Speaker 1 0:02
We all know we should be saving more for retirement, but sometimes it feels like a black hole where your money just disappears. Today on Retire Smart Maryland Radio, we’ll go through six classic missteps that could chip away at your retirement nest egg.
Speaker 2 0:20
Welcome in to Retire Smart Maryland Radio with Prashant Sabapathi. Welcome in to Retire Smart Maryland Radio, your hosts Prashant Sabapathi and John DeFeo. You can find them at Elite Income Advisors. They’re headquartered at Ellicott City, satellite office in Annapolis for your convenience, and the website treated as a resource, Elite Income advisors.com that’s Elite Income advisors.com and both are independent fiduciaries. I’m Morgan Patrick. Absolute pleasure to jump on with the gentleman and talk about the importance of being proactive and having a plan. Prashant, we’ll start with you, man. How was the week,
Speaker 1 0:58
Morgan? The week’s been great, you know, as we get closer and closer to year end, it really creates a lot of activity around the office. I think what we see is a lot of people trying to take advantage of year-end tax planning opportunities. Certainly, there’s a lot going on in the market, and with the federal government, you know, having just reopened, so a lot going on. I think it’s been creating a lot of opportunities for clients to take advantage of a few things, and then the end of the year is always just a good chance to kind of reset, take inventory of what happened, and you know, really start our planning for the next year. So the office has been busy, our team’s been really busy, but it’s been a lot of fun. It’s always my favorite time of year, right around the end of the year,
Speaker 2 1:42
and John, you’re going to echo that, I would assume,
Speaker 2 1:44
100% Yeah, I mean, in addition to everything Prashant just said, we’ve also been getting out into the community, doing a lot of educational seminars. This time of year is great for it. Folks are, you know, going out, you know, looking for some advice, looking for some guidance as the year wraps up, so we’ve had, you know, pretty maximum capacity at all of our seminars, people waitlisted, just wanting to learn more as the world around them changes. So a lot of good stuff going on, looking forward to closing the year out, but also very much forward to the beginning of next year. So it’s been a great couple of weeks.
Speaker 2 2:17
Well, here on Retire Smart Maryland Radio, we get into different topics. It’s all about just the importance of being proactive, but I love what the guy said. I mean, it is end of year, so it’s a time to kind of take a look back on how 2025 went, but also look ahead and plan for what is going to be our 2026 And we wanted to kind of start off the program today and just talk about some things that are out there that could trip you up when it comes to retirement, but if you have a solid plan, you can avoid these things. So, Prashant, this first one, and it’s tough if you start too late. It’s kind of hard to overcome that you can, but it’s tougher. Compounding interest is one of the most powerful things when it comes
Speaker 1 3:00
to retirement planning, believe it or not, just starting earlier could make all of the difference, and I kind of look at my own situation and the situation of our clients that have been with us for quite some time. You take a look at how compounding interest can really function. I always say going from like zero to $250,000 of retirement assets could take a really long time, you know, 1520 years, but it’s incredible to see how quickly you can go from 250,000 to 500,000 or even a million dollars, and that’s all due to compounding interest. So, the biggest takeaway when it comes to compounding, is that you have to start early. It’s actually more important to start earlier, even in smaller amounts, and do that for a longer period of time, because if you wait too long, it oftentimes means that you have to save maybe even an unrealistic amount on an on a month-to-month basis to ultimately achieve your retirement goals, so starting too late is an issue. The best thing you can do, start today, however small of a step that looks like in your particular situation.
Speaker 2 4:13
Yeah, we’re hitting again just some things that can trip you up. Now, if you have a solid plan, you’re going to be able to avoid these because you’ve already thought these things out, but again, starting too late with your, with your, your overall plan, the compound interest not going to be there to work for you, longer you have, obviously the better. This next one, John, is something I think a lot of people are dealing with right now, because there are so many expenses that are out there, the cost of living has gone up, so a lot of people are just not saving enough.
