On this week’s episode of Retire 360, Dwight and Mitchell discuss the two biggest mistakes people make in retirement, and break down tax-free investment options.
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7.14.23: Audio automatically transcribed by Sonix
7.14.23: 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:
All righty. Well, my name is Dwight. I want to welcome you back to the Retire 360 show. Good to have you with us, especially if you're a long time faithful listener. We're always glad to have our long time listeners back. If you're new to the show, we just want to welcome you to Retirement radio. This is brought to you by 360 Capital Management. That is our firm and we have folks listening in the western part of the state in the Boone Banner Elk Blowing Rock area, and we are recording today from our Southern Pines location. And with me, of course, my sidekick, as I like to call him here, Mitchell Keiser is back. Seems like it's been a while since we've been on the radio. It's only been about a week, but time is flying right by, isn't it? We're finally into the heat of summer. So, Mitchell, are you doing okay? Yep.
Mitchell Keiser:
Doing all right over here. Summer is in full throttle down here in North Carolina. Got to see a bunch of family this month. And one of the weeks that I was out, we were up in Chicago. So I don't know if we have any shy town listeners, but we got some aurélio's up there. That was a pretty awesome experience. Just this past week we were in Pennsylvania, so don't know if you have any PR people or PR people that used to live up there. But yeah, it's good to see family and but good to be back.
Dwight Mejan:
Yeah. For those that don't know what a real is, is it's a pizza joint in Chicago. Really good pizza. Mitchell got broken in the right way, eating the right type of pizza. So we paid for it, though, didn't we? Back in the gym again. Hard and heavy, right? Oh, yeah. Well, hey, we're, uh, we're glad to have you folks back with us here. And again, I'm your host, Dwight. My goal is really simple. It's been that simple From the get go since we've done this show is we want to help you win with your money. Um, those of you that are listening to this, most of you have begun or have a nest egg already saved. If you didn't, you probably wouldn't be listening to the show. But we do have people that are getting started, so we're glad to have them on the show as well. We've got a good show today lined up for you. We're going to be talking about the retirement red zone. For those that don't know what that red zone is, if you've heard us talk about it before, it's that critical period right before you get ready to retire. And it's the period just after that that really is critical about your money, how it's invested, what you have it invested in. Do you have an income plan? Do you have the proper amount of insurance set aside for both long term care, life insurance or disability? If you're still working? But we're going to tackle today how to take control of your financial future.
Dwight Mejan:
So again, this is brought to you by our company, 360 Capital Management, and we're just glad to have you with us. If you want to get a little more caught up on us or check us out, you can go to our website, Retire360show.com, or you can download wherever you get your podcasts from. You can go to retire 360. Just do a little search tab in there and you can find us anywhere you download podcasts. We're also on Facebook and Instagram. You can just find us there at Retire 360. We also have a YouTube channel. So check us out there. And hey, we love to hear from you, our listeners. So reach out to us. You can contact us by phone at (910) 235-0812. If you're in the low country, if you're up in the western part of the state, you can contact us at (828) 278-7814. But for our listeners, we got a special report. We put these together, our team does. We get a lot of great feedback, don't we, Mitchell on these reports that we get out to people and this one is on um that we have set up is basically it's free. All you got to do is call in or reach out to at that email address I just gave you.
Dwight Mejan:
The new one that we have ready now is a bond replacement report. For those of you that were in bonds last year, you felt the pain of being in bonds. Bonds took a beating, the worst beating ever on record. And we have a bond replacement strategy. If you're looking for ways to diversify, perhaps you're still in bonds and maybe want to get out. But you want to make sure that your strategy is still set up properly. As far as your allocation in a fixed income type model, we'd love to get that report in your hands. Just get in touch with us and the report. You'll learn a little bit about how we can delete fees on up to 50% or more of your portfolio today. Just remember, there are fees if you're in a managed account that go with those bonds. And in this report, we'll show you ways that you can keep more of that hard earned money in your pocket. And it's all part of our fee efficient and market efficient strategy for our listeners to help you win with your money. So just an overview of the show today. Mitchell's going to get to our inspirational quote of the week here. In just a moment, we're going to be bringing you a market update on the latest jobs report and interest rate hikes that are on the horizon.
Dwight Mejan:
We've got a demonstration of inflation, inflation demonstration that we'll get to in today's show. Americans are still struggling with rising costs and we'll talk about why. And then we also have an update on the great annuity Gold rush. Retirees and pre-retirees are breaking records in that in that arena. And then if we have time, we'll get to this Week in History. Just a listener call out if you've been listening to the show because you're interested in improving your financial situation in retirement. I know some of you got another call this week from somebody who says, Hey, I've been meaning to reach out to you guys for about four months. That person finally made the call and had a great, great first meeting with us. They sent us an email just saying they wish they would acted on that a little sooner. But the point was they reached out. We spent a little time with them on a Zoom call, which we can do zoom or we can do an in-person meeting, whatever is convenient for you. And we'll walk you through specifics that you have questions on. Just talk to you about some things that we'll be covering on today's show. Whatever suits your preference, but just give us a call. Go to that website. We'll be happy to meet with you personally and we'll provide some custom guidance and solutions based on your specific financial needs.
