On the Money with Secure Money: Episode 94 – Discussing Social Security, Legacy, and Investment Strategies

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Video Transcript

Joe 00:22

Pittsburgh, you’re watching on the money with the man I to call BQ. Brian, how are you?


Brian Quaranta 00:26

Joe? How are you always good to see you, my friend.


Joe 00:28

Listen, we’re talking this segment about Social Security and the impact that it can have on the modern retiree. But I know there’s a big secret, you want to get it out of the bag.


Brian Quaranta 00:38

That there’s no magic checkbox on Social Security that’s gonna that’s gonna magically increase the amount that you guys-


Joe 00:45

There’s no magic box.


Brian Quaranta 00:46

There’s no magic box, although there is a magic box. It’s called Planning. Well, there you go. And it’s called the magic novel idea. But what I wanted, I do want to clarify that because you know, too many people think that there’s something that they can check with Social Security or ask Social Security worker, all of a sudden, they’re gonna get a 20% increase, and it doesn’t exist. The biggest secret is that they took all the strategies they did, they’re changed the law, right. And that’s, that’s really where the planning comes in. And because the only way you’re going to maximize what you’re getting from Social Security, is actually to tie it into the overall income plan.


Joe 01:13

And I think that’s what’s so important that what you just said there the overall income. Yeah, how many people I know in my practice, and I know in your practice, we’ll see people come in with a statement from a big box. And they’ve done a proof just an amazing job of saving, prolific savers. There’s a big number, but out of the 1000s of statements I’ve looked at, and I know you were the same way, because you talked about this, not on what never understand, does it show you how much money you can take out to stay retirement ready. That’s right. And you have to couple that with Social Security, because as long as it’s there, that can be a viable part of the overall income plan.


Brian Quaranta 01:45

Well, what you’re talking about, is the pension disappearing, right? I mean, 85-90% of the people that are retiring are not getting pensions anymore. So that statement that we’re looking at, really is their pension, correct? And nobody is teaching people and showing them the proper way to use that money. And that’s the difference between your practice and the other practices and what we’re doing that so similar, is the fact that we’re helping people actually use their money use the money accumulating the money. Simple, right? I mean, it doesn’t, you know, all you really need is some halfway decent investments and some time, save more than you spend and don’t do anything stupid. Yeah. But when you when you’re out of time, and you need this transition from accumulating your money to now utilizing your money, and now you’re going to make decisions around when to click sole security, how to start taking withdrawals from your investment accounts. That’s when it really matters. And you better have a plan, Joe, you better have a plan. Because if you don’t, you’re gonna find yourself in some trouble.


Joe 02:37

It’s really tough when you look at folks that have tried to approach this on their own. Have you been to the social security.gov? site? It’s horrible. I mean, it’s I equate it to the Library of Congress. Well, the answers in there, but every book’s been knocked over. And it’s just, it’s buried, and you can’t find correct the real information that you need. Yep, this is so hard for folks to plan on their own. And I think so many folks who say, well, Aunt Sue, did this and Uncle Ed did them. But really, it’s not a one bucket fits all.


Brian Quaranta 03:04

No, no. And think about it like this. I mean, you know, my dad taught us how to fix our cars when we were kids, right? And I can remember, it was like, he would hand me a part and I go, Okay, well, now what do I do? Yeah. And Social Security, is that part? Yeah. Okay, now, what do I do? And how do I, how do I actually implement this? And that’s really where the planning part comes in. And there’s so much good you can do when it comes to maximize your social security with a good plan, because it may be and this is, and I know, you see the same thing in your practice. everybody’s situation is so different. There are some people that because of how much they saved and where they saved that money. Yes, taxable versus tax free, yes, they may be able to actually delay Social Security and take advantage of that 8% increase. There are others where it’s not going to benefit them to delay. Right. And the thing is, is that most of the advice out there is delay, delay, delay.


Joe 03:55

Correct, correct. And that’s not always the case.


Brian Quaranta 03:57

That’s not always the case.


Joe 03:58

And I think what’s so important, you said at the beginning, I want to reiterate, you know, if you haven’t saved enough, and life is hard, folks, sometimes it’s just hard to put money away. Maybe that’s you, you’re like, Man, I wish I had, there’s no secret. The secret might be on this. Just take it. Yeah. But if you’ve accumulated some wealth, this is specifically important because there are strategies and some things you have to consider. Yep. revolving around the tax consequences of your other assets, how this can be the perfect marriage and doing it right.


Brian Quaranta 04:22

Yeah, and you make a great point. I mean, if you if you haven’t saved enough, your best option, if you want to retire might just be take it right, absolute right, or work as long as you can, and try to save more than take it. But for those that actually have accumulated some wealth, this is where social security planning really can become powerful, as far as how you’re maximizing your own assets, along with Social Security. I mean, think about it. For every dollar that you get in Social Security. It could be $1 less you have to take from your investments.


