Speaker 1 0:02
Are baby boomers sabotaging their own retirement without even realizing it? Today we’re unpacking six surprising money mistakes, and how you or your clients can avoid them before it’s too late.
Announcer 0:14
Welcome in to Retire Smart Maryland Radio with Prashant Sabapathi.
Speaker 2 0:21
Welcome in to Retire Smart Maryland Radio. Your host, John DeFeo. You can find him at Elite Income Advisors, headquartered Ellicott City, and a satellite office in Annapolis for your convenience. Independent fiduciary and part of a team at Elite Income Advisors. I’m Morgan Patrick. My pleasure to go back and forth with the advisors each and every week about the importance of just being ready for retirement, having a plan, not just showing up with a portfolio and knocking on retirement’s door and saying now what, working with a fiduciary firm, you know, it’s being proactive as opposed to reactive, being ready for your retirement, and as we always do, before we dive in on the baby boomers, we’re going to talk about that first. John, how was the week?
Speaker 1 1:05
It’s been good. It’s been hot as we enter into these summer months, a busy office as usual, getting out and doing these seminars in the community, some dinner seminars, some weekend seminars, trying to again get in front of as many people as possible, help folks make good retirement decisions, so again, pretty pretty steady week. No complaints here, you know. Just ready to continue moving forward and bringing more people into the office the best we can.
Speaker 2 1:32
Well, it’s important to plan for your retirement, and again, we often say that retirement doesn’t happen in a vacuum, and if you’re paying any attention to anything that’s going in the on in the world today, you understand what we’re talking about. It’s going to influence what you do in retirement. So, make sure you have a plan. So, we want to kind of talk to the baby boomers as they settle into retirement. You guys are out there, and a lot of you are heading in at 10,000 per day, and you’re there or you’re on the doorstep discovering that even decades of savings, that’s what we’ve been doing, it might not guarantee financial security. So think about all the things are going to impact your rising healthcare costs. We’re living longer, there’s longevity for you. The market is the market, it goes up, it goes down, it’s volatile, and policy changes right there in the nation’s capital. It’s creating a retirement landscape that has pitfalls, and not just pitfalls, there are some new ones out there. So, we wanted to talk about maybe some of the common financial missteps that boomers are making, so we can avoid them. Right, we are learning from history. So, here’s the first one, and we’ll talk about this, because we want to make sure your plan is steady and safe as you move towards retirement. Are boomers? This is a first question for you, John. Are boomers overestimating their social security? I know we lean on it, but are we overestimating it?
Speaker 1 2:56
I think it happens more often than not. I think we see that a lot of times in our office where folks will come in and assume that their social security benefit will provide, you know, a more substantial amount of income than it actually does. Think there was a study in 2024 the average monthly social security benefit was only around $1,900 per month. That’s barely $23,000 a year. That’s, you know, hardly enough for a very comfortable lifestyle, especially as inflation erodes away purchasing power. So, you know, we do see folks that do, I guess, overestimate how much they’re going to receive and how much that will cover, you know, but at the end of the day, having a plan in place is what it’s all about, right? So, we have folks that will come in, we talk about what their social security will provide, we talk about what their lifestyle requires to live fulfilling, and go from there. So it’s very feasible to see this happen. Got to get in front of you, got to talk to somebody to ensure that you do have something set up as a fail-safe. If social security isn’t covering all of your income, how are you going to supplement what you need to live the lifestyle that you want?
Speaker 2 4:04
Retire Smart Maryland Radio. We’re powered by Elite Income Advisors, that’s where you can find John and the team, and it’s always about helping their clients get ready for retirement. And we’re just kind of hitting the boomers, because these are some common missteps that you know the Boom Boomer generation is making that could really be detrimental to retirement, but there are things that you can do to correct some of these, and it will make a big difference in your retirement. So, again, overestimating social security and what that’s going to mean to your retirement, don’t do that. Delaying contributions, we often talk about being proactive. You need to start this as early as possible. If you delay it, it could really hurt you.
Speaker 1 4:47
It absolutely can. I mean, the compounding effect of interest and growth is incredible. You know, I think that we see this a lot, where folks got started late in the game, either because they were uneducated about the power. Saving, or maybe they were unable to. Right? I know you know I personally seen this in some of my family members and friends’ lives, where they were struggling just to put food on the table for the first, you know, 15 years, 20 years of their career, as they’ve had kids, and you know, they didn’t get to the point where they could really start saving until they were in their 40s, you know. So that’s a difficult situation to be in, but if you’re not in that situation, if you are young, you don’t have kids yet, you’re starting off with your career, it’s very important to start that savings. I mean, there’s a Vanguard study that showed that even contributing $500 a month, starting at age 25 could grow to over a million dollars by the time that you retired. Again, that’s just $500 a month, that’s pretty doable, you know, for most people. I would hope at that age, depending on what your lifestyle, if you have kids, if you have other things going on, it might not be, but if you can swing that, if you can pay yourself first, it’s incredible what that can do for you in the future, and potentially provide you with a much more comfortable and earlier retirement than you would have anticipated,
Speaker 2 6:00
hitting some common financial missteps at the Boomer generation. They are making these missteps, and we’re going to learn from this. And obviously, if you’re about to head off into retirement, hopefully you’re not on this track. We talked about overestimating Social Security and how much that’s going to play in your retirement. And then if you are delaying your contributions, I mean, it can read the compounding interesting. We talk about it all the time. The more you delay, the less of that you’re going to have. I want to jump to this next one. Are boomers taking too much risk, or the flip side of that is they’re scared and they stay on the sidelines.
