YAR 6-24-22 FULL SHOW.mp3: Audio automatically transcribed by Sonix
YAR 6-24-22 FULL SHOW.mp3: this mp3 audio file was automatically transcribed by Sonix with the best speech-to-text algorithms. This transcript may contain errors.
Sam Davis:
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.
Sam Davis:
Welcome to your American Retirement with your hosts. Randy Sams and Kale Simpson get set for a full hour of financial information and economic news affecting your bottom line. Randy and Cale work hard each day to educate Americans like you on how to reach the financial freedom they worked so hard for by protecting and growing their hard earned money. And they can help you, too. So now let's start the show. Here are your hosts, Randy Sams and Kale Simpson.
Randy Sams:
Hey, welcome to your American retirement with Randy Sams and Kale Simpson 101.1 FM. The answer. We know you're out there listening this Saturday because it's 102 degree temperature outside. We just want to welcome you back. Again, my name is Randy Sams. I'm the co host along with my other co host, Mr. Kale Simpson. Kelly, you want to introduce yourself?
Kale Simpson:
How are we doing, guys? Kale Simpson, good to. Good to talk to you guys again.
Randy Sams:
So guys, we're excited to be with you today. If you were with us last week, you know, we talked about a lot of things to set your retirement up. Today, we want to talk about what would we do if we were you? So, Cale, give us a little insight on what you would do if you were them.
Kale Simpson:
Okay, guys. So again, welcome back and thank you so much for listening to another ta ta, another episode of your American retirement here on one on 1.1. The Answer. We greatly appreciate you guys. Perhaps what we can do as a company to help you guys understand what's out there, what challenges everyone is facing, like we spoke about last week and and what's out in the open market that that we utilize on a daily basis to help clients combat those big challenges on a daily on a day in and day out basis. So. So, Randy, real quick to piggyback on what you said. Sure. I appreciate that. So last last time we spoke about inflation in great detail. We all know inflation is high. We know it when we go to the gas pumps. We know it when we go to the grocery store. Gasoline prices have come down just a little bit and I've seen some people applauding that. But here's the reality, Randy. I mean, gas prices are still incredibly high. It doesn't matter if it's 4.49 a gallon. This past weekend, I filled up three different times at 449, 459 and 439 a gallon. So nonetheless, it is still very painful to put gas in the truck. There are talks right now about the government considering different ways to combat the high gas prices.
Kale Simpson:
We'll we'll see what that entails. And Randy, you can speak on that just just in a moment or so. But the reality is, is is is oil. Is still up. Oil. Oil is is up again. And as oil continues to go higher, it is economics 101. That's the deal, guys. It is not the government helping people out with a federal fuel tax momentarily. That's not going to curb gas prices, I promise. What will curb gas prices is economics. It's called supply and demand, and that's the deal. So as we get more and more into the summer driving season, Randi, guess what? Demand is going to be high and supply is going to be pushed down. That's what we're seeing now, resulting in higher gas prices. So anyway, that's kind of a recap from the inflation conversation we had last time with respect to fuel, but food. I mean, we went and ate last night and, you know, on the menu it said prices are higher by 15% just due to increased costs at the restaurant. So kind of hard to, you know, kind of hard to go out and eat without without spending a boatload of money, especially if you've got two little boys and a wife and a friend in from out of town. It it makes it tough, Randi.
Randy Sams:
Well, Kale, I mean, what I'm what I'm looking at is it's affecting everybody. I mean, I have a neighbor who owns a trucking company. And if you've seen the price of diesel, I mean, the prices that you just went over were probably for regular unleaded, if you look at the price for diesel. You know, he's he's told me that that the cost for him on a monthly basis to keep his rigs on the road is drivers on the road. It's going up like 30% and it may be even higher than that right now. He sent me pictures of drivers on the East Coast where when they're trying to fill up with diesel, they have a limit on how much they can get like 50 gallons. And those diesel tanks are like 120 gallons each and there's two of them. So you can imagine what it's affecting him as as a business, trying to keep those drivers on the road. But now, you know, let's look at the individuals. You know, we just got back from a trip. And I mean, if you check out airfare to see what the price of an airfare is right now, going up. Going up.
Sam Davis:
I actually just booked a couple of flights for a family trip just to visit my grandfather, who's been.
Kale Simpson:
Not doing too well. And some family up in New York.
Sam Davis:
And roundtrip flights to New York were way more expensive than I thought. I even booked out in advance for September and it's about 700 bucks to get me the.
Kale Simpson:
Wife and a set of golf clubs to New York and back. So very expensive.
