Speaker 1 0:00
For today on Retire Smart Maryland Radio, we’ll talk about the golden years you spend your whole life working towards your retirement, dreaming of lazy days, travel, and finally pursuing those hobbies that you never had time for. However, retirement isn’t always the carefree paradise that you imagine, so on today’s show we’ll talk about all the things that could make the difference.
Announcer 0:27
Welcome in to Retire Smart Maryland Radio with Prashant Sabapathi.
Speaker 2 0:35
Welcome into Retire Smart Maryland Radio, your host Prashant Sabapathi. You can find him at Elite Income Advisors, headquartered Ellicott City Satellite Office, Indianapolis, for your convenience. He’s an independent fiduciary. He’s also a published author, two books to his credit so far: Fiscal Health, Retirement Wealth, and Retire Abundantly. I’m Morgan Patrick. It’s always about a retirement discussion, the importance of having a plan, being proactive as opposed to reactive, and before we dive in on mr. and mrs. Boomer, and things that they possibly have done that they wish they would have done differently. Prashant, how was your week?
Speaker 1 1:11
Hey, Morgan, good to be with you. Week has been really excellent, quite frankly. It’s simply because this is the busiest time of year for us. There’s no question, you know, I was doing a workshop at one of the big steakhouses over in the Odenton area just last week, and it was, we were going into our last two workshops of the calendar year, we typically start to wind things down from a seminar standpoint in, you know, the early part of November, late October, we had 64 people over two nights, 64 people, and it’s kind of interesting that the last two seminars of the year were most well attended ones, and that creates a lot of activity around
Speaker 2 2:00
our office, you know, people were scheduling appointments to come in, talk about the retirement plan. I feel like every single appointment time slot on my calendar feels like it’s booked between now and the end of the year. So I’m really happy to have a great team around the office. Our advisors do a fantastic job working with new people coming in the door, as well as our existing clients, so it’s always an exciting time of year heading into the tail end of the year, because it just gets so busy, but that’s what we like. Yeah, I mean, elite income advisors, you guys keep your finger on the pulse on what’s going on, and obviously it’s a, it’s kind of an odd time right now, it’s an election year, things are going to get interesting in the next week or so, so I think people are just very locked in on their money and on their retirement, and they want to make sure that they’re going to be okay. Now, there are a lot of you out there that are probably going, yeah, maybe I should, I’m sitting on this portfolio, but I don’t have a plan. During the course of this show, we do this each week. We open up appointments with Prashant and his team at Elite Income Advisors, and they’re complimentary appointments, and you’re not agreeing to become a client if you grab one, but it’s a great way to kind of a barometer of where you are. Are you ready for retirement? Are you on track for retirement? Could you retire next year? These are all questions if you’re in that, that kind of, that, that red zone, you’re about 15 years out, 10 years out, you know, grab one of these appointments and really have this conversation, and why not? They’re complimentary, all right. So, let’s get into this. Meet mr. and mrs. A. Boomer. They retired at 67 thinking that they’d be on easy street, that’s what we all want, right? And in reality, the Boomers, well, they wound up paying, you know, playing this woulda, coulda, shoulda, or woulda, shoulda, coulda, however you want to put it. And we have seven discoveries that the Boomers made, but they made them a little late. We want to avoid these, so take some notes here. The first mistake, Prashant, just underestimating what their expenses were going to be once they hit retirement.
Speaker 1 4:05
This is such an important and underrated part of the retirement planning process. You have to have an understanding of how much your retirement lifestyle is going to cost. Okay, and what we always tell our clients is there’s always going to be costs that you simply cannot plan for, so when you’re going to map out your expenses in retirement, think about all the things that you want to do to make your retirement lifestyle as fulfilling as possible, whether that’s golfing or traveling, or whatever’s going to make your life fulfilling, you got to bake that into your retirement calculation. Okay, and so one of the things I was told one of our radio listeners came in to visit with us, and we actually ended up putting a financial plan together for them, and I think one of the biggest value adds that we provided to them was we actually sat down and helped them map out all the expenses that they didn’t. To ever think about, so when they talked about health care in retirement, they didn’t actually factor in what that would look like from the standpoint of Medicare premiums and out of pocket costs, those types of things. If you don’t properly map it out, you could be under planning, and if anything, you want to be over overestimating your expenses, not underestimating. It’s one of the biggest mistakes that we see people make.