Speaker 1 6:37
I think more often than not, with the boomers, we’re seeing them in more conservative investments than the aggressive ones. They have too much cash in hand, you know. They’re nervous about investing, but we have certainly seen the case where there’s way too much risk in the market with these folks as they’re in retirement. And I think it’s important to understand the balance of that. Right? I think it’s, it is important to have money in cash, and you know, liquid assets that you can use quickly for emergencies, for your daily expenses, but it’s also important to have some of that money in the market, and I think, you know, looking at the correct balance of that is important. We’re very big on the bucketing strategy here at our office, where you have different buckets of money with different goals and different investment strategies, that way you’re not taking on an incredible amount of risk with money that you might need in the short term, and vice versa, you’re not preventing growth on all of your assets when you don’t need all of them right away. So, I think having that balance is important. Certainly, we’ve seen it where there’s too much risk being taken. Certainly, we’ve seen it when there’s not enough risk being taken. Very rarely is the proper balance in place when they come into our office, and that’s our job to get them there.
Speaker 2 7:44
Okay, folks, we’re not, we’re not on the radio just to hear ourselves talk. We’re here to help. An opportunity to grab an appointment with Elite Income Advisors is right now. These are complimentary. John, kind of walk us through what’s going to happen.
Speaker 1 7:57
Yeah, you’re going to come in. It’s just a conversation. We’re just going to talk through what your goals are, what you’re looking to accomplish in retirement. We’re going to build out an income plan to identify where that income comes from, what your lifestyle will cost, how we supplement the income, how we navigate the tax environment, where we’re going to pull funds from. We’ll talk about risk management, asset management, talk about your estate plan, organize all of that into one holistic financial plan that you can carry with you and keep updated on a regular basis. So, pretty intuitive, you know. A great office, beautiful office here in Ellicott City. Love to have you.
Speaker 2 8:32
Okay, there you go. We’ve got 10 appointments, we call it our top 10. All you’ve got to do to grab one is call this number: 800-653-8404 that’s 800-653-8404 10 spots, when they’re gone, they’re gone. There’s no obligation here. You’re leaving the checkbook at home. 800-653-8404 See if you’re on track for retirement. 800-653-8404 When we return on Retire Smart Maryland Radio, the first year of retirement can make or break your long-term financial health. What do we mean? Well, we’ll tell you about it when we return. Welcome back into Retire Smart Maryland Radio. Your host is John DeFeo. You can find him at Elite Income Advisors. They’re headquartered Ellicott City Satellite Office in Annapolis for your convenience. And John is an independent fiduciary. It’s all about helping you get ready for your retirement. There’s going to be an opportunity to get on the calendar with Elite Income Advisors. Stay tuned for that. These are complimentary appointments. See if you’re on track for your retirement. So, retirement isn’t just about reaching that old finish line, right? It’s about thriving in the next chapter. We don’t want to survive, we want to thrive. But the first year of retirement can really be full of some landmines, some financial landmines, like let’s say overspending. Maybe there’s a tax surprise. There’s some emotional decisions that have to be made. So today we kind of wanted to get into Kiplinger’s first year of retirement rule. Now this a guidepost designed to help you make smart, intentional choices as you step into retirement. So if you’re a few years out from retirement, take some notes, right? If you’re in the middle of your first year, really listen, because you could be either making these mistakes or about to. All right, so the retirement honeymoon phase. John, I mean, this is obviously – we know what honeymoon means, we’re excited, but dive in on the honeymoon phase.
