*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.
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Video Transcript
Rebecca Powers 00:20
Welcome to this week’s edition of On the Money with Secure Money with Brian Quaranta of Secure Money Advisors. Everyone knows Brian. He created this independent idea of getting to know you, getting to know your dreams, reverse engineering to get to your retirement, but the biggest and most important word is Secure, and that is where we’re going to start today. Great to see you.
Brian Quaranta 00:50
Great to see you as always. Always great to see you.
Rebecca Powers 00:53
We have so much fun. We really do. So, we say the name of the show is On the Money. With Secure Money, the business is Secure Money Advisors, because you were with the big box at the beginning of your career, you could barely sleep at night because you felt like you weren’t really getting to know and servicing people. So much of it is just risk your money, keep it invested, ride the wave. But you think oppositely. You think you must secure an amount, guarantee your income; And one of the tools you like with the big insurance companies, there’s nothing stronger, is the annuities. So, let’s focus today. What types of annuities are out there? They’re not all created equally, yeah.
Brian Quaranta 01:35
Well, you know, first off, let me just say that. You know, I think the word fiduciary is an important word for folks to understand, and the reason is, is because, by law, a fiduciary has to do what’s in the client’s best interest. I would like to think that anybody working for a client is doing what’s in their best interest, all right, but that’s not always the case, because when I was working at the big box firms, one of the things that bothered me was that we were taught how to take risk with our clients monies, and so, you know, when I would put my head on the pillow at night, you know, I felt like every morning I woke up, I was walking on eggshells, you know, wondering what the markets were doing. You know, they are they up? Are they down? Because it was scary to know that you are taking someone’s life savings and you’re investing it for them. Now, that’s the way we were taught, and I thought that was normal until I had met a very good mentor of mine, and he had shared with me that they’re going about it all the wrong way. Brian, the number one problem for people today is not investing their money, is the fact that they’re not going to have a way of replacing their paycheck. And that’s the critical part of the plan that needs to be solved for now, you’ll hear a lot that people will say, I’m a fee only advisor. And you know, we’re going to talk about something called annuities here today, and we’re going to talk about why they are important. And I will say this, I don’t know how anybody could call themselves a fiduciary if you’re if you have to do what’s in the client’s best interest by law, and you don’t recommend all financial products, how can you consider yourself a fiduciary, because fiduciaries are fee only. Let me explain to you what that means. Fee only means. I only work with stock market investments, because the only way that you can charge somebody a fee on their assets is to have it invested in. The stock market regulation will not allow me to buy you a life insurance policy and charge you a fee. They’re not going to let me buy you an annuity and charge you a fee. They’re not going to allow me to buy you health insurance and charge you a fee. Do you get my point?
Rebecca Powers 03:56
Absolutely. Only when you’re investing the money do you get that?
Brian Quaranta 04:01
Yes, this is my actual problem with the word fiduciary, because what fiduciary really means is I’m going to invest your money in the market. Because as a fiduciary, I can charge a fee. And in a fiduciary world, right, you don’t have an insurance license. So, in order to do everything, you have to have an insurance license. Most people just have what they call their series six, series seven, and it only allows them to sell their risk investments. They might be identified as a fiduciary, but in my opinion, how can you do what’s in the client’s best interest if you can’t look at all financial products to help solve somebody’s problem?
Rebecca Powers 04:43
Well, it’s the big picture. A holistic person looks at every single part of your situation to figure out the plan. Right? All starts with the plan, but you’re right. How can you not look at Social Security, Medicare, all the different things they’re going to need?
Brian Quaranta 04:57
That’s right. And how can you not provide, somebody that’s coming in, let’s say you have a younger couple coming in. Let’s say they’re in, 35-40 years old. They have children, okay? And they don’t have a whole lot saved. Maybe they’ve got a little bit of debt. First thing would be to get them out of debt, yeah. The second thing would be building up cash reserves so they now have emergency cash reserves, money. The third thing would be buying life insurance for them, because if they died, you would want to make sure the family is taken care of. The last thing you would do is the risk investments, right, right? I can remember my brother called me one time. He said, hey, you know, I’m making some money now. What do I do with all this extra money? I want to start buying into the stock market. Okay. Well, do you have life insurance kids, because my little nieces and nephews, if you die, they lose the person that’s making the money for the household right now, if I was a fiduciary and I didn’t have an insurance license on top of that, I would only be able to do risk investments. Do you see where I’m going with this? Folks? Yeah, don’t let this fiduciary thing, even though I am one, don’t, don’t let people come to you like at some badge of honor. Okay, because the guys in the gals in this industry like to wear it like it’s some badge of honor. What you really should be asking is, are you a holistic planner? Do you do everything? That’s what we should be talking about. So, let’s dive into these annuities a little bit. Okay, so, annuities are really designed for one thing and one thing only, and that’s to provide guaranteed income, right? It’s to provide a guaranteed income and make sure that you have a guaranteed stream of income. And some of the questions I typically get, are annuities a good way of preventing myself from running out of money? And the answer is yes, because annuities are an insurance product. That’s exactly what they’re designed for, right? To make sure that you can never outlive your money. And once you put something into an income annuity, it’s going to pay you for the rest of your life.
