Win Like Warren Buffett: How the Oracle of Omaha can Help Teach You About Retirement

6.30.23: Audio automatically transcribed by Sonix

6.30.23: this mp3 audio file was automatically transcribed by Sonix with the best speech-to-text algorithms. This transcript may contain errors.

Producer:
Any examples used are for illustrative purposes only and do not take into account your particular investment objectives, financial situation or needs and may not be suitable for all investors. It is not intended to predict the performance of any specific investment and is not a solicitation or recommendation of any investment strategy.

Producer:
Welcome to the Active Wealth Show. With your host, Ford Stokes. Ford is a fiduciary and licensed financial advisor who places your needs first. He'll help you protect and grow your wealth. The Active Wealth Show has grown because activators like you want to activate their retirement planning with sound tax efficient investing. And now your host, Ford Stokes.

Ford Stokes :
And welcome the Active Wealth Show activators. I'm Ford Stokes, your chief financial advisor, and I've got Matt McClure, who is a financial advisor with us and our roving reporter who is part of the retirement radio network with us. Sam is out of town this week. Don't know who approved that, but he actually had to go to a Friday wedding. Matt So I guess the the bride and groom were able to save a little a few dollars, but we lost him for the week because of the Friday wedding. I thought that was interesting.

Producer:
Yeah. I mean, you know, I, I don't know who let him escape either, but that gotta gotta have a nice conversation with that guy, but.

Ford Stokes :
Exactly. Yeah. We're so glad that you're. You're here with us today. We'll have an even better show, and we won't tell Sam. It'll be great. So also today, Matt, we're going to be talking about wise investing strategies for your retirement. We're also going to really share how to be like Buffett, how to be like the Oracle of Omaha when it comes to investing and protecting and growing your money. We're going to help you win with your money today. And I think it's going to be a great show. We're also going to play a few important chapters from my book, Annuity 360. Also listeners, if you want to get my book, Annuity 360, all you got to do is visit annuity 360 dot net. That's annuity 360 dot net. You can fill out the information there and we'll send you a free hard copy. We're going to need your need, your name, email and address a mailing address so we can send that hard copy to you. Absolutely at no cost to you. We were trying to help people better protect their assets. We're not advocating that you invest 100% of your money into a fixed indexed annuity, but we are advocating for you to consider a bond replacement strategy where you could replace like 20 to 40% of your overall portfolio with a fixed indexed annuity.

Ford Stokes :
Mean. Look, Harry Markowitz was given credit for being the founder of Modern Portfolio Theory that gave you an efficient frontier in investing. So the premise was you get 60% stocks and 40% bonds as stocks went down like they did last year, Then you'd see money rush out of stocks and into bonds. Unfortunately, last year, the 60 over 40 portfolio had its worst year in 41 years. And we've got to do a better job at protecting our clients money. That's why as advisors, you know, we're recommending like crazy that we consider bond replacement strategies. We did that way in advance. We've done that for years now. And so that helped us do a better job in managing our clients money. And mean I had to I mean, I had to ladies Matt, that baked me brownies because they didn't lose any money on their annuity money last year.

Producer:
I love that. Hey, that's just even more incentive.

Ford Stokes :
Yeah, I mean, Paradys is a pretty good, pretty good incentive for money management, for sure. I'm telling you. So. So on this week's show, we're going to have our quote of the week. I'm going to let Matt share that one. And then we're also going to talk about Warren Buffett's rules of investing. You know, we've got some recession fears that continue to. Percolate up to the surface. And then also, we're going to talk about why Americans doubt their retirement plan right now and what you can do about it. And also, we've got a little this week in history with an Olympic legend and American business icon and more. So, Matt, why don't you go ahead and read our quote of the week this week.

Producer:
And now wholesome financial wisdom. It's time for the quote of the Week.

Producer:
Absolutely, Will. So the quote of the week this week comes from the Oracle of Omaha himself, the one and only Warren Buffett. And it has to do actually with his rules of investing that you mentioned a moment ago for. And the quote is, rule number one, never lose money. Rule number two, never forget rule number one.

Ford Stokes :
Amen. Hey, it's, uh. It's our number one job. It's our first job. It's the first priority as an advisor. When we're a fiduciary, we're fiduciaries. That means we have to put your needs ahead of our own. And our job is to make sure that we first protect your money. And one of the ways to do that is to take away the market risk and also the interest rate risk and the reinvestment risk that's associated with bonds and invest that money into fixed indexed annuities so you can generate income and growth on your money with market like gains without market risk, with fixed indexed annuity. That's our first priority in protecting your money. Another priority would be to implement tactical asset allocation where we're managing your portfolio. You know, we are series 65 licensed advisors. Both Matt and I are on this call and we've got to make sure that, you know, we're kind of rebalancing your portfolio on a monthly basis without hitting you with a lot of fees. We're investment advisor representatives. So that what that means is we're not stockbrokers. We're going to make 5.5% when you when we rebalance your portfolio each time and we're not getting our fees that way. Our fees are really reasonable fees when we're managing per year on the total amount of assets. And so hopefully what happens is your assets grow over time and therefore our flat fee grows over time because it's a percentage of the total that we manage.

