The

Retirement
Ready
GUIDE
A 5-Step Process to Making Work
an Option and Not an Obligation.
 In “The Retirement Ready Guide,”
you’ll review the following:
To help you view your Retirement
Planning Strategy from • The Tools, Results and Life Strategy
• The five steps to “Be Retirement
every angle, we’ve created
Ready,” including tax planning
“The Retirement Ready Process™.” and estate planning
• A 10-question quiz to determine
A happy and fulfilling retirement whether you are retirement ready
means different things to different • Working with a Fiduciary Advisory Team
people. For you, it may mean • FAQs
transitioning from a full-time career
into meaningful part-time work. Or
perhaps you envision yourself spending
more time with family, building
out your dream garden or making
regular visits to the beach. Once you
determine what will give you peace
of mind in retirement, it’s important
to know how you can get there
financially. We’ll help you get started
with some simple (and exciting) steps.
But before we continue onto these five
steps, let’s dive into the topic of YOUR
LIFE and how the financial vehicles
you choose will directly impact it.
 We believe it’s not 100% about the financial tools
you have, but about the life you live.
The tools you have worked so hard to build are currently and will
eventually produce a certain result. The key question remains: Will that
result give you the life you are seeking?

Stop for a moment and think about your life. What about your life is
most important to you? Is it your family, your health, spirituality or
maybe your hobbies and friendships? The financial tools you choose will
ultimately impact how you live your life and what you get to experience.
Will you encounter freedom or survival?

Let’s look at an example.

If you own an IRA, the result is having a tax-deferred account with the
potential of earning interest from the limited investments chosen within
that IRA. The other unfortunate thing about an IRA is its low annual
contribution limits. So the questions you have to ask yourself are:

• Will your IRA grow to the point where it has

accumulated enough to generate sufficient income
and maintain or increase your lifestyle?
• Will Uncle Sam (the U.S. government) raise taxes
and take a portion of your income during retirement?
• By taking those taxes, will it affect your desired lifestyle?

We are not saying IRAs are bad investment tools; we are mainly showing
that any financial tool you decide on funding needs to be structured to
support the lifestyle you desire.

THE RETIREMENT READY GUIDE 3

 Tools Results Life

Social Security Security Family

Mutual Funds Liquidity Spouses

Checking Acct. Returns Children

Savings Acct. Growth Grandchildren

Real Estate Tax Deferred Health

Annuities Tax Free Free Time

Roth IRA Tax Deductible Hobbies

IRA Diversification Traveling

401(k), 403(b) Income Fishing

FRS Death Benefits Swimming

Life Insurance Collateral Job/Career

Stocks, Bonds Opportunities Charity Work

Gold, Wine, etc. Etc. gym, Faith, etc.

If you choose a tax-free or pension-generating tool, the quality of your life could drastically change,
but it ultimately depends on the quality of advice you are receiving and the ethical standards of said
advisor. If you’ve worked with an investment advisor at your local bank or an investment institution,
their main objective, most likely, was placing your funds into a generic investment portfolio that did
not coincide with the life you envision for yourself. While choosing an investment portfolio may sound
complex, it’s actually fairly simple, and it is far from being considered full-service financial planning.

4 GUERRA WEALTH ADVISORS

 This is our five-step process toward making work an option and not

The Retirement an obligation. For this to succeed, you must familiarize yourself
with these five steps of wealth management and implement the
Ready Process™ multiple actions within each step. Not all actions are necessary
for each family or individual, but they are available if necessary.

Retirement
ST E P

1 Income
Planning
LET’S CALCULATE YOUR INCOME GAP:

$__________ Monthly Desired Retirement

Income + Inflation (+/- 3%/year)
INCOME GAP ANALYSIS
- $__________ Monthly Guaranteed Retirement Income
The income gap is a shortfall between your guaranteed
retirement income and your desired retirement income = $__________ Monthly Retirement Income Gap
plus inflation. For example, if you have a desired
retirement budget (including inflation) of $11,000 per x 12 months
month due to your expenses and inflation, but your
Social Security and pension income will only be $5,000 = $__________ Annual Retirement Income Gap
per month combined, then your income gap is $6,000 per
month. Other factors we would need to include in this
calculation are potential market risk and other income REQUIRED RETIREMENT
sources such as rental properties (assuming they are SAVINGS ANALYSIS
paid off) or dividend-paying investments. These factors
are necessary when calculating your true retirement Now that you know your annual retirement income gap,
income gap. you can determine the ultimate magic number, which is
how much you need to have saved for retirement.
The following (uncomfortable) methods
commonly used to close this gap are: THE RULE OF THUMB is to divide your Annual
Retirement Income Gap by 0.06. For example, if your income
• Increase your investments’ rate of return gap was $70,000, you would divide $70,000 by 0.06, which
(which increases your risk). equals $1.66 million. This is approximately how much you
• Spend less to save more should have saved for your retirement based on the current
(decreasing your current lifestyle). lifestyle you have. The next step is determining what needs
• Work long (postpone retirement) to be done from now until the moment you retire in order
and save more. to have the $1.66 million saved for retirement.

