Speaker 1 0:03
America has hit a major milestone. Experts call it peak 65 That means more people than ever turning 65 stepping into retirement, and facing the big question: Am I really ready for this? We’ll talk about it today on Retire Smart Maryland Radio.
Announcer 0:21
Welcome in to Retire Smart Maryland Radio with Prashant Sabbath.
Speaker 2 0:28
Welcome in to Retire Smart Maryland Radio. Your host, Prashant Sabapathi, and John DeFeo, both of elite income advisors, they’re independent fiduciaries. They’ve got a combined experience right at 20 years helping their clients get ready for retirement. They’re headquartered in Ellicott City, and they have a satellite office in Annapolis. I’m Morgan Patrick, and it’s my privilege to go back and forth with the gentlemen each and every week, and it’s always about the importance of having that retirement plan being ready for your golden years. And before we dive in on peak 65 let’s see how the week went. Prashant, you go first. The
Speaker 1 1:03
week has been great. I’ll tell you what, we’ve had a lot of weather recently in the area, as I’m sure a lot of our listeners know, but what’s been really cool is our office has stayed really busy despite the weather. I think there’s an appetite for people with everything going on politically and with the government, everything else, I think there’s a real appetite to get your financial plan in place, and so you know when there’s a lot of snow and rain, I think people start to cancel appointments and things like that, but that hasn’t been the case for us. We’ve been busy as ever, so that’s been a really nice treat. All right, John, what about you?
Speaker 2 1:39
Good bit of snow, wintry mix out here, but the clients are still coming in, you know, still getting out there and doing the seminars, you know, doing what we can. So, even with the adversity of the weather, we’re still making it happen.
Speaker 2 1:51
I’ll tell you, making it happen, that’s what it’s all about, getting you ready for your retirement. We’re going to talk about the Boomers today, guys. We really start off with it. They’ve been navigating for retirement for years, and their experiences, both positive and negative, the challenges they’re all often powerful lessons for us. And again, that’s what we’re going to do today. We’re going to learn a little bit about what is peak 65 So, again, John, we’ll let you start. Just give us a definition. Peak 65 we hear it a lot,
Speaker 2 2:20
so it’s going to be the moment when the highest number of Americans in history are turning 65 and this is mostly baby boomers that are reaching that retirement age, and that actually started as of last year, 2024 is considered to be peak 65 So I want you to think of the retirement system like a highway, and suddenly, all of a sudden, the largest group of drivers ever is emerging all at once, and if that road, which we can have consist of social security, medicare, retirement savings, all of that isn’t maintained well, or it isn’t expanded, there’s a significant risk of slowdowns, congestion, even roadblocks. So that’s exactly what’s happening with peak 65 more retirees means more pressure on the system, so having a personal plan in place is crucial to navigate those, those challenges. So, Prashant, could you expand a little bit on why this actually matters to retirees?
Speaker 1 3:14
Well, I think it’s exactly what you said, it’s it’s higher demand and lower supply at the end of the day, right, with people flooding the system with retirement benefits, whether that’s Medicare benefits or Social Security benefits. I think that creates an undue strain on the system, because we know that taxes that are being collected are not nearly enough to cover the benefits that are outgoing. If you just look at the federal deficit, you’re looking at approximately about a $2 trillion deficit. Now, of course, Department of Government Efficiency is working on hopefully reducing some of that federal spending, but that being said, the deficit is still pretty significant as a whole. The other thing I think about is, okay, for years we’ve contributed money to our 401 ks and our IRAs and our thrift savings plan, and that’s been an automated process. Every two weeks, when you get paid, you’re making those contributions, and as those contributions go into the market, you’re effectively buying the market, right. So, what happens when we buy the market as a society, when people buy into the market, the market tends to go up, but when you get to retirement, the game changes. You’re no longer putting money in every two weeks, you’re doing what you’re pulling the money out every every month as you need it to replenish the paycheck that you lost when you retired. So, what’s going to happen when, instead of putting money into the market, we’re selling to take money out of the market. Does that cause a huge negative impact on the market? I’m not so sure just yet, but I think it’s absolutely something that we have to be aware of for retirees heading into that next phase of their retirement. Planning journey,
Speaker 2 5:00
I mean, we talk about the boomers almost, you know, almost on a weekly basis. They come into the conversation because so many are headed off into retirement on a daily basis. That many people withdrawing from their accounts, you would think it’s going to cause a little bit of a ripple effect across the industry. So, just make sure you’re planning. We’re going to learn from some lessons, some key lessons from boomers, here in just a second. Want to remind you, the reason we do this show, we do it to help. There’s going to be an opportunity to get on the counter with elite income advisors, and these appointments are complimentary. We’ll tell you about those as we near the end of this first portion of the program. But again, if you can grab one of these appointments, you’re not agreeing to become a client, they’re not going to try to sell you anything. This is an opportunity for you to learn, and also see if it’s a good fit. So, stay tuned. Those appointments are going to be available. So, guys, key lessons from Boomers and their journey. We’ve got a few, you know, we’ve got enough example, I guess a sample size that we can kind of learn from what we’ve seen so far. So, John, let’s just start with you. Just some key lessons.