Ford Stokes :
It's generally right around 0.95 to 1.5% depending on how much money you invest with us. And most of the time it's it's right around 1% or a little bit lower, and that's really reasonable. So if you invested, let's say, a $100,000 with us, you'd be looking at a fee of $950 for the year. But our goal would be to return a much higher amount than that in growth. So let's say if you happen to have gotten a 10% growth on your portfolio for that year, you would got, you know, $10,000 in growth on that $100,000 and we would have made $950 from that portfolio. So you get paid a lot more money than we do, and it's on purpose because it's your money. We want to do everything we can to help protect and grow your money. But the number one thing is just really worry about the losses. And one of the best ways to avoid losses is to at least implement a bond replacement strategy. If you implement replacing your bonds where all you've got is 60% stocks and 40% fixed indexed annuities you're going to find. That you're going to sleep better at night. Also, what else can happen is you're going to delete 40% of the advisory fees you pay. Because Matt and I, as advisors, we cannot double dip. We can't charge a management fee on top of the insurance commissions that the insurance company and the annuity company would pay us.

Ford Stokes :
That's and if anybody else tries to do that, feel free to give us a call or call the state insurance commissioner or call the State Securities Commission and they'll make sure that that doesn't happen. We've got to do everything we can to protect your money. It's. It's too hard these days. The potential of tax going up and the taxes going up in the future. People are concerned about taxes going up in the future, and people are also concerned about market volatility. And is this recovery real that we're experiencing? I can tell you this recovery is muted compared to the losses that happened last year. I mean, the Nasdaq 100, which a lot of people are investing, is tech stocks these days, especially post the pandemic. You're looking at a 24.2% loss of the Nasdaq 100 last year. Now, our clients did not come anywhere near to capturing those types of losses last year. They they didn't come anywhere close to that. Again, because we did a good job at protecting and growing our clients assets. But we we focused on protecting first. And then when you've got the opportunity for the market to recover as it has recovered somewhat this year. Then you're in a better spot also with sequence of return risk. I want to make sure you understand, like for March oh eight to March zero nine, the S&P 500 lost 50.1%. So let's just round it to 50%.

Ford Stokes :
It took the market six years to come, back over six years to come back to their previous levels. That's a significant time period in your retirement. So you've got to do a really good job at protecting and growing your assets. But again, if we follow the Oracle of Omaha, Mr. Warren Buffett, really need to make sure we're doing everything we can to protect against bank failures and protect against market volatility. Also, please don't put more than $250,000 into any bank account. That's a real concern for sure. And we also want you to use the rule of 100 you want to take. 100. Take care your age. Let's say you're 60 years old. Subtract your age. So 60 from 100 is 40. That's 40% left over. That should be at risk in the market. And a lot of people gasp when I say that because they're like. But I'm invested 80% in the market right now. That's a concern. And if you were to invest in a fixed indexed annuity, you might find it a little bit different for you. And you also could generate the income you need from 40% of your assets and let the other 60% grow.

Ford Stokes :
Then we come back from the break. We're going to start playing some of these important chapters from my book, Annuity 360. We're going to play chapter two, which is why and how insurance companies are competing for baby boomer dollars. And it's an even better time to invest in fixed indexed annuities because interest rates are much higher and the ten year US Treasury is paying out a much greater rate than it traditionally has over the last ten years. When you come back from the break, we're going to play that chapter. We're going to talk more about. How fixed indexed annuities work and how we can also follow what Warren Buffett is saying and be a little bit more like Buffett and protect our assets. First and foremost, we're so glad you're with us here on the Active Wealth Show. Matt McClure and I are here with a brand new show this week. We wish everybody a happy July 4th weekend and come right back. You're going to hear more about why annuity companies are competing for baby boomer dollars and how that benefits you right here on the Active Wealth Show on Am 920. The Answer, come right back.

Ford Stokes :
Welcome back Activators the Active Wealth Show. I'm Ford Stokes, your chief financial advisor. I've also got Matt McClure, who is our roving reporter with Retirement Radio, and he's also a Series 65 licensed advisor with Active Wealth Management. Matt, again, say hello to the folks. We're glad you're here with us this week with Sam out for a Friday wedding.

