10.14.22: Audio automatically transcribed by Sonix

10.14.22: 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 Money Matters with Mike, with your host, Mike Zaino. Get set for a full hour of financial information and economic news affecting your bottom line. Mike works hard each day to educate Americans like you on how to reach the financial freedom they've worked so hard for. And he can help you, too. So now let's start the show. Here's Mike Zaino...

Mike Zaino:
What's up? What's up? What's up? It's Mike Zaino coming to you live from Fort Mill, South Carolina. A happy Saturday, people. What a great day to be alive in these United States of America. Fall is finally in the air. Hopefully to stay this time. But today we are absolutely bringing the heat back again. The whole goal of this show is to arm you with information that you can actually use and give you plenty of meat on the bone to chew on each and every week. I am super excited for today's show. On getting to the guarantees in life, and once again, I have the distinct honor and privilege of being joined by the one and only Mr. Matt McClure. Matt, how are you doing today, buddy?

Producer:
Hey there, Mike. I'm doing great, sir. Glad to join you again on this wonderful Carolina weekend.

Mike Zaino:
Oh, it is beautiful outside.

Producer:
It has been great here in the in the great state of Georgia as well. You know, I felt so much like fall. We have had zero rain over this past week. And I'm telling you, it has just been wonderful. So we're hopefully going to stay that way, as you say, for a long time. But but yeah, we've got a great show coming up. A lot of wonderful and useful information to share with our listeners today.

Mike Zaino:
We absolutely have meat on the bone today, for sure. That's not just meat on the bone segment.

Producer:
But throughout the show. But yeah, we do have that meat on the bone segment where you're going to share a lot of great info there. Got a lot of uncertainty in the markets of course, here lately and we've got downs. Unfortunately, we've got some ups as well, but we've got these big wild swings, you know, and and and that is just unnerving to people. And so that's why we're getting getting to the guarantees today. Right. Because we want to share with the listeners ways that they can actually strategically manage their finances so that everything's not so uncertain.

Mike Zaino:
Yeah, it's I mean, it's it's been a wild ride in the last couple of weeks. And every time the news comes on, you know, it's like, oh, how is that going to affect the market? What announcement is now going to cause my portfolio to drop by 3%? It used to be if you had a 3% incline or drop over the course of of a week, maybe a month, that was kind of normal. Now we're seeing, you know, just these overreactions and we're seeing three, four or 5% swings on a daily basis, which is not the norm. People are people are a little shaky right now as far as the markets go.

Producer:
Yeah, it's definitely not the norm, especially over these past, you know, like compare it to, let's say, the previous decade of market activity. It's just been, you know, movement of maybe on, let's say, the Dow a couple of hundred points a day and not, you know, oh, a thousand points up here, a thousand points down there is just like, okay, we're we're tired of the roller coaster, you know?

Mike Zaino:
Yeah. Now, roller coasters at amusement parks are fun roller coasters when we come to money and people's life savings and nobody likes to go down, That's not the we that we all like on a roller coaster.

Mike Zaino:
We're screaming. But because it's painful.

Producer:
Wrong kind of scream. The wrong kind of scream there. Oh, goodness. But yeah, we're going to we're going to look at how to set yourself up for some guaranteed income and retirement, too. That's one of those guarantees. Right. And we've got a nice example of a particular client also who has done that. We've got a lot to get to. But first, I wanted to share our information out there so folks have it with the website being Money Matters with Mike dot com, MoneyMattersWithMike.com Once again, all one word is the website. Or you can give Mike a call at 704 560 1573. To talk directly with Mike Zaino that number as he always says it's not a secret and he answers it when you call and if not, he's going to get right back to you as soon as humanly possible. And you reason, though, Mike, that people want to reach out to you, whether it's via the website or via the phone number, is to get a free financial consultation. What are some of the reasons why people might want to reach out to to you as a as a financial professional and, you know, maybe learn more about their finances?

Mike Zaino:
Right. So, I mean, bottom line is, is if you don't have a formal retirement plan, you need to meet with a financial professional. Right. If you don't understand the risk that you're taking with your investments, you need to meet with a financial professional. If you don't know what an expense ratio is or you don't understand how you should manage risk in your portfolio as you get older. Because as you get older, your appetite for risk should diminish. Then you need to speak with a financial professional. If you don't know whether or not to pay your house off or to pay your vehicle off as opposed to keep it financed, then you should probably speak with a financial professional. Bottom line is, is that if you haven't actually heard from your advisor, if you have one lately, and I know a lot of them are doing that ostrich effect that I call of sticking their head in the sand because are people you know their money is is going to crap in a in a in a handbasket if you want to say you know if I can I say that on on on air.

