with Secure Money, Brian Quaranta discusses how taxes can affect your income, investments, healthcare, and legacy planning in retirement.
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Radio Show Transcript
Announcer 00:00
Investment advisory services are offered through foundation investment advisors, LLC. an SEC registered investment advisor Brian Quaranta and his guests provide general information not individually targeted, personalized advice and are not liable for the usage of information discussed. Exposure to ideas and financial vehicles should not be considered investment advice or recommendation to buy or sell any of these financial vehicles. This information should also not be considered tax or legal advice. As performance is not a guarantee of future results, investments will fluctuate and when redeemed may be worth more or less than when originally invested. Any comments regarding safe and secure investments and guaranteed income streams refer only to fixed insurance products, they do not refer in any way to securities or investment advisory products, fixed insurance and annuity product guarantees are subject to the claims paying ability of the issuing company.
Brian Quaranta 00:39
Folks, boy, do we have a good show lined up today. As always, on this show, we’re talking about income taxes, investments, health care and legacy planning. When we come right back, right here with on the money with secure money. And now on the money. Any good retirement plans starts with the foundation,
Announcer 01:01
Asset protection, tax reduction, holistic planning,
Brian Quaranta 01:04
these are the things that start to move you towards having a retirement plan.
Announcer 01:08
Retirement doesn’t have to be complicated.
Brian Quaranta 01:12
You think that’s the difficult part. That’s just getting started.
Announcer 01:15
And now On the Money with Secure Money.
Steve 01:22
Hey, welcome, everybody. This is on the money with secure money. I’m consumer advocate, Steve. So it all Brian Quaranta is here, Brian, of course President CEO of secure money advisors, and so much more. Brian. Hi, how are you?
Brian Quaranta 01:33
Steve, how are you doing? What a day to talk about taxes, eh?
Steve 01:36
Well, yeah, that mean that’s on everybody’s mind for sure. And you know, we talk about baby boomers and for the most part, I mean, they have more money than any other generation at this point.
Brian Quaranta 01:48
Well, baby boomers do it matter of fact, they’ve got a substantial amount of money saved, especially in tax deferred retirement accounts, like IRAs, 401 K’s 403 B plans that you know, as well as other taxable assets, which means they shouldn’t assume they’ll pay much less in taxes and retirement. There are a few reasons including changing tax policy. And of course, those pesky required minimum distributions we have.
Steve 02:17
Yeah. And again, so as we look at this, we talk about planning for the taxes of tomorrow. How do we do that when we don’t know what the taxes are going to be bright?
Brian Quaranta 02:25
It’s hard. But we want to make a choice around planning for taxes based on current tax law. So, although no one can predict the future, there’s substantial evidence suggesting that taxes will rise. I mean, if you were to ask 10 people, do you think taxes are going up or down in the future? high probability that 90% of them, if not 100%, would say that they believe taxes are going to go up not down in the future. The tax cuts and Jobs Act is going to expire at the end of 2025. But we could see some major changes before then. So, you know, we’re experiencing relatively low taxes. rates right now in 1944. And matter of fact, Steve, the highest income tax rate was 94%.
Steve 03:12
Holy cow, really?