Producer:
Yes. Which is, you know, I those all the poor guests at the wedding had to go on a Friday. But, you know, it's when you get married, when you can get married and you know, all our best wishes to the couple and to Sam for safe travels. But you know, you got you got stuck with me today.

Ford Stokes :
I'm glad glad you're here with us for sure. Also, you know, Matt, we were talking about Warren Buffett's rules of investing, and we've got five rules that we're going to go over. We've gone over the first two, which was, you know, never lose money and then was the first rule. And then rule number two was never forget rule number one. One thing part of that rule number one, which is never lose money, is we encourage you to ask yourself, how much of my savings and my willing to lose? So I want you to really think about as you're driving around right now, heading to Home Depot or Lowe's or Publix or Kroger, or you're going to a cookout or you're getting ready for the fireworks show over at Green Summer, Shout out to the folks over at Green Summers in coming. They have an incredible fireworks show there. They're like one of the neighboring subdivisions. And we've got friends that live there. We live in a different part of coming, and they're always nice enough to include us and just shout out to the green summers folks out there. Hope you all have a great fireworks show at Green Summers in Cumming, Georgia, this Saturday night. But I want you to think about how much am I really willing to lose? And if the answer is zero, then you really need to have a different strategy if you're 80% invested in the market.

Ford Stokes :
For sure. Then also wanted to go over rule number three, which is if the business does well, the stock eventually follows. We do research on that. We do research on ETFs, exchange traded funds. We like to invest in exchange traded funds versus investing in mutual funds because exchange traded funds are superior to mutual funds in one key area. Really two key areas, I should say. One is their lowering fees. Which is the number one reason why you should invest in ETFs versus investing in mutual funds. And number two is there are also traded intra day within the day. So you could actually trade those at the end. I mean, during the day versus mutual funds, you have to get a net asset value of the shares at the end of the trading day and then put in to trade them to either buy or sell them. And those are two reasons why an ETF, in my opinion and my professional opinion is they're basically much more superior, in my opinion, to a mutual fund. So something to consider there. But again, if the business is throwing off cash, it's going to do better. Now, let's go into quickly. We're about to play this chapter, chapter two from my book, Annuity 360. And again, you can get that book at annuity 360 dot net.

Ford Stokes :
Also, if you want to get a free financial consultation with me, you'll get to meet directly with me. All you've got to do is visit ActiveWealth.com. That's ActiveWealth.com and click that schedule a consultation button in the upper right corner. But annuity companies and insurance companies they realize. Most of the money is sitting with retirees and pre-retirees and they want to make their products much more attractive so they can attract that baby boomer money. Also, throughout my career, the ten year Treasury is traditionally right around 1.4 to 1.8%. Now. It's now the ten year US Treasury is paying right around 3.4 to 3.6%. That gives the insurance companies a lot more value to be able to invest into options, a lot more dollars. So let's say you give an insurance company $100,000. Normally they would have 1400 to $1800 to invest in options to grow your annuity because they have to reserve 100% of the money you give them into the ten year US Treasury. They have to invest it into a safe product because they're regulated by the states and the states want a 100% financial reserve on all annuities and life insurance products. What that's going to do is allow instead with a 3.4 to 3.6% rate, you're going to have $3,400 at a minimum where they've got the opportunity to buy more options and therefore they can grow your money at a greater rate.

Ford Stokes :
So let's go ahead and play chapter two from my book, Annuity 360 on why annuity companies are competing for baby boomer dollars. Chapter two Why Annuity and Life Insurance Companies are Competing for Baby Boomer dollars. Big idea annuities counter one of a retiree's biggest fears outliving their wealth. Annuities create lifetime income streams. There are 73.4 million baby boomers in the United States that are close to or are already in their retirement years. Baby boomers put between 9 and 10% of their pay towards their retirement. Only 55% of boomers have any money saved for their retirement. More than 4 in 10 boomers inaccurately believe that Medicare will cover long term health care costs. Baby boomers hold $2.6 trillion in buying power. They have had more time to build their wealth in comparison to other generations because some might still be in the workforce and making more money. Baby boomers control 50% of the nation's wealth, outspend younger generations and are more likely to spend their retirement savings on themselves rather than passing them down. Total US retirement assets are about $28 trillion. More than half of those assets were either defined contribution plans or individual retirement accounts. Some other facts about baby boomers and their spending habits. 69% of baby boomers either expect to or are already working past age 65 or don't plan to retire.

