Speaker 1 0:01
A seven figure 401 k may feel impressive, but it only tells part of the story. What matters more is whether your savings paired with social security and other income can replace enough of your paycheck to sustain your lifestyle in retirement. We’ll talk about that and more today on Retire Smart Maryland Radio. Welcome
Speaker 2 0:22
in to Retire Smart Maryland Radio with Prashant Sabapathi. Welcome in to Retire Smart Maryland Radio. Your hosts are Prashant Sabapathi and John DeFeo of Elite Income Advisors, independent fiduciaries. Yes, sir. And helping their clients get ready for retirement, that’s what they do. They’re headquartered out of Ellicott City, and they’ve got a satellite office in Annapolis for your convenience. I’m Morgan Patrick. Absolute pleasure to jump on and talk about the importance of being proactive with your planning. Get ahead of this, but also, if you’re in the middle of something, make sure you’re getting a second opinion, make sure you’re on track for your retirement. A website that is a resource, check out Elite Income advisors.com that’s Elite Income advisors.com Links to the TV show, our radio shows are in podcast form, all there for you, Elite Income advisors.com And before we jump into topic number one, as always, we start off with Prashant. How was the week?
Speaker 1 1:22
The week’s been great. We’ve been traveling a little bit. I was out shooting some new episodes of Retire Smart Maryland Television, which was a lot of fun. It’s hard to believe we’re up to like 130 episodes there now, and we’re coming up on 200 on the radio. Crazy, it’s been a lot of fun, I gotta say, but wouldn’t be able to do it if we didn’t have great people coming in the office and facilitating really important conversations, especially lately, surrounding things like taxes, health care, in retirement, inflation. Where’s my income going to come from like these things are things that we’re talking about every single day, and and the conversation has been really productive. So it’s been a busy week, but it’s been a good one.
Speaker 2 2:09
Well, and I tell you, with that that growth, you add employees, and of course, John DeFeo, not new to us, but he’s one of the additions you’ve made in recent years, and I tell you, it’s more people to help handle so many people in your area, and obviously with their retirement teamwork to make the dream work, as we all often say. So, John, let’s just jump, jump in here, and just say, how the week was.
Speaker 3 2:36
It’s been about the same, very busy, you know. We’re heading into the end of the year, a lot of people want to get their finances in order. There’s a lot of tax planning that we do towards the end of the year when we talk about things like Roth conversions, tax loss harvesting. So it’s definitely a very busy time of year for our existing clients, but also for new clients. We have more and more folks that are walking into the door, looking for help, looking for guidance on their financial plan. So, as you mentioned, we’re growing, bringing on more staff to help more people retire, and it’s a great feeling to have that happen.
Speaker 2 3:10
Well, we get on here and we get into so many different topics in and about planning and making sure you’re prepared. We also give you an opportunity to take action on your own behalf. We have complimentary appointments. We’ll tell you about those as we move through. We have a limited number, we call it our top 10. If you get in in the first 10, you’re in this week. Outside the top 10, it’ll be a short wait list, and they will get to you in the next couple weeks. So, stay tuned. We’ll make those appointments available. So, guys, in retirement planning, focusing in on that headline figure, that million dollars saved, a lot of people do it, they have a certain number in their mind, that’s what they want to get to, and it kind of can give you almost like a false sense of security. Now, according to a recent Investopedia article, the Smarter Lens is your income replacement ratio, and Prashant and John, I know you guys are going to jump all over this, because it’s all about income, the percentage of your pre-retirement income that your income sources can replace. Now, traditional guidance is suggesting aiming to replace 70 to 85% of pre-retirement earnings, but the key is personalizing your target, subtracting, of course, projected social security, or maybe there’s a pension in there for you, that kind of income to reveal just how much your nest egg must truly generate. Now, Prashant, maybe a little bit more in depth, you say almost every single show it’s not about the outcome, it’s about the income.
