Cynthia de Fazio 0:21
Welcome to Retire Smart Maryland. My name is Cynthia DeFazio. Joined today by Prashant Sabapathi and John DeFeo of Elite Income Advisors. And to our viewers at home, are you in the viewing audience today? And you’ve already retired. You’ve amassed a nest egg. You have an income stream coming in, and yet you’re afraid to spend. Well, that’s more common than you think. So that’s what today’s show is all about. And thank you for being with us, viewers at home. We truly appreciate you, Prashant. How are you today?
Speaker 1 0:50
I’m doing excellent. Thank you. How are you?
Cynthia de Fazio 0:52
Fantastic. Thank you so much. And John, how are you?
Speaker 2 0:56
I’m doing fantastic. How about yourself?
Cynthia de Fazio 0:58
Doing fantastic. Thank you so much for asking again. I love the last name DeFeo, DeFazio, and Prashant. Your name has always been my favorite to say, Sabapathi. I love it, so I’m so excited about today’s show. So when we think about it, and this is common, people going into retirement, they are so excited and yet they’re afraid to spend their money. My parents actually were that same example. So Prashant, why is this so common? The fear to spend money.
Speaker 1 1:24
It just comes back to retirees’ number one concern at the end of the day, which is typically going to be the fear of running out of money. With people living longer, with the stock market, it feels like it’s been more volatile than ever. With all the geopolitical risk, the political risk, legislative risk-a lot of influencing factors that determine whether or not someone will actually run out. And I think that is at the forefront of the modern-day retirees’ mind. And so we’ve seen it time and time again. Some of our clients have great income coming in; they’re managing the tax liability. They’re not taking on more risk than they feel comfortable taking in a lot of cases. Yet they’re still having a hard time spending money, and I think that has to do with the the mindset, right? If you look at how people accumulate millions of dollars, they stayed very disciplined during their working years, they always put money away into a 401k or an IRA or TSP, and I think it’s hard to break the habit. Quite frankly, after 30 or 40 years of hard work, it’s a totally different mindset shift, and I don’t think people are as prepared for that shift as maybe they thought that they would be when they actually retired,
Cynthia de Fazio 2:45
makes sense. And it is oftentimes just generational, depending on what they saw their parents or grandparents go through. That you just want to keep everything. And John, do you also think that part of this could be that the number one fear still across the world would be running out of money? Does that play in mind as well?
Speaker 2 3:02
Absolutely. I mean, the reason people don’t want to spend is because they don’t want to run out of money, right? And it’s really interesting when we have people that visit with us that have surpassed the $1 million mark in assets. We ask them, “Hey, you’re a millionaire. How does it feel? And every single one of them says, “It doesn’t feel like it. Yeah, it’s true, and I think the answer to that is because they’ve lived such a disciplined life that they’ve been able to create that type of wealth, and they’re scared to do to go through that transition of accumulation to distribution. I think just psychologically, it’s a hurdle that you have to get over. As Prashant mentioned, our job is to be able to create income plans for clients where it not guarantees, but creates more certainty in the success of the income. And even with that certainty, even with the plans put together, we still have to counsel these clients on on just being able to spend their money. We encourage them sometimes. Hey, go out and spend more. Book the first class ticket instead of economy. Right. Go on that. Yeah.
Speaker 1 4:00
Right. Another angle I think is you look at the younger generations, and younger generations do not have the earning power that their parents had. You look at people in their 20s and 30s today. We’re finding that income levels on an inflation-adjusted basis feel like they’re lower. Cost of living is higher, and so as a result, the younger generations are not saving quite as much. And I think what that’s done is it’s placed more of a burden on the generation that is retiring right now. People don’t want to spend because they want to make sure that they’re leaving the next generation, their kids and their grandkids, a lot better off than they were left. Okay, and I think that has everything to do with higher cost of living and the inability for younger generations to be able to save at the same rate that baby boomers were previously saving. And so, you know, I can’t blame them for that. I want what. Best for my kids, as I’m sure we all do here. But that being said, I do think that there has to be a healthy balance. You should have a plan in place that gives you the confidence to spend so that you can have the most fulfilling version of your retirement, yet still be able to leave a strong enough legacy to make sure that your kids and your grandkids are set up in a way that they won’t fall behind when they get there, and I think that is truly the balance in creating a really solid retirement and legacy plan.
