How Randy Can Help Make Your Retirement Dreams Come True

7.28.23: Audio automatically transcribed by Sonix

7.28.23: 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, everybody. I want to welcome you to today's show. My name is Randy Sams. Thank you for joining me. You're listening to Your American Retirement on 101.1 FM. The answer, I hope you're having a fantastic Saturday morning. Some of you, your Saturday morning may have just begun. You may be drinking that first cup of coffee. And want to thank you for taking the making the choice of joining us here today to listen to the show. We got a great show to talk about today. Some great subject to discuss. And again, I want to welcome you to the show. My name is Randy Sams. I am president CEO of SMMG Financial. We work with clients such as yourself, pre-retirees folks that are in retirement right now addressing the financial the major financial issues that you guys are going to face that we're all going to face. In retirement. Basically what we look at today is we want to help our people understand and prepare for a secure retirement, not a risky retirement.

Randy Sams:
So that's what we do at SMMG Financial. That's our focus on Your American Retirement. For those of you who have been listening to us that we're in our second year, thank you so much. We appreciate the opportunity to continue. And again, we appreciate all our listeners that have left us great comments on via the toll free number or the website or give us the thumbs up on the podcast. Speaking of podcast folks, and you can listen to any of our previous episodes on YourAmericanRetirement.com or your favorite podcast app. So Spotify, whatever it happens to be, you listen to just look for our show YourAmericanRetirement.com and you'll find our podcast there. Hey want to give a shout out to our listeners again little Rock Benton Bryant Hey, how about all my friends and family in Conway, Arkansas? Thanks for joining me to this morning. You know, you can call me you can schedule a free consultation with me today, work directly with me or one of my assistants. And there's no obligation. Folks, please don't hesitate to call me number one. What I enjoy is just listening or hearing from our listeners. Number two. I appreciate the information and the suggestions that you have given me over the past several months. Oh, hey, Randy. This is what I'm concerned about.

Randy Sams:
This is what I have a question about, folks. That's what I'm all about. Call me up. Give me what your idea might be. Tell me what your concern is. What is it that stresses you out at night when you put your head on the pillow if you're in retirement? What is that? If you're getting close to retirement, what is that? And then let me listen to you. I can call you, get some more detail, and then we can add that to one of the segments on our show. Or it might be an entire show, depending on how concerning the stress point might be for you. All right. Speaking of our listeners, hey, get in touch with me and to receive a free report, tax free investment for a better retirement. So we want to help educate our listeners and clients on how to keep more of your hard earned money. Folks, it's your money. Don't give it away. Don't lose it. So if you have questions or want this report, please give us a call. (866) 990-7664 or go to the website YourAmericanRetirement.com. Leave us your information and say hey Randy, I want the free report. Tax free investments for a better retirement today show. Folks, are you on track for your retirement? How can we help make your retirement dreams a reality? So folks, we have. People that meet with people that have listened to me on the show, they see recognize me and they have questions.

Randy Sams:
But a lot of times when someone calls, they're going to want to know you or, you know, listen to your show. But exactly what is it, folks? If you've listened to the show very much, you know what we do? We focus on what guaranteed income. That is what you know, that's what we do. That's our objective. We want to put you and your family, you and your spouse in a position to where you have a secure retirement, not a risky retirement. And the only way that's going to happen is by guarantees. Remember, you retire on income, not assets. So I've got a story. Got a client. This is kind of reiterates and, you know, verifies validates my line of thinking. Guaranteed income. So I've got a couple that I've met with back in 2020. And what happened was we got together, spent a lot of time together, put together a retirement plan based on what they were looking at, what their objective objectives were. And again, you know, I'm going to put together a plan that's going to include guaranteed lifetime income for both the husband and the wife. This is a couple that I was working with, so. This couple is outside of Arkansas. As you all know, I travel five states.

