AWS 6-24-22 FULL SHOW.mp3: Audio automatically transcribed by Sonix

AWS 6-24-22 FULL SHOW.mp3: this mp3 audio file was automatically transcribed by Sonix with the best speech-to-text algorithms. This transcript may contain errors.

Matt McClure:
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.

Matt McClure:
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 Act of wealth show has grown because activators like you want to activate their retirement planning with sound tax efficient investing. And now your host Ford Stokes.

Ford Stokes:
And welcome to active wealth show activators. I’m Ford Stokes, your chief financial advisor, and I’m joined by Sam Davis, our executive producer. And Sam, say hi to the folks.

Tara Sinclair:
Welcome to the Weekend Activators. Hope everybody is having a nice summer. And we’re glad you’re with us today as we bring you some important information about how you can have a smarter financial plan.

Ford Stokes:
No doubt. I think at least we’ve got some August weather here in June. So we should have a very long summer where people are going to be able to spend some time outdoors. Obviously, it’s pretty hot outdoors, but hopefully that’s going to help you keep the weight down. Just get out there and have some fun and play some golf, play some tennis either early morning or late in the afternoon, late, late in the afternoon. Because remember, the hottest time is right around 5:00 because it’s been hot all day getting up. I’ve been able to get out there and play some golf. Sam, you know, I need to get out there and play some golf. We do shout out to the great folks over at River Club who’ve taken great care of me this summer already. And then also I played Chastity Golf Club. So shout out to the great folks up there. And in Dawson County, just north of Dawsonville, a good friend of mine lives up there and got to hang out with a few folks and play some golf up there. So that was a lot of fun. So we’ve got a big important show today. We’re going to talk about what would I do if I were you during this time of inflation and market volatility? We’re going to play a market update from Mark Diorio really quickly here in this first segment. Also, we’ve got a news article from Matt McClure, our retirement radio reporter, who’s got a great update in an interview with a an economics professor from George Washington University. So that’ll be really good to hear.

Ford Stokes:
We’re just trying to give you more information about what’s going on in the marketplace and get also just information from experts beyond just us. And we’re going to give you another market update. What’s going on with market volatility and gas price update, too? And then we’re going to give you the three big things that we think you need to do, which includes, one, stay invested to take advantage of the only two types of tax free investments out there. And three, just try to protect first and grow second your hard earned and hard saved money with a safe money product and something that I think you’re going to want to hear more about. And also, we’ve got the BD Bank CD segment this week and some different offers on annuity x ray to review any of your annuities out there. We’re happy to help you with any variable annuity analysis and also fixed indexed annuity analysis. And also just do some some bank CD alternatives too. It’s a good idea. And you’ll hear a chapter from my book Annuity 360. And we’ll also give you a financial wisdom quote of the week from Warren Buffett. I think you’ll like to hear that one. And we’re going to talk about a smart income plan, smart tax, smart, safe, smart risk. And just really build a smart retirement plan in general is an action packed show. And Sam, let’s go ahead and play that market update and just kind of the impressions from the MarketWatch from our Chief Investment Officer, Mark Diorio.

Tara Sinclair:
Hi, this is Mark Diorio. Chief Investment Officer. I wanted to take a look at what history says about market declines and recoveries in the bear market. Since 1957, the average decline from top to bottom took 11 months and the average recovery took 19 months. I would note, though, that if you remove the worst three bear markets, the recovery time drops to just seven months. Looking at how markets have reacted during a mid-term election year, the 12 months prior to the November midterm election month is notably weaker than the non mid-term average. However, the 11 months following the midterm election is notably stronger than the non midterm average. Digging a little deeper, the average midterm election year pullback has been a -16% one year after the low, which could be made at any time during the year. The market has recovered, rallying on average 37%.

