Speaker 1 0:02
We all make mistakes with money. Yes, even financial professionals have stories they’d rather not repeat, but that really matters is what you do next. Today, we’re talking about how to recover from financial missteps without compounding the damage, and maybe even come out stronger on the other side.
Speaker 2 0:20
Welcome in to Retire Smart Maryland Radio with Prashant Sabapathi. Welcome in to Retire Smart Maryland Radio, your host, John DeFeo, independent fiduciary with Elite Income Advisors, headquartered Ellicott City Satellite Office in Annapolis. I’m Morgan Patrick. My pleasure to go back and forth with the advisors at Elite Income Advisors, each and every week, the importance of having a plan, being proactive, being ready for your retirement. We hit the topics each and every week, and as we always do, before we jump in. John, how was the week?
Speaker 1 0:55
It’s been great. Yeah, busy as usual, a lot of traffic in and out of the office. You know, typically this time of year it does start to slow down a little bit, as you know, folks are starting to go on vacation, kids are getting out of school, there’s graduations, but even with that slowdown that we typically see, we’ve seen a good bit of traffic. I think the volatility in the markets have a lot to do with that. You know, the, you know, potential for this, this new big beautiful bill to be passed has certainly been causing some concerns from folks, so you know, in terms of new clients, old clients, we’ve got a lot of people coming in and out, so always a good thing to have.
Speaker 2 1:28
Hey, we’re here to help. We’re here to help. If you’ve got any questions about what’s going on with your portfolio, there’s going to be an opportunity to get into the office, grab one of our complimentary appointments. We’ll tell you about those as we move through this first portion of the show. So, let’s be honest, money isn’t just math, it is emotion, and sometimes even the most disciplined savers or investors can make a decision that’s a mistake and they regret it. Maybe it’s chasing that hot stock tip – we’ve all done that before – and then it goes cold, maybe dipping into retirement savings for an emergency, or waiting too long to update the estate plan. These are all on that list. Whatever it is, you’re not alone, and it’s not the end of this story. So today we’re going to unpack how to recognize, recover from, and rise above these types of financial missteps, so John, I’ll give you the misstep. You tell us what to do. So, the first one, and we’ve all been there, normalizing the occasional misstep. Ah, you know, it’s just a little bit of a mistake, and you know, you know, I won’t do it again
Speaker 1 2:34
until you do it, right? I think it really depends on, you know, the magnitude of the misstep, you know, what’s been done? I think it’s easy to feel shame when we think about money mistakes, but the truth is, I mean, there’s, you know, a lot more common than you would realize. I mean, even folks like myself, as a CFP, have made money mistakes in the past, and so long as you learn from them and you don’t do, you know, anything dramatic to try and rectify it, you’ll probably be okay. There was a survey in 2023 from Bankrate that showed that only 22% of Americans say that they have absolutely no regrets about how they’ve handled money, so you know that leaves a pretty significant amount of the population that do admit to making those mistakes, and I would argue that out of that 22% there’s probably some folks that either don’t realize that they made a mistake or they’re too proud to admit it. I think that everybody, at some point in their life, has made some sort of financial mistake, and it’s okay, so long as you learn from it, just like anything else in life.
Speaker 2 3:30
So, financial missteps, it’s almost a given, but how do you, how do you recover from those and not dwell? So, here’s the next one, and it kind of deals with that. Why compounding regret can be worse than compounding interest.
Speaker 1 3:45
Yeah, I mean, the temptation to fix that financial error in a quick manner, it sometimes can lead to an even riskier decision than the original one made, right? Like, maybe you pray, you know, rack up some high interest debt, and to pay that off, you take money out of your 401 k, which results in a hefty penalty and a high tax bill, less money to compound and grow over time. You know, there’s certain situations where it might make sense, where it wouldn’t, but you know, again, making a drastic decision to try and fix a mistake without seeking a professional’s opinion could be just as devastating as that original choice. So, it’s important not to dwell on these things too much. Try not to let your emotions get in control, you know. Assess what’s been done, you know. Talk to a professional, talk to an advisor, you know. Slow down a little bit, see, you know, how to get out of it. You know, there’s not many financial situations or mistakes that can’t be fixed, but sometimes you have to be patient in doing so,
Speaker 2 4:41
I tell you, it’s so important to just be aware, be in touch with what’s going on with your retirement plan, and there are a lot of you out there that just sitting on a portfolio haven’t thought about the planning process, and there’s a lot that goes into it. So, getting rolling on it, the opportunity, it’s ongoing during the course of this show, all you got to do is call 806 53840 Four, grab one of our 10 complimentary appointments, get into our top 10, grab one of these again, no cost, no obligation, 806 5384040 so, so now we move to again, these are the mistakes, these are the financial missteps, and what do we do if indeed we make them? I love what you said there, John, where most of these you can recover from, so what is a financial equivalent of a do-over?
