Speaker 1 0:02
With all the buzz about a potential recession, it’s easy to feel overwhelmed, but did you know that some of the most telling economic indicators aren’t the ones that you actually hear about on the nightly news. Today, we’ll explore both the quirky and the conventional signs of economic health and discuss how they can inform you and your retirement income plan.
Announcer 0:24
Welcome in to Retire Smart Maryland Radio with Prashant Sabapathi.
Speaker 2 0:31
Welcome in to Retire Smart Maryland Radio. Your host is Prashot Sabapathi. You can find him at Elite Income Advisors. They’re headquartered at Ellicott City, and they have a satellite office in Annapolis for your convenience. He is an independent fiduciary. He’s a published author, a couple of books already to his credit: Physical Health, Retirement, Wealth, and Retire Abundantly. I’m Morgan Patrick. It’s always a pleasure to jump on and talk retirement, and as we always do, we catch up first before we jump into the latest. Prashant, how was your week?
Speaker 1 1:02
The week’s been busy. It’s been really good, though, just with everything going on in markets and with the Federal Reserve, and certainly with tariffs and trade wars. I think we’re at a time of what I would call maximum uncertainty right now. I mean, the market has been relatively better through the month of the back half of the month of April, so that was nice, but we’re still down year to date as of this recording, and so I think it’s breeding a lot of uncertainty for people in their retirement plan, and I think that’s what keeps us busy at the end of the day. We have a lot of people that are concerned about income, about the market, about taxes, about tariffs, and those are the types of conversations that we’re having with folks every single day. It seems like,
Speaker 2 1:46
what do you mean? Chaos makes people nervous. I mean, holy cow, it is like a storm out there, and people are concerned. It is their retirement, it is their money. Make sure you have a plan. We’ll give you an opportunity to talk about your own situation. Get on the calendar with elite income advisors, sit down and really talk it out. And again, these appointments that we make available through the radio show, they’re complimentary, that means you’re not paying for anything, that means you’re not agreeing to become a client, that means also that elite income advisors not agreeing to take you as a client. This is a test drive, those appointments are open now, and you can call at any time: 800-653-8404 That’s 800-653-8404 So, yeah, crazy time, right? Unconventional indicators that the economy might be headed in certain directions, or people are a little bit nervous, and I find the unconventional very interesting, and we’ll get your thoughts on this Prashant. The lipstick index, explain that to us.
Speaker 1 2:47
The Lipstick Index is an indicator that when times get tough, people often splurge on small luxuries like lipstick, right? So, imagine you know, like a mom of three skipping her salon day, but still buying that bold new lipstick from Target for maybe it’s 10 bucks, right? That small purchase is really her way of reclaiming her control and comfort when the budget is tight, and so when millions and millions of people do that type of thing, it signals belt tightening across the board, and so economists are calling this the lipstick index, and when the lipstick index spikes, it’s often, you know, it’s like a quiet whisper that the economy could be facing some kind of pressure.
Speaker 2 3:33
I mean, maybe you go all out and get Ferrari red, you know, go a little, go a little high end, yeah, the lipstick index. I love that. Now, this next one makes sense. This next one, keep an eye on this one, the cardboard box index.
Speaker 1 3:49
Yeah, and I think you have to think of cardboard almost like the pulse of the economy, right? If factories slow down, if Amazon ships less, although, by the way, it doesn’t seem like Amazon’s shipping less than my house on my doorstep. Yeah, right. But if Amazon ships less and stores cut back on inventory, cardboard production inevitably drops, and that’s not glamorous, but it’s real, right? When box orders go down, it could mean that economic activity is cooling, and oftentimes we see some of that data even before things like the GDP data hits the headline, so it’s something to pay attention to the cardboard box index, it’s really an unconventional indicator to determine how much product is being shipped around the US economy,
Speaker 2 4:39
talking about our economy, talking about just the environment we’re currently in, and some unconventional indicators you might kind of be able to notice the lipstick index, you know, going for the smaller luxury item, the cardboard box index, which I really, really like, because less production of cardboard, less shipping, so the economy may be slowing down. Found this next one, I think I’ve got two versions of this one. There’s the mini bottle, the airplane bottle. Don’t go for the big liquor bottle, go for the smaller bottle, and you’re still getting the same, but it’s just in a far less quantity. And now we’re starting to see at craft brew houses, you can get a 16 ounce, you can get a 12 ounce, you can get an eight ounce beer, and the prices obviously reflect the amount of beer you’re getting, but what I’m saying is, you know, people are going a little bit smaller with some of their indulgences, and I think the question is why, right?