Cynthia de Fazio 5:33
Most definitely, and John, I’m sure a lot of people come in to the office for the first time when they’re sitting with you and the team, and they’re asking themselves, “I’m here, I’m excited. I want to have a plan. How often do people tell you, you know what, John? I’m going to spend less in retirement than I spend right now. Do you hear that quite often? Because that is sometimes calm, where people are like, I’m not going to need the income I have right now. I’ll be retired. But is that true?
Speaker 2 5:57
It is. I mean, we do hear that sometimes, but we try to reframe that train of thought and say, what if you could spend more in retirement than you were actually spending while you’re working, and is that possible? But you’re absolutely right. I mean, there is that psychological effect where I don’t want to spend. I really want to, you know, continue to build and grow my assets, as Prashant mentioned, for the legacy. I can’t tell you how many clients we have that are trying to help their kids buy a house these days because of the cost of housing and mortgage rates. I mean, it’s absolutely
Speaker 1 6:28
so. You know, I think it’s all a good point. It comes back to what you want your life to look like. Like you said, it. I don’t want to spend is something that we hear. Yes. But the response that we have, and it might be pie in the sky for some people. It might not. It might be very realistic. Is what if you could? Yeah. What if you could spend more without having the fear of running out of money? What if you could spend more on your family and being able to do the things that were actually important to you? That by the way, you never got to do while you were working because the job got in the way. What if? What if you could do more? If you’re not sure whether or not you are in a position to spend more to have that most fulfilling version of retirement, it’s a great opportunity, folks. We do it every show to pick up the phone, give us a call. The phone number is 833308 5200 When you dial that number, you’ll be able to schedule this complimentary visit with our team of advisors. You’ll come into the office, and it is just a confidential conversation about what’s important to you. You tell us what you want your retirement to look like. We’ll help you design an income plan that hopefully empowers you to spend the way that you deserve after you know three or four decades of hard work. The very first chapter in my book, it’s called Fiscal Health Retirement Wealth. The first chapter is called the Holistic Retirement. It’s all about what retirement should look like for you after working your entire career to get there. I’m going to give you a free copy of this book. We’ll pay for all the shipping. We’ll get it out to you. All you have to do is visit retiremaryland.com, or you can even scan the QR code. Just take out your cell phone, open up the camera, scan the QR code, get a free copy of this book. Fiscal health retirement wealth. It’s an easy read, and it’ll help you get prepared for the retirement that you deserve.
Cynthia de Fazio 8:24
Most definitely, Prashant. Thank you so much, John. Thank you so much to the viewers at home. The number to call in 83330852008333085200 or click on the QR code at the bottom corner of your screen. That’s the fast track to get on the schedule of elite income advisors, and also to get a copy of Prashant’s book. You don’t want to miss this. If you’re in the viewing audience today and you’re nervous to spend, well, the one thing that you’re probably missing is a well-constructed retirement plan. So we welcome you to come into the office to have one designed just for you. Again, 833-308-5200 We’ll be right back after this very short commercial break. We
Speaker 1 9:12
have a great team. First of all, we wouldn’t be able to do anything that we do without our fantastic team of both advisors and service and support specialists. We
Speaker 3 9:21
are trying to hire the best of the best, you know, because also the servicing the clients is an important part of our business.
Speaker 1 9:30
Once you become a client, you’ll not only have interaction with your advisor on an ongoing basis, but our great support team.
Speaker 3 9:37
And we are very proud of that. What we do at the Elite Income Advisors, the service, you know, whenever someone calls, whatever they need, you know, they don’t need to call the one 800 number. We want them to call us. We’ll take care of whatever they need.
