On the Money with Secure Money: Episode 75

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Video Transcript

Rebecca Powers 00:20

Welcome to On the Money with Secure Money. I’m Rebecca Powers your host this week here with Brian Quaranta and Neil Mager. How has your week been going guys?


Brian Quaranta 00:30

Great, very busy.


Rebecca Powers 00:31

I know, your business is growing, I’m hearing from the ladies in the office that you have a ton of people coming in just asking for advice, education. But I know that once our show airs, you kind of block out some time for our callers we do to come in and meet with them personally. What kind of things? What are the biggest questions of someone who’s never even seen a financial advisor before? Yeah,


Brian Quaranta 00:54

well, the biggest, biggest things that we hear are one, are we on the right track? Yeah, people really want to know whether or not they’re doing the right things. They’ll tell us that they’re not really sure when to collect their Social Security. They’ll, they’ll tell us that they’re going to be retiring or want to retire. They just don’t know if they’re going to be able to afford to retire. The other big one we hear is that people say we’re really concerned about the risks we’re taking, because we’re at a point in our lives where we really can’t afford to take another big market loss and lose a lot of money because we just don’t have the time to recover. Yeah, so those are probably the top questions that we hear quite a bit. I


Neil Mager 01:34

think it’s usually just are we on the right track? Am I doing all those other things? So, a lot of times, they don’t even know what they should be asking. Right? Yeah, cuz, but to Brian’s point, you know, it’s like it used to be when people come in or when people still come in, if they give you a date of their retirement, you know, they have a pension. That’s only about 10% of people are coming in anymore.


Rebecca Powers 01:58

And pensions used to be very common, but not as much any more.


Neil Mager 02:01

They’ve gone away. So, it used to be a date of when you’re going to retire. Now, I really don’t know. Because I don’t know how much income I would be able to generate. I don’t know how long my money will last. I don’t know how taxes will impact my retirement, I don’t know when to collect social security. I don’t know about the safety of my investments. So, it goes on and on and on.


Rebecca Powers 02:21

Yeah, it’s so many unknown.


Brian Quaranta 02:22

Yeah, it’s a monumental task. I mean, imagine, imagine that, you know, I had to when I retired, figure out how to bridge build a bridge from one island to another. And I’ve never built a bridge in my entire life right? Now the engineer that’s built bridges all of his life, that’s easy for him to do. But now I’m going to be tasked with that responsibility. So, what am I going to do? I’m going to figure out how to build a bridge by going to Google to say, how do I build a bridge? And do that, and it’s gonna start talking about all these engineering concepts that are clear as mud to me. And I don’t know, maybe I’m grasping that a little bit, right? Maybe I’m not. But I’m still very confused. And, you know, it’s wonderful that in today’s world, we have the ability to go out and research things and get information. But a lot of times when people are doing their research online, or they’re watching YouTube videos, whatever trying to figure it out, they actually become more confused. And what happens is when they’re confused, they get paralyzed, and they don’t know what to do. And no action is the worst action. So typically, do they keep working? Yeah, they keep working? Yeah, they keep, they just keep working, because they’re like that, we figured we’d never be able to retire. And I think that’s probably the most rewarding thing to us is that when people do come in, you know, we really roll up our sleeves. And we do real planning with them right there. I mean, we’re crunching numbers with them, we’ve got a big screen TV, that we bring all of this up, they’re involved in the planning process, so that they understand how we’re getting from point A to point B, you know, we’re not just taking their information and going behind doors, and magically coming back with a solution. We want them to see how that a solution is being designed, so that they have a good understanding of why it’s going to work.


Neil Mager 04:05

So, one of the first things that we do is we identify the income and retirement the most important thing, right? And so, we want to look at net income, right after taxes and, and lay that all out. And we want to get a real good understanding of how much monthly income do they need, because they’ll start to write out, you know, all their expenses. And they’ll say, well, I need $2,000 A month. And then what we’ll understand and realize is that they take home $7,000 A month right now, and don’t save any of it. Right. So, the assumption is they actually need $7,000 A month because that’s what they’re accustomed to. Right. So, one of the things that I think that we do really well in our office, and we pull up on the screen, is we show them the preservation rate of their money. So, what rate of return once we identify how much income we need to get you on the money that you saved? What rate of return do we need to get to keep the same amount and same balance and what pay People realizes that they need typically very little return two and a half, three, three and a half percent.


Brian Quaranta 05:06

I know that’s hard for people to believe right now. That’s correct. I know.


Neil Mager 05:09

I think that’s the first time they realize I can actually retire because all I need is 3%. Right?


