Speaker 1 0:00
In today’s interest rates are some of the highest that they’ve been in over a decade, and today’s annuities are offering features that your old contract probably never dreamed of, but should you cash out, exchange, or simply let it ride? Let’s explore today on Retire Smart Maryland Radio.
Speaker 2 0:22
Welcome in to Retire Smart Maryland Radio with Prashant Sabapathi. Welcome in to Retire Smart Maryland Radio. Your host is Prashant Sabapathi, and you can find him at Elite Income Advisors. They’re headquartered Ellicott City Satellite Office in Annapolis. He’s an independent fiduciary helping his clients get ready for retirement. I’m Morgan Patrick. My pleasure to jump on and talk about just the importance of having that pathway, having that confidence in what you’re going to be doing when your job ends, when you head off into retirement. So, make sure you have a plan. We’re going to give you an opportunity to get on the calendar with elite income advisors, and come on in and talk about where you currently sit in your retirement planning, I guess environment. Are you already planning? Maybe you need a second opinion, or you’re sitting on that portfolio and you’re in desperate need of a plan, you can grab an appointment and they are complimentary. So, Prashant, as we always do before we dive in on the old annuity, How was your week, man?
Speaker 1 1:22
Hey Morgan, good to be back. The week’s been awesome, as always. We’ve had a lot of traction with our seminars. One thing that we’re noticing here is we pretty much do three to four seminars a week. It’s usually that we have two presenters going out into our community during the week, and then we do two seminars every Saturday, it looks like, and so a lot of great feedback from the community, in including our radio listeners, our podcast listeners, and then the folks that catch us on TV. So it’s been nice getting some of those people into the office. What’s always really interesting to me is being able to talk about the things that people actually care about. I think, as financial advisors, sometimes we get so kind of stuck in our own bubble.
Speaker 2 2:11
Sure,
Speaker 1 2:12
and we stop hearing our clients, and if we just listen to our clients a little bit more, they’ll tell you exactly what is of concern to them, and the biggest takeaways that I’m hearing are where is my income going to come from in retirement. Okay, and I think a lot of that has to do with so many of our clients being federal employees, they’re used to getting the paychecks, and with everything going on with the Doge cuts and DRP, deferred retirement or delayed retirement, or you know, just figuring out whether or not you’re ready. I think it all comes back to people saying to us, is my money going to last? And in order to understand whether or not you’re at risk of your money lasting or not lasting the rest of your life, you have to understand where your income is going to come from in retirement, whether it’s a pension, social security, or somewhere else like your 401 k or tsp, and so it’s kind of been nice to refocus the planning around what is truly most important to the folks that engage with us, and that is where is my income going to come from. I think that’s the number one problem to this day that people come into our office asking about that, and then, of course, taxes.
Speaker 2 3:24
Sure, absolutely. Well, I wanted to ask you a further question on the seminars. I mean, you’ve been doing this, you’ve been helping people for years get ready for their retirement, and the seminars you’ve been doing them, are you noticing, I guess, just in recent seminars, are we seeing higher numbers? More people want information, more people want it’s almost like there’s a growing concern about what’s going to happen to them after they finish up work, and there just seems to be a heightened interest in making sure they get their planning right. Look, I think the days of
Speaker 1 4:00
complacency are over. Okay, I think if there’s anything that we’ve learned in the last five or six years, especially with the pandemic, and then with the market sell off in 2022 and then all the uncertainty surrounding government in 2025 and what projects to be beyond 2025 I don’t think it’s good enough to just wing it anymore, okay? Markets don’t seem like they’re just going to go straight up like they pretty much did from 2013 to 2022 Markets were pretty much straight up. I mean, yeah, there’s some volatility, but the trend line was definitely up into the right, and I don’t think that that’s going to be the case here, potentially moving forward for the next decade plus, which means that if you’re not prepared for it, the impact of the bad market is going to, I think, impact you so much more than the person that is properly prepared for it, and so I think you hit the nail on the head. I think a lot of people. Wanting more information, but it’s not just more general information. We’re finding that more people are actually ready to take control of their retirement situation and make sure that they have some level of certainty regarding what their retirement is actually going to look like, and so our seminars, I did one, I think two weeks ago I had something like 75 people in the room for that workshop, and that was awesome. And then the next night I had like 45 people, and the same workshops two years ago were getting 15 people, 18 people attending, so it’s at the forefront of most people’s minds right now, especially if you’re within 10 or 15 years of retiring, you get one shot to retire the first time, right? And you want to make sure that that one shot counts, and you want to make sure that you get it right, and you want to make sure that you’re never in a position where you’re going back to work because you have to go back to work. If you go back to work, we want it to be that you’re going back doing something that you are actually passionate about and that you love to do. So, look, I know it’s a little bit of a diversion from how we wanted to start the show, but I just feel that it’s so important to listen to the people that are actually coming in and talking to us every day, and then share what people care about with the rest of our audience, because I know we get a ton of viewership and ton of audience to all of our platforms every week, and I love sharing what we’re actually talking about.
