How to Reduce Fees, Delete Taxes and Beat Inflation with Your Retirement Plan

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7.7.23: 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. 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 to the Active Wealth Show Activators. I'm Ford Stokes, your chief financial advisor. I've got Sam Davis back with us from the Friday wedding here on the Active Wealth Show. And Matt McClure did a great job filling in for you there, Sam, last week. And a lot of activators obviously were listening because we got some calls and got some people emailing us and and saying, no way on that Friday wedding. It's tough deal. So but it sounds like you guys had a great time.

Producer:
We did have a great time. Welcome to the weekend activators. So happy to be back here with you on the Active Wealth Show. And Ford, I got to tell you, I love my family. I love my cousin Amanda. Congrats to Amanda and Rob. The happy couple is on their honeymoon celebrating.

Producer:
But man, I didn't know what day of the week it was for at least two weeks because that Friday wedding I'm used to weddings all being on Saturday. But it was great. The weather's beautiful this time of year in upstate New York and it was great to be with friends and family. That's some great stuff there. So on today's show, we are going to talk about how to protect your retirement from inflation and taxes. I think those are all two really big topics that people are concerned about during retirement. We felt like it was important to go ahead and try to share that a little bit if we could. And we're going to talk about strategies for managing these two common threats to your savings. First of all, you know, Sam and I obviously want to welcome you to the show. Obviously, we've always got Sam Davis here as our weekend ambassador. And Sam's going to have a great inflation demonstration for us. He's also going to share really here really quickly the quote of the week, the financial quote of the week. We've got questions from our listeners, this show for sure. And then we've also got. A little bit of tidbit mean a little bit of got a little bit of information for you if you are looking to retire early. If so, we want to avoid buying these five big things and we're talking about that later on in the show.

And again, we just want to thank all the activators out there for making us the number one listened to radio show on Am 920. The answer on the weekends. It's a really big deal. It's a big deal that you guys have made us the number one show on the weekends. Literally for the last two plus years. We've been at this for over three and a half years now. So, Sam, do me a favor before we start talking about inflation and taxes, go ahead and read us the financial wisdom quote of the week. And now wholesome financial wisdom. It's time for the Quote of the Week. All right. This week's quote comes to us from Sam Ewing. And Sam Ewing once said, Inflation is when you pay $15 for the $10 haircut you used to get for $5 when you had hair. Amen. Love those funny retirement quotes and funny financial quotes. That's all completely true. And it's and as a bald guy, I got to tell you, that's completely right at it. It's incredibly accurate. It can erode the services that you have got and also can erode your buying power. And we want to do everything we can to help make sure that that doesn't happen and make sure that your money keeps pace with inflation. And the ways to do that is to stay invested, also to consider bond replacement strategy and also to minimize the taxes that you're going to pay during retirement for sure.

We want all of our listeners to understand this fact. There's only two types of tax free investments out there. There's only two. Number one is Roth IRAs. You can start a Roth IRA and set up automatic contributions to your Roth IRA if you're below the contribution limits. You could also convert your existing tax deferred retirement savings accounts into Roth IRAs from, let's say, your IRA. Or you can move your money from a 401. K or a 403 B into an IRA and then move it into a Roth IRA by implementing a Roth ladder conversion. We want to move money a little bit each year to try to help you reduce the amount of taxes you're going to pay over your 30 plus year retirement. You're going to pay taxes in the year that you move the money on, the money that you move. So let's say you move 100 grand and you're in the 20% tax bracket, you're going to pay 20,000 on that, but you're going to move $80,000 into your Roth IRA. And that money will grow absolutely tax free. So you won't pay money on your principal, you won't pay money on the growth on that as well. And you won't pay any money on the income distribution. Is that come back to you from the Roth IRA? You also want to explore whole life or indexed universal life insurance options.

