Will Social Security Be Around for Your Whole Retirement?

9.15.23: Audio automatically transcribed by Sonix

9.15.23: 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.

Producer:
Don't touch your dial.

Dwight Mejan:
The next hour, this is your show. I am your host, Dwight Mejan, along with me, Mitchell Keiser and Sam Davis. We are Retire 360 show. This is your program. I always tell listeners this is the second favorite part of what I do during the week. The most favorite part is meeting with clients and meeting with our listeners face to face. When we can't do that, it's connecting with you and giving you the information that many of you call in. Many of you come to our show through our website, have questions and much of this show is shaped, believe it or not, we don't have an agenda. Our agenda is to help you win with your money. If we have an agenda, that's it. We want to help you. So much of our outline on this show comes from you, the listeners. So if you're a first time visitor to our station, we're glad that you're here again. I'm Dwight Mitchell and Sam are also with me. You're going to hear from them today as well. But just a few just quick updates and we'll dive into today's show. If you are new, you can come to our website, Retire360Show.com you can find out about us there. I say the most important thing there are our core values and our Mejan. If you want to know who we are, I like to say there's a lot of things that I'll, you know, negotiate. But one of those things I will not negotiate is the core values there.

Dwight Mejan:
We strive to live those day in, day out with our clients. That is the most important piece. So go to our website and please read those very important to us and hope you'll find that you connect with some of those and resonate with it as well. If you want to reach out to us during today's show, we have listeners in two parts listening to this. You might be in the mountains in the Watauga Avery County area. The number for our show, if you want to call in, is (828) 278-7814. Leave your name leave information. We'll let you know throughout the show today. You can call us about anything. Absolutely anything. We are an independent fiduciary wealth management firm. We don't just manage money. We develop tax strategies for our clients. We develop income plans, estate and legacy plans. We cover health care and the whole investment strategy of the portfolio. So we'll talk deeper about some of those areas on today's show. But if you're in the Moore County area, you can reach us at (910) 235-0812 and you can reach out to us there. Any questions that you have? We'd love to hear from our listeners. But again, our goal here is to simply help you win with your money. You can find us also, we have a YouTube channel. You can just go to YouTube, type in the search, retire 360. You can watch previous episodes of our show.

Dwight Mejan:
You can watch them on demand. We have a Facebook and Instagram account as well. Just type in Retire 360 and you'll find us there. But don't hesitate to reach out to us. We love helping our listeners with whatever it is that's on your mind. We got a great show planned for today, and I'm going to pass it over to Mitchell here in just a second. He's going to give us the quote of the week. Want to talk about emotional investing. You know, we're coming up on some possible volatility in the market, and we want to make sure that your emotions aren't ruling during those times. If we do hit some rocky periods, we'll talk about that. We've got some cost cutter ideas, which we'll also get to today. So with that, we also want to have a report. If you do reach out to us and you want to find out a little bit about tax free investments that you can have for a better retirement, reach out to us. You know, take one of those numbers, reach out to us on our website. We'll be sure to get you a report in your hands that'll be helpful as you help to navigate your own retirement pathway towards a tax free retirement. And Mitchell, you're going to talk about that. So, Mitchell, welcome back. I know you weren't on last week's show. Sam helped me out there, but good to have you back.

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

Mitchell Keiser:
Yeah. So the quote of the week Many of life's failures are people who do not realize how close they are or how close they were to success when they gave up. Moral of the story here, or at least my moral of that story, is don't be afraid of failure or setbacks. You just got to stay on the course. Be persistent and not be afraid to fail.

Dwight Mejan:
I forget how many how many inventions did it take Edison to to discover electricity? It was it was it was a bunch.

Producer:
I believe it was in the thousands because he had another quote that was I didn't find out how to make a light bulb. Light bulb. I discovered 10,000 ways not to make a light bulb. So I feel like he was a living example of that quote that Mitchell just gave, that he didn't give up. And I'm for one, am very grateful that he did not give up because think of how different our world would be, especially when the sun goes down. Man, I, I love having lights at night. And there's still people in many parts of the world that don't. So I'm very grateful for Thomas Edison and he's gotten a lot of inventions to his name. Very impressive.

Mitchell Keiser:
I'm just going to say transitioned into that flashlight on our phone. That's what we use probably most prevalent now.

Dwight Mejan:
I read that he was he he tried to get by with as little sleep. Sometimes he would take these little cat naps and something I read somewhere on him was he and his lab, which was detached from his house he would sleep with if if memory serves me right, he'd sleep with a cue ball from a billiards table in his hand, and it would be kind of off the side of the couch that he slept on to take these little cat naps. And when he would move, that ball would kind of fall and hit the floor. That's what would wake him up and he'd get back to work.

Mitchell Keiser:
Hey, I do just want to let our listeners know. I know we've been talking about it the past few weeks that we have an upcoming event here in downtown Boone on taxes and retirement. That is going to be this coming Thursday, September 21st. We have an 11:00 class and a 6:00 class. However, I will say, please do not just show up. Make sure you give us a call to make sure that we have room available. I know in one of our classes we are full and in one of the other ones I think we only have like 1 or 2 spots. We do fill up pretty quick. So if you're interested in that, give us a call. (828) 278-7814. And if by some chance that you guys give us a call or you think, well, you know, it sounds like they're pretty full, I don't want to make it to that one. We will be doing another class in Boone in November. If you guys are in the Pinehurst Southern Pines area, we are going to be doing another class at the community college here in Pinehurst next month. So if you guys are in that area and you want to check us out, just hang on another month. Um, but Dwight, some of our listeners might be thinking, okay, taxes and retirement, what exactly is that? So what could they expect if they were to invest an hour of their time with us learning about taxes and retirement?

