On this week’s episode of Retirement You Radio, Brian Quaranta shares three things you should consider to help reduce your taxes in retirement.

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Radio Show Transcript

Announcer 00:00

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

Asset protection, tax reduction, holistic planning

Featuring Pittsburgh’s wealth financial and income coach, Brian Quaranta

Brian Quaranta 00:37

Why do we have a show lined up I’ve had time to think and put some things together. And one of the things that I was thinking about was taxes. And I’m gonna highlight three things you could do now to cover taxes in retirement. We’ll come right back right here on retirement.

Steve 00:56

Welcome back, everybody. This is Retirement You Radio, increasing your financial IQ with Brian Q. I’m consumer advocate, Steve and Brian Q, of course, Brian Quaranta. Hey, Brian. Brian, by the way, President CEO of secure money advisors. He is so much more than that. But anyway, good to chat with you, Brian. Nice to see you.

Brian Quaranta 01:12

Hey, Steve, you know, we’re not too far off from having that book finished. It was almost done. We’ve been talking about it for a year. Oh, yeah, exactly. I think actually, I think more than that, it’s in the final edit stages. So Okay.

Steve 01:23

Well, that’s I know, that’s quite a process.

Brian Quaranta 01:25

It’s a big process.

Steve 01:26

You know, when you got the right editor they got to look at stuff, I mean, you know, yeah, it’s a big deal.

Brian Quaranta 01:30

Well, not only that, but I mean, in the financial industry, you also have compliance to deal with right how you say, Oh, I’m aware of compliance. Yeah. So compliance is a big deal, too. But but you know, compliance has always been very friendly to me, because we tend to just keep things very straightforward, right? So compliance only becomes a problem if you’re doing out things outside of the box. But we tend to stay in that box, because compliance likes that a lot better. So, well. But yeah, so How about how about a 0%? Tax bracket? How’s that sound?

Steve 01:59

I think that that is what we all strive for. But the question is, can it be achieved? And can you help us get at least close to that?

