Speaker 1 0:00
In 2025 gave us rate cuts, AI headlines, and an economy that feels almost normal again, but what does that actually mean for your retirement plan? Today on Retire Smart Maryland Radio, we’ll pull back the curtain on what really changed and what quietly didn’t.
Speaker 2 0:21
Welcome in. in to Retire Smart Maryland Radio with Prashant Sabapathi. Welcome in to Retire Smart Maryland Radio. Your hosts are Prashant Sabapathi and John DeFeo of Elite Income Advisors. They’re headquartered at Ellicott City, and they’ve got a salad office in Annapolis for your convenience, and they’re both independent fiduciaries working hard for you again. Elite Income Advisors, the power behind the program. Check out the website, treat it as a resource, Elite Income advisors.com I’m Morgan Patrick. A pleasure to jump on with the advisors and just get into all these different topics. And we’ve got a great show for you today. As I always start Prashant, we start with you. How was the week?
Speaker 1 1:04
The week’s been great. This is the busiest time of year in our office. Everybody is working to year-end deadlines, take advantage of tax planning opportunities. John and I just got the numbers for this year. We did 152 seminars in our community this year, so we got to speak in front of, I would say, 1000s of people this year, and the response has just been fantastic. And so activity has been very high at a time where most financial offices have started the process of going on vacation. We are working hard and running through the end of the year, so super excited about that, and really excited to get 2026 kicked off in a big way. We have a lot of really cool things planned, both for our clients and around our community for next year, so it’s exciting.
Speaker 2 1:54
I tell you, it’s hard to believe we’re going to put a bow on 2025 and head off into 2026 but it’s right there. John, what about you? How was your week?
Speaker 2 2:03
Yeah, all I can echo the same sentiment. I mean, it’s been busy in the office. It’s a great time of year, you know. Folks are doing a lot of tax planning, gearing up for other end of the year tasks, you know, trying to get set up for potential retirement. I’ve got a couple of people that just this week we’ve, we’ve submitted their retirement paperwork for the end of the year, so really exciting time, as Prashant mentioned. We’re also pumped for 2026 A lot of exciting things that are going to be coming out of our office. Hope to even increase the amount of seminars that we do next year, which is pretty crazy, considering we did that 150 or so. But yeah, it’s been a great week, as long as it’s busy, it’s a good week.
Speaker 2 2:41
I tell you, the 150 seminars, what an eye-popping number that is. I kind of equate that to, you know, those stories when they follow the CEO and he goes and he works in his own workforce, just to kind of see what the company’s like. Undercover
Speaker 2 2:57
boss, right? Yeah,
Speaker 2 2:58
I look at you guys, you’re doing these seminars, you’re in amongst the people, you’re hearing all of their concerns, and then you bring all that information back, and that helps you formulate how you’re going to attack, you know, the retirement planning for your clients.
Speaker 1 3:11
Yeah, I call it the power of perspective, right? For one person planning retirement, you just don’t know what you don’t know, and there’s only so many people you can actually lean on in order to get really good advice. The power in working with an advisor who sees 1000s of people every single year, an advisory office, I should say, because it is a team effort. Over here is that we have the power of perspective. We can look at all the people that have really successful retirement plans that are comprehensive, and we can see the ones that maybe fell a little bit short over time, and we can share those experiences, real-life experiences, with the folks that we meet with. It’s something that I call the power of perspective, and I’ll tell you what 2025 has offered a ton of perspective, and that’s why we want to talk about the biggest takeaways from 2025 and then I do want to spend some time talking about what the outlook looks like for 2026 So, I guess let’s get right into it. I think the biggest piece of legislation that came out this year was the One Big Beautiful Bill Act, and I think it makes sense to talk a little bit about that, John. If you want to potentially get into that, why don’t you give us the top two or three highlights on the big beautiful bill that passed in July of 2025
Speaker 2 4:32
Absolutely, yeah. You know, I think one of the biggest takeaways that we’ve seen that’s affecting our clients and what we do in our industry are the extension of the tax cuts and jobs act tax code that was implemented back in 2017 so this bill extended the tax code that we’ve been in since 2017 indefinitely, meaning that you know there is no end in sight so long as the current administration, current allocation to Congress stays into effect. I think that’s a conversation, maybe for another show, another time, in terms of where we actually see that going, but we know that at least for the next three years we’re going to have a tax code that’s a bit more favorable, in fact it’s the third most favorable in history. So that was a huge extension, we were really hoping to see that happen, that gives us additional opportunities for things like Roth conversions, strategic distributions, tax loss harvesting, so that was a pretty big takeaway. Another provision from this actually provided an additional standard deduction to seniors over the age of 65 This is also a bit of a confusing concept to a lot of folks. The federal government announced that there was no tax on social security that came out of this bill, that is not the case entirely. In fact, this standard deduction that they gave to seniors over 65 does what they packaged as no tax on social security. So, let me explain just a little bit now. If you’re age 65 and this starts for this year, if you make under $150,000 of adjusted gross income, and you’re a joint filer, you will get an extra $6,000 per person in a standard deduction. Inherently, if you’re on social security, that will likely reduce a lot of the taxes that you’re paying on social security, you know, but it doesn’t entirely eliminate the tax. If you’re a single filer, it’s $75,000 of adjusted gross income that you have to be under in order to get that extra $6,000 standard deduction, so it’s a great feature for some folks, but for those that are over that income limit, you likely won’t get the full deduction, and social security taxes still in play to the federal government up to 85% so that’s a huge point that we’ve provided clarification on for a lot of folks that’s come out of the bill, but I think those are the two top provisions that we’ve seen impacting our clients from that big beautiful bill act.
