Speaker 1 0:02
Everybody talks estate planning, but what if your legacy is more than dollars and deeds? All that coming up on Retire Smart Maryland Radio.
Announcer 0:12
Welcome in to Retire Smart Maryland Radio with Prashant Sabapathi.
Speaker 2 0:18
Welcome into Retire Smart Maryland radio, your host is John DeFeo. You can find him at Elite Income Advisors, independent fiduciary. Yes, he is, and it’s all about helping you get ready for your retirement. They’re headquartered in Ellicott City Satellite Office in Annapolis, and they have quite the team assembled to help again plan for your retirement. I’m Morgan Patrick. Absolute pleasure to jump on and just talk about being proactive, having that plan. And before we dive in on our first topic, John, how was the week?
Speaker 1 0:50
It’s been great. Absolutely, you know, even amongst this government shutdown, we’re, you know, we’re very busy, a lot of people coming into the office. You know, I think most people are accustomed to tax season being between january 1 and april 15, but for financial planners it really is towards the end of the year. As we’re wrapping up the calendar year, we’re looking at tax planning, ensuring things are buttoned up for the new year. So, we’re very busy, a lot of our existing clients coming in to have adjustments made to their plan, but also a lot of new faces coming into the office, which is fantastic. We’re getting out and doing a lot of workshops in the community. Typically, this time of year, people want to go out to dinner more, right? You’re not cooking out, you’re not on vacation, so we do a lot of dinner workshops where we offer people a meal, provide a lot of education and information, something I’m very passionate about, so we’re doing a lot of those, meeting a lot of new people, and getting ready for the holiday season. Really, I’ll
Speaker 2 1:47
tell you, it’s right upon us, and it’s almost.. it’s very encouraging that people are wanting more information, wanting that education when it comes to planning. Now, if you are interested in possibly tracking down one of these seminars on one of these workshops. Go to the website, it is a resource for you, Elite Income advisors.com that’s Elite Income advisors.com There are links to the TV show, our radio shows in podcast form there, but information on any upcoming workshop, and again, those are complimentary. It’s about getting you ready for your retirement. So, speaking of getting you ready, this is towards the end. This is kind of what you want to do. You’re retired and you’re working your way through retirement. You want to have that legacy, and most people think legacy means a will or possibly a trust, but that’s the legal part. What is a true legacy? That’s the big question, and that’s how your family remembers you, how you modeled your generosity, how your values echo after you are no longer with us. With biggest state law changes on the horizon for the coming year, now’s the time to kind of step behind the paperwork and build a story they’ll want to carry forward, not just the cash that you’re going to end up burning through in retirement. We’re talking legacy, so let’s talk some timelines. John,
Speaker 1 3:12
yeah, so as it stands for 2025 the estate tax exemption is about 13.6 1 million, or so. They’re actually increasing this as of next year to $15 million That was designed by the big beautiful bill. So we’re going to increase the estate tax exemption per person. If you’re married, that’s $30 million So you know it certainly gives an advantage to the higher net worth households, in terms of what you can actually pass on to your beneficiaries without being taxed. Now, with that being said, in the state of Maryland, the estate tax exemption is a lot less. I believe it’s going to be about $5,000 per person, so you could have some, you know, additional taxes due to Maryland versus the federal government in that capacity, but great that we have that increase starting next year, you know, and we’ll have to see what happens from there in the future with legislative changes.
Speaker 2 4:13
Yeah, we’re talking legacy, and it really does come down to just more than dollars, and it’s also what you do with those dollars. Here’s something. Here’s a question for you, John. Have you ever considered, and this goes out to our listeners, have you ever considered an ethical will?
Speaker 1 4:28
Ethical will, yeah. I mean, it’s not about dollars, it’s a letter, a video, you know, a document sharing your life lessons, values, hopes. You know, it’s more than just how you’re going to lay out your wealth and distribute your assets. It’s about, you know, what you would like to see, you know, passed on in terms of your values to your family and the lessons that you’ve learned, and a way to effectively share your life story with your family, your friends. I think it’s a great idea. I think. Something that we don’t see all that often, really have a lot of consideration for, but I think that’s very empowering, not just leaving assets to your family, but leaving your life lessons, the things, the trials and tribulations you’ve been through. I think that’s a great idea.