Speaker 1 5:30
And it’s intuitive, it’s just that we want to spend less money on some of these types of things, and so when people start grabbing those, you know, smaller options as opposed to the full-size versions, it often means that they’re not just stressed, but they might also be strapped for cash, and so we’ve seen this spike in past downturns. Certainly, you think back to 2008 you think about 2022 and you know when those types of sales, many alcohol bottle sales, or to your point, the smaller craft beer versions of these things. When those sales start to creep up, it could be what I would call a quiet stress signal.
Speaker 2 6:13
Tell you, it’s interesting when you start thinking about where we currently sit, and just the indicators that are out there that are kind of telling us where we exactly are, so now we’ve got, we go from the unconventional, the lipstick index, the cardboard index, and the mini bottle index to traditional indicators. I’ll just let you pick a couple of these, Prashant. These are the classics. I think we need to start with probably gross domestic product, GDP.
Speaker 1 6:39
Yeah, gross domestic product. The metaphor I would use is, think of GDP almost like your household income, right? If GDP shrinks, which, by the way, quarter one of 2025 GDP dropped by negative 2.5% and so if your paycheck shrinks, you cut back on spending, and that’s the same exact thing that happens with countries when GDP contracts, everybody from businesses to consumers tends to tighten the belt, and so when we see that negative 2.5% retraction in GDP, it’s almost like finding out that your company just cut bonuses across the board, right? It’s a signal that the economy is slowing, and really, for retirees, that can mean lower returns on investments, little bit more market volatility, and so you, as a person that’s preparing for retirement, or maybe you’re already retired, you got to figure out how that is ultimately going to affect you, and Morgan, the second one that I would look at is something like the unemployment rate, right. The unemployment rate is almost like the heart rate of the economy, right. When it’s too high, we find ourselves in cardiac arrest, right. And when it’s too low, the system might be overheating. So, when it comes to unemployment, you got to get it just right. So, for example, right now the unemployment rate is approximately 4.2% and while that sounds okay, job openings have dropped, right? It’s, it’s like seeing fewer now hiring signs on all the businesses you drive, drive by, and that’s not because everybody’s employed, it’s because businesses are too nervous to actually expand, and so I think we have to pay attention to how this is going to impact your retirement, and so what I go back to is the thing that’s wild to me is that some of the best economic indicators aren’t in the Wall Street Journal, they’re in your shopping cart, right, lipstick, liquor minis, cardboard, that might sound like a bunch of random stuff, but those are the things that are effectively the check engine light of the economy. We’re going to open up our phone lines. The phone number is 800-653-8404 When you dial that phone number, 800-653-8404 you’ll be able to schedule a no-cost retirement readiness review with our team at Elite Income Advisors. Let’s see whether or not you are on track for the retirement you deserve. Don’t wait until your retirement dashboard lights are blinking red to take action. Pick up the phone, give us a call. All
Speaker 2 9:10
right, that phone number one more time: 800-653-8404 We’re back with more. Retire Smart Maryland Radio right after this. We are back on Retire Smart Maryland Radio, hosted by Prashant Sabapathi. You can find him at Elite Income Advisors Independent Fiduciary. He is a published author, two books to his credit, thus far, fiscal health, retirement, wealth, and retire abundantly. They are headquartered in Ellicott City. They have a satellite office in Annapolis for your convenience. It’s about helping his clients get ready for retirement. We do the show, we talk to the different topics when it comes to retirement, but we also want to help our radio. Listeners, and that means a complimentary appointment is available. We’ll tell you about that, and you can get that retirement readiness review put together for you, and you’re leaving the checkbook at home, and there’s no obligation, meaning you’re not agreeing to become a client. So, we’ll tell you about those appointments as we, as we move through. So, retirement should feel like a reward, not a riddle, but many of the baby boomers out there, turning, you know, a lifetime of saving into steady and tax-efficient income, and a stream of it is anything but simple. So, the missteps, especially when it comes to timing, taxes, investment strategy, it can quietly eat away at your cash flow that you’re going to depend upon when you get into retirement, so today we wanted to dive into the most common cash flow mistakes retirees are making, and more importantly, How do you fix it? Right, whether you’re already retired or just crossing that threshold, this kind of conversation could mean the difference between a stressed out retirement and