Randy Sams:
I travel all the surrounding states. So I'm busy. I'm like the Marcus Welby of the retirement planning industry. I'm going to come to your house so I can't make someone in Nashville, Tennessee, drive all the way to Arkansas to meet with me. So I give them the benefit of the doubt and I drive to them. So this couple was outside of Arkansas. They were in Mississippi. But I went and met with the couple a couple of times and put together what I thought was a great retirement plan, and it basically came down between my plan and they had a investment advisor and I'm not going to mention the name of the company, but they had an investment advisor that basically talked his way into it and they went with the investment advisor versus going with my plan, which would include guaranteed lifetime income. And one of the reasons why, folks. Because the advisers play in, put together a, you know, a scenario that it was basically based on a what? A what if what if what could possibly you know, this is what we can do. This is what we can do. But it wasn't guaranteed. You know, you can run all kinds of programs and all kinds of Monte Carlo demonstrations that that are illustrations that you might want to. But, you know, I'm not going to sit down in front of my clients and say, hey, I've got a plan that's going to give us an 85% probability of this lasting you until you're 80 years old or 85 or 90.

Randy Sams:
No, I don't do that. My plan is going to be 100% okay. You live to be 100. Our plan is still going to be in force. You live to be 110. Our plan is still going to be in force anyway. Make a long story short, they chose the other plan because of the fact that they felt like they could get more money, they could withdraw more money out of that account than what we were being able to offer them on a guaranteed basis. All right. So they were going to choose withdrawals out of their investment account managed account versus putting into place a guaranteed lifetime income annuity. Okay. Now, what do you think happened in 2021? Okay. I'm not going to get political, but you guys know what happened in 2021 and what happened to the stock market in 2021 and 2022. Did they go up or did they go down? Well, you know, the answer to that. They went down. So, folks, here's what I call the perfect storm. When you have an account, a retirement account, be it in the stock market, be it an IRA, be it a 401. K, be it a managed account, whatever.

Randy Sams:
Have to take into consideration market risk and sequence of returns. Risk. What does that mean? That means you've still got your money invested in the stock market and sequence of returns. Risk is the fact that if you're taking money out at the same time, your account is going down. That's the perfect storm. In other words, you may end up running out of money before you pass away. Okay. In other words, your retirement account balance would go to zero before your blood pressure would go to zero. We don't we don't want to work that way anyway. That's what happened. So they were taking money out. They thought they were okay. But the market went down. We were taking money out again, 20, 20, 20, 21. Here we are in 2023. 2022 happens. It goes down. They're taking money out. 2023 it up. The account value is up just like everybody else is 401. But it's back. It's not back to level where it was in 2022 or 2021. So they're still down. So, folks, you have to realize. If you have an account and you lose 20% and you're taking money out, you're going to have to have an increase in that account of over 30% to get back to even. All right. That's tough. Fiscally impossible. So what happens? Will the phone rings? Guess who it is.

Randy Sams:
It's my friends in Mississippi. So they tell me what their situation is. We're able to meet and I'm able to once again, you know, listen to their story. And they apologized and said it's there's no reason to apologize, folks. You know, I did what I could. You thought you made the choice that was best for you at that time. But unfortunately, the perfect storm hit market went down and you were taking money out of the same time. So basically, to make a long story short, what we were able to do is we were able to take the funds that they had still in their account. Now it's lower than it was in when we started in 2020 because of the fact, what that the markets went down and they were removing money, they were taking money out, they were withdrawing funds. But now they have the peace of mind knowing that they have a guaranteed lifetime income stream, that they don't have to worry about sequence of returns, risk or market risk. So, folks, that's what we do at SMMG. Please give us a call. (866) 990-7664 or go to the website YourAmericanRetirement.com. Give us your information. Let us get in contact with you and let us set you up for a secure retirement. Hey, we'll be right back. Thanks for listening. Are you interested in ways to protect.

Producer:
And grow your hard earned money? Your American Retirement is here to help.

Producer:
Visit YourAmericanRetirement.com to schedule a free consultation with Randy today. And now back to the show.

Randy Sams:
Hey, anyway, welcome back, folks. My name is Randy Sams. Thank you for joining me today. I want to thank all our listeners. Folks, you know, we love you. We love all the comments. We love all the suggestions. We love all the thumbs up you guys give us on our YouTube and podcast. So, again, thanks for joining us. So we're going to start this segment off with we need the financial wisdom music, please, Mr. Producer.