Speaker 1 9:50
Marrying the financial plan with a good tax plan and a qualified CPA, and then having a support team to help you through navigating through retirement. That’s what I think it’s all about, and that’s what really creates a comprehensive financial plan.
Cynthia de Fazio 10:10
Welcome back to Retire Smart Maryland. My name is Cynthia DeFazio, joined today by Prashant Sabapathi and John DeFeo of Elite Income Advisors, and we’re talking all about the mindset shift that’s needed when you enter retirement. You go from the saving years to spending to having fun to enjoying your life. But how do you do that? Well, we’re going to talk about that in this next segment. So again, thank you for being with us today. So obviously, I’m thinking that clarity provides peace of mind. Anything that’s transparent that you can see, you just feel better about it. Takes away the unknown. So having a financial plan, Prashant, that’s so important in retirement. Talk a little bit about that, and not the statements that you’re getting out of the mail. A true constructed retirement plan.
Speaker 1 10:56
You know, I was driving to Dulles Airport the other day, and you know I live in Howard County, so Howard County to Dulles could be like hour 20, hour 30 minute drive. Yeah, we all know how the Capital Beltway gets with traffic. But what I found myself doing-it was almost subconscious-I found myself always looking at my GPS on the drive to Dulles because when you get into those traffic situations, you could take an exit, maybe shave off five minutes, take another route, shave off 10 minutes. But I found myself always relying on the GPS, and I got to thinking, what if I had a GPS to be able to navigate through my income in retirement? Look, I’m a pretty simple guy. At the end of the day, I want to be able to look at one screen or one sheet of paper, and I want to know several things about my income for the rest of my lifetime. Number one, I want to understand where that income is going to come from. Is it Social Security? Is it a pension? Is it 401(k) So I want to know where it’s going to come from. Number two is I want to understand how much that income is going to be after I pay taxes. Okay, that’s very important. Number three is I want to understand whether or not that income actually has the opportunity to increase with the cost of living on an annual basis. And number four, I want to know what happens to that income if I pass away. What does my spouse get to keep? Do they get to keep all of it, some of it, or none of it? I think when you have a plan that you can look at one sheet of paper and answer these four questions about your income instantly, I feel like stress goes down,
Cynthia de Fazio 12:34
yes, peace
Speaker 1 12:34
of mind goes up, and so if your advisor hasn’t taken you through those four things, I think it’s an extremely relevant exercise to go through. If you’ve never been through it, just give us a call 833308 5200 But really, I think John, when it comes to those four things, the one that I would isolate that goes under plan for in our experience is the tax angle. Right? People have this income coming in, but they don’t know what their tax bill is going to look like. Let’s say we come in, we visit with John for the first time. How are you going to have that conversation with somebody who’s watching from home about how to think about their taxes when they get to retirement?
Speaker 2 13:11
Great question. I think number one, we have to identify where you’re pulling money from in retirement. If it’s a pre-tax retirement plan, like most people that that visit with us have saved their money into. When you take distributions from these accounts, of course you have to pay some taxes on that. So we need to identify the net distribution amount that you need, the after-tax amount, and the higher that number is, the higher the gross distribution ultimately has to be, right? And if tax rates go up in the future, that would mean that we have to take even more money out to get the same net income that we need. So, what if there was a way? And I’m not saying that there is for everybody, but what if there was a way to button that up prior to retirement and make your income stream a bit more efficient through things like Roth conversions or strategic distributions in retirement? So, we have some great software. It’s called TestMyTaxes.com that you can actually evaluate your situation, identify if you might have a tax problem when you get to retirement, and potentially take some action on it and get in front of that ahead of time.