Speaker 1 5:26
Guess, in my opinion, a do-over would be, you know, reversing or correcting a mistake that you’d made without risking other assets or other mistakes. If that makes sense, so you know things like, you know, tax loss harvesting or restructuring debt, you know, consolidating to a lower interest rate, you know, there are even some cards that offer 0% rates for balance transfers, you know, those can be ways to get out of, you know, financial mistakes. Think a good example of this would be we had a client that had made a pretty, pretty poor stock selection, not going to name the company, but he bought in when they were really crushing it. They have since declined significantly, probably lost, you know, 50 to 60% of his value. So now he has a stock that has been, you know, performing terribly, you know, lost a lot of money. And what we’ve done is because he’s a higher earner and he has some, some other income and other things that he’s working on, and some other gains and other investments, we’ve done some tactical what’s called tax loss harvesting, so we sold out of that position, as we don’t, you know, we don’t foresee that recovering, and we’re able to offset some of the gains in some of his other positions with those losses, and what we weren’t able to offset, we were actually able to carry forward every year, you’re able to carry $3,000 worth of long term losses forward each year to offset income in the future, so we were able to do that for him, offset a lot of gains in the current year. So that’s just an example of how you know, even picking up poor stock, you know, making a mistake can be, you know, turned around and used as an advantage.
Speaker 2 6:56
Well, we’ve all, we’ve all been on, and this is the next one, we’ve all been on sports teams, and we’ve all heard the great coaches, and a lot of them will tell you they learn more, or it’s a more teachable moment after a loss, as opposed to a win. So, the next one, sometimes the lesson is more valuable than the money loss. So, yeah, you took a hit, but you learned something.
Speaker 1 7:21
Yeah, I think that’s the most valuable thing that you can take out of it. I’m very strong believer in this, that mistakes and failure is a part of success. So, in order to be successful in investing and in planning, you’re going to make mistakes, you’re going to fail. What’s important is getting back on the horse, you know, getting back to work. You know, there’s a biblical principle in Proverbs 2416 that says, though the righteous fall seven times, they rise again. Right? You gotta keep getting back on the horse. Don’t let mistakes, or you know, issues with your financial plan derail you. You know, talk to someone like ourselves, you know, get back on the horse and get about your day.
Speaker 2 7:57
And don’t be embarrassed about it. I mean, this is personal. We get it. It’s your money, but you’ve made a mistake, you know. Work with professionals, work with a fiduciary, and get on that road to recovery. When it comes to your portfolio, we’ve got appointments again with elite income advisors. John, tell us about them.
Speaker 1 8:13
Yeah, you come in, we’re going to talk through your current concerns, priorities, put together a comprehensive plan that touches on your income planning, tax planning, estate planning. We’re going to talk to risk management. We’re going to x-ray your existing investment portfolio, see if there’s any opportunity to improve, really drill down into the holistic approach of financial planning. Not completely complimentary, put that together for you. So, again, you know, come into the office, we’d love to, love to have you.
Speaker 2 8:40
All right. Here’s the phone number. Grab one of these complimentary appointments: 800-653-8404 Again, there’s no obligation, meaning you’re not agreeing to become a client. They’re not going to try to sell you anything, and they’re not agreeing to take you as a client. This is a test drive. Call now: 800-653-8404 10 appointments this week alone, grab one now. They will not last long. 800-653-8404 We’ve got more Retire Smart Maryland radio coming up. We are back on Retire Smart Maryland Radio. Your host is John DeFeo. You can find him at Elite Income Advisors. They’re headquartered Ellicott City Satellite Office in Annapolis for your convenience. The website Elite Income advisors.com wonderful resource for you. Check it out, Elite Income advisors.com I’m Morgan Patrick. My pleasure to go back and forth with the advisors each and every week at Elite Income Advisors, and we give you an opportunity to take action on your own behalf when it comes to your retirement. Maybe you’re sitting on a portfolio, haven’t thought about the planning process, you can do that now, or you’re halfway down. On the path, you’re frustrated, maybe the appointments getting moved around, your calls aren’t being returned. It is time for a second opinion. We’ll tell you how you can get that appointment again. We’ve got 10 this week, our top 10 available to you, but they don’t last long. So, when we give you the number, call and book an appointment. So, when you’re getting close, John, to retirement, there are a lot of loose ends you got to tie up. I mean, think about it: estate plans, health care, maybe a travel trip or two in the go-go years. But one of the biggest and most urgent questions is, How will I replace my paycheck when I stop working? So that’s huge. You’ve worked hard for decades, you’re in this rhythm, you’re in this, this is what you do, and now it’s time to make sure that your money works just as hard for you. So, let’s break down some of the most impactful, effective strategies to create reliable income in retirement without, and this is key, getting overwhelmed. Okay, so let’s do this first one, social security. I mean, this is going to be part of your retirement. It could be part of that foundation.