Dwight Mejan:
Yeah. No, I appreciate you asking that, Mitchell, because I'd be, you know, kind of wondering the same thing. What can I expect? And in the little bit of time we have, just to let our listeners know about that here. You know, the big thing I want people to understand is that taxes are different in retirement. And if I could see some of your heads right now, whether you're driving or at home listening to this, you're nodding your head because some of you have been there already with your own tax return where you go to pick it up, you get that call and all of a sudden, you know, you see a liability there of what you owe the IRS, thinking you might have been getting a refund. And we're going to talk through some of those things of what happens in retirement that make different sources of income, different types of things coming into that tax return because you've got Social Security. We're going to talk a little bit about that here shortly in this next segment. But when you start having that plus capital gains, then you start having required minimum distributions coming into that tax return. It just creates different structures of how your income is taxed. And we're going to talk specifically about that, the different types of income, how they're taxed and retirement and really how to avoid those those gotcha surprises. And we're going to talk about how you can get a customized tax map. This cost nothing.

Dwight Mejan:
This is basically offered to people who take the class. They'll have an opportunity to get their own personalized tax map to see their own unique situation and how it sets on top of, you know, the ordinary tax brackets that the IRS has set up. So we're going to go through all of that in the class. We're going to talk about important concepts like your marginal tax. We're going to talk about strategies to reduce lifetime taxes that you pay over your retirement. I've mentioned this before. We had a recent person that came to the class, not. Knowing exactly what it was about. And they as a part of taking that class through their tax map, they've got a strategy within over the next seven years, which is about the time they'd have to start taking out required minimum distributions. They've got a strategy that's going to reduce their tax bracket by 10%. That's under current tax brackets. So we like to always explain to our listeners, you know, it's not just how much you make you want to go out and you want to make responsible growth on your money. You want to earn what your tolerance for risk allows you to earn. But at the same time, it's important to look at the other side of that is how much of that are you keeping? And I think what surprises a lot of listeners, Sam, and you know, you're familiar with this, too, Mitchell, is what surprises a lot of people with this is when you're working, it's typically just ordinary income that's hitting the tax return.

Dwight Mejan:
It's your wages. And if you sell a home or a second home, you've got some capital gains or you have some capital gains, you know, on your investments. But what draws a lot of people to this class are the mistakes that they see, because no one is taking a proactive approach to telling them before you start taking this much money out or before you draw from this bucket of money, you need to consider this. Okay? And this is just a more of a rhetorical question I ask the listeners, those of you who are in the sound of my voice here, you've got three buckets in retirement. You've got tax free, you got tax deferred and you got taxable. My question to you is which one of those or which combination of those are you going to start to draw from first? And how do you know that that's the best strategy or mix If you're going to mix some of it, how do you know that's the best way to do it when you start pulling money out? And what's the impact if you wait to start pulling money out of that tax deferred bucket, which is what a lot of people do, might not be a bad idea, might be a totally wrong idea for somebody who's listening to this. But that tax deferred bucket is the big time bomb that could be ready to explode.

Dwight Mejan:
And unfortunately, we get a lot of people who come to this class who get burned on a tax return. They were expecting a refund. Instead, they paid an enormous amount on top of that. And they said, nope, nobody made me aware of this. Okay. One of the things that 360 Capital Management does with our existing clients is when we develop income plans with them, we're showing them strategies on how they can harvest that income, and we'll show them some of the pitfalls because all kinds of things cascade off of decisions that people make about when to draw Social Security, how much their Medicare cost is going to be. And again, I don't want to go too deep into these, but these are some of the topics that I'm going to talk about at this event. And I'd love to help, you know, people who are listening to this avoid the painful mistakes. Right. Because the painful ones are the ones that cost us money. Right. If we can avoid those. I don't know about. You all like to learn from the mistakes of other people. I don't like to be the one who made the mistake. So we'll talk about some of those mistakes, give you some examples and show you some things you can do to avoid it. So it's a really good class and look forward to seeing many of you know, I've signed up for it. Looking forward to having you there.

Producer:
Yeah, it's an important thing for listeners to start thinking about Dwight, whether there are a few years away from retirement or even if you are a few years into your own retirement, you still got a long way to go and you're going to be paying taxes the whole rest of the way. And they do get a bit more complicated When you're in your working years. You're likely a W-2 employee, so you have your taxes withheld or maybe your contractor, maybe you've got a stack of 1099 that at the end of the year when you when it comes to tax season. But regardless of which kind of employee you are currently, the picture is going to become a lot more complicated when your income sources are diversified between Social Security, maybe you still maintain some level of work and so you're getting taxed there based on some part time employment, but also the taxes that play into Medicare, any withdrawals that you're making from your investment accounts. And so you want to have a strategy. You don't want to just kind of dip into the well whenever you need some cash, you want to have a plan so that you're not wasting more of what you've worked so hard for.

Dwight Mejan:
And that's the biggest mistake that people make. Sam, you nailed it, is people go into retirement just thinking they've arrived because they've got that lump sum of money, but they don't have a strategy to take it out. And then it's too late for a lot of people sometimes to to make some significant impact on their tax savings. There are still things that can possibly be done, but you want to be proactive in this. It's no different than the discipline. All of our listeners who are listening now who have saved and developed a discipline of saving for retirement through retirement vehicles. It's no different before you get to retirement then and have to start taking that income. It's the plan that you have that's going to dictate whether you're successful in retirement or whether you, you know, have some mistakes. And this this class is intended to help you avoid the mistakes.

