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Video Transcript
Rebecca Powers 00:20
Welcome to On the money with Secure Money. I’m Rebecca Powers, your host today. So happy to be here with the founder of this show and your organization, Brian Quaranta and Neil Mager, I love that you have the word secure in your title, because that’s what it’s all about. Right?
Brian Quaranta 00:34
Pretty much, especially when it comes to retirement planning. I mean, you know, the, the grand experiment that we’re dealing with today is the fact that most people’s retirement is in some type of 401k or 403B, and those are typically, you know, you know, retirement plans that are at risk. And that’s okay, you know, while you’re trying to accumulate money, but you know, I call it the grand experiment, because 85% of the people retiring or don’t have pensions, so the day you retire, the paychecks gonna stop, and you’re gonna have to replace that paycheck, it used to be easy to replace because of the pension. Right? So, when you retired, you get a Social Security check. Imagine, that doesn’t happen anymore. So, people now are relying on the money they’ve accumulated in their retirement accounts, to start withdrawing that money from those accounts to live off of as income. And the big question is, are you going to have enough? Are you going to run out of money later on in life, and those are the big risk. And that’s why we believe it secure money advisors, the most important thing that you can do is to protect your retirement lifestyle, by creating First and most importantly, an income plan that provides you with money every single month, and do that in a way that you won’t run out of money later on down the road, you can leave a little bit of money in the market, there’s not a problem with that. It helps keep pace with inflation, still grow your money, and so on and so forth. But you really have to think about protecting your retirement lifestyle first, by creating a guaranteed source of income.
Rebecca Powers 02:01
And if you lose a little in the stock market, is that a tax write off? I mean, I don’t know. I’m just thinking if you like, if you have losses in a business, you can write it off. Is it the same thing?
Neil Mager 02:12
Yeah, it all depends where your money’s located, right? I mean, the people that we’re dealing with have a lot of pretax money, the 401k’s and the retirement accounts that they have, all pretax, you’re not going to be able to write that money off on any given year where you lose. But obviously, you know, just to kind of continue on Brian’s point, you know, when you’re in retirement, the folks that are coming in to secure money advisors, safety is the most important thing to them, you know, going into retirement and no longer having that guaranteed paycheck. Peace of mind is everything right. And the challenge for retirees, what’s really happened was, not only did they lose the pension, because companies found that it was easier and cheaper to provide a 401k than a pension plan. But they really lost their safe money options. And when you think about the Safe Money options, Brian have, you know, years ago? Well, it used to be that you could get great rates of return at the bank. Right? Yeah, you could get decent bond yield. Yes. And that’s really been taken away. And so the challenge is, you know, how do you actually create safety, to be able to generate that cash flow that we always talk about.
Brian Quaranta 03:17
And the low interest rate environment is really what’s caused is really has not been a good thing for savers and retirees. And they why? Well, because low interest rates, right means that I can’t, I can’t put my money in a safe place and actually earn a reasonable rate of return. So it forces people to have to take risks with their money, really risk was their money that they can’t afford to lose. You know, as Neil was saying, you know, Safe Money options have changed. We’re back in the day, you could go buy a bank CD at 10, or 15% interest. So imagine you had an extra $200,000 laying around, and you needed to generate some additional income, you’d go down to the bank, you buy a CD, it’s FDIC insured, right, right. And now on $200,000, at a 10% guarantee from the bank, you’re earning $20,000 A year and additional income and you’re not even touching your principal. Now, why did that change, because of the because of interest rates just constantly decline is so it affects the CD with the bank. So what the banks will? That’s right, what the banks will pay, and that becomes a huge problem. The other thing I want to touch on is what Neil just talked about, and that was when you asked at the beginning of the show, can you write off losses from your, from your investments, and as Neil mentioned, depending on where the money is, whether it is in a retirement account or a non-retirement account, but one thing that also brings up is the order in which you withdraw your money. And so a lot of times people will have money in non-retirement accounts, right, which we consider a taxable account because you’re paying taxes along the way, and then you have money in retirement accounts. So if you do need to start generating income, where do you take it from first? Most people have the order of withdrawals, incorrect, meaning they want to take it from are non-retirement accounts first, and they lose all kinds of tax benefits. Because if you lose money in a non-retirement account, you can write that loss off. And it’s done in a certain way based on the how much is the loss, and so on and so forth. But you can write that off in a retirement account, you can’t. So your most tax favorable account for yourself, and for your future money and for your kids is that non retirement account, because it’s got so many tax advantages, and most people are told to actually spend that money first. And we see that all the time.