We like indexed universal life insurance options because they grow over time with market like gains. Without market risk, life insurance offers a death benefit just in case you die too soon. That's what life insurance is all about. But it's also a great tool to build your retirement savings and generate tax free income during your golden years. That's what a lot of wealthy people do. They invest into. Whole life policies and indexed universal life policies for wealth preservation, but also for tax free distribution, whether it's for legacy or during their retirement. So if you're tired of worrying about your future and you're ready to chart a course for a tax efficient retirement, we just encourage you to pick up the phone and give us a call at (770) 685-1777. Again, that number is (770) 685-1777. Also, we want to make sure everybody understands that we've got a brand new office. We've we bought a building. We're right off McFarland on off Georgia 400. And we're at exit 12, really near Halcyon. Really nice area. Love our new building. It's brand new. Probably a little bit echoey in here where it's pretty fun to. To be in a brand new building. Got to get stuff on the walls, but want to say thank you to the activators out there. And our clients just really appreciate all the clients of active wealth management that made all this possible. It's nice to actually be in our own building rather than renting.

We really like the folks over there at the King Queen Building down in Dunwoody, but we had to move up to Alpharetta and. We wouldn't have been able to do it without you, activators and without our clients. And again, we're sincerely appreciative of our active wealth clients. And if you want to become an active wealth client or you want to try to figure out how you can build a more tax efficient, fee efficient and market efficient portfolio and get that free financial consultation, it's a $1,500 value. You can get that absolutely for free just by visiting active wealth.com. That's active wealth.com. And click that schedule a consultation button in the upper right corner and we're happy to work with you. And again all you've got to do is visit active wealth.com and click that schedule consultation button you're going to put directly into my calendar. Want to know where your hard earned money is going. It's time for an inflation demonstration. All right. For this week's inflation demonstration is a bit about why high interest rates could be here to stay. So we're taking a look at a report from The Wall Street Journal across affluent countries and world banking powers. Bankers are pencilling in further interest rate increases and warning investors that interest rates will be high for some time. The Federal Reserve earlier this summer held rates steady, but signaled that two more increases could come later this year, which would lift United States interest rates to a 22 year high.

Some big takeaways from this article. The underlying inflation rate in the US, but also Europe remains around about 5% per year with some stable wage growth. Central banks are revising their inflation forecasts upward and actually signaling further interest rate increases. The impact of previous rate increases seems to be waning, with signs of housing market stabilization and unemployment decline. Economies are still recovering from the pandemic, and delayed reopening in China could provide a boost with some stimulus measures. So a lot to take a look at forward in both the US and the global economy. Yeah, I thought I felt it was interesting. Price inflation in core services excluding housing, a closely watched gauge of underlying price pressures remains elevated and has not shown signs of easing, the Fed wrote in its semiannual monetary policy report last week. And so felt like it's just important to share what's also happening at home with the Fed. And what that means is you've got to stay invested means you have to stay invested to make sure that you keep pace with inflation. The market has recovered somewhat from its lows of 2022. We did see market volatility in 2022, where the Nasdaq lost 24.2% of its value. But the market has recovered in that 6.78% range, depending on how you're invested. And that's good. But also, you ought to consider a bond replacement, replacing the bonds in your portfolio with a fixed indexed annuity or a series of fixed indexed annuities where you could almost ladder those to get retirement income.

And if you've got questions about that or you have an existing annuity and you want to get an annuity x ray from us, absolutely at no cost to you, all you've got to do is reach out to us at (770) 685-1777. We're happy to do that for you. You get an absolute free annuity x ray or a free pension review as well. When we come back, we're going to we're going to have our listener mailbag where you get. We've got all these great questions from our listeners. We're going to try to answer all those for you in segment two. Be sure to come back to listen to our listener mailbag questions. Do it, baby. Dance. Dance. She. Contain 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 Investment Advisory Services offered through Brookstone Capital Management, LLC, BCM, a registered investment advisor, not an actual client of active wealth management 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 active wealth.com so we can help you delete fees and establish a personal pension that you can never outlive. Visit active wealth.com. Now that's active wealth dot com. And welcome back activators the Active Wealth Show I'm Ford Stokes your chief financial advisor I've got Sam Davis here with us our executive producer and Sam is going to ask your questions from our listener mailbag. Sam, go ahead. All right. For this first question comes to us from Larry in Alpharetta. And Larry writes in to say, I'm curious about how much money I should save before I retire. Any tips or guidance would be appreciated. Hey, Larry, first of all, thanks for reaching out to the second of all. It's great to be talking to somebody that's in Alpharetta near our new office here in Alpharetta at nine East Grassland Parkway. And first, Larry, what I would say is remember that retirement is about income, not about the size of your nest egg. Second, you want to determine your retirement goals and lifestyle expectations so that we can establish a baseline to estimate for your target income needs. Next with us is your financial advisor.

