On this episode of Your American Retirement, Randy explains the importance of reviewing your retirement plans to ensure success. Are you following these essential retirement rules? Find out on this week’s show. Finally, Randy shares some important updates from Secure Act 2.0, new legislation that will impact retirees.
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2.10.23: Audio automatically transcribed by Sonix
2.10.23: 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 Your American Retirement with your host, Randy Sams. Get set for a full hour of financial information and economic news affecting your bottom line. Randy 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 is your host, Randy Sams.
Randy Sams:
Hey, good morning. Little Rock, Arkansas, and surrounding areas. I want to welcome you to today's show. My name is Randy Sams. You're listening to Your American Retirement on 101.1 FM. The Answer where Little Rock comes to talk. Hey, folks, some of you all might be surprised. We are in a new time slot. And those of you who have been listening and maybe heard the updates, we used to be the program used to air at 1:00 on Saturdays. They were gracious and moved us to 10:00. So you're listening to us this morning on Saturday at 10:00. Again, my name is Randy Sams. Thank you for joining Your American Retirement 101.1 FM. The Answer, folks, I want to thank you again for joining. Hopefully we've got some new listeners. Please hang on. Don't don't, don't change that channel. Don't hit that dial. I think you're going to be very excited and it'd be it'd be educational for you to kind of listen to what we do here at Your American Retirement. SMMG Financial Folks, we've been in business for over 36 years. We travel around five states, basically centered around Arkansas, working with folks who are in retirement, folks who are getting close to retirement. And our objective, again at SMMG Financial is addressing the major financial issues retirees and pre-retirees in America face today by helping people understand and prepare for a secure retirement, not a risk of retirement.
Randy Sams:
So, again, folks, I want to thank you for joining today's show. Thank you for listening. Tell all your friends, tell your family. And also if you are a podcast listener, we have a podcast. So go to your favorite podcast vendor via YouTube, Spotify, whoever that might be. Look up YourAmericanRetirement.com. You're going to see my pretty face. Stop it. You're going to listen to us and tell all your friends, give us a thumbs up. And folks, please, those of you who are listening, we all our listeners and our clients to please go to our. Website YourAmericanRetirement.com or call us at 8669907664. Leave us your information, your contact information. And folks, if you have any suggestions on future shows, please leave us that information. We love to address the major concerns that retirees and pre-retirees are facing today. So, folks, again, thank you for listening. Tell all your friends, tell all your family and be listening again. Again, we are moving. We are now at 10:00 on Saturdays 101.1 FM. The Answer. So again, I want to thank you for joining today's show. And folks, we are going to, as you know, is Saturday and tomorrow. Guess what happens tomorrow? I think there's a big football game. All right. So one of the things we're going to talk about today just on the first segment here of the show, kind of give you an idea for for your first time listeners, those of you who may have tuned in and saying, hey, listen, we have a we have a new show on.
Randy Sams:
A lot of times I get asked, Randy, what is it exactly that you guys do at SMMG Financial? Well, folks, I'm glad you asked because first of all, what we focus on is what I call the retirement red zone. All right. The retirement red zone to me and what we tell our clients is five years before retirement, five years into retirement, those are the years that you want to remove risk, eliminate as much risk as possible. All right. We're going to focus on longevity risk. We're going to talk about your medical risk. We're going to talk about inflation risk. We're going to talk about market risk. So there's a lot of risk that we need to address when we're getting ready to go into retirement. And that's what we do when we sit down and meet with you. When you give us a call, leave us your information. We'd love to be able to sit down and have a consultation. Hey, there's no obligation. Again, we are focused on educating folks about what you're about to enter this thing called retirement. In other words, where's the paycheck going to come when the paycheck stops? You're no longer working, getting that paycheck. Where's that paycheck going to come? So we want to also try to help remove two things from your life.
Randy Sams:
When you are about to enter into retirement or you are into retirement. And number one is stress. You know, stress kills a lot of people. Stress is, I guess you would say that's that creates and causes a lot of illnesses for folks, heart attacks, strokes, different things of this nature. People are worried about spending too much money, you know, So. So what is it that you're concerned about two years into retirement? What is it that concerns you? Is it run out of money? Is it your health issues? Is it spending too much money? Is it not leaving money to your children, whatever that might be, folks. That's what we do when we sit down and meet with you as we want to address those concerns. But we want to take away the stress about worrying about spending too much money or running out of money. You worry, worry, worry. So retirement. It is about. Income. And that's what we want to look at, folks. We want to take away the concern of your retirement account. Hitting zero before your blood pressure does. All right. And number two thing we want to address is rocking chairs. And people say, Randy, wow, rocking chairs. Well, see what happens when you go in retirement and you're afraid to spend too much money.
