*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 to this week’s edition of On the Money with Secure Money with Brian Quaranta, I’m Rebecca Powers, of course, it’s all about securing your money. How do you know if you don’t have a plan? And that’s what we talk about each week. Great to see you, my friend. Good to see you. We’re taking more questions because we have so many wonderful people with some great questions, and we love that. So, let’s go right into it, from Moon Township, Tony and Maria, ages 61, and 60, their combined income is $118,000 Tony lost a chunk of his 401(k), like so many of us did in 2022 and it really shook his confidence. Understandably, they said they have about $540,000 saved just a small pension, and they are nervous about another downturn. So, here’s the question, Brian: we certainly cannot afford to take another major hit right before we retire. Should we be taking less risk, and how do we know how much risk is right? And I think that goes to the core of what so many of us need to figure out first.
Brian Quaranta 01:30
Yeah, well, look, I would rather look at it like this, the problem that needs to be solved first is, how are they going to replace the paycheck that they’re no longer going to have when they retire? So that’s step number one, and how much money is it going to take to replace that paycheck? Now we need a paycheck. We need to replace the paycheck to pay the bills, whatever bills they have, but we also need an additional paycheck so that we can do all the things that we promised ourselves we were going to do in retirement, right, the bucket list, if you will. So, you need a paycheck for the bills and you need a paycheck for retirement, right? Because, look, if you think about during your working years, when you spend the most money, it’s Saturday and Sunday. Well, in retirement, every day is Saturday and Sunday. Yeah. You know, one of the jokes that I use when I do my educational events is, I always will ask the audience, how many folks are retired in here? People will raise their hand. Say: how many been retired for a year? The couple raised their hand. How many have been retired for five years or more? Usually there’s one or two hands that go up. And I said, Can I ask, do you even know what day of the week it is? And they’ll all go, I have not a clue. Not a clue. So again, we’ve got to first focus on how are we going to replace the paycheck? All right? Then we can decide from there how we’re going to invest the remainder of the money. All right, so I’ll give you a great example. So, I was working with a couple, Bob and Debbie, okay, when I looked at their portfolio, I have a little worksheet that we bring up, and it’s got three buckets on it, right? It’s got a blue bucket, a green bucket and a red bucket, all right. So, what we do is we take their assets and we say, Okay, this is bank money. This is their savings account. Well, that goes in the blue bucket, right? Because that’s bank money. What’s this? Oh, this is their 401(k), how is it invested? Oh, it’s all at risk. That goes into the red bucket, because that’s risk money, right? What’s this here? Oh, an IRA. How’s it invested? Oh, all in the stock market, red bucket, right? Most everybody has a little bit of money in blue, a lot of money in red, and nothing in green.
Rebecca Powers 04:11
And what’s green.
Brian Quaranta 04:12
Your private pension, your income bucket, your cash flow bucket.
Rebecca Powers 04:17
If you need a new AC, a new car, that’s right, a major trip.
Brian Quaranta 04:21
That’s right. See, when we plan for retirement, every dollar you have needs to have a specific job, yeah, give it a purpose. Give it a purpose. See, dollars are terrible multi taskers. They can only do one thing at a time, right? You can’t have a stock portfolio that generates cash flow at the same time. As a matter of fact, if you folks that are watching today open up your statements from your investment company and just look on the front page, and just look and see how much income has your portfolio generated. Most of you will see a very small number, because most of you are invested in growth. We cannot retire off of growth. We can only retire off of yield. Let me say that again, you cannot retire off of growth. You can only retire off of yield, and that’s why many people used to use dividend paying stocks, right? Because it would provide a specific yield they could use CDs back in the day when they were paying 10, 15% but we have to understand where their money is once. We understand where the money is now, we can go, Okay, let’s figure out how much money we need to get in that green bucket. So let me go back to Bob and Debbie. All right; Bob and Debbie had a little over a million dollars. I said, What’s your income need? They said, We need about $50,000 a year in income. They got 1.1 million. So, we take $450,000 and we put it in that green bucket, which is the pension bucket, and that’s going to generate over $50,000 a year, every year for the rest of her life, guaranteed for Bob’s life, guarantee, if Bob dies, guarantees for Debbie’s life. And if Debbie dies, Rebecca any balance in the account gets paid out to the beneficiaries. Wow. Now that means that, if we used $450,000 to build the green bucket, that means that we’ve got what, $600,000, 650,000 you know, to invest in the red bucket, which means now we can take risk, real risk. We don’t need to bog it down and dampen our returns by buying crappy bonds and all that kind of we can go purely equities, because we’ve created the paycheck, and now the money that we put in the market is pure market money, and it’s got time to grow.
Rebecca Powers 07:11
And you’re comfortable with the risk because you’re already covered.