Speaker 1 4:36
Yeah, that’s exactly right, and I actually think the higher the income is, the better the outcome ends up being I’m not a big fan of this old ideology that you replace 70 to 85% of your working income, because to me that still means that you’re sacrificing somewhere. Look, I don’t know about our audience, but I do know about the clients that I’ve helped per. Only retire over the last 10 years, 12 years, however long it’s been. I’ll tell you what, my clients do not like to sacrifice when they get to retirement. If you’re going to work really hard for 3040, 50 years, in some cases, before you get to retirement, the last thing I want you doing is having to cut your income when you get to the one point in your life that you’re supposed to enjoy your time not working, and so it is not about replacing 70 to 85% To me, it’s about getting you to the highest level of income possible, so that you feel empowered to live life exactly the way that you’re deserving of after 345 decades of really hard work, and you know, John, maybe you can talk just about how we go about doing this, like let’s say that we’re someone brand new coming into the office and we’ve never put a financial retirement plan together? Where do we even start with attacking this problem of how much money do I actually have to have in order to retire in the most comfortable way possible? You’re a certified financial planner, that’s part of the reason we brought John to Elite Income Advisors, and so John, I’d love for you to share some perspective from a CFP’s point of view on how you go about solving this problem for clients that are walking in the door today,
Speaker 3 6:28
certainly, and Prashant, I couldn’t agree more with the concept of 70 to 85% of your income being replaced being the best way to retire, we won 100% of that income, if not more, so the first thing that we do when someone walks into our office is we identify what your retirement looks like, what things do you want to be doing as a travel, as it’s starting a business, are there projects you want to be working on, what is it going to cost you after taxes every single month to live retirement the way that you’d like to live it, so that identifies your monthly income target, how much we need to bring in after taxes to live that comfortable lifestyle. From then from there, we start to build out your foundational income. So, what does your social security look like? Do you have a pension? Do you have annuities? Do you have rental income? What is the income that we can rely on consistently throughout the rest of your life without worrying about volatility in the market, so we identify that we identify where you might be with your taxes, and there’s going to be one of one of two outcomes. You’re either going to have a surplus and be cash flow positive at the end of every month, which means your foundational income, it covers everything that you need to live retirement comfortably, or you’re going to have a deficit, right? You’re going to be cash flow negative, meaning that we have to supplement some of that income from your personal savings, and that’s where the real planning gets into place. How do we pull that money out safely without worrying about what the market’s doing at any given time?
Speaker 1 7:51
Folks, it’s about understanding whether or not you have an income gap, and so one of the first things that we do in your very first appointment, if you do come in to visit with us. We’re going to do what’s called an income gap analysis. We’re going to open up our phone lines. The phone number is 800-653-8404 That’s 800-653-8404 You dial that number, you schedule a complimentary no obligation visit with our team of specialists. Let’s do the math on your income gap. By the time you leave our office, that very first time, you’ll know exactly how much of a replacement paycheck you’re going to need when you get to retirement. We’ll help you identify what the shortfall is in your retirement plan. If you’re listening to this, if your advisor has never taken you through an income gap analysis, if you’ve never done it on your own, or if you’re not sure where to start, that phone number, it’s 800-653-8404 We have offices in Ellicott City, Maryland, that’s our beautiful new headquarter office office in Annapolis, or you can book a virtual consultation with the lead income advisors, 806 53 84041 8404 When
Speaker 2 9:03
we return on Retire Smart Maryland Radio, turning 67 may tick off age milestones: Social Security, Medicare, but retirement isn’t as simple as blowing out some birthday candles. We’ll talk about it coming up next. I welcome back in to Retire Smart Maryland radio, hosted by Prashant Sabapathi and John DeFeo of Elite Income Advisors, headquartered Ellicott City Satellite Office in Annapolis. The website, a resource, check it out, Elite Income advisors.com They’ve got a lot of information there for you on retirement, plus background information on the team, links to the TV show. We also have podcast versions of this radio show available for you at Elite Income advisors.com and both Prashant and John are into. And at Fiduciaries, I’m Morgan Patrick. A pleasure to jump on and talk about these different topics, but we also give you an opportunity to take action on your own behalf in the form of a complimentary appointment. We’ll tell you about those as we move through. I do want to jump on this. You’ve got something new, Prashant, E I A quiz.com E I A quiz.com Tell us about that, and why you felt like, you know, what we’re gonna push this out.
Speaker 1 10:25
Yeah, I love this. It’s a retirement readiness quiz. Okay, it’s 35 questions. Sounds like a lot, but it’ll only take you about seven minutes to do. I was catching a flight the other day from the West Coast. I was waiting at my gate. I decided to go do the quiz myself, just to time it and see how long it took. 35 questions took only seven minutes. And what it’s going to do is it’s going to give you an opportunity to start thinking about the important pieces of your retirement plan, thinking about things like risk in your portfolio, your legacy, who gets your money when you’re gone, things like whether or not you’ve considered the threat of rising taxes in retirement, and so if you’re just not sure even where to start, or if you never put a financial plan together, or you’re working with an advisor that you feel is not maybe speaking your language when it comes specifically to retirement and social security, EIA quiz.com totally free. Fill it out, 35 questions, take you seven minutes to see whether or not you are staying retirement ready.
Speaker 2 11:31
So, are you ready, Prashant? You took the, you took the test.