Ford Stokes:
And so, you know, obviously, markets go up and markets go down. And we’ve been in a down part of the market this year. We had an extreme uptick. In the market last last year. We also we’ve had a significant run up over the last ten years in general in the markets. And I would tell you to stay invested. That’s what kind of the moral of the story about what Mark just shared. It’s also interesting if you’ve got a downturn of 16 something percent and then all of a sudden the uptick from that low is 37 plus percent. What that tells you is you really need to stay invested. And and also you can say invested with safe products, too. You can get market like gains without market risk with a fixed indexed annuity. And that’s one of the big things that we’re going to talk about today is we’re going to talk about how you can stay invested but still keep your money invested in a safe financial product, or at least a portion of it. One of the big things I would consider doing is investing in a bond replacement strategy to replace the bonds in your portfolio with a fixed indexed annuity. That’s a really good idea. And we’re going to talk about more on how to do that and also different ways to do that. So that’s a good thing. But what I want to do now is kind of share this incredible interview that Matt McClure did with this George Washington professor. She shares a lot of really good ideas and things that can help you and really just kind of help how people can help beat inflation out there. We really like this news article and hopefully you’ll find this informative as well.

Matt McClure:
How long will inflation last? I’m Matt McClure with the Retirement Radio Network, powered by a merrill life. Americans and people around the world are struggling through the worst inflation we’ve seen in four decades. Everything from a gallon of gas to the food you buy at the grocery store is all more expensive these days.

Tara Sinclair:
We’re also seeing it in all sorts of other everyday services. Nail salons, hair salons, you name it, you’re seeing difficulties in terms of higher prices.

Matt McClure:
Tara Sinclair is a professor of economics at George Washington University. She says the inflation situation is a bit of a vicious cycle right now.

Tara Sinclair:
Employees are asking for higher raises and then employers are trying to figure out how to pass those costs on into the goods and services that they’re selling.

Matt McClure:
Ongoing supply chain issues are a huge factor driving inflation. In an ideal world, Sinclair says, fixing those issues would be a perfect outcome.

Tara Sinclair:
If we could provide all the goods and services that people are demanding at the current prices, then we would be in much better shape and we wouldn’t see this competition to buy these goods and services. That’s really pushing up the prices.

Matt McClure:
But it doesn’t usually work that way. Instead of increasing supply, the way we usually tamp down inflation is on the other side of the equation.

Tara Sinclair:
And so instead it’s about slowing the demand for goods and services. And the way that that happens is through the Federal Reserve, our central bank, raising interest rates.

Matt McClure:
And that means things like car loans, mortgages, home loans and credit cards get more expensive. It’s not the most pleasant way to do it, she says. But that is likely how inflation will cool down in the coming months. The Fed’s interest rate hikes have also caused a lot of volatility in the markets. But Sinclair says if you’re planning for retirement, it’s not all bad news.

Tara Sinclair:
It is important to remember that they have seen strong years of growth recently up till now. And so we’re seeing a lot of people that have a lot better financial conditions now then, particularly if we think about people that were trying to retire after the global financial crisis.

Matt McClure:
And she says many pre-retirees are looking to move assets into safer investments.

Tara Sinclair:
And there are these higher interest rates from the Fed are good news. So hopefully they can look forward to to that and maybe be able to find a steady annuity that will support them in retirement.

Matt McClure:
So how will you respond as interest rates go up in an effort to bring inflation back down? That’s a key question to consider as you plan for your retirement years with the retirement radio network powered by a merrill life, I’m Matt McClure.

Ford Stokes:
What I found was interesting what Professor Tara Sinclair said with George Washington University. It was just interesting to hear her talk because she was talking about, look, everybody’s had kind of unprecedented run up since 2008, 2009, where the market has just done really well, especially over the last ten years. We’ve had significant growth. You want to now try to take some of that risk off the table. You want to you want to protect some of that money. And also, you can get I mean, she even mentioned it. She actually named annuities as a strategy at the end of that news article. And and so what I would encourage you to do is kind of lock up 20 to 40% of your assets and put it into a fixed indexed annuity. That’s what I would do if I were you right now. And just trying to invest in that in an annuity, let it grow, you know, in a protected environment. Also, remember, you know. During the the stock market crash of 1929, the ten years running, there was 60% of all banks closed their doors and only 40% came back, whereas 100% of the 100% financial reserve. Life insurance and annuity companies did not close their doors and they stayed open and paid out their money. That’s something to consider as well. If you’re concerned about the markets and you want to run to safety, but you also want to generate income because retirement is more about income that is about building one big nest egg number, then that’s a really good idea to try.

