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Video Transcript
Rebecca Powers 00:20
Rebecca, Welcome, and thanks so much for joining us for this week’s edition of On The Money with Secure Money with Brian Quaranta, of course, he’s the CEO and founder of Secure Money Advisors, and I’m Rebecca Powers, a former retired news anchor and investigative reporter, and now I love just to be with you, to talk about the transparency, the ins and outs, the importance of really understanding what your money is doing, the risk it is taking. And we often talk about people not having pensions. Let’s talk today about the people, the small amount, yeah, who still have pensions. What should they know?
Brian Quaranta 00:57
Yeah. Well, first off, we forgot to mention that you’re, you’re an award winner. I mean, we should mention that at least, right?
Rebecca Powers 01:07
I’m not about the awards, but I did get procedural laws changed for child protection in the states of Mississippi and Louisiana. So, I’m very, I’m very proud of that. But yeah, I have a humanitarian Emmy a Peabody, which is equivalent to a Pulitzer, yes, and Edward arm of our highest journalistic excellence. So, I guess his point is, I don’t take Bs, and if he if you were full of it, I wouldn’t be here. You’re just such an amazing guy. But let’s talk about pension.
Brian Quaranta 01:32
Yes, all right, you got it, but we needed to let them know how important you are. So, but yeah, you know, pensions still exist in a very small percentage. And if you look at how pensions are designed, they’re designed to provide you with a monthly income. Now, what’s unique about a pension is that typically, if you have one, you know, we still see teachers having them, state workers like police officers, postal people, they still have pensions, and there’s big decisions that need to be made about those pensions, like you know, are you going to take a single life option? Are you going to take a joint option? And if you take a joint option, you got to decide, do you want 100% survivorship to your spouse? Do you want 75% survivorship to your spouse, or even a 50% survivorship? And of course, now you’re dealing with all these different numbers, and so it becomes very difficult for people to choose which is right for me, but I’ll read you this. You know, monthly pensions offer predictability. You receive a set amount of money each month, which can provide security in retirement. However, you also have the option with most pensions, to take a lump sum option and roll it over to an IRA account. And what I don’t like about what they write here is that rolling over a pension to an IRA could give you more control over your investments and potentially higher returns depending on market conditions. Now think about what they’re a pension is designed to provide you with security and monthly income, but yet it gives you the option to take the lump sum and take the money yourself. Why would we ever take money from a pension and put it into an account that potentially could get higher returns depending on market conditions? What that’s saying is risk. You would take something that’s guaranteed and now put it at risk, and unfortunately, people are talked into this all the time.
Rebecca Powers 03:46
Is there a benefit to taking the lump sum and putting in a very safe investment vehicle?
Brian Quaranta 03:50
Well, so the way that we like to do it is we like to go from safe to safe. Now, the only way that we’re going to do that is if we can increase the amount of the monthly income. So, in some cases, not all the time, if we roll a pension, if we take the lump sum and we roll it to an IRA account and we buy an annuity with it, we can sometimes, in certain cases, get more income from the annuity than we can if we left it at the pension company. Now, pension companies and annuity companies operate relatively the same. They are responsible for providing you with this guaranteed stream of income for the rest of your life, and a pension, if you chose a survivorship option, it would also provide income for the rest of your spouse’s life. So there’s a lot of decisions that need to be made on pensions, and you want to make sure you make the right one, and that’s why it becomes a bath problem that you need the crunch with a fiduciary. Firm that is willing to sit down with you and build you a written plan. That’s the most important thing when you’re looking at taking the lump sum. Don’t take the lump sum because somebody tells you that they can make you more money. Take the lump sum because you might be able to get more guaranteed income someplace else.
Rebecca Powers 05:23
And is it true with most or all pensions that once you pull that trigger, flip that switch, make that decision, you cannot go back? That’s it.
Brian Quaranta 05:30
That is very true. So if you decided that you were going to take a single life option, and you decided, you know, five years in, that maybe that was a bad idea. You cannot make that change. Now here’s what’s interesting. If you compare a pension to an annuity, an annuity works the same way as in regards to the options that you have. You can take a single life option right where it would just pay for one individual. You can choose to have a joint life option. Now a lot of people will ask me, well, Brian, when should I consider buying an annuity? Now is my answer, yes, and I tell you why, because annuities have something in them called a roll up feature. So just like Social Security pays you more money. For every year you delay the annuity, company will do the same thing. So, for every year you delay taking the income, the income gets higher and higher and higher, and the company will reward you. They will reward you for having your money in there for a period of time. So, for example, we were helping a client a couple weeks ago, and they’re not retiring for another five years. And the question they had was, well, why don’t I just buy the annuity in five years when I’m ready to retire? And I said, Well, let me show you why. Because if I take $300,000 today and I defer that for five years, I can get you more income off of that $300,000 than if you would have put $500,000 in the day you retired and wanted the money.
