On the Money with Secure Money: Episode 131

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*A Roth conversion may not be suitable for your situation. The primary goal in converting retirement assets into a Roth IRA is to reduce the future tax liability on the distributions you take in retirement, or on the distributions of your beneficiaries. The information provided is to help you determine whether or not a Roth IRA conversion may be appropriate for your particular circumstances. Please review your retirement savings, tax, and legacy planning strategies with your legal/tax advisor to be sure a Roth IRA conversion fits into your planning strategies. All rights reserved.

Video Transcript

Rebecca Powers 00:24

Welcome, everyone. Hope you had a wonderful week. I’m Rebecca Powers here with Brian Quaranta. And this show is called on the money with secure money. And I always say I love that you put the word secure in the name of your business. Yeah. It’s not about earning, earning, earning necessarily. It’s about saving, protecting and making it secure.


Brian Quaranta 00:44

Well, I mean, I think we think a little bit differently than most firms.


Rebecca Powers 00:49



Brian Quaranta 00:51

Yeah, I mean, I’m, you know, I have a philosophy that I use for myself. I mean, I’m very conservative with my money. And it’s getting even harder to consider taking risk when you have safe yields over 5%. I mean, would you rather have a, you know, a sure thing? Or a maybe.


Rebecca Powers 01:17

What is it a bird in the hand is better than two in the bush?


Brian Quaranta 01:21

Yes, yeah. So, so yes, but you know, helping people protect and helping them think differently about retirement and get into understand what retirement planning is really all about. It’s a very loosely thrown around word. And so, people think if they have a 401 K plan, or a 403, B, or any type of retirement account for their employer, they think they have a retirement plan. That’s an investment savings vehicle for retirement. But that’s not the plan itself.


Rebecca Powers 01:50

And another big myth is when you have that portfolio statement that you get, so many people come into your office and say, Oh, here’s my financial plan, correct? You made me realize that is just one leg of your stool. That is not a plan. That’s just one piece of it. Let’s write down the plan for you. Rebecca powers, Ben powers, your family, your children, specific laser focus right in writing that you could take it off the shelf, open it up and know exactly what’s going on?


Brian Quaranta 02:17

That’s right, exactly right. Yeah. And not only can you take it off the shelf and know what’s going on in our practice, but also, you get access to the plan itself. So that if you are sitting around one evening, and you want to see if taking $50,000 out of your plan, to go buy a new car, or you want to take a certain amount of money out to take all your children and grandkids on vacation, or you maybe want to consider buying a house, you can plug those numbers right into the plan, and you have some sort of control over looking at these things. And the great thing is that in collaboration with us, right, we’re giving you clarity by providing you a very simple software to use. So, you can plug and play these numbers. And a lot of our clients tell us that that provides them with a lot of peace of mind. Because, you know, if you’re anything like me, sometimes you’re thinking about things at 11 o’clock at night, and you want to solve that problem. And so, this gives people some autonomy to be able to do that.


Rebecca Powers 03:18

And the plan and I know this because I have one, but it covers everything, the foundation of your retirement. Yep, of course, your income, talk about the five things that it covers, and all the mistakes that you make on paper, just kind of the different scenarios that you list your clients choose from. Yeah.


Brian Quaranta 03:33

So why don’t we get into how we go about actually building a plan? Okay, okay, perfect. So first off before you even start even evaluating investments, the first thing we’ve got to understand is what is the primary purpose of the money? Right? What does the money need to do for you? Okay, well, some people will tell us that that money needs to provide income, some will tell us that they just needed to grow, and they needed to be there when they need it. Some will tell us they just want to leave a legacy to their children. Some will say they want it all. And a lot of people want multiple things and mix it up. Yeah, you can mix it up. But let’s income is always number one. So why do I start with income? Well, when you retire, the paychecks going to stop, but bills and taxes and all the money you’re going to need to do all the things you promised you were going to going to do in retirement your bucket list, you’re going to need to replace that paycheck. Okay, so how are we going to do that? So, the first thing we start off with is understanding how much you’re going to be receiving from Social Security. Husband and wife. Okay, he’s going to get this she’s going to get this. Okay, great. Do you have any other sources of income? Well, yes, we have a small pension from an employer. How small, very small $200 a month. Okay. So now we’ve got three sources of income, his social security, her Social Security and a pension. All right. Any other sources of income? Nope, no other sources of income. Okay, so this all adds Up to $60,000 a year. How much money do you guys need on a yearly basis to live? We need 100,000. Okay, well, that’s a $40,000 shortfall.


