Speaker 1 0:02
Before you pop the champagne on New Year’s Eve, there are a few smart financial moves that could save you 1000s in taxes. We’re talking about trimming this year’s tax bill, positioning assets wisely, and taking advantage of strategies that can still make a big difference, all before December 30-first.
Announcer 0:22
Welcome in to Retire Smart Maryland Radio with Prashant Sabapathi.
Speaker 2 0:30
Welcome into Retire Smart Maryland Radio, your host, Prashant Sabapathi, and John DeFeo. You can find them both at Elite Income Advisors. They’re independent fiduciaries, and it’s all about getting you ready for your retirement. They’re headquartered in Ellicott City and a satellite office in Annapolis for your convenience. I’m Morgan Patrick, and it’s a pleasure to jump on and talk about these different topics. Do want to get to the week, so Prashant, you’re first. How was the week?
Speaker 1 0:55
This week’s been great, you know, it’s just been busy around the office as we head into year end it always inherently gets a little bit busier. I think the thing that I’ve been most proud of this year is I feel like our educational outreach in the community has just been fantastic this year. I think we’ll close the year out having done something like 128 seminars and educational events, and that’s of course in addition to Retire Smart Maryland Radio and Retire Smart Maryland Television. So I feel like our objective for this year was to try to put out as much easy to access good information that people could rely on in their decision making process, and so I feel like we’ve been able to do that, and as a result, the activity around the office has just been fantastic. So, you know, we got a few weeks left in the year here, we’re hoping to continue that trend through the very end of 2025
Speaker 2 1:56
Well, we’re going to hit some hot retirement topics here in just a second, but John, just the same question to you, how was the week?
Speaker 3 2:01
It’s been great, as Prashant said, very busy in the office, you know, it’s the getting towards the end of the year, a lot of year-end tax planning for our existing clients, working with our in-house CPA to crunch those numbers, but I’d also mention, as Prashant said, that the traffic from new visitors has been a bit higher than normal, I mean, typically towards the end of the year, you know, it’s the holidays, people, at least new visitors, are a little bit less inclined to come in and talk to us, or come to the seminars, but lately we’ve still been stacked up, our seminars are booked to the point where we have wait lists, so I think that’s a testament to the need for financial planning, the crunch that we’re seeing with the tax code that we have, so it’s been great to see new people in the office, in addition to our existing clients, but it means that we do have a pretty stacked calendar.
Speaker 2 2:49
I think a lot of people are concerned about what’s out there and how it’s going to impact them and their money and their retirement. So again, opportunities during the course of this show to get on the calendar with Prashant, John, and their team at Elite Income Advisors. It’s going to be ongoing during the show. These are complimentary appointments. We’ll tell you about those here in just a little bit. So, guys, every December, and we’re creeping up on it. Folks are starting to string up the lights, they’re going to hang wreaths. Matter of fact, I was out shopping the other day, Christmas lights are up, I mean, people are already decorating for Christmas and for the holidays, but they tend to do that, but they put off financial decisions. So, what if a couple of well-timed money moves before the end of this year could absolutely brighten your retirement future and lower your tax bill? Wouldn’t that be interesting to you? I think it would. So, today we’re going to walk through the top tax planning strategies that retirees and pre-retirees should act on and act on now. First up, Prashant, you’re in the batter’s box. Here it is. Are you harvesting tax losses or missing an easy deduction?
Speaker 1 3:55
The market was volatile in the first quarter of this year, and volatility looks like it’s starting to pick up here, and that actually could provide you an opportunity. You can sell assets that have a capital loss and use that to sell assets that have a capital gain, and those things will offset, but if you net a capital loss for the year, you can deduct up to $3,000 of capital losses each and every year, so tax loss harvesting is this idea that at the end of the year you go through your entire portfolio, you cancel out some of the gains and losses, and if at all possible you try to book a capital loss for the year, which could help you at tax time. I think back to my mom, you know, but you know, God bless her, before she passed away, she was always really into gardening, and when I think of tax loss harvesting, it’s kind of like pulling out the weeds from your garden before winter, you clear out everything that isn’t growing, so that healthy plants can thrive. Palm spring, so doing tax loss harvesting at the end of a year, like in 2025 not only could help you for taxes in 2025 it could actually also set the stage for how to get your money working in a really efficient way heading into 2026
Speaker 3 5:16
Oh, Prashant, painting the pictures, man. Tax loss harvesting, like weeding your financial garden, are you kidding me? Right, I love that. All right, so the next one, John Roth conversions still smart. I mean, timing is everything. Yeah, and I think that with the extension of the tax cuts and jobs act, we have even more of an opportunity for Roth conversions for strategic tax planning. This time of year is when we are busiest with our recommendations for Roth conversions. We’re calculating all of the income that our clients have brought in throughout the year, making some estimates on what to expect the rest of the year, you know, minusing deductions, and then working with our in-house CPA to provide a sound recommendation on the conversion amount, calculating how much tax they’re going to have to pay on that, where to pay it from, so it’s a pretty in-depth process, but it’s extremely advantageous based on the historic low taxes that we’re experiencing right now, so you know, if this is a question you have about your own situation, if you have found yourself with a large amount of pre-tax savings in terms of an IRA, 401 K thrift savings plan, whatever your savings vehicle was. I encourage you to give us a call, you know, we have some time before year end to analyze your situation, see if maybe this year is a year that we could take advantage of these low tax codes. But absolutely, it’s a great, a great strategy, and we have even more of an opportunity with the extension of the tax cuts and jobs act
Speaker 2 6:43
today on Retire Smart Maryland radio, kind of get into the top tax planning strategies out there. And again, tax loss harvesting, we’ve talked about, be aware of it. We’re at the end of the year, Roth conversions, absolutely have that conversation if you haven’t already. The next one per shot, required minimum distributions don’t let the IRS play Santa.