Speaker 2 5:14
Yeah, opportunity just to learn more about the planning process, and it’s almost like reverse engineering, we’re talking about that estate plan, that legacy, what you’re going to leave behind, what happens when you leave money without mentorship,
Speaker 1 5:29
that’s a good question. And this is a huge conversation that we have with clients, right? I mean, studies show that most family wealth disappears by the third generation, so can legacy coaching help preserve some of those assets, you know. I would say that’s very important. So, one of the things that we talk about when it comes to legacy and estate planning is, how do you want your beneficiaries to receive this money? Do you have young kids or young adults as your children that you don’t feel comfortable managing millions of dollars at that age, right? You know, for example, my, my trust for my estate plan says that my kids don’t get any of my money or our money if my wife and I both pass away until they’re 35 years old. Now, you know, if they prove or demonstrate that they have built a successful life, they’re responsible. My trustee has the ability to provide them money earlier, but the soonest that they can get that money is 35 years old, because I don’t think that any 25 year old can handle the responsibility of a million dollar inheritance, right? That’s very difficult. So, I think that having some coaching, having a plan in place, is extremely important. You don’t want your legacy being, you know, thrown down the drain, if it doesn’t have to be worked hard for that money, you ensure that I can carry on to provide some benefit to your grandkids, your great grandkids, if you can, right?
Speaker 2 6:51
I tell you, we talk about retirement planning and just, you know, forging ahead with that roadmap to get you to and through your retirement, but the legacy piece of this, I mean, it takes some time. You need to sit down, you need to map this out, and as you can tell, a lot goes into it. So, have these types of conversations about your overall retirement plan, the estate planning side, how you want your monies to be distributed, how you’re going to do that, maybe to a charity, how are you going to handle it with distribution to your kids? Is John just use his own for as an example. I mean, these are things you have to make decisions on, and if you’re kicking the can down the road, you’re going to be behind the eight ball at some point. So, why not get the planning started now? Now, here on the program, we have 10 appointments each week, and they are complimentary. John, kind of walk us through what’s going to happen.
Speaker 1 7:41
Yeah, it’s just a conversation to understand what your current goals and priorities are. We’ll talk to you about how we look at financial planning and figure out if we’re a good fit to partner together. You know, we’re going to talk about where your income is coming from in retirement. We’re going to help you navigate any tax challenges you have. We’ll build out a state and legacy plan that helps establish an efficient transition of wealth. Guidelines for your beneficiaries. We’ll talk through medical costs, long-term care, the full gamut of financial planning is what we’ll put together. So, it’s, you know, again complimentary, no cost to it. I encourage you to come in, have a conversation, that’s really all that it is.
Speaker 2 8:19
All right, we have 10 appointments. We call it our top 10. If you get in on those first 10, you’re in this week. Outside of that short wait list, again easy to get in touch with us. Call the number 800-653-8404 That’s 800-653-8404 Again, no cost, no obligation. This is an opportunity to get the ball rolling or get that second opinion. 806 5384 538404 Coming up on Retire Smart Maryland Radio. A good retirement income plan doesn’t just show what you have, it shows when and how to use it. We discuss coming up next. I Retire Smart Maryland radio hosted by John DeFeo. You can find John at Elite Income Advisors, headquartered Ellicott City Satellite Office in Annapolis. He is an independent fiduciary. They are helping their clients get ready for retirement each and every day, that’s what they do. I’m Morgan Patrick. Absolute pleasure to jump on with John and the rest of the team when they’re available, and just talk about the importance of being proactive when it comes to your retirement. So, a good retirement income plan doesn’t just show you, you know, the bottom line, the dollars and cents, it also shows you when and how to use those. Okay, so imagine income almost like I don’t know, a waterfall guaranteed streams up top with withdrawals and tax decisions flowing downstream. Get the flow wrong and you absolutely flood your tax bracket, or you run dry too soon, or run out of money as it comes to retire. And so with new rules ahead, it’s time to kind of reroute the retirement income streams, the plumbing, as I say. Now, here’s the first one for you. We all know the three bucket concept, we hear it all the time, John, but how do you actually tap into these?
Speaker 1 10:16
Yeah, and just for the audience that maybe you know hasn’t been following us for as often the three bucket concept is talking about, you know, the ability to utilize different buckets of money for different objectives. When it comes to investing, you’ve got a blue bucket, you know, whatever color you want to use, we use blue, that’s your bank money, that’s your operational bucket. We’re not seeking high returns. This is liquid, it’s meant to be able to access quickly for emergencies and for cash flow purposes. You’ve got a green bucket, which is more of a safe, secure type bucket, where we want to be able to generate our income from keeping it away from market volatility. And then the red bucket is where we’re driving the growth in our portfolio, and we are taking on a good bit of risk in our investment. So, how do you actually tap into these buckets in the right order? I mean, I think that really depends on the environment that we’re in, right? You know, if we’re in a really, really good market cycle and your red bucket, your growth bucket, is really taken off, maybe it makes sense to utilize some of that growth to pull out for income at that time, but we’re, if in a poor market, say that, you know, we enter a period of time like 2022 when not just stocks were down, but bonds were also down, you know. At that point, you’d probably want to go and pull from your safe and secure bucket, where you don’t have the market volatility with some, some modest growth there. So that really comes down to, you know, when you’re going to start taking money out of the accounts, what the market looks like, but that’s a conversation that we have with every single one of our clients. Everybody has their own customized bucket approach. We advise them on what buckets to pull from, you know, at what time. So it’s a great question. It just depends on the situation, really.
