Speaker 1 0:00
You coming up on Retire Smart Maryland Radio. Just because you’re on a fixed income in retirement doesn’t mean your expenses are fixed. In fact, some of them might shrink. Let’s explore why your golden years might come with a few financial surprises, some pleasant, some not so much.
Announcer 0:20
Welcome in to Retire Smart Maryland Radio with Prashant Sababathi.
Speaker 2 0:27
Welcome in to Retire Smart Maryland Radio, your host John DeFeo. And you can find John at Elite Income Advisors, the power behind this program. They’re headquartered in Ellicott City, they have a satellite office in Annapolis for your convenience, and again, John is a fiduciary advisor. It’s all about getting you ready for your retirement. Great resource website to check out Elite Income advisors.com that’s Elite Income advisors.com So we’re going to dive in to some fixed income, we’re going to talk about retirement, obviously the importance of having a plan, being proactive as opposed to reactive, but as I always do, John, how was your week?
Speaker 1 1:02
It’s been great. Yeah, so you might have missed me over the past few episodes. My wife actually had a baby a bit earlier than expected. We were blessed with a baby girl, her name’s Maya. So I was out for a couple of weeks, taking care of the family, spending some time with them. So it was really nice to get away for a bit, and have some family time, but also very excited to be back in the office, back in the swing of things. But I honestly think it’s a great example of why you have to be prepared for everything, right? Having a plan, as we say all the time, is imperative. We weren’t, you know, quite ready. She was three weeks early, but you know, we planned for the worst, and everything luckily came out okay, and we’re all great. But again, it’s extremely important to have a plan in place. I think everything that happens in our life is a reminder of that, you know. You know, going a little bit of a tangent there, but yeah, I mean, it’s been great. Good week, happy to be back in the office, getting back in the swing of things, and you
Speaker 2 2:00
know,
Speaker 1 2:00
ready to go.
Speaker 2 2:00
Good week, great week. Congratulations. So happy to hear mom and daughter are doing just fine. And again, congratulations. Thank you. All right, so let’s get into this. When we talk about, you know, living on fixed income, most retirees imagine just tightening up the belt, maybe bracing for some higher bills, but the reality is there’s it’s more nuanced than that, while some costs, like say healthcare, that’s going to rise, we know that others might drop or even disappear entirely. Now think about it, no more commuting, right, fewer work clothes, and maybe even downsizing the home. So today we’re going to dive into some financial ebb and flow of retirement expenses, so you can plan with clarity and confidence. And again, it’s all about having the plan. Now, I do want to state that we are going to give you an opportunity to get on the calendar with Elite Income Advisors, and the appointments we open up today are no cost, no obligation, kind of see where you are with your retirement planning. So, listen, and then when you get the opportunity, grab one of the appointments. All right, so let’s go ahead and dive into this. We want clarity, we want confidence. So, which expenses typically go down in retirement, John? And why do they go down?
Speaker 1 3:11
Yeah, I think it depends on the person, right. But I think a big one, as you mentioned, are commuting costs. You’re not spending as much money on fuel, maybe maintenance on the car is a little bit less frequent, you know. Maybe if you took public transit, you’re not paying for those expenses. Some of those can go down, you know. Professional wardrobe, you know, spending for dry cleaning. I know I spend a good bit of money on dry cleaning on a weekly basis, so that can go down. I would even say, you know, some things like your spending habits for food, right? You know, when you’re working, you might be eating out more, you know, getting lunch out, you know, those types of things. You might not be doing that as much when you’re home. So, those are some of the things that we see typically go down. Another big one would be mortgage payments. We see a lot of people, you know, plan their retirements around when their mortgage is going to be paid off, so those payments can go away, that can reduce expenses, but you know it certainly presents a question, you know, how much of that spending reduction is really going to impact the increase of cost of what you’re going to do in retirement, right? So everybody has a different plan, I think, you know, it just depends on what you’re doing for your job, in terms of what expenses will go down, but those are some of the more common ones.
Speaker 2 4:25
Yeah, I’d kind of like an idea of what your dry cleaning bill is, because to quote the great philosophers from Texas, ZZ Top, everybody’s crazy about a sharp dressed man. So, anyway, I mean, you got, you got your job, and obviously you’re there to help with the planning, so things price wise, some can go up, some can go down. We talked a little bit about some of the reasons why, maybe you’ll see a dip in some of the prices. Now, this next one, I almost know the answer to this one. How do health care costs tend to shift as we age?