Randy Sams:
You're afraid if you go out and you join the country club and you go play golf or tennis or pickleball, or you take those cruises or, you know, every day is happy hour, whatever it might be, you're concerned that I'm going to run out of money. So you just sit around and do nothing. And I call that the rocking chair syndrome. All right? So you just sit there and you don't do anything. And you know, if you're not active, if you're not moving, if you're not exercising, if you're not walking, if you're not doing something, you're keeping your mind active, then that also can create health issues for us as we as we get older. So at SMMG Financial, we want to sit down with you, talk to you about what your objectives might be, educate you on what our options are to meet those objectives and remove those risks, remove that stress and remove those rocking chairs. So that's kind of a quick overview of what we do at SMMG Financial. So folks, please, again, thank you for listening. My direct number is 50124923435012492343. Or you can go to the website YourAmericanRetirement.com. Leave us your information and we'd love to sit down with you and help eliminate the stress and the rocking chairs and some of the risks that we talked about. Hey, let's get back to the football game, All right?
Producer:
Want to know where your hard earned money is going. It's time for an inflation demonstration.
Randy Sams:
Let's look about inflation. And if you all know about inflation, I think inflation has been up. I believe those of you who are on Social Security, your benefit this year, I think you had like an 8.7% cost of living adjustment. That wasn't because they're kind hearted up in Washington, DC. It's because that's part of the rules that they give us that increase based on what the inflation rate is. All right. So over the past two years, I believe you add them together, it's almost it's a little over 13%, maybe 13.7, somewhere in that range that what we have gotten as when I say we those of you who are on Social Security retirement benefits, you've seen those increases. And that's not because, again, the goodness of their hearts in Washington, D.C. it's just because that's what the inflation rate has been over the last two years. Speaking of inflation. Let me give you an example of what we're looking at here. All right. So let's look at the price of Super Bowl tickets. By years. All right. Now. Listen to this Super Bowl one, which took place in 1967. A Super Bowl ticket for Super Bowl one. Wouldn't you like to have one of those framed wonder what that would be worth today, but a Super Bowl ticket. From Super Bowl one in 1967 was $10. Folks, I don't even think you can get a soft drink for $10 at a Super Bowl game. Can you? Anyway, how about Super Bowl ten? Super Bowl ten took place in 1976. That Super Bowl ticket. If you were lucky enough to go or you had someone that took you to the Super Bowl at that time, 1976, a Super Bowl ticket cost you $20. Super Bowl 20, 1986. A Super Bowl ticket cost you $75. Uh oh, look at that, folks.
Randy Sams:
In a 20 year period, it went up from $10 to $75. Now, I don't know, maybe that's because of all the commercials and what those commercials cost, you know? It used to be when I. And I'm probably just like a lot of you that are listening today. One of the things that I used to do when I watched the Super Bowl was I was kind of almost more interested in watching the advertisements, the commercials that were going to be shown during the Super Bowl more than I was probably being interested in who was actually playing the Super Bowl, Not saying that there were teams that I didn't pull for, but there might have been years that the teams didn't get me as excited as other years, but definitely used to join and look at the watch the Super Bowl because I wanted to see what those commercials and as you know, guys, the commercials, the price of those commercials, I guess because of what the value supply and demand people were looking forward to them. The cost to do those commercials have gone up. So from Super Bowl one to Super Bowl 20, that ticket went up to $75 versus ten. Now, Super Bowl 30, 1996 was a big jump. Ten years. It went from $75 to in 1996. A Super Bowl ticket cost you $350. Super Bowl 42,006 $700. Will, folks Super Bowl 5720 23 tomorrow, If you were lucky enough to attend the Super Bowl, you probably spent an average of $5,400 for your Super Bowl tickets. Hey, folks, that's just an example of the inflation of what it's going to cost. Hey, stick around. We're going to talk about in the next segment the three distinct phases of retirement. We'll be right back. Randy Sams, Your American Retirement 101.1 FM.
Producer:
The Answer This is Your American Retirement to schedule a free no obligation consultation with Randy, visit YourAmericanRetirement.com.
Producer:
Visit YourAmericanRetirement.com to schedule a free consultation with Randy today. And now back to the show.
Randy Sams:
Hey, welcome back. I want to welcome you back to Your American Retirement. My name is Randy Sams. I am your host. I am president CEO of SMMG Financial, where we focus on helping folks enjoy their retirement. We want to set you up for a secure retirement, a happy retirement, not a risky retirement. So, folks, I want to give you the quote of the week, the financial wisdom quote of the week.
Producer:
And now for some financial wisdom, it's time for the quote of the week.
