Speaker 1 0:02
You retire to relax, but suddenly your schedule’s packed. You’re busier than ever, and you’re wondering, did I just retire into chaos? All of this coming up on Retire Smart Maryland Radio.
Speaker 2 0:15
Welcome in to Retire Smart Maryland Radio with Prashant Sabapathi. Welcome, Andre. Retire Smart Maryland Radio. Your host is John DeFeo. You can find him at Elite Income Advisors, headquartered in Ellicott City, satellite office in Annapolis. And again, Elite Income Advisors, the power behind this program, Prashant Ozzy, the entire team at Elite, again, John there as well. And we are going to be talking all kinds of retirement. Want to remind you, John’s an independent fiduciary. I’m Morgan Patrick. A pleasure to jump on and talk about these topics, but give you an opportunity to get on the calendar with Elite Income Advisors at no cost, no obligation. See if you’re on track for your retirement. Stay tuned, we’ll make those appointments available for you here shortly. But John, as we always do, as we start the show off. How was the week?
Speaker 1 1:02
Week’s been great, you know. It’s, it’s been a pretty busy week. As we enter the fall months, we have a lot of folks that, that want to come in and talk through, you know, the end of the year strategy for tax planning. You know, a lot of folks will, you know, plan their retirement for the end of the fiscal year. So, you know we’re helping people gear up for that transition into retirement at the beginning of next year. So it’s been a very busy, busy office, and you know, not just that, but we have a lot of new people coming in from a lot of the workshops that we do in the community, as people are, you know, listening to what we have to say and, you know, seeking assistance with their financial plans. So it’s been a really busy week. It’s been a great week. Looking forward to next week as well. Honestly,
Speaker 2 1:45
well, I tell you, it’s always entertaining and educational to talk about retirement planning and being prepared, and a lot of people feel like, you know, look, you save your entire working life and you’ve got this nice portfolio, and hopefully you’re planning with that portfolio, working with a professional, and you, you get to retirement, and it’s supposed to be calm, serene, enjoy it, right, that’s what you want, but a lot of people find out, guess what, there’s chaos, so for decades you know you’ve dreamed about, you know, sitting in the hammock, reading your favorite book, but all of a sudden, here’s a surprising truth. The first few months of retirement can feel absolutely positively overwhelming. Think about it: doctor’s appointments, paperwork, travel plans, because you’re you’re starting your go-go years, and then you’re catching up with everyone you’d never had time for before, because of work. So, the first year of retirement is like, wow, it is a life reset. It can be very, very exciting, but it can also come with a lot of surprises. So today we’re going to talk about how to mentally, emotionally, and financially get through this wild first year and kind of set the tone for what’s going to be the rest of your life. It’s your retirement, so John, let’s just start with this. Why does retirement often feel busier, not slower, in those first few months?
Speaker 1 3:07
Yeah, we hear this all the time, right? And I think one of the number one reasons is you’ve spent 3040, years working, potentially putting off projects or things that you’ve wanted to do, because you just haven’t had the time, right? And you enter retirement, number one, a lot of people want to ensure that they’re staying busy, they’re terrified of not having a purpose or not having some sort of activity to keep them busy, keep their mind and body sharp, so they enter into retirement with a whole list of objectives to ensure that they’re not going to be bored, right, but also, again, you have time that you’ve never had before, so maybe there are projects that you’re working on now. We have a lot of clients that are leaving Maryland because of the tax rates and retiring in other states, so a lot of them are getting their houses fixed up and ready to sell to move down to those locations. So there’s a lot to do those first couple of months of retirement. I’d even argue the first year or two of retirement can be a bit overwhelming, but at the end of the day, it’s all rewarding. I mean, you’re, you’ve, you’ve worked 30 to 40 years to get to this point to be able to do what you want to do, you know, and you might be a little busier in this first couple of months. I mean, I hear from people all the time, I’m busier in retirement than I was when I was working, right? So, not a bad problem to have, though. I mean, staying busy is important in retiring.
Speaker 2 4:22
Yeah, we talk about planning aspect, we talk about numbers quite a bit, but the emotional side of retirement and making that shift, it’s huge, and you need to be prepared for it, or as prepared as you possibly could be. I don’t think anybody’s 100% prepared for it, because it is a big, big change. So, here’s the next question, How do you help your clients, John, shift from the doing mindset, so we’re at work, we’re doing, we’re doing, we’re doing, and now all of a sudden it’s the being mindset that they’re shifting to.
