1.27.23: Audio automatically transcribed by Sonix

1.27.23: 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

Dwight Mejan:
good afternoon to everyone. My name is Dwight Mejan. I want to welcome all of you back, especially our long time listeners. I want to welcome you back to the Retire 360 show. Thank you for carving out some of your time in your day. I'm here with Mitchell Keiser and Sam Davis, our executive producer. Appreciate these guys a bunch. I'm your host and I'm going to be helping you navigate the next hour on the topic of how to build a smart retirement plan. So if you like building and you're into that sort of thing when it comes to finances, that is what our show is dedicated to you, the listener. And again, this is your show and we love to hear from our listeners. So if you want to contact us, you can go to our website at Retire 360 show. We are here located in Southern Pines, North Carolina, and you can reach out to us by phone at our office. 9102350812 And if you listen to podcasts, wherever you download podcasts, you can find us at Retire 360 show there as well and listen to previous podcasts. But I do want to start out by telling our listeners that we have an opportunity which we always love to do. We are hosting a live event coming up February the seventh. It's a Tuesday evening. It's going to be at 6:00. We're going to be live at Cannon Park Community Center in Pinehurst and we're going to be going over some popular topics.

Dwight Mejan:
We've had some changes this year to some of the retirement rules. We're going to go over some of those updates live at that event. We're also going to talk about taxes in retirement. A lot of our listeners come in and tell us that they thought retirement was going to be a lot easier in the area of even tax planning, but it actually is more confusing and that is certainly the case. Taxes in retirement begin to get more complex. And then when you start to have to pull money out of these different buckets that you have, particularly if you own a Roth, if you own pretax money or tax deferred money, it just gets muddled in people's minds as far as where do I take it from and what's the best strategies for me to minimize the taxes. So we're going to talk about that. If you can join us there. We'd love to have you. You can call our office 912350812 and talk to somebody here and we'll get you signed up. Or you can go directly to the website that Retire360Show.com and there'll be a link there you'll see for that upcoming event and you can sign up through the landing page that'll take you to right there and we'll look forward to seeing many of you there. Seats are limited, I'm going to tell you that. Looking forward to seeing you. But Mitchell, how are you doing this week?

Mitchell Keiser :
I'm doing all right. I repeat what Dwight just said. The last time we had an event at the Cannon Center, it did get overbooked. So if you guys are interested, make sure you check us out as soon as you can. Can see that at our website. Retire360Show.com.

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

Mitchell Keiser :
And this is coming at you from Evan Esser. Some taxpayers close their eyes, some stop their ears, some shut their mouths, but all pay through the nose. So Evan Azar was a American humorist.

Dwight Mejan:
Well, thanks for sharing that quote of the week, Mitchell. We're going to dive right in here and get to the meat of what we want to talk about today. And we're going to talk about smart risk. You heard us talk about that quite a bit here. What does a smart risk plan look like? What is a smart, safe retirement plan look like and what's a smart tax plan look like? So we're going to touch on all of those topics in our show today. And I want to start with where we picked up last week. Where we left off was smart inspection. We talk about that a fair amount. And that's really making the most of your current situation. And a lot of people wonder what's it like to work with 360 capital management? We tell people all the time, you know, to achieve your vision, you need to know where you stand now and what you can do to better prepare for your future. Your finances have principles attached to them. We can help you do this using a smart inspection tools that we have available and understanding where you stand is going to help you plan for the retirement that you desire. You don't want to leave your family's future in the hands instead to the stock market or the IRS. And many people they are set up to partner with the IRS and retirement and taxes are getting more complicated and we want to help you legally show you some strategies on how you can minimize the overall taxes that you pay over your retirement.

Dwight Mejan:
One of the things that we do that sets us apart from a lot of firms that manage money is we're not just putting together an investment plan we put together for all of the people that come through our office, an income plan. We talk about where you're going to get that income from, what bucket is it going to come from, What's the tax structure look like? And that's the next thing we do. We build a tax plan. And from that tax plan that helps dictate where we make recommendations on the overall investment strategy based on income needs that someone has. Everybody listening to this show right now has a different need for income to live the lifestyle they want. And everybody, of course, has different amount of assets. So we want to examine what that income need is, and we'll do that all for our listeners. Complimentary at no charge. We're going to do a portfolio analysis. So when you make an appointment with us, we're going to look over your current portfolio and we're going to offer suggestions and tips for improving your portfolio's outlook. And we're going to put together a financial plan that runs out through your 95th birthday. How do you know if you're a financial plan is going to last you until you're 80? What if you knew it was going to run out somewhere in your early eighties based on, you know, the probability of success with your portfolio and based on your income needs and some assumed growth, some people don't even realize the amount of risk that they're taking.

Dwight Mejan:
One of the things that we do here at our company, for people who come in to schedule that complimentary consultation is we will run a risk assessment. It's simple questions that people answer and then we match their portfolio, the current one that they're in with that risk score that comes out of this questionnaire that they take. And then we begin to point out if they're in alignment with their risk tolerance or if they're out of alignment with their risk tolerance. Some of you have looked back already at 2022 and you're like, Oh my goodness, I have lost way more money than I expected out of this account. We had somebody in here not too long ago. We just said, I need to keep working because the money I wanted to have when I retired, it's gone. And I didn't expect to lose this much with the market being down. So we don't want to have that happen to anybody who listens to this show or was listening to it right now. So we'll run the financial plan out for you to your 95th birthday, effectively partnering with you for the remainder of your life. That's what we want to help you see is you have money to make it to 95 and we're in your corner. And a plan to your 95th birthday ensures that we will be with you every step of the way. So we're going to talk about next year reasons why you should meet with a financial advisor or a financial professional. So if you're kind of doing it yourself and you've got accounts, you know, some over here, some over there, you've got a 401 K, it's important that somebody is coordinating all of those because what most people listening to this don't have access to is looking to see maybe you're holding too much of your investments of one certain type of investment or one certain type of stock.