Speaker 2 11:57
Yeah, we’re talking about again, we get so focused in when we start talking about our retirement dollars on just the amount, but you really need to know when and how to use what you have saved and put away for retirement. So the three bucket concept. Here’s the next one. What happens when RMDs from IRA start pouring in after age 73 This is a crucial time
Speaker 1 12:22
I Absolutely, I mean, we talk about RMDs all the time, you know. This is when you’re required to start taking money out of your retirement plan, whether you need it or not. So, if you’ve been able to defer your IRA money out throughout your, the beginning of your retirement, maybe all of the income that you need is brought in from social security, pensions, you know, real estate income, whatever it is, you might have grown your retirement plan, your IRA, to a pretty sizable amount. How can that impact your taxes? How can that impact, you know, some of the benefits we receive through the federal government? Right, we’re working with a couple right now that’s in that exact situation between the two of them, they’d saved about $3.5 million in their government retirement plans, that’s the Thrift Savings Plan, or TSP, and they were able to live off of their pension income and their Social Security income throughout the beginning of their retirement. They’re getting to the point that this year is the first year that the husband’s forced to take an RMD, and next year is the first year his spouse is forced to take an RMD, and if you look at what the total amount between those two required distributions will be, it will be somewhere around $135,000 next year. So, what that’s going to do is it’s actually going to increase their tax bracket, it’s also going to push their Medicare Part B premiums higher. Medicare Part B premiums are actually tied to the average income that you’ve earned over the last two years. So, with the next two to three years, it is highly likely their Medicare Part B premiums, due to this increased income from the RMD, are going to go from about $185 to about 480 or something dollars, it’s about a $300 increase per person. So, on a distribution that they didn’t want to take in the first place, that’s going to have them pay higher taxes than they wanted to pay, is also going to increase the premiums they have to pay for health insurance. So, all around, bum deal, you know, we talk about tax planning all the time with clients, especially in the tax environment that we’re in, if you have questions about how to reduce your RMD when you get to that age, please give us a call. This is something that we work on on a regular basis. Yeah,
Speaker 2 14:30
we’re talking about some of the new rules that are ahead of us, and again, you may want to think about sitting down and talking about how your retirement plan is working with your money, and we get so focused in on the amounts that we have in our accounts, but you really know, you know, you really need to know how and when to use this money. I want to jump to this, this next one, John, and that you know, do most retirees underestimate the impact of sequence of returns risk?
Speaker 1 14:57
Oh, absolutely, we. You know the sequence of returns within the first four to five years of retirement can make or break your plan. We talk about this all the time. You know, the first four or five years, you’re likely spending the most money that you ever have. You know, you’re electing to travel more, do projects, you know, maybe you know, start a business, so if you have a negative market or a really bad market period in that period of time, it can reduce the assets that you have significantly. Every time that you sell out of your account, when the market’s down, you’re making it harder for your account to recover. So, you know, a lot of folks don’t think about this, and they say, “Okay, well, you know, the market always comes back, you know. While I was working, we saw the market down, you know, pretty substantially, 20 30% at times. It’s always come back, and what they don’t take into consideration is that while they’re working, they have time for it to recover. They’re not taking money out, they’re not distributing money. But when you get to retirement, what’s the one thing that you don’t have as much of? It’s going to be time, right? You’re forced to start taking money out of the account, so at that point it makes it harder to recover. So I think that’s a huge misconception that we try to identify for clients, and it’s why a lot of people end up working with us, because we want to protect your money for what you need for income. We want to provide growth as well, and that’s why we use the bucketing strategy, so we can get in front of sequence of return risk. We have an option to pull from when the market’s down, and we’re not forcing ourselves to sell at a loss at any point in time.
Speaker 2 16:30
The opportunity to get on the calendar with Elite Income Advisors, meet with John and his team. It’s ongoing during the course of this show, and these are complimentary appointments. We have 10 each week. We call it our top 10. You call the number 800-653-8404 That’s 800-653-8404 There’s no cost to this appointment. There’s no obligation to this appointment, meaning you’re not agreeing to become a client, and they’re not agreeing to take you as a client. It’s a great way to test drive elite income advisors, see if it’s a good fit. If you’ve got any questions about where you sit with your retirement, and if you’re sitting on a portfolio that is not a plan, grab one of these appointments while they last. If you get into the first 10, you’re in this week. Outside of that short wait list, 800-653-8404 that’s 800-653-8404 So, going back to it, you know, good retirement income plan. It’s not just about what you have, it’s how you use it, and when you use it, and speaking of that, and how you, you know, apply some of the assets that you do have. So, this next one is Social Security, John. And what about Social Security? Because so many people are like, when I get to my age, I’m taking it.