Rebecca Powers 07:17
That’s the power of deferral. And such a great example of time being on your side, that’s right, and it’s true. With everything part of the big plan, you have to have a plan, and that’s what Brian and secure many advisers are all about taxing tax forward planning is a big part of those five pillars. Let’s talk about pensions and taxes. How does that affect each other?
Brian Quaranta 07:40
Well, pensions are taxed at an ordinary income tax level, right? So so are IRAs and 401, Ks and everything else. But unfortunately, if you take your pension from your pension company, right, there’s not a whole lot of tax planning you can do there. Gotcha. Now, if you were to roll that pension money over because you had an option for a lump sum, now, because it’s gone into an individual retirement account, no taxes, no penalties. To do that, now you could actually do some tax planning. So take the folks that I was just sharing the story about, where we had a deferral of five years. What if, over that five year period, we slowly converted that money to Roth money, and in year five, we turned their income stream on. And now, rather than having a taxable income stream, they have a tax free income stream. And folks, I don’t know about you, but I would rather pay no taxes on my income versus paying taxes on my income.
Rebecca Powers 08:44
Absolutely we need to take a very short break. Let’s give them that number, Brian, invite him in and really explain there’s no obligation. It’s really just to get to know each other.
Brian Quaranta 08:52
Yeah, folks, and I really want you to get this book here today. This is right track your retirement. It’s a book that I wrote a couple years ago because people were coming into our office all the time asking us, am I on the right track? Am I doing the right things? How do I know if I’m doing the right things? This book will explain it to you. It’s a simple guide. It’s a road map to help give you peace of mind and the understanding of how to generate income and retirement, how to protect your money, and most importantly still, how, at the same time, you can get growth as a fiduciary firm, we believe in the stock market, but what we don’t believe in is you risking 100% of Your life savings. There’s no need to do that, and I want you to understand why and tell you all about it in this book. So go to on the money offer.com get a copy of this book. I send it to you absolutely free. All you have to do is get up off the couch, grab your phone, scan the QR code, go to the landing page, or you. Just dial the phone number 1-888-382-1298, and my team is standing by to take your call, get the book out to you and get you scheduled for a complimentary appointment. And I promise you, when you come in, nobody from my team will ever try to sell you anything. Nobody will pressure you to do anything, and you will learn one or two things about your situation that you probably don’t know right now, absolutely,
Rebecca Powers 10:24
and if you’ve never been spoken to about these things, writing a plan. If anything Brian and I speak about resonates with you, if any questions at all, we’re happy to answer those and to meet you and get that book. All right, stay with us. We’ll be right back
Commercial Break 10:42
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Rebecca Powers 11:34
Welcome back to On The Money with Secure Money, and that’s what we talk about each week. How do you secure your hard earned money. No reason to gamble or risk anymore. You have worked hard. Let’s talk about continue our talk about pensions. Brian, does the plan offer any cost of living adjustments?
Brian Quaranta 11:53
Yeah. Well, some pensions will. Most pensions that we see do not. So, if you do have a cost of living adjustment on there. You know, it might be three, 4% a year that your income might go up, but it’s very, very rare that you see that. Now I will tell you that again. You know, if you have an option for a lump sum, and let’s say you were to move it to an income annuity, all you’re doing is essentially buying a private pension in the open marketplace with a big, strong, safe insurance company, that’s all right, and you’re insuring that income and with annuities, not all annuity companies, but there are annuity companies out there that will increase your income over time as your as each year goes by, your income can go up each and every year, which is always a nice thing to have, as the cost of living might go up so.
Rebecca Powers 12:44
And I want people to understand we talk a lot about annuities, because right now, it has never been a better environment when we say annuities, these are these massive, large insurance companies, some 100 years old, that are A rated and Brian being and secure money advisors being independent. Can go to any company, can shop around for you can cherry pick, explain briefly why, after 2022 $300 billion were sold in annuities, why is it the perfect environment right now? And it might change soon, but right now, it has never been better.
Brian Quaranta 13:19
Well, look, you know, I’ve been doing this for almost 25 years now, and I’ve never seen the Safe Money marketplace as strong as it is right now. And we can just look at the local banks and see what they’re paying again for bank CDs, over 5% so when you see the Safe Money market, the Safe Money type of accounts paying that that impacts the world of annuities. So, you’re seeing that annuity rates are up drastically right now. It’s probably the best I’ve ever seen. Meaning, typically, what might take $500,000 to generate certain amount of income is only taking $300,000 to generate that same amount of income because the interest rates are so high. And this is why we’ve talked on previous shows about refinancing retirement. You know, as we know, as interest rates go down, we want to refinance our homes, our debt, whatever of those things that are actually costing us money, but when interest rates go up, it is a fantastic time to refinance your retirement, because refinancing your retirement right now, when interest rates are very high, gives you the ability to protect your money and still get a very nice rate of return, probably a return that you were looking to get in the market just a few years ago, but now you’re able to get it on a guaranteed basis, and that’s been the biggest life changing thing for retirees and savers.
