Speaker 1 0:01
A retirement isn’t one plan, it’s five. We’re breaking down the five pillars of retirement: income, investments, taxes, health care, and estate planning to ensure your strategy is resilient, not just lucky. All of this coming up on Retire Smart Maryland Radio.
Announcer 0:21
Welcome in. to Retire Smart Maryland Radio with Prashant Sabapathi. Welcome into Retire Smart Maryland
Speaker 2 0:30
Radio, your host John DeFeo. You can find John at Elite Income Advisors, the power behind this program. They’re headquartered at Ellicott City and that satellite office located for your convenience in Annapolis, and John is independent fiduciary, huge team working together at Elite Income Advisors, Prashant Sabapathi, Ozzy, the whole crew. It’s all about getting Maryland ready for retirement. I’m Morgan Patrick. An absolute pleasure to jump on and just talk about these different topics. You’re going to have questions about your own retirement situation, it look, we understand it can be stressful, but have a plan, have a conversation, at least. Don’t just sit on a portfolio and hope it goes well in retirement. Make sure you’re structuring that retirement in the form of your retirement plan. We’ll give you an opportunity to get on the calendar with Elite Income Advisors, no cost, no obligation. Stay tuned for that. So, before we get into topic number one, I always do this. John, how was the week?
Speaker 1 1:26
It’s been great. Yeah, we’re moving in into the fall months. Daylight savings ends here shortly. So, you know, very excited about what’s coming. You know, again, we talk about this a lot. This is our tax planning season in the financial advisory industry, looking at income throughout the year, trying to make strategic tax moves, helping folks, you know, figure out their final expenses for the year, budgeting, you know, all of that by the end of the year. So we’ve been very busy, also bringing in a lot of new clients, you know, we’ve seen a lot of federal workers that have either decided to come on board because of the shutdown and making retirement early, or maybe they took one of the deferred retirement programs. So, we’ve had a lot of federal workers coming in talking about retirement plans. So, it’s been a great week, a busy week, but typically when it’s busy, it’s great, right?
Speaker 2 2:15
Yeah, we are here to help, and it’s all about planning, and it is encouraging. A lot more people are jumping on the calendar, a lot more people are concerned about what, what lies ahead for them. It is your retirement. Make sure you have a plan. So, we’ve all heard that people spend more time, get this, more time planning a two week vacation than they do planning 30 years plus of retirement. So, retirement today, think about it, looks very different from just a generation ago. People are living longer, you’re going to be facing higher health care costs, you’re going to have to deal with a market that is the market, it can be volatile. So today we wanted to kind of focus in on the five areas that truly matter to make sure your wealth supports your overall retirement vision, so John, first one up is the income pillar, distributing wealth efficiently. It is vital.
Speaker 1 3:08
Oh, absolutely. And this is one of the first things we start with when building out a financial plan. When it comes to success in retirement, isn’t it all about the income that you can bring in to fulfill the expenses and the lifestyle that you want, so there’s a lot that goes into that, right. When do I take social security? What’s the optimal point to turn that benefit on? If I have a pension, you know what type of survivorship option should I take if one is offered? How would that affect my spouse if I pass away in terms of income? How does it affect my current cash flow? Do I have to start pulling money out of my investment accounts? Right, and what do I pull from first? Is it the pretax 401 k or tsp or ira? Is it the Roth IRA? Is that the non-retirement brokerage account? Right, there are so many decisions to be made when it comes to supplementing income in retirement, so having a plan that not only takes into consideration, you know, the tax implications of the distributions, the longevity of your assets, you also have to take into consideration into consideration things like inflation, right, by ensuring that you’re increasing your cash flow every year. So, there are a lot of variables that come into planning the income in retirement, and that’s one of the things that we do best in our office is help map out exactly where your income is coming from throughout your lifetime to ensure that you have that peace of mind.
Speaker 2 4:29
Yeah, we’re hitting the five pillars, and you really need to have these, and again, it’s about supporting your retirement, the income pillar. Now we get to, yeah, your partner, your partner in retirement, it’s taxes, the IRS, the tax bill, are controlling what is going to be your future tax bill.