Neil Mager 05:34
I just had that case, and I think, you know, what we focus on are the five areas of retirement planning that we talked about all the time, those five areas, and oftentimes, you know, one of them is not being done properly, and you’re going to impact and affect the entire plan. And I just had someone come in last week, and they needed a little bit of income, from their retirement accounts had a lot of pre tax money. But their number one goal was to leave money to their four children. Right? So where should they be taking their income from well from their pre tax accounts? Because that’s going to be the least favorable to pass on to their beneficiaries. But where are they actually taking the money from? They’re taking it from their non retirement accounts, which get that step up in basis at death. And so what that what they were lacking was a true plan, a true Retirement Plan, and that retirement plans got to focus on those five areas. So you’re making sure you do everything successful. So it starts with income, we want to do tax planning, investments, health care planning, and then the legacy aspect,
Rebecca Powers 06:36
You read my mind, because I was gonna say, for someone just joining us for the first time, they like to keep it simple, stupid, you know, kiss Yeah. We always believe it. And I love that about your philosophy. It’s five simple things, you approach it cleanly, individually. And you know, for protection.
Neil Mager 06:53
Yes, I think we hear that a lot, too, right? Like, no one’s ever broke it down as simply as you guys, because going into my long-standing advisor, I never understood what we were actually doing.
Brian Quaranta 07:04
Most of the time, our industry has done a horrible job in, in, in educating people and making things simple, right. So a lot of times they go in, they sit down with their advisors. And you know, it’s it’s going right over their head.
Rebecca Powers 07:16
And it’s intimidating,
Rebecca Powers 07:17
And it’s very intimidating.
Rebecca Powers 07:18
And even physicians will tell you they feel stupid when it comes to investing their own money.
Rebecca Powers 00:20
Correct, and so the advisors using industry language, they really, you, as you’re sitting there, you might be shaking your head, yes, you are understanding, and you’re really not, you know, I want to talk about this step up in cost basis that Neil brought up, because this is really important for people to understand, you know, what he was referring to in that step up in cost basis. And this is with non-retirement account money. And this is why tax planning is so important, because there’s so much savings you can have in taxes just by doing it right and the order in which you take your money. But a step up in cost basis would be this. Let’s suppose that we make an investment into a stock for $50,000. Okay, and we never touch it. And over the course of the year or over the course of maybe 20 years, that 50,000 goes to 500,000. Okay, well, if I, if that was my personal account, and I were to sell that, all right, and sell that stock, I would owe capital gains tax on all the money that I earned over $50,000. Right? Oh, capital gains tax on 4000. Well, if you don’t realize is that there’s this beautiful tax benefit called the step up and basis where, let’s suppose I didn’t touch that money, and I passed away, right? My children would get a step up in cost basis, which means they would own the account at the value of the date of my death, which means they would own it at $500,000, which technically, they sold it to it was zero in taxes. Wow. So that is a huge tax benefit to the family. So you really have to think you know Neil’s case, they wanted to leave money to the kids. And they were pulling money from the account that was going to give their kids the more biggest tax advantage.
Rebecca Powers 09:00
Interesting. Wow. See, I really do learn something from you everyday.
Neil Mager 09:05
We say little mistakes cause big headaches. Yeah. So that’s what to focus on those five areas are so important, just because a little air like that, where you’re withdrawing money from how it impacts the entire situation.
Rebecca Powers 09:18
Now, I’m sorry, didn’t you say once that one of our last shows that you can pay pretax, you could pay on the smaller amount instead of the bigger amount that you earn? Or is that something different?