Ford Stokes :
Only 26% of baby boomers have a backup plan for retirement if they are forced into retirement sooner than expected. Baby boomers make up 46.8% of pet spending. Baby boomers are expected to spend 3.4% more on health related purchases than their parents did. Why are annuity companies targeting baby boomers? Boomers face many issues when planning for retirement. The three primary reasons are, number one, growing the money they have already saved. Number two, dealing with and preparing for unforeseen expenses, the largest of which are tied to health care and long term care. Number three, optimizing their financial plans when their exact lifespan is unknown. Annuities exist to help boomers with the last issue with an annuity, a retiree gives an insurance company a lump sum of money in exchange for an annual income that will last throughout their lifespan. Annuities have the potential to become useful tools in baby Boomers portfolios when planning their retirement. They offer protection from market volatility while also eliminating the risk of outliving one's retirement savings, which are not guaranteed by portfolios that lean heavily on stocks and bonds. The demand for retirement income amongst baby boomers already exists, and annuities are the only products that can provide a hedge for a long life like longevity insurance. Reasons Baby boomers should be interested in annuities. They are falling short of their retirement goals. Roughly 10,000 baby boomers retire every day, but a very small percentage of them believe they can retire and live comfortably throughout their golden years.

Ford Stokes :
Only 25% of baby boomers think they have enough money to retire comfortably. Many couples may be on the right track, but unforeseen circumstances such as health problems or staffing cuts, might force them into retirement earlier than planned, leaving a much larger income gap. Baby boomers are looking for a reliable source of retirement income, and annuity companies are beginning to tap into this market because they recognize the need. Not all annuities are created equal. There are two main types of annuities immediate and deferred. The right kind of annuity depends on your financial goals, your situations and your needs. One thing that makes annuities so attractive is that there are so many options available. While it may seem overwhelming. A financial advisor can help you sort through all of your available options and make a smart choice for your money. Security for their income. Annuities can help build a secure retirement through different income strategies while also alleviating any stress or fear they may have left over from the financial crisis of 2008 and the bear market. Annuities can play an important role in a plan along with your Social Security, health care and other factors. Annuities can address issues such as maximizing your Social Security benefits, which help create an income that you can never outlive.

Ford Stokes :
How annuity and life insurance companies have responded to baby boomer needs. Interest in hybrid products. Baby boomers don't want to pay a fortune for something that offers them only a part of what they need with less income to be counted in their retirement years. Already paying for individual products to meet each of their needs can be too expensive. Life insurance companies heard these concerns and responded with new hybrid products. Many life insurance companies now offer some kind of long term care rider on their whole life or universal life products. Generally speaking, these riders provide coverage for long term care should you need it or you receive a death benefit if you don't. These combination products have grown from 6,000,000 in 2000 and 8 to 2.6 billion with a B in 2013 and they are still growing. Need for guaranteed income. Baby boomers are also concerned with outliving their money. They want to enjoy their retirement, but they also don't want to run out of funds. The industry responded to these fears by offering a variety of products with guaranteed lifetime income. These products include variable and indexed annuities with guaranteed living benefit riders and immediate or deferred annuities. The annuity industry has been transformed by these new products. According to PricewaterhouseCoopers Employee Financial Wellness Survey, since the economic downturn of 2008, 76% of retirees say that creating a guaranteed income is their top retirement planning priority.

Ford Stokes :
Annuity companies rose to the occasion to create products to meet the needs of baby boomers and provide them with a sense of security. The need for advisers Annuity companies have created many products to meet the needs of their consumers. This is a good thing, but it can make for a tough decision on the part of the investor with so many options to sort through. Some pre-retirees and retirees can't sort through all the information. Many are afraid to make the wrong decision, which leads them to make no decision at all. A large part of the planning process involves an advisor educating their clients on all of their options so they can make the right decision. Hope you enjoyed that chapter. We've got more information on how you can safely and soundly invest and protect your hard earned and hard saved assets. We're talking about that 40% income portion of our portfolio here on the Active Wealth Show today. We're also trying to be like Buffett. We're trying to be like Warren Buffett and be a little bit more sound in our investment strategy. Go ahead and come back and see us here in segment three on the Active Wealth Show. We'll be right back after the break. You're listening to the Active Wealth Show right here on Am 920. The Answer.

Ford Stokes :
And welcome back Activators, the Active Wealth Show on Fort Stockton Chief Financial Advisor We got Matt McClure here. We're talking about I'd be more like Warren Buffett and how to be more sound in your investment strategy. We're talking about doing a new 60 over 40 portfolio, 60% stocks with tactically managed portfolios that don't just hang in there, they don't just follow a buy and hold strategy. We try to rebalance those on a monthly basis with the help of a financial advisor in with our portfolios. Our registered investment advisory firm Brookstone Capital Management has over $8.5 billion under management. Mark Diorio is our Chief Investment Officer and he's also a CFA. He's a certified financial analyst and that's a three year test folks. And he and his team do a great job at managing money. We try to make sure we're doing a great job at taking care of the relationship, making sure that the client is taken care of. But we're trying to tactically manage that 60% of the portfolio that's in stocks. Now, the other portion of the portfolio, 40% of the portfolio we're trying to generate income from and let the other 60% grow. And we're choosing a fixed indexed annuity product or a series of or a series of fixed indexed annuity products to go ahead and generate that income while also growing that part of the retirement nest egg as well. Now we've got a really fun chapter here. It's going to surprise you.