Producer:
And now wholesome financial wisdom. It's time for the Quote of the Week.
Mitchell Keiser:
Yeah. So our financial wisdom this week is brought to us by Abe Lincoln, 16th President of the United States. And that is the best way to predict your future is to create it. We get a lot of people coming into our office that they just plant seeds over the years. We're like, hey, you know, just took, you know, $100 out of my check or they contributed this much per year or they matched whatever their employer did, but they never really had a specific plan. I would tell you guys, if you don't have a strategic plan in place as far as what your money is working towards or what your goal is, how much you need to retire, whatnot, it is that you need to hit work with somebody in your community or ask a trusted friend or somebody that knows more than you that can help set you on that right track. Because more often than not, most people don't know how to do it on their own, and it's best to work with a professional. I also just want to let you guys know of our upcoming events that we have. If you guys are in low country down here in Pinehurst Sanford area, we are going to be having an educational event that we do on taxes in retirement, and that is going to be on July 20th at 6 p.m. and that is going to be at the Dennis Wicker Civic Center. And we're going to have another class on Friday, July 21st. And that is going to be at 11 a.m. So if you guys are interested in learning more about taxes and retirement, the best way to sign up is probably to give us a call. Um, if you are interested in that, call us at (910) 235-0812. And we can just make sure that we have a spot safe for you. We do sometimes book up, so make sure that you give us a call versus just showing up because sometimes we do book out, but we look forward to seeing you guys and think Dwight's going to fill us in on a market update.
Your active wealth market update?
Dwight Mejan:
Yep. Sureom Mitchell Just for our listeners here, we want to just report on job growth and some interest rate changes coming probably on the horizon here. But job growth continues to remain pretty steady. In June, US employers added 209,000 jobs despite relatively high inflation. Still, that we're facing high interest rates and nagging recession fears, the unemployment rate fell from 3.7% to 3.6%, the Labor Department said last week. And the job growth has slowed from blockbuster gains of 472,000in January. So it's it's down, but jobs are still being added. It's unlikely to stop the Fed from hiking rates again later this month, particularly when the downward trend in wage growth appears to be stalling. This was all from economist Andrew Hunter of Capital Economics. So, yeah, we got to continue. And that's what the feds are doing. They're continuing to watch this jobs report. And as great as it is that we're adding jobs, you know, the fact that inflation is still running rampant and interest rates are still high, they still want to slow down this economy. And that's likely where we're going to see later this month some interest rate hikes. And that's they predicted, you know, maybe a quarter point. A lot of that's probably priced right now into the market. But something still to watch. The labor market has defied predictions of a sharp slowdown in job growth for most of this year. You've heard us talk about it and we're getting our information from a lot of the analysts.
Dwight Mejan:
But this is defying a lot of the odds of what people are saying. So it may be that industries such as leisure and hospitality are still catching up to the pre-COVID payroll levels. This was from Ian Shepherdson, a chief economist of Pantheon Macroeconomics. So yeah, the jury's still out on this, Mitchell and our listeners, so we'll keep you posted on that. But just be aware of some hikes that are coming. And, you know, if you have to do something right now with fixed interest and you've got to go get that mortgage, it might be a good time because those are probably going to be creeping up a little bit. You know, it's kind of a catch 22, isn't it, That, you know, when interest rates on our CD rates and money markets go up, it's painful if you're on the borrowing end of that because that tends to go up as well. So and that's we didn't have this in the report we were going to share, but that's one of the reasons right now housing is fairly slow. Listings are I know are weak because a lot of us, you know, refied that have mortgages and that caused you know, nobody wants to dump a two and a half or 3% mortgage to trade up for something that's double that right now. So a job the housing market has certainly slowed down here as well as far as listings go.
Producer:
Want to know where your hard earned money is going. It's time for an inflation demonstration.
Mitchell Keiser:
So I had some stats for you guys just from where we were in previous years to where we are today and kind of what that looks like. So core inflation is up about 5.3% when we compare it to about this time last year. And according to a poll from USA Today, 7 in 10 Americans say that inflation and the economy are the nation's top problems. I just want to throw something out there, too, and just say I saw another poll was taken that said that Americans are very happy with their financial situation. I find that very hard to believe, though. That is what they claim. Private polls are saying the exact opposite. What's America's economic state overall? I think everybody would agree that it's frustrating and uncertain. The typical American household spends about $768 more on monthly goods and services compared to what it was in 2020 because of the high inflation increase. Just want to point out with the $768 more, that's just the average. So that's averaging people with, you know, young kids, no kids. The older households, that probably doesn't buy as much. That's not accounting for the young families. I would think that they're probably, you know, the biggest household spenders, the people with young kids that are eating them out of house and home and, you know, trying to save for college. So $768, you could imagine that the average young family is probably over well over a thousand. I just had to, you know, throw a dart at a dart board. But. Just something to keep in mind. Around 25 million Americans are behind on their credit card payments or auto loans, personal payments.
