On the Money with Secure Money: Episode 64

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Video Transcript

Cynthia de Fazio – 00:20

And welcome to on money with secure money. My name is Cynthia De Fazio and I’m joined today by Brian Quaranta. He is founder and president of secure money advisors as well as Neil, major senior investment advisor. Brian, how are you today?

Brian Quaranta – 00:33

Cynthia, I am great. So good to see you again.

Cynthia de Fazio – 00:36

It’s so good to see you as well. Nice to be here. Neil, how are you?

Neil Major – 00:40

I’m great. Cynthia, how are you doing? Fantastic.

Cynthia de Fazio – 00:42

Thank you so much. And I’m so looking forward to our show today. Because obviously, we know we’ve had a lot of viewer call in we’ve had a lot of viewer questions. They’ve been in the pipeline. They’ve been waiting patiently. So I would love to spend today addressing viewer questions. Right out of the gate. Yeah. All right, who wants to take the first one,

Brian Quaranta – 01:01

let’s see who can give the better advice is going to be

Neil Major – 01:05

perfect is great. I love

Cynthia de Fazio – 01:07

I love it. Well, Neil, I’m going to guide this to you then says I’m 67 years old Neal and I intend to take so security benefits at age 70. My wife turns 65 years old in June, she does not have the minimum 40 credits of work to get her Social Security retirement benefits. When she turned 65. Can she claim spousal benefits? If so, how would they be calculated? If she claimed spousal benefits? Will they have any effect on my benefits when I claim age 70?

Neil Major – 01:37

That’s a mouthful. Very good question, though. I would just ask that maybe we revisit the social security strategy because your wife is eligible for spousal benefits, but not, she’s not eligible until you start claiming your benefits. That’s when she would be eligible. Okay. So if you wait till 70, she’s not going to be eligible until that make her like 67. Yeah. So she won’t be eligible until then. Now, she’s also only eligible to receive 50% of your, your primary insurance amount of benefits, which is simply your full retirement age benefits. So she’s not going to have any advantage for you waiting till 70. Okay, now, that’s going to have no impact whatsoever on your benefits. If at age 70, you’re due to get $3,000 a month, you’ll get your $3,000 a month, and she’ll get whatever the spousal benefit is. Now, we do a lot of math at secure money advisors around social security. And I’ll tell you that strategy, most likely, unless you live to like 99 100 is probably not going to be the most favorable strategy, if you just look at it in terms of math. Okay. Okay. So I would, I would, you know, come into our office for a second opinion. We base things, obviously, on income planning, the first thing that we solve in Social Security as a primary part of that income planning, but there might be a better route and direction together.

Brian Quaranta – 03:10

I think the big takeaway from what Neil just said, is that there’s no extra benefit to the spouse for him waiting till 70. Okay, right. So she’s going to get, she’s going to get her spousal benefit. And he’s pretty close, he could probably turn it on right now. And she get her full spousal benefit. Okay, so him waiting isn’t going to take much of it make much of a difference there at all. So all right, that’s the big takeaway.

Cynthia de Fazio – 03:31

Okay. All right, Neil, thank you so much, Brian. Thank you. So this is a great question as well. And this is for you, Brian, my wife and I file taxes jointly, we are both approaching 50 years of age, we currently have a combined 750,000 In traditional 401k Money, both of us are still working and have a taxable income about 150,000. I want to switch future contributions from my traditional 401k to a Roth 401k. We currently give 35,000 a year to our 401k, which if I switch to a Roth 401k will push us into the 24% tax bracket. My goal is to have some on taxable income to fade our tax burden in retirement. Is this a bad idea?

