Speaker 1 0:02
As we head into the next year, Americans are shifting their focus to finances. Did you know that financial resolutions like saving more and paying down debt have overtaken traditional goals like weight loss? Today on Retire Smart Maryland Radio, we’ll break down how to set realistic financial goals and actually keep them. Welcome
Announcer 0:25
in to Retire Smart Maryland Radio with Prashant Sabapathi.
Speaker 2 0:32
Welcome in to Retire Smart Maryland Radio, your host Prashant Sabapathi. You can find him at Elite Income Advisors, the power behind this program, headquartered at Lakewood City Satellite Office in Annapolis, for your convenience. Prashant is an independent fiduciary, helping his clients get ready for their retirement. I’m Morgan Patrick, and each and every week, my privilege to get on with Prashant and just talk it. And that’s right, we not only talk retirement, we give you an opportunity to get on his calendar, and these are complimentary appointments, we’ll explain those as we move through the program, but this is an opportunity for you to test drive elite income advisors, so take advantage when we open up those appointments before we jump into what’s coming, and that is the new year. Prashant, how was your week? The
Speaker 1 1:16
week has been great, you know, always heading into year end is busy, and you know, we like to give our team a little bit of time off in that week between, you know, Christmas and New Year’s, but as a result of that, we’re trying to cram in as many appointments, do as many year-end planning meetings with clients as we can, and believe it or not, we’ve seen a lot of new people coming in, and usually people will traditionally, they’ll just say, “Hey, let’s talk after the new year, and I’ll make my New Year’s resolution and start to address it that way, but more than ever, I don’t know if it’s because we’re getting an incoming administration or, you know, just anxiety around finances seems to be what I feel like is at an all-time high. I think people just want to come in and get a financial plan put together and get maybe an alternate perspective. So, we’ve been busy around the office, it’s been great. We’ve brought on some new team members here, brought our new certified financial planners, names John DeFeo, and so he’s going to be a great addition to the team. So, things are moving around here at Elite Income advisors, it’s super exciting, and looking forward to what’s to come here.
Speaker 2 2:24
Well, and that means to probably in the near future, whenever Prashant wants to, we’ll have some of some of the new blood come on the radio show, and we’ll introduce you to them. But it’s again, it’s about getting you ready for what is going to be your in-game, your retirement now. As we make the calendar switch, Prashant, you teased about financial resolutions, but I’m gonna go ahead and just go off the board, and I’m just gonna ask you, in years past, when you get to this time of year, personally, what kind of resolutions do you have outside of retirement? Obviously, outside of finances, personal resolutions as you move into the new year, maybe some things that have worked, maybe some things that haven’t worked. I mean, you’re human, just like all of us, right? You’re not a cyborg. I mean, things do happen. I’ve always done the weight loss, or the, you know, the get in the gym type thing around that, around the new year. What about you?
Speaker 1 3:16
Yeah, traditionally, I’ve been.. that’s been a big one, is the weight loss and Jim, this is the first year. 2024 was the first year that I actually held the New Year’s resolution, held myself accountable to it. So, just overall accountability was was my thing for 2024 Happy to say, lost 30 pounds this year, got a lot healthier. So things are good, but other than that, you know, heading into next year, I want to read more. I think that’s really important. That’s a
Speaker 2 3:44
great one, by the way. I like that one.
Speaker 1 3:46
Yeah, so I’m thinking a book a month is what I want to do. I mean, obviously we’re busy around the office here, so I don’t get too much free time, but I think a book a month is is manageable. And the other thing is, with just our practice, my goal is to bring in new advisors and train them to provide a quality level of service that me and my team have provided for years now, and so we want to grow our team here, because the demand for what we do has just been through the roof, and so my goal is to add another two advisors over the course of 2025 and have them take care of our wonderful clients, and we’re going from there. So, we’re doing big things.
Speaker 2 4:26
I love it, I love it, absolutely love it. Now, in the teas, when we were talking about what we’re going to talk about on the show today, you mentioned financial resolutions overtaking health goals. Why do you think that
Speaker 1 4:38
is? So, I think it has to do with financial anxiety being at all-time highs, right, and I think there’s a couple things that go into that. Number one is inflation, right. Almost every client that comes in our doors tells us, you know, I used to be able to live off of social security in my pension, or I used to be able to take just 1000 or $2,000 A month out of my portfolio, and that was fine, but now car insurance is higher, property taxes is higher, groceries are higher, everything is through the roof, and it’s creating a strain on my retirement budget, and I think that’s created higher anxiety. We’ve seen higher credit card debts across America. All these things are contributing to what I call financial anxiety, and so, yeah, I think health goals, weight loss goals used to be the big thing, but it’s no surprise that this statistic survey came out that said 41% of Americans are prioritizing saving money in 20, you know, in the coming year, and for that, that eclipses resolutions like dieting and exercise? I have, I think, it has to do with the state of confidence that we have in the US economy and inflation right now.