Speaker 2 4:43
Yeah, I would agree. And I think part of, as you mentioned, is that expenses are so high they’re having a hard time finding where to increase savings within their budget. I think part of that is also cutting out unnecessary spending, if you can. We’re in a consumer world, right? Where everything you know has to be bought right now, you have to keep up with the Joneses. So, I think you know culturally we’re adapted to that. So, part of it is trying to figure out what is a necessity and what isn’t, your needs, your wants, and maybe finding a way to skim back on some of those extras that you’re doing and put that away for down the road, right? If you want to live your best life now, it could mean that in retirement you have to live a bit more meagerly, where if you can be a bit more reserved, conservative now, maybe that allows you to scroll some more away to be able to get into retirement and live a more abundant lifestyle. I think also, though, people get really hung up on reaching a certain number in retirement before they were, before they actually are ready to make that step, and we look at it a little bit differently, right. We talk all the time about the importance of income and your success in retirement being all about the income that you can actually bring in from the money that you’ve saved. So, what I would say is it’s not so much about the number that you’ve actually gotten to, it’s about how you can create income from that safely in retirement. Then, if you feel like you’re getting close to retirement, you don’t feel like you have quite enough, it might be worth it to visit with us, take a look at the situation, and see if maybe we can come up with a plan for you that you’re not thinking that you have to save at an aggressive stance to get to that number that you’re looking to get to
Speaker 2 6:23
again, just talking about just the importance of being prepared and having this plan, and if you have this solid retirement plan, you can avoid these missteps, and I think if we had a subtitle for this show, obviously it’s known as Retire Smart Maryland Radio, the subtitle would be it’s all about the income, right, it’s all about the income, so this next misstep, this next thing that a lot of people are doing, Prashant, and that is they’re concerned about the market, they’re concerned about the current environment that we’re in, and so they’re conservative. You can be too conservative when it gets to your investments.
Speaker 1 6:56
Look, I think that there’s a healthy balance that needs to be struck. There’s risk in obviously being too risky because you don’t want to lose too much money at the wrong time, but I think there’s also tremendous risk in being too conservative if your money simply does not grow at a sustainable rate that not only outpaces inflation but meaningfully allows you to accumulate as you get closer and closer retirement, I think that you could really be missing the mark. You might end up in a position where you just don’t have enough save. So, with that being said, being too conservative is a true risk. Now, how do we go about thinking about it, though? Because nobody likes to lose money, and certainly when you go through a market like 2008 or more recently in 2022 when we had the inflation crisis, you started to see markets go down, and I think a lot of people lost a lot of money, and that makes people feel nervous, and so there’s a healthy balance that needs to be struck here, and that’s why we do what we do every single day, so what we’ll do now is we’ll open up the phone lines. The phone number, folks, is 800-653-8404 It’s 800-653-8404 When you dial that number, our operators are standing by. They’re ready to book you for an appointment right here in the office. We have offices in Ellicott City, Annapolis, Maryland, as well as virtual appointments are available, so you just dial that phone number, 800-653-8404 Now, when you come in to visit with us, it is totally 100% free of cost to have that appointment with our team of retirement specialists. You’ll be able to sit down, we’ll design an income plan for you that helps you map out your income for the rest of your life. We’ll help you evaluate your portfolio, see if there’s any financial termites that are eating away at your portfolio, and then, most importantly, we’ll help you determine where your money should be positioned in order to get to the retirement that you deserve after 30 or 40 years of really hard work. It all starts with that phone call, 800-653-8404 Schedule that free up no obligation consultation with our team. Alternatively, you can visit Elite Income advisors.com for more valuable resources.
Speaker 2 9:18
When we return on Retire Smart Maryland radio, deciding when to retire. That’s a big question. We’re going to walk through some key factors to consider. It’s coming up next. Welcome back into Retire Smart, Maryland radio, hosted by Prashant Sabapathi and John DeFeo. You can find them at Elite Income Advisors, headquartered Ellicott City Satellite Office in Annapolis, for your convenience. They’re both independent fiduciaries. I’m Morgan Patrick. A pleasure to be on, and just talking about the importance of having a plan, being proactive, want to. Give you a website, it’s a resource, Elite Income advisors.com that’s Elite Income advisors.com Links to the TV show, radio show, and podcast form, really good background information on retirement planning, and of course, background information on the team. Prashant, John, Ozzie, again, they are growing to serve Maryland. All right, so let’s get into this, guys. It’s kind of like a big scenario, and we’re going to walk through some things that can be done, but there are a lot of people that are going to be in this situation at some point in their life. So take some notes. This is a retired couple, they’re in their late 60s. They found themselves kind of at a crossroads when they inherited a significant sum. Now, this is from a distant relative. They weren’t expecting it, while they already set their retirement plans in motion. All of a sudden, now they’ve got $500,000 in a windfall, and it made them reconsider their financial priorities. Now, this twist turned their simple retirement into a journey of kind of like dream fulfillment and careful strategizing, so we want to kind of explore this story where the dreams of family vacations, legacy planning, and financial stewardship collide with the reality of the market. So, John, let’s just start with you. There are going to be a number of people that are in this category, but all of a sudden, here it is: surprise inheritance.