Speaker 1 11:06
Absolutely, and this is typically where we start when building out a client’s financial plan. You know, we want to drill down into the foundational income sources that are available, where we know that money’s coming in every single month, regardless of what the market’s doing, of what their account balance is, you know, it’s a guaranteed stream of income, and you know, at Elite Income Advisors, we are all about the income, that’s where we believe the strength of your financial plan comes. You know, we get people that ask us all the time, Do I have enough to retire, and the answer is, we don’t know, right? We don’t know if your number’s a million or two or 3 million, it’s all about what your retirement will cost, and what income sources we can draw from. Right, so starting with Social Security, you know, about 90% of Americans over the age of 65 receive Social Security benefits, right? The 10% maybe they hadn’t, you know, worked long enough to collect, you know, didn’t earn the credits, or maybe they, you know, worked for an old-style retirement system, you know, like the civil service retirement system, there’s different situations, but most people will have a social security benefit available to them, and you can take it as early as 62 as of today, or you can delay out till 70, right? So, obviously, the earlier you take it, the less the benefit will be. So, there’s strategy behind when to take that, it’s something that we do on a daily basis with our clients, but it’s, you know, it’s very powerful, because it’s inflation adjusted, you know, you’re going to get an increase to that benefit every year based on the cost of living, you know. I think it’s a fantastic benefit to utilize, but the problem is it typically is not enough to fund 100% of a retiree’s lifestyle if they want to continue living at the same standard or higher standard than when they were working, right. So, social security was designed originally to be $1 for dollar supplement back in 1935 When it was created, the problem was the life expectancy back in 1935 was not what it is today, right. It was about 64 and a half, and full retirement age in 1935 was 65 so half the population didn’t even get to receive the benefit. Now we have a system that’s a bit underfunded, we have some issues. So the reason I bring all this to your attention is because it is a part of our clients’ income streams today, but most plans require additional income, and I think we’re going to talk about those additional sources, here in a minute,
Speaker 2 13:21
very important again to be on top of this effective strategies to create reliable income in retirement. We’re going over those, obviously. Social Social Security is going to be there, but it is not the end all be all. It is a supplement. Make sure you’re planning in and around that. It is going to be one of your puzzle pieces, we talk about that all the time. All right, so this next one again, thinking about strategies for that, you know that reliable retirement income. If you’re lucky enough, John, to have a pension, you are one of the few, right? But on the flip side, there is a product, an annuity, where you could create your own pension, and that is predictable.
Speaker 1 14:05
It certainly is. And you know there are far and few between folks that have pensions these days. You know, they’ve really been taken away as a benefit. Now people are forced to save their own money in these defined contribution plans, like four or 3b’s TSPs. So a lot of folks that come into our office are not blessed with the opportunity to draw on a pension, right, where they’re guaranteed income for the rest of their life, regardless of what happens. So there are ways of turning your own personal savings into your own personal pension, right, and that is in way of an annuity, and there are different types of annuities, you know, I’m sure you know you’ve heard certain people have negative connotations on annuities, but you know it’s a tool in the tool belt, just as anything else is. There are stocks that aren’t the best for folks, there are bonds that aren’t the best for folks, there are annuities that aren’t the best for folks, but that doesn’t mean that you eliminate all of them as an option. The annuities that we prefer happen to be. Fixed indexed annuities, these are more deferred, where you put the money in, you’re still going to be able to access your principal, you’re not handing over a lump sum of money to an insurance company with the hope that you outlive the payments, right? I think most people are familiar with that type of an annuity, which is called an immediate annuity, but the annuities that we utilize in our firm are very low cost, if at any cost at all, for a lot of these, they give you upside market participation with zero downside, and it allows us to ensure that your nondiscretionary income is predictable. You’re able to ensure guarantee that you’re going to have that money coming in on a monthly basis, just like a pension would afford you. You’re not worrying about if the market’s up or down, you know that you’re guaranteed with the principal, so it’s a great way to either provide yourself a pension, provide yourself downside protection to take income on, you know, a certain basis, and we really prefer to go that direction. If someone is in need of income in retirement and they don’t have a pension, social security isn’t covering it all, a lot of times that makes sense, so you know, I think it’s a great strategy. Sometimes these things will even offer inflation protection, so the guaranteed payments will increase over time. You can have it where your spouse continues on with that income for the rest of their lives with a survivorship option. A lot of different opportunities and benefits that come with these solutions, but it’s not for everybody, right, and I think that’s why it’s important to talk through your objectives, talk through what you have going on, and then you know determine if it does make sense. So that’s what coming into our office works.
Speaker 2 16:30
I mean, see if it’s a good fit, obviously it could be a pretty big puzzle piece for your retirement portfolio or not. And I think that the annuity suffers from past history, and a lot of people feel like they’re only a handful of annuities, and none of them, you know, none of them are good. Well, that’s not the case. I mean, you can have these conversations with elite income advisors and see if there is an annuity that is a good fit for what you’re doing. Again, just educate yourself, ask questions, get that information and make an informed decision from there. Again, when you are talking about creating that income in retirement, something that is reliable, that is predictable, think obviously you’re going to get social security in some form or fashion, most of you, and then you’re going to have the pension if you’re fortunate enough to have that, or you could create your own pension with an annuity type product. Now, the 4% rule – we talk about this all the time, John. I mean, there’s – I mean, it’s, it’s, it’s out there. If you’ve got $1,000,000.04 percent, that’s what you withdraw, and you know, hopefully you don’t run out of money. But guess what? We’ve got inflation, we’ve got taxes, we’ve got all this stuff that’s going to impact that 4% rule. So, there’s a little bit of a modern twist to this.