Speaker 1 7:03
If you’re 73 or older this year, you’re potentially on the hook for required minimum distributions, which is the forced or mandatory distribution that you have to take from your pre-tax retirement accounts, like your 401 k, your IRA, your 403 b. Here’s the thing, though, fellas, the penalty for missing an RMD is incredibly steep. It is 25% of what you should have taken. So, if I had to take out, you know, $50,000 in an RMD for the year, and I choose not to do that, or I simply forget, or my advisor doesn’t remind me of it. I’m not only gonna have to take out the 50,000 but I’m gonna have to take out an additional 12,500 to satisfy that penalty. And guess what, every dollar of that is going to be fully taxable, both at the federal and the state level. So that being said, you don’t want to miss your RMD. You want to have a plan to make the RMD process as efficient as possible. And folks, that’s why we recommend doing a year-end checkup on your financial plan if your advisor hasn’t provided you a year-end checkup, or you simply just don’t know where you stand with regards to the threat of higher taxes in the future, market volatility, or RMD planning. Let’s fix that. It starts with a phone call. We’ll open up the phone lines right now. The phone number for today’s program is 800-653-8404 That’s 800-653-8404 Now you dial that number, you’ll be able to schedule a time to come in to the office and really talk about your situation. It’s just a conversation, you’re not agreeing to become a client, but what you are doing is getting the opportunity to put together a real financial plan that could provide you real guidance in several different areas. It starts with that phone call. It is totally complimentary to come in and visit 800-653-8404 When
Speaker 2 9:07
we return on Retire Smart Maryland Radio, we’re living longer than the generation before us, but our retirement plans, they haven’t caught up. We’re going to discuss when we return, we’re Retire Smart Maryland radio, your hosts Prashant Sabapathi and John DeFeo. You can find them both at Elite Income Advisors, their headquarters Ellicott City Satellite Office in Annapolis. The website. wow, what a resource. Check it out, Elite Income advisors.com that’s Elite Income advisors.com Links to the TV show are there, links to our radio show and podcast form, just quality information on retirement, background information on Prashant, John, and the team. So, go check it out, Elite Income Advisors. Dot com. Independent fiduciaries. Yes, both Prashant and John are. And again, I’m Morgan Patrick. A pleasure to jump on and chat about all these different topics and give you an opportunity to get on their calendar, no cost, no obligation, to talk about your own retirement. And if you haven’t started planning, it’s okay, you can get rolling on it, or if you need that second opinion, we have complimentary no-obligation appointments. We’ll open those up here in just a little bit. So, there’s this strange irony in retirement planning: everyone wants to live long, healthy lives, but no one wants to plan for it financially. It just seemed that way now. A new study from Aviva shows that just how far off people are when estimating how long they’re going to live, and we’re going to talk about that today, and what it could cost them. So, digging into longevity risk, the very real possibility that retirees may live well into their, are you ready, 90s, only to find out that their money runs out at 82 So, if you want to avoid outliving your wealth. This conversation that we’re about to have is for you. So, John, first up, why are retirees underestimating longevity by a decade or more?