Producer:
We'll find out.

Mike Zaino:
Its hard. Yeah. If you haven't heard from your advisor then you want to get a second opinion. We want to help you reach your financial freedom. So if any of that pertains to you, then give me a call. 704 560 1573.

Producer:
And the website. Also MoneyMattersWithMike.com And you can also go to the website folks to subscribe to the show as a podcast. You can find all of our past episodes there. You can also get us wherever you subscribe to podcasts, really, the Apple Podcasts, Spotify, all the biggies there. Once again, the website for the show, though, is MoneyMatterswithMike.com.

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

Producer:
And our words of wisdom. Mike, this week come from Grant Cardone, a best selling author. He's a big, you know, touted as the world's number one sales trainer and he's a renowned speaker, social media influencer or real estate mogul. He's just a resume. As long as both of my arms here. And Grant Cardone says this, quote, If you don't get serious about your money, you will never have serious money. And, boy, I can see how that would be true. Yeah, absolutely.

Mike Zaino:
You know, and Grant is one of those speakers that when you listen to him talk, you can't help but get motivated. I've been to his ten x conferences before, and if you're out there in listener land, you ever have the opportunity to go and listen to the man? You will find a wealth of nuggets in what he has to say. Just like you find wealth of nuggets every single week inside and out. Listening to Money Matters With Mike.

Producer:
Hungry for something that you on here? Here is some meat on the bone...

Mike Zaino:
On last week's Meat on the Bone segment, we discussed the five key components of a financial plan, and the first one was goal setting. So if you missed the segment on how to set financial goals, go back online to Money matters with Mike Dotcom and be sure to catch up on that. But in today's segment, we're going to talk about step two, which is creating a budget. And I know people tend to hate the word budget because for some it feels super, super restrictive. It doesn't let them do what they want to do or buy what they want to buy. But you shouldn't ask yourself how to budget your money, but instead you should ask why you should want to budget your money in the first place. You see, a budget can actually give you freedom by showing you exactly where your money is going each and every single month. A fantastic personal budgeting tip is to follow psychologists. There's a psychologist named Edwin Locke, and he has this smart goal setting method. And I know we've talked about a lot with smart planning and smart investing and smart reinvesting and smart health care. Well, this is just smart goal setting and the word smart as an acronym. The S stands for specific, the M stands for measurable, the A stands for attainable, the R stands for relevant, and then the T is for time bound. And as long as your budgeting goals adhere to each and every one of these five descriptions, they are realistic enough for you to start your budget.

Mike Zaino:
So the first thing that you must do is to identify both your income and your expenses. Income is easy. Everybody knows how much he or she earns each and every month. But do you also know where it all goes? We have talked about that time and time again on the show as far as tracking every single one of your expenses over a 30 day period to identify any potential leaks. Another thing you need to be able to do, though, is separate your wants from your needs because your wants can eat up so much of your monthly income, especially if you would consider yourself someone who is not very good with money. So when you're designing your budget, you've got to make sure that you're not spending more than you make, and at the same time, you must make sure that you're able to account for everything you need to pay for on a monthly basis. And you know what that includes? It includes paying yourself first. If you wait until all of your bills are paid before you start saving or investing, chances are you're not going to have anything left over. So if you haven't created a budget and you're looking for some help online, there are a host of free tools that are available excuse me, available for you on the web as well as apps that you can download right in your hand on your smartphone. And those things will help you create and keep track of all of your money.