Speaker 1 4:57
Yeah, I think said, I think you know the answer to that one. Typically, they’re going to go up right as you get older. There’s more medical conditions that arise. I mean, another issue is that medical expenses increase just due to inflation, a lot higher than other costs. So, you don’t really have the inflationary impact of the increase, but you also just have more medical issues that you have to pay for. You know, longevity is increased in our population, people are living much longer than they ever used to, but it also means that you have to pay to extend that life and have a good quality of life. So, a lot of times those are going up, so we try to budget that into a retirement plan to ensure that that’s incorporated. You know, sometimes your health care premiums might go down, sometimes it might go up, right? If you’re on Medicare Part B, you know you’re not having an employer plan extend into your retirement. You have to pay those premiums out of pocket, depending on what your income is, you know, prescriptions, you know, out of pocket expenses, even, you know, long term care expenses. All of these things come into play, can really drive the cost up. I think, according to a Fidelity survey, the average retired couple may need over $315,000 to cover health care expenses throughout their retirement, which is a big chunk of change, right? So, you want to make sure you have these expenses built into your income plan, you’re not caught off guard if something like this happen, so I think it’s extremely important to build that into the plan. Yeah, you
Speaker 2 6:24
bring up an excellent point, and that Fidelity studies a few years old, so that number may be north of 315 and that doesn’t include long-term care. So think, think about that in the Maryland, Washington, D.C. area, what that’s going to look like if you have to go into assisted living. I mean, it’s expensive, folks, so you need to make sure you’re planning for it. So, again, talking about you’re on a fixed income, some prices for you are going to go down, some are going to go up. In healthcare, obviously, that is going to be a big one that could really, really go sky high. So, lifestyle changes, can that reduce maybe that financial footprint? It
Speaker 1 7:00
certainly can. I mean, I’d like anything. You change your spending habits, you change your lifestyle habits, you can certainly save money. You know, we see a lot of people looking to relocate to lower-cost areas. You know, Maryland is a higher income tax state. It’s not the most retirement-friendly state. So, we see a lot of people going south, going to other states that have more preferential state taxes for retirees, you know, we see some clients switch over to more of a minimalistic mindset. We try to avoid that if we can. I mean, we want people to enjoy their retirement, we don’t want them to stop working and then have to live super frugally, so we don’t, you know, like that. If we can make it work, we want to be able to have you spend, you know, if not the same amount of money, more, but some people will, you know, kind of cut some, some things out and be more minimalistic. All right,
Speaker 2 7:45
we’ve got a limited number of appointments this week. They are cost-free, no obligation. John, kind of walk us through real quickly what’s going to happen.
Speaker 1 7:53
Yeah, you come in, we’re going to do a diagnosis of what your goals are, right? We’re going to dive into what you’re looking to accomplish, we’re going to build out a roadmap for your lifetime income. We’re going to talk about what taxes could be associated with your, your income streams, right between your different investments. We’re going to dive into your portfolio and do an x-ray of where you stand with your investments, see if there’s any adjustments that could potentially be made, and again address all of those facets of the financial plan, right. So all of that’s included is completely complimentary, just by coming into the office.
Speaker 2 8:26
All right, here’s the phone number. Grab one of these appointments now, again, no obligation. 800-653-8404 that’s 800-653-8404 They’re not going to try to sell you anything, they’re going to talk about your retirement, your goals, what you want to get out of it. 800-653-8404 And you’re not agreeing to become a client, they’re not agreeing to take you as a client. This is a test drive. Call the number 800-653-8404 That’ll get you in touch with elite income advisors and grab you one of those complimentary appointments. 800-653-8404 He wants to golf, she wants to hit the beach. Now he wants the beach, and she wants to visit the kids. Next stop. Well, he says Mexico. She says Europe. Sound familiar? We’re going to talk about the spouses and getting along in retirement, you Welcome back into Retire Smart Maryland Radio. Your host, John DeFeo. You can find him at Elite Income Advisors. He’s an independent fiduciary. It’s all about getting you ready for your retirement. They’re headquartered in Ellicott City. They have a satellite office in Annapolis for your convenience. I’m Morgan Patrick. My pleasure to go back and forth with the team at Elite Income Advisors, and if you learn anything from this program, it’s about planning, it’s about being proactive as opposed to reactive, and just sitting on a portfolio, folks, that is not a retirement plan. We’re going to give you an opportunity to get off procrastination’s couch, start thinking about the planning process with a comment. Complimentary appointment, we’ll tell you about those as we move through this portion of the show. So, retirement dreams, they don’t always line up, and you know that’s okay. But before you sit down with an advisor, it’s crucial to have a real conversation with your life partner, right person you’re retiring with. And we thought we’d go over a few things, and here are a few items that you can talk about, and yes, this can even be fun, right? And I think John’s got some examples for us, but the first one, you’re heading towards retirement, you need to talk it out. This is a key conversation for couples as you are nearing retirement, because shockingly a lot of couples don’t have this conversation, and all of a sudden it’s like, wow, they’re on two different planets.