Rebecca Powers 05:11

So, you have identified the income gap, you’ve identified the income gap. That’s right now number one.


Brian Quaranta 05:15

That’s number one. Now, what we have to do is now we know that we’re going to need $40,000, where are we going to get that from? Most likely, they probably have retirement savings, so we’re going to have to get it from retirement savings. Now, the question is this, where do you withdraw the money from first? What if the client has money in 401k? Is IRAs, Roth IRAs, non-qualified accounts, bank savings, so on and so forth? What’s the order in which you withdraw that money? Very important? Very, very important. And most people get the order of withdrawing that money wrong. They get it wrong. I have seen some of the craziest things, Rebecca, advisors telling people to draw down all of their cash in the bank. Insane. Yeah, insane. That is the most tax efficient money. It’s there for emergencies. Why would you start there? I’ve seen advisors tell their clients to take all of their Roth IRA money first. Why would you do that you’ve already paid taxes on, you’ve already paid taxes, that money should be left for later on. Because that money you want it to get as big as it possibly can. Because if tax rates go up in the future, which they probably will, you would want to have your largest bucket of money to be all tax free. The best place to start is with your traditional tax deferred money, IRAs, 401 K’s Why, you’re going to be forced to take the money out anyway, starting at the age of 73, called the required minimum distribution. So, understand. Now we understand we’ve got all these different accounts. We know what the income gap is 40,000. But now we got to understand where to take the money from first. That’s where the planning starts. Yeah. Okay. That’s where the planning starts. So, I think when we come back, what we can talk about is the next topic of how we prepare for taxes, right. And again, you got all kinds of different monies. So, some money might be taxable at capital gains rates, some might be taxable at income rates, some might not be taxable at all. So, you need to understand how after you figure out your income gap, how you’re going to figure out how to properly put together the tax plan around it. And when we come back, we’ll talk about that more, but I want you to go to onthemoneyoffer.com. Get a copy of my book, right track your retirement, this is a step-by-step guide, that will give you the clarity that you need to start to put together a plan that will give you the peace of mind and security we’re all looking for in retirement. So, onthemoneyoffer.com I pay for the shipping and handling, folks, the book is free, I don’t know how to make it any simpler for you to get. So, when you’re there, you can also schedule an appointment at the office for a comprehensive complete right track review, where we’ll walk you through your own customized strategy to help give you a plan that will get you through retirement, or we can at least help you determine whether or not you’re on the right track. And if you are, we’ll be happy to tell you that our team is also standing by you can call 1-888-382-1298. They’ll take your call, get you a copy of the book and also get you scheduled to come in.


Rebecca Powers 08:18

It’s a great read very short, very simple, easy to understand. And Brian even pays for the shipping and handling. But definitely have your calendar ready so we can get you on the books. For the comprehensive complimentary review. There is no charge, no obligation. And our promise is we will never sell you anything. It’s really just a review of what’s going on in your financial life. More with Brian Quaranta and the steps to secure your retirement stay with us.


Brian Quaranta 08:42

So, 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 08:56

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


Brian Quaranta 09:05

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


Neil Major 09:19

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


Brian Quaranta 09:24

9 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 09:35

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


Brian Quaranta 09:40

This is about you if you’re not getting what you need. And you feel that when you walk out of the advisor’s 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 you dream of.


Rebecca Powers 10:11

Welcome back, I’m Rebecca Powers here with Brian Quaranta. We’re talking about securing your money. And the most important thing for your retirement is first you need vision, close your eyes, take a magic wand, if you could just create the perfect retirement, what would it look like? And then you reverse engineer into that we already talked about income, knowing what your bill is going to be finding the income gap, what is step two of building the in-writing retirement plan? Yeah,