Brian Quaranta – 04:16

No, no, not at all. I mean, making contributions to the Roth portion is good. I mean, obviously, you know, we are delaying paying taxes when we’re not putting money into a Roth. So I see no problem with it at all. I mean, I would I like to see people mixing up the monies that they’re contributing to the 401k. And it’s only been recently that the 401 K’s allow that Roth component to be added meaning now we can contribute money, we’re not getting a tax deduction as she was referring to, but the money that goes into the Roth portion is going to grow tax free and the income in the future is going to be tax free. So there’s a great advantage with that. Now, the only thing that they’re not gonna they have to understand is that they’re going to pay a little bit more in taxes as was mentioned, right because She’s not going to be able to take the deduction when she makes a contribution to the Roth component of the 401k. But listen, I do a conversion almost every single year on my money, I rip the band aid off, I pay the taxes. Why? Because you got to believe tax rates are going to be higher in the future. And if you believe tax rates are going to be higher in the future, I always say would you like to pay the taxes on the seed or the harvest? The seed is a lot lesser amount, the harvest is a bigger amount. So I would rather pay the taxes on the seed. And sometimes that means being a little bit uncomfortable paying a little bit more taxes right now for a much greater benefit in the future, when tax rates could be much, much greater.

Cynthia de Fazio – 05:35

Okay. All right, Brian, thank you so much, Neil, this next question is for you says, Neil, I have most of my money in a traditional IRA. I’m 66 years old, I’m still working. Is it better to convert to a Roth IRA and invest? And am I able to transfer the stocks in the traditional IRA? Or do I have to sell them? Sell them? Excuse me?

Neil Major – 05:57

So a few points are right, you’re continuing to could tell it tell me that first part again? Yeah.

Cynthia de Fazio – 06:02

So she said, I have most of my money in a traditional IRA. I’m 66 years old, I’m still working. Is it better to convert to a Roth IRA and invest? Am I able to transfer the stocks in the traditional IRA? Or do I have to sell them?

Neil Major – 06:16

Yeah, so that’s an interesting question. You know, Roth, is all the rage right? Now everyone wants to do a Roth, they’re not exactly sure what it means. But they want to do a Roth. And it’s a really great tragedy, just like Brian was just talking about contributing to the Roth 401k. The conversion doesn’t make sense for everybody. You know, what’s this particular person, I have no idea what her future incomes gonna look like? Is she a single person that’s only going to have a social security check? Who needs very, very little to live off of from that traditional IRA, and may be in a 0% tax bracket anyways, in retirement? So do we need to convert? I don’t know, it was

Brian Quaranta – 06:53

easy. The easy answer is, yeah, convert because tax free money is better than taxable money, right? But, but because there’s so many variables and everybody’s situation, that conversion could cause her to pay astronomical amount in taxes, because we don’t know if she’s married. We don’t know if she’s married, do we? We don’t know who’s married. We don’t know. She’s single, we don’t know what her income is. So the point is, conversion does have benefits. But there’s a lot of variables that have to be calculated, because of income thresholds and all kinds of stuff. It’s it’s very challenging. And it’s not as straightforward as people would like it to be. And they think it is they think, Well, shouldn’t I just convert and go from taxable to tax free, it’s not really that easy. That whole situation needs to be evaluated to determine the true benefit from the conversion.

Cynthia de Fazio – 07:35

Okay. So really, what it comes down to is really, people need to come in to have a personal consultation. So you can take a look at the total,

Brian Quaranta – 07:42

they don’t even need to come in and see us and go see your advisor, go see your advisor, because at the end of the day, you can’t they’re not gonna be able to make that decision on their own. Yeah, because there’s too many variables. And if you’re not getting the advice from your advisor to make that informed decision, then yes, come in and see us show because we want to talk with people that want help, right? We don’t we don’t want to talk with people that are happy with their advisors and have no intentions of hiring us. Right. We’re more than happy to, you know, answer a few questions. But at the end of the day, we’re looking for people that truly have concerns because they’re not getting any advice. Yeah, right.

Cynthia de Fazio – 08:15

Yeah, absolutely. Well, Brian, I know that you and Neil have a very special offer to present to the viewers at home today. Let’s talk about what that is. And then open the phone, the

Brian Quaranta – 08:23

right track retirement review, folks, it’s truly designed for you because everybody comes in wanting to know if they’re on the right track. And there’s so many different things. People want to know about their specific situation. And it’s so hard to go through all the different variables on this show. But when you come in, we’ll be able to talk specifically about your situation and help you get some more clarity and peace of mind around your retirement. So for the next 10 callers who call in right now, it’s a complimentary right track retirement review, that we’re going to give away at no cost. All you got to do is call us today. 1-888-382-1298 and schedule your appointment.

