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*A Roth conversion may not be suitable for your situation. The primary goal in converting retirement assets into a Roth IRA is to reduce the future tax liability on the distributions you take in retirement, or on the distributions of your beneficiaries. The information provided is to help you determine whether or not a Roth IRA conversion may be appropriate for your particular circumstances. Please review your retirement savings, tax, and legacy planning strategies with your legal/tax advisor to be sure a Roth IRA conversion fits into your planning strategies. All rights reserved.
Video Transcript
Rebecca Powers 00:23
Welcome to this week’s edition of on the money with secure money. It is brought to you by the CEO and founder of secure money advisors, Brian Quaranta. Great to see you again, as always good to see you. All right, everything you say always seems to come true. Because you always look ahead. You always plan ahead. You said you love giving good news and you hate giving bad news. But when you watch the news, it’s impossible not to notice the inflation, the stock markets and bonds tanking? Yeah. But you said Everything is on sale. Here’s the positivity folks. Yeah. When money goes out of your hand, it goes to someone else’s hand, but everything is on sale. Right? Tat let’s explain that. Yeah, yeah.
Brian Quaranta 01:00
Well, I mean, at the end of the day, let’s talk about it. Because for some people, this is not a good thing. So, because, you know, because a lot of people unfortunately, kept way too much of their money at risk. Okay, so they’ve taken a big hit on a lot on 100% of what they have, right. But when you set aside a certain amount of money that’s guaranteed and protected. And now you have a certain amount of money that we call your risk money, this risk money is in a great position to make a lot of money over time now. And you know, how I hate you know, the whole, don’t worry about it, hang in there, you’re in it for the long haul. But you can do that when you have a strategy, which I call the two-bucket strategy with which I write about my book called right track your retirement. But if you look at stock prices, right now, stock prices are down, they’re on sale. Okay. And so now you’re buying things for 30 40% of a discount. Think about it, if you were going to buy a car right now, and it was 30 or 40%. Less, would you probably buy it, if you were going in to buy a new wardrobe and it was 30 or 40%? Less, would you buy it? The answer is yes. Right. Now, it’s scary for people to do that, especially after they might have lost money. But for accounts that you truly don’t need for the next 10, 15, 20 years, this is a great place for you to start to pick up additional shares at lower prices. Not only that, but taxes are on sale right now we’re in the lowest tax environment that we’ve ever been in. If you ask most people, if taxes are gonna go up or down in the future, they’ll tell you, they’re gonna go up. Sure. And so, if you could do tax planning right now at low tax rates, now that’s an advantage. So, you got a double whammy here, you’ve got lower stock prices, which you can buy in more shares, less price, and you got taxes to sale, which you can do tax planning to go from taxable accounts to tax free accounts, while tax brackets are at their lowest.
Rebecca Powers 02:51
Now, I know your passion is really helping people retire in the best possible way. So, for someone who’s retired, this risky stuff we’re talking about is not right. I mean, that’s just part of the
Brian Quaranta 03:01
overall plan. Yeah, the overall plan, I always like to talk about money in buckets. Because, you know, once we understand how to organize our money properly, things start to get a little bit easier. So, for example, I always use a three-bucket strategy, right, I always say we’ve got bank money, we’ve got safe money, and we’ve got risk money, okay. And there’s a certain amount of money that you want in each of those buckets. Now, that’s going to depend on what your goals and your needs are, and your ages and everything else. But we always need bank money, because we’re going to need emergency money. If something happens, we need safe money, because typically what safe money is going to do over time is provide you with the cash flow that you need on a monthly basis without worrying about whether the stock market is down. Because if you’re pulling money out of an account, when it’s down, all you’re doing is compounding losses, and then the risk money that you have, once you set enough money aside in the bank money in the safe money, the risk money you have now truly is longer term money. It’s a longer-term money that you can focus on and say, Well, look, the market volatility doesn’t bother me because that’s a 10 year bucket or 15 year bucket or 20 year bucket. I prefer 20-year bucket. Yeah. Okay. Because if you look at the stock market over time, you look at chart of the stock market, it permanently has gone up, it temporarily goes down. But if you look at a trending stock market line over time, it has gone up year after year after year after year after year, decade after decade after decade, right but you need time, but you need time. Because what happens if we’re down right now and you need money? That’s a problem, right? And that’s why you need those other buckets. Right? You can’t just have everything in the risk bucket. And that’s where people get it wrong. And this is why I wrote about it and right track your retirement because too many people I see are still trying to do the things they were doing while they were growing their money when they go into retirement because the strategies or techniques that you use when you grow your money are not the same strategies and techniques you’re going to use when you go to start using your money. said if you think about that, you no longer have to trade your time for money anymore. Your money should be working for you. But how is your money going to work for you if it’s in a place where it can lose money, this is why there’s got to be a better balance in retirement. And most people just don’t know what that looks like.