Speaker 2 11:20
Yeah, and we see this time and time again as folks get older, you know, their parents pass away, their aunts, their uncles, you know, you have this windfall, and I think what you have to do is determine where you are currently with your financial plan, are you living comfortably, you know, do you have enough income from the sources that you have, and how does this play into that, right. So, if you know, for instance, they had all the income that they needed between their foundational income sources, like Social Security, maybe a pension, maybe their own retirement accounts, then certainly we could look at this money in a couple of different ways. We could figure out if there was anything during their retirement that they haven’t done that they would like to do that maybe we could use in a portion of this, for we could look at, you know, their estate and legacy intentions to figure out if this is something that they want to continue to invest and save, maybe for their kids, grandkids, nieces, or nephews. I think we also have to talk about the tax implications of this inheritance. Was it, you know, was it a retirement account, was it a non-retirement account? What implications for taxes are this couple going to have if they start to distribute it, and how much time do they have to actually work with it? So, all of this has to be determined, but I think you know ultimately it’s a travesty that someone passes away, but a blessing in the same token that they’ve fallen into this this amount of money. You just have to identify where you are with your plan now, how that fits in. Do you have intentions to spend more? Do you want to save more of it? Do you have enough income now? And if not, how do we turn this into an income stream? So we’d have to find out a little bit more about the couple to give a direct recommendation, but this is something that we see in our office time and time again, honestly, more often than we’d like to see, because it means someone’s passing away, but it does happen, you know. And you have to have a plan for it. So, if you’re in a situation where this is happening, where it could be happening, certainly give us a call, you know. We’d be happy to guide you through how to handle that in the best way.
Speaker 2 13:15
Yeah, we’ve done a number of shows just talking about the amount of wealth that is going to transfer from the baby boomers to the next generation, and this is kind of what we’re talking about today. We’ve got a couple that’s in their late 60s in retirement, and all of a sudden you know their plan is set, they know what they’re doing for retirement, and then someone basically they inherit $500,000 So, how does that play into their overall retirement plan, the next, and we talked about just having that surprise inheritance, and now Prashant, just balancing, you know, those dreams that we’re all going to have. I mean, you’ve got a half a million dollars, what are you going to do? You’re going to have those dreams, but it’s important to be practical.
Speaker 1 13:56
I think the generation today calls this lifestyle creep, isn’t that what they call it, where you get a big windfall, and immediately your lifestyle starts to increase, because you now have more resources, and so what you have to balance here, for most of our clients, and our clients’ kids who inherit money, I think the thing that we’re looking for is how do you balance kind of practicality versus actually getting to do the things that you want to do at this stage of your life. Great example is like, okay, let’s say you inherit half a million dollars, and now you want to potentially explore the idea of buying a second property, whether it’s an investment property, a vacation property, maybe you want to travel more and make your life more fulfilling in that way. I’m not saying you shouldn’t do any of those things. I’m simply just saying that there should be a really clear outline of how much of that money actually gets spent in certain areas. Give you a great example here. Maybe you do want to go buy a vacation home and you inherit half a million dollars. John said, “Hey, you already have all the income that you need. Maybe it makes sense to take a part of that money, use it to put as a down payment on vacation property. Maybe you take a part of that money, say 25 or $50,000 put it into a separate investment account that earns interest that you draw on to travel for the next five years, maybe take a piece of that money, put it into a vehicle that allows you to have a guaranteed income stream to help you pay the mortgage on your investment property or your vacation home, whatever you choose to do with it, or whatever anyone chooses to do with it. It should be backed by a plan that is mired in kind of fact and data, not just something that you’re winging, because now you came into a large lump sum of money, and I think a lot of advisors fall short in counseling their clients on an ongoing basis. I think we’ve met with so many people, I mean, John, maybe you can comment on this. How many people that do you run into that say that their advisors set them up for a plan five years ago, seven years ago, 10 years ago, but never did any maintenance on that plan anytime recently when the markets, the world, and most importantly, their lives have changed. I mean, I feel like I run into this every single day. How about you?