THE RETIREMENT READY GUIDE 5

You will need to do three things to reach your desired • Avoid collecting your benefit while working because
retirement savings amount: your Social Security benefit could be taxed based on
your income level.
1. Grow your retirement assets
• Apply for survivor benefits if your spouse passes away
through interest earned.
with a higher Social Security benefit.
2. Add funds to your retirement assets.
3. Use the time you have until you retire.
RENTAL PROPERTY
SOCIAL SECURITY INCOME ANALYSIS
MAXIMIZER Real estate is a fascinating asset that can be extremely
profitable if used properly. The main benefits of purchasing
The Social Security Administration has over 2,700 rules
real estate as an investment are the following:
used to calculate or maximize your Social Security income.
Here are a few of the rules and strategies you can use to • Increase in personal income
increase this income source. • Appreciation of the property
• Automatic mortgage paydown
• Determine at what age it makes sense for you to retire • Mortgage tax benefits
based on your income needs, tax bracket, work status
and spousal situation. Unfortunately, 9 out of 10 real estate investors purchase their
investment properties with the right intentions but without
Here are the three most common ages
actually doing their numbers. Use the calculator below to
to begin Social Security:
determine how profitable your investment property truly is.
Age 62, which is considered early retirement and is
+/- 75% of your Full Retirement Age (FRA) benefit. $________ Annual rental income
In some unique circumstances, it does make sense - $________ Taxes (+/- 1% of the property)
to begin taking your benefit at 62. - $________ Insurance (+/- 1% of the property)
- $________ Association cost
Full Retirement Age (FRA) is 100% of your benefit.
- $________ Repairs (+/- 1% of the property)
Everyone’s full retirement age is different and is
- $________ Real estate agent (+/- 1 month of rent)
calculated based on the year you were born.
- $________ Property management cost (if necessary)
Age 70, which is the maximum retirement age and - $________ Accounting costs (if necessary)
is +/- 132% of your FRA benefit. Most people believe - $________ Evictions/Attorney (if necessary)
they should begin taking their benefit as late as - $________ Liability insurance (if necessary)
possible, but this is not always the best option. - $________ Mortgage cost (if not paid off)
- $________ Vacancy (if necessary)
• Sign up for spousal benefits, which could equal up
to 50% of your partner’s eligible benefits. There are Once you’ve calculated all the expenses that come with an
scenarios where even divorced spouses can collect investment property, you’ll be sure to realize that the return
benefits from each other. on these non-liquid assets is between 2% and 5%. The real
• Have your dependent receive a dependent benefit if you benefit of purchasing a real estate investment property is
are retired. the appreciation of the property.

6 GUERRA WEALTH ADVISORS

ANNUITY ANALYSIS Investment/

STEP
If you have an annuity, it is of urgency to audit
that annuity as you’re going through the Retirement
2 Portfolio
Management
Income Planning Process. This audit has 30+
questions that are asked of the annuity company to PORTFOLIO STRESS
truly determine if the annuity is the most effective TEST SIMULATION
financial tool to provide you with the guaranteed
income you’re expecting. During the analysis, fees, What would happen to your portfolio or retirement
surrender charges, income values, withdrawal rules accounts if another 2008 market crash occurred?
and much more are discovered. Most of the time, Would you be able to retire? Recuperate? Or sleep
we discover the annuity has over 3% in annual well at night? Most likely not if you’re near or in
fees and has capped interest rates, which could be retirement. During the Retirement Ready Process™,
detrimental to the growth of the annuity. our proprietary software will run simulation tests to
determine how the current positions in your existing
Annuities were created to provide individuals with portfolio or retirement accounts would perform if
an income source during their retirement years, another crash were to occur. This simulation helps
similar to a pension. We’re not necessarily fans of all you determine how you would like to adjust your
annuities, but they can have their place within your positions so you minimize the risk on your assets.
retirement income strategy if structured properly.
Unfortunately, annuity sales agents have sold RISKALYZE EXAM
annuities without disclosing their full details, and
due to their complexity, the agents weren’t able to This proprietary exam takes you through +/- 10
explain them properly. The three types of annuities questions to determine your emotional risk tolerance
are fixed, variable and indexed. All three have toward market volatility. It then gives you portfolio
their pros and cons, which is why working with a and allocation options based on a scale of 0 - 99 (0
Fiduciary Advisor is so necessary due to their legal being not risky and 99 being extremely risky). Built
requirement to put your interests above their own. on a Nobel Prize-winning framework, Riskalyze
helps investors make investment decisions valuing
An annuity is a contract between you and an insurance emotions as well as reasoning.
company, where the purchaser pays funds for an
annuity in exchange for a variety of guaranteed payout HIDDEN FEE ANALYSIS
options for a set period of time or for the remainder
of his or her life. The two phases of annuities are Most portfolios or investment accounts have fees
the accumulation phase, where the contract value unseen to the eye and not presented on the monthly
accumulates interest earnings, and the distribution or annual account statements. This can be frustrating
phase, where income is paid out from the annuity. to investors who see the performance of their assets
They are the only financial products that can guarantee but don’t see it reflected in their balances. The most
income as long as you live. These guarantees are backed common accounts with hidden fees are mutual
up by the financial strength and claims-paying ability funds, variable annuities, 401(k)s, 403(b)s and other
of the issuing insurance company. employer-sponsored retirement accounts.

