AWS #131 Transcript: Audio automatically transcribed by Sonix

AWS #131 Transcript: this mp3 audio file was automatically transcribed by Sonix with the best speech-to-text algorithms. This transcript may contain errors.

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

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

Ford Stokes:
And welcome the Active Wealth Show activators. I’m Ford Stokes, your chief financial advisor, and I’m so glad you’re with us. I’ve got Sam Davis. Also with us here is our executive producer, Sam. Hello, everybody.

Executive Producer Sam Davis:
Welcome to the Weekend Activators. It’s a warm and humid weekend here in Atlanta, Georgia, but that’s why they call it Hotlanta. Thanks for joining the Active Wealth Show today.

Ford Stokes:
Yeah, at the break, folks, right before we start the show, Sam, guys, you know what I think? I think we were actually experiencing Hotlanta for the first time this year. I said, yeah, I think that’s true. I think we’re finally cresting the hill into Hotlanta, for sure. Hopefully, the Atlanta Braves can get hot. I’m glad they haven’t been swept, but they are struggling to win the series. And, you know, one of the games this week just just hurt my heart. I came home right after work and Kenley Jansen was still pitching and we were out for three and he gave up a run. And then we ended up losing in extras. And it’s just that one hurt who could have won that series against the Brewers in their place? But hopefully we’ll get continue to get better and right the ship and not let these stink in New York Mets run away with it. We don’t want them to run and hide. So on this week’s show, we’ve got an action packed show. We’ve got a lot to cover. And honestly, over the next four weeks, we’re going to be covering a great deal regarding what’s going on with the markets, what’s going on with inflation, what can you do about it? And try not to just report on things, but actually try to give you things that can help you. And let me just give you one of those things. So there’s two situations where a lot of people are coming in to talk to us right now.

Ford Stokes:
They they start at 3% of their salary. Then they went to 6%, then they went to 10%. And some have gone up as high as 15%. I mean, we used to work with with Dave Ramsey here in Atlanta, as well as a smart one of his smart investor advisors. And what he says is your income is your greatest generator of wealth. And we agree with. And the other thing he says is really you should try to start putting especially after you turn 50 years old, you really should be putting 15% into your and K and or IRAs and Roth IRAs if you qualify to contribute, because that’s your catch up time, because it’s likely you’re not going to work into your nineties. So you need to do everything you can to save while you can, especially when you’re making a lot of money and you should be making more money than you did in your twenties as an example in your fifties. And I think that’s a really good idea. So if you’re if you’re somebody who is within 2 to 5 years of retirement, somebody that’s or even six months to five years away from retiring, then I would encourage you to give us a call, because we’ve gotten several people over the last week that have called in to our office and said, Hey, you know what, for ID, I’ve never had a financial adviser, I’ve just done the buy and hold that, just hang in there stuff and just had a401k and my 41k has lost a lot this year and I need to do something about it.

Ford Stokes:
If you’re in that camp, if you’re in that camp or you know what, you’ve got a41k, you’ve got some investment accounts, but you haven’t and maybe you’ve got a rental house or whatever you’re doing, but you haven’t managed it other than just picking out a few investment options when you first started your jobs. Then I would encourage you to give us a call at (770) 685-1777. Again, (770) 685-1777. So that’s for the folks that have a41k or an IRA and they’ve really never had an advisor and they want to do something about it. That’s number one. Number two is if you’re working with a financial advisor or a financial firm and they have not communicated with you this year, they don’t send you weekly updates, they don’t do a weekly radio show or you can get information. They’re also not reaching out to you via phone. They take forever to get to get withdrawals done in your account when you need them or they struggle to get transfers implemented. Or they struggle on just not giving you articulating what the plan is if you’re dealing with a broker or an advisor like that. Is not communicating and doesn’t have you don’t have a plan. You also don’t have a comprehensive plan with Medicare or you don’t.