Speaker 1 10:38
Yeah, the concept behind this is, you know, the first year of retirement, a lot of people are excited, you know, they’ve got a lot of things they’ve put off that they want to do, maybe travel, maybe some hobbies, home projects, renovations, you know, a lot of things that you maybe wanted to do over the past couple of years, you’ve been gearing up for, and they end up blowing through a significant amount of money in that first year, and for some people this is perfectly fine. If you have saved and intentionally designed your financial plan to have a surplus of spending in that first year, then we’re okay with that. But if we’ve not designed that to be a part of the plan, and we’re just assuming that there’s a level expense over your retirement time frame, and in the first year, you triple that. That can certainly cause problems, you know. That first 12 months, I would really say the first three to four years of your retirement are some of the most important when it comes to the spending. You know, those are what are we call your go-go years. You have your go-go years, you have your slow go years, and you have your no-go years, right? I’m sure the audience have heard of this concept. Well, in those first, you know, five to 10 years, you’re probably going to be spending a considerable amount more than you’re going to later in life. And you know what the market does in those first four or five years is extremely important. We’ll talk about this here in a moment, when it comes to sequence of returns risk, but again, what you spend in those first couple of years can make or break the plan, so having an idea of what it would be, maybe spreading some of those projects out, some of those trips out, trying to minimize the expense in the first year is ideal. Now, again, if you have set away that cash specifically for that reason, and it’s part of the plan, and it’s been measured, then we have no problem with that, but again, it has to be a part of it in that breadth.
Speaker 2 12:24
I mean, so important to plan for retirement, but also understand that there are going to be things you’re going to come into your path, so to speak. In that first year of retirement, we’re discussing Kiplinger’s first year of retirement rules. So, these are just good things to kind of jot down, you understand that it’s a honeymoon phase. The overall rule, explain. Can you give us the explanation behind Kiplinger’s rule?
Speaker 1 12:51
Yeah, I mean it’s just simply to try and delay some of these financial decisions, these major financial decisions in the first year, if you can, right? So instead of doing the home remodel, taking the big trip to Europe, you know, starting the business all in one year, maybe do it in steps, right? Minimize the expense up front if you can, give yourself some time to adjust to retirement financially and emotionally, right? I mean, it’s exciting, there’s a lot that you want to do, you also don’t want to get out there and do it all, all at once. Sure, you don’t want to be able to spread that fun out, that enjoyment out, and also don’t want to burn out, right? What if that first year of retirement, you, you start a business, you plan a huge trip, you start on a home remodel, and then you don’t have the time to put attention and detail into all three of those things to the best of your ability. The business doesn’t work out the way that you wanted to. The home remodel doesn’t look as well as you’d hoped, and the trip wasn’t planned accordingly, right? You’re being spread too thin, so try to make retirement fulfilling, but also try to make it, you know, an enjoyable slow ride if you can. Yeah, I mean, that
Speaker 2 13:56
I was just going to jump in and say that first year, it’s like, you know, you know you’re going to go swimming, right? There’s the retirement pool, but that first year you just kind of walk up and you kind of dip your toe in, see if you like the temperature of the water, and then maybe you go in ankle deep, you go into that zero entry into the pool where you can kind of wade in and kind of see if it’s to your liking. I also equate it to the discussions we’ve had before, John, and that is practice before you get to retirement. Make sure you’re ready for it, and not just all of a sudden cold turkey. Hey, I’m here, you know, and a good, you know, you can have that spending plan, and you can kind of ease your way in while you’re still working to see if it’s going to be a good fit for you. So, again, the honeymoon phase, just the overall first year of retirement rule, and you mentioned this, so I want you to hit this hard, avoiding sequence of returns risk.
Speaker 1 14:51
Yeah, this is this is huge. We preach this a very, very fair amount. I mean, sequence of returns risk is the risk that the order of your. Turns of your investments over time are not the way that you’d hope them to be, right. So, maybe you head into retirement, and the first four years of retirement are down years in the market, right. We saw that in night, was it in 2000 2001 during the.com crash. You know, that was probably one of the worst periods of time in history to retire, and you know, if you start out retirement and the first four through the first four years are negative and you’re forced to pull that money out of your investments in a down market that significantly affects your plan, right? Because now you have less shares to recover when the market does bounce back, you’ve been taking money out while it’s down, it’s not an ideal scenario, so that’s why I mentioned those first three to four years can make or break your retirement plan. If you head into a bear market in retirement and you’re taking that money out, you can’t call BGE and say, “Hey, sorry, I can’t pay the bill this month, the market’s down. Right? You’re still required to pull that money, you’re limiting your chances to recover when the market does bounce back. So, there are ways to get in front of that, and the way that we look at that again is through bucketing, designing your income to come from assets that aren’t tied to the market, that there is no volatility, that you have certainty in the income. So that’s how we typically view that, getting in front of the sequence of returns risk, but nonetheless it can certainly derail plans if folks don’t have their plans set up in this fashion, and you’re 100% invested in the market in retirement, the sequence of returns, though the way that your returns actually come through your portfolio, can absolutely affect your success down the road. So, again, you know, even more importantly, if you have a really bad first year of retirement and you have a significant cost to retirement that year huge derailment that can happen, so we don’t like to see that. If we can, getting in front of that by bucketing money, creating non-market tied sources of income are the best way to do that in our opinion.