Speaker 2 6:49
Well, I know before we were talking about before that extension, you know, really take a look at the Roth, because taxes are on sale, they’ve extended that window, as John pointed out, so having the conversation about future Roth conversions, certainly one you want to have, just hitting some of the biggest takeaways from the year. We get into 2026 coming up on the program, but Prashant, any any other big ones that just stand out to you for 2025
Speaker 1 7:14
Yeah, real quick, before we have to get into the break here, but I think the three things that come to mind for me are number one tariffs, you know, for the first quarter of this year everybody was talking about tariffs, and so naturally tariff revenue has gone up through the president’s, you know, policy on tariffs, but it’s yet to be seen how that affects the inflation rate, so that’s number one tariffs, number two is, how is the Federal Reserve going to treat interest rates? Now we have seen rate cuts throughout 2025 As of December the 10th, it looks like the Federal Reserve lowered interest rates again, bringing the targeted range to between three and a half and three and three quarters percent, and so interest rate environment is going to be a big part of what happened in 25 and what’s going to be coming down the pipeline in the markets in 2026 and then I think the biggest thing here is tech and AI we’ve seen such a boom in artificial intelligence and technology stocks and in that sector, and everything that supports that sector, from the standpoint of internet security, semiconductors, so this touches almost every sector of the US economy in some way. So we’re keeping a close eye on that after big 2025 but folks, if your advisor is not talking to you about how to take advantage of the big beautiful bill, or whether or not the increase in tariffs is going to have a negative impact, potentially on your retirement expenses, your overall stock portfolio, or your tax situation down the road. Pick up the phone and give us a call. Let’s open up the phone lines, as we do every week. That phone number: 800-653-8404 800-653-8404 You call that number, you’ll get a complimentary, which means free appointment to visit our office, Elite Income Advisors. Just have a conversation about where you stand and where you are projected to go. 800-653-8404 When
Speaker 2 9:18
we return on Retire Smart Maryland Radio 2025 almost in the rear view. We look ahead to 2026 that’s coming up next. We are back on Retire Smart Maryland radio, hosted by Prashant Sabapathi and John DeFeo of Elite Income Advisors. They’re headquartered at Ellicott City Satellite Office in Annapolis. They’re independent fiduciaries, and they’re here to help with your retirement. Check out the website, Elite Income advisors.com and treat it as a resource. Links to the TV show, radio. Shows in podcast form, good information on retirement planning, background information on Prashant, John, and the growing team. Prashant, before we dive in on 2026 talk about that office, because you guys are, you’re busting at the seams, you got it, you got to have more people to help more people.
Speaker 1 10:17
Exactly right, when Ozzie and I started this whole thing just about a decade ago. Now we always had big goals and big dreams for how many people we wanted to be able to have a really great impact on how many people we wanted to serve in our community. I don’t know that either of us, when we started this, ever thought that it would turn into what it has, so very proud of that. Our team is growing, our office spaces are growing. We just did a big renovation and expansion of our headquarters in Ellicott City. Just opened a new Class A office space in Annapolis, Maryland. We have some really cool stuff planned for down on the Eastern Shore and at the beach, because we do have a lot of clients that migrate over into Delaware, and so we want to create a little bit more of a presence there. That’s something for 2026 that I think will be on the table, but we’re getting a lot more activity, clients, viewers, listeners, whatever you want to call it, all over the state of Maryland, and as a result, we’ve been able to expand both our team and our presence. So very proud of that. Really happy to have brought on folks just like John. John’s, of course, a certified financial planner. We have Dan here, who’s probably going to be getting a CFP later next year, so the activity has just been fantastic. I’m really proud of our team and what we’ve been able to do. I’ll
Speaker 2 11:46
tell you, it’s – I often say it – it’s teamwork to make the dream work, and it’s your retirement, and that’s what planning is all about. Now, we kind of opened up the show talking about the biggest takeaways for 2025 and we hit the big beautiful bill. We talked about tariffs, we talked about the interest rate cuts, the tech AI boom, but now we got to look forward to 2026 And I guess the perspective, what are you guys thinking for the new year? I think it’s we start, I think there’s four different things, we kind of covered a couple of them, but let’s look into the crystal ball of the future a little bit here, if we can. The four things to me are, how do we navigate through markets, and by the way, when I say markets, I’m not just talking about the stock market.