Speaker 2 6:00
Well, I think most importantly, starting early, right, or as soon as possible. You can compare this kind of to gardening in a way, so when you invest, it’s kind of like planting a tree, right? So the earlier that you plant it, the bigger it grows, but even if you start that late, you, you know, with the right care, catch-up contributions, strategic investing, those kinds of things, it can still provide plenty of shade or income in retirement. So, I think starting early is imperative. Diversifying your streams of income, you hear us talk about diversification all the time, so you know, try to think of it as somewhat of a three-legged stool, so you’ll have your social security income, potentially, you know, a pension or 401 k distributions from your savings through your employment and personal savings, so one of, if one of those legs is weak or missing, and that the stool wobbles, then you have to have a plan in place to fix that, right? Also, keep in mind that healthcare is a big deal, and it’s expensive, although the premiums for Medicare Part B are relatively inexpensive for lower income earners. There are still a lot of expenses that come up in retirement that you have to be cognizant of, so you know, paying attention to those expenses, adjusting it for longevity. Right, we talk about people living longer and making sure that you plan for that, ensure that your income stream is going to last much longer than you would have originally anticipated, so make sure that you have that longevity plan, and you know, of course, be prepared for the market ups and downs, you know, don’t panic when you know you see the red, stay the course, you know, and I would say if you do have a financial planner, financial advisor, seek their guidance and assistance in those difficult times, so I would say those are some of the key lessons that we would have, and yeah, absolutely.
Speaker 1 7:43
And one thing I look at here is just the bottom line. Look, if you’re entering that peak 65 zone, it’s not just about baby boomers, but it’s really a wake-up call for everybody, even those that might be getting to retirement five or 10 years from now. So look, we’re going to open up our phone lines as we do every week on the show. Here, the phone number is 800-653-8404 That’s 800-653-8404 Remember, retirement isn’t just about how much you’ve saved, it’s about making sure that your money lasts as long as you do, and so, if you don’t have a clear plan for your income, your investments, or your health care, or your taxes in retirement, now is the time to take a look at one. So, when you call that number, 800-653-8404 we’ll offer a completely free, no obligation retirement review. We’re going to take you through how to generate income that lasts for the rest of your life, we’ll walk you through your investment risk portfolio. Make sure that you’re properly diversified and protected, and talk about strategies to reduce that retirement income tax bill. Pick a phone, dial the number right now.
Speaker 2 8:57
All right, that number once again: 800-653-8404 That’s 806 5384 38404 When we return on Retire Smart Maryland Radio, what type of retiree do you want to be? Well, we’ve got a few categories, we’ll see which one you fit into. That’s coming up next. We are back on Retire Smart Maryland Radio. Your hosts are Prashant Sabapathi and John DeFeo, both of Elite Income Advisors. They’re independent fiduciaries. They’re headquartered in Ellicott City. They’ve got a satellite office in Annapolis for your convenience. It’s about helping their clients get ready for their retirement. I’m Morgan Patrick, and we go back and forth on so many different retirement topics. You’re going to have questions about your own situation, your own retirement scenario, and a lot of you are sitting on portfolios and you haven’t thought about the planning process, or you’re halfway down the path, you’re working with somebody, but you know what, calls aren’t being returned. Your appointments are getting moved around, you’re a bit, little bit frustrated. It’s okay to get a second opinion. We offer that on this show, and these are complimentary appointments. All you’ve got to do is call 800-653-8404 That’s 800-653-8404 And remember, no obligation means you’re not agreeing to become a client, they’re not agreeing to take you as a client, so call the number 800-653-8404 So, we ask a lot of questions on this show, and, and one of the big ones is, you know, you want, we want the retiree to say to themselves, you know, what kind of retirement do I want? Right, it’s a pretty broad question. So, there are some specific types, however, of retirees, and we’ve got an interesting way of going about this, so we’ve got some categories, and see which one you fit into, and we’ll have the gentleman talk about it today. In the first one, a very popular, the Oracle of Omaha, this is this is the category he falls into, the never retired mogul, John,
Speaker 2 11:00
right? So, you know, Buffett was one of the richest investors in history, and he never really formally retired, but more delegated a lot of his responsibilities to Berkshire Hathaway. So we see this quite often in the office. In fact, we were visiting with a client last week, 68 year old retired cardiologist, always loved medicine, enjoyed working with people, helping, but was ready to step back from his daily demands of the full-time practice. So, instead of fully retiring and stepping away from the hospital altogether, now he works about 15 hours a week as a consultant, mentoring some of the younger doctors, reviewing some of the more complex cases, but doesn’t deal with the long shifts, the emergency calls, and he’s able to stay engaged, which you know helps his mental acuity. It helps him stay healthy. He continues to earn some income, and he feels fulfilled in retirement, is able to do the things that he wants, and still contribute to the medical field. So we see this quite often, and it’s certainly a great way to go.
