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Video Transcript
Rebecca Powers 00:22
Welcome and thanks so much for joining us for this week’s edition of On The Money with Secure Money with Brian Quaranta of Secure Money Advisors. Great to see you as always.
Brian Quaranta 00:33
Great to see you, Rebecca.
Rebecca Powers 00:35
And we have a wonderful special guest. Last week we had beautiful Maggie, and this week we’re going to a younger gentleman. I love how you have a lady, an older gentleman, a younger guy. This guy’s story is amazing. His parents are both cops. His brother is a cop, a police officer. Your parents trust Brian with their pension. They both retired recently. That’s right, you listen to his radio show as a college student, and basically became his stalker.
Mike Diulus 01:02
That’s pretty much all. I mean, I listened to Brian on the radio with my mom, and she said, you know what? We just got to go see this guy. Yeah, and, you know, I said, Mom, we live in West Mifflin, that’s all the way in Zelienople. We made the drive out, and after interviewing some other firms, there was nothing, nothing comparable, right? The planning strategies and really everything being about the plan and not just the investments. That’s why I fell in love with the strategy. And called this guy 26 times, so he gave me a shot.
Brian Quaranta 01:34
He did. I never called him back. I will tell you, if it wasn’t for Neil, he wouldn’t be sitting here because Neil was the one that met with his parents, and he said to me, they keep bringing their young son, who’s still in college, and I’m telling you, this kid is sharp. He’s studying finances. I think we ought to bring him on as an intern. You know, he had long hair, and I’m going out. This guy doesn’t this guy doesn’t look like he’s studying finances, right? We brought him in, and he’s been impressive ever since, and he’s been an unbelievable member of the team, and he is really, really intelligent, and I’ve seen him work through some of the most complicated cases and just really help people change their lives, and to have such a young guy that’s handling large sums of money for people that have accumulated money 30, 40, years over their lifetime, and putting their trust in Him and our firm, and I think that’s a great thing about our firm, is that you know whether you’re seeing Michael, Neil, Maggie, we all operate as a team, and these guys are constantly planning and running ideas and notes by each other, and that’s really where that synergy comes in. So, when you come to secure money advisors, you’re not just getting one advisor here. You’re getting an entire team that’s watching after you, your family and your money.
Rebecca Powers 02:55
All right, let’s take a few questions. We love when you call in to make your complimentary appointment, you can also, if you get a landing page, put in what you’re curious about, and we might even mention your name and use your question on our show. All right, Jared from Mount Lebanon says, how does the tax treatment of annuities work during retirement? That’s an interesting question.
Mike Diulus 03:15
That is a great question. And you know, one thing that a lot of people don’t know about annuities and retirement is you can actually get your money out of your 401 K and move it into an annuity without any taxes at all during that transition, even while you’re still working. They call that through the in service rollover, right? So a lot of times, with many company plans, once you reach the age of 59 and a half, you’re able to then take a lot some of the money that you’ve put into your 401 K, and roll it over into an annuity to begin preparing for retirement before you’re even there.
Brian Quaranta 03:48
and that’s really what the in service withdrawal was created for, was to give the ability for people to remove the money from the 401 K while they’re still working, as Michael said, which means it doesn’t stop any future contributions from coming into the account. So they’re able to exit with some of their money, or all of their money get that position. So they’ve got that guaranteed bucket where they can get that stream of income from, and they still got contributions going in there for 1k that might be invested in the market. So it starts to become a really healthy balance of having money in the market and having money prepared for when you retire to generate income.
Rebecca Powers 04:24
Okay, fantastic. Let’s take another question, because we get so many, and these are great. Suzette asks, what are the implications of withdrawing from my retirement accounts too early? Never too early?
Mike Diulus 04:36
No, it can be. And you know, the IRS, just like the in service rollover. The age is 59 and a half. The IRS has that same role for when you’re allowed to actually start pulling funds out of your 401 k or IRA. And if you pull out early, the penalty can be significant. Not only will you have to pay the taxes on it, which is at your ordinary income tax rate, you know the 10% 12% 22 Percent, but also on top of that, an additional 10% penalty can be charged, right? So, imagine you pull out $10,000 and you’re in a roughly 20% bracket. 2000 goes to Uncle Sam, but then, if you’re not old enough yet, you have to pay an extra $1,000 on top of that. So, the penalties can be severe. So, this is why we always talk about diversifying your asset classes, right? Don’t only use the 401, K, you know, have some emergency funds in the bank, or invest in some non-retirement accounts.