Producer:
Come on down as we test your financial knowledge in right or wrong.

Mitchell Keiser:
Absolutely, Dwight. No. Something else we talk a lot about in our classes is Social Security. Social Security and taxes can kind of go hand in hand, especially when your Social Security starts to get taxed. If you guys are interested more in Social Security specifically, we do have a whole separate class targeted towards that. So stay tuned. But we do incorporate a lot of that into our taxes class as well as it more specifically applies to taxes. Transitioning here into the next segment of our show, we're going to go into what's called Right or Wrong, where we're going to ask Dwight a series of questions and he's going to go through if this is a right or wrong concept and this is going to test your knowledge and share some information on some of the most important details and features of Social Security benefits, most specifically that we get called in and asked on this show or from our clients or questions that we get asked at our events. So I'm going to kick us off here. Dwight. Under current Social Security law, full retirement age is 65, no matter when you were born. Is that right or wrong?

Dwight Mejan:
Okay, well, if the listener, if you said it was wrong, you were correct. That is wrong. Full retirement age for Social Security benefits in the US is currently 67 for people born between in 1960 or later, if it's 66 for those born between 1943 and 1954 and it's 66 and two, four, six, 8 or 10 months. For people who were born from 1955 through 1959. The retirement age increases by two months per birth year. That's the way it works. So eventually everybody's going to be 67. Now, there is some talk of even pushing Social Security back. Further logic would have. The reason why is, you know, baby boomers right now are coming in droves into retirement. We have more people today turning 65. One of you guys, Sam, you know what the numbers are? 12,000 a day, roughly. You're doing that or is it more than that now?

Producer:
I'll double check on that specific figure. But it's something like 75 million baby boomers retiring between now and the end of the decade. But I'll look and see what that is per day. Yeah.

Dwight Mejan:
So you know that we get lots of questions, as Mitchell was saying, about, you know, the timing of when to do this. And it's folks, it's not a one size fits all. You know, we had I'm thinking of somebody who attended one of our classes and, you know, we ask a series of questions to people to find out more about, you know, their goals, their future, their their health, their desire to leave a legacy. Some people aren't concerned about that. You know, we help somebody who was going to be facing tax of 85% on their Social Security and they wound up taking, you know, by taking Social Security a little bit later and living off some of the retirement income and investment income, they're going to reduce their Social Security over half of what they were expected to pay. So it's different for everyone. But on average, Sam pulled it up here. 10,000 baby boomers are turning 65 every day. So that's a that's a big, big number. And with more people causing that drain on Social Security and the trust fund, they're having to look at ways, you know, to do that. And the only two ways to to fix this or to raise taxes or to push back full retirement age. And, you know, I think we all look around and we see people are in general working longer and having to work longer. Many people, depending on how much they were able to save in retirement, you know, they're having to work longer and they're looking at that. So that could be something that we see changes on down the horizon. So.

Mitchell Keiser:
Yeah.

Dwight Mejan:
Good one. Yeah.

Mitchell Keiser:
All right. So the next one, in most cases, if I take benefits before my full retirement age, they will be reduced for early filing. Right or wrong?

Dwight Mejan:
Well, if you said right on that one, you are correct. You can start receiving benefits as early as 62. This is really important because there was a day in the past where if you made a mistake or you felt like you made a mistake by taking it early, you could have gone back and done a redo. You would have had to pay back the amount of money that you that you took from the system, from Social Security. But you could have done that today. You don't have that privilege when you make that decision. That decision is set in stone. There used to be a lot of creative strategies. There still are, but we had a lot more options for claiming Social Security benefits. Those have been a little bit more limited now, but you can start taking but if you do choose this option, your benefit is going to be permanently reduced. This reduction, it's based on the number of months you receive benefits before reaching your full retirement age. The exact reduction, it's going to vary depending on your specific full retirement age, which is based on your birth date.

Dwight Mejan:
It isn't necessarily wrong to do this if you you know, we have some people that it's a good strategy for a husband and a wife. For one of them to possibly take it at 62. There's different reasons why somebody would do that. But typically when someone does take it early, we do like to see the other person go as long as they can. And if they can go to age 70, there's a ton of benefits and reasons why that makes sense to do it. But certainly nothing wrong with that. But have somebody ask you questions and that's what we're here to do. We'll give you some contact information when this segment is done. But if you're one of those listening right now and you're kind of wondering about claiming strategies or you're thinking about doing this, but you haven't bounced it off of a fiduciary or somebody who's going to ask you some questions or pose some ideas to you that you haven't considered. I strongly encourage you to get a hold of us and we'll give you our number here in just a few minutes. Yeah.

Producer:
And I would say, Dwight, before we move on to the next one, that you really only have one chance to get that decision right as far as when you're going to take those Social Security benefits. And the more important that Social Security is going to be for your overall financial picture and retirement, the more important that decision becomes. So you're going to want to make sure that you understand exactly what you're choosing to do and have that plan in place before you decide to turn that benefit on.

Dwight Mejan:
Yeah, that's a great point. Good point.

Mitchell Keiser:
All right. Number three, if I have a spouse and he or she passes away, I will receive both my full benefit and my deceased spouse's full benefit.

