3.17.23: Audio automatically transcribed by Sonix

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

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

Producer:
Welcome to Retire 360 with your host, Dwight Mejan. Dwight is a licensed fiduciary and financial advisor who always places your needs first. Dwight works hard each day to educate Americans like you on how to reach the financial freedom they've worked so hard for. And he can help you, too. So now let's start the show. Here's Dwight Mejan.

Dwight Mejan:
Well, good afternoon. My name is Dwight Mejan and I am here with Mitchell Keiser, my son in law. And we've got Sam Davis, our executive producer. And you are listening to your retirement radio show. We are here for you. We're here to serve you. We're here to bring you information that's relevant to your retirement. And I just want to welcome everybody to this afternoon show. Thank you to our faithful listeners. And we want to welcome our first time listeners to the show this afternoon. We have a great show planned today. We're going to talk about a lot of what's going on this past week in the banking sector, which caused a big concern to a lot of us as investors, but more so to a lot of businesses as well that had money in those banks. We'll get to that here in a little bit. But the title of our show today is Be Prepared, Not Scared. And that's one of the ultimate goals of this show, is we want to help equip you, our listener, to prepare for retirement. Retirement doesn't have to be daunting. It doesn't have to be scary. We're not trying to make you financial experts, but we are here to bring you information that you can use that will help you navigate your path in retirement and make decisions that empower you, not decisions that you're afraid to make.

Dwight Mejan:
So welcome to the show again. We just want to encourage you to go to our website, either during the show or after you go to retire. 360 show.Com you can learn a little bit more about us. More importantly, there's a link or a tab on that website that you can schedule your own complimentary consultation with us as a listener to talk about anything we discuss on today's show or anything for that matter that you want to discuss on your own financial journey that you're on. We also have podcasts. Wherever you download podcasts, you can find us there at Retire 360 and you can go back and listen to prior episodes that we've aired. We'd love to have you do that and get caught up with some of the topics that we're talking about. But please reach out to us. We absolutely love reading and hearing your messages. We'd be happy to answer any questions on the show or during a complimentary consultation with you or with you and your spouse. So we also have been offering the last couple of weeks and want to throw that out there again for our listeners. You can get in touch with us to receive a free copy of 23 retirement cost Cutters for 2023 that we put together for you.

Dwight Mejan:
We can email that to you, we can mail it out to you. And that's just complimentary to you as a listener of the show. So we want to get that out to you. You can get all the details about hanging on to more of your hard earned money. The report is free to you today when you get in touch with us. So we're going to jump right in here. We're going to talk about, of course, our quote of the week, which Mitchell will take us to that here. Right now, we're going to talk about, as I mentioned at the beginning of the show here, the failure at the bank, Silicon Valley Bank specifically, and Signature Bank was another one that happened here this past week. We're going to talk about beating the bank CDs and we're going to talk about maximizing Social Security and why your nest egg is smaller today than you think. And we'll also get to talking about your bonds, what's happening with your bonds, and talk about some better strategies for retirement income. So with that, Mitchell, why don't you take us into the financial quote of the Week, But how's your week been going?

Mitchell Keiser:
Mitchell Yeah, it's pretty good. Over here in Southern Pines, Sun's sun's out, but it's dropping down to the 40 seconds. So it's reminded me of my old Pennsylvania days, but all good. Yeah, but thanks for asking.

Dwight Mejan:
Sun's out is my boys like to say sun's out, Guns out. They were. They had a little overlap in their spring break this past week So one was down from Virginia where he goes to school and his brothers started. So we we headed to the beach. It was a little chilly for a few days this past week. But boys and water and getting them ready for the summer. It was all good. Yeah.

Mitchell Keiser:
So the quote of the week this week is by Will Rogers. So this is actually one of your favorite quotes. We talk about this a lot because it's a pretty good it's a pretty good principle as you creep into retirement.

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

Mitchell Keiser:
People should be more concerned with the return of their money than the return on their principal. So people should be more concerned with the return of their principal than the return on their principal. So a lot of times we'll talk about that with the rule of 100. So making sure that you have your age is what number should represent the amount of money that you have in principal protected products. Why is that? Because you want to make sure that you're getting the return of your principal and you're not you're not jeopardizing too much of your nest egg.

Dwight Mejan:
Yeah, well, that's that age principle you just talked about. Mitchell's very important. The deeper you get or the closer you get specifically to retirement is that you have principal protection. Because as we always talk about on this show, you know, your income is your lifestyle. And if your income is coming specifically for our listeners that are drawing it from their portfolio, from their savings, if that portfolio is going down, their income goes down, then their lifestyle follows right behind there. So you've got to have that that money that's guaranteed or a certain percentage of it. So very true. Will Rogers had some great quotes. He had another one here that I thought of. He said too many people spend money they earned to buy things. They don't want to impress people that they don't like. So that's none of our listeners. I know that. But yeah. Good, good guy. So. Well, hey, we want to jump right in here. You know, the hot topic here for this past week was the failure at the banks. And I just want to put a little disclaimer out there that we never on this show want a fear monger. That's not our goal. Our goal is to report, you know, factual information for our listeners, give them relevant information that can empower you to make decisions that give you courage with your finances, not things that cause fear or cripple you from making finances.