Speaker 1 11:34
I took the quiz. The one thing that I’m lacking in is I’m not quite yet at retirement age, or really all that close. So, other than that, I feel like I’m on track. Just give me about another 2025 years. We
Speaker 2 11:50
certainly want you in this position for the next 2025 years. Again, that’s EIA quiz.com
Speaker 1 11:57
Hang on. You know what? This made me think of something. I was sitting with somebody two weeks ago. This is really funny. It’s actually, we weren’t planning on talking about this, but I asked everybody, you know, what compelled you to book an appointment to come in? This, this lady came to one of one of my seminars, and when she came in, I asked her, you know, she told me she was working with an advisor. I said, well, what compelled you to come in? She said, Prashant, I’ve been working with this advisor for 20 years, and I said, sounds good, the relationship sounds like it’s great. What do you need help with? And she goes, the problem is my advisor is getting ready to retire too, you know, like, so I’ve been working with someone 2020-five, years, I’m getting ready to retire, but the problem is my advisor is also getting ready to retire, and so if you’re out there and you have these long-term relationships, I think you have to think about this. You want an advisor that’s going to be there for your next 20 or 20-five years. You don’t want an advisor that retires at the same time that you do. You don’t want an advisor that’s going to retire five years after you. You want someone that’s going to be able to manage your retirement for the next 15, 2020-five, years. I’m not necessarily saying that you’re a good fit for elite income advisors or that we’re a good fit for you, but one thing I know for certain is John and I, we’re not going anywhere, right? And so, with that being said, I’d encourage everyone to come in and see whether or not we’re even the right match for you, but it’s something that people don’t ever think about. Is when is my advisor going to retire, and when
Speaker 2 13:30
they do, what is my plan? Right, think that’s.. I think that’s a fair question. If you’re sitting down with somebody, the what if would be, what if you are headed off into retirement the next five years, you know, what’s our plan at that point? So, those are, I think, those are solid questions to ask. And listen, we get into so many different topics on this show, they all circle around and focus in on the importance of just being ready, having a plan. So, 67 I kind of teased this a few minutes ago, I mean, it’s often seen as kind of that safe text for retiring, it’s right there. Full social security benefits kick in, Medicare is active, and maybe you’re at peak earnings at this point, but as financial advisors emphasize, true readiness goes beyond age. It’s about having the lifestyle plan, financial foundation, and the mindset prime for what is going to be new purpose now? This segment, this portion, we’re going to get into this a little bit, uses probing questions to help clients kind of bridge the gap between when and why they’re stepping into retirement. So, Prashant, we’ll start with you. Can you afford to stop working? That’s a very important question to ask right out of the gate,
Speaker 1 14:40
look, I think it’s the most important question, and as we know, turning 65 or turning 67 does not automatically guarantee you financial security, because we all need clarity on where our income is going to come from. Listen, while we’re working, we are so used to having a paycheck coming in, whether it’s we. Weekly, every two weeks, monthly, whatever it is, the paycheck is what gives us security. Why are we treating retirement any differently? Right, where is your income going to come from? Is it going to come from a pension? Is it going to come from social security? Are you going to be in a position where you’re only taking money from retirement accounts like 401 k’s and IRAs and Thrift Savings Plan, if that’s the case, you have to be able to manage those withdrawals and have confidence that you will never run out of money. So, can you afford to stop working is the most important question. It all depends on how much income you have and whether or not that’s going to be enough, but then I think once you figure that piece of it out, John, the next question is, are you actually really ready to stop working for real? I mean, how many times do we see clients that their financial plan says that they can retire, but they just keep working, so are you really ready to stop working? What’s your perspective on that?
Speaker 3 15:59
Yeah, and this is an interesting one. I mean, this is a question you have to ask to everybody, right? If, if there was a way for you to financially retire today, would you actually do it? Can you psychologically hang up the hat? And more times than not, we find that people are afraid to retire because they’re they’re fearful that they’re going to lose themselves, they’re going to lose their identity, they’re going to lose their health, their, their, their mindset. So, you have to have a plan in place for retirement, not just for the financial aspect, but, but for your lifestyle, right? In terms of having meaningful activities to do, maybe it’s joining a club, maybe it’s traveling with friends and family, you know, picking up projects. You have to keep yourself busy in retirement. I think one of the number one things that we see in terms of retirees or people withering away and falling into poor health is not having a game plan in retirement, not having structure to keep them active, keep their mind fresh, their body fresh. So it’s very.. it’s a huge hurdle for people to get over. One of the scenarios that sticks in my head is a good client of ours. I met with them earlier in the year for the first time. They came to one of my workshops, and you know, he was considering retiring in the next couple of years. Now, after reviewing the plan, we identified that he could retire very comfortably at the end of this year, doing everything that they want to do. They’re looking to move down south, sell the house, but once we identified that they could financially do it, I could still see reservation, and I asked him, I said, ‘What’s going on? You know, I was expecting to see excitement, and I’m seeing still a little bit of fear, and he’s like, ‘John, I’m scared to admit that I’m retirement age, because that means that I’m getting old, and he all kind of laughed a little bit, and you know, but that was a big hurdle for him to admit that he was at the point that he was the guy at work that was getting ready to retire, he was the older guy, and that that was important to him to still have that that meaning and that stature at work. So, again, it’s important to have a plan outside of just the finances for retirement. You want to ensure that you’re not going to get bored, that your mind’s not going to lose itself, so huge, huge part of it.