Rebecca Powers 06:51
And it’s a contract, right? It’s in writing. Its contractual you can live to 107 and you will not run out of money, because your principal is protected, and that’s the fixed index annuity. Is that different from an income annuity? Are they named differently?
Brian Quaranta 07:06
Well, income annuities are different than an indexed annuity because their main priority is to provide income where an index annuity allows you to have some upside potential. The market goes up, but if the market goes down, you can’t lose any money. And the catch on that one is, let’s say the market goes up 10% they’re not going to give you all the gains. They might give you 70% of the gains, so you might get 7% of the 10% but if the market goes down 50%
Rebecca Powers 07:36
You don’t lose a penny.
Brian Quaranta 07:37
You don’t lose anything.
Rebecca Powers 07:38
That’s why I like mine.
Brian Quaranta 07:39
That’s right. They say zero is your hero. Down here, you’ll get a zero. There’s other questions that I get, you know, and I wrote them down here, I say, you know, should I consider a fixed annuity or a variable annuity? Okay, now I will say that there are annuities out there that I don’t like, variable annuities being one of them, and the reason I don’t like it is because it really is a- it’s an insurance product that has investments inside of it. Okay? So, you wind up paying high fees to have this insurance wrapper with investments itself. So, it’s a risk investments money can go up and down. If you’re going to be at risk, just go buy mutual funds, ETFs, or individual stocks, don’t do a variable annuity. On the annuity side, I would only do fixed or index or an income annuity. That would be it.
Rebecca Powers 08:26
Absolutely and a lot of people who have variable annuities, trust me, if you have a variable give them a call or some fiduciary because it needs to be transferred, right. The fees will eat you up. They allow you to transfer variable annuities, correct?
Brian Quaranta 08:43
If you can get out of them. I mean, so…
Rebecca Powers 08:45
Depends on the contract.
Brian Quaranta 08:46
It depends on the contract we have. We have a process that we’ve created called the variable annuity escape. The variable annuity escape is created by a good friend of mine, mentor of mine, very brilliant man. And what we do is we call the insurance company directly, and we ask them about 15 to 20 different questions. With you there with us, and this is what I mean. If you ever heard me say this before, when you come into our office, one of the things we’re always going to do is roll up our sleeves. We’re going to sit on the same side of the table as you, because we’re on the same team. We’re working together to solve the problem. We call the insurance company; we ask them 15 to 20 of those questions. Usually, when I get done, it will sound something like this, knowing everything you know now, do you want to stay, or do you want to go? Let’s get out of this thing. So, folks, you can read a lot more about all this stuff in my book Right Track Your Retirement. It’s absolutely free, but all you got to do is pick up the phone call. 1-888-382-1298, you can schedule a call, or I an appointment with the team. You can also go to OnTheMoneyOffer.com and go there and get a copy of the book. And you can also schedule there, or you can scan that QR code at the bottom of the screen.
Rebecca Powers 09:55
And Brian will even pay for the shipping and handling. Again, we want everyone to. Have this very powerful book, short, easy to read, and make an appointment to come in and start your complimentary plan for retirement. We’ll be right back.
Brian Quaranta 10:08
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 10:22
The last thing you want to do is have a really good job in your 60s, retire, be looking for work again in your late 70s.
Brian Quaranta 10:30
The average person might say, well, a good portfolio would be a good mix of stocks, bonds and mutual funds. No, no, no, no, no,. A good portfolio is all designed around the five key areas, income taxes, investments, healthcare and legacy planning.
Neil Major 10:46
Because we’re not just product pickers here. What we do best here is we build retirement plans.
