9.30.22: Audio automatically transcribed by Sonix

9.30.22: 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 Act of Wealth show with your host Ford Stokes. Ford is a fiduciary and licensed financial advisor who places your needs first. He’ll help you protect and grow your wealth. The active wealth show has grown because activators like you want to activate their retirement planning with sound tax efficient investing. And now your host Ford Stokes.

Ford Stokes:
And welcome the active wealth show Activators on Ford Stokes, your chief financial advisor. We’ve got a special edition of the Active Wealth show this week. We’ve got Matt McClure, who’s on the board with us. He’s been the executive producer and Matt’s always the Reporter for Retirement Radio. It does a great job with our vignettes And Matt, say hello to everybody.

Producer:
Hello, everybody. I’m trying to fill for it. I’m trying I’m trying to fill the shoes of Sam Davis this week, although they are big shoes to fill. So I’ll do my best.

Ford Stokes:
They are, except for the fact that, you know, you’re more talented than Sam. Just don’t don’t don’t let anybody tell saying that. But we’ll keep it all between us and the activators. Make sure everybody listens in. So but it is nice to have Matt with us. It’s great to have you here. I mean, it’s always nice to get a guy that was, you know, who reported from the floor of the New York Stock Exchange for over a year with New York one, which is a pretty big deal. Television local television station up there in New York. You know, Matt, with all the market volatility this week, it’s really great that you’re here. We wanted to do this special edition. We’re going to first talk about the nine ways to live comfortably during retirement. We’ve seen a lot of we’ve seen just a lot of market volatility. We’re going to play right or wrong, I think, on this in segment three, but we’re going to play four chapters from my book and 8360 because we we’ve gotten so many questions, Matt, on, hey, what are we going to do about this market volatility? People are coming and calling me because, you know, maybe there are advisors hiding under their desk because they didn’t like how bad the market has done. You know, what’s our strategy? And you need to have a strategy before the storm comes, right? Just like all the folks, unfortunately, in poor Fort Myers in Naples have understood.

Ford Stokes:
I mean, it’s just total decimation down there. Our hearts go out to them and our thoughts and prayers go out to them as well. We I’ve got friends that have got family down there and they’ve lost their homes, They’ve lost their boats, they’ve lost everything. And some of them weren’t insured. At least the boat, some of the boats weren’t. So they’re just planning for that. But you need to plan before the storm comes and the storm’s kind of here. So what can you do? And we want to talk about replacing your bonds. We want to talk about doing a better job at planning and and not being all beholden to how the market does or does not do. And some of that’s fixed index in a way. Some of that. You can also do structured notes. We won’t talk about structure notes on this show, but what we’re going to do on this show is first talk about nine ways to live comfortably during retirement. Then Matt and I’ve got a special edition of right or wrong that we’re going to play. And you’re welcome. It’s all I got to tell you is, All.

Producer:
Right, man, you’re in for a treat, folks.

Ford Stokes:
Right? Exactly. And, you know, it’s always great to have the activators with us. And if you’re listening for the first time and you don’t understand who an activator is, it’s somebody who listens to this show who wants to plan for successful retirement. They want to build a tax efficient fee efficient and market efficient portfolio so they can weather the storms. And Hurricane Ian is he may go down as one of the one of the most damaging from a personal property perspective we’ve ever had in this nation. And, you know, we’re just again, thinking about everybody, but we want to help you with the storm that’s going on in the market, too, and that’s replacing your bonds, that’s trying to generate income because retirement is more about income than it is about just building one big nest egg. But, Matt, kind of your thoughts, what you’re seeing in the markets after somebody that’s been you know, that’s been on the floor of the New York Stock Exchange, what you’ve seen in the past week and a half, two weeks, and where the Fed keeps going up and up and up and you’ve even got a vignette on some of this stuff regarding inflation and other things, just your thoughts on what you’re seeing out there.

Producer:
Yeah, you know, I mean, the volatility is, is crazy and we’ve seen market volatility off and on over these past few years. But, you know, of course, obviously the pandemic really set things off as far as as that goes. And, you know, we’re still on an upward trajectory over the long term. But then this this year has just really with inflation, with the interest rate hikes to try to combat inflation. And, you know, doing that by trying to tamp down on demand. It’s all just sort of this in a lot of ways perfect storm to create a storm for for a lot of people’s investments. And that’s it’s a scary it’s kind of a scary time. It’s I know for a lot of people, a very unsure time at least. And so, yeah, you’re right. People are looking for safer investments, places to to put their money where they know that their principal is going to be protected, where they know they’re not going to lose their you know what’s. Sure. And you know, they’re going to be a lot better off in the end. And then when the markets do go up, they can take advantage of that and reap the benefits of those gains.