Speaker 2 16:21
Yeah, absolutely. The same. It’s incredible that there are that many advisors out there that are just providing transactional service to their clients instead of a true relationship. You know, when you put together a financial plan, this is a fluid plan. You know, it’s not static, it’s not going to be a set and forget it type of thing. I don’t know anybody that’s life hasn’t changed in a six to 12 month period in some way, you know. It might not be a significant change, but having those periodic reviews with your advisor to talk through your concerns to get your advisor’s perspective on changes in the environment. I mean, we just had a tremendous bill passed earlier this year that had a lot of provisions in it. There was a lot of confusion around, hey, there’s no tax on Social Security. I can’t tell you how many clients have come into our office hearing that Social Security tax was eliminated, and unfortunately, that’s not actually the case. There was an increased standard deduction provided to seniors over a certain age within a certain income limit that they packaged as no tax on social security. If you didn’t have an advisor to check in with to ask these questions, you might have gone about your financial plan with misinformation. So it’s just an example of how these periodic check-ins can really be valuable, not only to give your advisor updates on your current situation, but also to hear our perspective on changes in the environment, changes in the economy, and how we might navigate the plan differently. It really is astounding how folks are setting their clients up for not a successful retirement,
Speaker 1 18:01
Morgan. Real quick, I think you look at this and say, look, we go get a medical checkup every year. I mean, our health is one of our most incredible, important assets, just as is our money, but we go out and get a medical checkup every single year. Why are we not doing that with our next most important asset, which is our financial resources. If you’re not getting a financial checkup each and every year, either from the advisor who set you up from with your original plan, or at the very least someone else to give you a second opinion, I think you very well may be missing the mark here. And so, very important to do annual maintenance. This is something that we try to do with every single client each and every year. If your advisor is not providing that to you, it might be time for a second look or second opinion. Just dial that phone number, it’s 800-653-8404
Speaker 2 18:54
Again, these are complimentary appointments. We are having this conversation about a scenario that could occur in your future. This couple that we’re talking about today, again, hypothetical, they’re in their late 60s, and they have a portfolio of 1.2 million. They’re also getting social security, and they’re handling retirement. They seem to be doing fine. And then all of a sudden, here comes the windfall. It’s an inheritance of half a million dollars, and basically the overall message here is if you get something like this, don’t stop the planning process, ramp
Speaker 2 19:30
up the planning process on how that’s going to work for you. So this next one, and John, we’ll throw this one at you first, and that’s just things that you can be doing, okay? So you get this extra cash, you get this extra half million if you’re this fictitious couple investing in your security, investing in your health. We get so caught up in our go-gos, and this couple is in their late 60s, so they need to be thinking, okay, what about health care, what about long-term care? Yeah, I think that’s a great point, you know. If again their income is satisfied, or even if it’s not right, what if they don’t have all the income that they need? Maybe this is an opportunity to take a portion of this, if not all of it, and turn it into a consistent, secure income stream in some way that could be a blessing in itself, or if they do have their income needs satisfied, but they don’t have a plan for long term care, maybe this is the main asset they would now rely on for a long term care expense or a significant medical cost to themselves, maybe it makes sense to look into protection there a way to secure that money to ensure that they have a fail safe if that happens, so I think you know, looking into potential long term care policy, maybe a life insurance policy, maybe you know a fixed indexed annuity or something along those lines to create a consistent income stream could certainly be a good opportunity if there’s a need there to protect themselves in one of those areas.
Speaker 2 20:56
Again, important to remember, there are going to be moments in your future where possibly something like this could fall right in your lap. It could be an inheritance, something you’re not expecting. Make sure it’s part of your overall planning process. And a lot of you out there are just sitting on a portfolio, man. Start the planning now. We’ve got an opportunity for you to get on the calendar with Elite Income Advisors. Prashant is going to walk you through the appointment,
Speaker 1 21:23
folks. The phone number, it’s 800-653-8404 Phone lines are going to stay open throughout the program today. When you call in, you’ll be able to schedule that no cost, no obligation visit with Elite Income Advisors. Now, you come into the office, you’re going to sit down with the with a professional, and we’re going to help you map out your retirement plan. It’s going to include several different areas. Number one, an income for life plan to help you map out that income each and every month and year for the rest of your lifetime, while taking into account income taxes and the threat of rising inflation. So, income planning is going to be number one, number two, a social security optimization report, so that you can understand when the most optimal time to collect your social security benefit ultimately is, number three, an investment analysis, it’s incredibly important that your money is working just as hard as you are while you’re working, and so we’ll want to do that risk and return analysis. Make sure your money’s working for you in a really productive way. And then lastly, we have to talk about taxes and legacy. If tax rates go up in the future, how is that going to impact your retirement plan? If you don’t know the answer to those questions, all you’re going to do is pick up the phone and give us a call, it’s 800-653-8404 or visit the resource website www dot eliteincome advisors.com
Speaker 2 22:49
When we return on Retire Smart Maryland Radio, Bohemian Rhapsody, it’s unpredictable. What a fantastic song, but it’s a lot like your life and retirement. We’ll give you the parallels when we return. Retire Smart Maryland Radio, your hosts Prashant Sabapathi and John DeFeo. You can find them at Elite Income Advisors. They’re headquartered at Ellicott City, and an office in Annapolis for your convenience. They’re both independent fiduciaries. I’m Morgan Patrick. Absolute pleasure to jump on with the advisors and just have these types of discussions about the importance of being prepared, being proactive, having a plan for what is going to be your retirement, so you can enjoy it. Go into retirement with confidence, and we talk about it each and every week, but we also give you an opportunity to get on their calendar, no cost, no obligation. We’ll tell you about those appointments as we move through, so like the twists and turns, guys. We’re gonna get into some music, Queens Bohemian Rhapsody. Think about that song. The retirement and retirement planning can be full of surprises, some of them pleasant, others not so much. Whether it’s unexpected health care costs, maybe a market downturn, and then there’s that sudden family obligation might pop up. Retirees need to be prepared. So, a recent AARP study found that 45% of retirees face unexpected financial challenges. That’s from 36 plus source that survey. So today we are going to explore strategies for preparing for the unexpected in retirement, and that can be from emergency savings to adaptable investment plans. All right, so here’s some questions for you guys. John, we’ll start with you, how can retirees build a financial safety net for the unexpected, similar to the unpredictable nature of that great song, Bohemian Rhapsody?