Speaker 1 10:49
Yeah, yeah, we do see this a lot. I mean, as you mentioned, I had an example recently, we met with a set of clients that, you know, the wife was in love with the home that they lived in, it was her dream home, she spent a lot of time and effort, you know, doing the landscaping, the gardening. Doesn’t ever want to move, where the spouse said, “No, I’m, we’re out of here, I want to move to Upstate Upstate New York, I want to, you know, live in a cabin and snowmobile and be a mountain guy. And, and she said, “Well, no, if we sell that house, we’re going down south, and we’re going to live, you know, at the beach, and, you know, it was, it was a bit, you know, not super contentious, but it was fun, you know. They were going back and forth, talking about the differences, and it was, it was pretty apparent they had had this conversation before. It wasn’t the first time at our office they talked about it, but it was interesting to hear that perspective. But again, I think it’s important because they had had that conversation prior to the meeting. It wasn’t awkward, it wasn’t that contentious feeling that you might have with a bickering couple, but that can happen. We have had that happen where people haven’t been on the same page. So, I think it’s important to have these conversations in terms of where you’d like to be. Do you want to move closer to the kids, the grandkids? Do you want to stay where you are? Do you want to look at a retirement community? There’s so many different options out there. I do think that it’s important to consider.
Speaker 2 12:01
All right, so couples heading towards retirement, you need to have, you know, a sit down and talk about a certain number of things. So, the first one is, you know, stay or go. I mean, are you going to stay where you are? Are you going to relocate? Are you going to have a second home? Are you going to move closer to the grandbabies? That, I mean, that’s a conversation to be had if you’re retiring as a couple. The next one, you know, as you retire, you know the paycheck stopped, John. So this next one, budget and spending styles, you know, if you have your own paycheck, if both are working in this this marriage and they’ve got their own accounts, they probably have a joint account, but now the spending style really comes into play because they are both retiring together.
Speaker 1 12:44
You’re absolutely right, and we see this again with clients that come in, where one maybe is a much higher spender than the other. You can tell when they’re talking who is the spender and who is the saver, just based on the looks and all. In fact, that same couple we were just working with the gentleman, had mentioned that his whole life that he knew his wife, he loved her, you know, and you know was, you know, I guess one of the things he loved most about her was that she was pretty frugal, she didn’t spend a whole lot of money, and he said as soon as they retired the faucet turned on, and now she’s spending all sorts of money, and you know, it’s just, it’s funny to hear these things, but anyway, you have to discuss what kind of person you are, when it comes to spending, you know, you might have a different budget in retirement than you did when you’re working, as you mentioned, Morgan. You know, both of you have your own incomes, you both feel like you have a sense of entitlement to that money because you’re both earning it. And when one of you, or both of you, retires, maybe you know one of you has a larger retirement account than the other, and that’s the income that you’re living off of, or maybe one of you have a pension and the other one doesn’t, and there’s different streams of income coming in. You have to be communicated about how that money is going to be coming out. You have to be on the same page. You have to create a plan, right at the end of the day, create a financial plan that feels fair and flexible to the both of you, and ensure that you’re on the same page. You don’t want to have a contentious retirement based on that.
Speaker 2 14:02
Yeah, we’ve talked about it in the past on this program, that you know it’s almost like a retirement GPS, and you know you’re following it. It’s a, it’s a plan. Same thing goes for couples that are retiring, you’re just doing it together. So, make sure you’ve got your plan in place. So, again, think about it. These are just conversation points for couples, so we’re talking directly to couples that are very close to retirement. Say you’re 10 years out and you’re thinking about retirement, so you know questions you need to be asking yourself. It’s not pressing right now that you have to have answers to these questions, but it is a good conversation point to at least start having these. So, are you going to stay where you are, or are you going to go somewhere? Are you going to have that second home? Are you going to totally move, maybe downsize, and go somewhere else? And then, what are your spending styles right now? Guess what, when you get into retirement, every day is a Saturday, and the spending styles, well, they’re probably going to bump up a little bit, so you got to be prepared for that. You got to plan for that. We want to. Remind you that we do this show to help so many of you out there, as sitting on portfolios, and you’ve done an amazing job saving your entire working life, and now all of a sudden there’s retirement, it’s on the horizon, you’re 10 years out, you’re five years out. What are you going to do? There’s your portfolio, but no plan. Opportunity to get on the calendar with Elite Income Advisors is ongoing during the course of this show. We have a limited number of appointments. We’ve carved them out for our radio listeners. This is a busy, busy office, Ellicott City, and, of course, satellite in Annapolis. Call this number, no obligation appointment available for you right now: 800-653-8404 That’s 800-653-8404 All right, so back to the conversation. Couples retiring conversation points you really need to go over. Should we stay or should we go, or maybe a little bit of both? Maybe you just get a second home, maybe you downsize altogether, maybe you totally relocate near some of the grandbabies. The budget and spending styles, you need to have that conversation, because paychecks are going to stop, you’re on a fixed income, you’re in retirement, so lifestyle and travel goals. Now, one of the fun conversations to have, John, and I’m sure you’ve had many of these, is just what do you want to do when you actually retire, and we’re talking about probably the go-go years, 510, years, the first 510, years of retirement, because that’s when you’re going to go, go, so being on the same page as far as what kind of lifestyle you want and where you want to be able to travel to.