Speaker 2 16:54
Yeah, I mean, have the plan, work with a fiduciary firm, you have it mapped out before you get to retirement, and then during that first year, it’s not like you’re on an island by yourself. I mean, you’ve got a fiduciary firm working with you that has created this plan for you, and again, it’s two-way street as far as communication goes. Having that, that’s called confidence, knowing that you’re working with a group that has your best interest right up front. All right, so opportunity to get on the calendar with elite income advisors. It’s ongoing during the course of this show. These are complimentary appointments, meaning you leave the checkbook at home. It also means that you’re not obligated to become a client if you get one of these appointments. We call it our top 10. This is a great way to test drive elite income advisors. And again, meet with John Prashant Ozzie, I mean they’ve got the team there and it’s growing daily, it seems to service the area and get you guys ready for retirement. So, how do you grab one of these top 10 appointments? You call this number 800-653-8404 that’s 800-653-8404 Remember, no cost to this, and there’s no obligation to this, and they’re not agreeing to take you as a client. This is a test drive, 800-653-8404 So, back to it, Kiplinger’s first year of retirement rules. So, we’ve talked about the honeymoon phase, we’ve explained the rule to you, we’ve talked about avoiding sequence of returns risk is a danger, and then again, emotional. This is the next one, emotional versus financial decisions, but we get so caught up in the numbers. John, this is a very emotional
Speaker 3 18:30
time,
Speaker 1 18:30
100% I mean, realistically, we make decisions emotionally, not rationally, when it comes to money, right? We see this time and time again when it comes to selling at the wrong times or buying at the wrong times in the market, making the decisions based on how we’re feeling at that time. It’s extremely important to have an objective opinion or an objective outlook on your finances when it comes to that plan, and that’s why working with the fiduciary is so important. We’re able to eliminate the emotion, it’s not our plan, it’s your plan, but we can look at it objectively and look at what’s the best for you. A great example of this would be, you know, again, client that we have that is getting ready to retire at the end of the year did a pretty good job saving over their lifetime. They just hit a number that they were hoping to reach prior to retirement, they had invested their money pretty aggressively, right over their lifetime. It had been primarily equities that had served them very well, and they were looking to hit that number, and they hit it at the beginning of the year, and they were excited about it, and said, “Hey, this is the number I needed to hit. I’m going to retire at the end of this year. I made it, and they, you know, when we suggested, “Hey, that sounds great, let’s go ahead and de-risk some of this money, let’s not put all of this in equities and 100% in the stock market. Let’s lose some of this, you know. They said, actually, I kind of want to get even further now. I want to go to the, you know, from 2 million to 2.2 5 million. I want to see if I can keep getting more. I want to see if I can keep earning more money in the account. What happened was the tariffs were announced and he lost probably. Be you know 15% of his portfolio in a matter of three days, and it wet his pants, right? He said that wasn’t what I was hoping for, and you know it just goes to tell that you know it was an emotional decision, that was I’m winning the game, but I’m still going to keep playing, right, and that can happen quite often. The opposite can also happen where you sell out prematurely and do the wrong thing there, so it’s important to have somebody there to keep you honest, to keep you an objective opinion on that, and prevent those types of decisions. One other thing that we see here, that people get so excited about retirement that they want to reward themselves immediately, and that’s where they go out and spend all of that money. Again, a slow and steady retirement typically is a more sustainable one, so try and balance the emotions. If you have a hard time with it, then it’s certainly a time to reach out to a fiduciary who can kind of keep those calm and reassure you of the plan and how it works.
Speaker 2 20:50
Kiplinger, first year of retirement, and their rule, and again, it just kind of keeps you on track, makes you aware that, guess what, you’re not alone. These things can happen, and if you are overzealous in that first year, it can do some serious damage to your retirement. If you’ve got any questions about where you currently sit with your plan, maybe you’re about to enter into retirement and you’re sitting there on a portfolio, have a plan, work with a fiduciary firm. We’ve got an opportunity for you right now to get on the calendar with elite income advisors. John, tell us, we’ve got 10 appointments. We call it our top 10. What’s going to happen if they call the number?
Speaker 1 21:26
Call the number. We’re going to discuss what your goals and concerns are. We’re going to see if you’re a good fit to come into our office, and if so, we’re going to get you on our calendar. We’re going to go through your existing financial plan, if you have one. If not, we’re going to talk to you about what your goals are, when that retirement timeframe is. We’re going to figure out what retirement costs you build out a lifetime income plan that addresses the volatility in your investments, ensures you have a secure income. We’re going to address the taxes that could potentially be facing you now or in the future. We’ll go through your estate and legacy plans, partnering with our in-house CPAs, the attorneys that we work closely with, in-house Medicare specialists, all of that included in a holistic financial plan. So, lots we can do here for you. Financial headquarters here to lead income.