Speaker 2 5:49
I mean, there’s a lot of uncertainty, and what do we need when we get into retirement? We need, we need income, we need those, those streams of income, we need things we can lean on and depend on. We need to have confidence in our retirement, and just talking about why, with these resolutions, that finance has really gone to the top of the charts. What about inflation’s impact on just our overall financial goals? That has a lot of people concerned.
Speaker 1 6:12
Yeah, it’s interesting. I mean, inflation is a primary concern, and look, when it comes to financial planning and dealing with things like inflation, my overarching philosophy is that when we get to retirement, the higher the income, the better the outcome, and so oftentimes the answer to higher prices is having more income coming in. So one of the things that we’ve been doing with a lot of folks this year is designing these income plans to make sure that they have a baseline of foundational income coming in. So, foundational income is income that is not linked to anything that carries risk, like the stock market. So, think about your social security, think about your pension, maybe you have an annuity that’s giving you some extra income. Those are sources of foundational income that we can always count on, regardless of market condition. So, when we look at how to deal with inflation, and inflation will always be here, folks, whether it’s high or low, prices will always go up. The answer to dealing with inflation is simply having higher income, and to me it has to be guaranteed income. It can’t be income that is linked to the stock market. Okay, and so to me, that’s where we need to start this conversation. Look, folks, let’s open up our phone lines here. The phone number is 1-800-653-8404 that’s 800-653-8404 If you’ve never had an income plan done by a licensed fiduciary by a professional, come on into Elite Income Advisors, visit with my team of specialists. They’re going to sit down with you, help you map out your income each and every year for the rest of your life. That’s going to be one aspect of what we’ll help you do. The second thing is we’ll do a review of your portfolio as you head to retirement. You want to make sure that if the market goes down, you’re not going to lose too much money at the wrong time. We’ll include a risk analysis, as well as a social security optimization report, as a part of your complimentary consultation. Now, when you come in to visit with us, it is totally free of cost. You’re not agreeing to become a client, but what you are doing is you’re sitting down with a professional to get exactly what you need, which is a real retirement plan that addresses your retirement concerns. It starts with that phone call. We’ll open up our phone lines right now: 800-653-8404 Come on in and get on your way to Retiring Smart.
Speaker 2 8:38
When we return on Retire Smart Maryland Radio will continue the conversation on why financial resolutions have overtaken health goals. When it comes to the new year resolutions, we’ve talked about again inflation’s impact on the financial goals. We’ve got more to come right here on Retire Smart Maryland Radio. You We are back on Retire Smart Maryland Radio. Your host is Prashant Sabapathi, Elite Income Advisors. Where you can find him, check out the website, it is a great resource, Elite Income advisors.com Prashant is an independent fiduciary helping hundreds of his clients get ready for their retirement. Elite Income Advisors, headquartered in Ellicott City, they also have a satellite office in Annapolis. I’m Morgan Patrick, and each and every week it’s always retirement discussion, and we are talking about resolutions as we enter into a new campaign, a new year, and guess what, financial resolutions have overtaken health goals in a lot of these surveys that we’re looking at, and that’s because people are concerned. So, what should you be doing again? Make sure you understand inflation’s impact on your money, and Prashant, we want to start off this segment talking about just that, that new mentality.
