Are You in the Retirement Redzone?

7.14.23: Audio automatically transcribed by Sonix

7.14.23: 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 Activators, the Active Wealth Show on Ford Stokes, your chief financial advisor. I've got Sam Davis here with me as our executive producer this week and say hello to everybody. Sam.

Producer:
Welcome to the weekend activators. Hope everybody is enjoying their summer. Saw a lot of families out there this week enjoying summer vacation and and I just hope that you're out there enjoying and doing the same. And Ford, I know that you're enjoying seeing the Braves representing well in the all star game and big win for the National League. First time in a long time.

Ford Stokes:
First time since 2012. I know you're a Royals fan, but goodness gracious, the American League had the lockdown. And quite honestly, the National League is fared fairly well, you know, in World Series at least holding our own with the Braves winning in 2021. No, the the Astros won last year, but, um. We haven't held our own in the in the all star game though at all. Um. Yeah. So go Braves. And I know everybody's excited to get back to watching Braves games as they're trying to get to college football. That's what always gets me to college football is be able to watch the Atlanta Braves. And on this week's show, we're going to talk about how you can take control of your financial future. We're really going to start asking one big question Are you in the retirement red zone? And the retirement red zone is. For folks who are five years before retirement and five years after retirement. That's ten years. That's a ten year period. And that ten year period is extremely important in so many people were kind of forced to take an early retirement during Covid. And it kind of disrupted their retirement red zone. And now they're trying to figure out what to do. They're relaunching their career or they're trying to generate income in other ways, whether it's building their own personal pension with a fixed indexed annuity or whether it's getting rental income, although now it's getting harder and harder and more cost prohibitive to do that. On the real estate side, I'm not a real estate agent, but obviously we all know that the price of acquiring a rental property for you to be able to rent out is become cost prohibitive whether you're trying to build or buy.

Ford Stokes:
Well, we want to do today is we want to kind of help people figure out. What to do in that retirement red zone, how to get prepared for it. It'll help anybody's retirement. If you're 50 years old, you're not going to retire for. Another 15 years and this show will still help you if you're 65 years old and you retired last week. This. Show will help you if you. Ah, 68 years old. And you retired three years ago. This. This show will help you for sure. And we are offering a free information report on bond replacement to our listeners. All you've got to do is visit ActiveWealth.com. Slash resources that's ActiveWealth.com/resources and you can download that free. Report absolutely at no cost to you. You can also send me an email at forward at ActiveWealth.com and just request the report and we'll email that to you. Absolutely right away. And Sam and I want to thank each and every one of you. For making us the number one listened to radio show on Am 912 The Answer on the weekends. We still feel like that's a really big deal. We just really appreciate each and every person who listens to our show and we just want to give a big shout out to Sam, to our activators out there.

Producer:
Absolutely. I mean, the show's been going for over four years now, and we're excited to bring people important information each and every week. There's a lot of folks out there listening that are just retiring. Maybe they retired in the last few years and maybe they're in their 50s and they're really starting to pull those plans together and get excited about retirement. So we're here for all of those people out there.

Producer:
And now wholesome financial wisdom, it's time for the Quote of the Week.

Producer:
So this one comes from a former US president. We're going to have to go back many presidential terms ago because this is from Abraham Lincoln, the 16th president of the United States. An Honest Abe once said that the best way to predict your future is to create it.

Ford Stokes:
If you want to have a successful retirement, you've got to build it for success. You've got to build it to protect your wealth first and grow your wealth second. And also, you want to be able to understand that you've got to generate an income from your assets. And that retirement really is more about income than it is about getting one big nest. Egg Rates of return are really important, but at the same time. Getting an income plan. Getting a tax efficient income plan where you've got money, at least in tax deferred, and even some tax free buckets with Roth IRAs and life insurance and also even some of the the taxable accounts with investment accounts. Having money in each of those buckets would be a really good idea. The more you can get into the tax free bucket, the better off you're going to be from an income perspective, because that means that's less withdrawals you have to make from those accounts to be able to generate the income you need. Because if you don't have to pay the taxes, you obviously just straight math. You don't have to take out as much. And. If you if you're within 4 or 5 years of retirement or even 5 to 10 years of retirement and you are building for, hey, you know what? Everything we're doing, we're just dumping money like crazy for it into our our for our for 3 or 457 or Sep IRA in hopes of one day rolling that money over and out into a. Ira for yourself or a Sep IRA if you're if you're a business owner.