Speaker 2 22:11
10 appointments, they are no cost, no obligation. Call now: 800-653-8404 Get into our top 10, grab one of these complimentary appointments. Find out if you’re on track for retirement. 800-653-8404 When we return, a former president has some wise words. I think you’ll be shocked. That’s coming up next, you Retire Smart Maryland Radio, hosted by John DeFeo. You can find him at Elite Income Advisors. They’re headquartered at Ellicott City, and they’ve got a satellite office in Annapolis for your convenience. He’s an independent fiduciary, and again, a team of advisors at Elite helping you get ready for your retirement. There’s going to be an opportunity to get on the calendar with Elite Income Advisors, and the appointments we open up during the radio show. They’re complimentary, meaning you leave the checkbook at home, meaning you’re not obligated to become a client. They’re not going to try to sell you anything. This is a great way to test drive Elite Income Advisors, see if it’s a good fit. You can always go to the website. It’s a great resource for you, Elite Income advisors.com That’s Elite Income advisors.com I’m Morgan Patrick. My pleasure to jump on with the advisors each and every week and talk about the importance of just being ready for what is a very big day, your retirement day and beyond. So, quick question for our listeners, How many of you out there remember, and since we’re in DC, I know you do. Richard Nixon. Well, how do we feel about this former President Richard Nixon? You remember his nickname, John? Tricky Dick. Tricky Dick. Well, he might not have been the most likable guy, but he was actually a pretty smart guy, Duke educated, by the way, and in fact he had some brilliant things to say about retirement. Listen to this. The
Speaker 3 24:09
unhappiest people of the world are those in the watering places, the international watering places, like the South Coast of France and Newport, Palm Springs and Palm Beach, going to parties every night, playing golf every afternoon, then bridge, drinking too much, talking too much, thinking too little, retired, no purpose. And so, well, I know there are those who totally would disagree with us and say, gee boy, if I could just be a millionaire, that would be the most wonderful thing. If I could just not have to work every day, if I could just be out fishing or hunting or playing golf or traveling, that’d be the most wonderful life in the world. They don’t know life, because what makes life mean something is. Purpose, a goal, the battle, the struggle, even if you don’t win it.
Speaker 1 25:05
Wow, I mean, we’re talking about an old clip from President Richard Nixon, but it really kind of hits home on retirement. Just your thoughts on that statement alone. And, of course, I don’t think Richard Nixon was sitting there playing piano, but the piano did accompany that little clip. But just your thoughts, John. Yeah, I mean, at first it sounded pretty good. I was kind of curious, how you know those were the unhappiest people, but I think it does make sense. I mean, in all seriousness, you know, you want to have purpose in retirement. It’s not just about how much money you have. Certainly, money does provide opportunities, and it does help you do things that maybe you’d like to do, but it’s not everything. And I think that having a purpose is extremely important, whether it’s early in life, later in life, you know, finding your purpose is extremely important. I think he’s very right. I mean, you see some of the wealthiest people out there. I mean, look at some of these celebrities, some of these politicians that get into, you know, serious drug problems and serious mental illness, they have all the money that you could think of, but they didn’t actually find their purpose, and they are extremely unhappy. So, I’ve seen some of the most happy, content people with no money, right? So, it just depends on your mentality, where you stand, but, but I do agree. I mean, I think that having purpose is much more important at the end of the day.
Speaker 2 26:23
Well, and we talk about it all the time, you plan for your retirement, you’re worried about your numbers, what your finances are going to be, and you are successful in that category, you plan for it, you’re ready for it, and the most important thing, you can pay for it, but then you get into retirement, and then maybe a year in, maybe even sooner than that, you’re like, okay, now what? I worked my entire life to get here, so you got to find the purpose. So we’ve got some pretty radical examples we’re going to go over today about, you know, you know, retirees that kind of redefined their life, and we’re talking about later in life, proving former President Nixon’s point in some astonishing ways. And the first one is absolutely mind blowing, and that is Nelson Mandela.
Speaker 1 27:15
Oh, yeah, I mean, he was fantastic, he was, you know, a crucial figure in human rights movements in South Africa, you know, he was in prison for 27 years, right? That’s a very long time to be in prison. And when he got out, finally, at age 75 you’d think that after 27 years in prison, you’d just want to live your life, enjoy it, maybe have a quiet, you know, quite peaceful, you know, last few years, but no, he ended up running for president, became president of South Africa at age 75 you know, used his final years to establish the Mandela Foundation to promote peace globally, you know, so he took that opportunity to do more and give back to the community and the country that he was from, the same country that imprisoned him for 27 years, which is just outstanding, the way that he did that. I mean,
Speaker 2 28:03
think about it, you’re in prison that long, 27 years wrong and wrongly imprisoned, and you get out and what would be most people’s normal reaction, that would be anger. He went the opposite route. Great movie out there, Invictus, Matt Damon is in this movie. Morgan Freeman plays Nelson Mandela. It’s a rugby movie, but it’s more about the struggle when Nelson Mandela took over, and he felt like it was important for South Africa as a country to hold on to the Springboks, which is the national rugby team. Now you know there was part of the country that wanted the name changed because it represented the past, but Mandela was one of the ones that said, “Look, we need to unite the country, and they love the Springboks, and so he wanted that to happen, and then Matt Damon played the captain on that team, and it was just a really, really good story, but it sheds light on what Nelson Mandela was able to do late in life, and that’s what we’re talking about. We’re talking about purpose, I mean, that is an extreme example, but it also sheds light on things that retirees can be doing that will give them purpose and meaning late in life. So, the next example that we have is Michelangelo, and I did not know this, but these stats are pretty impressive.