Dwight Mejan:
Yeah, well, hopefully you you answered wrong to that. And if you did, you were correct. Social Security will continue to pay benefits to a surviving spouse after one of them passes away, but only the larger of those two checks. So the good news is if you got two of them coming, the larger one is going to be retained by the survivor. But there is a loss of that second check, the second person. So we find that typically to be about a third of the total Social Security income on average is what you can expect to be lost from the household. What's interesting is not a lot of the expenses change in the house. Yeah, there's a little bit less food, but generally speaking, not a lot of the expenses change for a household where there's a husband and a wife both drawn Social Security. So it's really important. You've got to have an income replacement strategy in mind for that surviving spouse because we haven't even talked about pension. I know pensions aren't as common today. Only about 14% of active employees today have some type of a employer sponsored pension. But when you have Social Security as one of the main sources of guaranteed income for people and one of those checks is lost, that income replacements got to come from somewhere in the portfolio. And we always make sure that people understand where that's going to come from. And we start by just asking people where if you had one of these checks that wasn't there, where would that replacement income, where would you get it from? And you need to be thinking about that, but you also need to make that important decision about the timing of it, because the timing of it's going to depend on sometimes how much the surviving spouse or the active the second spouse who's going to be drawn. Sometimes their amount is going to be dependent on that decision as well. So very important decision to make and just don't make that one on your own.

Mitchell Keiser:
And that's a good point. If you run into that problem as a listener, you're thinking, yeah, you know, we do have that income gap, but also highlights the need for if somebody wanted to purchase a pension, that is something that you can do today, purchase a fixed stream that will be there for the remainder of both of your lives, or another option would be life insurance. I know it's pretty common. Like if we have we have some clients that are military. We're right next to Port Liberty, which is the biggest military base, I think, in the country. So we've got a lot of military clients, but and a lot of those military people have disability. But most of the time when a person passes away that has disability, the disability goes with them. So what they'll do to offset that is they'll purchase these large life insurance plans where once they go, their spouse will have this large life insurance policy that they can live off of. So I don't know if that's applicable to any of our listeners, but that would be the importance of adding some life insurance to the financial equation as well, if that's something that you guys need some guidance on. We do lots of insurance planning here as well, so give you guys our number if that's something that's of interest to you. (910) 235-0812. If I delay taking Social Security benefits past the age of 70, I will continue to get delayed. Retirement credit increases each year I wait.

Dwight Mejan:
That is incorrect. That is wrong. Your benefit will increase 8% each year. You delay claiming it after your full retirement age. So if you're listening and your full retirement age is 67, you know you'll continue to get an increase. But it's only up to age 70. There's absolutely no reason to wait beyond age 70 because your benefits won't increase any further. So make sure if you are planning to wait that long, you don't wait one extra month because your payment isn't going to be any greater after that. So again, just an important decision. We can't emphasize it enough. It's not necessarily going to full retirement age. If I tell our listeners I'm seeing more and more people that come into our office or that we're working with that have picked up on this strategy of waiting because that 8%, there's not too many places you can you can use the word guaranteed. No, we can't use that when we're talking about investing someone's money in the market. There's insurance products. We can use the word guarantees, too, but we can't use that that word guarantee when we're talking about market risk. But this is a place for your income with Social Security that you have a guaranteed 8% increase for every year you delay above full retirement age. So get that right. And again, I would say, Mitchell, you might see this as well from people coming to talk to us about it. But I would say this year alone, I would say it's probably increased close to 20% that we're seeing at least one spouse waiting until age 70. I had somebody in here this morning that we were talking to. Same thing. He's pulling the trigger in January, he'll be 70. And that was his goal. So he was already looking at that target before and he made the right move just based on his goals and his objectives and the rest of his portfolio. And he was doing some part time work in the interim. So yep, yep.

Mitchell Keiser:
Yeah. I think a lot of that also has to do with somebody's average life expectancy. You know, if you have parents with a lot of longevity, might be more inclined to delaying that versus, you know, everybody in your family tends to get their wings and fly out of here into Paradise at an earlier age. Then, you know, maybe it makes sense to take it earlier. So good stuff. But the last one I have for you here, Dwight. Based on the government's most recent calculations, Social Security benefits could be reduced by 20% or more for everyone by 2035. Is that right or wrong?

Dwight Mejan:
Yeah. Well, first of all, that is right. That is correct. If you haven't been to look at your Social Security statement, I encourage you to do that, to look at the projections. But you will actually see on the website there's already some projections that are coming on that that says that I'm going to read this right from it says The future financial Status of the Social Security Program, currently Social Security Board of Trustees Projects program cost to rise by 2035 so that taxes will be enough to pay for only 75% of scheduled benefits. So what's going on here, folks, is there's a trust fund that pays for some of the additional amounts of money that are commitments that you see on those projections, you know, or people who are already getting Social Security. What they're doing, though, is they're paying a lot of the current benefits from current taxes. So it's not sitting building up somewhere, earning interest in the trust fund. The original purpose of the trust fund was to let it grow and beast so it would stay solvent for future years, future generations. But what happened is our wonderful politicians in Washington. You know, they pillaged this account and they went they went into it, they borrowed from it.

