Cynthia de Fazio 00:28
Welcome to Retire Smart Austin. My name is Cynthia De Fazio, joined today by Phil Capriotti, senior of Empower Wealth and Tax and to our viewers in the audience today, this is a very special episode, and we know that you’ve watched every one of these, but this is happy 200th episode to Phil Capriotti and Empower Wealth and Tax 200 episodes of Retire Smart Austin, thank you for being with us through them all. Phil, Happy 200th!
Philip Capriotti 00:56
God bless us. Five years and 200 episodes.
Cynthia de Fazio 01:00
Oh my goodness. I remember the first one way back in Charlotte, North Carolina. I remember almost like it was yesterday, when you came in, just larger than life, happy, excited, couldn’t wait to get started. And now look where we are today.
Philip Capriotti 01:15
And I had my notes written on I had them written on little pieces of paper, and I used to take photocopies, and I’d say, Cynthia, here’s what we’re going to about today!
Cynthia de Fazio 01:24
And then I’d be like, Phil, I can’t read your handwriting!
Philip Capriotti 01:28
Oh, that’s right. I learned cursive in Catholic school.
Cynthia de Fazio 01:33
But I knew that, but I was like He must have written this really fast.
Philip Capriotti 01:37
Gosh, yeah it was pretty much on the plane coming over, coming in North Carolina. Now we have this beautiful studio in Phoenix, and it’s just wonderful. I don’t know where the time went. Five years just like that in a blink of an eye.
Cynthia de Fazio 01:50
I know, I know. I can’t believe it either. I mean, to me, it does seem a lot like it was just yesterday, but then I look at just the trajectory of where we were five years ago to where we are today, not even to talk about how their face of retirement planning has changed in five years, which I do want to talk about that on today’s show, but God bless you, God bless us. What an amazing experience it’s been. And thank you Magellan financial for this opportunity.
Philip Capriotti 02:14
Yes, without a doubt, without a doubt, they’re amazing partners and they’re amazing people. I’ve worked with Magellan now for a little over 15 years, and I got to tell you, it’s they’re not just best friends, they’re family. Yes, they’re always they’re always wanting to partner in your success. And when you have people like that behind you, you can really bring the type of services. It really helps us to bring the types of services, value added services, to our clients that have really made us what we are today and even bigger and better as we go into the future. This is truly now becoming a generational practice. I have three of my children actively in the practice, thanks to Magellan. I have my youngest son, Parker, doing his three-year internship. I mean, he’s doing trading and analytics and all types of things. He’s just had his 24th birthday, and he’s like, Dad, I can’t believe how much I’ve learned in the last three years. Can’t wait to get out to Horseshoe Bay and work side by side with you.
Cynthia de Fazio 03:18
Oh, that is amazing and such a blessing. It truly, truly is. Well, Phil, let’s talk a little bit about what we went through together in the past five years, because we’ve had a plethora of topics to choose from. But the big one, we went through covid together. Let’s talk about that and how the face of retirement changed with covid, if you will, and the economic uncertainty.
Philip Capriotti 03:43
Right, so, one of the, one of the topics we chose, we actually, we looked at this analytically, and we said, I have an idea. Let’s- Cynthia came up the idea, of course, she says, Why don’t we do the changes in retirement over the last five years. So, yes, it does start with COVID. 2020 Yes. Well, first of all, what we noticed with covid in 2020 is that from February 20, 2020 through March 23 the average portfolio dropped 28 to 35% in one month. Wow. So, for us, what we saw- now, we were out. After 10 days we were out. We had to move everything out, because we could see the writing on the wall. But at any rate, with that being said, what we noticed is that’s when we said, we need to manage portfolios with expected drawdown. We have to set a number. I don’t want to go any lower than this, especially for our clients in retirement. But what we saw was the Secure Act; and the Secure Act 2.0
Cynthia de Fazio 05:01
Mm, okay, big change.