Brian Quaranta 05:14

Yeah. And I don’t need to roll the dice. But no one’s ever broken that down for them a lot that and I mean, it’s such a great point, Neil, you know, and I, you know, and there’s really what the three rates we figure out, we always figure out the preservation rate, because that’s important, right? How can you take the money you need and still preserve the principal of your accounts, that’s what we all want to do. But then you also want to know what your spend down interest rate is meaning, you know, if you’re pulling out a certain amount of money, you know, you know, how much can you pull out at a lower interest rate to where maybe the balance of the account would go to zero, but it wouldn’t happen till age 100. And then, of course, the legacy rate, which we all want to kind of shoot for, that’s when you’re pulling money out, but still growing your money at the same time. And those are some good points. And I think the other thing to point out on our cash flow worksheet that we build for the client, you know, if you’re a married couple, you may be maybe making this much money together. But we also have to take into account in planning, what happens is the spouse dies, because there will be a loss of income. And according to AARP, the average loss of income to a married couple is about 40%. So that means you’re taking a 40% hit and your income if your spouse dies. Well, what’s the plan when the spouse dies? What Neil and I always talk about the office and our other advisors is we always want to make these bad things happen on paper, because we make the bad things happen on paper, we actually have a plan when they do happen.


Rebecca Powers 06:34

Absolutely. And if someone when you mentioned, if a spouse dies, and you lose that part of the income, do you advise on maybe getting life insurance on partners?


Neil Mager 06:44

Yeah, when it makes sense? Absolutely. I mean, like, Brian, that’s part of your service. Yeah, absolutely. So, we want to make bad things happen on paper, we want to put volatility into the plan, we want to create loss of income when a spouse passes away. And we want to be able to why we do that now, instead of dealing with it when your spouse dies, is because now we can create a solution to remedy that issue. And so, whether it’s life insurance, or whatever we have to do to help solve that. It’s definitely important. That’s why you want to make those bad things happen on paper now. Exactly.


Brian Quaranta 07:18

And in regards to life insurance, a lot of the questions we get about people that have existing life insurance, yes, is they’ll say, do we need this anymore? Right? Should I get rid of this? Now a lot of people think that when you get older, that you just don’t need your life insurance? Well, before you make that decision, the opposite, you should see, you should really determine how much of a loss of income is your spouse going to have before you get rid of that insurance policy. And, you know, insurance is one of those things that it’s you know, nobody wants to, you know, pay for insurance, but they’re all glad that it’s there, when somebody dies, I’ve never had to apologize for delivering an insurance check to somebody, you know, I mean, you know, about a month ago, I delivered, you know, a half a million dollar insurance check to a client, they were not unhappy about that, right. So now they’ve got this sum of money, by the way, it’s all tax free. So, it’s all life insurance is all tax free. So, if you have a life insurance policy already, and you’ve been paying for it for years, you may want to consider keeping that policy because you know, if for you to get a new one later on in life would be very, very expensive.


Rebecca Powers 08:22

Because your health is not as good, your age is higher, obviously, it’s more expensive. But the


Brian Quaranta 08:27

point I want to address is the fact that you know, we’re not just saying, you know, keep it get rid of it, we’re letting the math tell us what to do. And that’s the important thing that people need to understand when it comes to your money advisors is that we keep our opinions out of it, right? We use technical data to be able to make decisions, and that black and white data, lets people make informed decisions. So when we say is this what you know, do you want Portfolio A or Portfolio B, the math is guiding them to where they need to go. It’s not some sales pitch,


Rebecca Powers 08:57

right? And you actually have a program that actually shows you and puts the numbers analytically. So, then you can help them make their decision.


Brian Quaranta 09:05

Yeah, which by the way, when we come back from this break, I want to talk about that next because that Riskalyze program we use is so powerful. And for the first-time people are really getting a financial X ray of what’s really happening in their accounts, and they start to understand it. But before we talk about that, on the next segment, I want to talk to you about taking advantage of our complimentary right track retirement review. That is complimentary, no obligation. So for the next 10 callers who call in right now, we’re gonna sit down with you, it’s not very often that you get to get to sit down with a fiduciary at no cost, and go through your plan. We’re gonna spend 45 minutes to an hour with you reviewing where you’re currently at understanding what you have, what your goals are and where you need to go. Then what we can do is we can take that information and we can do an analysis on it for you. We can bring you back and we can educate you all on that. That’s all complimentary, but you got to do your part you got to schedule with us today to do that, call 1-888-382-1298 and schedule your Right Track Retirement Review.


Rebecca Powers 10:07

And when we come back, that’s exactly what we’ll talk about. Stay with us.