Speaker 2 18:02
I mean, we talk about the planning aspect so often, but the transition into retirement, as John just mentioned, and Prashant, you’ve mentioned many times before, it’s huge, because we save all of our money for all of our working life, and then all of a sudden this is a big change for everybody, so having a plan, having some structure or having that purpose we talk about is going to make that transition a little bit easier on you, so make sure you’re doing that. So, again, these are some prime questions when you start talking about when and why you’re going to step into retirement. Here’s another big question, Prashant, maybe the last one we have time for, so both you guys can chime in on this, you know, and the question is, can your portfolio, if you want to go at 67 can your portfolio manage a downturn if it happens right on top of that?
Speaker 1 18:50
Look, the only certainty is that markets will go up and markets will go down, right. We just don’t know when that’s going to happen, but you guys remember the old saying on Wall Street, right? It was what, when it comes to investments, you buy low and you sell high, right? That’s our entire goal. It’s whole point of investing, that’s how we make money, is we buy our investments low and we sell them when they’re high, and that’s just a function of time, right? The longer we leave our money in the market without touching it, the higher historically, the higher the probability is that we’re going to earn a rate of return on our investments. The challenge is when we get to retirement, what is the one thing that we just don’t have as much of? It’s time, right. And so, with that being said, we need time to be successful, but we get closer to retirement, we don’t have quite as much time, and so when the market goes down in any significant way, think back to 2008 or 2001 or even more recently, 2022 when the stock and bond market went down, and now you have to pull money out of that market. To create your own paycheck in retirement, are we buying low and selling high? No, we’re doing the exact opposite. We’re selling low, we’re locking in our losses by selling, and we’re compounding those losses by taking our withdrawals to fund our income, which means it’s a heck of a lot more difficult to recover, and so, John, with that being said, I know we got to get to a break here shortly, but if you could just give the audience kind of some perspective on how you combat that, right? I mean, markets are going to go up and down, how do we make sure that we can withstand a downturn when we see a 20 or 30% decline in the S and p5 100.
Speaker 3 20:42
Well, this is where bucketing comes into focus. Here we are big proponents for utilizing different buckets of money for different objectives within your financial plan. We should have a bucket that is designed for growth, that is driving your assets forward in the market, that is used for an inflation hedge, for your legacy, for a long term care event down the road, but that is not the bucket of money that you want to be pulling from for the income you need in retirement. There’s a green bucket that we also suggest having that is more secure, it’s more conservative. This is where we want to draw that income from. It’s not aggressively invested. You want to have some decent return on it, but at the end of the day, it should not have volatility, we want our non-discretionary expenses to be on, or to be certain at all times. That is, that is what’s important. So, bucketing money into different fashions with different objectives, different risk profiles, is how we get in front of that. At the end of the day,
Speaker 1 21:34
folks, I think you have to ask yourself a fundamental question, not just what are you retiring from, but what are you retiring to? If you’ve never thought about that, if you’ve never paired that expectation with a proper financial retirement and income plan, you’re going to pick up the phone right now, and you’re going to call 800-653-8404 That’s 800-653-8404 You call that number, you’re going to schedule a complimentary visit with our team at Elite Income Advisors. We’re going to help you build a Retire Smart roadmap. It’s going to help you optimize your Social Security benefits. It’s going to help you understand what your income is going to look like every year for the rest of your life after taking into account the threat of higher income taxes and higher inflation, and most importantly, we’re going to help you understand the risk and reward in your portfolio. It all starts with that phone call, 800-653-8404 You can check out the retirement readiness quiz at EIA quiz.com When
Speaker 2 22:39
we return on Retire Smart Maryland Radio, BlackRock asked 1000s of retirees and savers about their favorite retirement investments. We dig in next RetireSmart Maryland radio hosted by Prashant Sabapathi and John DeFeo of Elite Income Advisors, the power behind the program. Check out the website, it is a resource, Elite Income advisors.com that’s Elite Income advisors.com Both Prashant and John are independent fiduciaries, they’re headquartered Ellicott City satellite office in Annapolis for your convenience, and as we’ve said already today, go to EIA quiz.com that’s EIA quiz.com and see if you’re on track for your retirement. I’m Morgan Patrick. Pleasure to jump on. We’re going to get into a BlackRock study. Retirement planning had a popularity contest, which investment would take home the crown. So, if they had this, which investment would take home the crown? Now, according to this BlackRock survey of nearly 3000 retirees and savers, the answer is well complicated. Some people love dependability of mutual funds, others swear by cold hard cash. A growing number are even saying why not crypto, but just because everyone else is doing it doesn’t mean it’s right for you. So today, let’s break down America’s top retirement investment favorites with some fresh stats, some fun insights, obviously, and a few caution flags that you’ll want to pay attention to. So, John, we’ll start with you. ETFs, the cool kid of retirement investing.