Ford Stokes:
Yeah, no question. And so let’s be specific for the listeners here, Matt. What Matt and I are saying is you ought to consider a bond replacement strategy taking let’s say you’ve got a 6040 portfolio, 60% stocks, 40% bonds, let’s take 40% and put that into something other than bonds, whether it’s fixed indexed annuities or structured notes or a structured note ladder, if you will. Let’s do that right now. Let’s try to get to some sort of income where we can know where the income is. I just had a couple. He works at AT&T and she is a nurse practitioner. They came into my office. They’ve been working me for about four years and they’ve got a perfect strategy. They’ve also got a Roth ladder conversion plan. They’re kicking the IRS out of being their part of retirement. We’re doing all of those things, so that’s a really big deal. So what you want to do is pick up the phone and give us a call at 7706851777. That’s 7706851777. Or just visit active while that’s active dot com and click that schedule a consultation button in the upper right corner and we’re happy to help you. We’ve only got like 6 minutes left in this segment. I’m going to get through this pretty quick. Let’s go over Matt the nine ways to live comfortably during retirement. So number one is you want to stay invested. Please don’t go to cash.

Ford Stokes:
There are better ways to protect your money. Specifically, you can invest in fixed indexed annuities. Also, we just got news. One of the companies we work with has got a product that’s going to pay 4.95% on a five year MIGA. So if you’ve got money that you want to just park and leave for five years, you can get 4.95% a year compounded interest with a five year multi year guaranteed annuity, which would be something that would go ahead and compete against the five year bank CD, which is, you know, not going to be over 3% for sure. So you’ve got a chance to to make almost double your money on that. And the liquidity requirement on that is only five years. You’re going to leave your money in there for five years versus a you know, a longer term annuity that can be 10 to 14 years. Number two is you want to implement a Roth ladder conversion or a Roth IRA conversion before age 72, before required minimum distributions kick in. And number three of the nine ways to live comfortably during retirement. You want to work until you’re 67. Then start taking Social Security. You want to get to full retirement age, then get 100% of the Social Security benefit you are owed. And don’t settle for less by taking it too early. Let me ask you, do you feel like you deserve more than $0.75 in the dollar, the money you put in with Social Security? I would say you do.

Ford Stokes:
And I would imagine you are saying the same thing as you’re driving around going to Publix or Home Depot or Lowe’s or Kroger or wherever you’re going. Right now, I would encourage you to get more than $0.75 on the dollar. And if you take Social Security at age 62 and a half, guess what? That’s you’re going to get $0.75 on the dollar. Number four is you want to pay your house off. The happiest people that I meet with have their house paid off. And they also can downsize and pay cash for a smaller, newer house, if that’s another way to do it. Let’s say you’ve got a couple of hundred thousand still sitting in a on a mortgage, on a on a house that’s worth 900,000. Go ahead and sell out and and buy $500,000 house and bank the rest of the money and pay off that that last little bit of mortgage. Number five is bank the money you save from a zero mortgage into an investment account. It’s called smart reinvestment. You really need to be doing that. You need to reinvest the money. Don’t spend all the money that you’re saving. Save the money. Number six is build your own personal pension You can never outlive, you can receive. Basically, we’ve seen illustrations of over nine, ten, even all the way up to 16% this year on fixed indexed annuities because the ten year US Treasury rate has gone up so much, they’re able to use the interest from those ten year treasuries and really generate some significant growth in income from options that are purchased.

Ford Stokes:
From the interest on the ten year treasury, you can grow your principal without with market gains and with no market risk. This is called fixed indexed annuity investing. Number seven is replace your bonds completely. Two strategies for that, like we said, is fixed indexed annuities and a structured note ladder or a combination of the two and number eight is accurately calculate your monthly expenses and build a positive income gap at the start of your retirement. It’s just a smart idea. It’s a smart thing to do. You understand if you have a surplus, a retirement income surplus every month, or if you have a negative. Income retirement income gap every month. We want to be careful about avoiding that negative income gap and make sure we’re building towards a positive income gap. Because I got here’s a little piece of news for you. If you start out with a negative income gap, it’s going to widen because of inflation, especially in a year like this year where you have such high inflation as Matt was talking about. And then number nine is you want to diversify your accounts between tax deferred taxable and tax free.