Speaker 2 5:24
Again, we’re kind of going over mr. and mrs. Boomer, that retired at 67 and you know they’re looking back, and hindsight being 2020 what would they have done differently? So, again, underestimating expenses, a big one, and the investments, taking a look at their investments, if they go back in time, they were not diversified enough. Prashant,
Speaker 1 5:44
yeah. And oftentimes, what we’re finding with regards to this specifically is that all of our eggs are typically in one basket, right? And that basket oftentimes is just a risk basket, right? It’s invested in the market. Markets go up, markets go down, and the good thing is, if all of our money’s in one basket and the market goes up, we could tremendously benefit from that. But the opposite is true as well. And what we never want to see is, we never want to see our clients be forced to sell their market-based investments at a loss in order to generate their retirement paycheck, and so by having a well diversified portfolio, or a portfolio that actually has different buckets of money, not just one bucket that’s a risk bucket, but maybe we have a safe bucket and a risk bucket, it actually allows us a lot more flexibility, in my opinion, to create the retirement income that we need to have, so maintaining diversification is really, really important.
Speaker 2 6:50
Yeah, we’re kind of using a time machine and a boomers couple that retired at 67 but they, they feel like they made some mistakes, and they, if they could do some things differently, they would. We’ve talked about just underestimating the expenses in retirement. Investments were not diversified enough as they entered into retirement, and now this one, I didn’t factor in the health care and the expense of health care. It was in there, but not at the amount.
Speaker 1 7:17
Absolutely. Look, I think one of the biggest myths is that when we go on Medicare, when we get to age 65 and potentially transition onto the government’s health care program, Medicare, our expectation is that our health care costs will go down. In fact, if you’ve done a great job saving money, like most of our clients do, and most of our clients are great savers, they’ve saved half a million, a million, $2 million or more. What we’re finding is health care costs could actually be higher than while you’re working. That has everything to do with the Medicare surcharge on Part B, which is called IRMA. It’s your income-related monthly adjustment. And so a lot of times we think healthcare costs are going to go down in retirement. What we’re finding is that for a lot of our clients healthcare costs are going to go up as a result of their responsible savings habits. Folks, if you have not thought about what your retirement expenses are going to look like, or you’re not sure whether or not you’re properly diversified and able to weather another bear market, or if you’re just not sure about health care costs in retirement, pick up the phone and give us a call. The phone number will open up those phone lines now. The phone number is 800-653-8404 Now, when you dial this phone number, you’ll be able to schedule a complimentary visit with our team of specialists at Elite Income Advisors. You come into the office, we’re going to talk to you about your specific situation. You’re not agreeing to become a client. All you’re doing is getting exactly what you need to have a real plan to retire smart. So, you come in and visit with us. We’ll talk through your situation, we’ll help you map out healthcare costs, we’ll talk about your investment portfolio, we’ll help you estimate what your retirement expenses are going to look like. If you’ve never been through that exercise. It’s an important part of the planning process. 800-653-8404 Call now.
Speaker 2 9:08
When we return on Retire Smart Maryland Radio, we’ll continue with the Boomer regrets. Again, we’ve already talked about expenses – are they diversified enough? What about health care? Stay tuned. We are back on Retire Smart Maryland Radio. It’s hosted by Prashant Sabapathi, and you can find him at Elite Income Advisors, they have a wonderful resource website, check it out, Elite Income advisors.com Prashant is an independent fiduciary, he’s a published author, Physical Health Retirement Wealth, book number one and book number two, Retire Abundantly. They are headquartered in Ellicott City, they have a satellite office in Annapolis. I’m Morgan Patrick, and it’s all. Is about the importance of having that plan. We started off the show talking about mr. and mrs. Boomer, that retired at 67 and they have some regrets. And just to kind of catch you up on what we’ve talked about so far, underestimating their expenses in retirement, investments weren’t diversified enough, and they didn’t factor in the real cost of health care, because it’s coming for all of us folks, so make sure you’re planning for that. Prashant, we’ll start with this next one: maximizing social security. They did not do that, they just took it at the number, or whatever their situation was at the time. They didn’t really think it out, they just took
Speaker 1 10:37
it. Yeah, I think when it comes to social security, I think people get rushed into making that decision because they’re fearful that the system is not solvent or something like that, right. And so this overwhelming thought is, okay, I’ve paid a ton of taxes for this benefit, and I don’t want to die and leave all that money back in the system without having benefited from it, so I can appreciate that. So, when we talk about social security, use the word maximize, Morgan, and I think that’s what a lot of advisors talk about. How do I maximize and maximize, maximize social security? I actually don’t talk about maximizing social security, what I talk about is optimizing Social Security, so it’s not about collecting the most amount of money from Social Security to you, it’s about the timing of those payments. What if I told you, hypothetically, okay, what if I told you that you could get $100,000 more Social Security by waiting until, say, age 67 or 68 but that 100,000 it would all come to you between the ages of say 80 and 85 years old,
Speaker 2 11:49
not as attractive,
Speaker 1 11:51
not as attractive, because you’re not going to be able to actually enjoy the money, and you got to make it to 80, which is not a total certainty, right?