Speaker 3 24:30
Yeah, ETFs are great, they’re exchange traded funds, and effectively it’s a basket of stocks or bonds or a combination that track a specific index, which means they’re passively managed. This is opposite of a mutual fund, where a mutual fund is also a basket of stocks, bonds, or a combination of the two, but it is actively managed by a mutual fund manager with some sort of objective in mind. So, typically the internal costs of mutual funds are slightly higher, or a good bit higher. Higher than exchange traded funds, but exchange traded funds have become much more popular in recent years. Number one, because they trade real time, you can buy and sell them throughout the trading day, whereas mutual funds trade at the close of business day. In fact, I think the global ETF market hit about $13 trillion in assets in 2024 which is up from about 1.3 trillion in 2010 right. So, in 14 years it’s gone up roughly 12 and a half trillion dollars in market cap to ETFs, which is pretty phenomenal. We do like and use ETFs in our office when it comes to investing our clients’ money, because they are lower costs internally. We pull, you know, multiple ETFs together for further diversification now, but at the end of the day, it’s the low-cost tracking that really is advantageous, and again, we use these ETFs for investing, driving returns in the market, trying to grow your assets, you know, it’s more of a risk-on type of investment that we utilize when investing in ETFs, we talk about protecting money. There are other solutions that we typically like to use, being that ETFs are not guaranteed. You can lose value in an ETF even if it’s aligned to bonds. So, when we talk about protection of assets, Prashant, what type of solutions do we prefer when it comes to actually protecting the downside in investing.
Speaker 1 26:24
I’m going to talk about the one that I’m going to call the underrated underdog, and that is the annuity. Okay, and so 21% of retirees in the surveys are actually using annuities in this day and age, and part of the reason for that is the fixed indexed annuity, in particular, offers us protection against market downside, as we know, like we talked about in the previous segment. One of the fundamental questions is, can we withstand a market downturn? And John, you talked about bucketing your money. I think it makes sense to have money that is exposed to market risk, where we can get tremendous growth potential, but I think it’s equally as important to have safe money that is protected from market downturns. That is exactly what an annuity could potentially do for a retiree’s financial plan. That being said, just like with any investment, it’s not necessarily a good fit for every single person out there, and oftentimes you don’t want to have all your eggs in any one basket, and so I think an annuity is just one probably underrated piece of a retirement portfolio that could bring some market stability and could bring some predictability when it comes to your income or just protecting your assets against a market downturn.
Speaker 2 27:44
Retire Smart Maryland Radio, you’re locked in. Of course, we got Prashant Sabapathi and John DeFeo, your host. You can find them at Elite Income Advisors. We’re going over again BlackRock. They did a survey, 3000 retirees that are out there, savers as well in this survey, and just talking about some of their favorite investments, and we’re kind of going over those during the course of this segment. So, the cool kid on the block is the ETF. We’ve talked about that, and also annuities, the underrated underdog. And John, this next one: cash, is it king, queen, or court jester? A lot of people are nervous, they go to cash, but they could be missing out.
Speaker 3 28:22
Yeah, I think it depends on the time, whether it’s a king, queen, or court jester. Right? I think right now we’re probably looking at somewhere queen. Interest rates are slightly higher than what we’ve seen them, I think, over the last decade or so. They’re still kind of high from when they were raised back in 2022 With that being said, though, the rates are expected to decline pretty significantly over the next year or two to come down to that more normalized level. So, right now you might be able to get three and a half, 4% on your money market account, when your CDs, but I would expect within the next year or two to that probably fall back down to the one to 2% level that we are accustomed to seeing, so when it comes to cash, it’s important to hold enough cash for emergencies, at the very minimum, right. Everybody has a different comfort level with the amount of cash that they hold. The CFP board suggests about three to six months worth of your living expenses in an emergency savings at all time, that’s completely liquid. I subscribe to that ideology, but there are also different goals that might warrant cash buckets, right? Maybe you have a short-term expense coming up that’s pretty meaningful. You got a wedding in a year, or you need to buy a car in the next six months. It might make sense to hold that money in cash, because you can’t afford the amount of time it might take for a recovery if the market crashes in that period of time. So it really comes down to your objectives, your priorities, in terms of how much cash is the right amount. We certainly encourage folks to have cash, but when you’re holding hundreds of 1000s of dollars in cash with no liquidity need, that’s when there can be a problem. You’re losing purchasing power, specifically when interest rates start to decline. So, again, all depends on your priorities. Now, if. You are curious if you’re holding on to too much cash. If it might be too much, give us a call. We’re happy to take a look, you know, give you our perspective on what’s going on. At the end of the day, it’s your money, we’re just the advisors, but we can certainly give you our professional opinion.
