On this episode of Your American Retirement, Randy goes into detail and outlines a plan for maximizing your income and living a stress-free retirement. Plus, Randy explains the changes to Required Minimum Distributions in 2023 and IRS penalties you will want to avoid in the future.
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1.20.23: Audio automatically transcribed by Sonix
1.20.23: 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 afternoon, everybody. I want to welcome you to Your American Retirement. My name is Randy Sams. Thanks for joining us on 101.1 FM The Answer this Saturday afternoon. I hope your day is going fantastic, folks. I just want to tell you once again, please go to our website. You are American retirement dot com. Leave us some comments. Leave us some ideas on what you'd like to see us put down as comments or or subject matters for upcoming shows or give us a call. 8669907664. Leave us your contact information again. Leave us some good comments. Give us some ideas on what you might like for us to talk about, because we've got some great subjects from suggestions from clients that have, you know, that are listening on the radio right now. And again, folks, I just want to thank you from the bottom of our heart for listening in on the show. I take it very seriously what we do. I've been in the business for 38 years and I really want to tell you how much I appreciate you listening to the show each week. I also want to point you to our podcast. We do this show will be on podcast. So were you ever you watch your podcast, YouTube, Spotify, wherever that might be, go online, give us a thumbs up, subscribe to the podcast. We love to know how many people are listening to the podcast and also that kind of gives us an idea that you've been listening to the show and you like what you're hearing as far as the subject go.
Randy Sams:
So folks, we are looking for people that are interested in a happy retirement. That's what we do at CMG Financial. Again, I am CEO, President of SMMG Financial. We've been in business since 2015. I've been in the insurance business for 36 years, 37 years now. This year, in 2023, at one time I for 18 years I led a a division, the senior division for one of the largest insurance companies in the nation was very involved in distribution, building, distribution, product building, worked with a lot of agents, a lot of distributions focusing on the senior market. So that's why you see me doing what I'm doing is the fact that I love to work with folks. And I use that word senior because a lot of people, they they throw you in that senior category when you turn 45 or 55. I'm not looking at your age. I'm looking at retirement. That's what I do is I focus on retirement planning. We want to be able to sit down with you, educate you on what options you have available out there before your retirement puts you into a great plan, guaranteed income, and set you up for a secure retirement. Not a risk at retirement, folks. That's one of the things we want to do. You see over the years, people ask me, So, Randy, what is it that you've done? You know, what do you do exactly at SMMG Financial folks over the years, you know, we've met with thousands of clients asking people at their dining room tables.
Randy Sams:
You know, I've been in presentations with agents. I do, you know, I meet with clients personally face to face. I love meeting with folks. But when we're sitting with folks, you know, it's changing. As, you know, the environment that we live in today is totally different than it was five years ago, ten years ago, two years ago. So, you know, I've met with men and women that they were planning their retirement at a certain age, say 65 or 68 or whatever. And because of what's happened recently, because of their 401. K accounts, their retirement accounts, their IRA accounts, you know, they're kind of in a dilemma. What do we do, Randy? So if you've lost 15 to 20% of your retirement account or even sometimes more, depending on what type of accounts you have your funds in risky your account or accounts or money market accounts. So, you know, I've talked to folks that have lost, you know, 50% of its value over the years. In 2022, you know, you guys have lost if you had it in a41k or an IRA account, managed account, probably close to 20% in 2022. So you've got decisions to make. So that's what we do. You're American Retirement, SMMG Financial folks. We want to be able to make sure that your retirement account will hit zero before your blood pressure does.
Randy Sams:
We want to make sure that you will not outlive your retirement account because what we've done. As we we sat down with the clients and I listen to your objectives. This is not cookie cutter. This is not Randy Sam's idea. Okay? Now, I've been doing it for a long time, and I know what the options are that we have to look at. But I want to listen to you. I'm going to ask some questions. I may ask you how much guaranteed lifetime income do you have now? What are your expenses? All right. What would happen to you right now if you lost 40 or 50% of your account value in your 401. K or your IRA accounts? So we're going to ask some questions and then we're going to sit down and we're going to put together a plan based on your objectives. What are your plans in retirement? Are you planning on traveling? How many of you are involved? Is it used as a single? Is it you as a married person, friends, family, whatever you want to do? That's what we're going to do. So, folks, that's what that's what we do. I appreciate your listening Today Show. You know, we we focus on annuities at SMMG Financial. We love to put you in a guaranteed lifetime income because, folks, what does that do? It removes risk and that's what we are all about.
Randy Sams:
Longevity risk is the number one risk that you and I are going to face as we go into retirement, as we live our retirement years. You're going to be going through three phases the go go years, the slow go years, and the know go years, The go go years are when you just retire. You're going to want to get up and you're going to want to go every day as far as you're concerned, when you hit retirement, guess what? Every day is Saturday. You're going to be spending money, you're going to be going on trips. Hopefully you'll join the country club. Hopefully you'll buy that boat you've been wanting. You'll spend time on the lake. You'll be able to travel and see the United States or see the world, depending on what your finances look like. All right. So those are the go go years. Next comes the slow go years slow go means you still want to go, but you're a little bit older and you may not go as quickly as you used to or as much as you used to. So you're going to be slowing down. It could be because of health, could be because of whatever the situation. But we want to make sure that if you get into the go go years and then hit the slow go years, it's not because you're slowing down because you have to because of your financial situation. All right. We want to remove that risk from the table.