Ford Stokes :
There's a lot of famous people that have invested into fixed indexed annuities and want to go ahead and play Chapter three from my book, Annuity 360 so you can get an understanding of famous people over the history, both far history, long time ago and recent history who have invested in fixed indexed annuities. Go ahead, Matt, and play Chapter three of my book, Annuity 360. Chapter three Famous people who invested a significant amount of their hard earned wealth in annuities. Big idea annuities are for everyone. Even if you're not worried about outliving your wealth. Annuities are safer for your money than investing in stocks or bonds, or simply not investing at all. Babe Ruth, known as the Sultan of Swat, Babe Ruth came into his glory days during the Roaring 20s and his manager was worried that he was blowing through all of his money without putting any of it away. He introduced Babe to an insurance agent from the Equitable Insurance Company. Now AXA Equitable from 1923 to 1929, the slugger contributed more than half of his salary annually, purchasing between 35,000 and $50,000 worth of annuities each year. The Great Depression hit the country hard. In October of 1929, Babe Ruth was forced to retire from baseball in 1935 due to health reasons. He was unemployed during the worst time in history, but Babe Ruth had his income annuity. It's been reported that he received an income of $17,500 a year, which would translate into an annual salary of more than $290,000 in today's dollars.

Ford Stokes :
His famous quote still resonates today. He said, I may take risks in life, but I will never risk my money. I use annuities and I never have to worry about my money. Steve Young. Steve Young was signed out of Brigham Young University into a $40 million contract with the USFL. That was the headline. At least in reality. Young was given an annuity that would pay out something like $40 million over the 50 years that followed. Given the fact that some players were not paid for playing in the final season or other seasons of the USFL, accepting the annuity appears to have been a genius move on the part of either young or his agent. The annuity payments have lasted longer than the league and it's safe to say that he's made more money than probably anyone else involved with the league. To be fair, it couldn't have happened to a nicer guy. Even with a large signing bonus and salary, he continued to wear old jeans and drive a 19 year old Oldsmobile dynamic. In addition to outlasting the league, that annuity even outlasted the Oldsmobile car company with a staggering number of pro athletes going broke after they retire. It's refreshing to read stories about players who made smart financial choices. Shaquille O'Neal, one player whose used annuities to his advantage, is retired star Shaquille O'Neal. Over his 19 year career, he generated $292 million in total compensation.

Ford Stokes :
In retirement, he is projected to make as much as $1 billion from endorsements, even after his career is long over, thanks to a wise agent who made him put $1 million annually into annuities from his rookie year onward. Shaq lives off the income the annuity generates with his endorsement legacy for his children. Shaq scenario demonstrates how pro athletes and other prodigious earners can protect themselves against their own personal spending errors. Allen Iverson, NBA player Allen Iverson earned $200 million during his career, 155 million in salary and 40 to $50 million in endorsement deals. Iverson ended up going bankrupt because of his overly lavish lifestyle in a December 2012 court filing. Iverson. Told the court that his monthly income was $62,500, but his expenses were 360,000. Luckily for Iverson, Reebok saved him from becoming destitute by paying him an annuity worth $2.3 million in 2001. Iverson made a very smart decision that would ultimately save him. He signed a unique endorsement deal with Reebok. Not only will Reebok pay Iverson $800,000 a year for life, they set aside a $32 million trust fund that he can begin accessing when he turns 55 years old in 2030. Since he divorced his wife in 2013, he will receive half of the trust. Another way that Iverson will be able to protect himself against future bankruptcy is his access to the NBA pension. He is eligible for another $8,000 a month. The lump sum of this pension is between 1.5 and $1.8 million.

Ford Stokes :
Most pensions are set up with single premium immediate annuities. Benjamin Franklin. When Benjamin Franklin died, he requested that the 2000 sterling he earned as the governor of Pennsylvania from 1785 to 1788 be divided equally between Boston and Pennsylvania. He wanted the money to be dispersed as a legacy 200 years later in the spring of 1990. The balance in the Philadelphia account was valued at approximately $2 million, and the balance in the Boston Trust was about $4.5 million. This was sometimes called Franklin's IRA. The money in the Boston Trust was invested using a new take on an old idea the annuity. Using a tax deferred index variety. The money was able to benefit from exposure to stock market growth without stock market loss. This allowed the trustees of the Franklin Institute in Boston to turn an estimated $4,400 into 4.5 million, even while it was paying out an income for 200 years. Beethoven. The social luminaries of Vienna wanted to keep Ludwig van Beethoven from leaving their country. And so in 1809, two Princes and an Archduke guaranteed the musician a generous annuity. All he had to do was stay in Vienna and compose and perform his music. His benefactors have supposedly been quoted as saying something along the lines of only a man free of worries can create with such genius. Interestingly enough, Vienna also saw its time of economic downturn, and one of the annuities guarantors tried to stop paying Beethoven, claiming financial hardship.