Speaker 1 10:00
And that is save more simple changes, like you know, the littlest thing, like increasing your retirement contributions by even just 1% can have a significant impact over time due to compounding interest, right. So, for me, what I look for is I look for small victories. Okay, it’s not the type of thing financial planning that you need to do it all at once. Okay, financial plans are built over time, and oftentimes the plan you end up with is not the plan that you start with. And so it’s all about getting small victories. You do that so that you can stay motivated, you don’t feel overwhelmed, and once you knock off enough small victories, it leads to really a heck of a lot of long-term success. So, even something as small as a 1% increase or 2% increase to your 401k contribution can go a heck of a long way
Speaker 2 11:00
as you get prepared for retirement, talking about some financial resolutions, you’re out there and you’re, we’re all headed towards retirement, so some things that you can be doing, and you can do it right now that will help you in the long run. You’re locked into Retire Smart Maryland Radio. Your host is Prashant Sabapathi, Elite Income Advisors, where you can find him, and again, there’s going to be an opportunity to get on his calendar at no cost, no obligation, no pressure. And Prashant likes to say, “Hey, look, you grab one of these appointments, you’re not agreeing to become a client, they’re not agreeing to take you as a client. But this is an excellent way to test drive, kind of see where you are with your retirement planning. If you’re sitting on a portfolio, folks, that is not a plan. If you are frustrated with the lack of communication, or maybe your appointments are getting moved around, and you need a second opinion, grab one of these appointments. Easy to do it, and you can call at any time during the show. 800-653-8404 that’s 800-653-8404 So, back to our resolutions, accountability, you’ve used this word quite a bit, Prashant. Just being accountable, we talk about it with resolutions all the time. You want to see results and you want to hold yourself accountable. Well, when it comes to your finances, you need to do that as well. So, why not work with a pro? Get some coaching.
Speaker 1 12:16
Yeah, in the least surprising fact ever that I’m about to drop here, the Motley Fool found that having a customized plan is typically more successful than just getting general advice, right? If I told you that you had to go take a road trip from here to Tennessee, which, by the way, I did that earlier this year, but I told you you’re not allowed to use a GPS, how would that journey go probably not so great, right? Because you know, I often don’t leave the DC and Maryland, Virginia area, and so going out of state is a big thing. So, if I don’t have a GPS to get to Tennessee, it’s going to be pretty difficult getting there. It’s the same exact thing with your retirement. You have a general idea of where you’re supposed to go, but you should think through all the different components of what’s going to be coming down the pike for you to be aware of, whether that’s tax strategies and increases in tax rates, whether it’s required minimum distributions. I just had a call with one of our Medicare partners down in Tennessee, and he was walking me through the complexities of Medicare, and sometimes I’m like, How does anyone who doesn’t understand Medicare figure Medicare out if they don’t have a specialist that they’re working with, and so having a customizable plan put in place is really important, but it’s not just that, it’s actually doing required maintenance on that plan, as your life changes, as the world changes, your portfolio, your income plan, your tax plan, your legacy plan, it should all probably adjust to reflect the world that we live in. So, it’s not enough to just put the plan in place, you have to do the maintenance along the way as well.
Speaker 2 13:55
Talking about the resolutions, when it comes to your finances, your retirement things you need to be doing, and we can talk it all we want to, Prashant, right? We can talk about it, we can say we’re gonna do it, but writing it down, the importance of having a written plan.
Speaker 1 14:13
Oftentimes, I think people think that they have a plan in place when all they have is a bunch of statements, right? So you might have several accounts, maybe did a great job saving money. I’ve oftentimes seen people come in to visit with me. Met with someone just today, had two and a half million dollars. It was spread out across seven different retirement accounts from previous employers. And so, with that being said, that’s not a plan. Having statements is not equivalent to having a plan, because nowhere on those statements will it typically tell you how long that money is going to last, what the tax liability of it is when you withdraw it, or how much risk and return you’re getting out of that portfolio, and so less than 40% of Americans have a written financial plan, despite the effectiveness. Of having one, and so you have to put that plan together, do it with a licensed fiduciary, and really outline what makes a plan successful. So I oftentimes ask my clients that, and ask prospective clients that, like, I’ll say, look, if we decide to work together, and we all decide it’s a good fit for one another, you’re a good fit for us, and we’re a good fit for you, and we’re sitting in my office 18 months from now. What would have had to have happened for you to say that this was worthwhile, that this is a successful relationship, and that this was a worthwhile investment of not just your time, but your dollars and your effort as well. And I think you have to define those things clearly before you engage in any relationship, not just with me, but with any financial planner, and really any professional, in my opinion.
Speaker 2 15:50
So, important again to be on the same page. You’re talking about heading off into this new campaign this new year, and what are your financial resolutions? We’ve already talked about today, you know, think about the things are going to impact you. Inflation is going to be out there for you. Have a save more mentality as you enter into this new campaign, and be accountable, you know, and be willing, be open-minded for financial coaching, and just the importance of having that overall plan, the written plan, and then last but not least, I mean, so many puzzle pieces we often talk about, Prashant, but the tax piece of this, you got to plan for it for long-term success.
