On the Money with Secure Money: Episode 93 – Retirement Realities: Navigating Financial Freedom

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Video Transcript

Brian Quaranta 00:22

Welcome to on the money with secure money. I’m your host, Brian Quaranta. And I’m here with a good friend of mine, Joe Wilson.


Joe 00:29

BQ! Another financial advisor from Ohio, are we allowed to be in the show?


Brian Quaranta 00:34

I don’t know.


Joe 00:36

I mean, my God rival football teams. And here we sit, friends!


Brian Quaranta 00:41

And I thank you so much for coming and doing this with me. Because, you know, you’ve been practicing financial planning about as long as I have probably the last 25 years close to it or so we’re getting old. Yeah, we are getting old, although you’re sending your kids to college. Yes, I have a I have a three-year-old and a four month old. I think that means i When you when I went into who did it right. But, you know, I want to know, how are you guys deal with inflation? Because you know, the biggest problem we’re dealing with right now is that, you know, it’s the worst stock start to the stock market, what 70 years, I believe? Yeah. worst start to the bond market and the last 31 since 81. Yeah, you know how old I was in 81. Very young. We were young, very, very young. So, I mean, I know we’re seeing it in our office right now. People are coming in. They’re saying, look, it’s costing me more to live. Sure. I need more income. What are you guys doing to address it right now?


Joe 01:29

I think right now, and we talked, we talked a little bit about this at much. I think it’s so important. And what I love about what you do, and with your clients, and we try to do the same is we want a detailed written income plan. Because even though we’re talking about inflation, I think it’s been this silent tax that’s just been attacking these portfolios, especially those folks that have just crossed over into retire. Yeah. But what we want to look at is inflation is hitting everyone differently. Right? Yeah, just because some client likes to do travel and maybe stay at hotels and go over to Europe. That’s a different inflation rate than maybe someone that just likes to hang out and go hiking in Pittsburgh. Yeah. And so even though the average inflation rate is one of the highest we’ve ever seen in 40 years, 9%, nine plus percent, right? It’s affecting the modern retiree differently. And it all comes back to personal, comprehensive, individual written income plan.


Brian Quaranta 02:23

I love that you shared that because I don’t think people realize I mean, if you’re, if you’re a retiree, that is in your go-go years, right? Go, go, go, go, go go. And you’re traveling the world and traveling the country, compared to the person that might just be staying home taking care of their grandkids, and tending to their garden. Yeah, it’s a different rate, the cost of their living, or the cost of their inflation is much, much different much because travel is up 40% gas is up 100%. Right. And it’s costing more to do those things.


Joe 02:50

Have a good friend that just flew to Italy took his whole family to Italy. Yeah. And when he came back said, how was it over there, and he’s like, the flight, the cost to fly was the most expensive tickets he had ever purchased ever. And they travel annually. And he goes, he got over there. And the dollar has gotten so strong, there are some benefits. But they’ve raised all the prices on the hotels to combat. Yeah. So, you know, for a traveler and many retirees I know in Cincinnati, and I know how they are here in Pittsburgh, you know, we had some ugly winters, we want to get out of here. And that bottom retiree is definitely probably facing an inflation rate more than just 9%. And I’m not sure everyone watching this show us plan that into their individual plan.


Brian Quaranta 03:26

No, because most people focus on the wrong number. They focus on their account balance number, not their future purchasing power. That’s right. Right. Because and one of the things that, you know, I know you do differently, your practice, as I do is that we focus in a different area of financial planning than most firms do. Most firms focus on that first phase of retirement where they’re just accumulating something. But there’s a phase that you shift to in retirement where you’re starting to distribute that money to yourself. And you know, we’re one of the only financial or professional services that don’t have specialties. Everybody thinks every financial planners are the same. I mean, if you hurt your knee, you would go to the knee doctor, right? If you had an issue with your heart, you’d go to a heart doctor, cardiologist and with financial planning, it has not yet been understood that there are people that specialize in different areas of financial planning and retirement. Yeah, and you and I both believe in the importance of having a written retirement plan, a true income plan. And this is where we can make all the bad things happen on paper. That’s right, you know, so we test it, we test it, we test and I think that’s important, because the biggest fear of most people in retirement, and I don’t know if you experienced this, but people will come in, they’ll say, Look, we’re at a point in our life where we can’t afford to take another big market loss. We can’t afford to, you know, not have our income coming in on a monthly basis because we need that income to live off of.


