Speaker 1 0:01
You finding love again later in life can be sweet, but the finances, that’s where it gets complicated. Today on Retire Smart Maryland Radio, we’ll uncover how couples can say I do the second time
Speaker 2 0:18
around.
Announcer 0:19
Welcome in to Retire Smart Maryland Radio with Prashant Sabapathi.
Speaker 3 0:28
Welcome into Retire Smart Maryland Radio, your hosts Prashant Sabapathi and John DeFeo of Elite Income Advisors, the power behind this program. They’re both independent fiduciaries, they’re headquartered out of Ellicott City, and they’ve got a satellite office for your convenience in Annapolis. I’m Morgan Patrick. My pleasure to jump on each and every week and talk with the advisors just about the importance of being prepared. And look, retirement, it’s going to be different for everybody. You need a customized plan. We’re going to give you an opportunity to get on their calendar, and it’s complimentary, and again, no obligation to become a client. So, stay tuned. We’ll open up those appointments here shortly. So, gentlemen, I always do it. Prashant, how was the week?
Speaker 1 1:07
The week’s been great. We have some exciting news to share with our radio audience. We have undergone an office expansion here at our headquarters in Ellicott City, so adding, I think, a couple 1000 square feet to our office. We’re adding in a new recording studio, so anyone who’s listening to this is obviously just listening to the audio, but we should have some pretty cool video capability coming pretty soon. You’ll see us more doing some content on social to keep our clients better informed and to keep pushing out the education that we strive to do every week, so that’s been exciting, that’s all under construction right now as we speak, literally. And then another piece of exciting news is we’re opening a new Annapolis office over on Best Gate Road, and that’ll have two or three conference rooms, couple offices there, so the team is expanding. We’ve hired a couple new people this just this week, actually. And as a result, the practice is expanding. It’s all very exciting, and I’ll tell you what, we wouldn’t be able to do it without the support of our not just our clients, but the people who attend our live events every year. I think I’ve shared on the program we’re on track to do something like 128 live events between myself and John and Wes Lindquist in our office, and so things are really happening here at Elite Income Advisors. It’s a lot to be proud of, and I think it’s just gonna make the experience that much better for the existing clients that we have, so a lot of exciting stuff going on. Yeah,
Speaker 3 2:42
it’s about it’s about helping and making sure you’re ready for retirement. There’s a lot that goes into it, and just fantastic news that the firm is growing to feed that need. So, John, what about your week?
Speaker 4 2:56
Yeah, it’s been very, very busy, a lot, as Prashant mentioned, a lot of exciting things happening here in the office. The energy has been really high as we, you know, work on moving into that suite. You know, one thing that I really do love about this firm is that we give back to our clients. We want to give a great atmosphere for them to meet and feel comfortable in, you know, in these types of conversations. So excited about that, and you know, this time of year is really where things start to get busy in our industry. You know, the kids are back in school, typically vacations are starting to wrap up by now. The end of the year is coming, so there’s a lot of tax planning to be done, a lot of, you know, conversations on how the year is going to wrap up, talking through, you know, how to strategize for the new year, so a lot of people in and out of the office, but exciting time of year at that.
Speaker 3 3:45
I tell you again, growing to help the area get ready for retirement. Have the staff available again. We on the radio show, we talk it, but they also walk it. They give you an opportunity to get into their office, complimentary, no obligation. See how you’re doing with your retirement, and if you’re just sitting on a portfolio, we say it all the time, that is not a plan. We applaud the saving and the putting the money away, but now you need to really kind of get in there and grind on having that plan for your retirement. So, there’s a trend out there, it’s, you know, we’re all married, or you know, we’ve either been married or we’re currently married. I’ll say that, because I’m currently not married, but I did go through the steps and married into the Catholic faith, guys, and we had to go on counseling, and because they want you to stay married, and the stats back when I got married were about 50 to 55% of marriages did not make it right. Well, those numbers have gone up. So, we’re going to talk about grade divorce, and on the positive side of that, you know, once you are divorced, as you’re moving towards retirement, a lot of people do end up meeting somebody, and so things have changed. And when it comes to your money, you got to be concerned about it. So, Prashant will start. With you, late life love on the rise, we’re seeing those, those second and third relationships really take root.