Speaker 1 17:42
You’re absolutely right, and this is a rule that I had been taught to live by early in my career. Hey, 4% rule, rule of thumb, you know, you’re pretty guaranteed, but in today’s economy, with higher inflation, potential higher taxes, more volatility in the market, you know, I would say that it’s probably closer to a 3% rule. I mean, there was a Wall Street Journal study done, believe, back in 2021 2021 that said the 4% withdrawal rule has a 57% chance of failure in today’s economy, right? If you’re getting ready to go on a plane, travel down to Boca Raton, or the Keys, or, you know, the Hamas, wherever you’re going, the pilot said, ‘Hey, when we get there, beaches are going to be beautiful, the skies are clear, but there’s a 57% chance that we’re going to get there, right? You getting on that plane? Probably not, right? Probably only if it’s a point 0000 1% chance, right? So, why would you take that chance with your retirement money as well, right? So, although the distribution rate you’re taking is certainly impactful to the plan. We no longer feel that a 4% distribution rate is sustainable. We’re more confident in a 3% distribution rate, but I would argue that securing your money into a solution that doesn’t have any downside is the best way to do it. Again, we want to ensure that your non discretionary income is certain, that you’re not going to have issues with the markets doing so again, just looking at these statistics, changing the way that we look at financial planning based on how the economy evolves, the world evolves, and you have to constantly change these plans. We tell people all the time, the plan we have today might not be the same plan we have in five years, based on the changes in legislation, economy, your lifestyle, so we have to be flexible. I think that’s very important.
Speaker 2 19:26
Yeah, we’ve had this conversation many, many times between Prashant, Azza, yourself. The flexibility, the open-mindedness, when it comes to planning, is not set it and forget it, because things happen, things change. We often say that retirement doesn’t happen in a vacuum. Things are going to impact you, and you’re going to have to pivot, shift, change. Just be aware of it again. Just going over some strategies, you want that predictable income in retirement bucket strategy. Next, this might be the last one we have time for, John, but just. Organizing your money based on your time horizon.
Speaker 1 20:04
Yeah, I think this is huge. Right, we are big proponents of a bucketing strategy where you separate your assets into different buckets based on time horizon and ultimate goals, right? So we want to have a short-term bucket that’s going to be your operational funds, you know, think of your bank accounts, you know, checking, savings, the money you’re using on a regular basis to fund your lifestyle, not searching for high rates of return, just operational cash, right. The next step up from that is going to be your intermediate bucket, or your pension bucket, is what we would call it. And in this type of a bucket, you know, you want to have solutions that produce income with no downside potential, right, so you’re not taking a lot of risk in these types of accounts, you’re utilizing this for guaranteed income in retirement, whether it’s through an annuity, some sort of bond ladder, or bond strategy, there’s, you know, some CD strategies that would be employed here, so it just depends, but again, this is a safe bucket of money that is guaranteed to provide income, and then finally you have your long-term bucket, right? You’ve got your stocks, your growth investments, the money you’re using for your legacy, for long-term care down the road, for, you know, maybe big purchases, those types of things. So we’re big on separating those assets, and we create that into every retirement plan we work on.
Speaker 2 21:19
Yeah, building that reliable income in retirement. We’ve been talking about that in this portion of the program. If you’ve got any questions about your situation when it comes to retirement, now’s the time to call. We have complimentary appointments. John, walk us through them.
Speaker 1 21:32
Yeah, you’re going to come in just a conversation, right? Nothing being sold. We’re just going to identify where you currently stand with your financial plan, if you have one, talk through your concerns about where you are today, where you’d like to be in retirement. We’ll build out a lifetime income plan for you, addressing the tax implications, inflation. We’ll talk through risk management strategies, we’ll do an x-ray on your investment portfolio, determine where you are today, if we have any suggestions on making a change, and ultimately put together a holistic financial plan for you, you know, and if it works out, great. If not, that’s okay too, you know. It’s a small town, we’ll still see and say hello. We’re just here to help at the end of the day,
Speaker 2 22:13
here to help, end of the day, that’s what it’s all about. Here’s the phone number to call, grab a complimentary appointment, 800-653-8404 that’s 800-653-8404 Again, 10 appointments jump into our top 10. It’s complimentary, 800-653-8404 More Retire Smart Maryland Radio coming up, you We are back on Retire Smart Maryland Radio. Your host is John DeFeo. You can find him at Elite Income Advisors. They’re headquartered in Ellicott City. They’ve got a satellite office right there in Annapolis. The website Elite Income advisors.com is a resource for you. Check it out, Elite Income advisors.com There are links to the TV show, radio shows, and podcast form. It’s all about giving you the information you need for retirement planning. We give you an opportunity to get on their calendar through this radio show, and those appointments, they’re complimentary. There are a lot of you out there that are procrastinators. I procrastinate on a lot of things myself, but on retirement planning, you need to get ahead of this. You need to be proactive. It will lead to confidence as you move towards your retirement date. Easy to grab one of our 10 appointments, jump into the top 10 by calling 800-653-8404 that’s 800-653-8404 They’ll sign you up for one of those complimentary appointments. All right, Morgan Patrick with you. And again, John is on our program today and giving us some great information. So, when it comes to retirement, most of us have the basics covered: savings, social security, maybe even a plan to do a little traveling, maybe take up that new hobby, but what if you could go beyond those basics? What if your retirement could be great instead of just good? I’d take that. Right, in this segment we’re gonna dive into some key questions that can help you raise the bar and build a retirement that’s not just secure, not just good, but truly fulfilling and great. All right, so the first question I’ll throw it at you, John. Here it is. What’s your definition of a successful retirement, and is your current plan aligned with that vision? These are questions you need to ask yourself.