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

Randy Sams:
Financial wisdom quote of the Week. The question isn't at what age I want to retire, it's at what income. And that is brought to us by Mr. George Foreman. Again, the question isn't at what age I want to retire, it's at what income. Now, folks, I'm going to add this to what Mr. Foreman gave to us. I believe it's at what, guaranteed income? Because if you remember the story that I just told about the couple from Mississippi. They had an income when they started their retirement, but it wasn't guaranteed. And there because they were making withdrawals and the accounts value, the market value was going down. So was their account balance. So I would add it's at what guaranteed income you retire on. Now, Mr. George Foreman, you guys know he's a former professional boxer, an Olympic gold medalist who became a cultural icon both inside and outside the ring. So after retiring from boxing, Mr. Foreman became a successful entrepreneur, marketing his famous Y'all know what I'm about to talk about? George Foreman Grill. Kind of like he was the first one to do the infomercials, wasn't he? So the George Foreman Grill became one of the best selling household appliances of all time, selling more than 100 million units. Way to go, George. That was a knockout, wasn't it? So. Good job. All right, let's do a little public service announcement.

Randy Sams:
What I'm going to tell you about today. If you all have been the beneficiary of an inherited IRA, there is an update. I come across folks more often now than than had as folks. Parents are getting older and they're passing away and they're leaving IRAs or they're leaving accounts with their children. There's issues that you have to be aware of, folks. There's procedures that you have to follow when you inherit an IRA. So it's a beneficiaries of inherited IRAs get more RMD relief for now. This is a Forbes article that came out last week, July 19th, 2023. So a few years ago, that was before 2020. If you inherited an IRA from a parent, the distribution rules were simple. You could stretch withdrawals over your life expectancy. Since the rules for non spouse's inheriting retirement accounts have been. Anything but straightforward. So since that time. Before 2020. It's it's it's difficult. You have to get in contact with us or you need to meet with a a a planner or a financial advisor to help you understand exactly what it is when you inherit an IRA from your parents or a sibling. All right. So. What happens before was that if you had a parent that passed away, let's say in 2019 and you inherited that, IRA could be in an annuity or it could have been it's an IRA, an individual retirement account or an individual retirement annuity.

Randy Sams:
They allowed you. Before 2020. They allowed you just to take the RMDs, which was based upon your life expectancy. So if you inherited that IRA at the age of 50, then you would be required to take an RMD based on that age at age 50. And that's based on what your life expectancy is going to be for the next 40 years or whatever. Okay. 35 years. It's just like when you hit age 73, now you have to take an RMD and that's based on a certain percentage of your account balance based on your life expectancy. But if you inherited that IRA before 2020, they allowed you to take those funds and you could live on it for the rest of your life by just taking the RMDs. But. Everything changed in 2020. So starting in 2020, most new beneficiaries of retirement accounts are subject to a ten year rule. So this was rightly widely interpreted to mean required. Minimum distributions were gone. And instead beneficiaries must take the entire sum within ten years. This means that beginning in January 1st, 2020, if you had a spouse excuse me, not a spouse, but a parent, a non spouse pass away and leave you those funds in an IRA or an annuity. You had to take all those funds out by the end of the 10th year.

Randy Sams:
All right. So in early 2020, the IRS proposed changes that would require some beneficiaries to take RMDs. Listen and empty the account in ten years. So an example, in early 2022, if you were going to have to take RMDs and empty the account in ten years, if you had $100,000 account that you inherited, if your RMD at that time was 2%, that's $2,000, you'd multiply $2,000 times ten and that's going to be 20,000. All right. Well, you're way below the 100,000 that you would have to deplete over that ten year period. All right. And that's just the RMD at two. 2%. It's going to go up every year. So you may have taken out over ten year period. Just take an RMDs, you may have taken out 30,000 or 35,000. But unfortunately the rule states that in beginning in 2020 you had to deplete those funds by the year end of ten years. All right. Does that make sense? So. But so. A final ruling was expected in early 2023. But just last week, folks, the IRS again waived penalties on missed distributions for 2023 and indicated that final guidance wouldn't come until 2024. So a little reprieve there for you folks if you have an inherited IRA. So the news should come as a welcome reprieve for many. For those who have not yet considered planning strategies around inherited IRA distributions, now is the time to get in contact with us.