Speaker 1 17:37
Yeah, we hear this a lot. You know, I don’t know if it’s going to be around in the next five years. I paid into the system all of these years, I deserve to take it out, and I don’t necessarily disagree with that philosophy in some mindsets, but at the end of the day, you know it all depends on what your retirement plan requires, right? If taking social security early is what makes sense for your retirement plan, I’m all about it now. If it’s strictly out of fear that Social Security is not going to pay the benefit out one day, I don’t know how feasible that that is. I understand the concern, especially with the solvency of the program, but I think that, you know, when it comes down to it, the federal government, by precedent, has always, or for not say always, but most of the time grandfathered people in when they make changes to a system. So, if you’re already collecting the benefit, or you’re eligible to collect it, it’s not likely you’re going to have an issue. You know, by taking it early, you’re getting a pretty significant decrease to what you’re paid out over your lifetime. So, you have to figure out the trade off. Does it make sense to take it early? Does it make sense to delay it. We help folks with this decision on a regular basis. You want to look at your longevity. If you’re not in great health, if your family doesn’t have great history, then maybe it makes sense to take it early. But if you got longevity, you’re in good health, you can afford to draw off other assets and maybe allow your benefit to grow a little bit. That could make sense too, so there’s a lot of different strategies, you know. It just depends on the situation. So, again, if you have questions about when to take Social Security, I think it’s a great opportunity to give us a call.
Speaker 2 19:10
Last one we’re going to have time for, we’ll hit it real quick. Have clients considered using annuities for for base income layers at the top of this this overall plan, because again everybody’s going to be different, but these types of discussions, when we talk about layering their money,
Speaker 1 19:27
certainly. Yeah, I think you know certain types of annuities are absolutely a tool in the tool belt for securing income. You know, we typically use more of the fixed indexed annuities in our office, as they’re not, you know, forcing you to give up your principal, they give you some market linked returns, and they can provide you with a pretty substantial amount of income for your lifetime. Now, these, you know, solutions aren’t for everyone, you know, you really, you know, typically need to have an income need or market volatility concerns, not everybody is. A good candidate for an annuity, but I would say that if you want to guarantee your income, you want to ensure that you will never run out of money. It’s an absolute fantastic tool. I mean, we insure our cars, we insure our houses, we insure our health. Why not ensure your income in retirement as well? So that’s certainly a way to do it within a an annuity.
Speaker 2 20:20
Tell you, it’s important, folks, just to be prepared for your retirement. And here on the program, we are here to help you. We have 10 appointments each week that we open up for our listeners. There’s no cost, there’s no obligation. John, kind of walk us through exactly what’s going to happen if they’re lucky enough to grab one.
Speaker 1 20:38
Yeah, as I mentioned, it’s really a conversation, right? We’re going to figure out what’s important to you in retirement, what your vision is, how much that’s going to cost you. We’re going to put together an income plan that identifies where you’re going to take your income from throughout your lifetime. We’re going to help navigate any tax implications that you could have now or in the future, help you build out an efficient legacy and estate plan that gives you an efficient transition of wealth, identify any medical concerns, tax concerns. We’ll look at your risk management strategies and investment strategy. Put all that together into a written plan for you, so you know it’s a great process, complimentary again. No, no hard pitch there.
Speaker 2 21:15
All right, here we go. Here’s the phone number to call: 800-653-8404 That’s 800-653-8404 If you have been kicking the can down the road, and that would be a description of someone that has worked really hard, saved their money, put their monies away, but they’re sitting on a portfolio and you have not started planning, grab one of these complimentary appointments. Also, if you’re in the middle of something, you’re halfway down the path, and you’re a little bit frustrated, maybe your calls aren’t being returned, maybe your appointments are getting moved around. It’s okay, go grab a second opinion with one of our appointments. 800-653-8404 and as fiduciaries, if you’re doing okay, they’ll tell you again. 800-653-8404 10 appointments, they’re gonna go fast. 800-650-3840 800-653-8404 We’ve got more Retire Smart Maryland Radio coming up. Retire Smart Maryland Radio. Your host is John DeFeo. You can find John at Elite Income Advisors, the power behind this program. They’re headquartered in Ellicott City, and they’ve got a satellite office in Annapolis for your convenience. Check out the website, it is a resource, Elite Income advisors.com that’s Elite Income advisors.com There are links to the TV show, our radio shows are in podcast form, and any kind of workshop they’ve got coming up, there’ll be information there, there’ll be a sign up there, and again, these are complimentary, educational for you, and of course, we want you to be better prepared for your retirement, and speaking of that, during the course of the show, we do open up 10 appointments that are complimentary, where you can come in and talk about your own retirement situation. Maybe you haven’t started planning, maybe you’re in need of a second opinion. So, grab one of the appointments when we make them available. So, most retirees think the word risk means the market’s going down, but that’s pretty predictable. I mean, we know the market’s going to go down, it’s also going to go back up. Now, the real danger, it’s the surprise stuff. Maybe it’s a sudden health crisis, a family member is in need. There’s a new tax that kind of wipes out your safe withdrawal strategy. That’s where this shock blanket we’ve been talking about comes into play. It’s comforting, obviously. It can protect you. It’s a flexible reserve to absorb life’s gut punches that are going to come without derailing your overall retirement. So, John, let’s talk about it. Do you have the what if fund? I mean, we often talk about the rainy day funds, we talk about emergency funds, but what about the what if fund?