Speaker 1 5:08
Yeah, this is becoming more and more prevalent. I think gray divorce has actually doubled since 1990 for folks over the age of 50, and believe it or not, tripled for those over the age of 65 that’s from a US news.com piece, and so it kind of makes sense that many are finding love again and giving this partnership another go. So, if you’re in this situation, I think you have to think about this from the standpoint of what are some of the financial conversations that you should be having if you’re entering into a second or even a third marriage. Right, I think there’s a thought of talking about assets. Are we going to combine, or is there, or are we going to stay separate? You know, I know we’ll talk a little bit about things like prenups and that type of thing, but John, maybe you can talk a little bit about how it’s not necessarily just all about the romance, it’s as kind of unromantic as it is to say, it’s not just romance, it’s also like a merger, isn’t it? It
Speaker 4 6:15
absolutely is, right? I mean, it isn’t just about the romance, you know, you have to think of things that are going to be coming together in terms of your finances, you know, are you going to merge 100% of your finances together, you know, put joint bank accounts, assume you know each other’s assets are yours, do you keep them separate? I think a lot of times when we see this situation in our office, the, you know, individuals are planning separately, maybe you have kids from those previous marriages, and there’s specific ways that you want to leave those assets that the current spouse you don’t want to have control over. There’s a lot of things to think about there. I mean, think of it, it’s kind of like you’re blending too many empires, and how do we ensure that they stay standing, even if at some point in time those empires don’t get along right, I mean it happened once, so we have to be, you know, mindful of that when combining the financial strategies in addition to just the romantic aspect of it.
Speaker 3 7:12
So you said the word prenup, we’ll hit this really quickly. What if what if Travis Kelsey and Taylor Swift walked into Elite Income Advisors and and they wanted to talk about, I think the term we’re going to use is the love legacy, instead of prenup, we’ll say the love legacy. How do you think that conversation would go? Okay, who’s bringing what to the table? Taylor, you’ve got the world over here, Travis, you got a really cute podcast with your brother, maybe some other deals, but I would imagine that love legacy conversations already happened there.
Speaker 1 7:46
Yeah, I think it probably has. But what’s really interesting about all this is that, as ridiculous as it is, and kind of as tongue in cheek as it is to joke about, I think it’s an extremely important part of the planning process. And you know, our podcast is getting a little bit of traction. Who knows, maybe they will walk into this office, but that being said, I think it goes back to having a plan, and we talk about this every single week, folks. And by the way, that phone number will open up the phone lines, it’s 800-653-8404 whether you’re thinking about getting married for the first time, the second time, or maybe even the third time, or beyond. It’s a great opportunity to sit down and make sure that you have your financial plan in order, in terms of division of assets, coordination of income, coordination of social security benefits, and even things like potentially switching from filing taxes as an individual to married filing jointly. You can come in, have that conversation with our team of retirement specialists. It’s a free conversation. There’s no obligation to become a client. It all starts with your phone call to schedule that visit with us in Ellicott City or in Annapolis. The phone number again, 800-653-8404 Retire Smart Maryland radio. We’re going to come back on the other side. We spend decades watching the old 401 k grow, but then what do you do when we return? Going to unpack what happens after you retire. That’s next, you
Speaker 3 9:25
Retire Smart Maryland radio. Your hosts are Prashant Sabapathi and John DeFeo. You can find them at Elite Income Advisors, the website. It is a resource, Elite Income advisors.com Check it out, Elite Income advisors.com Both Prashant and John are independent fiduciaries. They’re headquartered in Ellicott City. We’ve already talked about that expanding office. They have more advisors to help the area get ready for retirement. They have a satellite office in Annapolis. They’re getting a new space there as well. So, a lot going on with Elite Income Advisors. You can always check out Elite Income Advisor. Advisors.com and you can also follow them on social media. Anything that’s going on, those seminars that we talk about so often, you can find it again. Just search Elite Income Advisors, give them a like, give them a follow. I’m Morgan Patrick. Again, a pleasure to jump on and talk about all these different topics, but the most important theme for our radio shows is planning and being prepared, and we’ll give you an opportunity to get on their calendar, cost-free, obligation-free. So, listen up for that. So, the 401 k gentlemen can feel like that trusted old friend. It’s quiet, it’s reliable, always there in the background. But once you punch the clock for the last time, and you’re headed off into retirement, the question becomes, now what I mean, what should you actually do with all that money? For now, for some, retirement means finally tapping into the nest egg. For others, it’s about preserving and repositioning them. So, today, let’s dig into post-retirement 401 k choices from age 55 all the way through the RMDs, which, of course, is in the early 70s. We’ll keep it light, we’ll keep it clear, and yes, a little bit of fun, because financial confidence should be part of your retirement too. So, John, you’re first up, 59 and a half rule, it’s a green light to start spending a little bit of that money, but do it smartly.