Speaker 1 16:29
Right, I think this is this is probably my favorite conversation to have with clients, and it is one of the first questions we’re going to ask you when you walk in our door, is what does a fulfilling retirement look like to you? What are your hobbies? What are your goals? What do you want to be doing in those golden years? Right, you’re retiring from – we like to say that you’re retiring to something rather than from something, right? So, what are you retiring to? Where do you want to go? What do you want to be doing it now? Who do you want to be doing it with? So, identifying what those goals are early on is paramount to creating that financial plan, because you have to figure out what it’s going to cost you right. If you don’t know what you want to do, you’re not going to know what type of income you’re going to need. And at the end of the day, retirement success is all about the income that you can produce to live that fulfilling lifestyle, right. So big, big conversation, exciting one to have.
Speaker 2 17:19
All right, couples headed towards retirement, things you need to be talking about. You know where you’re going to be when you retire. Are you going to stay where you are? Are you going to move? What’s the budget spending plan we like to call it on this show? Again, what’s your spending plan? What are your styles, and how much are you spending? Make sure you’re aware, lifestyle and travel goals, and a lot of times, John, we have different age. I would say most of the time there’s going to be a little bit of an age gap. It might not be a lot, but it might be. It might be 10 years, it might be 15 years. So, how you claim social security as you’re planning for retirement, how it fits into your overall plan? Another big one.
Speaker 1 17:58
Absolutely, yeah. And we do social security planning with every single client that comes into our office, I think that it’s one of the most important decisions that you make. Number one, because it’s irreversible. Number two, because there’s a lot of money that can either be left on the table or completely lost if you don’t look at this strategy correctly, right. So, sometimes we’ll look at staggering the benefits, having one person wait a little bit longer to take it, where the other, the other person takes it a bit earlier to have the benefit of some income in the short term, as well as a higher benefit down the road. There are things like survivors benefits, spousal benefits that we have to consider when we’re making these types of plans. You know, you want to look at longevity, as you’d mentioned, there’s age gaps, and when we have a set of clients that there’s a 20 year age gap within them, so that planning comes is important at the end of the day. Social Security is a part of your foundational income in that lifetime income plan, so ensuring that you’re getting the most out of it is imperative. I mean, you’ve paid into this your whole life, you might as well maximize that benefit that you’re receiving at the end of the day, all
Speaker 2 19:02
right. Next, is it’s an easy transition. We just had the conversation about social security claiming strategies, and what if there’s an age gap with the couple, and now healthcare and long-term care plans. This is something that’s paramount. A lot of people are, you know, you head off into retirement, and for the most part, you’re healthy, you feel good at your go-go years, and you’re ready to go, but you need to plan for when you start to slow down, and now here comes your age gap again, so your older member of this couple is possibly going to need it, and then you also need to consider taking care of the younger spouse as you age and possibly pass. I mean, this is another conversation. It’s a tough one to have.
Speaker 1 19:47
It is a very tough one, you know, probably one of the least favorites of ours and most people. But you know, if you’re not on the same page about your plans for health care and long term care, it can be a. Huge mess, right? You know, Medicare does not cover everything. You know, you have to plan for long-term care expenses. I mean, you know, we see on average, you know, around eight to $12,000 a month for good long-term care in a facility. I mean, I’ve seen it up to $20,000 a month in this area, in the Columbia, Maryland area. So, you have to have a plan in place for that to ensure that the other partner is not going to go broke trying to fund that level of care, whether that be through a long-term care policy, whether it be through self-funding and saving, you know, there’s a lot of opportunities out there, but being on the same page with that’s important. You want to make sure that your health care plans are aligned, that you do the best thing that you can with your Medicare, and maybe look at some supplemental plans, some Medigap plans to fill those gaps. So, there’s a lot that can be done, you know. We specialize that in that in our office. We actually have a licensed Medicare and Social Security specialist to help navigate the different types of plans, look at your current setup, and identify if there’s any opportunities to improve the coverage for maybe a cheaper price, so we do that as well.
Speaker 2 21:05
I’ll tell you, couples, if you’re listening right now, it’s an opportunity for you to come in and sit down and start the conversation about where you are, and make sure you’re on the same page as a couple that’s headed towards retirement. We’ve got the appointments. John, walk us through how they’re going to go.
Speaker 1 21:19
Yeah, you’re going to come in. We’re going to ask you what you’re looking to accomplish. Again, determine what your retirement looks like. We’re going to map out the cost of that retirement. We’re going to map out how we’re going to fund that retirement in a lifetime income plan. We’re going to talk about the tax implications. We’re going to talk about your estate plans. We’re going to talk through risk management and asset management. We’re going to again X-ray your current plan, if you have one, and come up with a good recommendation on how you can live the most fulfilling retirement possible.