Speaker 1 4:49
Yeah, that’s that’s a tough transition, right? You’re your worth throughout your working life has been defined by your productivity at work, and when you get into retirement, you know. Do you gage your worth? We hear that from a lot of people. You know, your value in retirement doesn’t come from your output, it comes from how you live. And I think that’s how we try to position this to our clients. It’s not about what you’re retiring from, it’s about what you’re retiring to. So, although you were doing while you were working, you can still do in retirement, you know, create the goals that you have and the objectives you have, whether it’s traveling, starting a new business, spending time with family, have that be your new why, that be your new do. So, it’s, it is a tough mental hurdle to get over, but as long as you have an agenda of things to do in retirement, you have things to keep you busy, you know, join an organization, a club, you know, find a project or a hobby, you know, most people are able to get over this pretty quickly, but you know, aside from the financial aspect of retirement, there’s a big psychological component that people have a hard time getting over,
Speaker 2 5:56
yeah, and it kind of bleeds into our next question, and I’ll answer it for us, and that is, you know, why is retirement routine more important than most people expect? It’s for what you just said. I mean, you have a routine at work, now all of a sudden you’re not at work, so what’s going to be your routine when you get into retirement? Make sure you have purpose in that category. So, the next one I want to get to, this will be the last one we really have time for in this portion of the program, and again, going over understanding that retirement is it’s a life reset. So, here’s the next one, final one today. What’s decision fatigue? I think a lot of people hear that, and they’re like, I just retired, how can I have decision fatigue? Why does it hit retirees so hard?
Speaker 1 6:38
Well, I think a part of it is what you just talked about, it’s not having a routine, so the retirees that we work with that have a plan in order prior to retirement, they have the routine built out for what they’re going to do, typically don’t experience the decision fatigue because they’ve already implemented a new plan, a new routine, so they know when they’re going to be making these smaller decisions and how they’re going to be making them, it’s the folks that don’t have that plan that end up falling into the decision fatigue predicament, right? Where I don’t know what my next meal is going to be, right? What do I eat? What do I do today? Where should I pull money from this month? Right, what should I do with my day? Without boundaries, even fun can become stressful. So, planning on how you’re going to spend your time in retirement, trying to identify what you’re going to be doing, and honestly working with a financial professional to help with some of these decisions is extremely helpful. Having an objective opinion to let you know a different perspective than your own, that is where we are. I think our value truly comes in with helping our clients.
Speaker 2 7:40
All right. Well, speaking of help, let’s, let’s help some people. We’ve got appointments, they’re complimentary, no obligation. John, kind of walk us through, if they call our number, what’s going to happen.
Speaker 1 7:48
Yeah, well, we’ll have a conversation, have you come into the office. It’s truly just an opportunity to get to know you better, identify your goals, your priorities, determine if we’re even the right fit to help you out with your objectives, and if we are, we’re going to identify where to pull that income from in retirement. We’re going to talk to you about tax implications on the savings that you have. We’re going to help build out an estate plan that warrants an efficient transition of your wealth to whoever that goes to. We’ll talk through health care costs, we’ll talk through the investment strategy, you know, the full gambit of financial planning, and hopefully you know if it ends up being the right fit, we can guide you into your retirement years the same way that we’ve done for over 1000 of our clients.
Speaker 2 8:30
We’ve got 10 appointments available, we call it our top 10. Call this number: 800-653-8404 that’s 800-653-8404 First 10, you’re in this week outside the top 10, you’ll be on a short wait list, and they will get to you in the next couple of weeks. Call now, 800-653-8404 It’s all about your retirement, 800-653-8404 no cost, no obligation. When we return, you plan the trips to Tuscany, but what about trips to the ER? Health care in retirement isn’t just a cost, it is a category into itself. We’ll talk about that next. Welcome back in Retire Smart Maryland radio, you’re tuned to it. Your host is John DeFeo. Elite Income Advisors, where you can find him, the power behind this program, the website, it is a resource. Check it out, Elite Income advisors.com Links to the TV show. Our radio shows are there in podcast form, really good information on planning, background information on the team, and that team includes, of course, Ozzie Prashant. Again, they have an all-star group, and it’s all about helping you get ready for your retirement. I’m Morgan Patrick. Absolute pleasure. Want to remind you, John’s an independent fiduciary. They’re headquartered in Ellicott City Satellite Office in Annapolis. So, here we go. Here’s, here’s a very tough truth. Healthcare, it might be your biggest expense in retirement, and it doesn’t come with a nice little estimate in the old 401 k plan. So, according to Fidelity, and we’ve hit this number a lot, John, 65 year old couple, they’re gonna need between 315 and 400,000 just for health care in retirement. That does not include long term care. So today let’s peel back that curtain, let’s pull it all the way back on Medicare, unexpected costs, and the steps that you can take right now to prep for the stuff you hope never happens. I’d rather be proactive in this category than reactive. So why is Medicare not the free – I’m doing air quotes – free health care. Many retirees think it
Speaker 1 10:43
is well. I think one thing we know in this country, Morgan, is nothing’s free, right? And although Medicare covers a lot for retirees, it doesn’t cover everything, right? Medicare Part A is your hospital insurance, your emergency insurance, you still have a deductible that you have to pay on that, and then your Medicare Part B insurance, which is your more outpatient insurance, that’s your doctor’s visits, your labs, things like that, that’s only a coinsurance program, so it covers 80% of those costs, with you being on the hook for the other 20% and for Medicare Part B, there is a monthly premium, that monthly premium is going to be driven from your income over the last two years, so those premiums can range from $185 a month per person up to almost $700 a month per person, depending on your income, so you know with the 20% that you’re on the hook for, the premiums, the deductible, the copays, as you mentioned, Morgan, this can really add up, especially if you have an event like cancer, like a significant disease that costs a lot of money, right. So there are also supplemental plans, like Medigap plans, that you can purchase, which also cost money to help bridge the gap within that scenario. In fact, in our office we have a Medicare specialist that all of our clients have access to that his job is specifically to help you decide if a supplemental plan makes sense, and what the most cost-efficient one is for you. So, we find it’s a huge cost, and you have to be careful with it, you know. Another thing that is a misconception is that Medicare covers long-term care costs, which is not the case. It covers the first 100 days, but beyond that, you’re on the hook for it. So, although it’s a great program, it covers a lot, it doesn’t cover everything, and having a plan in place to cover those additional expenses is extremely important to build into the plan.