Randy Sams:
Financial fitness is not a pipe dream or a state of mind. It's reality. If you are willing to purchase it and embrace it. That was given to us by Will Robinson, who is an Arthur author, financial fitness is not a pipe dream or a state of mind. It is a reality if you are willing to pursue it and embrace it. I like that, folks, because that's what we're all about. It. You're American retirement. We want to make sure that you enter in those retirement years and. Looking forward to a happy and a successful retirement. So financial fitness. We want to do a check up on where you sit financially and what are your objectives. So again, if you're willing to pursue it, you can embrace it for a financial. Fitness for your retirement. All right. So let's look at that. Hey, just a quick update and we're going to get into the three distinct phases of retirement. You guys know that they just passed the Secure Act 2.0. Kind of a quick overview, a review. Of what was passed or the new law passed late in 2020 to congressional session. So what does this mean for you and your retirement? Just a quick review on some of the things that affect retirees and pre-retirees. Required minimum distributions. Rmds. So people want to know, Well, Randy, what is an RMD folks? An RMD. It stands for required minimum distribution. So if you have any program that is a qualified plan, that would be a 401 K and IRA.
Randy Sams:
Anything that has been accumulating tax free or tax deferred, I shouldn't say tax free tax deferred. All right. So you're still working. You have a41k through your employer. You're making contributions. If you're lucky enough, your employer is also making a matching contribution up to a certain percentage of your salary. And that money has been accumulating tax deferred. All right. So when you start taking that money out, it is taxable. But there are rules. This does not allow you and me as a holder of an IRA or a 401 K to just keep that money in there forever and ever and ever and ever and pass that on to our kids or our spouses or whoever we want to pass it on at some point in time. Uncle Sam requires you and me, those of us who have plans like that. To take a withdrawal that's known as a required minimum distribution. So before it started at 70 and one half, the first Secure Act moved it up to age 72 and secure Act 2.0. Your minimum distributions, you're required minimum distributions. Now begin at age 73 and in 2030, 33 they're going to switch that up to age 75. So in 2033, the new age for required minimum distributions is going to be 75. Now, folks, a lot of people say, Oh, well, that's great, Randy.
Randy Sams:
That means I don't have to take out money until I'm age 73 or if you're younger, age 75, I don't mean to burst your balloon if you get what I mean. This is not a weather balloon. It's not a spy balloon. This is a real balloon I'm about to pop. Because here's what happens as you get older. The percentage that they require you to take out of your 401. K or IRA is also higher. That also increases. So so it's, you know, is it bad? No. You get to enjoy those additional two, three, four years of accumulation. But what happens when you hit age 73 or when you hit age 75 in 2033, the amount that you have to begin to withdraw that you required to withdraw is also increased. What happens then? Well, if you're required to take out more money, that could put you in a higher tax bracket. It could affect your premium for Medicare Part B. So there are a lot of things that those additional RMDs or the higher RMDs could affect you when you get into retirement. And that's what we do, folks. So go to the website, YourAmericanRetirement.com, leave me your contact information and I'd love to sit down and kind of go over some of the options that you can look at. Well, we can discuss RMDs, what that effect might have on your retirement plan, own your retirement funds on your Medicare premiums.
Randy Sams:
So give me a call 86699076648669907664. Leave me your contact information and I'll be glad to reach out and touch base with you and have a short conversation. And if we have the chance to meet face to face, like I said, we can we can cover some of these face to face for you. But. So what you have to do, folks, is you've got to realize that if you do not take. Your RMDs, which is required. The penalty for failing to take an RMD will decrease to 25%. Now it's 50% and decrease to 10% if corrected. All right. So if you know that you missed your first RMD and you correct it quickly, then instead of paying 25%, you will pay 10%. All right. Catch up contributions will increase in 2020 54416403 B's government plans and IRA account holders. This gives pre-retirees more room to catch up and save. So what catchup means that when you hit a certain age, I think it's 55 and above if you want to put a certain dollar amount. Additional above what their limits are. As far as your 401. K, you can do that. That's called catch up contributions. 529 College savings plans. After 15 years, assets in a 529 plan can be rolled over into a Roth IRA for the beneficiary. Subject to annual Roth IRA contributions. So, folks, I was listening to a show the other day and they were also talking about some of the benefits of the Secure Act 2.0.
Randy Sams:
And one of the things that they talked about was the 529 plan. But. They basically made it sound like you could take the entire amount that you had in that 529 plan and roll that over, folks. You cannot. There is a lifetime limit of 35,000. So it's not the full buy. So if you have 150,000 that you've accumulated in a 529 college savings plan and your child, your son, your daughter or whoever, you've got that plan set up for, if they are lucky enough to get a scholarship, what are you going to do that do with that money? I mean, you can still use it for college benefits, whatever it might be. But if that money is sitting there, you're not able to take the full amount and roll that into a Roth IRA. You can only roll up to 35,000, not the full value. So, folks, let us help you navigate these new changes. We always strive to help our prospects and clients adapt to ever changing landscape of taxing and the public policy that we have to look at three distinct phases of retirement. Folks, we probably aren't going to get through all of this in this segment, but we're going to we'll make sure we finish them up. So folks at SMMG Financial, Your American Retirement, we want to prepare you for the three distinct phases of retirement.