We can assess your current savings rate and identify any income gaps you want to do that retirement income gap analysis. And finally, you want to continue contributing to your retirement accounts and take advantage of employer matching programs if available. By maximizing your savings now, you will shorten the length of time that you'll have to work. But again, you really should be trying to target a 10 to 15% savings rate, especially if you're in that retirement red zone, which is five years before retirement and five years after retirement. You want to try to target a 10 to 15% total savings rate. And you can also get helped out when you get 6% matching by your 401. K, you know, by your employer within your 401. K or, you know, if you're looking to do other things, I think it's a really good idea to try to save between 10 and 15% of your income. So therefore, with Social Security income and and also taking a 4% withdrawal rate from your retirement nest egg or also getting a higher rate of of return and a higher payout ratio from any fixed indexed annuities. You could actually improve that income that can help you where you wouldn't have to save as much for retirement. I know that was your original question, Larry. I just want to say you really want to implement that 10 to 15% savings rate if you can.

You want to pay yourself first? Yeah, I think that's a great question from Larry. And it's not all that uncommon. We get a lot of questions asking about, you know, how much should I have before I retire. And we encourage people to think about it a little differently. It is definitely more about income. And when you sit down with Ford and the active wealth team, you may find that your income plan is strong enough to retire a bit earlier than expected. So don't forget to visit active wealth.com and come and see us. All right. The next question comes to us from Sharon in Kennesaw. And Sharon writes in to say, I want to explore different retirement savings options. Can you provide insights on the best ones available for baby boomers like me today? Yeah. You want to consider traditional IRAs or Roth IRAs for tax advantages and flexibility. And Sharon, thanks for the question. By the way. You may also want to invest in an index universal life insurance policy if you're, you know, younger than 60 years old. That's a pretty good idea and a pretty good time because we don't want the cost of insurance to be too great. And you can be your own bank and generate your own tax free retirement income over time. You also want to explore annuities as a way to secure guaranteed income streams during retirement, and you want to maximize contributions to workplace retirement plans like 401, especially if your employer offers matching contributions.

Like we mentioned with Larry's answer off his question, a financial advisor or professional can help you roll over these funds into an IRA. We'd love the opportunity to help you do that. That allows for lower fees and better investment options, at least more investment options if you're looking for different financial vehicles as well. Besides the actual type of accounts, the IRA is a type of retirement account that is a qualified account. Therefore it's qualified for tax deferred growth. Here's the thing. Here's what I would encourage you to invest into a tactically managed portfolio that uses ETFs like ours do to minimize the cost you're paying and minimize what's called an expense ratio. We want to minimize the expenses that are inherent with your account. That may not show up in your statement, but they absolutely show up in the actual bottom line value of your account. The next thing I would do is consider investing in things like structured notes and we can talk about those later, but that's a really good option for you to higher interest rate of return than you would see from a bank or a money market. There is risk involved with structured notes and market risk involved, but they also come with a 30% buffer. So that's something to consider to buffer for your principal. The next is a fixed indexed annuity, investing in a fixed indexed annuity that gets you a retirement income and you can never outlive that gets you market like gains without market risk because your money is actually not invested in the financial markets.