Ford Stokes :
Beethoven sued one and continued to receive his annuity payments. Perhaps this is what inspired the literary genius of Jane Austen, whose character Fanny observes in Sense and Sensibility. People always live forever when there is an annuity to be paid. An annuity is serious business. It comes over and over every year and there is no getting rid of it. Chapter four Financial Reserve Requirements Annuity has a 100% reserve requirement and is greater than the FDIC insured Bank Reserve requirement of 3 to 10%. Big idea. Annuities are required to reserve 100% of your investment. Banks are only required to reserve 3 to 10%. Having a 100% reserve on your money will help you sleep more soundly at night knowing that your money is protected. Did you know that the federal and state financial reserve requirement for annuity products is 100%? Did you also know that the FDIC banking regulation requirements are just 3 to 10% of deposits? I prefer investing in financial products that have a 100% financial reserve myself. Quite literally, the requirement for annuity companies to reserve money on the policy premiums paid are at least ten x the banking deposit reserve required by the FDIC. In the six years after the stock market crash in 1929. 60% of all US banks closed their doors and only 40% of those banks ever reopened. 100% of reserve life insurance and annuity companies didn't fail or close. That is a remarkable historical fact. That's a wow. Also, in every US state, there is some form of Annuity Guaranty Association where the licensed annuity companies operating within the state will cover the payout of annuity policies as a collective for any failed annuity company within the state.

Ford Stokes :
State annuity guaranty associations prohibit advertising them. Here's how annuity guaranty associations work. Guaranty associations are funded by assessments levied against member insurance companies that help pay claims when a member company fails. The funds are combined with the failed company's assets to pay claims up to statutory limits. However, the coverage may not be necessary because often when an insurance company becomes insolvent, the company's contracts are purchased by other insurance companies. So customers still have the same insurance and annuity contracts worth the same amount of money only from different companies. To ensure you receive all of your annuity benefits, it's a good idea to investigate the ratings of the issuing insurance company before making an annuity purchase. If you plan on purchasing annuities worth more than your state guaranty association limits, you may want to purchase multiple annuities from different companies without exceeding the guarantee limits on a single annuity. Most annuity state Guaranty Association limits per annuity policy are equal to the $250,000 per bank account or bank CD or money market account that the FDIC insurance coverage delivers to the account holder. I see the Annuity Guaranty Associations as a great extra stopgap insurance for my clients annuity policies. Matt and I both hope you enjoyed both chapters three and four for my book Annuity 360.

Ford Stokes :
I think it's probably pretty surprising to hear that famous people that have invested in fixed indexed annuities. They're also incredibly successful. And then in Chapter four, I think it's probably pretty surprising for people to understand that there is a 100% financial reserve on annuities versus a 3% to 10% financial reserve on bank CDs. As an example, we come back from the break. We're going to talk about Chapter nine, which is how you can generate your own personal pension. And we're going to go over. Warren Buffett's rule number four and rule number five on smart investment strategies. Use the Active Wealth Show right here on Am 920. The answer And welcome back to the Active Wealth Show Activators. Also, if you're wondering who an activator is, an activator is somebody who is looking to build a successful retirement. It's somebody who's looking to protect and grow their assets. They want to build a tax efficient, fee efficient and market efficient portfolio. And Matt, it's somebody who listens to this show. And so we really love our activators. It's been great, Matt, that they have made us the number one listen to radio show on Am 920. The answer on the weekends literally for three years running. And that's awesome. Yeah, it's pretty cool. And so we just really appreciate our activators. We thought about moving time slots to the 9:00 hour and we had the opportunity. But no, we wanted to stay with the 12 noon folks on Saturdays and the 11 a.m.