Cynthia de Fazio – 09:01

Brian, thank you so much, Neil, thank you, to the viewers at home, the phone number to call is on your screen. That number is 888-382-1298 like Brian and Neil have mentioned before, if you’re not on the right track for retirement, when you want to know that today, this is your opportunity to call in and find out that number is 888-382-1298. We’re going to take a very short commercial break, but don’t go anywhere. I have a lot more viewer questions to get through. The next one could be yours. Stay tuned.

Brian Quaranta – 09:29

See, everybody can tell you how to invest your money. There’s not a lot of people out there and a lot of firms that can teach you how to use your money. Most people also tell you that they’re scared. And the reason they’re scared is because they’re afraid of running out of money.

Neil Major – 09:43

The last thing you want to do is have a really good job and you’re in your 60s retire, be looking for work again in your late 70s.

Brian Quaranta – 09:51

The average person might say Well a good portfolio would be a good mix of stocks, bonds, mutual funds. A good portfolio is all designed around the five hearings, income, taxes, investments, health care and legacy planning.

Neil Major – 10:05

There’s we’re not just product pickers here, what we do best here as we build retirement plans,

Brian Quaranta – 10:10

nine out of 10 people, when they walk through the door would ask us, we just want to know if we’re on the right track. And I always say, if you’re not on the right track, when would be a good time to know it? Probably now,

Neil Major – 10:21

people you know, can actually see a vision once we start to really build out their plan.

Brian Quaranta – 10:27

This is about you, if you’re not getting what you need, and you feel that when you walk out of the advisors office, it’s time to get a second opinion. And you can’t get a second opinion from the person that gave you the first of the difference at secure money advisors. As a fiduciary firm. We help you manage the risk, build the income, and give you the retirement withdrawal.

Cynthia de Fazio – 10:59

And welcome back to on the money with secure money. My name is Cynthia De Fazio. I’m joined today by Brian quanta, He is founder and president of secure money advisors as well as Neil majors senior investment advisor. Gentlemen, I love today’s show, because it’s all the viewer questions they have been waiting so patiently. And so are you ready to keep going? Let’s keep going. All right, Neil, I’m going to take this next one right to you. It says Neil, in your opinion, what exactly is rebalancing a portfolio? And is it necessary? In your opinion? Is it necessary?

Neil Major – 11:29

Yes, I think there’s a lot of different ways that we could look at rebalancing, I’m gonna tell you the most simple way that you know, we go about looking at it, okay. And the viewer should just understand what needs to be done. So we break out money in different buckets. And the different buckets have a certain goal and task that that money is responsible to do. Some of it’s just to sit there and be safe and liquid, some of it is to be safe and generate income. And some of it is to be more growth oriented. Okay, so we want to set up our three buckets, bank pension and risk right now, our pension money is what we’re going to use in the short term to generate our cash flow in our income in retirement, okay, so we’re going to typically want to use that money up over a 10 to 15 year time period. Now, that money enables the risk money to grow and deal with market volatility and not cause us a lot of concern. So what will happen at times, is as the years go by, our risk bucket is growing. And our pension bucket is starting to decrease. So we want to continue to get the money positioned in the right way, set up for retirement. Now we can also look at rebalancing in terms of, you know, different mutual funds and things like that. But that’s just the most simple way for a viewer just watching the show for the first time to understand, Okay,

Brian Quaranta – 12:53

well, I would say this too. I mean, typical rebalancing has to do with the specific investments, like if I have three mutual funds in an IRA account, and they all have $25,000 apiece, and one over the course of the next six months grows from 25,000 to 50,001, grows from 25,000 to 40,000. And the other one stays at 25,000. Rebalancing, this is what they’re probably referring to, because they hear about it all the time with our 401 K’s we rebalance your 401k for you, it means they’re going to equally split those investments. Now, back amongst those three, right, so you’re not going to have 50,000 in this one anymore. 40 in this or 25 They’re all going to have the equal amount. And sometimes that’s not a good thing to do. So that’s what Pete When people hear rebalancing, especially from there, advisors or their 401k companies. That’s what they’re referring to. What Neal is referring to, though, is our approach of rebalancing a distribution plan, as income is starting to be withdrawn, and investments grow. And the distribution plan needs to be rebalanced, so that it continues on without running out of money.