Mitchell Keiser:
And this is according to a recent Moody's and Equifax data analysis. Also, the delinquency rate for bank credit cards is about 3.27in May, nearly two points higher than it was back in 2021. The good news is many people still have jobs and the wage growth has been pretty solid, but not enough to feel good about shelling out more money for basic needs. Yeah, so not all bad. Not pointing to a full on recession, but there is still a lot of uncertainty going on in the market, in the housing market and the stock market. And every day, day to day life, I think we're all experiencing a lot of changes. So just something for you guys to be aware of in your portfolios. Hopefully you are looking at those quarterly statements. Hopefully you do have a plan, but if not, make sure that you're consulting somebody. If you guys want to consult us or if you have any questions, we're more than welcome to answer those. You can put an inquiry on our website at 360 inchem.org. We have a spot where you can ask questions there or if you want to call us, if you have a lengthy question, feel free to do that at (910) 235-0812. Again, our office number is (910) 235-0812. And we can try to answer that on a more personal basis. We are going to take a short break. And when we get back, Dwight is going to go over the annuity gold rush and how that is affecting us today.
Producer:
Miss part of today's show, Retire 360 is available wherever you listen to podcasts and online at Retire360show.com.
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.
Dwight Mejan:
All right, Well, I'm your host, Dwight Mejan, and we're back here, Mitchell Keizer alongside me. We just want to welcome those of you who may be just tuning in for the first time to the Retirement 360 broadcast brought to you by 360 Capital Management. Glad to have you with us. We're here to talk about how to win with your money. Mitchell just got done in this last segment giving us a little inflation demonstration update on kind of where we stood with inflation. I think everyone listening feels the inflation pinch regardless of your income level. As we always my dad always used to say, everybody's broke. It's just some people are broke at a higher standard of living than others. You know, inflation affects obviously people who are on lower incomes, particularly people who are retiring, maybe that don't have the wage that they had when they were employed. But there is a little bit of a silver lining here as far as where people are flocking with their money and Limra, which is a marketing research association, their life insurance marketing and research association, they put out a report. They're very active in basically tabulating sales of life insurance and annuities and annuities have had another record breaking quarter in the United States as more pre-retirees and retirees are seeking out more guaranteed income solutions for their future. They again have broken records by purchasing more annuities than ever before. So following record high sales in 2022, and that's basically where people were flocking.
Dwight Mejan:
A lot of them were going into fixed account annuities similar to CDs. You know, there's rates. I know we had clients that we don't have these rates right now quite there, but we had clients that were locking in at over 6% last year. I know we got some folks into fixed 6% rates for five years. Another indexed annuity is another one that people are flocking to because of that responsible growth component that they have by tracking the gains of being in a market or equity linked account without any downside risk. And that's one of the reasons these have been purchased so heavily. And Limra is backing that up here with their statistics. But the first quarter in 2022 was $92.9 billion and that was a 47% increase from the prior year. This represented the highest quarterly sales ever recorded, according to preliminary results from Limra US Individual and Annuity Sales Survey. So again, if you're not familiar with annuities, that is one of the things we occasionally talk about on this show. Again, may not be for everybody. And there's different types of annuities on the marketplace. There's fixed which are kind of like your CD type. I was just mentioning then you have fixed indexed, which are annuities that are linked to an external index like the S&P 500, for example. And then you have variable annuities, I don't think variable annuities, although they were up they weren't up as high as the fixed and the fixed indexed annuities because that's still a securities product where you do face risk to your principal.
Dwight Mejan:
But some of the the key takeaways from this survey about annuities market conditions really continue to drive investor demand for annuities. Every major fixed annuity product line experienced at least double digit year over year growth. Folks, I can't emphasize enough that's a huge, huge change to have every annuity product line experienced double digit growth. So that that ought to get your attention. It certainly got mine when I read that statistic from Limra. Fixed indexed annuity sales also had a record breaking quarter. They were up 42% this year of 2023 over the same first quarter in 2022. So 42%, folks, is a big, big jump. And again, it just speaks to people's flight, to safety and wanting to responsibly grow their money and hang on to what they've saved. Economic conditions remain favorable for annuities, and this is forecasted to continue throughout the year. Limra is predicting fixed indexed annuity sales to continue to grow as investors continue to seek out solutions with a better balance of both protection and growth. So just, you know, be on the lookout and, you know, call us if you want to know a little bit more as to whether or not some of your portfolio should be in an annuity.
Dwight Mejan:
And I would speak to those of you who perhaps this is a great opportunity to mention this. Maybe you got into an annuity, you know, 4 or 5 years ago. And I'll tell you, if you're one of those people, you need to pay attention to. What I'm about to say to you is with the rise in. Interest rates and annuities, particularly fixed annuities and fixed indexed annuities. The fixed indexed annuity is all linked to what the bond yields were at the time that you took out your contract. So being that bond yields have have risen when the insurance company, when you hand them money to take out an annuity, they have to go in and purchase a government treasury with that money. They can't speculate in the market and just invest it in something where they could lose your money that you've given them. So because rates have have climbed on, some of those older contracts are not as favorable with their caps and with a fixed indexed annuity, you know, the promise of protecting your money in a downward cycle comes at a little bit of a cost. On the upside is that you don't get the full oftentimes upside potential of that of the market when it's growing. So, for example, if the market has a favorable year and it grows 20%, it's highly unlikely that your fixed indexed annuities are going to keep pace with that 20%. You'll have some reduced amount for the protection.