Speaker 2 21:50
Tell you, it’s all about having a plan and being ready. If you’re a couple out there, maybe you’re on the same page, maybe you’re not, maybe you’re sitting on portfolios saying, you know what, we’re going to do that later, next month, next year, you can get to it right now. You can be proactive. Call this number, a no obligation complimentary appointment: 800-653-8404 Limited number, busy office. We carved these out for our radio listeners. Call now: 800-653-8404 That’s 800-653-8404 All right, when we get back, we’re going to go back in time for the real dirt on some serious financial screw ups. Don’t miss six legendary money mistakes made by some major historical figures. Stay right there, you John, welcome back into Retire Smart Maryland Radio. Your host is John DeFeo. You can find him at Elite Income Advisors, independent fiduciary. Elite is headquartered in Ellicott City, they have a satellite office in Annapolis, and they have a website, is a wonderful resource for you. Check it out, Elite Income advisors.com links to the TV show, as well as radio shows and podcast form, but just really good information, background information on the team, and again, Ozzie Prashant, and of course, John, and again, the team is always growing to serve the Maryland, Washington, D.C. area. Again, folks, we’re here to help you with your retirement. I’m Morgan Patrick. It’s my pleasure to sit here and go back and forth with the team on the importance of having a plan. But now we’re going to go not just back and forth, we’re going to go back, we’re going to go way back, we’re going to go back in history, and there are some major money mistakes, so put on your scholarly robe and your cap, all right, John, and maybe your monocle, you know, make you make you look a little bit smarter. You’re very smart, by the way. So, we’re going to go over some of these truly tragic financial failures, and these could be catastrophes when you think about it, so Marcus Crassus, this is circa 115 that’s 115 to 53 153 BC, so here we go, chased one last payday, what was his big mistake, why did he fail, and what’s the lesson we can learn?
Speaker 1 24:22
Well, so he was one of the richest men in Roman history. Just starting out to say that, I mean, we’re talking serious wealth, like enough to retire 10 times over, a stupid amount of money. And his critical mistake was instead of enjoying life and the comfort and security of his home, his palaces, he just couldn’t resist one more shot at glory, and he launched a military campaign against Parthia in search of more wealth, more status. So, in doing so, he was actually killed in battle, right? So, that backfired spectacularly, and not only did he pass away and not get to enjoy the fruits of his labor, but. It was a tragic and deeply embarrassing for Rome itself, right. So I think that the takeaway from this is just like Crassus, some people heading into retirement feel tempted to take one last big risk, right, try to just earn that last extra dollars on their portfolio, chasing that final win in the market, real estate, maybe even starting a last-minute business, but sometimes that gamble doesn’t pay off, right? I mean, a good example of this, we have a client that had $2 million in their 401 k at the beginning of this year. If they’re planning on retiring at the end of this year, they really want to get it to two point, I think, was like $2.2 million and they’re keeping it primarily in equities, I mean, you know, 90% equities a year before retirement, and we’ve tried to talk him down, explain the risks, and that he’s gung ho, and trying to earn that extra money. What happens if we see a 20% decline this year? Right, that might extend his retirement date. So, there’s things you have to be careful of when you’re chasing that extra win. Sometimes it’s better to take the wins that you have and go about your day.
Speaker 2 26:00
Well, we’ve talked about this before on the show. The market has been up for so many years, it’s almost like we’re oblivious to it. We know it’s gonna, we think it’s gonna be there, and it’s gonna, if it does take a dip, which we know it’s going to do. If you’re in the wrong spot, it can really hurt you. You got to remember that. Again, this is your retirement, and the fear of missing out could really hurt your retirement nest egg. So, make sure you’re planning. Don’t be Marcus Crassus. All right, so here is the next one. This is Charles the Fifth, the Holy Roman Emperor, 1500 to 1558 retired to a monastery, totally unprepared. So, give us the mistake, why he failed, and then what’s the lesson.
Speaker 1 26:49
Well, I think with Charles’ status, you know, he was a leader for decades, you know, he was a very high status figure, had a lot of power, and when he retired to that monastery in Spain. The shift was a bit too extreme for him, you know. He went from ruling armies and influencing world affairs to living a quiet life of solitude, and he wasn’t ready for it, right? So he battled boredom, he was isolated, he was depressed, and at the end of the day, he was not ready for that transition. So I think the lesson here is that retirement planning is not just about the numbers, right? It’s not enough to have just a well-funded portfolio, but you need to have a plan on how you’re going to spend your time, how you’re going to spend your money. You need to stay connected, you need to stay fulfilled, you need to have that circle of friends and things to do, right. So that’s why we see a lot of people that work part-time jobs, maybe you’re going to go work the greens at the golf course, or you know, hang out at Home Depot and help people with their projects. I mean, everybody has something different, right? So I think it’s important to have that plan. Don’t go into it, you know, without, without any sort of plan, with uncertainty, and you won’t have that empty feeling of, you know, not being important, not having that status anymore. Well,
Speaker 2 28:04
you said it earlier in the program, it needs to be more about what you’re retiring to, as opposed to what you’re retiring from. So, have an idea of what you want, your purpose when you get to retirement. Yes, having enough money to be able to enjoy your retirement, take those trips, you know, spoil the grandbabies a little bit, but you really need to think about what’s going on between your ears, the emotional side of retirement, and be prepared for it. And if you’re retiring as a couple, you know, you need to do this together. All right, so I want to jump to Napoleon Bonaparte. All right, so 1769 to 1821 retired, and then tried for a comeback. So, the mistake, why it failed, and give us the lesson. John,
Speaker 1 28:50
yeah, so Napoleon, after being exiled from Elba, and in 1814 with a pension, a palace, he escaped, and he returned to power for one last, but unfortunately failed bid, the 100 days, and it failed because he was defeated at Waterloo. Right, he was exiled again, this time permanently, and he was exiled to a remote island, where he effectively died. Right, so I think the modern lesson here is to know when to exit gracefully, right. The wrong kind of second act can erase the legacy of the first, so again, knowing what you’re doing, how you’re going to do it, I think is extremely important, especially if you want to try and come back, you know, don’t try and come back to the same status that you were previously, maybe do something a little bit less, you know, if you want to work again, if you want to volunteer, you’re probably not going to be able to go back at the same level that you were when you left in the first place.