Randy Sams:
So that's one of our top objectives with you. And we sit down with you and meet and put together a retirement plan. We're going to look at your income. We're going to look at Social Security. We're going to put together a plan that's going to be tailored to meet objectives. So, folks, and then you've got go, go slow, go, and then you got the no go years. That's when maybe your health is just to a point where you don't feel like doing anything. All right? You're not going to be going out. You're just staying at home and you're not going to be leaving home until they're going to come get you and take you out. You know what I mean? Yeah, that's the way it is to go. Go gear. So go, go gears slow. Go gears. No, go years. We want to sit down with you and we at SMMG Financial. You are American retirement. We want to put you in a fantastic situation. We want to take away that risk and we want to make sure that you have a secure and a happy retirement. So folks, you know what happens, people. All their lives. They work all their lives to hopefully have a happy retirement and a secure retirement. But too many times over the past couple of years, I've met with clients who they've lost quite a bit of their retirement accounts. What does that mean? So if you're not in retirement, but you've lost 20 or 30% of your retirement account, what are you going to have to do, number one? Either you're going to have to retire at the same age at a lesser amount than what you wanted to.
Randy Sams:
Or number two, you're not going to retire at that age. You're going to have to continue to work. All right. Let us take you out of that situation. Listen to me when I say this. Stop losing money. Give us a call. 8669907664 or go to the website YourAmericanRetirement.com . Leave us your information folks and I'm not trying to sell you anything. I just want to let you know what we do. This is what I do on a day to day basis is sit down and meet with people and I enjoy it. There's no obligation on your part. And we're going to talk about this a little bit later in the show today. But I get asked this question so people call me or they leave comments and they want to know, man, I love what you what you're talking about on the radio, Randy. But, you know, just tell me a little bit about what you're doing, what what you do at SMMG, what are you specialize in? So folks, what we specialize in, we remove risk, we take away longevity risk off the table. We want to take away that possibility of you running out of money, your retirement funds.
Randy Sams:
Because there are two things that I feel like that killed people in retirement. Number one is stress. You stress out because the fact that you feel like you're not going to be able to enjoy retirement because you may have retired with too little in your retirement funds, your retirement account. And I can imagine the stress. If someone looks at Social Security as being your retirement account, folks, Social Security was never established to be a retirement account. You're sole retirement account. It was supposed to be a supplement to win back in the days when every employer offered a pension account. Right. Only about 10% of people today work with companies that offer a pension account. So now the burden is on you and me to basically take care of our retirement. We have to set up our own pension through what defined contributions for one case IRA accounts. And then you look at Social Security. So please don't go into retirement thinking that Social Security is going to be your or setting yourself up, that Social Security will be your only retirement account or your source of guaranteed income. We love meeting with folks, sitting down, putting together a plan based on what your objectives are, folks, and we'd love to do that for you. So just give us a call. 8669907664 or go to the website YourAmericanRetirement.com . Leave us your information and we'd love to get in contact with you guys. We've got a great show.
Producer:
And now for some financial wisdom, it's time for the quote of the Week.
Randy Sams:
Quote of the Week by Mr. Mark Twain. The secret of getting ahead is getting started. The secret to getting started is breaking your complex, overwhelming task into small, manageable task. And then starting on the first one, folks, that's what we're going to do. Our first task today is we're going to talk about RMDs. So please come back and join us and we'll tell you what the changes are coming in 2023. Again, Randy Sams are American Retirement on 101 FM. The answer? We'll be right back.
Producer:
Miss part of today show Your American Retirement is available wherever you listen to podcasts and online at YourAmericanRetirement.com .
Randy Sams:
Hey, welcome back. Your American Retirement 101 FM. The answer I am Randy Sams. I am your host for today's show and tomorrow's show and next week's show. I enjoy being here. President CEO, SMMG Financial. Folks, we thank you for joining us today. Hey, we're going to spend a little time on this segment. As you guys know, we're all about retirement, retirement planning. We want to educate you guys on exactly what's happening. Some of the changes. As you know, they just passed the Secure Act 2.0. I think it was signed into legislation. I think President Biden signed put his signature on it, stamp of approval. And on January 1st, 2023, there were some things that are changing come concerning your 401. Case. Any tax qualified plans, Ira accounts and want to spend a little bit of time just kind of going over some of those. And so we're going to talk about RMDs and if you're not familiar with RMDs, hopefully after we get through with this segment, you'll be a little bit more educated on exactly what an RMD is. Why am I required to take it? But folks, really what happens is this is that as you work so I'm employed and I'm working at XYZ Corporation and I've been there for say 30, 35 years and they don't offer a pension, but they offered a defined contribution, which is a 401 K plan and so forth.