Dwight Mejan:
It just depends on the product. But if you got if you came into an annuity, you know, 4 or 5 plus years ago, this might be an ideal time for you to determine if you could get out of that annuity. And some of you are thinking, well, if I do that, I might take a penalty or I'm going to take a penalty. There are newer products that have higher caps potentially that you could exchange your product for, and there are bonuses that could come with that to pay the penalty to get you out of that less favorable product. So again, if you are listening and that kind of fits your situation, definitely reach out to us. We'll get you that phone number here in just a moment. At the end of this segment, I'll have Mitchell give it to you or our Web address and we can do a simple, you know, five, six, seven minute analysis on a phone call and get back to you and let you know if a product exists that could make a difference in you potentially earning several more percentage points in a market compared to the product that you're in right now. So Mitchell, think you can update our listeners maybe on a consultation and give them that phone number and that information that I just mentioned. They can reach out to us if that fits their situation.
Mitchell Keiser:
Yeah. If you guys up that struck a nerve or. Caught your attention and something you guys would like to look into a little bit more. We'd be happy to talk to you about fixed indexed annuities or if you guys would like us just to run a risk profile on what your portfolio is. How much risk are you taking? We're going to talk about the lost decade and the oh eight crisis here in just a little bit. But, you know, if we had a situation like that happen again, you know, how would your portfolio respond to that? If you would like us to shock, test your portfolio and let you know that information so you feel better prepared, we can do that to you at no cost. We run that through one of our nonprofits, but if you guys would like that, would like more information on that, you can give us a call at (910) 235-0812. Again, that is (910) 235-0812. And again, if you would like any kind of information from us, we do not charge you for knowledge. So that would be free to you. So feel free to call us.
Dwight Mejan:
Thanks for that, Mitchell. We also have Social Security that we can run for our listeners. If you're getting close or wondering if you could retire and you're wondering to figure out the timing of your Social Security, one would be the best optimal point to take Social Security. We had a call this week in our office from someone who was wondering should they defer their Social Security past full retirement age for this person. It was 66 and I think it was eight months. And their question was, should I delay that a couple years or even go to age 70? In this report, we can run that and give you some free advice, like Mitchell said, and let you see free of charge. When would be an optimal point for you to take that Social Security so you can reach out to us there as well. And we'll be happy to provide a report to you on that. So we want to shift gears here again, and we want to just address here the risk that you might be taking with your retirement savings. I think last year was a perfect year for people to evaluate whether or not they were in the correct asset allocation model. A lot of people lost money last year and obviously it's been a good year so far. You know, with the S&P up about 15% year to date this year, many people are starting to see some ground being covered from what they lost, but still not back to, you know, where their accounts were prior to this precipitous drop in the market. But it's a good time to evaluate whether or not you're taking too much risk with your retirement savings. You know, retirees have been facing some difficult decisions lately due to inflation, soaring interest rates that have been putting a strain on their wallets and retirement planning.
Dwight Mejan:
Some were actually unretiring and deciding to push back their retirement. And some aren't even sure whether or not they're going to retire at all. Yet there's this common thread among retirees they can't seem to let go of their stock market habits. There was a recent Gallup survey, and they found in that survey that among older Americans aged 65 and over, about two thirds of them, 63% owned stocks, which is up from 53% for Americans in that same age group. Prior to the Great Recession, which was 2001 through 2007. So it's important to remember that as you near and enter retirement, you have less time to make up those big losses, which means that balancing safety and risk is an important point to consider with your financial advisor or the professional that's guiding you on that. And you know, when markets are good, you know, people are quick to forget these two recent events. And the first one here, and I'll let Mitchell cover the second one was the lost decade, and that was a ten year period. That was from December of 31 of 1999. And it went through December 31st of 2009. The S&P 500 generated an annual total loss of 0.9%. So just under 1%. So that whole decade, can you imagine if you had retired at the beginning of that period and you were counting on a portfolio that needed income from it and you got a dismal loss of almost 1%? So it's very important to balance risk with safety. And Mitchell, you've got another point to talk about there, about another crisis. Maybe you can update our listeners.
Mitchell Keiser:
Yeah, just I just kind of wanted to add to what you were saying about the lost decade. So that was ten years where if you were in the market, you were essentially down still after that ten year period, about 1% and might introduce a new term here to our listeners. This is why you want to make sure that your assets are not highly correlated. And what that means is that, you know, when markets go up, you know, all your your whole portfolio is going up and when the market goes down or is flat, your whole portfolio is flat, it means that everything moves in tandem with one another. And I will say the biggest situation where we see clients come in, where they are highly correlated is when they're working with like five different financial planners and they say, Oh, well, I'm going to be diversified and have a planner here, here, here and here. That's probably one of the worst strategies that you could do because they're probably going to have you invested very similarly with different mutual funds. So what you're probably going to see in those situations is, like I just said, when the markets are good, it's going to go up. And then when it's bad, it's going to go down. Ideally, what you want to do is make sure that they are not correlated. So when markets are going up, you have some assets that are probably not going quite as fast. And then when markets are down, you have other securities that are going to go. Up to offset the losses.