Brian Quaranta 05:31
Well. And the other thing too is that, you know, there are some rules that allow people to get money out of retirement accounts. Early one is called the 55 rule, and the other one is called 70 2t these are two different rules. Now what’s interesting about the 55 rule, and if there’s people out there that want to retire early, is what you got to be very careful of. If you remove your money from your 41k and roll it to an IRA, okay, you lose the option of doing the 55 rule. What I mean by this is, if you want to retire and you want to use this 55 rule, the money has to stay in the 401, K, and the IRS will allow you to start taking money at the age of 55 when you’re retired, if it’s in your 401, K, not your IRA. Now that’s a tricky one. The other one is called 70 2t 70 2t allows you through a, through an annuitization strategy, right, where you can take out a certain amount of money every single year under, under these rules, where it’s five years, or whatever is longer, right? So, if you started doing, you know, at what is it five years or two, you’re 59 and a half or longer, right? So, so if you start taking money out at age 50 you got to take money out for nine years. If you start taking money out at 55 you only have to take it out for four and a half years until you hit 59 and a half. So there are ways to exit and retire early with your retirement account money without incurring a penalty. So again, how are people going to know all this stuff? Right? You’re talking about 25 years of doing this to understand all these little parts. But this is why we can engineer the plans for people the way that we do, and why we hear so much in the conference room. Why has nobody ever told me this? Why has nobody ever showed it to me in this way? I could have done so much better. I could have retired earlier. So, and those are the things we love hearing.
Rebecca Powers 07:25
Yeah, I heard you all on the break talking about tax lost tax loss harvesting. Anytime I hear something, it perks at my ears. I’ve done the show with you for years. But what is tax loss harvesting?
Mike Diulus 07:36
Yeah, tax loss harvesting is a great technique to use with some of your non retirement monies. And essentially what you can do is, whenever you have in a position that goes the wrong direction, and you start losing some money, but then you have other positions that are up and doing well, you can actually eliminate the tax of the gain by utilizing the tax benefit of the loss. Right now, there’s some tricky rules with it, called a wash sale. So, you have to be very careful when you do this. I recommend you speak with an advisor whenever you do something like this. But it’s done by a lot of the wealthy in America that save a lot of money on taxes, and that’s something that everyone should be thinking about. Just think about
Brian Quaranta 08:15
this. If you had a stock in your account that had a big gain on it, okay, and you and you were worried about selling it because you didn’t want to pay all the taxes on it. But now, all of a sudden, you had a stock that was down, let’s say $20,000 right? But you had this gain of $50,000 you could offset $20,000 of that gain with the $20,000 loss. And that’s called tax loss harvesting. That’s the things you got to look at at the end of the year. And again, tax planning is not something that we just do one time. We’re always looking at, how do we maximize the plan going forward? And you’ve got to be forward looking to do that, not backward looking like a tax account. Exactly.
Rebecca Powers 08:54
Tax Planning is not just a few years they can actually map it out to your 95 years old and see what the different strategies are all right, here’s another question, what are the benefits of a deferred income annuity in a tax planning strategy? You
Mike Diulus 09:08
know, Rebecca, this is, this is interesting, because I just helped somebody with this a couple months ago. And, you know, with some deferred income annuities, it depends on the company that you have your annuity with. You can actually convert the money within them, from pretax dollars to Roth moneys. And for those of you that don’t know what Roth monies are, essentially how it works is you pay the taxes on the way in and it’s all tax free on the way out. So, what we’re doing is over about a three to four year period, converting all of the money to Roth so that when they retire and they activate that income stream from the annuity. They don’t have any taxes on it, not federal, not state, local, nothing.
Brian Quaranta 09:47
Which is another way of saying tax free, folks, another way of saying tax free, Uncle Sam, is out of your life, gone forever. These are the things we want you to know about. This is why I want you to go. On the moneyoffer.com get a copy of my book and schedule a complimentary appointment to come in. You’ll come in. You’ll see one of our team members go through the process. I know that if you’re coming to a financial advisor’s office, it might be intimidating, but I promise you, it is not at our office. You don’t need to worry about what questions to ask, because we’re going to probably have 2530 questions to ask you anyway, so we truly understand your situation. As a fiduciary planning firm, we have the responsibility to do what’s in your best interest. So again, go to on the money offer.com get a copy of the book. Wire there, schedule your compliment complimentary appointment, or the team standing by, you can just call 1-888-382-1298, or you can scan that QR code. You got many ways to get a hold of us. No reason not to get a hold of the book. And again, I sent it to you absolutely free.
Rebecca Powers 10:49
That’s right. All right. You’ve got two minutes to go make this call, get a snack. We’ll be right back.