Speaker 2 11:59
Yeah, not guaranteed,
Speaker 1 12:00
yeah, and so with all that being said, I think what’s so important is optimizing your social security benefit, figuring out the right time for you in your specific situation to collect that benefit, and the interesting thing is that we see so many people that take social security advice from people that have no consequence put upon them if the decision is incorrect, right. And so, what I mean by that is, you take advice from your coworker, or your golf buddy, family member, or your brother-in-law. And, by the way, if that ends up being the wrong decision for you, the person who gave you the advice doesn’t have to live with the consequences, and to me that’s an issue. Okay, you should have a social security optimization plan that fits your situation based on your unique set of circumstances. When you come in to visit with us, we actually run something called a social security timing report, and the timing report is customized for your situation, and when you have that report, it should start to answer some of those questions about which collection strategy is actually the best for you.
Speaker 2 13:10
You know, I think it’s a great distinction to bring out optimize as opposed to maximize, because in this, you know, as we get into retirement planning, you do hear, hey, this is what you can do to max out your number, but how does it fit into your overall plan? How do you optimize what you’re doing with Social Security as it relates to your retirement? Again, these are things that boomers are looking back on, mr. and mrs. Boomer, that have retired at 67 and they wish they would have done things differently. Now we get to the big one, and that’s taxes, and we get so wrapped up in planning and saving, and boy, if you don’t have a tax strategy, and apparently these boomers at 67 when they went into retirement, they, they really did not focus in on that, it can really take a bite out of your retirement. We have to think about taxes, okay? And so
Speaker 1 14:00
often people do not think about taxes. If you’ve been saving money into, like, a 401 k or an IRA or Thrift Savings Plan, all that money is before tax, which means when you go to take that money out, you will pay income tax on it, federal, and if you’re living in a state that taxes income, you’re going to pay state income tax as well. And so the question I have for our audience is, think about the state of our country, of our national debt, of social security, of our deficit on an annual basis, and ask yourself this question: Do you think that 15 or 20 or 25 years from now income tax rates at the marginal level will be higher or lower than where we’re at today. Morgan, what’s your thought on this? I’m gonna go north, I’m gonna go high, you’re gonna go high, and I think every logical person would look at the state of our financials, of our debt, of our social security solvency and say I think tax rates probably. Probably have to go up, and so think about this. You saved all this money in retirement accounts that are fully taxable upon withdrawal, yet the tax rate in the future could be much higher than the tax rate today, while you’re still working. And so this is why having a tax strategy is really important. So, what goes into a tax strategy, it’s a couple different things. One, it is planning for things like Roth conversions. Roth conversion is when you set yourself up to pay taxes today, convert to a Roth, so that you never have to pay taxes again in the future. That’s number one. Number two is things like RMD planning, right, so when you’re taking the forced distribution, the required minimum distribution in the future that adds taxable income to your situation. When that happens to you, how are you going to deal with the tax liability? You should have a plan in place three years, five years, seven years ahead of time before you ever get to that RMD. And then the last thing I would say is Medicare planning, the more your income is, the higher your Medicare premiums are, and so it’s a domino effect that we have to be cognizant of. I know advisors are not talking about it. If you’re working with a supposed retirement advisor and they haven’t talked to you about the impact that rising taxes will have on your net paycheck in retirement, you have to ask yourself, am I working with the right specialist? I think that’s a fair question.