Speaker 2 12:29
Tell you, it’s all about the plan, and again, being ahead of this, so many of you, and we know this, we know the numbers, you’re just sitting on your portfolio, and here comes retirement. How are you going to handle it? How are you going to plan for it? We give you the opportunity to get on the calendar with the elite income advisors and start that conversation, get that ball rolling, stop kicking the can down the road. And again, these appointments that we open up, we’ve got 10 of them, they’re complimentary, there’s no obligation to become a client, and they’re not obligated to take you as a client. This is a total get to know you type meeting call now and secure one of our 10 800-653-8404 again, no cost, no obligation, 800-653-8404 So we’re going to talk about my Aunt Irma. No, no, no, it’s not my Aunt Irma, it’s income related monthly adjustment amount, and what’s the deal with Irma, and how does your income impact the premium?
Speaker 1 13:23
Yes, this is what I was just talking about, with the premiums for Medicare Part B and D being directly tied to your income over the last two years, and that is your income-related monthly adjusted amount. So, for the lowest, you know, the lower-income earners in the country, anybody that’s married filing jointly under, I think it’s like $206,000 a year. Your Medicare Part B premium is going to be about $185 per person. If you go $1 over that, then your Medicare premium increases, and it continues to increase between different thresholds. So, depending on what your income looks like in retirement, your health care costs can actually go up in terms of the premiums that you’re paying, especially if you have large pre-tax retirement plans that you’re not using throughout your retirement, you know, retirement plan, you have all the income you need from your pensions, your social security, your annuities, you’ve let your 401 k or your tsp grow over the years, and you get to the point that you have to take a required minimum distribution, this can significantly throw off your Medicare expenses. A great example of this is a set of clients that we’re working with that were in that exact situation. They had sufficient pensions, social security, they had a rental portfolio, so their income in terms of foundational income covered all their expenses. They didn’t touch their TSP accounts for their entire retirement, they were approaching the age of 73 Between the two of them, they had about $3.5 million between the two of them, and their RMDs that were going to be forced to come out of the account were going to be somewhere around $135,000 between the two of them. What this did was it pushed their income, or it will push their income. Into a threshold with Medicare or Irma premiums that their Medicare premiums are going up $300 a month per person, so the IRS is forcing them to take a distribution out of their retirement plan that they didn’t want to take in the first place, right, paying taxes on it, and that is inherently affecting their Medicare Part B premiums, they’re going from like $185 a person up to almost $500 a person, and you know there’s nothing we can really do about it. So, when we talk about Medicare and medical expenses, you know tax planning, believe it or not, comes into play when it comes to reducing your medical costs in retirement. So, I think what’s important to understand here is that all aspects of your financial plan are somehow tied to each other. It all ties back to something else. It’s not as simple as x, y, and z. There’s a lot that goes into it. So, again, probably going on a bit of a tangent here, but Medicare or Irma charges are a huge concern for our clients. Nobody wants to pay more for Medicare or healthcare in retirement than they have to.
Speaker 2 15:58
Yeah, I like what you said there, because it’s so true. I mean, everything’s connected. We talk about retirement and a plan as almost like being puzzle pieces. Well, think about a puzzle, it’s all connected, it’s all touching, it’s all that big picture, but it’s going to impact other parts of your retirement. Make sure you have a plan, all right. So, this next one, this is like the boogeyman under the bed or in the closet or wherever, when you were a kid, the boogeyman would hide. This next one is the boogeyman, and give us an idea of what this cost is right here in Maryland. The real cost of long term care, and who ends up paying for this.
Speaker 1 16:34
It’s not cheap, I can tell you that. We have this conversation just about every day with our clients in terms of how are we going to afford long-term care if we get to that event, you know, the average cost of a private room in a nursing home is over $100,000 a year, and I would argue that in the Columbia Ellicott City area, in Howard County in general, it’s well over that, I mean, we’ve seen these expenses run 10 to $20,000 a month for the most advanced levels of care, and as I mentioned, you know, Medicare only covers the first 100 days. In order for Medicaid to kick in and cover your long-term care expenses, you have to deplete your assets, you have to go broke and spend all of your money down in order for them to take over. And Medicaid, you know, facilities unfortunately don’t have the same resources that private ones do, so you probably aren’t getting the same level of care. So, having a plan in place for long-term care is imperative. When we plan for retirement, you know, it used to be long-term care policies were the way to go, but those have really fizzled out over the years. They’re extremely expensive, it’s hard to ensure they were underwritten very poorly in the past, so a lot of folks are forced to self-insure these expenses, so making sure you have a portfolio in place to do so is quite important. We plan for all of our clients that way,
Speaker 2 17:51
Ted. It’s important again, we talk about the planning aspect of this, but we are focusing in on health care in this portion of the show, and it can absolutely crush a retirement plan, if you do not plan for this, because we’re talking about just the expense, health care alone, and then you tack on long-term care if you need it, it can really ratchet up the old price tag. So, here’s maybe something that can be done, and that’s how does a health savings account, the HSA, we talk about them quite often, it can really become kind of a retirement superstar.