Ford Stokes:
And the only two types of tax free investments out there are Roth IRAs and life insurance. We like investing in indexed universal life policies for our thirties, forties and 50 year olds. And. We like obviously doing Roth ladder conversions in our sixties with us, especially after they stopped working with our 60 year old clients and our early septuagenarian clients. Early folks have just turned 70 before they turn 72 because if you start taking RMDs and you’re doing the Roth ladder conversion, it’s going to be a double witching effect on your taxation because you do have to pay taxes on the money that you convert. Well, we got 30 seconds left in this segment. I just want to say thank you so much for tuning in to the active wealth show, especially during this difficult time with the financial markets. We’re here to help you. We’re here to be that calm inside of the storm. And over the next three segments, we’re going to play different chapters from my book and 8360 show. You can learn more about important bond replacement strategies, how to generate your own personal pension, and also understand some lifeboat camaraderie out there and understand some of the famous people who are investing in annuities today and have done it throughout history. You’re listening active while show right here on AM 920. The answer.

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

Ford Stokes:
And welcome back. Activators the active well show of force structure. Chief financial adviser. And I’ve got a special radio producer this week. Our executive producer is Matt McClure with the Retirement Radio Network. And Matt, here’s our financial Wisdom quote of the week. And this comes from Albert Einstein. If you want to live a happy life, tie it to a goal and not to people or things. And one is that’ll just help you do everything you can to reduce the amount of money you’re investing into things. And help you save at least. But also tying to a goal where your happiness is not dependent on others is a really good coaching. To your thoughts on that man.

Producer:
Yeah, no, it’s great because, you know, if you invest in people or in material things, the material things are material things and they’re they’re going to go away, you know? But then people, regardless of who they are, generally speaking, are eventually going to let you down in some way. So so set yourself a goal and tie your, you know, happiness to that goal instead of being so dependent on others or on material things. And that’s I think that’s great. That’s a great quote.

Ford Stokes:
Yeah, I agree. That’s great. Now, we’re going to play this important chapter right now on why you should consider investing some of your hard earned wealth into a fixed indexed annuity. If you want to get a free copy of my book Annuity 3060, all you’ve got to do is visit annuity 360 dot net That’s annuity 360 dot net. Chapter one Why you should consider investing some of your hard earned wealth into a fixed indexed annuity. Big idea. Protect your hard earned wealth with annual point to point protection periods that lock in your gains each year. A fixed indexed annuity can help you do the following with your wealth. Number one Protect your money from market loss. Fixed indexed annuities offered by highly rated annuity carriers did not lose a dime in account value in 2008 or 2009 during the worldwide recession caused by the mortgage loan crisis that resulted in the S&P 500 losing 50.1% of its value from March one, 2008 to March 31, 2009. Number two, grow your money with market like gains, typical annual growth of 5 to 7%. Number three generate a lifetime income. Your retirement will likely last 30 plus years. It might be a good idea to place some of your assets into a fixed indexed annuity to set a safety net around a portion of the retirement income that you wish to generate. Number four, eliminate market risk associated with bonds by replacing the fixed income bonds in your portfolio with a fixed indexed annuity.

Ford Stokes:
Number five, eliminate the advisory fees you’re currently paying to generate fixed income with bonds in your portfolio by replacing them with fixed index annuities. The annuity companies pay the advisor you don’t. This is called a bond replacement. If the above fixed index annuity benefits sound appealing to you, then I invite you to listen to the rest of this book and ultimately invest a portion of your hard earned wealth into a fixed indexed annuity to build a successful retirement. For more important information on annuities beyond this book, I also invite you to visit our website Annuity 360 dot net. Let’s consider a $100,000 investment in the S&P 500 versus a $100,000 investment in a fixed index annuity with a 50% participation rate in the S&P 500 from 2000 to 2013. Here’s a hint, folks. The annuity wins from January one, 2000 to December 31st, 2012. The S&P 500 experienced -2.943% growth over those 13 total years. People who retired prior to 2000 experienced zero growth over 43% of their estimated 30 year retirement question. Do you want to live your life during retirement without any growth over 43% of your retirement years? I didn’t think so. Conversely, if you had invested into a fixed index annuity with a 50% participation rate in the S&P 500 in January 2000, you would have seen a growth of 65.53%.