That's a really good idea. And if you've got questions about that, Sharon, I would encourage you to give us a call at (770) 685-1777. Again, our number is (770) 685-1777. We're happy to help you. And again, thank you for your question. All right. And our last question comes to us from Steve in Stockbridge, Georgia. And Steve says, I'm a bit confused about Social Security. Can you explain how it works and when I can start receiving my benefits? Yeah. Hey, Steve, and thanks so much for your question. You want to understand your Social Security eligibility and how your benefits are calculated based on your earnings history. Create an account at ssa.gov to view your top earning years and potential benefits. The earliest age to start receiving benefits for retirement is 62, but waiting until your full retirement age, typically 67 or 66, can result in higher monthly benefits. So most folks that are, you know, that were born before 1960, their their retirement age is their full retirement age is somewhere in the 66 and a few months. If you're born after 1960, congratulations, your full retirement age is. Yes, you guessed it, 67 years young. And you really want to try to get there if you can. Also, you don't want to put too much pressure on your portfolio and withdrawal rates.

We've seen a lot of people who retired during Covid or post-COVID because they just didn't want to deal with it anymore. And they took an early retirement. They retired at like 62 or 60 3 or 61 years old. And one of the problems is they had to try to get to Medicare. They had cost of their health insurance. You want to make sure that you can try to make it to Medicare age as well at age 65. But remember, delaying benefits until your age 70, You basically get an 8% roll up. You get 8% more every single year in income that you wait in between your full retirement age and 60 and 70 years old. So if you can make it to at least your full retirement age, you're maybe a really good spot. And let me ask you this, Steve. And as you're driving around down there in Stockbridge, my question is, you know, do you want to get more than $0.75 on the dollar? Because if you end up taking Social Security income at age 62.5, guess what? You are going to only get $0.75 on the dollar that you've put in and the dollars you put in are precious and you deserve to get that money. And so I would encourage you to try to make it your full retirement age, but also make sure you're not putting too much pressure, downward pressure by more withdrawals from your portfolio.

Yeah. So I hope that's helpful for you. Steve And another thing that we like to help not just our activators, but anyone who comes and meets with us here in our new office in Alpharetta is that we're planning on Social Security benefits being cut by somewhere between a quarter and a third around 2033, and that's only ten years from now. So if you're listening to this and you're in your 50s, you've probably got some questions about retirement. You're probably starting to pull together some plans for your retirement. I'd encourage you to get in touch with Ford and Active wealth.com and get that Social Security maximization report put together just so you can start to see how that Social Security income will fit into your overall retirement income picture. That's a great question from all of our activators. Be sure to get in touch with us if you have questions. We'd love to answer them personally or even on the Active Wealth Show. Thanks, Sam. Appreciate that. We're coming up on our break here and we come back from the break. We're going to talk about the five things you should never buy if you want to retire early. I don't. I don't care. I do it. I'm ready. 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 active wealth.com to book your free financial consultation and tell them Charlie Kirk sent you. Investment Advisory Services offered through Brookstone Capital Management, LLC BCM a registered investment advisor, not an actual client of active wealth management. 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. It's controversial because everybody is 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. 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 marine Life. I'm Jim Tarbox. Charlie Kirk here. If you're concerned about your investments, then I encourage you to listen to the Active Wealth Show hosted by my good friend Ford Stokes Saturdays at noon and Sundays at 11. Investment Advisory Services offered through Brookstone Capital Management, LLC, BCM, a registered investment advisor, not an actual client of active wealth management. 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 active wealth.com or call us today at (770) 685-1777.

Remember all of Ford's listeners receive a free financial consultation just for listening to the show. Visit active wealth.com to learn more and schedule an appointment. Thanks for listening to the Active Wealth Show and subscribing wherever you listen to podcasts. And welcome back Activators, the Active Wealth Show on Ford Stokes. Your chief financial advisor got Sam Davis, our executive producer here. And we're talking about the five things you should never buy if you want to retire early. Whatever your reason, if you want to retire early, whether you want to sit on a beach or turn your hobby into a business or travel the world, experts agree there are some things you should consider not purchasing in order to reach that goal. The number one would be luxury vehicles trying to avoid buying luxury automobiles, boats and RVs. Vehicles are already a depreciating asset and most people aren't using their car, truck or SUV to generate income. New cars lose 20 to 30% of their value after only one year of ownership as an example. So be careful there. Also, we see a lot of couples, retiree couples, They go to one vehicle, especially when the female starts driving the male all the time. Also, luxury vehicles come with big price tags, but they also come with more expensive ongoing costs such as insurance, maintenance, repairs, docks, parking fees, etcetera. It's better to drive a Honda to the hills than a Lambo to the office and then say, Why don't you give us the second one? Yeah.