Randy Sams:
(866) 990-7664. Or go to the website YourAmericanRetirement.com. Say Hey Randy, I have an inherited IRA I need to understand the rules. We'll get in contact with you. So here's an update on the timeline for ruling on inherited IRA distributions. On July 14th, which was last week, the IRS released notice 2022 dash 54 waiving penalties for certain inherited retirement account beneficiaries for missed requirement required minimum distributions in 2023. That would have been necessary under the 2022 proposed guidance. You see how confusing this is. You need to. You need to give us a call. So since even this clarification sounds confusing. Yes. Let's start from the beginning, guys. Let's go back. So we're going to summarize the inherited IRA distribution rule and the changes since the Secure Act. So before 2020 pre 2020, that's pre secure act. The stretch. Ira was alive and well, meaning most non-spouse beneficiaries who inherit any type of IRA or a defined contribution plan such as a 401 or 403 or an annuity, could choose to withdraw the funds by taking required minimum distributions over their lifetime so beneficiaries would calculate their life expectancy according to their current age using the IRS Uniform Lifetime Table. So it's important. Note the passing of the Secure Act or any subsequent changes do not impact existing beneficiaries who inherited a retirement account before 2020.

Randy Sams:
So all of you guys out there, guys and gals that are listening that have an inherited IRA, but you inherited it before 2020, the you're okay, You're just going to have to take your IRA RMDs based on your lifetime so those individuals can continue to stretch distributions over their lifetime. So again, this only affects those from 2020 and forward. So beginning January 2020, the Secure Act provisions are in effect. It created two classes of designated Non-spouse beneficiaries. Eligible. Designated beneficiaries not subject to the ten year rule and non eligible designated beneficiaries. So we're going to focus on the distribution rules for non eligible designated beneficiaries as this is what I come across most often. This is the most common. So based on widespread interpretation of the Secure Act, it was originally assumed that when a decedent dies after January 1st, 2020, a non spouse beneficiary, which is a non eligible designated beneficiary, must empty the retirement account by the end of the 10th year following the year of death. And there would be no RMDs. Meaning that if you're. If that person if your father or your mother passed away in 2020, you must empty the account by 2031. All right. That's ten years after the year of death. So. So that's what they said. You inherited this in 2020 by the by the end of the 10th year or the 11th year, which is ten years after one year after their passing away, you have to deplete that account.

Randy Sams:
To a non-spouse eligible designated beneficiary includes minor children of the account owner under 21. Any disabled or chronically ill individuals or individuals not more than ten years younger than the account owner. All right. A non-spouse eligible designated beneficiary. But we're talking about. Those folks. So two years pass February 2022 IRS Proposes Changes to the Secure Act. Inherited IRA RMD rules. In early 2022, the IRS issued proposed guidance that stunned the financial community. Big breath. So as it was drafted, the changes would impact non-eligible designated beneficiaries by requiring distribution in years one through nine. In addition to withdrawing all the funds in year ten only if the decedent was subject to RMDs when they died. That makes sense. So. Distributions during the ten year window would generally be based on the beneficiaries. Own single life expectancy according to the IRS uniform lifetime Table reduced by. By one each year. So. What that basically means that if you inherited an IRA from someone. Who were who was required and already taking RMDs when you inherited it. Then you were going to have to take RMDs. All right along with it. But there's a simple math way that we can get around this. So folks, October 22nd, the IRS 2022 IRS waives penalties for beneficiaries who missed RMDs.

Randy Sams:
So the IRS released a notice 2020 2-53 announcing final regulations. So that's going to apply at the earliest to 2023 distribution year. Individuals affected by the new rules who fail to take RMDs in 2021 and 2022 will not be subject to ordinary penalties. Fast forward July 20th, 23. Irs extends Inherited IRA RMD penalty waiver for 2023 oh. There's a reprieve. The penalty waiver extends to 2023 for those who may be affected by the still pending guidance. So they still hadn't made up their mind what they're going to do starting in 2022, 2023 excuse me. The penalty for a missed required minimum distribution is 25%, down from 50% before. In the release, the IRS said they expect to release final guidance in 2024. Now, folks, that was confusing. I'm sorry, but I just wanted to have a little information if you have an inherited IRA. Regardless of whether potential changes to the inherited distribution rules may impact you, consider planning strategies to help mitigate the tax implication. Folks take out 10% a year. It'll cover you all. Hey, we're going to be right back again. Take out that 10% a year. It's going to take care of all your you'll deplete it after ten years. You're listening to Your American Retirement on 101.1 FM. The answer will be right back.

Producer:
Missed part of today's show. Your American Retirement is available wherever you listen to podcasts and online at YourAmericanRetirement.com. That's what I am. Are you anxious about retirement? Concerned that you could outlive your money? Randy Sams is a Little Rock native who has nearly four decades of experience helping hundreds of Arkansans retire with confidence. If you want to get the most out of what you've worked so hard for, or if you're interested in learning how to maximize your Social Security, call Randy Today at (501) 249-2343. That's (501) 249-2343. Or visit YourAmericanRetirement.com. Welcome back to Your American Retirement. Here's Randy Sams.