Ford Stokes:
That’s a significant total account growth difference of 68.473%. Do I have your attention now? The account value growth chart below shows the $100,000 invested into an S&P 500 spider in January of 2000 versus 100,000 invested into a fixed index annuity with a 50% participation rate in the S&P 500 also in January of 2000. The fixed indexed annuity achieved a total growth of 90.038% versus just 25.786% growth in the S&P spider by December 31st, 2013. This chart shows the power of one year protection periods called annual point to point features. The gains from each year were locked in on each anniversary of the annuity policy effective date when the S&P had negative years, the S&P Spider 500 spy experienced losses in those same years, the fixed index annuity experienced zero losses. This proves that you don’t need double or triple digit gains if you don’t experience losses. In this author’s opinion, every sound portfolio with a smart financial plan includes fixed indexed annuity investments with tactically managed portfolios in hopes to minimize market risk, reduce advisory fees and deliver a reasonable rate of return. The annuity can also deliver consistent income with or without the added feature of an income writer that also charges fees within the policy. I recommend avoiding income riders. I strongly recommend investing a portion of your hard earned wealth into a fee efficient, accumulation based, fixed indexed annuity with no more than 5% annual penalty free withdrawals.

Ford Stokes:
To allow your money to grow and to generate important income during retirement, refer to your audiobook companion PDF that comes free with the purchase of this audio book. See Chart 1.1 for annuity account growth Examples. Green line, a $100,000 investment into a fixed index annuity, showing the net growth of the annuity with a 50% participation rate with zero withdrawals from January one, 2000 to December 31st, 2013. The resulting account value is $190,038 by the end of December 31st, 2013. Red line, $100,000 investment into the S&P 500. Spider. Ticker symbol spy. This investment carried 100% market risk with a 100% opportunity for market gains on the performance of the SPY from January one, 2000 to December 31st, 2013. The resulting balance of the account is $125,786. Your human capital versus your wealth capital. Human capital is an intangible asset or quality not listed on a company’s balance sheet. You can think of this as an economic value of your work. Your human capital will decrease over the course of your career. Your peak amount of human capital is at the start of your earning years, whether that be right out of college at 22 years old or at age 30 after completing your advanced degrees. This is the time where your productivity levels are high and you are contributing to your company’s wealth.

Ford Stokes:
You have all of your earning years ahead of you. During this time, you have to protect your hard earned wealth capital. This is not something you can recoup. You can’t go back and relive your prime earning years or the years where your human capital was the highest. There are many barriers to going back to work at retirement age. Unfortunately, age bias is a real issue, especially in certain industries. Those who might have been an engineer during their younger years might be forced to take a retail job to make some extra cash because companies in their field won’t invest in older employees. Many employers focus on what you can’t do when you’re older. Instead of thinking about the experience and the expertise you could bring to a project. You will most likely have to rely on your wealth capital during retirement. The idea of losing capital as you go farther in your career sounds a little scary, but you can rest easy knowing that this new form of capital will kick in as your human capital dwindles. As you earn and invest throughout your career, your wealth capital will grow exponentially. You’ll need this wealth capital for your retirement. So it is important to choose investments that will protect and grow your wealth. Annuities, specifically fixed index annuities, can offer you market like gains without the market risk. Your money never goes below zero.

Ford Stokes:
By investing in a fixed index annuity, you are taking money out of the Wall Street casino and we think that’s a good thing. Annuity guarantees like guaranteed lifetime income and the guaranteed growth of your principal are based on the claims paying ability of the issuing annuity company. It’s a good idea to buy annuities from highly rated annuity carriers that are rated by Standard Poor’s and AM best. We consider a highly rated annuity carrier to be rated at least a triple B rating by S&P or with a B plus rating by and best. The impact of loss on your portfolio specifically, it can be devastating to your retirement. When we look at market volatility risks, the risk of loss and the potential impact on your retirement income is an important thing to understand. This chart shows the impact of losses on your retirement accounts. If we take a look at an example, let’s say you have an account that is at risk. If you start with 100,000 and lose 20%, you lose $20,000 and you are left with 80,000. If you gain back the same 20%, are you back to even? As you can see in the graphic below? The answer is no. In order to get back to your original 100,000 investment, you would have to gain back 25%. If we add an additional 5% for RMDs, we would now have to gain back 33.3% to get back to even.