Randy Sams:
We want to help baby boomers never run out of money. We want to help baby boomers enjoy their latter years. In other words, we want to prepare you for a happy retirement. So, folks, listen. A lot of folks think retirement is 30 or 40 years, 30 or 40 years of golf, tennis, travel, pickleball line dancing, going on cruises. Not true. Three phases of retirement, folks. Listen to this. It's not 30 or 40 years of Saturdays. Number one, the first phase of. Retirement. Go, go years. This is where you're going to go on cruises. You're going to play pickleball, you're going to go golfing. Every day is a is a is a happy hour. All right. The second phase, the slow go. Years. You can still do everything you did in the go go years. You just don't want to. All right? You don't go out after 530 because you can't see very well after dark. The third phase is the no go. Years when you're probably not leaving the building. Until you're leaving the building. If you know what I mean. So. Go, go. Years to me and most people that I deal with for many is 60 to 80. Ages 60 to 80. Retirement is all about guaranteed income, folks not. Assets. We don't want you stressed out about running out of money. It's time to enjoy your retirement.
Randy Sams:
So 100% of your focus should be on income, not assets. You don't need to have a bunch of money when you turn 105, you can't enjoy it. You want to have all that money in your early years and your go go years where you're going to be playing golf, where you're going to be playing tennis, where are you going to go on those cruises where every day is happy hour? That's why we focus on income. Now we get into the slow go here, slow go years. It's all about long term care. So what's your plan for long term care if you don't have a plan? Here's what's going to happen to a lot of you guys out there. Not everybody, but this is what's going to happen to a lot of you. Somewhere between the slow go and the no go years, you're going to get wiped out. What do you mean by that, Randy? Well, why are you going to get wiped out? Because the rules say. That you have to become destitute. You have to basically have no money whatsoever. And then you will go on welfare slash Medicaid so you lose control of all your decisions. All right. So if you don't have a long term care plan, again, go to the website, YourAmericanRetirement.com or give us a call 8669907664. And we'll be glad to have a discussion with you because folks, that's not my idea of a successful retirement when you lose control of all your decisions.
Randy Sams:
So let's get a long term care plan in place for you. The no go years. It's all about life insurance. People say you need to understand it's the life insurance that you bring into retirement that allows you to spend your money. One of the reasons I see why retirees are not enjoying their retirement is because they think they have to leave the kids some money. So they deny themselves in retirement to provide for their children. For their kids folks. Listen, you've worked too long and too hard to accumulate what you have today. You are the one that needs to go out and play the golf and enjoy your retirement, because I see a lot of people when they pass away, they left it all to the kids. And guess what? The kids inherit it and they're the ones that join the country club and go play tennis and take those cruises. So folks like, look, use a life insurance policy to provide the inheritance for your kids and you go out and enjoy your retirement years to the fullest. You go out and have a happy retirement. Hey, folks, again, my name is Randy Sams. I am your host. You're listening to Your American Retirement on 101.1 FM. The Answer we're Little Rock comes to talk. We'll be right back.
Producer:
Best part of today's show, Your American Retirement, is available wherever you get your podcasts and YourAmericanRetirement.com.
Producer:
Do you have a vision for what you want your retirement to look like? I'm Matt McClure with a Retirement.Radio Network powered by AmeriLife planning for retirement can be overwhelming. A survey from Gobankingrates shows that one third of Americans don't think they know enough about retirement. And they're probably right. So if you fall into that category, how do you know where to begin? Well, you've got to know where you want to go before you start planning how to get there. That's where having a smart vision for your retirement comes in. Whether you want to be a jet setter during your retirement years. Want to take it easy in a quiet cabin in the woods or start a new adventure by opening your own business, you should set that goal and keep it in mind throughout your working years, retirement expert Dean Waguespack said during a recent TEDx talk. I want to challenge all of us to redefine.
Dean Waggenspack:
Retirement away from depart, remove withdrawal to a new definition, a blending of pay.
Producer:
Passion and purpose. Still, retirement looks different for everyone. Sit down with your spouse and talk about your retirement goals. That will make it easier to determine how fiscally responsible you need to be now and how much income you'll need to make it happen after you retire. That's right, I said. Income. More and more retirees are finding that cash flow is more important than one big nest egg number.
Lee Baker:
That's when you want to say, Hey, listen, I want to start thinking about all of this accumulation that I've done through these decades of working. How do I begin to think about turning what I've saved and what I've accumulated into paychecks after I retire?
Producer:
That's Lee Baker, president of Apex Financial Services, speaking to CNBC. He says annuities are a great option for most retirees to generate an income you can never outlive. That's especially important since life expectancy has grown over the years. So you'll need to plan for a longer period of time than you may think. So do you have a smart vision for your retirement years? That's a key question to consider as you start planning how to get there. With the Retirement.Radio Network Powered by a Life, I'm Matt McClure.
Producer:
Welcome back to Your American Retirement. Here's Randy Sams.