Speaker 1 24:38
Yeah, I think this is a very interesting question. I think everybody’s going to have a different answer, of course. I think, in my opinion, the definition of a successful retirement is peace of mind, is the assurance that you are not going to run out of money, that you can live the life that you had always dreamed of as you were working, and that you’re not concerned. About what’s going to happen if the market’s down, right? You can, you can live your life, you can do the things that you’ve always dreamed of doing, and that takes planning. You can’t just wing it, you know. We had a set of folks that came into our office recently, and you know, they had a sizable amount of assets and done a great job saving, and you know, they were thinking about retirement in the next few years, and more than likely the plan that they put together would would be okay, but they didn’t pull the trigger just because they didn’t think they could, and you know, looking at their, their plan, it was obvious they’re going to be in good shape, but they mentally couldn’t get over that hurdle, they didn’t feel the peace of mind, and when we introduced a solution like a fixed indexed annuity, where we said the income that you need in retirement can be guaranteed. We can assure you peace of mind with this solution. Can still invest, you know, more than half of your money traditionally for growth, for your kids, your legacy, for inflation hedge, but the money that you need to live for the next 20 years. If I could guarantee that to you, what would that mean? And they’re filling out paperwork to retire at the end of this year, after that conversation, right? So I think having the plan, having the confidence, the peace of mind, in my opinion, is the definition of the successful retirement. I
Speaker 2 26:09
mean, think about what’s the value of that. I mean, to have that kind of confidence as you’re moving towards retirement, knowing that your income is there, you’ve got your basics covered. Again, this is all about planning, folks. Again, these are questions, these are key questions that will help you kind of raise the bar on your retirement. So, the definition – know the definition of what you feel is a successful retirement, and maybe you enhance that a little bit, maybe you do a little bit more planning. How about this one? Are you confident that you understand all the moving parts of your retirement plan, or are you just trusting someone else to do that for you?
Speaker 1 26:44
Yeah, I think this can go two directions, right? I think it’s very important to be confident in the way that your plan works, and knowing your moving parts, understanding how the financial plan works, but I also feel as though you should be able to trust someone to do that for you, right? If you didn’t grow up in this industry, you didn’t go to school to be a financial advisor, you have not studied the intricacies of this industry, you probably don’t want to learn that, as in retirement, right? You don’t want to learn a whole new skill and do all of that. At least we hear that from a lot of our clients, you know. And I think that’s that’s very powerful. So, you know, having someone that you can trust to manage that plan is extremely important, you know. When we work with our clients, we don’t move forward with any financial plan until our clients understand every last aspect of it, right. And we’ve talked about this in previous shows. The financial industry can be quite complicated, so you might not grasp every last thing in that plan, but we’re going to ensure that you understand the most important parts, right? The things that significantly impact you. We want to make sure that you’re on board, completely confident in that. So, you know, I think that it’s important to be confident in the plan, but it’s also good to have someone to trust and lean on in those situations, especially if you’re the one that manages the finances and your spouse doesn’t, right? Then you have somebody that then to fall back on as well.
Speaker 2 28:03
Well, if you’ve ever been, let’s just use an example, you’ve ever been on a cruise, right? You’re out there, they do safety drills, it’s mandatory, you have to be ready to get off that boat if something happens. So this next one falls right in this line. Have you ever run your retirement plan through a stress test for market crashes, inflation spikes, maybe a health care shock. I mean, knowing what your portfolio and your plan can take,
Speaker 1 28:32
this is a very important one. It’s something that we’re very passionate about. When we build out financial plans for our clients, we don’t build out just one plan, we build out four or five, six different scenarios in anticipation of these types of things. Right, we use higher and lower inflation assumptions, we use higher and lower tax assumptions. We’re going to look at different market outcomes through Monte Carlo simulations. You know, there’s a lot that goes into testing these types of results. I mean, we even look at what happens if a spouse passes away, what happens? You know, if there’s a long-term care event, how does that affect the plan? So, all of these things we have to take into consideration. You can’t just set up a static plan, set it and forget it like you were when you were working. You have to have, you know, more oversight, more tactical movements in that plan to ensure that if one of these types of events happens, inflation runs higher for longer, if taxes go up, you know, if health care costs continue to go up at the rate that they are, that you’re prepared and ready for that, and that we didn’t overlook that type of thing. So, very important, we do that with every client.