Dwight Mejan:
But we can't get away from the macro economic landscape right now and what's gone on this week, because this was a significant event that just took place here with Silicone Valley Bank and Signature Bank this past weekend. And we just want to talk a little bit on this segment here about how to protect your family, how to protect your hard earned money. We know all of our listeners have worked a long time to acquire what you've had. And we just want to help, you know, your retirement from a potential bank crisis. So silicone Silicone Valley Bank was a commercial bank headquartered in Santa Clara, California. It was sitting right in the heart of many of the IPOs, the initial public offering companies, the start ups. And it was the 16th largest bank in the United States at the time of its failure on March 10th. And it was the largest bank by deposits in Silicone Valley. The bank operated from offices in 13 countries and regions and Silicone Valley banks. Failure quickly became the second largest bank failure in US history. The bigger biggest one prior to that was Washington Mutual. Many people may remember that one back in I think it was in oh eight, but that one officially had had failed. But on March 10th, Signature Bank, another one, a New York based full service commercial bank, also experienced failure as customers spooked by that sudden collapse of Silicone Valley Bank withdrew more than 10 billion in deposits.

Dwight Mejan:
I read an interesting article this past week that The Wall Street Journal put out earlier in the week about the fact that KPMG, which is an auditing firm, their worldwide auditing firm, auditing firm, they gave Silicone Valley Bank 14 days prior. They signed off on an audit that gave them a clean bill of health, and 14 days later they failed. We're not going to get into all the specific details of what happened there, but there was definitely some negligence. There was some mismanagement. Whether there was just malfeasance. That's going to be up to the regulators and Congress and the people that investigate what happened here. But I know one of the things that was a glaring mistake from a I believe a mismanagement is they bought too much long term debt with interest rates going up and they knew they were going up. That's the wrong time to buy long term bonds. You want to stagger a portfolio and have short term have some intermediate. And with interest rates on the rise, the smaller portion of your portfolio doesn't need to be long term bonds because as interest rates continue to rise, which they did all of last year and they started having some warning signs in the second quarter of 2022 when deposits started to slow down and outflows for these IPOs started to pick up. And that's a good point to just mention here.

Dwight Mejan:
They were a regional bank primarily, primarily primary customers were IPOs, initial public offerings. So a lot of these companies were just getting launched, just getting off the ground, so they didn't have a lot of revenue. They had venture capital money that was being invested to help these companies get launched and they had payroll. That's one of the big things that they had as far as expenses go. And these banks or this bank, you know, as these customers were coming in and needing more and more cash flow less was coming into them for deposits and more was going out. And it came to a point where they were forced because inflows were coming in were slower. They had to sell their assets, which were primarily in long term government bonds. And with interest rates on the rise throughout 2022, they continued to take steep losses on those bonds to get to keep afloat, to supply their customers with the cash that they needed to operate their business. And that led to a big problem that led to a further run on the bank when there was word out that there was they were having some problems. But again, I think it's going to be interesting to see what happens as they investigate this more. We're going to learn more details as time goes. But for our listeners, you know, one of the things we just want you to take away from this is several things.

Dwight Mejan:
You know, one is most people know that the bank insures deposits for up to 250,000 per depositor per account. So certainly if you're a listener to this show and you keep more than that in any one bank, that's a red flag right there. So hopefully some people, if you heard that and you realized, hey, I need to get some money out of this bank and move it somewhere else, We're going to talk later in the show about some other products that are just as safe, you know, as bank from a principal protection standpoint. We'll get into that more. But certainly just be cautious of what you have in banks today and make sure you're not over that that requirement of $250,000. We saw in a matter of days, we saw two of the three largest bank failures in US history. And I mentioned earlier Washington Mutual was in 2008. If you look at the 20 largest bank failures in US history, ten of them happened between 2008 and 2010. So we just want our clients to understand current events that are happening in the economy and the financial system. Don't be fooled. There's another thing we want you to know or our listeners to take from this. Don't be fooled by people who may be using these bank failures to help sell gold, silver cryptocurrency. You're hearing a lot of those advertisements today on the radio.

Dwight Mejan:
Other assets, for example, that offer little to no consumer protections or and also carry higher risk. So just be careful with that. We don't believe in having huge amounts or certainly put your whole IRA in gold and silver. And we get questions from people all the time. We've had tons of questions this past week about what's your thoughts on gold, what's your thoughts on silver? We're not against those commodities, but generally speaking, that should remain about 5 to 7% of your portfolio. Certainly wouldn't go with huge amounts in that. It's also very important that you work with a bank that is FDIC insured, Federal Deposit Insurance Corporation. They insure deposits, as I've been mentioning here, up to 250,000 per depositor per insured bank. So we want our clients and our listeners to just make informed decisions and make choices that leave them and their money safe as well as secure. So what what concerns us about recent bank volatility? So US banks have $620 billion in unrealized losses. The chairman of the FDIC warned that these unrealized losses weaken a bank's ability to meet unexpected liquidity needs and cautioned that mapping out a strategy to to fund themselves profitably would prove a complex and a challenging task. So, Mitchell, you've got a couple things I know you're going to share there about Roku and some other companies, so why don't you? Yeah, so.

Mitchell Keiser:
So I'm sure that a lot of people have heard of the company, Roku, Roku. It's a publicly traded tech company. You would commonly probably know it as the chip that you put in your TV that enables you to use it like a smart TV. I'm sure either somebody's listening or their grandkids or somebody has had something similar to that. But anyhow, they held $487 million at Silicon Valley Bank, so that's an equivalent to 26% of their cash reserves, which obviously was all gone. So you got to think about think about how much money that Roku just lost with the collapse of that bank. So how do you think I mean, I'm asking you, Dwight, but I'm asking our audience. So how do you think that that's going to affect the overall tech industry? So there was other companies that invested in in this bank as well, such as Roblox, Blockfi Rocket Lab and a few others that. We're a little smaller. Also reported to have reserves at SVB. But yeah, that's crazy to think all those companies that held all those cash reserves that are just now gone and, you know, you're already talking about unrealized gains. Well, an unrealized losses. But think about all those people that, you know, their companies were already suffering and now they just lost all their cash reserve. So, you know, what's what's the ripple effect going to be of that? Because, you know, nowadays almost everything is revolves around the tech company. So whether you've heard of some of those companies or not, it's going to it's probably going to have some sort of some sort of ripple effect. So would you agree?