Randy Sams:
It is expensive. And so that's that's probably putting a little bit of a hurt on families vacation plans, travel plans, you know Americans, you know how to budget and cut costs, but you can't stop buying gas and food. So those are two things that you got to have. Plus, you've got to have a place to live. And we spoke about that last week. But, you know, it's it's just crazy what people are having to go off, go through. And, you know what Keller and I do at SMG Financial, your American retirement, you know, we're in the in the business of helping people address major financial issues facing their retirement today. We want people to retire with a secure retirement, not a risky retirement. And that's what Keller and I do. So it's it's good that we can kind of reminisce about what we spoke about last week. We hope people took notes. You've got our phone number 8669907664. Feel free to give us a call. We'd love to have a discussion with you, but right now, I think Kayla's time for us to maybe start talking about what we're going to look at today.
Kale Simpson:
Absolutely. So let's go ahead and dive right in, Randy. So as you alluded to just a moment ago, guys, we're based here in central Arkansas. We've got offices in Pulaski County here in North Little Rock. We've also got an office in Benton out in Saline County. So we're we're right in your backyard. If a client Randy, yesterday, I was on the phone with with some clients for about 2 hours discussing some very high level overview items, one one being challenges to being comfortable retirement. So I'm looking at one of our, one of our folders, guys, if you would like a, an annuity or retirement info kit, we have them. I've got one on my desk right here and on the inside of our kits and folders, I guess it says Retirement Simplified. That's kind of one of the things that we stand for here at SMG Financial and your American Retirement. We want to make it easy. However, no two clients are alike. It's not a cookie cutter type system. Everybody has different goals, different financial objectives. And our jobs are to listen to you, to find out what your goals and objectives are, and to use the resources that we have available to us to customize a plan to possibly put in place. And if you guys if we can help you accomplish one or two or three or all items in your retirement list of things to do, then amen. That's great. That's what we'll do. But sometimes we can't. And if we can't, that's fine. But we can at least let you know what's available to us. So Randy here in just a moment, we're going to jump into what we like to call your annuity x ray while we're doing our financial analysis and financial overview. And then we'll certainly have a lot of information for for you guys to kind of take down and and and really get some questions geared up for us.
Randy Sams:
So, folks, what we'd like for you to do again, call 8669907664 or visit your American retirement. Leave us a message. We'd love to get in contact with you. Kale and I are very low key. We are. You know, we don't believe in high pressure. We've been I've been doing it for 38 years. And Kale is about 38 years old. So, you know, he's he's he's trying to catch up with me. But what we like to do is we like to sit down and, first of all, kind of get to know you as a client. We want to understand what your objective is. Now, if you ask me what I'm looking at. When you're young, you're in an accumulation phase, so you want to accumulate. That's what it's all about. We want to we always focus on building wealth, building wealth, building wealth. And that's great. But see, when you retire, the game changes on you. It's no longer about building wealth, it's about keeping, it's about not losing. It's about income. You don't retire on assets, you retire on income. So what we want to look at is we want to look and see what do you have as far as guaranteed income sources? Do you have a pension where you work at? Do you have Social Security? What is that Social Security going to cover for you? What are your monthly expenses? And then from there, we want to put together a specialized, a focused plan based on your objectives to meet what we consider to be the third leg, which is trying to set up your own self insured pension plan, and that is using an annuity.
Randy Sams:
One of the safe money investments that we have today are safe money projects that are products that we have out on the market today that Kayla and I love to utilize. But that's what we want to do. First of all, we want to be able to show you what your retirement is going to look like based on the income that you're making now, based on the income, what's going to happen when you retire and then based on income, what you're looking at when you just have Social Security or pension. And so what we want to be able to do is in this next section, we're going to kind of we're going to dive deep into what we consider the annuity x ray. We're going to kind of give you some examples. We're going to tell you why we believe the way we believe. And we're looking forward to speaking to you in just a little bit.
Kale Simpson:
So, guys, we're going to take a quick break here on one on 1.1, the answer. We'll be right back with segment two of what would we do if we were you guys in retirement with your American retirement? I'll talk to you in a moment.
Sam Davis:
You're listening to your American requirement to schedule your free no obligation consultation. Visit your American retirement.
Sam Davis:
The heat is likely. Not the only thing making you sweat this summer. I'm Matt McClure with the Retirement Radio Network powered by Emera Life. With energy prices soaring and record breaking heat waves across the country. The cost of cooling your home could set you back a pretty penny this year. The Wall Street Journal reports the average American household will pay $540 in electricity bills during the summer months, up $90 from a year ago. An air conditioning can make up a big chunk of that total, especially in hotter and more humid areas of the country. Sarah Baldwin is with the think tank Energy Innovation.
Sarah Baldwin:
Because we have a confluence of factors, the increased price for both gas and oil, as well as natural gas in homes and buildings and a an extremely hot summer and likely to be record heat all over the country as well as the world, largely due to climate change. We're feeling the pressures on both sides.
Sam Davis:
But if you think there's nothing you can do to ease the pain, you'd be wrong. Baldwin says there are some things you can do that will cost you only a little, if anything at all.