Randy Sams:
Hey, welcome back, everybody. Again, you're listening to Your American Retirement on 101.1 FM. The Answer. I want to thank everybody for joining the show this morning. Again, go to your favorite podcast provider, whether it be YouTube or Spotify. Look up Your American Retirement dotcom. Give us a thumbs up. Leave us some good comments. Tell all your friends and family members, hey, listening to listen to Your American Retirement with Randy Sams on. 101.1 F, and the Answer is given some good advice as far as retirement is concerned, folks, we are all about if you can't tell by now, we are all about guaranteed income. All right. Again, you heard me state earlier. You do not retire assets. All right? There was a time in our lives when we were younger. They we were all about accumulation, accumulation, accumulation. We all had a target dollar amount in our head that we wanted to try to retire on. A lot of people ask me, Can you retire on 250,000? Can you retire on 500,000? Can you retire on $1,000,000, folks? That's up to us. That's up to when we meet to set that plan in in writing for you. All right. Let's put together a plan. Let's put together a vision. Let's put together something that's based on your objectives and utilize the funds that you currently have. Set yourself up and your spouse. For a happy and a secure retirement, not a risky retirement. So, folks, one of the things that we look at is we want to do a smart review.
Randy Sams:
We want to sit down with you and we want to review what you currently we want to look at the options that we're looking at. What exactly are your objective. So, folks, remember, we want to review the performance of your investments that you currently have to ensure you're staying on track. So what is your objective? So if you're in that accumulation mode right now. What is your objective as far as how much money that you want to have in that 401. K. What is your objective? What is your target retirement age. All right. And we want to make sure that you stay on track. To. So we all need to retire someday, and that's why we want to help people retire better. Ronald Reagan used to say Trust and verify, folks. Ronald Reagan, trust and verify. All right. So. When you meet with me. Or one of my agents at SMMG Financial. We're going to provide you with a comprehensive consultation at no cost. And there is no obligation. You only work with us if it's best for you. We help you analyze your financial situation. We're going to look at closely examine any annuities that you currently may have, because, folks, the annuities of today are not the annuities of yesterday. We have annuities today that and I'll tell you what, they've got all kinds of benefits. You know, I had a gentleman that was a listener to the show and he called me and left me a voicemail.
Randy Sams:
And one of the things that he was very impressed about was that he had always heard from other people, other advisors, how bad annuities were. And I hate to use that word, folks. There are bad annuities out there, but guess what? There are a lot of products out there that are bad. But you know what? We stay away from those bad annuities sold. But the ones that I consider to be bad are the ones that are loaded with fees. All right. That's going to eat up your eat up your funds that you put into just like keeping it in the stock market. Somebody charging you a fee whether your account goes up or goes down. So anyway, what he said was he enjoyed my show in the fact that I gave him a good understanding and a good education as to exactly how an annuity could be utilized for he and his wife. And he was very happy to have listened to that show because it it kind of opened up his eyes to realize that there are two sides to every story. All right. So if you've got someone that's telling you that an annuity is bad, why don't you ask them why they ask why they think that? What's your thought process? And they may say, well, it ties your money up. All right. Well, guess what, folks? There are annuities today where you have liquidity, you have access to those funds.
Randy Sams:
If you have an emergency, long term care, emergency nursing home emergency, terminal illness emergency and the majority of annuities today, they provide you with a certain percentage of liquidity, five, seven, 10%, you know, during whatever surrender periods you might be. So during if you have a surrender period of seven years, during that seven year period, you might have access to 10% of those funds if you need them. But the majority of the reasons that we deal with annuities is called guarantees. There's no other product out there, folks, besides Social Security or a pension that can provide you with guarantees. So you want a guaranteed lifetime income if you leave your money in the stock market. And we're going to talk about that in just a little bit. You know, there is a probability, a possibility, a high probability that you could run out of funds depending on how the stock market reacts, depending on how much money you have to withdraw. It's a little thing called sequence of returns risk. We're going to closely examine what annuities you have and see if we might be able to put you in a in a better situation, depending on how long you've had that annuity. We're going to discover exactly how much you're paying in fees. All right. So, folks, again, let me just tell you a little hint. If you have someone that is charging you a fee to manage your money, whether your account goes up or whether your account goes down, guess what you are to that person.
Randy Sams:
You are an annuity. You are a guaranteed stream of revenue. So as long as we have your money, they call it AUM assets under management and they are charging you a fee, that's a revenue stream for them, a guaranteed revenue stream. So that makes you an annuity. All right. So if they ask you or tell you that they don't like annuities, then you might want to ask them. So I guess you don't like me when they look at you. Like, what do you mean? Well, I am your I am your annuity, because as long as you're charging me that fee, whether my account goes up or whether my account goes down, I'm an annuity to you. All right, So give us a call. We're going to look at what you've got, see what kind of fees you're getting charged. You know, there are some variable annuities out there now. We don't do anything that's tied to the stock market, so we don't do any variable products, but a lot of variable annuities, those are the ones that you're going to hear. A lot of the folks that have negative things to say about annuities, they're mainly talking about variable annuities because they have a lot of fees. All right. And we want to stay away from fees as much as possible. So. We can also help you with Social Security planning and Medicare.