Speaker 1 18:22
Yeah, I love HSAs. These are fantastic vehicles that they head into retirement with, even to use while you’re in your working years, if you have a family. So, HSAs, they offer a triple tax benefit. It’s a triple threat. Your contributions into the account are tax deductible. The growth on the investments in the HSA, if you have an HSA that allows you to invest, that’s tax free. And then, when you take the money out of the HSA for qualified medical expenses, the distributions are tax free, right? So, a triple tax advantage, it’s a fantastic opportunity. You typically have to have a high deductible health plan, you know, but as long as you’re comfortable with that, I think an HSA is a fantastic strategy to be able to take advantage of that triple threat with the taxes.
Speaker 2 19:07
Want to jump to this last one, John, and again, just talking health care, how expensive it is, the impact it can have on your retirement if you’re not planning for it. Make sure you’re doing that, make sure you’re having those conversations. We’re going to give you an opportunity to get on the calendar with the lead income advisors, and you can do that very thing. Come in and say, “Look, I’ve got some concerns when it comes to health care, long-term care. Take a look at what I’m doing. Are there ways that we can improve upon what we’re currently doing? Or, if you’re just sitting on a portfolio, man, start the planning process. We’ll tell you how to grab one of those appointments here in just a little bit, so should health care costs last thing, should health care costs just be a separate bucket in your retirement plan? We talk buckets all the time, just have a health care bucket.
Speaker 1 19:49
I think it depends on the person, to be honest with you. There are some clients that prefer to bucket their money into different ways for their expenditures and. Um, you know, in depending on the situation, we might agree with that, right? If the assets you have, you know, are limited and you need to focus on health care costs, we might, you know, set up a bucket for that. I would say that where we’ve really done this specifically is if we identify a need in the short term, we know that there’s a, you know, a procedure coming up or something that’s going to cost a lot of money in the next year or two, will typically set aside some money to take that out of the market, ensure it’s not at risk to have that available for that cost coming up. So, I think it depends on the situation. I don’t know that, you know, identifying a specific investment bucket just to use for health care costs is something that we do on a regular basis, except if it’s in an HSA, obviously that’s a different scenario, but we, it’s on a case by case basis in terms of creating that separate bucket for those expenses. It’s
Speaker 2 20:49
important just to have an understanding of what’s coming. If you are on a portfolio, just sitting on a portfolio, and say, you know what, I’ll just start withdrawing when I need to, when I get into retirement. Folks, that is not a plan. You’re not considering the health care side of this. You’re not considering the tax side of this. I mean, it needs to be incorporated into your overall plan. And if you’re sitting on a portfolio, you haven’t even started, and it’s never too late. But certainly, get some professional advice. We’ve got an opportunity for you right now to get on the calendar with the elite income advisors and have these types of conversations. John, kind of walk us through the appointment.
Speaker 1 21:23
Yeah, it’s a conversation, simple conversation on your goals, your priorities, what you want to accomplish. We’ll figure out if we’re the right fit to help you with those goals, and see if it makes sense to put a plan together. Obviously, we’re going to identify what types of healthcare costs you’re going to have. Is there a long-term care event that we’re looking to prepare for? We’re going to identify where you should be taking your income from in retirement. We’re going to ensure that the taxes that you’re paying on those distributions now and when you pass away are minimized. We’re going to help you set up an estate plan that allows for an efficient transition of your wealth to your beneficiaries, help you with any risk management strategy that we need. Again, put together a full holistic financial plan that we meet and adjust on a regular basis. So that’s how our process works.