THE RETIREMENT READY GUIDE 7

A 0.5% fee may not affect you in a given year, but the DIVERSIFICATION
opportunity cost of those funds not earning interest Everyone knows the adage of not putting all your eggs in one
over many years can be considered an accumulated loss. basket, but do you truly follow this advice? Or are all your
Imagine paying 0.5% on a $100,000 mutual fund. At assets in the bank or in real estate? When you diversify your
$500 per year compounded annually for 10 years at 8% investments, you reduce the amount of risk you’re exposed
interest (in opportunity cost), that’s more than $10,000 to in order to maximize your returns. Despite your wish that
in only 10 years. If not analyzed properly, fees can cost all your positions will soar, there will be periods when some
you hundreds of thousands of dollars over your lifetime of your holdings will lose money. When that occurs, you
of accumulating assets. need other investments to offset the decline. Diversification
ensures that by not “putting all your eggs in one basket,” you
PORTFOLIO MANAGEMENT will not be creating an unwanted risk to your capital.
& DIVERSIFICATION
Diversify within asset classes. Investors who loaded up
If you currently have a portfolio or retirement accounts, it’s on tech stocks in 2000 lost their shirts when the dot-com
crucial to analyze their management style and diversification. bubble burst and technology shares rapidly fell. Similarly,
financial stocks were hammered down in late 2007 and
ACTIVE MANAGEMENT (aka Market Timing) early 2008 due to the subprime mortgage crisis. Anyone
The investor who follows an active portfolio management exclusively invested in these assets at those times would have
strategy buys and sells stocks in an attempt to outperform a experienced significant losses. And if it seems risky to put
specific index, such as the Standard & Poor’s 500 Index or all or most of your money into a single sector, it would be
the Russell 1000 Index. An actively managed investment even riskier to do the same on a single stock. That’s what
fund has an individual portfolio manager or a team of many investors did in the late 1990s, when many employees
managers all making investment decisions for the fund. of tech companies allowed their holdings to become top-
The success of the fund depends on in-depth research, heavy in their employer’s stock. Consider anyone who was
market forecasting and the expertise of the management heavily invested in Amazon at the turn of the millennium.
team. Unfortunately, this type of portfolio management In December 2000, shares of Amazon were selling for more
requires taking greater risks with your accounts and than $100. By the following October, they had fallen to
has proven to be unsuccessful in the long run, such as below $6. If you were banking on those stocks at that time,
planning for retirement. you were in for a rude awakening. It wasn’t until December
2007 that it had climbed back into the $90 range.
PASSIVE MANAGEMENT (aka Time in the Market)
Passive portfolio management can be referred to as index MORNINGSTAR REPORTING
fund management. This is because a passive portfolio is
typically designed to parallel the returns of a particular Part of our Investment/Portfolio Management process
market index or benchmark as closely as possible above includes generating a Morningstar Report on your existing
it. For example, each stock listed on an index is weighted. portfolio and retirement accounts. This tool collects every
That is, it represents a percentage of the index that is position and value your portfolio has and completes extensive
commensurate with its size and influence in the real research on everything from mutual funds to bonds, covering
world. The creator of an index portfolio will use the same more than 620,000 investment options. Our advisors use this
weights. In most retirement planning cases, this is a analysis to screen stocks, bonds, mutual funds and ETFs,
structured and more realistic method for achieving long- to review comparative benchmarks, to analyze internal
term results. investment fees and much more.

8 GUERRA WEALTH ADVISORS

 accounts that have different tax consequences: taxable
accounts, traditional IRAs and other tax-deferred accounts,
and Roth IRAs and other tax-free accounts.

Tax diversification also lets you practice tax bracket

management in retirement. Bracket management lets you
control your tax rate in retirement because you have a lot of
control over which money you spend. In a year when you’re
in a low tax bracket, take more money from the traditional
IRA. When you’re already in a high bracket or want to avoid
jumping into the next tax bracket, take tax-free distributions
from a Roth IRA. In other years, you might want to keep the
ST E P

3 Tax-Planning
Strategies
overall tax bill low by taking long-term capital gains from a
taxable account. These intricate decisions are all part of the
tax planning strategies our team implements.

IRA CONVERSIONS TO An IRA, whether traditional or Roth, will be included in

TAX-FREE ACCOUNTS your gross estate and potentially subject to the estate tax.
In addition, when your beneficiary inherits a traditional
An IRA conversion to a tax-free account sounds simple but IRA or 401(k), the beneficiary is taxed on distributions just
can actually be complex and painful if you’re working with as you would have been. The beneficiary really inherits
an inexperienced advisor. This strategy can easily save you only the after-tax value of the traditional IRA. So, the
20% to 40% in retirement and estate taxes if completed traditional IRA is potentially taxed twice: There’s the estate
properly. The idea is you slowly start transitioning your IRA tax and then the income taxes on the beneficiary when the
assets into a tax-free environment based on your income IRA is distributed.
and your tax bracket of every particular year. The biggest
mistake we see people make is they decide to complete BUILDING TAX-FREE
this conversion on their own, and it ends up costing them INCOME STRATEGIES
thousands of dollars in taxes and unnecessary IRS penalties.
Imagine getting to retirement, taking out a withdrawal
Answer this question: “Do you believe taxes will go up?” If from your retirement account and then realizing that 25%
so, now is the most appropriate time to begin making this or more of that income isn’t really yours. That is why
conversion. When you believe you’ll face a lower tax rate having a tax-free retirement income strategy maximizes the
in the future than you do today, an IRA conversion is less lifestyle you’re looking for. Whether you have $100,000 or
compelling. But the case for a conversion is more powerful you have $10 million, these accounts are built for you to
when you anticipate paying a higher tax rate in the future. live tax-free throughout your golden years. Unfortunately,
It might be better to pay taxes at today’s lower rate instead there are only a few highly favored tax-free account options
of the higher rate in the future. that are available to you here in the United States, but
lucky for you, our team has become experts in customizing
We urge everyone to have tax diversification. That means and structuring them in a way that makes sense for each
having investment assets in each of the three types of individual’s particular situation.