Ford Stokes:
Then I would encourage you to really listen to this show and want you to really understand, because we're going to be talking one, we're going to give you a market update on what's going on with the latest job reports and interest rate hikes. We're also going to have an inflation demonstration. We're going to talk about the great annuity gold rush, but we're going to talk about what to do during the retirement red zone. One of those things we really need to figure out is how much are we paying in fees with our accounts? You got to inspect what you expect. How much are we taking in risk? That's measured by standard deviation within our portfolio and how correlated are our assets within our portfolio. So those three things I want to cover those again. Number one is you want to understand how much you're paying in fees. There are things like if you own mutual funds, you've got 12 B1 fees, A share fees, C share fees. Those fees can erode value within your portfolio. That doesn't necessarily show up in your monthly statement, but it does show up in the actual bottom line value of your account at the bottom of your account statement. And then number two is you wanna understand the risk you're taking. Our goal is to reduce risk and hopefully get you in a better spot to be able to. Get your higher average rate of return. One hint here is that you really want to see your average rate of return over the last ten years, even if it's back tested.

Ford Stokes:
Of a portfolio are considering. It should be higher than what your standard deviation number is. And if you don't know either one of those numbers, then you probably ought to reach out to us and visit ActiveWealth.com and click that schedule a consultation button in the upper right corner. We're happy to help you. Here's what we're offering. We're offering a free portfolio analysis. Absolutely no cost to you so you understand the fees you're paying within your portfolio, the risk you're taking within your portfolio as measured by standard deviation. And third. We're going to help you understand the correlation of your assets, like when one asset you have one of your top 20 holdings moves. What happens to the other 20 holdings? So we're going to be able to show you a whole correlation matrix of all of your top 20 assets. And I think it's going to be an eye opener for you. We're going to do all that portfolio analysis. That's number one. Number two is we'll give you a free Social Security maximization report when you decide to take. Social Security is really one of the most important decisions you're going to make during retirement. We'll repeat that again. When you make a decision. On when to take Social Security income, when to begin your Social Security income benefit. That is one of the most important decisions you can make as a retiree or pre-retiree. So we're going to help you. We're going to give you a Social Security maximization report. Absolutely no cost to you to give you some what if scenarios so you can understand, hey, if I take it at 62.5, I'm going to get this.

Ford Stokes:
If I take it at 65, I'll get this. If I take it at full retirement age at 67. Or 66 and a few months, depending on if you're born before 1960 or after 1960. You know, will help you make those decisions. Also, reminder, it's an 8% roll up. In other words, you get 8% higher in income each year, every year that you wait to turn on Social Security income after your full retirement age. So if you go all the way to 70 years old, it's 132%. If you go just to full retirement age, you're going to get 100. Percent of the money you've you're owed. If you take it at 62.5, you're going to get $0.75 on the dollar. And as you're driving around Atlanta right now, heading to Home Depot or Lowe's or Kroger or Publix or whatever, or to a kid's soccer game or a kid's baseball game. Out. We're going to the beach or going to the pool. I would encourage you to think about this. Do you deserve more than $0.75 on the dollar? I would imagine that Answer is yes. And then, you know, three through five is we're going to give you a financial plan to help you. Playing all your retirement all the way to your 95th birthday. And when we come back, we're going to talk about the risks that you're taking within your portfolio. You're listening to Active Wealth Show right here on Am 920. The Answer.

Charlie Kirk :
Charlie Kirk here. If you're concerned about your investments, rising taxes from the Biden administration, then I encourage you to listen to the Active Wealth Show hosted by my good friend Ford Stokes right here on Am 920. The Answer. Listen to the Active Wealth Show Saturdays at noon and Sundays at 11 a.m. The Active Wealth Show right here on AM 920. The Answer.