Number two on this list of things to not buy if you want to retire earlier is holiday homes and specifically timeshares. So unless your vacation home is producing enough income to offset its costs, it's likely sitting empty and unused most of the year. Timeshares offer pretty limited flexibility in terms of travel plans, you may be limited to specific weeks or seasons to access the property. Instead, consider contributing some extra money towards paying off the mortgage. That way, when it's time to retire, you can sell the family home and relocate to the beach, the lake, the mountains, wherever the kids and grandkids will be eager to visit. And Ford, I know a lot of your active wealth clients have taken your advice and done that very same thing. Yeah, it's a really good idea. You want to try to get it where you're somewhere in the water so the kids and grandkids will come see you. And you know, I've got some some friends of mine and some clients who are who've had a lake house for 20 years and they're in their 80s and they're and they ended up selling the lake house and they regret it. They they because they just didn't want the the kids and the grandkids to do all the work. And, you know, but they they don't see their family as much. So I would encourage you to do everything you can to try to get on the water somewhere, whether it's a lake or river or a beach somewhere.

And you won't believe how many visitors you're going to get during your retirement from your family. And also going to one house is a really good idea, trying to get down to one home. That way you've got only one power bill, one cable bill, all that kind of stuff. Try to get your costs down because you probably don't. You might not necessarily need the in-town city one. And a lot of people, instead of trying to chase kids and grandkids all over the country, wherever they're living and moving multiple times and things like that, what they've done is they said, you know what, We're just going to get on the lake somewhere and then everybody can come see us. And that's worked out really well for a lot of people. So it's just a good idea there. Sam I'll go ahead and read number three. Yeah, The next one is hold off on buying the latest and greatest technology. It's easy to become caught up in the new features of the latest smartphone, laptop or television, but waiting just an extra year or two can save you some cash. Consider buying models from the previous year or hold off on upgrading until devices go on sale. And here's a tip for our activators. Black Friday and Cyber Monday are great days for deals on the latest and greatest technology.

Yeah, put those on your calendar for for December next year for sure. Something to consider there or November and December with Black Friday, you know, the day after Thanksgiving. And also number four is excessive daily conveniences. Sam, why don't you share a little bit more about that? Yeah, absolutely. So making coffee at home instead of buying from Starbucks, Dunkin Donuts or the cafe on the corner could save the average couple 1500 to $2000 a year. Specialty drinks often cost $5 or more. And I know from experience it's easy to become tempted by that pastry right behind the glass. So do the right thing. Make coffee at home and save yourself. Maybe 1500, maybe even $2,000 a year. And the last one is high fee and financial products and investments. One thing that I would just like to share is be careful. Try not to buy mutual funds because they come with 12 one fees, a share fees and share fees. Try to reduce the fees you're paying because that's a guarantee that you can do to help grow your assets. You really want to try to reduce those fees for sure. And also try to avoid the speculative investments that tout potential gains but carry high risk. That's something to be to really be considerate of for sure. And there are safer and structured ways to make smart risks to grow your wealth and also smart, safe risks to grow your money in an efficient manner.

Example If you invest in a fixed indexed annuity, guess what? There are no advisory portfolio fees because we don't double dip as financial advisors because we're fiduciaries and we put your needs ahead of our own. And that's a really good idea. And if you want more information about how you can reduce the fees you're paying within your portfolio, all you have to do is visit active wealth.com and click that schedule a consultation button in the upper right corner and you'll get booked directly into my calendar. I look forward to working with you and Sam. You've got one of our chapters, an important chapter from my book, Annuity 360. You're going to play during the show this week. Yeah. Ford We're going to go ahead and play the chapter from Annuity 360 on how to reduce risk. In your portfolio with annuities. So we're going to play that right now. And when we come back, we'll talk more here on the Active Wealth Show. Dinner and Wine Saturday girls I was never in. Chapter 16 Reduce risk in your portfolio with annuities. Big idea. An annuity can protect against several risks that can affect retirees and pre-retirees and offer a better financial safety net than other investment types. One of the biggest benefits of investing in annuities is reducing risk in your portfolio. With current market volatility, pre-retirees and retirees are more concerned than ever about their retirement funds and protecting their hard earned wealth.