Speaker 2 29:34
Yeah, it’s so important. I mean, we’re just going over some key questions you need to have answers to. I want to jump to this one, John, and get your thoughts, because this is very important. Again, elite income advisors thought it was so important they created a website for this. What is your tax game plan in retirement, and are you prepared for higher taxes down the road? And again, Elite has come up with testmytaxbill.com Yeah, another topic we’re
Speaker 1 30:02
extremely passionate about. You know, we have legislation right now that’s getting ready to be put through that could extend the tax codes that we saw in 2017 So, there’s some strategy behind that, you know. We’re in the third most favorable marginal income tax bracket in history, so a lot of tax planning that we can do, you know with the anticipation that down the road taxes will be higher at some point in time? Right. Look, folks, you know the federal government will come out and say, or the current administration will come out and say, we’re going to put in a permanent tax code, right? This tax cuts are going to ride out forever. In reality, that’s just impossible, right. Congress controls the purse, another administration can come in, write a different bill that does increase the tax code, so our assessment of where we are with our national debt continuing to roll up, you know, we’re about that $37 trillion now, you know, every tax cut that we have today is just a deferred tax increase down the road, in our opinion, that’s also of Congressional Budget Office, so you know we have to be mindful of where taxes are going, where they are today, and figure out how to navigate that through things like Roth conversions, through tax loss harvesting, looking at different strategies like HSAs, tax deferred accounts, so there’s a whole gambit of resources out there that we utilize, and that’s why it’s important to utilize a financial advisor. Right, do you have a game plan to mitigate the taxes for yourself, maximize your income in retirement, and maximize the wealth transferred to your beneficiaries? If not, might be a good opportunity to give us a call, have us review the plan, see if there’s any suggestions we might be able to make, and have our in-house CPA do the final look over to ensure that the plan works out.
Speaker 2 31:42
It’s, I mean, it’s just important to be ready. These are just some questions you need to be asking. The last one, and you kind of hit on this. Who’s your retirement board of directors, and are they fiduciaries committed to your goals, not theirs?
Speaker 1 31:58
Absolutely, every advisor in this office as a fiduciary advisor, right? You work with Oz, you work with Prashant, you work with myself, Connor Wilson, any of these guys, even our pair planners, the folks that are behind the scenes crunching the numbers, you know, putting these plans together, are all licensed fiduciaries. So we’re very big on that. You know, you’re getting the best when you come into our office, and we’re very proud of that acumen.
Speaker 2 32:23
All right, we’ve got 10 appointments. John, walk us through what’s going to happen.
Speaker 1 32:27
Yeah, you’re going to come in, and we’re going to have a conversation. That’s it. We’re going to talk through where you are, where you’d like to be, what your concerns with your existing plan, if any, are what your priorities and goals are. We’re going to take a look at where your income is coming from, you know what retirement will cost you. What do you want to be doing? Put together a lifetime income plan to ensure that you’re successful, regardless of what the market’s doing. We’re going to talk through risk management strategies. We’re going to do that x-ray on your portfolio to see where it stands. If we have any suggestions to make it different, going to look at your tax implications now and in the future, put all of that together in a holistic plan, and hopefully it is something that does empower you to hang up that hat, make that final decision to retire. If we can help you with that, give us a call, we’re happy to do it.
Speaker 2 33:14
Stop procrastinating, grab one of these appointments, we’ve got 10 of them, 800-653-8404 but when they’re gone, they’re gone. Call now: 800-653-8404 When we return, it’s time for retirement scenarios. I’ll throw him a job. We’ll see what he comes up with. Retire. Retire Smart Maryland Radio, your host John DeFeo. You can find him at Elite Income Advisors, the power behind this program. He’s an independent fiduciary. They’re headquartered in Ellicott City, and they’ve got a satellite office in Annapolis for your convenience. I’m Morgan Patrick. It’s my pleasure to go back and forth with the advisors each and every week. The importance of having a plan, it is paramount. Get ready for your retirement, have that confidence, peace of mind as you move towards your retirement date. And you’re out there sitting on a portfolio, congratulations, you’ve saved really well, you’ve worked a very long time for this, but what’s the plan? We’ve got an opportunity for you to take the next steps, if you would like, and these are complimentary appointments. We’ll tell you about those now. Listen to these scenarios. These are retirement scenarios we grab from all over the country, and we present them to our advisor, that would be John. And let’s see what he would do now. Take these with a grain of salt. You might have something similar going on with you, but you need a customized plan, because your puzzle pieces are completely different from anybody else’s. But take these with a grain of salt. Let’s have some fun. First one up, they’ve noticed that the grocery bill, utility bills are creeping up nearly 20% over the last three years, and now they’re starting to wonder. If their current withdrawal strategy is still sustainable, so how should someone adjust the income plan to keep up with inflation, John, without running their savings dry?
Speaker 1 35:12
This is really important, right? Especially considering that the cost of living adjustments that you get on your social security benefit don’t include food in that adjustment, right? It’s based off the consumer price index, and the consumer price index strips out food and energy from that report, so it’s not included in your social security increase. You have to build in an inflation hedge within your savings, you know, your investment portfolio through exposure to stocks and equities. I mean, that’s the best way to hedge against inflation. Now, you know what I would say is that you have to build this into your plan when you create it. You know, it’s probably too late if you get to the point that you have to adjust your plan, maybe 510, years in, and you’re assuming your retirement would be successful off of a static number, right? So, in our financial plans, we always assume inflation throughout the entirety of the income plan, so that we don’t miss out, right? If inflation does continue to go up at a higher rate than expected, you know we’re ready for that. We’re increasing the distributions on an annual basis. So, I think it’s important to build in that inflation hedge, assume that your distributions are going to need to be increased year over year based on what inflation does, so I think that’s what you have to do, right? You have to assume every year that you’re going to need more money than the previous year, whether you do or not, and if the year doesn’t have a significant amount of inflation and the next year you do spend relatively the same amount of money, then your plan is better for it, right? So definitely important to build this in. We do this with every one of our plans.