Speaker 1 4:46
Right? I mean, as Ed Slott puts it, it’s not what you make, it’s what you keep after taxes that matters the most. You know, I would say that the majority of people that come into our office have been told the best place to save your money while you were working was in that pre. Retax retirement plan, the 401 K, the TSP, the 403 B, because the idea was, while you were working, you were in your peak earning years, your tax rate was as high as it’s going to be, and when you get into retirement, you should be in a lower tax bracket, and you can take it out at that point, right? So that was the idea. Now we have seen a completely different tax environment today than we did, you know, 1015 years ago. We’re in the third most favorable marginal income tax bracket in history from the Tax Cuts and Jobs Act, that’s been extended by the big beautiful bill. So now a lot of people have tax problems, they have these large pre-tax, we call them tax-infested retirement plans that they have to figure out how to distribute efficiently, minimizing taxes for themselves, minimizing taxes for them down the road, and minimizing taxes for their beneficiaries. So, there are a lot of things that we can implement, like Roth conversions, qualified charitable distributions, strategic distributions to help minimize what you actually have to pay to Uncle Sam, but if you don’t have some sort of tax planning equation in your financial plan, you’re probably forking over more money to the federal and state governments than you absolutely have to. So, if that’s a concern to you, please come in, see us. That’s something that we help clients with on a regular basis.
Speaker 2 6:13
Yeah, giving you an opportunity to get on the calendar with Elite Income Advisors. The appointments, we’ve got 10 of them. Call 800-653-8404 if you’ve got questions about your own situation, again, the 10 appointments are complimentary. That means no cost, no obligation. 800-653-8404 So, income pillar check, tax pillar check, investment pillar, building resilience to the volatility that’s out there,
Speaker 1 6:37
right? And part of retirement involves investing, right. We don’t have interest rates like we did back in the 80s, where you could make 14% bring in 140 grand off a million dollars in retirement safely, right. And retirees are pretty much forced to take risk at this point in time to generate a rate of return that’s going to be meaningful, that will outpace inflation, build their wealth, allow them to take distributions, but at the same time, you don’t want to take too much risk, right? If you see a 30% portfolio drop in the first couple of years in retirement, that could significantly derail the assets that you have over time, right? The sequence of returns that you have in the first four to five years in retirement are the most important and can make or break your case. So, having the right asset allocation, having the right amount of risk in the market with your financial plan is imperative for that success. We’re big on the bucketing approach, you know, ensuring that you have objectives through each bucket, risk for growth, security for income, and an operational bucket for those liquid events that come up regularly. So, having some diversification is very important in the plan.
Speaker 2 7:42
Talking about the five pillars, we’re going to get to the final two pillars coming up in our next segment, but right now we want to give you an opportunity to get on the calendar with the Elite Income Advisors, no cost, no obligation. John, walk us through what’s going to happen if they grab one of our 10.
Speaker 1 7:56
Yeah, you’re going to come in, we’re going to have a conversation, that’s all that it is. We want to figure out what’s important to you. What retirement looks like. Understand your financial plan. Figure out if we’re even the right fit to help you with your problems. If we find that we could be, we’ll put together a plan that identifies exactly where to pull your income from, how to navigate the tax challenges that are potentially inherent in your assets, how to potentially invest that money and protect the downside while you draw the income. We’ll help you draft up an estate plan. We’ll help you identify your long-term care and medical costs. Again, put together a full holistic plan for you. If it makes sense, we’re fine with the right fit.
Speaker 2 8:32
All right. We got 10 spots. Call now: 800-653-8404 There’s no cost. There’s no obligation. See if you’re on track for retirement. 800-653-8404 Get into our top 10. Outside of that, it’ll be a short wait list, but if you’re the first 10, you’re in this week. 800-653-8404 That’s 800-653-8404 We have three pillars down, two to go. That’s coming up next. You’re listening to Retire Smart Maryland Radio, you. Radio. Welcome back into Retire Smart Maryland Radio. Your host, Prashant Sabapathi and John DeFeo. You can find them both at Elite Income Advisors. They’re headquartered at Ellicott City, they’ve got a satellite office convenient for you in Annapolis as well. They are independent fiduciaries helping the area get ready for their retirement. So, important to have a plan, be proactive. We talk about it each and every week. I’m Morgan Patrick. A pleasure to jump on with the advisors and just have these discussions. You’re going to have questions about your own situation, we give you an opportunity to get on their calendar. These are complimentary appointments. We’ll tell you more about them as we move through the program. So we started off the program talking about guys, the pillars that are out there, and the ones that you really need to focus in on: the income pillar, the tax pillar, the investment pillar, and now we’re going. Shift gears and go to the healthcare pillar. Prashant, let’s just jump off and let’s start with you. I mean, planning for these hidden costs. I mean, a lot of people don’t understand what’s coming, and that is health care is going to be expensive, and that’s not including long-term care.