Speaker 2 6:31
Well, and it’s, it’s just so vital to be ready, and we talk about the planning aspect, you know, each and every week, and the importance of it, and there are different puzzle pieces we often kind of fixate on, focus on, try to explain, and try to enlighten people on, and we’re going to get into the annuity, simply because there are a lot of people out there that might be sitting on an older annuity, and maybe you bought it years ago, and you, it’s been a set it and forget it type of product that’s within your portfolio, and that was back when interest rates were scraping the floor. The modern features were just marketing buzzwords. Well, guess what? A whole bunch has changed. The rates have jumped dramatically since 2022 meaning you know the new contracts, whether fixed multi year guaranteed annuities or even fixed index annuities. I mean, they can offer payouts far richer than what you locked in on. So, we’re going to talk about that today. And in and around that conversation, we’re also going to give you an opportunity to get on the calendar with Elite Income Advisors. And if you’ve got one of these older annuities and you’ve got questions, bring it in. They’ll pop the hood on it, they’ll take a look at it, and tell you exactly what’s going on, and it might be time to make some adjustments, maybe switch it up a little bit, but we’ll get to that coming up on the other side. But first, Prashant, we’ve got these appointments, we’ve got 10 of them. What’s gonna happen if they call our number?
Speaker 1 7:57
So the phone number is 800-653-8404 that’s 800-653-8404 As we do on every show, we open up a few slots in the calendar over the next week or two here to allow people the opportunity to just have a conversation about what is important to them as they head for retirement. If you don’t have a real written retirement plan in place, if there’s any uncertainty surrounding where your retirement income is going to come from, or how best to collect social security, or maybe the most efficient way to minimize your tax liability to Uncle Sam and the IRS when you get to retirement, it’s a great opportunity for you to dial the phone number 800-653-8404 Set up a complimentary and confidential conversation with our team at Elite Income Advisors. We’ll help talk through your situation, we’ll help understand what’s important to you, and see if we can put together a written plan for you that addresses your concerns concretely. You can book with us in Ellicott City, our headquarters in Annapolis, or a virtual appointment on Zoom, 800-653-8404 When we return on Retire Smart Maryland Radio, we’re going to pop the hood on that annuity that you think you know what’s going on in there, but do you? It’s coming up next, you
Speaker 2 9:28
We are back on Retire Smart Maryland Radio, hosted by Prashant Sabapathi, Elite Income Advisors, where you can find him. The power behind this program, he’s an independent fiduciary. He’s also a published author, couple of books to his credit, so far. Physical health, retirement, wealth, and retire abundantly now. Elite is headquartered in Ellicott City, and they have a satellite office in Annapolis for your convenience. I’m Morgan Patrick. It’s my pleasure again. It’s always retirement and the importance of being ready for it, having that plan, and we kind. Of teased you in our first portion of the show, talking about, hey, do you have an annuity in your portfolio, and have you taken a look at it? When did you purchase it? When did you put it in play? Things may have changed. Well, today we’re going to talk about how to review an existing annuity. What are the pitfalls that you need to watch out for, and how to know when a maybe a 1035 exchange might be the smartest tax free move that you can make this year. All right, so first and foremost, Prashant interest rate reset – we’re seeing some things starting to move. Here is now the time to take a look.
