*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 00:00
Welcome everyone and Happy Holidays. This is On the Money with Secure Money with Brian Quaranta, and I’m Rebecca Powers. I was a long-time news anchor and investigative reporter, and just from doing these shows, I have learned so much, and it has truly been life changing. Truly, my husband and I have this book, actually two copies on each side of our bed. We have it highlighted. It truly is a clear, simplified path to retirement. Brian, great to see you as always.
Brian Quaranta 00:55
Yeah, I’m glad you got a copy on your side of the bed and on your husband’s side.
Rebecca Powers 01:00
I made him read it, yes, because he’s like, I don’t care. You just make the decisions like, Oh no, no, no. You have to, because there are some wonderful guides, things that you just don’t think about. You actually named the book “Right Track Your Retirement” years ago, when I asked you, how did you decide on the name? And I love this answer. It’s again, just reality.
Brian Quaranta 01:21
Yeah, and, you know, I have to give Neil, you know, my senior advisor at our office, credit, because he was the one that really convinced me that that would be the right name. But it was also because we were getting that question all the time. We would say to folks, what’s the number one most important thing you want to try to accomplish during our time together? And they would say, we want to see if we’re on the right track. Yeah. And today, it still happens. It’s the same comments, yes, the same ones. So, but yes, it was the way the book was written. Is me essentially acting as your guide, right? Giving you a framework to follow in retirement, but also educating you enough so that if you are working with a financial advisor, you have the ability now to be armed with knowledge, to be able to ask the right questions during your annual reviews with your current advisor.
Rebecca Powers 02:17
Or even to find an advisor. Sometimes, yeah, even to find an advisor right. There are conflicts. If you go to a bank, you might say, Well, what about my tax planning? How can I save major money the rest of my life in taxes? And they, for the most part, could say, I’m sorry, we’re not allowed to even discuss that. Yeah.
Brian Quaranta 02:31
Well, the dirty little secret with the big box firms is that they’re not allowed to give tax advice, right? They will tell you need to consult with your tax accountant, right, right? So again, this is where I kind of get a little bit ruffled and bent, because, you know, the whole idea of being a fiduciary is to have the ability to do what’s in your client’s best interest in all areas of financial planning, but yet, the way the industry is structured and the regulation around some of these big box firms, the advisors, hands are tied, and they don’t have the ability to do it.
Rebecca Powers 03:07
And as you know, in that beautiful plan, everyone would get a binder. Once you work with the team and get, you know, your plan, it’s in a beautiful binder, because all of these different parts truly affect each other way more than I realize.
Brian Quaranta 03:19
Yeah, and look in today’s world. Look, I know we can go paperless, right? This could very easily be on a hard drive somewhere, but out of sight, out of mind. Yeah. So, what happens if you’re on a trip and something happens you think your kids are going to be able to dig through your hard drive and find things exactly the greatest peace of mind our clients get, and they tell me this all the time. They said, Brian, I will tell you that every time we leave. Now, I always remind the kids that there is a black binder in your dad’s office. It says, Secure Money Advisors on it. If anything happens, take it off that shelf and make sure that you call Brian and his team to get everything taken care of. And there’s something about having a tangible plan too, right, that you can flip through the pages and look at and review it. So, I mean, this is exactly how I keep my own personal plan. This is recommended by the Certified Financial Planning Board, so it’s a great way to stay organized and stay on top of things.
Rebecca Powers 04:21
Absolutely. all right, besides the information in this wonderful book, we’re going to take your questions, because even if you’ve read the book, obviously everyone is different. So that’s the opposite of the big box approach, because everyone is completely different. So, I’m just going to read this question to you, Brian, and you can take it away. John and Mary say they finally retired at 67 and 65 feeling good about life. They had $1.2 million saved, and for the first time in years, they weren’t worried about their paycheck. But then tax season came. Please help. What did we do wrong?
Brian Quaranta 04:55
Yeah, well, I bet you they’re seeing things like their Social Security being taxed.
Rebecca Powers 05:02
Higher Medicare costs, higher Medicare costs.