Mike Zaino:
Once you understand where all of your money is coming from and going to each and every month, your next step is to then separate your expenses into your fixed costs and into your variable costs. So fixed costs are those things like your mortgage, your rent, car payments, utilities, although those can vary a little bit if you average them out, it's a fixed cost insurance costs. If you have fixed loans, student loan payments, those are your fixed costs. Your variable costs are things that change on a monthly, sometimes even on a weekly basis. And those can include things like grocery shopping. You may decide to go out all out one week and eat filet mignon and shrimp and seafood, get your surf and turf. Right. And then next week you may be eating beanie, weenies and rice. So big swing in grocery shopping, entertainment costs. Whether you're going out to the bar with your friends, you're going to concerts, things like that. When we used to go inside theaters, although those are slowly making a comeback, clothes shopping, eating out, those are examples of variable costs. And while your fixed costs don't offer that much flexibility when it comes to your saving, your variable costs, do does that mean that you have to stop going out and stop having fun? Of course not. It just means that you might have to rein in some of that, the extra spending and become a little bit more disciplined in order to help you save more. And another thing is that you have to remember that every single month.

Mike Zaino:
Is different. Some months you're going to have to budget for things like back to school supplies or routine car maintenance. Other months, you're going to be saving for things like vacations, birthdays, holidays. But regardless of the occasion, you have to make sure that you prepare for those expenses in the budget. And another thing is you got to have a contingency plan. In the military. Every operation has a contingency plan, a fallback plan, and you should, too, when it comes to your budget. So put a small amount of money aside for those unexpected expenses throughout the month and then label that as like your miscellaneous category inside your budget. That way, when something comes up and you know it will come up because life gets in the way, you can cover it without taking money away that because you've already put it somewhere else. Now, if all that still doesn't work in keeping you on track with your budget, then you might have to eliminate some, if not all, of your discretionary spending. And getting comfortable with sticking to a budget can take time. Normally 2 to 3 months, sometimes a little bit longer. But cut yourself some slack because after all, you've lived all of this time without a budget. So you have to be patient and give yourself time to adjust. And above all, don't be afraid to ask for help if things aren't falling into place. Help is just a phone call away and that phone number is 704 560 1573.

Producer:
There you go. That's the number, folks. And as we say, it's no secret. Once again, 704 560 1573. And the website as well because we're technological like that MoneyMattersWithMike.com Is also a place you can go to reach out to Mike and we'll find out some more information about the show too. So as we said earlier, Mike, our focus of the show, the main like portion of the show today anyway, is going to be getting to the guarantees. And you know, there's been so much with all of that uncertainty we've been talking about, not only on Wall Street but on Main Street, you know, it's been really affecting everybody with inflation and all of that. You still running rampant and then you've got interest rate hikes which on top of inflation make things even more expensive. So it's been this compounding effect on people's on people's nerves. And so they're looking for those guarantees in life. And and it's maybe surprising to some people, but there are some things out there that are guaranteed, you know, aside from the things that you normally think about, there are some things out there that are guaranteed that might be good things.

Mike Zaino:
That is true. Matt, You know, with today's stock market absolutely crumbling the way it has so far this year, and retirees and those that are close to retirement have been losing so much of what they've worked for their entire lives. We are getting absolutely flooded with calls for guaranteed ways to invest and generate guaranteed income for life in retirement. And like you just mentioned or referred to, we've all heard that there are only two guarantees in life, right? Death and taxes. But there are other guarantees in life that are possible if and only if you take control of your current situation, whatever that may be, and set yourself up for those guarantees down the road. So if you want to get to the guarantees in life, number one, you have to start by saving smarter. So I remember that I used to tell people, Hey, you know what, you should be saving 15, maybe 20% of your income each and every single year if you want to retire. Well, you know, with inflation going the way it is and the cost of living going up and the stock market, I'm actually saying, hey, you know what? Save up to 25% of your income each year so that you don't have to work quite as long. And there are ways that you can accomplish this. A lot of people say, well, where do I put my money in, you know, in a savings account and a money market account and a CD? And I'm like, please don't, please don't do that. Instead of putting your money into one of those types of vehicles at a bank, if you have funds that you've identified that you're not going to need for at least, say, I don't know, six months to two years instead of putting it into a CD, let's invest that into a two year MIGA that's called a multi year guaranteed annuity that earns you know, we've have now that are earning more than three and a half percent.

Mike Zaino:
If you can live without the money just a little bit longer, you can earn almost 5% on a five. Yea, my God, I know people that are putting money into the 60 month CDs. Well, that's five years. Well we have five year migas that are paying just south of 5% and who knows what the Fed raising interest rates over the coming weeks. Those may go a little bit north of 5% so the banks aren't going to pay you that, right. If that is something that interests you, then all you have to do is visit our website, Money Matters with Mike Dot com, set up a consultation or pick up a phone and call me at 704 560 1573. Imagine how much better you would do if you could generate almost 5% on your savings each and every year without any market risk. See, this percentage of return is based on the claims paying ability of well known, highly rated multibillion-dollar insurance companies that have been doing this since before most of our listeners were in diapers. And your return, plus the principle it earns, is never at risk in the stock market that is saving and investing smarter with your shorter term savings dollars. What do you think about that?