Randy Sams:
Hey, welcome back folks. You're listening to Your American Retirement. My name is Randy Sams. Thank you for joining me on 101.1 FM. The answer Hey, listen, I just want to kind of shore up some things that we spoke about in that last segment that I did, a little public service announcement concerning inherited IRAs. There have been a lot of rule changes from the IRS when they implemented this in 2020. It's changed several times. Basically what it comes down to, folks. Number one, if you have an inherited IRA that began pre 2020, you are required to just take your RMDs, your minimum distributions. You can stretch that out over your lifetime. Okay? If you have an inherited IRA that started after 2020 when the Secure Act kicked in January 1st, 2020, you are required. It said based on 2022 rule, you have to take the the you have to take the RMD and you have to deplete the account. You have to empty the account. In ten years. Now, that's ten years after the year of death. All right. My suggestion and what I've worked with folks setting these up is your RMD based on your life expectancy, depending on how old you are, it could be anywhere from 2% to 3%. Whatever. All right. Maybe even lower than that. What we've done focused on how do we empty this account at the you know, after 11 years, take the year that they passed away.

Randy Sams:
Then begin that one year after and that gives you ten years. So if they passed away in 2020, we have to deplete that account by 2031. One year after death, then ten years. So the best thing to do and what we've done is set folks up in an annuity. That allows you to take up to 10% withdrawals, free withdrawals without any penalties. You can take the full 10% out over the next 11 years. And guess what? At the end of 11 years, you should have zero balance. All right. If there's any balance at the end of 11, then you just take that out and you have to pay the taxes on it. But that's the easiest way and that's the way that that we've worked with the majority of our clients to where we get both of them. You kill two birds with one stone. Let's look at the free withdrawal amount that we have set up for the annuity and let's take advantage of that 10% free withdrawal over the next 11 years and will satisfy both the RMD and having the account empty by the end of 11 years. All right. Hopefully that clears things up. It did for me anyway.

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

Randy Sams:
Let's jump right into it, folks. Inflation now, it's getting a little bit better from what I hear. I don't know. Inflation is still up as far as I'm concerned, you know, over the last two years. But we're starting to see a little bit of relief, uh, inflation demonstration. The question is, will Social Security keep up? So while it remains higher than Federal Reserve would like it to be, inflation has consistently been slowing down in recent months. That's good news. So it's an indicator that could lead to low cost of living adjustments in 2024 for millions of American retirees. That's not so good news if you're on Social Security, right? So earlier this year, the Senior Citizen League estimated that based on the most recent consumer data. Next year's Cola cost of living adjustment to Social Security and supplemental Social Security income, SSI could be as low as 3%. This would probably be a difficult situation to navigate for retirees relying relying on Social Security for their spending, especially in Florida's Miami, Fort Lauderdale, West Palm Beach area, which is estimated to have the highest inflation rate of all metro areas in the country at up to 9%. The Cola will be officially announced in October. So about three months from now, they're going to announce what the Cola percentage increase will be. Meaning that the Senior Citizens League estimate could still change. It could be higher, it could be lower, but the estimate remains much lower than the adjustment for 2023, which included the highest boost in 40 years with an 8.7% rise.

Randy Sams:
Now, folks, you know, when it says a boost, they're not giving you that boost out of the goodness of their heart. I wish I could say differently, but it's not. It's it's set up in law that the percentage, the Cola increase, if there is an increase that we will see next year, is going to be based on what inflation percentage we see this year. So for those of you who are on Social Security and you got that 8.7 increase percent increase in 2023, that's because inflation in 2022 was so high, what was it, over 9%, 10%, probably higher than that. But that's why you saw the 8.7% increase. But that was the highest in 40 years. Which means what? That inflation in 2022 was the highest that we've seen in 40 years. All right. So. Elsewhere. If we look at Tampa, Saint Pete, looks like Florida's kind of a tough place. Clearwater, Florida. The inflation rate there is 7.3%. San Diego, Carlsbad, California, 5.2%. Detroit, Michigan, 4.7%. Dallas, Texas. Got friends and family in Dallas, Texas. Arlington, Fort Worth, Texas. 4.7%. Atlanta, Georgia. 4.6%. So, folks, this is why it's important. Be concerned about Social Security and the income plan. That you play an old receiving.