Randy Sams:
30, 35 years while I have been employed, I've been making contributions to that 401 K plan and my employer has been doing a matching contribution up to a certain percentage. And that growth over that 30 to 35 year period has been tax deferred. So any growth that I've had, I have not received like a 1098 at the end of the year showing that my account grew by 10,000 or in 2022, my account decreased by 20%. So any any growth that you've had or that I've had over that 30 to 35 year period has been tax deferred. So now it hits me at the age when I want to retire. The IRS has regulations. It's called required minimum distributions. When you hit a certain age prior to I think it was in 2019, that age was 70 and a half. In January 1st, 2020, it jumped up to 72. And in January 1st, 2023, it jumped up to 73. All right. And we'll talk about that here in more detail as I go through. But basically, here's here's the situation, folks. So we know that clients who own IRAs or participate in qualified retirement plans must take distributions. Those are required minimum distributions from their accounts, according to the RMD rules. The RMD rules mandate the timing and the minimum amount, and IRA owner and retirement plan participant must distribute both during life and after his or her death.
Randy Sams:
Right. You hear that? So they have established rules that we as plan participants must distribute both during life and even after his or her death. So clients must comply with the rules because failing to satisfy the minimum distribution requirements results in a penalty of 50% of that should have been taken but was not. So you could be penalized up to 50% of the amount that should have been taken as an R and D, But for whatever reason, it wasn't taken. All right. So here's the solution. So let's start by being clear on what plans are subject to RMD. So RMD rules apply to traditional IRAs, including seps and simple IRAs, defined benefit plans, defined contribution plan such as 401 K plans, ESOPs profit sharing plans, Section 4o3b tax sheltered annuities eligible Section 457 B plans. So in contrast, Roth IRAs are not subject to a lifetime minimum distribution requirements. All right. So listen to this. So if you have a 401 K or an IRA right now that you've been accumulating funds in starting at age 73, if you're not already having to take your RMDs, So if you're turning 73 in 2023, then you will be required to take an RMD. All right. And we'll go a little bit deeper into the into the rules here in just a second. So if again, if you're already taking RMDs, then this doesn't even affect you as far as the RMD change, the age change, it's only affecting those folks who will be turning 73 and 2023.
Randy Sams:
As an example, I have a young lady that I that I just worked with. We set her up in an annuity. She's going to let her funds grow and then at some point in time she's going to turn on an income. Well, she will be 72 in 2023. So going into 2023, guess what? We were already anticipating that she was going to have to take her RMDs beginning this year in 2023. Well, because of the Secure Act 2.0, that age is now increased from 72 to 73. So the good news for her is that in 2023 she will not have to take an RMD, But in 2024, when she turns the year that she turns 73, she will have to take an RMD. So basically here's what happens folks. When must an individual take RMDs first year and beyond? As indicated, you have until April 1st of the following year after reaching age 73 to begin taking your first RMD. All right. So listen, so if you turn 73 and let's say September of 2023, you can delay taking this year's to 2023 RMD as far out as April 1st of 2024. All right. So listen to that. So this April 1st deadline only applies to the RMD for the first year.
Randy Sams:
So I want to make that clear. If you turn 73 in 2023, you don't have to take your RMD in 2023, but you have to take your 2023 RMD before April 1st, 2024. So people just ask the next question. So, Randy, does that mean that since I can delay my 2024 RMD payment until 2025? No, it does not. Basically you have the first RMD you have that I'll say grace period to be able to delay taking that first RMD payment till April 1st of 2024. So if you turning 73 in 2023 you can go ahead and take your RMD this year or you can delay taking your 2023 RMD to April 1st of 2024, but then in 2024 you will also have to take your 2024 RMD by December 31st, 2024. So I hope that makes sense. I hope it didn't confuse anybody. So the amount required to be distributed folks. So here's, here's what happens as an example. So if, if I use as an example so let's say John turns 72, so I'm going to go back to last year when it was still 72. So if John turns 72 in August of 2022, he has until April 1st of 2023 to take his first required minimum distribution, which would be based on his 2021 year in balance. So let's say John's account balance at the end of 2021 was 100,000.
Randy Sams:
So in 2022 he has to take his RMD based on that 100,000. So it's based on the year end balance of the previous year. So for 2023, if you're turning 73 and 2023, guess what folks, your RMD is going to be based on your account balance as of December 31st, 2022. That makes sense. So there you go. So if John waits until April 1st to take his mandated distribution, he will still have to take an additional distribution or additional withdrawal by December 31st, 2023. So he can withdraw. He can delay taking his 2022 until April 1st, 2023, but then before or by December 31st, 2023, he has to take his 2023 RMD distribution based on what his account balance was in 2022. All right, so the amount required to be distributed is determined by dividing the account balance by a life expectancy factor taken from the uniform lifetime table. That the IRS establishes. So the first distribution is for the calendar year in which a participant reaches age 73, but is not due until April 1st or the following year. So hopefully, folks, I've beat that horse until it's dead too many times. Just remember that if you turn 73 in 2023, you are required to take an RMD. Based on what your account balance was at the December 31st, 2022. All right.
