Cynthia de Fazio 00:00
Welcome to Retire Smart Austin. My name is Cynthia de Fazio, joined today by Phil Capriotti Sr and Henry Lande, certified financial planner of Empower Wealth and Tax, and to our viewers at home, do you understand the importance of proper portfolio construction. When you get into the retirement phase of life, it’s no longer about accumulating money so much. It’s more about preserving it. We’re going to talk about that in today’s show. So again, thank you for being with us. We can’t wait to get started. Phil, how are you today?
Philip Capriotti 00:58
Just absolutely wonderful. God bless you, Cynthia. I was just thinking about how many shows we’ve done. I know it’s well over 100 but they just seem to be getting better and better and better, and we seem to be having more and more fun.
Cynthia de Fazio 01:13
Yes, we most definitely are.
Philip Capriotti 01:14
We won’t tell the audience what I did right before the show.
Cynthia de Fazio 01:19
Can I stop you for a second like this is episode 212, 212.
Philip Capriotti 01:24
What
Cynthia de Fazio 01:25
I know? Yeah, that’s amazing. 212 episodes. God bless us. So happy to be with you.
Philip Capriotti 01:32
Happy to be with you as well. Really happy to introduce Henry to our viewing audience as well. Henry got my- he caught my eye after interviewing well over 30 certified financial planners, just at FYI, because, you know, we look, I look for a lot in an individual, and he just hit all of the bases. In fact, he, you know, he’s like that Grand Slam batter that gets up and hits the Grand Slam out of the park. And that’s pretty much Henry. He went to school in Texas, graduated top of his class. He won’t mention any names, but it’s referred to as the Harvard of Texas.
Cynthia de Fazio 02:11
So very nice. That’s awesome.
Philip Capriotti 02:15
And the fact that he’s a Certified Financial Planner with over, you know, 1000 client interviews and plans under his belt. He just fell right in as the perfect fit, the perfect Senior Advisor for our Georgetown he’s actually going to be floating, but primarily Georgetown office. So, gentlemen, ladies, we’re looking for several more. So, if you feel as though you fit the bill, or you’re close to the type of individual that you see on TV next to me, Henry, please come in. Dial up. Get dial 888-818-6557, and tell them you’re not really happy where you are. You are certified financial planner, and you would consider running one of our, one of our many offices in and around the city of Austin.
Cynthia de Fazio 03:07
Well, Henry, I’m so excited to have you on the show, because I know you’re so passionate about helping people make proper decisions when it comes to protecting their wealth and also tax planning. So, today’s show specifically talking about portfolio construction. Henry, I want to start with you, because obviously, when you get to the retirement years, it’s not so much about accumulating wealth anymore, as much as it is about preserving wealth. Talk about the importance of helping someone understand the difference and why preserving your wealth in retirement is so important.
Henry Lande 03:36
Yeah, it’s, it’s important for a multitude of reasons. I think the biggest one is actually psychological you tend to work 30, 40, 50 years in a career. You save, you work hard. You’ve done well to get to the point where you’re at. Now it’s time to do the opposite. And there’s a psychological struggle people go through to take from a portfolio that they’ve watched grow and grow and grow over time. So we take a lot of things into account your pensions, your Social Security amounts, your assets, and where they’re located, if it’s in a qualified account, a taxable account, a Roth, aka tax free account, and all of these factors are going to be a portion of what makes your portfolio risk match, what the reward is and what you’re looking for. Is it spending more? Is it traveling with grandkids? Is it giving away charitably? And we take that all into account to start building up a portfolio that’s risk adjusted for you customized.
Cynthia de Fazio 04:29
I love that you said risk adjusted, because obviously, Phil, we’ve talked about this in other episodes that people are truly unaware of how much risk they’re currently taking, and there’s a difference between someone’s risk capacity and risk tolerance. Explain that a little bit.
Philip Capriotti 04:45
It was over 10 years ago, about 15 years ago, I started doing Morning Star reports on clients’ portfolios because I realized and when I say clients, we’re talking about new prospects that have either listened to us or watched us, and they’ve come into the office and. Hmm, so many folks have no idea exactly what the risk tolerance is. They also have no idea what the risk is in their current investment portfolios. They have no idea what the costs are, the internal fees. I’ve asked folks, how much are you paying your advisor per year? What’s your annual What is your yearly fee to manage the assets. And I can tell you, over 90 out of 100 people say I have no idea. I have no idea. I’ve had talk with So at any rate, I won’t, I won’t go any further on that, except to say you need to come into our office and let us do a risk analysis, run a Morning Star report. We have a team of certified financial planners to do this work. We do it complimentary, and then we’ll run a portfolio observation. We’ll also, we’ll also do a risk tolerance questionnaire to help you understand what is your risk, what should you expect as a return on average, and what? What do you expect your portfolio to lose when we see these 2008, 2022 moments.