Commercial Break 10:53
We know the market is going to get worse from here. This is the biggest monthly decline in 10 years. People’s 401, case took a major hit. My investments are tanking. My retirement isn’t going as planned. I can’t believe I let my kid talk me into buying crypto. I mean, what is that? Anyway? This was the fourth worst contraction in history. So how are you two doing? Your financial future doesn’t have to be uncertain. I’m Brian Quaranta with secure money advisors. If you have amassed a nest egg, it’s time for a financial advisor to help you reach your retirement goals. This is one of the greatest tax windows in history. Now is the time to take advantage of this tax discount while you can we specialize in retirement planning, tax mitigation, estate planning and more. Plan your retirement right Call now for your complimentary portfolio review and tax analysis.
Rebecca Powers 11:48
Welcome back to On The Money with Secure Money with Brian Quaranta of Secure Money Advisors. I’m Rebecca Powers, a long-time news anchor retired, and now I am a happy consumer advocate, and I love doing this show, because you have so many people committed to your office, to your cause. It’s about education. You’ve got women, you’ve got older men, you’ve got this young gentleman comes from a law enforcement family. You cover all the bases. It’s about long-term relationships. So, when people have questions like, what planning should I do at the end of the year to manage my taxes? Brian, yeah, you’ve got this whole plan. You can go through the different scenarios.
Brian Quaranta 12:29
There’s lots of different tax planning strategies at the end of the year. I mean, this is where we might consider converting some money to Roth, because now we know how much we can convert without putting you into another tax bracket. This is where we might look at tax loss harvesting, like we just talked about on the last segment. So, there’s lots of strategies that could be considered at the end of the year to manage taxes going forward, and it’s the probably most number one overlooked area by most of the big Wall Street box firms, because the only thing the Wall Street firms care about is the money being invested, right? And the only thing they talk to you about is performance. And if they are giving you a plan, they’re giving you a plan about this thick with charts and graphs, bar charts, line charts, and you know darn well you don’t understand it, because we barely understand Okay, so just get yourself a simple math plan built in an Excel spreadsheet like we do, and you’ll have the clarity that we’ve had for the last 25 years. And it’s why we’ve got a 98% client retention rate, because we’re able to keep our clients on track every single year. Look, we’re not perfect. If we’re investing people’s money in the market, our accounts go up and down too, but our clients are not worried, because we’ve built it in a way to manage that volatility different than what most firms do, and that’s why I want you to come in and really learn about this. It’s
Rebecca Powers 13:48
such a good point about Wall Street, because their function is to keep the money in the stock market, and brokers, their function is to get that commission. That’s right when they’re doing the trades. It reminds me of chapter two, if you have his book, take it out right track your retirement. If you don’t call us and we will mail you one for free in a beautiful gold envelope. Chapter Two, think like a pensioner, not a gambler. Will you have enough to stay retired if you have everything you’ve ever worked for in Wall Street, you’re gambling, and we know that. How do you think like a pensioner instead of a gambler?
Mike Diulus 14:20
Yeah, I think one thing that you need to understand is there’s two phases to your financial life. There’s the accumulation phase and there’s a distribution phase, right? So, whenever you’re young and you’re investing and you have time on your side, your goal is to squirrel away as much money as you can and just grow that nest egg as large as you can. But between the two of those phases, you move into the retirement red zone, and then your distribution phase is up next. Now, during that distribution phase, your primary goal is no longer growth, it’s now income, okay? So, if your goal is income and your goal was growth before Do you think the same investments are going to work for two different goals, completely different, right? So, what you need to do is you need to start thinking like a pen. And focusing on asset classes that will give you income in retirement. So, you know, especially because we don’t have pensions anymore, the number one issue with people retiring today. So that’s what we mean when we say, think like a pensioner and not a gambler.
Brian Quaranta 15:13
Yeah, look, you need to insure a portion of your money. It’s the right thing to do, right? It’s no different than insuring your car, your home or your health. I mean, I say this all the time on as many shows as I can. Why in the world, the most important thing you’re going to need to do is replace your paycheck, right? I mean, isn’t it better when you’re working, and you know that your job is secure and stable and you’re not potentially going to be laid off from your job? Well, that’s like trying to build income from the stock market. It’s like your job not being secure. You’re like, well, I don’t know if next year This income is going to be there. Why would anybody want to build something that way? This is why we teach you the way, the proper way, to utilize an annuity. And not all annuities are created equal. There’s a lot of annuities out there that we will never touch because they’re too expensive. They’re not going to do the right thing for you, and you have to have an annuity that is going to give you the ability to get income for both you and your wife, if you’re married, and also if both of you die. We want the annuity to pay out any balance in the account to your family members. That’s what our accounts do, and by doing that, it allows you to invest money in the stock market, which any investor will tell you, the only way to be successful is to invest for the long haul, right?