Randy Sams:
When's the best time, Randi, for me to take Social Security? Tell me about Medicare. How does Medicare work? What is Medicare Part A medicare Part B? What's. To talk about your Medicare plans, what your options might be when you. That age. All right. We're going to compare your current situation to what's possible if you choose to work with us. So, folks, if you haven't heard from your advisor lately, please give us a call to get a second opinion. We want to help you set up the path to retirement you've always dreamed of. Again, folks, we want to set you up for a safe and a secure retirement, not a risky retirement. All right. We want to consider the following rules that could help you create more a more solid foundation for your retirement. Rule of 100. What is the rule of 100? The rule of 100 is a simple but effective way to diversify investments and plan for retirement. It works by taking the total of an individual's age, plus their percentage of investments in stocks and ensuring that it does not exceed 100. For example, if an individual is 30 years old, they should have no more than 70% of their investments in stocks. The other could be in bonds or whatever any other safe money that they might be looking at. So as they age, their percentage of investments in stocks should decrease so that the total of their age, plus the percentage of investments in stock does not exceed 100 folks.
Randy Sams:
This is what I deal with. People ask me, Well, Randy, how much should I have in stocks and how much should I have in safe money? All right. So folks, I refer to annuities, especially guaranteed income annuities as safe money. All right. It's guaranteed. It's safe. You're not going to lose a dime. You're guaranteed for the rest of your life. And we can set it up where it's guaranteed income stream for your life and for your spouse's life. So as an example, if you're age 70. You should have 70% of your retirement portfolio in safe money products. All right. An annuity is not an investment. An annuity is a risk transfer vehicle. You're transferring the risk from yourself and transferring that risk to the insurance company to the insurance carrier. All right. So, again, don't look at an annuity as an investment. It's not it's a risk transfer vehicle. All right. So if you're 70 put 70, you should have 70% of your. Retirement portfolio in safe money products, 30% still in the market. So, folks, when we meet, I don't ever tell anybody to take 100% of what you have in your retirement portfolio and put it into an annuity. All right. If you want to keep a portion of your money into the stock market, then by all means do. But look at the annuity as setting yourself up with that guaranteed income. So let's look at what your expenses might be.
Randy Sams:
What are your monthly expenses? Do you have a mortgage, car payments? You know, you've got utilities, you've got to buy groceries. You're going to have medical health insurance premiums out of pocket expenses. So let's set up an annuity to address those basic needs. All right. Those basic expenses and then anything that you have left over, whether it be 50% of your account value or 30% of your account value, then by all means, do that money in the market. All right. But you've got to understand that you have your money in the market. There's risk. There's a risk. It's going to go up. Everybody says hallelujah to that. But there's also a risk it's going to go down. Just ask yourself about 2022. What did your account value do in 2022? What has your account value done thus far? What are we in February of 2023? What's your account value? Is it going up or is that going down in 2023? So folks, the benefit of the rule 100, it's a great way for individuals to diversify your investments and plan for retirement. All right. So so this could help protect your retirement savings and ensure that you have enough money to last throughout your retirement years. All right. Another rule to look at is the 4% rule. Now, what is the 4% rule? Folks, The 4% rule was established many years ago by folks that, you know, they were financial advisers, they were economists.
Randy Sams:
And what they were looking at is they were saying that when you hit retirement, a safe withdrawal amount was around 4%. All right. Now, folks, that 4% rule does not work today because of the volatility that we have in the market, because of what we've experienced and because of the environment that we are in. So the 4% rule, a lot of people I heard someone say the other day they had an argument and they were talking about, you know, the 4% rule is great for people because as you're if you're for one K value goes up or your IRA value goes up or you're managed to your managed account goes up, then your 4% is going to go up. But you know what? They left it at that because guess what happens if you're for one K value goes down, your IRA value goes down and your managed account goes down and you continue to take out 4%. Well, guess what? Your 4% is going to be less if your account value decreases. Correct. All right. But they didn't say anything about that. So, folks, what they're doing today is what we look at. The 4% rule has been a popular rule of thumb for retirees to follow when it comes to managing money. It suggests that retirees should withdraw 4% of their retirement savings each year in order to maintain their nest egg. All right. Now, I know people that are withdrawing more than that.