Cynthia de Fazio – 14:00

Okay. All right. Thank you both excellent responses to that question. So this is a great question to Brian, I’m going to actually just go ahead and give this to you. It says, what can cause a shortfall when you’re talking about the retirement income gap?

Brian Quaranta – 14:13

Yeah, so a shortfall is really simple. So when you retire, there’s going to be a certain amount of income that you need on a monthly basis on an annual basis. So let’s just look at it annually. Let’s say you need $80,000 A year annually to live off of and between your Social Security sources. Maybe you’re a married couple, you have $50,000 A year coming in. The shortfall is the difference between what you need and what you’re getting in guaranteed income. So if I take what you need $80,000 minus your social security $50,000. I’m left with a shortfall of $30,000. Yeah, that’s the problem that now needs to be solved. So how do you solve that? Well, that’s exactly what we do at secure money advisors through our bucket approach, which Neal just kindly explained to us. The three different buckets help us generate the cash Low to get the extra 30,000. So we can get you $80,000 A year in income. And then on top of that a good plan would take into account inflation so that as cost of living goes up, you have more money coming in.

Cynthia de Fazio – 15:10

Okay. All right. Thank you so much, Neil, this is a great question. I’m going to guide it to you, as is Neil, how do you keep track of so many different retirement and investment accounts for your many clients?

Neil Major – 15:20

Yeah, that’s a great question. We have a really great team at secure money advisors to help and handle and assist us and make sure that we’re making sure we’re monitoring our clients accounts, make sure that we’re, you know, people are in different stages of their life and require different things out of their investments. So you know, we have a great team, and the team helps in our situation, Brian’s been very proactive, about adding more staff, much sooner than we need it. Okay, so we have people in place that, you know, are, you know, we’re not trying to teach them on the fly. So we have a great team in place that just kind of monitors, you know, Brian, myself, we’re in there each and every day, numerous, and the

Brian Quaranta – 16:01

technology we use helps a lot to, you know, we have technology that flags us with specific, you know, situations that might arise, especially, we’re dealing with the clients investment accounts, you know, and we all know this, I mean, technology is that can become our friend, sometimes it can get our way. But for the most part, it can become our friend, especially when it comes to monitoring. And you know, not only with the great staff and the team, but we also have great technology that kind of alerts us of things that we need to be considering for the clients, you know, and that technology makes us look really good to sort of the rest of the team.

Neil Major – 16:34

Yeah, yeah. It doesn’t beat having technology that can help us make educated decisions. But yeah, with data backing those decisions. Yeah,

Cynthia de Fazio – 16:42

sure. Sure. That makes a great team too.

Brian Quaranta – 16:45

Yes, we have a great team. You guys are listening. It’s a great team.

Cynthia de Fazio – 16:50

I love this. So Neil, I’m going to ask you this next question. It says, Can you help me understand what exactly is smart risk and Smart Safe when it comes to investing?

Neil Major – 16:59

Smart risk and Smart Safe? That’s an interesting question. I’m not real sure. But I will. How do you answer smart risk versus Smart Safe? Yes.

Brian Quaranta – 17:09

I have no idea. Is that a real question?

Cynthia de Fazio – 17:11

Yes. Fortunately, it

Brian Quaranta – 17:13

is somebody just make something up. Here’s what I here’s what I like. And first off, I’ve never heard that question in my entire life. I didn’t even know there was such thing as smart risk. But I will tell you what smart risk is. Because it’s the risk I like to take. So most people when they take risk, don’t have anything that builds in downside protection. So here’s how I would define smart risk. Do you know what cruise control is we all have those cruise controllers, right? So if you see the old cruise control, you know the difference between cruise control and adaptive cruise control? Okay, if you don’t, let me share this with you. So the difference between cruise control and adaptive cruise control, if I put my just regular cruise control on, and I’m on the highway, and all of a sudden a car that’s in front of me what happens to regular cruise control, it just shuts off and my speed limit goes, my speed drops drastically, right? What does adaptive cruise control do adaptive cruise control, that person cuts in front of me adaptive cruise control senses it and taps the brakes and slows me down a little bit. It just doesn’t shut off to cruise control to where my speed drops completely. Okay. So in investing, we use adaptive cruise control on our portfolios that we have at the office. What does that mean? Well, if the market start to get volatile, rather than just getting out of the market, right and not keeping the current position for growth, we have a portfolio through technology that taps the brakes a little bit slows the portfolio down so we don’t lose a lot of money. And that to me is smart rescue. Never heard of that before. So

Neil Major – 18:49

that’s my

Brian Quaranta – 18:50

risk, but it’s smart risk to me.

