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Video Transcript
Rob 00:23
Welcome to On the Money. I’m Rob Hurtig. Back again with Brian Quaranta. Brian, what’s going on?
Brian Quaranta 00:27
Rob, good to see you, as always.
Rob 00:28
It is always fun to see you. We talked about really important stuff. Stuff that’s impactful, stuff that people need to pay attention to, like volatility, like volatility is bad right now.
Brian Quaranta 00:36
Well, it depends on who you’re listening to.
Rob 00:38
Right?
Brian Quaranta 00:39
If you’re listening to the some of the talking heads, they might think it’s not a bad thing.
Rob 00:41
Or your, your financial advisor doesn’t truly understand risk and what’s appropriate for people at certain stages in life. Right?
Brian Quaranta 00:48
You mean the ones that are being told, don’t worry about it, hang in there, you’re in it for the long haul. It’s just a paper loss. It’ll count you know, those, you know, those, those emotional, you know, that those statements that are designed to control emotions.
Rob 00:59
What if somebody’s financial advisor, and they did get that tub of ice during the last decade?
Brian Quaranta 01:05
I saw those people get that advice. I met those.
Rob 01:07
It’s right when you got into the business.
Brian Quaranta 01:08
Yes. I mean, those people, those people had to go back to work, some of them had to come out of retirement because somebody got paid to convince them that it was a good idea to take risk with their money.
Rob 01:17
The funny thing is, you’ve told me stories that when you came into the business, and you didn’t put these people in those plans, you inherited clients, and we’re past opportunities that were people that want to talk,
Brian Quaranta 01:27
The first thing you learn when you get into financial history, the first thing they teach you at the big box firms, is that when people are concerned about risk, you let them know not to worry about anything that everything will be alright, they have to remember that it’s a long-term investment. Well, that might make sense if you’re 25 years old, 35 years old, even 45 years old. But when you start getting to get in that retirement, red zone, volatility makes a big difference. So, you better have some active management to be controlling that because a loss can hurt you, at that point in your life and losses do hurt you more than gains help you once you get into that retirement zone.
Rob 01:57
What was that? What was that stat, you told me the other day, the worst time to retire is when,
Brian Quaranta 02:00
In an up market. And at the top of the bull market. If you look at if you look at the statistics, you have a higher probability of running out of money if you retire at the top of a bull market, because you have a higher probability that when you’re going to start pulling money out of your accounts, that the market might be going down. And that’s what’s happened in the first part of 2022. So, think about the people that retired at the end of 2021, or even at the end of 2020. And now they’re going right into this bare market, potentially, and they’re pulling money out of their portfolios. And why are they pulling money out their portfolios, because 85% of them retiring, do not have a pension.
Rob 02:31
So, the funny thing is, every time we have a market downturn, it at least a substantial one, we always try to come up with ways to fix the problems of the past. Right. And what do we see we see 6040 portfolios, right. How’s the 6040? Portfolio doing right now?
Brian Quaranta 02:43
Yeah. How about the target date fund? Right, exactly. I, you know, for those of you that don’t know, the target date funds, you know, they were implemented back after the 2007-2008 crisis, because employees sued their employers because they had lost so much money in their 401k. Is that Wall Street’s answer to solving that problem, rather than giving them this big, long list of investments to choose from, they said, hey, if you’re going to be retiring in 2025, choose the retirement 2025 fund, if you’re gonna be retiring in 2030, choose to 2030 fund. Now, I don’t know about you, and I know you talk to advisors all over the country. But I’ve talked to people, and I had a gentleman come in the other day to my office with a 2025 target date fund down almost 20%.
Rob 03:22
Wow.
Brian Quaranta 03:23
Right. And this guy’s three years out from retirement. And this is supposed to be the foolproof way this is supposed to be a portfolio that gets more conservative. How about we had a client come in, or not a client, but an individual that came in 2022 target date fund down 24%. Why? Because bonds have been hit so hard with the rising interest rates,
Rob 03:39
You’ll get long term bond portfolios down anywhere from 8% to almost 20. And these are big name bond portfolios. These aren’t just obscure names that we don’t know. They’re the big names. And I won’t be saying because I don’t want to call it my compliance department.