Speaker 3 11:12
Yeah, I mean, according to that Aviva 2025 report, that people are underestimating life expectancy by about up to 10 years, as you mentioned, and I think a part of this is, you know, a reliance on old data, or maybe their own family history, old inflation assumptions, all of these things combined, right? When we talk with clients about longevity, I mean, it’s a very morbid conversation, but necessary conversation when talking about your financial success, you know, folks are saying, “Oh, well, you know, I can’t imagine that I’ll live past x because my mom or my dad didn’t, or you know, the Smiths don’t live past 75 and that might have been true, but look at what their habits were, look at what medicine was back in those days, and the advancements that we’ve had up to this point I think people are certainly underestimating the power of medicine, of advances in our medical community, all of these things put together. So, you know, it can be a pretty significant miscalculation when we build out our retirement plans for our clients. We’re looking at 9095, years old, knowing that it’s very possible you could make it to that age, and hey, I mean, if you do pass away early, you know, at 80 or 85 and we plan till 95 then you know, at least your beneficiaries are going to have something to collect on that, but if we only plan to 85 and you live until 95 do you want to be going back to work at that age, you know, do you want to be visiting the food pantry because you can’t afford groceries, you know, those types of things, so you know, I would certainly encourage you to be on the more conservative side and plan for a longer life expectancy based on where we are today.
Speaker 2 12:48
Yeah, I mean, we’re in this longevity conversation, a lot of people just don’t want to talk about it, because it’s just what you said, John. I mean, this is the, this is the end, but you really need to plan well for this, if not for you, but for your heirs, for your, your family members who are going to be left behind. Make sure you’re planning all the way to the end and beyond. So, this next one, Prashant, to you, I mean, How does longevity risk silently wreck even a well-built plan?
Speaker 1 13:13
Longevity risk is precisely the type of risk that you don’t actually feel it or realize that it’s even there until it’s too late, and that’s because it just kind of creeps in quietly. It’s like one of these things that I would call a financial termite, right, that just slowly eats at the foundation of your retirement plan, and that’s because you know the amount that you had in your 401 k or your IRA when you were 65 can look dangerously thin if at 85 over that 20 year period you haven’t gotten the appropriate amount of return on your investments or inflation runs at a higher rate than whatever you initially expected, and so look, I’ve said this for years, the scariest day of a retiree’s lifetime is not actually the day that they run out of money. Okay, it’s the day that they realize that they’re going to run out of money, and there’s nothing they can do about it. And so everything that our practice is geared towards doing is making sure that our clients never have to live to see the day where they realize that they’re going to run out of money, and there’s nothing that they can do about it. And I’ll tell you what it comes down to, to make it as simple as possible. It comes down to a concept that we call money in and money out. Okay, the higher your income is in retirement, the better your outcome will be, and so when it comes to your income in retirement, we want to understand three things. We want to understand how we can get that income to be as high as possible. We want it to happen as quickly as possible, but most of our clients, most importantly. Want that income to be there in the safest way possible. They don’t have to worry about the stock market fluctuating or their dividend stocks, you know, keep increasing the dividend each and every year. A lot of our clients just want to know that there’s going to be guaranteed mailbox money, so to speak, that shows up every single month, so that when they retire, they don’t have to think about it.
Speaker 2 15:24
We are chewing on again longevity. It’s, it’s a thing, and you’re going to have to be able to pay for a longer retirement. Again, the percentages are showing us we’re living a lot longer. So, again, making sure you’re planning for it. First step is to have that meeting. First step is to talk about your portfolio. So many of you have done the initial saving and accumulating and putting that portfolio in a good position, but now the planning needs to start. The opportunity to get on the calendar with Elite Income Advisors is ongoing during the course of this show, these are complimentary appointments. No obligation to become a client, but see if you’re on track for your retirement. Is longevity an issue? Think about that, and how that’s going to impact your overall plan. Grab one of our appointments at any time: 800-653-8404 That’s 800-653-8404 All right, so we talked about again underestimating your lifespan. You’re going to live longer, and how is that going to possibly mess up what you’ve already planned? Make sure you’re adjusting there, John. Why are so few people talking about income planning past the age of 85 I mean, they really need to be thinking about creating income well past that.
Speaker 3 16:44
Yeah, I agree 100% I think it goes back to those, you know, assumptions based on their family history, you know, what their possibility will be for spending. You know, I hear time and time again that, hey, my spending is going to be a lot higher during the go-go years, maybe even during the slow go years, but when I get to the point that I’m in those no-go years, and I’m too, too tired to go on those international trips, I’m not traveling as much, I’m not spending as much money on the, you know, the fun things. Then I can probably decrease my spending target, and although I wouldn’t disagree that you’re not going to be spending as much on leisure during those later years, we find that the cost for medical care, hospital services, long-term care creeps up at that point in time, so you have to account for that in the plan as well, you know. So, we again, when we plan for our clients, we’re expecting that income to continue to need to rise year over year based on inflation throughout the rest of their lives. We’re not cutting that back unless there’s a significant event that maybe a debt gets paid off or something happens, we’re not just going to reduce that spending, because you’re probably not going to travel as much. We have to assume that some other expense is going to pick up due to your due to your health. You know, there’s a study that suggests that if you’re married and you’re 65 years old, there’s a 50% chance that one of you is making it to your 90s, right? So, if you’re married, look at your spouse, figure out who it is that’s making it till 90, and you know we have to ensure there’s a plan for that. If you’re retiring at 60 and you’re planning it to live till 90, that’s 30 years of income at least that we have to plan for. So, I think there’s a lot that goes into that, and if you haven’t sat down, map this out. I think it’s a great opportunity to get on our books and go through that lifetime income plan, map it out, ensure that you’re in good shape before you enter retirement without that written plan.