Speaker 2 24:49
I think having your emergency fund for those unexpected expenses is extremely important. I mean, the CFP board subscribes the audio. Of three to six months of your living expenses in a liquid emergency savings. You don’t want to have any market volatility with this. You want to have complete liquidity, so no CDs, no bonds, no annuities, things like that, because again, you want to be able to access this very quickly in the event that something goes wrong. You know, great example is my hot water heater went up a few months back. It flooded the basement. That was about a $7,000 repair before insurance came in. You know, thankfully I had that three to six months of my living expenses right there, able to pull it was done quickly. So those things happen all the time. We don’t know when it’s going to happen, so ensuring you have that emergency fund’s important. Otherwise you may be forced to put it on a credit card that has pretty high interest right now, maybe you have to liquidate an investment if the market’s down, as you mentioned, we don’t know what the market’s doing, so having a dedicated savings for those unexpected expenses is so important to have within your financial plan. How do you feel about people that say, hey, I have a 401 k plan, and because I’m working, I could just go ahead and take a loan from my 401 k, because you know, I’ll just pay myself back instead of putting it on a credit card, I’ll just go ahead and take a loan from the 401 k. What’s your opinion on something like that, that’s a great point, Prashant, because we do hear that often, and don’t get me wrong, there are advantages to taking a loan out of your 401 k and paying yourself back interest, but there are also a lot of drawbacks, especially if you’re nearing retirement, right, so within that loan and your 401 k plan, again, you’re required to pay that back, and if you happen to either retire or even leave your company, you may be required to take that income, take that remaining loan balance as income to yourself. So, if you’re in a position that, say that again, it
Speaker 1 26:55
becomes taxable, it becomes
Speaker 2 26:57
taxable, right? It becomes taxable income to you. So, again, if you say, “Look, I’ll just do that in emergency, you might find yourself in a pretty significant tax burden when you retire or you leave that job. I’d also mention that taking those loans takes some time, you know, they have to liquidate investments in your portfolio. It also is going to inhibit growth within your account, because say that you take a $30,000 loan, they have to sell investments, so that’s going to draw down on your growth potential. If you don’t pay it all back, it can be a significant income, you know, taxable income distribution to do when you leave the company. So, there are times that it makes sense, but for these types of emergencies, when it’s a quick, hey, I need cash quickly, we definitely recommend having that out of the market in an emergency accounting cash.