Producer:
Advisory Services offered through Brookstone Capital Management, LLC, BCM, a registered investment advisor, not an actual client of active wealth management. Fixed annuities, including multi year 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:
New rules across Major League Baseball have shown their effects both on and off the field. I'm Jim Tarabukin with the Retirement.Radio Network. Powered by Amara Life. In 2022, the MLB Players Association agreed to a handful of new on field rules, with the goal to increase the pace of play. A pitch clock was introduced prior to the season, eliminating downtime between pitches the numbers are in and game times across. Baseball are down an average of 31 minutes this season. But the new on field legislation has led to necessary changes off the field. President of Life Flip Media Eric Mitchell, explains the controversy further.

Eric Mitchell:
It's controversial because everybody so used to the seventh inning. That was it, right? Beer sales are shut off, so games are shorter. Beer sales are, you know, is important. They're also major sponsors of the teams.

Producer:
Mlb teams aren't governed to a league wide alcohol sales policy on how long into the game beer can be sold, but the seventh inning has traditionally served as that cutoff point. But according to the Associated Press, the Milwaukee Brewers and the Texas Rangers are two of five teams that will now sell alcohol through the eighth inning of their home games. Milwaukee President of operations Rick Schlesinger talked to MLB.com about his team's revised policy, saying, quote, If it turns out that this is causing an issue or we feel that it might cause an issue, then we'll revert to what we've done previously per the same report, the Miami Marlins and the New York Mets will halt their sales after the conventional seventh inning timestamp, but aren't ruling out potential changes in the future for the Retirement.Radio Network Powered by a Life. I'm Jim Tabaka.

Ford Stokes:
And welcome back. Activators the Active Wealth Show. I'm Ford Stokes, your chief financial advisor. And I'm joined by Sam Davis, our executive producer. And Sam, we're talking about are you taking too much risk with your retirement savings for those people that are considering planning for their retirement red zone? And again, retirement red zone is what we're talking about today. Activators retirement red zone is the first five years before your retirement and the first five years after your retirement. So it's ten years. It's the retirement red zone is a ten year total period. The five years leading up to your retirement and the five years after your retirement. And retirees have been facing some difficult decisions lately due to inflation and soaring interest rates that have been putting a strain on their wallets and retirement planning, some are actually unretiring. Some are deciding to push back their retirement and some are not even sure whether they will retire at all. Example Your greatest wealth generator. Your greatest income generator. Is your actual personal income. If it is to be, it's up to me. It's not necessarily something you can point the finger at and point at your financial advisor and go, Look, you need to get me more money out of my money. Incomes matters. Also, expense management matters. So don't draw down more than 4% of your assets on any given period. Also, don't take too much risk with your assets as well. We're going to play a chapter from my book, Annuity 360 regarding the rule of 100 that talks about risk and a good benchmark for risk.

Ford Stokes:
That's been a tried and true method for for decades. But yet there's a common thread among retirees. They can't seem to let go of their own stock market habits. A recent Gallup survey found that among older Americans, 65 and older, almost two thirds owned stocks, which is up from 53% for Americans in the same age group during the Great Recession 2001 to 2007. It's an important to remember as you near and enter retirement, you have less time to make up for any big losses, which we saw the market have a downturn in 2022 and now it's recovering. But a lot of people feel like it is a muted recovery, which means that balancing safety and risk is an important point to consider with your financial plan. It absolutely is. When markets are good, people are quick to forget these two recent events. We had the lost decade. That's number one, a ten year period from 1231, 1999 through 1231, 2009, when the S&P 500 generated an annualized total loss of 0.9%. So in other words, there was zero growth and actually. 0.9 of 1% loss. Over a ten year period. That's retirees. During that time, if you retired in 1999, you had zero growth over a ten year period. During your retirement years mean if you got a 30 year retirement that's 33% of your entire retirement? Now, the second event that people forget is the 2008 crisis.