Speaker 2 18:32
This next one I have this mental picture, and I’m going to explain it to you. So, here’s the question again: it’s inflation. This is to Prashant, is inflation the real enemy for a long life? I picture if Prashant were both these guys are rock stars in this business, they’ve helped a lot of people get ready for retirement, but I picture Prashant walking out on the stage, stadium is packed, and the crowd is chanting back at him, more income, more income, more income, and he’s just raising his hands and absolutely agreeing. So I kind of answered this next one. Is inflation the real enemy of a long life? And what’s the answer? More income?
Speaker 1 19:16
Do I even need to talk? I think you nailed it. You know, longevity and inflation, when you kind of mix those things up together at the same time, that’s really what is a toxic combo. Okay, because you know, if you looked at even just a 3% inflation rate, that’s going to cut your purchasing power in half in about 24 years, which means if you live to your mid 80s, early 80s, or even late 80s, or 90s, you’re going to feel that erosion, your dollars are not going to go quite as far, and so the answer to higher expenses or lower purchasing power. Or is simply going to be more income, and that’s exactly it. So, instead of figuring out how we get our portfolios to grow to the highest level, which you know that is a good thing, and that is important, I think we should start asking a different question, which is not how do we get to grow to the highest level, but how do we get our portfolios to create a higher amount of distributable income? Because it’s the distributable income that we’re going to ultimately end up living on one day.
Speaker 2 20:32
It’s important. I mean, having a plan, having this type of conversation, we’re talking about longevity, and the things are going to impact you. You’re going to live a long life, most likely. You got to be able to pay for it. You got to consider a lot of things are going to come at you, but again, having a plan, working with pros, that is going to relieve a lot of your stress. Final one, John will let you hit this one. What role should guaranteed income play in defending against this longevity risk?
Speaker 3 21:00
Well, I think it depends on the situation, but for folks that are short on income for their expenses in retirement, you know, if you don’t have a pension, if social security is your primary source of income, and you’re relying on income from your savings over your, over your career, I think that, you know, looking at something like an income annuity or a strategy like that could be a great way to guarantee you a paycheck and effectively build your own pension into your financial plan. These types of strategies will pay you and potentially a spouse out with a fixed amount or even an inflation-adjusted amount for the rest of your lives without the worry about what the market’s doing, whether the account runs out of money again. These are paid out for the rest of your lives, so if you’re 60 years old, you have 30 years of income to plan for. It could be a great way to lock that in, you know, and take the market volatility out of it. Folks, phone numbers 800-653-8404 If you’re noticing that folks in your family are living longer, if you’re concerned that you might live
Speaker 1 22:00
until 90 years old, and you’re not sure if you have enough money to do that, or more importantly, if your income will last as long as you do. Great opportunity to come into the office, sit down with a pro, and talk about it. And that’s all this is. It’s just a conversation to see where you’re at and what you need to do to make sure that you are on track, and we will help you build that Retire Smart roadmap to assess your current situation. The phone number again: 800-653-8404 That’s 800-653-8404 We’ve got more with these retirement rock stars when we return on Retire Smart Maryland radio.
Speaker 2 22:51
Welcome back into Retire Smart Maryland Radio. It’s hosted by Prashant Sabapathi and John DeFeo. You can find them at Elite Income Advisors, headquartered Ellicott City Satellite Office in Annapolis, for your convenience, and they are independent fiduciaries helping their clients get ready for retirement. I’m Morgan Patrick. Absolute pleasure to jump on, talk about these different topics. You’re going to have questions about your own retirement, and they could vary. It could be a lot about income, it could be a lot about longevity, it could be a lot about health care, taxes. Again, these are all puzzle pieces that need to go into your overall retirement plan. And if you’re sitting on a portfolio, that’s not a plan. Opportunity to get on their calendar and have those initial discussions is ongoing during the course of this show. These are complimentary appointments, or if you’re in the middle of something and need a second opinion, grab one of our appointments when we make them available. All right, guys, so as this year starts to wind down, we’ve been talking about that this week. Charitable giving kind of takes center stage, and not just because it’s the season of giving now for retirees, with you know, with that heart of generosity and an eye on the old tax efficiency, this is the moment to think strategically, whether it’s giving from your IRA, donating appreciated stock, or supporting causes that are close to your heart. The right move can absolutely stretch your impact and shrink your tax bill. So today we wanted to kind of get into the best year-end giving strategies and the questions every retiree should be asking before they write the next check, so Prashant, we start with this: Should I give cash or is there a better way?