Brian Quaranta 02:06

Yeah, I mean, well, first off, let’s just talk before we get into that stuff, let’s talk about the increased government spending we’ve seen because of COVID-19. And, you know, the mindset of putting all your money into tax deferred accounts, like 401, K’s or IRAs, you know, can have a serious impact on your retirement. I mean, if you reach out to a financial advisor, there’s chances, you don’t have a money problem. But you have a tax problem. And the problem is, is that no advisors are talking about the tax problem seems like to me, you know, 22 years now of practicing, the majority of conversations that people are having with their advisors tend to revolve around the investment allocation strategy. And then, of course, you know, the performance of the investments themselves. And retirement planning is so much more than that. I mean, you know, it’s secure money advisors, and we talked about this, whether it be on the radio show, or the TV show, we talk about the fact that there’s five key areas to the retirement planning process. Number one, and most importantly, as your income. Number two is taxes, number three is investments. Number four is healthcare, and five is legacy planning, and there’s taxes that are involved in all of those areas, but let’s just talk about two of them. Income, right, because when we retire, the paychecks gonna stop, but bills, taxes, and all the things you want to do what we call your bucket list, that those things are not going to stop. And for most people, their main source of income is probably going to be social security. Now, Social Security was not designed to cover 100% of your salary when you stopped working, it was only designed to cover about 40% of it, the remainder of the money that you need in retirement typically would come from a pension, but we know what the problem is there. Don’t have anyone. Yeah, they don’t exist anymore. They don’t exist anymore. I mean, most, most Americans need to wake up and realize that their problem has nothing to do with investments or investment performance. That’s the easy part. What it has to do with is understanding how to create an income stream with the money that you’ve accumulated. And that’s where people are being challenged. You know, one of the things that they have taught for a long time is something called this 4% withdrawal rule. And the 4% withdrawal rule was designed back in the early 90s. And it was a way that advisors were telling their clients to withdraw money from their retirement savings for income and retirement. And they said that if you follow this 4% rule that you should, you know, have money for the rest of your retirement, the Wall Street Journal’s come out and said, Hey, wait timeout. This thing needs to be reevaluated this 4% withdrawal rule. They say there’s up to a 57% chance of failure with it right now. You know, depending on what your rate of return is, depending on when you when you retire, but more importantly, taxes because here’s the thing. Let’s Suppose that you’re retiring in the next five years, or maybe you’re already even retired, you probably don’t have a pension because 85 to 90% of the people do not have pensions. So that means when you start to withdraw money from your retirement account, from a 401, k 403, B 457, plan, a traditional IRA, that money is going to be taxed at whatever your income tax rate is. So let’s make it simple. Let’s say you’re going to take $1,000 a month out. And let’s say that you’re in a 20% tax bracket. So $1,000 minus 20%, you’re going to be left with a net of $800. Well, what happens when tax brackets go up? What happens with all of a sudden, now you’re going to pay 30% on that income? Well, now, you’re only going to net $700. So we’re going to erode our wealth over time, by two things, taxes, and inflation. And this is why tax planning is so important as you move into the retirement planning process. And one of the things that we can do is be proactive, by converting to a Roth IRA, as opposed to a traditional IRA Roth IRAs are funded with after tax dollars, and the contributions are not tax deductible. But the key difference is that once you start withdrawing funds, from the money of or from the account, the money is tax free. I mean, what better is there to be in a 0% tax bracket? That sounds good to me, right? Not only that, but it helps you from even your sole security being taxed and what most people don’t realize that if you make a certain amount of money, there’s certain thresholds depending on whether you’re single or married, were Social Security, the tax on your social security, up to 85% of your social security would be taxable. And by the way, that was a benefit. That was a benefit. Social Security was a benefit that we were promised, we would never ever pay taxes on it. The guy that said that was Mr. Roosevelt. And he said, as long as I’m alive, you’re never ever going to pay taxes on your Social Security, you want to take a guess why we pay taxes, because he’s dead. He’s dead. That’s right. But when converting tax deferred funds to a Roth IRA, you do owe taxes on the full amount of the transfer. See, what we want to do is go from taxable money to tax free money, which I’m going to talk about more on the next segment. But for the next 10 callers who call in right now, we’re actually going to give you a complimentary right track analysis, see the number one question that I get every single week when people come to the office, whether it’s me, sitting down with an individual, or one of my advisors, people always say, look, I want to understand if we’re on the right track, the majority of people we meet are not on the right track when it comes to focusing on the five key areas, income, taxes, investments, health care and legacy planning, they might have a diversified portfolio of investments. But that’s not a retirement plan. The strategies and techniques that you use during what we call your accumulation years when you’re accumulating money are not the same strategies and techniques that you use during your distribution years, when you have to start to generate income. You know, they say that a lot of people die when they’re climbing Mount Everest. But believe it or not, the majority of people die on Mount Everest not going up. But coming down. And this is why you need a guide, you need a guide to get you down the distribution plan is where we specialize at secure money advisors. So for the next 10 callers, we’re going to give you a complimentary Right Track Retirement Review. We’ve seen other people charge up to $1,000 or more for the similar features or offers, but we’re going to do a complimentary it’s truly going to take the mystery out of financial planning. We’ll look at what fees you’re paying, we’ll do a tax analysis, we can show you what a cash flow plan looks like how to start withdrawing money so you don’t run out of money in retirement. Most importantly, we’re just going to take the guesswork out of financial planning. So but you’ve got to do your part, you’ve got to pick up the phone and call us and schedule that today. So for the next 10 callers, that’s a comprehensive financial review or giving away complimentary

Steve 08:39

800-656-8616. The next 10 callers are going to get that comprehensive financial review. You’ll see where you are today. Yes, but more importantly, you’ll find that you’ve now got a roadmap that’s going to help get you to where you need to be when it comes to retirement. 10 callers right now. 800-656-8616 That’s 800-656-8616 When

Brian Quaranta 09:01

we come back we’re talking about going from taxable money to tax-free money right here on Retirement You Radio

Announcer 09:10

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

Steve 09:52

We are back on Retirement You Radio I’m consumer advocate Steve and on Retirement You Radio we increase your financial IQ and Brian Quaranta, Brian Q, is here to help us do that each and every week, Brian. So, I think you know, getting to retirement is one thing, getting there with taxes in mind is crucial to have a successful retirement. That’s my opinion, what do you think.