Sarah Baldwin:
Paying attention to when you're turning on appliances, when you're turning on the AC. If you have a thermostat that you can program setting that thermostat to a modest temperature instead of going straight to really, really cold, looking at what kind of window coverings you have.
Sam Davis:
Other improvements may be a bit more costly.
Sarah Baldwin:
Update your air conditioner to the most efficient unit. A heat pump. Air conditioner is going to be your best bet. You can also look at replacing windows and doors. Those can be a bit more costly but can have huge benefits in the long term.
Sam Davis:
And don't overlook your power company. It could have some programs or incentives to help you cut back on energy use and save yourself some money in the long term. Baldwin says renewable energy is the way to go since prices are much less volatile than things like oil and gas.
Sarah Baldwin:
The sun, the wind, geothermal, hydroelectric, other carbon free sources like nuclear are all generally very cost stable relative to their more volatile and spiking fossil fuel counterparts.
Sam Davis:
So how will you survive the summer heat and its impact on your wallet as you plan for retirement? That's a key question to consider as the mercury and inflation keep going up with the retirement radio network powered by a marine life. I'm Matt McClure.
Randy Sams:
Hey, welcome back to your American retirement. But Brandon Sams and Kale Sims, it's an 866990766 for your American retirement one at 1.1 FM the answer. The guys we're going to jump into what we like to call the annuity x ray. Want to give you some some information as to why Keller and I do so many annuities. And we want we feel like annuities should be a part of your retirement planning. Just received today from Newsmax. The S&P is down 23% year today. Iras and 401 K's have lost 1.6 trillion. That's worth a T trillion in value year to date. So as we spoke about when you're in retirement, it's not about accumulation. It's about not losing what you have. So that's why we believe in protecting what you have when you retire. We believe in setting people up with a guaranteed lifetime paycheck. To give you an example, we believe in longevity risk, longevity risk. We want to make sure that your blood pressure goes to zero before your retirement account does. We don't want you to outlive your funds, people. They aspire to live longer. There's a study out in Norway. They found that the average Norwegian wants to live until the age of 91.
Randy Sams:
A Pew Research Center study found that 68% of respondents indicate they would accept medical treatments that slow down the aging process if it was possible to live to at least 120. That's old 120. And AIG survey found that 53% want to live to 100, yet 51% were uncertain. Their savings will last. Do you hear that? 51% will uncertain that their savings will last. And nearly six in ten, 59% feared running out of money more than death. Now, you think living to 100 is kind of far fetched? Today there are nearly 1 million centenarians in the US. Their ranks are projected to reach 5 million over the next 30 years. So by then living to 100 could be commonplace. So we believe in establishing a retirement plan. Focus to the age 100. So what we look at is you've got to be able to set yourself up with some type of a guaranteed income. So you've got a couple of examples I know that you wanted to to give to the folks on some of the folks that you've worked with recently. So why don't you go ahead and give a couple of the examples.
Kale Simpson:
Yeah, absolutely, Randi. And longevity risk, guys, is like Randy said, I mean, it's something that the older you get becomes more and more evident, especially when you near and achieve retirement. Guys, when you decide to hang up your cleats, it can be at age 59. It can be at age 50 if you're lucky enough. It can be at age 60 to 65 or 70 or people working beyond the age of 70. Everyone is different, but the reality is. Going out and looking for a job when you're 85 years old really doesn't make sense. Okay. So. What Randy mentioned earlier about having steady buckets of income, allowing us to live and live comfortably without fear of market drops or geopolitical nonsense or anything else that might be going on in the world. Really can help on a a simplified retirement strategy. It can really alleviate a lot of anxiousness and stress in retirement when we should be enjoying retirement, not stressing about income. So again, guys, I spoke to some clients the other day and the conversation we had, it was it was very neat to understand the very first time I had spoken with her husband actually multiple times. But this was the first time I've spoken to her. And one of her biggest concerns was outliving money. And so when I pulled up an illustration that I'd sent to her and I showed her what a lifetime income product would do with a fixed indexed annuity, that's a very, very common place here at our firm on the guaranteed.
Kale Simpson:
And guys, this is a guarantee. It is in writing. It's issued by an insurance company and is not an investment vehicle. It is an insurance vehicle issued by an insurance company. It was guaranteed that once they started taking income, they would have income of $26,422 for as long as they live. And she stopped me and said, Well, what if we live beyond the age of 90? I don't know where the 90 number came from, but I said, it doesn't matter. It's as long as you live. It's a lifetime income. You can live to be 120 years old. And if you do live to be 120 years old, that's fantastic because you still have a guaranteed amount of income, like a pension that will pay you $26,422. And that's if you never, ever, ever earned a penny in interest. And so, Randy, if they have never, ever earned a penny in interest, we typically don't see that. But that's fine because we need to look at guarantees and we need to look at worst case scenarios and on a worst case scenario basis. Not only the husband, but if something happened to him or if something happened to her. They would still receive that $26,422 every single year as long as they both lived. And for her, that was jaw dropping, because guess what? In your 15, Randi, did they have any more money left in that account?