Rebecca Powers 05:16
And your whole goal, really, and what you do so beautifully in the book that you can get, by the way, complimentary when you come to meet Brian, for your complimentary review, is that the money has to work for you. We talked last week about lazy money. What does that mean? You give each chunk of money a job, you give it that specific job, it’s doing what it does to let people sleep at night? Let’s talk about that. Yeah,
Brian Quaranta 05:37
that will the job is important, right? I mean, it’s like organizing anything. I mean, I think about it, I mean, you know, you walk into an office, and it’s disorganized, and you can’t find a whole lot of things, you know, with the purpose of right, God is efficient. So, money is the same way. There’s a purpose for each bit of money that you’ve got. So just take me for example, okay. Every year, I make sure that the money in the bank is funded correctly, I like to have 6 to 12 months’ worth of salary in there. Right? Wow. So good for you. So, you want you want to have that heavily invested, you know, and I’ll get you a lot of my kids. You know, my clients, kids, they’ll come to me, and they’ll say, I want to start investing. Yeah, I’ll say, Well, how much money do you have to make a couple $100? Well, we need to think about making sure that the money in the bank is funded correctly, because that’s the number one bucket, you got to make sure that right. More than that for young kids is paying off debt. But-
Rebecca Powers 06:29
I’m sorry to interrupt you, but just about three months for regular people, right? I mean, you have 6 to 12, for emergencies but I think for us regular working Joes its probably-
Brian Quaranta 06:36
6 to 12, 6 to 12 worth of expenses.
Rebecca Powers 06:39
So, of expenses.
Brian Quaranta 06:40
Yeah, I know I said salary but I should have said expenses,
Rebecca Powers 06:41
Okay, no, That’s fine, you scared me.
Brian Quaranta 06:33
Yeah, yeah, yeah, yeah, like whoa!
Rebecca Powers 06:45
Yikes! I gotta work a lot longer.
Brian Quaranta 06:47
If you’re sitting at $2000 – $3,000 a month of expenses, times that by 6 or 12. Right, that’s about what you should be. I say 12 now, just because of COVID. Right? Yeah, you know, like, those are, those are things we may never see again. But you know, they do change your philosophy a little bit, sometimes on things. So, bank money is absolutely important, because you need those there in case if something happens, then you always want to start funding what I call your Safe Money or Your pension money. So, every year I put a little bit of money into that safe buckets. Because as I’m approaching retirement, I want to make sure that I have a bucket that I’m going to be able to turn monthly income on from and I want at least 20 years of monthly income from that safe bucket. And that safe bucket cannot have any market volatility.
Rebecca Powers 07:35
All right. So, it’s linked to the market, but not in the market.