Brian Quaranta 03:16
You know, I think Reagan before he even became president was quoted in saying that, you know, once he reached a certain amount of income, he just wouldn’t work anymore, because it wasn’t, it wasn’t worth working, because 94% of its money would go to taxes. But the maximum capital gains tax rate, by the way, was 40%, which has been conversation where they want to raise it again. I mean, right now, the highest income tax brackets 37%, in the highest long term capital gains tax rate is 20%. And this is why we talk about taxes a lot with our clients, and why we educate people on taxation, because the two things that are going to erode your wealth over time is going to be taxes and inflation. Look at this. Here’s a great example. I mean, Social Security just announced they’re gonna have a 5.6% increase in Social Security income due to the fact that inflation has gone up that much. But let’s just suppose that you’re like a lot of people out there today, where you’re going to retire and you’re not going to have a pension. Matter of fact, 85 to 90% of the people leaving the workforce today for retirement are not going to have a pension, things have changed. I mean, you know, 3040 years ago, it was a lot simpler, because when you had a pension, you didn’t have to worry about where your income was going to come from, you know, between social security and your pension that you got from your company. You could go on and live a great retirement. Now what’s happening is people are going to be required to generate income, right when they stop working paycheck will stop, but bills, taxes, and of course, all the things you want to do on that retirement bucket list. That’s not going to stop. You got to replace that income. How are you going to do that? Well, most people are probably going to start taking withdrawals. from their 401k’s from their IRAs from their 403 B plans, and when you pull money out of those accounts, you’re going to have to pay income taxes on it. Now, depending on how much income tax you pay will depend on how much your overall income is in retirement. So, but let’s just look at some simple math, let’s say you need $1,000 extra a month, and let’s say you’re in a 20% tax bracket, well, you take $1,000 out of your retirement plan, you’re not going to net $1,000, you’re going to net $800, right, because you got to pay the taxes on your core. Now what happens when tax rates go up, which most likely they’re going to that same $1,000 that you were planning on taking isn’t going to net $100 anymore, let’s say tax rates now go to 30% is only going to net you $700. So these are things that we have to be aware of going into retirement, because the number one fundamental, foundational piece to building a good retirement plan that’s going to give you the peace of mind and security you want in retirement is building an income strategy that puts you in a position of having the income that you need on a monthly basis that can also go up over time. Remember, folks the same amount, the amount of money you need right now is gonna be different than the amount of money you need five years from now, 10 years from now, 15 years from now. I mean, you know, all you got to do is go into the grocery store and see how much more your bill is. Right? So, it’s certainly noticeable, it’s very noticeable. So, we have to have a way to increase income. But with that comes now the risk of running out of money, right? Because if you don’t have a guaranteed pension, and you have to withdraw money from your retirement savings, how long is that money going to last? Have you taken the time to figure out what rate of return you’re going to need? Have you taken the time to figure out if the markets were to go down how much of a loss you could absorb before you actually put yourself at risk of running out of money in retirement, it’s so important to make sure that those fundamental key areas are handled. And this is why it’s secure money advisors, we talk about our right track retirement system, whether you’re listening to our radio show, or you’re watching our TV shows, or you’re coming on to one of our educational events, because most people today want to know with a high degree of certainty of whether or not they’re on the right track. Now, my question to you is this, if you’re not on the right track, when would be a good time for you to find that out day before yesterday? Yeah, probably sooner than later. So, our right track retirement system is built around five key areas. It’s helping you understand the best practices to building income replacing that paycheck when you retire. It’s designed to help you reduce taxation, on the best investments that are efficient. You know, we call that Glee around here, gain loss in efficiency of your portfolio G le gain loss in efficiency of your portfolio. We also want to make sure that if you have a health event, that you got a good plan for that. And of course, when the good Lord decides to take you home, you certainly don’t want to make the IRS the largest beneficiary of your money. And that’s why for the next 10 callers who call in right now, we are going to give you a complimentary right track retirement review. It’s completely complimentary. We’ve seen other people charge $1,000 or more for similar features or offers. We will literally take the mystery out of financial planning. We will help you we will bring you through a process to help you determine if you’re on the right track. And if you’re not on the right track, we’ll show you how to get on the right track again for the next 10 callers who call in that’s a complimentary right track retirement review.
Steve 08:23
Hey, that sounds fantastic. Brian, folks, take advantage of this. It is a great opportunity to sit down get that financial roadmap put together that right track retirement review that Brian just explained to you is no cost no obligation and it’s your chance to get that true practical Financial Review. It’s a phone call away at 800-656-8616. You’ll get that comprehensive financial review plus all the extras that Brian just talked about. And when you walk out the door, you will have that roadmap we talk about the guide that’ll help get you to where you need to be when it comes to retirement. So, you’ve got nothing to lose 10 collars right now 800-656-8616 again 800-656-8616
Brian Quaranta 09:05
The closer we get to retirement, the more we need to make sure our plan is helping keep our money safe. When we come back. We’ve got some ideas and strategies that can help you do just that. When we come right back with On the Money with Secure Money.
Announcer 09:28
Do you ever feel like you’re fighting for financial knowledge? Don’t let bad advice be a punch in the gut your retirement to take advantage of a complimentary no cost no obligation consultation with a local trusted financial coach. Call Brian Quaranta, host of Retirement You radio 800-656-8616 or text Brian Q to 800-656-8616 we’ve made it easy for you to take advantage of this fantastic offer. All you have to do is call or text Brian Q to 800-656-8616
Steve 10:07
We are back on the money with Secure Money, Im consumer advocate, Steve, Brian Quaranta is here as he is each and every week, or at least mostly. He’s president and CEO of Secure Money advisors. He’s an independent advisor, he is a fiduciary and so much more. Securemoneyadvisors.com is the website securemoneyadvisors.com, I encourage you to visit that site. Really? Because it’s a constantly evolving process, Brian, I mean, plus we get to see you.