Ford Stokes:
And we work with Bonnie Dobbs and Medicare and other red tape here. And she handles all of our Medicare planning as our Medicare partner. But then if you don’t have that and you don’t have an income strategy, you don’t have a way to maximize your Social Security income. And you want to learn how even Social Security is calculated and how your Social Security is going to be calculated. If you’re thinking about taking Social Security to age 62 and a half or at age 67, if you’re born after 1960 or if you’re born before 1960, it would be like 66 and six months or 66 and eight months, things like that. Then I would encourage you to give us a call then to I would I would encourage you to go ahead and pick the phone up, call us today. Debra and her team are standing by or you can call us on Monday. No problem. Just reach out at (770) 685-1777 or schedule a free consultation by visiting Active Wealth. There’s a button that says Schedule a consultation in the upper right corner and just click that and you’ll get placed directly into my calendar. You get to meet directly with me and not other people and we’re happy to help you. However we can again, feel free to reach out to us at Active Wealth. So those are the two scenarios where I feel like folks should really consider investing with us. The third one, I’ll give you a bonus one.

Ford Stokes:
A third one is if you’re somebody I’m talking mainly to the guys here. Now, if you’ve been managing your own finances and you’ve been investing in Vanguard funds or you’ve been investing in mutual funds, and you think you were doing the right thing even though you didn’t understand what the expense ratio is within those mutual funds with a search fees and C share fees and 12 B one fees, which are just marketing fees that the mutual fund companies are allowed by law to charge and they’re just putting that money in their pocket. Then I want to encourage you to pick the phone up and give us a call at (770) 685-1777. If you’re concerned about, hey, what’s going to happen to my wife and our finances if I pass away? Let’s say you’re in your seventies and you’ve been handling it for a long time, but you don’t feel like you know what you’re doing in this market and you’re capturing a lot of the losses that people are seeing in the market, like the S&P 500 is off 15 plus percent, especially after this the last week. Then you really should call us. You really should pick the phone up and give us a call at (770) 685-1777. Also, you can visit ActiveWealth.com to click that schedule a consultation. I don’t know if we had enough time, Sam, but can we go ahead and play that market update from Mark Diorio.

Executive Producer Sam Davis:
Hi, this is Mark Diorio, Chief Investment Officer. I’ve had a number of questions about the market decline, so I wanted to provide an update. This is now the 24th entry year market correction or pullback of 10% or more since 1980. Market pullbacks are not fun, but a 10% or more correction occurs about every other year. The market sell off has dropped the S&P 500 forward price to earnings ratio to about 16 and a half, bringing it right in line, if not slightly below the 25 year average. Look at Morningstar’s price to fair value estimates. Every category shows it’s trading below its fair value. From a technical perspective, the S&P is oversold to a degree where it’s trading more than 10% below its 200 day moving average, only the fourth time since the global financial crisis. And each time turned out to be near market cycle bottoms. Sentiment is used as a contrarian indicator when there is a lot of pessimism, it is actually a bullish or encouraging sign. This is only the seventh time since the global financial crisis that has showed readings at such extreme pessimism levels, and each one turned out to be near market cycle bottoms. Well, no one knows for sure where the actual trading bottom will develop. Some of the pieces are starting to fall into place.

Ford Stokes:
So, you know, I think Mark’s words are very apropos. It’s great to have him as our chief investment officer and a big fan of Mark’s. You know, none of us know where the bottom really is. But I will tell you that we’re headed towards, you know, at 16 and a half times earnings for the S&P 500. That’s pretty low territory. Also, I would say that if you do not have a bond replacement strategy and you don’t have an idea what you’re going to, what you’re doing, your bonds or you don’t know the risks you’re taking with your bonds or even the investment grade of your bonds or the duration of your bonds, like when your bonds will mature and you just have bonds in your portfolio and and that’s it, then I would definitely encourage you to give us a call because we can inspect what you expect and we can show you what the risks you’re taking, the fees you’re paying with your bonds, and give you some different strategies that can net you greater results with a significant bond replacement. Strategy. That’s a combination of fixed indexed annuities and or a combination of structured notes as well, or both. When we come back from the break and kind of the rest of the show, we’re going to talk about kind of how market emotions can affect you, in effect, performance and also affect long term performance.