Randy Sams:
During retirement. Here's what I mean. You have to consider your options before you decide when you want to turn on Social Security. Why does that affect us? Because if you turn on Social Security at age 62 versus age 67, which if that is your full retirement age, which majority of the folks that I'm working with right now, their full retirement age is anywhere from 66.5 to 67. So let's just take 67 for easy math. If you turn on your Social Security benefit at age 62 versus full retirement age, at 67, you will receive about 30% less. And that's lifetime, folks. All right. And say, well, Randi, but that gives me five years of a head start. Yeah, but it's at 30% less. So if I wait to age 67 and I get 30% more each month, slash each year after about 8 or 9 years down the road, I've now caught up to you at age 62. And now every month from that point on, I'm ahead. All right. Plus, just think, you're taking 30% less today at age 62. How much is that going to be worth as we go forward five years from now, ten years from now, 15 years from now, 20 years from now? So this is what we always talk about. It's always best to delay taking Social Security. Now, this is me speaking. This is Randy. All right.

Randy Sams:
There are certain situations where, yes, it's probably the best for us to take it at age 62 when we take into consider health concerns when you look at longevity. If you feel like you're going to live. Your parents have lived a long time. Your grandparents have lived a long time, then you need to take into account longevity. And the longer that you can wait to turn on your Social Security, the better off you're going to be in the long run. Because listen to this. If you wait to turn on Social Security at age 70 versus age 67, you're going to make 30% more each month slash each year. All right. That's what most people are targeting now. Not all. A lot of people, they want to make it to full retirement age and they want to turn it on. And I'm good with that. But if you can make it to age 70. That's a 30%, guys. That's that's guaranteed. That's compound interest. It's guaranteed income. It's guaranteed compound interest over that 67, 68, 69, 80 years of age, it's guaranteed to grow. Take advantage of that. So that's what we look at. You need to get in contact with us, receive your free Social Security maximization report. I can help you make the most of the government benefit you have contributing. You your entire working life. Remember, folks. Give us a call. (866) 990-7664.

Randy Sams:
Or go to the website YourAmericanRetirement.com. Leave us your information and let's talk about when's the best time when's the optimum time for you to look at turning on Social Security and receiving those benefits? Okay. Let's talk about risk. Age appropriate is your level of risk. Age appropriate. Folks, we talk about this with our clients. The rule of 100. Rule of one Hot 100 is a simple financial guideline often used for retirement planning. So it helps individuals determine an appropriate asset allocation based on their risk tolerance and age. The rule of 100 suggests that you should subtract your age from the number 100 to determine the percentage of your portfolio that should be allocated to more aggressive investments like stocks. The remaining percentage after subtracting your age from 100 represents the portion that should be allocated to less risky investments slash guaranteed income, annuities or bonds, if you like bonds, and we'll talk about that in just a second. So the idea the concept behind this rule is that as you age, you should gradually reduce your exposure. You should gradually reduce your risk. To loss and shift towards more stable investments, more safe money investments to protect your savings from potential market fluctuations. To give you an idea how that rule works is this if you're age 40. Take 100 -40, and that leaves 60%. So you could have 60% in equities and 40% in bonds or annuities.

Randy Sams:
If you're age 60, 100 -60 is 40. You could have you should have no more than 40% invested in equities and 60% in safe money assets such as annuities or bonds. So let's speak about that. It's a very simple, simple formula, folks. So you look at what you've got in your retirement portfolio. Are you heavily at risk? In other words, do you have a majority of your funds at age 70? Do you have the majority of your funds sitting in equities in a risky account or. Did you use the math? Did you use the rule of 100 and figure out that, hey, I'm at age 70, I shouldn't have any more than 30%, folks. I never. We put together a plan with folks. We're going to look at what you have to offer to to work with. And I'm going to say, let's take a percentage of what you have and let's put it into an annuity and get you that guaranteed stream of lifetime income. All right. Then you can use the other portion. Let's say it's 60%. We put it into the guaranteed income annuity and we let that grow over so many years. Then you turn on income or we can put it into that income annuity and turn on income immediately. And then you take the other 40% and play the market with it.