Speaker 1 24:01
Yeah, this is not as common as the, you know, emergency or rainy day fund, but it is something that we suggest for certain circumstances. For instance, you know, caregiving needs long-term care, you know, having a specific bucket for that, I think, is important. You know, maybe if you’re expecting your adult children to move back in, in some capacity, if you know they are slower to launch, and you’re not completely sure that they’re going to not come back, or with their kids, or maybe you’re supporting a grandchild, or a kid with special needs, it can make sense to have an additional pot of money set away just for those concerns. What we’re actually finding, it’s very interesting, Morgan, is that with the current real estate market and the price of houses, the interest rates, it’s very challenging for college graduates, really anybody between the age of like 22 and 30 to purchase a home and move out and live in, and you know, on their own, we’ve found a lot of clients that. Least in this area, in the Columbia, Maryland area, that have their kids still living with them because of the exorbitant cost it takes to buy a house, and they can’t afford it. So we see kids that are working that are doing pretty well, but just don’t have the means to actually buy the house, and their parents are allowing them to stay there a bit longer, which is causing their expenses to be a bit higher. So I think having a plan in place for something like that’s important, you know, it’s, you know, a little bit more common than it used to be, but I think long-term care is the number one consideration for having a separate fund for, if you don’t have a long-term care policy, you know, I think having some of your money set aside for that specifically is very helpful, those expenses can be very, very, very high, and having a plan in place for that’s important.
Speaker 2 25:46
Yeah, we talk a lot about surprises. You don’t want to be taken off guard as you move to and through your retirement. So, there’s the emergency fund for some of that. I say rainy day fund, that is another way to phrase that, but when you start talking about the what ifs, that’s when things really come up and surprise you. Be ready for it. You mentioned long-term care. Let’s kind of continue that discussion. Just health care inflation, it’s running about 5% annually. Are most retirees just underestimating the real cost of what it is to age?
Speaker 1 26:22
I think that some are, yeah, I mean, we build this into our financial plans, knowing that as you get older, medical expenses typically increase, but you’re absolutely right, I mean, medical costs have gone up absorbently, you know, now we’re facing the potential for them to, you know, change the ACA, you know, supplements, and the, you know, the prices that we’re paying for healthcare could go up even further if that changes, you know, so it’s not likely to get better. I mean, advancements in medicine are only getting better, people are living longer, and that inherently becomes more expensive. New technology, unfortunately, when it comes out is more expensive, so you know we try to build this into our financial plans. You know, we always build in a buffer for medical expenses when it comes to identifying the monthly income target that you want to bring in every month, and you know one of the things that the clients will say to us is, “Hey, look, I know that there’s the go-go years, the slow-go years, and the no-go years. We talk about this all the time, and they said, well, look, when I get to the no-go years, I’m not going to be spending the same amount than I am in my go-go years, and we would agree with that, in terms of travel and, you know, doing those fun things, but what we typically find is, by the time you get to your 80s, which are relatively the slow go or no-go years, your health care costs are a lot higher, right. You know, Medicare Part B, which is your outpatient coverage, this covers most of your doctor’s appointments, your visits like that. Labs, that only covers 80% of the cost, right. It’s a co-insurance program, so you’re on the hook for the other 20% You know, if you have a cancer event or, you know, a significant event in terms like Alzheimer’s or dementia, or something like that. It can be hundreds of 1000s of dollars that you’re on the hook for, even with Medicare. So, you know, having a plan in place for that, you know, looking at supplemental or Medigap policies, I think is a great idea. So, this is something that we have a conversation about every with every single client when it comes to healthcare. So, yes, I think you have to assume that health care costs are going to continue to increase, probably even higher than your average inflation in the economy, and we’ve seen that over the last decade. I think we’ll continue to see that. Tell you, it’s so important just to be prepared for the what ifs, and they’re going to come at you, and you got to make sure that you’re ready for it. And do you have a what if fund in place, so talking about again health care inflation, talking about long term care, that’s the big elephant in the room. 7% of Americans over 50 are going to need some form of long term care insurance, but we’re also talking about pricing. So I guess John, here’s
Speaker 2 29:00
one just off the cuff, if the premiums are just through the roof, are there alternatives for people seeking long term care coverage?