Randy Sams:
No, sir.
Kale Simpson:
No, not at all. Did they still continue to receive income?
Randy Sams:
Yes, sir.
Kale Simpson:
That's the way a lifetime income, fixed indexed annuity strategy works, guys. It allows you to alleviate that variable in the equation. To take away longevity risk. And protect the income piece of the puzzle as long as everyone lives. One less thing to worry about.
Randy Sams:
What I look at that is this and I've heard this said from other financial gurus in the industry that an annuity is not an investment, an annuity is a risk transfer vehicle. So what you're now doing is you're now transferring the risk of you taking out too much money too quickly or your account values going down. You're transferring that risk now to the insurance company. So in other words, like you said, after 15 years, if it was just me and my wife taking money out in my account down to zero, how much money could I continue to take out? Kail Zero. But if I have a guaranteed lifetime income annuity established and after 15 years that account value happens to hit zero. My guaranteed lifetime income is still going to be what, 26,400 as long as I live. And if I pass away, it's guaranteed for my wife 26,400 for as long as she lives. I don't think there's anything out there that can touch it myself. That's why I say we believe in guaranteed lifetime income. You see, annuities protects you from living too long while life insurance like IUL protects you from not living long enough. So, you know, and life insurance company basically can what you say they could they basically can play both ends. You know the risk for a life insurance company Kail is you have a 26 year old that goes in and buys $1,000,000 term insurance, writes a $26 check, walks out of the office, walks across the street and gets hit by a bus. That's right. And you're going to have to pay out $1,000,000. Right. So the risk to an insurance company for life insurance is what? That you die early. What's the risk to an insurance company when it comes to an annuity.
Kale Simpson:
If you live too long, Randi?
Randy Sams:
Right. I'll use my dad as an example. Now, my dad was a fireman. He retired after 35 years. He just passed away a couple of years ago at the age of 94. Now, I don't believe the fireman's pension fund thought that he would live to be that that long. So just think he received his fireman's pension from the day he retired at age of 55, 58 to age 94. And now guess what? My mom's now receiving that pension because he set it up to where she got the same thing. So that has been a life changer or a life saver for my mom and my dad. So it can be the same. And that's why what Carol and I do during the annuity x ray, when we when we look at what you have your objectives, we want to be able to put together a plan that's going to be able to give you peace of mind knowing that, like what Kael's client said, what happens if she lives past age 90? Well, what if you live past 100? We want to be able to put that plan together for you.
Kale Simpson:
You're exactly right. And Randy and I want everybody to understand that's listening to us right now on your American retirement. Guys, please give us a call. If we can help send you some literature, we'll be glad to. We'll we'll put together a folder, a client info, KITT, retirement simplified. We'll get that put together and we'll send it wherever we need to send it. So that way you can put your fingers on it and go through a lot of the articles, the big articles that are out there today from all the PhDs and the economists that are in the world. We've got we've got a bunch of information that we'll be glad to send your way. So that way you can you can be better informed, not only listening to to the radio shows, but but obviously put your hands on something. So if that's what you want to do, guys, give us a call. 8669907664. Again, 866990. Smg. That's seven, six, six four at the end. But Randy, real fast on the annuity x ray, there's there's going to be multiple things. We talked about this the other day, Randy. There's going to be multiple things that that we need to talk about and we need to uncover and analyze when doing an annuity x ray.
Kale Simpson:
Some things that we need to talk about obviously are going to be tax planning. Now, full disclosure, neither Randy nor myself are tax attorneys or tax accountants. We are not CPAs. So if there is a specific tax question, please refer to your certified public accountant. But smart tax planning is something that we look at on a daily basis. Also, smart income planning. Guys, there are multiple ways we just talked about income planning. Randy just gave a great example about about his folks and the pension plan that was set up a long time ago that continue to pay. That is smart income planning. Guys, if we're smart on the front end, like my dad always said a long time ago, and then we revised it, you can either work smart or you can work hard. But Dad said, do both of them. So work smart and work hard. But guys, a couple of things. During the annuity x ray that we'll discuss here in just a moment about smart tax planning. Randy's got a lot of good stuff on Roth IRAs. I've got some stuff on I Uls. That's that life insurance deal in addition to smart income planning. Guys, we've got to take another break.
Sam Davis:
We get it almost every night. And when that.
Sam Davis:
Missed part of today's show, your American retirement is available wherever you listen to podcasts and online at your American retirement dot com.
Sam Davis:
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.