Ford Stokes:
Also, we’re going to talk about with our inflation demonstration, we’re going to talk about what going on at the pump with gas prices. More great news there. And then also rising health care costs, too. And we’ve got several really great segments for this week in history. And we’re just going to really talk to you also about why you need to stay invested when it’s likely that taxes are going to go, going to increase in the future and why it pays to stay invested that could really benefit you during your retirement. Again, we want to help you enjoy a peaceful and and great retirement and successful retirement. We don’t have as much stress looking at the stock ticker as many have this year. So feel free to give us a call at (770) 685-1777. And when we come back from the break, we’re going to talk about how emotions can affect your market performance and give you a new inflation demonstration and talk about rising health care costs as well and what you can do about it. It was the Active Wealth Show right here on AM 921. And the answer.

Late December, back in 63. Very special time for me.

Ford Stokes:
As I rebuild.

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

Executive Producer Sam Davis:
Just the two of us. We can make it if we try to do.

Ford Stokes:
And welcome back, activators the Active Wealth Show. I’m Ford Stokes, your chief financial advisor, and we’re talking about how investing with emotions can be costly. I’ve got a report here from BlackRock. They came out with a great report. It’s not coming from me. We just did a little bit of research and they’re some of the one of the investment firms that we work with on some of our portfolios. And they shared this great 2022 report called Investing with Emotions Can Be Costly. And if you want a copy of this two page report, we’re happy to share it with you. I think it’s it’s graphically done. We’ve also got it up on the screen here for the ActiveWealthShow.com. And I would encourage you to to just give us a call or you can send me an email at for it at Active Wealth dot com that’s forward at ActiveWealth.com. And I’ll I’ll just email it right back to you. But here’s what it says. It says, When times are tough, we want to limit our losses. When things are going well, we wish to we had invested more. We all fear missing out. But when you’re investing, giving in to fear is often a losing strategy. More often than not, investors with this mindset tend to buy high and sell low as they invest more in a rising market and pull money out in a falling market.

Ford Stokes:
So here are some of the emotions that they kind of classified when you’re riding the ups and downs. So imagine you’re starting a journey up up a mountain here where you’re encouraged and you’re confident and you’re thrilled. And then you get to the top of the mountain and you’re euphoric, which, you know, could it be at the end of last year and then all of a sudden the market starts to decline and then you’re surprised, and then it declines further and then you’re nervous, then declines further and you’re worried, and then you climb. I mean, it falls all the way down to a bottom and you’re panic stricken and then you sell at the low point, and then it goes back up. And they’ve got another chart here that investors who have followed their emotions joining the crowd of other emotional investors have historically regretted it. Periods that followed investors cashing out of the market have provided above average returns, while periods that followed investors adding to the market have provided below average returns. The average investor gets the timing wrong. Three year returns based on direction of quarterly stock flows from 1993 to 2021 was used in this graph that we’re looking at here, but counting on a 10.7% average annual rate of return of the S&P 500 index from 1993 to 2021. If you follow the herd and you return to buying when others were buying, you’ve got a 5.5% return.

Ford Stokes:
But if you went against the return and bought when others were selling, you had a 15% return. That’s almost a 10% gap in there. So obviously investment involves risks and including the possible loss of principal for sure. But we want to make sure that, you know, that, hey, there’s real risks for selling at the bottom, especially when you’re missing days, when you know, when some of the great trading days and when you’ve got really positive days in the market, you could be losing a lot of growth and a lot of account value. And the next thing I want to share is I want to share strategies for what do you do in volatile markets. So you want to make sure that you stay invested because if you if you miss the top performing days, it could really, really hurt your return. So by staying invested, if a hypothetical investment of 100,000 in the S&P 500 index over the last 20 years from 2020 from 2000 to excuse me, from 2002 to 2021. If you stayed invested. That 100,000 in 2020, at the end of 2021 would be would have been worth $616,317. Or six times. But if you miss the just the five highest trading days of the year. Each year from 20 from 2002 to 2021.

Ford Stokes:
19 years of it. You would have missed. You would have only had $389,264. If you miss ten days, the portfolio will only be worth $282,358. If you miss the top 15 days of the year. So in other words, you stayed on the market. And you missed the top 15 days each year. It’s $213,370. And so on. And it just keeps going down to the chart where if you missed 25, if you missed the top 25 trading days each year, you would have literally only had a grown year. 100000 to 134003.92. So what that means is you need to stay invested. That’s the moral of the story. And because we want to make sure also that your money is going to grow with inflation here. It’s just a big deal. Also, you can use dollar cost averaging to help you achieve a better outcome when markets are volatile. You can systematically let’s say you’re let’s say you want to put 7000 a month into your IRA or 7000 a year into your IRA. What you could do is just put. You know. Five $600. Into your IRA each month and that would help average out. The cost per share. Allows you to buy some at the low, some of the high, some of the medium. And so that average blended cost per share. Is much lower than if you bought all of it really high.