Cynthia de Fazio 14:13
Most definitely, and I think a lot of times I don’t want to interrupt you, Prashant, but when people are contributing to their 401k’s the qualified accounts, it means you’re qualified to pay taxes on those. There’s also a silent partner that are in those accounts that would be Uncle Sam. Yeah, absolutely. So that number that you’re seeing that you think provides confidence and clarity actually could be clouded once you start factoring in the tax liability. That’s
Speaker 1 14:36
exactly right. I think John makes a really good point. Is that if your tax rate happens to go up in retirement. That means less net income, just like you’re saying. Yes, you cannot spend gross, folks. You can only spend net, and if your net income is lower due to a higher income tax obligation in the future, you effectively have two choices. Number one is you can withdraw more money to get to the same level of net income, but the problem there is the more we withdraw, the greater the risk is potentially that we might run out of money one day. Option two is you adjust your standard of living to a lower standard of living to reflect the lower net income that you have because your tax rate potentially was higher. Look, I don’t know about you, but if I worked 3040, 50 years to get to retirement, the last thing that I want to do is reduce my standard of living.
Cynthia de Fazio 15:33
Agree.
Speaker 1 15:34
Okay, and so I always say this: the scariest day of a retiree’s lifetime, believe it or not, it’s not the day that they run out of money. Okay, in my opinion, the scariest day of retirees’ lifetime is the day that they realize that they’re going to run out of money, and there’s absolutely nothing they can do to stop it.
Cynthia de Fazio 15:54
Yeah.
Speaker 1 15:54
Okay. If you’re not sure, and I’m saying I’m not saying everyone is in that position. Some of you will find that you’re in a great position and you just need to make a few tweaks. Some of you might find that you need a wholesale change to make sure that you get on track, but you won’t know unless you take some action. One thing you could do is you could dial the phone number. It’s 833308 5200 You come on in for a visit, and we’ll sit down. We’ll help you map out your income. It’s something that we call the retire smart road mapping process. It includes things like social security optimization, creating that simple income for life plan, understanding what your tax rate could look like in the future, and then making sure that you’re managing your risk in an effective way to give you the lifestyle that you deserve 833308 5200
Cynthia de Fazio 16:43
and most definitely and probably the other thing that you also factor in I’m assuming John would be inflation taking a look at inflation down the road because it’s something that’s often overlooked and perhaps your money needs to stretch even further if the price of goods keeps going up because we know inflation has gone down but I don’t know about the two of you. I don’t feel like prices have gone down. I mean, going to the grocery store is quite the experience, correct? It
Speaker 2 17:08
absolutely is. We were just joking about the you know thought of me you know having a farm here in the next few years where I got cows and chickens to reduce the bill for milk and eggs for my kids, right? Just because of how expensive it is, and
Cynthia de Fazio 17:19
because they’re so darn cute. I mean, let’s just be honest. That’s very
Speaker 2 17:25
true. But yeah, I mean, people overlook inflation time and time again. They assume because they’re getting that cost of living adjustment from their social security benefit that that will help give them the raise every year that they need. But we’ve found that the increase to cost of goods and services of the economy, a lot of times is outpacing what the cost of living adjustment we’re getting from Social Security. And if you need additional income from that, then you have to increase your distributions every single year to keep pace with that. So that creates another challenge of how do we do that? How do we safely grow our money to ensure that we’re not losing purchasing power without also taking too much risk in the market and having the potential for a large downfall in our assets, so a lot that goes into it. It
Speaker 1 18:11
absolutely is. And look, I’ll make it really simple again. What’s the answer to higher inflation? It’s higher income.
Cynthia de Fazio 18:19
Yeah.
Speaker 1 18:20
Sometimes it’s that simple. Okay, we you hear advisors talk about investing in equities to try to outpace the market, outpace the inflation rate in the market, and you got to be cognizant of the risk. To me, I look at it very simply. The answer to higher prices is higher income. If you’re not sure whether or not you’re in a position to take on higher prices through the use of higher income, whether or not you’ll have that, pick up the phone, give us a call. It’s 833308 5200 I do talk about inflation in the book as well. Fiscal health, retirement wealth. It is one of the five deadly risks of retiring today. That’s chapter two in this book. 833308 5200 You can also visit retiremaryland.com or scan the QR code. Get a free copy of this book. Give it a read, and then come in and visit with us in the office. Let’s talk about it.