Brian Quaranta 07:38
Or it can be completely fixed, it could just have a fixed rate of four or 5%. Or it could be linked, but it cannot have the ability to go down in value, right? zero risk zero or higher. Zero, yeah, zero is your hero. Okay, and then you can have your risk money, right now that’s longer-term money. So, every year I put money into the risk bucket. But I know that that’s money I’m not going to need for 20 plus years, and I don’t care what age you are, there always should be a little bit of money going into those buckets, and it’s going to differ for everybody. But that’s what we help you figure out at secure money advisors when we do the right track retirement review. And I built this review, ultimately, because people would come in every single year. And they’ll say, we don’t even know if we’re doing the right things. Are we on the right track? Are we making the right decisions. And when I would talk to people, I realized that they didn’t really even understand what retirement planning looked like. So, I started to look at and I said retirement plan is really made up of five key areas. It’s made up of your income strategy, your tax strategy, your investment strategy, your healthcare strategy, and your estate planning strategy. If you have all the i’s dotted and t’s crossed in those five key areas, you are going to have a solid retirement plan. Most people do not have all of those areas handled. So, if you weren’t on the right track, when would you want to know when would be a good time to know come in and get yourself on the right track by taking advantage of our complimentary no obligation, right track retirement review, all you’ve got to do is pick up the phone and call 188838 to 1298. Again, that’s 1-888-382-1298. And let me tell you what you can expect when you come in. We’re going to sit down for 45 minutes to an hour. We’re going to roll up our sleeves. And we’re going to start to understand where you currently are, what your concerns are. And we’re going to start to analyze whether or not there can be changes made to improve your situation, or the questions are going to be what risk are you taking? What fees are you doing? What tax planning have you done? And it’s okay to not know what I want you to understand is this is not an intimidating process. You don’t have to worry about coming in and being criticized for what you have or haven’t done. We’re there to truly help as a fiduciary firm. Our job is to help put you in a better situation. So again, folks, call today and schedule your right track retirement view. It’s one eight 888-382-1298
Rebecca Powers 10:02
Absolutely, and stay with us, we’re going to talk more about tax planning and how you can keep more money in your family’s future instead of the government stay with us.
Brian Quaranta 10:11
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 Major 10:25
And 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 10:34
The average person might say, well, a good portfolio would be a good mix of stocks, bonds, mutual funds. A good portfolio is all designed around the five key areas, income, taxes, investments, health care and legacy planning.
Neil Major 10:48
Because we’re not just product pickers here, what we do best here as we build retirement plans,
Brian Quaranta 10:53
9 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 Major 11:04
People, you know, can actually see a vision once we start to really build out their plan.
Brian Quaranta 11:09
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 11:39
Welcome back to On the money with secure money. And we are talking about how to keep more money in our pockets. So, we’re going to talk about legacy. Yeah, what is the importance? I mean, for some people, they come in, you ask their hopes and dreams? That’s the first question when you get to know each other. Yeah, some people say I want to spend every penny till the day I die. Yeah, some say I really want to leave it to my children. What is legacy planning? Exactly?
Brian Quaranta 12:01
Yeah. So legacy planning is how do I get the money that I’ve accumulated over my lifetime, to pass efficiently to the next generation. And when I say efficiently, what I’m talking about is not losing a lot of wealth or money to taxation, right. So, I’ll give you a good example. So, there was an article going back quite a few years ago in Money Magazine, big magazine, right? Most people probably have seen a copy of Money magazine at some point in their life. And it was a story about a son that inherited his father’s retirement account from work. As a matter of fact, his daughter’s father had died. Suddenly, he got a call from his dad’s company, the retirement company that his dad had the money with. And they said, You’re the sole beneficiary of this money. And they said, it’s about a half a million dollars, he had a call back to check the amount he said i He said in the article, I had no idea that my dad had saved this much money. Yeah, did a good job did a good job, right. So, he finds out he’s the sole beneficiary, they said, you need to send us a death certificate, fill out these documents and send it into us. So, he does it. So, he’s fills everything out. And a couple weeks later, he gets a check for $500,000. So, he puts in his bank account. And a few weeks later, he gets a 1099 $500,000, which is not a good document to get. A 1099 means that you’re earning, which means the 1099 said $500,000, which means he had earnings of $500,000 when he pulled that money out, because when that money came out, and they gave it to him, 100% of it became taxable. The article went on to say that the son was married. So, he was working along with his wife, they were making about $100,000 a year on combined income. So, in that year, they wound up paying taxes on $600,000. And the article went on to say that the son owed over $240,000 in taxes to the IRS for receiving his dad’s money. Can you imagine almost half of his dad’s money got paid out to the IRS. And I can guarantee you the dad did not intend for that to happen. Right. Nobody intends for that to happen when their money passes along. But this is one of the most overlooked areas in retirement planning is where’s your money going to go when the good Lord decides to take you home? More importantly, is how much of that money is going to go to the individuals you want it to go to? Because if you do it and don’t do any planning, and you leave it in the way that this gentleman did to his son, now you’re going to have a huge taxable event. And there are ways that we can avoid that.