Neil Major – 18:53

Smart Safe might be well, you know,

Brian Quaranta – 18:56

the market goes up. You make money market goes down. You don’t lose any

Neil Major – 18:59

money. Yeah, maybe like a fixed index annuity. Yeah, that would be smart, safe.

Cynthia de Fazio – 19:05

Beautiful. Yeah. Brian, obviously you and Neil have a special offer to present today. Let’s talk about what it is. Again,

Brian Quaranta – 19:12

this is always the risk of taking the viewer questions, right. You just never know.

Cynthia de Fazio – 19:15

So they’re not filtered. They’re unscripted.

Brian Quaranta – 19:19

So folks, the right track retirement view truly designed for you. Why? Because most people want to know if they’re on the right track. You’re probably wondering the same thing if you weren’t on the right track. When would you want to know that? When would be a good time? Probably now. That’s why right now for the next 10 callers. We’re going to give you a complimentary right track retirement review. All you’ve got to do is pick up the phone and call us 1-888-382-1298 and schedule with us today.

Cynthia de Fazio – 19:45

Brian, thank you so much, Neil, thank you so much to the viewers at home. The phone number to call is once again on your screen. That number is 888-382-1298. We’re going to take a very short commercial break when we come back. I do have time for a couple more viewer questions. So stay tuned.

Brian Quaranta – 20:01

If I could help you increase your income, if I could help you pay less taxes, if I could help you potentially maximize the returns of your investments while reducing risk reducing fees if I could help you prepare for a health event, or more importantly, when the good Lord decides to take you home to make sure that the money you’ve accumulated over your lifetime goes to your family and to your charities rather than the IRS. Would that be worth the time to come in and get a second opinion?

Cynthia de Fazio – 20:32

Welcome back to On the money with secure money. My name is Cynthia De Fazio. I’m joined today by Brian Covanta. He is founder and president of secure money advisors, as well as joined by Neil majors senior investment advisor. So I’m in a wonderful show. I love the viewer questions. So if you don’t mind, we’re going to keep going. Is that okay? All right. Neil, this is a great question that says, In your opinion, is there a certain age where people should limit their exposure to the stock market?

Neil Major – 20:57

Yeah, absolutely. I mean, there comes a point where, you know, a portion of our money, no longer needs to be at market risk, right. I mean, I, I personally own a fixed annuity myself, you know, just with a portion of my money that I don’t want to take risk with. So you know, what I consider the financial redzone is when you’re really 10 years out from retirement, during that last 10 years, you want to make sure that everything goes according to plan. So it doesn’t move your retirement date, right, it doesn’t, doesn’t move it back. And what you have to understand as you get closer and closer to that date, market volatility can impact that date. So if you’re expecting to retire with $500,000, and that’s your goal, because you’ve laid out your income needs. And all of a sudden, you’re two years from retirement in the market experience as a 2008 scenario, and you lose 40%. Now you’re down to 300. That changes the game. Right? So now you’re pushing back retirement. Now, obviously, we can’t put all of our money underneath a mattress, we have to have the right balance the right mix of safe principle protected investments, and money that’s designed to give us more growth. But more long term growth, right? So absolutely. Five, at least five, I think more like 10 years, you want to make sure that that plan is in place.

Cynthia de Fazio – 22:18

Okay. All right, Neil, thank you so much, Brian, this is a great question, too. What is the best way for someone to diversify their risk and reduce volatility when it comes to investments?