Brian Quaranta 10:35
Yeah, well, that’s, that’s a real treat. And you know, I want to talk about planning for a moment. All right. Sure. I, you know, I think most people really, they misunderstand what retirement planning really is all about, you know, if you own a bunch of investments, that’s great, glad you’re doing something. But that’s not a retirement plan. Because investing is only one area of the retirement planning process. I mean, think about all the variables that need to be solved for your income, oh, yeah, tax strategies, owning the right investments, you know, because the investments that you own right now, during your accumulation years, they’re not the same investments you’re going to want to own during your distribution years, especially if you’re going to be responsible having to build your own pension, there’s just a completely different way of doing it. And most people, unfortunately, when they retire, they keep doing the same thing. And our industry has not done a good job getting people to understand that the accumulation strategy, if used in retirement, does have a probability of failure. And the reason it does is because you have no idea what rate of return you’re gonna get on a year to year basis on your investments. It’s a flip of the coin, you could get a good sequencing of returns, or you could get an unfavorable sequencing of returns. But when it comes down to building a retirement plan, that gives you peace of mind. And the security that we all want after working 3540 years, it comes down to having a plan. So, let’s break down what a plan should look like. All right, number one. Number one, and most importantly, you got to carefully select investments, right, the risk of your 401 K plan varies based on the investments you select within your accounts and most 401k plans provide a very short list of investment options. You know, many of the fun choices will expose you to the volatility of stock market, which offers the potential for big returns, but it also offers the potential for significant losses. Now, remember this going into retirement or when you’re close to retirement, the losses will hurt you more than the gains will help you. Let me say that one more time, the losses will hurt you more than the gains will help you. What does that mean? Well, that means that as we get closer to retirement, it becomes about risk mitigation, meaning we need to focus on our downside number, not our upside number. Because the upside number is very simple. Getting a reasonable rate of return in retirement should not come with the potential of losing a lot of money. And most people have never looked at what the potential loss of their portfolio is, which is called a drawdown number. By the way, this is a technical term that we use in finance to determine what’s the maximum drawdown of this portfolio. We have a very powerful software here at Secure Money Advisors that we will run your portfolio through when we do the Right Track Retirement Review to determine what that maximum drawdown is. Now, why do you want to know that? Well, because if you’re only averaging a 5 to 8%, rate of return over a 5 or 10 year period, but your maximum drawdown of your portfolio could be 40%, the risk that you’re taking is not worth the reward that you’re getting. So, we want to make sure that your portfolio is efficient. And one of the ways that we can do that is by utilizing technology. And technology allows us to take a deep dive into any portfolio out there and look at whether or not we’re getting the return for the risk that we’re taking. Now I don’t have a problem with risk. And most of you out there listening this show probably don’t have anything against risk. But if I’m going to take risk with my hard-earned dollars, I better be getting the return for the amount of risk that I’m taking. And most people have never had someone evaluate that for them. And you come in for your right track retirement review. We will show you what that number looks like. So, you got to know your risk level. Most people don’t know what their risk level is. The most people say, Well, I’m relatively conservative. Well, what does that mean? Well, if I ask somebody, how much money are you willing to lose? They say none. Right? If you ask anybody, how much money are you willing to lose? None? Really? Did you know your portfolio could lose 40% of the market goes down?
Steve 15:23
Oh, that’s hurt, that hurts.
Brian Quaranta 15:25
How about 20%? Would you be Wait, you know, think about it, right? Let’s say you’re five years from retirement retired, you take a 25 30% hit. And you’re gonna need that money for income, you may have to delay retirement. I mean, we saw it happen many times. You know, 2007 2008 was probably the most extreme situation that we saw where people had to delay retirement to come out of retirement because somebody got paid to convince them that it was still a great idea to take risk. One of the very powerful things that we have not only in our software that we use to help determine the drawdown of your portfolio, but we can also give you a risk number. So, for example, the S&P 500 index has a risk score of 70. Well, if I plug in all of your portfolio data and your risk score comes back at a 75 or 80. That means you’re riskier than the overall market, people will say, I didn’t want that much risk, I had no idea my risk number was that high. Know Your Risk Number. As you get closer to retirement, it’s time to shift into more conservative investments over time, the closer you are to your retirement age, the more conservative your funds should be. If the market crashes, when retirements only five years away, it can be devastating to your 401 K balance. So, take advantage of the right track retirement review. We offer it every single weekend. Those that have taken advantage of it will always say to me, I wish I would have done this sooner, because you opened my eyes up to things I wasn’t even focusing on. Remember the right track retirement view is all about five key areas income taxes, investments, health care and legacy planning. Folks, for next 10 callers who call in right now, we’re going to give away complimentary review. That means it’s no cost to you, you get to come in and do it at no cost. Not only that, but there’s no pressure to do anything. But you got to do your part, you got to pick up the phone, you got to call us today. And you’ve got to schedule that time to come in. We know the process of meeting with an advisor can sometimes be intimidating, but it’s not when you come to secure money advisors because we make the process very simple and easy for you to understand. So again, for next 10 callers as a complimentary right track retirement review
Steve 17:32
800-656-8616 10 callers right now, get the comprehensive right track retirement review, and it’s a phone call away at 800-656-8616. Again, 800-656-8616.