Speaker 2 29:43
We are going back in time and learning from some mistakes that were made in history. We’ve talked about Marcus Crassus, we’ve talked about Charles the Fifth, and Napoleon Bonaparte. The opportunity to, you know, learn from this kind of history, but also apply it to what. Is going to be your future, your retirement. We have complimentary appointments with elite income advisors. All you got to do is call 800-653-8404 talk about where you are in the planning process, and a lot of you are just sitting on portfolios, and there are probably just as many of you that are halfway down this retirement path, but you’re a little bit frustrated. It’s okay to get a second opinion. Call the number and grab 1-800-653-8404: Again, it’s complimentary. It’s an opportunity for you to see kind of where you are, and also talk about where you’d like to be as far as your retirement planning is concerned. So, we’re going to go back in history, 1756 to 1791 Wolfgang Amadeus Mozart, no financial plan, no estate, brilliant, obviously a genius when it comes to music, but what’s the mistake, why it failed, and give us the lesson.
Speaker 1 30:56
As you mentioned, Mozart was obviously a musical prodigy, I don’t think anybody doesn’t know the name Mozart in some capacity, you know, composing different masterpieces, you know, before most kids can even read, right? So he earned a lot of money, he lived in the spotlight, he was beloved across Europe, but despite his talent, his earnings, he lived far beyond his means, right? He lavished spending, he didn’t save, he didn’t have an estate plan, which left him very financially vulnerable, right. So, when he died with note, with a lot of debts and no will, his widow had to rely on charity and public support to continue on, right. There was no succession plan for his family. So, I think the, you know, the modern lesson here is even the most brilliant people can make big mistakes when it comes to planning, right? You know, you, you need to ensure that you have a plan in place, even with all the money in the world. If you don’t have a plan for how to take care of your, your legacy, your kids, your family, your wife, whoever it is, it can lead to a lot of problems, and that’s what we saw with most hardened forces. And look,
Speaker 2 31:57
we understand there are a lot of really, really smart people in our area, but you don’t do retirement every single day. John does, Prashant does, Ozzy does. It’s all about having that plan in place. Work with professionals, work with a fiduciary firm, make sure you’re ready to go. We’ve got appointments. John, walk us through how these are going to transpire once they come in.
Speaker 1 32:21
Yeah, so we’re going to identify what your retirement goals are. We’re going to figure out what that’s going to cost you and build out a spending plan. We’re going to identify how to fund that spending plan, right? How to bring the money in, identify what your foundational income sources will be, how to supplement those foundational income sources. We’re going to talk through the tax implications. We’re going to talk through your risk profile. We’re going to go through your investment portfolio to see if there’s any ways to adjust that. Really, look at the whole holistic financial plan to see how we can potentially improve upon or build one to begin with.
Speaker 2 32:55
All right, we’ve got a limited number of appointments available for our radio listeners. They are no cost, no obligation. Here’s the number to call to grab 1-800-653-8404: That’s 800-653-8404 Don’t hesitate, jump on the phone: 800-653-8404 When we return on Retiring Smart Maryland Radio, it’s time for scenarios all around the country. We’ll throw him at John, see what he comes up with. We are back on Retire Smart Maryland Radio, hosted by John DeFeo. You can find John at Elite Income Advisors, the power behind this program. They’re headquartered in Ellicott City, and they have a satellite office in Annapolis for your convenience. John’s an independent fiduciary. It’s all about getting you ready for your retirement, helping hundreds of their clients do that, and this is about being proactive, not reactive. Make sure you’re ready for your retirement. I’m Morgan Patrick. It’s my pleasure again to go back and forth with the team at Elite Income Advisors. And we are now at the scenario portion of the show. We pull these from all over the country, and we, we present them to our advisors, and we see what they’re going to come up with. Now, you may hear a scenario that’s similar to something you’re going through, but remember this: it’s not exactly what you’re going through. You need to have a customized plan. You need to have a one on one conversation about your retirement. We’ll give you that opportunity, and again, a complimentary appointment. We’ll tell you about that as we move through this segment. All right, so first scenario, John, is this: they’re about to retire 450,000 in a traditional IRA, 150,000 in a Roth. They’ve got a small pension that covers just the basics. They’re not sure which accounts to draw from first to make their money last. What’s the smartest way to sequence their withdrawals to retirement? In retirement, I should say, to help many. Taxes and also stretch the savings.