Speaker 2 36:44
Scenarios, they happen all over the country. You’re probably going through your own scenario. The opportunity to come in to Elite Income Advisors and talk about that scenario, talk about the planning process, discuss what your goals are for retirement, and maybe get the ball rolling on the planning, or get that second opinion. Well, you can grab an appointment at any time during this segment. 800-653-8404 We have 10 of them. We call it our top 10. You can get into the top 10 simply by calling 800-653-8404 Again, this is complimentary, no obligation. You’re not agreeing to become a client, and elite income advisors not agreeing to take you as a client. This is a test drive. 800-653-8404 All right, here’s the next scenario, John. They’re in their early 60s, semi retired, and in a low tax bracket this year due to a part-time income. Would this be a good window for a partial Roth conversion, and how much is too much to convert without triggering other tax issues like higher Medicare premiums?
Speaker 1 37:51
This question has a couple of moving parts, so it’s a bit difficult to answer straight out, as most questions we get are all, you know, subject to more information, but I would say, you know, at a high level, a couple that’s in their early 60s, semi-retired, low tax bracket, probably would be a good opportunity for a Roth conversion. Again, it depends on the size of their pre-tax assets, depends on their goals in retirement, their income needs, their intentions for their beneficiaries. All of this comes down to actually, if a Roth conversion makes sense, and also, do we expect our future tax rate to be higher than our current tax rate? I think all of that has to be looked at, and if the answer to all of that is yes, and I think it does make sense to look at a conversion now. The amount you convert also depends on your goals. We have some clients that are okay with taking a higher Roth conversion now, paying higher taxes, so that their kids don’t have to pay taxes on it when they inherit it, right? There are some people that say, you know what, I would rather not pay more taxes now and let my kids pay those taxes when they inherit it. So, there are different trains of thought when it comes to Medicare premiums, your Medicare Part B premiums that you have to pay for your, you know, your medical insurance at 65 are income driven, so look back at the previous two years of your adjusted gross income, and that determines your premium. If you’re married filing jointly and you earn less than $212,000 in that two years, your premium is the lowest premium, I think it’s about $185 per person, as of 2025 You go $1 over that amount, the premium increases for both of you, and there’s different tiers where you can get it up to the point that you’re paying almost 600 $700 a month per person in premiums. So it’s important to be mindful of that, but we also have clients that say, “Hey, look, I’d rather get a couple extra dollars into that Roth IRA, the tax savings that I’m going to have long term outweighs the additional premium costs that I might have to pay for the next two to three years. So you know we have to do that analysis, we have to determine what the client really wants to do and make that determination from there. So at a high level it could be a good opportunity, how much and into what. Degree that is really up in the air.
Speaker 2 40:02
It’s all about having the plan and being ready for it, understanding what’s going to impact you on your way to your retirement date and all the way through those retirement years. So, work with fiduciaries, map this stuff out, have those reviews, make sure you’re on the right path, and if you’re a little bit off, that’s when you pivot, that’s when you talk about maybe just a little bit of an adjustment to your overall plan, but again, work with pros. We’re going to give you an opportunity to get on the calendar with Elite here in just a little bit, so stay tuned for that. All right, your next scenario, John, is this one: they’ve always dreamed of spending a month in Italy to celebrate their 40th anniversary, but the $15,000 price tag is giving them pause. How can someone decide if they can afford a big bucket list trip like this without derailing the long-term financial plan?
Speaker 1 40:54
Hey, if they can spend a month in Italy for $15,000 I’m impressed. I was gonna say that’s a
Speaker 2 40:59
little low.
Speaker 1 41:00
Yeah, I mean, that’s, that’s, that’s impressive, but what I would tell them is, you know, we have to map it out right. A lot of our clients, we suggest putting in an annual budget for trips, even if it’s, you know, one they want to take every couple of years. We budget that in on an annual basis. You know, I would say, if that, you have a significant amount in savings, if your income plan is working with your other foundational sources, and you can swing it. Absolutely, we would suggest doing it, but how do you decide if you can afford it? I think you have to have a plan in place, right? $15,000 being taken out of someone’s account that has $500,000 but a pension and social security that gives them all the income they need is much different than somebody taking $15,000 out of a $500,000 account when they’re living on that 500,000 for income, right. So it depends on the situation, you know. I would say if you have all the income that you need solidified through foundational sources like social securities, pensions, annuities, whatever the income strategy is, then you have some extra cash and you want to go do it. Absolutely, another thing that we do quite often for our clients is, you know, if their growth bucket is really high, you know, it’s appreciated significantly. You know, we had a good two years. We just did this for a client at the end of 2024 Take some of those gains and move it over into your green bucket, right? Move it into a vacation fund. Take some of those gains you’ve got, go do something fun with it. We typically wouldn’t suggest selling out of a lost portfolio to fund that trip, if we could, you know, ideally, but again, all depends on the situation, what their financial plan looks like. But shoot, I mean, you can get through Italy in a month for 15 grand, I’m signing off on that,
Speaker 2 42:41
I was going to say, if you’re planning, I mean, it just gives you permission to go spend your money, if you know that you’re going to be okay with your overall plan. Go to Italy, and if you can get that kind of price tag, absolutely jump all over it and spend the month there. All right, final scenario, we’ll hit you with this: they’re healthy now, but saw how quickly costs added up when a sibling needed long-term care. How can someone plan for future care expenses without draining their retirement savings or sacrificing their lifestyle?
