Speaker 1 0:03
Creating a successful retirement doesn’t happen by accident. It takes intentional planning, discipline saving, and the right strategic guidance. We’ve all heard that people spend more time planning a two week vacation than they do planning 30 plus years of retirement. Let’s flip that script and focus on the things that truly matter as you enter your next phase. We’ll talk about that and more today on Retire Smart Maryland Radio. Welcome
Speaker 2 0:30
in to Retire Smart Maryland Radio with Prashant Sabapathi. Welcome into Retire Smart Maryland Radio, hosted by Prashant Sabapathi and John DeFeo, Elite Income Advisors, where you can find them, the power behind this program. They are fiduciaries, independent fiduciaries, and it’s all about getting you ready for your retirement. Headquartered in Ellicott City, Satellite Office in Annapolis, for your convenience. Check out the website, Elite Income advisors.com It is a resource. I’m Morgan Patrick. And again, a pleasure to jump on talk retirement. And before we jump into our first subject, gentlemen, we’ll start with Prashant. How was the week?
Speaker 1 1:11
Hey, the week’s been good. It’s been nice to get back to work after some paternity leave. As I’m sure some of our audience knows, my first baby was born recently here, and John was just about a month before me for his second, and so you know, I think it’s been welcome for both of us. We’ve talked about this privately in the office, just being able to get back to the office, and thank goodness we both have our wives at home, which are the house, at least for now, anyway. So it’s been really nice to get back to the office. Our clients have been great. Outpouring of love and support just from our existing clients with the babies has just been fantastic. But it’s been really cool to get back to work, especially after the passing of the big beautiful bill, and you know that’s created a lot of buzz, a lot of uncertainty, a lot of opportunities for folks, and so you know working through that with clients has been pretty cool last couple weeks.
Speaker 2 2:12
All right, so John, is that ditto from you?
Speaker 3 2:14
It is. Yeah, I have to say again, thank God for our wives, because if it wasn’t for her, I don’t know how we would, would do it. Call her the household CEO, as she runs everything in the household. Yeah, it’s been good to be back. As Prashant mentioned, we’ve had a lot to do with the new big beautiful bill passing, really understanding the bill itself, and you know how it’s going to affect our clients. So, doing a lot there, and ensuring that that we keep them up to date, but it’s been a great week,
Speaker 2 2:43
that’s a mouthful for sure. I want to say this for the show record. Yes, our advisors are with new kids. I’m not going down that path, I’ve already been down it twice, and mine are adults now. But I wish you guys the very best. It is the best time of life, you’re going to be absolutely exhausted, but in the most pleasant ways. So, again, congratulations to both of you, and just good health to the babies, and to the moms, and to you guys. And, obviously, you know, we want to talk about, you know, maybe the bigger picture. I mean, we end up talking about family, it makes you think about the bigger picture, and you built this career, you’ve accumulated your wealth, and maybe even helped raise the family, as we have our advisors doing that right now. But now comes a huge question, What’s next, and how do you make that last? I mean, this is going to be big. Retirement today looks very different from what it did just a generation ago, and people are living longer. We talk about longevity all the time, facing higher health care costs. That’s going to hit you right in the face, dealing with more market volatility than ever before. And Prashant mentioned that big, beautiful bill – it’s causing a rocky ocean right now. And this episode, this particular show, we’re going to get into making sure your wealth supports your vision, not the other way around. So, we’ll start with you, John. Do you have a clear.. these are questions you need to ask yourself. And if you’re at home or driving around listening, ask this of yourself. Do you have a clear vision for your retirement? What’s going to be your lifestyle?
Speaker 3 4:20
Yeah, I mean, I think any time that you start building out a retirement plan, you should really know what you’re looking to achieve, right? What type of lifestyle you’re looking to live? Do you want to be traveling? Do you want to start a business? Do you want to be spending time with your family, volunteering charitably inclined? You know, really drill into what you’d like to do in retirement, figure out what that could potentially cost you, and what it’s going to take to get you there. I think there was a 2024 survey by AARP that found that 69% of retirees who reported high satisfaction had specific lifestyle goals and a plan to fund them. So, our question to you, as the listeners, How specific is your vision? And does your financial plan support it?
Speaker 2 5:02
I mean, think about it, having a plan that gives you confidence, I mean, you’ve got, you’ve laid the groundwork, you’re ready. So, this next one to you, Prashant, have you built a smart income distribution strategy? Very important.