Dwight Mejan:
They used it to fund other things. And, you know, if we did that, you know, we'd be in big trouble if we worked for a company and tried to do that. But our politicians have done that. But nonetheless, that trust fund is the amount that's that's that's dwindling. And when that gets reduced in 2035, that's where they're projecting to say, hey, we'll have money to pay current benefits up to 75% of what you're looking at on that statement. So again, our planning with clients today, what we're showing people is, you know, how to plan for that right now. If you haven't started or if you're already drawing it, they could cut that. I think there'll be some type of a means testing where they'll look at your adjusted gross income and they'll determine from there if you're going to have a cut. And then anybody potentially that hasn't started yet will see cuts. So you got to remember this to the worker to beneficiary ratio. In 1945, there were 42 people who were working to support one retiree. Okay. That was back when Social Security was designed in its inception. And it was really only designed to cover old age.

Dwight Mejan:
It was called Old age Survivors and Disability Insurance for beneficiaries who happen to live longer than the life expectancy back then, which was, I think in the early 60s, was the life expectancy today or I should say in 2018, you know, five years ago, instead of having 42 workers, we had 2.8 people working to support one retiree. That's where it was in 2018. And in 2049, it's going to be 2.2 people supporting one retiree. So the tax base is shrinking. So we don't have enough money coming into this. So unless we raise taxes or cut benefits, those are the only two options we've got. So you got to plan around that. And a typical dual income couple retiring in 2033, we estimate this would represent an immediate $17,400 cut in current dollar annual benefits and immediate $13,100 cut for a typical single income couple. So again, if this is something you know that you're hearing and guys, if you want to anything this. We're going to take a break in a second. Is there anything you want to add to this segment or anything that we're talking about? And I'll give our listeners a way they can reach reach us to talk about this.

Producer:
Yeah. One last thing that I would say, Dwight, is that for many people, when you start to talk to them about retirement, Social Security is the first, if not maybe the only thing that comes to mind. And when you consider the inefficiencies of government, which we're all familiar with in one regard or another from, you know, the post office, God bless them to the, you know, DMV, you cannot count on Social Security as being your true one and only safe retirement plan. You've got to have some other things in mind. And and that's why having a comprehensive plan is so important and making this decision and making it right the first time is so important. Yeah.

Dwight Mejan:
Good. Great point. Yeah. And guys, whoever wins this, you know, this next 24 election next year, you know, they're going to face a real problem with this trust fund rapidly, you know, approaching insolvency. So it's it's going to be a big issue for the next administration. And you know, that that fund being depleted by 2033, the reserve account is going to cause some cuts. So if you want to talk with us about this, you can reach out to us if you're in the mountain area in Avery County. Watauga (828) 278-7814. Again that's (828) 278-7814. If you're in Moore County area, you can reach out to us at (910) 235-0812. And when we come back, we're going to give you just a brief update here from TSA.gov, the Social Security administration.gov. So we'll be right back.

Gordon:
Could save time in a bottle. The first thing that I'd like to do. Is to save every day till eternity passes away. Just to spend them with you.

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 Mason 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. You're listening to Retire 360 with Dwight Mejan. Now back to the show.

Mitchell Keiser:
All right. And we are back. You guys are listening to the Retire 360 show brought to you by 360 Capital Management. Next, we're going to transition into talking about some facts from the Social Security Administration. We pulled this right from ssa.gov. Dwight, based on our best estimates, what do you suspect this year's reports to show?

Dwight Mejan:
Well, one thing we we kind of pulled out of there that we thought was interesting was and I hadn't seen this until this was reported on their website. Part A, which is a hospital insurance part of Medicare, the hospital insurance trust fund, it said on there will be able to pay 100% of total scheduled benefits until 2031. I'd never seen that anywhere before. That's three years later than reported last year. At that point, the fund's reserves will become depleted and continuing program income will be sufficient to pay 89% of total scheduled benefits. So again, what's driving a lot of this is the rate at which people are coming into retirement. And we have a huge demographic, the baby boomers entering retirement. So there's going to be a heavy strain not just on Social Security, but on Medicare. Those are the two largest social programs that are funded with taxpayer revenue. But again, it's being taxed with the number of retirees coming in here. So that was just something to be aware of with Part A insurance. And then we had Dwight.

Mitchell Keiser:
Yeah, I was gonna just before you hop into the next one. Sure. Just for the listeners that are hearing about that or maybe they're confused about Medicare, how to plan for Medicare. I do a lot of that for our clients. Our firm's been doing Medicare planning for over 30 years, and I know everybody that's 65 and above. If you haven't started getting peppered with calls, brace yourself because it is coming very soon. I'm sure if you guys have questions on what to do or how to improve your situation, you can feel free to give us a call. I'll tell you the couple of the most common things that we do here on the topic of Medicare is, well, my insurance covers everything. If you have the supplement, probably plans F or N, those are probably the three most popular. You could be overpaying what that is if you're not working with somebody that's constantly refreshing that for you to get you the lowest premium possible, you guys need to be doing that. We sometimes have people paying, you know, it could be as little as 10% more. I've had people paying 400% more. Biggest success story of last year. I saved a gentleman $15,000 a year, I believe. And that's just on Medicare premiums. So don't let those get out of control. If you're on the other side, you have the advantage plans. Um, most of those should be $0 per month. The best plan that I saw last year actually added $100 back to your Social Security check and they gave you a $50 a month card that you could use on your utility bill, the grocery store, gas, all the necessary. So that's that's $150 per month that they're giving you to enroll in a free plan. That's that's pretty strong. So if you guys are wanting to learn more information about Medicare, I just wanted to throw that out there that we do work with over 100 different companies and we've been doing this for a really long time. So you guys have questions on that. Please feel free to look us up or give us a call. (910) 235-0812.