Kale Simpson:
Welcome back. 101.1 FM The answer. We're listening to your American retirement. Just beautiful Saturday, guys. We have been talking about many things with respect to retirement and challenges in retirement and what we would do if we were you. So what we're doing now is we're going to delve a little bit deeper into the annuity x ray that we like to do here at SMG Financial, as if you if you reach out to us, call us 8669907664. We'll be glad to answer any questions that you may have put together. An annuity info kit. Get it in the mail to you. Simplified pieces of retirement strategies in your hand in the mail very quickly. But in doing an annuity x ray, it helps Randy and I determine what may be appropriate directions to take. And then looking at that stuff, Randy, we've we've talked about making sure that we are diligent with respect to tax planning. We spoke in in great length earlier about income planning, how to use a fixed index annuity, for example, to satisfy a lifetime income pension type paycheck that you never worry about running out of money in retirement, which is very powerful. People are more afraid of running out of retirement today than they're afraid of dying, which you mentioned earlier. Guys, one thing that we did want to talk about when we're talking about tax planning and income planning, we will oftentimes run into clients. Had a client last week, Randy, and they already have an annuity or multiple annuities. Guys, that's fine. A lot of clients do have multiple annuities.
Kale Simpson:
Annuities are typically not designed for all your eggs in that one basket, but for your safe money, money you cannot afford to lose. A lot of times an annuity, a fixed annuity or a fixed indexed annuity might be appropriate for that particular basket of eggs. But one thing that we want to look at is if you already have an annuity, what type of annuity do you have? There are multiple annuities that are out there. A lot of them participate on the ups and the downs. In the market. Some of them pay a fixed rate of return. Guys, you know what banks have been paying lately? If you're in a in a fixed type product, you can answer the question yourself. You think you're you're earning a pretty good rate of return. I don't know. You have to know the answers to those questions. And those are some of the things that Randy and I will be asking you when we're performing the annuity x ray. But one thing that we that we do notice more often than not elevated fees on a fee structure. So if you if we're seeing elevated fees, guys, average fees on a on a variable type product, which we do not do at the office. It can be anywhere the average from and this is from annuities dot org the average VA fee structure is 2.3%. Annually. So every year it's 2.3%. And a lot of times it can be as high as 3% or even higher than 3%. And that's not not including any other fees that might be embedded in that particular product.
Kale Simpson:
So we want to know what fees you're currently paying. If we can eliminate or delete a portion of those fees in your portfolio, that might make financial sense. Again, these are all things that we will go over while we're doing the annuity x ray. But it's very important to understand if you are paying a fee, need to know what that fee is for. If your fee is for a lifetime income, Randi. That might make sense if your fee is for an enhanced death benefit. That fee might make sense. But if your fee is just there because it's a fee to pay someone, we might be able to eliminate or delete that particular fee from your portfolio. But again, every client is going to be different. Guys, you're American retirement. Give us a call. 8866990766 for you listening to us right now, one on 1.1, the answer, we'll be able to help you out and we'll be able to perform an annuity x ray or at least scratch the surface of the annuity x ray. But we'd love to work with you. We'd love to at least help you get started and let you know what's available on the open market. But, Randi, jumping into smart tax planning, you know, there are a couple of different ways to avoid taxes in retirement, correct? One of them is going to be a life insurance policy and index, universal life policy that might earn cash value, perhaps. Then another one is a Roth IRA.
Randy Sams:
Thanks, Carol. I appreciate this, folks. I hope you're kind of getting an understanding of what Carol and I do. We're going to we're going to put together we're going to meet with you. Yeah, we're going to do the annuity. You know, x ray. We're going to look at your objectives. We're going to put together a retirement plan, a financial plan. But, you know, when you speak to most people, you know, they're the old guys used to I guess they used to focus on age 90. But we all know that people are living longer. The example I gave earlier about people living to age 100, there's almost 1 million right now today in the United States, people that are age 100 within the next 30 years, they're saying it could be over 5 million. So we want to put together a plan that until at least age 100, if not past. But when we talk about annuities, we're going to focus on the longevity risk. We want to remove that, which to me is the number one financial risk that you're going to face in retirement and that is outliving your retirement funds. So if we if we remove longevity, risk off the table and set you up with a personal pension, a guaranteed lifetime paycheck, then we will have done our job for you on that. But when we want to talk about tax advantages, that's what we have to be able to include this in your plan.
Randy Sams:
So when we look at a Roth IRA, it's a good saving option for those to expect to be in a higher tax bracket. Now, a lot of people look at this scale and they said, well, you know, Randy, I've been working for so many years and if I retire, I'm not going to be making as much money. So I should be in a lower tax bracket. And that makes sense. But there are a lot of people I know that they don't choose when they retire. They don't just choose to sit on, sit around and play golf, tennis or whatever. They a lot of them have jobs, so they have an additional income coming in. But here's something you need to think about right now. You have at age 72, if you have any qualified plans, guess what the government requires you to do? You have to have required minimum distributions a lot of time depending on the amount of your 41k, your IRAs. It's a pre tax qualified plan. When you hit age 72, you're required to take a certain amount, a minimum distribution with that minimum distribution. I've seen a lot of folks be knocked into the upper tax bracket. So tax planning comes into into play.