Speaker 1 12:30
I think that one of the mistakes that advisors make is that they don’t look at what’s also going on in alternative markets and bond markets. So, what’s going to happen to the price of silver and the price of gold. What’s going to happen to the price of Bitcoin in 2026 What’s going to happen in the bond market? So, understanding what’s going to go on in markets, I think is really important. Number two is taxes, number three is inflation as a result of tariffs, and number four is what continues to happen with interest rates, so maybe let’s start with the market. John, you can talk a little bit about how we’re helping people navigate through what seems to be like a pretty choppy market that could present itself in 2026
Speaker 2 13:20
right? And when we get this question all the time, we just.. I just did a review with a client a few hours ago that was saying, John, you know, we’ve had a great 2025 there’s been some bumps in the road, it’s been a little bit scary. What are your thoughts for 2026 And, you know, of course, we don’t have the crystal ball, it’s tough to say exactly what’s going to happen, but I think, you know, based on the economists that we follow and the analysis that we do as a team, we’re still optimistic that 2026 could be a good year, just based on the data that we see coming in regards to economic growth normalizing, you know, where we’re heading with interest rates, but with that being said, it’s also a midterm election year, right, and typically, or historically, midterm election years are subject to a lot more volatility, a lot more of a choppy market. So, although we’re hoping to have, you know, a positive return in terms of equity markets by the end of 2026 it could be a pretty rough road to get there. So, you know, one of the things that we incorporate with our clients as a bucketing system, right. We have, you know, the assets that are for long-term growth invested. The goal is to not touch those funds throughout the year, or really in the short term, meaning that if we do have a period of time, maybe a few months, where the market’s not productive, we’re not forced to sell out of those accounts and take losses. Where we also have a green bucket, or more of a safety, secure income bucket, where we can draw from during those times when maybe the market is a bit choppier, so diversifying assets, providing flexibility is a big way to get in front of these volatile markets that we could be seeing coming into 2026 which is crazy to say, because this was a pretty volatile year as well, so. So you know it’s our expectation that maybe next year we could see something similar.
Speaker 1 15:03
I think you mentioned diversification, John, and what strikes me as something that really jumps off the page in visiting with the 1000 plus people that we visited with this year is I know I see this a lot in my meetings. I’m curious to see what you think, John, but how many people come into the office thinking that they actually have a very well diversified portfolio, maybe they have an account that has 2030 different mutual funds in it, and then we’re able to do this kind of neat correlation analysis and like overlap analysis that says, hey, you might own three or four different mutual funds, or 20 different mutual funds, but those mutual funds are all holding the same underlying sucks, and so you’re, you think you’re diversified, but you’re actually really not, and that’s actually putting you in harm’s way when it comes to navigating market uncertainty. I know, I see this a lot with my meetings, that people think that they’re diversified, but upon further analysis, they’re not. Are you seeing that too, quite a bit, John?
Speaker 2 16:09
I see it all the time, you know, and even further than that, folks that are considering, you know, bigger companies that are high dividend, dividend paying stocks as being safe investments, you know, certain bonds as being safe investments, but certainly, you know, having too many of your assets correlated in the same direction is a huge risk. A great example of this, as we had a client that we visited with recently, that when we discussed our philosophy on bucketing, green, red, you know, green for safety, red for risk, they had mentioned that they felt like they aligned with that philosophy, and they had actually recently reallocated their accounts to have about half of it in a green bucket and half of it in a red bucket. So that made me really happy that they aligned with the same philosophy. And after doing the analysis, it actually turns out that their portfolio was still 100% in the stock market, what they had done was diversified into some larger cap mutual funds that were actively managed that had a bit more exposure to different sectors of the economy, but still was 100% in the stock market, and when we did a max drawdown analysis to see what the worst case scenario could be on that portfolio, there was somewhere around 70% That means that if we went through another financial crisis, they could have seen their portfolio fall 70% during that period of time. Then it took about five years for us to recover from 0809 So that means that 70% of their portfolio during a time when they needed income could have been affected, and they were thinking that they were diversified and doing the right things, and again, it’s no fault of their own. They were not in this industry, they were doing the best that they could, but it just shows the challenges that retirees have with managing a big bucket of money that they’ve saved over their lifetime and turning that into income in an efficient way with the resources that they have,
Speaker 2 18:01
so far today we have talked about some of the biggest takeaways for 2025 Now we’re looking ahead to 2026 here on Retire Smart Maryland Radio. You’ve got questions about your own portfolio, maybe you’ve got questions about what our advisors just talked about. You know, what is your risk number? Do you even know where you are from a risk factor with that portfolio, you might think you’re diversified, but maybe you’re not. You can grab one of our appointments, no cost, no obligation, and see where you are. 800-653-8404 that’s 800-653-8404 Prime candidate would be somebody sitting on a portfolio, hasn’t started planning yet, think things are diversified, you might not be all right. And also, if you’re halfway down the path and your advisor’s not talking to you about diversification, you grab one of these appointments as well. 800-653-8404 All right, gentlemen, we’ve talked about the markets, we got three more to go.