Dwight Mejan:
Yeah. And if you're in the mountain area, it's (828) 278-7814. I going to toot Mitchell's horn. He does a great job with that. We get a lot of calls from people who he's helped and they tell friends about it and they said, hey, this really helped save me some money. He'll lay it out for you and let you, you know, take it with you and mull it over and and help you guide you, make sure you're in the best plan. But that is that is one of the biggest areas I know that we find of helping people cut costs in their budget is through their insurance. Has somebody else threw a bunch of life insurance policies? We saw that put a bunch of money back in their pocket just through some restructuring and canceling some things they didn't even need in the area of their life insurance. So we'll take a look at that for you as well as if you want to look at that. So one other trust fund update here that came out of that tsa.gov report, Old Age and Survivors Insurance Trust Fund, which was basically, you know, Social Security will be able to pay 100% of total scheduled benefits till 2033. This is one year earlier than reported last year at that. Time the funds reserves will become depleted. Continuing program income will be sufficient to pay 77% of scheduled benefits.

Dwight Mejan:
So, folks, the reason we're sharing that in this segment, because we just got done talking about Social Security, very important, the timing of that Social Security, and we want to help you. We can put together for you a Social Security maximization report. It doesn't cost you as the listener anything. We'll let you see what that looks like. We'll show you, you know, your break even consideration points taking at a certain age versus delaying, seeing if you can delay all of that are things to consider and we'll run this for you In the Social Security maximization report. We believe we believe you deserve to get back what you have paid for and what you've paid into, and we'll do it for you complimentary. So to take advantage of that for any of our listeners, give us a call if you're in more county area (910) 235-0812 is the number you'd call. If you're in the mountains, you can reach out to us at (828) 278-7814. Be glad to talk with you. So we're shifting gears here, talking a little bit about guys emotions as it comes to your investments and avoiding some of the mistakes that are happening. And we want to just illustrate this through what I think. I encourage you to to look at this chart. When you have time to go back, you can go on demand and go to our show in YouTube.

Dwight Mejan:
We'll have a chart up there that we'll have up on the screen. But, you know, there's a lot of talk still and I agree with this talk that there's some volatility still that we have to get through before we can say we're out of this uncertainty. And of course, we're heading into an election year. So it could continue for for quite a while. But, you know, how do how do you, as an investor avoid making mistakes when it comes to emotion? Right. Markets go through cycles, markets go through UPS, markets go through downs. Markets can kind of remain flat. But we know that when markets start to go down, people get fearful. Right. Some of you listening have called your advisor before and said, Hey, I think we need to get out of the market right now or we need to get more money over into cash. And one of the things you have to consider when you're doing that is, am I in the right adjusted risk portfolio for my risk tolerance? We believe investors at our firm at 360 Capital Management that they're best served by allocating long term investment assets to a globally diversified portfolio that's consistent with their risk profile and maintaining a solid, disciplined approach no matter how markets are working over time.

Dwight Mejan:
So this chart that I'm looking at and I'll give you some numbers, but I encourage you to go look at this. This assumes a $100,000 is invested over the last 20 years. Okay? So if you would have stayed invested every day over the past 20 years, your 100,000. I'll just pause a second. Let the listener be thinking. Think about how much money 100 grand would have grown to over the last 20 years if you stayed fully invested, didn't get out of the market, didn't pull some money out during cash, during some of the down cycles. What would you have in that account? Well, your 100,000 would have grown to $636,545 staying fully invested. Okay. If you would have missed just five of the best days, you pulled your money out on five of the best days over that 20 year period, you're 636,000 would only have been worth $392,225. It's a huge, huge drop. Folks for five days missed missing the market. Ten best days out of the market would have taken you to 288,000, missing ten of the best days again, 20 days or 20 years fully invested. 636,000 missed the ten best days, 288 grand, missed the best 15 days. You're down to 220 grand. Missed the best 20. You're down to 175,000. And if you're really panicked and took it out during the best 25 days and missed those best 25, your 100 grand would be a measly $142,906.

Dwight Mejan:
So the point that we're teeing up here in our conversation on emotion is you have to be careful, folks, when it comes to your emotion. You've got to stay disciplined. You've got to be in the right risk adjusted portfolio, meaning every listener on here has a certain risk profile. Some of you listening might be young. You're early in your investment career. Some of you are already retired and you can't afford or you can't tolerate much risk. Okay, It's going to be different portfolios for both individuals. But the point is you're going to be able to tolerate a down cycle regardless of which category you're in. If you're the aggressive or if you're the conservative investor, you don't want emotion to end. Tour that where you decide, I've got to get out of this and I've got to reinvest in something different. That's where you make mistakes. That's where it can cost you real return differences. And I'm going to ask just Sam, I know Sam and Mitchell, one of you guys may want to say something here on this chart or along the lines of emotion, but what do you have to chime in here that the listener might want to be thinking about?

Producer:
What comes to mind for me, Dwight, is that how quickly this drops off? It doesn't take much of a overreaction and emotional adjustment. Maybe you pull out for a little bit and some of you listening may have done this sort of thing. And if you've done it in the past, there's no sense in worrying about the past. You can't go back and change it. It's just something to keep in mind moving forward. But whether it was the beginning of 2020, in the spring time when we saw a lot of volatility at the onset of the pandemic in the United States, or if it was way back in 2007 through 2009, just missing the five best trading days dropped almost 200 over $240,000 of potential value out of this account. So it doesn't take much to really miss out on some big gains. And so I think it's about staying disciplined, Dwight, and managing those expectations and and understanding that it's not about timing the market. It's about time in the market.