Speaker 1 10:36
It’s always worthwhile to take a look. Let’s set the stage on this conversation a little bit, if you think about where interest rates are today, right? I oftentimes, when I do these seminars, I ask people, what’s the best CD rate that you’ve seen recently, and you know, people will chime in, they’ll say three and a half percent or 4% some people might say four and a half percent, depending on the length of the term, but then I’ll always follow up with what is the best CD rate you ever remember seeing. Morgan, how about for you? What’s the best rate you ever remember seeing? It probably the early 80s, right? Yeah, I mean, it
Speaker 2 11:15
would, yeah, it’d have been the early 80s. The rates
Speaker 1 11:18
back then, as you know, were like 1314, 15% percent, so let’s contextualize that for a second. If you had done a great job saving money, let’s say you saved a million bucks, you could take your million dollars, park it in a CD at the bank, and create $130,000 of interest, just interest safely off of that million bucks. Well, if you just lived off your interest at that point in time, is that a pretty good income to retire on? 130,000 safely, not bad. That’s pretty good to me. And so to like, to look at this, even though interest rates are much higher today than they were five or 10 years ago, we’re still talking four to 5% which means that earning interest safely is at a premium in today’s environment, so you might have gotten an annuity five years, seven years, 10 years ago, when rates were 1% or 2% and at that time it was the best thing available, because there wasn’t that much available, if you could safely potentially earn 345, four 5% more on an ongoing basis than what you are currently in, wouldn’t you want to know about that ahead of time? Yes, absolutely. And so, look, I’m not saying that if you have an old annuity that was done in 2012 or 2015 that it automatically means that you need to do something different with it, but I think one thing that everybody who has annuity should be doing is reevaluating whether or not they’re working for you the way that you intended when you first got them, and some of you will find that there’s so many better solutions out there that are better rates, just better features, more stability, potentially with the company that’s issuing the annuity. Some of you might find that you’re locked into an annuity that is actually in your best interest and is working for you exactly the way that you intended. So this is not intended to be, hey, why don’t you come in and let’s replace what you have. It’s more so let’s educate ourselves on what’s available to see whether the features align with what your objectives are.
Speaker 2 13:28
Yeah, have that conversation, and as Prashant just indicated, I mean, it might be fine, you know. And as a fiduciary, he’ll tell you, “No, it looks good, it’s doing everything you want it to do for you, keep it right where it is. But there are some newer models, you know, we were kind of sports car guys, we, you know, when we go by the lot and we see something we really, really like that we didn’t see a couple of weeks ago, it kind of piques our interest, so on the line of annuities, there are a whole bunch of new bells and whistles that people just need, you know, they need to be aware of,
Speaker 1 14:00
the one that’s becoming more and more prevalent is this idea of index linked growth. Okay, so what that means is let’s say that we’re linked to an index and that index happens to be the S and p5 100, and so what index linked growth is, is that as the S and p5 100 goes up, you get to participate in some of the growth of that index, but if the S and p5 100 were to go down, you don’t actually bear any of the market loss. Okay, now what’s a trade off? Because there’s always a trade off, right? If I could give you all of the upside with no downside, that would qualify as too good to be true, right? So the trade off is that if you’re in one of these index linked options, when the market goes up, you go up, but you might not go up all the way. Okay, and so if you didn’t capture all the growth, but you didn’t have any market risk, that’s a trade off. A lot of retirees are finding more and more attractive in an in a volatile market like we like we have today. Now, of course, not a good fit for everybody, but that’s just one of the newer bells and whistles that tends to be prevalent with some of these newer solutions out there, and you know, I think it’s worth exploring whether or not an account that’s protected from the market but still provides you some index link growth could be a good fit for you.
Speaker 2 15:28
Yeah, I mean it’s worth a conversation. And again, we’re kind of diving in on the annuity, and maybe you’ve got one in your portfolio from just a handful of years ago, and a lot, a lot has changed. It’s worth a conversation, might still be good for the portfolio, maybe a conversation about altering it a little bit, swapping it out for something, but again, those are conversations that you can have. We have complimentary appointments, and again, I got to tell you, the office is very busy at Elite Income Advisors, and they’ve carved these appointments out each week, they are complimentary, no obligation. So, if you’ve got any questions, grab one of these right now. 800-653-8404 That’s 800-653-8404 Again, no cost, no obligation. You’re not agreeing to become a client if you grab one of these appointments, but you are going to gain a lot of knowledge when it comes to your retirement, your portfolio kind of, where you sit, all right. So, Prashant, we’ve talked about the new bells and whistles, possibly, but now let’s say we have somebody that’s out there, they’ve been in an annuity for quite some time, they’re not really sure what’s going on. The next category, death by 1000 fees, that does not sound good.