Joe 04:51

To keep the standard of living and stay in the retirement that we’ve dreamed.


Brian Quaranta 04:54

Right. And you know, at least in Pittsburgh, I bet you’re 85 90% of people Joe that come through The Office are not retired with a pension. So, you know, they’re utilizing their 401k, their IRAs as a source of income years and years of work to save that money. And I think what’s really frustrated about it is that no one’s ever really taught them how to start utilizing these accounts as a stream of income. And the problem is, is that when you pull money out of these accounts, you actually have to pay taxes on. So, if you’ve got 9.1% inflation, and then you have to pay taxes on that money, you can see how that started to compress your purchasing power very, very, very quickly. So, you know, if someone’s watching, I mean, what best practices do you guys follow in in order to help someone give peace of mind in retirement so that they don’t run the risk of running out of money?


Joe 05:43

I gotta tell you the story. We had a- we had someone that called in off of off of our show, yeah, too long ago, and they came in with the retirement savings, they done a great job of saving us quite a bit of money. Her concern was, Do I have enough to enter retirement? Yeah, she had amassed a good amount of good amount of money for her spinning. It was it was well, within reach. Here’s the challenge. And I know you’re gonna know what I’m talking about. I we call it if planning. And she started the conversation like this. She was like praying, Joe, if, if I earn 6%? Yeah. And if inflation isn’t, too, right, and if I can just keep taking only 4% out this Monte Carlo system thing here says I’m good one. I’m like, well, that’s if planning and Monte Carlo sounds like a really bad casino in Vegas, right? Yeah. And so it’s if planning, the challenge is wishing one of the worst starts to the market and doesn’t have to just go down and come right back up. Right. I think so many folks have been lulled to sleep a month, it’s amazing run up. We’ve had a great point, but that markets can hang on around a while. Yeah, 2000 2001 2002. That was a 42% decline in the market. So, if you’re in retirement, you’re going to take money out and you start in those types of years. You can’t keep an F 4% withdrawal rate. And we already know inflation is not at two. So right then and there. I looked at I said, I don’t want to tell you, other than three of the things that you said have to happen aren’t happening this year. Yeah. And that becomes a problem. And that’s the challenge with doing a financial plan, it is an ongoing comprehensive plan? And I know that’s what you all


Brian Quaranta 07:13

Yeah, and this is why reviews are so important. Because the game does change from year to year as variables change, towers will change, market changes, tax rates change, inflation rates change. And so things need to change along the way. Folks, I will tell you, if you’re at a point in your life, where you’re concerned about potentially running out of money, or you don’t want to run the risk of not being able to do the things that you promised yourself you were going to do in retirement, I want you to call the number on the screen 1-888-382-1298. And I want you to get scheduled for your complimentary retirement Readiness Review. And I want to give you an inflation report with that something that’s going to help you understand where you are right now and where you need to go again, call the number on the screen, it’s 1-888-382-1298 and tell our folks that answered the phone that you want to schedule your complimentary retirement readiness review today and also get your inflation report with it again. 1-888-382-1298. Or you can scan the QR code at the bottom of the screen. Thanks for watching. Call


Announcer 08:18

888-382-1298 for your Retirement Readiness Review. With inflation report. inflation continues to hit all time highs. Will your investments provide you with income you need in retirement? Are you losing purchasing power of your savings? Don’t let runaway inflation erode your retirement dreams. Now’s the time to act to be certain you have an income strategy that overcomes the effects of inflation called Brian and his team at 888-382-1298. For your no cost retirement readiness review with inflation report. You might have the savings you need today to weather the storm. But how will Inflation affects your nest eggs 510 15 years from now? Discover the peace of mind you deserve call Brian and his team 888-382-1298 for your no cost retirement readiness review with inflation report or use the QR code to schedule your appointment today.


Brian Quaranta 09:18

Welcome to on the money with secure money. I’m your host Brian Quaranta. And in studio with me today is my good friend Joe Wilson. Joe, how are you?