We believe that annuities can be the answer to risks in your portfolio. Longevity risk. Retirees and pre-retirees are concerned about outliving their wealth. We have offered some strategies in this book that will stretch your retirement funds, such as following the 4% rule. But annuities can offer even more protection against this fear. We are living longer, so it is important to plan for at least three decades of retirement. An annuity can help create an income you can never outlive. Your money will last for your entire retirement by utilizing monthly, quarterly or yearly distributions from your annuity account after your money grows during the accumulation phase. Market Risk Fixed index annuities can protect you from market risk. These annuities are not actually invested in the market. They're only tied to a specific market index. This means that you enjoy all the benefits of your market index when it performs well, but you are not exposed to any of the market risks. Should your index perform poorly. You will either make money or remain flat. You will never lose any money. Zero is your hero. Inflation risk annuities can offer riders that can help you adjust for inflation, even though a rider might reduce your payout. Protecting yourself from inflation will ensure that your money lasts and is not exposed to any unnecessary risk. It is important to have an annuity with a payout linked to the Consumer Price Index or CPI instead of one that increases at a fixed rate each year to ensure you are protected against inflation risk.

An annuity that increases at a flat rate each year does not offer sufficient protection against inflation. Sequence of return risk. An annuity with a lifetime withdrawal benefit can counteract the effects of a down market at the start of your retirement. Research conducted by Retire One has shown that you can flip 15 years of returns from retiring during a recession to retiring during a market that is up and completely change your retirement outlook. The positive returns would offset your withdrawals and grow your assets before your account felt the effects of a negative return. Consider a smart, safe plan with a smart, safe plan. Your money is invested not in the market. The characteristics of investing not in the market include growth with safety market upside limited to no downside principal and gains protection low cost 0 to 1% Annual fee. Time horizon of 7 to 14 years can earn 5 to 7% annually. Options are available for guaranteed income. Here are some examples of not in the market investing bank CDs. The annual percentage yield APY is about 1 to 2%. Your time horizon is typically 1 to 3 years and you cannot access the funds until the contract is up. Treasuries. The APY is about 3%. Your time horizon is ten years and you cannot access the funds until the ten years is up.

Fixed annuities. The annual percentage yield is between 3 and 4%. Your time horizon is typically 4 to 7 years. You are able to access the funds during the contract period. Multiyear guaranteed annuities or omegas. You get between 2 and 4% growth on your principal depending on the duration of your policy. This is less growth than a fixed indexed annuity, but it is guaranteed. The annuity company is required to pay you the rate they promise for the duration of your policy. Fixed indexed annuities you receive between 5 and 7% growth on your principal. The time horizon is 7 to 14 years and you do have access to the funds in your account if you need them. A smart, safe plan does not invest your money directly in the market. Your investment is tied to an index without being invested directly in it. This means that you get a portion of the market gains without the market risk. You may want to consider investing in a fixed indexed annuity over other not in the market options. If you invest in treasuries or CDs, you will lose ground in your investment due to inflation. Investing in a fixed indexed annuity will likely cut down on your inflation risk. We prefer accumulation annuities because they minimize your risk in several areas and they lock in your gains through the use of point to point protection periods, meaning you won't lose money 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 active wealth.com so we can help you delete fees and establish a personal pension that you can never outlive. Visit active wealth.com now that's active wealth.com. Charlie Kirk here to tell you about Ford Stokes founder and CEO of active wealth management right now for a limited time active wealth is offering a financial consultation to Am 900 and the answer listeners absolutely free. That's a $1,500 value at no cost to you. Active wealth will show you the hidden fees you're paying. How to potentially save six figures by deleting taxes on your IRA during retirement Visit active wealth.com Today 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. And welcome back Activators, The Active Wealth Show. I'm Ford Stokes, your chief financial advisor got Sam Davis, our executive producer here with me. And I hope you enjoyed that chapter on it's chapter 16 from my book Annuity 360 that talks about how you can reduce risk within your portfolio with fixed indexed annuities.