Randy Sams:
But while the exact 4% withdrawal rate may vary depending on the individual's financial situation, the rule was generally accepted as a safe way and I emphasize was accepted as a safe way to ensure retirement savings last throughout retirement. Today, folks, as with any rule, they change. So right now I call it the 2% rule. Most economists, most people that look at. People that want to make sure that they don't run out of money. In other words, you don't want your retirement account to return to zero before your blood pressure does. We are suggesting. That you have a 2% rule. All right. So the 2% rule is considered a much safer way today to keep you on track with your money. With the current inflation rate and uncertain market conditions, withdrawing 2% of your savings is thought to be a safer amount, one that will increase the longevity of your savings. Well, folks, I have an income annuity accounts that will do a payout of about 6% or some even higher depending on what your age is. So don't get stuck with 4%. Don't get stuck with 2%. Give me a call. 8669907664 or go to the website YourAmericanRetirement.com. Leave me your information. Let me sit down with you and talk to you about what we can do and what we can show for a guaranteed income. Hey, you're listening to Your American Retirement. My name is Randy Sams 101.1 FM. The Answer. We'll be right back.
Randy Sams:
Hey, welcome back again. My name is Randy Sams. You're listening to Your American Retirement on 101.1 FM. The Answer where Little Rock comes to talk. Folks. We want to continue talking about the smart rule following. We've spoken about the rule of 100, the 4% rule, which is now the 2% rule if you want to be safe. And my rule is. Guaranteed income. If you want to write down Randy Sams, rule is safe income, guaranteed income, folks. That's what it's all about. And again, I have income annuities. We have insurance companies, annuity companies out there that your income that you are guaranteed for the remainder of your life and for the remainder of your spouse's life. If we set up a joint income plan for you and your spouse, that amount is guaranteed. And right now the payouts, depending on your age, could be anywhere from four, could be seven, could be eight. So it really depends on your age. All right. So that's why we want you to give us a call. 50124923, four, three. And let us help you out of that 4% rule or that 2% rule. And let us show you how we can guarantee you an income stream of around, say, anywhere from 4 to 6% based on the guaranteed income through the income annuity. All right. The last rule we're going to talk about is the rule of 72.
Randy Sams:
The rule of 72 is a straightforward calculation used to estimate the amount of time it will take for an investment to double in value. So to calculate, simply divide 72 by the expected rate of return to get the number of years needed to double the investment. For example, if you have an 8% return on your money, it's going to take nine years for that money to double 72 divided by eight equals nine. If you have an account that is paying you 10% interest, it's going to take you a little over seven years for that to double. If you have an account that's paying you 2% is going to take you 36 years for that money to double. All right. Just use that rule of 72. You know, a lot of people say, well, I'm getting an average of 4%. All right, we'll take 72 to divide that by four. And that's going to tell you how long. If you leave the money in there, it's going to take to double. So, folks, those are the smart rules. Let's jump right into smart income. All right. Because folks, again, we specialize in setting people up with a guaranteed lifetime income stream. I like to call it paychecks and paychecks, paychecks to cover your basic expenses and paychecks for you to go out and play golf pickleball, take those cruises, whatever you might want to do in your retirement.
Randy Sams:
But too many people think retirement is about building one big nest egg. You need to have a plan to replace to replace your income and fund your monthly expenses. Ask yourself this question Where's the paycheck going to come from when the paycheck stops? All right. So keep in mind, some income savings are taxable while other sources are tax free. So we know we have Social Security. Social Security Act was signed into law by in 1935 by President Roosevelt, and the first payments for Social Security were made available in 1940. So listen to this. Social Security is one of the largest government programs in the world. 176 million people paid Social Security taxes in 2021. As of April 2022, more than 65.5 million Americans are receiving Social Security benefits as a life expectancy of American. As the life expectancy of Americans increase, the concerns that the program will not be able to support retirees with less people in the workforce is is is hitting us right now in the face. So I have that when I talk to younger folks, they're always they already state that, hey, probably by the time I hit retirement age, which who knows what that was going to be. When you've got someone who's 40, what's their retirement age going to be? Is it going to stay at 67 or are they going to raise it to age 70? Because right now, the Social Security Board of Trustees has estimated that Social Security funds will be depleted by 2034.
Randy Sams:
Folks, that's 11 years from now and will only be able to pay out 77% of scheduled benefits. I foresee a battle happening on that because you know what's going to happen. You take away the Social Security benefit of those folks who are in who are in retirement right now. It may affect your political career. Something may happen. All right. So you've got to look at income. Do you have a pension, folks? We have to look at income. So listen to this. As more Americans enter retirement without the protection of a traditional defined benefit, which is a pension plan, the potential ramifications for inadequate income planning have become more immediate. So when determining post retirement income requirements, there are four key variables that we need to focus on. Number one, how long you're going to live. Number two, how healthy you're going to be. Number three, equity market volatility, specifically during the first ten years of retirement, because that can materially affect how long you're saving. Things are going to last. Remember that sequence of returns risk and what I call that retirement red zone five years before five years into it. But if you have a big significant drop in the first ten years of your retirement and you're withdrawing funds, it can affect how long your savings are going to last.