Ford Stokes:
Also, there’s we’re going to talk about next segment, beating bank CDs. Some meager rates have really come back in a big way and are really giving you some really great rates of return in a two, three and five year meager rates. So that’s something to consider as well. But also, you can do you can invest in a fixed indexed annuity that has got only a five year surrender period. So it’s a five year product, not a seven or ten or 14 year product. We do like a lot of the 14 year products is are they’re paying out significant rates of return. They illustrated at a high level and they’ve they’re giving you a high participation rate like you can get 90, 95%. And in an index like the growth on the index of like the Credit Suisse Raven Pack as an example, that’s paying 9.61% a year. That’s what the illustration says from the from that company, from Psylocke insurance company. Those are the kind of things you should consider is trying to replace the bonds in your portfolio, take 20 to 40% of your portfolio, lock it up, get income, and also delete the advisory and portfolio fees out of it. We’re so glad you’re with us here on the Active Wealth Show. We’ll be right back. Talking about the three things that I would do if I were you during this time of market volatility and rampant inflation.

Matt McClure:
But my back is broad. Thanks for listening to the active wealth show. If you like what you’re hearing, make sure to rate our show on Spotify or wherever you listen to podcasts.

Ford Stokes:
And welcome back to the active all show activators on Ford Stokes, your chief financial advisor. And I’m joined by Sam Davis, our executive producer. And Sam, let’s go ahead and share our Beating Bank CD segment this week.

Matt McClure:
Need a higher rate of return from your safe money? Listen up, it’s time to beat the bank. Cd rates.

Ford Stokes:
According to bankrate.com, the one year average bank CD rate that’s offered by bricks and mortar banks is paying 0.037% a year. The five year bank CD is paying 0.59%, which is obviously not a good situation for you as an investor. And also with bank CDs, you still have to pay the taxes on the interest that is generated even if you don’t take withdrawals from that bank CD at the each year. So what what else is interesting is multi year guaranteed annuity or Amiga? My A is what it stands for. They don’t have that same tax situation because your money will grow tax deferred until you take withdrawals. We’ve got we’re offering a multi year guaranteed annuity from American life at 4.01%, you know, eight times what a traditional bricks and mortar bank is paying on a bank CD. So I think you’re in a better spot if you go ahead and consider a multi year guaranteed annuity of, let’s say, a two or three and a five year, the three year from American life. And that’s their contract they’re offering. It’s a fixed rate of 4.01%. The five year they’re paying 4.17%. And we’ve got there’s a company called a CPA, and they’re they’re paying out 3.05% on a two year. So all of those are higher. So if you’ve got questions or you wanted to consider a bank CD alternative, a multi year guaranteed annuity is a really good bank CD alternative, and that’s something I would consider and I would just encourage you to go visit Active Wealth dot com, click that, set an appointment button or set a consultation button the upper right corner and we are happy to meet with you and you’ll meet with me directly.

Ford Stokes:
You won’t be with another downline advisor. You’ll, you’ll meet with me. And you can also give us a call at 7706851777. Again, 7706851777 is the phone number. You can give our team a call. Deborah and her team are standing by to take your calls. And look, we know this dog days of summer, you’re driving around, going Home Depot, going to the grocery store or or going going to the pool, hopefully, and trying to get cool. But go ahead and pick the phone up and give us a call and and reach out to us. And we’re happy to help you figure out some sort of income strategy, also way to protect the growth that you’ve had in the past. You probably had a lot of growth in your in your account last year. You may want to kind of protect some of that money and also stay invested by investing in a fixed index annuity. We’ve got a 14 year fixed indexed annuity that’s offered by a site like insurance company that’s, you know, illustrating at 9.61%, which we think that’s really great. Happy to help you with that type of product where you can get market like gains without market risk.

Ford Stokes:
And let me tell you how those products work. Fixed indexed annuity. Basically, what they do is they take 100 pennies, the 100 pennies you give them. So 100% of the money you give them, they have to invest in the ten year US Treasury bond, which is usually considered one of the safer investments on the planet. And then you take the investment, the interest generated off of that. And right now the ten year US Treasury is paying out right around 3.31% in annual interest rate. So you take that 3.31%, so $3,310 and they’ll then take that money and invest into options in the S&P 500, the NASDAQ 100, or the Credit Suisse Raven Pack with the Psylocke insurance company product that we’re talking about. And they’re going to give you 95% of the growth rate. They even have products that have a bonus attached to it that will give you a 10% bonus if you invest that money in a 14 year product. They can also you can turn on income at the end of year one as early as at the end of year one, beginning of year two. They can pay you out over time. They’ve also got a free income rider because we don’t like investing in fixed indexed annuities that have an income rider fee because that’s kind of like a hole in your water bucket where you’ve got value just, you know, leaking out of your bucket.