Randy Sams:
So we have to take a look at making tax free withdrawals even more advantageous. And that's where a Roth IRA comes into play. Now, there are some limitations, so not everyone will be eligible. But here's some of the things. What is it, a Roth IRA? Number one, Roth IRA is an individual retirement account. You get to contribute after tax dollars. While there's no current tax year benefits, your contributions and earnings can grow tax free. You withdraw them tax and penalty free after age 59 and once the account has been open for five years. So other advantages of having a Roth IRA include no contribution age restrictions. In other words, you can contribute at any age as long as you have a qualifying earned income, no required minimum distributions, there's no minimum withdrawal allowing your savings to continue to grow even during retirement. No income taxes for inherited Roth IRAs. If you pass your Roth IRA onto your heirs, their withdrawals will also be income tax free. So that's a fantastic benefit. So we we include looking at your situation, what your tax consequence is going to be when you retire. What can we put together as a plan? Is a Roth IRA, a product that we probably need to have a discussion with? A lot of times it is, but there are ways that we can take someone care.
Randy Sams:
Because I get asked this and you probably do to. I've got a401k, I'm not going to retire. Maybe I've got a41k from a previous employer and I don't plan on retiring soon, but I would like to be able to take that money that I've got in my qualified for one K or my IRA, and I'd like to be able to put that into a Roth IRA. So how do we do that, Gail? It's a product called or what we look at is called a Roth conversion. All right. So a Roth conversion involves the transfer of retirement assets from a traditional asset, a simple IRA, a defined contribution plan like a41k into a Roth IRA. While the owner has to pay income tax on the money they convert, they will be eligible to make tax free withdrawals from the account in the future. Now, here's how we do it. What I've done with some clients when we do a Roth conversion is we set up an indexed annuity, so we take the amount that they currently have in their IRA or their 41k and we put that money into an indexed annuity. No fees is just a growth annuity. It's sitting there and we put them into an annuity again with no fees, with the ability to take out, say, 10% on an annual basis.
Randy Sams:
So instead of taking all of your money out of your 41k, your qualified plan and having to pay taxes all up front. What we do is roll that money into the indexed annuity and the first year we take out 10%. We pay the taxes on the 10% and put those taxes put that after tax money into what the Roth conversion. And we will we will basically mirror that for the next ten years. So you're taking out 10% withdrawals and you're putting that money over into the Roth conversion. So again, that money has to be able to stay there for five years. So it's not something that you can state right now, Carol, that, you know, I'm 65 years old. I want to retire. I want to put my money into a Roth IRA, pay all the taxes up front, start taking money out next year. It's not going to work. You have to be able to keep the money in there for four or five years. But if you can do that over a ten year period, you're still accumulating that growth in any growth. Remember, it's tax deferred. Any growth that you have during that period of time is taxed, is tax free that you start taking out. Let me let me give you an example, an example of a client. So here's what we got.
Randy Sams:
We get my notes here. Here we go. So. So I've got a single client. Taxable earning is 80,000 this year and they have 100,000 in a traditional IRA, whether it's a previous 41k with a previous employer, they'd like to convert it to a Roth. So based on taxable income, their highest marginal tax bracket is about 24% because the 24% bracket ends at $170,050, they can convert up to 90,000 this year. That would be $170,050, -80,000, and pay no more than 24% tax on the money. So they were able to convert the entire 100,000 over a two year period and convert the rest of it the next year. Or we could take the 100,000 and we put it into an indexed annuity and just take out 10,000 over the next ten years and put it into the Roth IRA. And that money, again, you pay your taxes up front. But you know, I'm not a big believer in paying the lump sum taxes. I want to be able to pay a little bit every year. It doesn't increase your tax bracket. And then whenever you retire, you've got that tax free income waiting for you. So, I mean, the main reason people convert their traditional IRAs or other retirement accounts to Roth IRAs is so they can enjoy the tax free income in retirement. Any questions? You got any comments?
Kale Simpson:
That was a lot of information on Roth IRAs. That was that was a great a great job. And guys, listen at SMG Financial and your American retirement. We will discuss. How a Roth IRA might make sense. It might not make sense for everybody. It could potentially make sense. But that's what an annuity x ray can provide to you as the information, if that does make sense. Randy, before we go to a break, guys, we've got a lot of information on the other side of the break. Some things that we will talk about here momentarily, life insurance. We spoke about it very briefly at the top of the broadcast, why life insurance might make sense and why insurance companies look at life insurance and annuities in their portfolios. And how life insurance in addition to. Fixed index annuities perhaps might make sense for clients. But after our break, Randi, we're going to talk about tax free income from an index universal life product, how that works, how that how that's similar and different from a Roth IRA, which you went over.