Brian Quaranta 03:53
Yeah, well, listen, there’s an ETF out there with a 20-year Treasury that’s down almost 20%. I mean, if someone told you if you wanted to protect money, that a good place to do that would be probably a treasury bond. Wouldn’t you think that a 20-year treasury bond would be relatively conservative? It blows my mind?
Rob 04:07
Brian, we have to pay attention to who’s giving the advice. Yeah. Right. Who’s giving the advice? How are they being compensated? How risk is being quantified? Right? And how is risk being quantified? Right, right. And that’s a huge problem in our industry. Tell them why?
Brian Quaranta 04:18
Well, because most people understand risk as conservative, moderately conservative, moderately aggressive, aggressive, or even balanced, right? Those are the words that we’ve given to risk. But what person can be put in those boxes? Well, nobody can because everybody’s risk profile is different. But it’s not those, those terms are not actually quantifying the risk, right? What is moderately conservative mean? Because I’ve seen people come in with moderately conservative portfolios that are down, you know, 25%. Well, I thought that was supposed to be moderately conservative. We want to quantify risk in the form of a number, meaning I think about it like a speed limit sign, right? If you’re driving at 10 miles an hour versus 70 miles an hour and you get an accident. There’s gonna be a lot more damage at 70 miles an hour than they’re going to be at 10 miles an hour, and that’s what our risk analysis report can do. And our retirement readiness report, and our risk analysis report will show people exactly how much risk they’re taking how much their portfolio could lose if the markets continue to go down. But more importantly, how to make their portfolio more efficient so that when the market does go up there potentially maximizing the gain on the way up also.
Rob 05:20
So it’s almost a bit predatory. The way that we define risk way that we design products, five-star ratings, for instance, we talked about that a little bit ago, right? Yeah, we talked about the Morningstar five-star ratings, right? The one stars outperform the five stars, right? Why is that? So why is it a five star? Right? But people have confidence in that. And all they know is, hey, it’s got a five-star rating. Brian,
Brian Quaranta 05:41
Yeah. You ever had a five star restaurant that really wasn’t that good?
Rob 05:43
A few.
Brian Quaranta 05:44
We all have
Rob 05:44
just not my type. You know,
Brian Quaranta 05:46
You know, I didn’t have a one-star restaurant and think, why is this one star? Right? You know, because this is really good food. So, you know, how are they quantifying those star ratings? Nobody knows. There’s probably some mathematical algorithm that goes into it. But it doesn’t seem to make sense on a year-to-year basis. When you look at returns versus reward.
Rob 06:00
It has nothing to do with performance.
Brian Quaranta 06:02
That’s right.
Rob 06:03
Unless you flip it on its head.
Brian Quaranta 06:04
Yeah. But you know, the whole idea of the target date fund was to create an easy button, right? And we know these easy buttons only work during easy times. Right? And times are pretty difficult right now.
Rob 06:14
You think about anything in life this worth working for?
Brian Quaranta 06:17
Yep.
Rob 06:18
Where is there an easy button?
Brian Quaranta 06:19
Yeah.
Rob 06:20
Nowhere. Nowhere. There’s it does not exist.
Brian Quaranta 06:22
That’s right.
Rob 06:23
There. There’s no hands off. There’s no set and forget it approach. So, what does somebody do?
Brian Quaranta 06:27
Yeah.
Rob 06:28
How do you know there’s so many pieces here? Because we’re not just talking. You know, we talked about Social Security. We talked about taxes. Right now, we’re talking about everything.