Brian Quaranta 10:11

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 will also tell you that they’re scared. And the reason they’re scared is because they’re afraid of running out of money.


Neil Mager 10:25

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 10:33

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


Neil Mager 10:47

Because we’re not just product pickers here, what we do best here is we build retirement plans,


Brian Quaranta 10:53

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 Mager 11:03

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


Brian Quaranta 11:09

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 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.


Rebecca Powers 11:39

All right. Welcome back. We were talking about the wonderful right track retirement review that you do guys. And there’s something you have that is amazing. The analyzer,


Neil Mager 11:49

Yeah, Riskalyze. So, it’s a program that we utilize, I think most people that are coming in, are most people that are watching even they want a second opinion, they might have been with their advisor for a long time. But they truly want a second opinion. They don’t want to go into an advisor’s office and hear a sales pitch, right, but they’d like to actually get a review of what they’re currently doing. And so, the software program that we have the analysis we look at as really breakthrough analysis, because it’s a true black and white comparison between what you’re currently doing, and what it potentially could look like. And really the Riskalyze what it does, what it breaks down how much risk your portfolio is actually taking. So that’s important for people to know, it shows your expense ratio. So, what are your funds actually costing you that you’re in?


Rebecca Powers 12:38

Excuse me? Does your husband have to be in the room, and they look at what you spend? I’m just thinking?


Brian Quaranta 12:48

Yeah, husband, wife, all we should do.


Neil Mager 12:52

It takes a look at one very, very important thing that we’d like to see a lot is what’s the max portfolio drawdown? So bad things happened? How much is my portfolio going to go down? It takes a look at, you know, your performance over a three year-five year time period. So, you know, over the past 12 years, the markets gone straight up. Yeah. So, you, every time you opened up your statements, you saw good things happening, you didn’t really know if your advisor was doing fair, good, great. You just accepted that you got more money each and every time you open up those statements, but Could there have been a lot more? And was your portfolio actually inefficient? So that’s the types of things that Riskalyze does, I think it’s really important tool getting that true second opinion?


Brian Quaranta 13:37

Yeah, I mean, it really does, you know, revitalize what people’s expectations are what they can expect from their portfolio. And when, you know, a lot of times in our industry, our industry tends to quantify risk as conservative, moderately aggressive or aggressive. Exactly. Nobody knows what that means. Nobody knows. What people want to know is, how much could my portfolio go up? But more importantly, if the market went down? How much can my portfolio lose? Yeah, I believe and I’m sure you’ll agree with me, the biggest data point that Riskalyze gives us is how much the portfolio could go down how much it could draw down from its high to its low. If a market correction were to take place. The analysis that Riskalyze does also will let us run what if scenarios, so it’ll say wow, what if another 2007 2008 happened? What would happen to your portfolio that you currently have? What happens if we had a financial crisis? What if interest rates continued to go up? So now you can look at your portfolio and you can stress test it under those scenarios? And you can see how it responds. Now what we can do is then we can say, Okay, what if we were to just change this position from here to here? Yeah, keep this one change this one from here to here. What are we seeing now and typically what we want to find is that if You had this much of a drawdown. So, this is how much you could lose when the market goes down. We want to say, well, now with the adjustments, this is how much you could potentially lose, right? So, we want to mitigate that downside risk, because in retirement, it really is about mitigating, mitigating the downside, it’s not so much more about how much you earn, right, as it is about how much you keep, and the return of your money versus the return on your money. And we want to make sure that if the markets do correct, that you’re not taking such a big loss that you can’t recover from it,


Rebecca Powers 15:32

and then you figure out the exact amount you would need to protect that amount to get you through retirement. Yeah.


Brian Quaranta 15:37

And that leads into what we call our bucketing approach. Yeah, you know, and our bucket approach is very powerful, we have three buckets of money that we focus on. And this is really eye opening to people, this is the simplicity and what we do that because people can now make a connection of what they’re what the purpose of their money is, a lot of times they just see their money as one song, okay. And it’s diversified about stocks, bonds, mutual funds, but we want to break it out in the buckets bank money, right, what we call Safe Money, or pension money. And then we want risk money, and we help them identify it, a lot of times we look at portfolios, everybody’s got all their money in risk money, right? And that goes against what their primary goal is. So, when we sit down with people, there’s four things we go over with them. Right? Tell them a little bit about that, because I think so.


Neil Mager 16:26

So typically, you know, we want our money to do everything, right, we want it to want it. And there’s really only four things your money can do when you invest it, it can provide income, it can provide growth, it can provide safety, and it can provide liquidity access and availability of your money. We want it to do all those things. Unfortunately, no investment does all four things. And so that’s why we break out the buckets. I mean, think about the bank, you know, the bank is, is available. I mean, it’s liquid, it’s safe. But we’re giving up growth in the market,


Rebecca Powers 16:58

Because the interest rate is so tiny, okay.


