*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 00:22
Welcome everyone. Thanks for joining us for this week’s edition of On the Money with Secure Money with Brian Quaranta, of course, Brian created Secure Money Advisors. He’s an independent fiduciary firm. Looking at the whole picture of your retirement plan, and that’s the most important word plan. Ask yourself this, if the market fell 30% tomorrow, how would your current strategy hold up? And I think that’s what so many Americans worry about. Brian, great to see you.
Brian Quaranta 00:53
Great to see you. You know, the number one fear for retirees is running out of money.
Rebecca Powers 00:59
And AARP asked that every year, and they say, What is your number one fear? And they don’t say death. They’re not afraid of death itself. They’re so scared to run out of money.
Brian Quaranta 01:09
It’s probably one of my favorite surveys, because they did, they interviewed about 1,000 people, and they had asked them, you know, do you fear? What do you fear most, running out of money or death? And over 90% of them said I would fear running out of money more than death alone. And I would be in the category that category too. Yeah, you know, could you imagine, you know, running out of money at age 80 and you live till age 95 I mean, how do you go back to work at that age? Yeah, you can’t. No, you mean, you might not even have the physical capability of doing it. I don’t think people truly, you know, it’s really hard to look past like what I’m even going to have for dinner next Thursday, let alone like 25 years from now, right? Yeah. I think one of the things that we did that really helps people see the future is we got rid of all of the fancy bar charts and line charts and the graphs and everything, and we went to basic tools like Excel software, where we can look at basic formulas of money coming in, money going out, right? And we can demonstrate so many things at any point in time. You know, if you look at and you go, you’re looking at a 30-year retirement, you could say, Okay, well, you know, in 15 years, what happens if you have a health event, and all of a sudden, now we have to pull out $100,000 a year. You know, and the worst case scenario would be that you have a health event, right? And you have to pull out $100,000 for three years, but then you get better, right? You don’t actually die, yeah, you get better, and you come out, and
Rebecca Powers 02:50
And then you really run out of money.
Brian Quaranta 02:51
And then you really run out of money, right, right? And these are the things that people need to simulate. They need to simulate what would happen if they lost their spouse. They need to simulate what would happen if they had a health event, right? They need to simulate what’s going to happen when they turn 73 for the required minimum distributions, and what kind of pressure that’s going to put on their investments. And there’s so much planning that can be done, especially from a tax perspective, that can help eliminate a lot of those problems. But for those that don’t take action, you’re falling right into the- to the, you know, the trap, yeah, yeah, right. Right where Uncle Sam wants you, right?
Rebecca Powers 03:31
Don’t worry about paying for now. “Let that debt grow and grow” and then when you’re in your vulnerable years you have to pay.
Brian Quaranta 03:37
I mean, think about this, you know, you know, people go, well, well, how am I going to keep pace with inflation? Right? That’s a big concern of most people, right? You know, I would say that the biggest thing you should be worried about is how much you’re paying in taxes, because that’s a form of inflation. Think about it, when you withdraw, let’s say we’re going to withdraw $1,000 from a retirement account, and you’re in a 20% tax bracket, well, you’re only going to net $800 but if your tax rate goes up to 30% you’re now netting $700, so, just through taxation alone, you’ve lost purchasing power, right? And so, we talk about tax planning, what we’re really talking about is protecting your purchasing power, to keep more money in your pocket, right? And so, and a lot of people don’t think to take the time to look at those strategies, but I don’t blame it on them. I blame it on the big box firms, the Wall Street model, the Wall Street model, because the Wall Street model is all about the investments and the risk and the risk, and I’ve got nothing wrong with the risk. What I have a problem with is that you can only think about risk and only risk when you’re in your accumulation years of growing your money. Right? Because that’s the only thing that matters. You want to try to put as much money away as you possibly can get the biggest rate of return that you can, so that when you retire, you got the biggest pile of money. But once you retire now, the whole game changes. Now and again. I write about it in the book Right Track Your Retirement. It’s the five key areas. It’s what are we going to do for income? What? How are we going to reposition the investments? Because what got you to retirement is not going to get you through retirement. What are we going to do about taxation? Because there’s all kinds of tax traps that we can run into, right? I mean, think about the fact that just the RMD alone, if you’re forced to take money that you don’t need to take. You’re talking about increasing the taxes on your social security, increasing your Medicare premiums, right? Again, more money out of your pocket and reducing your purchasing power. So that’s why, number one, I wrote the book so people would have a guide, right? But they needed a guide that was simple and easy to understand, because I think Wall Street has done all of us a disservice and has made this whole planning thing way more difficult than it needs to be.