Cynthia de Fazio 06:09
So important because, again, there’s such a difference between working with an advisor that specializes in the accumulation phase, if you will, versus distribution Henry. Why is it important to notate the difference between the two when you’re shifting from accumulation to distribution, if you will?
Henry Lande 06:26
Yeah, essentially the heyday ends, and now it’s time to reap the rewards from that portfolio. You’ve worked hard, you’ve saved, well, you’ve got to where you are today. If anything, I would sit in that chair and say, I want to make sure I have a second pair of eyes on this. I know. I’ve done my homework, I’ve looked at it, I’ve done everything I can. But maybe there’s a tax efficient way to withdraw, to draw down when you’re pulling out of these portfolios. Maybe there’s a way to grow a different portion faster than the other, because you can get more aggressive in certain accounts because they’re wanting to have tax-free growth. That’s the big difference. And what we tend to see with clients is, unless they have a written-out plan, and they’ve started going down that path, we can add a lot of value.
Cynthia de Fazio 07:05
I would say a well-constructed retirement portfolio also means consistent income. Phil, would you agree with that statement and consistent income, if you will?
Philip Capriotti 07:14
I would take it a step further. Obviously, if you don’t have consistent income, you’re not ready to retire, I would say consistent, tax free or tax efficient income, what you spend I, you know, I had a new prospect come in, a client, actually, they’re going to move forward up the Horseshoe Bay office, and he told me, he said, You know, I took a large distribution out of my IRA. I wanted to pay off one of the houses that I had, and he has several different homes that he’s invested in, plus plays in right house in Colorado, house on Lake and so forth and I asked the point blank, I said, I said, we’ll just call his name. We’ll just say John. I said, John, why did you pull it out of the IRA? Why? He said, Because I asked, because I’ve been watching you for about five years, I decided to come to one of your workshops over at Horseshoe Bay Yacht Club. He said I got worried when I pulled this six digit out of the IRA. He said he didn’t realize that he could have done something like a HELOC loan just because he was cash high, had all of his money in retirement accounts over $5 million in an IRA, okay, but that’s all he did. He saved in a 401(k), saved in an IRA, in homes. So, he wanted to pay off this six and a half percent interest rate. And so, he has one home that’s totally paid off, the lake house. It’s worth about 1.4 million. And I’m like, John, why didn’t you come in to talk to me. We could have done a HELOC for you, okay? And we could have just left that money available, or we could have looked at other- so yes, he ended up paying 24% in taxes on the distribution that he took out because of the other income. Wow. Okay, so think about that. So, I’m going to take out 200,000, right? Okay, and I’m going to give 24% of that to the government, use the balance to pay off the loan at six and a half percent. So sometimes extremely wealthy folks don’t understand this type of management, so I’m going to put it under stress management, because he was pretty stressed out after doing so. So, it’s extremely important in retirement planning before you jump, you know, into the lake or off the cliff. So, to speak, talk. Come into the office and talk with us. Let’s talk about all of the different resources, even certain avenues you may not have even known because your current advisor may not have explained them all to you, so there are a lot of conversations to be had. Risk management, tax management, extremely important, especially in retirement.
Cynthia de Fazio 09:49
Phil, thank you so much. Henry, thank you so much to the viewers at home. There’s a number for you to call on your screen, 888-818-6557, if you’re in the viewing audience and you’re hearing a lot of this in for. Information for the very first time, and you realize, Wow, I need some help. I need to figure out that I can navigate my retirement years with a proper tax plan and to make sure that my portfolio is not taking too much risk. Call in today. Book the complimentary consultation, 888-818-6557, if you’re rushing out the door, we’ve made it even simpler. There’s a fast track to get to Empower Wealth and Tax click the QR code at the bottom corner of your screen that takes you right to a landing page. Fill in a little bit of information, and you can find your way to that consultation even faster, even quicker, if you need guidance, the number 888-818-6557 we’ll be right back momentarily on Retire Smart Austin, stay tuned.