Speaker 1 11:00
a secure one, believe me, you want the ladder there, all right. The first one, if you’re not timing the withdrawals right, Prashant, if you’re not being strategic about this big mistake. So I think back to an interaction I had with somebody, this must have been a couple years ago at this point, but it really kind of hit home for me because I was sitting there talking to this gentleman, and we were talking about this particular topic. How do I time IRA withdrawals in a strategic way? And when I sat down with this guy, he was about 76 years old at the time that he came in to visit with me. Okay, but but what we found is that he did not start touching his IRA money until he was 70 and a half years old. Okay, and at the time that was the age of the required minimum distribution was 70 and a half. For most people today, they’ve raised that age to 73 but what my takeaway was from this is that he thought that he was doing the smart thing by letting that money grow until 70 and a half without touching it, but what we found is that when the required minimum distribution kicked in, it actually pushed him into a much higher tax bracket, which then in turn caused them to pay more taxes on social security income, and then it actually raised the cost of their Medicare premiums in retirement. A lot of people don’t understand that things like your health care, especially when it comes to Medicare, is dependent on your income, so the higher the income is, the more you end up paying potentially in Medicare premiums. It’s this vicious domino effect that really takes place, and so I think back to, like, how could we have avoided this particular scenario from playing out, and the answer is, if we had some strategy behind taking this money out, maybe prior to the required minimum distribution age, it would have given them the opportunity to maybe not increase his tax bracket and not have the higher Medicare premiums, just by doing a little bit of extra planning. It’s almost like waiting too long to start draining a swimming pool, right? Like, suddenly you’re in a flood and everything starts overflowing. You don’t want to find yourself in that position when you get to retirement. You want to get ahead of the curve and make sure that you have a concrete strategy in place that’s going to work for you to help you minimize your tax liability down the road.
Speaker 2 13:39
Tell you, it sounds like if you plan this out and you’re being proactive, these are things that you can really avoid, and we’re talking about common cash flow mistakes that people are making, people that are heading into retirement, people that are already in retirement. So, again, you’re not timing the withdrawals, you don’t have a strategy there, tax strategies, just overlooking it, not having a real plan.
Speaker 1 14:03
Yeah, that’s exactly right. I mean, I think too often retirees focus on investment returns, and sometimes ignore or are unaware of the tax consequences of their money. But what we have to remember is the IRS, Uncle Sam, can be one of your biggest retirement expenses, if you’re not really careful, and so you got to look at things like Roth conversions, things like social security timing, asset location, all these different types of things can dramatically impact your overall net income. Okay, and so you know, I think back to my mom, and God bless her, but when she was still with us, she was really into like gardening and stuff growing up, right, and I would always think like she would garden in our backyard and she’d build these like beautiful gardens, and I always would think like. Four or five weeks into the summer and the spring, the deer would come by and eat it, right, and they’d ruin all the hard work that she put in. And so it’s like building this big, beautiful garden and forgetting to fence it in, right. Taxes are the deer that eat your hard work in the garden, and so the takeaway is you got to fence that garden in, right. You got to think about tax strategies, things like Roth conversions that will allow you to have tax-free income down the road, so that the IRS isn’t in your back pocket taking a piece of your retirement away from you. And oftentimes I wonder, how many people just don’t know that these strategies exist, and that’s why they never take advantage of them.
Speaker 2 15:44
I tell you, if you’ve got questions about where you are with your cash flow, grab one of these appointments – they’re complimentary – and you can talk about where you currently sit and get that retirement readiness review put together for you. Call the number 800-653-8404 that’s 800-653-8404 We’ll line you up with one of those complimentary appointments, and again, you’re not agreeing to become a client, they’re not gonna try to sell you anything. This is a get to know you retirement readiness review, available 800-653-8404 limited number of appointments, so grab one now. All right, so again, talking about common cash flow mistakes, this next one with the environment that we’re in. Prashant, I can understand this happening. People are nervous, they’re pulling everything close to the vest, and they could be maybe playing it too safe.