Also, it's interesting because thinkadvisor.com came out with an article not too long ago and basically it was April of this year that said that people who own annuities actually want to buy more annuities, which I thought was really interesting. They did a full survey on it. And I would just encourage you to consider doing a bond replacement with your portfolio. And we're going to play that chapter on bond replacement for my book, Annuity 360 here in a little bit in Segment four. What I would encourage you to do is to really consider reducing the risk within your portfolio. It's it's really that simple. And if you can get to something that's contractual, also an annuity is a 100% financial reserve product. It's regulated by the states, it's not regulated by the federal government and therefore they require a 100% financial reserve of that product. Now, FDIC, if you were to invest in a bank CD or money market, that's only a 3 to 10% financial reserve requirement. And for me personally, I would rather invest in a fixed indexed annuity that's got a 100% financial reserve product versus investing in just a 3 to 10% financial reserve. Requirement, as evidenced by what happened with Silicon Valley Bank and First Republic Bank in April, in March and April of this year.

And so it's something to really consider for sure. Fixed indexed annuities are invested into the ten year US Treasury and the ten year US Treasury is paying out much higher rates than what is done traditionally in my career and my career, it's usually averaged between 1.4% and 1.8%, and now it's averaging well over 3%, which is, you know, between 3 and 3.6%. That's two acts of where it's been traditionally, and that allows the annuity companies to invest more money into options in things like the Credit Suisse momentum or the Credit Suisse Ravenpack or the BNP Paribas Global Factor Index that follows US global healthcare. There's hundreds of indexes that are tied to fixed indexed annuities with annuity companies, and you get a portion of the gains and they get a portion of the gains. And that's how they make money off of your money. But in a really good year, like we're on the way to having hopefully this year you see significant growth. But in bad years, like last year, a fixed indexed annuity investor lost $0. So let's go ahead and listen to that chapter about bond replacement, how to replace the bonds in your portfolio with a fixed indexed annuity. Chapter 15 Bond Replacement with fixed Indexed annuities. Big idea. Historically, bonds have seen volatility when the market is volatile. Fixed indexed annuities are not subject to the same volatility, which makes them a much safer investment.

You might have heard a financial advisor talk about replacing your bonds with annuities to protect your wealth and grow your retirement funds. At my firm, Active Wealth Management, we believe this is a smart way to protect your future. Many people have learned that bonds are a safe way to invest your money, but there are some downsides to bonds that should make you think twice. We'll talk about some reasons why you should consider replacing your bonds with annuities. First, here's some information on the history of bonds in the United States. Historical Bond volatility. The 1900s saw two secular bear and bull markets in US fixed income. Inflation peaked at the end of World War One and World War Two due to increased government spending. The first bull market started after World War One and lasted through World War Two. The US government kept bond yields artificially low until 1951. The long term bond yields were at 1.9% in 1951. They climbed to nearly 15% in 1981. In the 1970s, globalization had a huge impact on bond markets. New asset classes such as inflation protected securities, asset backed securities, mortgage backed securities, high yield securities and catastrophe bonds were created. Early investors in these new asset classes were compensated for taking on the challenge. The bond market was coming off its greatest bull market coming into the 21st century. Long term bond yields declined from a high of 15% to 7% by the end of the century.

The bull market in bonds showed continued strength in the early 21st century, but there is no guarantee with our current market volatility that this will hold. See Chart 15.1 To see the incredible difference of investing in a fixed indexed annuity versus investing in bonds. Why you should consider replacing your bonds with annuities. The first question you should ask yourself is this Why would you take market risk with your bonds when your bonds can lose their value? If you just look at the history alone, you can see how uncertain the future of bonds is. Inflation and fluctuating interest rates play a big role in bond yields. Interest rate. Risk of bonds. Bonds and interest rates have an inverse relationship. When interest rates fall, bond prices rise Due to the Covid 19 pandemic. Investors have moved their money to bonds because they believe it is a safer investment option. However, this has caused bond yields to fall to all time lows. As of May 24th, 2020, the ten year Treasury note was yielding 0.64% and the 30 year Treasury bond was at 1.27%. Reinvestment Risk of bonds. This is the likelihood that an investment's cash flows will earn less in a new security. For example, an investor buys a ten year, $100,000 Treasury note with an interest rate of 6%. They expect it to earn $6,000 a year at the end of the term. Interest rates are 4%.