Philip Capriotti 10:47
Hello, folks. My name is Phil Capriotti Sr, and I’m the CEO of Empower Wealth and Tax. We specialize in tactically or actively managing your portfolio’s risk, tax efficient retirement income planning, maximize Social Security, making sure that the estate is being handled in a tax efficient way, making sure that you have not just a trust, but the right trust, and having it all done within the firm that is your tax advisor, Is your CPA firm, is your attorney, is your estate planner, is your financial planner, handles your Medicare, handles your Medicare, supplements your long term care when you’re all encompassing and have a 360 degree protection around your estate now you’re working with A private wealth manager, if your financial advisor is not currently acting in this capacity, I think it’s time for a second opinion. In fact, I know it’s time for a second opinion. Pick up the phone, give us a call, and let’s get it right the first time. Let’s plan your retirement and let’s plan your estate properly.
Cynthia de Fazio 12:03
Welcome back to Retire Smart Austin. My name is Cynthia de Fazio, joined today by Phil Capriotti Sr and Henry Lande, certified financial planner of Empower Wealth and Tax we’re talking all about the importance of being able to preserve your wealth in retirement. You’re shifting from the accumulation phase to the distribution phase. And why is that different? Today’s show is just for you. I think it’s amazing when we break these pieces down just a little bit at a time and take a look at what it means to have risk management and proper allocation. Phil, how important is that, overall, to be properly managed and to have allocation?
Philip Capriotti 12:38
I got to say it’s 50% of the game. It truly is at least 50% of the game. I, you know, I, Henry and I, we kid around and have a lot of fun about working with big box retailers. And don’t get me wrong, they’re all well and good, but as Henry puts it, the cake in a box. You know, it’s a cake. It’s in a box. You throw a name on it, you stick a candle, light it up, and that said, it’s not really customized. It’s not really customized to you. So many times, what I see with these boilerplate portfolios and these, I’ll call them cookie cutters, that big bucks, retailers, I’m talking about a basket of mutual funds, okay? Or a basket of ETFs, per se. So, when we take a look at that, what happens is, many folks will look at these mutual funds, and they’ll say, Well, gosh, I’m very diversified. I have 20-25 different mutual funds, and they all have different names. And what we find is 80, 90% of them, they might have different names, but they all have the same doggone companies inside of them. Wow. So, they’re not really, truly diversified. So, when we run a morning star report and a portfolio observation on these cookie cutter cake in the box portfolios, I love that term, yes, what the client sees for the first time is, I’m not near as diversified as I thought I was Wow. So, I’ll ask him, I like, Why? Why don’t we have, you know, mini nuclear in here? Why don’t we have quantum in here? Why- there are a lot of missing sectors that are not in your portfolio? Why? Because the thing was passively managed. We got cookie cutter and a lot of these advisors, really, I don’t blame them, because they just don’t know any better. They don’t stay current. So, working with a fiduciary that has your best interest at heart, as well as a certified financial planner or CFP as well as a tax planner, the only way to go.
Cynthia de Fazio 14:37
Most definitely. So, Henry, again, it’s not just about risk isn’t eliminated, because anytime you’re, of course, in the stock market, there’s a little bit of risk, but it’s more about managed. It’s managed properly by going this route, yeah.
Henry Lande 14:49
And the big thing is, again, you can’t get rid of all risk. Everything has a risk. US flying out here was a risk, absolutely, getting in our car today, that’s a risk. But the way we mitigate it is, say, Hey, what if this portfolio existed and you had it in 2020 when the covid crash occurred? What if you had it in 2008 when the financial markets crashed? It’ll show an actual drawdown of what that portfolio did during that time and again. We like to put dollars instead of percents. If you have a million dollars and it goes down 50% that is $500,000 that you no longer have, and you need to make 100% just to get your money back. Wow. So, it’s a great way to measure twice and cut once too, as we look at your portfolio and move forward. Absolutely.
Philip Capriotti 15:35
And there’s one other thing I would add. I don’t want my financial advisor telling me, don’t worry about it, it’ll eventually come back. And that’s what a lot of these financial advisors said, don’t worry about it, it’ll eventually come back.
Cynthia de Fazio 15:46
It’s a paper loss.
Philip Capriotti 15:49
Yes, yes, paper all right. It’s greenback, hundreds of 1000s of dollars. So again, this is where active portfolio management, active risk mitigation, all and tax management, really all comes should be all encompassing in everyone, every baby boomers portfolio, and I would even say every baby boomers children’s portfolios, because I like the we will have to like to work with their kids and so forth as well. So, with that being said, active portfolio management, not cake in a box boilerplate. I absolutely love that, folks. I’m sorry about the cake in a box, but ever since Henry told me cake in a box was actually, we were, we were actually interviewing, and I interviewed so many. We interviewed our team, interviewed so many different financial advisors. When he said, Oh yeah, it’s a portfolio. It’s cake in a box. I busted out laughing, and like one of these interviews where you’re supposed to be serious, and I went and told Jen, I’m like, he’s hired.