Cynthia de Fazio 19:10
Prashant, thank you so much. John, thank you so much to the viewers at home. Thank you. We’re going to ask you to call in 833-308-5200 You can book that complimentary consultation. Most importantly, receive a copy of Fiscal Health Retirement Wealth. Again, the number 833-308-5200 Or we’ve made it even simpler. We know you’re rushing out the door. Perhaps you can open up your camera app, click the QR code at the bottom corner of your screen. That’s the fast track to get on the schedule of Elite Income Advisors. We’re going to take a very short commercial break, but we have so much more about not being afraid to spend in retirement when we return.
Speaker 1 19:49
Do you have the answers to these four key retirement questions? How much should you save each year for retirement? How much do you need to have saved in order to retire? What will your retirement. Savings covered. How can you make your retirement savings last the rest of your life? We’ll cover all of this and more by building you a complimentary retirement roadmap. Just visit retiremaryland.com today, and you’ll also receive a complimentary copy of my book, Fiscal Health Retirement Wealth.
Speaker 4 20:18
You know how much you’ve saved for retirement, but do you know how much of it the IRS will take? Require minimum distributions, Medicare surcharges, and Social Security taxation can all chip away at your income. A Roth conversion may help reduce future surprises, but only if it fits your situation. Want to know your true tax exposure? The better you understand your risks, the more options you have, scan the QR code on the screen or visit eiarothquiz.com to take our free Roth conversion quiz today.
Cynthia de Fazio 20:53
Welcome back to Retire Smart Maryland. My name is Cynthia DeFazio. Joined today by Prashant Sabapathi and John DeFeo of Elite income advisors, and we’re talking all about the common fear that people have when they get into retirement, when they’re afraid to spend, even though you’ve worked your whole life for those beautiful memories that you’re going to create. Sometimes fear can paralyze you, and you don’t know where to turn. But thankfully, you’ve turned to the right place. This show is all about how to overcome that fear. And thank you again for being with us. It’s so common to hear that people are just nervous and afraid without having that plan. And I think some of the viewers at home, if they’ve seen the first two segments, they’re probably wondering this plan sounds wonderful. It seems very comprehensive, but how? What age do you plan it out for? Is there a number where you stop? Is it age 100? Is it age 95? What does it look like? I’m sure they’re wondering in the audience.
Speaker 1 21:46
Look, I personally like to design plans to go through 100 years old. But look, everybody’s a little bit different. I don’t know that there is a cookie cutter answer to this. This is why when you come in to visit, it’s just a conversation. It’s not about creating a plan like we do for every other person out there for your your situation to fit into theirs. It’s really designed to be your plan, and so maybe you have great family history. Like my grandmother turns 100 years old this year, so like something tells me I probably have to build my plan to go do at least 100 yes, and you know we’ll see on that one. But but that’s what I would do, right? But others will find that maybe your parents only live to be 70-five or 80, and maybe you don’t need your plan to go through 100 years old. So I think this is where having a personalized discussion with your advisor about it makes a lot of sense, and two things come to mind when when we go back to this idea of not being able or not being confident enough to spend money.
Cynthia de Fazio 22:48
Yes,
Speaker 1 22:48
John, maybe you can talk a little bit about this. The one that comes to mind for me is healthcare and long term care planning, right? So, like, how many times do you see people? And I know I’ve heard it. People are afraid to spend because they think the cost of long-term care 15 years from now is going to be so high, and they’re going to regret having spent in the early part of their retirement because long-term care costs are through the roof. How often do you see something like that?
Speaker 2 23:15
Very often. And how
Speaker 1 23:16
do you deal with it? Like, how do you counsel clients through that? Because that’s a tough thing to go through.