Randy Sams:
Do you know, let it grow. Hopefully it will grow. Okay. Hopefully that'll help take care of some inflation down the road. But if you have it, if you're 60 years old and you have. The majority of your account in equities. Now going to be good. So let's talk about bonds or income annuities, which are best for retirement income. Okay. We're going to take this that we just talked about. Use the rule of 100. And on the safe money side, should we have bonds or should we have income annuities which are best for retirement income? So if we're working with pre-retirees or retired clients like we do at SMMG Financial, we are creating and managing their retirement income plans is typically an important part of their value proposition. All right. So folks, the timing of claiming Social Security benefits to managing sequence of returns. There are many factors for advisors and clients to consider. Another of these is choosing an appropriate asset allocation for the client, often a mix of stocks. Remember the rule of 100, which are meant to provide potential upside and bonds which serve as an income generating ballast with less risky stocks, folks. You come right back because we're going to finish up and we're going to figure out which one is better for your retirement income, bonds or income annuities. You're listening to Your American Retirement on 101.1 FM, The answer. We'll be right back.

Producer:
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Randy Sams:
Hey, welcome back, folks. Again, I want to thank you for joining us today, this beautiful Saturday that we have here in central Arkansas. Say hello to all my friends in Benton, all my friends in Bryant. Thank you guys for joining us again. We're going to close out today's show. We're going to figure out. Bonds or income annuities, which are best for retirement income. So folks, there's a gentleman by the name of Tom Hegna, and he states that he's a big believer like I am in guaranteed lifetime income. He basically states that any money that he's he's an economist, very, very smart, has traveled all over the world, educating advisors, agents. On retirement planning. He doesn't sell. He just educates. But he basically puts a challenge out there. Any investment advisor, any money manager that wants to challenge him to put together, they think they can put together a better. Cipher. Less riskier plan. For the client. Then what? Tom Hegna presents. He accepts the challenge because what he says is this. If you take a guaranteed income annuity, take the money that you have in bonds and put that money in a guaranteed lifetime income, you do two things. Number one is you reduce the risk. Number two, you increase the performance, the returns of that portfolio because a guaranteed lifetime income annuity acts like a triple A rated bond with a triple C rated return. All right. It's called guarantees, folks. That's what it's all about.

Randy Sams:
But let's get into this. Bonds or income annuities. So. We think that income annuities, which make regular payments during an individual's remaining lifetime, could play an important role in the retirement income equation. So annuities can help mitigate several types of risk, including longevity risk, meaning the payments are guaranteed to last throughout the client's lifetime. So you'll never outlive those payments and sequence of returns risk. Remember the first segment? No matter what happens to the stock market and you're taking money out, the payments from a guaranteed lifetime income annuity are fixed and not based on future market returns. So income annuities could be a particularly attractive replacement for a bond portion of the client's portfolio. Not only do income annuities offer bond like income as the insurance company selling the annuity will invest the principal in bonds itself. But an annuity also offers a form of longevity insurance that bonds and bond funds cannot necessarily offer. That means the annuity payments can be larger than income generated from bonds because they include mortality credits. That means leftover dollars from annuity buyers who do not live very long on top of just the bond interest alone. So I get asked that question all the time. Randy, how can an annuity company or an insurance company have a payout factor of 7% or 8% or 9% where most of your advisors, you know, they're stretching it if they go with that 4% rule? And I tell them the reason why is because of mortality credits.

Randy Sams:
All right. Give us a call. (866) 990-7664. Or go to the website YourAmericanRetirement.com. Leave us your information. You want me to educate you on mortality credits and what they are and how they work. Leave us your information and I'll get in contact with you. All right. So. We find that the efficient frontier asset allocation so income annuities are superior to bonds as part of a fixed income allocation when it comes to generating income in retirement, that's what I say. Income annuities are superior to bonds as part of a fixed income allocation when it comes to generating income in retirement, asset allocation for the client is a combination of stocks which provide potential upside and can preserve assets for those with legacy interest and income annuities with no allocation to bonds at all. This suggests that we, as retirement planners or advisors can help clients determine their their preferred retirement income style and consider whether and how income annuities might help clients achieve your goals. By using more assets to buy an income annuity. You you prioritize stable lifetime income or fewer assets. If you want to pursue more upside and leave a larger legacy. So folks, there has to be a balance. Remember the rule of 100. Take your current age, take 100 minus your current age and what's left, whatever that number is. If you're 75 years old from 100, that leaves you 25. You should have no more than 25% of your retirement fund in risky investments in the stock market.