Ford Stokes:
And we don’t want that to happen. So especially if you’re going to defer and you’re not going to turn on income at the beginning of year two. It’s a good idea to just invest in a fixed indexed annuity that doesn’t have an income rider fee because the income rider fees basically range from like 0.95 to all the way up to two plus percent. I mean, why are you going to pay an annuity company money for that to happen? Because if they’re not, you’re not going to pay them for the service. They’re not rendering if you’re not turning on income, in other words, you’re deferring and you’re going to turn on income, let’s say, in year five. Why would you pay them 1% a year for five years for doing nothing? The answer is you wouldn’t. There’s no reason to do it that way. So we’re really good advocates for people to invest in the right types of fixed index annuities, not the wrong types of fixed indexed annuities. Also, if you want to learn more about fixed indexed annuities, you can get my book Annuity 360 just by visiting Annuity 360. That’s Annuity 360 net. And we’re happy to send you a free hard copy. And we’ll also get you a an executive summary of the book immediately to an immediate download, and you’ll learn a lot about fixed indexed annuities.

Ford Stokes:
We think that’s a really good idea. So. The title of this show is is really What would I Do If I were you during this time of market volatility and inflation and the three things we’ve talked about already on the show, but I want to be clear about it. Number one is stay invested. You need to have smart risk investments like structured notes or or tactical asset allocation. But you also want to have smart, safe investments as well, like fixed indexed annuities and replace the bonds in your portfolio. I mean, the Moody’s Ban APRA index. It’s not done well this year. I mean, you’ve got bonds that are bonds in general are down. Us corporate bonds are down between 11 and 15% this year because of interest rate risk. That has come to roost because as interest rates go up, if you hold bonds that you previously had invested, those bonds are less attractive because you now can get investors. You can go get a higher interest rate because the Fed went up 75 basis points last week. And that’s a concern. We’re in a slightly rising interest rate environment. You want to minimize the bonds that you’re holding because that’s a melting ice cube situation where you know you’re going to lose market value even though you may get paid out the interest that you’re on, the bond you hold. There’s no reason to lose market value just because you’re invested in bonds.

Ford Stokes:
And you know that it’s likely that the Fed has said they’re going to go up in interest rates to kind of curtail this inflation. The one thing that curtails inflation is inflation because it it generates less demand for goods and services. The problem is we all need to gasoline to be able to drive around in our cars and also for Amazon to be able to deliver packages to us and for truckers to be able to afford diesel. And so therefore, we’re all still consumers of gasoline and that is driving inflation. It just is. Sam has pulled up kind of the county by county map on the average, triple A national average is $4.4 and $0.94 a gallon for regular gallon of gas, a regular unleaded. And. You know, that’s that’s a hefty number. That’s a whole lot more than it was two years ago when Trump was in office. I can tell you that. In Cobb, Fulton and all that stuff. It’s it’s really high. The closer you get to Atlanta, the more you’re paying at the pump. And so you’ve got to stay invested. And you’ve got to get. You know, rates of return that make a lot of sense. And you’ve got to keep pace with inflation because you just bear it in your backyard or put it on your mattress. You’re going to be losing buying power.

Ford Stokes:
And it’s also not safe to do that with your money. Right. So I would encourage you to make sure that you stay invested and try to just take the biggest theme of this of this show this week is you want to stay invested, but also stay invested with some safe products like fixed indexed annuities. Or if you’ve got some investment account money that you want to just want to put in banks at ease and just leave it there or put it in a money market. I would encourage you to consider that multi year guaranteed annuity difference as a different financial product to invest in. It’s just smarter. I know a financial advisor based in Tampa, Florida, that he just publishes my grades. He’s got a drive up office and he just publishes his meager rates above his store. He’s got a digital sign and people just walk in straight from the bank and say, I want that instead of investing in a bank CD. I would encourage you to do the same. Invest in a multi year guaranteed annuity. Don’t invest in a bank CD because you’re just losing buying power. You’re losing lifestyle. So. We also want you to listen to our podcasts, or you can listen to our podcasts any time you visit active wealth show, dot.com, active wealth show. All of our episodes are up there saying we’re up over, I think, over 130 shows now.