Speaker 1 18:59
Let’s get into taxes. You know, I think with the passing of the big beautiful bill, and John mentioned that marginal tax rates are the third most favorable in American history right now. How do we go about taking advantage of what the big beautiful bill offered us? And from my point of view, it comes down to one thing: do we want to pay taxes now, or do we want to pay taxes later? And one way to do this is to delve into things like Roth conversions. Okay, a Roth conversion, of course, is when you take your before-tax retirement account, like an IRA, you convert it into a Roth, you pay all those taxes in the year that you convert it, so that you never pay those taxes again. The perspective that we have is if you believe your future tax rate is going to be higher than your current tax rate, then doing a Roth conversion could very well make sense, but I think that is the fundamental question. Where do we. Think taxes are going. Why don’t we pull the panel here? We got three of us. Let’s see if we can find some consensus. Morgan, 10 years from now, do you think taxes are going to be higher or lower?
Speaker 2 20:08
We owe a lot of money, they’re going to be higher.
Speaker 1 20:10
Absolutely, John,
Speaker 2 20:11
with a 38 trillion in debt, much higher. Yeah,
Speaker 1 20:14
much higher. And I tend to agree, most people that we talk to tend to agree. So we’re running into situations where clients might actually have lower income in retirement as they planned, but actually a higher tax rate, and that to me is so backwards. If there’s anything that we can do to reduce the future tax burden, we should be looking at those things right now, while the big beautiful bill is in place. If your advisor isn’t talking to you about it, I think you are missing the mark, and keep in mind, lower income in retirement means that you’re less prepared to handle rising costs. So, John, why don’t you talk about inflation and what the prospect is for inflation, not just in 2026 but also beyond, but more importantly, How do retirees start to plan for higher cost of living?
Speaker 2 21:07
Yeah, when it comes to success and retirement personnel, you say it all the time, the higher the income, the better the outcome, right? So the higher that you can get your income each and every year, as the cost of goods and services increase, the more successful you’re going to be. There was a report that I was reading that suggested, you know, in 2025 the average cup of coffee cost $3.50 They’re probably not going to Starbucks, but you know, about $3.50 If you fast forward to 2055 that’s about 30 years into the future. That same cup of coffee could cost about $11 right? And that’s just on a cup of coffee. You think about other things like your rent, your car, your house, those things are going to skyrocket as well. So, increasing income, you know, investing in the market to try and protect against the rising cost also can help on a portion of your portfolio, but at the end of the day, it’s all about creating additional income out of the money that you had in doing that in a safe way,
Speaker 1 22:04
folks. As we head into 2026 here is the real takeaway: the headlines will shift, but your peace of mind shouldn’t have to. It starts with a phone call, it’s 800-653-8404 You dial that number, you book that free appointment, which is just a conversation to talk about where you stand today, and whether or not you’re on track. You come into the office, we’ll sit down with you, we’ll walk you through a comprehensive planning process, help you design your income plan for life, talk about tax reduction opportunities into the future, understand how much risk you’re taking, whether or not you’re properly diversified, and yes, talk about your legacy, and we’ll get into that after the break. But that phone number is 800-653-8404
Speaker 2 22:52
When we return on Retire Smart Maryland Radio, it’s a new segment, it’s strategy of the week, that’s coming up next, you Welcome back into Retire Smart Maryland Radio, hosted by Prashant Sabapathi and John DeFeo. You can find them at Elite Income Advisors, they’re independent fiduciaries, they’re headquartered in Ellicott City, and they’ve got a satellite office in Annapolis. That team is growing to serve Maryland and beyond when it comes to retirement planning. I’m Morgan Patrick. Pleasure to be on with the advisors. Talk about the importance of being proactive, not reactive, when it comes to your planning, and we’ve had some fun just talking about what has just happened, which is 2025 what we believe is going to happen in 2026 and how to prepare for that. And now we’ve got a new, I guess, a new element for the program, and that’s strategy of the week. So, the question is, Where did this come from? I love it. I think this is a good idea. We can do this every week and have a different strategy, and this is a way that our listeners can kind of build a platform.