Brian Quaranta 06:33
Yeah. So, I had an uncle who had a garden, okay. And he was he made these beautiful gardens every year, tomatoes, squashes, cucumbers, you name it peppers, and big plants everywhere. And they would harvest it well, one summer, he got really, really sick. And then he planted that garden, it took months for that garden to grow. Well, do you know how you do, you know how you harvest a garden at the end of the year, right to get all of your fruits? Sure. Have you ever seen what happens to a garden when you don’t harvest it, it just dies, it just dies, your money is no different. Once it fruits, you have to harvest it and you’ve got to be able to position and protect it in ways that’s going to get you through your retirement years and in a way that’s going to absorb volatility. rolling the dice in the market is not a way to handle volatility. There’s much better ways and this is why I want folks to have this retirement Readiness Review. And the risk report that we’re going to put together for you. It is going to tell you, you know what type of risk that you’re taking, if the markets go down how much more you could potentially lose, it’s going to show you by making some changes. A lot of people think that when the markets down, that you shouldn’t sell or get out the reality is changing things up sometimes can work to your benefit something called tax loss harvesting, where if you were to sell off assets, right now, you could actually benefit from the volatility by having future tax write offs on losses that you’ve taken. But also making changes, you know, getting rid of a losing stock for a better stock is a good thing. And in volatile market times. Getting on a better horse is basically essentially what you’re doing when you’re making a change. You’re not getting out of the market and locking in the losses, you’re just changing the vehicle that you’re in, and that makes a big difference. And this retirement Readiness Review and the risk report will uncover a lot of these opportunities for you. All you have to do is call 888-382-1298 or scan the QR code at the bottom of the screen.
Announcer 08:19
Call 888-382-1298 for your own complimentary retirement Readiness Review and Risk Report. Why take unnecessary risk when you don’t have to at 65 years old? Would you drive to the grocery store at 100 miles per hour if 40 miles per hour would get you there safely When nearing retirement? Are you still driving your investment accounts like you’re in your 30s or 40s? Have you changed your investment election since you first chose them in your retirement accounts at work? Call Brian and his team at 888-382-1298 for your own complimentary retirement Readiness Review and Risk Report. Do you know exactly how much risk you’re taking in your investment accounts. Now that you’ve accumulated a nest egg for retirement, you want to be certain the risk you’re taking in those investments matches your goals and objectives. Call Brian and his team 888-382-1298 For your own complimentary retirement Readiness Review and risk report or use the QR code below to begin scheduling your appointment, you may not have time to recover from taking too much risk.
Brian Quaranta 09:22
Welcome to On the Money with Secure Money. I’m your host Brian Quaranta. And I’m in studio today with my good friend Rob Hurtig. What a lot of you don’t know is my good friend Robert here is a consultant with lots of financial planners all over the country.
Rob 09:34
Absolutely.
Brian Quaranta 09:35
You have a heck of a vantage point in getting to see what’s happening around the country. It’s and it’s, it’s a little bit scary right now with inflation. And I’ve got to ask with you working in so many different markets across the country and working with so many different planners. What is being addressed with inflation right now? Kind of what’s going on?
Rob 09:53
Yeah, well talk with you. I know that you’re passionate about the game here. We’re in, in your craft and helping people retire the way they want to retire. I know it’s really important to you, you know, from my vantage point and man, you know me, I’m not a doom and gloom guy, I’m a positive guy, right? I’m not a head in the sand guy I focus on, on what can be achieved. And the scary thing to me is that people are putting their heads in the sand when it comes to when it comes to inflation and planning for retirement. And, you know, just the whole ball of wax. It’s out of sight, out of mind. And to me, that’s, that’s terrifying.
Brian Quaranta 10:26
Do you think they have their head in the sand right now? Because they’ve lost money? Because they don’t want to deal with it. They, what is it? Why are people not willing to address it?
Rob 10:37
I think it’s a combination of quite a few things. But you know, you look at a 12-year bull market run.
Brian Quaranta 10:42
Yeah,
Rob 10:43
You know that kind of rolls you to sleep a little bit right, you guys. Boston’s a confidence. And we’re talking about inflation. So, let’s talk about inflation. The 100-year inflation average is about 3.23%.
Brian Quaranta 10:52
Yeah,
Rob 10:53
so, it’s been so far out of line, the 10-year average is about to 2.1. So, let’s, let’s really put this into perspective from $1. standpoint.
Brian Quaranta 11:02
Yeah,
Rob 11:03
at 2.1%. Inflation, if you need $100,000 A year in retirement, it takes 30 years for that to double to.
Brian Quaranta 11:11
So you’re telling me if I need 30,000 Right now, in 30 years, I’d need 60,002% inflation, right? Okay, got it.
Rob 11:15
3% 3.2% inflation, which is 102-year average. It’s about every 25 years, so out of sight out of mind. And here’s why.
Brian Quaranta 11:25
What how long does the average person live in retirement?