Dwight Mejan:
Yeah, yeah, I agree. Mitchell And I want to mention something just so our listeners are clear of what the magnitude of that 620 billion of unrealized losses. What are we talking about there? What I want our listeners to understand about an unrealized loss, and I'll use Silicon Valley Bank as an example, you know, Bonds, which are primarily, you know, instruments that are used by a lot of these banking institutions, When you have these long term bonds, as interest rates have gone up over the last 13, 14 months in the economy, the value of those bond portfolios that had, you know, older bonds in it that were at lower rates, the value of that bond portfolio has gone down. So bonds will eventually, if you hold them to maturity, they'll they'll mature at that that par value, you know, but it's at a loss when the interest rate goes up. And that means, you know, they haven't realized that loss, that 620 isn't a realized loss until it's sold. And that's the problem that Silicon Valley Bank had. Their bond portfolio had been clobbered by that rising interest rates. And when they needed to get cash on hand to supply their customers with cash flow that they needed to make their payrolls and do what was needed to keep those companies afloat. They didn't have the incoming deposits. And we're going to talk about fractional reserves here in a minute. They didn't have those deposits on hand that were coming in from new customers to loan back out to their current customers who needed cash. So they were forced into selling their own assets, which were unrealized, losses that became realized losses on their balance sheet. That's what caused the run on the bank. So it's just like if you own a stock, if you buy a stock for $10 a share and it drops to five, you haven't taken a loss yet until you sell at $5 a share, then it becomes a realized loss at that point. So I just want to make sure. Absolutely.

Mitchell Keiser:
Dwight, I know you're going to get into fractional lending here. I just wanted to tell our listeners, you kind of touched on it, but do not keep more than $250,000 in one single bank. If you have more than that, that's just sitting at a bank. Make sure you have that diversified. You probably should keep that closer to even 200 because hopefully, you know, you're earning interest on that as well. I'd also caution you to make sure that those banks are FDIC insured. There's a lot of online banking that I see. I get these emails from different credit card companies or different mutual fund companies or, you know, different types of things like that where they're offering these high yield savings accounts. I'm not saying that those are bad. Some of those are pretty good, but I just make sure that they are FDIC insured as well. That's pretty important because if things like this happen and it's not and you might have been receiving a high yield, well, you could potentially lose all your money, too. So the FDIC stamp there is pretty crucial.

Dwight Mejan:
Yeah. And you know something else, Mitchell, you said that triggered something in my mind that we've had this question I've had it already this week is, you know, Dwight, should I be concerned because this bank, Silicon Valley bank signature, these were regional banks, You know, they're not your big you know, there's the big 4 or 5 banks nationwide that, you know, it's been said before that some of these banks are too big to fail. I would never put anything in that category. But I get why they say that, that banks, certain banks are too big to fail. But should I keep money in these smaller community banks? And I just want to say personally, I don't have an issue with small regional banks, particularly for a lot of us here on the East Coast where we're at. Because again, I mentioned this earlier, Silicon Valley Bank had a niche market that they catered to and they were IPOs. They were in that startup area around Silicon Valley. So a lot of their customers, they, you know, they were unique in the sense that they were startup companies. And for a lot of us here, you know, the banks around us and a lot of regional banks, for that matter, across the country, they have a fairly diversified customer base. You know, they're not just catering to the startup industry. There's catering to established businesses who come to them for loans, you know, customers, individual customers, which are a lot of us here.

Dwight Mejan:
So I'm not as concerned myself personally with that. But it does require us to just make sure we do our due diligence. And we've been mentioning to make sure you don't have more than that to 50, you know, per bank. That is something we would say regardless of where you bank, don't go over that. You know, over that limit, use a different bank at that point. So but anyway, I just want to transition that here into I mentioned something about fractional lending. We won't go too deep on this, but I wanted to just touch on this, that banks have what is called and it's a regulatory requirement that's on them, that they have what's called a fractional reserve rate, which essentially says this for every dollar that they bring in on deposit, they have to only keep 10%, $0.10 per dollar has to actually be sitting, you know, in that bank's vault in cash to be able to supply customers because 90% of that money could either go out in loans or be invested by the bank and their portfolio. So it's a it's a relatively small percentage, 10% per dollar. And, you know, I mentioned that maybe listeners, a lot of them, I'm sure as you're listening to this, many people didn't know that requirement was that low 10%. But that's what it's been. And it usually isn't a problem because the amount of money that people need for day to day operations or dealing with cash, they don't need more than that.

Dwight Mejan:
And that tends to keep the bank more than afloat. But, you know, our question in light of this to people is how do you feel about fractional lending right now? You know, in light of what happened, that's kind of for you to draw your own conclusion. But do you feel more comfortable with your money being invested into 100% financial reserve product? We'll give you one example of that. The insurance industry, not to say we haven't seen insurance companies have problems because they've some of them, the smaller companies have been in that same situation. But the difference with an insurance company, with a product, for example, like an annuity, and I'm not talking about a variable annuity, I'm talking about something that's fixed. Fixed annuities right now are competing with CDs. And then you also have you've heard us talk about fixed indexed annuities. You know, those products have 100% financial reserve. So all of that money has to be accounted for by the insurance company. So do you still feel banks are safe, you know, with that reserve requirement compared to an insurance product? Just just a question. What's the difference between a 10% reserve requirement at banks and 100% with annuities? It's 90% difference and it's fewer sleepless nights. So, hey, we get up in the morning and we want to help people make better decisions with their money and, you know, be skeptical of of what you may see in the media.