Ford Stokes:
So you can use dollar cost averaging to reduce your risks as well. The moral of all this is you really need to stay invested. Number two is you need to have some sort of strategy about what you’re doing with bonds. You’ve got to do a better job investing and having knowledge of what you’re dealing with with bonds. If bonds give you income, let me ask you, why are you paying advisory fees and portfolio fees on bonds? You really shouldn’t. What you should be doing is considering a new type of 6040 portfolio. Harry Markowitz, again, founder of Modern Portfolio Theory in 1952, that that means that modern portfolio theory with the traditional 6040 portfolio, 60% stocks, 40% bonds. Guess what? That’s a 70 year old strategy. I would encourage you to consider a different strategy. Consider a 6040 portfolio with 60% securities and a blend of fixed indexed annuities and structured notes to generate income. With the structure note, you’ll you’ll have market risk. With structured notes, you’ll also have advisory fees, but you could get a higher rate of return than your traditionally see with bonds and definitely more with bank CDs. Obviously, though, structured notes are not a financial product comparison to bank CDs because they don’t carry the same security and protection. The next is with fixed indexed annuities, you can get market like gains without market risk. Your money’s not invested in the stock market.

Ford Stokes:
Your money is invested in ten year US Treasury bonds. And it can really help you generate significant lifetime income. Also grow your money tax deferred. You only pay taxes when you’re you’re getting income from your fixed indexed annuity. The other big hint that I would give you is try to invest in annuities that don’t carry an income rider fee. Try to avoid the income rider fee at all costs because you can avoid the income rider fee. You’ll plug a hole in the bottom of the bucket and you won’t lose value in the principle that you invest in it. And if you’ve got questions about annuities and you want to learn more about them. I would encourage you to visit Annuity 360. That’s annuity360.net. And you can learn all you need to know about annuities, which ones to avoid and which one to buy for successful retirement. And one of the big hints is you want to invest in accumulation based annuity. And if you don’t know what that is, I would encourage you to go to annuity360.net and put your information in and we’ll we’ll mail you a copy. Also, we’ll give you a free retirement income consultation for free. Also, we’ll give you a free retirement income consultation. Absolutely. At no cost to you. So again, I would encourage you to visit Annuity 360 net.

Producer:
It’s time for an active wealth inflation demonstration.

Ford Stokes:
Prices at the pump continue to shatter records ahead of the Memorial Day weekend. The national average for regular gas hit a fresh record of $4.48 a gallon Monday, according to Triple A. That marks an increase of $0.15 in the past week and $0.40 in the past month. Gas prices are now up 27% from the day before. Russian invaded Ukraine. Also, we’ve got more of inflation demonstration. The rising cost of health care. Cost of health care is climbing rapidly for retiring Americans. A new estimate from Fidelity Investment released on Monday shows the average 65 year old retiring this year can expect to spend an average of $315,000 in health care and other related medical expenses during their retirement. That’s 315,000 folks. That’s a sharp increase from last year, when Fidelity projected that most retired couples would spend up to an average of $300,000 over their retirement years. Listen, these two pieces of analysis come at a time when retired Americans confront sky high inflation with a price for everyday goods like rent, groceries and gasoline or surging. We have got to do a better job at making plans here, folks. Listen, we care about you activators. We really do. And again, if you’re wondering about who an activator is, it’s somebody who wants to protect and grow their wealth that somebody who wants to generate a significant retirement income, if somebody wants to grow their money, tax efficiently, market efficiently and fee efficiently.

Ford Stokes:
And if you’re not any of those three things, we can help you get there. We can help you get more tax efficient with Roth IRA and Roth IRA ladder conversions. We can help you invest in life insurance too, because there’s only two types of tax free investments which are Roth IRAs and. Also life insurance. And then we can help you get more market efficient. And when we come back from the break on segment three, we’re going to talk about This Week in History. We’ve got some really neat this week in history stuff you’re going to want to hear. And we’ve got a new news report that is incredibly important for just about everybody to hear from Matt McClure about whether you should be investing some of your hard earned retirement funds, your IRA funds into. Self-directed IRAs. And I think some of the results are going to surprise you. And it’s a significant concern. You’re something you should definitely weigh extremely seriously. There’s the Active Wealth Show right here on AM 920. The answer.