Speaker 1 16:38
Yeah, and I call them internal fees and external fees. Okay, I don’t know what the annuity companies call them, but I call them internal and external. To me, external fees are the ones that are printed on your statement that you can see what you’re transparently paying. Internal fees are the ones that are kind of like financial termites, almost, right? Like they are kind of hidden in the contracts, they eat at your principal, and then you’re 15 years later saying, Where’d all my money go, right? And so it’s important to understand if you have an annuity, whether or not you’re paying internal fees, external fees, both, or none. And believe it or not, there are some contracts, some annuities out there that there are no fees whatsoever associated with them, which means you’ll never get a statement that says that your account balance went down due to you paying a fee, but not every annuity is like that, and believe it or not, there’s a ton of annuities that are chock full of fees, and you want to know what those fees are because ultimately, if it’s not performing, if it’s not growing at the rate that you expect it to, and one of the reasons for that is you’re paying an abnormally high fee, that’s the type of thing that you want to know about ASAP, so that you can nip it in the bud and find something that is a little bit more aligned with what you’re hoping to accomplish one day, and so we found cases where our radio audience came to us, and I’ll never forget this one guy came to me. This must have been last year at some point. He put $400,000 into a variable annuity, something like eight or nine years ago, and for eight or nine years his advisor never reviewed the annuity with him, and what we found when he came to us is that he was paying like two and a half to 3% per year in fees and charges, and I don’t know, like it was kind of sickening to do the math on 3% on $400,000 over eight or nine years. How much money went to unnecessary fees? And so we were able to review it for him, do what we call an annuity MRI. We did that for him, and we found something that was better for him, that was not in an annuity. We actually got him out of the annuity and put him in something different, not an annuity that allowed his money to be a little bit more aligned with his goal, so what you’ll find is that there’s solutions out there, maybe go annuity to annuity, maybe go annuity out of the annuity. What’s most important is that you’re doing things in a coordinated way that allows you to achieve what you’re trying to achieve.
Speaker 2 19:16
We are diving in on the annuity conversation, because there have been so many changes, it might be a good time to take a look under the hood. Interest rates, where they are, new bells and whistles on some of the newer products that are out there. The number of fees possibly hidden in the older annuities you might not be aware of, and I want to jump to this last one, because you kind of mentioned it in your last comment, Prashant. That’s the 1035 exchange advantage. Might be a good time to at least have that conversation as well. Yeah, 1035 exchange allows you to go from one annuity to another annuity with after-tax dollars, so non-retirement dollars, and not pay any taxes on that transfer. Okay, so.
Speaker 1 20:00
Very important, let me give you a reason, or a real-life case study on how I’ve done this a few more than a few times before, but one thing I’ve learned in advising my own clients over the last several years is that it’s really difficult to shift the mindset from saving to spending. Okay, and so when I did plans for clients seven eight years ago, we set them up with an annuity that was specifically designed to give them additional guaranteed income in retirement. Well, that’s while they were working, we put together that plan, put some money into an annuity. Well, Morgan, they got to retirement, and guess what, they didn’t do, they didn’t actually need all that income, they didn’t actually spend the way that we thought they would spend when we first created the plan, and so now they’re they’re in this annuity that’s supposed to give them income, but they don’t actually need the guaranteed income, and so what we did is we utilized the 1035 exchange, got them out of the annuity that was going to give them income and put them into one of the index linked ones that is more designed for growth and accumulation, not for guaranteed income. And so, look, your life, it’s going to change, your objectives are going to change, and when things come at you, your plan has to be flexible enough to adapt to make it as efficient as possible, and this all goes back to doing constant maintenance on your plan. You might have a great plan that your advisor set up for you, but if you’re not doing maintenance on it, or if they’re not helping you do maintenance on it, there could be some level of inefficiency that is not being addressed when you call that phone number. Folks, 806 5385 538404 That’s 800-653-8404 You can schedule that complimentary visit with our team at Elite Income Advisors. We’ll do that annuity MRI for you. We’ll help you evaluate your existing annuity, and you can make the determination for yourself, whether or not it’s still aligned with your goals. We’ll give you all the tools to make that very important decision. If you haven’t done that in several years, it’s a great opportunity. It’s totally free of cost to come in, talk to the team. There’s no obligation. Come visit us in Ellicott City, our auxiliary office in Annapolis, or you can book a virtual consultation, visit Elite Income advisors.com to book that appointment, or you can call 800-653-8404 When we return on Retire Smart Maryland Radio, you’ve been a good saver, socking the money away in that 401 k or IRA for years and enjoying those annual tax breaks, but as retirement years, guess what, it’s time to face a possible lump sum time bomb. We’ll discuss next,
Speaker 2 23:02
retire smart. Smart Maryland radio hosted by Prashant Sabapathi of Elite Income Advisors. The website, Elite Income advisors.com it is a resource, lot of great information there. Elite Income advisors.com links to TV shows, radio shows in podcast form, really good information on the entire team. Prashant is an independent fiduciary, he’s a published author, physical health, retirement, wealth, and a second book, Retire Abundantly. Want to remind you, too, that Ellicott City is the headquarters for Elite Income Advisors, and they have that satellite office in Annapolis for your convenience. I’m Morgan Patrick. We jump on, we talk about all these different topics in and around planning and getting ready for what is going to be your future, your retirement. So now we get into this conversation. Tax deferred retirement accounts, 401 ks, IRAs – they’re very powerful tools for building your wealth, but the same tax benefits that helped you grow your savings during your working years can become a liability in retirement, so once the RMDs kick in at 73 your taxable income could absolutely go through the roof, along with your Medicare premiums and tax burden for your heirs. So, these are some important topics. Today, we’re going to dig into, you know, what a financial advisor is going to call that lump sum time bomb, and looking at some of the practical strategies, like a Roth conversion, maybe asset location, health savings accounts, HSAs, that kind of help you defuse this bomb before it explodes. So, let’s unpack the risk, and also explore some of the tax smart moves out there, Prashant. And the first one, I mean, just define it for us. What exactly is a lump sum time bomb, and how does it sneak up on most retirees?