Joe 09:25

I’m wonderful, buddy.


Brian Quaranta 09:26

Should I tell everybody you’re from Ohio?


Joe 09:30

My God and we’re on the same set.


Brian Quaranta 09:33

That’s risky. risky, and I think that’s what we’re talking about today is risk and how much risk can really impact somebody’s retirement and how much it’s not being taken into account. And I don’t think people really understand how to define risk. I know for me, I define risk. It’s very simple. If it can go up in value, or it can go down in value. It’s risky period bottom line that so many people are taught that there Is this measurement of risk by, you know, calling it a conservative portfolio or moderately conservative or moderately aggressive? What’s your thoughts and opinions on risk?


Joe 10:09

Well, here’s the challenge. I think risk can be defined at Wall Street, let’s just start there has done a terrible job of defining risk. I think anytime there’s just generic questionnaire and conservative moderate. What does that mean? Right? It’s like saying, How spicy Do you want your enchilada? I mean, it’s so- just- it’s a variable? Yeah, there needs to be a quantitative reasoning behind it. I know. That’s what I love about what you all do. And you shared with us, and we adopt that in our practice, and the ability to really quantify someone’s willingness to what, are they willing to lose them a million dollars, he’s losing two and $1,000 risky to them. And that can be a frightening scenario. Absolutely. And so, I think one, Wall Street has just gotten this all wrong, because they just want people to see that I’m a moderate investor, but they’ve never showed them what a moderate investor could lose in markets like this.


Brian Quaranta 10:56

I think the other risky thing is the way that Wall Street looks at math. Okay. I mean, you and I look at math completely different. Yes. And you know, we’ve talked about this example, many times, but Wall Street’s legally allowed to say something like this. So, let’s say we have somebody that has $100,000. And they lose 50% of that money. So now they go to $50,000. Okay, the next year they earn 50%. Well, minus 50 plus 50. That’s an average return of 000. So, you would think that with a 0%, rate of return to your average of zero, you would still have $100,000. The reality is, when you return 50%, on $50,000, you’re only going back to 75,005. So that’s still a 25%, a major loss of cabbage. So that’s the difference between real rate of return versus average versus averages.


Joe 11:45

Why is nobody talking? Well, because Wall Street loves to pump this whole average rate of return thing. And we get these Morningstar reports and average average, average, my horror, just the modern retiree and their options that they can select in a 401k. Yeah, I think most folks is you know, they’ll look at the sheet go that’s average this that’s our I’m just gonna put it there. Yes, completely oblivious to really what risk is and how it can affect the modern retiree in these down markets. I got to tell you a story. We had someone that called in not too long ago and came in there, they had amassed about $2.8 million from great sum of money, right? Here’s the issue, Brian, at two years old, had amazing run up in the market. And came to us right after the first quarter this year going, something’s messed up. They were down over 700,000. Now, wow. Three months? Wow. At 81? Yeah, we did the risk analysis that I know you’re going to talk about here. And we were able to look and see that they had 85% of their portfolio in growth. Mutual Fund. Wow, at 82. That’s incredible. That is risk. Right. And they looked at us and said, we thought we were conservatively moderate.


Brian Quaranta 12:53

Yeah. Isn’t that risk evaluation that we do so powerful? Because I know you and I were taught, you know, 20 plus years ago, at the big box firms, we were both talking about the whole, you know, moderately conservative, you know, moderately aggressive, that whole strategy, and none of it really made any sense. But today, because of technology, we’re actually able to quantify risk in the form of a number. I don’t think people realize that no, and now you can look at and you can say, look, how much are you willing to lose, because when you quantify risk and a number, you can actually determine maybe what your probability of drawdown is going to be. So, a lot of times when we look at people’s portfolios, and they say that they’re relatively conservative, and we run a risk score on them, and again, that’s on a scale from one to 99, right? 99 being the highs. So, people will say, Look, we’re not risky at all. And we’ll find out they have a risk score of 80. And then right, which is very, very risky. Now, we also do a quiz with them, and their quiz will come back, and they’ll say their risk score should really be a 25, or 30. But their portfolios invested at an 80. That’s eye opening to people.