Speaker 2 11:58
Yeah, I mean, someone like Warren Buffett, when they talk, people listen, and obviously his, his investments speak for themselves. But also, we’ve talked about this in recent months, you know, his, his going to cash at certain points. Why is he doing this? So, so a lot of people are following what Warren Buffett is doing, the never retired mogul. The next one, we’ll throw this one at Prashant, the luxurious sunset, or who fits this category. I think a John D. Rockefeller, right? And that’s because,
Speaker 1 12:30
you know, he retired 58 years old. He eventually became the richest man in the world. He was famous for playing golf, you know, handing out dimes to strangers, enjoying his estates, that type of thing, and so the takeaway I have from this is that if you’ve built enough wealth, retirement is that time not just to enjoy yourself and enjoy leisure, but it’s also the right time to potentially give back and leave a legacy. I think, so often about just our existing client base, and some of them are some of the most generous people that I’ve ever met, not just giving back to their families and their grandkids, but also most of our clients tend to be really charitable type of people, they’re good, solid people that love to give back through time or through money in the community and to organizations that are really really important to them, and here’s one thing that I’m reminded of, is when you build a retirement plan, we can’t just act like every year is going to be the same in terms of spending in retirement, what we found is the early years of your retirement, typically the first maybe five to 10 years, you’re going to spend more money than you would at later points of your lifetime, and so why not structure your retirement plan in such a way that allows you the opportunity to spend more and be more charitable in the earlier part of your retirement, I think. To treat every year in retirement as the same is a huge mistake. You should have a retirement income plan that allows you to understand what that income is going to look like at different points in your lifetime, and make sure that you’ve done a good enough job saving to create the income that’s going to make your life as fulfilling as possible.
Speaker 2 14:20
Talking about just the kinds of retirees that are out there, and there are specific types, and these archetypes they fit into these categories. So, John D. Rockefeller, the luxurious sunset, or we also talked about Warren Buffett, the never retired mogul. And when you sit down and you start mapping out your retirement, and you’re planning for it, you’re talking about your goals, maybe one of your goals is going to be like Rockefeller, you’re going to leave some of your money for society, you’re going to leave it to charity. So, this next one, I’ve got an interesting question I’m going to ask both of you, and this one is the Passion Project Embarker, and the example they use is Stan Lee. So, my question to both of our hosts. Yes, what was your favorite, or what is your favorite Marvel character
Speaker 2 15:06
on this one? That’s tough. I mean, it’s probably got to be between the Hulk and Iron Man, the Hulk, just because he’s massive, and I like to lift, so I would say between the two of those, but you know, it all views were created by Stan Lee, obviously, in his retirement, because he was more of a creative, engaged until the end kind of guy, and we see that all the time. I mean, we had a client, this was actually a couple months ago, came in, we haven’t seen them because they’re on the road, and their retirement plan was to pack up, get in a camper, and travel the United States for the next year, and then each year create a different road trip, sometimes heading into Canada, to Mexico, but that was their idea of retirement. It wasn’t sitting still, it wasn’t, you know, relaxing to them. They wanted to go and see the world, or at least North America in its entirety. So pretty cool deal, I mean, we see this quite often. Everybody has a different adventure that they might want to go on, and these folks.. I don’t know that I could stay in a camper for an entire year with my spouse, so much I love her, but you know, but again, you know, everybody has their own, their own preferences and their own suits, so you know, whatever is your preference is the best for you. And again, as Prashant said, so long as you’ve done a good job saving, doing the right things to afford you that lifestyle, you should be able to do it. All right, Prashant, you got you got a favorite Marvel comic character?