Dwight Mejan:
We tell people trust but verify and don't listen to the Wall Streeters who criticize annuities so they can keep managing more assets with high fees. That's just something that, you know, the insurance industry competes with, You know, the Wall Street crowd. It's one of them's going to have the money. So a lot of the people that manage it, you know, they're going to critique insurance products like annuities. And we believe that a well thought out portfolio is going to have a blend of both of those smart risk money. And we talk about smart, safe money, work with someone who is required to put your needs first. And we say you should work with a fiduciary. We are a fiduciary firm. The best way to enjoy retirement is to have income streams that you can never outlive, and that's the goal. One of the goals of this show is to help you never run out of money and to give you income streams that can help you support the lifestyle that you dreamed of in retirement. So we're going to take a quick break. And when we come back, we're going to talk about beating the bank CDs. And I'll have Mitchell kick off that segment. But we'll be right back.

Producer:
Like what you're hearing, you can watch the show to visit YouTube.com and search retire 360 to watch clips from this program.

Producer:
With soaring inflation continuing to wreak havoc on everyday budgets, there's never been a more important time to cut costs. But do you know where to begin? I'm Matt McClure with the Retirement.Radio Network. Powered by a mirror life, there is no question costs have been soaring. About one third.

Sharon Epperson:
34%, say they are worse off financially this year than a year ago. Almost half, 46%, say they've had to cut household spending due to inflation.

Producer:
Cnbc correspondent Sharon Epperson recently reported on a survey that sheds more light on how inflation has been impacting us all. Even those who earn six figures a year.

Sharon Epperson:
These high earners say the first expenses to go are dining out at restaurants, entertainment outside the home and travel and vacations. More than half also say they'll delay big household purchases.

Producer:
That high inflation has led the Federal Reserve to respond with interest rate hikes. The goal is to increase costs to tamp down demand. Esther George is president of the Kansas City Fed.

Esther George:
Already we've seen the committee's policy actions lead to a very sharp tightening of financial conditions.

Producer:
But it hasn't done enough yet and costs still keep rising. So what should you do? Well, we have a free resource called 23 retirement cost cutters for 2023. It's full of ideas to help you make the most of every penny. Things like take advantage of senior discounts, eliminate unnecessary subscriptions, and cut back on clothing expenses, look at.

Sharon Epperson:
Your needs and wants, Figure out what's optional and what you can cut out.

Producer:
The last one on the list of 23 retirement cost cutters for 2023 is perhaps the most important. Seek advice from a trusted financial professional. That's the best way to get in-depth financial advice in retirement planning that's customized to you and your goals. Just make sure whoever you consult for financial advice has years of experience and credibility you can verify. So do you know the best way to cut costs in 2023? That's a key question to consider as our budgets get stretched to the max with the Retirement.Radio Network Powered by AmeriLife, I'm Matt McClure to.

Producer:
Get your free copy of 23 cost cutters for 2023 call Dwight today at (910) 235-0812 or visit Retire360Show.com.

Mitchell Keiser:
All right. We are back. This is Mitchell, and you guys are listening to the Retire 360 show, and that is brought to you by 360 Capital Management and located in downtown Southern Pines and in Banner Elk, North Carolina. We're going to hop back in here to beating the bank CDs.

Producer:
Need a higher rate of return from your safe money. Listen up. It's time to beat the bank CD rates.

Mitchell Keiser:
There aren't certain types of products and instruments that are pretty competitive in a lot of ways. Some of these are better than some of the bank performing products. So basically, we're going to talk about what to do with your safe money, money that you do not want put into the market or subject to any form of risk. With inflation continuing to rise and with recent bank failures, do you really want to count on these banks for money? A lot of our clients would say no. They wanted any kind of money that they had sitting at a bank put into something different because just due to the bank failure. So why would you want to take risks with your income portions of your portfolio? Probably the most common question that we're asked. Dwight recently touched on the fact that you're not hearing anything about insurance companies going belly up because they are required to have 100% reserve where banks are required to only have a 10% cash reserve. So how do you what do you do with that information? So insurance companies have products that are like CDs, but in some ways they can outperform them. I know in our office we've seen similar instruments from 3 to 5 year terms and they're over there over 5.5%. To just be broad, I haven't seen anything quite that high with a bank. Now, these products are backed up. I know a lot of people are attracted to a bank because banks are backed up by the FDIC up to $250,000. If you do have your money in an insurance product, that money is backed up by the Guaranty Association, and that is up to $350,000. So you've got a little bit more of a buffer there. And I'll say just comparing apples to apples, insurance companies do have a bigger requirement as far as making sure that they're not going to go belly up like a bank would. Another quote here we got for you by George Santayana. Those who cannot remember the past are condemned to repeat it.