Philip Capriotti 05:02
So, one- let’s go ahead and talk about that change. So, initially, when the Secure Act was implemented, and that was in 2019 what we saw was everybody thought it was wonderful. And this is where they change the RMD age from 70 and a half to 72 so they changed that. The other thing that we that they also changed was they eliminated the stretch IRA, wow, okay, so and that was put in the back door. It was pretty much the last sentence, okay, on a 600 or 700 page bill that got put in between Christmas and New Year, something like that was one of those last minute deals. So, what we saw was prior to prior to 2020, actually 2019 our retirement accounts, we had to take distributions based on RMDs, or required minimum distributions, starting at 70 and a half based on our life expectancy, okay, and then at the death of the first spouse, it would refer back to my wife. She would have to take RMDs, one of the big things, though, if my when my wife passed, if there was anything left in the retirement accounts, it would transfer to our five children, and they could take distributions over their life expectancy, okay, which that’s the meaning of stretch IRA and stretch it out. We can stretch it for myself, my wife and our five children actually help implement their retirement plan. So, the government said, no, no, no, no, no, no, it’s not your child’s retirement plan. I can still remember Barack, Barack Hussein Obama telling us that it’s not there. It’s your retirement plan, and we want our money. So, here’s what we’re going to do. We’re going to change it to 72 and we’re going to make sure that your wife can still take her RMDs, okay, called converted to a spousal IRA, but your children, they must empty that account in 10 years. So once that happened, we started to see a major shift in Roth conversions. Now we were doing Roth conversions for 10 years prior, but not as much, because people were saying, Hey, first of all, I want to make sure my retirement is tax free. And the next thing, I don’t want to leave this big, huge tax burden for my kids, the IRS is going to become the primary beneficiary of our retirement accounts, and for many clients, 80, 90% of their retirement savings are in these 401(k)’s in these government taxable accounts. Absolutely, we saw the elimination of the stretch. We also saw employer sponsored plans encouraged, in fact, and I kind of like this change, you’re basically forced. If you have an employee staff of more than 15, and the larger your employee staff is, the more it’s you have to offer a 401(k), and you have to offer matching after a period of time, okay, so that was never a must or have to prior to that. Okay? So, we saw employers were encouraged to sponsor retirement plans for their employees. So, we want to focus, pardon me, on those. On those retirement plans, we actually saw a major boon in our business, because a lot of the folks that we were managing, we had the tax practice. So, for us, being accountants, first, financial advisors, first as well, but a close second. When you merge the two, it’s a marriage made in heaven. Oh, it totally it really is. So, this really helped us between that, doing our workshops at the local library and doing our TV and then later our radio shows, it just took off. So for those of you out there, over the last five years, from 2020, to 2025, if you haven’t started executing a Roth IRA, you’re going to be one of those individuals that’s going to be forced to see a major increase in your taxes as you have to start to take distributions from these retirement accounts. So, the other thing I’ll say one more, and I’ll let you talk a little bit. Sorry for hogging the stage. The other thing we saw with Secure Act 2.0 is they changed the RMD age from 72 to 73 so now, if you’re born before 1960 you must take your first required minimum distribution at age 73 the year you turn 73 has to be taken by a. First the following year. That’s another issue. If you’re born after 1960 you do not have to take your RMD until age 75 okay, so this was one of the milestones that was implemented in the Secure Act 2.0 so a lot of other changes, but we’re taking a look at it. We saw covid. We saw a major boom in, excuse me, AI absolutely and supercomputing, yes. So, with that being said, we had a couple things going on in 2020. The market really did crash. I won’t call it a correction, but really only six or seven companies were allowed to stay open. So, this was actually part of that active management. So, what was a company that exploded begins with an A, ends with an N, Amazon.
Cynthia de Fazio 10:56
There you go. Everything needed to be delivered to the home, right? I mean, so what are you going to do? You have to do that.
Philip Capriotti 11:02
Mom and pop stores, close you down. Walmart, you’re okay, but Mom and Pop, close them down. Was really kind of sad to see that. But at any rate, we saw an explosion in Amazon, along with Amazon stock prices. Yes, yes, right? So certain companies really benefited and I would say, because we had a vested interest in all of these companies, we benefited as well. So, what would you say some of the major changes in the last five years with retirement planning?