Speaker 2 27:42
Well, it kind of goes back to, you know, working with professionals and having a plan, and if you’ve got some situations that come up, you know, ask that question: Is it a good idea to go into my 401 k? Answer: no. I mean, you really need to have a plan. Certainly, you know, there can be sometimes when you have to take some drastic measures, but we’re talking about just safeguarding your financial future. Make sure you are preparing in this fashion, and make sure you have that plan. So, have that emergency fund again. This is something that needs to be liquid, needs to be ready in case your water heater goes out, like John’s did, or maybe you need a new roof. HVAC goes on the put. I mean, a lot of things can happen to you. So, have the emergency fund. So, Prashant, this next one, it’s about flexibility, and how can retirees make sure that their investment portfolios are flexible, especially with the market volatility as it
Speaker 1 28:41
is. Well, we’ve talked for years on this show, and certainly on my TV program, Retire Smart Maryland Television, about this idea of bucketing money. You know, the clients that tend to be the best fit for our organization, and we tend to be a good fit for them, are the ones who believe that you shouldn’t ever have all of your eggs, just in any one basket, so what a lot of our clients will do is they will set up multiple buckets of money, not just to optimize their withdrawal and distribution plan, but also to really safeguard against the threat of extreme market volatility. I give you a great example, I was just onboarding a new client had about $2 million in their 401 k, and one of their concerns was what happens if the market goes down in a significant way, kind of like it did in 2008 and now I have to withdraw income from that $2 million 401 k account while the market is crashing, and so very reasonable concern, because the old saying on Wall Street said that you never wanted to sell your investments while they were down, and so what we did is, while the market was at an all-time high on the $2 million we simply took $800,000 and put it into a separate bucket of money that separate. Bucket of money was totally safe and secure and protected from market volatility, so when the market crashes, whenever that happens, that $800,000 is going to be 100% principal protected, and so what’s going to happen here is we left $1.2 million in their risk bucket of money, when the market goes up, we’ll simply take their income off of the 1.2 million, which should have grown when the market goes down. Will simply take their income from their safe and protected bucket that won’t lose, and so this is why using a bucketing approach where you do have your traditional stocks, bonds, and mutual funds, but then you mix that with a bucket that has alternative investments, protected instruments like annuities in that bucket. Having a balanced approach can really help you shield yourself and protect yourself against extreme market volatility. I’ll tell you what, Morgan, 100% of our clients who are a good fit for us and we’re good fit for them, which is not everybody, but for all the ones that are good fit, this is how they believe in managing their money in retirement, having multiple buckets of money for protection, growth, and income. When you get to retirement,
Speaker 2 31:12
it’s all about conversation, having a plan. You can get it started with a complimentary appointment with Elite Income Advisors. Simply call our number 800-653-8404 that’s 800-653-8404 That will grab you one of those appointments again, no cost, no obligation. Just talking about safeguarding your financial future, that’s going to be your retirement. So, emergency fund flexibility with your investment portfolio, just understanding that, John. The last one we’re going to have time for. What role can insurance play just in safeguarding against the unexpected?
Speaker 2 31:48
A huge part, right? That’s what insurance is all about, is risk management, risk protection, you know, between life insurance, long-term care, health insurance. These can alleviate significant expenses that you might have come up for you. I think you know a lot of times you know life insurance and long term care can be paired together in terms of how they can protect you. You know, if you’re not able to do this with the assets that you have, or you’re concerned that the expense is going to deplete the amount of money you can leave for your legacy. I think having a combination of those two solutions or vehicles are quite helpful, you know. Health insurance is a no-brainer in retirement, so huge help for causing those risks.
Speaker 1 32:31
One more thing, John, real quick, what about income insurance? I know we got to get to the break here, so maybe we cover this one on the other side of the break, but we buy health insurance. Most people have life insurance. You have auto and home insurance. Why are we not protecting the biggest asset that we actually have, which is our income, right? While you’re working, your financial life really just is about money in and money out, and our income is our biggest wealth building tool. When we get to retirement, doesn’t it make sense to have insurance on our income to make sure that we always have enough income in retirement? Like, I think that’s a huge thing that we talk about. Maybe we should get into some of that on the other side of the break. But let’s open up our phone lines here. It’s 800-653-8404 It’s 800-653-8404 You call that number, schedule that no cost, no obligation visit with our team of specialists at Elite Income Advisors. When you come into the office, you are not agreeing to become a client. All you’re doing is having a conversation about the things that are important to you, whether that’s where’s my income going to come from in retirement, what is my tax rate going to look like? Am I going to leave a legacy that I can be proud of? It all starts with that conversation, folks. 800-653-8404 Call now.
Speaker 2 33:50
When we return on Retire Smart Maryland Radio, we will get to our scenarios, but we’re going to talk about insurance – no, not life insurance, not health insurance, not long term care insurance. We’re going to talk about income insurance to start off our next segment. Coming up on Retire Smart Maryland Radio, we are back on Retire Smart Maryland Radio. Your host, Prashant Sabapathi and John DeFeo. You can find them at Elite Income Advisors, headquartered Ellicott City Satellite Office in Annapolis, for your convenience. And both are independent fiduciaries. I’m Morgan Patrick. A pleasure to jump on and just talk about the importance of being prepared, having confidence in your retirement plan, and a lot of you are sitting on portfolios, haven’t thought about the planning process, you really need to, and they’re just as many of you out there that are halfway down the path, you’re frustrated, and you’re thinking, you know what, I need a second opinion, we have that for you today in the form of a complimentary appointment, no obligation, again, we’ll. Tell you how to get those in just a little bit, so before we jump into scenarios. Prashant, you threw this out at the end of the last segment, and that is, we have insurance for practically everything. Why not income insurance? Explain yourself.