Dwight Mejan:
You might have too much of it inside of these different accounts, and you have no way of knowing that we call that correlation. And we're going to talk maybe a little more about that as we go on in the show today, but reasons why you should meet with a financial advisor. Number one if you don't have a formal. You know, if you don't have that income plan, you need to understand what that looks like and we'll help put that together for you. Next thing is, if you don't understand the risk that you're taking with your investments, you have to understand risk, because without it, you may not have the bucket of money. You need to enjoy the lifestyle that you want. More and more people are not getting the pensions from their retirement. It's up to them and they're going to create their own pension from their 401 K plan. So we need to understand, you know, overall risk that you're taking with those investments because the nearer you get to retirement, you need to be invested appropriately based on your tolerance for risk and the money that you're going to need from that portfolio to live on.

Dwight Mejan:
Next thing is, if you don't understand how to manage risk in your portfolio as you get older, that's something that a professional is going to help you do is allocate properly in your asset allocation the older you get so that you have more reliable income because that income is guaranteed. Income is very, very important in retirement and a lot of people have an idea of how much income they're going to have. But when we ask them is it guaranteed if it's all in stocks and you're just going to pull money out of that portfolio, that is not a guaranteed lifestyle. Dividends aren't guaranteed. And even following some of you are familiar with the rule of 4%, that's not even guaranteed these days. The 4% rule is a rule that just states it's been around for a long time. If you just pull out 4% from your portfolio, assuming it's mostly in stocks and diversified in bonds, we're not big into bonds if you've been listening to this show. But if you take out that 4%, you'll have enough money and you shouldn't run out during your lifetime. But that is not still even enough. As a guaranteed plan, many people have turned that 4% rule down to about 3.2%. But now when you look at inflation and everything else, there's there's different ways to harvest income out of your portfolio. If you don't know why, if you should pay off your house or not. That's one of the top questions we get. I get that question all the time with people who have mortgages.

Dwight Mejan:
Should I pay this mortgage off or should I keep continuing with that mortgage? And I would tell you, that depends. Generally speaking, we like to see the mortgage gone, but there are circumstances and situations. You know, there's some pretty cheap rates out there right now. So you need to understand whether or not you should do that. That's another reason to meet with a professional. If you don't have a health care plan in place for you and your family's future, you need to meet with a professional. Long term care. You hear us talk about that quite a bit. We spent some time last week talking about that. That is the number one expense that wipes out financial plans, even that we as professionals will put together. If someone hasn't addressed the long term care issue, that could be the thing that causes the whole retirement plan to crumble, even if it's a good plan that you put in place. So if you looked at long term care before and you looked at premium based plans where you pay an annual or monthly premium, there's new products on the market that you can revisit. We go over those in those complimentary sessions that we host with prospective clients. And if you don't understand what an expense ratio is very, very important, you need to meet with an advisor. There are expenses that come out of your portfolio beyond the advisory fee agreement that you have with your firm that could cost your portfolio money. That's one of the things that we're going to talk about.

Producer:
Want to know where your hard earned money is going. It's time for an inflation demonstration.

Dwight Mejan:
Just a sidebar here. I want to talk just briefly about inflation and really an inflation demonstration. And it's really shocking. Today, most of us can relate to this if you own a home or pay a utility bill. Electricity prices are through the roof. Consumers paid 14.3% more for electricity last year on average, according to the Consumer Price Index. This data was released January 12 by the US Bureau of Labor Statistics. And energy costs are going through the roof. The price of residential electricity is projected in the coming years to rise more slowly. The Energy Information Administration said on January ten it jumped 15.0 $0.07 a kilowatt hour last year from 13.6 $0.06 per kilowatt hour. In 2021, it's projected to rise 15.4 $0.05 a kilowatt hour this year and by a penny more in 2024. So those pennies don't seem like a lot. But when you consider that on how many hours are used per month, it's something we all can feel the squeeze on. And believe me, inflation is something that we hear at 360 capital management. We take it very serious in the part of what we do for clients when we put together a plan or retirement plan. Electricity to heat homes is expected to cost 10.2% more this winter over last winter, or an average of $1,559 for the season, according to the National Energy Assistance Directors Association.

Dwight Mejan:
We're going to dive in here now and start talking about smart risk. We talked about that at the beginning of the show, and we want to talk about building your smart plan by considering the risks you face during your retirement, learning how to best handle them. So what is smart risk investing? Smart risk investing. It's an investment strategy that's designed to maximize returns while minimizing risk. Smart risk investing is an investment strategy designed to maximize returns while minimizing risk. So smart risk investing is based on the concept that all investments carry some amount of risk. And the only way to reduce that risk is through diversification. I said earlier talked about correlation. Many of you have a 401 K and you've got an old 41k at a previous company. You're funding an IRA and you've got all these different accounts. And we see this quite often when people bring their statements to the office for the analysis. And what they're surprised to learn by that analysis is they have a ton, for example, of Tesla and Apple stock because it's purchased in all of these funds that they're in. And someone says those are great stocks to hold. That's true. They are good companies. But when you have assets that are highly correlated, it basically just means when the market's doing really well with certain assets, those assets all move in tandem with each other and that could be a good thing.