Ford Stokes:
Also, I want to remind people, people during the 2008 financial crisis, where we saw a significant erosion of value in the stock market, specifically with the S&P 500. The people that owned fixed indexed annuities lost $0 from their investment. They lost $0 from their principal and they lost $0 from any bonus they were given and they lost $0 from any gains that they had experienced before the 2008 financial crisis. I want to make sure you understand that. People who own fixed indexed annuities lost $0 during the 2008 financial crisis. Now, here's what happened to the the 2008 financial crisis from its pre-crisis peak in October of 2007 to its lowest point in March 2009, the S&P 500 lost approximately 56% of its value. The Dow Jones Industrial Average dropped by 54% between October 2007 and March of 2009. Approximately 8.7 million jobs were lost in the United States between 2009 and 2010. Over 3.1 million homes were foreclosed on in 2008 alone. In a total of 10 million homes were foreclosed on between 2007 and 2010. The US government intervened with bailouts and financial assistance to stabilize the financial system. The Troubled Asset Relief Program, or Tarp, authorized $700 billion to rescue banks and other institutions. That's why we see banks like JPMorgan Chase pair together. That's why we see Bank of America and Merrill Lynch paired together. Et cetera. The ups and downs of the US stock market and annual performance. You know, from 1970 all the way to today.

Ford Stokes:
It's been a little bit of a ride from 1970 all the way to 2022. We mean 2022. We saw 19.4%. Downturn in the S&P Dow Jones indices. According to macro trends. The two biggest retirement mistakes that people make is the retirement is not about one big magic number. That's number one. Retirement is much more about the strength of your income plan and the total balance of your savings. Too many people have all or a majority of their savings in a tax deferred account, such as the 400 and IRA for 3 or 457 B or a Sep IRA. This means that the government is a major partner in your retirement and you will be subject to significant and likely rising. Effective tax rates. To correct this, we recommend focusing on different sources of retirement income, Social Security, pensions, annuities, life insurance, etcetera. And the second one is people just don't start saving or planning early enough. And by the way, the best time to start saving is when you have money. And the other best time to start saving is right now. So check out this Annuity 360 chapter about the rule of 100. Think you're going to find that it's going to help you allocate risk a lot more effectively within your portfolio. Chapter six, The Rule of 100. Big idea. You want to risk less as you get older because you have less time to make up any big losses as you get closer to your golden years.

Ford Stokes:
Many financial professionals advise gradually reducing your risk. Retirees and pre-retirees don't have the luxury of waiting for the market to bounce back after a dip. The dilemma is figuring out how safe you should be in certain stages of your life. For years, a commonly cited rule of thumb has helped simplify asset allocation. This rule states that individuals should hold a percentage of their stocks that is equal to 100 minus your age. For example, a 60 year old would have 40% of their holdings in stocks and 60% in fixed income products like bonds or fixed indexed annuities. Why you should follow the rule of 100. Take our current example of a 60 year old at age 40. Your risk capacity is higher. You have more time to rebuild your wealth should you experience a dip in the market. However, at age 60, you can't afford to risk as much of your portfolio in the market because the time horizon to rebuild your wealth is much shorter. Rule of 120. Many financial advisors now advocate the rule of 120 so they can get a significant rate of return for their clients and maintain management of the portfolio. I disagree with today's market volatility. A retiree does not want to go back to work in a job making less than what they made before. They must consider following the rule of 100 or at least a 5050 smart financial plan that is built equally with smart risk and smart, safe investments.

Producer:
With the traditional 60 over 40 portfolio having its worst year in more than four decades now may be a great time to consider more than just stocks and bonds. Ford Stokes, author of Annuity 360 and host of The Active Wealth Show, wants to help you retire with peace of mind. Schedule your free consultation today at ActiveWealth.com so we can help you delete fees and establish a personal pension that you can never outlive. Visit ActiveWealth.com. Now that's ActiveWealth.com.