Executive Producer Sam Davis:
Just sitting on the dock of the bay watching the Thai roadway.

Producer:
Registered Investment Advisors and Investment Advisor representatives act as fiduciaries for all of our investment management clients. We have an obligation to act in the best interests of our clients and to make full disclosures of any conflicts of interest. If any exist, refer to our firm brochure, the ADV two A Page four for additional information. Any comments regarding safe and secure products and guaranteed income streams refer only to fixed insurance products. They do not refer in any way to securities or investment advisory products. Fixed insurance and annuity product guarantees are subject to the claims paying ability of the issuing company and are not offered by BWR.

Ford Stokes:
And welcome back Activators, the Active Wealth Show and Ford Stokes Chief Financial Advisor. And we’re going to hear from Matt McClure, our reporter with the Retirement Radio Network. We’re going to hear from him here in a second. But I want to first talk about this week in History.

Executive Producer Sam Davis:
This week in history.

Ford Stokes:
So this Week in History. 523 1785, Benjamin Franklin announced his invention of bifocals. Bifocals are used by approximately 25% of the people who wear glasses. The technology has extended to contact lenses as well. That is remarkable. Eyewear, multifocal glasses. Thank you, Benjamin Franklin, for allowing me to be able to read and see stuff and get directions on how I need to cook things. And then also being able to play tennis and with my multifocal prescription sunglasses, it allows me to actually see the tennis ball. And also, Sam, you’ve actually got an eye appointment this week. You might be headed toward some sort of glasses here saying too, huh?

Executive Producer Sam Davis:
Yeah. So I haven’t heard anything from my optometrist yet about needing bifocals or multi focals. I’m a I’m a nearsighted individual, but I think this is so interesting because we know Ben Franklin loved to read and write, so he needed the ability to see up close. But I’m sure he also wanted to be able to look up and read the clock across the room and see what time it was. So the bifocals entered his brain. And if you’re watching the video and you can watch it at Active Wealth Show or on Ford’s Vimeo page, and we’re looking at his original manuscript where he sort of sketched out what a pair of bifocals would look like.

Ford Stokes:
Very cool. Yeah, it’s super neat. It’s it’s really cool to actually see the sketch. He did an incredible job on the circles. Just really neat, neat stuff there. Also, we like to share some famous quotes from people to you from time to time. There’s two quotes here that I really from Benjamin Franklin don’t want to don’t want to read by failing to prepare, you were preparing to fail. So I would say that’s very apropos now with the markets. If you want to get prepared and you want to really prepare what’s going on with your finances, I would encourage you to give us a call at (770) 685-1777. And also you can visit Active Wealth dot com and click that set an appointment button or sorry that schedule a consultation button in the upper right corner. We’re happy to to get you placed directly into my calendar and we’ll spend some time together so you can understand the risks you’re taking and the fees you’re paying with your current portfolio and how we can improve on that. And then the last thing that the last quote I want to share that Benjamin Franklin said is that he said that he that waits upon fortune is never sure of a dinner.

Ford Stokes:
And we like to implement results in advanced planning with Active Wealth. We like to let you know, here’s what kind of your retirement looks like in advance between now and when you turn 95 years old. And also, the CDC says that, hey, when you’re if both couples, if both spouses within a couple, if they live to be over 65 years old, there’s a 60% plus chance that at least one of them is going to live to be over age 90. Now, in today’s world, even with COVID, and I would say that we need to plan for the long haul and start getting prepared and make sure that we’re not waiting on our fortune, that we’re actually trying to protect and grow our wealth and get into strategic and tactical asset allocation portfolios, implement a bond replacement strategy, and get a lot of other things going on and just trying to make sure that you understand what’s going to be your tax efficient, retirement income, etc.. And Sam, you had some thoughts on on these quotes as well.