Brian Quaranta 10:50
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 11:01
People, you know can actually see a vision once we start to really build out their plan.
Brian Quaranta 11:06
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 opinion. 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 11:37
Welcome back, the show is all about educating and empowering you. That’s why we really want you to go to OnTheMoneyOffer.com, ask for this book. Brian will send it to you. It is so powerful, and you can get an appointment to come in as well and start that complimentary retirement plan. Everything starts with a plan. We’re talking about annuities, because it is this wonderful opportunity for safety and security of some of your funds. You do not need to keep rolling the dice and risking your hard-earned money. Fees and charges are another thing that I think people feel like they’re overcharged with an annuity contract, Brian, it says exactly what the fees- the insurance company pays you, first of all, not the client.
Brian Quaranta 12:19
Correct
Rebecca Powers 12:19
And you’ll see exactly what the charges are. Since 2022 the annuity sales went up like 300%, so many people were rushing toward that safety. You can cherry pick. You can get as an independent from any insurance company, any product. That’s powerful.
Brian Quaranta 12:38
Yeah, yep, yeah. It’s very powerful, and it’s important that you have somebody independent that can shop the market for you and find the right annuity for you, because annuities will differ based on how much money you’re looking to invest, whether you’re male or female, what age you are. So, you can have two people come to the office, ones in their 50s, ones in their 60s, and this annuity company works much better for them than this one for these folks over here. So my wife, Kate and I, as we continue to plan our retirement every year, I put a chunk of our money into an income annuity, and all I’m doing with that is, is making sure that the day that comes that we want to retire, or, God forbid, anything ever happened to me, Kate and the kids have a source of income, and every year I will put a lump sum into an annuity to do that. Now, there are fees in annuities. Okay, variable annuities are some of the highest, three and a half to 4% again, if you didn’t hear me on the last segment, I’m not a fan of the variable annuity. If you own one, I would tell you, come in, sit down my team, and we can show you the difference. Neil, one of my top advisors at the office, was telling me the other day, he said, we had some folks come in. They had about, I think it was somewhere around $600,000 in in a variable annuity, and it had an income rider on it, okay, which meant that it was going to provide them with guaranteed income for the rest of their life. That $600,000 from this insurance company, they were paying 3% a year in fees, 3% a year of fees on $600,000 so do the math. That’s $18,000 a year in fees. Okay? And on top of it, it was going to provide them with income. Was going to provide about $40,000 a year in income. Okay. Well, what Neil did, why they were there was number one, what was the purpose of this annuity? And they said, Well, we wanted to protect money, but we also wanted a stream of income. And he said, Well, you know, it would you be disappointed to find out if it wasn’t protected? And they said, Yes. And so again, calling the insurance company, we said, is this principal guaranteed? They said no. And then we said, Can we double check on the income that it’s providing, and they said it will provide about $40,000 a year. And so that checked out. But then the next question we asked, and this was critical, folks, is the income single or joint income? And it was single, which meant:
Rebecca Powers 15:18
Only one income was protected.
Brian Quaranta 15:21
Only one income was protected, which means that the account was in the husband’s name, the $40,000 would have only paid that a husband, not the wife. So, if he dies, she loses the guaranteed income. They did not know that, and they were furious. Could you blame them? No, this whole time, they’re thinking that they’ve got this annuity that’s going to pay this income stream, and they find out it’s only on one of them.
Rebecca Powers 15:50
And they were paying 18,000 a year in fees.
Brian Quaranta 15:53
Yep, so Neil. So Neil goes back, we have very powerful software, and he puts in their information, and it comes back and it says, If we move this money from where it’s currently at to this insurance company, by the way, A-rated company, big, strong, safe companies are the only companies we believe in working in with The income would go from $40,000 a year to $55,000, a year, the income would go from being single income to joint income, and the fees would go from over 3% to 1%. That’s life changing. Absolutely. Now you might say, well, I don’t like paying fees. Well, nobody does, right? But here’s the thing, you have to ask yourself, you’re paying fees when you invest in the market, and what are you paying for? What are you getting in return for those fees? Well, I’ll tell you what you’re getting. You’re getting the hopes that whoever is managing your money is going to be able to manage it in a way that you try to get a better return than the stock market itself, right? But you are not really getting anything other than management. There is no protection of anything. So, when you pay a fee on an annuity. What are you getting? You’re getting a guarantee that you’re going to have income for the rest of your life, and you’re going to get a guarantee if you die, that your spouse is taken care of. And by the way, if both you and your spouse die, the income or not the income, but the annuity gets passed on to your children. So, what are you paying for? You’re paying for a real guarantee of monthly income that you can never outlive. I’ll pay that fee all day long, and I personally do
Rebecca Powers 17:51
Yes, me too.