Rebecca Powers 06:09
Exactly. And you’re now writing your second book, and I want everyone to know this is it Right Track Your Retirement. Look how short, easy to read it is. And Brian really wants you to get this information so much so that if you just go on OntheMoneyOffer.com he will mail it to you. They will put it in a golden envelope, pay the postage. It will show up at your mailbox, and it’s really wonderful for you to read it before you come in to kind of start your planning. It’s no obligation. Also complimentary. Appointment is also absolutely free. You brought the binder this week, and in the rest of the show after we come back, is going to be questions from you, Pittsburgh. So, we love shows like this, so stay tuned for that. Let’s look at the binder quickly, because so many people say you talk about the binder all the time. Of course, you have everyone’s plans in your computer system, obviously, but this binder really is just such a kind of warm and cozy it’s got everything you could ever imagine till you’re what, 95?
Brian Quaranta 07:03
Yeah. Well, look, when you’re doing any type of accounting work, legal work, financial planning work, it’s a lot of it’s intangible, right? Touch it. You can’t feel it, you can’t see it, right? Yeah? You know, I always say it would have been so much easier to go into the construction business, because at least if I designed a really beautiful kitchen. Someone would come walk in and go, my gosh, who did your kitchen? Who did your cabinets? And I would say, well, here, call this guy. Nobody walks into your house and goes, my gosh, Rebecca, what a beautiful retirement plan. But the reason you want the binder number one is for financial organization, right? So, in your binder, right? You’re going to have a number of different tabs that we put together for our clients. You’re going to have your tab for your income that demonstrates your income strategy, but what your income looks like while you’re both living, what happens if one of you die? What that income looks like, what the strategy is to protect from that if that were to happen, what your tax strategy is going to look like, your investment strategy, all of your life insurance policies, a will, insurance policies, wills, trusts, everything. It all lives in here. You know how many people have said to me, I love going on vacation now, because we just tell the kids, if anything happens, there’s a black binder in the office, grab it from the shelf, open it up, call Brian and his team, and everything will be taken care of for you guys. And that’s what we want for people, right? And so, you know the binder, it’s kind of old school a little bit, right? But it’s probably one of the most important things. And when I share this with people in the conference room, you want to know what happens. 90% of the time, the spouse will look at the husband and go, I told you, that’s what we need. That’s what we need, right? And you realize how important financial organization is to people. But folks, I’m telling you, you go to OntheMoneyOffer.com right now, you can get a copy of my book. It’s absolutely free. People think I’m crazy for printing these books and sending them out for free, including paying the postage, right? But I am so passionate about getting this information into your hands, because I want you to have a guide. Because here’s what it’s going to do. It’s going to allow you to have better conversations with my team, if you come in, but it’s also going to allow you to have better conversations with your current advisors to make sure that they’re doing all the right things, that they’re checking all the boxes. And what a lot of people find out is, once they get the book and they read about all the areas that you need to be thinking about in financial planning, they realize how much is missing from their plan. So again, all you got to do is go to OntheMoneyOffer.com or call 1-888-382-1298, you can schedule a compliment. Recession, to come down and sit down with the team and go through your situation and guess what? If you’re on the right track, we’re going to let you know that we are not in the business of moving money just to move money. We truly want to help families improve what they are doing. And if I cannot make an improvement to your plan. There is no reason for you to ever hire us as your financial planner. So again, OntheMoneyOffer.com go there right now and get a copy of the book.
Rebecca Powers 10:30
All right, stay with us, Pittsburgh. When we come back, questions and answers from Brian, from you, stay with us.
Brian Quaranta 10:36
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 Mager 10:50
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 10:58
The average person might say, well, a good portfolio would be a good mix of stocks, bonds and mutual funds. No, no. A good portfolio is all designed around the five key areas, income taxes, investments, health care and legacy planning.
Neil Mager 11:12
We’re not just product pickers here. What we do best here is we build retirement plans.