Dwight Mejan:
From March of oh eight to March of 2009, the S&P. Many of you remember this lost 50% of its value. And the average timeframe it took an investor to recover to get back to its previous value. It took six years for a lot of people to recover what was lost in their portfolios. And meanwhile, inflation was eroding away at the purchasing power of many hard working people. So many people who were nearing or already in retirement. They suffered big time during this time. And especially if you're planning on taking income from that portfolio. We talk about sequence of return risk, which is simply the risk that you run out of money because when you retire, if you run into a bear market where the market's down a couple or consecutive years and you're taking money out of that portfolio, you can see some very, very significant drops in your principal. So the bottom line is, instead of placing your money in banks instruments like CDs, we suggest you consider savings vehicles that have 100% cash reserve requirements such as multi year guaranteed annuities. Those are typically most of those today are paying higher yields for the same term as a CD. You could get the similar term with an annuity that is going to outperform that in most situations that we see.

Dwight Mejan:
So we'd be happy to run those quotes or you can contact us about that. We're getting lots of calls about that right now, about people who are looking to beat the banks in terms of the rates, but also people who are looking to say, hey, I better get some of this money out of the bank. And you're not hearing a lot of people today talk about the problems in the insurance industry because they're not the ones having problems. They have a higher reserve requirement at 100% of your money on deposit. There's also fixed indexed annuities and also indexed. Universal life might be another place where you can park money and also be able to have an opportunity there to have cash free money coming out of there, out of the cash value and a death benefit with that as well. So we'll help educate you on all your options that could help you reach your goals. And we want to help you determine the appropriate amount of risk to take with your savings and ultimately let you make the final decision. It's your money and we respect that. We just want to show you some other options.

Mitchell Keiser:
But you brought up a good point that I think it's good for people, especially if they're nearing retirement age, to think back to the 0809 time period, you know, we'll do those Morningstar reports, which shows people how their portfolio responded during oh eight and if we had another. A recession, what it would look like if that happened again. And to think that it took six years for somebody to recover from their losses that they had during that time period, I don't know about our listeners, but I have grandparents that they don't have six years to let their income. I mean, they rely on their portfolio and they don't have six years for their income to recover like that. They'll drain the rest of their money in order to maintain the lifestyle that they're living. It's a pretty important concept that I would tell our listeners if you don't know how your portfolio would be affected, that is something that we could provide the resources to and we wouldn't charge for that. You just have to give us a call and we can get that to you or can point you in the right direction. Our office number is (910) 235-0812. You guys have our website Retire360Show.com but we'd be happy to get you guys that information if that was something that you heard that you were like I want to know more about that. That sounds important. You could be listening to this and you could know exactly how it would be affected. And if that's you, then, hey, that's awesome. Good for you for doing your research. But I would say probably 95% of people do not know the answer to that. You know, Michelle.

Dwight Mejan:
We had a client in here this past week who listened to our radio program and he said what made him come in was a comment that we had made, and it was simply about the fact that in 2022, the feds were making announcements throughout the whole year in their 7 or 8 sessions that each session we plan to raise interest rates strategically to get to that rate of around four and one half to 4.75%. This particular listener said that he never heard from his advisor. A simple thing that we brought up was You really don't want to be heavy in the bond side of your portfolio during this next 12 months because the bond side of that portfolio was going to get clobbered by the intention that they already they already advertised it. Rates are going up. They said what was happening. So if you work with an advisor in 2022, you didn't get a call and you had a lot of money in bonds, that would be a pretty good reason, in my opinion, to get you to pick up the phone or go to the website to get that complimentary analysis. And we did that for this particular client who came in, ran a morningstar report on their portfolio, and we made a portfolio that we manage here at 360 Capital Management that fit right in this particular client's objective.

Dwight Mejan:
It had a similar percentage of money on the bond side of the portfolio, but we were using bond alternative vehicles, instruments that were in the same category of bonds. And he said, Dwight, I don't know why my advisor never called me to let me know about that because I should have been out of that. That's what I'm paying them for. And he was very motivated even when he came in here, knowing that he probably was going to find a solution, which he did, to enact the recommendation that we made. And that was up to him. We just merely laid it out there for him, laid out the opportunities, compared the two portfolios over a one year period of time. We looked at it over a ten, three, five year and a 15 year period of time. So we had lots of little periods of time to compare his holdings against the recommended portfolio that we knew was a pretty good fit. After running him through an evaluation and asking him a bunch of questions and he saw the opportunity there. And I want to say one other thing on that note. We ran his expense ratio, which was the cost of the particular funds that he was in, the bond funds. He had a lot of mutual funds. We're not opposed to mutual funds here, but mutual funds typically are going to carry higher expense ratios.

Dwight Mejan:
And his expense ratio on his portfolio was 0.96%, almost 1%. And we took his cost down almost 80 basis points. So that means for every 100,000 he had in his portfolio, he was going to save $800 just through the type of investments that he was invested in that had nothing to do with the fee he was paying the advisor for the lack of service that he was getting on that portfolio. That was purely the investment cost for the assets that he held in that portfolio. So we'll be more than happy to run that for you. It's eye opening, I can assure you, when you see that for a lot of people because many people haven't even been taken through that exercise and that's something that we do here complimentary to you, our listeners. So if you'd like to take advantage of that, check us out. Call us here at 360 Capital Management. We're at (910) 235-0812 or go to Retire360Show.com click on the link for that complimentary consultation. Shoot us a message and we'll get you on our calendar and get you in to do that. So let's take a quick break. When we come back, we're going to talk about how to receive the maximum social Security check. And we'll tell you what that is. We'll be right back.

Producer:
You're listening to Retire 360. Here's Dwight.

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.