Brian Quaranta 05:04
They probably have 85% of their social security being taxed because there was probably no withdrawal strategy put in place the order in which you take money out of your accounts. We all have different types of accounts. And what I mean by that is, when you think about your money at the bank. Those are taxable accounts. Your savings account, you get a 1099, on each year. But if you go in and you take a large withdrawal from a savings account, not all of that money is taxable. It’s only the interest you earn in each year. Compare that to an IRA account or a 401(k), every dollar you take out is taxable at whatever your income tax rate is. And most people, Rebecca, their largest source of income is going to come from their retirement account, like a 401(k) or an IRA. And because of that, that is going to cause a multitude of problems, like paying higher taxes on their social security, having their Medicare premiums going up, right? So, it becomes a compounding effect, and that’s why having a written plan is so important. Because when we build a plan, we simply want to look at what your sources of income are, minus your expenses, minus taxes, because now we need to strategize which accounts are we going to start taking from first, and on top of that, should we consider doing conversions right now while tax brackets are low so that in the future we don’t have additional tax problems? But again, most people typically are going to sit down with their advisory firm, and all they’re going to do is talk about how the stocks or the bonds performed, and that is not planning.
Rebecca Powers 06:50
No. And you make such a good point, it’s almost like taxes are on sale. Yeah. Why would you not pay on the acorn now, instead of this giant, beautiful oak tree later, it really is something that is a travesty. We’re not taught this in school. Yeah.
Brian Quaranta 07:05
I mean, look, there is no better time to do tax planning than right now. I mean, it’s the lowest tax rates we’ve had in history. And for people not taking advantage of that, it’s mind blowing to me, yeah, for myself. I mean, I’ve converted all of my IRAs to Roth, and the reason I did is because I don’t believe we’ll ever see these tax rates again, and I’d rather get it over with now, because I don’t want to owe the IRS taxes in the future as my account balances get bigger, that’s what we have to remember, is that if you eliminate that tax problem right now. Yes, you might take a little bit of a step backwards because you’ve had to pay the taxes, but over time, that account is going to get very, very, very large, and it’s all going to be tax free.
Rebecca Powers 07:54
And that’s the perfect scenario. The perfect scenario, all right, we need to take a very, very short break. We’re going to put this on the screen, onthemoneyoffer.com you don’t have to go and make an appointment, although it is free. We want you to just go to onthemoneyoffer.com and get this book. And Brian will even pay for the handling and shipping. He’ll even mail it to you in a golden envelope. Why do you want people to have this book before they even come in for that free appointment, Brian?
Brian Quaranta 08:18
Yeah, because people don’t lose their retirement all at once. They lose it one bad decision at a time. I love that, and so the book is the information they need to quit making poor decisions. Because here’s the thing, if you don’t believe in something, you will fall for anything. And that’s what I see people do over and over and over. Why did you buy this account? I don’t know. They said it was good. They said it was going to do this. They said it was going to do that. If it didn’t do all that, would you be disappointed? Yes, I would be. Would you mind if we called the company that you bought the account from? And typically, when we call, it’s not what they were told. People lose their retirement one bad decision at a time. I don’t want to see that happen to you. So go to onthemoneyoffer.com, get a copy of the book today. Look, this is urgent, folks. This is urgent. We have a major problem right now in our country, and for those of you that get it right, you’re going to be okay. For those of you that get it wrong, it’s going to be tough onthemoneyoffer.com or call 888-382-1298, the book is absolutely free. It will take you a weekend to read it. It’s my gift to you. And if you decide you want to come in after that and sit down with us, it’s a complimentary meaning. There’s no cost to you.
Rebecca Powers 09:47
Yeah, when you say a lot of little mistakes, I said I love that, because when you realize it’s just a lot of little bitty mistakes that might need tweaking, it’s not some giant overhaul, you might be on the right track. And that’d be great to find out. All right, more with Brian Quaranta, how you can secure your money and get your retirement plan. Stay with us.
Brian Quaranta 10:07
One of the biggest challenges people face when planning for retirement is simply knowing where to start. Over the years, I’ve sat with countless families who felt overwhelmed by all the information out there, and that’s why I wrote my book to cut through the noise and give you straightforward strategies to protect your money, avoid unnecessary risk and build real financial confidence inside you’ll find step by step guidance on how to structure your retirement income, how to prepare for rising health care costs and how to reduce the impact of taxes. It’s not about complicated theories, it’s about clear, actionable steps that anyone can follow. And here’s the best part, I’d like to send you a complimentary copy of my book, no cost, no obligation, just real information that can make a difference in your retirement. This book has helped thousands of people better understand how to secure their financial future. If you’re in that five-to-10-year window of retirement, or you’re already retired and you want to make sure you’re not missing something, this book is for you. Call Secure Money Advisors today or visit us online at securemoneyadvisors.com to claim your complimentary copy today.