Speaker 1 24:09
Yeah, the reason we wanted to do a strategy of the week is going back to that power of perspective and getting the opportunity, and quite frankly, the privilege of sitting with over 1000 people this year. We get to hear about the things that are actually important to people, and I think one of the things that we probably haven’t done enough talking about that we constantly hear from the folks that we visit with is how to plan for your legacy, both just from an operational standpoint, but I think the one that we’ve been hearing the most is from a tax standpoint, so John, let’s shift this thing from outlook to strategy, because you know, even with a great plan, legacy taxes, and these tough kind of, you know, almost like, what should I do with this type of thing decisions, they’re still really heavy parts, and so let’s talk a little. Bit about Roth conversions. I know I touched on it briefly in the last segment, but talk to me about Roth conversions, not so much from the standpoint of planning people’s retirement, but why don’t you talk about that from the standpoint of legacy planning and how to pass wealth onwards after people pass away?
Speaker 2 25:20
Yeah, this is a huge concern for folks with the passing of the Secure Act back in 2019 So, the Secure Act eliminated the stretch IRA rule for beneficiaries, that is where you know if you’d passed away, you left a pretax retirement plan, like an IRA, to your kids, your grandkids, your nieces, your nephews, they could stretch the distributions out over their lifetime based on their life expectancy and make the tax implications a bit more manageable. When that went away, it introduced the 10 year rule. So now our beneficiaries, if it’s your kids, your grandkids, your nieces, your nephews, anybody that’s not your spouse or within 10 years of your age, they now have 10 years to distribute that money, so that we have, you know, folks coming to us saying, “Hey, I’ve saved all of my money into my pre-tax 401 k or thrift savings plan with the federal government. I haven’t had to tap into this. I’m terrified that when I pass away, this will be worth 5, $6 million and my two kids are going to have to take out $3 million a piece over a 10 year period, right. That’s a significant amount of income to take out on an annual basis, on top of whatever our kids, or whoever our beneficiaries are, are already earning throughout their working careers, right. So it presents a huge challenge, that means that the money that we worked hard for and saved is not going entirely to our legacy, you know. A lot of this could be going to the federal government, the state government. You know, I say this all the time. I’m not out here to make my kids rich. In fact, my trust says that they have to be 35 years old before they get anything. You know, they have to be able to establish themselves, be responsible to handle that kind of money. I figure if they get to 35 and they haven’t figured it out by that time, whatever, you know, go have fun. But in all seriousness, if I’m going to leave them money that I worked hard for, I want it to be in the most efficient manner possible, and I want them to get the most of it. I don’t want Uncle Sam taking a piece or more than a piece than he has to. So this is a huge point of concern for folks that have those large pretax plans. So doing Roth conversions reduces the taxable dollars that are passed on to our beneficiaries. In fact, when our beneficiaries inherit Roth accounts, they don’t have to pay any tax at all. They still have a 10 year period to take it out, but if I left my kids all of my money in Roth accounts, they could delay it out for 10 years, let it grow, and cash it all out at one time with no tax implications. So it’s a much more efficient way to transition that wealth, prevent them from having unnecessary tax burdens. It makes me or the person feel better at the end of the day that they did something at a preferential tax environment.
Speaker 1 27:59
How often do we hear this, though? John, hey, if I have $6 million when I pass away, my kids will be able to pay the tax. I mean, they’re inheriting $3 million each in your example. Why should I care, right? I feel like we hear this type of thing all the time. I certainly have my thoughts on it, but I’m curious to hear what you would say to a client who brought that concern forward.
Speaker 2 28:24
I’ve told it to him. I said, then don’t do it right. If you don’t care that your kid has to pay an unnecessary amount of tax, and you’re okay with that going to the federal government, who’s mismanaged the funds that they have for decades, rather than taking care of your kids, your grandkids, your, you know, whoever it is that this money is going to, that’s your prerogative. If everybody has a different objective with their legacy plan, but I’d also remind them of the value that is leaving their legacy, right? The money that they worked hard for, they’re just giving away at the end of the day. If 50% of that goes to the IRS and the state government, but in the day, you can’t change people’s minds. I mean, I had a guy that say, “Hey, look, my kids will be just fine. I really don’t care. I’m not paying the tax if I don’t have to. I paid for their college, I paid for x, y, and z, and that’s okay. But I would say that 90% of the folks that come in reasonably will look at this and say, “No, if I can pay a lower tax today, so that my kids don’t have that burden, I’ll do it. So that’s just my perspective. I don’t know, Eric.