Speaker 1 16:31
That’s exactly right, you know? I look at the state of the national debt, Morgan, and it, it keeps me up at night because it’s ballooning, it’s growing at a rate like we’ve never seen before. We’re over a trillion dollars of interest on the national debt in 2024 What are we going to do when this national debt gets to 50 trillion or 60 trillion or $80 trillion one day? And if nothing changes, we’re going to get there, and so what has to change is taxes probably have to go up, and so if you did a great job saving money, maybe have a million or 2 million bucks in your retirement accounts, you got to ask, do I really have $2 million if all that money becomes taxable when I have to take it out, and I’d say the answer is no, because you are in a partnership with the IRS, and the issue is that they’re the managing partner. They set all the rules, you don’t get any say in it. So all you can do is try to set your tax plan up in such a way that you’re going to pay the least amount of taxes possible over the course of your lifetime. This is an integral part of not just the financial planning process, but the legacy planning process as well, and I think if you have not talked with your advisor about taxes, either you’re missing the mark or your advisor is missing the mark. It’s a great opportunity to sit down with people who do this every single day and talk about tax strategies to review and reduce your tax bill, when you get to retirement,
Speaker 2 18:02
just so important to have these types of conversations, and it’s a great time in the calendar year to kind of sit down and not necessarily hit a reset button, but at least review and take a look at what’s going on, and there’s so many of you out there that are sitting on, as we’ve talked about before already today, just sitting on portfolios, and there is no rhyme, there is no reason you’ve done well in the saving department, but as far as the planning aspect of this, there’s so much that can impact you on your way to retirement. So, working with a professional, working with a fiduciary, someone that does this on a daily basis, it provides confidence, right? We can’t eliminate all the stress, but a lot of the stress will go out the window, just knowing that you have a plan in place. And, Prashant, you say it often, you know, income streams, the income that’s coming in that you’re going to have for retirement, knowing that you’re confident and you’re going to be covered in your retirement years.
Speaker 1 19:00
Yes, exactly right. You know, it’s tough because you think about something like long-term care, right? And I’ve been through this. I’ve shared my story about this with my, with my own mother. My mom was in long-term care for eight years with dementia. In the last three, it was 10,000 to 12,000 bucks a month, and so what we’re finding is more retirees are helping adult children financially, but also adult children are helping their parents, and that’s kind of what happened in my family, and so depending on which side of that equation you’re on, whether you’re the 55 year old who may have to take care of a parent or maybe you’re the 70 year old who’s helping take care of an adult child, you have to be able to plan for these types of things. So one thing we talk about all the time is what happens if the stock market was to go down right when you need to take these big withdrawals to help your family out or help yourself out due to life. Long-term care event, we’ve seen people who’ve saved a heck of a lot of money in pretax retirement accounts, like you saved a million or $2 million but then now you need 10 or $15,000 a month to deal with long-term care, or you need an extra two or 3000 a month to help one of your adult children, and now you start to take that out of your 401 k, well, in order to net 10,000 a month, you have to account for the tax liability along the way, right? So, instead of taking 10,000 you might have to take 15,000 to get to the number you need, even if you’ve saved $2 million When you withdraw that kind of money that quickly, and the market goes down at the same time, you are now instantly at risk of running out of money. These are the types of things that people don’t oftentimes think about, not because they’re just putting their head in the sand, ignoring it. It’s because no one’s ever advised them to think about it. So, folks, if you have not had a conversation like this with your licensed fiduciary, or if you’re a do-it-yourselfer, and you’ve never thought about how to plan for the what ifs that come with retirement, pick up the phone and give us a call. The phone number is 800-653-8404 It’s 800-653-8404 You come in to visit with me and my team. We’re going to walk you through a financial planning process. We’ll get to know you, you’ll get to know us, we’ll get to hear what’s important to you. And then we’re going to put together this complimentary retirement plan. It’s going to include a social security optimization plan, an income plan for life, a risk assessment, and a tax analysis to show you where you could potentially save money on your future tax bill. We’ll also talk about long-term care and legacy, all of that to have those conversations is 100% free of cost to you. All you have to do is pick up the phone and give us a call. It’s 800-653-8404 Come on in, visit with the team, and let’s make sure that your retirement is on the right track. 1-800-653-8404
Speaker 2 22:00
When we return on Retire Smart Maryland radio, are your finances built to weather any storm? We’ll talk about that next when we return Retire Smart Maryland radio hosted by Prashant Sabapathi. You can find him at Elite Income Advisors. Check them out online, and it’s a wonderful resource website, Elite Income advisors.com That’s Elite Income advisors.com Independent fiduciary, yes, Prashant is. He is a published author, fiscal health, retirement wealth, and a second book, Retire Abundantly. They’re headquartered in Ellicott City. They have a satellite office in Annapolis for your convenience. I’m Morgan Patrick. And away we go. So, think of your retirement plan like you’re building a house. We’re going to talk about this. Are your finances built to weather any storm? So, without some stability with that structure, you’re going to have some issues. So, just like any house, Prashant, when you’re starting, what do you want? You want a plan, you want to work with an architect, but the financial foundation, that’s the start of the plan.