Rebecca Powers 11:27
All right, so glad you stayed with us. I’m Rebecca Powers here with Brian Quaranta, and we are talking about how you can secure your money. Most importantly, have peace of mind. Have it all in one beautiful place. We call that the binder. All right, we’re going to go back to some more questions from you, because people really say that they like the shows when we take your questions. So, thank you very much for sending them in. We appreciate it. All right. Mark says he is 58, Lisa is 56, good for you. They just sold their businesses and want to retire early. They have 1.4 million in savings, 250,000 in cash, and no pension. Like most of us, they say they’re nervous about living 30 years or more without saving- uh, on their savings rather. So, what would you say?
Brian Quaranta 12:11
Yeah, I can see why there’s a concern there. I mean, you’re talking about 30 years that you know roughly what 1.6 million, $1.7 million needs to last them for 30 years. Yeah, that’s a good point. So, the first question I would have for them, Rebecca is, well, how much money do we spend on a monthly basis just to pay the basic bills? Do we have a mortgage? We have car payments, right? What do you typically, you know, spend on groceries, electric, cable, all the basic stuff. But then we don’t retire just to sit at home. There’s things that we’re going to want to do. And so, what are we talking about? One vacation a year, two vacations a year, and what type of vacations we talking about? We talk about just going down to Myrtle Beach and hanging out at the beach for a couple of weeks, or are we talking about going to London? So, the first thing that needs to be resolved is, what are all their expenses? Right? Once we figure out what all their expenses is, now we need to figure out, okay, what sources of income do you have that are going to be guaranteed? Do you have now, they say they owned a business, right? So, they could have had a defined benefit plan there, where they set up a pension for the company. We don’t know that yet. Okay, they could have a 401(k), right? IRAs, we know they’re probably going to be entitled to a social security check, but let’s just assume that Social Security is the only guaranteed source they’re going to have. Okay, well, maybe that between the both of them. Maybe it’s 40, to 45, to $50,000. Well, how much money do we need above and beyond what Social Security is going to pay so the income gap, the income gap, so let’s say they’re getting that make the math easy. They’re getting $50,000 a year in Social Security between the both of them, and they need 70,000 Okay, now we need $20,000 from all the other investments. Okay. Now here’s the big question, since they’re going to be retiring at 58 and 56, we’ve got a problem, don’t we? Yeah, and the problem is they can’t collect Social Security yet. Oh, gotcha. So now we’re going to have to bridge the gap. So where are we going to get income from Mark’s age of 58 and Lisa’s age of 56 and when exactly are we going to turn on Social Security? This is why working with a fiduciary firm is so important, because we can make all of these things happen right on paper. In this plan, we can run scenario after scenario after scenario. I always say, Let’s make all the good things and all the bad things happen on paper. Math is math, right? I don’t like opinions. Hey, opinions do not help you in retirement, although a lot of big box firms and financial planners like to give their opinions. Well, this mutual fund has done X amount over the last 15 years. Okay, that’s great, but they’re at the very bottom and very, very fine print. It says past results don’t guarantee future results, right?
Rebecca Powers 15:21
Because no one has a crystal ball.
Brian Quaranta 15:23
Nobody’s got a crystal ball; nobody’s got a crystal ball. And I don’t care how confident anybody is, I’ve known some of the best traders in the world, and I’ve seen them lose lots of money. Okay? Now, people always like to talk about their wins, but they don’t like to talk about their losses. So, we want to have a conservative approach here, right? A conservative approach that number one is going to make sure without a doubt that if the market didn’t cooperate at all, that mark and Lisa could stay retired, because if they sold a business, Rebecca, I would probably bet you that the last thing they want to do is go back to work and start another business.
Rebecca Powers 16:07
Exactly. Now, the $250,000 cash, they’re probably wondering, what do we do with that? Would you section it out? Do? Maybe some annuities for safety, some for income, savings?