Mitchell Keiser:
All right. And we are back. This is Mitchell. And you guys are listening to the Retire 360 show, and that is brought to you by 360 Capital Management in downtown Southern Pines. Now, I want to speak to the listeners that want to maximize their Social Security benefit. What is the maximum Social Security currently? That is $4,555 per month. So what do you have to do to try to achieve that maximum Social Security? Step number one that I'm going to give you guys is to work a minimum of 35 years. So how they figure out the Social Security payment and what you're going to receive is the Social Security Administration takes your 35 highest paid years in the labor force into account when calculating that benefit to be eligible for the $4,555 a month, you'll have had to have worked for 35 years so that you won't have any zeros in your benefits calculation for those missing years. Step number two, I would recommend that you earn an income equivalent or greater to that wage gap. So what is that income that would hit you at that max? So in 2023, that wage cap was $160,000, $160,200. So income beyond that threshold isn't taxed. So you're not making any more in retirement. If you make 200, if you make 2 million, you're still going to be subject to that maximum that we just went over. Yeah, you want to make sure if you're trying to max out your Social Security, you want to make sure that those two things are kind of where you're at. Dwight's going to take take you guys into another step that we have. If your income maybe isn't that high or if you haven't worked that long because there are other ways to max out your Social Security, maybe you're not concerned of hitting that max per se, but maybe you're concerned about, um, maybe you're just concerned about maximizing what you are going to have, which is either way you look at it, they're both equally important. So yep.

Dwight Mejan:
Thanks for that, Mitchell And it is, you know, everybody's situation is a little different. We we'd love for every listener to be able to wait until they're 70. But we realize that there are circumstances that prevent people from doing that. There's a lot of decisions and factors that go into, you know, being able to delay that long. Number one, you got to have, you know, a pot of money somewhere beyond that if you're going to especially if you're going to retire, to start drawing money from. So if you don't have that nest egg, it could be difficult to do that. But we want to try to delay Social Security as long as we can. And you the latest you can go is age 70. Many people who listen to this show are aware of that. But if you're younger, that's the latest. You can go to claim Social Security. You know, you're entitled to complete monthly benefit based on your earnings history. Once you reach full retirement age, which today it's either 66 or 67 or somewhere in between there, depending on the year that you were born. So every year you delay filing past full retirement age, whatever that is for you, your benefits grow 8%. So to get that extra maximum Social Security benefit, you've got to hold off filing until age 70. So to get that $4,555 monthly benefit that Mitchell mentioned here at the beginning, every month during retirement, it might seem nice, but for most seniors, it's it's unrealistic because many don't have incomes that are high enough to qualify for that maximum benefit. Any idea average? Mitchell You know, what is what the average Social Security benefit is right now? Average monthly?

Mitchell Keiser:
I don't know. But if I had to guess, I'm going to say 2000.

Dwight Mejan:
You're pretty close. Average monthly amount is $1,827. Okay. So, you know, if you can't pull that big amount, does it mean you're doomed, you know, to a cash strapped retirement? But, you know, it does mean, you know, you want to try to max that benefit out because an 8% guarantee that doesn't exist most places in the investment world to have that kind of a guarantee. So the things that you have to watch out for when you're building a strategy around when to take Social Security and this is going to apply particularly to the larger accounts that you have. And when I say large, I'm not talking about $1 million. This could affect somebody who's got half that amount at half a million or sometimes even a little less than that is when you when you reach the required minimum distribution age, which is 73 currently for people who haven't hit that age yet for this year, if you're turning 73, this is the first year you're going to have to take those withdrawals. The IRS is wanting your nest eggs, particularly those IRA accounts to grow because the bigger they get. The more you're going to have to take out due to that requirement of RMDs. So the logic goes like this is if you have a big enough nest egg and your income needs aren't, you know, unrealistic in retirement and you can start drawing from that and delay Social Security even if that income portfolio or the nest egg that you have were to drop a little bit over time between now and 70, where that could be a benefit to some of our listeners is it could help you on your Medicare premiums because that's impacted by your total income and it could help you in some other areas, you know, like Social Security, because not everybody's taxed at 85% of your Social Security.

Dwight Mejan:
Many of our listeners are taxed on 85% of their Social Security. But if you can get that Social Security tax lower by spending some of that other money, you know, that may be something to look at. And again, there's other factors you've got to consider. Hey, do you want to leave a legacy? Is that important to you? Those are things that, you know, we'll ask you questions when you come in for a consultation and will help lay out for you the options that you have. And we also know the questions that need to be asked so that you can help to make an informed decision of what's going to be best in your situation. So there's no one size fits all. Every one of our listeners is going to come to their own conclusion, but many of them are just confused because they don't know and they don't understand, you know, the tax return. They don't understand the impact of how certain monies that come on the tax return and retirement.

Dwight Mejan:
They have no idea how that impacts the bottom line of what the total tax bill is. So we can help with that through generating some, you know, some reports and some analysis and ask you the right questions to do that. So we can also help you establish a personal pension that you can never outlive, you know, income. It's great if you have more than one source of income, you know, beyond just Social Security. Obviously, it's great if you have a pension, but what if you could create another pension that could be larger than your Social Security check and have an income that you can't outlive? That's one of the things that we'll look at. So give us a call at (910) 235-0812 and we'll take a look at that with you. So next, we want to just shift gears here for a moment. We want to talk about why your retirement nest egg might be 15 to 37% smaller than you think. So too often we meet people and we learn that almost all of their retirement savings is in tax deferred accounts. We talk a lot about on this show the three different tax buckets that your money is in. You've got taxable money, you got tax free money, which is the great account, the Roth account or life insurance. And then you've got tax deferred accounts. And this is primarily the one that we see that's the largest for most people that come into our office.