Speaker 1 24:45
Look, it’s this idea that you’ve been putting money away in these pre-tax accounts and taking a tax deduction every year for making your contributions. Just remember, every dollar that you saved in your 401k or IRA, every employee. Lawyer matching is tax deferred. You’ve never paid taxes on that money. I was visiting with somebody a couple weeks ago, they came in, they said, Prashant, I finally got to a million dollars in my 401 k, that’s the number I wanted to get to. They were like, hey, I was this guy was a big Dave Ramsey fan, and he said Dave always talks about being a 401 k millionaire, and he said, I finally got to the point where I’m a 401 k millionaire, and I looked at him and I said, Tom, I hate to break it to you, but even though you have a million dollars in the 401 k, that doesn’t necessarily mean you are a 401 k millionaire, quote unquote, in, and that’s all because of taxes, right? You can’t go put your hands on that million dollars without paying taxes, right? So, what is the true value of that million dollars? And so, the reason we call it the lump sum time bomb, or the tax time bomb, is because at some point in time the IRS says that you have to pay the piper, and typically that’s going to be between the ages of 73 and 75 years old. You can let that money grow, grow, grow in a tax-deferred way, but when you go to take it out, they’re going to force you to pay federal and state income tax on it, especially if you’re living in a state that taxes income, and it creates this vicious domino effect of higher tax on social security, potentially, or I should say, more of your social security becoming taxable, higher Medicare premiums, potentially a higher tax bracket, and then more tax burden to your heirs if you were to pass away. Actually, wrote about this in my book, Morgan Fiscal Health Retirement Wealth, you mentioned it there. There’s a chapter in the book called Rescue Your IRA. Okay, and what I talk about in that chapter is rescuing your IRA from the tax burden that is associated with it. Here’s what I’m going to do. If you visit Retire maryland.com special website retiremland.com you can fill out a form. I will be happy to send you a free copy, no obligation, folks, just a free copy of my book, Fiscal Health, Retirement Wealth, Retire maryland.com We’ll get that out to you. Read the chapter on rescuing your IRA and see how you can potentially benefit from using tax free strategies to help you plan for your retirement, so not to plug my own book a little bit there, but it’s helpful. A lot of people have read it, and they said that the feedback that I’ve gotten is that the strategies that we talk about are super important for long-term planning.
Speaker 2 27:33
Well, this just in, it’s your radio show, yeah, it’s your book. I mean, you can plug it again, you can go to Retire maryland.com request that book, Physical Health Retirement Wealth, and they will send it out to you again. That’s complimentary, no obligation to make an appointment or become a client. So, the opportunity is there for you. We’re kind of hitting this, this tax time bomb, and it is coming for all of us. If you are in tax-deferred accounts, how can snowballing RMDs really throw you off with your retirement planning?
Speaker 1 28:05
Well, look, even if you only withdrew the minimum required amount, like let’s say you had a great pension, you have Social Security, you don’t really need to touch your own money for the purposes of living life the way that you want to, and so all you’re going to do is require, take out the minimum required distribution. Your tax bill can really compound over time, especially if your investments are growing at, you know, a modest or even better than modest rate. So, according to Fidelity, a million dollar IRA that’s growing at roughly 6% compounded annually can require over $100,000 in distributions by your mid 80s. I would actually argue it would be higher than 100,000 because a million dollar IRA carries about a $37,700 distribution in the very first year, and then, by the way, you have to take more and more on a percentage basis each and every year. So, I think the amount of tax you’ll pay is going to be well over $100,000 on that account. And then, by the way, when you pass away, it’s still pre-tax money, it passes to your beneficiaries, but then they have to reconcile the taxes at that point in time, and so look, the better you are at investing, the more that your money grows, the higher the tax burden is ultimately going to be. And so one of the big challenges that we’re helping people solve is, how do we keep our money growing at a rate that is still sustainable for us, but how do we do that using things like Roth IRAs, where we can minimize or even eliminate all the future tax liability that may be incurred. This is like probably the top in the top three things that we talk about with folks every single day.