Joe 13:55

It is, because I think that was allowed to skate through because everything went up over this last decade. Because the Fed was easy. It was low interest rates, pumping the economy with all this free money. And now it’s time to have that root canal and that drawing, and it is shocking some folks when they’re opening those statements, for the first time looking at some of these quarterly statements on Oh my Lord, how much are we losing? No.


Brian Quaranta 14:17

Why and the difference is protecting your retirement lifestyle. So, I’ve always said if you protect your retirement lifestyle risk is okay. That’s right, right. Because if you’re going to take risks, there’s nothing wrong with risks. That’s why she says can you afford to take the risk? And most people and we see this all the time, people are rolling the dice with 100% of their life savings.


Joe 14:39

They manage it all the same way.


Brian Quaranta 14:41

That’s right. And we know from being in the financial industry, as long as we have your number one most important thing that you need when you’re taking risk is time gotta have time on so think about all the people that we meet that are with these big box firms that are not being advised the right way that are actually pulling money out of their portfolios why While they’re going down in value, that’s right. So not only is the market taking their money away, but they’re compounding those losses by pulling income out because they have to live because they have to live, they’re not going to stop. But now their probability of running out of money drastically goes up.


Joe 15:14

And that’s because they’ve managed it the old big box way, a number of a statement and just assuming if it we get this, and if you do that, and it just doesn’t work in the real world,


Brian Quaranta 15:25

I know you guys focus at your practice a lot on protecting that retirement lifestyle. And I believe that if you can carve off enough money to protect at least the first 15 to 20 years of retirement, that buys you enough time, it’s right on any money that you have in the market. What’s your ratio there? Do you guys like to carve off at least 15 to 20 years, at least 10 years? How much do you try to carve off to-


Joe 15:48

We like to look at it and feel that we look at what are your necessities? Yep. What are your necessities? They’re going to change-


Brian Quaranta 15:53

So, basic, basic expenses.


Joe 15:55

Just to stay retired. You have your go-go years, and you’re kind of slow go and then the no go Yeah, right. So, some necessities that you have to cover. But I think you don’t retire just to live inside of our hermit, you got to have some lifestyle. And as long as you have breath in your body BQ when you retire, you have to have your necessities covered. And that’s the number that you have to look at. Yeah. And that’s how you have to position these assets. Isn’t


Brian Quaranta 16:17

that the truth? Folks? I can’t tell you how important it is to protect your retirement lifestyle before you even consider taking risks. I’ve said on a number of occasions, if you’ve won the game, there’s absolutely no reason to continue to play. That’s the only reason you should ever be able to continue to take risks is because you’ve protected your lifestyle first. So, if you’re in a position right now, where you don’t know how much risk you’re taking, you don’t know how much potential money you could lose. If the market continued to go down? Would you have to delay retirement potentially come out of retirement? Don’t put yourself in that position. Come in and get a risk analysis from us today. I want you to call the number on the screen. It’s 1-888-382-1298. And when our team answers, I want you to tell them that you want to schedule a complimentary retirement Readiness Review and tell them that you want the risk report along with it so that we can help you quantify the amount of risk that you’re taking again, call the number 1-888-382-1298 or scan the QR code at the bottom of screen. Call


Announcer 17:17

888-382-1298 for your own complimentary retirement Readiness Review and Risk Report. Why take unnecessary risk when you don’t have to at 65 years old? Would you drive to the grocery store at 100 miles per hour if 40 miles per hour would get you there safely When nearing retirement? Are you still driving your investment accounts like you’re in your 30s or 40s? Have you changed your investment election since you first chose them in your retirement accounts at work? Call Brian and his team at 888-382-1298 for your own complimentary retirement Readiness Review and Risk Report. Do you know exactly how much risk you’re taking in your investment accounts. Now that you’ve accumulated a nest egg for retirement, you want to be certain the risk you’re taking in those investments matches your goals and objectives. Call Brian and his team 888-382-1298 For your own complimentary retirement Readiness Review and risk report or use the QR code below to begin scheduling your appointment. You may not have time to recover from taking too much risk.