Producer:
With age comes wisdom and senior discounts. I'm Matt McClure with the Retirement.Radio Network powered by Amara life. As the old saying goes, everything gets better with age. It's true of a fine wine, a happy marriage and opportunities to save money. People of a certain age can get discounts ranging from 5 or 10% to 25% or more at restaurants, shops and other businesses. Many times they'll promote those extra savings. But Jim Miller, senior editor of Savvy, told Oklahoma's News Four, Sometimes you have to be proactive.

Jim Miller:
So the first thing is, is you always need to ask, because a lot of businesses and organizations offer senior discounts, but they don't advertise them. So don't be shy about asking.

Producer:
To save time. You can search online for lists of up to date senior deals at large retailers like Amazon, Kohl's and more. If you're willing to dive a little deeper, you can find more discounts in a variety of other places. And if you're looking to stay healthy, Silver Sneakers is a program that provides fitness classes for those on Medicare at no cost. That's right. You don't get a bigger discount than free. So are you taking advantage of the big senior discounts you're eligible for? That's a key question to consider. And it's one of the 23 retirement cost cutters for 2023 with the Retirement.Radio Network powered by Amara Life. I'm Matt McClure.

Charlie Kirk :
Are you concerned about the Biden administration, how rising taxes could negatively impact your retirement? Then I encourage you to talk to Ford Stokes and his team at Active Wealth Management. Ford and his team of experienced financial advisors will help you understand the fees and risks involved with your current portfolio. Simply visit ActiveWealth.com to book your free financial consultation and tell them Charlie Kirk sent you.

Producer:
Investment Advisory Services offered through Brookstone Capital Management, LLC BCM a registered investment advisor, not an actual client of active wealth management. Thanks for listening to the Active Wealth Show. If you like what you're hearing, make sure to rate our show on Spotify or wherever you listen to podcasts.

Ford Stokes:
And welcome back. Activators to the Active Wealth Show. I'm Ford Stokes, your chief financial advisor. Got Sam Davis here with us. He's our executive producer. And Sam, kind of your thoughts and impressions on the Rule 100 chapter that we just heard?

Producer:
Yeah, I really think that the most important thing to consider, Ford is that as you get older, you're going to have less time to make up any big losses that happen in the stock market. And as we just discussed in segment two, you know, from 1970 to today, kind of this modern stock market era, it really has been a bit of a bumpy ride between the lost decade, the financial crisis in 2008. You do not want to have one of those sort of events affect you if you're in that retirement red zone. So the rule of 100 helps you allocate that risk in a more manageable way so that as you get closer to retirement, you have more guarantees built into your financial plan. If you're younger, like me, you know, still working early in, in, in your career, you've got more time. You have the time to take more risk. But if you're in your 50s and 60s, you really need to build in a bit of a safer plan so that you can have that guaranteed retirement income you need when you finally choose to step away from your desk.

Ford Stokes:
Yeah, I think that's right. So many people that we see come in, they've got 80 or 100% in stocks. They don't have a plan also to do any bond replacement, even if they have 60 over 40, they don't realize that 40% of their assets is in bonds. That still has market risk. The 60 over 40 portfolio had its worst year in 40 years in 2022, where, you know, 6040 portfolio is 60% stocks and 40% bonds. Harry Markowitz was given credit for being the founder of that of modern portfolio theory. That kind of what he stated was basically a 60% stocks and 40% bonds builds an efficient frontier for you to move forward with your assets. And ostensibly, the thought is, is stocks money rushes out of stocks. When the stocks are going down, money are rushed into bonds. And that's not necessarily been the case. And then also in with bonds, you have interest rate risk, significant interest rate risk. If we've seen over the last year and a half and then we've with housing continuing to stay strong, that the Fed is looking to go up again and. I just don't think they're listening to every day average Americans, because the goal for these large institutions like BlackRock, they are have a goal of 40% of all single family residences in the United States will be owned by a financial institution. And that's what's propping up our housing market. And it's making it very difficult for people to afford a home.