Speaker 1 16:35
Got gotta be Spider Man for me, gotta be Spider Man, you know. Just growing up watching the movies, I was always really into it, and what I would say is, yeah, it’s an underdog story, isn’t it? If you think about it, it’s an underdog story. Great villains, and hey, look, the movies had a good mix of both action and some humor along the way, so I would probably go Spider Man. All right, The
Speaker 2 17:00
Passion Project embarker, Stanley, of course, creator of Marvel Comics, and we got the favorites there. We got, we got to know a little bit more about John. He’s a beefcake guy, likes to work out, he likes the Hulk, and he also likes Iron Man, but Spider-Man, also one of my favorites. Prashant giving the nod to Spidey. All right, so again, talking about just these different areas of retirement, when you talk about what, which one are you, which archetype are you? And again, luxurious sunset, or is John D. Rockefeller, you got Warren Buffett, he is the, the never retired mogul. And then the passion project embarked, we just talked about with Stan Lee. Now the last one we’re going to hit is the late life committer now? This is someone that they’re around for quite a long time. Prashant, who you got for
Speaker 1 17:49
us? Yeah, I think when we were doing our show prep, we came up here with Prince Philip, right? And so why do we consider Prince Philip a late life committer? Is because he dedicated the vast majority of his life to duty and service. Okay, and so I think that’s really important, and I think we all kind of know somebody like that. I just think back to a personal experience, and the late life committer that I know would be my own father, right? I’ve shared on this show for years what our family has been through with long-term care for my mom, and I think of my dad, you know, to this day, Dad still works. He’s 68 years old, and he still goes to work every day, not because he needs to – he’s definitely saved enough money to retire any day that he wants to, but he does it because what’s really important to him is leaving a lasting legacy, wanted to be able to take care of my mom while she was sick, and he did that up until the day that she passed away, but now it’s about kids and grandkids to him, it’s about saving enough to leave a meaningful lasting legacy, and I think of some of our other clients, like I have this really great client who was a former military officer, and he waited all the way until 70 years old to retire, because not because he needed to work that long, but he wanted to make sure that his spouse would have stable income if something happened to him, because he had a pension and he had social security, and one thing we know is that when you pass away, if you don’t have a survivor benefit on that pension, there’s a huge loss of income, and of course, when one spouse passes away, you lose one of the, one of the social securities as well, and so those are the types of things I think about. Is how are we going to leave a legacy? How are we going to make sure that our loved ones are properly protected if one of us passes away, knowing that there’s going to be a loss of income in the case of that client I was just talking about, talking about, they had saved about a million bucks, and in order to help him offset the loss of income when someone passed away, we actually took about $250,000 of his money and we put it into an income generating annuity for him, and he was actually planning to. Work a little bit longer than 70, but by by putting it into an annuity that we would start to take income out of when he passed away, his wife was actually able to offset some of that loss of social security income by using something like that annuity. So, just one quick idea there. I think the late life committer is becoming more and more popular because people are finding more ways to work from home and be comfortable in retirement, even while doing the work that they’ve done for decades and decades.
Speaker 2 20:28
We’re talking about just the different kinds of retirees, and you’re probably saying yourself out there, well, Warren Buffett, John D. Rockefeller, Stanley Prince Philip, I mean, they are really well known, and obviously they needed to plan, you know, how they were going to retire, how their monies were going to be distributed. This, you can go all the way down. I mean, look, having a plan and being ready, Prashant, as you mentioned, if it’s $500,000 if it’s a million dollars, if it’s a little bit below that, or way above that, having the plan gives you the confidence as you move towards your retirement date, because guess what, last time I checked, we can’t take anything with us. Correct,
Speaker 1 21:09
that’s exactly right. And what I would say is that too many people enter retirement without a real strategy, and without a real plan, without a real strategy, that’s what leads to costly mistakes. So, don’t let that happen to you. Pick up the phone, give us a call. It’s 800-653-8404 When you dial that phone number, 800-653-8404 you’ll come in for your free no obligation retirement readiness session, where we’re going to cover different things, like number one, are you on track to generate the income you need for the rest of your lifetime. Number two, are you paying too much in taxes through your retirement journey? Number three, do your investments align with your risk tolerance and your goals? And number four, have you accounted for healthcare and long-term care costs, as you head for retirement. If you’re unsure about any or all of the above, pick up the phone, give us a call. It’s 800-653-8404 If you’re online, visit Retire maryland.com to schedule that complimentary session. Again, Retire maryland.com
Speaker 2 22:18
When we return on Retire Smart Maryland Radio. We have some case studies. We will talk about those when we return. Again, you’re listening to Retire Smart Maryland Radio. We are back on Retire Smart Maryland Radio. Your hosts are Prashant Sabapathi and John DeFeo. Again, they are independent fiduciaries. It is all about getting you ready for your retirement. Ellicott City is their headquarters, Annapolis is their satellite office for your convenience, and again, a great resource website, Elite Income advisors.com that’s Elite Income advisors.com I’m Morgan Patrick. My pleasure. Each and every week to go back and forth with the fellas, and it’s always about the importance of having a plan. As we were wrapping up our last segment, Prashant, you mentioned something – you mentioned taxes. If you’re not ready for taxes as you enter into retirement, you could have some big, big issues down the road. Well, you felt like so dialed into taxes that you created a website, and it’s gotten a great response.