Tara Sinclair:
Yeah. I mean, I’ve been producing the show for about 30 months plus, so yeah, we’ve got quite a few up there and we appreciate the activators listening to us on AM 920. The answer. That’s how most of them find us initially, but we just want to let the people know that if you ever miss a week, maybe you’re out of town, maybe you got busy, you had to go to a Little League game or something. The active wealth show is available online as a podcast wherever you listen to podcasts. And while you’re there, leave us a rating. Let us know where you’re listening from. So if you’re listening from East Cobb or Cumming or or out there in Lawrenceville, wherever you’re at, let us know where you’re listening from.

Ford Stokes:
Yeah. And please do me a favor and subscribe. We’ve got we have like 2600 downloads the last three months of our show, but we need to get more subscribers. So thank you in advance activators, if you guys could just make it put it on your to do list to go to Spotify, Stitcher, Google, Google Play or iTunes and say or even iHeart and say, you know what, I’m going to I’m going to subscribe to the Active Wolf show that you would be just doing us a huge favor. We really would appreciate that. When we come back from the break, we’re going to talk more about what I would be doing if I were you during this time of market volatility and inflation, and also specifically on the two types of tax free investments out there. We’ve got a really good story you’re going to want to hear, right? We come back to the break about and a former Kroger executive, or he was actually a Kroger just grocery store manager. And what he’s doing to diversify his tax buckets with his investments and how he’s protecting against market loss, I think you’re really going to hear this story and we’ll be right back here on the active while on I am 920 the answer.

Matt McClure:
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.

Tara Sinclair:
If I had $1,000,000, if I had $1,000,000, well, I’d buy you a house.

Ford Stokes:
And welcome to segment three of the active wealth show here this week, Activators. And also, if you’re wondering who an activator is, it’s somebody who is really focused on building a tax efficient, fee efficient and market efficient portfolio for their retirement. They want to build a smart retirement plan. And. We just love activators. Listen to our show. We just really appreciate it. Sam Davis really appreciates all of our activators out there and at least once a show we like to give a shout out to our activators. Remember to check us out on Twitter and make sure that you reach out to it at Active Wealth. M is our Twitter handle Active Wealth. M is in management. And then obviously you can check out our our Facebook page at Active Wealth. On Active Wealth is our Facebook page. And then please obviously check out our podcast again at Active Wealth Show dot com that’s active wealth show. So we I mentioned the two different types of tax free investments out there that are truly tax free. So let me first give you the definition of tax free investment. Number one is there’s no additional taxes on your principal. You’ve already paid the taxes on that principal. Number two is there’s no taxes on the gains that are generated from the investment. So that’s really good. That’s that’s a that’s a tax free investment. And then the other the third thing is there’s no additional taxation on your Social Security income. It wouldn’t trigger to up your ordinary income.

Ford Stokes:
So therefore, it would take you into a higher tax bracket or a higher effective tax rate. And then the fourth thing is it wouldn’t contribute to additional Medicare surcharges. What’s interesting. Is that even municipal bonds, which used to be considered tax free municipal bonds, still the interest generated from municipal bonds contribute to additional taxation on your Social Security income and additional Medicare surcharges. So your Medicare costs more as well. Whereas these two different types of tax free investments, which would be Roth IRAs or life insurance, those are the only two truly tax free investments out there. Are the only ones that don’t contribute to all four of those things. They don’t contribute to additional taxation on your principal or your gains or your Social Security income or additional Medicare surcharges. That’s a really good thing. So you ought to have those types of investments. So. In the last month, we’ve had a listener who’s a Kroger executive where he actually was a grocery store manager, and he and he moved around a lot and worked really hard. He retired about three or four years ago and. He had an executive program where he had a whole life insurance policy that Kroger had paid for and that he had had to put some premiums in. So he had $159,000 of cash value in his life insurance policy and what he’s going to do. It was a whole life policy. We’re going to do a 1035 exchange over into an index universal life policy to get a market like gains without market risk.