Cynthia de Fazio 16:49
That’s fantastic, because we hadn’t heard that before, but that is brilliant. Now I’m never looking at cake again. I mean, exactly the same. Oh my goodness. Now, what about a bucket strategy? I know we’ve talked about this before, but when you’re talking about short term, mid-term and long-term, how important is it to have a bucket strategy overall? And that cake in a bucket? No cakes in the bucket right now?
Henry Lande 17:14
Yeah, it’s very important. And the important thing is it’s important based on your age and where you’re at in your process, if you’re in accumulation, it’s different than you’re in the withdrawal phase, but the short-term bucket needs to be short term. I once had a client come in and say, Hey, I’m selling my house, and I want to put it all in the market, and then I’m going to close on my other house in three months. So, we had to talk through that. You know, if short term volatility occurs from March of 2020, until the end of March, 23 days, we saw a 30% loss in the market. Let’s keep the short-term bucket a lot less volatile for short-term needs. Makes sense. So, we kept that cash cleaning clear. The mid-term, we’re trying to keep up with the distributions that’s going on if you’re in the distribution phase, and then the long term has to refill that bucket you have to invest for five to 10 years with a certain portion to continue replacing what you’re drawing out now. So, it’s a segmented approach, but it’s a great way to look at things realistically in terms of, what do I need today, what do I need the rest of the week? And then what do I need five years from now, 10 years from now, 20 years from now?
Cynthia de Fazio 18:17
Do most people make a mistake in one area before we take the next commercial break, one area, specifically?
Henry Lande 18:24
Client by client, it varies. I tend to see some people that are very conservative are very cash heavy. There’s other things out there that can still be liquid and accessible that don’t necessarily need to be that conservative, because we do have to deal with inflation as time goes on.
Philip Capriotti 18:39
Okay, perfect. One of the mistakes I see often, even with advisors, unfortunately, is the fact that on their Roth conversions, when they do their Roth, their Roth accounts, they’re not there’s ultra conservative on their Roth. Well, the Roth is the last money you’re going to spend, unless we have some sort of a Roth income strategy. So, with that being said, We’re aggressive in the Roth or a large percentage of it. Why? Number one, it’s tax free. Number two, if I’m making 2025, 30% a year in good markets in my Roth, happy camper. Okay, I don’t need that in a short-term bucket like Henry. Henry, yes, so eloquently stated. So, when we take a look at a client’s risk tolerance and then accurately putting together that perfect retirement plan, that perfect portfolio plan, this is really where it’s at, as far as I’m concerned.
Cynthia de Fazio 19:35
Most definitely. Gentlemen. Thank you so much to our viewers at home. There’s a number for you to call on your screen, that number is 888-818-6557, we’re talking about the importance today of making sure that you have proper allocations in your retirement portfolio, so that you can have peace of mind. Make sure, as you’re entering the distribution phase of life, that you’re ready for all of these things that could come your way. These could be. Challenging unless you have a proper plan. And how do you get one? You call in to 888-818-6557, take the opportunity to meet one on one with Phil and Henry and the Empower Wealth team. Let them get to know you one on one, your goals, your dreams and your hopes for retirement. The plan will encompass your specific situation and will include tax planning as well. So important for you to enjoy your retirement years. To make it even simpler, you can click on the QR code at the bottom corner of your screen takes you right to the landing page of Empower Wealth and Tax schedule your time accordingly. We’ll be right back with so much more after this very short commercial break. Hello.
Philip Capriotti 20:40
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 21:32
Welcome back to Retire Smart Austin. My name is Cynthia De Fazio, joined today by Phil Capriati Sr and Henry Lande, certified financial planner and Empower Wealth and Tax we’re talking all about protecting your assets in the retirement years, all of your hard-earned money. Make sure that you can keep the most of what you’ve earned. Gentlemen, today’s show is so important. And then you started to say something, Phil, as we came back from the commercial break, let’s talk a little bit about that. There’s a difference in a couple of different products. Talk about what that is, yeah.