Randy Sams:
You can delay taking your 2023 RMD payment until April 1st, 2024. But then in 2024 you have to take your 2024 RMD payment or withdrawal before December 1st, 2023 2024. All right, so here's an example. This is how this can affect folks. Let's assume we have an individual born on July 1st, 1950. As a qualified plan. Balance of $1,000,000. On 1231 2021. The individual turned 72 in 2022. Since the first calendar distribution year is 2022, the year the individual turned 72. The new distribution table. Provides a factor of 27.4. Remember, that factor is your what? Your life expectancy is. All right. So they have to take 1 million divided by 27.4 results in an RMD of $36,496. So that's 1 million divided by 27.4. So the first distribution of 36,496 can be taken this year or or it could have been taken in 2022 or you could have delayed it till 2023. Now, folks, here's what happens when when you have a large sum in your qualified plan. Like this gentleman did a million and you have to take out 36,000, almost $36,500. You have to ask yourself or meet with someone such as myself, what are the tax implications on this mandated distribution? So this additional $36,500 that the IRS is telling me that I now have to take or I'll be penalized up to 50% of that amount? What's it going to do to me tax wise? How is it going to affect my Medicare Part B? Because as you know, folks, depending your Medicare Part B premium.
Randy Sams:
That you pay every month is going to be based on. Your income for the previous year. So that $36,500 has a strong possibility of raising you up. Into a different bracket and income bracket, which means that your Medicare Part B premium could be more for 2023. Than it was in 2022, based on that $36,500 that you had to take out. And also, what is that $36,500 mean to you? For your Social Security being taxed because, you know, if you go over certain dollar amount, income wise, a certain percentage of your Social Security retirement benefit can be taxed. So, folks, as as another example, very quickly. So you'll understand this. So for your RMD, if you have a 100,000 account balance based on December 31st last year and your expectancy, your factor is 27.4, you divide 100,000 by 27.4 and that gives you $33,649.64. So folks, I'd love to be able to get this IRS uniform lap time table to you. So if you'll go to YourAmericanRetirement.com or leave me a message 8669907664. I'll get you that IRS two 2023 IRS RMD requirement table. So folks again you're listening to Your American Retirement with Randy Sams on 101 FM. We'll be right back.
Producer:
So you know where you are now and where you want to be in retirement. So how do you plan to get there? I'm Matt McClure with the Retirement dot Radio Network. Powered by Ameri. Do you have any. Other questions for me, counselor?
Producer:
There are a lot of questions to ask yourself when you start your retirement plan. Questions like When should I retire? How much money will I need? When should I claim Social Security? What about health care costs and taxes in retirement? This complicated puzzle means you're probably going to need some help coming up with a smart retirement plan.
Ford Stokes:
If you want to retire successfully, you really need to plan early. You know, Inspector Jack's back and get prepared. Putting a plan in place now while you're still working is a great idea.
Producer:
Ford Stokes is founder and president of Active Wealth Management. Once you find a financial professional you want to work with, they can help you answer all the questions you may have.
Ford Stokes:
Back to what Warren Buffett said. If you don't find a way to make money while you sleep, you're going to work until you die. So we need to do everything we can to figure out a way to make money while we're sleeping. We talk about this human capital versus actual capital. When you're young, you have a lot of human capital. You've got a lot of left, a lot of room left, a lot of capital left in your career, Right? But at the same time, a lot of people that are older, let's say you're 65, 70 years old. You don't have a lot of human capital left, but you should have a lot of capital that is making money while you sleep. And if you don't, then you didn't make the right decisions.
Producer:
There are also some retirement costs you may not have considered yet. Long term care, for example. Did you know it's not covered by Medicare? What about home renovations? If you decide to stay in your home instead of moving into a facility, your home might need some updates to ensure you're safe and comfortable. And those are just the tip of the iceberg. So do you have a fiduciary financial advisor or professional to help you wade through the complicated retirement planning process? That is a key question to consider. If you want to make the most of your hard earned money with a Retirement dot Radio Network powered by a life, I'm Mat McClure. Visit YourAmericanRetirement.com to learn more and schedule an appointment. Thanks for listening to Your American Retirement and subscribing wherever you listen to podcasts.
Randy Sams:
Hey, welcome back. You're American Retirement. My name is Randy Sams. I am your host on today's show. Tomorrow's show, Next week's show. Love you to join us. Thank you so much for listening. 101.1 FM The Answer we're Little Rock comes to talk, folks. We're going to spend a little bit of time finishing up on the RMDs. If you were listening here, the previous segment we talked about RMDs. I get a lot of questions on folks that are getting ready to retirement. They don't understand how their 401. K they feel like, Man, I'm just going to leave that for on one K money in there and let it grow and let it grow and let it grow and let it grow. And I wish that was the case, folks. I wish we could do that. You know, a lot of people used to think they could take that 401 K and leave it as a legacy to their kids or grandkids. But unfortunately, Uncle Sam has these RMD rules required minimum distribution rules that we have to follow, which means that when you hit a certain age you have a required minimum distribution, which means you're going to have to start taking money out of that 41k plan or that IRA plan. Any tax qualified plan, you are required to take those distributions. So beginning January 1st, 2023, that requirement age has now been increased from 72 to 73 and it's going to jump up to age 75.