Speaker 2 22:06
All right, grab an appointment by calling 800-653-8404 We’ve got 10, we call it our top 10. If you get in, you’re in this week. Outside the top 10 short wait list, call now: 800-653-8404 That’s 800 653 6538404 When we return, the market dips, family emergencies, maybe a kid moves home, life throws you a curve ball. How you going to handle it? Talk about it next, you retire Smart Maryland radio, your host is John DeFeo. You can find him at Elite Income Advisors. Again, that’s the power behind this program. They’re headquartered Ellicott City Satellite Office in Annapolis, and they are a growing firm. They are adding talent, and they’ve got a lot of it, Prashant Sabapathi, Ozzie, they’ve gotten together and they want a team to help Maryland get ready for retirement. That’s exactly what they have. I’m Morgan Patrick. A pleasure to jump on with John today. He’s an independent fiduciary, and we talk the retirement topics, but we give you an opportunity to take action on your own behalf. That means you can grab an appointment, they’re complimentary, come in, have that conversation, see if Elite is a good fit for you and you’re a good fit for them, and then you move forward if you want to. 800-653-8404 again, no cost, no obligation, 800-653-8404 So we all plan for the ideal retirement, we’ve got it in our mind, right, but life rarely sticks to that kind of script. So, let’s talk about it. A bear market hits, your adult child gets divorced and needs some help, a spouse gets sick, possibly, or maybe you just wake up one day and realize your dream of retiring on the beach doesn’t feel like home like you thought it would. So, today we’re going to talk about the art of flexibility in retirement. Think about that, the art of flexibility in retirement, how to plan well, pivot quickly if needed, bounce back when life throws the old curve ball. I like this. So, first up, John, why is financial flexibility the most underrated retirement goal,
Speaker 1 24:22
I think, because most people have a hard time with flexibility, right? Especially if you’re in a routine, you’re accustomed to a certain way of things, but being flexible in retirement really is one of the most underrated goals, and it’s because things change constantly throughout our lives, right? The financial plan that we put together today is likely going to look a lot different, you know, six months a year, two years from now, and you know, I think one of the most helpful things is to work with a professional like ourselves who are up to speed with the trends and the changes in the market, the economy, the new legislation that’s passed, you know, we’re in a right now, I mean, that by the time this episode comes out, we could. To be out of it, but we’re in a government shutdown right now. How is that impacting financial plans? How is the tax code now and in the future going to affect the plan? So, you know, being able to adjust and adapt your strategy is extremely important as life changes, whether it’s something we can control or we can’t control. I think building a plan that bends and doesn’t breaks is imperative, and that’s what we seek to do in our office. That’s why we meet with our clients three to four times a year to get updates to their life, to talk through our observations with changes with external factors like the economy, the markets. So it’s imperative to check up and revisit the plan. You know, you go to the doctor for a checkup regularly, you should do the same thing for your financial plan, right? It’s just the same. Keep the financial plan healthy and able to pivot when needed.
Speaker 2 25:47
Yeah, if you’re, if you’re following the set it and forget it, you need to wake up. You need to make sure you’re having these annual reviews, minimum annual review on what’s going on with your portfolio, and hopefully your overall plan. And if you’re just sitting on a portfolio, grab one of our appointments and come in and talk about it. They’re complimentary: 800-653-8404 That’s 800-653-8404 Again, just talking about these curve balls that could be thrown at you. How should you handle a market downturn? You get into retirement, it’s very early, and all of a sudden, boom, the market goes south. How do you handle that job?
Speaker 1 26:24
Well, this is called sequence of returns risk, right? And that is, you can’t control the sequence of the returns you receive on your investments over time. And the first four to five years of retirement are some of the most important years to ensure the sequence of returns you receive is favorable, right? If you enter retirement in your peak spending years, and we have a downturn, it could significantly affect the plan you’re selling at a loss, you’re making it harder for your account to recover to where it should have been. So, we’ve seen this derail retirement plans time and time again. So, if you plan correctly, and the way that we plan for our clients is by using different buckets, right. We have a growth bucket, we have an income bucket, and we have an operational bank bucket. And the idea is we invest our money in the stock market, we grow our assets in the risk bucket for the long term, but we don’t want to have to touch that for income in the short term if we don’t have to, because if we have a downturn in the market, as this scenario would suggest, we don’t want to have to liquidate and lock in losses, so we use a bucket of money that’s more secure, that has, you know, a bit more certainty in providing the income to prevent this type of situation, and that type of strategy can be, you know, a bond bladder, it can be a cash reserve, sometimes we’ll use annuities like fixed indexed annuities that are very low cost that allow you to have protection on your assets with some market linked returns to it, so those are some strategies, but I think ultimately having different buckets of money with different objectives really allows you to have the flexibility to pull from the market when it’s up or pull from a more secure bucket when it’s down, that’s how we do it. And we found that that is the best way to create a concrete, bulletproof financial plan.
Speaker 2 28:08
Yeah, we’re talking about curveballs that can come at you early in retirement, and these things happen every day. Your scenario is going to be different from anybody else’s, but make sure you’re planning for what we like to call the what ifs, and there could be a number of them that you have to go through early on in retirement. Now, if you’ve got questions, if you are sitting on a portfolio, you don’t have a plan, grab one of our appointments. We have 10 of them, they are complimentary, and once we fill our 10 slots, there’s a short wait list, we’ll get to you in the next couple of weeks, but first 10 you’re in this week 800-653-8404 no cost, no obligation, that’s 800-653-8404 Now this next one’s a tough one, John. What happens when your adult child boomerangs back home or needs some kind of financial help? You’re early in retirement, and bingo, this is on your plate.