Ford Stokes :
to 12 noon on Sundays. So we want to make sure that we kept the time slot. We grew the time slot. So it's our time slot. So we just really appreciate everybody. Also, just big shout out and thanks to Tom Edwards and the entire team over there at Am. 920 Answer We're just taking great care of us and we just appreciate being part of the 920 The Answer family. Matt we were talking about Warren Buffett's rules of investing. We've gone over the first three. The first one is never lose money. Rule number two is never forget rule number one. So again, don't lose money. Number three is if the business does well, the stock eventually follows. And we talked about investing into exchange traded funds as well to minimize the fees versus mutual funds and reduce your expense ratio within your portfolio. And expense ratio is really the expenses that come out of your portfolio without you seeing it. They're not necessarily in your statement, but it does show up in the bottom line for, you know, they're in the prospectuses of all the mutual funds that you purchase and they do tell you, but very few people actually read all the prospectus is out there on mutual funds. Here's rule number four. It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price. So if you've got a performing exchange traded fund that's done well, it's better to get that at a fair price is the bottom line is what we look for.

Ford Stokes :
We also look for different asset classes that we think are going to do better over time, and that's why we rebalance on a monthly basis. And then rule number five is our favorite holding period is forever. That's what they like to do. They like to hold companies forever. They don't like to flip them. So what I would say same is true for your portfolio. Our goal is to grow your portfolio forever so that your money outlives you. We want to make sure that your money outlives you. And one of the ways to do that is to take the 40% of your assets that you're going to generate income from. Instead of doing it with bonds, do it with a fixed indexed annuity or a ladder series of them you can turn on when you need them that have different functions. And again, an annuity is an annuity contract. It's a policy between you and the insurance company. And we're going to help explain every bit of that policy to you before you purchase it. There is a nationwide peak ten product that we really like. It's paying 20% bonus, immediate bonus on the income account. It's offering a 325% participation rate in the BNP Paribas Global Factor Index that follows international healthcare, which we think is a really good idea as a retiree because one of the largest expenses you're going to have during retirement is health care.

Ford Stokes :
And we want to do everything we can to help you keep pace with that inflation on health care costs. And hopefully that should also outpace regular inflation as well. So we want to do everything we can to help you better protect and grow your assets, but also generate the income and a greater income than you could get from just a typical 4% rule where you're taking out 4% of your assets. If you've got $1 million, you take out 4%. Guess what? That's 40 grand plus your Social Security. Let's say the household's making another $36,000 in after tax. Social Security income. That's $76,000 that you get to live on. Now, granted, you know, with that 40,000, you might have you might have some taxes coming out of that as ordinary income. If you're invested into an IRA, as long as it's not a Roth IRA, you're going to have taxes on that money. But your money is growing tax deferred, just like it does in your IRA with a fixed indexed annuity. So to recap on this, you get one you get to eliminate and delete your advisory fees on the Porsche that's invested into a fixed indexed annuity because there are no advisory fees with a fixed indexed annuity. We can also help you get into a very fee efficient annuity as well If you want to avoid income rider fees, we also can help you get a 10 to 20% bonus on your money immediately, which also would help backfill what you've dealt with in 2022.

Ford Stokes :
If you saw a downturn in the market and then you could also generate a higher level income than the traditional 4% withdrawal rate because. And it also grows over time. If you've got questions about that, I would encourage you to go ahead and reach out to us at ActiveWealth.com that's ActiveWealth.com click that, schedule a consultation button and we're happy to help you. A lot of people don't realize that they can generate their own personal pension. I wrote an entire chapter about it in my book Annuity 360. You can get a free copy of my book Annuity 360 by visiting annuity 360 dot net that is annuity 360 dot net. Put your name, email, phone and mailing address in there and we'll send you a free copy of my book. Annuity 360 at no cost to you and I'll even sign it for you with that. Matt, want to go ahead and play Chapter nine from my book Annuity 360 on how the good folks out there and the great listeners to the Active Wealth Show can actually generate their own personal pension. Chapter nine You can create your own personal pension. Big idea Using an annuity to create a personal pension helps you create a lifetime income stream, but it also helps you leave a legacy for your beneficiaries.

Ford Stokes :
All annuities can create annuity income to supplement the income you need before or during retirement. Those who are approaching retirement are afraid that they will run out of money. But an annuity can help make sure you have income you can never outlive. An annuity can be a great investment for your portfolio, but I encourage you to be careful that you don't overpay for your annuity. When you put your money into an annuity, the annuity company will pay you your money back at a date. You specify you don't want an annuity company to charge you too much to simply pay your money back to you. I'm confident that leaving a remarkable family legacy is important to you. You likely want to have money left over when you pass away to leave your beneficiaries. The goal of a personal pension is to generate lifetime income with no risk that grows your money and allows penalty free withdrawals. An annuity can create a lifetime income with market like gains and no market risk, while also allowing you to build enough wealth to leave for your beneficiaries when you pass away. Don't give the annuity company fees for doing nothing. We prefer fixed indexed annuities for our clients that do not have an income rider fee. But you can still create a personal pension without an income rider on your annuity. If you get an annuity with an income rider, but don't utilize the features of that income rider, then you are not getting what you paid for.