Ford Stokes:
Understanding this concept is one of the keys to a successful retirement income distribution plan because you no longer have time on your side. The last thing we want to do is run out of money when we are 90 or 100 years old. How much do you have to gain to make up for a market loss? See Chart 1.2. After reviewing the above chart, I’m reminded of Warren Buffett’s two rules of investing. Number one, never lose money. Number two, never forget rule number one, when you invest in a fixed index annuity with a highly rated annuity carrier that has a high financial solvency ratio, then it is likely that you will be able to follow Warren Buffett’s two rules of investing. Exactly. You will likely not lose any money with the amount you invest in a fixed indexed annuity offered by a highly rated annuity carrier with a high solvency ratio. A good financial solvency ratio is any solvency ratio over 104. The solvency ratio expresses financial soundness and a company’s ability to meet policy obligations as they come due. Assets divided by each $100 in liabilities result in a financial solvency ratio expressed in a dollar figure. Assets are bonds, stocks, cash and short term investments. Liabilities exclude separate accounts. The higher the amount, the stronger the company’s position to cover unforeseen emergency cash requirements.

Producer:
That is chapter one of annuity 360. Much more to come on the active wealth show. Stick around.

Producer:
Come on down as we test your financial knowledge in right or wrong.

Producer:
Welcome back to the active wealth show Activators. I’m Matt McClure here alongside Ford Stokes, your chief financial advisor. And it is time for us to play a game that we like to play here on the Active Wealth show that sort of tests our financial knowledge a bit. And it’s it’s going to be me getting my financial knowledge tested today by the one and only Ford Stokes. But in right or wrong I am going to present a statement and then Ford, you are going to tell us if that statement is right or if it is wrong. And of course, folks, wherever you are today on this beautiful weekend, Well, I don’t know how beautiful it is because of, you know, the weather situation even. And every weekend is a beautiful weekend here in metro Atlanta, though. And wherever you are, you can play right along. So let’s do it, shall we? Yes, this is right or wrong. And so here we got three statements. Statement number one is the S&P 500 is down more than 20% year to date. But investors in fixed indexed annuities are not down at all. Is that right or is that wrong?

Ford Stokes:
That is actually correct. That is right. With fixed indexed annuities, zero is your hero. Your money is actually not invested in the market. It’s invested into the ten year U.S. Treasury. So if we have a tough year in the market like we are this year, you still will lose no money and you lose no principal and you’ll be able to lock in your principal and your gains depending on the product, whether it’s a one, two or three year annual protection period, you’ve got a chance to really lock in your principal and gains, which is a really good deal. So it doesn’t go all the way back to what your original principal was. You never retreat. You only go.

Producer:
Forward. Yeah, and that sounds like a great thing in volatile times like these. So right there you go. With number one. I’m batting 1000 so far. Hall of Fame material over here. Right. All right, Let’s see if I swing in a miss at this one or if I knock it out of the park with number two, the traditional 6040 portfolio, 60% stocks, 40% bonds. Well, that’s a tried and true investing strategy that is still very successful today. Is that right or is that wrong?

Ford Stokes:
Unfortunately, that is wrong. This strategy was developed in 1952. Harry Markowitz was given credit for being the founder of Modern portfolio theory, and that’s the 60% stocks and 40% bonds that are both traded on the same exchanges, but they’re also non correlated or negatively correlated. It’s generally been true for a long time. It was more of a labor saver for the broker brokerage houses because they didn’t have to do much. The 40% bonds are a little bit of a drag on the portfolio, but they’ll give you income. And what we’ve seen is generally you’ve got money rushing into bonds when we have problems with stocks. That’s not happening this year because there’s bond volatility with with interest rate risk as Jerome Powell and the Fed keep going up with with interest rates and they thoroughly have stopped the economy and or slow down the economy to where we’re in a recession. And they really, in my opinion, don’t need to be doing what they’re doing. They’re they’re doing a little bit too much and it’s a real problem. But my question is, do you really want to use a 70 year old strategy when it comes to your hard earned money? Fixed indexed annuities are a much better option for the safe portion of your portfolio. And we’re going to hear about why, baby, and we’re going to hear why insurance and annuity companies are competing for baby boomer dollars and how that can really benefit you in when we play that chapter and I think we’re playing that chapter next in this segment, fixed indexed annuities are a much better option for the safe portion of portfolio right now because with bonds you face reinvestment risk and interest rate risk, and with fixed indexed annuities, you don’t necessarily face both of those risks.

Producer:
All right. There’s number two. So number three, I’m batting 500 at this point. So let’s see how I.

Ford Stokes:
Can finish that game.

Producer:
I am still in the Hall of Fame even with that swinging. Yes. There you can structure your retirement accounts to deliver tax free income during retirement, right or wrong.