Speaker 1 23:30
Yeah, so we actually designed this super cool tax calculator website. Now it’s just there for illustrative purposes, but you can play around with it. It’ll give you an idea of what your retirement tax bill could look like, so if you’re driving, you might want to pull over and put this in your phone, or if you’re just listening online on the podcast, write this website down. It is www.testmytaxbill.com that’s testmytaxbill.com super cool tax calculator. There, you can play around with it. It will generate a free report for you. Of course, it’s not official tax advice. It’s still really important to work with a tax planner and a financial advisor when making important tax decisions about how to remove some of the tax liability out of your potential retirement plan, but folks, go check it out, it’s free. testmytaxbail.com
Speaker 2 24:25
All right, as we roll on on RetireSmart Maryland Radio, the financial trial of the century, it’s upon us. Whether you’re part of the mass exodus into retirement, peak 65 which we’ve already talked about that phenomenon, there’s a lot going on there. There’s taxing, you know what’s going on with the process there. It’s important as you approach your retirement to have your i’s dotted and your t’s crossed. So, we thought we’d get into a few case studies, highlighting some keys to ensure you know you tip the scales in your favor as you move towards retirement. So, case study number one, Prashant, you can start with this one, you. He’s the unprepared retiree. John is 65 and planned to retire, relying solely on social security. He’s unmarried, doesn’t have any kids. Now, his father had a pension in social security and was more than fine in his retirement, but guess what, John doesn’t have that. What are John’s core issues here? And how could folks in similar situations avoid this type of issue that John is facing?
Speaker 1 25:25
I think three things come to mind here in a situation like this, in terms of what are some of the core issues that someone in this type of situation may face. Number one, failing to save enough money, right, so relying on social security alone created a major income gap. Right when you get to retirement, you lose the paycheck that you had while you were working, and you’re replacing that with things like social security and a pension if you’re fortunate enough to have earned a pension. The problem is most people can’t live on just social security alone, so now there’s a gap in the income between what we need and what we actually have coming in. So that’s number one, failing to save enough money to close the income gap. Number two, didn’t consult a professional, right? If, if in this case, John had consulted with a professional at some point in the retirement planning process that could have helped him either diversify his income sources or use different strategies to accumulate more money to be able to close that income gap that we talked about, and then number three is I would say maybe some financial literacy concerns here, and maybe that was just not understanding what options were out there that he could have taken advantage of at some point in his retirement planning process, because look at the end of the day, this doesn’t just apply to financial services, we all just don’t know what we don’t know, right, and unless we’re going out and doing the hard work to educate ourselves, then you know we could be deficient in some areas, so I think those are the three core concerns or issues that this particular person might end up facing, but you know what is the winning strategy, John, maybe you can talk about this a little bit, is we know what the concerns are. How do we rectify this? How do we make this right, so that we’re in the best position possible moving forward.
Speaker 2 27:27
Well, I think the first step is seeking the advice of a professional, determining where you currently are in your stage of accumulation, identifying what you’re looking to accomplish in retirement, and again establishing that monthly income target, figuring out how to get there. One of the biggest mistakes that we see clients make is not adjusting their income in retirement for the increase in expenses. Although John will get an increase in social security every year for the cost of living, we’ve seen that that cost of living adjustment that’s awarded to social security doesn’t necessarily keep up with the pace of inflation, so the CPI numbers that the cost of living adjustments are based on strip out two key components, and that’s going to be fuel and food, so or energy and food. I don’t know about the listeners, but I spent a heck of a lot of money on fuel and energy, so although you are going to have a slight increase to that amount, it’s not going to completely make up for the increase in cost, so making sure that you have some sort of an investment portfolio as an inflation hedge is extremely important. I’d say that that’s a big impact that would have had.