Speaker 1 29:00
Believe it or not, we hear this a lot, a lot, where a kid leaves the house, they come back, or maybe they’re, you know, they’re a bit slower to launch. I think there’s over 50% of young adults from 18 to 29 are living with their parents. I think the real estate market right now, the way the economy is positioned, the high student loan debt, it’s making it very difficult for the younger generation to get out, purchase their own home, rent, do whatever it is. So, a lot of parents are willing to help them in those earlier years, but what happens when they leave and come back, or if you’re not financially in a position to really help them, that can be tough. There might be some, some difficult conversations you have to have with your kids over that, and the one thing that we want to ensure is that by assisting your kids, whether it be to pay for their college, help with their boarding, pay for their health insurance, whatever the case might be, we’re completely fine with that, as long as it’s not going to derail your own success in retirement. So, it comes down to your goals, your objectives, your priorities. We have clients that say, look, I’ll delay my retirement two to three. More years, just to ensure I can put my kids through school. I don’t have a problem with that. If you’re comfortable working for two to three more years, and that is a priority of yours to make sure your kids are, you know, free of debt, or you want to make sure that they have a good place to live that’s not in your basement, then you’re okay paying their rent, whatever the case is. We’re fine with that, as long as it fits into the plan. So, it’s just a conversation you have to have. Do you have the excess cash flow to fund it? How long is it going to be funded for? And is there a game plan in place? This is the number one suggestion I have. If your kid moves back home, come up with some sort of an agenda of how they’re going to get back out, right? A timeline for applying for jobs, a timeline for getting into school, whatever it is. Come up with some sort of action item, so that, that you can keep them accountable and get them back out, you know, as soon as you can. Well, it
Speaker 2 30:44
goes back to that analogy we’ve used so many times before. When you get on those flights and you’re headed out, they go over the safety procedures, and if the cabin decompresses, the, you know, the mask will come out of the ceiling. What do you do first? You put the mask on first yourself, you’re not helping anybody else, because if you pass out, you’re definitely not helping anybody else. Same thing goes for retirement. If you have an adult child that needs help or is moving back home, make sure your retirement is sound and can handle this. And this is something John just pointed out. You can plan for this. You can put your resources in certain places where, if this happens, you’re prepared for it, but I tell you, doing it blindly can really damage your overall retirement. All right, so this next one, this will be the last one we have time for, and that is, what if your retirement dream, not actually the dream when you get there?
Speaker 1 31:36
This is tough, and we’ve experienced this with clients before, where you, you’ve dreamed of getting to retirement and traveling the world, and you know, starting a small business, and you know, maybe it’s walking dogs or making cookies, whatever it is. You get there, you’re in that life, and you find, wow, this is not what I thought it was. This isn’t fulfilling. I’m not, you know, feeling the way I thought I would feel. You have to re-pivot, you have to reposition and think about what is it that I do want to do, right? Try new things, you know. We have a lot of clients that will retire, stop working, and then go back to work part-time because they just miss it. They enjoyed working. I mean, if you enjoy what you do, then it’s really, you never work a day in your life. And we hear that from people all the time. I just had a client in the office that owns a yarn business, and she loves to knit, and she said, I’ll work until I’m 90 years old, doesn’t bother me, because I enjoy what I do. So, you know, finding that thing is important, but you know, you find that it’s not what you’re hoping for, find something else.
Speaker 2 32:32
Yeah, have a plan, and again, work with professionals and map this out. We’ve got opportunity for you. 10 appointments, John, walk us through it. There are no cost, no obligation.
Speaker 1 32:40
Yeah, it’s a conversation. We’ll come in, we’ll figure out what’s important to you. We’ll talk about your goals and priorities, talk about how we look at financial planning, and figure out if you’re even the right fit to help out with your goals. And if we are, we’ll identify where we’re going to take the income from for retirement to meet your expenses. We’re going to talk through any tax implications that you have on your assets or your beneficiaries ensure an efficient transition of wealth through estate planning. Identify medical costs, long-term care needs. Put that full plan together, and again, meet regularly. Keep it updated. Just as you go to the doctor, we’re going to do a check-up on your financial plan regularly.
Speaker 2 33:16
All right, we’ve got 10 appointments. Call this number: 800-653-8404 It’s complimentary, 800-653-8404 When we return, it’s time for retirement scenarios. We’ll throw him at John, see what he comes up with next. Welcome back in. You’re listening to Retire Smart Maryland Radio, and we have John DeFeo hosting the show this week. Prashant Sabapathi on assignment. You can find them both at Elite Income Advisors. Check out the website, Elite Income advisors.com John’s an independent fiduciary. They’re headquartered in Ellicott City, and folks, they have a satellite office in Annapolis for your convenience. I’m Morgan Patrick. Absolute pleasure to jump on and talk about the importance of just being proactive, being prepared, having that plan for retirement, and we know that so many of you have done such an amazing job accumulating, right, putting everything into those retirement vehicles, your portfolio, but that is not a plan. Now, the opportunity to get on the calendar with the Elite Income Advisors, it’s ongoing during the course of this show. Call our number, secure one of our 10 appointments, 800-653-8404 There’s no cost to it, there’s no obligation. You’re not obligated to become a client. They’re not obligated to take you as a client. This is to see if it’s a good fit. If you got any questions about where you currently sit, call the number and get on it. 800-653-8404 All right, so scenarios, John, first one up, they’re 68 retired, wondering whether to start. Drawing from their IRA or delay withdrawals to let it grow a bit longer. They’ve got about 750k in tax-deferred savings, and they are taking Social Security already. So, the question, what’s the best way to time IRA withdrawals to avoid a big tax hit later?