THE RETIREMENT READY GUIDE 9

LIRP (Life Insurance Retirement Plan) If structured popular with people in high tax brackets because they help
properly, this well may be the most beneficial tax-free reduce their tax burden while still earning interest and with
income vehicle that is available for the qualifying public. older adults because they are generally low-risk investments.
Here’s why:
OTHER OPTIONS Other properly structured tax-free
• Tax-free income (if structured properly accounts are Education Savings Accounts, such as 529
under the MEC — Modified Endowment Plans, Coverdell Accounts, Flexible Spending Accounts
Contract — limit) (FSAs) and Health Savings Accounts (HSAs). If you would
• Competitive rate of return based on like to learn more about these accounts, feel free to reach
market index performances out to our team of advisors.
• A guaranteed interest earned regardless
of market performance 1031 EXCHANGES
• Protection from creditors, judgments
and college planning This one’s for real estate investors! If you plan to purchase
• High/nearly unlimited contribution limits or sell a property, make sure to process a 1031 Exchange
• Liquidity of your cash value to avoid the capital gains taxes on the sale of your existing
• Use of funds as collateral property. The main benefit of carrying out a 1031 Exchange
• Exempt from estate tax rather than simply selling one property and buying another
• Liquidity, use and control is the tax deferral. A 1031 Exchange allows you to defer
• Disability protection and income capital gains tax, thus freeing more capital for investment in
the replacement property. In a 1031 tax-deferred exchange
*A LIRP doesn’t make sense for everyone, but it truly depends on type of transaction, you sell one property and defer the
your particular situation. payment of capital gains taxes by acquiring a replacement
property or properties. This helps you keep the money
MUNICIPAL BONDS Municipal bonds (or “munis”) working for you, rather than paying out about a third of
are bonds sold by local governments to support public that equity in taxes.
improvement projects. They generally have a fixed rate
of return and a set length of time. There are short-term The term “like-kind” is commonly used when discussing
bonds, which mature in anywhere from one to three years, a 1031 Exchange because the tax code specifically refers
and long-term bonds, which don’t mature for more than to “like-kind” exchanges, but this term is perhaps the
a decade. most misunderstood phrase in all of real estate. Too many
people perceive “like-kind” to be real estate specific; i.e., a
To encourage investment in local government projects, the residential rental needs to be exchanged for a residential
interest earned on municipal bonds is free from federal rental, or raw land can only be traded for raw land. This is a
taxes (some, but not all, municipal bonds are exempt from misconception; the term “like-kind” in this section takes on
state and even local taxes if you live in the state in which a less specific meaning.
the bond was issued).
Make sure to meet with a real estate professional and
Munis pay relatively low-interest rates, but most are financial advisor to review the pros and cons of completing a
considered to be low-risk investments. These bonds are 1031 Exchange based on your particular situation.

10 GUERRA WEALTH ADVISORS

1035 EXCHANGES LAND CONSERVATION EASEMENT
(ROLLOVERS) (LCE) OR CONSERVATION DONATIONS
If you purchase a conservation easement, it becomes
The IRS allows holders of these contracts to make this permanent, was donated — not sold — to a land trust
type of exchange so they can replace outdated contracts for conservation purposes and meets certain other
with new contracts that have improved benefits, IRS conditions, it can qualify as a tax-deductible
lower fees or different investment options. Years after charitable donation that can reduce your state and
purchasing an annuity, life insurance policy, long- federal income taxes. The easement is treated as a
term care product or endowment, a policyholder donation of the development rights to your land. That
might determine that the policy is not the best fit for means the value of the donation (and the amount of
their circumstances, personal or economic. To cover the deduction you can claim) would be the difference
this situation, the IRS created the 1035 Exchange between the property’s market value if its development
so the funds can be transferred without triggering were not restricted in any way, and its value with the
tax expenses. The following exchanges of insurance easement’s restrictions in place.
contracts are considered tax-free by the IRS:
INCOME SPLITTING The goal of using an
• Replacing one annuity contract with another income-splitting strategy is to reduce the family’s
annuity contract with identical annuitants. gross tax level, at the expense of some family members
• Replacing one life insurance policy with another paying higher taxes than they otherwise would.
life insurance policy, endowment policy or
annuity contract. HIRING YOUR OWN KIDS Another tax-
• Replacing one endowment policy with an identical planning strategy for individuals who have their own
endowment policy or an annuity contract. business is to hire their children. If you have children
• The 2006 Pension Protection Act modified who are of legal working age and have free time to do
the law to allow exchanges into long-term administrative work for your company, add them to
care products. the payroll. A business owner is not required to pay
• Although a 1035 Exchange doesn’t incur taxes, Social Security and Medicare taxes on their children’s
it generally will be reported on a 1099-R form. earnings as long as the children are under 18 years
Some exceptions include if the exchange occurs old and their earnings are taxed at their tax rate. This
within the same company or is a contract- way, the owner is shifting the tax burden to their
for-contract exchange that doesn’t result children, who have lower tax rates. However, if you
in a designated distribution. are using this strategy, please remember to pay your
children a fair market value salary.
UNIQUE TAX-PLANNING
STRATEGIES These are just a few tax strategies our firm implements
for thousands of families across the country. These
LEASING COMPANIES Purchase your strategies require advanced planning through tax
vehicles through a corporation and lease the car out professionals, financial advisors and attorneys all
to yourself. This strategy could reduce your taxable working simultaneously toward minimizing your taxes.
income by the purchase price of the car in that Do not attempt to implement these strategies on your
particular year. own as there are details not described in this guide.

THE RETIREMENT READY GUIDE 11

 Insurance &

STEP
4 Asset Protection
Planning

ASSET PROTECTION FROM

HEALTH CARE NEEDS
One of the most common concerns people have as they
age is running out of money due to the high cost of
health care and long-term care in retirement. Long-term
care generally means receiving help with your activities
of daily living (ADLs), which include eating, dressing,
bathing, toileting, continence and transfers. Many
people receive long-term care at home while others
receive long-term care in an assisted living facility or
nursing home.

As you may already know, having a long-term care

policy can become extremely expensive, especially as
people enter their 60s, 70s and 80s. This is why we don’t
necessarily recommend that most people have a long-term
care policy. In our 40+ years of experience, we’ve seen
that having a LIRP (Life Insurance Retirement Plan),
which includes an ADL health care benefit, is much
more affordable and beneficial for individuals worried
about health care expenses in retirement. This ADL
benefit includes critical illness benefits, chronic illness
benefits and terminal illness benefits.

When looking to protect assets from the cost of long-

term care, people generally think about Medicaid, but to
qualify for Medicaid, you must have depleted practically
all your assets, and that is not a viable option.