Neil Mager 17:01

If we’re in the market, if we give it time, we’ll see growth, but you’re risking you’re risking, so we have liquidity, we give up safety, right, we’re risking, we give up safety. So that’s why we create these buckets, because we want all four things done. We just have to create different investments to be able to achieve all four. Does that make sense?


Rebecca Powers 17:20

It does. And when you said stress test, yeah, it makes me think so my health is not just eating right, right. It’s not just exercising is not just taking care of myself sleeping enough. It’s these three or four things in combination.


Neil Mager 17:34

You know, when we meet with people, and they’ll tell us, what do we hear the most important things that people are income? Yeah. And safety? Yeah, of course. And then we’ll we look at their portfolio, all their money is in the red bucket at market risk. Yeah. So, it’s very eye opening,


Brian Quaranta 17:50

it’s very eye opening, when you draw out the buckets for somebody, and then you actually put the amount of money that they have in each bucket, and they see that all of their money is over here in this risk bucket. The first thing I’ll say is when you look at this, is there anything that jumps out to you immediately, and they’re like, Wow, yeah, we have all of our money in that bucket. You do? Can you afford to have all of this money at risk at this point your life? Most people are going to tell you no. And that is the right answer. Because as you get older, you just don’t need to roll the dice anymore and gamble with 30-40 years worth of work. I truly believe that when you’ve won the game, when you’ve won the game, folks, you don’t have to continue to play it. Right. So, you’ve saved enough money, your job is to protect it so that you can get through retirement. And this is why I want you to take advantage of our right track retirement review. Because we’re going to help you understand these things give you more clarity and confidence about what you’re doing, and really teach you how to use your money. There’s so many people out there that have so many goals and dreams to do things retirement but they’re scared to use their money because they’re afraid that they’re going to run out the strategies, the techniques that we use the risk analysis software, we use the tax software as figuring out when to collect social security. These are all things that we can help you with at secure money advisors. We’re a full-service fiduciary planning firm. So, take advantage of our right track retirement review today. You but you’ve got to do your part. You’ve got to pick up the phone and call us today. Don’t procrastinate on this. This is not something that you want to kick the can down the road. Call us today and schedule 1-888-382-1298.


Rebecca Powers 19:31

Absolutely. And time is money. As we all know. Stay with us. We’ll be right back with more.


Announcer 19:37

As a good saver, you’ve been putting away money during your working years. Studies find that the biggest fear of retirees is running out of money. Market volatility isn’t just a downward movement of stock prices. It’s the size and frequency of change. The more dramatic the ups and downs the higher the volatility. This can put savers who are newly retired or a few years away from being retired at greater risk. Today’s generation of retirees is not receiving traditional pensions as our parents or grandparents did. Instead, we have retirement accounts such as 401K’s or 403B’s. These accounts typically exposure money to market risk. The last thing you want right before retirement is to lose a portion of the money you need for income. But how do you turn these accounts into a retirement income? Is it safe to keep all your retirement money sitting in the stock market, the last thing you want is to lose a portion of the money you need for income due to market loss. By working with a financial professional, you can learn how to turn a portion of your savings into an income stream for life and income for the life of your spouse if you’re married. We all have moments in our lives when we wish we had taken action sooner. Don’t let procrastination rain on your retirement parade. Act now before it’s too late. Please call our office to set up your no cost no obligation retirement income review today.


Rebecca Powers 21:05

Welcome back. You know, I have a question. I’ve been working with Yellen and love it for a while now. And I hear the word fiduciary a whole lot. Is it the same thing as a financial planner? I mean, explain the importance of having a real fiduciary?


Neil Mager 21:17

Yeah, yeah. So, at the office of all the advisors at the office are fiduciaries. And I think secure money advisors approach one legal definition by law, we have to do what’s in the client’s best interest. First and foremost, obviously. But really, what a fiduciary is about is really building out your retirement plan. And not just picking products, but focusing on the plan in coaching you along the way to make sure the execution is flawless. So, we focus on income planning, tax planning, investment planning, health care planning, and legacy planning. And those five key areas are really what if fiduciary is to work with you on and then also, you can talk about a little bit about the fees and how fiduciaries get paid, I