Speaker 2 30:13
Yeah, and again, we have those complimentary appointments. Simply call 800-653-8404 that’s 800-653-8404 We open up 10 appointments each week. We call it our top 10. If you get in on the first 10, you’re in this week. Just outside that top 10, you’ll go on a short wait list, and they will get to you in the next couple weeks. Very busy office, so call now. 800-653-8404 All right, America’s top retirement investment favorites. We’re kind of going over these, talked about ETFs, talked about annuities, maybe keep a little in cash. I like the idea of emergency funds, a lot of people overlook that. This next one, individual securities per shot, high risk, high drama. It’s kind of like when I’m trying to choose my golf outfits for a golf trip, there’s a lot of drama there, but when it comes to individual securities, I mean, this is something you got to be careful with. I,
Speaker 1 31:02
by the way, I have played golf with you, and it is a lot of drama with you getting ready to golf. Yeah, so that’s true. But 47% of people in the survey actually did own individual stocks and bonds, and you know what? I think that’s empowering, right? How cool is it to own shares of a company that you believe in, or that you’ve had a personal positive experience with, or municipal bonds, even that could support your local community, but at the same time it’s also a concentration risk. What I mean by that is, as stocks grow, and typically, traditionally, anyway, stocks are going to grow at a faster rate than ETFs or mutual funds, and that’s because you get the benefit of single companies doing great things that increase the stock price, but as the value of your stock portfolio increases, the percentage of money that you have in stocks relative to the other investments in your portfolio also increases at the same time, and that creates concentration risk. You might be overexposed to things that have a large amount of downside, and so I do believe that investing in the market is important, typically for most people’s long-term financial health. I also believe that there’s a responsible way to go about doing it to make sure that you are not subjected to an inordinate amount of risk. That being said, if you don’t know whether or not you are operating within your risk capacity, you should give us a call. It’s 800-653-8404 That’s 806 53 88404. Whether or not you know if you have the right mix of investments, John mentioned, do you have too much cash? I mentioned, do you have too much in stocks, or if you’re just not sure if you want a complimentary analysis on that, we have a great risk analyzation tool that will help you break down your portfolio’s potential for risk and reward, give you an understanding of whether or not you’re positioned in accordance with what your financial objectives are. 800-653-8404 or you can visit Elite Income advisors.com
Speaker 2 33:16
When we return on Retire Smart Maryland Radio, it’s time for scenarios, we’ve gathered a handful. We’ll throw them at the advisors and see what they come up with. That’s next on Retire Smart Maryland Radio. Retire Smart Maryland radio hosted by Prashant Sabapathi and John DeFeo of Elite Income Advisors. Check them out online, it is a resource, Elite Income advisors.com They’re both independent fiduciaries helping their clients get ready for retirement again. Headquartered Ellicott City Satellite Office in Annapolis for your convenience. I’m Morgan Patrick. Absolute pleasure to jump on with the advisors and just have a conversation about the importance of planning, being proactive. And now we’re at a portion of the show where we’ve gathered some scenarios, and these are real-world scenarios. They happen all over the country. Take these with a grain of salt, because you may have one that kind of fits what maybe you’re going through, but not exactly what you’re going through. So, again, make sure you have a customized plan. Let’s get to our first scenario. And John, your first up, they admit they check their retirement accounts more than their grandkids’ social media. I love this, and it’s given them a little bit of heartburn. When the market dips, they panic. When it rises, they wonder if they should just go ahead and cash out. How can someone avoid emotional investing now that their portfolio feels kind of like a mood ring?