Cynthia de Fazio 11:37
I mean, well, hold that thought, because I want to take a commercial break. Would that be okay? Because we can do a deep dive into this together. Okay to our viewers at home, you are a part of our 200th episode of Retire Smart Austin, and we are so blessed and thankful that you are here. We know that you have a lot of questions for Phil and his team about how to plan your perfect retirement, how to have active portfolio management, how to make sure that you have peace of mind in your retirement years, the opportunity is here to call in today. 888-818-6557, 888-818-6557, and when you do, please mention that you watched the 200th episode. If you’re rushing out the door, you can grab your smartphone, click on that QR code at the bottom corner of your screen, but don’t go anywhere. I have so much more on this anniversary episode with Phil Capriotti when we return.
Philip Capriotti 12:27
Hello. My name is Phil Capriotti. You know, some of the folks that come into our office are concerned that they might outlive their money in retirement. At Empower Wealth and Tax, we’re able to address those concerns by answering your questions and by developing a comprehensive tax efficient retirement income plan. Now this includes a cash flow analysis, a tax and risk assessment as well as a comprehensive investment portfolio review. Remember, this is a complete and comprehensive analysis and it’s prepared by one of our licensed fiduciaries absolutely free. As you know, we never accept compensation for this service. We simply want you to be educated and informed. So, call us today or select one of the options below and start empowering your retirement right now.
Cynthia de Fazio 13:26
Welcome back to Retire Smart Austin. My name is Cynthia De Fazio, joined today by Phil Capriotti, senior of Empower Wealth and Tax on our very special 200th episode, Phil, let’s go back into the world of just retirement planning, if we could, for, obviously, what has changed in the past five years? Talk a little bit about how inflation has taken a rise, if you will. Because we were talking about this five years ago, we didn’t talk about inflation, not much.
Philip Capriotti 13:52
No, what happened was when we saw our literally, the world economy be devastated by this covid, I like to refer to it as the election infection. That’s another story. That’s where all of the political actors could campaign from their basement. They didn’t have to, you know, go out and campaign like they used to. One of the other things, I’m just going to a little off topic. I just wanted to throw this in there. Prior to 2020 we were not allowed to do Roth contributions to SIMPLE IRAs and SEP IRAs. And for those of you folks out there, if you’re self-employed, you’re eligible to have a simple IRA. And if you don’t know what that means, okay, you ought to give our office a call and or a SEP, but now you can put it directly into a Roth simple and a Roth set. So, coming forward again with the inflation, what we saw was the government printing they cranked up the printing presses. Yes, they started sending money to everybody. And now we’re starting to find out even some bad. Actors, unfortunately. But the more money the government prints, the more inflation becomes exacerbated, sure, because what happens is you have too much money chasing too few goods, yes, and that’s, and that’s really the definition, one of the major definitions and criteria for inflation. So, we knew it. In fact, when I saw it, I’m like, What are they doing? I don’t understand. But they meant that the mentality behind it was, we don’t want you to go to work. We’ll pay you to go home. It was kind of the beginning of socialism in the United States. It was kind of a form of it, anyway. So, with that being said, inflation hit 40-year highs, literally within a one year period. And when we saw 2022 interest rates spiked up 4%.
Cynthia de Fazio 15:54
Yes, 40-year highs.
Philip Capriotti 15:57
40-year highs, I think they had 14 separate FED interest rate increases. A couple of them were 75 basis points at a shot. Wow. So, with that, it changed, really changed the entire calculus for bondholders, okay. It also took a- it also made annuities a lot more popular, believe it or not, okay, and it also helped folks start to understand about withdrawal strategies. So with interest rates spiking and inflation going straight through the roof, our inflation increased the 40 year highs we hadn’t it was actually higher than we saw it in 1978 through 1980 when Jimmy Carter was president, we went through those gas wars, and that’s when inflation, you may recall, we could get 12% in a CD, but mortgage rates were 17% they could talk on mortgage Absolutely. You know, back in the late 70s, and those of you who are baby boomers like me remember those days, so we saw that type of increase in inflation. Now most retirement portfolios are not equipped to handle that type of inflation.