Dwight Mejan:
These are the 401. S 403 B's, 457 and IRAs. You know, the Roth account hasn't been around as long as the other ones where people contribute on a pre-tax basis. But we are finding more and more people that are starting to build up those Roth accounts, and we like to see that. But these accounts allow you to defer paying taxes on contributions. We're talking about the tax deferred accounts until they're withdrawn. So because the government, as I said this earlier, they would rather you pay tax on a big harvest versus the small bag of seed that you had. So don't don't forget to account for the taxes you haven't paid to Uncle Sam in the US government. So for most of our listeners, if you have a rather large pre-tax account, this is going to depend a little bit on your tax rate. But if you combine your your federal and state tax rate on there, you're somewhere between 15 and 30% smaller in these tax deferred accounts. So the IRS, we want everybody to know it's not a good partner in retirement. So that money that you have in that account, much of it belongs to the IRS. And we want to just help you understand how you can minimize the tax liability over your retirement. So, Mitchell, maybe you can share with the listeners what what are some steps? What are some things they can do?

Mitchell Keiser:
Yeah. So you guys might be listening to this and say, Oh, that all sounds good, but what the heck am I supposed to do about that? How how do I start? Where do I start? And that's something that we would like to talk to you guys about. Obviously, that is way too broad of a topic for or that's way too specific of a topic for us to just talk openly about the proper way to do to make these Roth conversions. But that's what we would like to offer you guys, is to provide you with a Roth conversion plan. This plan would allow you to convert your money that's currently in a tax deferred bucket to a place that it's a in a tax free bucket if you guys have been listening to. Us for some time, you'd know that a Roth IRA is one of only two tax free instruments. For Americans, the other option is life insurance. Those are the only two instruments that are available on the market right now where you can pass money on tax free with your money in the Roth IRA funds. This will allow you to grow the money tax free and the distributions will be tax free as well. So if you are of RMD age or if you're thinking about RMD age.

Mitchell Keiser:
That's something else that's important to understand with a Roth IRA. Roth IRAs are not subject to RMDs. So if you are 73 years old and you have Roth funds, you are not required to take them like you are with a tax deferred bucket. Additionally, with money that you have that you're taking out as dividends or capital gains or anything like that, if it's in a Roth account, you will not be subject to those taxes as well. There's a lot of perks, a lot of benefits that could apply to not just you, but to a future generation. I know a lot of times when people come in, they have these buckets. Not always, but a lot of times people have these buckets of money that they want to leave their as their their safety net or their rainy day fund that hopefully they don't have to tap into it, but there's a chance that they will. That's a perfect place to do a Roth conversion because that money then not only could you take that tax free, but hopefully you don't need it and you pass that on to your kids or to your beneficiaries, whoever that would be.

Mitchell Keiser:
And they're not going to be faced with a big tax burden if you do. We didn't talk a lot about this a whole lot, this episode. But if you do have a big tax deferred bucket and that passes to the next generation, they are subject to pay all of that tax within ten years. So if they don't pay that until the 10th year, you know, and you leave somebody $500,000, they're going to be subject to the highest tax bracket available. So it kind of forces them to take it. So, yeah, you could defer the tax, but when that passes to the next generation, they do not get to defer the tax like you did. Hopefully something there sparked an interest of you guys. Dwight's going to get to talking about bonds here, but I just wanted to encourage our listeners that if we could help you in any way or could provide you with a plan on how to do Roth conversions or what that might look like for your specific situation or portfolio, give us a call at (910) 235-0812. Or you could check us out at our website. Retire360Show.com broadcast by 360 Capital Management. That's the name of our company and we're located in downtown Southern Pines.

Dwight Mejan:
Yeah, well, thanks, Mitchell. Yeah. Let's talk a minute. Just about bonds. We've been talking a little bit about them here throughout the show, but want to just mention again what's happening to your bonds. You know, the feds are I'd hate to be Jerome Powell right now, the head of the chair of the Federal Reserve, because he's in a very delicate place right now as far as what to do next with the uncertainty right now with banks and tipping us really into a recession. You know, it's people say right now, hey, we're already in a recession. Some think we're not there yet. Whatever your view is of that interest rates, the feds have already said that they plan to raise interest rates. Now, they were talking about that before we saw some bank failures out there. So it's it's it's just a really delicate place right now. We don't know exactly what's going to happen, but they are indicating because of inflation, they still need to tame interest rates some more. And if you have bonds and you're still stuck in those bonds, it's a good idea to get with somebody. We'd love to be that person that you talk to about that and look at some alternative asset classes for those bonds. But let's just talk a minute again about what's going on here. As interest rates go up, the bonds that are being offered in the marketplace today, they have more favorable rates. So why would somebody want to buy your old bonds when they're lower yields and when they can go out in the market and get higher priced bonds? This means that the bonds that you hold in your portfolio at lower rates, they need to be sold at a discount in order for you to generate income from those holdings.

Dwight Mejan:
So simply put, your old bonds are less attractive to investors because the new bonds are available at the latest rates, which are much higher. So why are you taking risks with the income portion of your portfolio? And to add a little insult to injury, if you have a heavy bond portfolio, you're also paying typically fees to an advisor for that portion. So if you were to consider alternative asset classes to those bonds and there's many of them out there, we don't have time on the show today left to talk about those. But those other alternative portions of your portfolio that you could invest those bonds in, you could lower the fees in your portfolio. That's going to help you save some money. And we can build a plan for you to replace the bonds you currently hold. Some of the instruments we would look at would be fixed indexed annuities. You've heard us talking about those, the fixed indexed annuities. They have 100% cash reserve requirement. So there's no fractional amount of money that has to be held on those. Fixed indexed annuities provide you with a personal pension that you can never outlive. So when you want to turn on income, you have the option to do that. Many of the fixed indexed annuities that we use within our client portfolios for every year that you decide you don't want to turn on that pension, which is, you know, kind of an account inside the annuity. It's a separate account that tracks a payment that you could elect to receive at your discretion when you want to take it.