Randy Sams:
You know, we've focused the first part of the show. We've focused on, you know, income, guaranteed lifetime income, personal pension. We focused on removing the longevity risk off the table. So what we want to do right now is we have a little audio book of Annuity 360. We want to play a chapter on a personal pension. And if you like what you hear from the audio book, give us a call. 8669907664 or visit us at your American retirement. Ask for the free audio book or the Free Annuity 360 book, and we will send it to you in the mail. Thank you so much.
Sam Davis:
I had $1,000,000.
Sam Davis:
Are you concerned about market volatility, rising taxes, economic uncertainty and how it all could affect your future in retirement? Then tune in to your American retirement to learn how you can protect and grow your hard earned money. Your American retirement. Every Saturday at 1:00 pm, right here on 101.1 FM. The answer Protect your hard earned money today and schedule a free, no obligation consultation now at your American retirement.
Sam Davis:
Chapter nine. You can create your own personal pension. Big idea. Using an annuity to create a personal pension helps you create a lifetime income stream, but it also helps you leave a legacy for your beneficiaries. All annuities can create annuity income to supplement the income you need before or during retirement. Those who are approaching retirement are afraid that they will run out of money. But an annuity can help make sure you have an income you can never outlive. An annuity can be a great investment for your portfolio, but encourage you to be careful that you don't overpay for your annuity. When you put your money into an annuity, the annuity company will pay you your money back at a date. You specify you don't want an annuity company to charge you too much to simply pay your money back to you. I'm confident that leaving a remarkable family legacy is important to you. You likely want to have money left over when you pass away to leave your beneficiaries. The goal of a personal pension is to generate lifetime income with no risk that grows your money and allows penalty free withdrawals. An annuity can create a lifetime income with market like gains and no market risk, while also allowing you to build enough wealth to leave for your beneficiaries when you pass away. Don't give the annuity company fees for doing nothing. We prefer fixed indexed annuities for our clients that do not have an income rider fee. But you can still create a personal pension without an income rider on your annuity.
Sam Davis:
If you get an annuity with an income rider but don't utilize the features of that income rider, then you are not getting what you paid for. You are literally just paying the annuity company 1 to 2% each year. You defer annuities in your annuity without receiving a single benefit for that annual fee. This income rider fee will also draw down your account value or principle, depending on how that index is performing. The growth on your entire account value could be significantly and negatively impacted. Some accumulation focused annuities are built to deliver increasing payments without an income rider. You should consider the features your income rider is providing you before deciding to purchase it as an add on. Make sure you utilize the features you are paying for more ways to get the most out of your annuity. The longer you wait to turn on the annuity, the more you'll receive in annual payments. This is because your annuity will spend a longer time in the accumulation phase, meaning it will spend more time building up your account value. Your annual payments will grow as your account value grows. Believe it or not, you can generate your own personal pension by distributing no more than 5% a year with penalty free withdrawals. From your accumulation based annuity policy, many accumulation annuities are set up to be RMD friendly, so you won't suffer a penalty when you have to take your RMD. It would be silly for you to be penalized for something you are required to do. Annuity companies take this into account by creating products that make taking your RMDs easier.
Sam Davis:
Inspect what you expect with any annuity. Don't just go with what the annuity agent or advisor tells you. Read it for yourself. Specifically, you should read the annuity illustration guaranteed and non guaranteed tables included within the annuity illustration. Also, please remember that annuity policy is a contract between you and the annuity company, so caveat emptor or buyer beware applies here. Be aware of the annuity you are buying and choose an annuity that works best for you. They will help you build a successful retirement and they'll offer you peace of mind. Whether you choose to generate income through penalty free withdrawals or invest annually in an income rider, know the consequences of both. This is a decision you will make at the beginning of the investment process. One poor decision here can cost you 1 to 1 and one half percent of annual growth over a 30 year retirement. This could come out to be a significant loss. Educate yourself on your options and the specifics of each option you are considering. Making the right decision up front will save you a lot of frustration in the long run. Also, please remember that if you withdraw too much annually, say 10%, you will run out of money in 10 to 12 years. Make sure that you're working with an advisor who can help you choose the appropriate withdrawal amount so that your money lasts for your entire lifetime. As discussed above, we recommend no more than 5% be withdrawn each year from your account.
Kale Simpson:
Welcome back, guys. Your American retirement. This is Kale Simpson with Randy Sams coming to you Saturday morning from central Arkansas. We've been talking about a wide range of issues concerning retirees today and today and today, what we would do if we were you. Before we left off, we were talking about life insurance. We do a lot of life insurance from our office. We've talked a lot about fixed indexed annuities and how that may add some different security layers in your retirement portfolio that we find very helpful and valuable to a lot of clients after doing an annuity x ray. But if life insurance is something that we do recommend, we will go over that in more detail. But guys, reach out to us. You can call us any time. 866990766 for your American retirement. We'll be glad to get that information out to you. But from a tax free retirement standpoint, that's where the IUL can come in, Randi. But from a smart income planning standpoint, I'll talk about this here in just a moment. We've been talking about income. We need to be smart when it comes to income. The last things to encompass the entire broadcast, Randi, it's important in retirement to be efficient, to be tax efficient and to be market efficient.