Ford Stokes:
And it's also generating greater demand for homes because, you know. The Millennials and Gen Z, they're all like, Wait a second, where is our chance of the American family dream? What's the deal here? And I don't think that should be a factor to drive up interest rates in Jerome Powell. If you're listening to the Sound of My voice, which I'm sure you're not. Please reconsider going up on interest rates and further dampening down. What's going on with our market and our recovery from 2022 when your rate hikes significantly impacted and negatively impacted the markets. So that's what I would say there. Because of that, the annuity gold rush continues another record setting quarter for US annuity sales. For this from Lemur. This isn't for me. This is from lemur.com limra.com. This is from their newsroom. As pre-retirees and retirees seek more guaranteed income solutions for their futures, they have broken records by purchasing more annuities than ever before than ever before. Following record high sales in 2022. Total first quarter annuity sales were 92.9 billion, a 47% increase from the prior year. This represents the highest quarterly sales record ever recorded, according to preliminary results from Libra's US Individual Annuity Sales survey. Here's the key takeaways from this survey about annuities. Market conditions continue to drive investor demand for annuities. Every major fixed annuity product line experienced at least double digit year over year growth. Fixed indexed annuity sales or fees also had a record breaking quarter.

Ford Stokes:
Fixed indexed annuity sales or fees had a record breaking quarter. Fire sales were up 42% from the first quarter of 2022 results. It's a 42% increase in a single type of financial or insurance product. Again, annuities are insurance against you living too long. They're insurance against losing principal and their insurance to generate income for all of your retirement years. Economic conditions remain favorable for annuities, and this is forecast to continue throughout the year. Limra is predicting fire sales to continue to grow as investors continue to seek out solutions with a better balance of protection and growth. If you're confused or lost when it comes to planning for your retirement, let us help you. With a no obligation financial consultation, all you got to do is visit ActiveWealth.com. Many people who choose to meet with us simply were not receiving any guidance from their work based retirement plans or they were too busy running their own businesses to put a plan together for their financial future. So I'd encourage you to go ahead and reach out to us at ActiveWealth.com or call (770) 685-1777. Again (770) 685-1777. And now let's play this chapter from my book Annuity 360 on how to build your 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. All annuities can create annuity income to supplement the income you need before or during retirement.

Ford Stokes:
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 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 index annuities for our clients that do not have an income writer fee. But you can still create a personal pension without an income writer on your annuity. If you get an annuity with an income writer, but don't utilize the features of that income writer, 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 using your annuity without receiving a single benefit for that annual fee. This income writer 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 writer, you should consider the features your income writer 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 payments. 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. Inspect what you expect with any annuity.

Ford Stokes:
Don't just go with what the annuity agent or adviser 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. They'll 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 and one half percent 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.

Producer:
Is your house too big for your current needs? What about your current budget? I'm Matt McClure with the Retirement.Radio Network. Powered by AmeriLife. As our circumstances change, so do our needs. In retirement, it's likely you'll no longer need the five story, two bedroom home you've lived in since your kids were all in school. But it's not just the size of the home that can be a consideration in deciding whether to downsize.

Sandra Rinomato:
Some people are living in a situation where the house needs a lot of work. It's time to renovate the kitchen. It's time to put on a new roof. And they they think, do I spend that money? Do I have the energy to do that? Maybe I should just move instead.

Producer:
Real estate expert Sandra Rinomato told CBC News that selling your home and moving into something smaller can be a good way to free up cash in retirement.

Sandra Rinomato:
By selling the house that liquidates gives you the money to live a lifestyle that you've dreamt of your whole life.

Producer:
A smaller place is also cheaper to heat, cool and maintain. Moving into an apartment or living with family members is another way to potentially save money on housing expenses such as lawn care and maintenance, experts say. To maximize your profits on the sale of your old home. Keep your real estate agent's commission as low as possible. And there are companies out there that can help if you decide downsizing is right for you, So could cutting the size of your home help keep your retirement budget in check? That's a key question to consider. And it's one of 23 retirement cost cutters for 2023 with the Retirement.Radio Network powered by AmeriLife. I'm Matt McClure. Remember, all of Ford's listeners receive a free financial consultation just for listening to the show. Visit ActiveWealth.com to learn more and schedule an appointment. Thanks for listening to the Active Wealth Show and subscribing wherever you listen to podcasts.