Speaker 1 29:08
There are. Yeah, and in fact, I mean, we are really moving away from traditional long term care policies. I think as a country, and specifically in our office, because those premiums are so expensive, the coverage isn’t as good as it used to be. We’re encouraging our clients to either self-insure or find a way to cover this in terms of their family. Now, nobody wants to burden their family with long-term care costs, right? I mean, that’s the number one thing we hear is, “Look, I don’t want my kids or my grandkids to have to take care of me. So, if we can, we do want to set aside a pot of money in the growth bucket that we can use for those long-term care expenses down the road. You know, I think that it’s, it’s a very important part of the financial plan. Now, there are other alternatives when you get to the point that you are, you know, out of money, maybe you’ve spent. Everything that you have, you can tap into equity in your home as a last resort. That’s an opportunity there. I mean, if you’re completely broke, you would have Medicaid pick up the price on long-term care. Now, of course, the type of care you’re going to get in a Medicaid facility is not likely the same level of care as a private facility, but they will cover those costs. One interesting idea that we’ve been floating to some of our clients is the idea of an indexed universal life policy that has a long-term care rider attached to it. So, what this type of policy does is you can contribute money to it, you add money to the policy, some of that money goes to pay the cost of the insurance, some of it is actually invested in a fixed indexed type of account, then you can actually access a cash value within that over time, but it also provides a tax-free death benefit, and it provides a long-term care benefit. So, say that you purchase a million dollar death benefit, you’re going to have a premium that you pay every year for that, and then it offers you a million dollar tax free death benefit when you pass away. If, before you pass away, you require a long term care need, you can actually use that million dollars for your long term care instead, and whatever is left over can just be applied to your death benefit. So, it has a triple threat: you can access the cash value tax free. You can access a death benefit tax free if you never have long term care, or you can use it for long term care. So, that’s an option that some of our clients have really liked and went with, but it’s not for everybody. So, there are alternatives out there. I think talking with a professional, identifying what your needs are, is really what it’s all about. We have all the tools in our tool belt to be able to help you fix that problem. So, good question.
Speaker 2 31:45
So, so important, just to be ready and think about the what ifs. Come in and talk about it. We’ve got the 10 complimentary appointments. John, kind of walk us through. If they call our number and grab one of these, what’s going to happen?
Speaker 1 31:58
Yeah, we’re just going to meet and have a conversation on whether or not we’re the right fit to work together. I mean, that’s that’s as easy as it is, right. We’re going to identify what your goals are, your priorities. We’ll talk to you about your income needs, your tax planning preferences. We’ll go through estate planning, legacy planning, long-term care, and health costs, as we just talked about. We’ll look at your investment portfolio and see what type of risk we’re taking, and if it makes sense that we’re the right fit, we’ll partner together and help you solve all those problems. So it’s again very low key non salesy environment. In fact, that’s what a lot of our clients enjoy about us, and they say, “Hey, look, there was no pressure when we came into your office, and we are intentional about that. It’s just a conversation.
Speaker 2 32:39
All right, here we go. 10 appointments, they’re complimentary. Get into our top 10 by calling 800-653-8404 First 10, you’re in. That’s 800-653-8404 No cost, no obligation, as John just said. No pressure. 800-653-8404 We’ve got retirement scenarios coming up next, you Welcome back, Retire Smart Maryland Radio, your host, John DeFeo. You can find John at Elite Income Advisors, headquartered Ellicott City Satellite Office in Annapolis. They’ve got quite the team approach. Prashant Ozzy, again, they are growing to serve Maryland and surrounding about retirement planning, being prepared. They are independent fiduciaries. And again, I’m Morgan Patrick. Absolute pleasure to jump on and talk about so many different things as it pertains to retirement, having that plan, being proactive and just getting you ready, and again, we offer up 10 complimentary appointments each week. If you get into the top 10, you’re in this week. Outside of that short wait list, you can call at any time to secure one. Come in and talk about your own retirement scenario. 800-653-8404 All right, scenario time. Here we go. First 168 recently retired, wondering if their 4% withdrawal plan still holds up with inflation being what inflation is being. Should they reduce their drawdown now to preserve more for their 80s and 90s as they prepare for this retirement, or is it better to front load, so during the go-go years they can spend while they’re healthy.