Speaker 2 23:21
It is tough, but I mean, it’s it’s all part of the plan. You can’t just ignore it, and I think you have to have these difficult conversations. You have to talk to them about their genetics, about their family history, about their current health. Talk to them about what assets they have to potentially fund those types of expenditures, and try to build it in. I think that sacrificing your enjoyment in the short term because you’re concerned about the potential cost for care in the future is is is a mistake. I think that there is a way to plan for it so that you can spend now and you can also be protected in the future. I think it all comes back to having that proper plan in place.
Cynthia de Fazio 23:57
Most definitely. The
Speaker 1 23:57
second thing I would go to is this idea of market volatility. I mean, you look at what happened in the market in 2022. Yes, it was pretty scary, wasn’t it? I mean, we saw the inflation crisis hit us after you know the COVID stimulus, so that hit us a year and a half, two years later. You saw the geopolitical issues going on across the globe, and that definitely had an impact on energy prices, oil prices, and caused the world economy to suffer a little bit. You saw the stock market go down, but more importantly, you saw things that are “quote unquote” supposed to be more conservative assets, things like bonds, also go down. And I think that was a scary thing for people to go through because we’re taught for years and years by Wall Street that in order to be successful investing our money, we’re supposed to buy low, and then we’re supposed to do what? Sell high. But the problem is, if you’re retired and now you’re drawing on that 401k or IRA to fund your lifestyle and the. Market goes down at the same time. You have to ask: Am I buying low and selling high, or am I doing the exact opposite? Am I selling low? Am I locking in the loss by by selling, and am I compounding that loss by taking the withdrawal? Right. Exactly. This is another thing that is at the forefront of people’s minds. Yes. And so, John, maybe you can talk for just a minute on how you strike that balance. Like we know that our money has to be able to grow over time for most people. How do you balance taking the risk with trying to get the growth that we think is required in order to make our plan work?
Speaker 2 25:37
Yeah, and I actually think it it can be really simple. You know, we just want to have specific objectives for each bucket of money that we have. We’re big in bucketing when it comes to our money. You want to have money in the bank to fund short-term expenses, emergencies. You want to have a bucket that creates the income that you need with stability, and then you want to have a bucket that you can grow your money with and take risk to be able to provide a legacy for your family. Take care of long-term care costs. So I think just bucketing your money into those different buckets with different objectives is how we do that. That’s how we do it for every one of our clients. I think
Speaker 1 26:13
what you’re saying makes so much sense, and it comes back to this idea that every dollar should have a purpose. Yes. Okay. You shouldn’t just be moving money around. In my opinion, you shouldn’t just be moving money around for the sake of moving it around.
Cynthia de Fazio 26:27
If
Speaker 1 26:27
your advisor says you should move money from account A to account B, the first question I would ask is, what is the concrete purpose? How does this further my retirement objectives? Is it going to be lower in risk? Is it going to give me higher income in the future? Is it going to give me a better return? I think the closer and closer you get to retirement, the more important these decisions become. Okay, whether you work with elite income advisors or you’re a do-it-yourselfer, I think when you’re moving money around, every dollar should have a purpose. If you’re not sure whether your dollars are working for you in the way that you need them to in order to retire comfortably and retire smart, it’s going to be the last opportunity for today’s program to pick up the phone, give us a call. It’s 833308 5200 When you dial that number, I want you to have your calendar in front of you. We have a team of operators. They’re standing by there, ready to book you for that appointment. So have your calendar in front of you, 833308 5200 Also, pick up a free copy of Fiscal Health Retirement Wealth. It’s your prescription for income generation, tax management, and financial peace of mind. Visit retiremaryland.com or scan the QR code at the bottom of your screen.
Cynthia de Fazio 27:40
Prashant, thank you, John. Thank you to our viewers at home. Most specifically, thank you for spending time with us today on Retire Smart Maryland. The number 833-308-5200 Don’t forget to grab your book. Be safe, be happy, and be blessed. We’ll see you soon.