Speaker 1 29:25
I would say it’s a matter of principle to me, it’s a matter of ethics to me, right. It’s it’s this idea that somebody’s going to get the money when they’re gone. It’s either going to be people you care about, or charities that you care about or causes that are important to you, or it’s going to be the government who you mentioned it, 38 and a half trillion dollars of national debt. I’d argue I’m a much better steward of my money than the federal government would ever be, right. And so to me it is a matter of morals and a matter of ethics.
Speaker 2 30:00
And personally I think it’s un-American to have to pay any more taxes than is absolutely necessary, and that is what this planning is really all about. Yeah, I was going to say, guys, it’s these are some pretty simple steps as far as the planning process, being proactive with your tax planning, and not taking the avenue of I’m just gonna let my kids deal with it, because if they’re not prepared and they don’t have a plan, just as you both have illustrated, the government’s going to take, so why wouldn’t you plan to give them what you owe, but don’t give any more than that,
Speaker 1 30:39
you know, I think it’s a good question, and now you’re asking why. You know, why wouldn’t you do this? And I’ll tell you the reason why people don’t do it is they don’t even know where to start, or they think that, hey, I’m not at a level of wealth that this actually should matter. And I’m here to tell you this type of conversation we have with people who have a quarter of a million dollars, we have people that have $2 million that have this conversation. I just had this conversation just earlier this week with somebody that had nine and a half million dollars, right. And so it actually does not matter what wealth level you are actually at. This is important stuff, and I’d argue, if your advisor isn’t proactively having this conversation with you, I think that there’s a gap in your financial and your legacy plan, and it actually transitions here to a scenario, because as a part of the strategy of the week, I think we can bleed into a hypothetical scenario here, but let’s say we have a couple in their early 60s that’s getting ready to retire, let’s say in the next two years. Let’s say they have a rental property out of state for which they purchase for their child when the child was in college. John, what is the best way to analyze whether renting the property for additional income is good for their retirement versus selling the property and investing the proceeds, and then if you want to take that one step further, before we get to the break here, real quick, is what is the impact of holding that real estate and potentially getting a step up for legacy planning purposes in the future.
Speaker 2 32:17
Hey, I think it comes down to four things, right? What is your income going to look like in retirement. What tax implications would you have on the sale of this property? What’s the investment strategy if you do sell it and put those funds to work? Then what are your legacy goals? Do you want to be able to give your kids or your grandkids, whoever you’re leaving your money to, an efficient legacy transfer? I think that’s what it comes down to. If you need income in retirement and you don’t have an investment strategy that’s going to provide you with that income on a safe basis, rental income can help. I would also argue we found ways to generate income that has a higher rate of return than a lot of rentals pay out, but you know, if you don’t have a way to do that and you’re getting a higher rate of return or return on investment from your rental, maybe it makes sense to take the income and build additional foundational income if you have a low cost basis on the property and you sell it and it’s going to incur a significant tax event. Could make sense to hold that and take the income from the rental. When it comes to legacy, if you hold that property until you pass away and you leave this to your beneficiaries, they actually get to step up the cost basis of what you purchased the home for to the market value at the time you pass away, so all of those capital gains and taxes that could be incurred on a sale are eliminated, and it’s a more efficient way to do so. So, I think you have to look at those, those four different things, figure out what’s the best for you, and if you’re still unsure, give us a visit. Happy to give you our perspective.
Speaker 1 33:41
800-653-8404 Reach out, schedule that legacy strategy session. There’s no pressure, there’s just urgency to make sure that your legacy plan is everything that you want it to be. 800-653-8404 Corby,
Speaker 2 33:58
we’ve got more Retire Smart Maryland Radio coming up. We are back for the final segment on Retire Smart Maryland Radio. Your hosts are Prashant Sabapathi and John DeFeo. You can find them in Ellicott City at the headquarters, Elite Income Advisors. There’s a satellite office in Annapolis for your convenience as well. And both are independent fiduciaries, and they’re part of a larger team that’s serving Maryland and the surrounding areas, helping you with your retirement planning. I’m Morgan Patrick. Absolute pleasure to be on and talk about all these different topics, and listen, everybody’s concerned about their money, and if you’re sitting on a portfolio, you’re very concerned, because you don’t have a plan. We give you an opportunity, no cost, no obligation, to get on the calendar with Elite Income Advisors. We’ll tell you how to get in here and do that here shortly, but also, there again, no cost, no obli. Education, and if you’re halfway down the path, and you need a second opinion, hey, it’s okay, you can grab one here as well. We’ll give you the phone number, you can grab an appointment, you can come in and get some peace of mind. So, already today, guys, we’ve talked about the biggest takeaways for 2025 We’ve looked ahead and taken a look at 2026 and what we could possibly expect. We’ve talked about that strategy of the week. I love the new segment, I love that, and we’ve given a scenario as well. But now we are going to kind of just go over our entire show and just have some closing thoughts on what we’ve talked about today, and maybe one thing listeners should review this week when they can do this on their own.