Speaker 3 10:16
Yeah, sorry about that. I missed the first segment here. We’re running to some technical difficulties, but I’ll tell you what. Our team stepped in and got me set right back up. So, yeah, you’re exactly right, Morgan. I think we’ve always talked for years about how the two traditionally biggest expenses that any retiree will ultimately face are going to be taxes and health care. I know John talked a little bit about tax in that first segment, but there was a Fidelity study that came out that showed that a 65 year old couple retiring today will need roughly $315,000 for health care expenses in retirement, which, by the way, does not include long term care, so if you think about all the times that you’ve seen people that had to deal with nursing homes and assisted livings, and I’ve shared for years on this show about the experience my family had with my mom with that type of thing. You’re talking about 10 to $12,000 a month on average that could be added on top of that $315,000 number, and so it’s important to remember that Medicare does not cover everything, and how you end up dealing with this is by making sure that you always have a reliable source of income that is in excess of what your monthly income needs are, so that you have buffer built in to deal with health care expenses. A great example is like, if you think you need $7,000 a month to retire, we always recommend increasing that target income by a good 15 to 20% to account for the potential for rising health care costs. So, if you needed $7,000 a month to retire, let’s go ahead and build a plan that allows you to have 8500 coming in, so that when health care costs go up, you have a means to be able to deal with it. So, healthcare pillar super important here, but it all comes back to your income. Make sure that you have enough income coming in on a guaranteed basis to live life the way that you want to, while building in the cost of health care.
Speaker 2 12:18
Retire Smart Maryland Radio, Prashant Sabapathi and John DeFeo joining us on the program, and again, it’s always about the importance of having a plan, talking about the pillars we’ve covered so far, the income pillar, the tax pillar, the investment pillar, and now the health care pillar, and we’ll close out this part of the discussion with the estate pillar, John, to you, just aligning your money and do it with meaning.
Speaker 1 12:42
Yes, state planning is something that’s overlooked a lot of times in terms of how to most efficiently transition your wealth to your beneficiaries, whether it’s your kids, your grandkids, the charity. It’s very important to have that in place, but I think even in addition to the transition of wealth, ensuring that you know while you’re alive and you know the decisions that are being made about your finances and well-being are also very important. People overlook power of attorneys, they overlook healthcare directives. You know, the power of attorney allows someone that you trust to take over and manage the finances. If you ever get to a point that you’re incapacitated and can’t make those decisions on your own, and the medical directive gives you the authority to tell the doctors exactly what to do if you get to a certain stage of health, so it’s not the courts that are deciding how to make that decision. So those are very important documents to have in place, in addition to the will, the trust, the things that allow the efficient transition of your money, and we encourage every one of our clients to have some sort of blueprint like this, so in our office, what we’re able to do is talk to you and identify what your goal is with how your money is going to be left to your heirs. We can help draft the framework, you know, as a certified financial planner. That was part of my training was how to draft estate plan framework, and then we have an estate planning attorney that we work very closely with to actually draft the documents and create the estate plan, so it’s a very important part of the planning process, and it’s pretty crazy how many people overlook this step.
Speaker 3 14:11
John, I wanted to ask you a question, because the way that you just outlined that, I think it brings to the forefront one of the biggest myths associated with estate planning. I mean, you just said that it’s the transfer of anyone’s money to whoever they want it to go to when they’re gone, so this is not a problem that is exclusive to those that are just ultra wealthy, right? So, when you come to estate planning, based on what you just said, and I would agree with you. It doesn’t sound like you’re targeting only people that have millions and millions of dollars when talking about the importance of putting together an estate plan. Can you expand on that a little bit? How important it is, even if maybe you only have half a million or a quarter of a million saved, how it’s just as important. Important, as if you had had two or $3 million saved. Can you talk about that a little bit?
Speaker 1 15:05
Oh, yeah, absolutely. I mean, you think about it, 250 $500,000 that’s not a drop in the bucket, that can be somebody’s entire net worth. And ensuring that that can be transitioned and passed down efficiently, maximizing what their heirs gets is even more important. I would argue, I mean, if you have $500,000 and you want to ensure that your kids have a legacy from that, isn’t even more important to ensure that the money that goes to them is as high as possible. The minimum goes to the federal state governments, the maximum goes to them. You know, if you have three, 4, $5 million short, it’s important to ensure that efficient transition, but if you have less money, I would argue it’s even more important because you have even less that can go to your beneficiaries. So, the dollar amount, you know, I’d say is not as important. It’s important for every single person to have that plan in place.