Speaker 4 11:16
Yeah, I would think of it more as a green light to more flexibility with your retirement savings, because you know a lot of people that get to the age of 59 and a half aren’t ready to retire yet, so taking money out and paying taxes on it in years that you’re earning likely the highest you’ve ever had might not be the best you know advice, but there are situations that we do advise that, so once you get to the age of 59 and a half, this is when you’re eligible in a lot of 401 k plans, employer plans to start to start taking money out, whether it be a taxable distribution or potentially a rollover out of the plan into an IRA. It also is when you have money in an IRA that you can take that money out without the 10% penalty, so it gives you access to the money where there is no 10% early withdrawal penalty, but you still have to pay the taxes on it. You know, I talk about the flexibility it gives you with moving some of that money, because there are some people that are at this age, 59 and a half, almost 60 years old, that want to start to change the strategy of their investment, so they’ve been working their whole lives to build this nest egg. They get to a point where it’s been about accumulation, and they want to switch to the distribution objective with their investing as they head into retirement. And sometimes it makes sense to pull some of that money out of the retirement plan to be actively managed with someone like ourselves as an advisor or another fiduciary, or potentially just to have additional investment options that are available in the employer-sponsored plan. So, again, it’s more about giving you flexibility with the money to do different things, but ultimately it avoids the 10% withdrawal penalty or early withdrawal penalty when you get to that age and it gives you the ability to pull the money out if need be,
Speaker 3 13:03
so post retirement 401 k choices, we’ve talked about 59 and a half rule, that green light to be flexible, as John worded it, I like that. This next one, Prashant, just the early access with age 55 another rule, age 55 rule, little known, but it is incredibly useful.
Speaker 1 13:23
Yeah, this is one that I think a lot of people don’t even realize that this rule exists. And basically, what it is, is it’s that if you separate from service to your employer, either through retirement or maybe you’re laid off in the year that you turn 55 or later, but before 59 and a half, you can access your current 401 k without incurring the 10% early withdrawal penalty. So, this is what we call the age 55 rule. Okay, and so with that being said, where can this be a valuable planning tool? I actually just went through this with an existing client, he retired at 57 years old. He had about one and a quarter million dollars in his four 1k plan, and so what we were needing to do is he needs income now, because he retired. The challenge is, if we rolled that money over to an IRA, he can’t touch it till he’s 59 and a half, so on that one and a quarter million dollars. What we did is we moved a million dollars to an IRA and positioned that IRA for future growth when he turns, you know, 6062, 65 years old, but then we left $250,000 in his existing 401 k, because if he withdraws it directly from that existing 401 k, he can access it between his current age of 57 and 59 and a half to bridge his income without incurring the IRS 10% penalty for early withdrawal. Now, of course, he’s still gonna have to pay. Income tax on it, but that exists whether he used this strategy or not. But it was a kind of a cool way that we could segment his money, position it for future growth, but still give him what he needs in terms of current income. The best part about this whole experience is he, like a lot of other people, didn’t even know that the rule of 55 even existed, and so just by coming in and talking with us about it, he was able to put together a plan that solved all of his income needs, as well as future growth needs on his retirement assets. I mean, education is, we talk about it all the time. I mean, that’s power. I mean, just knowing you may not even know about the age of 55 rule, but now we’re talking about it. Might be something that you should consider, or may consider, but think about the planning aspect of this. Again, this is what we do each and every week. We talk about these topics. You’re going to have questions about your own situation. You can grab one of our appointments at any time during the show. We have 10 of them
Speaker 3 16:00
available. They do fill up fast. If you don’t get into our top 10, you’ll go on a short wait list, and again, you’ll get in in the next couple of weeks at Elite Income Advisory. But right now, 10 slots wide open, no cost, no obligation. 800-653-8404 that’s 800-653-8404 So back to it. Post retirement 401 k choices that you can make here, 59 and a half rule, we talked about age of 55 rule, a lot of people don’t know about, we just discussed, and then we go back to John on this one, the new RMD age at 73 is now the new 70 and a half, so we have a little more time here,
Speaker 4 16:36
that’s right, yeah, so we’re we’re shifting gears now from talking about early access of your retirement funds to what happens if you don’t pull all of your retirement funds out, so when you get to a certain age, you mentioned the Secure Act 2.0 actually extended the required minimum distribution age to the age of 73 or to the age of 75 if you were born in 1960 or later, so when you get to that age and you have money in a pretax retirement plan, like an IRA, a 401 k, a TSP, any of those tax-deferred retirement plans, you’re required to start taking a percentage of that account out, paying taxes on it to the state, local, excuse me, state, local, federal governments, and then either reinvesting it, spending it, do whatever you’d like. So this is where, again, if you have not, you know, come up with a tax strategy ahead of time, you could be looking at pretty significant distributions from these accounts. We’re dealing with a couple right now, that’s in this exact scenario. They had accumulated roughly three and a half million dollars between the two of them in IRAs, they were able to meet all of their expenses in retirement with their social security and their pensions. They didn’t have to touch that pre-tax money. Now that they’re getting to the age of 73 where they’re forced to start taking money out, the required minimum distributions are going to amount to somewhere around 150 to $160,000 based on their age, the value of the assets, so what that does to their tax bracket is it number one increases the income they’re taking in, which is likely moving into a higher marginal bracket, but it’s also increasing their Medicare Part B premiums, so for Medicare Part B, you have to pay a monthly premium based on the income that you’ve brought in over the last two years, and they’re now going up roughly $300 a person with their Medicare Part B premiums, just because of a distribution the IRS is forcing them to take. So it’s a pretty impactful distribution, and we have to plan accordingly for it.