Speaker 1 29:32
Yeah, no, absolutely. I mean, Michelangelo was, you know, still working on St. Peter’s Basilica at age 88 right? So, he was still in charge, and oversaw the construction of that famous church, and you know, he famously said, ancora impero, right, which is Latin for I am still learning. So, even at age 88 he was still admitting that he was still learning, he was still trying to find the fruits of life, you know, and you know, the takeaway for this is. Lifelong curiosity can be a spiritual force, right. You, the more knowledge that you seek, the more that you’d like to learn and grow, the more powerful that can become. I mean, I believe this in myself every day. I mean, if you’re not attempting to grow every day and learn something new, then you’re really just staying stagnant, right? You’re not improving yourself, so there’s a balance between, you know, going too hard and not doing enough. Finding that balance in between is really what it’s about, but I think these two guys prove that age is just a number, and you can continue to do great things even late in life.
Speaker 2 30:33
Just so important to stay on top of it, and talk about purpose, talk about lifelong learning. I mean, think about, think about your job, John, and what you do. It’s not like you know you showed up at Elite Income Advisors, and they handed you a book from 20 years ago and said, ‘Hey, this is how we’re doing it. That’s not how it works. I mean, retirement planning is always evolving. You’re always educating yourself, doing continuing ed, being on top of what’s going on with retirement planning, the latest and the greatest, and obviously the tried and trues you’re going to have, but your industry is always changing, it’s important for you guys to have that purpose as well.
Speaker 1 31:14
It absolutely is, and you couldn’t be more correct, right? I mean, the laws are constantly changing, the market’s constantly changing, the world is changing in itself, so being flexible, you know, keeping up to date with the new, I guess, the new laws, the new regulations, the new trends, all of that’s extremely important, and as you mentioned, keeping up with education, learning more, reading books, I mean, I’m listening to a new book on the way, and every, every day, you know, doing new certifications, trying to keep up and learn as much as I can, even outside of this industry. I think it’s important to just expand your knowledge that you can.
Speaker 2 31:45
So important to be ready. Last thing we’re going to do, and we’re just going to hit a couple of these, and these are just some planning takeaways with purpose being the goal. I love this first one, and it might be the only one we have time for, but that’s don’t retire from something, retire to something. Oh
Speaker 1 32:02
yeah, we say this all the time, right? I think everybody is so focused on not working, retiring from their job, that they don’t spend enough time thinking about what they’re retiring to and what they’re going to do in retirement. And I think that’s why we find a large population that gets to retirement and they wither away, they didn’t have a plan, they didn’t have a purpose, and it results in them, you know, kind of withering away, the health goes, you know, the, you know, the money goes, it’s not a good situation, so you know, having a clear path and a clear goal of what you want to do when you retire is imperative to the success financially and emotionally, physically, all of that pairs together at the end of the day.
Speaker 2 32:42
Well, let’s help some people out. We’ve got the 10 appointments, we call it our top 10. Walk us through the appointments, John.
Speaker 1 32:47
Yeah, you’re going to come in. We’re going to do an analysis of your goals and concerns about retirement. We’re going to map out where your income is going to come from. We’re going to identify what retirement will cost you. We’re going to go through how your assets are allocated, and you know, recommend how that should be in terms of how we do things that creates you a stable income bucket. Look at your estate plan, all that good stuff here at the headquarters. So, love to see it.
Speaker 2 33:13
All right, we got the 10 appointments. Get into our top 10 by calling 800-653-8404 These are complimentary, no cost to you. 800-653-8404 See if you’re in on track for retirement. 800-653-8404 We return with retirement scenarios. To retire Smart Maryland radio, your host is John DeFeo. You can find him at Elite Income Advisors. Check out the website, it’s a nice resource, Elite Income advisors.com easy to remember, Elite Income advisors.com John’s an independent fiduciary and helping his clients get ready for retirement, that’s what he does every single day. I’m Morgan Patrick. We talk the talk, but we also walk the walk, meaning we get on here, we talk about the latest when it comes to retirement, but we also give you, the listener, an opportunity to kind of take matters into your own hands, right, get into the office, talk about your retirement, and it comes at no cost. It comes at no obligation, meaning you’re not agreeing to become a client, but it’s a, it’s an opportunity for you to learn, you know, kind of where you are in this entire time horizon. When it comes to retirement, are you ready to retire? You’re going to find out, hey, yeah, you are, or maybe you got some work to do. Grab one of the complimentary appointments. You can do that at any time. We’ve got 10 of them, so get into our top 10 by calling 800-653-8404 That’s 800-653-8404 That will solidify one of those appointments for you. And again, leaving the checkbook at home, they’re complimentary. All right, so scenarios, these happen all over the. Country, we gather a few each week, and we throw them at the advisors. John, the first one up for you is this: they’ve built substantial wealth, including about 20% in private equity and alternative assets. Now they’re semi-retired. They’re wondering if these less liquid investments still make sense as part of their long-term portfolio. How should high net worth retirees think about liquidity versus growth as they transition into retirement?