Speaker 2 29:52
Well, let’s let’s dive in on that, because you know we’ve we’ve had this conversation before on this program about how. Now the current tax window is closing. Well, now it’s been extended, so we’ve got these lower taxes, preferably. This is where kind of where you’d like to be talking about a Roth conversion, but people tend to put things off, put things off, put things off. You really need to start talking about it right now.
Speaker 1 30:18
Absolutely. So when the one big beautiful bill passed. It extended the tax brackets indefinitely. Okay, now what is indefinite when it comes to government? It’s indefinite, it’s permanent until it’s replaced by whoever comes in next, right? So it’s important to not plan your retirement solely based on what’s going on with the White House, because with elections every two years in this country, anything that can be done can be undone, and anything that can be undone can be redone, right. So, with that being said, I think you have to take it as it comes, and one thing that the one big beautiful bill did is it extended the tax rates, and so what that does is it gives people a new lease on life for planning retirement. If we know that there’s going to be approximately, we think at least another three and a half years, potentially of lower tax rates, we would be silly to not take advantage of that low tax rate environment while it exists, because there’s no guarantee that six years from now, 10 years from now, 15 years from now, taxes will be as low as they are today, and so what people are doing is they are proactively paying the taxes on their 401 ks, on their IRAs, on their TSPs, and doing what’s called a Roth conversion. By converting that money to a Roth, you’re paying the taxes at your income tax rate today, but then any subsequent growth you get on that money after you pay the taxes, you in theory never have to pay income taxes on ever again. So, if you took that million dollars, hypothetically, and you converted all of it to a Roth, which may or may not be the right thing for you to do, please get professional advice before you do anything, but if you converted all of it to a Roth, one day that million dollars grows to three and a half million dollars. Guess how much tax you pay on the two and a half million of appreciation?
Speaker 2 32:11
00,
Speaker 1 32:12
Okay, and we have a saying around our office: zero is our hero. That applies to taxes, it applies to market loss as well, so look, if you haven’t been introduced to this concept of proactively and preemptively paying your taxes, so that you pay the lowest rate possible. If your advisor hasn’t talked to you about that, there’s something that is missing in your plan. I think that they are missing the mark, and there’s likely some level of inefficiency that needs to be addressed, and it needs to be addressed right now, because we might not ever see an opportunity like this after this big beautiful bill expires. Folks, 800-653-8404 that’s 800-653-8404 We have time slots set aside in the next two weeks in our office, if you call in and you try to book beyond two weeks, I can’t guarantee you that we’ll have the availability there. We’ll have to put you on a priority wait list, but if you call in and you can book in the next two weeks, come in, have that conversation, and that is all it is. It is just a conversation about how best to efficiently structure your retirement plan to make sure that you have enough income, that you leave a proper legacy, and that, most importantly, you minimize the tax liability that you owe to the federal government over the course of your retirement. 800-653-8404 I think the quote was, “You would be silly not to at least have the conversation. So we’re saying don’t be silly. Call that number and grab one of those appointments, 800-653-8404 When we return on Retire Smart Maryland Radio, time for scenarios, you To
Speaker 2 34:04
retire Smart Maryland radio, you’re locked in. Prashant Sabapathi is your host, and again, you can find him at Elite Income Advisors. The website is a resource, Elite Income advisors.com It’s easy to remember, Elite Income advisors.com and consider it a resource, because there’s great information there, links to the TV show, radio shows, and podcast form, but just really good background information on the team. Prashants, an independent fiduciary, want to remind you too that Elite Income Advisors has a headquarters in Ellicott City and a satellite office in Annapolis. I’m Morgan Patrick, and again, planning, being ready, being prepared, being proactive, as opposed to reactive, and again being ready for what is going to be your golden years, your retirement. So we get to this portion of the program, and we have scoured the country, we have scenarios that happen, I have gathered about five of the. These four or five of these, and we’ll just see what Prashant would do. Now, listen to these, and if you’ve got any questions about your own retirement scenario, when we make our appointments available, grab one. They’re complimentary, they’re no obligation. All right, first scenario, Prashant is this: they have a mix of investments in taxable accounts, a Roth IRA, as well, and a traditional IRA, but they’re unsure which accounts they should pull from first to minimize taxes. So, the question is, How should someone decide the most tax-efficient order for drawing down different types of accounts in retirement?