Brian Quaranta 09:28
Well, that’s called the Roth IRA, right? Or the Roth 401 k where, you know, rather than, you know, if you make a contribution, you’re not going to get a tax deduction in that current year. But when you deposit that money, okay, let’s say it’s $15,000 in your retirement account, and that grows to a million dollars, you can pull all that million dollars out tax free, fantastic. Now think about the opposite of that, right? Somebody makes a contribution of 15,000. They get a tax deduction at year but now, every dollar they earn and let’s say that grew to a million they pull it out. They owe taxes on every dollar but look We offer a right track retirement review where we talk about all of these different things with you when you come in. And I really want you to take the opportunity to come in and have this complimentary review with us our right track retirement review goes over five key areas, income taxes, investments, health care and legacy planning. It truly will give you peace of mind and clarity when you come in, and a good understanding of what a retirement plan should really look like. So for the next 10 callers, who call in right now, we are going to give you a right track retirement view, complimentary, no obligation, all you have to do is call us and schedule today, call the number 1-888-382-1298.
Rebecca Powers 10:42
And we’re gonna take a quick break, we will be right back with On the Money with Secure Money.
Brian Quaranta 00:20
So, everybody can tell you how to invest your money. There’s not a lot of people out there and a lot of firms that can teach you how to use your money. Most people also tell you that they’re scared. And the reason they’re scared is because they’re afraid of running out of money.
Neil Mager 11:02
The last thing you want to do is have a really good job and you’re in your 60s retire, be looking for work again in their late 70s.
Brian Quaranta 11:10
The average person might say, well, a good portfolio would be a good mix of stocks, bonds and mutual funds. A good portfolio is all designed around the five key areas, income, taxes, investments, health care and legacy planning.
Neil Mager 11:24
Because we’re not just product pickers here, what we do best here is we build retirement plans.
Brian Quaranta 11:30
Nine out of 10 people, when they walk through the door would ask us, we just want to know if we’re on the right track. And I always say if you’re not on the right track, when would be a good time to know it. Probably now,
Neil Mager 11:41
People, you know, can actually see a vision once we start to really build out their plan.
Brian Quaranta 11:46
This is about you, if you’re not getting what you need, and you feel that when you walk out of the advisors office, it’s time to get a second opinion. And you can’t get a second opinion from the person that gave you the first the difference at secure money advisors, as a fiduciary firm, we help you manage the risk, build the income and give you the retirement withdrawal.
Rebecca Powers 12:16
Thanks for staying with us. I’m Rebecca Powers here with Brian Quaranta and Neil Mager. And we were talking about protection, the five simple steps. And I wanted to ask you, Brian, about the greatest trick ever played.
Brian Quaranta 12:27
The greatest trick ever played? What do you think it might be?
Rebecca Powers 12:30
I have no idea. I’m thinking it’s taxes because I don’t even think they’re legal. Sorry. I don’t know. What’s the answer?
Brian Quaranta 12:37
Well, the greatest trick ever played happened in 1978. It was called the Revenue Act of 1978. And what happened was Congress basically shifted the responsibility from the employer to the employee by providing this new account called the 401K plan. Right? So, what happened was, you go back to retire planning 40 years ago, right? You know, 50 years, you really didn’t have to think about how you were going to retire. Most people knew exactly when they were gonna retire. This is why we had retirement parties right? Tire, they’d have a big party, they get their gold watch, they’d be on their way, never working again, everywhere. That was my grandfather, when my grandfather retired, he got his social security check, and he got a pension, he didn’t have to worry about where income was going to come from. But employers, it didn’t take a whole lot of time for employers really to catch on with this and go wait a second, we don’t have to provide any more this pension and have this legacy costs that we have to carry for the rest of the employee’s life, we can actually still provide a benefit to the employee by providing this retirement count called a 401 K and the match and the match. That’s right, that’s match. We call this the yo-yo retirement plan, you’re on your own, you have to figure out how to generate income for the rest of your life. Yeah, but that wasn’t the greatest trick I’ve ever played. A greatest trick I ever played was the fact that these accounts are tax deferred. So, remember, we were talking about $15,000 turning into a million dollars, right? And that when you take that million dollars out, you got to pay taxes on every dollar, here’s the thing, they can change the rules of the game, any point in time they want. So, imagine this, I have little kids Neils has little kids, if we explain the rules to a board game at the beginning of the game, they’re gonna get but if all of a sudden, you know, 20 minutes into the game, I start changing the rules on them. Those kids are gonna know.