Ford Stokes:
Believe it or not, that is right. You can, with both Roth IRAs and indexed universal life policies or life insurance in general. The only two types of tax free investments. We set it in segment one, which is number one, is Roth IRAs. And number two is life insurance. They can provide tax refunds. Roth IRAs allows you to take tax free withdrawals with no required minimum distributions and with indexed universal life or any type of life insurance or cash value life insurance. Following the I.R.S. code, the IRS code they call an Internal Revenue tax code, the I.R.S. Code build up cash value of life insurance and take tax free withdrawals from the accumulated cash value of the policy that that Internal Revenue Code is Rule 7702 If you want to Google that and look it up. So let’s go ahead and play this chapter to Matt that talks about why annuity and life insurance companies are competing for baby boomer dollars. Chapter two Why annuity and Life insurance companies are competing for Baby Boomer dollars. Big idea Annuities counter one of a retiree’s biggest fears outliving their wealth. Annuities create lifetime income streams. There are 73.4 million baby boomers in the United States that are close to or are already in their retirement years. Baby boomers put between nine and 10% of their pay towards their retirement. Only 55% of boomers have any money saved for their retirement.

Ford Stokes:
More than four in ten boomers inaccurately believe that Medicare will cover long term health care costs. Baby boomers hold $2.6 trillion in buying power. They’ve had more time to build their wealth in comparison to other generations because some might still be in the workforce and making more money. Baby boomers control 50% of the nation’s wealth, outspend younger generations and are more likely to spend their retirement savings on themselves rather than passing them down. Total US retirement assets are about $28 trillion. More than half of those assets were either defined contribution plans or individual retirement accounts. Some other facts about baby boomers and their spending habits. 69% of baby boomers either expect to or are already working past age 65 or don’t plan to retire. Only 26% of baby boomers have a back up plan for retirement if they are forced into retirement sooner than expected. Baby boomers make up 46.8% of pet spending. Baby boomers are expected to spend 3.4% more on health related purchases than their parents did. Why are annuity companies targeting baby boomers? Boomers face many issues when planning for retirement. The three primary reasons are, number one, growing the money they have already saved. Number two, dealing with and preparing for unforeseen expenses, the largest of which are tied to health care and long term care. Number three, optimizing their financial plans when their exact lifespan is unknown. Annuities exist to help boomers with the last issue with an annuity.

Ford Stokes:
A retiree gives an insurance company a lump sum of money in exchange for an annual income that will last throughout their lifespan. Annuities have the potential to become useful tools in baby boomers portfolios when planning their retirement. They offer protection from market volatility, while also eliminating the risk of outliving one’s retirement savings, which are not guaranteed by portfolios that lean heavily on stocks and bonds. The demand for retirement income amongst baby boomers already exists, and annuities are the only products that can provide a hedge for a long life like longevity insurance reasons. Baby boomers should be interested in annuities. They are falling short of their retirement goals. Roughly 10,000 baby boomers retire every day, but a very small percentage of them believe they can retire and live comfortably throughout their golden years. Only 25% of baby boomers think they have enough money to retire comfortably. Many couples may be on the right track, but unforeseen circumstances such as health problems or staffing cuts might force them into retirement earlier than planned, leaving a much larger income gap. Baby boomers are looking for a reliable source of retirement income, and annuity companies are beginning to tap into this market because they recognize the need. Not all annuities are created equal. There are two main types of annuities immediate and deferred. The right kind of annuity depends on your financial goals, your situations and your needs.

Ford Stokes:
One thing that makes annuities so attractive is that there are so many options available. While it may seem overwhelming, a financial advisor can help you sort through all of your available options and make a smart choice for your money security for their income. Annuities can help build a secure retirement through different income strategies, while also alleviating any stress or fear they may have left over from the financial crisis of 2008 and the bear market. Annuities can play an important role in a plan, along with your Social Security, health care and other factors. Annuities can address issues such as maximizing your Social Security benefits, which help create an income that you can never outlive. How annuity and life insurance companies have responded to Baby Boomer needs interest in hybrid products. Baby boomers don’t want to pay a fortune for something that offers them only a part of what they need. With less income to be counted in their retirement years, already paying for individual products to meet each of their needs can be too expensive. Life insurance companies heard these concerns and responded with new hybrid products. Many life insurance companies now offer some kind of long term care rider on their whole life or universal life products. Generally speaking, these riders provide coverage for long term care should you need it or you receive a death benefit if you don’t.