Dwight Mejan:
Yeah, 100%. That's, you know, you're right on That's a 38% drop, folks in missing five of the best days over 20 years. You have 38% less money in your account. $242,000 less.

Mitchell Keiser:
So yeah, the only other thing that yeah, I would just add to that is being registered investment advisors, you know, they hone down so much on making sure that you match your advisors to an advisor to match you with the risk tolerance that you can stomach. So for example, if you're an aggressive investor, you could stomach a lot of risk if you are a moderate investor, that's moderate risk. If you are a conservative person, that is very little risk. There are some people that we meet that say, I want zero risk to my principal. I think it's important and this chart just shows it to identify that on the front end, because if you are somebody that cannot stomach risk and you think that, you know, you want to invest into something that's going to have these outrageous returns, but then you watch your portfolio take this huge dip and then you say, rip it all out of there. I can't take that anymore. No, I don't want to lose any more money. And you just pull it out and you're not willing to, like Sam said, stay in there for the long haul and watch that recover and watch it come back on the uptick. If you are that type of person, you need to make sure that your risk tolerance is matched to your portfolio. Because if it's not like you said, you could cost yourself a 38% dip in the portfolio.

Dwight Mejan:
Mitchell had a listener of this show in our office this week. Perfect example what we're talking about. He remembers calling. I'm not going to mention the name of the advisory firm, big name company, advising him with his money in in this beginning of next year, early next year. His portfolio needs to shift completely to income because he needs to take out. We talk about the 4% rule, which is the maximum that's recommended that you pull from a portfolio to meet income needs from your investments. But his portfolio, I did the analysis of it, and this is just something we do for our listeners. He wanted to get the analysis done. So I did that and I looked at his portfolio and it was tilted towards a moderate, aggressive, moderate, aggressive folks. Was his was his portfolio before I showed him where his portfolio needle was on that moderate, aggressive. We always ask people, we put up buckets and they're not the buckets we talk about in our classes. For those of you who've been to our classes where we show taxable tax deferred and tax free, this has to do with risk. In each bucket. Bucket A has a certain level of risk. It's the least amount. Bucket B has a little bit more, but your principal is still safe. And bucket B and then bucket C is kind of the money that's in the market. And I asked him, I said, So, you know, I made a description or I gave him a description of each bucket, the characteristics of the investments that would be in each of those buckets.

Dwight Mejan:
And I said, Based on your age today and you knowing you need income here in about 6 to 8 months, how how would you allocate your portfolio into these buckets as a percentage? Total 100. And he told me his percentages and I said, what do you think? Your buckets are invested now in there? And he actually was pretty accurate. He says, Well, I probably got 10% in bucket A and 90% in bucket C, and he had nothing in bucket B but his bucket B selection was he wanted to have a third of his money in there and because it was still protected, but his portfolio wasn't even closely designed to that whatsoever. In fact, I'm as I'm going over this, I could feel my heart rate going up because I'm thinking this is this guy is one big market downturn away from ruining his retirement because the income that he's going to need, he could run out of money very early because he's going to need to pull money out of it. So he was not in the right portfolio and made that very clear to him. I said, if something happens here, you're going to have to alter your plans with continuing to work because this portfolio is could take a very big hit as a as a moderate, aggressive portfolio. And he needed to be moderate conservative. Those are those are a lot of degrees away from where he was to where he needed to be. And we had that discussion.

Dwight Mejan:
We just showed him here's a risk adjusted portfolio that matches your risk profile, that meets your income requirement that you have that was going to actually provide him about 75% of his guaranteed income. Okay. And he got it. The light bulb went on when he saw it. But when he called this firm back in March of 2020, when we all saw portfolios going down due to Covid, he got on the phone with his advisor and he said, I think we need to put this portfolio to cash. I'm not real comfortable with this right now. And he's telling me this. And I said, what the advisor say. He said, Well, he told me this is short lived. It's going to come back. Now, did he know that with certainty? No, he didn't. Did we see a V-shaped recovery and it bounced back within 90 days? We certainly did. But if that didn't happen, he had a portfolio drop 15% in less than a month. And if that would have dropped another 15% and didn't recover. And we're still sitting here today, that changes the whole outcome of when you're going to retire and how much you're going to have when you retire. Very, very important, folks that you get that right. You stay in the market, but you got to have the right portfolio that you're committing to. If you're getting uneasy or have gotten that way, chances might be good. You're in the wrong portfolio if you're getting that uncomfortable. So just be be cautious with that.

Mitchell Keiser:
Dwight, what would you say to the people that are listening to that? And they're like, Well, I'm not really sure if my portfolio is going to match what I need on the long term, but I've been working with John Smith for the past 30 years. He's never done me wrong. So, you know, I'm kind of afraid whether they'd say this or not, they're afraid to question the advisor or maybe they're afraid of the conflict or the resistance that could come from having a serious question. What would what would you say to them?

Dwight Mejan:
Yeah, I would say this. You know, I don't want to be harsh with the listeners, but it's your money. Okay, Call the advisor up and ask them if this portfolio was to go down 30%. You know, no one's gonna be able to give a guarantee of what it's going to do if it's in the market. But I would say, you know, if you've been uncomfortable with 2022 and you saw what happened there, imagine 20, 22 not recovering like we've seen some of in 20. 23. Imagine 2023 adding to those losses. How would you feel? So if you went down with the market, you know, the S&P was down 19.5% last year if you were down with that full amount. But this year you were you were down another ten. What conversation would you be having with the advisor? Okay. Are you were you would you be in the right portfolio? So think you have to challenge that advisor. They work for you. Okay. And think they need to run some stress tests on a portfolio. That's one of the things that we do. We will stress test your portfolio.