Speaker 1 34:28
This is a great question. You know, I think that, you know, this comes down to a couple of things. Number one, what are their intentions in the first five to six years of retirement? Right, do you have a lot of goals? Do you want to be doing a lot of things? You know, is reducing your spending to look out for the future going to affect your retirement? You know, living off the 4% rule, for those who aren’t familiar, is simply when you take 4% of your assets the first year of retirement, you withdraw that from your account, you then. Increase those distributions by about 3% every year to account for inflation. Then you should be able to live 30 years without running out of money. This has been a rule of thumb for decades, and this was based off of the economic conditions and market conditions from 3040, 50 years ago. We have a completely new environment when it comes to the economy. We have a different market cycle than we’ve ever seen, so the 4% rule, you know, although in some scenarios can work, is not a, you know, consistent method or a sure thing anymore, you know, if you have a couple of really bad years of performance and you’re pulling all of this out of an account that is in the market, that could significantly derail what you have down the road, so in that position I would certainly suggest reducing your distributions if you’re all in the market, but if you implement a plan like we put together for our clients, where you have some balance, you have some flexibility with different buckets, then you can really reduce the volatility when you start to take money out, so I think if you plan correctly, you shouldn’t have to reduce the drawdown in early years to save for later. We should be able to build that into the plan. We should be able to have some of your money growing to outpace inflation, so that by the time you get to your 80s or 90s, you’ve got a bucket of money that you haven’t touched for 2030 years that’s sufficient enough to cover your expenses at that period of time, so I think just looking at a different strategy is what I would suggest, you know, the 4% rule is just kind of outdated in terms of what we’re looking at today.
Speaker 2 36:30
Yeah, and I think a lot of people are kind of stuck in that rut, you know, they haven’t had that that sit down to talk about the overall big picture when it comes to their retirement, because everybody’s different, so your plan is going to be customized to you, and that 4% rule, as John just said, it might be outdated as it pertains to what you want in retirement. Make sure you have a customized plan. All right, next scenario, they’ve got about 700,000 in savings, they don’t have a pension, just social security starting at age 70. If they live into their 90s, what is the best way to structure withdrawals to avoid running out of money in their later years?
Speaker 1 37:07
I mean, I would go back to that same concept of bucketing, right? I mean, you got $700,000 in savings, you got no pension, you’re just starting social security, you know? I would say looking at a bucketing strategy is the best way to do it, right, you take the money from the account that’s not, you know, subject to market volatility in the years that you need it, and you let your invested money grow, and you don’t touch it, right? You know, to live into their 90s, that means that they’ve got a bucket of money that’s growing for 20 years, as I just mentioned, that they don’t have to liquidate it, you know, if the market’s down, they’ve got the green bucket that they’re taking income from as they need it, which satisfies whatever they need in the short term. So, in theory, that should be able to last them the rest of their lives. I mean, that’s what we plan for when we build out our retirement plans for our clients. We’re looking out until 8590 even 95 years old at some times, depending on the family history of the individual that we’re working with, so if they expect to live into their 90s, I’d say the bucketing, a bucketing approach, I mean, regardless of what age you live to, I think the bucketing approach, having different objectives with different bucket of money, is the best way to go about it. We, you know, subscribe to that philosophy 100% and think that’s the best way to do it.
Speaker 2 38:22
Opportunity to get on the calendar with elite income advisors and talk about your own retirement scenario is ongoing during the course of this show. We have 10 complimentary appointments, no obligation appointments as well, meaning you’re not agreeing to become a client if you grab 1-800-653-8404. first 10, you’re in this week outside of that short wait list, 800-653-8404 All right, next scenario, they thought retirement would be relaxing, but now they feel anxious about spending the money, even with 1.2 million say they worry every vacation or home upgrade could derail their long-term security. How can a retiree strike a balance between enjoying their lifestyle but staying financially smart?