12 GUERRA WEALTH ADVISORS

HEALTH CARE POWERS
OF ATTORNEY through their payroll taxes. It covers costs billed
by hospitals or similar inpatient or inpatient-like
Imagine you are a sick person and need help with the settings, such as skilled nursing facilities, hospice
activities of daily living (ADLs) cited on the previous and some home-based health care. However, this
page. Not only are you sick, but you’re also debilitated plan doesn’t cover long-term or custodial care.
— you can’t speak or move, and possibly can’t even
think. What might this look like? You might be in MEDICARE PART B is not free but generally
such terrible pain that you literally cannot speak. covers costs for outpatient care such as doctor visits.
Maybe you are unconscious as the result of an Part B also covers preventive services, ambulance
accident. Perhaps you are a terminally ill patient services, certain medical equipment and mental
who has entered into a coma. If you’ve ever found health coverage. Some prescription drugs also
yourself in these types of situations and come out qualify under this plan. The cost per month is not
alive, you likely would have been grateful that your significant but still needs to be accounted for within
Health Care Power of Attorney (HCPA) was in place your budget.
to communicate with your doctors and others for the
sake of your well-being. Individuals who are eligible for Medicare Parts A
and B are likewise eligible for PART C, ALSO
Anyone may serve as a health care power of attorney, KNOWN AS MEDICARE ADVANTAGE.
or an attorney-in-fact. Your HCPA can have any Consumers purchase Medicare Advantage plans
type of relationship with you — this person might be through private insurers rather than through
your friend, partner, lover, relative or colleague, for the government itself. Many of these plans offer
example. You are free to choose anybody, so long as annual limits on out-of-pocket costs. Many also
you trust them and feel that they are competent. provide benefits that Original Medicare patients
otherwise would need to purchase via supplemental
MEDICARE PLANNING insurance such as a Medigap plan, and they may
include copays, co-insurance, deductibles, costs
Medicare is a national program that subsidizes related to insurance while traveling outside
health care services for anyone age 65 or older, the U.S. and possibly even dental, vision and
younger people with specific eligibility criteria and hearing care.
people with certain diseases. It was sanctioned by the
Social Security Act of 1965 to give coverage to people All MEDICARE PART D plans must cover a
in or near retirement who didn’t have any health wide range of prescription drugs that people with
insurance. Medicare is divided into four categories: Medicare take, including most drugs in certain
Medicare Part A, Part B, Part C (also called Medicare protected classes, such as drugs to treat cancer or
Advantage) and Part D for prescription drugs. HIV/AIDS. A plan’s list of covered drugs is called a
“formulary,” and each plan has its own formulary.
MEDICARE PART A is free for those who Patients are responsible for paying premiums for
made Medicare contributions for 10 or more years the Medicare Part D program.

*The above health care planning information is not meant to be advice. Always consult with a health care planning professional.

THE RETIREMENT READY GUIDE 13

 STEP
5 Estate
Planning

WILLS, TRUSTS AND

POWERS OF ATTORNEY
A WILL is a legal document that sets forth your wishes
regarding the distribution of your property and the care
of any minor children. If you die without a will, those
wishes may not be carried out. Further, your heirs may
end up spending additional time, money and emotional
energy to settle your affairs after you’re gone. Though no
single document will likely resolve every issue that arises
after your death, a will — officially known as a last will
and testament — can come pretty close. If you die without
a will, or intestate, then the courts will decide how your
assets will be distributed. Some people think that only the
very wealthy or those with complicated assets need wills.
However, there are many good reasons to have a will.

• You can be clear about who gets your assets.

You can decide who gets what and how much.
• You can keep your assets out of the hands
of people you don’t want to have them
(like an estranged relative or the ex-spouse
of your kids).
• You can identify who should care
for your children. Without a will,
the courts will decide.
• Your heirs will have a faster and
easier time getting access to your assets.
• You can plan to save your estate money on taxes.
You can also give gifts and charitable donations,
which can help offset the estate tax.

14 GUERRA WEALTH ADVISORS

A TRUST is a fiduciary arrangement that allows a very careful which pension option you choose because
third party, or trustee, to hold assets on behalf of a it may be a decision you will regret. When choosing
beneficiary or beneficiaries. Trusts can be arranged how you would like to retire and receive your
in many ways and can specify exactly how and when pension, you will most likely be given the options
the assets pass to the beneficiaries. Since trusts to receive a lump-sum pension, a single life pension
usually avoid probate, your beneficiaries may gain or a joint and survivor pension. Every pension has
access to these assets more quickly than they might its own options, but these are the most common.
to assets that are transferred using a will. The pension option you choose is your decision, but
always consult a financial advisor because he or she
Additionally, if it is an irrevocable trust, it may not has seen the pros and cons of every option.
be considered part of the taxable estate, so fewer taxes
may be due upon your death. Assets in a trust may SOCIAL SECURITY Choosing when to
also be able to pass outside of probate, saving time take Social Security is one of the most important
and court fees, and potentially reducing estate taxes retirement income decisions you can make. Yes, it
as well. There are many different types of trusts, would be nice to use your Social Security income to
including marital trusts, bypass trusts, irrevocable fund your retirement lifestyle, but just for a moment,
life insurance trusts, charitable trusts, generational let’s assume you don’t need your Social Security
skipping trusts and so on. This is why meeting with benefit to pay for your lifestyle. What strategy could
a qualified estate planning attorney and a Fiduciary you use to maximize your estate and legacy?
Advisor is so necessary in estate planning.
• In this example, let’s assume your Social
A FINANCIAL POWER OF ATTORNEY Security benefit at age 66 was $2,000 per
(POA) is a legal document that allows a person the month. With this guaranteed $2,000 per
authority to act on behalf of someone else in regard to month, you can open a permanent LIRP
their finances, properties, etc., when they are unable to (Life Insurance Retirement Plan) and leave
do so. The authority outlined in the POA can be fairly your family with a guaranteed benefit of +/-
broad or, in some cases, restrictive, limiting the agent $700,000 tax-free. The other option is saving
to very specific duties. Most POAs are issued when the that $2,000 in the bank or in an investment
principal is ill, disabled or physically not present to account that will grow to +/-$500,000 in
sign important paperwork. The agent on the POA can the market but will be 100% taxable to
legally manage the principal’s finances and property, your heirs. The choice is yours, but you
make all financial decisions and conduct all financial need to begin planning how you’re going to
transactions that are within the scope of the agreement. maximize your Social Security benefit.