Speaker 2 16:25
Opportunity to get on the calendar with Prashant and Elite Income Advisors, it’s ongoing during the course of this show. All you’ve got to do is call 800-653-8404 that will secure an appointment for you, and these are complimentary, and as Prashant always says, you’re not agreeing to become a client if, if you secure one of these appointments, it’s an opportunity for you to educate yourself, get to know elite income advisors, and kind of see where you are. Again, that number 800-653-8404 that’s 800-653-8404 Again, these are complimentary appointments. Okay, so mr. and mrs. Boomer, they’ve made some mistakes, they’ve got some regrets. We’re going over those, so we can learn from them. They underestimated their expenses, investments weren’t diversified enough, they didn’t really factor in health care. Hold that thought, because we’re going to come back to it. Optimizing social security, we often talk about maximizing social security, but how is it going to fit into your overall plan? How do you optimize social security? And then the tax strategy – they didn’t have one, or they didn’t have enough of a tax strategy, and they really took a bite out of their retirement. So, here’s the next one. Prashant, and I said we were going to come back to health care, didn’t think about, didn’t plan for long term care,
Speaker 1 17:45
you know. I’ve oftentimes shared my personal family story about my mom, who went through a long term care situation. She had dementia, eight years, last three years of mom’s life. Our family was outputting anywhere from nine to $12,000 every month, just to take care of her, and that is so much money, Morgan, right? Like, even if you’ve saved a million or $2 million think about taking out $12,000 a month just to pay for long-term care, and furthermore, if you saved all that money in a pre-tax account, in order to get $12,000 net, you might have to actually withdraw 1516, 17,000 before the taxes are accounted for, and that creates an unrealistic and unsustainable drawdown spend down of your retirement assets, which could put you at risk of running out of money, and so you have to have a long term care plan in place. I actually just did this with a client. We actually put together a comprehensive long term care plan for them that included solutions that did not actually have insurance as a part of it. So, believe it or not, you can protect yourself for long term care without buying long term care insurance, and one way to do it is through what’s called asset-based care. You can actually use your assets to actually protect yourself against a future long-term care event, and you can do that without buying insurance. It’s kind of the new age of planning for long term care. If long term care is a concern for you, you should give us a call and come in and talk about it. Doesn’t mean that you’re going to do anything, doesn’t mean you’re going to buy insurance, and it doesn’t mean that you’ll even work with us. But if you need to get educated on this, you should dial that phone number, it’s 800-653-8404
Speaker 2 19:35
Again, we are talking about mr. and mrs. Boomer, they retire at 67 and they’re looking back, and they’ve got some regrets again. The long-term care part of this, you know, not factoring that in. I mean, we already talked about health care, so that’s a double hit, a double whammy. You really need to have that on your radar, have it baked into your overall plan, and again, this is about, you know, learning from the. Ask, we don’t want to repeat it, so if you are headed towards retirement, make sure you’re working with a fiduciary, make sure you’re having these types of conversations. There’s going to be an opportunity to get on the calendar with elite income advisors, meet with Prashant and his team, and you can have those very discussions. And here’s the cool thing: the appointments are complimentary, you’re not agreeing to become a client. This is a great way to kind of get the ball rolling, or if you need that second opinion, that’s 800-653-8404 Final one again, these are boomers that retired at 67 Looking back, things that just really kind of hit them hard. And this last one is just more about the information, drinking from a fire hose. They just, they, this particular couple just felt overwhelmed when they retired at 67 There were so many things to consider, choices to make. They were kind of bowled over.
Speaker 1 20:49
Yeah, exactly. And this comes back to a saying that people have said to me several times, is you just don’t know what you don’t know, right? And the good thing about living in this day and age, in the age of the internet and social media, is that there’s so much information out there for you to get educated. Now, the bad thing about this day and age is that there is so much information out there, and you don’t know what is good information, and so when people come into our office. It’s not, hey, take my advice, because I’ve been doing this for 15 or 20 years. It’s let me show you in a logical, easy to understand way how utilizing some of the strategies that our clients take advantage of allows them to retire, and let me prove it to you by mapping out your income, by optimizing your social security, by talking about taxes in a way that anybody can understand it. So, if you’re overwhelmed, you’re not alone. Okay, everybody, a lot of people feel overwhelmed. All you have to do is pick up the phone and give us a call, and come on in and visit with us, and we’ll help you put that roadmap together in an easy to understand way. That phone number again is 800-653-8404 That’s 800-653-8404 You come in, we’ll have a series of appointments. All of those appointments are totally free of cost. At the end of our process, when we help you map out your income, we’ll determine whether or not we’re the right fit for each other. If we are, we’ll work together. If we’re not, we’ll go our separate ways as friends. Call the phone number now: 800-653-8404
Speaker 2 22:28
When we come back on Retire Smart Maryland Radio, retirement isn’t just about securing your future, it’s also about creating a legacy. We’ll talk about that on the other side, you Retire Smart Maryland Radio, your host Prashant Sabapathi. You can find him at Elite Income Advisors. He’s an independent fiduciary. He’s also a published author, couple of books to his credit: health, retirement, wealth, and retire abundantly. They are headquartered in Ellicott City. They have a satellite office in Annapolis, and it’s a crazy time of year. Everybody’s, you know, getting ready for the new turn of the new year. And Prashant, you felt it, and everybody at Elite felt like it was necessary to really have a dedicated website to deal with taxes, so you have testmytaxbill.com Just give us a little info on it. Why you felt like, you know, what we want to put this out there.