Speaker 1 35:17
Yeah, so if I guess it depends on whether they need the income from the IRA for expenses or if they were just thinking of, you know, trying to take money out in a lower tax year than what could be in the future, you know. I would say, if you need the income, certainly taking some distributions now is the right thing to do, but if you don’t need the income, I think looking at something like a Roth conversion could be really impactful if they’re looking to reduce the amount of RMDs when they get to 73 or the amount of taxable dollars left to their beneficiaries, so Roth conversions are just where you take that pretax money, you pay taxes on it in the given year, and you roll it into a Roth IRA, where it grows tax free for the future, so you know, I would look at what their existing tax rate is with Social Security and other income sources, you know, identify how much they’re comfortable paying in taxes for the year, and see if that might be an opportunity to do a Roth conversion and save them some taxes down the road, you know, again, if they need the money, then you know, talking about how much to take in each given year is important. We want to be mindful of those Irma charges on Medicare, be mindful of tax rates, where you are today, where we think we’re going to be in the future. So, this would be a pretty extensive conversation on their goals, their priorities, and from there we would certainly be able to make a recommendation.
Speaker 2 36:39
I tell you, it’s all about talking about your own scenario, and you start thinking about all the moving parts to what’s going on with you. I mean, having a plan, not just showing up at retirement with a portfolio and say, you know what, I’m just going to start withdrawing at 4% and hope it goes well. That’s kind of scary, folks. Have a plan. You don’t know what you don’t know. Work with professionals that do this on a daily basis. You can grab one of our complimentary appointments. We have 10 of them each week. You can call at any time: 800-653-8404 Discuss your retirement scenario: 800-653-8404 All right, this next one probably hits home with a lot of people. Monthly budget has jumped by nearly $400 over the past year, just from groceries, utilities getting bumped. They’re worried that inflation might outpace their fixed income. So, here’s the question: How do retirees plan income that keeps up with rising costs?
Speaker 1 37:38
Yeah, we hear this every day, as well. I’m experiencing this myself, with, you know, grocery bills going up, and everything going up, but you know, if you’re seeing your expenses rise year over year, that’s expected. You know, we know that the cost of goods and services increase in the economy over time. Lately, it’s been a bit worse, because of Covid. You know, we dumped a lot of money into the economy to try and get out of that hole, so you know what I would say, it the best way to outpace inflation, or you know create some sort of hedge to the increase of costs, would be to invest in the market and have equity exposure to try and beat that. Right, historically, if you look at the market, you look at the S&P over the last 3040 years, it’s returned eight to 10% on average, not every year it’s going to do that, but over the long term it should provide an increase to your assets to be able to cover those costs. Now, with that being said, we don’t encourage folks to take those distributions directly from an account invested in the market, especially in a year that the market’s down, so having that bucketing approach is extremely important. Having a growth bucket to provide the inflation hedge is important, but also having the bucket that’s more secure, that can deliver the income in the year that you need it, without jeopardizing selling them a loss. So, when we put together a financial plan for our clients, we’re always assuming that the monthly income target that you are seeking is increasing over time, and we’re also increasing the distributions that we’re taking from your retirement accounts year over year to keep up with inflation. So, building that component into the plan is very important. I think it’s a big thing that people miss when they come into their office. They’ll have their own spreadsheet, they’ll show us, “Hey, I’ve mapped this out, I’m in great shape, and we ask, what did you consider inflation in this? I don’t see your expenses increasing over time, and once we do that, the plan looks much different, and we have to go back to the drawing board. So, building that in the plan is imperative. Having investments in the market is super important. Again, some people will come in and are terrified of taking any risks. They have all of the money in the bank, and shortly interest rates are going to be coming down, so you’re not going to be able to get the rate of return on safe money that you need to actually keep up with the pace of inflation. So, if you have questions on whether you have too much cash or whether you’re, you know, taking the appropriate amount of risk to pace inflation, give us a call, you know, come in, talk with us, we’re happy to give you our. Perspective on that.
Speaker 2 40:00
Yeah, I mean, emergency funds are very important, but at the same time, as John just mentioned, you do risk leaving too much on the sidelines when it could be working for you. But if you have a plan, that’s the confidence that we talk about so often. Again, one of our appointments available to you right now, we’ve got 10 of them, 800-653-8404 It’s complimentary, there’s no obligation to become a client. The only catch, if there is one, we only have 10 appointments, so if you get into the top 10 you’re in this week, outside of that, it’ll be a short wait list, and they will get to you in the next couple of weeks. But go ahead and grab one right now: 800-653-8404 and bring your retirement scenario with you, and you guys can talk about it. 800-653-8404 All right, next up, they moved half of their 401 k to cash after a rough market. Very similar topic we just hit, and now they feel absolutely stuck. They’re nervous to reinvest, but also nervous to stay out of the market. So, how do you coach someone through the fear of getting back into a market during retirement,
Speaker 1 41:02
it’s very tough, especially considering that they sold at a loss in their account, and they locked that in, right? You know, if we were working with someone that, that had, you know, the idea to do this, we would certainly have tried to walk them off of the, the ledge there, right? When you sell and the market’s down, you have inherently locked in that loss. It’s only a paper loss until you sell, so that’s number one. You know, want to avoid this at all costs, but in the event that you’ve made that decision, you’ve liquidated when the market was down, and now you’re trying to figure out how to get back in. You know, I would say that’s that’s tough to figure out when to do it. You know, it’s very difficult to time the market, so I think that coming in and talking to a professional is probably the best thing to do. The way that I would coach someone through it is asking, you know, what the alternative would be if they didn’t have any growth on their money over time. Would it be enough to last them the rest of their lives? You know, would they be comfortable, you know, having money that’s not growing, knowing that their expenses are increasing? You know, ask just a lot of questions to understand why they did what they did, what the alternative would be if they didn’t make a change, and then identify what we should do from there. You know, we’ve had people that just, you can’t talk out of that decision, right? They’re going to do it regardless, because they can’t mentally stomach it. Then, unfortunately, those people were not able to help. They’re not the best fit for us, but we’ve been able to get through to a lot of folks that have had this mindset, just simply by talking through the bucketing strategy, taking risk with some of the money, but ensuring that the money you need to live on is safe and secure. I think that’s one of the best ways to do it.