Mitchell Keiser:
Um. Tying that back into what Dwight was saying earlier about annuities or CDs. That is a reason why annuity sales are up. Annuities are like a form of CD. You guys have heard the term CD at a bank. Protect your principal backed up by a huge association that it's not going to go bankrupt. Another so we use annuities, we use CDs, we also use notes. People have heard of structured notes, things like that. It's important to have those things also embedded into your portfolio. So that way, you know, when you have and a note that I'm saying when you have because it's more than likely not going to be is there going to be another time period where markets are going to be flat? It's really when because historically this has happened and history tends to repeat itself and it's likely to happen again. So when this does happen again, how are you going to be prepared for it? And are you guys going to wait ten years for your portfolio to do nothing for you to decide to do something different? Folks, don't wait ten years. Do something now. Make sure that you're not correlated. Like I'm saying, add some CDs, add some structured notes, add some annuities, add some diversification outside of, you know, just stocks, bonds and mutual funds. Because like we just said there with the S&P, if you do that mean you just run the risk of being correlated. And if we do have another time like the lost decade, your your portfolio may not fare favorably.
Dwight Mejan:
Mitchell, on that point that you're mentioning, we had somebody in our office this past week that came to one of our events that we're going to be doing here again that you updated our listeners on earlier. And I know you'll give it again by the end of the show. Um, on a tax event that we did, this person came in and was looking for some guidance on just the way some things were hitting their tax return. They got clobbered with taxes. So we were looking at that and he had brought in all of his investments and they did. This couple have done a great job in saving for their retirement. Phenomenal job, to the point that they didn't even need income. From their portfolio. Been retired for a few years and asked them, I said, Do you foresee a time in the near future, in the next five years where you're going to need to pull money out? You know, and it wasn't for required minimum distributions, by the way. Just asked them, Are you going to need to supplement, you know, more income from this portfolio to live the lifestyle, to do the things you want to do? And they just both looked at me and said, nope, don't think we'll ever need it. Well, most of their money was in pre-tax accounts, like a lot of people that we visit with, most of them have more money saved in pre-tax accounts where they, you know, have contributed. Got to write that off on their taxes as far as contributions.
Dwight Mejan:
But all that money, when they pull it out, it's got to be taxable. And I asked him a question. I said, What's your strategy? Start moving this money over. And do you have a strategy for moving it into Roth accounts? And who's going to help you with that? And they had none. I simply looked at them and I said, well, if you what if you have to pull and gave him a number X number of dollars out of your portfolio in about five, six years because you're forced to pull it out due to required minimum distribution, they said, Well, it wouldn't be that much. And I said, Yeah, it's very likely to be that much. And I proceeded to just show them if they made between 6 and 7% on their portfolio, very modest return over that next period of time. I showed them exactly based on the current RMD tables, how much they were going to need to take and 80% of their money was in pre-tax accounts. And I showed them what tax bracket that was going to put them in. It jumped them up three tax brackets and on top of it, their portfolio was down last year, 26%. So know I'm throwing a lot of information out here to our listeners, but the point I was making there is, number one, this person didn't need income and they had a portfolio on a 1 to 5 risk scale, five being very aggressive.
Dwight Mejan:
They were at about a 4.2, 4.3 as far as aggressive. And I asked them both what their tolerance for risk was earlier than that. We were kind of and I'm simplifying this because it's a radio show so people can understand this. Her risk tolerance was a one all the way. She did not want any risk. He was right in the middle of about a 2.5 out of five, maybe right around there. No, no higher than a three. And yet their portfolio, just looking at it at first glance and what they lost was set up more like a four and a half. And they're taking all this risk. They have nobody managing the money. They've got money spread out all over the place and they don't need income from the portfolio. And they're going to be thrust into much higher tax brackets. And I could see the light bulb literally going on in both of their heads saying we've got a tax problem, a tax time bomb sitting right in front of us. So what we proceeded to talk about and they're coming back next week for another complimentary meeting with us, we're going to show this couple how in the next five, six years they can tilt that portfolio to get it more where more of their money by the time they have to start pulling money out for required minimum distributions, we're going to show them how more of that money is going to be in tax free buckets into that Roth account.
Dwight Mejan:
And we're laying out for them how that portfolio can get even more diversification. And folks don't know what you grab out of what I just said there. But when you talk about less risk, similar returns historically and less tax liability in the future, that ought to get your attention to say, Yeah, why isn't my advisor talking to me about those things? And you know, we just need to maybe get that second opinion. Hey, pick up the phone. Give us a call. (910) 235-0812. If you're in the Pinehurst-southern Pines area, if you're up in the mountain area, western part of the state, reach out. Call us at (828) 278-7814. Hey, we'll put it on one page of paper. How's that? How's that for an offer for you? I'll put it on one sheet of paper, the whole gamut that will show you that I just described for that couple. And it'll be simple for you to understand. This isn't complex. It can we can make it complex, but we find from our experience, most people want simple and we keep it that way to where you can understand it and you're able to digest that and, and just evaluate it against what you're doing. And we'll, we'll, we'll lay those two side by side and let you determine which is the best path for you to continue. So Mitchell, why don't you update them? I think you had to get to the the other financial crisis that we were talking here about taking too much risk with.