Rebecca Powers 14:32
They will revolt.
Brian Quaranta 14:33
They will revolt. And they’re like, Dad, that’s not how it’s played. You’re making this up. That’s what the IRS does. That’s what Congress does, here’s why. Because at any point in time, they can raise tax rates. So, let’s say you’re withdrawing money, you need $1,000 a month, okay? And tax rates are at 20%. Well, that means that you’re when you pick that $1,000 out, you’re only going to net $800. Let’s say that tax rates change, right changing the rules, tax rates change go to 30%, now you’re only getting a $700 net check. But here’s what else they can change, they can force you to take money out of these accounts, whether you need it or not, it’s called a required minimum distribution.
Rebecca Powers 15:11
That’s at 72.
Brian Quaranta 15:12
That’s right. It used to be 70 and a half, but they changed the rules. And they said that you can now- you don’t, you have to take that 72. And by the way, if you don’t take that required minimum distribution, it’s a 50% penalty. Let me tell you what other rules they changed in the middle of the game, the way that your kids inherit your money. So, it used to be that you could pass your retirement account to your children, they would have to pay no taxes on it. But they would be required to take a little bit of money out each and every year for the rest of their lives. And they came back and they said, we’re no longer going to do that. That was an unintended loophole, it’s too much tax favored to the account owner. So, we’re going to force that these accounts are spent down over 10 years, and we want all of our tax money upfront. That’s the greatest trick ever played on the American public. Because you are always in partnership with Uncle Sam.
Neil Mager 16:05
And think about the other challenges of the 401k? I mean, first of all, they take away the pensions, you’re left to save your own money. How much are you supposed to save, hopefully saved long enough to be able to be in a position in retirement, which investments do you choose inside the 401k? You want to make sure that you’re not too conservative, you want to make sure you’re not too aggressive? That’s right. Once you get to retirement, how much income are you going to be able to generate? You have really no idea what we see. I think that’s why that 59 and a half rule is so important to our clients and important rule, right at the age of 59 and a half, that’s the first time that you’re eligible to do a rollover to an outside institutions IRA, even if you’re still working, even if you’re still working, right. So the advantage to that is now you have lots of different options instead of the 15 or 20 that are available in your 401 K. I mean, think about the times that we see people coming in, they want to be safer. Maybe they’re 58 years old, not eligible for that. All right, yeah. And think about the safe options available inside those 401Ks.
Brian Quaranta 17:08
It could be protecting their money right now many and setting and setting themselves up to have an income stream and protecting that first 15 to 20 years worth of retirement and making things easy. So that, you know, if the markets did correct, and they did go down, they don’t have to delay retirement. See, there’s so many people that are right at the point of retirement, and the only option they have is the option to their 401k. And typically, those options are best suited for those that are younger during the accumulation phase, right. So, all of a sudden, they get close to retirement, they still have a lot of exposure to risk. And now they lose 30 or 40% of money. And they were planning on retiring in two years, and they can’t now they have to delay retirement. And they tried to make it simpler, right. And Neil sees this a lot when he evaluates the 401k is, is they try to make it simpler with these, what they call target date funds, target date retirement funds within the 401 K. And they were basically designed to provide a level of safety, if you will, to the to the client, as they got older. And the target date retirement fund, for those of you don’t know is basically, it would say, you know, if you were planning on retiring in 2025, you would choose the 2025 target date retirement fund. And as you got, we got closer to 2025, that portfolio would reallocate itself and make it a little bit safer and safer as time went on. You recently had a case where someone was in a 2023 target date fund, and what was their loss in that portfolio?