Speaker 1 35:30
This is really dependent upon their goals, right? I mean, what is their legacy goal look like? What are their income needs? You know, what type of income are these, you know, alternative and ask this, maybe alternative assets or private equity investments, potentially generating what’s the length of the illiquidity. I mean, there’s a lot that would go into this, but I think you can think of it this way, right? If you have income generated from your investments that’s more than enough to sustain your lifestyle, and you want to be able to put 20% of your investments into a higher growth potential asset, something like private equity, something like alternative investments that might be a bit riskier or illiquid, but have higher growth potential down the road. I don’t see any issue with that. Right? I mean, if you want to grow your legacy, you want to grow your assets for your kids, specific charity, you know, whatever that goal is, I don’t see any issue with that, so long as you have enough of your investments liquid for the goals that you have. I think that’s how you should look at it, right? What is the value of growth versus the income that you need to pull from your money, and how are you introducing that income? So, there’s a certain level of liquidity that everybody should have, but everybody’s level of liquidity is different. The same with the amount of equity investments someone should have is different than every other person, right? So it really comes down to what their objectives are, that what they’re looking to accomplish, their tax situation, all of that comes into play here. So I think it’s just, what are your goals? What are you looking to accomplish, and we go from there.
Speaker 2 37:00
Yeah, perfect opportunity to almost throw out a disclaimer when it comes to our scenarios. These happen all over the country. You may find a scenario that’s similar to what you’re going through, but life doesn’t happen in a vacuum. Things are going to impact you differently, so you need to have a customized plan. So, take these scenarios with a grain of salt, we have some fun with it, see what the advisors would come up with, but it gives you an idea of, you know, look, things happen, but if you have a plan, if you go through this planning process, you’re going to be better equipped to handle these types of scenarios. So, the next one is this: after 28 years of marriage, this is sad. This is sad, sad scenario. 20-eight years of marriage. They finalize their divorce at age 60-two, splitting most assets evenly, including a $400,000 amount in retirement accounts. Now facing retirement alone, they’re unsure how to adjust their income plan. How should they think about dividing social security benefits and managing their solo financial future,
Speaker 1 38:06
so you know, couple of things that go into this. I mean, when it comes to planning for each of their retirements individually, you know, we got to create new income plans, we got to create new expectations for expenses. I mean, I think working with the fiduciary advisors, important, you know, fortunate, unfortunately, we’ve had clients that have gotten divorces in our office, and we continue to work with them in separate capacities, create new plans, ensure that, you know, everything is taken care of, you know, when it comes to social security benefits, that’s, you know, a bit, you know, I guess misworded, they’re not going to divide their social security benefits, what happens is you’re eligible to claim your ex-spouse’s social security benefit if you’ve been married for more than 10 years. So you typically can get up to about 50% of your ex-spouse’s full retirement benefit. You don’t get their actual monthly benefit, you know, if they claimed early or late. So it just depends, but I think reevaluating the plan itself is obviously going to have to happen. There’s a different, different expense now, different income, different overall situation, different tax bracket, right? I mean, when you go from married filing jointly to single, the tax brackets pretty much divide in half, right? So you have less income that you can take at a lower rate, so a lot of different planning needs to be done to ensure that they’re both successful on their own in the future.
Speaker 2 39:29
Yeah, and it’s shocking. I mean, divorce rates, they’re up, folks. I remember back in the day when I, when I got hitched, they basically told you you had a 5050 shot, and it’s, it’s gotten a little worse. So, make sure you know, you know, we want everybody to be happy and live a long life and stay married, but if you are going through something like this, you know your plan needs to include probably some adjustments and working with a fiduciary. Firm, and getting that done all right. So, here’s the next scenario. The pension offers a lump sum, 550,000 right up front, right, or monthly payments, 2800 for life. They don’t have a strong family history of longevity, that’s something to note, but want to make sure they don’t outlive their money. How do you help weigh the risk and rewards of taking the lump sum versus the monthly payouts?