Joe 04:52

We’ll say that again. Because that’s so profound, and yet it’s so simple.


Brian Quaranta 04:55

Every dollar you get in Social Security is $1 less-


Joe 04:58

You don’t have to spend it out of your savings,


Brian Quaranta 05:00

You don’t have to spend out of your savings. So, think about what that does to your wealth over time compounds it up, think about how that how that protects your purchasing power over time, right? Because one of the rules that can be changed on Social Security. And the other big secret is that, you know, security when it started, we were promised it would never be taxed. Right, right. And then what happened and what 8383 with Ronald Reagan, right, he changed it, he started taxing that started winning, and they realized there was enough money, and that’s right, and then and then Clinton, tax it again. So now up to 85% of the benefit could become taxable. So think about it, if all of a sudden tax rates go up, and I talked to people every single week, so to you on your TV show, and radio show, all the all the educational events we do if you ask people today, if they think taxes are going up or down the future, they tell you, they’re going up. And if that’s the case, think about the loss of purchasing power as taxes go up, and they and they’re getting less money. And then on top of it, if inflation continues to run at the rate that it’s going to be running. And we have to think about purchasing power long term, because that’s what matters. So, you know, you tried to get the gas in the car. That’s right, the account value on the statements is less important than the cash flow that can be generated from the investments themselves. So powerful, so powerful, right? And you need a written income plan, you absolutely do. And this is why I love the fact that we’ve put together a very simple retirement readiness report that allows people to look at all these different options that they can choose, along with a Social Security Report that can dial some of this stuff in. And it’s just important that people have information laid out. And they look at the math and both you and I are big believers in the math, we’ll win all the time, all the time, it will win. And so many people are not building their plans around math. And so it’s just important that we look through the strategies. And social security is a big decision. Just like just like choosing your Medicare is a big decision. Do I do a supplement? Do I you know, or do a do I do an advantage plan? Right? I mean, do I use Medigap? Do I use an advantage plan? These are all big decisions that need to be made.


Joe 06:53

And that’s why it’s so important to know what you do this so well, your firm, that it’s a comprehensive retirement plan. That’s right. It’s not just gonna grow the money. Okay? How does it all where it needs to be a symphony, everything has to go together? So, you can have the retirement of your dreams?


Brian Quaranta 07:09

That’s right. Your income, your taxes? Yes. Your investments? Yes, your healthcare strategy, and most importantly, your estate planning strategy. That’s what that retirement planning is all about.


Joe 07:19

Folks, so many of you that are out there probably are thinking about wow, I haven’t really thought about Social Security and the impact it has on my overall retirement. This is exactly for you, Brian and his team are standing by, we need you to doubt 888-382-1298 You get one shot at retirement. Ask yourself this question. What if I choose poorly? When to turn on my Social Security? How does it affect my overall retirement plan? Am I going to have enough money? Brian, it’s important not just to retire, but to be and stay retired. And to do that you have to have the proper income position. And so, what the team standing by and ready to offer you as a retirement Readiness Review, and a part of that is a written in compliant with a Social Security Maximization report. But again, we need you to dial 888-382-1298, you owe it to yourself to be in stay retirement ready, call that number and say I want a Social Security Maximization report. Thank you for watching on the money.


Announcer 08:20

Call 888-382-1298. To receive your complimentary retirement Readiness Review and Social Security Maximization report. Get the most from your Social Security payments, find a strategy that maximizes your Social Security benefit and preserves the assets you’ve saved for retirement. Social Security seems easy, right? The question is, should you take it now or later, there are numerous ways to file for Social Security. The decisions you make can also affect how much you pay in taxes you paid into Social Security for decades now get the most out of your Social Security benefit call Brian and his team 888-382-1298 for your complimentary retirement Readiness Review and Social Security Maximization report. Now you need to build that into a retirement income plan with all your assets. Call Brian and his team right now. 888-382-1298 To receive your complimentary retirement Readiness Review and Social Security Maximization report or use a QR code on the screen to schedule your appointment today.


Joe 09:21

Pittsburgh you’re watching on the money with BQ. Brian, we’re talking today about legacy. Now we’re in Pittsburgh,


Brian Quaranta 09:30

Do you do you think anybody knows what legacy is?


Joe 09:33

Probably not. Yeah, no, I- legacy planning is a challenge. I think we start there. Yeah. What is legacy planning for the modern retiree from Pittsburgh? Well,


Brian Quaranta 09:43

let’s first talk about what they think it is. Right? Okay. They think it’s when you put together legal documents, right? Yeah. When you put together a trust and a will and a living will and all those documents right? But really legacy planning comes down to really having a retirement strategy that leads into the legacy agenda because What people don’t realize is that the most important document you own actually is not any of your legal documents. It actually is the beneficiary document act on your IRAs, your 401, K’s your insurance products like life insurance and annuities, that beneficiary document trumps everything legal document, use the trump card, it’s the trump card. And a lot of people think that they need a trust to avoid probate and things along those lines, when in fact, a beneficiary form avoids probate. So, people are setting up estate planning strategies without having a real written retirement plan in place first, and what happens is things are missed, not all the i’s are dotted and all the T’s are crossed.