Rob 11:27
Well, first off, most people can’t think about whether, they can’t think past what they’re gonna have for dinner tonight.
Brian Quaranta 11:30
Yeah,
Rob 11:31
Let alone. 25 years that they’re going to need extra income, right?
Brian Quaranta 11:33
Yes.
Rob 11:34
So, so, here’s the old average person was 18 to 20 years in retirement, right. So, it’s not even a double the whole time, their retirement, is it 2.3, right, or 2.2? Whatever it is. Now, we ran it also 8.6, which was the national average. Okay, right now, it’s not anymore. It’s 9.1. Now, so we ran this, so it’s getting worse. What so I dumbed it down a little bit, just because I don’t want to do use case right now. You know, I try to be realistic about this stuff. But I do think it’s worse than 8.6%. And when we run into 8.6%, your income need doubles every eight years. So that’s about three times in retirement. So, if you need $100,000 a year now, it becomes 200 by year eight, and by year 16. It is $400,000. A year, where are you? Where’s that coming from?
Brian Quaranta 12:13
Well, and most people will spend 20 to 30 years in retirement. So, this is a lot of doubling that could happen if inflation stayed at this. And we were talking about this a little bit earlier this morning, where everybody’s inflation rates a little bit different too. Because I mean, I have clients that enjoy just staying home taking care of the garden, right? They watch the grandkids.
Rob 12:31
Yeah,
Brian Quaranta 12:32
but then I have clients that are flying around the country flying around the world going on cruises, going out to dinner spending time with their grandkids, right. their grandkids are in different parts of of the country. Yeah, right there. inflation rate is has gotta be different, because travels up what 40%?
Rob 12:48
35 to 40%, kind of depending on who you’re talking to, then fuel is up. Oh, 100% 100% fuel. It’s insane.
Brian Quaranta 12:57
So, so somebody that’s very active in retirement could have a completely different inflation rate than the average.
Rob 13:01
I think you make a great point. Because what do you say about returns? He said the market doesn’t return in what? An average, right? So, we’re talking about returns, it doesn’t return an average, that means it’s not going to hit everybody equally, right?
Brian Quaranta 13:11
Yeah.
Rob 13:12
And it’s not going to hit the same way all the time, right?
Brian Quaranta 13:14
Yep.
Rob 13:15
Well, why do we look at inflation in averages, because if you have a different lifestyle than somebody else, I would venture to guess inflation is a much higher rate for you.
Brian Quaranta 13:22
Yeah, and you make a good point about averages. And this is where the math lies, Wall Street math lies, you know, folks, if you don’t realize this, but it’s not inflation. But just if you look at math, in general, let’s say you had a million dollars and you lost, you know, let’s say 50%, and you go to 500,000. And next year, you gain 50%, you’re only going back to 750,000. That’s still a 25% loss. Let’s say the next year after that, you get an additional 30%. You’re not even back to even yet. So, you have a three-year return of zero. But if you look at the averages, Wall Street will tell you, you still average a reasonable rate of return of about 10%. Right? Isn’t that, isn’t that insane?
Rob 13:58
It’s crazy.
Brian Quaranta 13:59
That’s amazing to me that they are able to do that and project those numbers like that.
Rob 14:03
You want to look at a little more math.
Brian Quaranta 14:04
Go ahead.
Rob 14:05
Okay, look at your 100-year average. Right?
Brian Quaranta 14:06
Yeah.
Rob 14:07
3.2%.
Brian Quaranta 14:08
Right.
Rob 14:09
Point two, three. Okay, sustainable, right.
Brian Quaranta 14:09
Yep.
Rob 14:10
3.2 Because what’s that? What’s the seven-year average return to the s&p? About nine, right?
Brian Quaranta 14:14
Yep.
Rob 14:15
So, if we take the 3.2% inflation, and we, we factor in the systematic withdrawal approach, where we’re taking the 4% rule, it’s also called the 4% rule. We’re taking additional 4% withdraws out per year to live off of right. When we have a total of 7% per year.
Brian Quaranta 14:28
Yeah, that’s sustainable.
Rob 14:29
Okay. Now back out that 3.4% Average rate of return
Brian Quaranta 14:33
Yeah,
Rob 14:34
or average inflation rate. Right. And plugged back in that 8.6.