Speaker 3 34:50
Well, the last thing that we want is for you to have indigestion from the markets. Right? I think there’s a couple things that plan to this. Number one, the. Importance of working with a financial professional, I think, is paramount in this scenario. We take the emotion out of decision making, right? We provide an objective opinion that is a professional opinion, it’s our perspective rather than an emotional reaction to something going on in the markets. People make decisions emotionally, it’s defined by science or studies done. When you see your account drop, you’re more inclined to make a decision to sell and lock in your losses and prevent your recovery. So, I think number one is working with an objective professional that can eliminate the emotion from that decision making. Number two, I think it goes back to that bucketing strategy that we talked about earlier, identifying different buckets of money for different objectives, so that when you do see your risk bucket drop, you know that it’s okay, because you have time to recover. You’re not going to be forced to take distributions from that account when it’s at a loss, giving you the ability to recover faster and get back up to even in a quicker fashion. So I really think it comes down working with a professional, bucketing your money, and ultimately ensuring that you’re never selling at the inopportune time. At the end of the day,
Speaker 1 36:10
one thing that one thing to add to that real quick is the power in bucketing your money is really a big deal, and I don’t think we talk enough about this. As much as we do talk about it. I think we could go deeper. I’ll give you an example here. I met with somebody, must have been a month or two ago. She came in, she had gotten to that million dollar mark, that was the impetus for her coming in to visit with us. She was what she would call a TSP millionaire, so she worked for the federal government, worked her whole life, finally accumulated a million dollars in the TSP. Now we’re sitting there, and I asked her that question that we ask every single person when it comes to taking risk, and that is, look, on the million dollars, now that you’ve made it to a million, how much could you lose if the market goes down before you begin to feel uncomfortable? And she told me that that answer was 20% so she said, “Look, I know markets are going to go up and down. If a million became 800,000 that’s my maximum point of discomfort, and I can’t really afford to go lower than that. So, couple different ways we could structure a financial plan. We could just put all million dollars in the market, but structure in a way where maybe she doesn’t take on more than 20% loss, but that’s not a guarantee to her, right? Because anytime we’re in the market, there’s never such a thing as a guarantee. So, what we did is we took half a million dollars and we put it in a safe account that was protected from the market’s downside. We took the other half a million and we positioned it in the market now on the half a million that was in the market. She now technically has up to 40% downside before she loses $200,000 on that, and with the investment portfolios that we have, we think there’s a high, high degree of probability that she’ll never approach that 40% level of downside, and so by protecting half of her money it actually empowered her to take an appropriate amount of risk on the rest of the money to get to the return expectations that she wanted to have, and that’s a great example of how more protection is the thing that could actually lead to more growth. It’s not actually more risk that leads to more growth. From our perspective, it’s important to remember, you know, having a plan, working with professionals, and mapping this out well before you get to retirement. Have these types of conversations and talk about balance inside that portfolio, these scenarios we talk about them each and every week, and you’re going to have your own scenario to get on the calendar with Elite Income Advisors. Simply call 800-653-8404 that’s 800-653-8404 We call it our top 10. If you’re in the top 10, you’ll get in this week. Just outside
Speaker 2 39:00
of that, it’ll be a short wait list, but these are complimentary appointments. See if you’re on track for retirement. 800-653-8404 All right, so here we go. Prashant, you’re up. They’re both 67 recently retired, and trying to figure out how much they can safely withdraw from their combined 1.3 million in retirement savings. One wants to stick to the old 4% rule. We’ve talked about that quite a bit on the course of this show. The other is worried about inflation and market swings. What’s the best way for a couple to decide on a withdrawal strategy that keeps pace with rising costs but doesn’t drain their accounts too fast?
Speaker 1 39:39
Look, I’m going to stop short of saying what the best way to do anything is, all I can tell you is my philosophy on this, and how we’ve helped over, you know, 500 600 people, whatever the number is, plan properly for retirement. If we had $1.3 million and we wanted to just follow the 4% rule that. Means our intention is to withdraw $52,000 for the year off of the 1.3 million, so I recently ran into this type of case with somebody that had about this 1.3 million, they were going to follow the 4% rule, 52,000 instead of withdrawing 52,000 off of 1.3 million, believe it or not, what we did is we carved out $700,000 from the 1.3 and believe it or not, we put it into one of the new age types of annuities that’s actually available, and on that $700,000 annuity it provides the couple $52,000 per year, but that’s totally guaranteed income for the rest of both of their lives. It’s almost like they took $700,000 of their own money and created a self-funded pension that continues to come in for as long as either of them is living, but think about what that empowered them to do. That empowers them to take the remaining 600,000 and invest it. They can invest it as aggressively or as conservatively as they want to, because they know that that $52,000 a year will always be there for them. Now, when inflation goes up, when they have more income needs, all they’re going to do is draw minimally off of the 600,000 or whatever that grows to over time to get them to their income target, and so that’s how we were able to reposition the 1.3 million to create the 52,000 but do so in a way that makes sure that they’re not taking on too much risk, and at the end of the day, that’s all retirement is. It’s all about managing your downside. The downside is the thing that leaves you financially crippled, is going through that 50% and then someone getting sick, and then taxes going up all at the wrong time. That’s how you end up running out of money, one day, have a plan. You can get on the calendar with Elite Income Advisors. Complimentary appointment awaits you. 800-653-8404 10 appointments, we call it our top 10. You get in those top 10, you’re in this week. Just outside of that short wait list, they will get to you in the next couple of weeks. Very busy office. Call now, 800-653-8404 See if you’re on track with your retirement scenario. John, next up here it is. They inherited an IRA from their sibling last year, and just learned
Speaker 2 42:30
about the 10 year withdrawal rule under the Secure Act. They haven’t taken anything out yet. They’re worried they might face a big tax bill if they wait too long. How should someone approach withdrawals from an inherited IRA under the new rules to avoid a surprise tax hit?