Speaker 1 5:15
Yeah, before I get to that, I mean, just going back to what John said, I find that so interesting that people oftentimes don’t realize what a simple concept that actually is. I mean, think about what he just said, John. I think you said, if I heard you right, 69% of retirees who reported high satisfaction had specific lifestyle goals and a plan to fund them, I mean, is anybody surprised that the people that are most prepared for what retirement is going to look like actually report having a fulfilling and successful retirement? I mean, like, that just seems intuitive to me. Yet so many people do not put that plan in place, and so, Morgan, to your point, one key component to building that smart retirement plan is understanding where your income is actually going to come from. Listen, while you’re working, your financial life really just is a function of what we call money in and money out, right? You’re used to having a paycheck come in twice a month or every two weeks. When you retire, that idea of money in and money out, it doesn’t really change. It’s still about money coming in, money going out, but what changes is where the money in comes from. If it’s not coming from your paycheck, it’s got to come from somewhere else. So, maybe it makes sense to map out where that income is going to come from. Is it going to come from social security? Is it going to come from a pension, is it going to come from your 401 k, your Roth IRA, your TSP, and most importantly, how much is it going to be? Does it allow you to live the lifestyle that you want, and how is it going to be taxed, right? And I think these are the things you have to be thinking about when it comes to your income and retirement. So, John, thinking about the taxes, how many people don’t actually think about taxes, and what are some of the questions or concepts that our audience should be thinking about when they’re thinking about taxes in retirement?
Speaker 3 7:14
Yeah, I mean, I think a lot of folks don’t understand the impact that taxes can have, especially down the road, when there could be changes in codes and things like that, but every dollar that you pay to the IRS or to the state is one less dollar in your pocket, it’s one less dollar in your beneficiary’s pocket. So it’s extremely important to navigate the tax codes as efficient as possible. We have a lot of people that walk into our office with high valued pretax retirement plans, right? So, large 401 K’s, TSPs, 403 B’s, where they’ve been deferring taxes over their working career, and now they have to navigate how to take that money out efficiently over time, you know, prevent the taxes, but being passed on to their beneficiaries. So, there’s a lot that goes into that. We want to be mindful of the tax strategies that we have. We work on this on a daily basis with our clients, so definitely powerful.
Speaker 1 8:04
I think a lot of people in our viewing audience can likely relate with the fact that you’ve spent decades working hard and saving money, but I think the question is, have you actually spent time envisioning what you want your retirement to look like? You got to remember a financial plan isn’t just numbers, it’s a real foundation for how you’ll live the next 20 or 30 years of your life. If you feel like you do not have a sound retirement income plan that accounts for taxes, longevity, and lifestyle, now is the time. The phone number to join the show: 800-653-8404 When you, when dial that number, you’ll have the opportunity to schedule a no-cost, no-obligation visit with our team here at Elite Income Advisors. When you schedule that time to come in, we’re just going to have a conversation about the things that are important to you. We’ll help you create that real Retire Smart roadmap for your retirement income, and it’ll be your opportunity to get on track for the retirement that you deserve. 800-653-8404 Complimentary visit. Call now
Speaker 2 9:11
when we return on Retire Smart Maryland Radio Smart, practical ways to simplify your retirement planning, so you can stay ahead of the curve. That’s next, you We are back on Retire Smart Maryland Radio, hosted by Prashant Sabapathi and John DeFeo of Elite Income Advisors, the power behind this program. They’re independent fiduciaries. It’s all about helping you get ready for retirement. They’re headquartered in Ellicott City, and they have a satellite office in Annapolis. The website is Elite Income advisors.com It is a resource. I’m Morgan Patrick. My pleasure. Jumping on with the advisors each week and talking about the importance of being proactive as opposed to react. When it comes to your plan, but we give you an opportunity to get on their calendar, and the appointments we open up during the show, they are complimentary. We’ll tell you about those as we move through. So, Mark Twain once quipped, never put off till tomorrow what may be done day after tomorrow just as well. Well, it’s funny until procrastination leaves you without a plan for one of the biggest transitions in your life, and that is when we move into retirement. So, today we’re going to break down what it takes to move from good intentions to intentional action, whether you’re a diligent saver or just starting to sort out your retirement roadmap. We’re going to cover this and essential strategies that can make the difference between surviving and thriving in retirement. So, Prashant, we’ll start with you. Why is it so hard for people to go from saving to spending when they retire?
Speaker 1 10:54
Most of us spend 3040 years in accumulation mode, right, building wealth, maximizing contributions. hopefully watching your balances grow significantly over time, but retirement really kind of flips that script, doesn’t it? I mean, suddenly it’s not about how much you earn, but really how wisely you’re going to draw those savings down, and I think it’s deeply rooted. This idea of saving, saving, saving is deeply rooted in what I would call the scarcity mindset, right, and that’s just this idea of thinking what if I don’t have enough, right, and I think spending and retirement requires what I would call an abundance mindset, right, if you’ve heard me talk about one of the books that I co-authored. The name of the book is called Retire Abundantly, and to me that’s why retirement is about an abundance mindset, which is this idea of I’ve saved enough to actually allow myself to enjoy life, right? And I think so often people get in stuck in that scarcity mindset of just save, save, save, save, save, mostly because they don’t actually know whether or not they’re going to be okay, and so much of what we do in our practice, believe it or not, is not all about the investment management or, you know, picking the right combination of stocks and bonds and mutual funds, so much of what we do is helping people just create a written plan that they can rely on when everything else doesn’t make sense, and so, so much of what we do is just rooted in simplicity and making sure that people feel confident in what they’re doing, and I think once you have that confidence, it actually empowers you to shift from saving to spending, from scarcity to abundance.