Dwight Mejan:
But it can also be a detrimental thing to your portfolio because when they move the wrong direction with the economy and those assets are all correlated, everything drops severely together. If you're comparing returns with friends, that's not a good thing to do because everybody has different risk. But if you do that and you have portfolios that seem to match, you may have a lot of correlation in your portfolio and when markets are going down, that's why you may be losing more money. So if you want to understand that better, book that consultation with us, it's free. We'll give you that second opinion and we'll run a correlation analysis and explain that in a little bit more detail to you. Most people know about diversification, but diversifying just simply means investing in a variety of different asset classes, such as stocks, bonds, real estate, commodities and other financial instruments. We want to make sure that that portfolio has broad diversification and that that's going to help manage risk. It's one of the foundational principles of how risk is best managed. And the other thing is here is investors need to consider their individual needs and their goals, as well as their risk tolerance. And as we said, if you don't know what your risk tolerance is, we're going to give you a brief five, six minute questionnaire and it's going to help develop a risk score.

Dwight Mejan:
It's pretty cool. It's kind of like a speed limit sign when you're going down the road. If you're going too fast, the risk score is going to tell us that and we'll be able to match that against your current portfolio and the holdings that you have, and you'll be able to see if you're taking too much risk in there. And we'll give you tips of things that can be done to help de-risk that portfolio. And sometimes we can look at the historical rate of return and see a better average rate of return for something that actually has had less historical risk. So that's something I'm sure people would want to know about Social Security maximization. That's one last area for those. Those of you that haven't yet claimed Social Security, we're going to run a complimentary Social Security maximization report. We do an entire seminar on Social Security, but many people don't know when is the best time to draw Social Security. We have people that come in here that love what they do. They love their job and they're like, you know, I think I want to keep working. And others come in and say, Man, I'd like to retire, but I don't know, what should I pull from first? Should I start taking money out of my portfolio? If I do that, am I going to get taxed If I take Social Security, what's that going to look like? So these are all a bunch of decisions that need to be made.

Dwight Mejan:
And what that Social Security maximization report shows you is how to best maximize Social Security earnings and retirement. Because the other thing Social Security does is it can create taxable income and it could also create a higher amount of your Social Security to be taxed. And the timing of when you do that could actually save money for you in taxes based on when you draw it out. So we're going to look at that through that optimization report and explain that to you. So we've got tips and tricks that can help take advantage of everything that's available to you and make sure that you have a comfortable retirement. So when we come back, we're going to talk about smart planning and we're going to help you prepare for what might come. But check us out on the website if you'd like to take advantage of that complimentary offer. We encourage you to go to Retire360Show.com and you can also call us at 9102350812 and we'll be right back. Talk about smart planning.

Producer:
Helping bring you one step closer to financial freedom. You're listening to Retire 360. Rolling Stone You know, if a call is right.

Producer:
I need to find so you know where you are now and where you want to be in retirement. So how do you plan to get there? I'm Matt McClure with the Retirement.Radio Network powered by AmeriLife. Do you.

Producer:
Have any other questions for me.

Producer:
Counselor? There are a lot of questions to ask yourself when you start your retirement plan. Questions like When should I retire? How much money will I need? When should I claim Social Security? What about health care costs and taxes in retirement? This complicated puzzle means you're probably going to need some help coming up with a smart retirement plan.

Ford Stokes:
If you want to retire successfully, you really need to plan early. You know, Inspector, you expect and get prepared. Putting a plan in place now while you're still working is a great idea.

Producer:
Ford Stokes is founder and president of Active Wealth Management. Once you find a financial professional you want to work with, they can help you answer all the questions you may have.

Ford Stokes:
Back to what Warren Buffett said. If you don't find a way to make money while you sleep, you're going to work until you die. So we need to do everything we can to figure out a way to make money while we're sleeping. We talk about this human capital versus actual capital. When you're young, you have a lot of human capital, You've got a lot of a lot of room left, a lot of capital left in your career.

Ford Stokes:
Right? But at the same time, a lot of people that are older, let's say you're 65, 70 years old, you don't have a lot of human capital left, but you should have a lot of capital that is making money while you sleep. And if you don't, then you didn't make the right decisions.

Producer:
There are also some retirement costs you may not have considered yet. Long term care, for example. Did you know it's not covered by Medicare? What about home renovations? If you decide to stay in your home instead of moving into a facility, your home might need some updates to ensure you're safe and comfortable. And those are just the tip of the iceberg. So do you have a fiduciary financial advisor or professional to help you wade through the complicated retirement planning process? That is a key question to consider. If you want to make the most of your hard earned money with a Retirement.Radio Network powered by AmeriLife, I'm Matt McClure.

Producer:
You're listening to Retire 360 with Dwight Mejan, now back to the show.