Mitchell Keiser:
So when things are good, it's easy to look at what's good. We were just kind of talking about, you know, the the lost decade when things were, you know, pretty flat for about ten years and then for the past ten years plus, you know, prior to Covid, we had a bull run where things have been growing exponentially. And we were just talking about the lost decade. Don't forget that. We also just want to remind you of the 2008 financial crisis and what that looked like. So from its pre-crisis and peak of October 2007 to its lowest point in March of 2009, the S&P lost approximately 56% of its value. The S&P lost over half of their value. The Dow Jones dropped 54% between October 2007 and March 2009. So they also lost over half of their overall value. Approximately 8.7 million jobs were lost in the United States between 2008 and 2010, over 3.1 million homes were foreclosed in 2008, and a total of 10 million homes were foreclosed in 2007 and 2010. The US government intervened with bailouts and financial assistance to stabilize the financial system. But the Tarp, which is the Troubled Asset Relief Program, authorized $700 billion to rescue banks and other institutions. We don't tell you this to scare you. We just know that these are real situations, real problems, real concerns that people have. On a personal note, just this past weekend, I was talking to my grandma and she was just asking me some questions about her Social Security and her Medicare and just different things that she should be made aware of.
Mitchell Keiser:
And she just kind of made a joke of, you know, I hope it doesn't end up that I have to go back to work or get another job. I hope it doesn't turn out to be that way. She's 77 now. She's been retired about 12 years, and now she's looking at the economy and she's just kind of saying, you know, I hope I don't end up having to go back to work, which is, you know, it's a pretty sad place to be from somebody, you know, that has prepared for retirement as a government pension, you know, And then they're looking at the world, they're looking at things going on and they're, you know, they're fearful. So this stuff is real, folks. And if anything that we've said sparks something in you to want to learn more information, we encourage you to look that up. Give us a call. Seek that information out for yourself. We are going to take a break. And when we come back, we're going to talk about retirement mistakes and the things that you guys need to be cautious of looking out for. We'll be right back.
Producer:
You're listening to Retire 360. You're listening to Retire 360 with Dwight Midgen. Now back to the show.
Dwight Mejan:
Okay. We are back with the Retire 360 show. Thanks for tuning in with us and sharing part of your day with us. It's an honor that you tune in to hear us and have you part of the show. Hey, on that segment, Mitchell was just talking about just one statistic here. 1970 through today. There have been 13 years out of that period of time, 50 plus years that the market has experienced loss. And some of those losses, folks were very, very significant. We always, you know, emphasize it's not, you know, you want to make a fair return on your money, what risk that you can tolerate. But it's not what you make, it's what you keep. And one little reminder I want to throw out there to people, this really irks me that we get these mutual fund reports and everybody likes to express returns as an average annual rate of return. Or you might have heard me say this. I haven't said this for a while on the show, but that is, in my opinion, especially when you introduce a loss in a given year like we had last year in 2022. When when they average that in to, let's say, a period of five years. As soon as you introduce a loss into a period of time, the amount of money you start with, if you just take that average and just start multiplying it, it's not going to equal your ending balance.
Dwight Mejan:
Okay. And as a perfect simple example, imagine taking $100,000 and investing it and in the first year you have you have a healthy year, it's up 10%. So you. I'm sorry. Let's just go with the loss. You have a night. Let's say you have a 10% loss. I'll just start with the loss. You put 100 grand in, you got a 10% loss, you're down $90,000. Now, the second year, year or two, you have a 10% positive return. So you're up to, what, $99,000? Correct. That will be reflected if I asked you what's the average rate of return that you earned? You would take those two plus ten minus ten, divide it by the number of years, which is two. You end up with 0%. But you notice if you take 0% on what you started with, you're down $1,000. So that doesn't equate to the real dollar value of your account. And that's the distinguishing feature between what's called real rate of return on your money and average rate of return on your money. And I will tell you that the pundits over at Wall Street and all the mutual fund companies, they're always going to show you the average rate of return. And that is not always an accurate figure to use when you are looking at your accounts.
Dwight Mejan:
What ultimately matters at the end of the day and what matters to me, my own accounts. What's the real rate of return on my money? Not the average rate of return. Because if you have a big loss in a given year, it's going to skew what your, you know, your total balance is going to be. If you were to try to average that number out from your beginning investment. So just be careful with those, you know, the verbiage on what you're reading and look at that real rate of return. And that's, you know, if you're good with math, you have to kind of compute that yourself. So but hey, I want to talk about here as I finish up my segment, Mitchell's got one other segment he's going to take to finish round out today's show. I just want to talk about the two biggest retirement retirement mistakes that people make. And number one is a lot of people often equate retirement with a number. There was a commercial I know that ING used to put out there. I don't see it much anymore with the little orange squirrel. I'm not poking ING by any means, but that was just the ad, remember? And the question You remember the question in the ad, what's your number? That's what they used to ask. What's your number? And they even made it appear that there was this magic number that you had to get when you retired and then you were, you know, scot free and sail off into the horizon and you got your number.