Speaker 1 23:13
Yeah, if I was building a brand new house, I think the foundation is the most important part of that house, and so I feel the same way about retirement, and so the, the, the architect designs, you know, the plans to the house, and that’s what your financial professional should be doing. Okay, you need this comprehensive retirement plan, and it needs to be written and mapped out, because that’s going to be what ensures that you know exactly how to transition from the accumulation to the income phase of your lifetime effectively. Okay, and so there’s key elements that you should be aware of, and I always say this, the strongest foundation that you can create when it comes to your retirement plan is a foundation of income, so the very first thing that we do with our clients and the folks that come in to visit is we start to ask them, How much income do you need on a monthly basis to live your most fulfilling quality of life? Is it five, 710, $1,000 a month, whatever it is to you, we need to know what that number is, and then what we’re going to do is we’re going to compare that number to all of your foundational sources of income, think social security, think pensions, etc. So, hypothetically, if I needed $7,000 a month to retire comfortably after taxes in today’s dollars, but my social security and my pension only add up to 4000 a month, then now I have what’s called a gap in my income. Okay, so my monthly income target is 7000 my foundational income is 4000 and so I have a gap in my income of $3,000 a month. In order to create a strong foundation, we have to figure out how to make sure that we’re fit. Link in that income gap of 3000 a month on a certainty type of basis to make sure that it’s guaranteed, and so that’s how we create a foundation. Guaranteed income is the foundation of your retirement plan. Remember, the higher the income, the better the outcome. When we get to retirement,
Speaker 2 25:16
we are discussing again making sure that retirement plan is a sturdy build for you and exploring key elements to fortify your financial future, so we’ve talked about the foundation, the start, you know, starting with a plan, and then inflation, here’s the I word again, inflation proof your retirement, because we’ve all been to the store, the gas station, things are expensive,
Speaker 1 25:42
inflation erodes your purchasing power, right? $100 expense today could cost $200 in 20 or 25 years, and so what you have to ask is, are your investments designed not just to keep pace with inflation, but hopefully outpace inflation? Okay, so here’s a statistic, between 2021 and 2023 inflation cost a noticeable increase in retirement costs, which highlighted this need for proactive retirement planning. One thing that I found is, have you been paying attention, Morgan, to what the social security cost of living has been the last several years,
Speaker 2 26:22
I mean, it’s, it’s something,
Speaker 1 26:24
it’s something, it’s, it’s, it’s higher than what it has been historically, but if you look deep into it, what you’re probably going to find is social security doesn’t actually keep up with the cost of living, they give you a cost of living adjustment, but it often doesn’t match the inflation rate, which is why I had so many clients come into me after Social Security gave out those raises, and they said, Prashant, I don’t get it. Social Security gave me this raise, but it feels like I still can’t keep up. Why is that? And oftentimes it’s because it doesn’t truly keep up with the true cost of living, so you have to have your portfolio working for you in a way that not just keeps pace with inflation but actually outpaces inflation, especially when you get to the retirement years of your life,
Speaker 2 27:11
and it brings up that, you know, we talk about it all the time. I mean, leaning heavily on social security, it’s going to be there, but you really need to have, you need to have a plan, you need to have a backup plan, you need to have those those gaps covered, and leaning solely on, or heavily on, social security is kind of scary for a lot of people out there. So, make sure you are planning and planning well as you move towards your retirement, so your financial future, you know, we’re talking about elements that you can put in there to really fortify it, so start with a plan, make sure that plan is inflation proof, and then you know risk management and diversification. This is something that we hit almost every single show, Prashant, because it’s so vital to make sure you’re not too heavily, I guess, sprinkled in one area and you’re diversified.