Brian Quaranta 07:13
Yeah, you know what people say to me, gosh, Brian, now that I know I have all this cash flow, can’t I just take a lot more risk with this Yes, and I go, yes. That’s the point. That’s the point.
Rebecca Powers 07:25
Peace of mind really is the point. We need to take a very, very short break. But I want to make sure everyone knows you can go to OnTheMoneyOffer.com, get a copy of Brian’s book. It’s called Right Track Your Retirement. Because so many people were coming in saying, Am I on the right track? You also want people to know that there is no obligation. You’re going to pay for the shipping if you do decide to make an appointment, by the way, you can do that as well. But you really want people to read the book first.
Brian Quaranta 07:50
Yeah, I want people to retire with confidence, with clarity, and that was why I wrote the book, because most people are confused because there’s so much noise in the marketplace. So, if you want to retire with confidence, with clarity, which ultimately leads to peace of mind and control, get a copy of my book right now. Go to OnTheMoneyOffer.com. Go there right now. Don’t procrastinate on this. It’s not the time to kick the can down the road. We don’t want to put our head in the sand not look at our stuff. Let’s build a real plan that works, that you’re proud of, that you understand, and gives you the confidence to go live the lifestyle that you want to live in retirement OnTheMoneyOffer.com.
Rebecca Powers 08:41
All right, we’ll be right back. Stay with us.
Brian Quaranta 08:43
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 could 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 10:03
All right, welcome back. Thanks so much for staying with us. I’m Rebecca Powers here with Brian Quaranta, we hope you went to OnTheMoneyOffer.com to get a copy of Brian’s book for free. He even pays for the postage. Jumping right back into your questions. This one is from Mike and Terry, ages 60 and 59, they’re from Robinson township. Combined, they make $155,000 here’s a situation, raising a grandchild full time, and I give you my fullest, deepest respect, because that is so wonderful, and it can be difficult to raise your grandchild. Their spending has increased. Obviously, children are expensive. They do worry about having enough to retire on schedule and then worry about enough to take care of their child now that they’re their grandchild when they’re gone. So their question is, with raising our grandson, our expensive expenses have gone way up, how do we know if we’re still on the right track for retirement, or if we need to do major adjustments to this plan that is a stressful situation thinking of having a young grandchild and that you won’t be around forever. How do you help someone like that start that plan?
Brian Quaranta 11:07
You know you can fix a house, you can trade in a car, but you cannot rebuild 30 years of retirement if you get it wrong, right? And I’ve said many times, it’s not a dress rehearsal, we don’t get a second chance at this. And this is why I encourage people so much to seek out the right financial planner interview. You know, my hopes for people is that as they watch this, they start to get armed with knowledge that allows them to go interview firms and determine whether or not that firm is worthy of them giving their money to because, you know, we talk about the written plan, right? And when I, when I’m looking at Mike and Terry here, they got a lot going on, and they got a lot of responsibility. You know, your written plan, this is what gives you clarity. This is what gives you clarity and confidence in a lot of people don’t have this, you know? I mean, look at how thick this thing is. There’s a lot of stuff that goes in here.
Rebecca Powers 12:29
And you do it until they’re 100 years old, right? We always plan out till age 100 and why?
Brian Quaranta 12:35
Because it proves to you that you have permission to spend money now, yes, right? I love that. I mean, who wants to like, I look at some of these thick reports that some people bring in from the big box firms, you know, and it has them dying at age 95. I don’t like dying at 95. What if I am 95 and I’m like, Okay, well, the plan ends here. My gosh.
Rebecca Powers 13:01
But it’s good to have, because you have all the pieces in there, and each section is this big. It’s not this big, just about your stock market. Yes, right? Because I think the confusion you’ve said that the Wall Street model is to almost barrage you with information, and then it’s confusing.
Brian Quaranta 13:17
Yeah. I mean, it’s, I think it’s by design, yeah. I mean, if you ever looked at a statement from any brokerage house, I mean, they’re confusing as hell. So, don’t worry, because when I look at them, sometimes I’m like, I can’t make heads or tails of this, you know, until I look at it for 20 minutes, right? And I’m like, oh, okay, there’s the fees they’re paying. How the hell are they getting that yield that doesn’t even make sense. The math doesn’t make sense. Then you call the company, and they’re like, well, we calculate it on a time-based factor. Y’know… Big word.
Rebecca Powers 13:50
What are you talking about? So, but look, Mike and Terry are in a unique situation here. I mean, and they’re not alone. They’re not alone. You have a lot of families today, raising grandchildren, raising grandchildren, yeah, full time. So how do you help them? Do you maybe do insurance products for their grandson, for when they are gone or everyone’s different? Obviously, we only have a little information.