Ford Stokes:
And welcome back Activators The Active Wealth Show. I'm Ford Stokes, your chief financial advisor. I've got Sam Davis here, our executive producer. And welcome back for segment four. And we just heard my chapter on personal pension How to Build Your Own Personal pension from my book Annuity 360. So, Sam, I'll just tell you. You really can do it. I mean, retirees really can do this. They can build their own personal pension. Also, if people don't think pensions are important. Then I would just encourage them to try to take a pension away from somebody. It is. You don't think pensions are important? Just try taking one away from somebody. It would be something else. Example. The retirement age and all that stuff is. They're trying to take it up in France and you're seeing France burn 7 to 10 million people. Actually protesting in Paris. A couple of months ago because all about their retirement, all about the income they're going to get. And in some ways I feel like Europeans understand lifestyle is more important than money at times. Then us Americans were always trying to get more, get more. But also remember, income is incredibly important. And also with with inflation going crazy high. Retirees are living on a fixed income, they're able to buy less now. And you really do need to build your own personal pension. Also, one big point about a personal pension and specifically a fixed indexed annuity, you want to have a fixed indexed annuity that's tied to a market index. So you can get market like gains without market risk.

Ford Stokes:
So you can in hopes, keep pace with at least a portion of the withdrawal rates that you're going to have because you don't want that annuity value to go to zero after 15 to 20 years. You want that annuity to have value so you can pass on to your heirs. But also let's say you want to surrender the policy and get another bonus and and generate more income or you want to turn it back into an investment account later. That interest rate, that participation in how that market index does really matters. And here's how these annuities work, right? I mean, they they take them on. You give them let's say you're going to give them $100,000, you give them 100 grand. They've got to invest $100,000, 100% of your assets into. The ten year US Treasury. Will the ten year US Treasury is paying well over 3% now. Throughout my career it was paying in that 1.4 to 1.8% range. It's almost two acts of where we are, where we were. So therefore, annuity companies have more access to more capital at the end of each year generated by your money that you invested with them. For them to be able to buy options and they get take a small portion of the gains and they give you a large portion of the gains. But your money is never invested. Your principal specifically is never invested in the US stock market. Only the interest that is generated from that principal is invested on the stock market. So you're 100% safe on your principal and it's contractual as well.

Ford Stokes:
I mean, you sign an annuity policy contract with the annuity company and they have to make sure they protect your principal and you get the chance to lock in any bonus you get and also any gains you get. Within a one, 2 or 3 year protection period. Most annuities come in with one, 2 or 3 year protection periods. One that we like the best is. Offer by nationwide and it offers a 20% bonus. Immediate bonus. It offers a 325% participation rate in the BNP Paribas Global Factor Index. And. That's a really good deal. The Global H factor index goes up 10%. Guess what? You get 32.5% less their 1% spread. So you would get. 31.5% growth during that two year protection period. If the index were to go up. 10% again, visit annuity 360 net to get a copy of my free eBook. Annuity 360. We'll send that out to you. Hard copy. All you got to do is put your information in with your name, email, phone and mailing address, and we'll mail you a free copy of my book, Annuity 360. Chapter 13, The Annuity That is just right. The fixed indexed annuity. Big idea. A fixed indexed annuity gives you a portion of market like gains without market risk. Your investment is tied to an index but not directly invested in it. How does it work? An FIA gives the owners or annuitants the chance to earn higher yields than fixed annuities when the index they are tied to performs well. They typically will also provide some protection against market declines.