Speaker 2 12:48
I mean, it’s almost like having that plan gives you permission, right? That’s exactly got it. You’ve got it. So, go and enjoy it again. Having the plan, very, very important. So, again, you know, how do we go from just thinking along the lines of surviving, but we want to thrive in retirement, so how do retirees, John, how do they calculate their true income needs, including the fun stuff? I mean, we want the fun stuff, we think about the go-go years, we want to have fun, but we want to include the overall plan too.
Speaker 3 13:18
Yeah, I mean, building out a spending plan or calculating a monthly income target is extremely imperative to putting together a successful plan. You want to obviously build out your, you know, your needs versus your wants. You know, you want to make sure that your income that’s providing for your needs is predictable, right? You don’t want to have to worry about what the market’s doing to keep the lights on to pay for the groceries, but I would also argue that the fun thing should also not be uncertain, right? You don’t want to have to worry about what the market’s doing to go on that big vacation. You don’t want to have to worry about what the market’s doing when it comes to providing a gift to your grandchildren. So, if we can actually produce all of your income for the things you want and you need consistently with predictability that will be ideal, that’s what we attempt to do. You know, I think that you have to include your travel, your hobbies, gifting, health care costs. Healthcare costs are huge in retirement. Now build all of that together to get to your monthly income target, and then get to work on how you’re actually going to meet that expense, right? As Prashant mentioned, having that written plan on where you’re going to draw your income, how you’re going to pay those bills, how you’re going to account for inflation, all of that is extremely impactful.
Speaker 2 14:28
Well, we talked about, and Prashant, you mentioned it in your first comments about just not knowing, and you know you’re almost like giving yourself permission to go and spend your money in retirement, so have that plan, but you also need to review, you kind of need to know what you do have. I mean, it’s almost like you go to the swimming pool, you walk down to the diving pool. I’m going to check to make sure there’s water in the pool. Same thing goes for retirement, I need to make sure I have that revenue there, and what the sources are.
Speaker 1 14:54
It’s about inventorying your income sources, just like you’re saying, right, so. What if there was a way to aggregate all your income sources in a clear cut manner, where you could look at one sheet of paper and know what your income was projected to look like each and every year for the rest of your life after accounting for things like inflation and taxes? How much comfort might that give you, if you could look at one sheet of paper, know what your projected social security is, what your pension is. If you have an annuity that’s giving you guaranteed income for life, rental income, dividends, interest. My opinion is that in order to truly feel confident about your retirement outcome, you have to understand your retirement income, and you should be able to look at one sheet of paper and know exactly what that projects to look like, and that’s so much of creating that roadmap, that’s what we’re helping people with every single day, and believe it or not, it’s so incredibly simple, it’s so incredibly simple, people think financial planning is only for the ultra wealthy, and estate planning is only for the ultra wealthy. It’s not the case. Most of the people that we visit with sit in a range where they’ve spent their entire lifetime saving, and they’re what I would call the millionaire next door, right? They’re the person that worked really hard for 30 or 40 years, saved three quarters of a million, 1,000,002 million, $3 million and are just trying to figure out how to make that last the rest of their lifetime, and so it’s all about creating a roadmap that’s incredibly simple, and inventory, invent, creating inventory of your income sources is the very first step in creating that retirement plan, in my opinion.
Speaker 2 16:39
Tell you, so, so important to be ready, and Prashant, you hit on something. I think there are a lot of people out there that have saved really, really well, but they just don’t feel like they have enough to worry about, or you know, they fit into a category where they need to plan. Folks, this is your retirement, you’ve saved, you’ve done really well. Make sure that money is working for you to the best of its ability, have a plan again. Opportunity, get on the calendar with Elite Income Advisors, see how you’re doing. Are you ready for retirement? These are complimentary appointments. Just call 800-653-8404 That’s 800-653-8404 Well, I’ve heard the word inflation several times already on the show today, if you watch any news, any headlines, you’re going to see the inflation word pop up quite a bit. And I guess to John, this is for you. How big a threat is it? The big word inflation to your retirement income, and what can people do about
Speaker 3 17:36
it? Yeah, I mean, I think inflation is probably one of the biggest eroders of assets over time, in terms of purchasing power, I would say roughly around what, two and a half, 3% is the target, but if you look at a 3% inflation rate over a period of 24 years, expenses would have doubled in that period of time, right, so we have to be mindful of ways to grow our money to provide income that will end up hedging that inflation, right. So we’re big on bucketing, you know. We want to be able to create stable income, create a predictable income, but we also want to be able to invest your money, or some of your money, in the stock market to provide higher rates of return to outpace inflation, if possible, provide you with that hedge moving forward, if so possible, right. So, there’s different investment solutions, there’s different bucketing strategies that we put together to ensure that you’re not only receiving the income that you need, but you’re growing your assets in a meaningful way to outplace the inflation, inflationary pressures that we see day in and day out. Now, some people will just rely on their cost of living adjustment from Social Security, but we would argue that that cost of living adjustment does not actually equal the increase to cost of goods and services in the economy, so we have to be mindful of that, build in our own inflation hedge within our assets through equity exposure. I think that’s the best way you’re going to be able to do that, but again, you don’t want all of your assets aligned into the stock market, because you have to create income from a stable bucket, if possible, so that’s where coming in, talking through your own personalized bucketing strategy, can really be impactful to ensure that you’re not putting your income needs at risk in the market, but you’re also providing yourself growth opportunities moving forward.