Ford Stokes:
These combination products have grown from 6 million in 2008 to 2.6 billion with a B in 2013, and they are still growing need for guaranteed income. Baby boomers are also concerned with outliving their money. They want to enjoy their retirement, but they also don’t want to run out of funds. The industry responded to these fears by offering a variety of products with guaranteed lifetime income. These products include variable and indexed annuities with guaranteed living benefit riders and immediate or deferred annuities. The annuity industry has been transformed by these new products, according to PricewaterhouseCoopers Employee Financial Wellness Survey. Since the economic downturn of 2008, 76% of retirees say that creating a guaranteed income is their top retirement planning priority. Annuity companies rose to the occasion to create products to meet the needs of baby boomers and provide them with a sense of security. The need for advisors. Annuity companies have created many products to meet the needs of their consumers. This is a good thing, but it can make for a tough decision on the part of the investor with so many options to sort through. Some pre-retirees and retirees can’t sort through all the information. Many are afraid to make the wrong decision, which leads them to make no decision at all. A large part of the planning process involves an advisor educating their clients on all of their options so they can make the right decision.

Producer:
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Ford Stokes:
I see. And welcome back, everyone, to the act of well, show I’m Ford Stock, your chief financial adviser. And we’re playing we’re going to play this next chapter. We want to entertain you guys a little bit. Matt and I thought felt like it was important to entertain everybody. We’re talking about the famous people who invested a significant amount of their hard earned wealth into annuities so that you can understand a little bit of lifeboat camaraderie with some really famous people, even folks who are still alive, and also some historical figures you may not have thought of who actually invested in annuities. Chapter three Famous people who invested a significant amount of their hard earned wealth in annuities. Big idea Annuities are for everyone. Even if you’re not worried about outliving your wealth, annuities are safer for your money than investing in stocks or bonds, or simply not investing at all. Babe Ruth, known as the Sultan of SWAT. Babe Ruth came into his glory days during the Roaring Twenties, and his manager was worried that he was blowing through all of his money without putting any of it away. He introduced Babe to an insurance agent from the Equitable Insurance Company, now AXA Equitable from 1923 to 1929. The slugger contributed more than half of his salary annually, purchasing between 35,050 thousand worth of annuities each year. The Great Depression hit the country hard.

Ford Stokes:
In October of 1929, Babe Ruth was forced to retire from baseball in 1935 due to health reasons. He was unemployed during the worst time in history, but Babe Ruth had his income annuity. It’s been reported that he received an income of $17,500 a year, which would translate into an annual salary of more than 290,000 in today’s dollars. His famous quote still resonates today. He said, I may take risks in life, but I will never risk my money. I use annuities and I never have to worry about my money. Steve Young. Steve Young was signed out of Brigham Young University into a $40 million contract with the USFL. That was the headline, at least in reality. Young was given an annuity that would pay out something like $40 million over the 50 years that followed. Given the fact that some players were not paid for playing in the final season or other seasons of the USFL, accepting the annuity appears to have been a genius move on the part of either young or his agent. The annuity payments have lasted longer than the league, and it’s safe to say that he’s made more money than probably anyone else involved with the league. To be fair, it couldn’t have happened to a nicer guy. Even with a large signing bonus and salary, he continued to wear old jeans and drive a 19 year old Oldsmobile dynamic in addition to outlasting the league.

Ford Stokes:
That annuity even outlasted the Oldsmobile car company. With a staggering number of pro athletes going broke after they retire. It’s refreshing to read stories about players who made smart financial choices. Shaquille O’Neal. One player who’s used annuities to his advantage is retired star Shaquille O’Neal. Over his 19 year career, he generated $292 million in total compensation in retirement. He is projected to make as much as $1,000,000,000 from endorsements, even after his career is long over, thanks to a wise agent who made him put $1 million annually into annuities from his rookie year onward. Shaq lives off the income the annuity generates with his endorsement legacy for his children. Shaq scenario demonstrates how pro athletes and other prodigious earners can protect themselves against their own personal spending errors. Allen Iverson. Nba player Allen Iverson earned $200 million during his career, $155 Million in salary and 40 to $50 Million in endorsement deals. Iverson ended up going bankrupt because of his overly lavish lifestyle. In a December 2012 court filing, Iverson told the court that his monthly income was $62,500, but his expenses were 360,000. Luckily for Iverson, Reebok saved him from becoming destitute by paying him an annuity worth $2.3 million in 2001. Iverson made a very smart decision that would ultimately save him. He signed a unique endorsement deal with Reebok. Not only will Reebok pay Iverson 800,000 a year for life, they set aside a $32 Million trust fund that he can begin accessing when he turns 55 years old in 2030.