Brian Quaranta 18:20

Welcome to on the money with secure money. I’m your host Brian Quaranta. And in studio with me today is my good friend Joe Wilson. He’s from Cincinnati, Ohio.


Joe 18:29

I can’t believe that you said that word on Pittsburgh airwaves!


Brian Quaranta 18:33

Someday we’re going to do a show with during football season we have to Pittsburgh and Cincinnati we have to it’d be a lot of fun. You know, we’re talking about the greatest trick ever play ever played. Not the greatest play, but their greatest trick. When we first talked about this topic, you would think like, what is the greatest trick ever played it? Would it be like a hat trick by Wayne Gretzky? Yeah, it could be you know, it could be but tell us what is the greatest trick ever played on all of us when it comes to retirement? Well,


Joe 19:04

I think you have to go back in history and history when you go back and look at what retirement used to be. Yeah, no mom and dad would go work somewhere and they’d work and they would be there for 30 plus years, and there’s a big retirement party, they get the watch, and they get the party and maybe a little vacation trip. And then they got this glorious pension mailbox money that came from that company for as long as they live. Right? Right around that 1980s You start seeing a big shift right away from that into this 401k market. And here’s the trick. The government was brilliant, because what we know is if you put money in the market and allow time and compound interest to work in your favor, it is the eighth wonder of the world, right? And what the government did is said BQ Why don’t you just take this this little bit of money, we’re gonna give you a tax break on this sheet, put money into 401k in an IRA it won’t give you tax break on it. We’re just gonna let it grow 2030 years and when you go to retire way down there and it’s time to harvest it. You can pay US tax Actually, so you gotta break on the seed. But when it’s time to harvest the corn Allcock, it’s taxed his tax time. And what we’ve seen is a build up in these qualified plans. And so, the government, me and they’re like a fat kid sitting, just waiting on the deli to open because they’re gonna go in with sandwiches, hands because they haven’t been taxed on that. Yeah, this is a great opportunity for the government to help pay off some of this debt. My God, we got to talk about the debt.


Brian Quaranta 20:25

I look at it as almost like, I mean, think about having a shareholder, you know, think about any business owner, you have a partner, right. And that partner doesn’t show up for work. Yeah, they have no skin in the game at all. They don’t give you any advice on how to operate your business or anything. However, they get a share of your business. Yeah. Now take it one step further. They can change the rules on you. Oh, yes, in the middle of the game. Yes. So, they can decide one day when you wake up, they can say, you know, we were thinking about only taken 30% For me, but now we’re going to take 40% from whatever they want. And always look at it like this, let’s say that you only contributed ever in your lifetime $15,000 into an IRA or a 401K or 403B, right, any type of tax deferred retirement. Now, let’s say you made an never made another contribution again. So that meant you got to you got a tax deduction on that $15,000 You put in. However, let’s say that we get some really good returns and at 15,000 grows to a million. Okay. You’re telling me that when I want to pull out that million, yeah, I’m going to be taxed on all $1 million. And they are a shareholder in all $1 million,


Joe 21:35

It’s not all your money BQ.


Brian Quaranta 21:37

My three-year-old would know that that is not a fair game. So why is it that you know, when I meet people, and I say tell me a little bit about, you know, your current plan and what you’re doing and the strategies that you have in place? And I’d say, tell me a little bit about your income plan, your tax strategy, your investment strategy, your healthcare strategy, your legacy strategy. Tell me a little bit about what tax planning is going on right now? Are you moving any money from taxable accounts to tax free accounts? And they said, We’re not having those discussions most of the discussions people have is about how the investments performed last year. Right. Right. Why is it that you think and you know, I’ve got my opinions, but what’s your opinion on why people are not getting advice about these types of things to make their planning better? Right?


Joe 22:22

Well, one, usually some of these big box firms don’t have the tools to give you advice on it. Yeah, I think that’s important. Yeah. And what separates us as fiduciaries, you know, with your practice, if your fiduciary, right, and you guys do comprehensive wealth planning, right, and so there’s just a fundamental difference right there because they’ve been focused on growing the assets, right. And if there is a Roth conversion, we’re gonna talk about that in a bit. That money has to come out and move out of that account to another account, and you have to pay the tax on the year that you do that right. Now, we’ll talk about why you might want to do that. But when that money comes out, that manager now is managing less money and almost ensuring a pay cut. Wow. So, there’s a lot of theories out there of what’s going on. But a lot of times, it’s just that number one, they’re bound by really not having all the tools in the toolbox to help those modern retirees get to this, this conversation.