Rebecca Powers 16:31
Absolutely.
Mike Diulus 16:33
Yeah. I mean, time is the most important variable in the stock market. That’s why we take the two-bucket approach. Yes. We have some money’s focused.
Rebecca Powers 16:40
Yes, well, I’m pointing to you because I literally opened the two bucket of take some of that money and make it secure. And that’s the whole point. Why would you gamble? If you go to the casino, you’re going to put every penny you have on one number. No, you’ve got these to say, diversify, diversify, diversify. But they only said to do it within your portfolio.
Brian Quaranta 17:04
You talk about diversifying everything in non correlated assets. What that means is that money that is over here is not impacted by what’s going on in Wall Street, right? And the Wall Street money is only impacted by what’s going on in Wall Street, and this isn’t impacted right? So it’s important to have these non correlated asset classes, it’s important to have some emergency cash. It’s important to have an account that’s going to provide guaranteed, insured income for the rest of your life. And it’s important to have money in the market long term for growth to keep pace with inflation. Because guess what happens when that market money goes up over the long term, we can peel some of those gains off, and we can then create more income on a guaranteed basis to increase your cash flow in the future as expenses might go up.
Rebecca Powers 17:48
And there’s nothing. There’s no question that is too small. You’ve had people call and say, should I get my daughter a new car? Should I get this you mentioned not all annuities are created equally. If you have bought a variable annuity, or any annuities, any product, it is fine to call, you bring it in, because you can, you can get them out of that, not so good, and get them in the great environment now.
Mike Diulus 18:10
And that’s, that’s something we call refinancing your retirement. I mean, you have the ability with this high industry environment. You know, high interest rates are good for savers. They’re bad for borrowers. And the opposite is true as well, right? So if you bought an annuity five years ago, six years ago, seven years ago, and you’re wondering if you can improve that, you know, we recommend you call in.
Brian Quaranta 18:32
Because we can help you find out most likely you’re going to be right, most likely going to be able to and in regards to the variable annuity, let me say this, the variable annuity is a very expensive annuity owned and the reason is, the name variable means that it’s actually investing its money in the market. It’s separate account is invested in the stock market, which means you’re exposed to the ups and downs in the market. Now these variable annuities will offer a guaranteed income, but it comes at a very high cost. Typically, when we do what we call our variable annuity scape, where we call the insurance company, typically, what do you see in fees that the variable annuity?
Mike Diulus 19:09
I mean, I’ve seen anywhere from three to four and a half percent in fees. I did a call with a guy a few months ago that was in a variable annuity, and he’s been in this since 2002 okay, so going on 22 years now, right? We found out that his average return has been under 2% because the fees, the fees were 4.3% a year, so they’re eating all of his returns. Now, it did have an income side to it as well, but it just wasn’t that great because of the interest rate environment he bought it in, right? So what we do every single day. I mean, we do these calls nonstop is trying to find out. Are there any ways that we can help you? Can we improve it? Because, like Brian said, the fees, I mean, they’re intense.
Brian Quaranta 19:50
Not only that, but typically, the variable annuities are not going to offer you as high income as the fixed or fixed indexed annuity, because the insurance company does. Doesn’t know what the value of the account is going to be because it’s in the market, so they typically will have a lower payout yield than what the fixed or fixed index will because the fixed and fixed index, the insurance company could, has control over what the account value is actually going to be, so they can calculate with a high degree of accuracy how much money they can actually pay you. So again, folks, I write about this all in the book right track your retirement. It is a simple planning guide to help provide you with peace of mind and security as you go into retirement. It’s going to show you the proper way to position your money, allocate it, the right way, and get the income that you need and growth you need at the same time without worrying about the stock market. And we teach you in here about how to understand the performance and what your accounts are actually going to have to do. I talk about in the book The three most important interest rates that you need to know about, which we’ll talk about when we come back on the next segment. But for now, go to onthemoneyoffer.com get a copy of my book. Scan the QR code that will take you there. Also, as you get a copy of the book, schedule your complimentary appointment. Come in and see the team. Nobody from my team will ever try to sell anything. Pressure to do anything. And again, you can also call 1-888-382-1298, the team standing by to take your call, and we’ll
Rebecca Powers 21:16
be right back. Stay with us.
Commercial Break 21:25
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’ve 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 so you may live every day to the fullest and enjoy the retirement of your dreams.
Rebecca Powers 22:14
All right, welcome back. We’re talking about securing your money specifically for retirement. Michael, what are the three rates of return? What does that mean?