Joe 10:38

Correct. You have to have a written and complete because think about this, when you’re marching into retirement, the pensions are gone. Right. What you’re going to be able to spend and live off of is the are the assets that you’ve accumulated. That’s right. I don’t know how Wall Street, it’s, it’s failed the minor retiree? Yeah, because what they’ve done is promoted this watch your numbers Oh, commercial I What’s your number? What’s your number? What’s your That’s right, but it’s not the number. It’s the income derived off that number that allows people to stay retired, as we know, in this market, that number can be up. And honey, it can be gone. I like that.


Brian Quaranta 11:10

That’s right. And what you’re really talking about is purchasing power. Correct? Right? How are you going to continue to maintain your lifestyle if you lose purchasing power? So, if you have a portfolio that you’re taking money out of, and the market goes down? Are you going to continue to take money out? You could but if you do, you run the risk of running out of money, because now not only are you locking in the losses because the market took it away, but you’re compounding the loss correct by pulling the money out correct. And this is a very dangerous thing for people to be doing. But yet they’re being advised over and over again to do it because they don’t understand, and Wall Street does not understand income distribution. They just don’t they understand accumulation. And that’s it. And what Wall Street needs is time with your money. But when you don’t have time, Wall Street’s not the place for the money, you could have Wall Street in some portion of the plan. But you can’t have it at all correct. Because if you’re rolling the dice with 100% of your money, bad things potentially could happen.


Joe 12:04

Well, the world saw that. We don’t have to go back to ’08, ‘09 go back further go back to the lost decade, right? Think of 2000, ‘99 everything was hot. Yep, 2000, you’re down 10%, 2001, you’re down about 13%, 2002, you’re down almost 40% between those three years down. If you’re taking the old John Wayne shoot from the hip 4% Row income off of that your income has gone yet a million dollars from 40 grand, substantially less almost cut in half, because the assets have come down as you pull money out. That’s right. And so, when it comes to legacy and leaving a legacy, not only do you have to plan on your income and how to survive that, but you’ve said this, in previous shows, you can only spin after tax money. Most folks don’t have a clue at the tax implications sitting right now, the hidden debt they owe. That’s right. And their 401Ks’ and IRAs and how it affects their legacy.


Brian Quaranta 12:56

You mean, the IRS is the largest beneficiary and shareholder of most qualified deed? Ding, ding, ding. Yeah. So, a lot of people think that putting money into a trust, and I know you see this, they think that they’re gonna magically avoid all this taxation. But the reality is, for most people, their largest asset they have is an IRA or a 401. K, that money cannot go into a trust, right? If it goes into a trust, it becomes taxable correctly. The only way, the only way to properly get that money, right into a legacy plan that would be tax efficient, is actually to do tax planning, in the retirement planning portion, and to do it now. That’s right. That’s right. And the reason we say now is because we know if Congress does nothing, and they’re brilliant at doing nothing, the current tax law will change at the end of 2020 thrive. So, there is a window of opportunity for legacy planning now, just because Congress has that window, but the best tax rates we’ve ever seen ever. And just to your point, Congress can change the rules and hardpoint look what they did with the RMD. Correct. Right. So, the RMD was actually worked in our favor. It went from seven and a half to 72. But there’s legislation right now where they want to increase the amount of money that you’re required to take out. And so, they not only that, but they could vote themselves into being a larger shareholder in your retirement.


Joe 14:12

I would challenge on top of that to say at $30 trillion in debt. Yeah, I think the odds of that happening and


Brian Quaranta 14:17

I don’t think people understand, Joe, that they can get the IRS out of the picture. Get him out, buy him out right now.


Joe 14:22

You showed me something at breakfast, we have to go over it. Yes. This is part of what we’re talking about today. Folks, if you’re if you’re hearing this, you have money in a 401 K and an IRA Well, we like to say in the history is a qualified plan. I want you to pay attention here. Brian ran this example. It was a 65-year-old man, here’s some assumptions, a million dollars in an IRA. You just ran the taxes where they are today 25% and stayed that way forever, forever. But as you know, most people that have accumulated wealth, they ended up not just living off this, but they have other assets. They just want to reinvest it and let it grow. Right. So, you took this 65-year-old takes the RMDs reinvest the RMDs they’re still taxes, do what’s right, and then passes away at 90 and so There’s money still left in there that the kids have to pay taxes. When you run that report a million dollars at 65 to 90, the total taxes paid and due on that is over $900,000. Yes, that is why leaving a legacy, you have to look at a tax analysis, you have a clear understanding of how much money you might be able to leave on the next generation, because somebody’s gonna get it. And I know you and I know me. That’s right. I want that to go to my kids.