Speaker 1 18:35
It’s incredible how many downstream effects something like a required minimum distribution can have, I mean, can you imagine doing the right thing by saving your own money for the past, I don’t know, 20 3040 years, and you finally get to that peak of retirement feeling like, hey, I accumulated in this case three and a half million dollars, I did my job by saving the money, only to find that when I get to 73 years old they’re going to penalize me by I’m going to have to pay more for my Medicare because of a forced distribution that the government imposes on me, like to me it’s absolutely ridiculous that we ended up in this situation, and I think if we had all known 1520 years ago, that this is what the rules would amount to be. We might have taken that money and put it into a Roth, which is exempt from RMDs and taxes. We might have taken that money, saved it in an after-tax brokerage account, where we’d only pay capital gains taxes on it, not ordinary income, and we’d not be forced. We would never be forced to take money out, and so with this being said, John, it’s like, what strategies do we use? Let’s say for someone maybe 10 years away from 73 or 75 what can they do to be proactive about this situation, because look. I think we can all agree that the strategies of 20 and 30 and 40 years ago just are simply not quite as applicable in today’s day and age. So, like, let’s say I’m listening to the show, I’m seven, I’m sorry, I’m 60-four years old, I’m nine years away from the RMD. What do I even do to address this problem if I have two or $3 million saved in pre-tax assets,
Speaker 4 20:24
it’s a great question, and it’s a question that we get from clients on a very regular basis, and the answer is through strategic distributions and Roth conversions, taking advantage of the tax code that we have today, which is the third most favorable that we’ve seen in history, to take some of that income out, pay the taxes at the current rates, defer that into a Roth IRA for tax-free growth down the road, is in our opinion the best way to reduce the RMDs that you’re going to have to take when you get to 73 It also reduces the taxable dollars that you leave to your beneficiaries, who then have to take that money out and pay taxes on it over 10 years, so that’s the best way to do it, right? You mentioned Roth IRAs don’t have the same requirements for those distributions at 73 it grows tax free. So, between the age of 64 and 73 you convert as much money as you can, as it makes sense to do based on your tax bracket, now what you expect it to be, and try and get as much over into the Roth as you possibly can.