Rebecca Powers 14:43
That was my next question. I was gonna say What should his dad have been told been informed and educated to do?
Brian Quaranta 14:49
Well, the unfortunate thing is, is that the son should have been told by the company, right, he would qualify for something called an inherited IRA. Okay, so The first step would be to move the money from the plan from his dad’s plan to an inherited IRA couldn’t go into the son’s retirement accounts has to go into a special inherited IRA. So, if his son would have been instructed to do that, and he would have had the right information, he could have moved the $500,000 in his dad’s retirement account, to his inherited IRA to the sons inherited IRA, and they would have been no taxes, no tax zero taxes. Now, there’s a couple catches, that only catches this, the son would have to take start taking money out of the account, okay, so each year, he would be required to take money out of the account, and he would have to pay taxes on that. And he’d have to spend that account now down over a 10-year period, okay, or you could just wait till you’re 10 and take it all out at once. But if you spend it down over 10 years, you’re gonna you’re gonna spread out the tax liability. So that’s solution number one, right is to take advantage of the current tax law with the inherited IRAs, his dad could have done tax planning where he could have went from taxable money to tax free money by doing some Roth conversions, and now his son would have inherited tax free money, not taxable money, right. So that could have been another strategy. And then there’s other unique strategies that can be used too, but these are the things that people don’t know about, that they need to know about, that I am so passionate about educating them about.
Rebecca Powers 16:21
Exactly. And that’s why I think it’s so important for you at home, and I felt this way. It is not your fault. You know, you said when you come to the office, it’s no pressure, it’s no sales pitch. It’s not your fault, because don’t you feel, I would guess that 9 out of 10 of us, feel the same way I did. That Oh, I don’t want to look at it. I didn’t really know what I was doing. It’s okay. None of us do.
Brian Quaranta 16:44
Nobody does. And you know what, I blame a lot of my industry for this because, my industry has done a terrible job in helping people understand the intricacies of planning. They always talk about the investments and the performance of the investment, everything else, but that’s meaningless. When you could leave half of your money to the IRS at death. What’s the point of your advisor getting a 20% rate of return every single year? But half it goes the IRS there is no so you’re right, Rebecca, you don’t have to feel bad about it, because most people don’t know. But this is why I created the right track retirement review. Because I want you to know I want you to understand these strategies, you deserve to understand these strategies. So, all you got to do to take advantage of this complimentary no obligation, right track retirement review is called 1-888-382-1298. My team is standing by to take your call to get you scheduled to come in, I’ll send you a copy of my book right track retirement, where I put together a simple guide on how to plan for retirement and build income, it truly is going to help you have a good understanding of our philosophy. So, call today and schedule your right track retirement view. It’s 1-888-382-1298.
Rebecca Powers 17:56
Absolutely. Or you can see that QR code right there, you can point your phone to it with your camera and it’ll bring you right to our landing page. Please have your calendar ready because we reserve a certain amount of spots each week because we want to make sure our viewers get in first. Thanks so much. Stay with us. We’ll be right back more on the money with secure money.
Brian Quaranta 18:12
If I can help you increase your income, if I can help you pay less taxes, if I can help you potentially maximize the returns of your investments while reducing risk reducing fees if I could help you prepare for a health event or more importantly, when the good Lord decides to take you home to make sure that the money you’ve accumulated over your lifetime goes to your family and to your charities rather than the IRS. Would that be worth the time to come in and get a second opinion.