Dwight Mejan:
All right, Well, we're back. I am Dwight Mejan, I am your host and I am the owner of 360 Capital Management. And with me is my son in law, Mitchell Keiser. And we're going to take you through the next section here on smart planning. And we're going to talk specifically about risks that retirees and pre retirees need to consider. We talk about headwinds a lot, don't we? Mitchell Headwinds in retirement that people face. And there's there's quite a few of them here that we can just touch on. But let's just dive into some of these here. The first one that I'll bring up and Mitchell you can take them the next one we're talking about market risk. Your portfolio will be affected by changes in the market. We've all seen that in 2020. Too many people listening to this saw it in 2008. We saw it in the nineties with the dot com crisis. So having a smart plan that accounts for market risk very, very critical. There's there's systematic risk and there's something called unsystematic risk. Which could cause drastic change to your investments. So just need to be prepared for volatility. Volatility is going to come in any market, but volatility and uncertainty in the market by practicing tactical asset allocation. And we do that here tactically looking at what's happening in the market and making adjustments in that portfolio based on what the overall environment is doing.

Mitchell Keiser :
Absolutely. The next topic we'll jump into is interest rates. Interest rates change when there's a dip or a rise in the overall economy. Changes in interest rates can have significant impact on the American families and how that can affect the economy as a whole. So those interest rates, I mean, those are on I mean most commons probably loans your mortgages people moving, but you kind of see that across the board with CDSs with bonds and everything is kind of fluctuating.

Dwight Mejan:
So, yeah, you know, it's interesting and the interest rate environment. Mitchell with like you said, when you're when you're borrowing money, rising interest rates are bad. But when you're investing money, it tends to help a little bit. We just we're helping a client with a money market rate that we learned about. That's 2.75% right now. So those are up pretty pretty nice to have liquid money sitting somewhere and be able to access it at those rates. But it's great when you're when you're when you're investing. But even at that, most of us know with inflation, if you take inflation, let's say it's been coming down slightly, but let's say inflation's at 7%, that's where you've got to be taking some calculated risk with that portfolio. And that's something that will help you balance properly. The next big one here, and this comes as no surprise to our listeners, is inflation. Inflation has a significant effect on the spending power of American citizens. You know, as inflation continues to rise, our spending power decreases. So when planning for retirement, it's important to consider how rising inflation may affect your retirement accounts and your future budgets. So one of the things that we do when we run that income plan out to 95 and the retirement plan, we're going to show you what it is in today's dollars. And then we're going to show you what that income needs to be and what it's going to look like in future dollars. And future dollars is going to account for whatever assumed rate of inflation we agree is reasonable. A healthy rate of inflation is in that 3 to 3 and one half percent range, and that's where the feds try to get it. But when it gets start getting above that, that's where it starts to really affect most American pocketbooks.

Mitchell Keiser :
Just on the topic of inflation, Dwight, you say those numbers or those numbers get released to the public as far as how high inflation averages out or even from 2020 to 2023, what the average rate of inflation was. And I can't give you what that specific number is that they advertise, but it's very small compared to what I feel. The reality is, you know, you can account for inflation and you can account for those numbers. But if anybody's like us, most middle class people, when you go to the grocery store, the cost of eggs has not gone up. I mean, it's it's a greater part of 50%, you know, or milk or a lot of these just common things that people are buying at the grocery store. It's not you know, it's it's over double digits. What a lot of these inflation things.

Dwight Mejan:
You're right on the money, Mitchell. I was just in the grocery store two nights ago. My wife sent me for something and she always tells me you need to get the grocery store. You're living behind the times as far as what stuff should cost. And she was correct. I specifically took a walk to that egg aisle and depending if you're buying organic or just the regular eggs, they range anywhere from 5 to 750 a dozen I saw. So it's.

Mitchell Keiser :
Crazy.

Dwight Mejan:
Yeah, absolutely crazy. Yeah.

Mitchell Keiser :
Another risk to consider is public policy that affects everything from taxes to retirement account rules to contribution limits, retiree. These should pay close attention to these policies as it relates to their pension plans, Social Security benefits, health care coverage. Know, last week you talked a little bit about how they can mean means test your Social Security, how those benefits can change. The RMD requirements are now different. Where it used to be somebody that was 72 is now 73. We're going to get into some Roth changes. All these all these public policies affect people not just every year, but every day. So it's just definitely you want to be aware of the latest tax laws and how to use all that to your advantage.

Dwight Mejan:
Yeah, we don't want to steal the Thunder for future show, but some of the changes that's come out in the secure 2.0 act, we'll get more specific with those are direct decisions that our government is making because the message that we're seeing in the financial world is very clear. The government wants you to own your own retirement. They don't want to be there anymore, not permanently, but. There is going to be some changes with Social Security. There's going to need to be it's either going to come in the way of taxes or means testing your benefit. And there are strategies right now that we are working with existing clients on if their Social Security gets cut. We have built in benefits in their portfolio that are going to automatically kick in to supply that cut benefit, because I don't care what level you're at when they cut, there's a cut in place. It's like somebody said, new level, new devil, right? If you get cut at a higher level, you're just you're still cut. But you've got to have something in place to accommodate for that. And we can't control folks. Let's face it, other than who we put in Washington, we can't control public policy in terms of what happens. We can either vote them in or vote them out.

Mitchell Keiser :
You just always say a common quote in finance and people with their just how people spending patterns that most people are poor, just that different standards of living.

Dwight Mejan:
That's right. Everybody's broke. It's just some people are broke at a higher standard of living. You're correct. That is correct. But yeah, public policy is a huge factor that pre-retirees and retirees need to consider. And that's all the more reason why we want to help you be independent from the government. And that means by way of your taxation over your overall taxes in your lifetime. We want to build that tax strategy for your portfolio so you're going to pay your share. But there are ways to mitigate and minimize some of that overall taxes and thus pushing RMDs back to 73. Some people kind of say, Oh, that's cool. I get to push that back a little bit. That may be the worst thing for half of the people listening to this right now, because what if by that, by you delaying you enter a higher tax bracket because now the number they're going to calculate your RMD on is going to be set higher. So that's one of those things with public policy that isn't always a good thing. On the surface, it might look like a good thing but isn't always a good thing. So that's the other important reason to have a professional looking at all of these aspects of your portfolio and helping you come up with a plan. That plan is going to help you win in retirement, and that's one of our objectives here at 360 Capital Management.