Speaker 1 35:14
It just makes so much sense, right? We look at the most important aspects of each of our lives, right. It’s typically our biggest assets are going to be things like our home, our auto, our health, and we buy protection against all of those things in case there’s a catastrophic change. Right, if your health changes, you want to have insurance, you can go to the hospital. If you’re in a car accident, you don’t want to have to pay 3040, $50,000 car, so you go out and buy insurance. What is the most catastrophic thing that could happen to a retiree? It’s that they run out of income, their assets go to zero, and thus they don’t have a paycheck to live on. And so what we’ve been talking about for years on this show, and for really my entire career in financial planning, is how do we make sure that we have insurance on our most important retirement asset, which is our paycheck. For so many people out there, that traditionally meant that our insurance on our income was having a pension, and that pension would provide us a monthly income each and every month for the rest of our lifetime, but what we’ve seen, John, over the last, I don’t know, 1520, 30 years is that these pensions have started to go away. That’s just reality. They’re underfunded, people are living longer, they’ve been mismanaged, and so people in this day and age don’t have pensions like they did 2030 years ago, and that’s why we’ve started to talk about income insurance and this idea of creating your own pension. So, why don’t you talk, John, a little bit about how we do that? Maybe you have a recent case study for a client that came into the office. How did you help them create income insurance, so that their financial plan didn’t fall apart when they got to retirement.
Speaker 2 37:06
All great points, Prashant. Absolutely, and I think when we talk about protecting income, it’s imperative because you just mentioned only about 15% of folks retiring today have a traditional style pension. The rest of us are required to take the money we’ve saved over our careers and turn that into an income stream, become our own pension managers at a time that we want to be able to relax and enjoy ourselves. So, yeah, I mean lots of case studies in our office, but I think most recently we had a set of folks that was looking to retire in the next two years, they had dreams of being able to drive around the country for a year, sell their house, drive around the country in a camper, see all of the national parks, and then potentially move down to North Carolina, South Carolina area, and their biggest concern, aside from the long-term care that they could potentially have to pay, was running out of money. They did not want to get to a point where they were 7580 years old and scrambling to come up with income, having to go back to work. So, what we did was we showed them a way to bucket their money where they could still have growth potential to provide for a long term care event down the road, or potentially even a legacy if they don’t end up having long term care costs, while also taking a portion of that money and creating a safe bucket to take that income from when they need it, right, and we did that via fixed indexed annuity that paid them out a monthly income of $5,000 a month, guaranteed for the rest of both of their lives. We were able to accomplish this with about $650,000 you know, being able to defer that out over a couple of years alongside some of their other income sources, so now they don’t have to worry about the income that they’re going to receive for the rest of their lives, regardless of what the market’s doing. We were able to alleviate that concern with the strike of a pen, right, and I think one of the key things that we do in our office, in addition to just financial planning, is creating peace of mind and giving people time back. I mean, I would argue that your time on this earth is the most valuable thing that you have, especially as you get to a point where you’re 6070, years old. So, why not try to take as much of that back as you can allow us to help alleviate some of those concerns every minute that you’re stressing about the market, about whether you’re going to make it in terms of your income is time that you’re not spent enjoying time with your family vacationing, allow us to help you alleviate some of that time, and
Speaker 1 39:37
we always say, look, higher the income, better the outcome when you get to retirement. Creating income insurance is just about getting your income in retirement as high as possible as quick as possible, but most importantly, folks, doing so as safely as possible. Now, I know usually the last segment of the show we’ll go through some scenarios. Is here, so here’s an interesting scenario that we were looking at. John, maybe you can talk a little bit about this. Let’s say, hypothetically, I have a 50 year old person with a quarter of a million dollars in a 401 k plan, and their primary concerns are market volatility, and one way they’re thinking about attacking that problem is by exploring those target date funds, but they’re unsure if those target date funds are actually giving them the type of diversification that they want. What should they look for? What should anyone be looking for in a target date funds asset mix if they are considering that within their 401 k to save for retirement?