Ford Stokes:
Since he divorced his wife in 2013, he will receive half of the trust. Another way that Iverson will be able to protect himself against future bankruptcy is his access to the NBA pension. He is eligible for another $8,000 a month. The lump sum of this pension is between 1.5 and $1.8 Million. Most pensions are set up with single premium immediate annuities. Benjamin Franklin. When Benjamin Franklin died, he requested that the 2000 sterling he earned as the governor of Pennsylvania from 1785 to 1788 be divided equally between Boston and Pennsylvania. He wanted the money to be dispersed as a legacy 200 years later in the spring of 1990. The balance in the Philadelphia account was valued at approximately $2 million, and the balance in the Boston Trust was about $4.5 million. This was sometimes called Franklin’s IRA. The money in the Boston Trust was invested using a new take on an old idea the annuity using a tax deferred index variety. The money was able to benefit from exposure to stock market growth without stock market loss. This allowed the trustees of the Franklin Institute in Boston to turn an estimated $4,400 into 4.5 million, even while it was paying out an income for 200 years.

Ford Stokes:
Beethoven. The social luminaries of Vienna, wanted to keep Ludwig van Beethoven from leaving their country. And so in 1809, two princes and an archduke guarantee the musician a generous annuity. All he had to do was stay in Vienna and compose and perform his music. His benefactors have supposedly been quoted as saying something along the lines of only a man free of worries can create with such genius. Interestingly enough, Vienna also saw its time of economic downturn, and one of the annuities guarantors tried to stop paying Beethoven, claiming financial hardship. Beethoven sued one and continued to receive his annuity payments. Perhaps this is what inspired the literary genius of Jane Austen, whose character Fanny observes in Sense and Sensibility. People always live forever when there is an annuity to be paid, and annuity is serious business. It comes over and over every year and there is no getting rid of it. I hope you guys enjoyed Chapter three. I always find it interesting to listen to all the famous people. Now Chapter four talk about financial reserve requirements and annuity has a financial reserve of 100%, and that is much greater than the FDIC insured reserve requirement of 3 to 10%. We felt like this is an important chapter to play because so many of you are parking money, don’t want to put it in the market right now. You’re leaving it into bank CDs or checking or savings.

Ford Stokes:
Listen, save up to 6 to 12 months worth of an emergency fund and the rest of it should be invested. Let’s get it working. Chapter four Financial Reserve Requirements. Annuity has a 100% reserve requirement and is greater than the FDIC insured bank reserve requirement of 3 to 10%. Big idea Annuities are required to reserve 100% of your investment. Banks are only required to reserve 3 to 10%. Having a 100% reserve on your money will help you sleep more soundly at night knowing that your money is protected. Did you know that the Federal and state financial reserve requirement for annuity products is 100%? Did you also know that the FDIC banking regulation requirements are just 3 to 10% of deposits? I prefer investing in financial products that have a 100% financial reserve myself. Quite literally, the requirement for annuity companies to reserve money on the policy premiums paid or at least ten x the banking deposit reserve required by the FDIC. In the six years after the stock market crash in 1929. 60% of all US banks close their doors and only 40% of those banks ever reopened. 100% of reserve life insurance and annuity companies didn’t fail or close. That is a remarkable historical fact. That’s a wow. Also, in every US state, there is some form of annuity guarantee association where the licensed annuity companies operating within the state will cover the payout of annuity policies as a collective for any failed annuity company within the state.

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

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

Ford Stokes:
On this week’s show, we we talked about the nine ways to live comfortably during retirement. We also played the first four chapters of my book and nearly 3060. Listen, we’re we’re so happy to bring you great, important knowledge during this time of unrest and market volatility that we’ve seen. And also on the wake of Hurricane Ian, we need to plan before the storm and also plan while we’re in the storm at least. So let’s do everything we can to seek knowledge. If you’re going to be a bear, be a grizzly when you’re trying to seek information about how to invest and retire successfully. And next week we’re going to talk more about how to build a smart financial and smart retirement plan right here on the active wealth show. Listen to AM nine joining the answer. Have a great week, everybody.

Producer:
Thanks for listening to the Act of 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 Fareed Stokes at 7706851777 or visit Active Wealth Investment Advisory Services offered through Brookstone Capital Management LLC become a Registered Investment advisor. Bcm and Active Wealth Management are independent of each other. Insurance products and services are not offered through BC, 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.

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