Brian Quaranta 22:09

think I think it’s important to understand that, you know, there’s a difference between a commission based advisor and a fee based advisor, and we’re working with people with their investments, we’re fee based, which is very important, because, you know, if we are required by law to do what’s in the client’s best interest, and we make changes during different market conditions, as we always do, because market conditions change, business cycles change, and you just can’t have a static portfolio that set it and forget it, right. That’s what most people typically do. And so, when things start to go bad, they get cookie cutter phrases like, you know, don’t worry about it hang in there, you’re in it for the long haul things will be okay. We actively manage, which means when the markets move, we’re gonna move, right, if that means the markets get volatile, we want to have ways to protect it. And as a fee-based firm, when we make those changes, it’s not training, we’re not transacting any type of commission to the client. They’ve got just the one fee a year that they pay, and that comes directly out of their portfolio, it really is structured in a way that when the clients do well, we do well, when the clients don’t do well, we don’t do well. So, we have skin in the game with the client versus a broker, who when they make a transaction just gets paid a commission. So, they’re not their revenue is not tied to any, you know, performance of that portfolio, their revenue is tied to the transaction. So, if the portfolio doesn’t do well, they’re not losing any revenue, because they got paid all their money up front. And that’s why the industry really is moving towards that fee-based approach. Because it’s a more trusting relationship with the client. So, the client knows that if you’re making a move, you’re truly doing it in their best interest. Motivation is sincere. The motivation is sincere. Yeah, yeah. And you want to believe that any financial advisor’s motivation is sincere? Sure. But you know, at the end of the day, when you transact business, if you get paid a commission, sometimes there’s temptation there, right, and you’re not being paid a commission, you really are doing what’s best for the client.


Neil Mager 24:14

So I think one of the things that we’ll hear, I just had this example last week is, you know, someone came in, they said, well, we don’t pay anything to our advisor.


Rebecca Powers 24:22

That’s what you think, buddy.


Neil Mager 24:24

And that’s what you think, right? Yeah. So, what they were doing are, they’re paying all those upfront load fees. And so, whenever their advisor called to make a position change, now, they don’t know once they realized what was actually happening. They don’t know if it was in their best interest or, you know, because a trip to Italy was coming up.


Rebecca Powers 24:42

Right? Exactly. That actually happened to my husband and I, about 20 years ago. This guy said, you know, something financial planner. He wasn’t a fiduciary, apparently, well, later we find out he was paid $10,000 up front. He sold us insurance products? Yep. And once we found out because a great, great friend of mine ended up becoming a fiduciary, she explained that and I felt we felt violated, to be honest. Right. Anyway, that’s just my personal story.


Brian Quaranta 25:13

We hear those stories. And unfortunately, you know, in every industry, you know, you got, you know, the bad apples, right. And you hate to hear it because it gives a black eye to the whole industry. But the news is that, you know, there was a push towards this better relationship with this fiduciary standard said, we hope the entire industry goes there. Obviously, there’s a lot of politics involved, because big these big box financial planning places earn a lot from their commissions. But at the end of the day, I think the most important thing to stress really is one of the things that Neil mentioned. And that’s really delivering a plan. The plan is so important that we meet so many people that come in with their POS, by the way, that stands for pile of stuff, another pile of stuff. And when we talk a little bit about their plan, I want to know well, can you show me your cash flow worksheet that’s been built? We don’t have a cash flow worksheet, can you show me withdrawal worksheet that’s been built? So when you’re pulling money out, we can come in there anticipating maybe with the account balances, we never have anything like that. What do you have? We have just the statements Exactly. And so, when you meet with your advisor, what do you typically go over? Well, he just tells us how the investments performed. And that’s it. That’s not planning, right? That’s not planning truly is going over the cash flow, understanding how much income you have, as a married couple, how much you have income coming in together, if one of your die, how much income you have, where to take the money from? Should I be taking it from my retirement accounts, my nonretirement accounts, if I want to leave money to my kids, how do I do that. And that’s all written out in the plan. And this is why we always for all the listeners that are TV viewers, I should say, because so used to saying listeners and your radio show, which by the way, you should try to tune into our radio show, too. That’s on 94.5 3WS and it’s also on WDVE. You can find out where the time slot is right on our on our website. But I want to offer you today for the next 10 callers, a right track retirement review where we’re going to help you truly get some clarity and peace of mind around what you’re doing. We will go through the five key areas that we always do the income taxes, investments, health care and legacy planning. But you have to do your part, you’ve got to take action. And you’ve got to call us today to schedule it’s about a 45 minute to an hour meeting where we’re really going to discuss all of your concerns what’s on your mind, figure out where you are and do an analysis of where you currently stand and then we’ll give you turn by turn directions of how to get to where you need to go. Again, do your part scheduled today. 1-888-382-1298.


Rebecca Powers 27:48

Hope you learned a lot today. Thanks so much for being with us. We’ll see you next week.