Speaker 1 21:24
It’s a great strategy. It’s not the right thing, necessarily, necessarily for every single person out there, but I do think every single listener should, at the very least, do some proactive tax planning to figure out what they can take advantage of to mitigate or even eliminate the threat of paying higher taxes in the future. For 1k withdrawals are a huge part of your financial plan. It’s almost like you’ve spent 40 years filling a giant pantry with food, and retirement is when you finally get to enjoy it. But if you eat too much too soon, you run out, and if you don’t eat enough, you starve, right, and so creating that balance is what having a plan is really all about in retirement. The phone number, folks, 800-653-8404 If you’re concerned about RMDs, if you’re concerned about the threat of higher taxes, if you’re not sure whether you’ve even saved enough money to sustain the lifestyle that you want to have in retirement. Come on in, have that conversation with us. It’s just a conversation, no obligation. It’s free of cost, but it’s what I think you need to do to get on track for the retirement you deserve. It’s 800-653-8404
Speaker 3 22:37
We’ve got more Retire Smart Maryland Radio coming up after the break. Retire Smart Maryland radio hosted by Prashant Sabapathi and John DeFeo. You can find them at Elite Income Advisors, headquartered Ellicott City Satellite Office in Annapolis. The Ellicott City office is expanding, and again, new digs for Annapolis, so they are growing at Elite, and that is to better serve their clientele, and it’s all about getting Maryland ready for retirement. They’re independent fiduciaries. I’m Morgan Patrick. A pleasure to jump on and get into all these different topics, and this next one’s pretty interesting. So, let’s, let’s just be honest. Not every retiree dreams of golf courses and grandkids, however, I am one of the golf course guys. But anyway, some folks, they zig and they zag, I mean, they’re all over the place, where, whether it’s a necessity, or just curiosity, or maybe a rebellious streak you never aged out of. A surprising number of retirees are throwing the traditional retirement playbook out the window and just doing things differently. So, today we’re going to unpack six strange but true retirement strategies that are popping up across our great land. Are they wild? Absolutely, are they totally crazy? Well, that’s totally up to you to make that decision. We’re going to talk about it and break it down. So, first one up, Prashant, tiny house or van life. Now I’m going to go ahead and just say it. If I retire and Michelle wants to go tiny house, we would need a tiny house for us. We would need a tiny house for her shoes, and we would need a tiny house for my golf equipment slash simulator. But what about you? Tiny house, or just jump in a van and go?
Speaker 1 24:34
You know, I think I respect a lot of our clients who do this. Okay, but different strokes for different folks, I guess, right. So, if this was me, catch me extending my workout, I’m happy to not retire in this case. Now, look, here’s the beauty of it, though, because everyone’s different, and we respect everyone’s viewpoints, and. Opinions, and so you know you’re exactly right, though. More and more, our clients are going non-traditional when it comes to retiring, right? Whether it’s trading in some of that square footage for the square wheels, so to speak, right. So I have a client. The other day, literally, I was doing a review, a couple weeks ago. A guy came in and told me that he was buying like a $250,000 RV, right? Not necessarily my style, but the great thing is that he has the income to be able to do something like that. And so, having a mobile retirement is a thing. I was meeting with somebody like a couple years back, and I’ll never forget this. They said that their goal was in retirement to sell their house and literally do like a cruise around the world, like live on a cruise ship for like a whole year before deciding what they wanted the rest of their retirement to look like. So, you know, I think people try doing stuff like this, because it slashes expenses. It certainly removes the property taxes, which we know in our area are ridiculously high. And so, you know, I think there’s pros and cons. If you ask me, I think the cons are the tight quarters, the spotty Wi-Fi, and finding a doctor doesn’t operate out of a gas station, you know, but you know, who am I to criticize everyone’s.. well,
Speaker 3 26:26
you said it when you opened your comments, I mean, everybody is different, and they’re going to be a lot of people out there that, that hear this segment, this portion of the show, and you know, maybe they had a traditional retirement in mind, but this may spark interest in maybe just looking at other options when it comes to, yeah,
Speaker 1 26:43
look, here’s one more thing I’ll just add on before we get to, you know, extreme geography, which is the next thing John’s going to talk about here, but look, I think I view what we do as retirement advisors as the work is designed to help you be empowered to live the lifestyle that you want. It might not be the lifestyle that we personally want as advisors, like I’m a golf course and beach guy, right? And that’s not for everybody, and that’s okay. But literally, I was sitting with a client who wants to – they already have a house in Florida, they’re going to have another house, potentially in Pennsylvania, and then a third house somewhere out west in the mountains, and it’s like, if that’s what they want to do, my job and our role as advisors is to show them how we can increase their income to support their three houses, because that is what is going to make their life fulfilling after 40 hard years of work, and you know, I think that’s a beauty, and the uniqueness of what we do every day is that no two people are exactly the same, and it’s really cool and neat as advisors to help people get where they want to go, even if it’s not the lifestyle that we personally want for ourselves.