Brian Quaranta 10:35

Well, this is where we get into expenses and taxes, right? So, we know that if we’re withdrawing a certain amount of money, we have a certain amount of income, we’re going to have to pay taxes. So, we have to look at the tax rate because we need to see what your net income is going to be after taxes. Once we understand what your net income is, we apply the expenses. And then we can see after expenses, what you have leftover. And now that’s really where the planning starts. Because we now have figured out ultimately what we need from an income perspective and a tax planning perspective. Now the question is, if we need to take a certain amount of money out each year, how are those withdrawals, going to impact the balance of your account as we start to take those withdrawals, so and what rate of return are is your portfolio going to need to perform at in order for you to be able to maintain those returns that you want, or those that income that you want to take out. And I write about three very important interest rates in my book that everybody needs to know about. And those three interest rates are your spend down rate, your preservation rate and your legacy rate. Folks, most people today really don’t know what their portfolio needs to perform at. And if you’re just having conversations around performance, and you’re not sure what the portfolio actually needs to do to stay on the right track, you’re really kind of blind and shooting in the dark. So, we have to understand those three rates of returns. And once we understand those, now we can just start to apply those to the plan. Why are those understanding those returns important? Because let’s just say that your spin down interest rate was 1%. And your legacy rate was 5%. Okay, so you are going to need a range between one and five, to make sure that you have money until at least age of 95, or 100. Why we need the range of return is because that starts to identify the level of risk that you need to take. So, if you only need a 5% or less rate of return, yes. Why in the world would you be risking to try to get seven or eight when your plan only needs five?


Rebecca Powers 12:56

This is for we’ve done the show for two years. And every time you say something that blows my mind. And there you go; there you have it. Yes. Because why in the world would you risk, let’s say 50-80%? If you only need 4%? Right here goal, exactly. And if you don’t have a written plan, you don’t even know what your target goal is. Right?


Brian Quaranta 13:12

That’s right. And this is the biggest mistake people make. They don’t understand the rate of return that the portfolio needs to do.


Rebecca Powers 13:18

That’s liberating because it takes it off your chest. Yeah, need to be That’s right. When and risking.


Brian Quaranta 13:23

Right. Exactly. And I it’s shocking to me yeah, how even some of the most sophisticated financial planning software’s out there that some of the big firms use, don’t even take into account what the rate of return, the portfolio is going to need to do. Now, if you knew what actually your portfolio needs needed to do to stay on the right track for you to take the withdrawals that you wanted to take, wouldn’t that put you in a better position to go in and really judge whether your advisor is doing a good job or not? That’s a big critical piece of information that most of you watching are missing. You’re not sure what your performance of your 401k needs to be, you’re not sure what the performance of your investments with your advisors needs to be. So again, understanding that is a is a critical component. So that is that takes care of the tax part and understanding the risk part. Now, once we understand that return that we need, now we get into what kind of strategy are we going to use for the investments? Right? Because, again, there’s five areas in my book, there’s income, there’s taxes, there’s investments, there’s healthcare, there’s legacy planning. So, we’re talking about investments now. Okay, so your accumulation? Yep. So well, we’re, we’re, we’re understanding now that they need a certain rate of return. So, let’s say they need 5%. Okay, well, if they need a 5% rate of return, right now, you can go out and you can buy a fixed rate account for over 5%. Yeah. So, think about this. If you have a risk-free yield of over 5% And that’s all your portfolio needs to do in You’re good. Why would you roll the dice in the market? Right? Well, because you need to keep pace with inflation. That’s what the advisor is going to tell you. Okay, okay. Let’s talk about this. Because this little phrase of what you got to keep the money in the market to keep pace with inflation is just hogwash. Can I say that?


Rebecca Powers 15:21

Yes. Say it! Hogwash! It’s not in the list of words we can’t say.


Brian Quaranta 15:23

Yeah, I’d like to use a stronger word. But you could say BS. Yeah, yeah. And the reason is, is because of literally, I mean, you know, people there, they just losing money, okay, losing money is your first way to not keep pace with inflation. So, your portfolio goes down, that inflation plan is out the door already, because now you’re in years of recovery just didn’t get back to even and you’re very far behind, compared to the guy or lady or a couple getting a 5%+ guaranteed yield, right?


Rebecca Powers 16:00

With zero loss.


Brian Quaranta 16:02

With zero loss.


Rebecca Powers 16:03

And there are products right now. I don’t want to jump in too much into annuities. But I just want to say that we did that, you know, that I talked about in the radio show, too. We took half of everything and put it into a fixed index annuity. And I was stunned that zero is my hero. I cannot lose the principle, you cannot lose the principles, right? And you get some of the gains, but not all the gains. But that helps me sleep at night. Yes. What do you say to people who say, Oh, it’s too good to be true? Well, it’s not. How does insurance do it?