Speaker 1 16:31
I think that’s human nature, right? Especially if you’ve been scarred by past market downturns, you might feel a propensity to like shift all your money into CDs or cash or ultra conservative bonds, only to find that inflation silently kind of erodes your purchasing power over time, right? It’s what I call losing money safely, right? Like, you’re not losing principal balance, but your purchasing power goes down as the inflation rate outpaces the rate of return that you’re getting on your investment, so I think that there’s clearly risk in being too risky with your money, but there’s also risk in being too safe with your money in the event that inflation spikes like it did back in 2022 if you’re not earning enough to keep up, or if your income is not high enough to keep up with the cost of living, you could find yourself in a very precarious position when you get to retirement. So, oftentimes one of the things that we talk about is that the answer to higher cost of living is typically higher income. So, let’s start to think about for retirees and pre-retirees. If you’re within 10 years away from retirement or less, you got to start thinking about not how much money you have, but how much reliable income that money can ultimately provide to you, and whether or not that’s enough for you to live your most fulfilling version of life and account for things like higher taxes and accounting for potentially the higher cost of living along the way,
Speaker 2 18:06
so important to be ready and also just be aware of some of the mistakes that are out there, and we’re talking directly to boomers that are getting ready to head off into retirement, maybe already in retirement, and these are just common cash flow mistakes that can be made, so avoid these. Make sure you have a plan. The next one, it’s almost like if you’re an avoider, you’re gonna fall into this category. Believe me, it’s too late to save, so I’m just not gonna worry about it. I’m too far down the road. That’s an avoider, that’s a problem.
Speaker 1 18:37
Yeah, I mean, I think there’s a myth out there that, like, once you get to about 60 years old, saving more doesn’t actually help you, right? But there’s things like catch-up contributions. Catch-up contributions have been increased: $7,500 for IRAs, 10,000 plus for workplace retirement plans. Actually, let me correct that – it’s actually $8,000 for IRAs, 10,000 plus for workplace plans, late stage saving can absolutely still have a pretty big impact. And so, look, it’s never too late to get started. I mean, if you feel like you’re behind the eight ball a little bit, just know that you’re probably not alone in that feeling. But what are your choices? Like, at the end of the day, I feel like I’m a very results-driven person, and the way I look at it is, yeah, we can beat ourselves up for not saving enough, but where are we going to go from here? Right, your choice is either get on track or don’t, and it’s kind of binary, and so why not do everything we can to get on track to give ourselves the best chance, and we might not end up where we wanted to, or where we hope to, but at least we’ll be further down the road than where we, than where we were if we had never started.
Speaker 2 19:47
Yeah, it’s, it’s like you’re in the diving well, right? You’re right, right out in the middle, and you can’t touch the bottom, so you’re treading water. You’re going to stay there, you just going to stay there, right? Just going to tread water. No, you need to get to the side, you need. Make some progress, so again, when it comes to retirement, it’s about having that plan and making sure you’re going to be covered when the income stops, when the paychecks stop. You got to be able to generate your own income in retirement. So the last one I want to hit is the last one on here, Prashant, and that’s just not investing in income generating assets, and again, we’re talking about common cash flow mistakes. Yeah, I mean, we just have to remember that retirement isn’t just about preserving your
Speaker 1 20:30
capital. I mean, certainly that is incredibly important. You don’t want to lose too much money at the wrong time, but in addition to preserving capital, it’s about creating sustainable income. If you think about what your financial life is, while you’re working, your life really just is a function of what I call money in and money out, right? It’s your paychecks that come in, it’s your expenses that go out, and you do your best to try to save as much money as you possibly can along the way. And then, when you get to retirement, Morgan, I’m not so sure that that concept changes. I still think it’s about money coming in and money going out, but the thing that changes is where the money in comes from, and so we should invest in things that provide us tangible money in, things like dividend paying stocks, real estate investment trusts. I’ll tell you what, one thing that has been making a huge comeback are things like annuities? Annuities guarantee you income for the rest of your life. All these different types of things can all play a role. I think the key is figuring out which one or combination of these things could end up being the best fit for you. Okay, you’ve worked for 30 or 40 years to build up this nest egg, but are you accidentally poking holes in it now that you’re in retirement or near retirement? Whether it’s bad timing on IRA withdrawals, playing it too safe with your investments, or ignoring some of these common tax traps, you could be costing yourselves 1000s of dollars a year without even knowing it. We’re going to give you the phone number, it’s 800-653-8404 that’s 1-800-653-8404 We’re going to give you the opportunity to change your financial trajectory when you come in to visit with us. We’ll put you through a retirement readiness process, map out your income, talk about taxes, evaluate the risk in your portfolio, and let’s figure out whether or not you’re on track for the retirement that you deserve. 800-653-8404 We
Speaker 2 22:30
have much more on Retire Smart Maryland Radio, and it’s all coming up next, and we’re gonna, gonna go to the gym, I think you Retire Smart Maryland radio hosted by Prashant Sabapathi of Elite Income Advisors. Check out the website’s a nice resource, Elite Income advisors.com that’s Elite Income advisors.com Prashant is an independent fiduciary. He’s a published author of fiscal health, retirement, wealth, and retire abundantly. They’re headquartered in Ellicott City, and they have a satellite office in Annapolis for your convenience. I’m Morgan Patrick. We go back and forth on the topics, and now here’s one that kind of hits home for all of us, and I think we’ve all been in this, this situation, this category, at some point in our life, we’re trying to lose weight, and this is a no judgment zone here. I mean, think about it, there’s all the new stuff, the Ozempic drugs, one of the most popular injections in the country right now, and it’s no secret that we’re not just eating right or we’re just failing to keep these healthy habits, so here’s the thing. If we are what we eat, then what does that say about how we plan for retirement? So we’re going to do this little tie-in, and I think it’s time for some tough love. So we got to whip our bodies, but also our finances into shape, and we’re going to do it today. So here’s how to do both of these things. So, first one, Prashant, get a health checkup. Yeah, we need to do that for ourselves, but what about our finances?