Ford Stokes:
And it’s illustrating it over 7.3%. A year based on the historical the last 10 to 20 years performance of the index, the underlying index that this index of universal life policy is linked to this index, universal life policy is actually comes from fidelity and guarantee. It’s called the path setter. And he’s also going to put in 2000 a month for five years. He’s 66 years old and he’s going to take it to 71 years old. And it’s illustrating where it’s going to pay him $27,992 a year. Tax free. From 71 to age 91. So 20 years of getting that kind of income, he’s got a death benefit to protect for his wife if he passes away of 449,000. But he’s generating tax free income. That’s that’s almost equal to his Social Security income payment. So it’s also a way for him to fill back in and do income planning and specifically retirement income gap planning. So one thing we’ve talked about on the show is, look, when one spouse passes away, the household loses at least 33% of the Social Security income overnight. When that person passes away. So example, you got a husband who worked outside the home making making good money, say he’s got a $30,000 a year Social Security income benefit. And you’ve got the the wife who worked harder, but she worked inside the home. She raised their their kids.

Ford Stokes:
I’m sure as you’re driving around, women get an amen from you. The the wife and the mom actually worked harder than the husband raising the kids because that is that is incredibly rewarding work. But it is difficult and it’s 24 seven 365. You can’t ever get fired from that job. Right. But she was she gets half of his so she gets fif 15 grand. So she’s getting 50% of his benefit because they’ve been married longer than ten years. So that’s 45,000. Let’s say he passes away, she gets his benefit of 30,000 a year, but she loses hers. So she loses 15,000 of the 45,000 they were getting into the household each year in total in Social Security income benefit. You need to have a plan for that day. To fill in it. Also, it’s likely going to happen when the wife is not going to want to go back to work. And she’s also not going be able to make the same kind of money she could have made when she was younger. Age discrimination is real in America, folks. I’m telling you. You don’t necessarily want to have to say, hey, welcome to Wal-Mart. And so. This index universal life policy that this Kroger, former Kroger grocery store manager is investing in is a great situation for him and he’s diversifying his tax buckets and he doesn’t have to do any Roth conversion for it. He’s he’s not it’s not contributing to his additional ordinary income tax from age 66 to 71 years old.

Ford Stokes:
That’s really good. That’s a great situation. And we were able to do a 1035 exchange, a tax free exchange over. But he’s also putting a little bit of extra premium in there to kind of sweeten the pot. And it also keeps it out of being what’s considered a modified endowment contract. You want to avoid a modified endowment contract because a modified endowment contract is taxable. We work with our clients to make sure that doesn’t happen. And so I would encourage you strongly if you’ve got an old whole life policy just laying around somewhere or you’ve got an index, universal life policy. Or even a term, but you’ve got any kind of cash value, life insurance term. You wouldn’t have cash value life insurance, but any life insurance policy you want to get analyzed that you’ve had for a while that just sitting there did you know you can turn that in to tax free income for retirement? You absolutely can. And that’s one of the things that I would be doing if I were you. During this difficult time of market volatility and inflation, I would try to diversify my tax buckets. I would also try to get more tax efficient, but specifically more tax free with the income that I generate during retirement. Again, we’ve talked about it. Retirement is more about income planning than anything. It’s How much money are you going to generate on a monthly basis for you, for you to live and enjoy your retirement so you don’t become a burden on your kids? Also, we want to make sure that your money outlives you, not you outlive your money.

Ford Stokes:
We don’t want you to have to just live a demure lifestyle, just sitting in an apartment somewhere, letting the cable-TV pour over you or your living just on Social Security and food stamps. We want a better lifestyle for you during retirement. Also, it is likely you’re going to stay. Retired almost as long as you worked. I mean, the CDC has come out and said, you know, if both spouses lived to be over 65 years old, there’s over a 60% chance at least one of them is going to be live lived to be over 90 years old right now. That’s even post-COVID world. So we are living longer. And we need to have a plan for that. We need to have a retirement income gap planning. But specifically, how much better is it if you can get it where it’s tax free? So give us a call go to or visit active wolf dot com and click that schedule a consultation button the upper right corner and we’ll help you we’re happy to help you. We’ll help you plan for a tax efficient or tax advantaged retirement income plan, or at least help your money grow tax deferred and get you income consistent income on a on a monthly basis for you. Happy to do that.