Speaker 1 40:29
Yeah, this is a good one. This is a conversation that we have with people quite regularly, right? How do I manage the money I’ve saved to generate the income that I need? Do I turn this into some sort of a pension? Do I invest it? What’s the best strategy, right? If they don’t have a strong family history of longevity, then there’s arguments behind whether taking the pension makes sense or not, right? I think if you assume that there is no growth on this money and just dollar for dollar, $550,000 it’ll take about 16 years to run through that money, right? Again, assuming no growth, the pension payment would offer them a $2,800 pension payment for life, so they’d have to live for a little bit longer than 16 years in order to generate that level of asset through the income, right. And again, assuming no growth, if you include some growth to that, maybe it stretches to 20 years, so you know, again, 20 years is how long they’d have to make it in order for that to matter. Another question would be, is whether that that $2,800 is for the life of the individual, or if it’s a joint rider and they have a spouse that can come into the decision, you know, and then again, how we manage that $550,000 comes into play, so I think we have to have a little bit more information to give a sound recommendation, but this is certainly a scenario that we, you know, encounter on a very regular basis. Do I take the pension lump sum, roll it over into something else to figure out how to generate the income, or do I take the straight payment for life and make the bet, because remember, if they pass away in 10 years and there’s no survivorship option, the house wins, they, you know, the company keeps whatever was left of the pension, and that’s that. So, there has to be a good careful analysis when we, you know, go into making that decision.
Speaker 2 42:14
I mean, it’s, it’s very important to have a plan and to consider all your options and have those conversations. Again, the opportunity to get on the calendar with Elite Income Advisors is ongoing during the course of this show, and we have 10 appointments. We call it our top 10. You can jump in the top 10 simply by calling 800-653-8404 It’s a complimentary appointment. Ask your questions about your retirement scenario: 800-653-8404 All right, final scenario, we’ll hit it quick at 66 They’re ready to step back from their small manufacturing business, which provides about 60% of their current income. They have an interested buyer, but they worry about taxes and how to structure the sale. What steps should they take to create a tax smart exit plan, exit strategy that supports their retirement.
Speaker 1 43:05
Yeah, I think a couple of things they need to do. Number one, they need to get a business valuation right, they need to determine what the business is worth, what it’s going to take to offload it. So, working with a CPA or an M and A attorney to explore, you know, maybe an asset sale versus a stock sale, those each have different tax implications, you know, maybe even looking at an installment sale to spread the payments out over time to, you know, avoid some sort of a tax liability over time, you know, certainly those are some options, you know, you need to identify the cost basis of the business to determine what gain there could potentially be, you know, potentially look at section, I believe it’s 1202 exclusion, you know, selling stock in a qualified business can potentially give you some deductions there. So, there’s a lot of different things that you can do to identify what the tax implications will be, what strategy to offload that asset could be, you know, there’s also the property aspect. A lot of businesses own the property or own the building that they’re in. So, identify what implications that could have. Are you going to keep the building? Are you going to sell the building with the business? Maybe you continue to lease out the building to the new owner of the business, and you have a tax write off for the rent. There’s a lot of different things that you can do when looking at selling that, but again, I think it’s important to identify what it’s worth, what your cost basis is, what the potential capital gain would be on the sale, and how to potentially spread that over time, or maybe take it at once, depending on what the situation is. So pretty intricate steps to get that done.
Speaker 2 44:38
What’s your scenario? Ask yourself that question when it comes to your retirement, and grab one of our appointments and come in and talk about it. These are complimentary appointments. John, walk us through it.
Speaker 1 44:49
Gonna come in. It’s gonna be a simple conversation on what your retirement goals are, what you want to accomplish. We’re gonna identify what you’ve currently saved up to this point, what your foundational income sources are. Through social security, pensions, annuities, any income source you have that pays you out for your life. We’ll figure out what retirement is going to cost and what type of gap there is. We’ll talk about how to fund that gap from your savings, what the tax implications would be, how to navigate the tax environment to keep more money in your pocket, less out of Uncle Sam’s. We’re going to go through your estate plans, we’re going to work with you on asset management, risk management, put together a holistic financial plan that you can refer back to, and we can adjust on a regular basis. Again, we’re your financial headquarters. Come check us out, we’ll be happy to have you.
Speaker 2 45:32
10 appointments, get into our top 10 simply by calling 800-653-8404 Again, there’s no cost to these appointments. Come in and talk about your retirement scenario. 800-653-8404 That’s 800-653-8404 Another edition of Retire Smart Maryland Radio in the books, powered by Elite Income Advisors for John DeFeo. I’m Morgan Patrick. We’ll see on the radio next week, you guarantee
Speaker 4 46:06
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 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. The professional advisors should be consulted before implementing any of the strategies discussed. The 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 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, Prashanth Sabapathi, and Jonathan DeFeo receive commissions for the sale of insurance products as insurance agents for Retirement Planning Services Incorporated. Insurance annuity product guarantees are subjects 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 Retirement Smart Maryland. The program is the production of Elite Income Advisors.