Speaker 1 24:11
Okay, especially if, if you’re kind of like me, you’re a little bit out of shape, and you don’t necessarily eat quite as well as you should, you should be getting a regular health checkup, and I do that to assess my cholesterol and my blood pressure and my BMI and all that good stuff, and I think a retirement plan absolutely needs a checkup as well, and so kind of an action plan for our audience is number one, you should have inventory of all of your assets, and your debt, and your income sources, and your expenses. I think it’s incredibly important, Morgan, to be able to look at one sheet of paper and know what your net worth is on any given day. That’s the type of thing that we prepare for clients all the time, is that I think you should be able to look at one sheet of paper. Understand what your net worth is on any given day. I think you should be able to look at another sheet of paper and understand what your income versus expense situation is going to look like after considering the threat of higher taxes and higher inflation. You should be able to look at one sheet of paper and understand that, and so that’s action item number one is inventory all your assets, your debts, your income, and your expenses, but then evaluate your retirement readiness. Is the second piece of this. Do you actually have enough income to retire now, or do you need to extend your working years? Right, and like I think a lot of advisors are not educating their clients on these types of questions, like I had someone come in to see me just this past week, actually, and they already have an advisor. What they really wanted was just a second opinion, right? They wanted to know whether or not their advisor was doing a good job, and one of the core questions they asked me was, do we have enough to retire now, and I feel like that’s a common concern, but then I’m sitting there thinking, if you’re asking me that question, that means your advisor hasn’t answered it for you, either that, or you don’t believe the answer that they gave you, otherwise you wouldn’t be in my office in the first place, right, and so how we helped them get to that solution was to not think about how much money they had, but what we did was we asked them to project out what their retirement expenditures would look like, and then we compared that to all the sources of income that they had, and it turns out they actually had a gap in their income that did not allow them to retire immediately, but it just got them thinking in a different way, and I think it’s an eye-opening experience when someone contextualizes your entire retirement, taking into account income, assets, taxes, Medicare – it’s all got to be coordinated when you get to that stage of the game.
Speaker 2 26:56
You’re locked in to Retire Smart Maryland Radio, and we’re having a little fun with the tie in between what we all want to do, we want to be healthier, you know, physically, we want to feel good about, you know, how we’re doing with our diet and our exercise, but then when you kind of parallel that with your retirement planning and your finances, how does that look? So, you know, you’re gonna get, you should be getting that annual checkup, make sure you’re okay, you know, physically, and the same thing goes for your finances. You need to have that comprehensive financial review. This next one, and I’m guilty of this one, Prashant, and that’s the junk cut. The junk. So, from a diet standpoint, there are a few things that I really, really like. I need to do a better job of not having that quite as much, but when it comes to my finances, or anybody else out there, it’s just try to eliminate what the wasteful spending is.