Speaker 1 35:36
Traditional retirement planning from 1015, 20 years ago would tell you that you leave your tax-deferred money for as late in the game as possible. I think a lot of that has shifted in this day and age. So, in order to decide which order of operations you want to follow, in terms of withdrawing, it’s totally dependent, I think, on what your current tax rate is projected to be for this year. Okay, and then what we’re trying to do is we’re trying to forecast whether or not your future tax rate is going to be higher or lower than your current tax rate. If you think that your future tax rate is likely to be higher than your current tax rate, I think it makes sense to pull taxable, fully taxable money out first. Okay, now if for some reason you think that your tax rate in the future is going to be significantly lower, then it would make sense to leave your tax-deferred money for at some point down the road when you would, in theory, pay less in taxes on it. Okay, so it’s actually a pretty complicated decision to make, because it depends on so many different factors, right. It’s not really just about what your tax rate is, it’s about how are your investments positioned. You know, if you have investments in a Roth or taxable accounts, traditional IRA, how are they positioned? Do you have more equities, more stocks, more bonds. Do you have annuities? You have real estate. Do you have dividends? Do you have interest? Like your tax situation, your tax return really needs to be analyzed properly before you can make a decision like this in a really educated type of way. It’s not really as simple as just saying, okay, we should just pull from this account, because right, and so this is a level of analysis that I think is required to make a really educated and smart decision, but what we’re finding, because I talked in the beginning of the show, of listening to our clients, the people that come in to visit, when we share with them how we help our clients make these distribution plans, what they tell me is that’s a level of detail that my advisor is simply not talking about. They don’t do any analysis, they just help me grow my money, and maybe they’ve done a great job growing the money, but how are you going to make sure that it’s tax efficient coming out? Your advisor should be giving you advice on this type of thing.
Speaker 2 37:58
Overall planning, folks, you got to hit it all as you head towards your retirement. The opportunity to get on the calendar with Elite Income Advisors is ongoing, and the appointments – again, there are 10 of them – they do go fast. It’s a limited number, and they do fill up. So, call the number 800-653-8404 That’s 800-653-8404 no costs, no obligations. See if you’re on track for your retirement. Come in, talk about your scenario. All right, so next one for you, Prashant, is this: most of their retirement income comes from a pension. They’re fortunate enough to have one. They also have social security, but those payments don’t rise much with inflation. What’s the best way to add inflation protection to a retirement income plan when most of your current sources are fixed. I like to make things as simple as possible. Morgan, we’ve done how many episodes of this podcast? I think we’re probably well over 160 I want to say now we’re closer to almost 200 almost 200 episodes.
Speaker 1 39:01
Okay, so we’ve done this for years and years. Yes, and one thing that I have for years talked about is making your plan simple. Okay, so let’s just take a very simple approach to this question. What is the best way to account for higher prices. What is the solution to higher prices? It’s very simple. It’s higher income. Okay, the more income you have in retirement, the better the outcome is likely to be, because if you had all the income that you could ever need coming in every single month, and it was always enough to pay all the bills, including the higher bills, now that inflation is what it is, you’re still going to be okay. And so, to me, it’s very simple. You got to figure out how to take some of your portfolio and make it produce more income for you, whether that’s through real estate or dividends, or some people get really complex. With it, and start using things like option strategies, whether you’re using an annuity, derivatives, like whatever it is to you, you got to figure out a way to create more income, because more income typically leads to a better outcome, and that gives you a good way to outpace inflation. Now, if you’re not sure how to create income, that’s what we do every single day, that’s why we call the company Elite Income Advisors. When Ozzy and I started this thing, we said we’re going to be different because we’re going to talk about people’s income first, because they’re used to their having their income for 30 or 40 years while they’re working. We don’t want people to lose sight of that when they get to retirement. Retirement is not about how much money you have it’s about how much income you’re able to generate.
Speaker 2 40:44
Tell you, folks, have a plan, be ready for this. You know, create that income, the income you’re going to need in your retirement, and take a lot of the doubt out of it. Have that confidence as you move towards your retirement date, but simply have that, have that plan. All right, so next scenario. Instead of putting a large lump sum into one annuity, they’re wondering if buying smaller annuities over time could be better. So, how can someone decide between a one-time annuity purchase versus say spreading that out in stages? I think it depends. It depends where you place your priorities at that stage of your life. Some people love the idea of doing an annuity,
Speaker 1 41:30
but they don’t like the idea of doing it right now, because they’re still in growth mode, and I totally respect that. I think there’s a tremendous amount of value in investing your money aggressively in the market in the earlier years of your life, and so the further you are away from retirement, maybe the better it is to leave your money in the market, where it has time to compound and grow. That doesn’t mean that you don’t still subscribe to the idea of using an annuity to provide you a paycheck in retirement, it just might mean that it’s not the right time to do it, and so with that being said, your entire situation needs to be evaluated when you make an important decision like this one. How many years do you have before you’re getting ready to retire? How much money do you have? How much money do you need in order to retire comfortably? Like, I think you have to take into account several different factors when making a decision like that. We see everything right. We’ve seen people put a million dollars or $2 million into an annuity to create income. We’ve seen people who don’t have that kind of wealth, but who want to fund it over time, and so they’ll do an annuity this year, and then five years later they’ll do another annuity, and three years after that, they’ll do another annuity, right? So, there’s no right or wrong, it’s just a matter of what fits your situation.