Speaker 1 24:28
You know, writing a check is often the easiest option, but a lot of times it’s actually the least tax efficient method, specifically for affluent donors. So I’m on the planned giving advisory council for the Baltimore Symphony Orchestra, and one of the things that we’re responsible for doing is kind of spearheading the charitable giving efforts of the Baltimore Symphony Orchestra’s patrons, and so we go through strategies every single year on how to. To you know, help people plan for charitable giving, specifically at the end of the year, and I think two things come to mind. One is donating appreciated stock. I’ve seen this through the BSO, but I’ve also seen it just with our client base with other charitable organizations. If you donate appreciated stock, that could potentially help you avoid capital gains taxes, so that’s number one. And then for those of you who are over the age of 70 and a half, you can take advantage of something called a qualified charitable distribution, and so called qualified charitable distribution allows you to donate money directly from your IRA account to a charity, and by doing so, it actually makes it such that you don’t have to pay tax on that donation, and thus you don’t have to report it as income, which could really help you with required minimum distribution planning. So, if you’re going to give money to an organization anyway. Instead of just writing a check, let’s explore the different options, whether it’s donating charitable, donating appreciated stock, or doing something like a QCD. John, we get this question all the time, because we see a bunch of people that have hundreds of 1000s, if not millions of dollars in IRA accounts, the fundamental question with those types of accounts is, is a qualified charitable distribution, a QCD, actually the right thing for me to do? What are your thoughts?
Speaker 3 26:33
Well, I think number one, you have to be charitably inclined, right, to give to a charitable organization that has to be a part of your legacy planning goal, there. If so, and you’re over the age of 70 and a half, I think it’s a great advantage. Number one, it maximizes the charitable contribution, so there’s no taxes taken out. You’re able to give more to the charity, you’re able to minimize your taxes on the back end, and if you’re taking required minimum distributions, as you mentioned, Prashant, this can eliminate the tax burden from having to take that. You can do up to about $108,000 in a QCD for 2025 So, if you have a pretty sizable required minimum distribution, this can eliminate that, protect your taxes, protect your potential Medicare Part B premiums from being increased as they’re based on income, so I think it could certainly benefit you if you’re charitably inclined, you’re looking to reduce some of your taxes, and again, you’re over the age of 70 and a half. I’d mentioned that one strategy that, in fact, we’re implementing for one of our clients is to separate a different IRA than your normal growth IRA for QCD contributions, it makes it cleaner. You can elect the contingent beneficiary on that IRA to be the charity itself. So, God forbid you and your spouse pass away before that account is eliminated. The rest of that money goes to the charity tax free. It doesn’t burden your kids. So, there’s a lot that you can do with strategy there, but I think again, at the end of the day, a charitably inclined. Do you want to reduce your taxes? Are you 70 and a half? If so, I think it could be a great strategy.
Speaker 2 28:06
Yeah, I mean, now’s the perfect time to have these types of conversations when it comes to giving, when it comes to how it’s going to impact you and your taxes. So, Prashant, the next one to you, how do I know, and this is the question, how do I know if I’m giving enough to make a difference.
Speaker 1 28:21
Personally, I think giving isn’t just about how much you give, it’s about kind of the intentionality that goes behind it. You know, everyone’s in a different situation. Some people can give more, some people just can’t afford to, but even modest gifts can be structured for some serious long-term impact, whether that’s community foundations. We’ve seen things like donor-advised funds, and giving during your life, rather than only through your will, actually lets you see the results firsthand. I think this is one of the things that we found with our clients is we’ve had so many people say I want to give now so that I can actually see what that money goes to use for, whether that’s to a charitable organization or even if it’s to your family, and so you know it’s not just about the dollar amounts, I think as long as there’s a plan behind it, I think that it does make a big difference. And for most of our clients, charitable giving is super important to them. And so, in addition to the income planning and the tax planning, being very charitable is a huge part of the financial planning process, and that’s what we would call planned giving.
Speaker 2 29:44
It’s important to, you know, have this all planned out, the opportunity to come in and talk about your overall retirement plan, but also how you’re going to handle possibly charitable giving, either, you know, while you’re living or after you pass. I mean, these are. Things that you can be doing, and baking in is a term we use a lot. Baking into your overall retirement plan, to grab one of our complimentary appointments, simply call 800-653-8404 That’s 800-653-8404 Again, there’s no cost to the appointment, there’s no obligation to become a client. And as fiduciaries, if you bring in your portfolio, you bring in your current plan, and if it’s okay as fiduciaries, they’re going to tell you, you know, what looks good, and you can go about your way. But if there are suggestions to be made, you know, have that conversation, be open to that discussion. That’s what planning is all about. Prashant kind of hit this next one. You know, should I give now or wait until I pass? I mean, that is going to be an individual decision to make. John, let’s move to this next one. Is it better to give directly or use a donor-advised fund?