Brian Quaranta 11:17
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 11:29
People, you know, can actually see a vision once we start to really build out their plan.
Brian Quaranta 11:33
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’re dreamed of.
Rebecca Powers 12:04
All right. Welcome back. This is one of my favorite types of shows. We get to hear from you, and I’m going to read questions. I haven’t given them to Brian yet, and we’re just going to put you in the hot seat. Answer the questions as they come. Here we go. All right, Meet Bob. Bob is 65, Debbie is 63, she has $500,000 in her 401(k), he has 50,000 in an IRA. They need $30,000 a year net for their bills. They said they are worried about health care costs and market swings, and they do not have a pension. So, how do you turn a paycheck into something that we can’t outlive? She asks.
Brian Quaranta 12:40
Well, this is exactly the type of family that I wrote the book for, okay, this is exactly the type of family that I wrote the book for, because this is most of the average Americans out there, right? Yeah, this is what they’re dealing with income. So, we’ve got $500,000 sitting in a 401(k), and we’ve got $50,000 sitting in an IRA account, which is probably all exposed to the stock market, right? So, they have a choice. They could follow Wall Street’s traditional advice of utilizing what they call the 4% rule, where they would start taking 4% of the portfolio out each year, but they would increase those withdrawals by 3% a year to keep pace with inflation. But here’s the problem, let’s suppose we’re taking that 4% a year out of this portfolio. In this case, you know 4% of 500,000 or really 550,000 maybe you’re getting close to a little over $20,000 a year in additional income, right? But they need $30,000 a year. So, there’s the gap. So now that would mean that we would have to take out about 6% a year in order to get $30,000 which is way more than the recommended amount. So already, right there, they would be violating fundamentals, and now they’re going to put themselves at the risk of running out of money, because will the market go straight up the entire time that they’re that they’re retired? No, do they know, on a year-to-year basis, what the rate of return is going to be of their portfolio? No, you never know until you look backwards. That’s the thing. So, something so easy is what I call FG squared. Okay, all right. FG squared. It means floor growth and guardrails, okay, so the floor would be, let’s build a baseline of income. Let’s build a baseline of income, but then let’s position some of the money for growth, because we know that the $30,000 they need today might not be enough. 10 years from now, they might need $40,000.10 years from now. So how are we going to do that? Well, first off, let’s build the baseline of income with the least amount of money possible. So again, if we’re utilizing the 4% rule, what are we able to get from a $550,000 portfolio? Little over $20,000 a year. Okay, but we also don’t know what rate of return we’re going to get. We don’t have any guarantees built in. So, the way that we would build this is we would build it in a two-bucket approach, okay? We would take the first bucket, which we would call the floor, or the baseline of income, and we would be able to take about 300 to $350,000 okay, and generate anywhere from 30,000 to about $38,000 a year in income, just from that 300 to $350,000. So, think about that.
Rebecca Powers 15:52
Yeah, you know, you’ve got that.
Brian Quaranta 15:54
The yield on that, Rebecca, yeah, the yield on that is like 10%, do you understand? Yeah, in order to get $30,000 a year from $300,000 that’s a 10% yield On the Money. Okay? So now, if we took 300,000 and we got roughly about a 10% yield on that by utilizing an income annuity, we’ve got $30,000 of base income coming in that’s guaranteed for Bob’s life, and if he dies, guaranteed for Debbie’s life. And if the account balance goes to zero, they’re still guaranteed the income as long as one of them are living. Now, if there’s money left over in the account when they die, it just passes on to the kids.
Rebecca Powers
16:40
With one death certificate, yeah, keeps you out of probate as well. You’ve said-
Brian Quaranta 16:44
It avoids probate, because it’s got, you know, it’s got beneficiary forms. It goes directly to the kids now, so with that $550,000 that would mean they still have $250,000 right, right? So that $250,000 now can go into the growth bucket, all right? That growth bucket, in order for it to work correctly, what does Wall Street always tell us, invest your money. Don’t touch it right. Don’t touch it. So now this growth bucket of $250,000 we can put into a strong mix of investments, but now we can build about a 10-year time horizon on that. So maybe that 250 over the next 10 years grows to $400,000, $500,000 well, guess what? In 10 years, when they need more money, we can peel off some of that growth money, right? We could peel like $200,000 off, go buy another income annuity. Now maybe we take $200,000, get them another $20,000 a year, and now we still have 200 to $250,000 in the growth market. You follow me on? Yes, totally. All right, so we just keep building the income by scraping off the growth. But in order to get the growth, we have to have at least a 10-year time horizon. Because if you look at any 10-year time horizon on a stock chart, there’s a high probability that you’re going to make money over that period of time. Okay, so we have the highest probability of success there, all right. Now, the guardrails, obviously, are the fact that we have the guaranteed income annuity, right, which means that if the balance goes to zero, we’re never running out of money. And even if we took another $200,000 in the future and bought another annuity and got another $20,000 of income, now we’re getting $50,000 from annuities. If both annuities go to zero, guess what?