Speaker 2 28:34
So, again, folks, make sure you have a plan, and even if you are late to the game, and the issue, or I should say, the case study we’re using with John, he’s very late to the game. So, make sure you have that budget, make sure you’re working with a professional, make sure you’re contributing. If you’re still working, and at 65 probably you know this is a situation where he may continue to work for quite some time. Make sure you’re using your catch-up contributions. We talk about it each and every week. There are strategies out there, even if you’re late to the game. All right. Case study number two. John, we’ll let you take the lead on this one. This is the overconfident investor, and, boy, I know we’ve got examples of this. Lisa, this is the example used. 62 years old, heavily invested in, are you ready? A single stock, believing it would secure her retirement right, and honestly, I’ve seen a good bit of this. There was a time that I managed a lot of 401 k
Speaker 2 29:30
plans for Southern Company employees, and Southern Company pays a fantastic dividend, but it’s still all in one stock. So, in Lisa’s situation, that could have been why she picked that. Maybe she accumulated a lot of that single stock. Maybe she really believed in the company, but she ignored the concept of diversification, right? So, if something happens to that specific company, whether it be due to performance, whatever the case might be, she is extremely open to losing a lot of money, right? So. Um, you know, I think that, excuse me, looking at the emotional side of that, there’s not many reasons that someone would be in a single stock unless they’re uneducated or they’re emotionally attached to that, so I think that’s a big issue in, you know, choosing just one stock to support your entire retirement,
Speaker 2 30:19
so the winning strategy I would imagine work with a professional and start moving some stuff around,
Speaker 1 30:25
and I think I think what it comes back to is ultimately financial planning and retirement planning is all about what I call paycheck security. It’s all about where is your paycheck going to come from. Now we have some clients that put a large lump sum of money all in one stock, but the clients that are doing that are the ones that have reliable income coming from other sources, right? They’re not depending on this one stock to either go, you know, to go up to create all the retirement income that they need, I’m a big fan of taking risk in the market. I think that there’s certain stocks out there that could absolutely provide you a huge amount of growth that is much higher than what the general market may provide, but most people are not willing to take that risk. How you become willing to take risk is when you have paycheck security. If you know exactly where your income is going to come from when you retire, you know exactly how much it’s going to be. You understand that it will always be there for you, regardless of if the market goes up or down or sideways. It now empowers you to take single stock risk in a way that the person who doesn’t have paycheck security is simply not able to do.
Speaker 2 31:46
We’ve got time for one more, and this case study is the late planner. It’s a couple, they’re 58 Tom and Sarah. They just realized they haven’t saved enough money for retirement for shot. Where’s the mistake, obviously? And what can they do
Speaker 1 32:00
typically? If you haven’t saved enough, it comes down to two things. Number one, I’d be willing to guess that procrastination costs them some valuable time, so missing out on decades of compounded growth means that now you have to save much more aggressively to be able to catch up. Number two, I’d say probably comes down to a lack of a spending plan. If they didn’t have an idea of how much the money in and money out was each and every month, it didn’t allow them the opportunity to save the way that they want to. So, the winning strategy here is to maximize contributions to retirement accounts, including catch-up contributions. You might even consider using something like an HSA, a health savings account, or you know, maybe get to retirement and find that you need to delay in order to catch up, so you delay retirement work just a little bit longer. Okay, so are you truly ready for retirement? I think that’s what it comes down to. If you’re not sure where you stand, or whether you can retire or when you retire, you can stay retired. Pick up the phone, give us a call, come in for that retirement readiness review. The phone number is 800-653-8404 Again, that’s 800-653-8404 If you prefer to book that appointment online, just visit Retire maryland.com
Speaker 2 33:20
When we return on the program, these scenarios they take place all over the country. I’m going to throw them at the guys, we’ll see what they come up with. That’s all next on Retire Smart, Maryland Radio, Retire Smart Maryland radio hosted by, well, these guys can be found at Elite Income Advisors. Got Prashant Sabapathi and John DeFeo. They are independent fiduciaries. Prashant has been busy, he’s got a couple of books already: Physical Health, Retirement, Wealth, and Retire Abundantly. They’re headquartered in Ellicott City, they have a satellite office in Annapolis. I’m Morgan Patrick, my privilege. Each and every week to talk retirement, but also this program. We’re here to help you. We get it, a lot of you have not started. We use the word procrastination quite a bit on this program. There are a lot of you that are sitting on portfolios, haven’t started the planning process. We’ve got complimentary appointments for you, so listen up for that. And we also have appointments for those of you that are halfway down the path, that you’re frustrated, and you feel like, you know, what I’ve signed up with a firm, I’ve signed up with a particular advisor, and I’m married to that advisor. That is not the case. You can get a second opinion, and as fiduciaries and lead income advisors, if you’re okay, they’re going to tell you, you know what, this looks good, you’re okay. But folks, if there are things that need to be done, if you need to pivot in any way, those conversations are going to be had as well. You can grab an appointment at any time, 800-653-8404 All right, gentlemen, scenarios, and again, these happen all over the country. How would you handle this one, John? You’re first, six. Two years old, 900,000 in a traditional 401 k wants to reduce their tax burden by converting a portion to a Roth 401 k within their plan. They’re concerned, however, about the tax impact, but want future tax-free income. How can they determine an optimal conversion amount here?