Speaker 3 30:53
Yeah, I mean, I think it depends on your desire to control where the distributions are going real time yourself. It also depends upon the tax deduction you’d like to be able to take up front, you know. Donor advised funds have become a kind of a go-to strategy for bundling charitable giving into a single year to maximize the deduction that you can give, while also being able to gift over time, and not having all of those, you know, gifts go out in one year. So, what you can do is, you can, as Prashant mentioned earlier, you can donate appreciated assets, get the tax benefit immediately, and then take your time deciding where to actually grant those funds to go. So, you still have control over where the funds are going, you get an immediate tax deduction, and this can really be beneficial for folks that are maybe in their last few years of work, their income is really high, and they want to reduce the taxes they’re potentially paying, but maybe they don’t quite want to give all the money to charities right away. They want to spread it out over time, maybe they have different ideas for how that is distributed. So, I think it can be a fantastic strategy if you’re in a situation like that again, where you want to have a maximum deduction upfront while giving over time in the future,
Speaker 2 32:02
it’s important. I mean, these are all things to consider, and so many of you have have done the first step really well. You’ve saved, you’ve put the monies away, it’s in your portfolio, and now the planning really needs to start. Right now, we’re just talking about the charitable giving portion of this, and what that can mean to your overall plan. Prashant, last one to you. How does charitable giving fit into that estate plan that we just mentioned?
Speaker 1 32:27
I think when you look at the complexity surrounding estate planning, a lot of moving parts here. So when you give charitably, you got to be able to coordinate that with the creation of things like trusts. Okay, you could do just a living trust, you can do an irrevocable trust, you could do a charitable remainder trust, pair that on top of beneficiary designations, like all of these different things go into creating a really smart legacy strategy. And so listen, if you’re wondering how to make the most out of charitable giving for this year, or just in context of your longer term financial plan. Come on in, and let’s walk you through the smartest options, from tax savings to legacy planning to living out your faith through generosity. A little strategy goes a really, really long way. We’ll give you the opportunity to come in and visit with us, so we can talk about it. The phone number 800-653-8404 You can also visit Elite Income advisors.com We are back with more Retire Smart Maryland Radio right after this. You To
Speaker 2 33:45
retire Smart Maryland radio, your hosts are Prashant Sabapathi and John DeFeo, both of Elite Income Advisors, the power behind this program. Check out the website, it’s a resource, Elite Income advisors.com that’s Elite Income advisors.com links to the TV show, our radio shows in podcast form, good information on retirement planning, background information on Prashant, John, and the team, and it’s all about getting you ready for your retirement. They’re both independent fiduciaries, they’re headquartered Ellicott City Satellite Office in Annapolis for your convenience. I’m Morgan Patrick. We are on to our scenarios, and we’re going to go through a few of these. They come from all over the country, and you may hear a scenario that’s kind of what you’re going through, but it’s not exactly what you’re going through. So, make sure you take everything with a grain of salt, but also, if you’ve got a scenario and you’ve got some questions, grab one of our complimentary appointments and come in and have that conversation, no costs, no obligation. We’ll tell you how to grab one of those here in just a little bit. So, John, you’re up first. 66 planning to retire next year, debating whether to start Social Security right away or delay until age 70. They’ve got 400k in retirement accounts, no pen. Opposition, and they worry that they’re not going to live long enough to break even. Is it? Here’s the question: Is it really worth delaying social security if they don’t have a family history of longevity?