Speaker 1 43:16
Well, I think there’s like, there’s three levers you can really pull here, right? Number one, you can take control of your health. You can be healthier prior to those things happening, you know, exercise, eat healthy, take your medications, your vitamins, whatever it is that you have to do. I mean, there’s always the preventative approach, but obviously you can’t prevent everything. So, you know, we have clients that will establish an investment fund specifically for long term care, you know, a bit more aggressive if they’re 10 to 15 years away from where they might need that, and they have that directly, you know, correlated or addressed for long term care. That’s one way to do it. The third would be to look at a long term care policy. Right, these policies have become increasingly expensive based on the underwriting that was performed when they were created, you know, 1520 25 years ago, right? When the insurance companies underwrote those long term care policies, they weren’t anticipating healthcare costs to rise at the degree that they have. They weren’t expecting life expectancy to increase to what it has, so they have now been forced to increase these premiums on these long term care policies to a degree that is unsustainable for a lot of people when it comes to their cash flow, so if you can swing a long term care policy, if you can afford it within your cash flow, it could make sense, especially if you have a history of dementia or cognitive disrepair in your, you know, your family history, so definitely a good advantage, I think. A lot of people are end up self funding this through their personal savings. You invest, you grow your money. A lot of people end up having to use their savings in order to fund these things. So it’s a really difficult situation, you know, something that we have to plan for, but. Do it on a regular basis, so,
Speaker 2 45:02
so important to be ahead of this, and again, opportunity to see if you’re on track for your retirement. We’ve got appointments. John, walk us through the appointment real quick.
Speaker 1 45:10
Yeah, we’re gonna have you in. We’re gonna have a conversation about what your objectives and goals are in retirement, figure out what it’s going to cost you to do that, talk through a personalized bucketing approach for yourself. Take a look at your existing investments, see if there’s any opportunity for improvement there. Talk through taxes, estate planning, build out that holistic financial plan. See if we can get you the confidence to retire.
Speaker 2 45:33
All right, get in here, grab one of these appointments right now: 800-653-8404 That’s 800-653-8404 There’s no cost to it. There’s no obligation. See if you’re on track for retirement. Call now, grab one of our 10 appointments, 800-653-8404 Another edition of Retire Smart Maryland Radio in the books for John DeFeo. I’m Morgan Patrick. We’ll see on the radio next week, you
Speaker 3 46:06
Annuity guarantees are subject to the claims of paying ability of the issuing insurance company. If you withdraw money from or surrender your contract within a certain period of time after investing, the insurance company may assess a surrender charge. Withdrawals may be subject to tax penalties and income taxes. Persons selling annuities and other insurance products receive compensation for these transactions. Products are subject to fees and additional expenses. Any comments regarding safe and secure investments and guaranteed income streams refer only to the fixed insurance products. They do not refer in any way to securities or investment advisory products. Information presented on this program is legally factual and up to date, but we do not guarantee its accuracy, and it should not be regarded as complete analysis of the subjects discussed. Discussion should not be construed as an offer to buy or sell, or a solicitation of an offer to buy or sell the investments mentioned. Professional advisors should be consulted before implementing any of the strategies discussed. Investments involve varying degrees of risk, and there can be no assurance that any specific investment or strategy will be suitable or profitable for a client’s portfolio. Investment advisory services offered through Elite Income Advisors Incorporated, a registered investment advisor located in Ellicott City, Maryland. The firm only conducts business in states and jurisdictions in which they are properly registered or exempt from registration requirements. Registration is not an endorsement of the firm by securities regulators and does not mean the advisors achieve a specific level of skill or ability, content should not be viewed as personalized financial advice. Insurance and annuity products are sold separately through Retirement Planning Services Incorporated. Neither firm is affiliated with or endorsed by the Social Security Administration or the IRS. Social Security, Medicare, pension, and tax rules are subject to change at any time. Insurance and annuity products are sold separately through Retirement Planning Services Incorporated. President Ozer Culhagil, Prashant Sabapathi, and Jonathan DeFeo receive commissions for the sale of insurance products as insurance agents for Retirement Planning Services Incorporated. Insurance annuity product guarantees are subject to the financial strength and claims payability of the issuing insurance company. Morgan Patrick is not client of or affiliated with Elite Income Advisors. However, he has a financial incentive to promote our services because he was compensated for his work on Retirement Maryland. The program is paid production of Elite Income Advisors, you.