Speaker 2 19:13
Tell you, we are talking strategies right now, and again, we want to – we don’t just want to survive, we want to thrive in retirement, so things that we can do, things we want to make sure we’re aware of, and we don’t want to overlook. Prashant, this next one hits close to home for you. You talk about it quite often. Healthcare costs, especially hidden ones, it’s got to factor into retirement planning, because it’s coming for all of us.
Speaker 1 19:36
Fidelity, and we’ve talked about this on the show, I feel like for years now, because Fidelity does this study each and every year, but Fidelity estimates in their latest, like, cost of care study, or whatever they call it, 65 year old couple retiring today will need roughly $315,000 for health care expenses in retirement, but. Morgan, that does not include long-term care, right? And I’ve, for years on this show, shared my experience that our family has been through with my mom and her dementia diagnosis, and it’s estimated that we spent anywhere from 800,000 to a million dollars out of pocket just on her long-term care expenses over an eight or nine year period of time, and so the question that comes to the forefront inevitably is, if that happens to you, how are you going to deal with it one way or another. There’s always a plan. The plan A is you pay out of pocket until you run out of money, and plan B is you get proactive about it, and you put strategies in place that help protect your money, create additional income, hopefully grow your assets, like John talked about, to be able to support you during those times of higher expenditures, specifically when it comes to health care, folks, if you are not thinking about health care and the out of pocket expense. If you are not properly thinking about the tax ramification of your investments, I think you are really missing the mark. And John, maybe you can talk about that. I think we have like 30 seconds here before we got to get to the break here. But what tax pitfalls do retirees need to actually avoid when converting assets into income?
Speaker 3 21:27
Yeah, I think you have to pay attention to what sources of assets you have, or what types of taxable assets you have when taking income, what your expected taxes are in the future versus now, what the tax code is. So, looking at strategic distributions from your pre-tax retirement accounts and tax-favorable years, such as we’re in currently with this extended tax cuts and jobs act that we’re in. So, trying to find opportunities to convert money into a Roth IRA, take strategic distributions will prevent you from having large required minimum distributions down the road when you might not expect it. You can plan when to take that tax and pay it, rather than be at the mercy of the federal government to whatever your account is worth, and whatever the tax bracket is, when you get to RMD age.
Speaker 1 22:10
Folks, you don’t have to be a financial genius to retire successfully, but you do need a plan, whether you’re five years away or if you’re already retired. A simple retirement readiness review can help shift help you shift from saving to a confident intentional spending mode. Phone number 800-653-8404 For that complimentary visit with our team of retirement specialists here at Elite Income Advisors, again 800-653-8404 Call, have your calendar in front of you, and book that no cost, no obligation visit with our team today.
Speaker 2 22:45
We will be right back. We’ve got more Retire Smart Maryland radio right after the break, you welcome back into Retire Smart Maryland radio. Your hosts are Prashant Sabapathi and John DeFeo, and you can find them at Elite Income Advisors. They’re headquartered in Ellicott City, and they’ve placed a satellite office in Annapolis for your convenience. They’re independent fiduciaries, helping their clients get ready for retirement. I’m Morgan Patrick. Always a pleasure jumping on talk in retirement. The importance of having a plan, being prepared, and again, we offer up complimentary appointments during the course of this show. We’ll tell you more about that as we move through this portion of the show. So you know, somebody once said that love conquers all, but if that’s true, then why is divorce so popular these days? Here’s a fact for you: divorce rates for seniors have tripled since 1990 and that’s according to research from Bowling Green State University. And we can’t tell you why, but we can talk about, you know, how this is going to impact your money. In fact, we have a clip from the Diary of CEO podcast, and again, Kevin O’Leary was a guest on this podcast. You recognize him from Shark Tank, and he wants you to know how badly that divorce can jack up your cash. So, listen to this.
Speaker 4 24:17
I’ve heard you say before that the most important financial decision you’ll ever make is who you’ll marry.