Producer:
Matt Yeah, you know, that's great. And we did a segment not all that long ago on the show a few weeks back now called, you know, beating the bank CD rates. And you mentioned bank CDs there and it astonishes me the especially the big brick and mortar banks, some of the larger ones have just these these minuscule rates of return. We're talking like, what was it like 3/100 of a percent or something like that for for yeah, for that particular bank CD rate. Now, of course, the online banks will give you a higher rate of return than that. But you know this the almost 5% rate of return for Amiga, if that five year figure is, it's got to be very enticing to a lot of people, I'm sure, because, you know, it's it's a safer place to put your money where you're going to get a higher rate of return and you're not putting that money somewhere. As I say, it's safer. You're not putting it somewhere where it's at risk in the market.

Mike Zaino:
Sure thing. I mean, I had an elderly gentleman, I'll just call him a very wise person. He told me, look, if I could have gotten a 5% return on my money each and every single year, he goes, I would have retired a millionaire. And you know what? I didn't believe him at first until I ran the numbers. And he was right. I mean, a 5% return was zero risk. Zero risk then. Yeah, you can you can earn a lot of money over time, for sure. Yeah. Another thing to do is to maybe start with, say, 40% of whatever your nest egg is. And instead of investing that into bonds, that historically that's where people went for income later on in life. Well, bonds this year have dropped 13, 15%. And nobody should ever pay for an underperforming asset. You can implement a bond replacement strategy with both a tax free and a tax deferred income strategy for investing for your own retirement. And we can talk about that in our consultation. A third way would be to invest in a product called fixed indexed annuities. We've talked a lot about those because those are now becoming an asset class of their own to replace bonds. Why they get protected growth that's market linked gains without any market risk. So you're able to set those up for growth, you can set them up for income, you can set them up for growth for a few years and then income. And if your income is your goal, you can generate income that you can never outlive. Why it's guaranteed for the rest of your life, no matter how long you live. So this is part of creating a personal pension.

Producer:
Yeah. And that's, you know, having that sort of guaranteed. And you say the word pension, right? It's like almost like finding a unicorn these days because they don't really exist in the private sector, especially if you got a federal government job. That could be a different story for you. But in the private sector it would be like finding a unicorn and people were like, Oh, I can create that for myself, like an income that I know I'm going to have for the rest of my life. That is something that's a potential game changer for people.

Mike Zaino:
It is. Absolutely can be for sure. Well, another way to accomplish something very, very similar is through the proper use of an advanced designed life insurance policy. Life insurance is one of the only two truly tax free investments that is available to all American pre-retirees and retirees, and specifically within life insurance. We prefer a product called an index universal life insurance policy, better known as an IUL, because they also are linked to indices, whichever indices or index you choose so that you get market linked gains. Without the market risk, there is a low cost for the death benefit of the life insurance itself. But once that cost of insurance is satisfied each and every single year, you continue to build cash value within the insurance policy that is going to grow over time. And that money, like I said, is linked to the market index. So both your principal and your annual gains are locked in every single year with what's called an annual reset. One of the great benefits of the IUL is that withdrawals that you make from the policy are done so in the form of a loan against the policy alone. You never plan on repaying and therefore are tax free. And we like to call this a rule 7702 plan because it ties back to the IRS tax code. 7702 Society in general benefits from life insurance. Tax savvy investors use this strategy to generate tax free retirement income, and it is great for younger folks in their thirties, in their forties, in their fifties because the cost of insurance is extremely low at those ages. Once you get north of 55 and into your sixties, they start charging you a quarterly because let's face it, you're closer to mortality.