Speaker 1 35:03
Yeah, this is a good one. I think that unfortunately there’s no cut and dry answer to this. I think it depends on a couple of things. Number one, the tax environment that we’re currently in, and that we expect in the future. So, as of now, we’re in the third most favorable marginal income tax environment in history, the new big beautiful bill that just has to get through the Senate now is going to extend those tax cuts in perpetuity, so we expect those tax rates to be a bit lower in the short term, but we talk on the show all the time about the expectation over the long term for tax rates to go up to try and fund this federal deficit, so now as it currently stands, we would probably suggest taking some of that pretax traditional IRA money, paying taxes at a lower rate, allowing the Roth money to grow tax free for down the road, so that maybe in 1015, 20 years, if tax rates are higher, they now have a larger pot of money that has no tax implications that they can pull from, so that’s just one strategy. Again, there could be more at play in this situation that might warrant a distribution from the Roth instead of the traditional IRA. So, it really all depends on the small details, but in a nutshell, I think that would be how we’re currently viewing that, based on the existing tax structure that we’re in.
Speaker 2 36:20
Yeah, I think it’s smart to take all these scenarios with a grain of salt, and as John pointed out, I mean, your situation, it could be similar, but it’s not exact, and your puzzle pieces are going to be different from anybody else’s, and how it all fits together, man, that’s retirement planning. So, the opportunity to get on the counter with the Elite Income Advisors is coming up, so make sure you grab those appointments when we make them available, next scenario, both are 63 they’re healthy, one spouse eligible for significantly higher benefit. They’re wondering if it makes sense for one to claim early while the other delays. Obviously, we are hitting on social security here. How can a couple coordinate their social security benefits to maximize lifetime income and to manage the risk if one spouse outlives the other.
Speaker 1 37:06
This is a great one. This is a conversation we have every day. In fact, I’m doing a seminar tonight on social security strategy and optimization. I think that it really comes down to a couple of things. Number one, longevity, right? If both these, it says that they’re healthy now, but if they have longevity in their families, if they expect to live a long time, I think it does make sense for one of them to delay. Really, depends on the cash flow situation, it depends on the size of their portfolio, their expenses. So, a lot goes in to coordinating this recommendation, but if we’re just looking at this at a high level, you know, I would say a lot of times it does make sense to stagger it, right, and have the spouse with the higher benefit to delay it, allow that benefit to grow and bake in the system, you know, increase the amount that you’re going to receive, where the spouse with a lower benefit takes a little bit earlier, and the thought behind this is if you know one of those spouses starts collecting income now. It takes some pressure off the portfolio in terms of what you have to distribute, allows the other benefit to grow and become higher, so that when one of the spouses passes away, there’s a higher benefit that’s left to that surviving spouse. There is what’s called the survivor’s benefit with Social Security, which just simply means that when one of the spouses passes away, the higher benefit remains, and the lower benefit goes away, right? So, if you allow one of those benefits to delay and grow, it’s a higher amount of money that the widow, the surviving spouse, is going to receive down the road. So, again, a lot that goes into this, but at a high level, it could be a good strategy in this situation.
Speaker 2 38:38
So, the question you need to ask yourself, you’re out there and you’re listening, you know what’s your scenario. Have you thought about everything that’s going to impact you as you make your way to not only to retirement but through retirement? The opportunity to get on the calendar with Elite Income Advisors, it’s ongoing during the course of this show. We have a limited number, we’ve carved them out for our radio listeners, but they are complimentary. That means you leave the checkbook at home, you’re not agreeing to become a client, they’re not going to try to sell you anything. This is a test drive, this is a get to know you. 800-653-8404 again, no obligation, leave the checkbook at home. 800-653-8404 and you can always check the website. What a resource, Elite Income advisors.com All right, so next up on the scenarios, they are charitably inclined, they’re over age 70 and a half, but never heard of the QCD until recently. They want to support their church and lower their taxable income. How do QCDs work, and what should retirees watch out for to make sure the distribution counts properly on their tax return?