Rebecca Powers 14:57
And some people are even and I’m. Of them, my husband and I, because I do these shows, I learn a lot, and I took all of my money from the ABC affiliate that I worked for 27 years, all of it, and I bought a fixed, indexed annuity. I personally didn’t want to lose a penny. That’s just me. I don’t get all the gains of the market, but I get some of it. And then my husband still works, so we’re still risking his money. The market is so good right now that I didn’t even get charged for it, like they did this match. They do this. It’s just incredible to think, because, because of the competition, okay, these big explain that the big companies, yeah, are competing, and it’s good for the consumer.
Brian Quaranta 15:36
Yeah, where they’ll give up from bonuses in some cases. So, so when you’re refinancing an annuity, there may be exit charges to get out, just like if you were going to try to get out of a bank CD early, you might have some exit charges or some penalties to get out. Well, that’s the case for annuities. So let’s say you bought an annuity three, four years ago, maybe it had a 10 year maturity on it, and now you want to exit in year three or four. Well, there’s going to be a cost to exit. So what the insurance companies do is they offer a bonus to offset that. So we have a company right now that offers a 12% bonus for going into their annuity. So let’s just say you had a 5% exit charge, and you moved it to this annuity that gave you a 12% bonus. That means that you’ve got 7% more money in this account than you did in the other account, more than when you left, because of that bonus, and that you’re seeing that a lot now, because that’s how the insurance companies are able to acquire business, because nobody’s going to want to take a step backwards, sure, right? So in order to prevent somebody from taking a step backwards, they provide these types of bonuses.
Rebecca Powers 16:58
Yeah, let’s talk about the fact that annuities keep you out of probate court completely.
Brian Quaranta 17:02
So, look, and that has a lot to do. Rebecca with annuities being used in non retirement accounts. Gotcha. Okay, what? What I want you to understand at home is that annuities can be used in many different types of accounts, meaning you can roll your 401, K, over to an annuity without incurring any taxes or penalties. That annuity will sit within an individual retirement account, and all the rules that govern that individual retirement account will govern the annuity. It will be treated just the same. The annuity is the investment inside of the IRA, but let’s suppose that you didn’t buy an annuity within an IRA, and it was just regular cash money that you had sitting at the bank that you wanted to put into an annuity. Well, there’s a few features that are very attractive about them. Number one, the interest that you earn gross tax deferred. So rather than getting a 1099, each year, which causes your income to go up, which causes your taxes to go up, the interest is tax deferred. You can take money out of them, but the interest will come out first. Okay, and to your point, because an annuity has a beneficiary document that you have to fill out and say, here are my name beneficiaries, here’s my primary here’s my contingents. When you die, that annuity passes through the beneficiary document, not through your will. If anything passes through your will, that is the process of probate.
Rebecca Powers 18:44
It’s the process of proving your will, and with an annuity, what I was told you only need to show a death certificate.
Brian Quaranta 18:49
Yeah, that’s it. That’s it. Correct? That is exactly right. Yeah.
Rebecca Powers 18:53
Probate can be a nightmare. It can take up to a year. You have to pay court fees; you have to and then all the confusion it causes. I just for me personally, that was a really big feature that you totally avoid probate.
Brian Quaranta 19:04
Yeah, well, you know, beneficiary documents are very, very important. They come on retirement accounts like IRAs. They come on insurance products like annuities and life insurance. And the big advantage you have with that Rebecca is the fact that that beneficiary document overrides every document you own, it will override your will. It will override your trust. So if that beneficiary document says, Please give this to my husband and to my children, that’s exactly where it’s going. Now you do have to be careful here, because there has been situations that I have been called in on this should be good, where somebody calls me and says, I was referred to you because I changed my will when I got divorced, and I changed it so that my current spouse would receive all of my money. Right, but they never changed the beneficiary form. So when the individual died, the ex spouse would have gotten everything. Would have gotten everything. That’s right. So if you’ve been through a divorce or a change in a marriage, please make sure that you double check your beneficiary forms, because, again, those beneficiary forms will trump every document you have. But again, folks, I want you to go to on the money offer.com I want you to get a copy of my book, because in this book, it’s going to teach you the ways to approach retirement that are simple and easy to understand. It’s going to give you the confidence and peace of mind, and it’s going to show you a simple planning process on how to build income give yourself the peace of mind and confidence that you need to get through retirement. So all you got to do to get a copy of this book, and again, I’m sending it to you absolutely free. It’s going to show up in a gold envelope, is go to onthemoneyoffer.com when you go to on the money offer.com you put in your information. We send the book to you, and while you’re there, you can also schedule a complimentary appointment, which I would highly recommend that you take advantage of. You can scan the QR code or just call 1-888-382-1298, my team standing by to take your call and get you scheduled and get a copy of the book to you.