Ford Stokes :
You are literally just paying the annuity company 1 to 2% each year. You defer annuity paying your annuity without receiving a single benefit for that annual fee. This income rider fee will also draw down your account value or principal, depending on how that index is performing. The growth on your entire account value could be significantly and negatively impacted. Some accumulation focused annuities are built to deliver increasing payments. Without an income rider, you should consider the features your income rider is providing you before deciding to purchase it. As an add on, make sure you utilize the features you are paying for more ways to get the most out of your annuity. The longer you wait to turn on the annuity, the more you'll receive an annual payment. This is because your annuity will spend a longer time in the accumulation phase, meaning it will spend more time building up your account value. Your annual payments will grow as your account value grows. Believe it or not, you can generate your own personal pension by distributing no more than 5% a year with penalty free withdrawals from your accumulation based annuity policy. Many accumulation annuities are set up to be RMD friendly so you won't suffer a penalty when you have to take your RMD. It would be silly for you to be penalized for something you are required to do. Annuity companies take this into account by creating products that make taking your RMDs easier.

Ford Stokes :
Inspect what you expect with any annuity. Don't just go with what the annuity agent or advisor tells you. Read it for yourself specifically, you should read the annuity illustration guaranteed and non-guaranteed tables included within the annuity illustration. Also, please remember that annuity policy is a contract between you and the annuity company. So caveat emptor or buyer beware applies here. Be aware of the annuity you are buying and choose an annuity that works best for you that will help you build a successful retirement and they'll offer you peace of mind. Whether you choose to generate income through penalty free withdrawals or invest annually in an income rider know the consequences of both. This is a decision you will make at the beginning of the investment process. One poor decision here can cost you 1 to 1.5% of annual growth over a 30 year retirement. This could come out to be a significant loss. Educate yourself on your options and the specifics of each option you are considering. Making the right decision up front will save you a lot of frustration in the long run. Also, please remember that if you withdraw too much annually, say 10%, you will run out of money in 10 to 12 years. Make sure that you are working with an advisor who can help you choose the appropriate withdrawal amount so that your money lasts for your entire lifetime. As discussed above, we recommend no more than 5% be withdrawn each year from your account. It's the final.

Producer:
So let's recap what you may have missed. It's the final countdown.

Producer:
Today on the Active Wealth Show. We talked about Warren Buffett's rules of investing and how you can apply those to your own plan and how active wealth management and Ford Stokes, your chief financial advisor here on the Active Wealth Show, can help you in that journey and help you with that plan, help you improve that plan. Rule number one was never lose money. Number two, never forget rule number one. Those are the two easiest to remember. Rule number three, if the business does well, the stock eventually follows rule number four. It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price. In other words, if something's in the bargain bin, it's probably there for a reason. Right? And rule number five, our favorite holding period, is forever. Ford talked about all of that in depth. Of course, you can always listen to the show as a podcast version wherever you download your podcasts. Apple, Spotify, all the Biggies there as well. Wherever you want to find us, you can find us. And if you can't, you're just not looking hard enough. All right. Happy July 4th weekend to everybody. We really do appreciate it. I'm Matt McClure, the sort of fill in producer here this week on the Active Wealth Show. But I've been alongside Ford Stokes, your chief financial advisor. Thank you all, Activators, for joining us and we'll talk to you again next time.

Producer:
Thanks for listening to the Active Wealth Show. You deserve to work with a private wealth management firm that will strategically work to protect your hard earned assets. To schedule your free consultation, call your chief financial Advisor, Ford Stokes at (770) 685-1777 or visit ActiveWealth.com Investment Advisory services offered through Brookstone Capital Management, LLC BCM a registered investment Advisor. Bcm and Active Wealth Management are independent of each other. Insurance products and services are not offered through BCM but are offered and sold through individually licensed and appointed agents. Investments involve risk and unless otherwise stated, are not guaranteed. Past performance cannot be used as an indicator to determine future results.

Producer:
Fixed annuities, including multiyear guaranteed rate annuities, are not designed for short term investments and may be subject to restrictions, fees and surrender charges as described in the annuity contract. Guarantees are backed by the financial strength and claims paying ability of the issuer.

Producer:
Any bonuses mentioned may be subject to additional restrictions and regulations based on the offering annuity company. You may not receive the bonus if the contract is fully surrendered or if traditional annuitization payments are taken and if the policy is partially surrendered, it could result in a partial loss of bonuses because these are bonus annuities. They may include higher surrender charges, longer surrender charge periods, lower caps, higher spreads, and other restrictions that are not included in similar annuities that don't offer a bonus feature.

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