Speaker 3 42:47
Yeah, yeah, this is, this is big. We talk about this in all of our workshops. We talk about this with just about all of our clients that have the pretax retirement plans. So, number one, we need to identify whether this sibling was more than 10 years younger than them, because the Secure Act 10 year rule only applies to folks that are more than 10 years younger than you. If it’s somebody within 10 years of your age or a spouse, there are other rules. So, let’s just assume that this sibling was more than 10 years younger, right? They would have 10 years to distribute the balance that they had received. It doesn’t matter where they distribute it, whether they take distributions all in one year or if it’s over a five year period. They just have to ensure that the entire account is depleted by the 10th year. Now, with that being said, the IRS does require a small required minimum distribution each year, so if this individual’s plan was to wait five years and take five large distributions proportionally, because maybe they were working right and they were retiring in five years, their income would go down, they wanted to take the large distributions in the latter half of that 10 years, they still have to take a small required minimum distribution in the five years, so without getting too complicated again, you have 10 years to cash it all out. It has to all be out of the account in 10 years. How much you take each year is not so important, as long as you’re taking the minimal requirement. So there’s a strategy that comes into play when we talk through distributions within the 10 year rule, again, depending on when you’re going to retire, what your income looks like, but I think even more importantly, how do you get in front of that? Right, how do you prevent your beneficiaries from inheriting these large pre-tax accounts and have to take them out over 10 years? If you’re interested, if that’s a question you have, I think it’s a good time to give us a call. We can talk you through the ways that we help clients with these situations.
Speaker 1 44:39
Fundamentally, it comes down to folks, when it comes to your taxes, do you want to pay taxes now at a rate that you know and understand, or do you or your heirs want to pay them later at a rate that we all kind of think is going to be a heck of a lot higher? That is the fundamental question. If you’re like most of our clients. Who fall into the category that they would pay the, they’d rather pay the least amount of tax possible if they were given the choice. This is a pain point that folks are dealing with, and this is what we’re helping folks with every single day. The phone number, last opportunity for today’s program to get into the Elite Income Advisors calendar, 800-653-8404 We have operators standing by. Have your calendar out in front of you. Have some time slots here in the next two or three weeks. After that, we’ll put you on a wait list if you can’t get in. 800-653-8404 Visit EIA quiz.com to assess your retirement readiness. Check out all our resources for free on our resource library on www dot elite income advisors.com
Speaker 2 45:47
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 46:04
The newly guarantees are subject to the claims payability of the issuing insurance company. If you withdraw money from or surrender your contract within a certain period of time after investing, the insurance company may assess or surrender charge. Withdrawals may be subject to tax penalties and income taxes. Persons selling annuities and other insurance products receive compensation for these transactions. Products are subject to fees and additional expenses. Any comments regarding safe and secure investments and guaranteed income streams refer only to the fixed insurance products. They do not refer in any way to securities or investment advisory products. Information presented on this program is legally factual and up to date, but we do not guarantee its accuracy, and it should not be regarded as complete analysis of the subjects discussed. Discussion should not be construed as an offer to buy or sell, or a solicitation of an offer to buy or sell the investments mentioned. Professional advisors should be consulted before implementing any of the strategies discussed. Investments involve varying degrees of risk, and there can be no assurance that any specific investment or strategy will be suitable or profitable for a client’s portfolio. Investment advisory services offered through Elite Income Advisors Incorporated, a registered investment advisor located in Ellicott City, Maryland. The firm only conducts business in states and jurisdictions in which they are properly registered or exempt from registration requirements. Registration is not an endorsement of the firm by securities regulators and does not mean the 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 receive commissions for the sale of insurance products as insurance agents for Retirement Planning Services Incorporated. Insurance and annuity product guarantees are subject to the financial strength and claims paying ability of the issuing insurance company. Morgan Patrick is not a client of or affiliated with Elite Income Advisors, however, he has a financial incentive to promote our services because he was compensated for his work on Retires Smart Maryland, a program that paid production of Elite Income Advisors.