Speaker 1 27:48
Before I even get to that, I got to know. I now, now you, now you brought it up, so I got to know what is the guilty pleasure food for you that you just can’t say no to. It
Speaker 2 27:59
is the spicy Chick-fil-A combo
Speaker 1 28:04
okay? Fries,
Speaker 2 28:05
sweet tea,
Speaker 1 28:08
okay? I was gonna ask if you’re a milkshake guy, but sweet tea is the way to go. Look, man, I’m the same way, okay? For me, it’s sugar, right? Like, you put a piece of cake in front of me, or you put the whole cake in front of me, it’s hard for me to stop. So, look, cutting the junks is important, just like you’re cutting out fast food or sugar or soda, whatever it is to you. Our retirement plans also has to cut out financial calories, right? And so to me, the unnecessary high junk financial calories are things like higher fee funds, right? So, if your advisor is charging you an excessively high fee, if the investments that you are invested in have higher expense ratios, those are the types of things that eat into your retirement’s readiness and your retirement’s ability to serve you the way that you need it to. So, review the fees in your portfolio, but also let’s talk about eliminating wasteful spending, right? Whether it’s reviewing some of the subscriptions that you have, or luxury expenses, or this is a common one, redundant insurance policies. I can’t tell you how many people I visit with that have ridiculous coverage on their insurances, like home and auto insurance, where they have an extremely low deductible that they’re paying hundreds and hundreds of dollars of extra premiums for, just in favor of a lower deductible. Well, you got to remember insurance is not necessarily there to pick up every little expense, it’s there to protect against the catastrophic, so if you have retirement savings or even cash savings in the bank, does it make sense to go from a $500 deductible to a 1500 deductible, so that it saves you a little bit of extra money. Now, of course, I’m not giving advice on the radio, make sure that you’re talking to a licensed insurance agent when you’re making those types of decisions, but. Bring it up, because it’s a great way to cut the junk
Speaker 2 30:04
we are talking about, you know, our physical health, but also our financial health, and how they parallel, and things that we can be doing along the same lines. So, this next one, you know, when you think about it, when you’re thinking about health, you want to get a checkup, make sure you’re doing okay, you want to eliminate any of the extra junk when it comes to possibly your diet, and then you want to start exercising in some form or fashion, and I’m not saying going out and running a marathon or anything, but it’s, it’s personal, get in some exercise, and when it comes to your finances, the parallel is, you know, make sure your money’s working for you,
Speaker 1 30:37
that’s exactly right, you know, I started this year with a goal, and my goal was to work out 185 days this year, so roughly about half of the year. Okay, proud to say that about a quarter of the way through I’m actually on track. So I feel really good about that, but I think you’re exactly right. You have to start exercising, you got to put your body to work, and when you’re getting ready for retirement, you also have to put your assets to work, right, and so make sure that cash isn’t just sitting around in a low-yielding savings account. Let’s put that to work in a way that it can actually grow for you. Maybe it returns you some dividends, maybe you’re rebalancing your portfolio to assets that actually have growth potential, things like dividend paying stocks, things like mutual funds, exchange traded funds that have the ability to grow. Maybe you’re investing in things like commodities, things like gold, right? Which gold has made a heck of a comeback heading into this year. So there’s a lot of things out there that you could be doing to put your assets to work, so let’s talk about financial exercise. I think it’s a huge part of it,
Speaker 2 31:45
huge part. So we talked about junk food. The last one we want to hit is this one, and that is we just want to eat healthy overall. And when it comes to your finances, maybe you start thinking long-term finances.
Speaker 1 31:59
Long term is such a, such a huge key, right? Like, when we’re eating healthy, how often do we go on fad diets, right? Like, you eat well for like two weeks, and then some life event happens, and you totally fall off the wagon, and now you’re back to the fast food, and, and the sugar, and everything else. I think the biggest way to affect long-term change is to do it in small doses that are you’re able to build on good actions, right. And so same thing, like you’re going to eat lean proteins and vegetables to sustain your long term health. I think investing has to be done in the same way. Okay, you want to have a balanced diet of growth, income, inflation protection, and the growth piece of it could be equities for long-term returns. The fiber might be the bonds for regular income. Vitamins are things like treasury and inflation-protected securities, I bonds, real assets. What’s important is that you have balance at the end of the day, so if you’re not sure where your financial health stands, pick up the phone and give us a call for that free retirement readiness review. You’ll come in, have a conversation with our team, and we’ll walk you through our process and see whether or not you are on track to be and stay retirement ready, folks. That phone number is 800-653-8404 that’s 800-653-8404
Speaker 2 33:25
When we return on Retire Smart Maryland Radio scenarios, I’ve got a few. We’ll throw them at Prashant, see what it comes up with. It’s all next. We are back on Retire Smart Maryland Radio. Your host is Prashant Sabapathi. You can find him at Elite Income Advisors. They’re headquartered in Ellicott City. They have a satellite office in Annapolis. They have a website. It’s a good resource to lean into. Check it out, Elite Income advisors.com that’s Elite Income advisors.com I’m Morgan Patrick. My pleasure to go back and forth with Prashant, Independent Fiduciary, about retirement each and every week, and a lot of times we’ll have John DeFeo on here. He is on assignment this week. We’ll welcome him back very soon. I also want to talk about this too, and this is unrehearsed. We, he doesn’t know it’s coming, but you felt like it was very important to have a special website that people could go to for taxes. Prashant, tell us about this. You’re getting a lot of traffic.