Philip Capriotti 22:02
So, I- a lot of folks come in and they have these portfolios that have been around since, I don’t know, the cape men started rubbing two sticks together. What I’m talking about is these old basket of mutual funds you know that you get from Johnny or an Eddie or a Fisher guy or whoever. We tend to like stock portfolios. I want to manage stock portfolios. I want our analyst. I want our dozens and dozens of analysts to look at stocks. What is coming up next? Okay, what are we- what types of technologies are coming up? What types of startups do we have? What types of companies can we grow? 100 200 300% especially in a Roth in a broth account. So, when we’re looking at chocolate, vanilla mutual funds, as opposed to using modern day analytics and super computers and analysts to actually choose different companies that are up and coming. What I’m finding is we can manage the growth of a portfolio much more accurately, as well as the potential down downsizer or downturn in it, or draw down in the portfolio, we can manage risk better. It’s just that simple. So, I would say to our viewing audience, and you know, if you’re listening to us on the radio, if you’ve looked at your portfolios and you’re looking at these same mutual funds, quarter in and quarter out, or month in month out, I’d say, Come on in. Let’s run a morning star report. Let’s put a team of CFPs on your dog. This is your opportunity to do it without any charge. Bring it in and let us explain the benefits of stock portfolios, as opposed to mutual funds.
Cynthia de Fazio 23:54
Thank you, Phil, such a big, huge difference when you break it down that way. Henry, I want to ask you a little bit talk a little bit more in depth about keeping more of what you earn. That’s kind of how I teed up the segment. But it’s so important, and you can do that with proper tax efficiency, which, again, is something that you specialize in. Talk a little bit about how small portfolio construction looks at tax location, not just allocation.
Henry Lande 24:19
Yeah. So, there’s a multitude of ways that we go about doing this. I think Phil kind of hammered it on the head perfectly when it comes to taxes on the Roth side, your taxable account can also be beneficial to your tax return. You can have certain municipal bonds, for example, that pay tax free income. Some of them, if you hold them in a state that has state tax income, it’s exempt from both. You can also harvest losses as the year goes on, to offset future gains, to offset these Roth conversions. So, there’s a multitude of ways that we look at it, and I always say it’s got to be specific to you as an individual. If you want to have a conversation with us, if you want to come into our office, we’re happy to get the actual answer for you, not the cake in the box answer of Here we go, this is what you get.
Cynthia de Fazio 25:06
And it’s always been about customizing for every client that comes in. Phil, you’re so passionate about that, and Henry just blends in so perfectly with the team, because that’s what it’s all about, making sure that each person that calls in, that clicks that QR code, gets that individualized attention.
Philip Capriotti 25:23
That comprehensive, written retirement income plan that we do for each and every one of our clients really shows it drives it home, because it takes a look at all of the income, whether it be Social Security, pensions and the like. But what it does is it creates an estimated RMD required minimum distribution chart at each age. And remember, folks, you know, when you married file and joint, an RMD of 100 150,000 may not be that bad, but as youth each year you have one less year to live that RMD grows significantly, and then at the death of the first spouse, we go from married filing joint. I don’t know why Congress has done this, but going to found as a single the worst tax bracket. And now my surviving spouse, if I haven’t done any tax mitigation or tax management, has to take these huge RMDs and the IRS becomes the primary beneficiary of the IRA account. So again, when we take a look at a holistic plan, it’s important to do tax management. It’s important to look at it and actually talk to someone that has your best interest at heart. Just because they work with a big box retailer doesn’t necessarily mean they work for you. Many times, they’re forced to sell the investments, mutual funds and so forth that the company put not pushes but urges their advisors to offer the public. We work for you. We work for the client, and you’re our most important priority, not somebody in the back office that I never met. So, with that being said, I’m going to defer to Henry. You’ve worked with the big box retailers in the past. Now you work with a private equity firm. What would you say of the differences?
Henry Lande 27:02
It’s really that layer of customization. And as a fiduciary, we have to do what’s best by our clients, and I really feel like we are able to do so by having our tax planning side, by having our estate planning side. If you don’t have someone looking at everything, they’re not going to be able to give you the best answer for what you need specifically. And I’ve very much enjoyed that with Phil and our team, every day is a new day, and with our 1000s of clients, he’s not my boss. I have 1000 bosses, all of our clients.
Cynthia de Fazio 27:29
Very well said Henry, thank you. Very well put Phil. Thank you. To the viewers at home, the number to call is on your screen, 888-818-6557, 888-818-6557, or even quicker, click the QR code at the bottom corner of your screen takes you right to the landing page of Empower Wealth and Tax. Be safe, be happy, be blessed. We’ll see you back one week from today. Take care now. See you soon.