Speaker 2 35:20
Well, I think the first thing that we want to do is understand why they would want to take income now to make it better for them down the road. So, the concept of the Roth conversion is simply to take income at a favorable tax rate and not have to take it down the road when potentially your tax rates could be higher. And we talk on this show quite often about how that’s our expectation, right? So, with this individual you would want to look at where you’re lined up currently in the marginal income tax brackets and where you could assume to be down the road, whether that’s through distributions that are required or by what your account could potentially generate as a required minimum distribution. So to look at that, you, you line up the again marginal income tax brackets, based on your taxable income for the year, you figure out where you want to get to, and that’s the approximate amount of the conversion. So, it is a bit of a difficult analogy to look at. So, we do encourage you to seek out the advice of a tax advisor. We have those on staff, we can certainly assist with that, and we do it quite often, but the best time to look at this is at the end of the year, once you have an idea of what your income is from all sources, figure out, you know, what room you have to the next tax bracket, and if it makes sense to fill up that or go to the next one, and again, this is based on what your anticipated tax rates in the future would be, so that’s typically how we determine that optimal conversion amount,
Speaker 2 36:39
we are in the scenario portion of Retire Smart Maryland Radio, and again, these scenarios occur across the country. We’ll see how the advisors handle them. And Prashant, you’re up next. Here it is: a retiree who relies on investment income is concerned about market volatility, aren’t we all? And they’re considering using an annuity to cover essential expenses, they’re unsure if an annuity will offer the security that they’re seeking. What annuity types best align with this type of goal?
Speaker 1 37:10
So, several different types of annuities out there. The one that tends to be the most popular in our office is one called the fixed indexed annuity, and the reason we use fixed indexed annuities are because they are protected from market downside, so if the market goes down, you cannot lose any of your principal in a fixed indexed annuity. So that’s really cool. I think the market clearly is unpredictable, right? And my opinion is that for as unpredictable as the market is, your retirement income shouldn’t be okay. Imagine you wake up every morning in retirement knowing that no matter what happens in the stock market, your essential expenses, things like housing and food and health care, are completely covered by an income stream that is always going to be there for you for the rest of your life, and potentially for the rest of your spouse’s life as well. That is the power of using the right annuity in your retirement plan. And to piggyback on that, we know that Social Security alone will not be enough, and so you can’t afford to just rely on Social Security, just as you can’t afford to rise, rely solely on the stock market to give you the type of income that you need to live life the way that you want to when you get to retirement.
Speaker 2 38:32
When we get into these scenarios, it kind of gives you an idea, and I’m talking directly to our listeners, that man, there’s so many things that are going on in these individuals or these couples’ lives, and their scenario is much different than yours. So, remember, you got a lot of moving parts, and if you’ve got a plan, you’ve got an idea of how things are going to work out for you, and how nice would it be to have that confidence as you move towards retirement. So, think about your own scenario, but also think about taking advantage of the complimentary appointment with Elite Income Advisors that we hand out on this program, and again, it’s an opportunity for you to get to know the team at Elite, also to see where you are in your retirement planning process. All right, so here’s another scenario, John. This one to you: a retiree wants to use their IRA to make charitable donations, but isn’t sure if they qualify for a qualified charitable distribution, a QCD. How does this strategy work? And what are the benefits?
Speaker 2 39:31
So, the qualified charitable distribution is a great strategy for those over the age of 70 and a half, and what it allows you to do is make a direct donation from your individual retirement account to a qualified charity, and not have that income be reported on your, your income taxes, so it’s effectively a tax-free distribution. So, this is a great strategy for those that are charitably inclined, that would like to be able to give to an organization and reduce the amount of tax. Taxable income that’s being taken in, so we see clients that do this just because they like to give to their community, maybe they like to donate to their church, and instead of dropping a, you know, a check in the basket every week, they write one big check at the beginning of the year, they’re able to deduct that from their taxable income, and it’s a great strategy. It’s also wonderful when you’re taking required minimum distributions, right? So, if you don’t need that income and you’re being forced to take it, and maybe you’re trying to minimize your income for the Medicare premium, or any of those reasons, you can make these distributions out to a charity, avoid the taxes, and again it’s a wonderful strategy, it helps the organizations that need the money, and it prevents the taxes from coming back on you.
Speaker 2 40:47
We are smack dab in the middle of our scenario portion of the program. Want to remind you that we do offer up complimentary appointments with elite income advisors. Again, you’re leaving the checkbook at home. This is an opportunity for you to test drive elite income advisors, you’re not agreeing to become a client. Call this number now. Secure an appointment: 800-653-8404 That’s 800-653-8404 All right. Final scenario, Prashant. To you, here it is. Someone is wondering if they should contribute to a traditional IRA for the tax deduction or a Roth IRA for tax-free withdrawals in retirement down the road. How should they weigh the long-term benefits of each one of these?