Neil Mager 17:35
30%
Brian Quaranta 18:36
30% loss in a 2023 Target Fund, which was supposed to be something that was conservative, but this is why we do our Right Track Retirement Reviews. Because these are the things that you don’t know that you need to know. And it’s the things that we don’t know, right, that really come up to hurt you in retirement. So our right track retirement review is complimentary. There’s no obligation, but you’ve got to do your part, you’ve got to pick up the phone and call us and for the next 10 callers who call us right now. We’re going to give this to you and go over the five key areas income taxes, investments, health care and legacy planning. Call us today and schedule. It’s 1-888-382-1298.
Rebecca Powers 19:16
And it might just be a look and you’re fine. You’re on the right track. And that’s great.
Brian Quaranta 19:20
And we’ll shake hands and part as friends.
Rebecca Powers 19:22
Absolutely. I think education we’re gonna take a quick break, but education, I really really wish that everyone can educate their children are better is even a subject in public schools. So, you know, it’s that important. All right, we’re gonna take a very short break. Stay with us.
Announcer 19:39
How confident are you in your current financial plan? Do you know with certainty how the recent market volatility will affect your future hopes and dreams? How much are you paying in taxes? And how much are you losing to unnecessary high fees? You didn’t work to save this money so that you could spend your time worried in retirement now was the time to take charge of your finances so you can feel confident about your future call in during the next 30 minutes of today’s show only. To set up an absolutely complimentary, no obligation, full blown financial review that will result in your own customized written plan that we’re giving away complimentary to the first 10 people who respond. We’ll start with a full blown analysis of what you already have, by running a report to untangle how much you are currently paying in fees, how you’re allocated for risk, and what it’s costing to work with your current advisor. Next, we’ll identify your goals. Where do you see yourself in the next five years? Where do you want to go? And who do you hope to go there with is your current financial plan set up to get you there without mishap? Let’s design a roadmap to create a financial plan you can follow with confidence, get the piece that so many people are missing from their retirement. Find out how having a written plan can make a difference to your retirement dreams. Call now to schedule your complimentary no obligation full blown financial review today.
Rebecca Powers 21:14
Welcome back to On the Money with Secure Money. We were talking about the greatest trick ever? Of course, it had to do with taxes. That’s right. And then I just heard you say there’s a big secret. So now I’m intrigued.
Neil Mager 21:25
Oh, the big secret. Yeah, pertaining to Social Security. So, you know, we hear all the time in our office about different strategies. They’re hoping to acquire knowledge on about Social Security file and suspend found restricted. Well, not anymore. So, in 2015, at midnight, they actually eliminated all those strategies. And so people coming to us, they’re seeking more information about Social Security. Really, Social Security is pretty basic information anymore. It’s when do you actually want to turn it on? What’s your longevity look like? What’s your family longevity look like? How’s your personal health? What’s the breakeven points to do the analysis of when you should actually take it, but those file and suspend file restricted reads to be able to play off of your spouse, allow your Social Security to defer and then take it at 70. When you get the larger amount, those all went away.
Rebecca Powers 22:18
So at midnight, Congress met, while we’re all sleeping, and just wipe that away.
Brian Quaranta 22:24
Said, no way, unintended loopholes, which basically means you guys figured it out. And we’re going to close it, because it was a great way to really maximize the amount of money somebody was gonna get from Social Security, and they’re all gone. And people still think there’s some magical box, they can check on the Social Security form, or there is something that they need to circle that all of a sudden is going to give them more soul security. And it’s just not the fact.
Rebecca Powers 22:47
Because that’s how it was for years.