Speaker 3 27:56
I was going to say, it’s got to be exciting, guys, every day you have a new, a new challenge placed in front of you when it comes to an individual or a couple that is retiring, and you know they have come in and sat down in front of you, and they want you to help them put this together, so it’s like an adventure every time you have a client come in, and you want to plan for the best possible retirement, and also what they want out of retirement. So, talk about your goals now. The opportunity to get on the calendar with Elite Income Advisors is ongoing during the course of this show. The spots we have, there are 10 of them. They do go very fast. If you get into our top 10 simply by calling 800-653-8404 you’re in. Right, if you’re in the top 10, you’re in 800-653-8404 If you don’t get into the top 10, short wait list, two weeks will get to you. Absolutely, there’s going to make room for you, but it’s not right away. But the 10, you’re in 800-653-8404 So, back to it, just maybe not the traditional retirement we talked about, the tiny house, maybe the van life, extreme, and Prashant previewed it for us, extreme geographical arbitrage. John, jump into this, because this is something that a lot of people are looking into, staying within the confines of the US, per se, but changing locations.
Speaker 4 29:22
Yeah, actually, this has come up more and more over the last couple of years, actually last couple months, really, with people coming into the office, looking at other countries because they’re not super happy with the direction of the company, of the country, the administration, or even just because they have ties to another area, so you know, there are countries that are still US territories that a lot of our laws still apply with. You’re still, you know, considered to be a US citizen when you go there to visit. You don’t need to have a visa or a passport. It’s basically like visiting another state, and those, the most popular would be Puerto Rico, Guam, and the US. Virgin Islands, so these are, you know, Caribbean tropical paradises, and people will move out to those locations where taxes can be a bit friendlier, you know. There are some of these areas, well, obviously, there’s no state income tax, so that you can avoid some of the taxes there, you know. There’s some other incentives with these territories that apply to different people for different reasons. Maybe you have family out that way, you know. We’ve got a couple that we’re working with that is from Puerto Rico. Puerto Rico, they’re, you know, they moved here when they were younger. They built a beautiful life, and they have a house back there that they’re going to continue to travel back and forth to, and you know, haven’t quite decided whether they’re going to list that as their primary residence, that’ll be a part of the planning process, but I think it’s, you know, it’s something that we’re seeing more and more of, is you know, can I move out of the states, still have access to a lot of the things within this country as a US citizen, but have the sunshine and beaches that are of the Caribbean, right, you know, I’d say the fine print is that healthcare access can be, you know, not as, I guess, a quick, and maybe not the best of the best, like we have around here, being so close to such great hospitals, you know, and the Wi-Fi might be a little bit spotty, so you know that island-time vibe, it’s pretty charming. I mean, you might need some broadband or an MRI or something like that, but for the most part, it’s very attractive to some people.
Speaker 3 31:22
I love it. Both of you have really focused in on the Wi-Fi part of this, you know, and the challenges that we may face if we do some extreme retirement strategies. Look, the opportunity to get on the calendar with elite income advisors is ongoing during the course of this show. Prashant, kind of walk us through, if they’re lucky enough to grab one of these 10 appointments, we’re going to get you in, but the top 10 get in right now. What’s going to happen for them?
Speaker 1 31:48
Yeah, you’re gonna have the opportunity to sit down with a pro when it comes to retirement planning. That phone number, it’s 800-653-8404 but when you come in, we’re going to talk specifically about what’s important to you, not about what we are doing for other clients, but you tell us where your top concerns are, whether it’s long-term care, taxes in retirement, if you’re not sure where your income is going to come from, or how you’re going to replace the paycheck that you’re losing when you retire, it’s a great opportunity to have a real written plan put together. 800-653-8404 And we believe that your retirement should be simple. You should be able to look at one sheet of paper or one screen and know exactly what your income is going to look like every year for the rest of your life. It should be able to be understood what that income is going to be after your tax liability is accounted for, and after the cost of living increasing, all of that needs to be accounted for. If your advisor is not doing that for you now, it is a great opportunity to take a step back, reset, and if you’ve never had a real written financial plan put together, call 800-653-8404 Have your calendar in front of you, book that one hour complimentary, no obligation time slot with our team of retirement specialists right here at Elite Income Advisors. You can book an appointment either in the headquarters in Ellicott City in Annapolis, or you can book a virtual consultation as well.
Speaker 3 33:27
Retire Smart Maryland Radio. Going to roll on on the other side, we’ve got scenarios, we’ve gathered them from around the country, we’ll throw them at the advisors, see what they come up with. That’s next. Retire Smart Maryland Radio, you We are back on Retire Spark, Maryland Radio, hosted by Prashant Sabapathi and John DeFeo. You can find them at Elite Income Advisors. They’re headquartered Ellicott City Satellite office in Annapolis, for your convenience. Again, both are independent fiduciaries. I’m Morgan Patrick. We go back and forth on the topics. You’re going to have questions about your own situation. We give you an opportunity to get on the calendar with the lead income advisors, and the appointments we open up during the radio show are no cost, no obligation, and you can call at any time to get into our top 10, that number is 800-653-8404 but when those 10 are filled, you go to the next week and there’ll be a wait list, probably get in with the next couple of weeks. So call now, grab 1-800-653-8404 no cost, no obligation, see how you’re doing with your retirement. All right, so first scenario to John 64 single trying to decide whether to start social security now or wait until full at 67 They’ve got about 200,000 in retirement savings and worry about market downturns wiping that out. How should someone weigh the risk of drawing down savings early versus locking in. Lower social security benefit for life.