Speaker 5 24:22
Yes, because think of the geometric loss of wealth every time you get divorced, you pay the woman that you divorced, or man, and you pay the government a third, often through capital gains and liquidation, because you can’t separate all the assets without liquidating them, sometimes. So, you’ve got the government sitting there, you’ve got the other spouse sitting there. This is the stupidest thing you can ever do. It took your whole life to create this nest egg, could be your 45 or whatever, you’ve got a comfortable life, and all of a sudden you don’t like your wife or husband. Think about that for a while. Well, because you are going to wipe out up to two thirds of your wealth, you better really like somebody else a lot.
Speaker 2 25:08
All right, that’s Kevin O’Leary, aka mr. Wonderful Shark Tank, appearing on a podcast. And I guess I’m just going to ask both of you to comment. So, the big question is, you know, what should you do if your marriage is on the rocks and you want to protect your assets. Do you guys, John, you want to start with this
Speaker 3 25:26
one? Yeah, I mean, well, first of all, I think he left out a key player in the money grab, and that’s the attorneys, right? There’s a lot of costs that go to lawyers to go through a divorce, especially if it’s a contested divorce. You know, you can also, you know, if you’re younger in a divorce, you have, you know, child support, if you have young children, there’s alimony that can be paid moving forward. So, I think really what Kevin Leary said is, do your best to try and, and marry the person that you are going to stay with. You know, marriage is a covenant, it’s supposed to be something that’s permanent. You know, unfortunately, things happen and people split up, but going into situations, being smart, having the right tools in place, especially if you have a high net worth. I think is very important. I think it’s you got to take the steps ahead of time, because once you’re in that situation, there’s not much you can do. I mean, you’ve been married to somebody for 3040 years, you’ve been providing income, you have a life together, they’re entitled to half your stuff, whether you like it or not. If you don’t have some of these strategies we’re going to talk about in place.
Speaker 2 26:23
All right. Well, Prashant, any quick thoughts from you before we dive in on some examples?
Speaker 1 26:28
I think it applies to everybody, right? I think this is not unique to the ultra wealthy. I think if you’re going to spend your working life accumulating, you better be with the right person who’s not just going to help you maximize it together, but also make sure that it doesn’t get jeopardized down the road. So, I totally agree with that. And look, I think money is the number one reason for divorce in America today, so I think the more aligned you can be on the topic of money, the better things are going to be for you, and I think a lot of that comes in on the front side of it, right? Just making sure that you are aligned, and I know you know Dave Ramsey talks a lot about this type of thing as well, so you know that’s that’s my only comment in this. Yeah,
Speaker 2 27:21
I mean, we talk, we talk about planning all the time, and you know, planning possibly for, you know, I always look at the prenup as, I mean, if you’re not really in it, I mean, people are going to throw prenup in your face. The first example we have for you is Steven Spielberg, and it’s the napkin prenup. And John, you’ve got some stats for
Speaker 3 27:40
us. Yeah, first of all, big Jurassic Park fan, so this breaks my heart to be talking about this. My son, also, his second birthday is this Saturday, and its theme is the two wrecks. He’s a huge dinosaur fan, so great. That’s all. Breaks my heart to have to talk about this. But Steven Spielberg, unfortunately, divorced with his wife, Amy, back in 1989 and the prenup was written on a napkin. Anybody that’s unfamiliar with the prem up, it’s a prenuptial agreement where you’re effectively deciding on the division of assets and what’s out of the purview of your spouse prior to the marriage, so that when you do divorce, I mean, it’s kind of setting yourself up for that. There is no contestation on the asset. So he wrote it on a napkin, and unfortunately, it was later ruled invalid by the courts, so he ended up paying pretty close to $100 million to his ex-spouse in order to pay her out for that divorce. So that’s a pretty hefty sum of money. Again, I don’t even know what the attorney’s fees would have cost for that, but it’s a great example of how not having the proper plan in place can do it, can really be devastating. I mean, $100 million is not a little bit of money to anybody, even Steven Spielberg. So, unfortunate that happened, but you have to be prepared.
Speaker 2 28:50
These are these are some extreme examples, and some pretty well-known names. This next one, Prashant Rupert Murdoch, trust the trusts.
Speaker 1 29:00
Yeah, you know, trusts are an extremely valuable protection tool, both in divorce and taxes, is a huge part of potentially using a trust. So, when you look at the case of Rupert Murdoch, multiple divorces here, and a lot of Rupert Murdoch’s fortune was largely tied up in family trusts and corporate entities, which are ultimately structured to regain control within the family and shield against divorce asset division, and so he did end up paying large settlements. Much of the core business and long-term family wealth actually remained protected, and so the lesson that we can take away there is that having trusts, if they’re structured correctly, and well-structured ownership stakes in businesses can isolate resources from marital claims, and so that’s why having a dream team, as I call it, is an important part of. This right, it’s not enough to just have a financial plan. You should also have an estate plan, a legal plan, a tax plan that works in a coordinated and comprehensive way, so that you’re well protected if any scenario comes up, not just divorce, which is what we’re talking about, but you know, if you have a health care scenario or a tax scenario come up, you want to make sure that your assets are positioned properly.