Brian Quaranta 14:13
Well, look, I mean, if they are the primary caretakers, which it seems like they are, the question would be, if something did happen to Mike and Terry, is there money there to make sure that those kids continue to maintain their lifestyle? Is there going to be enough money there for them to go to school, you know, buy school clothes, right? You know, are the parents? Is the kids’ parents around at all? Right? Now, let’s assume that they weren’t. Yeah, then life insurance becomes a tool that you may want to consider, right? But life insurance in general, you know? And I just want to talk about this a little bit, because I don’t think people realize the power of. Life Insurance. Most people think of life insurance as an expense, but done correctly, it’s probably one of your greatest investments. I’ll give you a good example. So, my dad, you know, he says, I want to make sure we leave something for you kids. And I said, Dad, we don’t need anything, I said. I want you and mom go spend the money. No, no, we’re not going to spend the money. We want to leave it to you kids. Well, all my dad’s money is in 401(k)’s, IRAs. So even if my brother and sister and I inherited that money. It’s a huge taxable event, right? So, I’d rather them spend it. So, I came up with something called the spend it twice strategy. So, the money that my dad has in his IRA, roughly about $600,000, $700,000, what we did was we took a we’re taking money out every month for them to live off of but then we take a little extra money out and we buy a life insurance policy with it, a $1 million life insurance policy. So, the IRA is not only providing them with their income, okay, but it’s also providing an inheritance for the kids. So, what do we do? We buy a million-dollar life insurance policy. My mom and dad get to spend their IRA down to zero when they die, the kids get left a million dollars of life insurance.
Rebecca Powers 16:49
100% tax free, because insurance policies are tax free, correct?
Brian Quaranta 16:53
Life insurance is one of your only investment vehicles that is 100% tax free.
Rebecca Powers 16:58
That’s why it’s still in the tax code. I guarantee you, everyone in Congress.
Brian Quaranta 17:02
You want to know who the big to know who the biggest, listen the biggest. The biggest owners of life insurance-
Rebecca Powers 17:08
Are billionaires, I bet.
Brian Quaranta 17:11
Banks.
Rebecca Powers 17:12
Really?
Brian Quaranta 17:13
Banks. You want to know why? Because they know they’re strong. You can put your life insurance up for collateral. You know what that means? That means if I want to start a business and I need a million dollars, yeah, and I’ve got a large enough life insurance policy, I can put that up for collateral.
Rebecca Powers 17:32
Because they know you’re not a risk, because you’re covered if something happens to you, you can pay them back.
Brian Quaranta 17:36
Yes.
Rebecca Powers 17:37
Huh. Leverage.
Brian Quaranta 17:38
And guess what? Why that life insurance is being collateralized, right? The bank becomes the beneficiary of the death benefit, huh? So, they’re guaranteed to get paid, and they love it. They love it. They love it. Because, quite frankly, if you die early on them, they’re kind of glad their rate of return is like in the thousands of percent, but, you know, we’ll do a whole show on life insurance, but it is probably the most underutilized tool in retirement planning, and usually it’s underutilized because people think of life insurance as an expense, or death insurance, or death insurance, and they’re like, Well, we did. I’m 60 years old. I don’t need life insurance anymore, do I? Yeah, are you crazy? It’s the greatest tool to build wealth. So again, folks, go to OnTheMoneyOffer.com, get a copy of my book while you’re there, schedule a time to come into the office. When you come in, we will go over five key areas with you, your income, your investments, your taxes, your health care and your estate planning. You don’t have a retirement plan until every one of those areas is handled. If all you have are statements with diversified investments, congratulations. You have an investment strategy, not a retirement strategy. I want to stress that you should also have a physical written plan. You become a client of ours; you will get a written plan. This will go home with you. It’ll probably sit in your office somewhere. OnTheMoneyOffer.com go there right now. Folks, don’t procrastinate. Not the time to kick the can down the road. Take action right now. OnTheMoneyOffer.com, scan the QR code and again, while you’re there, scheduled complimentary meeting to come in.
Rebecca Powers 19:43
All right. You have one minute to do that. There’s your homework. We’ll be right back.
Speaker 1 19:47
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 2 19:56
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 1 20:06
This was the fourth worst contraction in history.
Speaker 3 20:09
So how are you two doing?
Brian Quaranta 20:11
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 20:42
Welcome, back. So glad you’re still with us. All right, we’re going to take a question from Carl and Jennifer, ages 62, and 60. They say, Brian, we helped both of our children go through college with no debt. That’s amazing. We’ve saved $480,000 and we don’t have a pension. We’re wondering if it’s too late. You talk often about tax planning. We have a good CPA, but he never talks about tax planning. What does that mean exactly? I love this question.