Speaker 2 15:50
So, it’s so important to have the plan, being proactive. We’ve been talking about the pillars today, the five you really need to focus in on: the income pillar, the tax pillar, the investment pillar, health care, of course, and that estate planning piece, that pillar there to support what is going to be your retirement. Now, the opportunity to get on the calendar, if you’re thinking about it, you’re like, well, you know what, I hadn’t really thought about that pillar. No matter which pillar that is, you need to have it. Why not have the conversation? Complimentary appointment awaits 800-653-8404 You’re leaving the checkbook at home, and there’s no obligation to become a client, and they’re not obligated to take you as a client. This is to see if it’s a good fit. Call and grab one of our 10 appointments right now, 800-653-8404 All right, gentlemen, we’re going to transition into a tax conversation, and when you think about it, retirement, when we get into it, so many different levels of it, but the 2026 tax hike, well, it’s officially been canceled, at least for now, and we’re going to talk about that, that tax tsunami that we had been waiting on, and waiting on, and assuming that it was coming, that has passed. At least the threat for now has passed. So, let’s start with you, John. Tax rates and deductions, they are now permanent. And when I say permanent, as far as who is currently in control, the administration wise, that’s how permanent it is. It could change, but right now we get a little bit of a reprieve,
Speaker 1 17:22
and I appreciate that clarification, Morgan, because you wouldn’t believe how many people believe that it’s a permanent tax code, and you know, as we know, the federal government, you know, the purse is controlled by Congress, so they can come in and make changes to the tax code, write new bills, so this new tax code, or the extension of the 2017 tax cuts and jobs act that the big beautiful bill extended is now going to be, you know, at least for the next three years, right? At least through this next administration, we don’t know what would happen after that, so we have to pay attention. But what I would argue is, do we now have an extended opportunity to plan for the future? Are there strategies that we can put in place today in the third most favorable marginal income tax bracket in history to get in front of potential future tax hikes? We’re looking at things like Roth conversions, like tax loss harvesting, like strategic distributions, of course, keeping in mind things like Irma, your modified adjusted gross income, you know, all of these we have to take into consideration, but I think the big, beautiful bill has given us a fantastic opportunity to plan for our clients’ future when it comes to minimizing taxes from what we can pay today.
Speaker 2 18:33
I tell you, it’s so important to have all aspects of your planning and have those i’s dotted and those t’s crossed, and when it comes to taxes, I mean, really be on top of this, because you have a partner in retirement, it’s the IRS, you want to pay what you need to pay, but you don’t want to overpay, and certainly, if you’re not keeping track of this, if you do not have a tax plan within your retirement plan, there’s a danger of doing that, and the opportunity to come in and talk about your situation, you can do it with the elite income advisors. It’s a no-cost, no-obligation appointment. We’ll tell you about that as we move through this portion of the show. So, we talked about the tax rates and deductions that are now quote unquote permanent, at least for a little bit. Medicare Part B, the projected cost hike per shot to you.
Speaker 3 19:18
A lot of people don’t even take this into consideration when they’re planning retirement, is what is actually going to be the cost of health care, and I think one of the biggest misconceptions is very simply that when I get on Medicare, the cost of my health care and retirement should go down, because that’s what I thought I was paying all these taxes for all these years. The interesting thing is that Medicare Part B, which covers your outpatient insurance effectively, is a coinsurance program for which Medicare picks up 80% of the billed cost, and you, as the consumer of that insurance, pick up the other 20% so the projected 2026 Cost of Medicare Part B is $206.50 per month. Okay, now John mentioned Irma, which simply means that the higher your income is, the more you potentially have to pay for that Medicare Part B. So, as you increase your income through things like required minimum distributions or Roth conversions, or even just withdrawals from your retirement plans to satisfy your lifestyle. I think what you’re going to run into is higher projected health care costs. If you are not building in the tangible cost of insurance and health care into your financial plan, I think that you may be missing the mark. Furthermore, if you’re working with an advisor who has never talked to you about Irma, the income-related monthly adjustment amount, or the increase potentially in cost to your health care, I think that you have to consider whether or not you’re working with the right specialists. I know there’s more to get to, but John, we’re going to open up the phone lines here. Why don’t you tell the listeners a little bit more about what they can expect when they dial the phone number?
Speaker 1 21:10
Yeah, you know, if it makes sense for you to come into our office and meet with us again, it’s just a conversation. We’re going to discover more about your goals in retirement, more about what makes you important. Figure out if we’re a right fit to help you with the concerns that you have, and if we are, we’ll put together a plan that identifies exactly where you’re going to take your income from, how to minimize the taxes on those distributions, now and in the future. We’re going to build out an estate plan to help again efficiently transition your wealth, ensure you’re protected on all sides. We’ll walk through an investment management process to mitigate the risk on the downside as you’re drawing that income. Well, navigate the health care costs, keep your Medicare premiums low. If we can, can all of these things we’re talking about, we’re going to build into one holistic plan and deliver that to you and maintain it over time. Right? When we build this plan, it isn’t a set it and forget it. We have to maintain this over time, so that’s what you get if you come in and work with us.