Brian Quaranta 14:37
Yeah, yeah, you’ve got a problem.
Rob 14:38
We’ve got a problem right?
Brian Quaranta 14:39
And nobody’s talking about it and firms aren’t talking about it. How many people do you come in and say hey, yeah, my my big box firm. They called me and told me I should come in and talk to him because inflation and because of inflation is impacted my plan. How many of those you have your we don’t see it, never not getting those phone calls. You know, here’s what I’m gonna say. And most of most of these big box firms have figured out plans around three or 4% inflation and they’re not reviewing it, right? You know, and of course, when people are losing money, all they’re doing is telling them, don’t worry about it hang in there, you’re in it for the long haul. It’s just a paper loss. And I think the big box firms really are disconnected from what’s really happened in retirement because they focus on an investment strategy, right, that’s designed to accumulate and grow the money.
Rob 15:18
Yeah,
Brian Quaranta 15:19
But, but what retirees need is actually a distribution of income they do, right? It’s about you climb the mountain, but then how are you going to get down the mountain, right? You know, and you need a guide to get down the mountain. And this is what Secure Money Advisors has always been really good at and what we’re passionate about, but there’s not many of us out there. You work with some of the best advisors across the country that focus solely on distribution. And that’s a different strategy than actually growing the money. It’s a different area of expertise, building income, protecting yourself from inflation, right, making sure that your lifestyle is protected, is different than just growing a pot of money, because you have time, right? When in retirement, you don’t have time.
Rob 15:59
So, you think about what we asked a little bit ago, why are these other firms not talking about either they don’t do it, right? Or they’re worried about losing income, right? Because they’re, they get paid, the more money you have with him under management, the more they get paid. So, they don’t want that leaving going into other instruments that are going to help you survive retirement, right.
Brian Quaranta 16:14
Like if they’ve taken money out of managed accounts and go into something that generates cash flow.
Rob 16:19
Exactly.
Brian Quaranta 16:20
cannibalize their fees.
Rob 16:21
Exactly. They don’t wanna take a pay cut.
Brian Quaranta 16:22
So right,
Rob 16:23
right in that fascinated me, it’s interesting.
Brian Quaranta 16:26
Well, it is interesting, because that’s not, that’s not helping people from a consulting standpoint, solve problems, folks, we’re talking about inflation. And there’s a few ways that you can solve this problem, you could get a part time job, you could go back to work, but the better thing to do is actually get a review and test stress, test your portfolio for inflation. If you call right now, call 1-888-382-1298. Our team is standing by to schedule you for a complimentary retirement Readiness Review and inflation report. Take advantage of this right now. This is not the time to kick the can down the road and procrastinate again, call 1-888-382-1298 and schedule your complimentary retirement Readiness Review and get your inflation report today or scan the QR code at the bottom of the screen and schedule. Thanks for watching.
Announcer 17:14
Call 888-382-1298 for your retirement Readiness Review. With inflation report. inflation continues to hit all-time highs. While your investments provide you with income you need in retirement. Are you losing purchasing power of your savings? Don’t let runaway inflation erode your retirement dreams. Now’s the time to act to be certain you have an income strategy that overcomes the effects of inflation call Brian and his team at 888-382-1298. For your no cost retirement readiness review with inflation report. You might have the savings you need today to weather this storm. But how will inflation affect your nest eggs 510 15 years from now, discover the peace of mind you deserve. Call Brian and his team 888-382-1298 for your no cost retirement readiness review with inflation report or use the QR code to schedule your appointment today.
Brian Quaranta 18:15
Welcome to On the Money with Secure Money. I’m your host Brian Quaranta. And in studio with me today is my good friend Rob Hurtig, and consultant of many hundreds of actual financial planners all over the country. And it’s really neat to have you in with us because you give us a perspective that we don’t really get all that often you get to see kind of what’s going on everywhere in the country, and how financial planning firms are really going about solving some of those major problems. And one of the most major problems we’re dealing with is taxation.
Rob 18:45
Yeah.
Brian Quaranta 18:46
So, when it comes to taxes, why do you think most people just don’t have a tax plan? What’s going on?