Dwight Mejan:
But as we say, you know, retirement is much more about the strength of your income plan than the total balance of your savings. Too many people have all or a majority of their savings in a tax deferred account, such as a 401. K, an IRA, 403 B or a 457. This means the government is a major partner with you in retirement and you're going to be subject to significant and likely rising effective tax rates. And to correct this, what we recommend focusing on is different sources of retirement income because your income in retirement, folks, it is your lifestyle. And that's what ultimately matters is where are you going to get that check every single month? And what if you can't count on that same check? Because you know, the principal amount of money that you saved goes down because you've been too aggressive with it. So you've got to look at the different sources of income, Social Security, pensions. If you own any annuities, that's what you have to focus on. So the other thing, you have to look at the number two thing, the biggest mistakes people make is people don't start saving or planning early enough.
Dwight Mejan:
Einstein once said that compound entrance interest is the eighth wonder of the world. So the earlier you start saving, the more time you have to grow your hard earned money. Remember, it's never too late to catch up. I just read something this weekend that if you're if you're young and you're driving right now, you want to stay tuned in, even if you're getting out of your car, stay in your car for one second. If you invest $100 a month in your 25, you put it in an average growth mutual fund and leave it alone. And just only do $100 a month until you're 65. You know how much money you'll have when you retire. You'll have a little bit north of a million bucks. Now, if you wait to do that, just ten years, you forego that $100 a month. You said, I'm going to start it at age 35. And I want to do $100 all the way to age 65. So you just say I missed ten years. We won't be that far off. Mitchell, you want to take a shot at that? How much money do you think they'll have at 65? Just delaying it. 35 when we're talking about 1200 bucks a year here. So a little over $10,000. 1212 grand. 13 grand. The this saving, What does that compute out to at 65 for that person?
Mitchell Keiser:
So for it was 1200 I'm going to guess if they delay it. 1800.
Dwight Mejan:
Yeah. No if say if they wait to put that money in their account that save $100 a month, they start at age 35 instead of age 25. So they delay it ten years. Well, how much are they going to have difference if the person at 25 has got a little over $1 million in their account? How much do you think the person who started at 35 is going to have.
Mitchell Keiser:
Uh, let's say? 30% less if they delay it.
Dwight Mejan:
That's about two thirds less. They're going to have they're going to have 300 grand in their account versus a million. So you you forego $700,000 by waiting to invest 100 bucks for ten years. Folks, if you're young and you're drive and you're listening, get started in a retirement plan. Just put money aside and invest it and let the power let that eighth wonder of the world, like Edison said, let it take over. You won't regret it. You'll get addicted to saving and you won't miss saving when you watch it start to grow. Waiting too long to plan for retirement could mean enduring a massive lifestyle downgrade. And there's multiple factors to align and consider. You've got Social Security planning. You've got tax planning to consider pensions, when to turn on income or take a lump sum. Establishing a budget that considers rising inflation and taxes is something else you have to consider there, as well as estate and legacy planning. So. Enough with that. But Mitchell, maybe I'm going to turn it over to you. Over to you. Here. And you could just wrap up segment here for the show for our listeners. You're going to talk about tax free investments and the number of tax free investment options there are.
Mitchell Keiser:
Yeah. So a big question we always get asked is how do I grow my investment tax free? How do I avoid the RMDs? People want to take advantage of taxes. That's also why it's our biggest class that we teach. Again, we're teaching that class this upcoming week, if you guys are interested in that. But we'll get to this first, the two types of tax free investment vehicles and how to take advantage of that. Number one, you can open a Roth IRA, you can start an IRA and set it up for automatic contributions If that's something that you're not already utilizing, you can also convert your existing tax deferment or deferred retirement savings into a Roth IRA by implementing a Roth conversion. So something I would caution you guys to do if you are considering a Roth conversion is one, look at your tax bracket. Make sure that you're not going to cause yourself a big tax problem to be looking at your tax and what that's going to do to your Medicare. Because if you don't know this, if you take more income and if you pass an income threshold with your Medicare, they could actually double the cost of what your Medicare is. And if it's not double, it could be triple or quadruple in the highest amount that you could pay in Medicare right now is over $500 a month. So you want to be cautious of that. You want to do a Roth conversion strategically. If you are still working and you're receiving income, you can contribute. If you're over 65, you can contribute. I believe it's $7,500 if you're under that age. Or if you're young, still working, it is $6,500 a year. The other way to grow your money 50.
Dwight Mejan:
And over can do 7550 and.
Mitchell Keiser:
Over 50.
Dwight Mejan:
And over. Yep. And Mitchell, just don't interrupt you here again. But on that, something you said you want the listeners to know, some people are wondering, you know, this whole Roth conversion, how is it how is it going to save me money? Will it save me money? How much will it save me? We have a Roth calculator comparison that if you were to call us up and say, hey, I've got, you know, half $1 million sitting in an IRA that I'm going to be subject to required minimum distributions in seven years based on age 73. Currently, if I started converting some of that, how much would I save in taxes? Assuming no change in tax rates, which we know is going to change, but we can run it for you under the assumption of tax rates remaining what they are currently today and show you on a ten. 15, 20, 25 year retirement span with with a projected rate of growth, we could project whatever rate you want 6%, 7%, 8% growth and factor in the taxes and show you the size of your Roth account over each of those years. What that tax free buck is going to be worth versus how much you'll pay in taxes if you just leave that tax free bucket sitting there or that taxable bucket tax deferred and let it just sit in that account and just be subject to required minimum distributions. And then how much tax would be left on that when you pass away at a given year? We can run that for you and explain that on a one page piece of paper to you. Very powerful. And it's gotten a lot of folks thinking differently about just taking minimum RMDs. And it's it's huge, wouldn't you say? Mitchell We get probably 75 to 80% of people when they see that they want to start implementing some type of a Roth conversion. Would you say it's around that statistic?