Speaker 2 22:03
All right, we’ve got 10 appointments. Call this number right now, they’re complimentary: 800-653-8404 That’s 800-653-8404 Stop sitting on procrastination’s couch, get in here and start working on your plan, or get that second opinion. 800-653-8404 10 appointments, they’re going to go fast. 800-653-8404 We’ve got more Retire Smart Maryland Radio coming up. Retire Smart Maryland radio hosted by Prashant Sabapathi and John DeFeo. You can find them both at Elite Income Advisors. They’re headquartered at Ellicott City, and they’ve got a satellite office for your convenience in Annapolis. Check out the website, it’s a resource, Elite Income advisors.com Again, that’s Elite Income advisors.com Links to the TV show. Our shows, radio shows are in podcast form. Just really good information on retirement, background information on Prashant, John, and their entire team, which is growing Prashant real quickly before we dive into the topic. The fact that the firm is really adding, I mean, you’re adding new space, you’re adding advisors, that means there’s a real need for quality retirement planning. I think the response from our community has just been incredible over the past like 18
Speaker 3 23:30
months or so. We’ve grown significantly, not just in our client base, but in our team as well. So, you mentioned that we just put an extension on our headquarter office here in Ellicott City, big beautiful office. We added four new conference rooms. We added space for our growing team. We’ve brought on new advisors, just like John. John joined us, you know, almost a year ago now, and it’s been a great addition to add really qualified people like certified financial planners, just like John is tax advisors. We’ve added a Medicare advisor into our office as well. His name is Wes Lindquist. He does a great job advising clients on health care decisions, which are obviously incredibly important. Opened a new office in downtown Annapolis, which is pretty sweet as well. It’s a Class A space down there with three or four different boardrooms and meeting rooms to be able to visit with our Anne Arundel County-based clientele. So things are really booming over here at Elite Income, and most more than anything, I just have to say, thank you. I mean, we wouldn’t be able to do it without the trust and the support of our existing client base, which seems to be growing every single month, but that being said, when my business partner and I, Ozzie, started this whole thing over a decade ago, I don’t know that we ever dreamed that it would grow to this, but it’s certainly been a privilege getting to serve our community in this way. So very exciting stuff.
Speaker 2 25:02
I was going to say, absolutely. I mean, growth to serve your community, serve the greater Maryland area, DC area. A lot of people need this kind of direction, this kind of planning when it comes to what is going to be their post game, their retirement. If you’ve got questions about where you sit, if you are sitting, as I say, on a portfolio that is not a plan. There are a lot of things that are going to come at you, and if you’re just going to enter into it with a well, I’m just going to take a withdrawal rate, and that’s it. Good luck, you could run out of money in retirement. Make sure you have a plan. Grabbing one of our 10 complimentary appointments is a great first step. Check the number: 800-653-8404 800-653-8404 Call it now. Again, the 10 appointments are complimentary. There’s no obligation to become a client, but you’re going to find out pretty quickly if you’re in good shape as you head towards retirement. And if you don’t have a plan, folks, this is a great way to get started. 800-653-8404 Again, there’s no cost to that call or that appointment, and there’s no obligation to become a client. 800-653-8404 We are here to help. So we always talk about saving, right, putting the money away, maxing out the 401 ks, choosing investments, making sure there’s a tax shelter there for your monies, and once the paychecks stop, things are going to change now. It’s decumulation. You’ve been accumulating your entire working life, and now you’ve got to decumulate the process of basically withdrawing from your savings, and that’s where a lot of high earners out there are going to stumble and possibly fall. So today we wanted to kind of explore why failing to plan for decumulation can undermine that whole lifetime of effort that you’ve put into this, and a unique risk when you think about it, that retirees are going to face, but talk about the strategies to draw down on those assets intelligently without outliving your money. So, first up, and Prashant to you, decumulation, it’s a hidden partner of accumulation.
Speaker 3 27:02
Yeah, there’s a good Motley Fool article. It’s titled Why Decumulation Is Just As Important as Saving for Retirement. You can Google that headline and find this Motley Fool article, and what it highlights is this survey that was done by a big fintech company that says that only about 22% of retirees actually use a systematic withdrawal plan, and so what that tells me is that the majority of the retired population is just winging it, they actually have no idea what bucket to pull from, when to pull it, what the tax impact is going to be, and when you don’t have a supreme understanding of those types of things, the risk that you will run out of money one day or withdraw too much too early, that risk increases tremendously. Okay, and so if only 22% of the population that was surveyed actually has a plan in place, that to me seems like a really low number, right? If I was building, like, a house, or if I was designing a brand new car, I would want to make sure that the blueprint for those for those construction projects was really solid before I ever engaged with it. Why is your retirement plan any different if you were building a new house tomorrow, wouldn’t you want the architect to build a really solid plan and blueprint before you went to construction? Yet, so many people don’t do that with their retirement. The ones that do are the ones that tend to have the most successful, fulfilling version of life.