Speaker 1 35:41
I think, as we wrap up today, one thing that comes to mind for me, in terms of what to review for this week, is your income plan, right? I think it’s all about having a paycheck in retirement. If you think about what your financial life really is, it’s just money in and money out, right? For your entire career, it is just paychecks coming in, it’s expenses going out, and you try your best to save as much money as you possibly can to get to retirement, but when you get to retirement, the concept of money in and money out does not change. It is still about money coming in, money going out. The only thing that changes is where the money in comes from. If it’s not coming from your paycheck, it has to come from somewhere else, whether it’s a pension, social security, or your retirement savings, for 1k IRA, TSP. And so, John, let’s say I’m a brand new client, I’m coming into the office, sitting down with you for the very first time. Walk me through how you coach me or counsel me on how to reconcile my income plan and figure out where is my income going to come from in retirement.
Speaker 2 37:00
Yeah, I mean, I think to do this, the first thing we have to identify are the variables of that equation that you just mentioned, right? Where is the money coming in from that you have foundationally, and where is the money going? So, what type of retirement do you want to live? What is your lifestyle going to look like, and ultimately, what is it going to cost you? We have to build in things like leisure and travel, what do you want to be doing for fun? Healthcare costs, between Medicare supplement plans, maybe a government program, whatever it is that you have available, your day-to-day expenses, right? All this has to be calculated to figure out what you want to bring in after taxes every month, and then we put what you know that you will have for income on a foundational basis against that, so that’s social security, that’s a pension. Maybe you have rental income on a property that you’re not selling, you know, maybe you have an annuity that you’ve, you’ve invested into. So we identify those sources of income and we determine if there’s a gap there. Right, I’d say that the majority of folks that visit with us have some sort of gap between their foundational income sources and their monthly target, so where do we pull that money from? And I think that’s a big question that people don’t have an answer to, and it actually it amazes me how many people visit with us that have an advisor already that have not had this conversation will ask that question, have you discussed where to pull your income from, and they say, well, no, we talk about the investment strategy, but we don’t talk about where I’m going to take income from, or how, and I think if you’re not having that conversation with your advisor, how can you truly be confident in your financial plan? So to identify that, you know, how do we take whatever amount of money you need to fill that gap safely, ensuring that you still have growth in your money, but you can take what you need without risk. That’s a big question. So, that’s something that we have to build into the plan. But to start, we do what I just said, we identify what’s coming in, what’s going out, what the gap is, and then from there, maybe Prashant, you can talk a little bit about our philosophy with, with how to actually produce that type of income efficiently.
Speaker 1 39:04
Yeah, you know, I was visiting with a client, doing a review. I brought this client on last year. They earn about 175,000 through work. Right now, they’ve done a really great job saving money in the 401 ks and IRAs. They had a total of about $1.8 million dollars. Okay, so really did a great job in accumulating, but still going to work, actually, for another about four or five years. Okay, and so when they came in, we went through that planning process, and I asked them, What should your target income be in order to have the most fulfilling version of your retirement, she told me that number needed to be $8,000 per month after taxes, so she wanted to be taking home $8,000 per month. First thing we did, we examined foundational income, just like John said. Foundational income is any income that has total certain. So we think about things like pensions, annuities, social security, so we totaled up all of their foundational income, it got them to $4,500 per month in retirement, and we needed to get to 8000 in order to meet the target, so we had a gap in the income of $3,500 per month, so we looked at the $1.8 million that they had, and what we found is that that 1.8 million was all in a red bucket of money, just means it has risk, it’s all invested, it could go up 1.8 could easily become 2.1 1.8 could just as easily become 1.4 if the market went down, so what we had this couple do is we had them take $550,000 of their money from the 1.8 and we reposition that in a totally safe bucket of money, we actually had them put it into an income generating annuity, which five years from now that income generating annuity will pay out to them $42,000 per year, which, if you take that as monthly, that’s $3,500 per month guaranteed, and that income will come in every month for as long as either of the spouses is living, and so, how I presented this to them is, I said, look, part of the issue is you don’t want to lose money in the red bucket and have to pull the 3500 out at the same time, so by protecting this 550,000 it effectively means we’re closing the income gap that you have, and we’re doing so with 100% certainty, which means the remaining money that we have in the account in the red bucket, which is going to be somewhere around $1.4 million $1.3 million that money can stay in that red bucket, compound and grow, and you will never have to worry about selling it at a low point when the market goes down. These stories are so powerful, where you can take 1/3 of a client’s assets and create 100% of their income needs in retirement, and I’ll tell you what, guys, if you had all the income you could ever want, or that you could ever need in retirement, would that ease some burden? Would that ease some anxiety for you as you plan for retirement?