Rebecca Powers 21:20
Use this quick two minute break to give us a call. We’ll be right back. More on how to secure your money.
Brian Quaranta 21:27
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Rebecca Powers 22:16
Welcome back. We’re going to continue to talk about pensions a little bit for those of you who still have one. What happens to someone’s pension? Brian, if the company faces financial difficulties, that’s always a worry. It is.
Brian Quaranta 22:27
It’s a big worry. We’ve seen this happen a number of times in Pittsburgh, especially with some of the airlines in Pittsburgh. And if your company gets in the financial trouble and they’re not able to pay you the money that they promised you that pension will be taken over by the pension benefit guarantee corporation, which is the PBGC. And you can go on their website and you can see what companies have filed with them that where they’ve taken over the pension so that these individuals still get paid. Now here’s the problem, though, if your company becomes insolvent and they have financial trouble and the PBGC takes over, you’re not going to continue to get the same amount of money that you were getting. So if you were used to getting, you know, two or $3,000 a month, you might get a letter saying, I’m sorry your company came into some financial difficulties. We are now in charge of the pension, but we can only pay you 40 cents on the dollar, and so people will have a reduction in income. And this is why, when you’re looking to possibly take the lump sum from your pension, you really have to evaluate, do you believe in your company long term? Good point for what they’re doing so, and what industry are they in, right? And, and how volatile is that industry? So there’s many cases. I mean, you’ve got Kodak, Polaroid, us, airways. I mean, these are just a few of the companies that have been taken over by the PBGC, where people’s incomes drop drastically in retirement because of the failure of the company itself. And
Rebecca Powers 24:07
And where does the pgbc get the money from?
Brian Quaranta 24:12
Great question. So every company is required to pay in to the PBGC as an insurance policy in case, if they go financially insolvent. So it every pension company has to pay this premium into the PBGC. Now, never even heard of that. Now, interesting, folks, here’s what I want you to understand. This is very, very important, because just like the PBGC, some questions I will get a lot of times is, well, Brian, what happens if one of these big, strong, safe insurance companies became financially insolvent? Well, first off, in the insurance world, they’re highly regulated, which means that insurance companies don’t have the freedom and luxury to just. Vest their money however they want. They have to follow regulation, and they have to invest it in a very disciplined process. Typically, they’re buying long term bonds. So you don’t see a whole lot of failure in the insurance world, especially if you’re dealing with a rated companies. However, if there is some type of failure, that’s okay, because we have what we call the state guarantee fund, and every insurance company is required to pay into that. So whether you have a life insurance policy or an annuity, you’re protected up to a certain amount. Now you have to check your state to see how much you’re protected up to, but I believe in the state of Pennsylvania, for annuities were at about $250,000 and for life insurance were somewhere around $350,000 don’t quote me on that exactly. You can go to the state guarantee website and look at that yourself, but we do have underlying protections, just like the banks have the FDIC.
Rebecca Powers 25:59
But insurance companies are historically much stronger than banks. They’re not shutting down a dozen at a time like you see in the news.
Brian Quaranta 26:06
Insurance companies are required to self reserve. That means they have to hold enough cash on hand to be able to pay out their policy holders, very different than the banks. The banks work off of what we call the fractional reserve system. So that means, if a bank takes in $10 they can loan that money out 10 times, which means there’s no money in the bank. Wow, right, yes, and this is why, right, we had the FDIC because we don’t want people making a run on the banks. Because the banks don’t carry our cash. They lend that money back out in the form of car loans, Home Loans, business loans.
Rebecca Powers 26:47
But they have to keep a fraction of it, right?
Brian Quaranta 26:50
I mean, some there’s not too much reserving. There’s a little bit of reserving, but it’s not as much as you think. And the other thing too, you know, if you read the documents of the FDIC, I mean, the FDIC reserves the right to have a period of time to pay you if your bank becomes insolvent. And that’s why, if you’ve got money in the bank, my recommendation is, do what I do, split it across many financial institutions in your area, so that you have protections on that money folks, go to on the money offer.com get a copy of my book. I’m telling you, if you come in, we can probably help you. I don’t know if you’re a candidate for what we do, and that’s okay, but when you come in, you at least find out if you’re not on the right track or you are on the right track. So again, on the money offer.com scan the QR code or just call. 1-888-382-1298, my team standing by, take your call, send you the book and schedule an appointment.
Rebecca Powers 27:47
Absolutely, have your calendar ready, leave your checkbooks at home. We just want to meet you Pittsburgh. We’ll see you next time. Thanks for being with us.