Rob 18:52
Well, I think we’ve been conditioned to look at taxes in the rearview mirror.
Brian Quaranta 18:54
Yeah,
Rob 18:55
look at how we file our tax returns on our income. Right. We’re doing it after the fact.
Brian Quaranta 18:58
Right.
Rob 18:59
We’re making prep. We call it preparations aren’t preparations like a tax preparer.
Brian Quaranta 19:02
Yeah,
Rob 19:03
preparations for something you’re getting ready to do. And that’s something you already did.
Brian Quaranta 19:07
Right. Right. Right. Right. Right.
Rob 19:09
We’ve been conditioned to look at things backwards, right. And so we go into retirement, we look at taxation on our assets, we look at it from a completely different lens than we do with any other thing. Like think about this. When you went to college, right? You had a plan to get through your school, right? And once you accomplish that goal, you had other goals, right? And there was a plan of action. Why is it with taxes we wing it? It’s the,
Brian Quaranta 19:30
Or we look backwards, right? We’re looking backwards, right? We’re saying what’s happened over the last year and let’s prepare that return, rather than saying, hey, what’s going to be happening?
Rob 19:39
Yeah,
Brian Quaranta 19:40
and how do we prepare and how do we avoid those obstacles that are about to come because they’re coming?
Rob 19:45
So, here’s the interesting thing. There’s a quote, I think that that expresses this perfectly. There was a federal judge, his name was Learned Hand, okay. And he essentially said in America, there are two tax systems, one for the form, informed the others for the uninformed, both are illegal. Well, you know what they’re counting on?
Brian Quaranta 20:00
Yeah,
Rob 20:01
the uninformed.
Brian Quaranta 20:02
That’s right. Yeah.
Rob 20:03
So, who are you going to be?
Brian Quaranta 20:03
Yeah,
Rob 20:04
who are you?
Brian Quaranta 20:04
Most people are the uninformed,
Rob 20:05
and they don’t have to be. But they it’s not that they’re not smart people by it’s not that they’re dumb.
Brian Quaranta 20:10
Right?
Rob 20:11
It’s that they’ve been conditioned to believe that this is the way to do it.
Brian Quaranta 20:13
Yeah. Yeah. Or they’re getting advice from the wrong people. Right,
Rob 20:16
right.
Brian Quaranta 20:17
And most people don’t realize that one of the most people that we meet, your largest asset is some type of retirement plan, like a 401, K, a 403. B, an IRA account, right? These accounts have never been taxed before. They look at it like they happen, right. And what they don’t realize is that their largest shareholder in those accounts, is the IRS got a business partner, you have a business partner and imagine having a business partner, that any day, they could wake up and say, you know what, I don’t feel like just getting 30% of your money anymore. I want 40% or 50%, or 60% of their money. And they can change the rules in the middle of the game, right? Now. Listen, I have a three-year-old, he’s just learning how to start playing games. But if I change the rules on Maddox, in the middle of the game, he’s like, Dad, that’s not fair. Right? But yet, we deal with this with the government all the time with the with the tax code,
Rob 21:09
We would call you out. Nobody in their right mind, we play this game that we do every single day. Yeah, it’s, it’s a matter of being proactive versus being reactive. There’s a way to be proactive. But a lot of times, you know, we talked about what I do for a living on the intro. And, you know, it’s, it’s really cool to see, but it’s also really terrifying to see too, because, you know, I’m part of this experiment, right? Where I get to see all these people coming in, because their advisors not doing what they’re supposed to be doing. Yeah, and to hear the stories and to see where people are at. And they’re putting blind faith and blind trust in somebody that may or may not have their best intentions in mind. Right?
Brian Quaranta 21:44
Yeah. And they’re going in and they’re having reviews about account performance. They’re not having reviewed around the best ways to maximize their income, the best ways to reduce their taxation or their future taxation. They’re not talking about how to properly bucket their investments. Right,
Rob 22:00
right.
Brian Quaranta 22:01
You look at most people, they have investments in, all in one bucket, right. And they have not taken the time to designate certain buckets of money at certain times of their life to do certain things. They don’t have a healthcare strategy, don’t have a legacy strategy, right? Because these big firms are not doing this type of in-depth planning. And there’s a lot that’s being missed. Not every eye is being dotted, and not every T is being cross. Right.