Brian Quaranta 22:48
That’s how was for years. And so, we all just assumed, and then it just changed, right? So, you know, most of you probably, you know, you get a probably an invitation to some type of soul security seminar in your local area. I would encourage you, there’s no need to go. Because you’re really not going to find out anything. I mean, it’s either do you want to collect at 60 to your full retirement age or 70? The biggest question you have to ask yourself is, when are you going to file? But the one question that nobody asked that we believe is the most important question to ask, before you decide when to collect your Social Security is, How’s your health? How’s your health? Because if you’re not in good health, you know, you might want to collect your Social Security sooner than later. But the other problem is this. Let’s say you have somebody that wants to retire at 62. Okay, and maybe they’re being told not to collect their Social Security till their full retirement age? Well, where if they don’t have a pension, where are they going to get income from, most likely, that means they’re going to have to withdraw money from their retirement account? Well, if they don’t have if they don’t turn their social security on, at 62, because they’re going to wait, think about how much money they have to pull out of their retirement account now, depleting that account at a much more rapid pace. Now, eventually, the goal would be to either turn that off or reduce it. But when we run our analysis for people, what we find is that getting your income subsidized by Social Security sooner than later, actually preserves more of your honor. And I would rather you use a benefit that you’ve paid into all of your life and subsidize your income with something that you only get if you’re alive. So why not turn it on? And most of our clients want to get their income as high as it can as quickly as they can as safely as Kennedy in the beginning of their years. Because as Neil was mentioned before, many times we have the go-go years, the slow-go years and no-go years. So that’s the biggest secret. There are no more strategies, but you still have to figure out and that’s one thing we do at secure money advisors help people figure out these best ways to manage that and get the most from their cash flow. Yeah,
Neil Mager 24:52
That’s exactly it. Rebecca. I mean, people come in they get this long list of all the things that they want to accomplish in retirement. Yeah, visiting family and grandkids out. Estate, traveling to see national parks, adjoining a country club, all those different things. And to Brian’s point, the Social Security helps provide that guarantee of income that makes them feel like they’re able to do that type of stuff. Because often what we see is when they defer the Social Security, they’re not real eager to pull money from their investment accounts. And so, you know, to Brian’s point, again, I mean, we have to look at what are the breakeven points, if we defer our Social Security? Typically, you know, we’re going at 78-82 years old, roughly, depending on what analysis we’re looking at. That’s a long time to live. I mean, believe it or not, the average length, life expectancy in Allegheny County is 78 years old, for a male.
Rebecca Powers 25:43
That’s going up every year to with good health care. And women they say live even longer.
Neil Mager 25:49
Yeah, we have to think of the opportunity cost to on the money that we’re pulling out, and what rate of return we could have potentially got on that. So that puts that number even further out.
Rebecca Powers 25:57
We only have two minutes left, Brian, some closing thoughts and,-
Brian Quaranta 26:00
Look, the most important, the most important part of the retirement planning process is to number one, and most importantly, protect your income. Yes, because remember, folks, we cannot do all the things that you plan on doing retirement without monthly income, it is the number one priority in retirement is to make sure that you’re going to have the monthly income to do what you want to do. But it’s harder than that. Because the biggest challenge is the fact that we’ve got to build it in a way that you don’t run the risk of running out of money. And there’s strategies and techniques that we use to make sure that you’re aligned properly so that you don’t put yourself in a position to where you run out of money at the age of 85 or 90, when you really don’t have the ability to go back to work and make money at that point in your life. And this is what the right track retirement review is all about. We’ve spent a lot of time putting together what we feel are the most important things that you need to know about your retirement strategy. And we talk about them all the time. It’s income, taxes, investments, health care and legacy planning. If you make sure that all five of those areas, every i is dotted, every T is crossed, that is what’s going to make a really good retirement plan. There’s a lot of people that we talked to that say, you know, we’ve been working with people for a long time, but we feel still very uncertain about where we’re at and whether or not this is our plan is actually going to work. We will give you that clarity, we will give you that certainty and that’s going to give you the confidence to do the things that you want to do in retirement and live the life that you deserve to live but you got to do your part. Call us today and take advantage of our right track retirement review. It’s complimentary, no obligation. Call us today and schedule 1-888-382-1298.
Rebecca Powers 27:46
Have a great week. We’ll see you next time.