Speaker 1 23:32
Look, I think getting educated is half the battle when it comes to retirement planning. Yes, there are big decisions to make on tax planning, but I think being able to just see things in an easy to understand way at least gives you the empowerment to start thinking about your taxes in a productive way. So, if you visit testmytaxbill.com you’ll actually be able to run a simulated report based on your account balance, your average rate of return, and your projected tax rate, you can play with the calculator and put in those inputs. When you put in those inputs, you’ll be able to get a report that shows you what the potential embedded tax liability is within your pretax retirement accounts. We set the website up so people would have access to a tool that you did not have to pay for, to at least give you some idea of how you should start thinking about your potential tax bill in retirement. So just visit that website, it is Test My Tax bill.com Play around with the calculator, and when you have questions, because most people play around with it. Have questions, you can always schedule a follow-up with our team after the fact, but it’s a great resource.
Speaker 2 24:47
Great resource. Again, test my tax bill.com Again, plug the numbers in, and if you’ve got questions, obviously contact Elite Income Advisors and get those questions answered. All right, so let’s move to this. Estate planning, critical part of any retirement strategy, and a lot of people don’t think about it. According to Fidelity, listen to this: 67% of Americans don’t have a complete estate plan in place, and without proper planning, your assets may go through probate, and that is, you don’t want to go there. Your heirs could face tax burdens, to say the least, and in this portion of the program, going to cover some of the importance of just creating a comprehensive estate plan, and how you can protect your legacy through tools like wills, trust, charitable giving. I mean, there are a lot of options here, but you really need to have it baked into your plan. So, let’s talk about this. Why is estate planning, Prashant, so important for retirees, and what are the key components of, let’s just say, a comprehensive plan? Yeah, so you know, I think estate planning is a really important aspect of your overall financial planning, and that’s
Speaker 1 26:00
because estate planning makes sure that your money goes where it’s supposed to go according to your wishes when you pass away, and then you want to make sure that it’s protected from things like taxes, legal challenges, so the key components to estate planning are going to be things like a will, trusts, powers of attorney, and beneficiary designations. Okay, according According to Fidelity, 70% of wealth transfers do not happen as intended due to improper planning. That’s seven out of 10. Morgan, doesn’t that seem like a really high amount?
Speaker 2 26:37
And we’ve had the conversation that the generation that’s coming up is going to be one of those generations that’s going to be getting a lot of wealth from their ancestors, so I mean, not having an estate plan, if you’re listing out there, I mean, 70% of the wealth transfers, that that number is staggering.
Speaker 1 26:57
Yeah, I mean, absolutely, it’s such a high number, and the thing is, so much of that can just be avoided by having a one hour or two hour conversation about your estate planning, whether it’s the, you know, just making sure your beneficiaries are set up correctly, or taking the time to set up a will or a trust, like those simple things can alleviate a lot of this wealth transfer concerns, yet seven out of 10, according to the study, have improper wealth transfer. I mean, it’s bizarre to me
Speaker 2 27:27
talking about legacy, talking about estate planning, talking about just some simple steps that you can take to avoid a lot of the headaches are going to be out there if you don’t have one set up. So, let’s talk about this next one. How can setting up a trust help retirees minimize estate taxes and ensure that their wealth is efficiently transferred? Yeah, so trusts are a central tool for, I think, minimizing estate taxes if your estate is over the estate tax exclusion. But the second use case for a trust is to keep your assets
Speaker 1 28:00
out of probate. Okay, so couple different types of trusts out there. And look, I’m not an attorney, I don’t try to, you know, imitate one or anything like that.
Speaker 3 28:10
Don’t
Speaker 2 28:10
play one on TV or the
Announcer 28:11
radio,
Speaker 1 28:11
don’t play one on TV or the radio, exactly right. But if you have something like a revocable living trust that gives you control of your assets while you’re alive, and it actually ensures that your assets pass directly to your beneficiaries after your death, while bypassing the probate process. Okay, now if you have something like an irrevocable trust that can actually help you on the tax side of things, it can actually help you reduce the size of your taxable estate, and you know the estate tax exclusions are pretty high, you know. You’re talking about as of 2023 over the exemption was $12.92 million But states also have their own unique thresholds there, so you got to be really careful on the estate side of things. If you’re considering a trust, what is always helpful is to map out what your objectives are first, and then meet with a professional to figure out what type of trust is the right type of trust for you.
Speaker 2 29:07
Here on Retire Smart Maryland Radio, talking about the importance of estate planning and making sure you have one in place. Opportunity to talk about your situation ongoing during the course of this show. You can grab a complimentary appointment with Elite Income Advisor simply by calling 800-653-8404 that’s 800-653-8404 These are complimentary, leaving the checkbook at home, and you’re not agreeing to become a client. This is an opportunity for you to get to know elite income advisors, and they’re going to get to know you. And then, of course, if you want to move forward, you can now back to the estate planning, so this is I’ve heard this one beneficiary designation is very, very important. How do they work, and why is it so important to make sure you update these? I’ve heard some horror stories.