Speaker 2 28:38
I tell you, Prashant, that’s a great picture you just painted. Imagine your retirement is a pile of lumber, some nails, and maybe a few workers that show up at the work site, and you don’t have a plan. How’s that going to turn out? How’s that house going to look? How’s your retirement going to play? Probably going to be pretty rough, folks. Make sure you have a blueprint, make sure you have an architect that’s going to mold what is going to be your retirement. Work with professionals, and again, folks, there’s an opportunity to get on the calendar with Prashant and his team at Elite Income Advisors. Call the number 800-653-8404 Don’t just show up with some wood and some nails. Make sure you have the architect that is going to help you build your retirement. So, again, to grab one of our complimentary appointments, call 800-653-8404 That’s 800-653-8404 Have a professional retirement architect put your house together when it comes to your retirement. 806 53840 538404 All right, John, to you on this next one. The decumulation paradox: affluent retirees. Guess what? They’re underspending.
Speaker 1 29:51
Yeah, yeah, we actually see this more times than not, where folks are so reluctant to spend their six. Savings, because they’re terrified of running out of money, that they don’t live the fulfilling lifestyle that they want to live. One of the things that we tell our clients is, we want you to go out and spend your money, you worked 30 to 40 years, you’ve sacrificed during those years to be able to have a retirement that you enjoy, go out and live it right, so long as it works out in the plan. So, a great example is, I was just visiting with a pair of clients, they’re roughly $3 million in their retirement plans, and they’re not doing much. They’re afraid to travel, they’re afraid to go out and spend money on large trips or renovations around the house, and we’ve given them that blessing time and time again, saying, look, you have more than enough money, we’ve structured you in a way that all of the income that you need is going to be certain and there for the rest of your life. If you want to go on a big trip, it’s okay to do so, but it’s there’s something in that mindset. It’s, you know, a lot of the folks that grew up from Depression era, their parents were in the Depression, that they have that same mindset where they can’t let go and spend. So that’s something that we really try to get our clients more on board with, we have been able to push some people over the needle in terms of just showing them how it’s going to work. Hey, this is where your income is coming from, you’re set, you don’t have to worry about running out of money, you can go have that trip, and I think once you display that to them, you show the numbers, you visually outline how it’s going to work. It makes it easier, but believe it or not, not all advisors do that. We ask all the time, people that come into our office working with other firms, when your advisor mapped out exactly where your income is coming from through time, what did it look like? And they said, well, we’ve never had that conversation, so you know, a lot of things being listed in those firms, but very important to look at,
Speaker 3 31:40
I think. Another, I think another piece of this, Sean, is how often do you see this? Where used to visit with somebody who comes in to visit with us, and they said their advisor told them they can retire, and we go, okay, what proof did they give you? And they’re like, no proof, they just told me that I have enough, but this is what people need in this day and age. They want proof, they want proof that if they retire, that the money that they’ve worked their entire life to accumulate will be enough to live the way that they want to, and by the way, that should be the bare minimum standard for any advisor, in my opinion, is to be able to back up your recommendations with hard proof, yet so many people don’t do it, and I honestly, quite frankly, I think that’s why we have a thriving practice, is because we don’t operate in the world of what ifs, we operate in reality, where there has to be proof to provide to people, and so folks, if you are looking for proof that you are able to retire, or if you’re just not sure, just sell the phone number, 800-653-8404 that’s 800-653-8404 come in for that complimentary conversation with our team. If we’re the right fit, we’ll help you create all the proof you need to retire smart and to retire comfortably. But it all starts with that conversation. 800-653-8404
Speaker 2 33:15
We’ve got more Retire Smart Maryland Radio coming up, you Retire Smart Maryland Radio hosted by Prashant Sabapathi and John DeFeo. You can find them both at Elite Income Advisors. Again, Elite is growing. They’re adding space to the office, they’re adding advisors to the roster, and it’s all about helping Maryland and the greater DC area get ready for their retirement. They’re independent fiduciaries, they’re headquartered in Ellicott City, and again, that second office in Annapolis for your convenience. I’m Morgan Patrick. A pleasure to jump on with the advisors, talk about the importance of planning and being proactive, but also giving you the opportunity to take action on your own behalf. A complimentary appointment, we’ve got 10 of them this week, we call it our top 10. If you get into the first 10, you’re in this week. Outside of that, it is a short wait list. You can call right now, they’re complimentary again, no obligation, 800-653-8404 that’s 800-653-8404 see if you’re on track for your retirement. All right, scenario time, John, you’re up first. Here it is, they’re turning 63 next year, wondering if it makes sense to delay social security until full retirement age, especially with inflation pushing up the living costs, and therefore 1k down about 9% this year. How should someone balance rising expenses with long-term advantage of delaying the social security?