Randy Sams:
All right. The fourth issue to consider impact of inflation over time and purchasing power, giving retirements that could last easily for 20, 30, 40 years. All right. So we spoke about the 4% rule. So listen to this. For an individual utilizing both conservative a a conservative 60 over 40, that's 60% in equity, 40% in what you would consider bonds, 6040 split, fixed income investment mix and a moderate, a modest 4% withdrawal rate indexed for inflation. There's a significant risk of running out of income should they achieve an average life expectancy while enduring an equity market correction during their first decade in retirement. Economists call this the sequence of return risk, folks. So to give you an example, just very quickly, if we saw a 20% market correction within the first ten years. So if you retired in 2021, 2022, was the market up or was the market down? All right. So we're going to just kind of give you an example. In the first ten years of retirement, if you look at a 20% equity market correction, the probability of running out of income with that 20% market drop in the first ten years, if you are taking out 4% and you are doing a 7030 split, your possibility of running out of funds in year ten is 12.7%.
Randy Sams:
In year 30 is 40.1%. If you're taking out 5% and you have a 7030 split in year ten, you have a 30.8% probability of running out of funds with that 20% market drop in the first ten years at age in year 30. With that, 7030 is 63.3%. So folks, that's how sequence of returns can affect you. You have a market drop, you're taking out money, you've got your money in the market, you've got an overly positioned into equities and you have a market drop and you're taking funds out. You can see that your retirement account, your retirement fund could hit zero before your blood pressure does. All right. So simply put, many Americans entering retirement face a considerable level of financial risk from the trifecta of longevity, equity market volatility and the uncertainty of health cost in old age and long term care. In addition, even a 2% inflation rate is going to cause it to double what you need today versus 35 years from now to maintain purchasing power. So a realistic planning horizon for a healthy individuals looking for or looking at another way, the economic value, not to mention peace of mind of protected lifetime income again, once upon a time provided by a traditional pension plan may be far greater than most people or their financial advisors realize.
Randy Sams:
It may also help explain why a 2019 survey conducted by the Alliance for Lifetime Income revealed that only 42% of non retired Americans believe their savings and income from other sources will last their lifetime. That means 58% of the folks that that were involved in the 2019 survey did not believe that their savings and other sources of income will last throughout their retirement. So one of the most difficult challenges someone faces when reaching retirement is developing an appropriate de accumulation or income strategy for their retirement nest egg. And that's what we do at SMMG Financial Folks, Your American Retirement. We want to set you up for a safe and a secure retirement, not a risky retirement. So, folks, you see, we want to focus on raising awareness of potential post retirement risk for market movements and longevity. People are living longer so that individuals, in consultation with myself and my other employees that work with me can develop a suitable strategy to identify prudent amount of savings that could be utilized each year to live on during retirement. We want to sit down and we want to establish what are your basic expenses. We want to focus on those basic, expensive folks. So listen, why is it important to do it now? Because according to the US Census Bureau, the US in one year. A year from today. One year may not be to today.
Randy Sams:
But anyway, in 2024, folks, listen to this. We're going to have the most 65 year olds in history in 2024, a record 4.5 million baby boomers, 4.5 million Americans will reach the age of 65. The Life Insurance Marketing Research Association, better known as limb, estimates there are over 50 million retirees in the US today, and by 2035, they project that number will reach 72 million. 72 million Americans will be age 65. So folks, that's why it's important to focus on income annuities. All right. Lifetime income can be achieved by using a traditional fixed single premium. Immediate annuity or an indexed annuity is usually what we use. But folks, it's very important that an income annuity is part of your retirement plan. All right. We want to be able to set you up with a peace of mind knowing that you are not going to run out of funds. We want to take away that stress. We want to take away the rocking chairs. We want you to enjoy the three phases of retirement, especially those go go years when you want to go out and play pickleball where every day is a happy hour. So, folks, hey, again, my name is Randy Sams. Thank you for listening this Saturday morning. You're listening to Your American Retirement on 101.1 FM. The Answer. Thank you for joining us. Have a fantastic Saturday.
Producer:
Thanks for listening to Your American Retirement. You deserve to work with licensed financial insurance experts who can offer sound strategies for protecting and growing your hard earned money to schedule your free no obligation consultation. Visit YourAmericanRetirement.com today that's YourAmericanRetirement.com.
Producer:
Not affiliated with the United States government. Randy Sams does not offer tax, legal or investment advice. Consult with your tax advisor or attorney regarding specific situations. Opinions expressed are subject to change without notice. These opinions are not intended as investment advice, nor do they predict future performance of any product. All information provided is believed to be from reliable sources. However, we make no representation or warranty as to the accuracy of any statement. This information is intended to be educational in nature and does not provide a guarantee or a specific result. All copyrights and trademarks of the property of the respective owners of air of life assumes no responsibility or liability for the content of this message. The information contained herein is provided on an as is basis with no guarantees of completeness, accuracy, usefulness, timeliness, or of the results obtained from the use of this information.
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