Brian Quaranta 23:11

The business model is limited. I mean, that’s why I left a big box firms I know use it, because they’re really limiting us on what we can do and the type of planning we could do. I never wanted to look, I didn’t grow up with a silver spoon in my mouth. My mom and dad worked really hard for money. My dad had a Montgomery Rewards Catalog store. You remember Montgomery Rewards?


Joe 23:29

I’d go through it at Christmas time. Every page.


Brian Quaranta 23:33

Right. Yeah. That was the Amazon before Amazon.


Joe 23:35

Oh, I spent hours watching a baseball game doing that. My beloved dreads probably, who’s into The Pirates? Yeah.


Brian Quaranta 23:41

But you know, the, these are the things that ultimately like make my grandfather had a Kirby vacuum cleaners to remember Kirby vacuum. Yeah, you know, so my parents taught me to work really hard. And at the end of the day, what they taught me was, work hard, save your money, so that eventually someday your money can start to work for you. And, you know, when I was at the big box firms, what I realized was nobody was teaching anybody how to use their money, they were teaching them how to invest their money and roll the dice with it. And as long as everything was going up, they were heroes. Right, right. But when things started to go south, the only answer they had was, don’t worry about it hang in there. You’re in it for the long haul. Or my favorite line was it’s just a paper losses to paper loss. Now, I don’t know about you, but I invest personally in the market. I know you do, too. To this day when I lose money. I don’t feel like it’s a paper loss. Now, the difference is I’ve got time before I’m going to need that money. Still spring chickens. A lot of people that are watching the show today, they don’t have the time to recover they another big market loss would be absolutely devastating to them. So I know we’ve talked about this a lot about protecting the retirement lifestyle right, but Are there alternative strategies out there where people can protect money still get decent returns? And do you guys choose to use that type of stuff here?


Joe 24:59

I’m gonna have to use in this market in this world, you have to use alternative asset classes, sophisticated option strategy, right? Because that’s what’s going to propel the modern retiree to cover those necessities to position themselves in a place where they can live that retirement of the dreams. I don’t know how let’s do that when you look at the stock market down, you know, the massive that it is since the before worst since the Great Depression. And then look right on top of that the worst bond market in 41 years, you have to


Brian Quaranta 25:23

find those alternatives you’re talking about is a real hedging of risk versus, we’re trying to a lot of people are trying to hedge risk by having bonds in their portfolio. But when you have a positive correlation between stocks and bonds, and you got both them going down at the same time, you’ve got no hedge against risk with whoever. And people need to realize that there’s just better ways to approach to absolute folks, if you’re in a position right now, where you’re concerned about how much risk you’re taking, or how much money you could potentially lose, or not being able to live the lifestyle that you promised yourself that you were going to live in retirement or if you think that you’re at a place right now, where a income plan would make a difference in your life. And I will tell you if you’re five years from retirement or retired, an income plan is absolutely necessary. I want you to call the number on the screen and schedule your appointment today. It’s 1-888-382-1298. Our team is waiting by tell them you want the retirement Readiness Review and the tax map tell me what the tax map or scan the QR code at the bottom of screen you can schedule. Thanks for joining us. Call


Announcer 26:20

888-382-1298 now to receive your complimentary tax map with your retirement Readiness Review. Learn multiple strategies that can protect you from higher taxes now and in the future taxes are a threat to your financial stability in retirement protect yourself from the potential threat of rising taxes as a retirement planning financial advisory firm, Brian and his team will help you navigate the financial waters to pursue your retirement goals call 888-382-1298. Today, Brian and his team provided inclusive retirement services such as investment directories for your portfolio income producing strategies and wealth preservation plans for your family and legacy call Brian and his team 888-382-1298. Now for your complimentary tax map with your retirement Readiness Review. Discover tax strategies to keep more of what you have saved in retirement or use a QR code below to schedule today.