Rebecca Powers 18:37
You still get paid.
Brian Quaranta 18:38
You still get paid
Rebecca Powers 18:39
Because it’s a contract.
Brian Quaranta 18:40
It’s a contract.
Rebecca Powers 18:41
With a big insurance company.
Brian Quaranta 18:42
With a big insurance company, that’s right. Now, people go, Well, how the heck can the insurance company do that? Yeah, well, here’s the thing, not everybody’s account balance is going to go to zero, because a lot of people are going to die before it goes to zero, right? But there’s going to be a bucket, if you will, or a bunch of people, a pool, a pool of people that the insurance company loses on, right, but they’re going to win on enough to be profitable and stay in business and still be a big, strong, safe company. But now we’ve just taken out all the guesswork, all the anxiety, and provided the peace of mind that we all want, yes, in retirement, that’s all we want, is to know that every month that I go to my mailbox, there’s a check in there. Now, I know none of us really go to the mailbox anymore, because it’s direct deposit into the bank account, right? But you get my idea that is, that is peace of mind, but that’s FG squared floor growth guardrails key to building a solid retirement plan and folks, if you want to know more about it, go to OntheMoneyOffer.com get a copy of my book. It’s absolutely free. I write about it in the book. This information is so urgent and so important that you and your family have, it truly will change your lives. I cannot tell you, over the years, the thousands of families that we have helped the things that they have shared with us, why didn’t I meet you guys 10 years ago? Why didn’t I meet you 20 years ago? Why has nobody shared this with me? The answer I have for them is I don’t know, but OntheMoneyOffer.com get a copy of the book right now, or call 1-888-382-1298, the team is standing by. Schedule your complimentary session to come in, sit down with the team and see if you can optimize and get yourself on the right track.
Rebecca Powers 20:34
And when we come back, we’re going to talk about how you can avoid the trap of moving into a higher tax bracket at all. ‘Course, starts with planning. Stay with us.
Speaker 2 20:45
We know the market is going to get worse from here. This is the biggest monthly decline in 10 years. People’s 401(k)s took a major hit.
Speaker 3 20:53
My investments are tanking. My retirement isn’t going as planned. Can’t believe I let my kid talk me into buying crypto. I mean, what is that, anyway?
Speaker 2 21:02
This was the fourth worst contraction in history.
Speaker 4 21:06
So how are you two doing?
Brian Quaranta 21:08
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 21:37
All right. Welcome back. You know, a penny saved is a penny earned. So, we talk a lot about not only protecting your money, but how to save money. And a big way to do that is not risking to earn, right? A big way to do that is to figure out your tax planning. And I love this question from Janet Moon Township. She says, Brian, love the show. My husband and I are both 66, we’ve saved pretty well, but we’re very worried about taxes and retirement. Smart lady. We keep hearing about Roth conversions. Are they really worth it? And can anyone do it? Great question. Thank you. Janet.