Mitchell Keiser:
Yeah, I would say more people that can take advantage of their taxes, the more money that you can save and not give to Uncle Sam, who wouldn't want to do it right? So the last thing that I had for you guys for how to you grow your money tax free is utilizing whole life and indexed universal life insurance. Life insurance offers you guys a death benefit just in case you die too soon. But it also offers a great tool to build your retirement savings and generate tax free income during your goal years. We'll get people come in here and they'll say, Well, do I still need life insurance? You know, I have IRAs, 401 seconds. I don't think I need to be paying premiums anymore. I would just tell somebody to look at their tax burden that they're going to leave on their kids. This is another reason to have insurance because the money that your beneficiaries receive will be tax free to them. So if you were going to leave, let's just say you had a large portfolio and you were going to leave your beneficiaries a couple hundred thousand dollars in taxes that they would owe on that money, you may want to take out a life insurance policy to offset those taxes.
Mitchell Keiser:
So they're not getting slammed with the inheritance tax or with paying the taxes on that money. Within ten years. They're going to fall probably within one of those two situations. And if you are interested in taxes and you want to learn more about that and you're in Moore County, Lee County or a surrounding area, we are going to have a class in at KCC at the Dennis Wicker Building. So if you guys are interested in coming out to that to learn more about taxes, the best way to sign up is to give us a call at our office here in Southern Pines. And our phone number is (910) 235-0812. So if you guys are interested in coming to our class on how to take advantage of taxes and retirement, give us a call. We'd be happy to save you a seat. And didn't say this. No, we are not going to charge you to come to our class.
Dwight Mejan:
Well, great. Well, I believe that's all the time that we have for today's show. I appreciate Mitchell being alongside me here and providing information for our listeners. We appreciate you spending time with us. And we're going to hope to see many of you at that class that Mitchell mentioned. And if not, we'll look forward to seeing you on our next broadcast and show. Thanks for taking time out of your day to be a part with us. And everybody, have a great week and thanks for tuning in.
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. 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:
New rules across Major League Baseball have shown their effects both on and off the field. I'm Jim Tarabukin with the Retirement.Radio Network. Powered by AmeriLife. In 2022, the MLB Players Association agreed to a handful of new on field rules, with the goal to increase the pace of play. A pitch clock was introduced prior to the season, eliminating downtime between pitches. The numbers are in in game times across baseball are down an average of 31 minutes this season, but the new on field legislation has led to necessary changes off the field. President of Life Flip Media Eric Mitchell, explains the controversy.
Eric Mitchell :
Further, it's controversial because everybody is so used to the seventh inning. That was it, right? Beer sales are shut off, so games are shorter. Beer sales are, you know, is important. They're also major sponsors of the teams.
Producer:
MLB teams aren't governed to a league wide alcohol sales policy on how long into the game beer can be sold, but the seventh inning has traditionally served as that cutoff point. But according to the Associated Press, the Milwaukee Brewers and the Texas Rangers are two of five teams that will now sell alcohol through the eighth inning of their home games. Milwaukee President of operations Rick Schlesinger talked to MLB.com about his team's revised policy, saying, quote, If it turns out that this is causing an issue or we feel that it might cause an issue, then we'll revert to what we've done previously per the same report, the Miami Marlins and the New York Mets will halt their sales after the conventional seventh inning timestamp, but aren't ruling out potential changes in the future for the Retirement.Radio Network Powered by Emeril Life, I'm Jim Tabaka.
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.
Producer:
When it comes to saving money this year, why not do it the old fashioned way? Clipping coupons? I'm Matt McClure with the Retirement.Radio Network. Powered by Amara, life coupons are still a great way to save money in the digital age, with a lot less paper cuts. You can still find coupons and sales promotions in newspapers and magazines, but things have changed over the years. These days, there are a lot more opportunities to save money by searching online. The tools that.
Dwight Mejan:
Are available now online make that really easy for shoppers to find the very best.
Producer:
Offer. That's Jason Test with the coupon website. Honey Speaking with NBC's Today show, the shift away from traditional paper coupons coupled with inflation does make it harder for some people to save. Take Kirsty Turek, an extreme couponer, for example. She recently told The Today Show.
Jason Test:
I'm saving about 15% less than I was last year, but I'm also seeing probably 50% less sales and less moneymaker items.
Producer:
Still, she says, there are plenty of ways to save if you know where to look. Websites like RetailMeNot have been around for a while, but there are also newer apps dedicated to couponing helping you keep the savings at your fingertips.
Jason Test:
Do not pay for toothpaste. Don't pay for shampoo and conditioner, laundry detergent, personal care items and household essentials. Always, always, always. Have a coupon.
Producer:
So do you know where to go to find coupons that could save you a pretty penny? It's a key question to consider. And it's one of the 23 retirement cost cutters for 2023 with the Retirement.Radio Network powered by AmeriLife. I'm Matt McClure.
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