Producer:
It's funny how that happens. Things get more expensive in the life insurance arena once you get to be a little bit on in your in your years there. But yeah, that's great. And, you know, I mean, for the folks who may be newer to the show. Yeah, we do we talk, you know, quite a bit about fixed index annuities and we talk about the indexed universal life insurance policy as well. But there are too, as you alluded to a moment ago, very similar things are not the same, obviously, but there are two sort of very similar things, almost two sides of the same coin or two sides of a similar coin. I don't know exactly how to put it, but they're similar. And, you know, they're both things that can be used very strategically for people. And they might at first sound like, oh, I'm going to take out an insurance policy and then take a loan against it. Well, a loan is something that you generally have to pay back. But no, that's not going to come out of your pocket. You know, you're you're you'll you'll be gone at some point in time. And, you know, they're not going to come looking for you for for the money to pay it back.

Mike Zaino:
No, they're not. You're actually leveraging the death benefit in your favor to be able to utilize a portion of it while you're alive and kicking. Which is, you know, that's good, because otherwise life insurance is just death insurance, right?

Producer:
Exactly. And that's that's right. That's that's like your grandfather's life insurance there, you know? So, yeah.

Mike Zaino:
That's old school life insurance. Okay. So we mentioned that there's a one of two truly tax free methods of of providing yourself income and retirement. And the other one is through a Roth IRA. What is Roth? Roth IRA is something that when you contribute to, as long as it's in the account for at least five years, you're paying the taxes on the upfront side. And once you do that, that money continues to grow tax free over the entirety of its life and there are no required minimum distributions. So the government's not going to force you to take money out once you hit age 72. Now, in order for you to pay a tax burden because you paid it on the seed and you're not going to have to pay it on the harvest. So a lot of folks who have traditional IRAs or traditional 401 KS that they roll over into a traditional IRA tax deferred, they can actually do what's known as a Roth IRA conversion, or they can do a Roth ladder conversion and do it several times over the course of many years. And so, again, Roth IRAs are the other type of tax free investments that are available to both American pre-retirees and retiree. And I'll give you an example. One of my clients, he's his name's Rob. He's he's married. He's 63 years old. He has $760,000 in his traditional IRA, and he's planning on working for another four years.

Mike Zaino:
He makes a pretty good living. His income's around 166,000 a year. So what he's planning on doing is systematically taking the amount of room that is left between where his annual household income is and the next income threshold that would push him over into a higher tax bracket. He's going to take the remaining balance, go ahead and pay the taxes. Now over the course of the next several years on that money and then convert it to a Roth IRA. And that strategy is is proving to be extremely beneficial for him because his tax savings alone get this his tax savings alone is going to be $478,000. I'll say that again. His tax savings, he's saving himself just shy of a half a million dollars in taxes by paying that today at a known tax rate. So if you think taxes are going up in the future and with our national debt just topping $31 trillion, the government really only has a couple of choices. That's to spend less, which, you know, that's never happening or tax more. Why in the world would you leave your your hard earned money in a place where down the road they're going to raise taxes? So by doing that, he's going to save almost a half a million dollars in taxes. I thought that was just absolutely brilliant when it came to his strategy after sitting down and meeting with me.

Producer:
Yeah. And you look at that and if you, you know, just on the on the surface. So if he's got that $760,000, he'll save almost half a million. Right. In taxes through this this Roth IRA conversion, that 500,000, if I'm rounding the numbers here in my head, but that 500,000 roughly, there is about two thirds of the total amount that he has in his traditional IRA to begin with. That's the amount of money that he will be saving in taxes over the years. That's pretty wild and a great strategy, I think, for a lot of different people who have those accounts that they're going to have to pay taxes on eventually down the road. Like I say, you might as well pay them now while they're while they're not as high.

Mike Zaino:
Yeah, as I say because that's if that's if tax the tax brackets aren't changed in the future. Remember in the sixties our current 24% tax bracket was 56%. If we go to anything similar to that, then that tax savings is going to be a heck of a lot more than that.

Producer:
Yeah, absolutely. That that's very, very true. So, I mean, that's great. That's a wonderful, wonderful thing. To get some guarantees that you won't have to pay taxes in the future, that's one of the that's a great it sounds like a good guarantee to me. No taxes, Good guarantee.

Mike Zaino:
So, yeah, when we say death and taxes are the only two guarantees in life, that's not necessarily the case, Right? Especially if you're willing to do a little bit of planning and take the bull by the horns and create some more guarantees for yourself in retirement.

Producer:
Absolutely right. And that is something that, you know, you have to put the work into. But it is definitely, definitely worth it in the long run.

Producer:
It's time for this week's Problem Solver.