Speaker 1 28:00
It’s because too much risk can effectively derail your retirement plan, but there’s a balance, right? Because being too safe, being too conservative, might leave you too short on growth, and so maybe you won’t grow to the number you’ll need to grow to in order to retire, and so this is why having balance is really important. Okay, so we think about everything in terms of buckets. Okay, and the two buckets that we oftentimes talk about are what we call the red bucket and the green bucket. The red bucket is for risk money, and the green bucket is for what I would call safe money. Now, a lot of times when people come in to visit with us, they have their money over weighted in either of these buckets. For those of you who are out there who don’t like taking risk, it’s natural to see most of your money in that green bucket that’s safe. For those of you who are more comfortable taking risk, I’ve seen people with 9596 99% of their assets in the red bucket. When we get closer to retirement, in order to be successful investing in the market, the number one thing that that success is driven by, in my opinion, is time. Right, the longer we can leave our money in the market without touching it, the higher the probability is historically that we’re going to earn a return on our investment. Okay, but when we get to retirement, time is the one thing that we just don’t have quite as much of, so we’re in this weird place where we need time to be successful, but we don’t have quite as much time, and often times, if we can balance your money out across multiple buckets, a safe bucket for when the market goes down, and then a risk bucket for when the market goes up, that’s oftentimes how we construct retirement plans in a way that allows you to create the retirement income that you require to make your lifestyle as fulfilling as possible. That’s our philosophy, and I often joke with clients, the way that we plan is not necessarily like the sexiest, highest. Growth way to plan, but one thing I’ve seen in helping the number of people that we’ve helped retire is the way that we plan more often than not. It works, and I think that’s what most people want. They just want the reliability of a plan that works.
Speaker 2 30:18
I like it’s not sexy all the time, but it works. I mean, certainly you want something that’s going to be functional and protects you as you move to and through retirement. We’re talking about key elements just to fortify what is going to be your financial future. The last one we’re going to have time for in this segment is we’re going to get to health care, and we’ve used this stat quite a bit. Fidelity came out with a survey a few years ago, and obviously the numbers have probably gone up, but the ones we have, you know, an average couple age 65 is gonna, you know, have 300 and right around 315,000 just in health care expenses as they move through retirement. That does not include long term care. Just think about those numbers, folks, 315k for a couple 65 and older, just health care, so not planning for health care, or not thinking about health care, or not having it as one of your foundation blocks for your plan is a big mistake.
Speaker 1 31:10
It’s almost like taking out another mortgage in retirement, right? 315,000 per that Fidelity study is like taking out another mortgage, and so what is the answer to higher expenses? It’s higher income, folks. It’s really simple. The higher the income, the better the outcome. And so, look, Morgan, I’ve never had a client ever come to me and say, Prashant, I’m suffering because you built way too much guaranteed income into my financial plan. It’s never happened. Okay, and I don’t think that it ever will. It’s a good problem to have if you have too much income. Yes, you have to deal with the taxes, and yes, you have to deal with higher Medicare costs and things like that, but when you have higher income, it allows you the opportunity to pay for things like health care expenses unexpected in retirement. Folks, if you don’t have that income plan in place, where you can look at one sheet of paper or one computer screen and map out your income each and every year for the rest of your lifetime, while taking into account the tax rates and while taking into account inflation, you need to come in and visit with us. The phone number is 800-653-8404 We will put it up on each one of our 70 inch TVs in our office. Your income plan, where you’ll be able to see line by line what your income is projected to look like after taxes and inflation have been accounted for. We’ll also do that risk analysis, social security optimization. We’ll have a conversation about how to reduce your retirement tax bill, and we’ll talk about how you leave the best legacy possible in the most tax-efficient way. It starts with that phone call, folks, 800-653-8404
Speaker 2 32:54
When we return on Retire Smart Maryland Radio, we’ve got scenarios, and remember, retirement planning, it’s not always sexy, but oh, how necessary it is. We’ve got again scenarios coming up next. I’ll throw him at Prashant, see what he comes up with. Retire Smart Maryland Radio, hosted by Prashant Sabapathi. You can find him at Elite Income Advisors. They’re headquartered in Ellicott City. They’ve got a satellite office in Annapolis. Prashant is an independent fiduciary. He’s also a published author, Fiscal Health, Retirement, Wealth, and Retire Abundantly. And if you go to the website, Elite Income advisors.com it’s a great resource for you again, links to the TV show, radio shows, and podcast form. Just great information there. Great way to test drive. And speaking of test drive, there’s going to be an opportunity to get on the calendar with Prashant Sabapathi and his team at Elite Income Advisors. And the appointments we make available today are complimentary. And here’s, here’s the deal, you’re not agreeing to become a client if you grab one of these appointments, it is a wonderful way just to see if it’s a good fit, and again, having a retirement plan and being ready for it is it’s paramount, and then just showing up with a portfolio that can be a little bit scary, because you don’t know what you don’t know. All right, so some scenarios for Prashant, we’ll see how he does. First one up, Prashant, 50 year old health care worker has accumulated 250,000 in a 403 b and wants to retire at age 55 So, we’ve got a five year window here. They’re looking at taking penalty free withdrawals under the rule of 55 Why should they know about this rule, and does it apply to their 403 b?