Brian Quaranta 17:47
There are plenty of things that can impact your retirement, don’t let procrastination be one of them. When we come back, five things not to put off. When it comes to retirement planning. We come back right here with on the money with Secure Money.
Announcer 18:07
He’s letting the clock run out on his social security to age 70 For maximum benefits. And here comes the Roth conversion. He’s got some outstanding coaching with that lifetime income plan. He’s created his own pension as well. And it looks like he’s going to go All! The! Way!
Play your best retirement game call Brian Q 800-656-8616. Or text Brian Q to 800-656-8616. Call or text Brian Q two 800 656 8616.
Steve 18:43
We’re back on the money with Secure Money and Brian Quaranta and consumer advocate Steve having a great conversation today covering some ground, Brian, I like it. We were talking about inflation. And then we talk about stress testing your portfolio understanding how to take that stress out of your portfolio and importantly, out of your life when it comes to retirement. What do you think, Brian?
Brian Quaranta 19:03
Theres a lot to it, isn’t there? I know. Well. I know. We’ve got some quite a few questions.
Steve 19:10
Well, yeah. You were talking about stress test. And we talked about stress and your plan. I used to work for a guy who would say, You know what stress is? Well, yeah. You know what the absence of stress is? What’s that? Death?
Brian Quaranta 19:27
Right. Yeah, as long as we’re, as long as we’re alive, there’s gonna be stress, isnt there?
Steve 19:31
Exactly. I could help ease that a little bit. And yeah, tons of questions. So, Brian, let’s jump in while we still got some time, I guess. And we hear from Ron. He says I just turned 52 been working for the same company but 21 years. I came in at the tail end of pensions and was then converted to a 401k, have never met with an advisor, think it’s time. What should I be looking for and how should I prepare? I like that question.
Brian Quaranta 19:57
Very common these days, where we’ll see people that had been working for employers, where they got in on the tail end that a pension, the pension was cut off, they now converted to a 401 K plan. So here, you’ve got Ron who’s going to be retiring, he’ll probably get Social Security. On top of that, he’ll probably get a small pension because the pension at some point was stopped to go to the 401k plan, but who also had the balance of the 401 K plan, that he’ll be able to generate some cash flow from it if he needs it? But you know, Ron, is exactly like everybody, as they’re shifting to retirement, what Ron should be looking for, and what he should be preparing for more importantly, is his income strategy and retirement. Remember, folks, the driving force behind the retirement plan is the income strategy. Because when you stop working, the paycheck is going to stop, but bills, taxes and all the things that you want to do, that’s not going to stop. So, we have to have a way to replace that. You know, and Ron’s probably never sat down with anybody that focuses on the distribution phase, he’s probably, you know, so focused on just accumulating money, he doesn’t know how to actually take the money that he’s been putting away and has an all these different plans and organize it in a way where he can see, hey, if I retire at 62, I’m gonna be fine. If I retire at 60, I’ll be fine. And that’s part of our job here at Secure Money, advisors is to show you: number 1- could you retire earlier than you thought? And what would be the benefits of waiting so, but the five key areas is what he should be preparing for income taxes, investments, health care, and legacy planning. Folks, I promise you, if you focus on those five key areas, you make sure every i is dotted and every T is crossed, you’re gonna have a great retirement.
Steve 21:41
I like the sound of it. Brian 800-656-8616. Ron, if you’d like to go sit down with Brian. Sharon is wondering, she says, I’ve seen a lot of commercials recently for ETFs. But I don’t really understand how they work. Can you explain and then do you find them to be a good or a bad investment? That’s a good question.