Brian Quaranta 10:13

It’s a big part of the planning process, that’s, that’s being left out for most people. You know, we’d meet 30-40 people a week at our office, you know, we’re extremely busy office and when people come in, when we ask them, what they’re doing from a tax planning perspective, they’re telling us that they’re just not having these conversations with the financial advisors that they’ve chosen. And, you know, look, if you’re going to choose retirement planning firm to work for you, and you’re going to spend money, paying a fee to have somebody work with you, then there should be some value in that you’re getting there. You know, for us, we use a financial planning checklist. And that checklist is how we make sure that we’re doing all the right things at the right times for our clients, because we got to remember, there are different milestones that we hit, you know, let’s say that you’re working with us and you’ve just turned 55. Well, 55 is a really good age for us to start to consider looking at some conversion strategies over time and getting you on the way of getting from taxable to tax free money. Man, there’s the Social Security milestone of 6266 and 70, or 6267, and 70. And when is the right time for you to collect your Social Security? Should you collect it now? Should you delay, and then there’s the 72 milestone, actually, before there’s even 72, we got 65, which is, you know, Medicare. So there’s lots of different things. But tax planning should be at the top of the list. That’s why we’re always talking about the five key areas to our clients at secure money advisors, we’re talking about the fact that we have to have a good income plan, because when you retire, the paycheck will stop. So how are we going to replace that paycheck? Well, one of the ways that we do that is through collecting Social Security. But for most people, that’s just not going to be enough. And for the majority of people retiring today, they don’t have a pension, what do they have, they have a 401 K plan. So, if you look at retirement planning 30-40 years ago, compared to today, things were a lot different. Because 3040 years ago, when you retired, you probably got a pension. So, when you retired, you had social security and you had a pension for people retiring, then that was enough money for them to be able to live on Social Security in their pension. Well, what about additional money that needed maybe to go on vacations, or you know, are used for emergency expenses? You know, or take the kids on vacation? How did they do that? A lot of people back then they would just go down to the local bank, and they would buy a CD paying 10 15%. So, they’d have some extra money coming in there. See, it didn’t take employers a long time, Steve, to replace the pension with this thing called a 401k plan. And you know, the companies didn’t want the liability of taking on this legacy cost of providing somebody with an income for the rest of their lives. So, they said, Well, look, we don’t need to worry about that. Let that let the let the employee worry about how they’re going to generate that income, let’s just give them the ability to save. So now what we have is this big grand experiment, because we got people retiring without pensions, they’re going to need to generate income from their investments. And the other problem is, is that not only are they not getting the pension, but the money that we’ve been convinced to save in or the account that we’ve been convinced to save in is a tax deferred account that grows tax free, so that when we take it out, we have to pay taxes on it. And that’s going to erode our wealth over time. So again, what we’re talking about here is how we go from, from paying taxes to paying zero in taxes. Well, we’ve got to do that through conversions. And here, why is that? Here’s why that’s so good. Because if we can convert money from taxable to tax free, that means when we take $1,000 (I’m using that example, again, of $1,000.) But now let’s say you have everything converted to a Roth IRA, and you take that $1,000 a month out and tax brackets are at 20%. What are you going to net after you pay taxes? You’re gonna net $1,000. That’s right. 1000. But I’m not a math guy, because that’s right. So, if tax brackets go to 30%, how much you’re going to net with that withdrawal of $1,000 2000 bucks. 1000 bucks. That’s right. So, understanding the tax game, if you will, and retirement is so important to you having a great retirement now. We just We can’t just think about taxes on the money we withdraw for income. What about the taxes that your estate will have to pay? If something happens to you, you know, there was a great story in Money magazine a few years ago, about a son that inherited his father’s 401k. The son was the primary beneficiary. So, he calls up the company says, Look, I’m the primary dependent fishery my dad has passed, they say no problem. We’ll send you some documents. He gets the documents in the mail. He fills everything out. He sends it in a couple of weeks later, he gets a check. Thank you for processing the death claim. Here’s your dad’s money. Okay, great. So, he takes the money puts it in his account A few weeks later, he gets a 1099. Now we all know what a 1099 Yes, we that means that every dollar that was in his dad’s account when he processed it that $500,000 came out of his dad’s retirement account went into his hands. And it became taxable at that very moment. And the article went on to say, Steve, that the son owed $240,000, oh, my God is on a $500,000 investment. Now, the secure Act is the secure act and, you know, got signed into law back in 2019, which took away a lot of the loopholes that we have to pass our money along to our family members without them paying taxes on it immediately. Now, the IRS is making it even worse for us with this, what they call this 10 year drawdown where they want all the money out of these accounts in 10 years, you know, we used to be able to use this thing called an inherited IRA and stretch it over time, they’re not even allowing us to do it anymore. So there has never been more urgency right now, to do tax planning, on your retirement money, because of some of these changes. And I’m telling you more changes are coming down the pipeline, because they know that there’s trillions of dollars sitting in retirement accounts that they want to capitalize on. But this is why we do these Right Track Complimentary Portfolio Analysis for the next 10 callers who call in right now, we are going to give you a complimentary portfolio analysis, we’ve seen others charge up to $1,000 or more, we’re gonna do a complimentary, the risk is truly on us. We will take the mystery out of financial planning for you, we’ll help you look at what you’re paying in fees, what you could reduce in taxes, how to generate an income plan that literally can turbocharge your income retirement. Most importantly, we take the guesswork out of it for you. So that’s a comprehensive portfolio analysis, complimentary with no obligation to the next 10 callers, you’ve got to do your part, though, you got to pick up the phone you got to call.