Speaker 1 34:40
Yeah, so typically, what will happen here is that if you separate from service from your employer in the year that you turn 55 or older, you’ll actually, believe it or not, be able to access money from your 401 k plan without incurring the 10% IRS imposed penalty for early withdrawal. Cool, so this becomes really important for folks that are considering retiring early. Okay, so if you’re in that group, like so many of our clients are, who want to retire maybe before the age of 59 and a half, and you have something like a 401 k at work, you can actually retire, leave money in the 401 k and draw some of that money out without incurring the early withdrawal penalty that you would normally get hit with if your money was in an IRA account, so it’s a great strategy for those of us who want to retire between the ages of 55 and 59 and a half years old, it gives you some additional access to your retirement capital, so that you can fund the income that you need over that particular period of time. Now, is it a good idea to do that? That just depends. That depends on your situation, it depends on your income needs, it certainly depends on your tax rate as well, and your risk capacity when you get to retirement. It is a great tool to take advantage of. I think not a lot of people know that that exists, but when you put that income plan together, that income plan should show you where the best place to take money from is, so that you can fund your retirement goals appropriately.
Speaker 2 36:20
You know, I love the scenarios, but you got to remember the main thing is it depends, right? Everybody’s going to be different. You’re going to hear a scenario, it might be similar to what you’re going through, but it’s not exactly what you’re going through. Make sure you’re getting professional advice, get a fiduciary working with you, make sure you’re mapping this out, and as we go over these scenarios, I mean, think about your own right, and there’s going to be an opportunity to grab a complimentary appointment with elite income advisors. Take advantage of that when we open up the phone lines. All right, here’s the next scenario: a single retiree is considering using part of their IRA to purchase a qualified longevity annuity contract, a QLAC, to
Speaker 1 37:00
reduce required minimum distributions, RMDs, we call them. How does this work, and what are the potential benefits here? So, when you get to the age of typically 73 years old, you’re required to take money out of your retirement accounts, your pre-tax retirement accounts, whether you need that income or not, you’re forced to do so by Uncle Sam for the purposes of you paying income taxes. Okay, so that’s what’s called the required minimum distribution. By purchasing a qualified lifetime annuity contract, also known as a QLAC, you can defer some of those RMDs all the way through the age of 85 years old, so one thing to be aware of here is you’re not actually eliminating the RMD, you’re just kicking the can down the curb to the point where you can defer it out for a period of time, that money still is pretax, you are still required to pay taxes on it when you withdraw it, and your heirs will certainly pay taxes on it in some form or fashion if you were to pass away and leave it to them. Culox are a great tool if your RMD is projected to be really high, so if you’ve saved 1,000,002 million, $3 million or more in your retirement accounts using a culock to defer out part of your required minimum distribution beyond the age of 73 could be a great idea. Now, there’s certain stipulations that apply. It will not be the right thing for each and every person out there, and there is a limit on how much money you’re allowed by law to put into a cullac. You can’t just take all your retirement accounts, put it into a key lock. The government will not stand for that, because they want to collect their tax revenue as well. But it could be an idea for those of you who saved a significant amount of money. Talk with a licensed fiduciary, or your insurance, or investment professional to make sure that you’re taking advantage of it in the correct way.
Speaker 2 38:58
All right, two scenarios down, two to go. Just a reminder: complimentary appointments with elite income advisors. You’re leaving the checkbook at home, you’re not agreeing to become a client. All you’ve got to do is call this number: 800-653-8404 That will secure an appointment for you. 800-653-8404 All right, next scenario: an investor with 250,000 in a self-directed IRA wants to add crypto to their retirement portfolio, but is unsure about IRS rules. How do self-directed IRAs handle crypto, and what are the tax and custodial considerations?