Dwight Mejan:
That can be determined by you when you take it. But every year you delay doing it. You can get with some carriers upwards of 8% growth on that pension side of your account, which provides you with opportunities for even greater guaranteed income. So fixed index annuities also allow you to sidestep the market because you still experience market like gains while your principal is 100% protected. So think about being in the market all of 2022 with a portion of your money where you didn't lose anything in your account, but you kept everything that was in there. So if you had the account in years prior and you had gains, not only was your principal protected, but those gains locked into that principal account. And while you didn't lose it and make anything, you didn't lose anything either. So that's another huge benefit of the fixed indexed annuity. And then replacing your bonds allows you to delete the fees that you were paying on the sizable chunk of your portfolio if you had it under a fee based account. So we just. Want to encourage you to something we've talked about here make sense to you or you'd like to learn a little bit more about it. Pick up the phone and give us a call. We're at (910) 235-0812 or go to Retire360Show.com and click on that link there and just set a time with us. We will call you. We'll confirm you the appointment with you. Mitchell will reach out to you and we look forward to having an opportunity to do that. So we're going to take a break here and we'll wrap the show up here in just a few minutes.

Producer:
You're listening to Retire 360. To schedule your free no obligation consultation with Dwight visit Retire360Show.com.

Dwight Mejan:
We just want to thank again our listeners, all of you, for being with us this afternoon. We hope we've enlightened you on some topics and given you some things to explore a little bit more. And we hope you find time to do that with us. We are not here just to put out information. We're here to guide you specifically. And we know that's done more in the privacy of a meeting one on one with us. We just want to remind our listeners that to meet with us, it doesn't cost you anything. It's all complimentary. We will full transparency. When you meet with us. We will lay out our entire process with you. There is never any pressure. We are fiduciaries, We're holistic. We look at the big picture. It's not just about investing your money in the account. That's part of it is developing and constructing a portfolio for you, but it's also about laying out for you options for an income plan. It's about building a tax map that will help you in retirement to be tax efficient. When you begin to harvest money out of that portfolio. The timing and we can lay out different scenarios for you of when you could start to draw from certain buckets.

Dwight Mejan:
We talked about Roth conversions. We'll give you some strategies and let you know if you're a good candidate to be considering that. We'll also lay out for you an insurance plan. You know, we talk a lot about on this show, one of the biggest threats to that retirement plan is health care costs. Health care is going up at a rate of four times the rate of inflation. And if you're over 65in a couple who is married, you'll expect to spend over 300,000 on health care needs in retirement. Not a small number. So we want to address the long term care issue. We'll look at that with you and give you some options of how you could look at that. There's some great solutions on the market today. And then we'll also look at the estate and legacy plan. Those are the pillars that we that we build around. And that's one of the things that we will take a look at with you. Mitchell, In closing here, do you have any final thoughts that you want to share with the listeners, either from today's show or anything else that I may have missed there that we want to share with our listeners?

Mitchell Keiser:
Yeah. I would just encourage our listeners, I know we we've been on here for quite some time now and if you've been thinking about reaching out to us or if there's been something that we've been talking about that you're like, Hey, I'd like to learn more about that. But I don't know if it's a stupid question or you might think that it's too early to ask this question. Just give us a call and ask. I mean, we love to hear from our listeners. We love feedback. After all of our classes, we always ask people just to fill out a feedback form because it's what helps us grow. So let us help you and tell us, affirm what we're doing as well. If there's something that you would like to just, you know, bring to our attention or if there's something that we could assist you with in any way, give us a call. (910) 235-0812.

Dwight Mejan:
Last thing, Mitchell, on that note and we'll sign off here. We get calls sometimes and had a call from somebody who wanted to know, do we speak to groups? Can you come and speak and just design a topic for 30 minutes or come and speak to part of a retirement group? We would be more than happy to do that. So you can call us for that as well. And we'd love to get out and meet you personally and meet some of our listeners. So just know that we do that as well. But thanks for tuning in to today's show and we will be back next week and we'll have some new information that will be updating you on with the the banks. See what flushes out from that and some other great information that we'll be sharing with you. But thanks for tuning in today and we hope all of you as listeners have a great week.

Producer:
Thanks for listening. To Retire 360. You deserve to work with an experienced and licensed expert who will strategically work to protect and grow your hard earned assets. To schedule your free no obligation consultation with Dwight visit Retire360Show.com or pick up the phone and call (910) 235-0812. That's (910) 235-0812.

Producer:
Investment Advisory Services offered through Brookstone Capital Management, LLC, BCM A registered investment Advisor. Bcm and 360 Capital Management are independent of each other. Insurance products and services are not offered through BCM, but are offered and sold through individually licensed and appointed agents. Investments involve risk and unless otherwise stated, are not guaranteed. Past performance cannot be used as an indicator to determine future results.

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 interest of our clients and to make full disclosure of any conflicts of interest, if any exist.

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

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

Sonix has many features that you'd love including world-class support, secure transcription and file storage, advanced search, automated subtitles, and easily transcribe your Zoom meetings. Try Sonix for free today.