Executive Producer Sam Davis:
Yeah, I think that second one there, you know, he who waits for fortune, you know, that really kind of goes down to what you say every week to if you’re going to be a bear, be a grizzly, be aggressive, you know, don’t wait for your meal to come to you. Go out there and get it. So Ben Franklin has dozens and dozens of great quotes like these. And I would encourage people to look them up. I’ve even I did a Google search yesterday and I saw that there’s a number of books just publishing quotes about Ben Franklin. So check them out.

Ford Stokes:
We’ll do that, I think. Between now and through the summer, we’ll share a different Ben Franklin quote each week just to educate everybody. So that way, in case you don’t you aren’t proactive and you don’t go out there seeking these. We’ll make sure you send it to you. I got a couple of good ones over the next couple of weeks that we want to share. Go ahead and play the news article from Matt McClure with Retirement Radio. I wanted to just share that we asked him to do this one because we’re seeing a lot of people out there that are. Considering investing some of their nest egg into they’re making emotional decisions and they’re investing into real estate thinking it’s going to keep going up and they’re taking money from an economically or financially depressed asset from their IRA or 41k, and they’re trying to do a self-directed IRA into an inflated asset with what’s going on with real estate. And I mean, listen, wait a minute. It may still go up. Real estate may still continue to go up in the future. But I would say be careful about investing into a, you know, an asset that’s gone up over 20% in the last year. Just be very careful about what you’re doing there. And I think this article is very important and timely. And so I’m glad that Matt did this one for us.

Producer:
Some creative investments may look enticing with the market in turmoil, but is it worth the risk? I’m Matt McClure with the Retirement Radio Network, powered by a merrill life. Home prices have been skyrocketing for a while now.

Executive Producer Sam Davis:
So far, it’s continued to be pretty hot, unfortunately. And that’s making home buying increasingly unaffordable for for some potential buyers that could eventually put the brakes on this market, but that still remains to be seen.

Producer:
That’s CBS News MoneyWatch reporter Amy Peachey there. One way to get in on the housing market could be to use funds from your IRA for a purchase, but not so fast. There are some restrictions, pitfalls, and there have been some horror stories. Let’s take a look at some of the pros and cons of this type of investment. First, getting in on the housing market can help diversify your portfolio, according to Investopedia. Real estate has historically appreciated over time, so it could be an appropriate long term investment. As for the cons, it’s a complicated process. You have to set up a self-directed IRA with a custodian. You can’t do any repairs or improvements to the property yourself because all of the work must be paid for with money from the IRA. You also can’t claim a lot of tax deductions that would otherwise be available to homeowners. Bottom line, it’s an investment property only you can’t live there or vacation there, period. There are also plenty of restrictions on the types of investments that you can and cannot make and who you can buy the property from in the first place. Violate any of these rules, and you could find yourself in big trouble with the IRS. Still, it can be easy to be emotional when the markets are extremely volatile. That can make investing in a hot real estate market pretty darn exciting. But are you letting your emotions dictate your investments as you plan for retirement? That’s a key question to consider as you decide what to do with your hard earned money. With a retirement radio network powered by Omaha Life, I’m Matt McClure.

Ford Stokes:
So I feel like Matt’s article is is spot on. There’s so many pitfalls to doing self-directed IRAs and trying to invest your hard earned money into a real estate based self-directed IRA, where you have to use money from the fund to improve the property. You can’t use your own sweat equity. There’s just so many pitfalls to it. And what happens if if you’d have done that into a commercial property where obviously commercial real estate has taken a hit since COVID started because people were working from their homes now then, not all going into an office. And. And so I would just say, be very careful about what you’re doing with real estate, but also specifically with your IRA or your 41k, your four or three be your 457, your SEP IRA or your simple IRA. Those dollars are precious. Those dollars are there for you. Those dollars are there so that you can generate at least 4% of it in income each year and continue to grow that. So it keeps pace with inflation so that you don’t outlive your money. So your money outlives you and so you can also provide a great legacy and pass that money on to your kids. The best way to do that is do a Roth Ladder Conversion kick the RS out of being your partner in retirement and also with inheritance to for your loved ones. I can tell you 100% of the time your loved ones are going to would rather inherit a Roth IRA than inherit an inherited IRA because with an inherited IRA, they have to take it over ten years and they have to pay the taxes on that. And I just feel like that is too much in taxes to pay, especially when that’s coupled with their ordinary income.