Speaker 2 40:40
Yeah, great question. I mean, I think one of the things we have to identify is when they want to retire, right, because the timeline that they have between now and retirement will impact the level of risk within that diversification that we would be comfortable with a client taking, or with anybody taking. So, for instance, if they were thinking of retiring in five years, we likely would not want to have a target date fund with a target date of say 20 years in the future, right? You’d want to have something closer by, and for those of you that are unfamiliar with target date funds, maybe we should start with that. Is it is a mutual fund that targets a specific date in the future, call it 2030 for this example, and it has an allocation of equity and fixed income that continues to become more and more conservative every year that we get closer to that target date, right. So maybe right now it has, you know, 50% in the stock market and 50% in the bond market, and every year we get closer to that five year period, they’re going to reduce the stock exposure and move it to fixed income exposure, so it’s just a way to, you know, not have to go in and make changes yourself. The mutual fund manager will reallocate that, make it more conservative, so you know that’s, you know, it’s a great feature to have, but I think looking at, you know, is it diversified across large caps, small caps, you know, internationals could be something to look into. Most important, that you want to make sure that the risk level in equities is appropriate for what you’re willing to take at that time. We
Speaker 2 42:12
are in the middle of scenarios here on Retire Smart Maryland Radio, and you may hear a scenario in the program that’s kind of what you’re going through. Just remember, it’s not exactly what you’re going through. You need to have a customized plan, the opportunity to get on the calendar with elite income advisors, and have this kind of conversation, and do it no cost, no obligation, ongoing during the course of this show. Simply call 800-653-8404 come on in, and talk about your retirement scenario. 800-653-8404 All right. Final scenario, this one to Prashant. John, you can jump in too. Here it is. A person is interested in a variable annuity to take advantage of market growth, but is concerned about the potential impact on the principal. They wonder if adding a rider for guaranteed withdrawals is a good idea. How can they balance growth with security?
Speaker 1 43:04
You know, this is a really good question. I think it comes back to this idea of bucketing. Now, Morgan, you mentioned in this hypothetical scenario somebody might be considering something like a variable annuity, and I think you have to be really careful here as you make these very important decisions on what types of investments to consider. One thing that I personally believe is a drawback when it comes to variable annuities is they’re oftentimes really high in fees. I’ve done analysis of some of these variable annuities that people come into the office saying that they bought this variable annuity five, 710, years ago, and what we’re finding is that they’re oftentimes full of fees that exceed 2% 3% 4% per year, and to me that seems like a really high fee to be paying for an investment, and that really eats into your compound interest, so variable annuity, not personally a huge fan of that one thing. You did say, though, is this idea of creating guaranteed income through the use of an income rider. One thing I do think that I agree with is that having more income in retirement, that is a certainty that we can always count on, ends up being a really good thing for folks in retirement, so I love the idea of adding guaranteed income. Not so sure about the idea of using a variable annuity. John, could you just talk for a quick minute here before we wrap up the show here today on what types of annuities are out there that retirees most commonly are using, especially the ones that are clients of ours, which are the ones that are most commonly used for retirement. Maybe you can give us some insight on that.
Speaker 2 44:49
Primarily, the annuities that we’re using for our clients that are seeking protection, seeking guaranteed income, are going to be fixed indexed annuities, these. Are annuities that still allow you to tap into the principal need be. Now, of course, if you’re going to utilize one of these strategies, the purpose is typically for the long term. We’re not looking to, you know, cash this out in a few years. It’s typically built for lifetime income, so we look at these as lifetime contracts for the most part, but they’re primarily very low in fees, you know. They sometimes can provide a guaranteed income for the rest of you and a spouse’s life. If one of you guys passes away before the account is depleted, you actually can pass it on to your beneficiaries. It’s not like the old annuities, where it’s kind of a gamble and you’re handing over that principle and the hope that you make it a long time, and if God forbid you both pass away in a short period of time, no, you know the house wins at that point. So we don’t use those types, loan fees, principals, accessible lifetime income, if we can. Those are typically what we’re using,
Speaker 1 45:53
folks. We’re not saying that an annuity is the right thing for every single person, but if you’re not sure where to start with your retirement planning journey, it’s the last opportunity to get into the office and into the calendar for today’s program. That phone number again, it’s 800-653-8404 That’s 800-653-8404 Come visit with us for a complimentary no obligation consult at Elite Income Advisors, 800-653-8404
Speaker 2 46:20
Thank you for listening to this edition of Retire Smart Maryland Radio for Prashant Sabapathi and John DeFeo. I’m Morgan Patrick. We’ll see you on the radio next week.
Speaker 3 46:37
Funded guarantees are subject to the 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 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 believed 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 duty 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 Retirement Planning Services Incorporated. Insurance and annuity product guarantees are subject to financial strength and claims paying ability 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 Retire Smart Maryland. The program is paid production of Elite Income Advisors,