Speaker 1 34:54
Yeah, this is an important decision to make, you know, and I think it comes down to a couple of things, number. One, your philosophy, right? Would you prefer to start drawing down on your personal savings, the money that you have been swirling away your entire career, that could potentially get passed down to your beneficiaries if you don’t use it all? Would you rather start drawing on that quicker, or would you rather start utilizing some of the money that you’ve been paying into the Social Security trust fund that does not get to be transferred down to your family, right. So, I think that’s part of it, is your philosophy on whether you want to use your money or the social security trust fund first. I think it also comes down to your ability to fund retirement through your assets, right. Do you have enough money where the distributions that you have to take to defer social security will put so much pressure on your portfolio that you’re at the risk of running out of money. I think you have to look at that, you know. Do you have enough assets to start drawing early? I think you also have to look at our other tax planning opportunities that you’re looking to utilize, you know. If you’re looking at doing a Roth conversion, starting social security early reduces the amount of Roth conversions that you can do also have to figure out if this person’s working or not, right? If you’re under a full retirement age and you take social security, you’re limited to income, so there’s a lot that goes into making this decision, but I think the way that you balance rising expenses with delaying social security in that mix is obviously by staying invested in some capacity, you have to have some sort of growth in your investment, in order to outpace inflation, you do get a cost of living adjustment every year with Social Security. The issue that you have with that, though, is that your Medicare Part B premiums also go up, so it sometimes can be a wash. So, having a plan in place is what it’s all about. They mentioned something about their portfolio being down 9% that year. If this plan was designed correctly, that wouldn’t have been an issue, because they would have had a green bucket of money to provide the income that they needed at the stage of retirement they were in, without having to go to that invested bucket that’s down 9% So it’s all about the plan, it’s all about the situation that you’re in. So you know it again comes down to where you are at that time.
Speaker 2 36:59
Yeah, retiring with confidence, knowing that you have a plan in place. 800-653-8404 Grab one of our 10 complimentary appointments while they last. First tenure in this week, outside of that short wait list, they’ll get to you in the next couple of weeks. Very busy office. 800-653-8404 All right, here’s the next scenario. Prashant to you, recently paid off their mortgage, and now have an extra 1300 a month to work with. They are still five years out from retirement. What is a smart way to put this money to work without taking on too much risk this late in the game, and avoid the lifestyle creep we hear so much about? Because we got some extra cash.
Speaker 3 37:40
Yeah, what a great accomplishment, by the way. Paying off the house with still five years away from retirement gives you a tremendous opportunity to take that 1300 or at least a piece of that 1300 a month, and put into something. When it comes to investing money, there’s of course several different factors that have to be considered. Number one, Morgan, you mentioned, how do we do this without taking on too much risk? I think it’s a very reasonable, common question to ask, but one thing I think advisors get wrong is they don’t actually go back and qualify what an appropriate amount of risk is to their clients. So, one of the things that I would ask in a situation like this is how much could you lose before you actually begin to feel uncomfortable with any investment that you’re in. Hypothetically, if you took $100,000 and put it into a market-based account, how low are you willing to see that 100,000 go? Heaven forbid we have a market crash before it starts to make you feel uncomfortable. I’m shocked at how many times I have this conversation with people that come to the office and their advisors never ask them a question that specific. They’re always talked to about what your risk tolerance is – is it conservative, moderate, or aggressive? And part of the issue is that those words don’t have meaning unless we actually quantify them, so there’s several different things you could do with an extra 1000 or $1,300 per month, but when quantifying risk, let’s get in the habit of being really specific about what risk is acceptable, as opposed to just using vague terminology like, hey, let’s pick a conservative investment or a moderate investment. At the end of the day, those words don’t have true meaning unless we actually assign value to them.
Speaker 2 39:26
We are in the middle of our retirement scenarios, and you’re probably thinking about your own scenario. Do you have any idea? Do you have a game plan of how you’re going to approach your retirement? Most of you are sitting on a portfolio, and haven’t started the planning process, and they’re just as many of you that are maybe halfway down this path to retirement, but you’re frustrated it might be time for that second opinion. We’ve got an avenue for you, that’s right. It’s almost like that, that, that life vest, that life buoy. We’re going to throw it out to you. It’s an opera. 100 for you to come in to Elite Income Advisors. It’s a complimentary appointment. Call the number 800-653-8404 That’s 800-653-8404 See if you’re on track for your retirement. Again, there’s no cost. There’s no obligation to that appointment. 800-653-8404 We are here to help, all right. John, here’s your next one. For a scenario, required minimum distribution, the RMD, the age changes, and possible tax law adjustments in 2026 right around the corner. They’re considering doing Roth conversions now. Their income this year is unusually low. How do you know if a Roth conversion really makes sense before tax brackets potentially go up.