Brian Quaranta – 22:30

Yeah, this is where the bucketing strategy is perfect for risk mitigation. Why? Because the three buckets control the risk. And if you don’t know about our three buckets, they are bank money, pension money, risk money. So by separating the money into separate buckets, and identifying the purpose of that money and the tasks that money needs to handle, you now can mitigate the risk. And by doing that, you’re actually buying time back on the money that you do have at risk. So this is why we always like to put a portion and this, again, this has come because when people are ready to retire and generate income, you have to have a strategy to where we set some money aside, that becomes our income, that gives us time for that risk money to grow. And that’s how you protect that downside, you can also do it through the use of the financial products that you choose. So for example, there’s product designs, where if the market goes up, you make money if the market goes down, you don’t lose money. There’s also product designs, where we can use the use of very powerful computer algorithms, where we can set a very specific drop down number, and that that drop down number is just a fancy way of saying, setting a number for how much money I can lose. So I can set that number at five, I can set it at seven, I can set it at 10. So if I set it at 10, and all of a sudden the market drops and it loses 30%. If I set that drawdown number at 10, the portfolio is not going to go past that number. So these are all different risk mitigation techniques that you can use. Now what you can do is you can stack them on top of each other. Right, so now you can use the bucketing strategy, along with the financial risk mitigation products themselves. And now you’re really mitigating across the board in every area of the financial plan.

Neil Major – 24:10

Okay, all right, right. We always talk about, you know, we want as human beings, we want everything right. And with investments, there’s only so many things each investments going to do for you, right, and, and so investments are going to do a few of these, they’re going to provide you income, they’re going to provide you growth, they’re going to provide you safety, and they’re going to provide you liquidity. But what they can’t do is provide you all four at the same time. If you think about the bank, I mean, the bank would be a great place to keep our money if we could we have safety there. We have easy access. So we have liquidity there. But we’re giving up growth, right? There’s no growth and keeping our money at the bank. You know, the market is a great place for growth and liquidity. But what are we given up there? We’re giving up safety. So when we talk about these buckets, we have to satisfy all four and have the right Mix. So we’re able to get all four. Yeah. So we can have everything that we want. Because as human beings, that’s what we want.

Cynthia de Fazio – 25:06

Absolutely. Well, that makes

Brian Quaranta – 25:08

a lot of demands. Yeah, absolutely. I’d like to make a lot of money, and I don’t want to take any less doing it.

Cynthia de Fazio – 25:14

I’m sure you hear that every day? Well, Neil, we have a question that’s gonna tie into estate planning. I think we have time to get through this one. It says, Neil, can you help me understand the difference, please, between a will and a trust? And what does it provide?

Neil Major – 25:27

Yeah, so you know, a very common question that comes in to us, right. And a lot of people are confused about exactly what they need. You know, so basic wills are important to have for everybody, right? We want to make sure that we have the ability and powers of attorney and ability to make decisions on family members and be able to pay our bills and things like that. So anybody that’s coming into the office, we’re going to direct you to make sure and we’re going to keep on you to make sure that you have the legal documents complete as far as basic wills. Now, when we get into trusts and things like that, a lot of people that we’re seeing don’t necessarily need to go into that direction of getting more of those, you know, sort of documents completed. Yeah, so it’s a case by case basis. And I’d say, you know, we work directly with an estate planner, that way, we can have synergy between the two of us and identify, you know, what’s best for the client. So they need to dig into these expensive options, like trusts and stuff like that. And oftentimes, it’s probably not okay,

Brian Quaranta – 26:34

yeah. You know, I always like to say, think of a trust as a bucket, you could put assets into that bucket and it removes it from your estate, okay? A will you can’t put anything in the Will It can just say, Hey, make sure my kid gets my watch, make sure this guy gets my guns or my car or whatever. But trust, you can actually put assets into the trust, which can remove it from your estate, which can remove you from paying unnecessary estate taxes, or even avoiding probate and things along those lines, but to Neil’s point, you know, having access to an estate planning attorney to determine which legal documents are going to be best for you, again, different for everybody. But this is why Cynthia, we created the right track retirement review, because these are all the areas that we go over with you. The Right Track retirement system was designed with you in mind to help you determine if you’re on the right track gets goes over the five key areas income, taxes, investments, health care and your estate planning. So all you have to do is pick up the phone call us today. schedule your complimentary right track retirement review today. Call 1-888-382-1298.

Cynthia de Fazio – 27:42

Brian, thank you so much, Neil, thank you so much to the viewers at home. Thank you for spending time with us. Be safe, be happy, be blessed. We look forward to seeing you back one week from today.