Randy Sams:
But that's not till 2033. All right. So we've got another, what, ten years before before that actually hits us. So it's going to jump up to age 75. But right now, if you're turning 73 in the year 2023, you better give us a call. 8669907664 or go to YourAmericanRetirement.com . Leave us your information and leave us a little comment. Say hey Randy I need you to help educate me on these RMDs that you say I've got to start taking because I'm turning 73 in 2023. And folks, there's a couple of other little changes that took place because of the Secure Act 2.0. I'm going to spend a little bit of time in this segment on basically what has happened. So you remember when I spoke earlier, the RMDs, they are required, folks. They're mandated. So if you do not take it on purpose or you forget about it, it doesn't matter. You can be penalized 50% of your RMD amount. So if your RMD amount was supposed to be 20,000 and for some reason you overlooked it, you forgot it. Sorry, you can be fined or penalized up to 50% now. So with some of the changes that we've seen because of the secure Act 2.0, I'm going to say this the days of IRS forgiveness for RMD mistakes may soon be over.
Randy Sams:
So before I've heard clients that have forgotten because folks these RMD rules are not you know, it's not a B.S. I mean, it's like there's pages and pages. So it's it's difficult for someone who's not in the business to understand exactly how the RMDs work. I mean, it's a pretty simple formula. You know, you look at your age, you look at the what the bracket or what the graph shows. You take how much my balance was from December 3rd, December 31st, the prior year divide that by the factor could be 27.4, could be 25.2 depending on your age. And then that tells you what your RMD has to be for that year. And a lot of people don't understand that. A lot of people forget about it. They don't do it on purpose. Some people do, but most people that we deal with, they forget about it. But you can see that that sort of mistake with RMDs can cost you up to 50%, which could be tens of thousands of dollars that you're going to have to pay. So remember, if you forgot to make your RMD payment by December 31st, 2022, or you paid the wrong amount and you realized it and you got it wrong in the past year, the faster you recover, you correct that error, the more likely the IRS is to waive the fines so your chances are good.
Randy Sams:
Overall, despite the agencies, the IRS is starting reputation. All right. So be aware, though, new rules are going to effect this year that could make the IRS less accommodating. One thing, the age to start RMDs again I've said this several times is going up to 73 this year and then 75 in 2033, which means the government is going to be hungry for the missing revenue. Even more importantly, the penalty will be reduced to 25%. Or 10% if you're really quick about reporting it. So, folks, the IRS has responded generously so far because they know the rules are complex and mistakes happen. So I'm not I'm not pointing fingers and throwing rocks or stones at the IRS because really, they have been lenient. They understand they've responded generously to folks that have honestly made mistakes and they've given them waivers. But here's the key point that I want to make. New penalties seem worded to avoid waivers in the future, especially because the extra reduction of 10%, if you act too quickly, if you act quickly, correct your mistakes. So if you act quickly, it's not going to be 25%. You respond quickly and let the IRS know I made a mistake, I overlooked it. I forgot whatever I put the wrong amount in, the penalty is down to 10%. So now the IRS has taken pains to point out how to ask for forgiveness on its website.
Randy Sams:
But now there will be new emphasis on the lower penalty. So folks, think about this. The 50% penalty effectively scared taxpayers into withdrawing the RMDs. So reducing the penalty could reduce the fear of additional tax, leading more taxpayers missing their RMD. So I guess you could say there may be more taxpayers because of the penalties being less going forward that potentially choose to neglect taking that RMD. I don't think I like the consequences of that. So what I feel like is that because the RMDs may not have as high a penalty and confusion over the current required minimum distribution or the required age, the IRS will probably collect more taxes. Overall, they may not be as lenient with that 10% as they have been with the 50%. So that's what you have to look at, folks, or you've got to realize you've got to keep taking your RMDs every year from your designated start time, starting age from the accounts until they are empty or until you die. All right. So the beginning age in the past was 70 and one half, then it moved to 72 and now it's changed to 73 as of January 1st, 2020. So, folks, there are some changes coming to your RMDs. The penalties could be less. Again, if you're turning 73 and 2023, then you are required to take that RMD that minimum distribution at least before April 1st, 2024.
Randy Sams:
All right. But if you're turning 72 this year and you thought you were going to have to take that RMD, the good news is you can wait till 2024, you can wait till your birthday, 2024, and then April 1st following year, which would be 2025 to start taking those RMDs. So folks, those RMD information is very important. It's something that we do here. We want to set you guys up for a secure retirement, not a, not a risky retirement. And one of the things that we look at and I'm going to ask folks is this when I meet with you, do you have a smart retirement plan? What is a smart retirement plan, Randy? I'm glad you asked. Okay. So retirement is one of the most important times of our lives, folks. It should be one of the times that you enjoy. Remember, you got to go. Go years. You got to slow, go years. And then you have the know go years. We want to get you prepared for those. Go, go years. Go out and have a great time. So it marks the end of an era. You're working. You're now going to retire and the beginning of a neck. So now I'm stepping away from when I was an employee and now I'm going to be stepping in to I am a retiree. All right. So one of the questions you got to ask yourself, where's the paycheck going to come from when the paycheck stops? So when I'm no longer working at my employer and I don't get that paycheck every week or every two weeks.