Dwight Mejan:
Just like when you go for a physical, they're going to see how good shape your heart is through a stress test. We're going to do the same thing with your financial report. We're going to run a stress test for you and we're going to see how would that portfolio have held up under some recent downturns in the economy? And I would just say you have to challenge that person. Don't just take it that you don't you know, you don't like conflict. Um, you've got to go into that conflict because the outcome could be the thing that that breaks you or it could be the thing that makes you if you go through it, you know, it's your money. At the end of the day, you saved it. They didn't save for it. They're they're supposed to be the fiduciary helping you responsibly. And I can't emphasize that word enough responsibly grow that money. And that's going to be, you know, a little bit more conservative. I believe the closer you're in retirement or the deeper you get into retirement.

Mitchell Keiser:
Right before you finish that point, Dwight, I do just want to remind our listeners, if you are 65 or later in age and you are taking a fair amount of risk with your portfolio, if you lose 30% of your portfolio, if it goes down 30%, you need to make an additional 43% just to end back up where you were. So if you're fine taking the dips and you're like, Well, it's fine. I've been in the market for 40 years. Well, how long did it take it to recover? 43%, Because if you're 65 and you rely on that income, I mean, you could be running out of your money, you know, five times sooner than you actually anticipated. So just wanted to share that statistic. I know we like to remind folks of that as they're adjusting for their risk.

Dwight Mejan:
But yeah, well, and I'd add to that, Mitchell, if you're taking money or depend on money for income coming out of that portfolio, you know, we had a period of time known as the lost decade in the stock market from 99 to 2009, where the S&P had a -1% overall return during ten years. So if you're in retirement and take an income out, imagine no growth on your portfolio for ten years, but you're pulling money out. You know, you would have done better just sitting in cash because what's coming out of your portfolio is fees to have it managed.

Mitchell Keiser:
I just wanted to give you a reminder that if you guys are interested in coming to attend our taxes and retirement class in the Watauga County Library in downtown Boone, if you are in the Avery or Watauga County, come out and see us. That is going to be this Thursday, September 21st. We have a morning class and an evening class. If that is something that is of interest to you, please call us ahead of time because we are just about out of seats. So make sure you give us a call so we can tell you if we can accommodate you and you and a spouse or a friend or not. The best number to reach us at to make that arrangement is (828) 278-7814. If you guys are in the Moore County or Lee County area, we are going to be having an event next month. So don't worry. Or if you guys are in Boone and you can't make it this week, we will be back in November. So don't worry. We've got plenty of shows coming up.

Dwight Mejan:
Yeah. Well, that's great. Well, that's that's a wrap on today's show as this hour just goes extremely fast. But hope you got some value out of today's show. We look forward to doing these each and every week. Look forward to having our new listeners come to the show. Definitely reach out to us. We'd love to meet you face to face. This is the class coming up is one of our most popular ones that we do. I just guarantee you it's going to be worth your time if we if we do have seats available. If not, you can catch us next time around. But want to thank Sam for being a part of the show today with Mitchell and myself. I know he's usually back in the background making sure everything flows well, but respect his knowledge and expertise here as well. So thanks for tuning in with us this week's show, and we'll be back next week, same time as well. So stay tuned and take care. And appreciate everybody being with us today. Have a great week.

Producer:
Thanks for listening. To retire 360, you deserve to work with an experienced and licensed expert who will strategically work to protect and grow your hard earned assets. To schedule your free no obligation consultation with Dwight visit Retire360Show.com or pick up the phone and call (910) 235-0812. That's (910) 235-0812. 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:
Do you want a steady stream of income for retirement? Then it's time to consider annuities. I'm Matt McClure with the Retirement.Radio Network. Powered by a Life. Gone are the days when most employers offered pensions with guaranteed lifetime payouts to their workers. But what if I told you that you can build your own personal pension? It's possible with an annuity. An annuity is a financial product that provides a series of regular payments to an individual over a specified period of time, often for the rest of their life. There are several.

Ford Stokes:
Options for you to consider when choosing an annuity. Be confident in knowing that there is an annuity out there that can meet all of your needs.

Producer:
Ford Stokes is founder and president of Active Wealth Management and author of the book Annuity 360. There are several different types of annuities, including fixed variable and fixed indexed.

Ford Stokes:
A fixed annuity offers a specific guaranteed interest rate on their contributions to the. A fixed indexed annuity is an accumulation based product offered by an insurance company. The growth of your fixed indexed annuity is dependent on the performance of a chosen stock market index, but your money is not actually invested in this index. This offers you great growth potential and exceptional protection for your investment.

Producer:
While each can provide tax deferred growth and a lifetime income stream, variable annuities put your principal at risk in the market. If you are.

Ford Stokes:
Currently investing in a variable annuity, your funds could be in serious trouble if the market experienced any downturns.

Producer:
With so many possible choices to consider, it's essential you speak to a financial advisor or professional to help you make the best decision for your future. So are you ready to consider an annuity as part of your retirement plan? It's a key question to consider as you approach what should be your golden years with the Retirement.Radio Network Powered by AmeriLife. I'm Matt McClure.

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:
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 Migeon 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.

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