PENSION/SOCIAL SECURITY • Remember that Social Security survivor

LEGACY PLANNING benefits are paid to widows, widowers and
dependents of eligible workers. This benefit
PENSIONS If you qualify to receive a pension is particularly important for young families
from your employer or a previous employer, then be with children.

THE RETIREMENT READY GUIDE 15

 In some cases, “small” actually can be quite large.
AVOIDING PROBATE • Give away your assets while you’re alive. Instead of
leaving your assets to family and friends after you die,
The last thing anyone wants to think about after a loved give them the items before then, which might help
one passes away is probate, or the process of distributing trim or even eliminate future federal and
the deceased’s property. While probate isn’t always complex, state estate taxes.
it is important to understand the process, particularly if • Establish a living trust. Trusts are appealing when it
you wish to spare your heirs from it. During this process, comes to avoiding probate because property held in
a probate court validates your will, authorizes your executor trust is not part of your estate upon your death. The
to distribute your estate to your beneficiaries and pays any reason? A trustee, not you, controls the trust property
taxes your estate may owe. If you have no will, a further and is obligated to distribute it under the terms of the
administrative proceeding must be held to determine how trust agreement.
your estate will be divided. In this case, the court will name • Make accounts payable on death. Bank and
an administrator for your estate, who then follows the probate other accounts that are payable on death go
judge’s instructions on how to distribute your property. This directly to your designated beneficiary without going
entire process may be overwhelming to your family in a through probate.
moment of grief and crisis. • Own property jointly. Making your spouse or someone
else a joint owner facilitates the transfer
Although probate is often straightforward, many people want of the asset without the need for probate. Some ways
to avoid it. The reasons can vary, but there are some common to hold such assets include joint tenancy with right of
complaints about the process: survivorship, tenancy by the entirety and community
property with right of survivorship.
• It can be slow. In some cases, it can take years
for a probate court to finalize an estate, especially IRREVOCABLE LIFE INSURANCE TRUSTS
if it’s complicated or involves a contested will.
• It can be costly. Costs vary from state to state, People buy life insurance for many reasons, and it offers
but probate generally entails executor fees, attorney some unique features that are not found in many other
costs and other administrative expenses, such as financial products. For example, there’s leverage, especially
appraiser’s fees. In some cases, these charges can in the early years of a policy, where you pay a small premium
accumulate quickly. The expenses are exacerbated to lock in a large death benefit or the ability to time liquidity
if the process drags on for a while. to an event (the death benefit).
• It is public. Since it is a state legal proceeding,
what goes on in probate court does not stay there. An irrevocable life insurance trust (ILIT) is created to own
All the material in the probate process goes into and control a term or permanent life insurance policy or
the public record. policies while the insured is alive. ILITs are also used to
manage and distribute the proceeds that are paid out upon
WAYS TO AVOID PROBATE INCLUDE: the insured’s death. The parties in an ILIT are the grantor,
trustees and beneficiaries, and it can be used to minimize
• Have a small estate. Most states set an exemption level estate taxes, avoid gift taxes, protect government benefits,
for probate, offering at least an expedited process for protect assets, for distribution control, legacy planning and
what is deemed a small estate. various tax considerations.

16 GUERRA WEALTH ADVISORS

 Personal Financial interest rate or get a partial cash-out, make sure you meet
ST E P

6 Coaching
COMPLIMENTARY
FOR CLIENTS
with a refinancing expert. This strategy allows you to have
liquidity of your money for any opportunities that may arise,
such as an opportunity to buy after a bear market or market
crash, or even a business opportunity that may arise.
While it is crucial for families to go through the 5-Step
Retirement Ready Process, our clients receive a sixth step REVERSE MORTGAGES
of planning, which is Personal Financial Coaching. Here’s a
deep dive into our complimentary coaching program. Reverse mortgages can provide much-needed cash for
seniors whose net worth is mostly tied up in the value of
LARGE PURCHASE ADVICE their home. Home equity is only usable wealth if you sell
and downsize or borrow against that equity. That’s where
Throughout your life, you will be making large purchases, reverse mortgages come into play, especially for retirees
and our advisors are trained in analyzing financial purchases with limited incomes and few other assets.
based on their purpose. Here are a few choices we guide
families through: With a reverse mortgage, instead of the homeowner making
payments to the lender, the lender makes payments to the
• Buying or renting your home homeowner. The homeowner gets to choose how to receive
• Selling your home these payments and only pays interest on the proceeds
• Renovations received once they pass away. The interest is rolled into the
• Buying, leasing or selling a car loan balance so that the homeowner doesn’t pay anything
• Goal budgeting: college planning, vacations, etc. upfront. The homeowner also keeps the title to the home.
• Business owner advice and private classes Over the loan’s life, the homeowner’s debt increases and
home equity decreases, but overall, the value of the home
REFINANCING ANALYSIS increases, which will typically wash out the debt and
leave the heirs with equity in the property and with the
The value of your home will increase whether it is paid off ability to pay off the debt. A reverse mortgage is not for
or not. If you’ve been thinking of refinancing your home everyone, but it could benefit a select few retirees with
or an investment property to either reduce your mortgage limited income.