Randy Sams:
Okay. You've worked too hard to get where you are today. Folks, let me give you a hint here. Listen, get close to the radio. There are folks out there, younger folks today trying to get where you are right now. They would love to be where you are right now. So you need to take a step back and remember. You're past the accumulation stage, you're now in the accumulation stage. Your objective from this point on is not to lose. And the only way you can guarantee not to lose is to take a portion of your money. And put it into a safe money vehicle such as a guaranteed lifetime income annuity. All right. Let's take that longevity risk off the table. Let's take market risk off the table. Let's take sequence of returns, risk off the table. So you're in the decumulation phase. Remember the remember the retirement red zone that we've spoken about so many times here on this show, five years before retirement, five years into retirement. So the five years before retirement. You do not want to lose. Why? Because I've met with too many people that they have a they have a goal. Let's say you're 62 and you want to retire at age 67. That's five years from now. The last thing you want to do is see your retirement account, your 401. K or your IRA or whatever vehicle you're using today.

Randy Sams:
The last thing you want to see is that account balance go down because what happens if it goes down? You've got two options. Number one, you're going to have to work longer. So you're not going to retire at age 67. Or number two, you're going to retire at age 67 at a much lower amount than you anticipated at age 62 because your account value is much lower. All right. So you have to start looking at retirement. Use that retirement red zone that we have five years before five years into retirement. So here's how to manage your decumulation phase. The accumulation is a process you go through during retirement. When you shift your focus from saving accumulation to using your assets to generate necessary income. Folks, you all know we were all younger. Our objective was, Hey, you've got a retirement age that you plan on retiring at and you've got an income amount. Excuse me. You've got an income amount or you've got an account balance that you want to try to target. All right. So let's say your retirement age is 67. That's what your target age for retirement is. And your account balance target is 500,000. You work all your life to get to that point. And again, when you hit that time, you don't want to lose. But when you hit that time, you're no longer adding to your account. You're now taking away from. That's called decumulation.

Randy Sams:
All right. So in the accumulation phase, you're saving for retirement. You have a cash contribution. You focus on asset growth, remember asset and its long term investment horizon. So folks, remember in 2008 when I was still working at my company, that that I was, you know, a had an executive role at that company, president of that division in 2008, when the stock market fell 40%, my 401. K fell along with it. But folks, I was a young enough man where I had remember the old Rolling Stones song time? I had time on my side. It took about four and a half, five years for that account to come back to the level that it that it started dropping in 2008. But I was young enough to withstand or to ride that wave out for for five years. Folks, when you hit retirement, you don't have time on your side. The last thing you want right now if you're in retirement, is to see a 40% drop in your in your account balance while you're taking income out at the same time. That is the perfect storm. All right. Go back to listen to the first of my segment or the first segment of the show and you'll hear a story about how that affected a couple that I worked with that I was able to bring them out of that. In Decumulation, you're spending from your savings, you have a net cash drawdown. You focus on return certainty and you have a shorter investment.

Randy Sams:
Horizon. Okay. The soaring number of baby boomers entering and approaching retirement is leading to a major shift in focus from accumulation and retirement savings to decumulation and retirement income. Remember, folks, you retire on income, not assets. Here's the problem. Most people approaching retirement today are uncertain how they will manage their retirement assets and generate consistent income without outliving their money. That's called longevity risk. And this is the number one risk and the number one fear for most retirees. Retirees need retirement income solutions that can provide spending confidence for both essential spending needs and discretionary wants so they can enjoy the lifestyle they worked so hard for all these years. Okay. Only 36% of Americans are confident that they will have the income they need in retirement. 55% of retirees are concerned about outliving their savings in retirement. Without thoughtful, trusted guidance and planning, this could have a dire consequence for the next generation. Seeking income to sustain a consistent standard of living. So folks remember. You retire on income, not assets. Give us a call. (866) 990-7664. Or go to the website YourAmericanRetirement.com. Leave us your contact information. Let us set up a free no obligation consultation and let us get you set up for that secure retirement, not a risk of retirement, folks. Appreciate your time this morning. You go out and have a fantastic Saturday. Saturday. God bless you. Thanks for joining. We'll see you next week.

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 are the property of their respective owners. A merry Amerilife 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.

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.

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