Speaker 2 30:21
We are talking about, you know, if things go south once you are in retirement, maybe divorce does happen. These are some examples, and we’re going to go to friends in low places for this next one. John, and that’s Garth Brooks. Timing is everything,
Speaker 3 30:36
and the thunder rolls, right? Yeah, no, Garth Brooks is great as well. So, unfortunately, he divorced with his wife, Sandy, back in 2001 And some people might have thought this was a coincidence, some maybe thought it was intentional, but he actually paused his music career to focus on family right around when that divorce was going on, so it limited his earnings exposure during the divorce window, which he still paid like $125 million not an insignificant amount of money, but a lot of portion of his future touring and revenue came after the settlement. So it’s ironic he probably was focusing on family because they were looking at going through a divorce, and at the end of the day he didn’t tour, a lot of that income wasn’t coming in, so he was able to save that down the road. I don’t know that I would suggest this for everybody. If you’re going through a divorce, quit your job, so that you don’t have to pay as much money. That might not be the solution, but you know it’s something that you could look at if you needed to. I think this is just pointing out that what you do during the divorce process can certainly impact the payout. I
Speaker 1 31:43
think divorce, John, later in life, divorce can feel like an emotional and financial earthquake. And you know, we’ve dealt with a lot of clients that have marriages that last decades, and then for whatever reason they end up splitting up. But I think the important thing to remember is there are ways to protect yourself, whether you’re happily married or not. The smart move is always going to be planning ahead. So, when you come in, we’ll talk about asset protection as a part of your strategy session to help you explore things like trusts, prenups, account titling, and more, so that you can secure what you’ve built, no matter what happens. It starts with that phone call. It’s 800-653-8404 That’s 800-653-8404 You dial that number, you set up that complimentary appointment. You’ll get to visit with our team, including myself, John Connor, Nick, Dan, Ozzie, and when you come in, we’ll address your concerns by helping you put together that concrete written plan.
Speaker 2 32:48
It’s important, folks, be ready for it. A lot of things can come at you as you are planning for retirement, as you are in retirement, working with professionals, mapping this out again. It gives you confidence and peace of mind as you head towards your retirement. Again, complimentary appointment available: 800-653-8404 That’s 800-653-8404 Again, leave the checkbook at home. You’re not obligated to become a client, and they’re not obligated to take you as a client. This is a get to know you. 800-653-8404 When we return on Retire Smart Maryland Radio, it’s scenario time. They happen all over the country. We’ve gathered them. We’ll see what the guys do with them coming up next. To retire Smart Maryland radio, we are back. Final segment of the program. It is scenarios. Your hosts are Prashant Sabapathi and John DeFeo of Elite Income Advisors, headquartered Ellicott City Satellite Office in Annapolis. For your convenience, they’re independent fiduciaries helping their clients get ready for their retirement. I’m Morgan Patrick. My pleasure to jump on with the advisors and just talk about the importance of planning, the importance of being ready, the importance of not showing up with just your portfolio. Make sure you have a plan. We’ll give you an opportunity to get on their calendar here in just a little bit, but first, one of my favorite segments scenarios. These happen all over the country. We’ve gathered a few, a handful, and we’ll see what the advisors will do. John, you are up first. Here it is. They’ve got around 620,000 saved in the 401 k, but they’re unsure whether to start pulling from it once they retire at 64 or hold off to avoid bumping up their tax bracket. They also have a small pension kicking in at 65 How do you help someone time 401 k withdrawals to avoid unnecessary taxes?
Speaker 3 34:53
Interesting. I probably need a little more context for this one, but I think number one, do they need income if they. Retire. This is their only source of income. I think that’s pretty cut and dry. They’re going to have to find a way to start taking some money out and deal with the taxes, but if their income and retirement could be solved or sustained through social security, maybe that small pension, and they don’t need the 401 k assets for income, then there’s certainly a conversation to have. And we have these conversations on a daily basis with our clients, we are in a very favorable tax environment right now. We had the Tax Cuts and Jobs Act back in 2017 reduced the marginal brackets to the third most favorable rate in history, right, and we just saw the big beautiful bill extend these cuts indefinitely. So we now have some more time to do things like Roth conversions, like strategic distributions from retirement accounts. These things will help us take advantage of the current tax code that we’re in, that again is quite favorable, and prevent taxes being paid down the road at an unknown rate. You know, our theory is that at some point in time, you know, with the federal deficit continuing to increase, tax rates will have to be higher. It might be 510, 15 years down the road, but you want to wait to see what happens at that period of time. If we know that we’re in a very favorable environment, so it really depends on your situation. Now, there’s a lot that goes into it. I wouldn’t say it’s a cookie cutter, you know, way to recommend it to somebody, unfortunately, but if we have some more information, we identify what your income needs are, what your tax bracket is, you know, what your legacy goals are. We can help drill into a distribution strategy or a conversion strategy to reduce the taxes that you might have to pay down the road in a more favorable environment, if that makes sense.