Speaker 1 34:35
Yeah, we sure are. So, a couple years ago, when we started really kind of refocusing our practice to help our clients understand taxes. One of the biggest, I think, misunderstandings that we found for folks was people didn’t really realize how much tax liability was truly embedded within their retirement accounts, because in the. Retirement accounts, you’ve saved all that money before tax, and so when you go to withdraw it, you’re going to pay taxes on it when you withdraw it. The challenge is that we were always told that we’d be in a lower tax rate environment when we got to retirement, and what we’re finding anecdotally now, but it seems to be a trend, is that our clients, who are really good at saving money, a lot of them are actually projected to be in a much higher tax bracket in retirement compared to while they were working, and that’s a huge growing concern for folks, and so we decided to build a website, and the website is test my tax bill.com Okay, that’s test my tax bill.com And when you visit test my tax bill.com it’s got a calculator on there. It’s totally free of cost to use. Now it’s just a projection calculator, but you’ll be able to put into the calculator how much you have in retirement assets, you’ll be able to model in a hypothetical tax rate and a hypothetical growth rate on your investments, and what the calculator will do is it will spit back to you a report that shows you how much embedded tax liability is built into your retirement accounts on a projected basis, and then what it will do is it will show you if you were to reallocate that money to a tax-free status by using something like a Roth conversion or using things like life insurance plans, how much money you may be able to save in total tax liability over the course of your lifetime. If you’ve never been through that exercise before, what I’ve been told is that it’s an eye-opening experience to understand the tax liability that is embedded in your retirement. I call it the financial termites, right? Like, if you think about the termites that could be in your house, hopefully not, but hopefully not, but in your house, financial termites, they slowly eat away at your foundation of your house until it’s too late. Taxes are the same way. Taxes are financial termites that eat away at your retirement, and you don’t even realize it until it becomes too late. Visit Testmytaxbill.com Play around with the calculator. You can run the report as many times as you want using any numbers that you’d like, take a look at it, and when you have questions, because I know a lot of you will, when you have questions, just dial our phone number, it’s 800-653-8404 Tell them that you want to review your test my tax bill report that you ran.
Speaker 2 37:35
All right, there you go, the website again, test my tax bill.com All right, scenario time, Prashant, here is your first one. Someone is planning to retire coming up this summer, so it’s right around the corner, but their 401 k dropped by about 18% with the latest market pullback. If they stop working now, they’ll be locking in those losses. Would it make sense to delay retirement a year or two to ride things out, or should they adjust their withdrawal plan instead.
Speaker 1 38:06
You know, I think intuitively the logical thing to do would likely be to just delay retirement until the market recovers. However, one thing that nobody knows is when is the market going to fully recover, especially with the latest Federal Reserve announcement that interest rate policy is going to stay the same, and they’re not going to actually cut rates, at least for right now. We got to think, how long is it going to be before the market recovers? So, what if you determine that you want to work another year because you want to wait for the market recovers, and we get to this time next year, and we find that the market is down even further than it started the year down this year. What would you do? Would you then delay another year or another two years or another five years? Like, how do you go about making that decision? So, my perspective is in order to figure out whether or not you should work longer or just retire now and deal with the consequences of losing that money, it all comes back to your income. Okay, when you know that your income is always going to be there for you the way that you need it to be to live your most fulfilling version for of life, you now know that you can retire. I think a lot of people just don’t know whether or not they’re actually projected to have enough income to live the way that they want to and need to live, and so that’s what it comes down to. It’s not about how much money you’ve lost or how much money you’ve made, it’s about how much income that portfolio can create for you, and whether or not that income is enough for you to live your most fulfilling version of life,
Speaker 2 39:40
we are in the middle of scenarios, and these happen all over the country, and you may hear a scenario that’s kind of what you’re going through, but just remember it’s not exactly what you’re going through, so many things are going to impact you, because retirement doesn’t happen in a vacuum, and you need to have a customized retirement plan put together for you, and you can get a. Retirement readiness review at any time by simply calling 800-653-8404 limited number of spots. They do go fast, but again, there’s no obligation here. You’re not bringing the checkbook. It’s 800-653-8404 All right, this next scenario: original retirement budget was built assuming 3% inflation, but look at groceries, health care, housing costs, that’s rising four to 5% a year. Should this person rethink how much cash they need to keep on hand versus invested, or even consider adjusting the long-term spending plan?