Randy Sams:
Where's the paychecks going to come from? So you've got to ask yourself, do I have a smart retirement plan? Because, folks, while retirement can be a time of great joy and relaxation, it can also be a time of great financial strain. Two things that that hurt us, folks, is what? Stress and rocking chairs. You're stressed out because you don't have enough money. You've got to sit in that rocking chair. You don't want to do anything because you're afraid you're going to run out of money. All right. So, folks, I want you to pay attention. We want to remove that stress. We want to remove that risk. We want to get you out of those rocking chairs and we want to make sure that you go out and have a great time. Enjoy your retirement, relaxation. Go see the world as you want to. Hey, come right back because we're going to finish up. We're going to talk about smart working, smart retirement plans and what you need to make sure that you've included to make sure you have a smart retirement plan. Again, Randy Sams, you're American retirement on one on one FM. The answer. We'll be right back.
Ford Stokes:
Chapter 13 The Annuity. That is just right. The fixed indexed annuity. Big idea. A fixed indexed annuity gives you a portion of market like gains without market risk. Your investment is tied to an index but not directly invested in it. How does it work? And fire gives the owners or annuitants the chance to earn higher yields than fixed annuities. When the index they are tied to performs well, they typically will also provide some protection against market declines. The rate on an fire is calculated based on the year over year gain in the index or the average monthly gain over a 12 month period. Fire is often have limits on the potential gain at a certain percentage. This is known as the participation rate. The participation rate can be 100%, which means the account would be credited with all the gains, or it could be as low as 25%. Most fiAs have a participation rate between 80 and 90% benefits guaranteed income stream with Americans living longer and spending more time in retirement, many retirees are concerned about outliving their savings. In turn, they're searching for a product that can help ensure a steady income stream for A IS are designed with guaranteed lifetime income so you can never outlive your earnings diversification of portfolio. A balanced portfolio is essential for managing risk and reward in the financial markets designed for the long term phase are a great retirement vehicle to ensure you are not putting all your eggs in one basket for a IS offer the ability to make some money without the risk of losing it. Secure principal. Even with market volatility, investors will not lose value on their fixed indexed annuities. Your savings aren't exposed to market fluctuations, so even in a negative market return, you will not fall below zero.
Ford Stokes:
You can never lose your interest once it is credited to your principal tax deferred growth phase. Offer long term tax deferred savings. As long as your money stays in the annuity, you will not be taxed on the interest earnings. Once you receive a payout, the annuity will be taxed just like ordinary income predictable earnings. Because fees offer predictable income, Americans feel more comfortable when withdrawing funds from these retirement vehicles as opposed to an IRA or for one K. Choosing an FIA is an efficient way to plan for your future as your interest earnings rate always remains somewhere between the interest rate floor and the cap. No matter what happens to the market, you can still count on payments throughout your golden years. Potential drawbacks of fixed indexed Annuities Surrender Charges. A surrender charge is a type of sales charge you must pay if you sell or withdraw money from a fixed, indexed and even a variable annuity during the surrender period, a set period of time that typically lasts 6 to 8 years after you purchased the annuity. Surrender charges will reduce the value and the return of your investment. Withdrawal limits Almost all fixed index annuities play surrender free withdrawal limits within the annuity contract that generally range from 5 to 10% of the principal. While all annuities must be armed, friendly and provide for a penalty free withdrawal from a qualified annuity account equal to the RMD requirement for the clients, age carriers limit the amount of withdrawal to enable them to grow the money invested for themselves and the client not suitable for short term investing. If you want to grow your money, but you also need access to 100% of your money, then a fixed indexed annuity may not be right for you.
Producer:
You may already know what you want your retirement to look like. But do you know how to start planning to get there? I'm Matt McClure with the Retirement dot Radio Network. Powered by a married life.
Producer:
Where am I? I don't know.
Producer:
That's a question you must ask yourself before you start plotting out your retirement planning journey. After all, if you don't know where you are, it's pretty much impossible to get to your destination. Step one is keeping track of money that's coming in and what's going out. Otherwise known as a personal budget. It's an important thing to have. But a Gallup poll from 2016 found only 32% of couples keep a written budget of any kind.
PBS:
A lot of people tend to think of budgeting as prediction, estimating what you'll make in future months and how you'll want to spend it. But the most effective budgets work exclusively with present dollars. After all, you can't give orders to soldiers that don't exist, so the size of your army is only how much money you currently have in your bank accounts. And as general, your role is to give every last one of those soldiers a job to do.
Producer:
That from PBS's $0.02. Now, once you have a basic idea of what you're dealing with, reach out to a financial advisor, a professional who can go more in depth.
Ford Stokes:
We want you to do a financial checkbook checkup. It's just like getting a checkup at the at the doctor's office.