Rob 22:24
So, we know there’s some ways to mitigate taxes. There’s stuff like there’s, there’s life insurance, there’s also something called a Roth conversion, right? Where essentially you, you fulfill the taxation on it today, in the process, what you earn on it from then on out becomes tax free, right?
Brian Quaranta 22:39
Yeah. A lot of people don’t understand this whole Roth IRA thing.
Rob 22:41
Well, you know, what big box firms do not talk about it. And I challenge anybody out there right now call your big box firm, you asked him about Roth conversions. And you’re going to, I know the answer, they either don’t do them, or they don’t talk about it, you know, why they don’t talk about and why. Because when you do a Roth conversion, it takes you satisfying the taxation on that account, so that a lot of times the account size shrinks, so their financial advisors taking a loss in income.
Brian Quaranta 23:03
So, you’re telling me, let’s say you have a million-dollar account, right? And let’s just say that you’re going to convert that million-dollar account, you got to pay the taxes on it. Right. So now that million-dollar accounts only worth 700,000, because you had to pay 30% in taxes or maybe less. Right, right? So now they can only charge fees on 700,000? Not a million.
Rob 23:20
Right.
Brian Quaranta 23:21
Wow.
Rob 23:21
So, if you think that they’re charging 1%, right, right, their income went from what is that?
Brian Quaranta 23:24
Well, $10,000, down to 7,030% reduction in pay.
Rob 23:29
So, they weren’t worried about their pay not and not yours, right?
Brian Quaranta 23:32
Wow, that’s incredible. Because you know, the best thing you can do is really get rid of that. Get rid of the IRS as quickly as you can. Because, you know, you’re either going to deal with him in your lifetime, or whoever you leave your money to, they’re going to deal with them.
Rob 23:45
Do you remember what Albert Einstein said about compounding interest? It wasn’t it like this eighth wonder of the world safe wonder the world and the IRS knows that that’s why they’re allowing you to do your taxes, right? So, you can disinherit him right now. Yeah. And use that compounding in your favor. Yeah. Or you can let them win.
Brian Quaranta 24:03
I might see because I still get compounding interest when I do a conversion to a Roth IRA. It’s just the compounding of it is actually all tax free to me.
Rob 24:11
Yeah, absolutely. I get asked this question all the time, like, how do I know, how do I know if I’m a good candidate for, for Roth conversions? And I think a lot of people hear that and they say, oh, it doesn’t apply to me. But I think I mean, I know what I would identify as a candidate, but you and your practice, what you see is, hey, this person is a prime candidate to actually do some strategic tax planning.
Brian Quaranta 24:27
Well, look, I mean, if you’re 10 years from retirement, five years from retirement, you have money in an IRA a 401. K, you’re a perfect candidate to look at a Roth conversion strategy to see if it would benefit you to do it. If you recently retired probably if not too far, even recently retired, you can do it because look, look at it this way. Most people write with their retirement account that is replacing the defined benefit plan, right that the pension,
Rob 24:52
Yeah,
Brian Quaranta 24:53
so, most people 85 to 90% of the people that have these plans are going to need to take income out. So, let’s just do some basic math. Let’s say They need $1,000 coming out of that account, and they’re in a 20% tax bracket. Well, that means after they take that $1,000 out and pay the 20% in taxes, they’re only netting $800. Right? Well, what happens when taxes go to 30%? Now, they’re only netting $700. So just through taxes going up, they reduce their purchasing power, right? Now, you convert that to a Roth IRA, right? And now you take that same $1,000 out your taxes are at 20%, you pull that money out of a Roth IRA, you still get $1,000, because you don’t owe any taxes, tax rates go to 50%, you still get $1,000 because it’s all tax-free money. And now to your point that compounding interest is working in your favor, folks, the reason why you want to get a tax strategy right now is because we have the most advantageous tax rates right now. Now is the time to actually put together a tax plan, why taxes are on sale, but you got to do your part you got to call us today, call 1-888-382-1298 and get your retirement Readiness Review. With tax map report again, call 1-888-382-1298 or scan the QR code at the bottom of the screen. Thanks for watching.
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