Ford Stokes:
Then they’re in their prime earning years. They’re going to be paying a lot of money on the money they inherit from you, but specifically for you, just for your own retirement lifestyle. If if taxes go up in the future and currently we’re in historically low tax rates and there’s been lots of rumors from the Democrats about wanting to increase taxes, that’s a real concern. And if you part of my job as a fiduciary is to limit risk for my clients. And I think future tax rate hikes is a risk. That could negatively affect how much money you’re going to be able to distribute out of your IRA or your 43b or 457, etc.. So I would encourage you to go ahead and visit Active Wealth and book a consultation. Just schedule a consultation. There’s a button in the upper right corner to schedule a consultation with us, and we’ll help you build a Roth Ladder Conversion plan and also. Tax free retirement income plan for you. Absolutely. At no cost to you. We do that on the front end. So you make an informed financial decision with your hard earned retirement nest egg. We just will. So when we come back from the break, we’re going to give you another really great moment in history. And I think you’re going to really like also what we’re going to share for the rest of the show. We’re going to talk about how another reason why you need to stay invested during when there’s periods of tax increases and what else we can do for you to help implement a smart financial plan. You’re listening. Active Wealth Show right here on AM 920. The answer. And welcome back to the Active Wealth Show Activators. I’m Ford Stokes or Chief Financial Advisor.

Executive Producer Sam Davis:
This week in History.

Ford Stokes:
On This Week in History 520 1873, Levi Strauss received a patent for blue jeans on May 20th, 1873, San Francisco businessman Levi Strauss and Reno, Nevada, tailor Jacob Davis are given a patent to create work pants reinforced with metal rivets, marking the birth of one of the world’s most famous garments blue jeans. By the 1920s, Levi’s denim waist overalls were the top selling men’s work pant in the United States. As decades passed, the craze only grew and now blue jeans are worn and beloved by men and women, young and old, around the world. Pretty good stuff that we just shared that one. Because you know what? All you hard, hardworking people out there, I felt like you deserve the right to know. When Levi Strauss received the patent for blue jeans, I thought was pretty cool. What do you think, Sam?

Executive Producer Sam Davis:
Hey, I have a pair of Levi’s hanging in the closet at home right now. And the reason why they’re hanging in the closet is because I love my Levi’s, and I’m not going to stick them in a drawer. They get respected along with my other pants. It’s funny. Like, it used to be a working a working class pant, but really now they’re so versatile. I mean, people are wearing jeans for all sorts of occasions. So I love.

Ford Stokes:
Levi’s and you probably wearing jeans during retirement too. So but for all you people that worked really hard. Thanks for your hard work. And we’re going to do everything we can to help protect and grow your wealth. And it was harder to save it than it was to earn it. So we’re going do everything we can to help you continue to protect and grow that money. All right. Now, Sam, we’re going to talk about what you got to do with bonds. What are you going to do with bonds? Also, just talking about bond replacement in general. And we’re going to play chapter 15 for my book and 8360. Again, you can get that book at Annuity 360 net. Go ahead and play Chapter 15 from my book Annuity 360 Sam. And you’re going to learn how replacing the bonds you hold with fixed indexed annuities can help you handle today’s volatile market. 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.

Ford Stokes:
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 bond 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 index 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.

Ford Stokes:
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 24, 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.

Ford Stokes:
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. An 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. And 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. And we hope you enjoy that chapter of my book, Annuity 360. We also hope you enjoyed the Active Wealth show today. And now the final countdown. It’s the final.

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

Ford Stokes:
So on this week’s show, we shared a market update from Marc Diorio talking about what’s happening in the markets, interest rates and encouraging everyone not to get too emotional. Deborah and her team are standing by. You can just give us a call at (770) 685-1777. Again, that’s (770) 685-1777 or visit Active Wealth or Active Wealth Show. And we talked about rising prices. We talked about the concerns and pitfalls in some horror stories that Matt McClure shared about doing self-directed IRAs with real estate investments. And we gave you some Benjamin Franklin this date in history stuff wherein he invented bifocals and also for Levi Strauss’s patent on blue jeans that he got in 1873. And we played a bond replacement chapter for my book, Annuity 360. Listen, all this stuff today, what you really need to be doing is, one, don’t get too emotional to take action. Tony Robbins says if you don’t take action, you haven’t actually made a decision. Go ahead and make the decision to take action and replace the bonds in your portfolio, because bonds are off over 10% this year or two. And why are you dealing with market volatility with bonds? Why don’t you just go ahead and make that a little bit of a safer investment with fixed indexed annuities and also get some, even though there’s market risk with them, try to get some additional rate of return growth and have greater liquidity because they’re only one year structured notes out there.