Brian Quaranta 16:19
Well, the cash portion of the money can act as a potential bridge to get them to 62 but I don’t like doing that, and the reason is, is because cash is king, meaning, if I need to go into that account and I need to grab $50,000 I can do it without creating a big taxable event, right, right? So, with cash, I would prefer to figure out another way to generate cash flow, versus using the cash itself. And there’s lots of different ways that we can do that. And those are the strategies that you’ll find out about in my book. Those are the strategies that you’ll find out if you sit down with another fiduciary advisor. But those are the strategies that are outside of the box of your typical well, let’s just put this in some stocks, bonds and mutual funds, exactly. That’s not a plan. It could be life insurance. It could be a high cash value life insurance policy. Why? Because cash value life insurance people don’t realize this. It’s one of the best assets out there. It’s an asset. It’s literally property, meaning you can borrow against it, just like you could borrow against the equity in your home, and your money’s still working for you. If you and I had a house paid off, right? Yeah, say we have a half a million-dollar house paid off, right? And we want to, I don’t know, put it, put an addition on. Where would we get the money? We would go to the bank and we’d say, hey, we want to borrow $200,000 from the equity in our home, right? Heloc, yeah, no. Does that stop our home from growing in value year after year? No, it still grows.
Rebecca Powers 17:58
You’re just paying it back with an interest rate.
Brian Quaranta 18:00
Paying it back with an interest rate. This is called positive arbitrage. So, if I can get, if I can borrow money from my life insurance policy right at, let’s say, 4%, but the cash inside the policy is growing at six, that’s a positive arbitrage.
Rebecca Powers 18:19
I’ve never heard this word before.
Brian Quaranta 18:21
So, now I am using my own money and leveraging my own money to make money and do all the things I want to do, right? So, these are the strategies that a lot of people don’t hear about, right? Because typically what you’ll hear is, oh, gosh, life insurance. I was told to stay away from that. Now I’m not telling them that we’ll go out and my life insurance. What I’m sharing with people is you better be working with a fiduciary firm that can think outside the box. That’s what I’m telling you. We are financial engineers. That’s what we do. When my team and I sit down, we are going to engineer a strategy that is unique to your situation, because every financial product out there is good. The question is, is it going to be good for you and your situation? Because there’s pros and cons to everything. But I would start by going to onthemoneyoffer.com, get a copy of my book right now. Don’t procrastinate on this. This is urgent. This information is so important it needs to get into your hands. So, call 888-382-1298, while you’re there, you can always schedule a time to come in. It’s complimentary, at no cost.
Rebecca Powers 19:34
And Brian is writing another book. So, I don’t know if more of these will be printed when the new one comes out. So, you definitely want to give us a call, get a copy of this book. It is a very short, easy road map to retirement. More of your questions right after this.
Brian Quaranta 19:47
Market losses aren’t the only risk in retirement. One of the biggest and most overlooked could be the tax bill on your qualified assets, your 401(k), your IRAs, etc, as tax rates. Change so does the value of your retirement income. A Roth conversion may help reduce your exposure and create more predictability, but timing and strategy matter. Want to see if a conversion could be a right plan for you? Take the Roth conversion quiz today. It’s free, and it could help you make a more informed decision about your financial future. Scan the QR code on the screen or visit righttrackroth.com to take our Roth conversion quiz today. All right.
Rebecca Powers 20:32
Thanks for staying with us. We’re going to take more of your questions right now. Here we go. All right, let’s see. Bill is 68 Susan is 65 both lost their first spouses and recently remarried. Congratulations. They each have adult children and separate retirement assets. So, they’re wondering, how can these blended families- How do we protect both each other and pass on the most to our children? That is tough when you start having blended families, isn’t it? Yes, the first thing I would say.
Brian Quaranta 21:05
The first thing I would say is make sure you change your beneficiary documents. Let me explain this. Usually when people get remarried, the first thing they’re going to do is go see an attorney. We need to get a new will, right. But it’s actually the beneficiary document that’s the most important document, really. It overrides the will. It overrides the trust. I’ve seen this three times now in my career, where I had a spouse, a husband that lost their wife, got remarried, and they changed the primary beneficiary to the new spouse, but disinherited his daughters and his kids, on purpose, on accident, okay? Because what should have happened was the new spouse, along with the kids, should have all been put on his primary beneficiaries, because it would have been an equal split. He had thought based on the recommendation of the accountant: Well, this is my new wife. She becomes the primary beneficiary, then when she dies, she’ll give it to my kids. Uh-uh. As soon as that money goes to her, that legally becomes her money,
Rebecca Powers 22:38
And then her children.