Speaker 1 29:54
Yeah, so very important here, because beneficiary designations take high. Or legal precedents over your will or your trust, so what I mean by that is you can list out all your wishes in a trust or a will, but if you don’t change the beneficiaries on the actual accounts to reflect your legal documentation, whatever’s listed on the beneficiary designation will be the thing that governs, okay. And so you want to make sure that everything is aligned, okay. If your trust has language saying that you want the money to go to X, Y, and Z person, you got to make sure that the beneficiaries are aligned with that with your wishes, I should say. So, what I would do, Morgan, it was I would go to every single account that I have out there, and this is something that you don’t need a lawyer for. You can go do this right now if you wanted to go to every single bank account, investment account, retirement account, life insurance policy that you have, and make sure that your beneficiaries are up to date, and every single time that you have a life event that could affect how your beneficiaries should be set up, you should revisit that conversation. In fact, my wife and I, every single year, at the end of the year, when we’re planning for the next year, we go back and we revisit all of our beneficiaries on all the accounts that we have, including the new accounts that we’ve set up throughout the course of the current year, it’s a great exercise to make sure that you’re on track.
Speaker 2 31:25
Yeah, just staying up to date, and again, it’s all part of the planning process. And again, having the overall plan, there’s a lot that goes into it. It can be overwhelming, but if you’re working with a fiduciary and a fiduciary firm, you’re going to enter into retirement with confidence, because you’ve got that, you’ve got that roadmap right, that retire smart roadmap put together for you. All right, last one we have time for, when we’re talking about estate planning, what are some tax efficient strategies that retirees can use with the wealth transfer to minimize the burden on their heirs? Yeah, so I think there’s two things here. Number one is gifting,
Speaker 1 32:00
okay, so you can gift a certain amount of money each and every year, and that could reduce your taxable estate. Now, you got to be careful with this, because there are certain rules surrounding how much you’re allowed to gift before you have to file, like a gift tax return or something like that. Secondly, you can use something called a charitable remainder trust. It’s a CRT, and what that allows you to do is leave assets to a charity while still continuing to receive income during your lifetime, which actually offers both tax advantages and legacy planning advantages by giving money to charity. So, if legacy planning is important to you, if estate planning is important to you, if your advisor hasn’t talked to you about these types of things, you have to ask yourself, what’s going to happen to my assets when I pass away? And if you haven’t thought about that in depth with a professional, you need to give us a call. It’s 800-653-8404 It’s 800-653-8404 Now we’re not licensed attorneys, but we’ve helped so many people retire that we’ve had the estate planning conversation with hundreds, if not 1000s, of people. And if you need an attorney that you want to work with, I can also refer you to an independent attorney as well, give us a call: 800-653-8404 Schedule that free consultation today.
Speaker 2 33:26
When we return on Retire Smart Maryland Radio, it’s time for scenarios. I’m going to throw him at Prashant. We’ll see what he comes up with. That’s all next. We are back on Retire Smart Maryland Radio, hosted by Prashant Sabapathi. You can find him at Elite Income Advisors, easy website to remember, and great resource, Elite Income advisors.com Again, Elite Income advisors.com Prashant is an independent fiduciary. He’s a published author, physical health, retirement, wealth, and retire abundantly. TV show, radio show. You can go to the website, you can get links there for TV and radio, and we’ve got a radio in podcast form, so you can listen to your heart’s content. Also, see him on TV, headquartered in Ellicott City, and they have a satellite office in Annapolis. I’m Morgan Patrick. And each and every week, it’s the importance of having a plan, being proactive, getting you ready for retirement. And here on the program, we do offer up complimentary appointments. You’ll get that Retire Smart roadmap put together for you, and it’s a great way to get to know elite income advisors, and they’re going to get to know you, and it comes at no cost, so you’re leaving the checkbook at home. All right, time for scenarios. Prashant, your first one is this: if I get a loan from my 401 k, do I have to include it on my tax return when filing said taxes? Yeah, that’s a great question. So, it’s a loan, right, and so. Loans, you’re typically going to be able to access those without paying taxes, which is truly one of the benefits of it’s no different than if you were to go take like a home equity line of credit against your house, right? No benefit there is that you don’t have to pay taxes, however you do pay interest, right, and so you got to be careful with this because my philosophy is that retirement assets should be used for retirement. Okay, if you have a 401 k, we shouldn’t treat that
Speaker 1 35:30
as an asset that you should be readily taking loans from to fund your lifestyle or deal with emergencies, that type of thing. Now, of course, if you’re in a dire situation, you’re forced to take a loan, you know that’s something you have to deal with, but you do not have to include it as taxable income. However, one thing to be careful about, Morgan, is a lot of times your employer may not offer you the ability to continue to pay the loan if you separate from service while the loan still has an outstanding balance, in which case that loan could become taxable if you were to leave your employer while you have an outstanding balance. So every employer is going to be a little bit different. You’re just going to want to make sure that before you take the loan you understand the rules of separation as well.