Ford Stokes:
But and consider structured notes as part of that bond replacement strategy. We’re happy to help you with either one of those. Listen, you’ve got to start making bold decisions in a market that is not necessarily treating your account values. Well, you’ve got to do more. Also, you’ve got to talk to a financial advisor who’s going to communicate with you and also send you weekly market updates and things like that and help you make informed financial decisions about your hard earned dollars. Listen. Remember, with retirement, you’ve always got to be aggressive. If you’re going to be a bear, be a grizzly, seek as much information as possible so that you can invest and retire successfully. So glad you’ve been with us. And next week we’re going to go in detail all the aspects and factors of building a smart financial plan during this volatile market period. I hope everybody has a great week and go. Braves.

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 Ford Stokes at (770) 685-1777 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.

Producer:
Thanks for listening to the wealth show. A purchaser should evaluate and understand all of the risks and costs of an investment in structured notes or sions prior to making any investment decision. A purchase of an RSN entails other risks not associated with an investment in conventional bank deposits. A purchaser may not have the right to withdraw his or her investment prior to maturity or could incur substantial penalties for an early withdrawal if permitted. A purchaser should carefully read the disclosure statement and any other disclosure documents for a structured note before investing. An investment in SNS is not FDIC insured and is subject to credit risk. The actual or perceived creditworthiness of the note issuer may affect the market value of SNS. Sns will not be listed on any securities exchange. Even if there is a secondary market, it may not provide enough liquidity to allow purchasers to trade or sell SNS. As a holder of SNS, purchasers will not have voting rights or receive cash dividends or other distributions or other rights in the underlying assets or components of the underlying assets. Certain built in costs are likely to adversely affect the value of SNS prior to maturity. The price, if any, at which the notes can be purchased in secondary market transactions, if at all, will likely be lower than the original purchase price at any sale prior to the maturity date could result in a substantial loss.

Producer:
Sns are not designed to be short term trading instruments. Purchasers should be willing to hold any notes to maturity. The tax consequences of SNS may be uncertain. Purchasers should consult their tax advisor regarding the US federal income tax consequences of investment in SNS. If a structured note is callable at the option of the issuer and the SN is called, the holder will receive only the applicable redemption amount and will not receive any coupon payments that would have been payable for the remainder of the term of the SN. Sns are not FDIC insured, may lose principal value and are not bank guaranteed. This material is provided for informational purposes only and should not be construed as investment advice or as an offer or solicitation to buy or sell securities. All data believed to be reliable but not guaranteed or responsible for reliance on this data. Past performance is not indicative of future results, which may vary. The value of investments and the income derived from investments can go down as well as up.

Producer:
Future returns are not guaranteed and a loss of principal may occur. Brookstone does not provide accounting, tax or legal advice. Investors should be aware that a determination of the tax consequences to them should take into account their specific circumstances and that the tax law is subject to change in the future or retroactively. And investors are strongly urged to consult with their own tax advisor regarding any potential strategy, investment or transaction. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will be either suitable or profitable for a client’s investment portfolio. Historical performance results for market indices generally do not reflect the deduction of transaction and or custodial charges or the deduction of an investment management fee, the occurrence of which could have the effect of decreasing historical performance results, economic factors, market conditions and investment strategies will affect the performance of any portfolio, and there are no assurances that it will match or outperform any particular benchmark. The investment strategy and types of securities held by the comparison indices may be substantially different from the investment strategy and types of securities held by the strategy. Not FDIC insured may lose principal value. No bank guarantee.

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

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

Sonix has many features that you’d love including secure transcription and file storage, collaboration tools, enterprise-grade admin tools, advanced search, and easily transcribe your Zoom meetings. Try Sonix for free today.