Speaker 1 41:30
So, I think we have to start with the question, the fundamental question of, do we think tax rates are going to go up in the future.
Speaker 2 41:38
My hands up, I’m going to say yes. Up, they’re gonna go up.
Speaker 1 41:42
Yeah, I think we have probably consensus on this show here that tax rates are likely to be higher in the future. So, do you want to pay now or do you want to pay later? If you’re putting all your money into retirement accounts that are pre-tax, things like your 401 k, your traditional IRA, your TSP, you’re betting that taxes will be lower in the future, because when you go to withdraw it, you’re gonna have to pay the taxes at that point. Take a look at the national debt, take a look at the state of Social Security and Medicare – we’re trillions and trillions and trillions of dollars in the hole, with the deficit being multi trillion dollar deficit each and every year. So, Roth IRA allows you to take advantage of today’s rates. Okay, the longer you, the longer you keep your money in the Roth IRA, all that compounded growth now becomes tax free. So, Roth IRA is one of the few ways to create tax-free income when you get to retirement. I think what this comes back to is your future self is going to thank you for doing tax planning, and when I talk about tax planning, I’m talking about being proactive, not reactive with your tax plan. So you want to think about how much your expenses are going to be in the future when you get to retirement, you’re going to want to think about how to design the most tax efficient way to withdraw your money to meet those expenses, and wouldn’t it be nice to withdraw that money without having to send a chunk of it to Uncle Sam? That’s what the Roth IRA does for you. Doing that conversion on the front side allows you the opportunity to create a much more tax efficient retirement. It’s not the right thing for every single person out there, but I think every single person should at least consider whether or not utilizing something like a Roth IRA conversion or just using a Roth IRA, how that could be the right thing for you, potentially. I mean,
Speaker 2 43:40
it’s a conversation. I mean, the term we’ve used is because taxes are currently low and they’re probably going to rise. Taxes are on sale, so at least have the conversation, and maybe a conversion is something that could be in your future. But have a plan, work with a professional, and that’s what we do here on the program. We talk the talk, but we also walk the walk. It’s an opportunity for you to get on the calendar with elite income advisors, and these appointments are no cost, they’re no obligation, there’s no pressure. You’re leaving the checkbook at home. It’s a get to know you test drive of elite income advisors. And who fits into this category? Well, it would be someone that is a procrastinator. Have you sat on this portfolio for a number of years and you’ve thought about planning, but you just keep putting it off, or you’re halfway down the path, but you’re just not sure about your direction. Maybe your appointments are being moved around, maybe your phone calls aren’t being returned with your current advisor or advisory firm. Get a second opinion, and that opportunity is right now for Sean.
Speaker 1 44:43
Bottom line, folks, retirement planning isn’t something that you can afford to just get around to later. Every day that passes is a day where you could be either losing money, paying more in taxes unnecessarily, or missing out on your ability to have that guaranteed. Income security, when you get to retirement, you don’t want to wait until it’s too late. Last opportunity for today’s show to get on the schedule with our team of specialists here at Elite Income Advisors. 800-653-8404 is the phone number, that’s 800-653-8404 You can also visit Retire maryland.com Whether it’s annuities, tax planning, investment strategies, social security optimization, or just how to leave a legacy to your loved ones, our team is going to help you make sure that your retirement is is in as healthy of a position as possible, and that time to act is right now. Folks, pick up the phone 800-653-8404 or visit Retire maryland.com Another edition of Retire Smart Maryland Radio in the books. We’ve learned a lot. And joining us on the program, as always, Prashant Sabapathi and John DeFeo. I’m Morgan Patrick. We’ll see on the radio next week, you
Announcer 46:07
Annuity guarantees are subject to the claims paying ability of the issuing insurance company. If you withdraw money from or surrender your contract within a certain period of time after investing, the insurance company may assess the 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 referral into fixed insurance products, they do not refer in any way to securities and investment advisory products. Information presented on this program is believed to be factual and up to date, but we do not guarantee its accuracy, and it should not be regarded as complete analysis of the subjects discussed. Discussion should not be construed as an offer to buy or sell, or a solicitation of an offer to buy or sell the investments mentioned. A professional advisor 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. Elite Income Advisors Incorporated is registered as an investment advisor with the State of Maryland, and only transacts business in states where the firm is properly registered or is excluded or exempted from registration requirements. Registration as an investment advisor is not an endorsement of the firm by security regulators and does not mean that the advisor has attained a particular level of skill or ability. You should always consult an attorney or tax professional regarding your specific legal or tax situation.