Ford Stokes:
We’ve got like a minute left in this segment. The other type of tax free investment out there is Roth IRAs. You take money from your IRA, you convert it into your Roth IRA. You wait the five year waiting period from the conversion or from the time you open the account. And then you can enjoy the the principal and the gains completely tax free. And it doesn’t contribute to additional taxation on your Social Security income or on additional Medicare surcharges. So if you want to get more tax efficient, working with active wealth is a really good idea. I would encourage you to reach out to us at Active, click that, schedule a consultation button and we’re happy to help you get more tax efficient with your income during retirement. These are guarantees, folks. If you can divest the IRS out of being your partner in retirement, that is a good thing. As Martha Stewart says, it’s a good thing. So when we come back from the break, we’re going to talk more about what I would do during this difficult time of market volatility and inflation. And we’re going to talk more about how you can implement the right way to implement a Roth IRA conversion. It’s called a Roth ladder conversion to try to minimize the taxes you would pay for the conversion and also for probably 20 plus years of your retirement years. Right. We come back to the regular stay active. I’ll show right here on the 920. The answer.

I’m picking up. And she’s giving me.

Matt McClure:
Thanks so much for listening to the active wealth show. Make sure to rate us everywhere you listen to podcasts, including Spotify.

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

Matt McClure:
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.

Ford Stokes:
And welcome back activators a segment for here of the show, The Active Wall Show. And we’re so glad you’re with us now. We talked about Roth IRAs and life insurance being the only two types of truly tax free investments available to you as Americans. And that’s absolutely the case. So let me just talk quickly about how to properly let me give you a hint on how to properly implement a Roth ladder conversion. What you want to do is you want to take money from your IRA. You’re in individual retirement account, your 401k, your four or three B, you’re for 57, your Sep IRAs, your simple IRAs, get those moved into an IRA, then you take your IRA money and you convert a little bit at a time. Let’s say you’ve got $1,000,000 sitting in your IRA. What I would do is try to take 200,000 a year and you’re married filing jointly. We’re going to take 200,000 a year and we’re going to do it over six years because you have growth on that money, too, right? So what we’re going to do is we’re going to move 200,000 a year each year for four, six years over to your IRA. I mean, to your Roth IRA. So, so but we’re going to take the taxes from an investment account or a savings account or a checking account, and we are going to pay the taxes, let’s say 20% taxes. We’re going to take we’re going to take 40,000 and we’re going to pay the taxes out of our investment account.

Ford Stokes:
So I’m using taxable dollars now to pay the taxes on your tax deferred money. That is moving to a completely tax free bucket. That is the best way to implement it because you want to move tax deferred money. Dollar for dollar from your IRA to your Roth IRA. So as your IRA depletes when you do the conversion, as it decreases your Roth IRA increases by the exact dollar amount that you just moved over. Also, another strategy is if you’ve got some investments that are depressed right now because of the market volatility this year. Move it over now and move those those assets over in-kind. In other words, you don’t liquidate them. You just move those assets over from your IRA to your Roth IRA. You pay the taxes with a taxable account or a savings account or checking account, whatever you’ve got cast and make that happen. And then as those assets recover, they recover in the Roth environment. And therefore, you paid less taxes for more assets that are sitting in your Roth IRA account. Pretty cool, huh? The big thing we wanted to talk about was bond replacement and retirement income planning and how to generate market like gains without market risk. And the best way to do that is to play. My chapter or chapter 15 of Annuity 360. Again, if you want to get my book Annuity 360, we’ll give it to you absolutely.

Ford Stokes:
For free. All you got to do is visit annuity 360 dot net. That’s annuity 360 net. We’re happy to help you. Go ahead. Salmon Play Chapter 15 about bond or about replacing your bonds with fixed indexed annuities. Chapter 15 Bond Replacement with fixed indexed annuities. Big idea. Historically, bonds have seen volatility when the market is volatile. Fixed indexed annuities are not subject to the same volatility, which makes them a much safer investment. You might have heard a financial advisor talk about replacing your bonds with annuities to protect your wealth and grow your retirement funds. At my firm Active Wealth Management, we believe this is a smart way to protect your future. Many people have learned that bonds are a safe way to invest your money, but there are some downsides to bonds that should make you think twice. We’ll talk about some reasons why you should consider replacing your bonds with annuities first. Here’s some information on the history of bonds in the United States. Historical bond volatility. The 1900s saw two secular bear and bull markets in US fixed income. Inflation peaked at the end of World War One and World War Two due to increased government spending. The first bull market started after World War One and lasted through World War Two. The US government kept bond yields artificially low until 1951. The long term bond yields were at 1.9% in 1951. They climbed to nearly 15% in 1981. In the 1970s, globalization had a huge impact on bond markets.