Brian Quaranta 21:09
Yeah. You know, every dollar you save in taxes buys you freedom.
Rebecca Powers 21:14
A dollar earned, isn’t it?
Brian Quaranta 21:16
Yeah, it buys you freedom, not frustration, yeah, you know. And you think about it, people have worked so hard to build up their retirement accounts, and what they don’t realize is that the IRS is the biggest beneficiary on their accounts.
Rebecca Powers 21:30
You call it a silent partner. It’s a silent partner. They’re just waiting for that other half when you die when you get older.
Brian Quaranta 21:37
A lot of people misunderstand tax planning. They think tax planning is done by an accountant. It’s not what an accountant does. An accountant prepares your tax return based on how much income you earned last year, last year. Tax Planning is something that you do every single year with your retirement planner. Why? Because most tax strategies take time to fully be implemented, okay?
Rebecca Powers 22:11
Sorry, his phone- his watch is talking.
Brian Quaranta 22:15
I got this new watch and like, you know, I thought I’d on silent, and then it’s going off of the whole show. They never leave me alone. But
Rebecca Powers 22:26
CPA is a (indistinct)
Brian Quaranta 22:28
You know, but tax planning takes a while to be implemented,
Rebecca Powers 22:33
To come to fruition.
Brian Quaranta 22:35
Yes, yes. Because, for example, something as simple as, like, a Roth conversion, all right, yeah, a Roth conversion has to be done over a period of time. Usually, you do a Roth conversion over a five-year period. What a Roth conversion is I’m going from a taxable account to a tax-free account, right? So, I want to get again, the silent partner, the IRS. I want them out of the picture. I want to buy them out. Get them out. Break up with you. Break up with them. The sooner you break up with them, the better. But so many people, they don’t do anything, they wait, and because of them waiting, they lose the window of opportunity. If you haven’t done tax planning yet, I would tell you, start right now. Matter of fact, you can go to RightTrackMyTaxBill.com we built a calculator for you, and there you can actually put your numbers in, and you can find out how much you will owe in taxes. And then it will also tell you, if you did tax planning, here’s what it would look like. Let me tell you something, when you see the difference between the two, you are going to want to rush out and do tax planning right away. And I’m telling you, do not miss this opportunity, folks, because we may never have it again. At these rates, taxes are the lowest we’ve ever seen them. So, the best time to build a tax smart plan was yesterday. The next best time is now.
Rebecca Powers 24:12
Unless you want more of your money to go to the federal government. I mean, there’s maybe, but of course, right, all right, Dan and Rebecca from Fox Chapel say we are 65 and 63, combined income of $260,000. High income couple nearing retirement, they have 2.2 million saved, but they spend a lot, and they love to have fun. I love that, Brian, we are worried that despite our high savings, we also know that we spend a lot, how do high income earners make sure they don’t run out of money in retirement, even when they love their expensive lifestyle? I love their honesty.
Brian Quaranta 24:48
I love this question, because, you know, the people that truly understand the income annuity are those that have very complex financial situations, like these people do, okay. Why? Because they could take a million dollars of that 1.2 million guarantee them now $150,000 a year in income for the rest of their life, cover their all their bills and more, yes, and the other $1.2 million can be invested in the market aggressively for long term. And then when that bucket fills up and starts to overflow, we pull some more out. We put it more in the income annuity. And when now we bring them from 150 to $200,000 a year in income. And what does an income annuity do? Exactly what they want. It gives them permission to spend. Look, imagine going from a high paying job where every Friday you get this big paycheck, yeah, and then you retire, and boom, boom. Nothing scary. Now you have to be 100% confident that you’re going to be able to withdraw the money from your investment accounts without running out of money. Let me tell you, I’ve done this for 25 years. I would never do it that way. I buy income annuities every single year for my wife, and I do every single year. I ladder them every single year. Why do I ladder them? Because I can turn one on few years later, I can turn another one on, few years later, I can turn another one on. And just by laddering them, I’m stepping up my income. Wow. So, the people with the most complex financial situations, the higher net worth individuals, they love these income annuities, because exactly what she’s saying here, how do we do this? How do we maintain this lifestyle, and we love to spend money, and we don’t want to stop doing that. Well, you need an account that’s going to insure your high-income lifestyle, and that’s exactly what the income annuity does look we insure everything our life, we insure our health, we insure our cars, we insure our houses, insure your income, because when your balance goes to zero in an income annuity. Guess what? You still get paid. Be smart with your retirement dollars. Go to OnTheMoneyOffer.com. You can schedule an appointment there. If you want to know more about your taxes, go to RightTrackMyTaxBill.com.
Rebecca Powers 27:35
And we’ll see you again next Week. Thanks for joining us.