Brian Quaranta 17:51
With the annuities that we buy every single year for myself and for Kate.
Rebecca Powers 17:55
It’s passed on immediately with just a death certificate, and it’s also going to keep you out of probate court.
Brian Quaranta 18:01
That’s correct.
Rebecca Powers 18:02
Super important.
Brian Quaranta 18:03
That’s super important. And you know, one of the other big questions I get all the time is, can I take my IRA money and move it into here? Yeah, can I take my 401, K money and move it into here? The answer is yes. Matter of fact, that’s the best money that you can move into an annuity. And here’s why your IRAs, your 401 Ks, when you’ve deposited money into those accounts, you’ve got a tax deduction, which means that when you put that money in, as it grows and you start to pull it out in the future, gonna pay taxes on it. But you also have to worry about something called the required minimum distribution, which happens at the age of 73 right now, where the IRS says, when you turn 73 you have to start taking money out of this account, whether you want to or not. So why not take that money that we’re going to be forced to take the money out of anyway, and use that to put into the annuity, to create your own private pension, and that’s all you’re doing when you buy an annuity, is you’re insuring your income, but more importantly, Rebecca, you’re getting yourself your own private pension.
Rebecca Powers 19:10
Absolutely, it just takes one more step, and if you think about it, a pension, no matter how big the company was you worked for a pension is an annuity-
Brian Quaranta 19:22
That’s right, and so is Social Security!
Rebecca Powers 19:23
Exactly!
Brian Quaranta 19:23
And these are all things, again, you’ll learn about in my book, Right Track Your Retirement. It is a simple planning strategy to help you reduce risk, build income and provide you with peace of mind. And I will tell you, I kept it a short read because I want you to get the gist of what it means to have a good, solid plan, to have a strategy, but I didn’t want you to have to read 300 pages to figure it out. So, I took all the fluff out of it, and I put all the information in there that you need to know, so that for the first time, you. Can finish a book and say, I am clear on what I need to do again, go to OnTheMoneyOffer.com right now. Get a copy of it. It’s absolutely free. Or call 1-888-382-1298, my team is are standing by to get you scheduled and come into the office
Rebecca Powers 20:15
Absolutely, you also get a complimentary consultation to start your retirement plan, and that means absolutely free and absolutely no pressure. Stay with us. I’m Rebecca Powers here with Brian Quaranta and we’re talking about right tracking your retirement.
Brian Quaranta 20:29
Most people worry they’ll run out of money in retirement. Are you one of them? After decades of working, you deserve peace of mind knowing your money will last 20, 30, even 40 years. Maybe you want to leave some for your family after you’re gone. I’m Brian Quaranta president of Secure Money Advisors, after getting to know you and hearing your goals, we build you a customized principal protection plan based on your unique needs, focusing on five key areas of retirement. Secure Money Advisors helps you with things like income, investments, taxes, health care and legacy planning. We can Right Track Your Retirement. Let us show you how visit our website or call us to schedule a free meeting today.
Rebecca Powers 21:18
Welcome back. I’m here with Brian Quaranta and this man truly has a heart of an educator, someone who hated school and reading long books. I really appreciate this.
Brian Quaranta 21:26
That’s right,
Rebecca Powers 21:28
Alright, let’s continue our talk about annuities, because so many people don’t realize it’s gotten a bad rap, probably because of the variable annuities that Brian does not like. How important is it for tax advantages? There’s also some tax advantages to having the annuity, the good ones, right?
Brian Quaranta 21:45
So, I want to say this too, because you’re right. You know, the annuity has gotten a bad rap, and I’ve been working with it since 2000 and there’s been a big marketing campaign to push against it, right? There’s people out there that say, I hate annuities, and you should too, stay away from annuities. I mean, there’s all kinds of things out there that people, you know, are trying to damage their reputation, but people are getting smarter, just like you said on the last segment. I mean, annuity sales were up 300% because people are finally getting educated. You know, we all, we all create these or have these beliefs that certain things do certain things, like, for example, remember when we weren’t supposed to eat any fat, right? And we’re supposed to stay away from fat, and now they say, eat all the fat you want because you’ll lose weight.