Rebecca Powers 18:43
Welcome back to On the money with secure money. It is not how much money you make it is how much money you keep right Ben Franklin said of money, a penny saved is a penny earned. That is literal. Yeah, literal. You talk about compounding loss. And what we’re seeing right now with all the terrible things going on right now in our economy. Let’s talk about the power of compounding interest.
Brian Quaranta 19:03
Yeah, right. So, people don’t realize that, you know, when you start to get into real compounding interest, I mean, was it Albert Einstein, called the eighth wonder of the world. And it is very, very powerful when you understand it. The example I always give is this. You know, let’s take a bank CD versus like a fixed annuity that’s tax deferred. So, if I’ve got $100,000 laying around, okay, and I go to the bank, yeah, I go to the bank and I’ve got an I buy a CD pan, you know, let’s say 4% interest, okay? So that means every year I’m gonna get a 4000 I’m gonna get $4,000 in interest, but at the bank, I have to pay taxes on that, right. So, I don’t really earn the 4% Because I’ve got to pay taxes on the $4,000 I earned Okay. So, let’s take that same scenario now and said let’s rather than give it to the bank, let’s use a different type of tool. Let’s use something called a fixed annuity which is no Different than a bank CD, you maintain control. It’s got terms on it just like the CD does. When the terms are robbed, you can take your money out, nobody keeps your money, no risk, no risk. But now let’s say you’re getting 4% in a fixed annuity, well, that fixed annuity is tax deferred. So, you don’t have to pay taxes on that. Which means that that’s going to compound at a faster rate than the money at the bank. And even though you’ll have to pay taxes on it later, you’ll still make more money because you’re earning money off of the tax dollars that you would have normally paid out over here at the bank. And these are simple, simple moves, right? These are like one degree moves that you can make that can make massive changes and your financial situation.
Rebecca Powers 20:44
Isn’t that amazing? Just little tweaks, little tweaks. So that’s why when you have your money in a risky situation, let’s say like the stocks or bonds, and of course, you do that for your people to put them in those things. But when you lose a little that compounding loss just eats away eats away eats away that correct, right? Yes.
Brian Quaranta 21:00
And so, losses compound on themselves just as money compounds the other way,
Rebecca Powers 21:06
Right, but it’s a double whammy if it fails.
Brian Quaranta 21:09
It’s a double whammy because you have to earn more to get back to even. So, the simplest example I can give is this. Okay? If you had $100,000 invested, and you lost 50% of that. Now your $100,000 goes to $50,000. So, you ask most people, what rate of return would you have to do if you just lost 50%? And you want to get back to even what rate of return would you have to do those percent, most people would say 50%. But it’s not. Because if I have $100,000, and I go to $50,000, and I take 50% of 50,000. That’s only $25,000. So that means if I earn 50% of 50,000, I’m only going back to 75,000, which means I still have a 25% loss. So, in order to get back to even, I actually have to do 100% To get back, right now. Take that with any loss. 10% loss 20% loss 30% loss, yeah, you always have to do a greater return than the loss to get back to even. And this is what we talk about utilizing your money in retirement, people taking money out of their accounts, when they’re going down in value, just lost 20%. And on top of it, you take out five or 6% You’re compounding that loss. And now it’s even harder for your portfolio to recover itself. And this is why I write about in my book, right tracker retirement the three-bucket strategy that we use, because it eliminates that risk that comes with that strategy.
Rebecca Powers 22:43
So, when that money the risk money is going down, that’s not the place you want to take your income of Corona, take it out of the one that you know is going to keep growing.
Brian Quaranta 22:51
That’s right, yeah, the years that do, the years that the stock account is up, you could always take money from there and put a little bit more over here into the safe bucket. Right. So, you’re capturing gains.
Rebecca Powers 23:02
So, we’re talking about right now, 2022.