Speaker 1 39:10
This is a, this is a good one. I would bet that this individual did not sit down and put together a comprehensive plan to address these things, because our clients don’t have that anxiety when they want to go on a trip or they want to do the home upgrade, because we have built all of this into the plan, right? When you build out an income plan for someone, when you look at how much money you need throughout your retirement to do everything that you want to do, you should build that into your monthly income target, even if you’re going on one vacation a year, build that into your monthly income target. Make sure that that is all accounted for, so that you don’t ever have to worry. You’re looking five years out and saying, I’m bringing in the exact amount of money that I need to do all of these things. I’m set, you know. There shouldn’t be anxiety there if you’ve planned correctly. Now, in this situation, you know, I think you might have to balance, you know, or go me. With the financial planner and put something together that can help identify how much money you can spend on your vacations every year, how much the home upgrade, you know, would be reasonable to spend on. You know, I think that’s what it comes down to. We talk about this on every episode. It’s all about planning, it’s all about putting something together that you can refer back to, that you can ensure and remind yourself that all right, I’m in a good position. We personally provide all of our clients with a personal financial inventory binder, and within this we have a full net worth statement that has all of your assets on one piece of paper, so you can see exactly what you’re worth at any period of time. We have your income plan that identifies where your income is coming from throughout your lifetime, assuming things like taxes, inflation, we build in medical costs, we build in, you know, vacation funds, all of that. It’s going to have, you know, a way for you to identify your, you know, mortgage documents, long-term care documents. You can keep your estate planning documents in there, but again, it’s a way for you to always look back and remind yourself, okay, this is the plan that we put in place, and then you give us a call, and then we sit down and remind you as well, so you know, again, it’s all about the plan, if you plan properly, then you shouldn’t have to feel anxious about spending money in retirement,
Speaker 2 41:15
well, and it’s not something that you just go stick in a drawer somewhere, I mean, you’re going to revisit this annually, you’re going to talk about, you know, the progress, the direction. If there needs to be a pivot, that’s what you know working with professionals, working with a fiduciary is all about. Your plan is a living, breathing thing. It’s your retirement, so it will be attended to. All right, the opportunity to get on the calendar with John and his team at any time, you can call 800-653-8404 we have 10 complimentary no obligation appointments. See if you’re on track for retirement. 800-653-8404 All right, final scenario: retired last year, but didn’t expect the day to day expenses to feel this high. The prices, even without commuting. All right, some people say, you know, what I get into retirement, my prices are going to go down, but it doesn’t seem to be happening. Should they consider possibly going back to part-time work, or are there smarter ways to cut back without downgrading the lifestyle?
Speaker 1 42:13
Yeah, go back to, you know, we’ve got a right plan in place. You know, we wouldn’t be visiting this, this question, but I think this is, you know, certainly something all of our clients experience, right. Why do I feel like my expenses continue to go up? I don’t feel like I’m getting a raise from Social Security, you know. I still feel like things are tight, you know. I would say that certainly going back to work part time could fix that. Not everybody wants to go back to work, so you know there are absolutely ways to rein in spending in retirement, you know, depending on what you’re doing. If you’re eating out a lot, you’re taking a lot of trips, maybe you’re, you know, very charitably inclined, you’re you know spending a lot of money on the grandkids, you know. Just remember that the most important thing at the end of the day is that you don’t run out of money. It’s great to be able to give to causes that we feel are important. It’s great to take care of our family, but at the end of the day, if the plane’s going down, who do you put the mask on first? Right, you put it on yourself, so that you can ensure you can help other people. So you need to make sure that you don’t run out of money first and foremost, and if you want to be able to take care of other people, I think that is fantastic, but honestly, we find a lot of the expenses that people are paying out in retirement are things that they could potentially come back on. We don’t want you to, I mean, and that’s the whole purpose of the plan, is we want to put together a financial plan that permits you to do all of the things that you want to do and spend all of the money you want to spend without the fear of going back to work without the fear of cutting down your expenses or changing your lifestyle, so again, if you plan properly, we shouldn’t have this feeling at the end of the day.
Speaker 2 43:57
10 appointments, John, again, just tell us, I mean, you’ve said it several times already today. It’s just a conversation.
Speaker 1 44:04
It is. Yeah, we’re gonna figure out what your retirement goals are, what you want to be doing, what your lifestyle will look like. Then we’re gonna figure out what that cost you, right? How much do you need to live comfortably and do all the things you’d like to do without feeling like you have to go back to work? What tax challenges are you facing, and how do we address those? How do we ensure an efficient transition of wealth between you and your beneficiaries? You know, how are we going to pay for long-term care and medical costs? You know, are we confident in our investment strategy? So, we’re going to look into all of this. We’re going to put together a comprehensive plan, and again, we’re going to share this with you, give you our perspective, and see if it’s something that makes sense to implement, and if so, then we’re happy to work with you, build you out that personal financial inventory binder, and continue to meet with you and adjust the plan on a regular basis.
Speaker 2 44:54
All right, there you go. You got 10 complimentary appointments, they’re available right now, 865 38404 that’s 800-653-8404 and as John says, it starts with that conversation about your situation. 800-653-8404 your scenario, 800-653-8404 Another edition of Retire Smart Maryland Radio in the books for John DeFeo. I’m Morgan Patrick. We’ll see on the radio next week.
Speaker 3 45:30
Newly guarantees are subject to the claims payability of the issuing insurance company. If you withdraw money from or surrender your contract within a certain period of time after investing, the insurance company may assess a surrender charge. Withdrawals may be subject to tax penalties and income taxes. Persons selling annuities and other insurance products receive compensation for these transactions. Products are subject to fees and additional expenses. Any comments regarding safe and secure investments and guaranteed income streams refer only to the fixed insurance products. They do not refer in any way to securities or investment advisory products. Information presented on this program is 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 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 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 Retire Planning Services Incorporated. Insurance and doing product guarantees are subject to 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 Retire Smart Maryland. The program is paid production of Elite Income Advisors, you.