Speaker 2 36:20
We are in our scenario portion of the program. I give the scenario to Prashant, and he kind of gives us an idea of what you can do. And again, remember, you may have a scenario going on in your life that’s similar, but it’s not exactly what you’re going through. Make sure you have customized advice from a fiduciary as you move to and through retirement, here’s the next scenario: retiring at 62 but my pension not going to kick in until 65 I’d prefer to wait and start my social security when I’m older, but should I think about starting it earlier to avoid having to pull so much from my other investments until that pension actually kicks in.
Speaker 1 37:03
Yeah, it’s a great question. This goes back to social security optimization. This is actually a classic case of why optimizing social security is so important. In this case, you want to wait to start social security, that’s what the scenario says, is that I’m thinking about waiting, because that’s my preference, but I might have to dip in more to my retirement portfolio until I can bridge the gap. So, would it be actually better, even though I’d get less? Would it be better for me to actually collect it early, so I don’t have to burn down my own money to fund my lifestyle? This is a classic case of social security optimization. Now, everyone’s situation is a little bit different. We have to consider your tax rate, we have to consider your total income needs, and of course the size of your retirement portfolio, as well as how much risk you’re taking. So it’s hard for me to just give a straight answer to this, but I think what it speaks to is the larger example here that we have to optimize our social security benefit in a way that works for us, and when you have a social security timing report, that’s what it allows you to do.
Speaker 2 38:11
I tell you, the scenario portion of the program kind of sheds light on just how many things can impact you on your way to retirement and in retirement, so make sure you’ve got a roadmap, make sure you’re confident as you move towards your retirement date, that your money’s going to last, and you’ve got those income streams, and you’ve considered taxes, and you’ve optimized your social security, and again, it’s about you, your customized plan. All right, here’s another scenario for you, Prashant. My wife just learned she has an annuity from a company she worked for over 20 years ago. She’ll be eligible to withdraw the funds in a couple of months. A friend told us that she should roll it over to an IRA because there would be no penalties, and she could withdraw funds from the IRA also without penalties, should she keep it as an annuity or convert, roll it to an IRA.
Speaker 1 39:06
Yeah, so it kind of depends on your individual situation. I think a lot of times advisors are telling people to roll over money just because they left an employer just for the sake of rolling over money. My thought on this, Morgan, is that any time we make a financial decision, there should be a clear cut purpose behind it. We shouldn’t just roll over things to roll them over. We shouldn’t just consolidate accounts because it means we’ll get less statements, and that’s how we’ll have less to worry about. I think we should only make decisions if there’s a clear cut purpose behind it. The analogy I use all the time is, you know, a lot of our clients, and a lot of, lot of people out there take prescription medication, right? And when you take prescription medication, two things have. Happen right. Number one is their side effects, right, and number two is when you take multiple prescriptions together, they interact with each other. So, the way I think about it is every financial decision that you’ve made is a financial prescription that you’ve taken, and they have side effects, and they have interactions with all the other decisions that you made and prescriptions that you’ve taken, and so at this stage of your life, especially if you are close to retirement, the impact of these decisions is magnified, and so you should roll this money over if it concretely puts you that much closer to achieving your financial objectives, and if you can’t say that the decision you’re making concretely, concretely puts you closer to those financial objectives. You just shouldn’t do it. And so, when we talk about this with our clients, it’s all about creating a customized plan to show how you’re going to be that much closer to creating your income needs in retirement, reducing your risk, creating a better legacy plan, whatever that means to you. You should do it if there’s a clear cut purpose behind it.
Speaker 2 41:03
Yeah, I mean, talk about your options, and Prashant, you’ve said this many times, it’s, you know, you’re the advisor, but the client, if they become a client, ends up being the decider, but they are presented with the options when it comes to their retirement, and this plan, this roadmap that’s going to be out in front of them, that should take them to and through retirement. All right, here’s a scenario. What are my options if I’m locked into a variable annuity contract?