Brian Quaranta 22:00
Yeah, well, again, flip phone versus smartphone, right. So, think of your mutual funds, right? Everybody knows pretty much, you know, what a traditional mutual fund is, it’s a basket of managed stocks. So, if you were to look at, let’s say, a growth fund from any specific fund family, you’re going to see maybe 50 to 100 stocks, within that, within that mutual fund, and those stocks are managed, they’re not very tax efficient, they can generate a lot of turnover, which in turn, could have the client pay more taxes than necessary. ETFs have come into the marketplace, which provide a higher level of diversification much, much, much lower and cost, they trade at a real stock value, meaning I can buy an ETF at 1pm, sell it at 130. And I can get a buy price and a sell price. Whereas with my mutual fund, if I want to put a sell in in the morning and the mutual funds up, I don’t get the sale price until the end of the day known as the NAV or net asset value. And that could have gone over and down over time. So, you’re gonna find that mutual funds are slowly starting to become kind of the dinosaurs of the industry. I don’t think they’re ever going to go away, because there’s trillions of dollars in mutual funds, companies have invested their entire strategy into mutual funds. But moving forward, you’re going to see lots of people moving towards ETFs, a lot more flexibility, lower cost can be managed actively, much better and much more tax efficiently that we’re seeing with any other investments. So, I personally use ETFs. Sharon, if that means anything to you of how I feel about them. But the main difference is the fact that highly diversified lower fees, and you get a real share price.
Steve 23:48
All right. Well, let’s see. We got time for one more. I’m gonna go to Ernie. He’s wondering about Social Security benefits being withheld because of excess earnings. He’s wondering if they’re returned to you in monthly installments once you hit full retirement age.
Brian Quaranta 24:01
Gee, Steve, I don’t know the answer that one.
Steve 24:03
It’s right below there. Haha!
Brian Quaranta 24:08
All right. Let’s ask the question again.
Steve 24:09
Okay, here we go. And we’ve got time for one more. Let’s go to Ernie as he’s wondering about Social Security benefits being withheld because of excess earnings. What he’s wondering is if those months if those earnings are returned to you in monthly installments when you reach full retirement age?
Brian Quaranta 24:24
Yeah, good question. So, after you reach full retirement age, Ernie, here’s basically what they’re going to do. We will recalculate your benefit amount to give you a credit for any month in which you did not receive a benefit because of your earnings. They’ll send you a letter telling you about it any increase and your benefit amount. Keep in mind it’s actually really divided out over a longer period of time. So, you get it back, but it takes a long time to get it back.
Steve 24:49
So, there’s no lump sum deal going on there.
Brian Quaranta 24:51
No lump sum deal. No lump sum deal. But again, Steve, this is why we offer the right track retirement because everybody wants to know if you’re on the right track. And if you are listening to us today, and you want help getting on the right track, reach out to us schedule a time for the next 10 callers. We’re gonna give you a complimentary right track retirement review, it’s going to help you go over those five key areas income taxes, investments, health care and legacy planning. It’s truly going to take the mystery out of financial planning. It’ll give you a peace of mind and security that you deserve going into retirement, knowing you have a full written plan and that you’ve executed on everything that you need to execute on. But you got to do your job. You got to pick up the phone and call us today to schedule that time.
Steve 25:33
Hey, that sounds fantastic. Folks, here it is last opportunity today to give us a call 800-656-8616 You heard Brian 10 callers right now get that comprehensive financial review. You’ll see where you stand today. But what’s more important as you’ll find you’ve got a roadmap a guide, it’s going to help get you to where you need to be when it comes to retirement 800-656-8616 Again 800-656-8616 Brian its always a pleasure to be here with you and again such great information for everybody today.
Brian Quaranta 26:03
Thanks a lot Steve. And folks, we will see you again here next week with On the Money with Secure Money have a great week.
Announcer 26:17
Investment Advisory services are offered through foundation investment advisors, LLC, an SEC registered investment advisor Brian Quaranta and his guests provide general information not individually targeted, personalized advice and are not liable for the use of drip information. Discuss exposure to ideas and financial vehicles should not be considered investment advice or recommendations, buy or sell any of these financial vehicles. This information should also not be considered tax or legal advice. Past performance is not a guarantee of future results. investments will fluctuate and when redeemed may be worth more or less than when originally invested. Any comments regarding safe and secure investments and guaranteed income streams refer only to fixed insurance products did not refer in any way to securities or investment advisory products. Fixed insurance and annuity product guarantees are subject to the claims paying ability of the issuing company.