Speaker 2 36:37
You know, and just a word for our listeners, okay? You’re hearing these scenarios, and you’re thinking, you know what? You know, I need to put my scenario down on paper. Do that right? Write your scenario down, grab one of the appointments, come in, and talk about your scenario. It’s complimentary. These appointments, again, you’re leaving the checkbook at home. You’re going to have a pretty good idea of where you sit when it comes to retirement, but again, listen up. We’ll give those appointments out here in just a second. All right. Next scenario, Prashant to you, 60 years old, recently retired, so they went early and have most of their savings in a traditional IRA. They’re considering a Roth conversion, but don’t want to get hit with the big tax bill all at once. What is a smart way to approach Roth conversions over time, especially before the RMDs start, and obviously they’ve got some time here.
Speaker 1 37:26
Yeah, if not wanting to pay all the taxes in one big bill is a concern, you have to be really careful with how you convert to a Roth. I think we can all probably agree that having tax-free money for the future is an extremely important part of the planning process, if you can get to that point, but with that being said, let’s talk about some of the downstream kind of unintended consequences of doing a Roth conversion. To me, there’s a couple things to look at. Number one is the potential for having higher Medicare premiums in the future, and that’s going to be the Irma surcharge, for those you don’t know, Irma is income-related monthly adjustment amount, and Irma is a surcharge based on your income that you pay additional for Medicare, and so if you convert too much to a Roth, it could actually cost your health care benefits through Medicare to cost you hundreds, maybe even 1000s more per year in additional Medicare premiums, so that’s number one. Number two is increased tax on your Social Security benefits. Believe it or not, the higher your income is, the more of your Social Security potentially becomes taxable. That’s the second component. Number three is having a temporary spike in your tax bracket, right. And then number four is, what if you have a kid that’s in college and you’re currently getting financial aid, or you’re getting tax credits, you might lose some of those tax credits or benefits as a result of your Roth conversion. So, it’s not quite as simple as just saying I want to convert to a Roth, and thus we should do so. You have to evaluate probably five or six downstream items that are going to be impacted as a result of the Roth conversion. I was just sitting with a brand new client, we actually put his entire tax return into our software, and what we found is that we could convert for this gentleman, we could convert $186,000 $186,000 to a Roth IRA without an increase in his increase in his effective tax rate moving forward, but our software and our tool was able to model this out with specificity for him, so that he can feel like he has real control over what his tax situation is going to look like folks, if you are not doing Roth conversions, or at least evaluating whether or not a Roth conversion is the right thing for you, or if your advisor has not demonstrated competence in being able to explain to you why a Roth conversion could be a good thing for you. I think you have to evaluate whether or not you’re actually working. With a retirement specialist, okay, not all financial advisors are retirement specialists, okay, but most retirement specialists are going to be qualified retirement advisors. You have to start to ask your question, am I working with the right specialist? The closer I get to retire,
Speaker 2 40:17
well, and just to continue with that, Prashant, we talk about it all the time, you know, the tax window has been expanded with this big, beautiful bill, so it’s going to be a little bit longer. You’ve got a little bit more time. We don’t want you to procrastinate, but if you’re not thinking about, you know, taking advantage of this opportunity when taxes are on sale and thinking about Roth conversions, you’re going to miss the boat.
Speaker 1 40:38
That’s exactly right. I mean, if you think about what was scheduled to happen had this bill not passed January one of 2026 you would have seen marginal income tax rates get a heck of a lot less favorable. Now they’re now permanent, but when it comes to government, what is permanent? It’s permanent until someone comes in and replaces it, but at the very least it looks like we have a three year opportunity here to spread some of that tax liability out, whereas previously, by the time as of this hearing, we might only have five months, but now that this bill is passed, we’ve added three years to that, and so why are we not taking every bit of the next three years to maximize and optimize our opportunity to reduce our future taxes. It very well may be the last opportunity that we all ever see with a tax environment that is this favorable from the marginal standpoint. If that’s the case, you don’t want to be five or 10 years down the road regretting that you didn’t take advantage of these low tax rates, you might only have a couple years left. You have to put a comprehensive tax plan in place to minimize what you’re earning, what you’re owing to the IRS over the next couple years. Here,
Speaker 2 41:53
you can grab an appointment at any time. Talk about that Roth conversion aspect: 800-653-8404 That’s 800-653-8404 again. Again, a complimentary appointment. Leave the checkbook at home. 800-653-8404 That’ll get you in touch with Elite Income Advisors. All right, we’ll hit this one really quick. Final scenario, John, to you and Prashant, you can jump in as well. They still owe about 110,000 on the mortgage with nine years left at 3.2% They have the cash to pay it off, but they’re wondering if it’s smarter to keep the low rate loan and invest the money instead. What factors help determine whether to pay off the mortgage early or keep it and invest
Speaker 3 42:36
it? I think just a mathematical standpoint, you know, if you’re able to get a higher tax equivalent yield on safe money at the bank, then it probably makes sense to continue making the mortgage payments, collect that higher rate of interest at the bank, and go about it that way, right? So, right now, interest rates at the bank are pretty decent, you know, so you can probably make more than 3.2% in most scenarios with different CDs, money market accounts, but we don’t know for how long, right? There’s talks of the Fed cutting rates, so if that rate were to drop down and you’re now paying more in interest to the mortgage than you’re receiving on safe money at the bank, then at that point it probably makes sense to start paying that mortgage down a little bit quicker, but there’s also a psychological component, a lot of folks don’t like to enter retirement with that mortgage with that payment hanging over their head, so if that is more important to you, that peace of mind of not having the mortgage, then we might go that direction. So, there will be a conversation of the mathematical equation, but there also be a conversation of the psychological effect.