Speaker 2 42:37
We have one final scenario, then we’ll open up those appointments again, they’re complimentary. Here’s the scenario for you, John. They want to leave something to the grandbabies, but they’re not sure if they’re going to have enough left for themselves. Their house is paid off, and they have modest investments. So, the question: How do you balance living comfortably now with the desire to leave a legacy?
Speaker 1 42:58
Yeah, another, another situation that we deal with pretty much on a daily basis. One of the main questions that I ask when it comes to legacy and estate planning is, do you have a goal to leave your beneficiaries a specific amount of money, or it really is whatever is left them is what they get, and there’s no right answer to this. We want to just want to gage what the desire is to leave money to your kids, your grandkids, to charities, and a lot of times we hear, “Hey, look, if there’s something left over, that’s great. I’ve paid for my kids’ college, I’ve paid for their expenses of their lifetime, they’re in great shape, whatever’s left is left. But if you do have a desire to leave a legacy, I think that building that into your plan is important. You figure out what your expenses are, what you’re comfortable to live on, and build that out, and say, is it possible for me to have money left over? I think, in their situation, they have modest investments, they’re living off of them comfortably, you know, maybe they leave the house to the to the grandkids, or to their beneficiaries, right? You know, the house actually gets a step up in basis, so it’s even more of a tax advantage to the beneficiaries and their grandkids, so that could be an option for them, but you know, I think that prioritizing what you want is the most important. If you’re comfortable living a more frugal lifestyle, and you don’t have a high spending level, and that is intentional to make sure your kids or your grandkids have an inheritance, that’s okay if that’s what’s important to you, but there are other people that are the opposite say, look, I just want to make sure I can live comfortably. If I can leave something to them, great. And that’s where we back into the plan and say, this is your spending level, these are your assets, this is the possibility of what you could leave to them. So we talk about that a lot. We also talk about the efficiency of that legacy, right? So if you leave money in a pre-tax account, like an IRA or a 401 k, it’s a very high tax event to your beneficiaries versus living in a Roth account or a non-retirement account. There are tax advantages, so we talk through those strategies as well.
Speaker 2 44:49
Scenarios are in the books now. It’s time to get on the counter with the Elite Income Advisors. 10 appointments. John, walk us through them.
Speaker 1 44:55
Yeah, gonna come in. We’re gonna ask you, what your goals are, right? What’s your legacy goal? What’s. Retirement goal, what’s your income, your spending, and identify if you’re the right fit for our firm. If we’re the right fit to help you with your goals, and if so, we’ll build out that income plan. We will identify any tax advantages that we might be able to find for you. We’ll help you build out the estate plan to ensure an efficient transition of wealth to your legacy, help identify those health care costs, long-term care costs, you know, look at risk management in your investments, all of that put together again in a plan that we revisit on a regular basis to ensure that it’s up to date with the current legislation, the current market and economic conditions, and your lifestyle.
Speaker 2 45:36
Here’s the phone number: 800-653-8404 10 appointments, their complimentary call now, they won’t last long. 800-653-8404 Come in and talk about your scenario. 800-653-8404 Another edition of Retire Smart Maryland Radio in the book. John DeFeo. I’m Morgan Patrick. See on the radio next week, you
Speaker 3 46:05
guarantee 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 in 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 advisor has achieved a specific level of skill or ability. Content should not be viewed as personalized financial advice. Insurance and annuity products are sold separately through Retirement Planning Services Incorporated. Neither firm is affiliated with or endorsed by the Social Security Administration or the IRS. Social Security, Medicare, pension, and tax rules are subject to change at any time. Insurance and annuity products are sold separately through Retirement Planning Services Incorporated. President Ozer Culhagil, Prashant Sabapathi, and Jonathan Defeo receive commissions for the sale of insurance products as insurance agents for Retire Planning Services Incorporated, insurance, and annuity product guarantees are subject to the financial strength and claims paying ability of the issuing insurance company. Morgan Patrick is not a client of or affiliated with Elite Income Advisors, however, he has a financial incentive to promote our services because he was compensated for his work on Retire Smart Maryland. The program is a paid production of Elite Income Advisors,