Kale Simpson:
One thing that I was talking with some clients the other day about was eliminating risk from stock market downdrafts put in a safety net. Protection is vital. Growth is also important if we can have both. That's fantastic. So protection plus growth is ideal in a retirement portfolio, but a lot of times with sequence of returns risk, you cannot afford to take unnecessary risk in retirement while taking income. So that's where we come into play, guys. That's what we help clients with every single day. We help clients like you understand what sequence of returns risk means in the retirement phase of distribution where you're taking money in retirement. So protection and growth do not take unnecessary market risks. If you're not needing to be smart about taxes, we'll talk about taxes. Need to consult your your tax advisor with respect to specific tax questions and then from a fee structure, randy, we want to make sure that clients are not paying unnecessary fees for things that they do not need. Look at us online. Your American retirement dot com. Give us a call. The Office 8669907664. We'll be glad to help you guys. We'll get a kid out to your retirement. Simplified is the way that we like to do business.
Randy Sams:
And one of the things that we want people to understand is that in any product that we have that has a fee, you're you're not paying the fee for my service or service any any planning that Gail and I do. We don't charge for that. The fees that we're talking about in an income annuity are for guarantees. A guaranteed income, like Cale gave the example earlier with one of his clients that that he was speaking with where she was looking at, well, what happens if she lives past 90? Well, that guarantee, whether the account value is zero or whether it has money still in the account, that that that fee that you're paying is your guarantee that for as long as you live, be it 90, be it 95, be 100 to be 120. That guarantee income is going to be there for you. So what you know, what we want to look at is we want to try to eliminate fees, if at all possible. Don't overpay for an under underperforming asset market. We want to eliminate risk and we've spoken about longevity risk. We can talk about other risk in different shows. But today we've kind of focused on longevity risk to take that risk off the table where, you know, take some of the money that you have in the market today and put it into an indexed annuity or a guaranteed income annuity where you got market like gains without the market risk and then tax, you know, divest the IRS, pay your fair share, but nothing more.
Randy Sams:
You got to have a plan and consider implementing a Roth IRA. You know, one of the things that that we look at, income planning, we talked to people about. Replacing your bonds with an with an indexed annuity. All right. Here's the reason I give this as an example. You could take any portfolio. There's a gentleman by the name of Tom Hagner. He uses this as an example. He's trained 300,000, almost 400,000 agents, advisors across the country. And this is what he uses as an example. He's an economist and he's put out a challenge. This is not me making the challenge. This is Tom Hagner that if you any any portfolio manager that can put together, they think the best portfolio they can. He's going to come back and he's going to show them a better portfolio. What he's going to do is he's going to replace the bonds with income annuities, the income annuity. What that does, if you add an income annuity to your portfolio, what it does is decreases your risk and increases your returns. A income annuity inside your portfolio acts like a triple A-rated bond with a triple C rated return, and it doesn't get any better than that.
Randy Sams:
So that's what we want to look at. Kale, just, you know, we've spoken about the longevity we're talking about. I want to I want to give an example, a client. And this is why we focus on this. I've got a client. She's 66 years old. Her name is Jessica. Jessica is in good health. She knows something about living long because her mom, Alice, she lived to be 66. So you've got to ask the question, okay, how can can Jessica outlive her mom, say, by six years? Of course you could. Yes. With all the potential breakthrough treatments and technologies, you've got the promise of substantially increased life expectancy. So if Jessica outlives her mom by six years, Kayla, she will need income until the age 102. That means needing income for 432 months or three and a half decades. That's what we do, folks. That's why we want you to call 8669907664. You're American retirement. Give Kale Simpson or Randy Sams a chance to come and meet with you face to face. Do an overview of what you're currently have and see if we might be able to make some adjustments, some improvements in your in your planning.
Kale Simpson:
So let us help you. Let us be your advocate. Let us do the homework for you. If we're able to earn your business, that's fantastic. We would love that. But at least we'll be able to put you in the right direction. Guys, I want to end with a quote from a gentleman by the name of Will Rogers, you guys. A lot of you will probably understand what I'm about to tell you. People should be more concerned with the return of their principal than the return on their principal. So that makes a whole lot of sense. Removing that particular risk out of your retirement plan. Take that unnecessary risk out of the equation and do what will do what Will Rogers says. Guys, again, your American retirement. We're so glad that you joined us. We'll see you again next week.
Sam Davis:
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 your American retirement today that's your American retirement dot com not affiliated with the United States government. Randy Sams and Kale Simpson do 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 specific result. All copyrights and trademarks are the property of their respective owners. Amara 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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