Speaker 3 35:11
Yeah, it’s a great question, and certainly longevity is a factor that plays into social security decision making optimization, but I think it, you know, it has to go a little bit further than that. I’d be interested to know what their monthly income target is. You know, what you know, Social Security would cover in terms of that. Do they have other income sources to draw from? Of course, no pension. So, I think, you know, based on that, if they have a pretty significant gap in income, and Social Security would cover the majority of that, it would reduce pressure on their portfolio. I think it would make a lot of sense to take it early. I mean, of course, longevity and the breakeven point is a good case for that, but also just cash flow, right? They’ve got $400,000 in savings. Do they have expense high enough that that’s going to eliminate their savings quickly, or is that monthly income target low enough that it’s a sustainable distribution rate, so we’d have to identify that, you know, it might be a conversation to be had where one of them takes it early, one of them delays it a little bit to provide a higher survivor benefit for the surviving spouse, you know, to give a higher foundational income to whoever is the longest living, you know, individual in that family, so there’s a lot of strategy that goes into this. I’d be interested to know a little bit more information on their spending number to see if that’s a sustainable distribution amount from their savings. With all that being said, all these things are complicated, you know, there’s a lot of variables that go into social security optimization. We have a great reporting software that helps us analyze all of the ranges of outcomes, we run that for everybody that walks in our door. So, if you’re unsure of the optimal point for you or your spouse to collect social security, the benefits of living spousal benefits, survivor benefits, certainly give us a call. We’re happy to run that report, see how that builds into your lifetime income plan, and ensure that you’re making the best decision for that. Yeah,
Speaker 2 37:03
everybody’s different, and so you hear so many people talking about social security. I’m just going to take it when I can take it. How is it going to fit into your overall plan? You really need to have that conversation. The opportunity to get on the calendar with elite income advisors ongoing during the course of this show. Simply call 800-653-8404 If you’ve got these kind of questions, get these kind of answers. And when it pertains to you and your money, 800-653-8404 and your retirement, that’s 800-653-8404 All right, Prashant, you’re up next. They’ve been retired for five years, they’re starting to feel a little bit nervous. RMDs just kicking in. The market’s been a bit bumpy, and they’re wondering if they should cut back withdrawals now or ride it out. So, here’s the question: How should someone decide when it’s time to reduce spending in retirement before the portfolio says so, or only when it starts hurting?
Speaker 1 38:00
What if there was a way that you didn’t have to reduce spending at all? So many people come to us with this question, and I think one of the neatest things that a kind of a bulletproof financial plan can do for you is make sure that when the market goes down that you don’t actually have to change your standard of living, and so if the question is, How should someone decide when it’s time to reduce spending? I would say most of our clients don’t have to deal with that, because we try to make sure that their income plan allows them the opportunity to live a life where they never have to reduce spending due to fear of running out of money. Now, if you’ve not done any financial planning and you’re not sure whether or not you’re at risk of running out of money, then I’d argue you have to do a comprehensive analysis to figure out how long that money is going to last, which takes into account things like how tax rates are going to change, how inflation rates may affect your money’s longevity, all of those things start to go into it, but I’ll give you a great example. I had a client, 67 years old, and so he had about $2 million in his 401 k plan, and what we found is that by the time he reached his RMD age of 73 years old, we thought that his RMD was going to end up being somewhere around the 80 to $90,000 per year mark. Okay, that’s adjusted for withdrawals and everything else. So, what we did is of his 401 k money, we took about $600,000 we actually put it into an annuity, and what this annuity is going to do, if he delays it six years, it’s actually going to give him a guaranteed income for life, and that guaranteed income for life is, believe it or not, going to be around the $80,000 that will match his RMD, and so what we did is we took roughly a third of his 401 k and we used it to solve 100% Of his RMD issues down the road on a guaranteed basis, and by doing that, it allows the rest of his money within that 401 k account to continue to grow without having to worry about the choppiness of the market, and it also means that he doesn’t have to worry about reducing his withdrawals in the future when markets go crazy, I mean, I think we all know the market’s always going to go up and down. We don’t know when that’s going to happen. So, instead of trying to time it and change your plan in response to it, let’s just get out ahead of it and make sure that you have a plan that works through every type of market condition, whether that is good or bad,
Speaker 2 40:41
yeah, that’s peace of mind. And again, an opportunity to get on the calendar with elite income advisors and have that type of conversation is right now. Complimentary appointment awaits, no obligation to become a client. Call the number 800-653-8404 that’s 800-653-8404 Next scenario to you, John. 500k and a 401 K. No plan for distribution, but would like to set up their own pension. Can they do this? And how did they do this?
Speaker 3 41:10
Yeah, I think doing it exactly the way that Prashant just talked about. You know, if you’re looking to build a pension, you know, take some of the savings that you’ve worked hard for, and you know, create a lifetime income, create a pension for yourself. Then a fixed indexed annuity could certainly be a strategy for you. You know, one thing I’d mention is that we don’t want to take the full 500,000 in the 401 k if they don’t have other liquid assets. We want to ensure that our clients, or anybody that employs a strategy like this, has access to money quickly, efficiently, you know, for emergencies and things like that. We never want to put 100% of your wealth into one of these types of annuities, but you know, maybe shaving off half of that, or however much they need to create the income that’s required to supplement the gap that they have. Certainly, a plausible way to do it, it eliminates the uncertainty from the financial plan. It guarantees a paycheck, you know, with only about 15% of retirees having a traditional pension. We’re seeing this come up more and more, where folks are saying, I don’t trust the market, it’s more volatile than it’s ever been. I don’t want to be in a position where I’m forced to sell out of my account, take distributions while the market’s down, and risk not being able to recover, and potentially run out of money. We hear this time and time again. So, this is a strategy to provide certainty to the financial plan, give you a better peace of mind, and potentially take some of your time back in retirement. Right? If you’re worrying about your income, you’re worrying about what you’re going to do, you’re looking at the markets, that’s time that you’re not spending enjoying yourself. So, not only does it create peace of mind, but it gets some of your time back in retirement. And what’s the one thing that we’re running out of when we’re retired? It’s time. So, I think that’s one of the most valuable things that a solution like this can provide.