Brian Quaranta 16:32

Yeah, well, it’s very simple. So, the way insurance companies do it is simply by just buying an option on the market. And most people typically when they buy a stock will buy the stock itself. Okay, so that means if I want to buy Microsoft in, it’s at $50. Right? I take my $50, I buy Microsoft. So now all my $50 is exposed to that risk. So, if it goes down to $40, I just lost $10. Right? Well, professional traders won’t ever buy money directly in a stock, they’ll buy the option to buy the stock in the future, but they want to determine what the price is. So, let’s say they buy the option, and the option gives them the right to buy the stock at 50. Okay, in the future, though, okay, so let’s say aired. So, let’s say the stock goes up to 60. Well, they have an option to still buy it at 50. But they got to see where the price went, right. So they go, Oh, wow, I have the option to buy it at 50, it’s at 60. That’s a pretty good deal, I should probably buy it at 50, because the stock is now at 60. So, I immediately make $10, right? But what happens if the stock went to 40? Well, I just don’t buy it, I had the option to buy it, but it went to 40. So, I’m just I’m not going to buy it. So, my money, my $50 wasn’t in there, I had to pay a little bit of money, maybe $5, to have the option to buy that one stock. So, the only thing now is the cost that I paid for the option and the insurance companies work the same way. So, all they’re doing is saying, Hey, we’re just buying an option on the index, at the end of the year, it’s either going to be up or it’s going to be down. If it’s up, we’re going to buy, we’re going to take the option and buy it and we’ll make money immediately. If it’s down, we’re just not going to exercise the option. And this is why when I tell people, you’re not going to get all the gains, right? So, if the market goes up 10%, you might only get 70%. It’s because the insurance company is using that other portion of money to buy the option is very, very simple spread, it’s considered a very similar to a spread. It’s the same way the banks make money. Think about it. If you go to the bank, and you give the bank money, and you put it let’s say in a CD at 5%. Okay, well, what does the bank do with that money, they just don’t have it a little box with your name on it, they’re lending that money back out in the form of a home loans, car loans at 7% 8% 9%, whatever those rates are for those things, and the difference between what they’re lending that money back out for and what they’re giving you is called the spread. So, if they just lent the money back out at seven, and they’re giving you five, they have a 2% spread, it’s not costing you anything. They’re just using your money to make money. So, the same way the insurance companies work, they all work that way. And it’s the best relationship to have with any financial institution. So again, folks go to onthemoneyoffer.com Get a copy of the book, schedule a time to come in and get a comprehensive right track review. I want you to take advantage of this. This is not the time to procrastinate and kick the can down the road. Get serious about this because time goes quick. And you need to have a plan now not later. Call 1-888-382-1298. The team is standing by right now to get you scheduled for a complimentary right track review. And we’ll see at the office.


Rebecca Powers 19:39

There’s absolutely no charge by the way he’ll pay for the shipping and handling and there’s no charge for that first right track review. Definitely one of the most eye-opening days of my life when we saw our true risk and all the fees that we had been paying for someone I’ve never even met. All right, we’ll be right back. Stay with us.


Announcer 20:02

The work never seems to end until the day it finally does. After nearly a lifetime on the job, you should be rewarded for all the time you spent working. Whether that’s crossing off items on your bucket list, learning a new passion, or rekindling the love of an old one. After all, life isn’t over when you stop working. It’s the start of an all-new chapter, the one where you’re the writer and you get to choose how your story will go. A way to achieve that is by having a clear financial plan to sustain your golden years, the biggest fear most retirees have is if they’ll have enough money to maintain the lifestyle they always enjoyed. Having a plan to help protect you against the curveballs life often throws will help to maintain your lifestyle. Call today to get your free written financial plan. See me live every day to the fullest and enjoy the retirement of your dreams.


Rebecca Powers 20:54

Welcome back. I’m Rebecca Powers here with Brian Quaranta, of course serving the entire beautiful Pittsburgh area and beyond you created secure money advisors to secure people’s money, you realize that big boxes for the most part, and all don’t give in writing financial plans. So, we talked about income and spend down rates and all the different identify what’s part three? Number two is tax planning.


Brian Quaranta 21:17

We did, We did income, we did taxes, and we did investments, right? So, and investments really comes down to what your allocation need to look like, right? So, remember, in in your accumulation phase where you’re growing your money, okay, you’re going to do a lot of asset allocating, right where you’re gonna buy different asset classes. But when you get to retirement, you’re going to focus more on income allocation, because that’s primarily what people are going to need. Even if you just need money on a monthly basis, you have to have an income allocation strategy. Okay, so the fourth area is your health care. And we have to also plan for these things. So, in health care, what we talk about is a number of things. What happens if your husband dies first? What happens if your wife dies first. And we always talk about making bad things happen on paper, right? So, what we want to do is we want to kill your husband while you’re there at the office, and we just want to simulate what happens if he dies, we’ll bring him back to life. Don’t worry, some of you may not want that to happen.