Dwight Mejan:
We want to help our listeners win with their money. Timing is another one. You can choose when you retire, but you can't predict what the market will look like when you do so. Your retirement may look a little different if you plan during a recession than it would in a more favorable market. So by having a formal retirement plan, you can be prepared for whatever happens. And that just goes to something I shared earlier. Mitchell We've had people who have come in here in recent weeks who have basically told us I was on schedule to retire in June of this year until 2022 happened. And what that basically says is this person and let's face it, we've all been riding pretty high if we've been in the market for the last ten years. We had a few little glitches on the radar. But in the last ten years, it's been a pretty good run in the market. It's been one of the longest bull runs in the market's history since the Great Depression. But people are feeling the effect of this and people are afraid of going into these portfolios now and taking money. And we see people pushing back retirements. We don't want to have that happen to our listeners.

Mitchell Keiser :
Absolutely. Another risk just to keep in mind is liquidity. When we talk about liquidity, we're referring to the assets that can be bought or sold in the market without affecting the assets price. You want a plan that allows you to have sufficient access to your savings and funds. So what that means is not having all your money in bonds or CD's or annuities, you kind of have to layer it out. I know something that my wife and I were talking about this past weekend is just making sure that you have money in cash. What made us talk about that was we had a speaker come to our church this weekend from Ukraine and he was I believe he was an evangelist over there. And he was talking about how just some of the things that are going on. But one of the topics he touched on was that all the banks were closed and nobody had access to banks. So in those situations, it's good to have your nest egg. Even you have your liquid money at the bank, you have your money in your IRA. But if you don't have any liquid money, I mean, God forbid that that would happen. I rebuke that. But if it did, which it is happening in parts of the world, I do think you need to have physical money locked up in a safe that will be there in case there's a time of crisis 100%.

Dwight Mejan:
You've got to have liquidity. You got to have we always say, Mitchell, six months of your regular expenses, minimum in cash, just for those purposes that you mentioned. So got to have liquidity sequence or return risk is another one. You've heard me talk about that. If you've been a listener of this show sequence, a return risk, very significant risk that retirees, pre retirees are facing right now. And that's basically your your retirement funds could take a massive hit if the market experiences a major downturn in the early part of your retirement. So while you can't exactly plan. For this, you can change what you contribute to your accounts and use it and use guaranteed income strategies to combat the issue. One of the things that we look at is how much money is in the market relative to your age. We use the age rule quite often on this show that if you're 65 years old, generally speaking, around 65% of your retirement assets should be principally protected or they can experience a lot of risk. But if you're tilted pretty heavy, which we see people come into our office that have 90, 95% of their portfolio sitting in securities, that market goes down. And especially if you need income or you're forced into taking distributions. That's the point where you could start running out of money very, very quickly. So sequence a return, you definitely have to account for that. And that's the other reason you want a professional, as we talked about earlier here on the show, to look at all of your different holdings and make sure you've got the right allocation strategy and you've got the right assets sitting in the right bucket that you have your retirement funds in.

Mitchell Keiser :
Absolutely. And then another risk to consider would be longevity. So longevity you kind of have to consider in both cases what if you don't live as long as you have planned and what if you live longer than you have planned? You have to account for both. Obviously, different seasons of life account for different types of planning when you're younger. So pre retirement years, especially when you're newly married pre kids kind of in the season that I'm in you want to be heavier on like the term insurance so you want to get make sure that you're prepared in case something happens. I'm prepared in case if something were to happen to me that my wife is set up, if we have kids that they're set up, that they're not left in a catastrophe. After you've retired, those priorities switch and you have to plan to make sure that you don't run out of money. So you're making sure the longevity of everything that you have that you have saved is going to last now when you're in your saving years. So prior to retirement, you're probably invested more risky. So the likelihood of your money running out over the course of your life is going to be more volatile.

Mitchell Keiser :
They're not going to be able to give you or we wouldn't be able to give you even as much of a guarantee or of an idea about how long that that's going to last. Usually just in every season of life, you kind of have to keep switching your objectives, switching how you're investing, not because you're changing as a person, but because your situation is changing, Your family's changing different seasons of life. So different seasons of life call for different, different ways to plan. I know we had a client come in here this past week and they had a fairly large portfolio, but they also like to take some risk. Now maybe a third to 25% of their portfolio. We had set aside in a bucket of guaranteed income that they're going to have that for sure for the rest of their life. So if there's a portion of what they're going to rely on, that could fluctuate just slightly, but they are going to have a solid guaranteed bucket of money coming to him systematically. So I've got to kind of keep your options open and not be just too narrow minded to something you heard 40 years ago.