Brian Quaranta 15:27

Yeah. And folks, think about this. When’s the last time you wrote a check to the IRS for $995,000? And that is the check. You do not want no. Right. And again, what Joe and I are talking about here, it’s actually getting the IRS out of the picture with proper planning, so that the legacy component becomes tax free. Right. I mean, that’s it. And I know you see it all the time of your practice, no planning is being done on these accounts. None. You know, people are not getting planning. They’re getting some investment strategy advice, you know, but that’s not a retirement plan. Retirement Plans are all about your income. It’s about your taxes. It’s about your investments. It’s about your health care strategy. And of course, what we’re talking about right now is the legacy components. These are very important, because when you do get it right, you know, I’ve got two young kids. I know what’s interesting is, you and I are about the same age. You’re sending your kids to college now. And I’m just starting, I gotta get a head start. Yeah, but I know you feel the same way I do. I don’t want I don’t want to have my death calm. And my kids think, wow, my dad was a smart guy. But how did he miss this? How did he wind up leaving the IRS, the largest beneficiary, and nobody watching the show wants to see don’t happen to their money? No, but unfortunately, they’re not getting the proper advice. Or they’re taking their advice from the wrong people, Joe.


Joe 16:37

Right. Pittsburgh, listen, this if you have retirement money, and you have IRAs and 401K’s this show is specifically for you, you need to have a clear understanding the legacy that you can leave to your beneficiaries, whether it’s an institution or your own children, you need to dial 888-382-1298. And when you call tell them, It’s a retirement Readiness Review, and you would like to get a detailed tax map, if you have an IRA or a 401 K, if you need a tax map, why? Because taxes are owed on that money, and it will have an effect on your legacy planning. But to do that, we need you to dial in it 83821298 So you can be in stay retirement ready.


Announcer 17:20

Call 888-382-1298. Right now, for your own retirement Readiness Review. Having a clear path to retirement is more than just your savings. This review will include a complete risk analysis on your portfolio, and in-depth fee analysis to determine how much you are and could be paying on those investments, a tax reduction report. And lastly, we’ll look at health care and legacy planning for you and your estate. To begin your retirement Readiness Review. Call Brian and his team at 888-382-1298. Or use the QR code to schedule your appointment today. Whether your retirement is coming soon, or you want to be certain you can stay retired, the retirement Readiness Review will help guide you through your financial planning needs. Call Brian and his team 888-382-1298 or use that QR code to schedule your meeting today.


Brian Quaranta 18:21

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 18:28

I’m wonderful buddy.


Brian Quaranta 18:29

Should I tell everybody you’re from Ohio?


Joe 18:33

My God, and we’re on the same set!


Brian Quaranta 18:36

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’s this measurement of risk by, you know, calling a conservative portfolio or moderately conservative or moderately aggressive. What’s your thoughts and opinions on risk? Well,


Joe 19:12

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? Yes, losing $200,000 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 load people to sleep that I’m a moderate investor, but they never show them what a moderate investor could lose in markets like this.


Brian Quaranta 19:59

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. That’s still a 25%, a major loss of cabbage. So that’s the difference between real rate of return versus average versus averages. And why is nobody talking?


Joe 20:51

Well, because Wall Street loves to pump this whole average rate of return thing and look at these Morningstar reports, an average, average, average, my word just look at 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 and go that’s average this that’s our I’m just going to put it there. Yes. Just 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, 82 years old, had amazing run up in the market. And came to us right after the first quarter of this year going. Something’s messed up. They were down over $700,000. 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 21:56

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 it, you can say, look, how much are you willing to lose, because when you quantify risk in 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 highest. 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 then their quiz will come back, and they’ll say their risk score should really be a 25 or 30. At what their portfolios invested at an ad. That’s eye opening to people.


Joe 22:58

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 going, oh my Lord, how much are we losing? No. Why?


Brian Quaranta 23:21

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 23:41

They manage it all the same way.


Brian Quaranta 23:45

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 get that 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 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 24:16

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


Brian Quaranta 24:28

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 that’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?


Joe 24:51

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


Brian Quaranta 24:56

So, basic, basic expenses?


Joe 24:58

Just to stay retired right? Have your go-go years and then your kind of slow-go years, then the no-go, yeah, there’s some necessities that you have to cover. But I think you don’t retire just to live inside of our heart, 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.


Brian Quaranta 25:20

Isn’t 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 with that story. Only reason you should ever be able to continue to take risk 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.


Announcer 26:20

Call 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? We’re 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 this 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.