Brian Quaranta 22:39
And that’s exactly what happened. Yes, she turned it over to her kids. Now, what happens if you get divorced? You get divorced and you forget to change your beneficiary document.
Rebecca Powers 22:50
Have you seen that? Ouch.
Brian Quaranta 22:52
And you leave your ex-spouse on as the primary beneficiary?
Rebecca Powers 22:56
I’d be so mad. I’m coming after you from the grave.
Brian Quaranta 23:01
And you die, and your new wife finds out she is not entitled to that money, that your ex-spouse is now receiving that money, and the courts will side with the beneficiary document all day long, because they say the beneficiary document trumps everything. So, making sure that first those things are handled are critical, but realistically, most of these things are going to be handled on the beneficiary documents of your accounts. The only thing that is going to be handled through your will is nonretirement assets or assets that don’t have a TOD or a POD, right? And a TOD is transfer on death, okay, okay, a POD is pass on death. That can be done right at the bank. So, so that needs to be done even before wills get involved. And that’s how powerful these beneficiary documents are, yeah, and so is always gets complicated when you get remarried, right? But you certainly- the best- one thing you don’t want to do is get divorced, right? And leave your ex-spouse on as the primary beneficiary. That is a bad day. Yes, that’s a bad day when kids get disinherited, and I’ve seen it not under my watch, right? I’m usually the one they’re coming to try to fix it, and there’s nothing I can do to fix it, you know? But it’s a sad day. Yeah, it’s a sad day, so don’t let that mistake happen to you absolutely.
Rebecca Powers 24:36
All right, another question from you, Greg is 67, says he retired two years ago. His wife, Linda, is 64 and she is still working part time. They’re unsure if their withdrawal plan is sustainable, considering inflation and new cost of living, such a great question and a really good point. Thank you for that.
Brian Quaranta 24:55
Yeah, so first off, in my book, I talk about the three most important interest rates. It’s the spend down rate, the preservation rate and the legacy rate. Here’s why those are important, because when you’re building a withdrawal strategy, you have to make some assumptions, what rate of return is my money going to get, and what are those withdrawals going to do to the balance of those accounts. Now a lot of us don’t do this anymore, but back in the day, we all did a check register, right? Yeah, we got paid, we made the deposit, we wrote it down. We wrote, you know, if I gave my little brother $10, I had to write it in there. You know, if I paid a bill, I had to write it in there. Nobody does that anymore because of online banking, right? However, when you’re building a withdrawal strategy, you must have a system in place where you can see the balance of your account, the interest rate that you are receiving, the withdrawal that you’re going to be taking, and the end of the year balance. Now we can play a lot of different scenarios. So, we can say, Okay, well, what happens if our account only gets a 3% rate of return, and we have, you know, $700,000 in this account, we get a 3% rate of return, and we’re taking out $40,000 a year, and we do that every year. That spreadsheet will tell us exactly where we would run out of money, then we can throw different things at it. What happens if we have a health event and now for two or three years in a row, we have to increase the withdrawals from $40,000 to 100,000 a year. What does that do? How much quicker will we run out of money? What happens if we have a one-time withdrawal where we want to buy a new car for cash. So, we want to buy a new car for cash, and we want to plug in and say, What if I bought this car for cash, for $50,000 what’s that going to do? Oh, what happens if I don’t get a 3% rate? What happens if I get a 4% rate? What happens if I get a 1% interest rate? You follow me on this, so as we start to go through that, and this is a simple Excel spreadsheet, but it is so powerful, I do not believe in these complicated, convoluted piece of crap financial planning software programs. If you’re getting a report this thick with a bunch of bar charts and graphs and pie charts. Throw it out. It’s garbage. Excel is your friend. We’ve built models that will give you clarity and peace of mind, and when you see them, you will probably say what most people say to us. Brian, why hasn’t anybody ever shown me this before. This is so simple, and that’s what I want you to have. Don’t forget, this is not a dress rehearsal. You don’t get a second chance go to onthemoneyoffer.com get a book today. We’ll see you again.
Rebecca Powers 27:52
See you next week. Thanks for being with us.