Cynthia de Fazio 17:14
No, because when you think about it, Phil, obviously, most people think that bonds are the safe bet, if you will. But what happens to bonds when you have these interest rates that are going up and down? Talk about that. How that impacts your bonds.
Philip Capriotti 17:26
So, I had folks come into my office, some of them literally in the verge of tears, because they had 50% in bonds and 50% in stocks, and they thought they were safe. Well, what happened in 2020 you see when interest rates go up based on, let’s say, a 10-year treasury. For every 1% interest rates go up, your bond values drop 5% so when we saw a 2% raise, a 3% a 4% raise, we saw bond values drop 5% 10% 15, 16, depending on the term of the bond. The longer the term, the more interest rate risk. So, now what we had was increasing interest rates were, were we’re having bond values significantly reduce, and a drop in the stock market had our equities reduced. So, it was a double whammy, absolutely it was. Unless you were in an insured, guaranteed investment, which were met or an insurance product, these retirement accounts got pummeled. They truly did so for folks that were in retirement, that thought they were in safety, 50% bonds, 50% stocks, and an environment where interest rates and inflation increases, these portfolios, if they weren’t actively managed, saw significant losses. I call it the last three years. Well, we run, excuse me, when we run Morningstar reports, we’ll see a three-year period where a client, over the three-year period, the client averaged 2, 3, 4, percent per year, and they still had plenty of volatility in their portfolio. But at any rate, I also believe that the pandemic caused, I think people started thinking more about longevity? Oh, I think so too. Yep. And you know, we’re noticing. I don’t know whether it’s had a negative effect on our health, long term health, but it seems as though maybe it might have. We’re seeing a lot of folks pass much, much, much too young. But at any rate, that’s true. What we’ve also seen in the last five years is a surge in technology and virtual planning, so we have like these robo-advisors now, yes, so personally, folks, I’m not letting a robot handle my handle my portfolio or my clients’ portfolios. But at any rate, we saw virtual Finance. Financing became the norm during covid and sophisticated retirement softwares. Now we use a lot of these sophisticated retirement software I think it’s wonderful, but these Monte Carlo simulations, really, as far as I’m concerned, once you look at what’s called sequence of returns, if you get into the you get into retirement, all of a sudden you have two years of a down that can devastate your portfolio, as opposed to getting into retirement and seeing three years of up. So, we really have to plan for that type of thing, also planning for Medicare, Medicare supplements and long-term care planning also was pushed into the forefront over the last five years. I don’t think we’re going to have enough time to do 25 years. I know we’ve got to do a little bit of that. So, they were some of the major changes in the last five years, as I see it.
Cynthia de Fazio 20:57
Absolutely Phil and I know that we’re going to take a very short commercial break, but you have a very special message to the viewers at home, talk about that on your 200th anniversary.
Philip Capriotti 21:07
Folks, you probably didn’t even notice us over the first year, okay? Or might have thought, okay, flash in the pan. They’re here today, gone tomorrow. The fact of the matter is that was never really our mantra, pick up the phone. It’s time to pick up the phone. It’s time to have us, our team of licensed fiduciaries, certified financial planners, take a look at your portfolio, especially if you work on your own or work with the big box retailer. Dial 888-818-6557 or click the QR code. Let’s do a little tax efficient retirement income planning, portfolio analysis and recommendations, and let’s also take a look at how long your retirement savings are going to last you.
Cynthia de Fazio 21:53
Phil, thank you so much to the viewers at home. That number to call is on your screen, 888-818-6557, 888-818-6557, 888-818-6557, again, we know that you have a lot of questions for Phil and his team about how to plan your perfect retirement, how to have your savings lash through any economic conditions, any market volatility. You want to go to bed at night with peace of mind. And we totally understand that call in today, 888-818-6557, or better, still click on that QR code at the bottom corner of your screen. We’ll be right back momentarily with so much more on this very special episode.