Speaker 4 35:03
It’s a great question. This is a scenario that we analyze quite regularly here in our office, and that’s the optimal point to draw social security to not only maximize the benefit but maximize the savings that you have put together over your lifetime. So, when it comes to this, I think you know the distribution that would be required from that retirement savings would be a big question. You know, are you taking, you know, $1,000 a month or $5,000 a month? I think that’s a big difference there, of course. You know, how comfortable with you, or are you withdrawing down on savings that could be an asset that’s left to your beneficiaries, so there’s the whole philosophy of would you prefer to draw down on a benefit that you’ve paid into your entire career that doesn’t come with you when you pass away, or would you rather spend the money that you have personally saved over your lifetime that could potentially be portable to your beneficiaries, so that’s a question there, and then, of course, you know what is the distribution rate sustainable, you know, waiting to take the money from Social Security. So I think we have to look into those things, we have to ensure that it is invested properly as well. If you’re going to be taking distributions, how is the money currently appropriated, so that’s a big part of it. So, there would be a lot that goes into making that recommendation, or that suggestion. Part of it is their own philosophical ideas behind it. Part of it is their cash flow needs and the distribution need from that type of an account.
Speaker 3 36:37
Retirement scenarios, again, you may hear one that is close to what you’re going through, and we say this all the time, it’s not exactly what you’re going through. Make sure you have a customized plan put together that takes into account what’s going on with you, all your different puzzle pieces. All right, next scenario to Prashant, a couple in their early 70s facing rising out of pocket costs, even with Medicare and a supplement plan, their prescription drug expenses jumped to over $4,000 this year alone. How can retirees plan ahead for unpredictable health care costs that seem to grow faster than inflation? And I don’t think that’s stopping anytime soon.
Speaker 1 37:15
I totally agree with you that it’s not stopping anytime soon, and to me it’s kind of like the answer to higher expenses is higher income, you know, like, and if that sounds repetitive, because I say it every single show, it’s because I’ve watched clients retire eight years ago, seven years ago, when costs were so much lower, and now they’re all going through this. I mean, I think we all deal with this. I mean, have you seen an auto insurance renewal recently? How much has your home insurance policy gone up because of the cost of replacement and lumber and everything else is so much higher? Insurance companies are charging us more for premiums, right? The same thing is happening, happening with prescription drugs and healthcare services as well, so with that being the case, I think the way to think about this is to say if we know that costs are inherently going to be higher in the future, let’s just figure out a way to create more income that is reliable from our portfolios, okay, so if you have money saved for retirement, have we transitioned that money from more of a speculative growth mindset to more of a reliable income mindset, whether that’s using things like real estate investment trusts, dividend stocks, fixed indexed annuities, are becoming more and more popular for creating safety and reliable income in retirement, like I think if your advisor isn’t having these conversations with you, they might not have the foresight to understand what a true 2030 year retirement picture should end up looking like, and the thing is, you do not want to take a chance with this. Okay, you need to have a plan that you can rely on, not just in the bad times, but in the good times as well. So, with that being the case, if you haven’t done that yet, I think you should give us a call. It’s 800-653-8404
Speaker 3 39:19
Again, complimentary appointment awaits, no cost to that. Obviously, no obligation to that. You’re not agreeing to become a client if you grab one of the appointments, and guess what? Elite Income Advisors is not agreeing to take you as a client. This is a test drive. See if it’s a good fit. Again, that number: 800-653-8404 All right, next scenario, John, to you both in this couple scenario, 68 empty nesters wondering whether to sell their $750,000 home and buy something a little smaller for cash or rent and invest the equity. How should retirees think through a kind of financial pros and cons of downsizing versus. Renting in retirement.