Steve 16:58

It’s very simple, folks. That’s 800-656-8616. That’s the first step. It’s a chance to sit down with Brian and the team at secure money advisors and really kind of go through things begin to put together that financial roadmap, take that complex financial world, turn it into something that really makes sense. It’s a true practical financial review. If you’ve never done it before, no time like the present, don’t procrastinate another day, simply call 800-656-8616. You’re heard Brian, 10 callers. Right now, we’re going to get that comprehensive financial review, plus all the extras that he just described. And when you walk out the door, you will have in your hand that roadmap that we talked about, it’s a guide, that’s going to help get you to where you need to be when it comes to retirement 800-656-8616. That’s the next 10 callers right now. 800-656-8616.

Brian Quaranta 17:53

If you’re feeling anxious about funding your retirement, stick around, when we come back, we’ll outline some ways to kick your retirement savings.

Announcer 18:04

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

Steve 18:46

We are back on Retirement You Radio increasing your financial IQ with Brian Q. Brian Quaranta, of course President CEO of Secure Money Advisors and I like this, you know, we talk about different kinds of retirement planning tips. I mean, we do it every week, Brian, and we talk about the Morningstar report. I know you’ve referenced it many times. But just for clarification, Morningstar, Chicago based investment research firm. They analyze funds stock general market data. Now, Christine Benz ever since I’ve been doing this job, I’ve read her work, so to speak. I mean, she puts stuff out there all the time. And it’s pretty insightful. And again, so what we’re gonna do is take some of the things that she said over the years, and what she’s done for Morningstar and bring it home to you. What do you think?

Brian Quaranta 19:32

Before we get started on that I just kind of want to set the foundation because I think a lot of people think that they’re investing for retirement when in fact, they just have an investment strategy. And I want to really take the time to walk people through what a real retirement plan looks like. And number one, and most importantly, you have to have an income plan. You know, a lot of times when people come to the office, I’ll say, Well, let’s talk about income for a moment. Are you going to need income from your investments? And they say yes. And I said, Well, how much you’re going to need they say I’m going to need about $2,500 a month. Okay? Okay, so $2,500 a month, we know you’re gonna need about $30,000 A year from your investments. So, then the next question is, well, what rate of return to your investments need to do if you want this money to last till age 95? Or age 100? Or what rate of return to these investments need to do if you just want to preserve principle? Or more importantly, is what if you want to leave a legacy or an inheritance? What rate of return do we need to do there? And the income planning portion, I think, is really where people are missing. Because if you think you’re just going to retire, and start withdrawing money from your retirement account, with no strategy whatsoever, please think again, because people are running out of money, I see it at our office, people will come to me and they’ll say, Look, I need your help. We’ve been in retirement now for the last 20 years. And you know, we’ve only got about five years’ worth income folks, I’m telling you, once you get to that point, there’s no fixing it. And see, it becomes because of this 4% rule that everybody has talked about for so long. But one of the things that they didn’t realize, and what people are finally starting to talk about, and I’ve been talking about it for years is sequencing risk. And Steve, I know you know how challenging that sequence risk can be because you’re talking to advisors all over the country course.