Rebecca Powers 22:16

Just don’t act excited. Yeah, we’re doing the simulation.


Brian Quaranta 22:19

Right. So, what we want to do is we want to simulate what would happen if husband dies, first wife dies first, what happens if they die in the first year of retirement, five years in retirement, 15 years of retirement because if the spouse dies earlier on in retirement, that means that there’s going to be a drop in income very early on in retirement, now, we know that there’s going to be a drop in income, especially if you’re a married couple, because we know that social security is going to take away the lowest check. So, if the husband is getting 30,000, the wife’s getting 20,000, and the husband dies. First, she’ll get the 30, that she’ll get the 30,000 and lose the 20,


Rebecca Powers 22:53

That’s good.


Brian Quaranta 22:53

So that’s a drop in income. That’s a big drop, according to Social Security, the average drop of income for a married couple’s about 40%. That’s a lot of income to lose, especially if you lose it very early on in retirement. So, we have to look at what death does to the surviving spouse? Why do we need to do that? Because if there’s also pensions in there, that loss could be even more significant. So, does that mean now that we have to start withdrawing more money for the surviving spouse out of the investments? If we have to draw more money for the surviving spouse out of the investments? What changes do we need to make to the portfolio? What’s the rate of the portfolio that has to do now, right, and might need a different rate of return. And so, we have to relook at things and make sure that we’re in a place to where if that happens, that spouse is gonna be able to maintain their lifestyle, you don’t want to figure that out, while you’re grieving the loss of your spouse. You want to figure that out together? Way before way before, trust me, it’s a lot easier, then we have to calculate and what happens if you have a health event? Okay, what happens if you have a stroke? What happens if you get a car accident? You need care? What happens if your Medicare doesn’t pay for everything, and you got to start coming out of pocket? And now we’ve got $50,000, 60,000, $100,000 A year in medical expenses, whether it’s assisted living or you know, long term care, whatever it might be? What impact is that going to have? We have to simulate that in the plan to put the pressure on the plan to see where it eventually breaks and how much stress that portfolio really can take. Okay, so that’s got completing number four now. All right.


Rebecca Powers 24:35

I have three minutes left at Number Five.


Brian Quaranta 24:38

Your estate planning. So, when you both are dead? What’s going to happen to all that money? Folks, I’d hate to tell you, but unfortunately, for most people that I meet, they don’t even realize that at their death, the IRS becomes the biggest beneficiary of their money and not their beneficiaries or their charities that they want to leave the money to. Mostly because people don’t understand inherited IRAs and stretch IRAs things that we have the ability to do through the tax code, where the IRS allows us to give our retirement accounts to our beneficiaries, without the beneficiaries taking paying taxes on it. But the beneficiaries are required to take a little bit of money out each year. And they can do that over a 10-year period. But it’s also because people don’t have the proper legal documents, they don’t have the proper will, the proper trust powers of attorney, and a lot of cost is a lot of taxes and costs can come in by not having those areas properly prepared. So, we’ve all worked very hard for our money, we’ve all paid our fair share of taxes over our lifetime, there is no reason to put your family in a situation to where the IRS becomes the largest beneficiary of your retirement accounts or your entire estate, your children should be the beneficiaries of that. Okay. So, the most important thing is you get those documents correct. So again, if you go to onthemoneyoffer.com, my book right track your retirement, talks about the five key areas that Rebecca and I just went through, through his whole entire show. I’ll repeat them again, it’s your income, your taxes, your investments, your health care, and your estate planning. That’s what makes a great retirement plan. Those five areas all need to be handled together. They have to be communicating and working together. If they’re not, your plan may not be on the right track. And I will ask if you’re not on the right track, when would you want to know a lot of people tell me if Brian if I’m not on the right track, I want to know right now, how much better Could you do, making sure that you had all of this taken care of don’t kick the can down the road on this is not the time that procrastinate, time goes by quick. So onthemoneyoffer.com Get a copy of the book schedule your comprehensive right track review right there or call the 800 number 1-888-382-1298. The team is standing by right now to take your call get you scheduled to come in and we’ll also send you a copy of the book.


Rebecca Powers 27:09

And he even pays for the shipping. He wants to make sure you have it. Have your calendar ready, please when you call so we can get you a date and that really is free. That means no cost. Absolutely no obligation to work with Brian and his amazing team. It really is just for you, and we hope you take advantage of it. And we hope to see you again next week. Have a wonderful week. Hope you learned something we love you. Thanks for joining us.