Speaker 1 41:28
Oh man, this is actually an incredibly loaded question, right? So, locked in means different things, right? It means maybe you’ve held the contract for a long period of time and doesn’t make sense to get out. In some cases, maybe you haven’t held the contract for all that long, and there’s significant penalties to get out. Here’s what I would say: if you have an annuity, whether it’s a fixed indexed annuity, a variable annuity, if you have an annuity, the first step is making sure that that annuity is doing for you today what you intended when you first took it out, potentially years ago. Okay, the interest rate environment has changed significantly. Annuity products have changed significantly in the last several years. A lot of times, what we’re finding is older annuities might not be quite as beneficial as some of the newer things that are out there. So, the first step is, if you are locked in, or if you have a variable annuity contract, you should do a review of it to make sure it’s actually accomplishing for you what you needed to do. The second thing is to figure out what your alternatives are. Will you pay a penalty for getting out of it, and is that even the right thing for you to do? In some cases, you’ll find that keeping the annuity you have is actually in your best interest. In other cases, you might find that there’s a tremendous amount of benefit in doing something different. It all starts with getting that customized review. Make sure you understand the fees that you’re paying, the growth potential, the income benefits associated. You have to evaluate all these things before you make a decision as to what the best thing to do
Speaker 2 43:03
is. All right, final scenario, and I can see Prashant bringing out the hammer on this one. He’s going to nail this. My financial advisor has never spent any time looking at my tax return or asking questions about my tax situation. Likewise, my tax preparer has never asked anything about my investment. It seems to me that there would be some kind of overlap between the two, but maybe I’m wrong. Do you see any red flags?
Speaker 1 43:30
How much time do we have left in the show, Mark?
Speaker 4 43:34
You got 60 seconds, go.
Speaker 1 43:36
So I see red flags all over the place, because it’s all about having a comprehensive and coordinated plan that you can rely on, right. So, imagine, imagine you’re driving two cars towards the same destination, but each driver has a different map, right. And so, what we, what we are having here is an incongruence in strategy, right. We don’t know which the which the best strategy is if we’re not all on the same page, right. And so, how are we going to do this? How can you properly plan if investments have a direct impact on your taxes? Taxes have an impact on your Medicare. It all affects your Social Security and your health care plan. How are we going to operate if it’s not all coordinated? Right, you don’t want your tax advisor giving you advice that negates the advice of your financial advisor and vice versa. Everybody should be on the same page. So, it’s not enough to just have a comprehensive plan, but it actually needs to be a coordinated plan that all the professionals in your life work together. Okay, so I call it the financial dream team, the estate planning attorney, the CPA, the financial advisor. Everybody needs to be on the same page, folks. If you’re not sure if you have a comprehensive and coordinated plan, let’s open up the phone lines one more time. For today’s show, 800-653-8404 that’s 800-653-8404 You dial that phone number, you come into the office, you will be able to sit down with my team of specialists. They will help you design the Retire Smart roadmap, and that’s going to include an income roadmap. We’ll help you map out your income each and every year for the rest of your life, we’ll talk about tax reduction strategies to increase your net income in retirement. We’ll talk about estate planning strategies to talk about how you can transfer your wealth to your loved ones in the most tax efficient way possible. Last opportunity for today’s show, it’s a free consultation with our team at Elite Income Advisors, it is 800-653-8404
Speaker 2 45:46
All right, we’re about to turn the lights out on Retire Smart Maryland Radio for Prashant. I’m Morgan. We will see on the radio next week,
Announcer 46:02
you The annuity guarantees are subject to the claims paying ability of the issuing insurance company. If you withdraw money from or surrender your contract within a certain period of time after investing, the insurance company may assess the surrender charge. Withdrawals may be subject to tax penalties and income taxes. Persons selling annuities and other insurance products receive compensation for these transactions. Products were subject to fees and additional expenses. Any comments regarding safe and secure investments and guaranteed income streams referral into fixed insurance products, they do not refer in any way to securities and investment advisory products. Information presented on this program is believed to be factual and up to date, but we do not guarantee its accuracy, and it should not be regarded as complete analysis of the subjects discussed. Discussion should not be construed as an offer to buy or sell, or a solicitation of an offer to buy or sell the investments mentioned. A professional advisor should be consulted before implementing any of the strategies discussed. Investments involve varying degrees of risk, and there can be no assurance that any specific investment or strategy will be suitable or profitable for a client’s portfolio. Elite Income Advisors Incorporated is registered as an investment advisor with the state of Maryland, and only transacts business in states where the firm is properly registered or is excluded or exempted from registration requirements. Registration as an investment advisor is not an endorsement of the firm by security regulators, and does not mean that the advisor has attained a particular level of skill or ability. You should always consult an attorney or tax professional regarding your specific legal or tax situation.