Steve 21:15

Yeah, I mean, again, it’s something that is certainly front of mind for many advisors, you among them.

Brian Quaranta 21:21

Yeah, I mean, this is why the Wall Street Journal said, Look, if you follow the 4% rule, there’s up to a 57% chance you could run out of money, depending on when you retire and the return that you get. But remember this capital preservation is the key to building wealth. Understanding capital preservation is about understanding risk. Risk is the permanent loss of capital in real terms over an investor’s time horizon, you know, you should sit with your financial advisor to calculate the actual exposure to equity. And within equity, various market caps for example, some US experts state that investors would have to delay the retirement by six years to recover from a 25% loss of their portfolio six years. So, think about this. Take COVID, for example, when COVID hit the stock market went down 30% in about 40 days, if the market did not have what we call a V bottom recovery, meaning it went down and went right backup, if that did not happen. For those of you that are a year for retirement, five years from retirement, you would have had to have delayed your retirement by about six years in order to recoup and make up from that 25% loss. So, avoiding large losses remains a key element to building wealth. See, as you get closer and closer to retirement, the losses will hurt you more than the gains will help you. Let me say that again. The losses will hurt you more than the gains will help you. And this is why the key to building a retirement plan that you can rely on. And the key to building long term wealth is through capital preservation. And there’s certain strategies, techniques and tools that we can use to increase the probability of success as you go into retirement or if you’re already in retirement.

Steve 23:27

All right, I like the sound of that, that seems to make sense. What else can we do?

Brian Quaranta 23:31

Well for the future, I mean, it’s worth considering annuities in the context of annuities in terms of retirement. You know, annuities will help you to prevent you from outliving your money. And the annuities play a very important role in retirement, Cash Flow Planning. See, if you talk to any investment professional, they will tell you that your number one commodity that will help you during your time of investing is time, the more time you have, the better off you’re going to be. So, what happens as time gets less and less and less. The one commodity you don’t We don’t are not able to create more of him. We’re all running out of his time. So how do you go from somebody telling you that hey, look, if you invest your money, all you got to do is make sure that you’ve got enough time and you’ll be fine. Okay, well, when that time has expired, meaning when you get to retirement, you don’t have time anymore for it to grow. See, you love time and volatility during your accumulation years because you know, if the markets are going down and you’re 35 years old, 40 years old, 45 years old, even 50 years old, you’re actually okay with the market going down because guess what? Your dollar cost averaging meaning you’re depositing money into retirement plans every single month. As the market goes down. This means you’re buying in at lower and lower levels. But as you get to retirement, remember they say buy low, sell high. So, if when you get into retirement and You are going to start withdrawing money from your accounts. And let’s say you’re going to need $30,000 A year when the markets go down, are you going to stop withdrawing that money? Absolutely not. This is why we offer the Right Track Portfolio Analysis. So, for the next 10 callers, you’ve got to do your part, you’ve got to pick up the phone, don’t kick the can down the road on this, this is not a dress rehearsal, you don’t get a second chance at it, pick up the phone, call us schedule your Right Track Portfolio Analysis. Today, we’ve seen other people charge $1,000 or more. For similar features or options, we’re going to take the mystery out of financial planning for you. We’ll look at a lot of different areas of your portfolio, we’ll help you do a tax analysis, we’ll help you create a customized income plan that can literally turbocharge your retirement income and take the worry out of living too long in retirement to where you run out of money because we don’t want you running out of money. In short, we’re going to help you take the guesswork out of it. So, for the next 10 callers who call in right now, we are going to give you a complimentary portfolio analysis of your current situation with no obligation

Steve 25:57

800-656-8616, 10 callers get that comprehensive financial review you do see where you are today. But more importantly, it becomes this roadmap, really a guide that’s going to help get you to where you need to be when it comes to retirement. 800-656-8616 again, 800-656-8616 Brian, as always, a pleasure to be here, have the conversation, because the information you’re putting out there is so important for folks.

Brian Quaranta 26:23

Absolutely, Steve and we’re really committed to providing great financial advice. Take advantage of our offer, folks. We will see you at the office and we’ll see you again next week right here on Retirement You Radio.

Announcer 26:39

Re 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 Crompton nor his guests are liable for the usage of information discussed. Always consult with a qualified investment legal or tax professional before taking any action.

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