If the investor buys another ten year note, they will earn 4000 instead of 6000 annually. Consider the possibility that interest rates change over time when deciding to invest in bonds. Systematic market risk. This refers to the risk that is inherent to the market as a whole. It will affect the overall market, not just a particular stock or industry. This can be unpredictable and it is impossible to avoid. Diversification cannot fix this issue, but the correct asset allocation strategy can make a big difference. Unsystematic market risk. This type of risk is unique to a specific company or industry. Similar to systematic market risk, it is impossible to know when unsystematic risk will occur. For example, if someone is investing in health care stocks, they may be aware of some major changes coming to the industry. However, there is no way they can know how those changes will affect the market. There are two factors that. Contribute to company specific risk business risk. There are two types of risk, internal and external. Internal refers to operational efficiency and external would be similar to the FDA banning a specific drug that the company sells. Financial risk. This relates to the capital structure of a company. A weak capital structure can lead to inconsistent earnings and cash flow that can prevent a company from trading reduced advisory fees. Investors who trade individual stocks may know how much commission they are paying their broker, but individuals who buy bonds often have no idea what type of commission they are paying.

Bond dealers collect commission on bonds they sell called markups, but they bundle them into the price that is quoted to the investors. This means you are unaware of how much commission you are actually paying. Standard and Poor's estimates of bond markups is 0.85% of the value for corporate bonds and 1.21% for municipal bonds. However, markups can be as high as 5%, up to $50 per bond. Bonds have finite durations. Bonds only provide income for a finite amount of time. Unlike an annuity which provides income for life, you must reinvest your money if you want to continue generating interest with bonds. However, reinvesting with a bond can sometimes come at a loss. As we discussed above, annuities will provide you with an income you can never outlive. It's the final countdown. So let's recap what you may have missed. It's the final countdown. The final countdown. We talked about how to protect your retirement from inflation and taxes on this week's show. We also played two chapters of my book, Annuity 360. Also, you can get that book at annuity 360 dot net. We give you a free copy of that book. So all you got to do is visit annuity 360 dot net and we'll get that to you. But some of the strategies for reducing in, you know, for some of the strategies protecting your retirement from inflation and taxes is first of all, there's only two types of tax free investors out there.

Number one is Roth IRAs. Number two is life insurance. So you ought to consider investing in both. We also talked about replacing the bonds in your within your portfolio with fixed indexed annuities. We also talked about reducing the risk within your portfolio with fixed indexed annuities because with a fixed indexed annuity zeros your hero contractually, you can never lose your principal and it only advances, it never retreats. And you want to do everything you can to build a tax efficient, fee efficient and market efficient portfolio. And we can help you do that here at Active Wealth Management. All you've got to do is visit active wealth.com, click that, schedule a consultation button in the upper right corner. We're happy to work with you and you'll get booked directly into my calendar. Again. Feel free to give us a call at (770) 685-1777. Hope you enjoyed this show where we talked about protecting your retirement from inflation and taxes. Again, you want to make sure you stay invested and also stay invested with some safe products as well. For 20 to 40% of your assets with fixed indexed annuities. And we're so glad you've been with us here on the Active Wealth Show. Next week, we're going to talk about more ways for you to save and also for you to invest into a smart retirement plan with smart, safe and smart risk investing here on the Active Wealth Show.

Go ahead and reach out to us at active Worldcom, but hope everybody has a great week. Remember, when you're thinking about retirement, try to seek as much information as possible. If you're going to be a bear, be a grizzly, doing everything you can to seek out information, because knowledge is power with retirement as it is with anything else and hope. Everybody has a fantastic week and we'll talk to you next week on the Active Wealth Show. 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 active wealth.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. 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.

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