Brian Quaranta 22:12
Well, look, I mean, so first off, taxes is one of the five areas that I write about in the book. Right? Remember, there’s income, investments, taxes, health care and estate planning. And the reason why taxes is so important again, is it’s a form of inflation. People know inflation reduces your purchasing power. So again, we’re talking about taxes. We’re talking about protecting your purchasing power. So, can anybody do a Roth conversion? The answer is yes. Anybody can convert, not everybody can contribute, though, okay, okay, very different because of your income thresholds. So, if you make too much income, you cannot contribute to a Roth IRA, but you can convert your traditional IRA, or traditional 401(k) to a Roth IRA, and there is no limit. So, if you have a $500,000 401(k) or IRA, you could convert all $500,000 into a Roth IRA, no problem. But it doesn’t matter what your income or how much income you make, whereas a contribution, it matters, because if you make too much money, they say, No, you can’t contribute to the Roth, so you take advantage of it through the conversion. So, for me, for example, all right? My 401(k) that we have at Secure Money Advisors, my SEP IRAs, that I had those, I can convert each year to a Roth, all right? And I do why? Because I have a long runway in front of me where I can pay those taxes now, but have enough time to still grow that money to recoup what I paid out in taxes and some more, right, where some people wait too long. So, a lot of times, somebody might come in and say, Well, I want to retire in like, a month. Should I do a Roth conversion? Are you going to need money from this account? Yes. Roth conversion, probably not a great idea. If they had done it 10 years before, if they would have done it 10 years before, great idea. So, Jen and her husband are both 66. Yep. So, depending on when they need the money, right? Gotcha, she doesn’t say when she needs the money, okay? She just wants to know, would a conversion make sense? Well, if she said, Look, we don’t need the money for another six or seven years, because we have this source of money, and we could build, let’s say, a bridge. So, a lot of times, if we have somebody that has non-retirement dollars, okay? And I can build, let’s say, a four-to-six-year bridge, meaning I can get income from that account for that period of time, okay, then what I can do is I can convert the IRA money over that period of time and then turn that income source off from the non-retirement accounts and then turn the tax-free income on from the retire- from the Roth IRA. Wow. Okay, and again, look, you’re-
Rebecca Powers 25:09
It seems complicated, but it’s not.
Brian Quaranta 25:11
It seems complicated, but it’s not, but. But here’s the thing, you have to understand that your investment strategy is only as good as the people that are advising you, because if they don’t know these things, or they don’t know how to implement them or talk to you about them, or determine whether it’s a good thing or bad thing for you, you’re not going to get the advice. And this is what most people’s life is like working with a financial advisor, right? They’re working with a financial advisor, and they’re, you know, literally just talking about the performance of their portfolio. That’s it. They’re not talking about these five key areas of income, investments, taxes, health care and estate planning, you know. And this is where I feel bad for folks, because there’s so much more to retirement planning than just the investment itself.
Rebecca Powers 25:57
And that’s why you wrote the book, and you started in the big box. So, you know, he has so many great stories. We’re already out of time. It is really, really hard to believe just two minutes left to go. Let’s show the binder again. When people first come in, Brian, talk about the illustrations that you do and those third-party reports. Right when my husband, Ben and I left, the big box model went independent, the first, most eye-opening moment was the third-party report showing this is the actual risk you’re in, even in your late 50s. Oh, my and here are the fees you’ve been paying. You know, you mentioned in your book getting fee’d to death. Yeah, fee’d to death. What does that mean when you help us see the baseline, here’s where you are now, right? Where do you want to go? Right? And then the binder and the plan is the beautiful blueprint to get you there.
Brian Quaranta 26:40
Yeah, absolutely. Well, for all of our clients, we’re going to go through the five key areas with them, right? We’re going to make sure we check them off. Unfortunately, you can’t just do that in one meeting, right, right? But the number one thing is to figure out what your income strategy is going to be first, because without replacing your paycheck, you’re not retiring, okay, so, and without determining when you’re going to collect your Social Security, you’re not going to be able to- you’re not going to be able to retire. So that’s conversation number one. But at the same time, we’re having that conversation, we are looking at what level of risk are you taking in your portfolio. Now here’s the interesting thing. You know, what a lot of people do to manage risk with their portfolio? They typically will go out to make their portfolio more conservative. They’ll go out and buy bonds, right? Well, bonds have an inverse relation to interest rates. So, if interest rates go down, bond prices go up, right? Interest rates go up, bond prices go down, interest rates will probably go down. That will be beneficial for bonds, but people do lose money in bonds. It’s not a great way to make a conservative portfolio. It used to be, because that was the only way. But this is why I wrote the book. Right Track Your Retirement. It’s all in here. It’s a guide to give you the peace of mind and security that we’re all looking for. Go to OntheMoneyOffer.com get a copy of it right now. Or call 1-888-382-1298, schedule your session today.
Rebecca Powers 27:56
We love you. See you next week.