Speaker 2 42:58
I tell you, scenarios get you thinking about your own, and we’re going to open up those appointments here after this final scenario to Prashant 72 healthy thinking about getting long term care insurance, but the quotes pretty much eye watering, eye popping, however you want to describe it. One option showing premiums well over 6000 a year, is it too late to buy long term care coverage at this age, which was 72 or are there smarter ways to prep for this kind of care? Look, having
Speaker 1 43:30
lived through a long term care situation myself with my mom, one thing I’ve learned is that there’s multiple ways to solve a problem, all of which are potentially viable. It’s just a function of which solution is the right fit for you. So, in the past, we found people that are able to self-insure against a long-term care event, meaning we set up one bucket of money to provide them their income that they need every month, every year, for the rest of their lifetime. We set up a separate bucket of money that we call a growth bucket, and that growth bucket is designed for longer term growth, so that when they need money for long term care in the future, that money is already set aside and working for them. So that’s a self funded bucketing approach. Lot of our clients take that one on, especially the ones that are not able to qualify from a health standpoint, for something like insurance, the other way you go is to transfer the risk of long term care to some big insurance company, and that’s how you would go about buying long term care insurance. Now, believe it or not, there are programs out there today that give you unlimited long term care benefits. I just set a client up where he’s going to pay $10,000 a year into a long term care policy, and he’s only going to do it for 10 years, so it’s a 10 year pay policy, and what will happen is that will provide him $5,000 a month. For him and his wife in perpetuity, unlimited benefit for long-term care, and that’s one way to do it, but you have to be able to pay that $10,000 a year every year for 10 years. So, that being said, several different options here. If you’re not sure which is the best for you, or what may make the most sense, last opportunity for today’s show to call in schedule that time with John, myself, and our team of fiduciaries at Elite Income Advisors. It’s 800-653-8404 We have offices conveniently located in Annapolis, Maryland, and our headquarters are in Ellicott City. You can also call in, book a virtual visit on Zoom or Teams. It’s 806 5384 538404 Check out the great resource website we have, it’s Elite Income advisors.com lot of good information there. And you can schedule your appointment on the website as well.
Speaker 2 45:52
Another edition of Retire Smart Maryland Radio in the books for Prashant Sabapathi and John DeFeo. I’m Morgan Patrick. We’ll see on the radio next week,
Speaker 4 46:10
annuity guarantees are subject to the claims of paying ability of the issuing insurance company. If you withdraw money from or surrender your contract within a certain period of time after investing, the insurance company may assess a surrender charge. Withdrawals may be subject to tax penalties and income taxes. Persons selling annuities and other insurance products receive compensation for these transactions. Products are subject to fees and additional expenses. Any comments regarding safe and secure investments and guaranteed income streams refer only to the fixed insurance products. They do not refer in any way to securities or investment advisory products. Information presented on this program is believed to be factual and up to date, but we do not guarantee its accuracy, and it should not be regarded as complete analysis of the subjects discussed. Discussion should not be construed as an offer to buy or sell, or a solicitation of an offer to buy or sell the investments mentioned. Professional advisors should be consulted before implementing any of the strategies discussed. Investments involve varying degrees of risk, and there can be no assurance that any specific investment or strategy will be suitable or profitable for a client’s portfolio. Investment advisory services offered through Elite Income Advisors Incorporated, a registered investment advisor located in Ellicott City, Maryland. The firm only conducts business in states and jurisdictions in which they are properly registered or exempt from registration requirements. Registration is not an endorsement of the firm by securities regulators, and does not mean the advisor has achieved a specific level of skill or ability. Content should not be viewed as personalized financial advice. Insurance and annuity products are sold separately through Retirement Planning Services Incorporated. Neither firm is affiliated with or endorsed by the Social Security Administration or the IRS. Social Security, Medicare, pension, and tax rules are subject to change at any time. Insurance and annuity products are sold separately through Retirement Planning Services Incorporated, President Ozer Culhagil, Prashant Sabapathi, and Jonathan DeFeo received commissions for the sale of insurance products as insurance agents for Retired Planning Services Incorporated. Insurance of annuity product guarantees are subject to the financial strength and claims paying ability of the issuing insurance company. Morgan Patrick is not 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 paid production of Elite Income Advisors.