Ford Stokes:
The rate on an FIA is calculated based on the year over year gain in the index or the average monthly gain over a 12 month period. Fia often have limits on the potential gain at a certain percentage. This is known as the participation rate. The participation rate can be 100%, which means the account would be credited with all the gains. Or it could be as low as 25%. Most fiAs have a participation rate between 80 and 90%. Benefits. Guaranteed income stream. With Americans living longer and spending more time in retirement, many retirees are concerned about outliving their savings. In turn, they're searching for a product that can help ensure a steady income stream. Phas are designed with guaranteed lifetime income so you can never outlive your earnings. Diversification of portfolio. A balanced portfolio is essential for managing risk and reward in the financial markets. Designed for the long term, PHAs are a great retirement vehicle to ensure you are not putting all your eggs in one basket. Phas offer the ability to make some money without the risk of losing it. Secure principal. Even with market volatility, investors will not lose value on their fixed indexed annuities. Your savings aren't exposed to market fluctuations, so even in a negative market return, you will not fall below zero. You can never lose your interest once it is credited to your principal. Tax deferred growth fees offer long term tax deferred savings. As long as your money stays in the annuity, you will not be taxed on the interest earnings once you receive a payout.

Ford Stokes:
The annuity will be taxed just like ordinary income. Predictable earnings Because PHAs offer predictable income, Americans feel more comFordable when withdrawing funds from these retirement vehicles as opposed to an IRA or 401. K. Choosing an FIA is an efficient way to plan for your future as your interest. Earnings rate always remains somewhere between the interest rate floor and the cap. No matter what happens to the market, you can still count on payments throughout your golden years. Potential drawbacks of fixed indexed Annuities. Surrender charges. A surrender charge is a type of sales charge you must pay if you sell or withdraw money from a fixed indexed and even a variable annuity. During the surrender period, a set period of time that typically lasts 6 to 8 years after you purchase the annuity. Surrender charges will reduce the value and the return of your investment. Withdrawal limits. Almost all fixed indexed annuities play surrender free withdrawal limits within the annuity contract that generally range from 5 to 10% of the principal. While all annuities must be RMD friendly and provide for a penalty free withdrawal from a qualified annuity account equal to the RMD requirement for the client's age carriers limit the amount of withdrawal to enable them to grow the money invested for themselves and the client. Not suitable for short term investing if you want to grow your money, but you also need access to 100% of your money, then a fixed indexed annuity may not be right for you. It's the final.

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

Ford Stokes:
So on this week's show, we talked about retirement red zone, what to do when you're in the five years before retirement and five years after retirement. And one of those is you want to get an understanding of the fees you're paying, the risks you're taking, and what's the income you can generate throughout retirement. We've got to get started on that. So, listen, if you've been listening to our show for a long time and you've never called us and you've never set an appointment. Today's the day. Go ahead and call us. Diane and her team are standing by to take your call. (770) 685-1777. Again. (770) 685-1777. Let's go ahead and do that. Let's get that going. We also read the financial wisdom quote of the week Sam did, and it was the best way to predict your future is to create it. You are in control of your own life. You're in control of your own retirement. Especially with so few companies having pensions now, you can actually generate your own personal pension. We played the chapter on the rule of 100 from my book Annuity 360. We played the personal pension chapter and we played a chapter about how the fixed indexed annuity could be just the right type of annuity for you. Thanks so much for listening. Active Wealth Show right here on Am 921. The Answer. We're going to talk about more smart risk and smart, safe solutions to build a successful retirement on next week's Active Wealth Show. Have a great week, everybody.

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. Do you want more monthly income during retirement? Are you growing concern that you can't count on Social Security? Ford Stokes, author of Annuity 360 and host of the Active Wealth Show, wants to take this stress out of retirement planning by providing a complete portfolio analysis and retirement income plan free of charge to listeners of this station. Schedule your one on one consultation at ActiveWealth.com or call us today at (770) 685-1777.

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.

Producer:
Listen to the number one show on the weekends on Am 920. The Answer to Protect and Grow Your Hard Earned Money. The Active Wealth Show with Ford Stokes, your chief financial advisor Saturdays at 12 noon and Sundays at 11 a.m..

Sonix is the world’s most advanced automated transcription, translation, and subtitling platform. Fast, accurate, and affordable.

Automatically convert your mp3 files to text (txt file), Microsoft Word (docx file), and SubRip Subtitle (srt file) in minutes.

Sonix has many features that you’d love including world-class support, collaboration tools, secure transcription and file storage, generate automated summaries powered by AI, and easily transcribe your Zoom meetings. Try Sonix for free today.