Dwight Mejan:
Right? Right on. Good stuff, Mitchell. Good stuff for our listeners. Their loss of a spouse. As a last one I want to address here is when your spouse passes away, you're going to lose one of those Social Security benefits. So a household if you're listening and you're married couple, the higher of those two Social Security checks is going to remain in that household. So essentially what we tell people is we have to prepare for about one third approximately of income being lost to that house. Had a client we were just addressing something with disability benefits that they had through the VA. They were a veteran. They were going to lose those benefits and they're going to lose a Social Security check. Well, that kind of has them put in the pencil to the paper again and redoing a budget because we have to consider do they have enough life insurance when that happens? Are they going to need to consider life insurance? Because that's the only way to get a lump sum of money pretty quick when you're not when you're no longer working, you can't be saving money as much. So you've got to create that sum of money. And life insurance is the only option to do that with. So you've got to consider the loss of that spouse when you're planning for your income and retirement and in the future, because we don't know how we don't know when that event's going to happen. None of us do. That's the last one I got. You got any other ones there, Mitchell?

Mitchell Keiser :
No, but I will say if we could predict when we were going to die, we'd be pretty rich. But unfortunately, nobody can.

Dwight Mejan:
Right on. So last last tip I'll say before we take a break here is just you got to watch out for fees. That's something that we're sensitive to for our listeners. And we're also sensitive to it for people who come to our office. We want people to understand the full picture. It's not just an advisory fee. There's expense ratios. There's other fees that. Get hidden inside some of these statements and people can't always see them. We see a lot of hidden fees inside of products like variable annuities. You've got to be very careful with those as a general rule. Not huge fans of variable annuity products. There are some annuities that we do like, but the fees tend to be, in my estimation, excessive inside of variable annuities. So we want to watch out for those. Most investments include some fees that you have to pay, but we can help you choose investments with lower fees. Fees are not paid up front. They come out of your returns. So while you never see the money that is taken out to cover your fees, your returns are going to be lower if you have a high fee investment. So with that, we're going to take a short break and we'll be right back. But here again, if we touched on some topics and you want to discuss your overall plan and the road that you're on, we would love to hear from you. You can reach out to us by calling our office at 9102350812 or go to our website at Retire360Show.com and there's a link down there and you can book a complimentary session with us. We look forward to hearing from you. And we'll be right back.

Producer:
Got questions. Dwight Mejan is here to help visit Retire360Show.com today.

Producer:
At 360 Capital Management. We know you've worked hard to earn your money and you've worked even harder to save it. When it comes to wealth management and planning for retirement. Dwight Mejan is passionate about helping people protect and grow their wealth. Visit Retire360Show.com to schedule your free consultation. Today it's a $1,500 value provided at no cost to you. Book yours now at Retire360Show.com. Thanks for listening To Retire 360 with Dwight Mejan. If you like what you're hearing, subscribe to the podcast and leave us a review wherever you listen to podcasts.

Dwight Mejan:
Hey. Well, welcome back. My name is Dwight and I'm your host of the Retire 360 Show. Again, want to thank you. I also want to welcome first time listeners to our show. We're glad to have you spending part of your afternoon with us. Our goal is always to put value to you, the listener, and we're going to do that right now by talking about a specific product that many of you may not be familiar with, but that we use here strategically with some of our clients within their portfolio, and that is the asset class of structured notes. Now, there's been a lot written this year through 2022, specifically because of the volatility and the losses we saw in the market about the 60 over 40 portfolio kind of dying. And that's because bonds, as many of you know, it was one of the worst year in the history of the bond market. The worst year at one of it was the worst year since the Great Depression. And what it's causing a lot of financial firms to do is to basically package different asset classes. And you'll hear a lot, if you haven't already about alternative asset classes and structured notes would fit the bill for an alternative asset class. So let's just briefly talk about here for a moment what is a structured note up front? Just so everybody knows, a structured note is a security. So if you are an investor that is 100% principal, safe, structured notes may not be the best fit for you.

Dwight Mejan:
But let's talk a minute about what they are. Structured notes are a type of investment that combines features of bonds and derivatives. Now, that word derivative scares some people, but what is a derivative? A derivative is simply something that derives its value from something else. That's a very simple way to say it, But they're structured Notes are issued by banks and other financial institutions and typically offer a return that is tied to the performance of an underlying asset. That's what the that's where the derivative comes in. So an underlying asset could be, for example, the S&P 500 to use that index. So your structured note similar to a bond could have an underlying value, for example, and I'll give you a range of some of the structured notes that we use for income generating purposes for clients. Right now. We can find notes out in the marketplace right now between ten and 13, high 13% range, and that interest rate is paid out on the investment in that structured note every single month to the investor. And that structured note has a maturity of typically the ones that we purchased for clients there 12 month in turn. So there's a defined period of time of 12 months and every month that income that's on the face of that note, just like bond interest is paid out to the investor.

Dwight Mejan:
And what happens is that income can either be many of our clients use it for their budgeting purposes. It comes right into their checking account for living purposes, for lifestyle and others reinvest that. We have clients that use structured notes inside their IRA accounts and they use that yield as part of the overall return target that they're trying to hit with their portfolio. So there's the underlying asset is is derived by using the S&P 500 using different indexes. That's where they're deriving their value from. So they're using such such things as a stock or stock or commodity instrument or using a basket of assets. So the two components of structured notes or there's a bond component and a derivative component. So the majority of your investment that provides protection of your principal, that's the bond component. The derivative component offers a potential value increase of the structured notes return. And this derivative can offer the investor exposure to any asset class. So structured notes they can be customized to meet specific investment objectives, and they can be structured to provide exposure to a a wide range of assets and markets. However structured notes, they're often complex. They can have features that are too difficult for investors to understand, and because of that, they're not suitable for every investor. And it's important to have a good grasp of the features and the risks and the benefits before investing.