THE RETIREMENT READY GUIDE 17

EXTRA MORTGAGE Every family’s situation needs a unique debt strategy, but the
PAYMENT ANALYSIS most common one is the “Debt Snowball Strategy,” which
guides you toward paying off debt with the highest interest
“I want to pay my mortgage off!” Have you ever said this rates first and snowballing your contributions into the next
or heard someone say this? This feeling is very common debt as you pay them off. This strategy isn’t for everyone, but
because it’s your home, not just a house. If we left emotions in most cases, it works best. If you’d like to learn more about
aside and only looked at the numbers, you’d come to realize which strategy makes the most sense for you, contact our
that paying off your house and making extra principal team to receive our Debt Reduction Calculator.
payments is actually one of the worst financial decisions
you could make. Remember that the value of your home BUSINESS SELLING/
increases and decreases whether it’s paid off or not. If CONTINUATION ANALYSIS
you’d like to learn more about the massive benefits of not
paying off your home or making extra principal payments, Every successful business owner gets to the point where they
then contact our team to receive our proprietary Mortgage either sell their business, pass it on to someone capable or
Payment Calculator. a combination of both. Unfortunately, most business owners
believe their business is worth more than it actually is, which
CREDIT CARD/DEBT is why a formal evaluation must be done before considering
REDUCTION PLAN or seeking out buyers.

Here’s an unpopular truth: There are no quick fixes when Every business goes through a growth cycle. Some businesses
it comes to knocking out debt. Remember the old tale of have a faster growth cycle, while others take decades of
the tortoise and the hare? Yup — slow and steady always growth to reach their peak. If you plan to sell your business
wins the race, especially in the battle against debt. But that because you have no one who will continue it into another
doesn’t stop people from looking for the easy way out of growth phase, then the ideal moment is to sell it at its peak;
debt. Whether it’s signing up for a debt reduction service in other words, when it’s worth the most. Never allow your
or transferring debt from credit card to credit card, people business value to decline, as this is the moment you begin to
are always trying to speed up the process. lose value exponentially.

SELL ZONE

EXPONENTIAL MASSIVE
GROWTH DECLINE
STAGE STAGE

EARLY
GROWTH SURVIVAL
STAGE ZONE
START OF DEATH OF
BUSINESS BUSINESS

0% 15% 75% 100% 75% 25% 10%

VALUE OF BUSINESS AT ITS MAX VALUE

18 GUERRA WEALTH ADVISORS

 ARE YOU RETIREMENT READY?

QUIZ Walking through this 10-question quiz will offer the guidance to know
exactly where you are and where you’re going on the journey to a successful
retirement. Circle “Yes” or “No” and fill in the blanks, if necessary.

1. Have you calculated your monthly Retirement Income 7. Does/Will your advisor (if applicable) consistently
Gap, taking inflation into account? If so, how much is it? provide you with an analysis on the risk, diversification
 YES  NO $_____________ and fees of your existing portfolio or retirement
accounts before and during your retirement?
2. Have you calculated your Required Retirement Savings  YES  NO
amount (magic number) for the retirement lifestyle you
desire? If so, how much is it? 8. Have you received and followed a formal Tax Planning
 YES  NO $_____________ and Reduction Plan provided to you by your CPA
or advisor (if applicable)?
3. Do you have a written plan to reach your Required  YES  NO
Retirement Savings amount for retirement?
If so, who will guide you toward this magic number? 9. Have you finalized your estate planning documents,
 YES  NO WHO?_____________ including wills, trusts and powers of attorney,
so that your spouse and heirs are able to pursue
4. Are you and your spouse in agreement with your their life without you?
retirement “picture,” retirement dates and  YES  NO
retirement budget?
 YES  NO  NOT APPLICABLE 10. Do you feel your current advisor (if applicable) is doing
everything they can (in terms of tax planning, portfolio
5. Do you know the best way to handle your 401(k), management, income planning, estate planning and
retirement account or pension options that health care planning) to prepare you for your retirement
minimize taxes and maximize your income? and the complexities of distributing your income
 YES  NO and assets? If not, then what are you missing?
 YES  NO
6. There are 567 different Social Security strategies. Do WHAT’S MISSING?
you know which one will allow you to maximize your
family benefits?
 YES  NO

If you answered “No” to any of these questions or you are unsatisfied with your current retirement, tax, health care or
estate planning, then make sure to meet with a trusted Fiduciary Advisor, tax professional and attorney who can guide
you toward completing these necessary tasks. At Guerra Financial Group, we pride ourselves on being a one-stop shop
for all your retirement and legacy planning needs. We understand these topics may not bring immediate excitement, but
the financial peace you (and your spouse) will feel once this process has been completed has no price.
WORKING WITH A
FIDUCIARY ADVISORY TEAM our client portfolios. It’s important to know that we never
hold our clients’ assets in our possession or name, as all
The relationship you have with your advisor should be one funds are sent to Fidelity Investments directly under your
of trust, respect and expectations. As a Fiduciary Advisory specific account.
Firm, it is our legal responsibility to put the client’s best
interests above our own. Our investment philosophy has been cultivated through
a combination of exhaustive research and our years of
We pride ourselves on being a full-service financial advisory experience managing our clients’ portfolios. The foundation
firm focusing on all areas of wealth management (retirement of our philosophy is built upon the following beliefs:
income planning, investment management, tax planning,
health care protection and estate planning) for families. • Market timing presents more risks
As a Registered Investment Advisory Firm (RIA), Guerra than opportunities.
Advisors, Inc. is held at a fiduciary standard, with Sebastian • A portfolio’s risk must correlate
Guerra, managing partner of Guerra Financial Group, as the with a person’s emotional tolerance.
primary Investment Advisor Representative (IAR). • Proper diversification can maximize returns
relative to its measure of risk.
The Investment Advisers Act of 1940 was created to monitor • Income and/or dividends play an important
and regulate the activities of investment advisors, now role in long-term performance.
regulated by the SEC (Securities and Exchange Commission). • Investment fees are an important criterion
The advisor, as a fiduciary, owes the client a duty of loyalty, in portfolio construction but not the ultimate
which means he or she must act in the best interest of the deciding factor in keeping a portfolio.
client. Approximately only 6% of financial advisors in the
United States are considered Fiduciary Advisors. INDEPENDENT VS. CAPTIVE ADVISORS