Speaker 1 39:50
This is a great one. We’re huge, huge fans and proponents of qualified charitable distributions, the QCDs. So, you know, I think, most importantly, you. We can explain what they are. It’s a way to make a distribution or a donation to a charity, so long as it’s a qualified charity through the government, without having any taxes due on that donation, right? So it has to come out of an individual retirement account or an IRA, so it has to be made from that account directly, directly to the charity, whether it’s a check wire, a lot of times the check is the easiest way, because it’s reportable and you can track that and show that to the federal government. But anyway, what it does is, you know, say that you want to make a $20,000 donation to your church, and it’s a qualified charity through the federal government. Now you can take the $20,000 out of your IRA, you donate it directly to the charity, and that $20,000 is not considered taxable income to you. The same way it would be if you were to take that out into your checking account and pay it to the charity that way. So, it does a couple of things: number one, it reduces your taxable income, which can have impacts on your Medicare premiums, on your taxes on other income gives you maybe ability to do a higher Roth conversion, if that’s something that you’re looking at. So, again, reduces your taxable income, but I think most importantly, it increases the amount of money that goes to the charity, right? So, if you had taken that $20,000 out, you had, you know, taken that as taxable income, put it into your checking account and donated it to the church after the fact. Maybe you netted $15,000 after taxes were paid, that was what went to the church, right? 5000 to the federal and state government, $15,000 to the church. Whereas if you do the qualified charitable distribution, the QCD, all $20,000 of that goes directly to the church, you are, you have a higher benefit, a more, you know, more impactful benefit there. So, I think it’s, it’s a great opportunity to save money in taxes, maximize the donation, but you have to make sure that it is a qualified charity to the federal government, and you have to make sure that it comes directly from your IRA, not from another type of employer plan, not from your checking account, directly from your IRA to make that donation.
Speaker 2 42:07
So, important to be ready. What’s your scenario? We’ve got one more, and then we’ll open up those appointments. Here it is for you, John. They’re retired, living comfortably right now, but inflation is making them a tad nervous, especially health care and groceries prices going up. How can retirees adjust their income strategy over time to keep pace with rising costs without depleting their nest egg too quickly?
Speaker 1 42:32
Yeah, this is a very, very valid conversation, especially in today’s economy with inflation being higher than normal, right? The Fed’s targets about 2% We’ve seen it running a lot higher than that over the past four and four to five years. I mean, shoot, in 2022 we saw it as high as 9.1% So we have to be mindful of this in our financial plans, and we, we build this into every one of our clients’ income plans, right? We’re assuming an inflationary component. We want to ensure that your income increases over time. Now, you do get a cost of living adjustment from Social Security, so that helps a bit, but that doesn’t cover all of the increase to cost, right? I mean, health, groceries, and energy – they’re not included in that CPI report that the cost of living adjustment is based on, right? So, you have to ensure you have your own inflation hedge in your income, and we talk a lot about having equity exposure, having some risk in the market to generate a return that outpaces the level of inflation. So, I think that having a plan that this is built into is the most imperative. Right, it’s not easy to just spend less when you’re on a fixed income, right? If health, if food costs go up, you can’t just not eat. You might have to eat bologna instead of a steak, but at the end of the day, you’d probably don’t want to do that. So, build it into the plan ahead of time, and you shouldn’t have a problem.
Speaker 2 43:50
Scenarios, we have gone over four of them. What is your scenario? Do you have questions about where you currently are? And there are a lot of you that are just sitting on portfolios, so you probably have a lot of questions. We give you an opportunity through the course of this show to jump on the calendar with Elite Income Advisors, and we’ll do that right now. We’ve got a limited number of appointments. John, kind of walk us through how these appointments are going to go.
Speaker 1 44:15
Yeah, so these appointments are no obligation, you know, you’re not coming in to be sold anything. In fact, we don’t even know that we’re going to be the right fit, right. It’s a simple conversation on what is important to you, what your goals are, getting to know you a little bit better, allowing you to get to know us a little bit better. You know how we look at financial planning and really get to work, right. We’re going to identify what that retirement looks like what it’s going to cost you, what type of income streams you’re going to have, between foundational income, you know, social security, pension, annuities, those types of things. And then we’re going to dive into how to actually make that plan work, right? We’re going to look at things like taxes, we’re going to look at inflation, we’re going to ensure that you’re protected against risk between the. Different types of insurances, we’re going to look at your allocation of your portfolio, right. We’re going to make sure you’re taking enough risk to outpace inflation without taking on too much risk that subjects your portfolio to significant losses, right. So we’re going to go through all of that. You know, we partner with attorneys, we have in-house CPAs, in-house Medicare specialists, all of that paired together to put together that financial plan.
Speaker 2 45:25
All right, grab an appointment by calling this number: 800-653-8404 That’s 800-653-8404 Get on track with your retirement: 800-653-8404 Another edition of Retire Smart, Maryland radio in the books for John DeFeo. I’m Morgan Patrick. We’ll see on the radio next week.
Speaker 3 45:53
Guarantees are subject to the claims payability of the issuing insurance company. If you withdraw money from or surrender your contract within a certain period of time after investing, the insurance company may assess 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 advisor has achieved a specific level of skill or ability. Content should not be viewed as personalized financial advice. Insurance and duty 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 annuity products are sold separately to Retirement Planning Services Incorporated. President Ozer Culhagil, Prashant Sabapathi, and Jonathan DeFeo receive commissions for the sale of insurance products as insurance agents for Retirement Planning Services Incorporated. Insurance annuity product guarantees are subject to 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 Retirement Maryland. The program is paid production of elite income advisors,