Philip Capriotti 22:31
Hello. My name is Phil Capriotti. You know, we have been helping folks like you create a tax-free retirement income plan for over two decades. I am a firm believer that if you’ve worked and paid taxes for the last 50 years, the one thing you shouldn’t be burdened with is excessive taxation and retirement at Empower Wealth and Tax we specialize in helping you reach your desired retirement lifestyle with a tax free and tax efficient retirement income plan with the probability of taxes going up significantly in the future. Let’s plan your retirement right call us today or select one of the options below and start empowering your retirement right now.
Cynthia de Fazio 23:21
Welcome back to Retire Smart Austin. My name is Cynthia De Fazio, joined today by Phil Capriotti, senior of Empower Wealth and Tax. And in case you’re just now turning in for this final segment, this is our 200th episode today of Retire Smart Austin. And we are thankful and blessed that you are with us today, Phil, again, I just want to say congratulations, and I’d love to just pull back a little bit further if we could. Let’s take a look at 25 years ago, because I know that you’ve been doing this for a very long time. 25 years ago, I know one of the things that we were dealing with was the death of the pension and the rise of the 401(k), yeah. Would you agree?
Philip Capriotti 23:57
Yeah, we would. So, a lot of companies, in fact, we had a lot of new regulations, which were actually great with respect to defined benefit plans and pensions. We found prior to 2020, some of these companies that were saving for employee pensions were actually rating the pensions and using them for company for company expenditures, basically borrowing from them. So, with that, we saw the death of the pension and the rise of the 401(k). So, we had to bail out a few companies, and some folks had to serve a little time. But the point is, we started focusing on saving for our own retirement. So, with the death of the pension and the rise of the 401(k), over the last 25 years, we have been able to save trillions and have it leveraged in the stock market. So, and do it all tax deferred, wow. So, the burden shifted from the employer having to have pensions. Yep, to the employee, Hey, kids, you got to save for your own retirement, which made perfect sense. The other thing that we saw in the last 25 years was the rise of ETFs, low-cost ETFs and low-cost index funds. Prior to that, we had a lot of high-priced mutual funds. In fact, I still see them out there. Okay, some of these mutual funds that were sold 2025, 30 years ago, especially in inherited accounts, they’re still there. Internal fees over 1%, one and a half percent, horrible. But we’ve also seen an increase in robo-advisors and online brokerage, So this made self-directing and self-managing your own investments very, very popular, especially for folks that have a sense of economics, finance and that type of thing. Okay, I can, I don’t. Why should I pay an advisor to do it when I could do it just as good myself. Now, many times what we have is when we have an (indistinct) their own pension, normally, the other part of the equation, the wife or the spouse doesn’t want any parts of it. So, I hate to get to get off topic, but a lot of these do it yourselfers make sure you plan for your spouse. We also saw the market crash, oh yeah, in 2000 we had the .com bust. That’s true. Remember everybody’s computer wasn’t going to be good anymore.
Cynthia de Fazio 26:25
December 31, 1999
Philip Capriotti 26:29
Yes, Armageddon, every time they talk about Armageddon it’s something else. Everybody has to buy a new computer. So, we saw the .com crash before then. All of these IPOs, if you open up an IPO, it would open up at 15, $20 a share, and zip right up to 100 and all of a sudden, boom. They weren’t worth anything. So, with that being said, we saw the Great Recession of 2008 where the S&P500 dropped 52% the covid crash of 2020
Cynthia de Fazio 26:57
Well, Phil, I’m gonna have to stop you right there, because I want to wish you once again happy 200th episode of Retire Smart Austin. We could not be happier. You have been such a blessing to all of the viewers in the Austin area and beyond. I can’t thank you enough for allowing me to be on this journey with you. I’m going to get emotional, but it’s been amazing. So, thank you so very much. I’ll let you take it home. Any messages you want to say.
Philip Capriotti 27:28
All I can say, Cynthia is God bless us. You have certainly been a blessing, not only to our company, but to the viewers as well. We talk about so many different topics, and it actually not only expands our client’s knowledge, it expands our own as well. So, for those of you out there, give us a call. 888-818-6557.
Cynthia de Fazio 27:53
Thank you for watching. Click the QR code.
Philip Capriotti 27:55
Happy anniversary.
Cynthia de Fazio 27:56
Happy anniversary.