Rebecca Powers 22:35
And your brain needs it so you don’t get Alzheimer’s.
Brian Quaranta 22:37
That’s right. And there’s so many of those things that you once thought were true, that are not true, and
Rebecca Powers 22:43
And been debunked.
Brian Quaranta 22:44
They’ve been debunked, right? Consider your source. Consider your source. That’s it. I always say, consider your source where you’re getting your information from, because usually, if somebody’s saying they hate something or dislike it,
Rebecca Powers 22:59
They have an interest.
Brian Quaranta 23:00
They have an interest in someplace else. That’s right, you got it exactly right. So, I want to make that clear. So, ask me the question again, because I have forgotten by now, I think Donald Trump calls this the weave, but I screwed the weave up because I didn’t weave back in
Rebecca Powers 23:16
You’re wonderful, I love working with you! Tax advantages, we know you can get guaranteed growing lifetime income. We know it’s a contract with, you know, some of the best insurance companies, and some of these are 100-year-old companies. I mean, they’re stronger than any bank you’ll find. What are the tax advantages of an annuity?
Brian Quaranta 23:31
Yeah, well, first off, annuities, if you’re putting what we consider non IRA, non-retirement account, money in there, if I just get paid, take the money from my paycheck, and I buy an annuity with it. That money that I put in, the interest that it will earn, will grow tax deferred. Okay? So, if I put $100,000 into an annuity, that annuity grows to $150,000 I didn’t have to pay any taxes on that interest when it grew. So, it acts a little bit like a retirement account, if you will, if you’re putting after tax money into it, right? But what happens when you roll your IRA in there, or your 401(k), yeah. What happens now? Well, nothing. It’s just it takes on the tax rules of the retirement accounts, meaning it just- the IRA has always been tax deferred, that will the annuity will continue to be tax deferred. And the rules for the taxes are exactly what the rules would be if it was in the 401(k) or the IRA, so there’s no change there, right? That means that money is going to continue to go tax deferred, but every dollar you take out is going to be taxable, right? And this is why, if you are working with a financial planner, and you start working out with that financial planner early enough, that’s where you can do some good tax planning, and this is where you can start to do things like moving money from traditional IRA accounts into Roth IRA accounts. And even now Rebecca today, a lot of employers will allow for their 401 Ks, to have a traditional 401 K side and a Roth 401 K side, and you can now contribute to either one or the other, or you can contribute a little bit of money to both. And I will tell you that if you’re contributing to a 401(k) right now, I would contribute to the raw side, versus the traditional side, assuming that you don’t need a tax deduction of any sort. Okay, some people need tax deductions to stay under certain amounts of income, because if they go over, there might be something they are getting some type of benefit that could disqualify them or they could be penalized, yeah, but if you’re not worried about any or you don’t have any of that situation, putting money into the Roth component is going to be much better, because every dollar you have is going to be tax free. I’ll give you a great example of what I recently did. Okay? So, over the years, I would put money into a SEP IRA, okay? And in the beginning, when I started my company, you know, we didn’t have as many employees as we did today. So, I had a SEP IRA. As we got bigger. We had the 401(k), but the SEP IRA was money that I put in after before taxes, right? So pretax dollars went in and I got a tax deduction. So as that money grows, let’s say I had $100,000 in there. That 100,000 goes to 200,000 to 300,000 to 400,000 when I take that money, I got paid tax on all 400,000 so what I did was I transferred all the money from that account into a Roth IRA in one big conversion, ripped the band aid off, paid the taxes while the taxes are on sale,
Rebecca Powers 26:55
Sure are.
Brian Quaranta 26:56
Put the money into an income annuity, and now all my future income, not only is guaranteed for me, but if I die, guaranteed for my wife, but on top of it, it’s tax free for both of us.
Rebecca Powers 27:10
And that’s the key. Get tax free. Write that down, we could put that on a t shirt!
Brian Quaranta 27:14
Tax free. That’s right, we’re going to talk more about taxes when we come back on next week’s show, but your job today is to go to OnTheMoneyOffer.com and get a copy of this great book that I wrote. I want to get it in your hands to help you understand how to build a true retirement plan that’s going to give you peace of mind and security and give you a real plan, a real strategy that’s going to make sense and give you the clarity you deserve. Or just call. 1-888-382-1298, the team standing by to take your call, get you scheduled and get you a copy of the book.
Rebecca Powers 27:47
Thank you so much for joining us. We’ll see you next time!