Producer:
Ford Stokes is founder and president of Active Wealth Management. He says getting a smart inspection of your finances is essential.
Ford Stokes:
Want to review your accounts. You want to look at your IRAs, your four one case. Anywhere you hold assets, including cash, you want to check your balances, you want to review rates of return over the last 12 months, three years and five years. You want to answer this question, Do you have an income gap or do you have an income surplus?
Producer:
Understanding where you are now will help you plan for the retirement you want, leaving your future in your hands instead of the hands of the market or the IRS? So are you ready to reach out to a financial advisor for a smart inspection of your current situation? That's a key question to consider before you start your retirement journey with a Retirement dot Radio Network powered by a life. I'm Matt McClure.
Randy Sams:
Hey, welcome back. We want to thank you for joining us. My name is Randy Sams. I'm your host. You're American Retirement on 101 FM. The Answer I hope you're having a fantastic Saturday, folks. We we again want to tell you how much we appreciate you listening. Hopefully you're taking some good notes. Again, we want you to go to the website YourAmericanRetirement.com. Leave us your contact information. Leave us some comments on some subject matter that you might want us. You know what? What's concerning you? Maybe you're close to retirement or maybe you're in retirement. So what exactly are some of your main concerns? What is it that you kind of keeps you up at night and it's not letting you maybe get the same amount of rest or sleep? So, hey, Randy, can you spend some time explaining this or talking about this? We'd love to. We've got some great subject matters that's been suggested by some of our listeners. So again YourAmericanRetirement.com or 866 990 7664. Leave us your contact information and leave us some ideas that you want us to talk about on some of the upcoming show. So folks, we're going to talk about we're going to finish talking about smart retirement plans. You know, reason we do what we do and we talk about retirement planning is that, unfortunately, studies have shown that many Americans are not as prepared for retirement as they would like to be. They've got a lack of savings.
Randy Sams:
They've got high levels of debt. They're uncertain on Social Security benefits or my 401. K going to last. When should I start taking withdrawals? You know, when I shall how long can I leave it in there? So there are a lot of things that folks are pre-retirees and retirees are looking at. So 71%, more than two thirds of Americans are very concerned about the impact of inflation on retirement preparedness. 31% don't know how to make sure their retirement savings keep up that stressful, folks. Approximately half of Americans are at risk of not being able to maintain their pre-retirement standard of living after they stop working again. 41% had to make changes to their 401. Case because of the pandemic, only 25% of respondents. This was a survey done in 2020 by Charles Schwab of currently employed 401 K plan participants that saving for retirement is a leading source of significant financial stress for all generation. If you're still working man, I suggest get involved in the 401 K, set yourself up with an IRA or Roth IRA. If you're interested in tax free income, save on a regular basis, start as early as possible. Continue even after you have entered the golden years. So remember, consider setting up an automatic savings plan to ensure that you are saving consistently. Now, folks, this next one is a big one. Avoid debt. Debt can be a huge burden in retirement and can significantly reduce the amount of money that you are able to save.
Randy Sams:
Try to pay off any existing debt before you retire and avoid taking on any new debt in retirement. Prioritize high interest debt. So paying off your high interest loans, your interest debt first, you are taking care of that debt that is costing you the most money to carry. The longer you leave your high interest debt sitting, the more money you'll end up paying in the long run. Now, folks, I always also get this question What about mortgage? If it was me and I'm going into retirement, folks, I want to be debt free. I want to make sure I'd love to be able to meet with folks when I'm one of the first questions I ask is what do you owe? Own your mortgage? And they say zero. They've had that mortgage paid off for a year, two years, five years, ten years, whatever it happens to be, because now guess what you have to look at. Now you're just going to let's look at what our expenses are. Let's look at what my what my needs are and what my wants are. And then let's establish a plan based on that, because everybody has expenses. And everybody that I've ever met with that is retired right now or getting close to retirement, they will tell you they have to have an income. Folks, you don't retire on assets. Assets can be lost. You retire on income. And that's one of our specialties at SMMG Financial.
Randy Sams:
So we want to avoid debt, invest wisely. And one of the most important things that I feel like investing wisely is, number one, remove risk. Let's take longevity risk off the table. Longevity risk means that you are going to live longer. Folks. We're living longer today than, say, my grandparents did or your grandparents did or great grandparents did. All right because of medical advances. Just because we're taking better care of ourself. Longevity risk is one of the it is the number one risk that we need to address going into retirement. Well, let's make sure that your blood. Pressure goes to zero before your retirement account does. So remove risk number one. When I say investing wisely, stay informed, stay insured and stay informed. What type of health insurance do you have? What type of life insurance do you have? What about long term care? You know, as we get older folks, again, this is part of the longevity risk. As we get older, more than likely, we're probably going to have some health issues, maybe not. Major could be, but you're going to have some health issues. Stay informed. That's what we do, folks. That's why we love the relationships that we've established over the years at SMMG Financial with our clients. You've got to have a smart vision. So, folks, what will your retirement look like in the future? You've got to ask yourself this question What are you going to be doing during your retirement years? Who are you going to be with? Who are you going to be taking care of? What are your goals? So how do you plan the fund these final decades of your life? That's the go go years, folks.