Speaker 1 40:44
Well, I think at the end of the day you truly have to believe that your tax bracket today will be lower than the tax rate that you’re going to pay in the future. That’s one way to look at it. There’s another way to look at it, is that your tax rate today will be significantly lower than your beneficiary’s tax rate in the future, because there are inherently consequences that are passed down to our kids and our grandkids and our nieces and our nephews when we leave this retirement money to them. So, when we look at Roth conversions again, that’s the first question that we ask. Some folks say, “Look, I don’t really care, I think it’ll be the same, you know, and there might not be a good candidate, or maybe your income is very high in that year. For this situation, if their income is unusually low, they have a significant amount of pre-tax assets. They have a desire to reduce the amount of income that they may have to take at RMD age, or reduce the taxable dollars that are passed on to their beneficiaries. It could be a great strategy to take advantage of what we typically do, and again, I mentioned this at the beginning of the show, is towards the end of the year, right around this time of year, we start to calculate the approximate income that our clients are going to bring in in this given calendar year, right? We make some assumptions based on end of year distributions, in terms of capital gains distributions, things like that, but we figure out what tax bracket we want to fill up based on where we expect their tax rates to be in the future, what they want their kids to pay. We run this information by our in-house CPAs, they run a Mac tax return, we get the client’s blessing, and we execute that Roth conversion. So it’s a very lengthy process, a lot that goes into it, but again, it really comes down to, do you believe that your current tax rate is going to be lower than your future tax rate of your beneficiaries, and if so, could be a great strategy, encourage you to come in, see if it makes sense for you, but I think in this situation, just from what I’ve seen, probably a good opportunity to do so, based on the unusually low tax bracket.
Speaker 2 42:39
Final scenario, and then we’ll open up those appointments with elite income advisors. Prashant, you get last word here. Portfolio mostly in mutual funds and bond-heavy retirement accounts, but they’re starting to worry about taxes and flexibility once they get into retirement. Should someone this close to retirement be shifting into more tax-efficient or income-friendly investments? And if so, what direction?
Speaker 3 43:03
I think taxes have to be at the forefront of your financial plan. I was recently meeting with one of my really good clients who’s up in Pennsylvania, and we were talking about how potentially from the healthcare standpoint he might be able to qualify for Affordable Care Act subsidies. Okay, so one of the things that happened here is, by the way, this gentleman has saved about $2 million So you’re probably thinking, how can someone with $2 million actually qualify for Affordable Care Act subsidies, which are typically given to people below a certain income threshold. Well, the thing is, he only has guaranteed income coming in from Social Security, and so his income is actually going to look like it’s artificially low. And of the 2 million that he has saved, about a million dollars is in pretax retirement, another million is in after-tax brokerage, and so what we’re going to do as he heads for retirement next year at the age of 62 is he’s going to need that Affordable Care Act subsidy, so that his healthcare doesn’t exponentially increase before he gets to the Medicare age at 65 years old. So, what we’re going to do is we’re going to start shifting the after-tax piece of his portfolio into much more tax-efficient investments, things like ETFs instead of mutual funds, things like municipal bonds instead of corporate bonds, to be able to not show as much income, so that he still qualifies for that subsidy. It’s one small example of how even wealthy folks can take advantage of tax efficiency and planning to make sure that downstream impacts like Medicare and Affordable Care Act subsidies are not impacted. John, as we head to the end of the show, why don’t you tell the audience a little bit more about what they can get by calling in. That phone number 800-653-8404
Speaker 1 45:03
Yeah, yeah, I mean, it’s an initial conversation, that’s all it is, to identify what your goals are, who you are, what your why is, right? What retirement means to you, and to figure out if we’re the right fit to be able to address those concerns for you. If we are, and it makes sense to put together a plan. We’re going to identify exactly where your income is coming from. We’re going to address the tax implications that are inherent in those distributions. We’re going to walk through a risk management strategy to ensure that your distributions and income and retirement are certain, they are secure. We’re going to ensure we have a growth component to that as well. We’re going to walk through estate plans to ensure an efficient transition of wealth, ensure that your medical costs, long-term care needs are all addressed. Again, put that all into a holistic plan and keep up with it. Meet regularly, you know, adjust and maintain that plan over time. So, that’s in a nutshell what you would get by working with us.
Speaker 2 45:57
All right, we got 10 spots. Call now: 800-653-8404 No cost, no obligation. Again, this is an appointment to help you with your retirement. 800-653-8404 That’s 800-653-8404 Another edition of Retire Smart Maryland Radio in the books for Prashant and John. I’m Morgan. We’ll see on the radio next week, you
Speaker 4 46:27
Annuity guarantees are subject to the claims of payability 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 a 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 deleted to be 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 advisor has achieved 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 receive commissions for the sale of insurance products as insurance agents for Retired Planning Services Incorporated. Insurance of 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 to promote our services because he was compensated for his work on Retirement, Maryland. The program is paid production of Elite Income Advisors,