Speaker 4 40:03
Yeah, this is a good question. You know, I think this comes down to what they want out of their retirement years, where they plan to go. You know, there have been people that literally want to live in a different country or a different state every couple of years. In that scenario, I think it’s, you know, it’s pretty cut and dry. You probably want to rent, you know, if you’re not looking to stay there for the long term. I would also say, I mean, as a homeowner, there are a lot of responsibilities that come with the upkeep of the house, you know. You might have to pay for landscaping, you know, if something goes wrong in the house, you have to come up with the money for that or fix it yourself. So, if you’re tired of dealing with that, and maybe you just want to, you know, kind of a set it, forget it type of deal, where you pay your monthly amount, you’ve got somebody to handle all of that, that for you. That’s a lot of what retirement communities are like, you know, in terms of what’s offered there with the community fees, so you know it’s difficult. I think that you know if you want to invest your money in a business, or you know, even just traditional style investments, certainly taking the equity and doing that is an option, but I think it all comes down to what do you want out of life, right? Do you want an asset in real estate to hand down to your beneficiaries? Do you want access to the equity down the road? God forbid you run out of money for something like a reverse mortgage. There’s a lot of different scenarios that play into making a decision like that. I will say that, you know, dollar for dollar, the prices of rent right now are pretty comparable to the prices for buying a home, even with the prices, the where that they are, and the interest rates as high as they are, so the price could be pretty comparable in terms of what you’re looking for, so again comes down to do you want to be a homeowner, do you want the responsibilities that come with being a homeowner, you know, do you have the extra money for your property taxes and homeowners insurance in addition to what your expenses are, there’s a lot that goes into that, could go on for days about all the different pros and cons behind them, but I think there’s a lot to think through when making that decision. Yeah,
Speaker 3 42:06
absolutely, needs to be an informed decision, need to have a plan for that. And again, we give you an opportunity to get on the calendar with Elite Income Advisors, and these are no-cost no obligation appointments. Stay tuned for that. You can always check the website, it’s a great resource, Elite Income advisors.com that’s Elite Income advisors.com They’ve got an events tab, you can click there, find out about the seminars that are coming up. Again, final scenario to Prashant, the portfolio that they have dropped 15% last year, and they’re now debating whether to cut back on withdrawals or stick to their what they’re currently using, which is the 4% rule. They’re 73 and rely heavily on this income. What’s the smart way to adjust retirement withdrawals during a down market without jeopardizing the long term security?
Speaker 1 42:54
To me, this comes back to understanding how much income security you have. So, to me, income security, I define that by effectively saying how much income am I going to have when I retire, and with what level of certainty is that income actually going to be there for me, meaning if the market drops or if my portfolio loses value, do I still get the same amount of income for the rest of my life, or do I now have to make an adjustment? It sounds like in this particular scenario they might have to consider making an adjustment, because you never want to sell your investments and take withdrawals while the market is down, if you can help it. Okay, so the way we think about planning is not to have all of our eggs in any one basket. It sounds like in this case we might have all the eggs in just a market-based basket, and that’s what gives us the fear and anxiety when we lose that 15 or 20% But if I could go back and redo this plan. Maybe the way we would consider doing it is not putting all that money in the market in the first place. What we would do is we’d carve off some of the portfolio to put in a totally market protected vehicle that provides income for the rest of your lifetime, and most cases we’re probably going to use something like an annuity to do that. Now, I don’t love annuities for everything, but one thing I do love about some annuities is that the income that you get, the withdrawals that you get, can be guaranteed for both your life and your spouse’s life, and so, in theory, if you had all the income that you could ever want or need coming from your market protected bucket, it then empowers you and allows you to invest the rest of your money through the ups and downs of the market without feeling like you’re jeopardizing your retirement, so that’s why we recommend not putting all your eggs in any one basket and. Making sure that you have multiple pots of money to withdraw from through the ups and the downs of your market in retirement. That being said, folks, if you don’t have a written income plan that shows you how much income you’re going to have coming in and how to account for the taxation and how to account for inflation. Last opportunity for today’s program to give us a call, it’s 800-653-8404 that’s 800-653-8404 You come in, you have a free conversation with a retirement pro to help you design your own written income plan, to talk about tax strategies to minimize future tax liability, to talk about your legacy after 4050 years of hard work. You want to make sure that your legacy is well protected and carried on as you want it to be. It starts with that phone call: 800-653-8404 Complimentary no obligation visit with our team here at Elite Income Advisors.
Speaker 3 45:56
Another edition of Retire Smart, Maryland Radio in the books for Prashant Sabapathi and John DeFeo. We’ll see on the radio next week.
Speaker 5 46:15
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