Speaker 2 42:30
Oh, absolutely. Confidence, peace of mind, that would, that would do it.
Speaker 1 42:34
Morgan, this is what we call a no-brainer. Okay, if you get to retirement and you don’t know where your paycheck is coming from, you’re going to be looking at your accounts every single day, and one thing I’ve learned in counseling probably over 1000 people through this, the deeper and deeper you get into retirement, the more sensitive your emotions become to losing money. If you were 75 years old and you experience a 30% loss in your portfolio, the more tied to that number that you have in that 401 k IRA, you’re going to be, and it’s going to hurt more the further you are into retirement, and so at some point losses will hurt you more than gains help you, I believe, and at some point it is not about getting the highest rate of return possible. It is simply about protecting a lifetime’s worth of hard work and wealth, and I think when you bucket your money, that’s what gives you the opportunity to do just that.
Speaker 2 43:37
And Prashant, to piggyback on that, I mean, you know, we talk a lot about peace of mind and retirement, and the importance of getting your time back, right? I mean, the one thing that you don’t have as much of in retirement is time, time for the market to recover, but also time on this earth, right? And you want to be spending that time doing things that you enjoy, not stressing about where you’re going to get your next paycheck, so that’s one of the things that we talk through, is how do we create peace of mind in our retirees or our clients’ lives, and this is a way that we do it. There is no worry about where that paycheck is coming from. The market goes down, they’re okay, they’re not maybe not okay with it, but they’re more comfortable with the fact that they don’t have to pull money out, and they can look at that as their long-term legacy bucket, right. So we’re truly being able to give back time to folks to spend that time doing what they want to do with their families, traveling every minute that you’re spent worrying about the market, about where your next dollar is coming from, is one less minute that you’re spending with your family or enjoying yourselves presently with them.
Speaker 1 44:40
So I think the question you need to ask either yourself, if you’re a do-it-yourselfer, or your advisor is, Where’s my paycheck going to come from when I get to retirement? And number two, How certain is it that that paycheck will show up for me every month? Number three. How is that paycheck in retirement going to be taxed, whether it’s from a 401 k, Roth IRA, social security, or pension? And number four, what happens to the paycheck if I pass away? Does my spouse get all of it, some of it, or none of it? Folks, if you can answer these four questions about your retirement income, I’d argue you’re probably 80% of the way to having a really good, solid financial plan. Yet it is so surprising how many people cannot answer this question after working with their advisor for five years, seven years, 10 years. If you can’t answer any one of those four questions, last opportunity for you to pick up the phone and give us a call. The phone number, folks. It’s 800-653-8404 That’s 800-653-8404 You visit with us at one of our offices in Ellicott City or Annapolis. We will sit down with you, take you through that comprehensive income planning process. We’ll help you understand what your monthly income target should be. What is your foundational income look like? Do you have a gap in the income, and how do you solve it, all while taking into account increases of cost of living and the threat of rising taxes. That phone number again, last opportunity for today’s program: 800-653-8404 Call now.
Speaker 2 46:17
Good show. Retire Smart, Maryland Radio, another edition in the book.
Speaker 3 46:30
Finally guarantees are subject to the claims of 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 legally factual and up to date, but we do not guarantee its accuracy, and it should not be regarded as complete analysis of the subjects discussed. Discussion should not be construed as an offer to buy or sell, or a solicitation of an offer to buy or sell the investments mentioned. Professional advisors should be consulted before implementing any of the strategies discussed. Investments involve varying degrees of risk, and there can be no assurance that any specific investment or strategy will be suitable or profitable for a client’s portfolio. Investment advisory services offered through Elite Income Advisors Incorporated, a registered investment advisor located in Ellicott City, Maryland. The firm only conducts business in states and jurisdictions in which they are properly registered or exempt from registration requirements. Registration is not an endorsement of the firm by securities regulators, and does not mean the advisors achieve a specific level of skill or ability. Content should not be viewed as personalized financial advice. Insurance and annuity products are sold separately through Retirement Planning Services Incorporated. Neither firm is affiliated with or endorsed by the Social Security Administration or the IRS. Social Security, Medicare, pension, and tax rules are subject to change at any time. Insurance and annuity products are sold separately through Retirement Planning Services Incorporated. President Ozer Culhagil, Prashant Sabapathi, and Jonathan DeFeo received commissions for the sale of insurance products as insurance agents for Tower 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 Retires Smart Maryland. The program is paid production of Elite Income Advisors.