Brian Quaranta 23:04
We’re talking about 2022, right,
Rebecca Powers 23:05
Terribly nerve-racking.
Brian Quaranta 23:07
See, Think about your money like a garden. Okay, so my grandfather had this beautiful garden. And you know, in his later years, as he got older, it got harder and harder for him to, you know, tend to this garden. And, you know, I can remember the year that he had got diagnosed and got sick, it was impossible for him to even go out and harvest all the fruits and vegetables. And so that year I watched that garden not get harvested. Yeah. Do you ever see what happens to a tomato that doesn’t get harvested? Did you ever see what happens to it on the vine as it just sits there over time. It just eventually dies and withers away. Yeah, the only way to capture that fruit or that vegetable is to pick it. And your money is no different. You know, when the market was up, you know, everybody was trying to get in, that’s when you should be picking and getting out.
Rebecca Powers 24:00
Gotcha, because everybody was paying more they were paying high. And now they’re losing.
Brian Quaranta 24:05
Now they’re losing and guess what they don’t want to do? They don’t want to get in because they’re losing. So, there was a company, and I might- it was either DALBAR or Limra. Don’t quote me on this. They did a study and they looked at the average return of the average mutual fund, the average return of the average mutual fund was 10.7%. Then they looked at the average return of the average investor. And they found out that it was 3.7%. So how does the average return of the average mutual fund have a 10.7% rate of return, but the average return of the average investor has 3.7%. That difference of 7%. Well, what is that difference caused by? Investor behavior. Investors selling at the wrong time and getting back in at the wrong time and people what they do over and over again. And as they sell at the bottom, and then when the market recovers, they buy back in at the high. And this is why you don’t want to play that game. You see what happens when you don’t create a bucket strategy, like I talked about, and you have 100% of your money invested in the market. And the first year the market loses 10%. Then the next year it loses 20%. Most people start to get really nervous. Yeah, and pull out and they pull out, they have no other choice because they emotionally cannot take it.
Rebecca Powers 25:31
Yeah. It feels sickening.
Brian Quaranta 24:05
Right? So why do we have multiple buckets? Because if this bucket’s going down, we’ve protected our retirement with these other buckets over here. So, it’s okay that this is going down. Volatility is what we have to accept for the beautiful premium, high rates of returns that we get in the market. But you can’t roll the dice with 100% of your money.
Rebecca Powers 25:57
Especially when you’re 60 years old or older.
Brian Quaranta 25:59
Yes, you don’t go to Vegas with your savings account and put it on black. And that’s what’s happening. That’s what’s happening. And people just have the strategy wrong. And I want people to understand this is not what you should be doing right now. Or real retirement plan should be built around three buckets, which again, I write about them in my book called right track your retirement, which today, when you call in to schedule your right track retirement review, we’re going to give you a copy of my book, right track your retirement, I’m literally going to pay for shipping and handling when you schedule your appointment. So, but you’ve got to do your part, you’ve got to call us and schedule that right track retirement review. During that review, we are going to go over five key areas with you, we’re going to go over your income strategy, we’re going to go over your tax strategy, your investment strategy, your healthcare strategy, and your estate planning strategy. I promise you that if you take care of these five key areas, you will have a great retirement strategy. The other thing we have to talk about is mitigating risk. Because when the markets go down, you should be positioned not to panic. And I will show you how to do that my team and I will show you how to do it. So again, don’t procrastinate on this, this is not the time to stick your head in the sand. If there’s any time to get a second opinion. It’s right now and remember, you can’t get a second opinion from the person that gave you the first opinion. So, call 1-888-382-1298. Again, that’s 1-888-382-1298 and schedule your right track retirement review with us today.
Rebecca Powers 27:27
And if your financial planner is not asking you these questions, if you’ve not had these conversations about the volatility of the stock market, about tax planning about estate planning, the question you need to ask yourself is why not? And you can get that complimentary. No pressure at all. Thank you so much for joining us. We’ll see you again next week.