Speaker 1 39:36
Here’s my comment on cryptocurrency. Okay, especially after what’s happened in the fourth quarter of 2024 we’ve seen historic rises in the price of Bitcoin and other cryptocurrencies. I think what you have to be cognizant of here is how much risk these investments involve. Okay, so when it comes to cryptocurrency, you have to be able to value. Evaluate the risk involved. Here we’ve seen cryptocurrency like Bitcoin and other, you know, cryptos go down at periods of time 50 60% Okay, and then we’ve seen historic rises in the prices as well. Now, typically when we have a conversation with clients about crypto, it’s a conversation that surrounds risk. Okay, when the market goes down, or when the crypto markets go down, how much loss are you willing to incur? I think every investor has to reconcile that answer internally to how much risk they’re willing to take, and then determine whether or not crypto could be a good thing for you. Now, certain crypto investments out there, like they’ve come out with these crypto ETFs and things like that, you can typically purchase things like that within an IRA, because they are just ETFs, they’re funds that you can purchase on the open market, and so you’d have to be careful with tax considerations. There you want to work with a CPA, work with a tax professional when reconciling capital gains and crypto gains and losses. Most important thing, though, evaluate the risk and make sure that it’s a good investment for you based on your own unique risk capacity, not based on some advice that your golf buddy gave you, or that your brother-in-law gave you, or that your coworker gave you, it’s got to be the right thing for you. If you’re not sure how to evaluate it, meet with a fiduciary and let’s talk about it together.
Speaker 2 41:32
We are going to open up those appointments here in just a sec. I do have one more scenario. Here it comes: 50 years old, never taken the step just to begin the planning process. What are some tips for a 50 something to get moving on this
Speaker 1 41:50
number one is take inventory of where you stand today. Okay, in order to create a meaningful plan moving forward, you have to know exactly where you stand, so one thing we do is we put together what we call a summary of assets for each and every one of our clients. We help them create that. Okay, and summary of assets going to take inventory of all the different accounts you have, all the real estate that you have, etc. and it’s going to allow us to understand where you stand. Number two is start to forecast what kind of income you’re going to need when you eventually get to retirement, whether you’re five years, 10 years, or 15 years away. You should start to forecast what retirement looks like to you, and then from there you work backwards. So, what I mean by that is, let’s say you needed $10,000 a month to retire. I think what you want to do from there is, you want to work backwards to say, where is my income going to come from? Is it going to come from social security? Am I going to get a pension? Do I have rental income? Do I have an annuity that’s going to guarantee me income? And you start to add all those things together, and then you work backwards to figure out what kind of nest egg you need to grow to to generate the income that you need to live your most fulfilling lifestyle, it involves doing a cash flow analysis, it involves doing an income plan, a risk analysis to make sure that your investments are working efficiently for you, so that you’re balancing risk and reward, and then it’s all about taxes at that point, right, once you get all the other things taken care of, you have to understand what the potential tax liability is of your retirement investments, and most importantly, if there’s a way to do it, you got to see if there’s a way you can transition your retirement to as much of a tax-free retirement as possible. That’s our philosophy, and that’s what we help clients with each and every day. This will be our last opportunity, folks, to open up the phone lines: 800-653-8404 When you dial that phone number, have your calendar in front of you. I have a great team of operators standing by, ready to look at a calendar and book you to your own complimentary appointment with my team of specialists here at Elite Income Advisors. We have offices in Ellicott City, which is our big beautiful headquarters office. We also have an office in Annapolis for those that are in Anne Arundel County. Dial that phone number: 800-653-8404 Schedule that free consultation today. Now, when you come in to visit, we’re going to go through a series of different things. Number one, we’ll go through an income plan. We’ll map out your income each and every year for the rest of your life, taking into consideration taxes and inflation. Number two, we’ll put together that risk and reward report. Number three, we’ll do what we call a forensic fee analysis of your investments. We’ll show you how much you may be paying, and not just the transparent fees, but the hidden fees as well. And lastly, we will talk about tax planning. You should understand what your potential future retirement tax bill looks like, and what opportunities you have to raise. Reduce that tax bill if at all possible, as all sorts of that phone call. Last opportunity for today’s show: 800-653-8404 That’s 800-653-8404
Speaker 2 45:12
Another edition of Retire Smart Maryland Radio in the books for Prashant Sabapathi. I’m Morgan Patrick. We’ll see you on the radio next week, you
Announcer 45:29
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