Speaker 2 42:47
Yeah, I think you spotlight kind of what we talk about each week, and everybody needs to have, you know, we keep saying it, you need to have a plan, but that plan needs to be customized to you, because your situation is different from anybody else’s, if you’re retiring as a couple, or if you’re doing this solo, make sure you have a customized retirement plan. All right. Final final scenario, and then we’ll open up those appointments. They have a grandchild with special needs per shot, and they want to make sure their inheritance will not be jeopardized, will not jeopardize the government benefits that they need. What’s the right way to leave money to someone with special needs without causing unintended financial problems? So,
Speaker 1 43:30
look, we have a lot of clients in, in this situation, and I found a common thread between my clients who are caring for special needs children or grandchildren, and that is two things. One, you want to make sure that there are more than enough resources available to take care of that person in the way that you want them to be cared for. They’re your loved ones, you want what’s best for them, and so number one is you got to be able to create enough wealth to pass on so that they’re going to be properly taken care of, if you’re not sure how much wealth is an appropriate amount to leave to make sure that they’re going to be taken care of, that’s where you should start. The second place to look is in protecting benefits, right, so the government is very, very stringent on people qualifying for these types of benefits if they have significant assets, and so what a lot of people will do is they will put the wealth, their wealth, into a trust for the benefit of their special needs child or grandchild, and by using a trust, the trust, if it’s structured appropriately, could shield those assets from being counted against things like social security, disability benefits, and so on, and so forth, so you want to. Make sure that you’re working with a licensed attorney. Now, full disclosure, I am not an attorney. I don’t pretend to play one on the radio or on my podcast, but I’ll tell you what we do work with a bunch of different attorneys that are specialized, highly specialized in this area. If this is something that you are dealing with and you’ve kind of gotten stuck, just give us a call for a complimentary conversation. Doesn’t mean you have to become a client, but we can certainly help, hopefully point you in the right direction. Folks, last opportunity for today’s show, we’ve opened up some spots in the calendar here. The next two weeks, it’s 800-653-8404 Have your calendar in front of you when you make that phone call, 800-653-8404 800-653-8404 Pick a time slot here in the next two weeks. Schedule, have that conversation with our team of retirement fiduciaries here at Elite Income Advisors. Let’s create that written plan for you. Like I said, if you’re booking out beyond two weeks, we might have to put you on our priority wait list. Our calendar gets pretty full, but give us a call, schedule that appointment. Let’s get you on track for the retirement. You deserve 800-653-8404 or visit Elite Income advisors.com Another edition of Retire Smart Maryland Radio in the books for Prashant Sabapathi. I’m Morgan Patrick. We’ll see on the radio next week, family
Speaker 3 46:30
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 a surrender charge. Withdrawals may be subject to tax penalties and income taxes. Persons selling annuities and other insurance products receive compensation for these transactions. Products are subject to fees and additional expenses. Any comments regarding safe and secure investments and guaranteed income streams refer only to the fixed insurance products. They do not refer in any way to securities or investment advisory products. Information presented on this program is believed to be factual and up to date, but we do not guarantee its accuracy, and it should not be regarded as complete analysis of the subjects discussed. Discussion should not be construed as an offer to buy or sell, or a solicitation of an offer to buy or sell the investments mentioned, professional advisors should be consulted before implementing any of the strategies discussed. Investments involve varying degrees of risk, and there can be no assurance that any specific investment or strategy will be suitable or profitable for a client’s portfolio. Investment advisory services offered through Elite Income Advisors Incorporated, a registered investment advisor located in Ellicott City, Maryland. The firm only conducts business in states and jurisdictions in which they are properly registered or exempt from registration requirements. Registration is not an endorsement of the firm by securities regulators, and does not mean the advisors achieve a specific level of skill or ability. Content should not be viewed as personalized financial advice. Insurance annuity products are sold separately through retirement planning services incorporated. Neither firm is affiliated with or endorsed by the Social Security Administration or the IRS. Social Security, Medicare, pension, and tax rules are subject to change at any time. Insurance and annuity products are sold separately through Retirement Planning Services Incorporated. President Ozer Culhagil, Prashant Sabapathi, and Jonathan DeFeo received commissions for the sale of insurance products as insurance agents for Retirement Planning Services Incorporated. Insurance of an immunity product guarantees are subject to the financial strength and claims payability 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 programs and paid production of Elite Income Advisors.