Speaker 1 43:36
And John, I think to piggyback on that, what leads to that psychological comfort, right? If you, if you look at what that’s actually driven by, what that emotion of comfort or uncertainty is driven by, I’d argue it’s all driven by your income, right? Like, it’s all about the income, that’s what we say here at Elite Income Advisors, is the higher your income the better your outcome when you get to retirement. Listen, having debt, especially low interest debt, like mortgage debt, only becomes a real issue in retirement in the absence of an income to always be able to service that debt, meaning if you had certainty that the $1,500 a month that you needed to pay your mortgage every month, if you had certainty that that 1500 would always be there for you, no matter what, regardless of what’s going on politically or in the stock market, isn’t that going to give you a little bit more comfort about carrying that debt into retirement? I think absolutely, and so everything comes back to your income. It’s all about the income. The higher your income is, the better the outcome typically ends up being in retirement. If you’re wondering about Roth conversions, debt payoff strategies, how much risk is too much risk when you get close to retirement, folks do. Not guess, let’s run the numbers together. Let’s put together that written retirement plan. That’s ultimately what is going to give you comfort, is having that customized plan based on your exact situation, so you can stop worrying and start enjoying that phone number. Folks, it’s 800-653-8404 It’s a last opportunity to get in for today’s program. 800-653-8404 You’ll dial that number, you’ll schedule a complimentary no-cost, no obligation retirement readiness check with our team at Elite Income Advisors. You come into the office, let’s talk specifically about your concerns and put together a written retirement plan that helps you address them concretely. Again, last opportunity for today’s show: 800-653-8404
Speaker 2 45:52
Another edition of Retire Smart, Maryland Radio in the books for Prashant Sabapathi and John DeFeo. I’m Morgan Patrick. We’ll see you on the radio next week, you
Speaker 6 46:08
Annuity guarantees are subject to claims paying ability of the issuing insurance company. If you withdraw money from or surrender your contract within a certain period of time after investing, the insurance company may assess or surrender charge. Withdrawals may be subject to tax penalties and income taxes. Persons selling annuities and other insurance products receive compensation for these transactions. Products are subject to fees and additional expenses. Any comments regarding safe and secure investments and guaranteed income streams refer only to the fixed insurance products. They do not refer in any way to securities or investment advisory products. Information presented on this program is delimited factual and up to date, but we do not guarantee its accuracy, and it should not be regarded as complete analysis of the subjects discussed. Discussion should not be construed as an offer to buy or sell, or a solicitation of an offer to buy or sell the investments mentioned. Professional advisors should be consulted before implementing any of the strategies discussed. Investments involve varying degrees of risk, and there can be no assurance that any specific investment or strategy will be suitable or profitable for a client’s portfolio. Investment advisory services offered through Elite Income Advisors Incorporated, a registered investment advisor located in Ellicott City, Maryland. The firm only conducts business in states and jurisdictions in which they are properly registered or exempt from registration requirements. Registration is not an endorsement of the firm by securities regulators, and does not mean the advisors achieve a specific level of skill or ability. Content should not be viewed as personalized financial advice. Insurance and annuity products are sold separately through Retirement Planning Services Incorporated. Neither firm is affiliated with or endorsed by the Social Security Administration or the IRS. Social Security, Medicare, pension, and tax rules are subject to change at any time. Insurance and annuity products are sold separately through Retirement Planning Services Incorporated. President Ozer Culhagil, Prashant Sabapathi, and Jonathan DeFeo received commissions for the sale of insurance products as insurance agents for Retired Planning Services Incorporated. Insurance and annuity product guarantees are subject to the financial strength and claims payability of the issuing insurance company. Morgan Patrick is not a client of or affiliated with Elite Income Advisors, however, he has a financial incentive for motor services because he was compensated for his work on Retirement Smart Maryland. The program is paid production of Elite Income Advisors.