Dwight Mejan:
Now, I will tell you that one of the things that we do within the structure that we use for income structured notes is we ladder all of our purchases, meaning if somebody is investing, for example, 100,000. And in the structured notes, we're going to buy into those notes over a period of certain number of months, at least three, usually 3 to 4 months. We'll ladder into those. And there's some reasons why. And we explain that if that's a topic and you've heard something here that you like, we'll get into that with a little bit more detail when you contact our office and we sit down. But a financial advisor you trust can help you understand exactly how structured notes will work in your portfolio and they'll guide you in your decision on whether or not to invest. So for those of you who did hear some interest on that, if you want to learn a little bit more, check out our website. You can book a complimentary consultation with me to discuss those, or you can call our office at 9102350812. We're going to shift gears here, talk a little bit about what smart, safe investing. What does that look like? Smart Safe investing is an investment strategy designed to generate the highest possible return while keeping risk to a minimum. One of the instruments that we use quite often these days is a product you've heard us talk about fixed indexed annuities.

Dwight Mejan:
These are insurance contracts that provide guaranteed income stream for your retirement. And I know when I say annuities to a lot of people I just mentioned variable annuities. We're cautious on variable annuities because of the fees. But within fixed indexed annuities, you have exposure to equity linked interest based on how the the indexes are doing. But that principle stays protected. But just that word annuity, a lot of people come into our office and what they think when they hear the word annuity. We just had one in here last week. They think an annuity is something they give a lump sum of money to a company and they never control that money anymore. It's gone and they they get some kind of a payment promise from it that that's where you have what's called an immediate annuity. We don't typically use those with most planning that we do. We're using more deferred annuities and deferred annuities are in the category of what we're talking about here with fixed indexed annuities. So they're designed to provide protection from market downturns while providing potential for growth. And these are popular amongst people who want to get upside potential market like gains without market type risk. So that's one of the benefits of fixed indexed annuities. It's protection from market volatility. Fixed indexed annuities can provide protection from the market since the annuity is linked to the performance of an underlying stock market index.

Dwight Mejan:
If you are taking income from it, you can. You don't have to take the income, you can defer it and let it accumulate. But if you do take income, it's not directly affected by short term market fluctuations like some instruments are. This makes them an attractive option for investors who are looking for steady and reliable income. The other feature, of course, is tax deferred growth. This means that any earnings on the annuity, they're not subject to taxes until that money is withdrawn from the account. So you get growth on money you otherwise would have had to pay taxes on. And then finally, if you are looking for lifetime income stream, you don't have to worry about breaking your budget and enjoy your discretionary money with an income plan that you can count on and you can never outlive. And that's one of the benefits of using indexed annuities. And we typically, if someone is looking for income, there's specific products that are tailored to everybody's individual, objective and interest of what they're trying to do within their plan. So if your target is income, we're typically going to shop around and find a rider that's paying the highest payouts and we can forecast and actually project for people who come to our office and look at these sort of products, we can tell you exactly at the minimum range what your income is going to look like one year out, five years out or ten years out.

Dwight Mejan:
We can show you the lowest possible amount and that amount would be guaranteed for the rest of your life. And if that bucket of money that funded that were to run out, because we don't get any help with the market helping to grow that account, that payment will continue just like a pension until the day you die. So that's the other benefit when you have an income annuity. But just keep in mind, not all annuities are the type where you give a lump sum of money to an insurance company and then wind up losing control of that money. Most annuities stay in a deferred status where people maintain control and they use that as an asset to protect the principal portion of their money. And that's also the amount, the money that we in down markets, if it's in an IRA account, that's the money that we would recommend that a client pull money from to satisfy an IRA distribution because the market hasn't pulled that account value down like it has some of the money that's tactically invested in the stock market. So with that, we're going to shift to smart tax. That was the other segment of the show we wanted to address. Here is the smart tax aspect. Did you know that different investment accounts are taxed differently by understanding how different accounts are taxed? You can ensure your money is working, how you need it and when you need it.

Dwight Mejan:
So we want to help you divest the IRS from your retirement accounts with these two strategies. Number one is with Roth IRAs. A Roth IRA is a type of individual retirement account that allows you to contribute after tax dollars to an account that grows tax free. This means you pay taxes on the money that you contribute to the account up front, but you don't have to pay taxes on the money when you withdraw it. During retirement, future tax increases should not affect this portion of your portfolio because, remember, the goal in retirement is try to move that money now that you're not working anymore. There is strategic ways to start doing conversions with that pretax account. And what we see, Mitchell, is most of the time people come in here, we see 80 to 90% of their money in pretax accounts, and the goal is to try to move that money over a strategic process into tax free accounts so that later in life, especially if inflation keeps running rampant, people can start to have access to money that they don't have to worry about the IRS being involved in and taxing them on it. And that's one of the objectives of doing Roth conversions. We love Roth conversions. We think everybody that has a lot of pre taxed money should look at doing them.