Ford Stokes:
New asset classes such as inflation protected securities, asset backed securities, mortgage backed securities, high yield securities and catastrophe bonds were created. Early investors in these new asset classes were compensated for taking on the challenge. The bond market was coming off its greatest bull market coming into the 21st century. Long term bond yields declined from a high of 15% to 7% by the end of the century. The bull market in bonds showed continued strength in the early 21st century, but there is no guarantee with our current market volatility that this will hold. See Chart 15.1 to see the incredible difference of investing in a fixed 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. 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%.

Ford Stokes:
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 6000 a year. At the end of the term, interest rates are 4%. If the investor buys another ten year note, they will earn 4000 instead of 6000 annually. Consider the possibility that interest rates change over time when deciding to invest in bonds. Systematic Market Risk. This refers to the risk that is inherent to the market as a whole. It will affect the overall market, not just a particular stock or industry. This can be unpredictable and it is impossible to avoid. Diversification cannot fix this issue, but the correct asset allocation strategy can make a big difference. Unsystematic Market Risk. This type of risk is unique to a specific company or industry, similar to systematic market risk. It is impossible to know when unsystematic risk will occur. For example, if someone is investing in health care stocks, they may be aware of some major changes coming to the industry. However, there is no way they can know how those changes will affect the market. There are two factors that contribute to company specific risk business. This 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.

Ford Stokes:
Financial risk. This relates to the capital structure of a company. A weak capital structure can lead to inconsistent earnings and cash flow that can prevent a company from trading reduced advisory fees. Investors who trade individual stocks may know how much commission they are paying their broker, but individuals who buy bonds often have no idea what type of commission they are paying. Bond dealers collect commission on bonds. They sell called markups, but they bundle them into the price that is quoted to the investors. This means you are unaware of how much commission you are actually paying. Standard and Poor’s estimates of bond markups is 0.85% of the value for corporate bonds and 1.21% for municipal bonds. However, markups can be as high as 5%, up to $50 per bond. Bonds have finite durations. Bonds only provide income for a finite amount of time, unlike an annuity which provides income for life. You must reinvest your money if you want to continue generating interest with bonds. However, reinvesting with a bond can sometimes come at a loss. As we discussed above, annuities will provide you with an income you can never outlive. And so I hope you enjoyed that chapter. But specifically, there’s really no reason to invest in bonds right now because in a rising interest rate environment, it’s just tough. And and we’ve seen market valuations on bonds erode by like 10 to 15% this year. So now, Sam, let’s go ahead and share the final countdown. It’s the final.

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

Ford Stokes:
Countdown. So on today’s show, we basically talked about what I would do if I were you in this difficult market environment with inflation and market volatility. The big three things that I shared were, one, you want to stay invested, too. You want to take advantage of the only two types of tax free investments out there. And three, we want to work hard to protect and grow a portion of our hard earned and hard saved money with fixed indexed annuities by doing that bond replacement. And we also talked about multi year guaranteed annuities is a great bank CD alternative and how to beat bank CDs this week. And we shared how to get in touch with us. If I were you, I would just reach out to us at Active Health.com you can click that, schedule a consultation button and you’ll get booked directly into my calendar. You can also call us at 7706851777. Again, 7706851777. We’re here to try to help you through this difficult time. Also, remember, if you replace your bonds with fixed indexed annuities, you’re doing one. You’re doing a lot of things. One is you’re investing into a fixed indexed annuity policy. It is a contract with an annuity company that has to reserve 100% of the money you give them into a ten year US Treasury bond and they take the interest off of that and then they invest the the rest that interest each year into options and they give you a portion of the gains and they keep a portion of the gains. But the one we’re working with right now is the Credit Suisse Raven Pack is the index. And they’re giving 95% participation rate for you and they’re only keeping 5%. And you can get market like gains without market risk. And you can also delete any advisory fees and portfolio fees because the insurance company pays us the commission, and that’s a really good idea too. Thanks so much for listening to the Active Wealth Show. And next week, we’re going to talk more about how to build a smart retirement plan right here on the active wealth show on AM 920. The answer. Have a great week, everybody.

Matt McClure:
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 Forward 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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