Speaker 1 40:38
I think it depends, right? It all depends on whether or not you have a rising income in retirement. I think while we’re working, we’re used to being able to get raises on our annual income, and so why should our retirement be any different? And so when we design our plans, we try to account for rising costs by making sure that our clients have rising income in retirement. Okay, the answer to higher cost of living is higher income, and so should you rethink how much cash you have on hand or adjusting your long-term spending? Yeah, I think you could do some of that, and there’s no doubt that making some of those adjustments could certainly be a help, but with that being said, I think you realistically have to look at how you ensure that your retirement income is actually going to increase over time and not stay stagnant. You did it while you were working, why wouldn’t you do it while you’re retired,
Speaker 2 41:41
so important, I mean, just having that plan, having an idea of how you want to go about your retirement. So many people are out there sitting on portfolios, and you’ve saved really well, you’ve put it away, but most of it’s in tax-deferred accounts. You don’t have a withdrawal strategy, you’re not thinking about the tax aspect. What about health care? I mean, again, I’m just throwing a few of the puzzle pieces at you. I mean, you really need to have a plan for all of this. We’re in the middle of scenarios. I got time. I think we got time for maybe one or two more. Here’s the next one. This person is downsizing. We’ll say it’s a couple selling their home, but the mortgage rates are now over 7% which could hurt their sale price. Should they think differently about their housing strategy? If selling today could mean getting less than they expected.
Speaker 1 42:30
I think this comes back to priorities. You know, my dad actually called me recently, and he used to own this big, beautiful home. He ended up selling it because it was way too much room for him, and believe it or not, he took all the money that he netted from the sale of the house, and he actually just went and rented his next place, and now he’s like semi working, semi retired, but he’s renting the house, but he called me up and said, “My landlord is giving me the opportunity to buy the house, okay, should I do it, and I asked him a simple question. What’s your priority? Do you want to be a homeowner at this stage of the game? Do you want to take on the added headache of when something breaks that you have to deal with it? Is it important to you to have an asset that you’re living in to be able to leave to somebody else one day, right. And so, whether you should sell your house or not, now clearly it’s a personal decision, but it depends on your priorities. I wouldn’t say that it depends on where mortgage rates are or how much you’re going to get for the house, certainly that’s part of it. But what’s important to you, is it more important to you to sell the house, and maybe move to that beach house that you have somewhere down south, or is it more important to you to maximize the proceeds on the sale of your house? I think we just have to think about these things in a different way. Sometimes it’s not all about the money, it’s about what brings you the most peace of mind, and if selling the house is going to give you more peace of mind, then I think that there’s a tremendous amount of value in doing that. So, sit down with your advisor, review your income plan, review your tax plan, and then review how you feel about these decisions, and put all that together, and you will make the right decision for yourself.
Speaker 2 44:16
I tell you, this is a personal question. All right, this next, How cool was it to have your dad call and have that kind of conversation? I mean, here’s, here’s the guy that you’ve leaned into your entire life, and he called to ask that question. That’s pretty cool.
Speaker 1 44:29
It is very cool, and you know, it’s very fulfilling. I mean, it shows a level of trust. My dad is, full disclosure, my dad is one of my clients, so that’s kind of, that’s kind of cool, but he’s asking for my professional advice. I also think, by the way, he’s asking because he knows I’m the guy that’s gonna inherit the thing when he’s gone, but, but hey, that’s a different conversation altogether. But yeah, it is very fulfilling, and honestly, what’s really neat for me, Morgan, is that those types of questions are the types of questions my other clients. To ask me every single day, and what I love is, I love the client that’s going to ask, “Hey, what do you think I should do, as opposed to the one that asks or says, “Hey, guess what I just did, right? So it’s a big part of it, folks. This is the last opportunity for today’s show to pick up the phone and give us a call. That phone number is 800-653-8404 It’s a complimentary retirement readiness review. If you’re not sure where you stand for retirement, dial that phone number: 800-653-8404 You can also visit Retire maryland.com to book that complimentary visit with our team of retirement specialists. It’s just a conversation. You come in, we see whether or not we’re a good fit for each other. We’ll see whether or not we’re even the right match to help you plan for this important next phase of your life.
Speaker 2 45:46
Retire Smart Maryland Radio. We had a warm and fuzzy moment there. It’s not just about clients, it’s about relationships. Retire Smart Maryland Radio, another edition is in the books for Prashant Sabapathi. The I’m Morgan Patrick. We’ll see on the radio next week, you annuity
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