Dwight Mejan:
And that's what our tax mapping is going to help you look at and consider is how much should I take and what's it going to do to my tax return? Well, we're not going to let the surprise of that happen or the uncertainty of knowing what's going to happen without helping you see it before you do it. And that's why we use strategically designed software for this process, will lay out a conversion strategy, map it out for you, and show you an estimate of the taxes that you'll save over your lifetime. And this is assuming there's no change in tax rates, right? We don't know what's coming. We talked about that earlier in the show. Public policy could raise taxes. It probably will. That's all the more reason to consider an IRA in a Roth or a Roth conversion strategy. So the benefits of a Roth IRA, you've got tax free withdrawals, withdrawals from an IRA and retirement or tax free, which means you don't pay taxes on it. The conversion, if you're eligible, you can convert your traditional IRA into a Roth IRA, which can be beneficial if you expect your tax rate to be higher in retirement. And when we poll most people, that's what we find. People all believe taxes are going up. And I believe that as well. No age limit for contributions. Unlike traditional IRA, there's no age limit for contributions to a Roth IRA.

Dwight Mejan:
As long as you have earned income, you can contribute to a Roth IRA account. So there's also no required minimum distributions. So unlike a traditional IRA, you don't have to start taking distributions at age 73 like you do those pretax accounts. And there's also that potential for compounded growth. The money in a Roth IRA can grow tax free, which means that account has the potential to grow faster than a traditional IRA or a taxable investment account. The other benefit here is liquidity. You can withdraw your contributions to a Roth IRA at any time, although you you'll owe tax and penalties on earnings if you withdraw for 59 and one half. Just keep in mind with a Roth account, a Roth, if you're doing conversions and you don't have a Roth set up, that accounts got to be established for five years before you can begin to pull money out of it or you'll face a penalty with that as well. So estate planning is the last area. Roth IRA assets can be passed to beneficiaries without the need to pay taxes on those inherited assets. And that's a huge benefit for people who have that affliction of affluence, as we like to say, and they want to make sure their beneficiaries are set up. Tax strategies around those conversions are very important. So we're going to take a quick break and we'll be back to finish up.

Producer:
You're listening to Retire 360. Maybe you. Are you interested in protecting your assets from market volatility, rising taxes and economic uncertainty? Then tune in to Retire 360 with Dwight. To learn how you can protect and grow your hard-earned money. Retire 360 Sundays at 3 p.m. right here on Talk 97.3 FM 104.1 FM and 990AM WEEB. Protect your hard earned money today at Retire360Show.com. You're listening to Retire 360.

Dwight Mejan:
All right. Welcome back to the Retire 360 show. I'm Dwight Meegan and Mitchell Keiser. My son in law is here with me. And we're I just want to wrap up by talking just for these last few minutes about our live workshop that's coming up. These are always great events. Mitchell We find we find it refreshing just to get out in the public and meet people and shake their hands, but also to communicate valuable information that everybody needs to know a little bit more about. And that event is taking place on February 7th. That's a Tuesday at 6:00. It's two weeks, roughly a little less than that from when you're here in the show. But we're going to talk about the topic of taxes in retirement. This is going to be at the Cannon Park Community Center in Pinehurst. And when you attend the seminar, a couple of things we're going to be talking about is recent tax law changes. We're going to go over those. We're going to help you understand the importance of knowing what your marginal tax rate is. We're going to specifically address how taxes are different in retirement, and we're going to show you how to avoid some of the very common tax pitfalls.

Dwight Mejan:
There's some common mistakes out there that people make. We don't want to just tell you what the mistakes are. We want to share with you how to avoid those mistakes. There's all types of interaction between the different income types that people have in retirement. So we're going to discuss those, that interaction between those income types and what you need to be looking at in terms of laying out your investment strategy. And we're going to talk about the strategies to reduce the overall lifetime taxes that somebody's going to pay in their retirement years. We're going to discuss the overall tax system itself. And finally, we're going to look at how smart decisions that you make in retirement can have significant impact on the overall tax bill. So it's a lot of good information. Mitchell, don't you find that from the folks that come you hear that you hear this from people that you know, that you talk with, you meet with a lot of them after that, I don't talk with. But what do you hear, Mitchell or you want to add to that for the listeners?

Mitchell Keiser :
Yeah, You know, after as people are walking out, usually I'll just ask them, hey, did you learn something new today? Or just kind of get a little bit of feedback from them? They also give us a feedback form. Everybody always says that they learn something. I will say this year in particular, I do think is going to be different and they're going to learn more because there have been changes to the tax code and seniors are affected as of 2023. So I think if somebody does come out to our event, I mean, I guarantee you you're going to learn some stuff that you didn't know 100%.

Dwight Mejan:
Well, with that, we want to tell you how to sign up for that. A couple of ways to do it. One, you can contact our office, reach us today at 910 235 0812. Space is limited, folks. We do run out of room so probably happen at this event as well, just based on the room that we have. And you can also check us out on our website. There'll be a link there for the event to register for taxes and retirement seminar. You'll find that on our website. Retire 360 show again that's Retire360Show.com or reach out to us by phone at 9102350812. We're going to have one more show between that time and the event, but looking forward to meeting a lot of our listeners face to face and more importantly, sharing some valuable information with you. So take care and enjoy your week and watch that money wisely. And we'll be back to share some more relevant information next 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 9102350812.

Producer:
Investment Advisory Services offer 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:
Fixed annuities, including multi year 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. Structured notes involve risks not associated with an investment in ordinary debt securities. The securities are not bank deposits and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency, nor are they obligations of or guaranteed by a bank. The securities will not be listed on any securities exchange, and the secondary trading may be limited. Therefore, there may be little or no secondary market for the securities. Accordingly, you should be willing to hold your securities to maturity. The securities are subject to the credit risk of the issuing bank, and any actual or anticipated changes to its credit rating or credit spreads may adversely affect the market value of the securities.

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