On top of being an RIA, we have also established Guerra A captive agent or advisor is someone who works for only one
Advisors, Inc., a premier south Florida insurance agency. insurance or investment company. A captive agent is paid by
It was established as an agency in 2015 and is regulated by that one company. Captive agents have the knowledge of a
the state of Florida, with Fabian Guerra, managing partner limited number of products from the company that employs
of Guerra Financial, as its primary agent. Our agency them but cannot help a client who does not need or does
primarily offers cash value insurance and annuities but can not qualify for that company’s products. That company may
also provide fixed/variable annuities, as well as health and push its captive agents to sell certain investment products
accident-related insurance policies. or policies or meet certain sales quotas, in turn selling
something that’s not in the client’s best interest. Most agents/
As a Registered Investment Advisory Firm, our clients’ advisors are captive.
portfolios are held at the custodian Fidelity Investments. Since
1946, Fidelity Investments has over 40 million individual An independent agent/advisor does not work for any particular
investors, $11.1 trillion in assets under management, 22,000 insurance company. Independent agents/advisors can offer
business investors, 52,000 employees and over $2.4 million investments or insurance products from an array of companies.
trades per day as of 2022. As an RIA, we are assigned as the This arrangement can be better for clients because the agent/
Investment Advisor Representatives (IAR) to help manage advisor can seek out the best solution for that client’s needs.

20 GUERRA WEALTH ADVISORS

FAQ
WHAT’S THE CATCH? WHERE ARE YOUR CLIENTS’ ASSETS HELD?

After meeting with our team for your Retirement Ready Our clients’ assets are held at the custodian Fidelity
Process, we are very confident you will become a client of Investments, and we are assigned as the independent
our firm and want us to implement the strategies provided Registered Investment Advisors on your accounts.
to you and manage your assets as your independent
Fiduciary Advisors. HOW DO YOU GET PAID?

WHAT IF I ALREADY HAVE AN ADVISOR? As an independent Registered Investment Advisory Firm, we

are compensated through a management fee ranging from
As long as your advisor has provided you with the following 0.5% to 1.5% based on your portfolio structure and size.
planning, you should be fine continuing your relationship
with them: HOW OFTEN DO YOU MEET
WITH YOUR CLIENTS?
• A written plan to ensure your retirement
income exceeds your expenses We reach out to our clients a minimum of four times per
• An in-depth tax analysis of your year and meet with them from two to five times per year,
retirement assets and portfolio depending on their necessity. They receive weekly market
• A portfolio analysis and risk-reduction update emails from our firm, monthly text messages in
strategy that avoids market volatility regard to their accounts and invitations to client-exclusive
• An estate planning strategy to ensure your wills, social events and private financial classes.
trusts and powers of attorney are set up properly
CAN I DO MY MEETINGS VIRTUALLY?
We believe a second opinion never hurts. This is why you
can gather the plan we create for you and present it to your Yes, we can connect through Zoom or any video meeting
current advisor for implementation. platform that works for you.

THE RETIREMENT READY GUIDE 21

 BE PROUD OF YOURSELF
If you’re reading this page, make sure to give yourself a pat on the
back. Your commitment to reaching your goals is admirable,
and we hope we’ve added insight and value to your life.

The information in this booklet is not intended for financial advice.

Be sure to consult with a financial professional, tax professional and
licensed attorney before making any financial decisions or changes.

OUR MISSION

As Fiduciary Advisors, we create

customized financial strategies that
transform the way families retire.

OUR VISION FOR THE

FAMILIES WE WORK WITH

We believe work should be

an option, not an obligation.

These statements are the essence of our work within

the community. If you would like to learn more about our firm
and our educational involvement in the community,
feel free to reach out to our team by calling
(305) 448-1011
and we will be happy to serve you.

22 GUERRA WEALTH ADVISORS

Information contained in this booklet is current to the date of publication, derived from sources
believed to be accurate, and is subject to change. Neither the information nor opinions expressed
herein constitute a solicitation for the purchase or sale of any securities. The information in
this booklet is not intended as tax, financial or legal advice, and may not be relied on for the
purposes of making any financial or investment decisions. Guerra Advisory Services provides
advice and makes recommendations based on the specific needs and circumstances of each
client. To view our Form ADV Part 2 Brochure, visit www.guerrawealthadvisors.com. All
concepts, strategies, or ideas are presented for educational purposes only and are not given as
any form of advice or as any recommendation. Past results or strategies shared in this booklet
are not a guarantee or implied guarantee of any future performance, returns, profit, or growth.
Acting as a Fiduciary also does not guarantee, or imply any guarantee of, any level of investment
performance or professional experience. Investors should thoroughly evaluate their financial
objectives, goals, risks, costs, fees, expenses and personal parameters such as risk tolerance
with a licensed advisor before investing. Investing involves risk, including the risk of loss of
principal. This material was written, produced and prepared by Guerra Advisory Services.
Copyright 2022 Guerra Advisors, Inc.

THE RETIREMENT READY GUIDE

Be Retirement Ready
[email protected]
6401 SW 87th Ave., Suite 119
Miami, FL 33173
ph. 305.448.1011

guerrawealthadvisors.com

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