Mike Diulus 22:20
So, Rebecca, there’s three rates of return that you need to focus on in retirement, and they are your spend down rate, your preservation rate and your legacy rate. So, let’s start at the top. There the spend down rate. The idea of these rates of return is to understand how much you need your money to earn, to have it either last grow or be spent down. So, the spend down rate is by the age of 95 to 100 with the income you’re going to need, what kind of rate of return do you need? So, for example, let’s say you have $500,000 and you want to pull out 25,000 a year, and you want that to run out by 95 finding out the rate of return that will get you there is called your spend down rate. Okay, the next one is called your preservation rate. The idea behind the preservation rate is, what do you need to earn in order to preserve your principal? Right? I mean, we’ve all heard the old adage of you know, preserve the principal, live on the interest, right? So the preservation rate, if you have 500,000 and you need 25,000 a year would be 5% because you’ll earn 25,000 a year in income. Okay? And then the last one is the legacy rate. Okay? The legacy rate is, how can you get as much income as you need, you know, to live on every single day and still grow your money as well? What amazes people every time we show them these three rates of return is how low the returns actually are. Everyone comes in and says, I want to be at a three risk score and earn 10% because that’s what I need. But then when they find out, their spend down rates 1% and then their preservation is 3% and then five is their legacy, right? So they can leave phenomenal amounts of money and create a big difference for their family, and they don’t need these Wall Street type returns to do so. And
Brian Quaranta 24:03
what the what these three rates do is it helps you narrow your focus on how much risk you actually need to take with your money. That’s the whole point, right? So, when you go into a big box firm and they’re doing an evaluation, they’re not talking about what your the interest rate is that you’re going to need, okay, but when you calculate these three interest rates, you get very clear on what you need your portfolio to return on a year to year basis. Why do we do this? Well, how do we know on a year to year basis, when you come back to do your review at secure money advisors, how do we know that the plan is staying on track? We know because of these three interest rates. So as long as we’re maintaining that range of those interest rates, we know that the plan is on the right track. If we’re way over, that just means we’re ahead. If we got under a little bit, that might mean we need to make a little adjustment. But because we take so much risk out of the portfolio up front, a lot of. Times we’re on track quite a bit every single year, without varying where. If you’re just in a stock market account, you may be off track multiple times throughout the course of your retirement, right?
Mike Diulus 25:12
And you know, the way we look at it is, how can we build a retirement plan and remove as many variables as possible? Right? When you’re fully in the stock market, that’s the biggest variable there is, right? So, if we can start to remove bits and pieces and have an idea that this is going to work with a 98% chance, 99% chance of success, that’s our goal, right? That’s how we build retirement.
Brian Quaranta 25:34
And again, we’re not against the stock market. No, sure you need it for growth, right? We just feel that people are putting the wrong monies right in the stock market? Right? You can put a certain amount of money in the market when you’re retired, that’s okay, but you got to identify what portion of money that is. You cannot have 100% of your money in the market. It is just a bad idea to do that, especially if you’re going to need income. Now, if you’re one of the lucky few out there that you have a pension and you have got Social Security and you don’t need any income from your investments, my gosh, take all the risk you want, because maybe you don’t ever need to touch that money. But I would challenge you to say this, you probably will need that money, because studies show that you might have a health event, and when you do, where are you going to get that money from? Because if you have a health event and the market’s down and now you got to sell assets at a loss, that’s just going to compound your losses. So by setting up a separate non correlated fund from the market, even if a health event were to happen, you have a way to pay for that health event. So these are reasons why you want to do it, regardless of what your situation is. So again, folks, thank you for tuning in, but right now, I want you to go to onthemoneyoffer.com and I want you to go there, and I want you to get a copy of the book right track your retirement. It is a guide. It is a roadmap to help you understand how to put together a plan. It’s going to help you have better conversations with your current advisor. It’s going to help you understand maybe what they’re not doing and what you need to start doing. And remember this, I know Relationships are hard to break. They always are. I had a tax accountant that was my professor in college, and as my company grew, I knew I was outgrowing her, but every time I’d go in, I’d say, She’s a nice person. I’m going to stay with her. You can’t build a good plan off of just a relationship. You have to have a good strategy. And that’s what I want for each and every one of you, go to onthemoneyoffer.com get a copy of the book, schedule an appointment, or call the number 1-888-382-1298, and we will see you at the office.
Rebecca Powers 27:42
And like they say in the military, the failure to plan is a plan for failure. So let’s start with a plan. Michael, you did fantastic.
Mike Diulus 27:49
Thank you so much.
Rebecca Powers 27:53
I’ll see you next time Pittsburgh.