Randy Sams:
Go, Go slow. Go. All right. We want to make sure that when you hit that retirement, when employment is behind you and retirements ahead of you, that you're going fast and you're moving and you don't have to think twice about what you're doing because you've got that guaranteed income coming in. So you can laugh at the TV when the stock market crashes 25%, you can laugh at it because it doesn't affect you whatsoever, because you've got that guaranteed lifetime income set up for you and your wife. So remember, if you don't start with a clear vision of what your goals are for your retirement, you could experience a lot of unknowns down the road. So 37% of Americans feel they need more education or retirement plans. What have I said over and over during this show? In previous shows and future shows? Folks, what we do at SMMG Financial is we educate you and we prepare you for a secure retirement, not a risky retirement. So we love retirement planning. 52% of Americans wish they had more education on how to invest. Now, I don't know a lot of day traders that have had a lot of success. There may be a few out there.
Randy Sams:
I know a lot of people that have gone in to try to be a day trader and they've lost quite a bit of money and they got out of that very quickly. And now they're looking, you know, how do I invest? All right. So this is one thing I look at, folks, you've worked all your life to get to where you're at right now. Today, you're about to retire your two years from retirement. You're five years from retirement. Remember, people are out there every day right now trying to get to the level that you're at right now. So if you accumulated a41k balance or an IRA balance and you're a couple of years from retirement, listen, don't lose money. So your objective now has got to switch from accumulation to what saving, don't lose. And that's what we want to help you do, folks. So we recommend that you sit down with us at SMMG Financial. We want to sit down with you, your spouse and your family, and consider some important factors that affect your golden year. So, folks, listen to this. Social Security. When's the best time to take on Social Security? Is it best to take it at 62 is the best way to your full retirement age, which could be 67. Is it best to wait to age 70, which is going to be your maximum Social Security benefit? All right. So every year that you wait past your full retirement age, if your full retirement age was 66 and you haven't turned on Social Security and you're still waiting every year that you wait, that you get closer to age 70, that amount that you receive goes up 8%.
Randy Sams:
Now, guys, that's a pretty good return on my investment. So as long as I can leave that Social Security money in there and let it grow, if I turn it on at age 70, if my full retirement age was age 66, four years at 8%, that's 32%, I'll be making 32% more at age 70 every month than I would if I turned on my Social Security at age 66. All right. But there's a lot of factors that go in to making that determination. All right. So that's one thing that we want to meet with you and help you figure out. Do I need to turn on Social Security now or do I need to wait? Social Security taxes? Do you feel like taxes are going to be less going in the future? Are they going to stay the same than they are now or are they going to increase? So, you know, a common tax misconception is this, that your tax rate is going to dramatically decrease once you stop working. So you cannot tax you can't count on your tax rate decreasing. Because of the fact that if you listen to the previous segments, guess what? We talked about RMDs and depending on what accounts you have and your account value, guess what happens? Those RMDs could actually knock you up into a higher tax bracket.
Randy Sams:
And RMDs are not something that you're going to be able to eliminate. You've got to start taking those out. So we've got to do a little tax planning. If you're, say, 5 to 10 years away from retirement and you would like to have a tax free income in retirement. Then we need to talk about doing a Roth conversion. We need to start taking some of your funds out of your qualified account. Put those money into a an annuity and take out 10% over the next ten years, pay those taxes on that 10% and at the end of ten years you'll have a Roth conversion that any income that you take out is tax free. All right. It's always something we can talk about there. Medicare. What's your plans on Medicare? So, remember, folks, you may be covered while you're employed from your employer sponsored group health plan. But once you get to retirement age, guess what happens? You no longer have that group benefit. You now have to go on Medicare. So is it best to go on a medicare Advantage plan? Should you go on a medicare supplement plan? All right. Those are things that we want to talk about. So your health insurance, your Medicare, life expectancy, something that you need to think about, folks, long term care. I'm very adamant right now about long term care with folks.
Randy Sams:
I've got a client that I'm working with right now. Mom's been in a nursing home for two and a half years, and I ask them, did they have long term care? And guess what? The answer, the response was no. All right. So, folks, they've had to pay for the the the mother's long term care for two and a half years and she's still alive out of the estate plan. All right. So that's coming out of the estate. So remember, don't do that to your family. Long term care may not be for you. It's really for your loved ones, kind of like what life insurance is. So, folks, we want to set you up, get you set up for a smart plan, get you up, set up for a secure plan, because we want you to have a happy retirement, a secure retirement, and take that four letter word off of your retirement or away from your retirement. And that's called risk. So, folks, again, my name is Randy Sams. I am president, CEO of SMMG Financial. We focus on setting you up for a happy and a secure retirement, YourAmericanRetirement.com . Leave us your information. We'd love to be able to sit down with you, do a free no obligation consultation or leave us your information on 8669907664. Toll free 8669907664. Again, you're listening to Randy Sams. You're American retirement on 101 FM. The answer. Thank you so much. Have a great day.
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 our 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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