Producer:
Yes, it is that time once again where I will present Mike Zaino with the problem and he will solve it, as he so often does. Here's my thing, though, Mike. I am not presenting you with my own problem this time around. It's actually someone else's problem that I have for you to solve. All right. And again, yeah, there's some a good some kind of good problems to have in here and some that are a little a little tricky. All right, so let's let's go. This is about a woman named Linda, right? She's a professional female, right around 50 years old, divorced. She wants to grow the money that she got in the divorce and the money that she's making. So. So she got some money from the divorce. She has her income. She wants to grow all of that. She's a marketing executive, actually, in the aerospace engineering industry. She makes about 225,000 a year in salary and a $50,000 bonus. So that's, you know, right around to 75 K total. All right. Doing well for herself, Definitely. She's in that 35% tax bracket on the federal level. She's in a state where she pays about five and three quarters percent in state taxes as well. So her total take home pay after she pays Uncle Sam and the state 162, right around 163,000. Right. And she gets 5% raises on average each year. But she's been able to keep her expenses in check right around 4000 a month. That's 48,000 a year. Right. So she's she's doing well for herself. She's got this income. She got some money from the divorce. She wants to get to the guarantees, as we've been talking about all episode long here. And so how does she do that? How does she go about getting to the guarantees for her particular situation in her retirement?

Mike Zaino:
Yeah, I'm actually familiar with familiar with Linda, and kudos to her for keeping her expenses down at 4000 a month, even though she's making close to 169, are taking home 169,000 a year. So that's awesome right there. So the first thing that she's doing is she's taking 2000 a month and she's putting that into a ten year indexed universal life insurance policy, which as illustrated is going to deliver her just over $44,000 per year in tax free supplemental income, starting when she retires at the age of 65. So she's planning on on retiring at 65. She's going to fund the account while she's still working for the next ten years. So she's only funding it from age 50 to age 60. And then she's going to keep working until her 65th birthday, letting those that money that she's paid in marinate and grow based on the performance of the indices that she chose. And then she's going to retire at 65. Essentially, she's going to defer any withdrawal. She's not going to take any withdrawals when she retires for five years after she stops paying into it as far as the premiums. And then she's going to watch her account balance grow until she's 65. If you think taxes are going up in the future, then that is an incredible return for her income bucket. That's $44,214 in actual dollars each year. That's going to be worth about 59,000, almost 50, almost 60,000, I should say, in pretax dollars, because why she's getting $44,210 tax free. She's going to generate that kind of income from an investment of just $2,000 a month for ten years. She's making a slight lifestyle adjustment for ten years so that she can reap those benefits from age 65 to 90 plus with income. That is going to eclipse what she is due to receive in Social Security income. Think about that for a second. She is definitely getting to the guarantees with this IUL investment.

Producer:
Yeah, she absolutely is. And I mean, you know, talking about having these guarantees and, you know, here's here's the way that I sort of frame it, right, is that there's so much uncertainty in the world and in the financial markets right now. And, you know, when it comes to investing and the economy as a whole, just so much uncertainty control the things that you can control. I say kudos to Linda because she's taking control of the things that she can.

Mike Zaino:
She is not only is she cutting out her future income tax rate risk, she's also cutting out market risk. She's diminishing inflation risk as her money is going to grow with market like gains over the course of time. So here is a client who is extremely happy to invest into an index universe. The life insurance policy. She's also doing a Roth ladder conversion and she's taking half or about a half a million dollars and placing that into an annuity as part of her bond replacement and tax strategy. So she's going to generate the $44,000 from her insurance policy. She's also going to generate another $32,000 in change as far as annual income from her $500,000 annuity. And like I said, she went with that 5050 plan, had $1,000,000 total in her 401 K and IRA. She left 50% inside in the market at risk, just so she wants to try to capitalize if the market does have a turnaround and do a lot more. But she took 50% off the table to avoid risk. With half of her money, she's going to pay taxes on her annual withdrawals. But all that money that she's saving in taxes from the life insurance plan is more than enough to justify that move. She is also get this going to invest in a five year MIGA. That's the multi year guaranteed annuity that I talked about earlier in the show that is going to pay her just shy of 5% if rates don't rise. Right. And she's doing that every quarter for the money that she's earmarked as, hey, you know what, I won't need this in the next six months. She has a real plan and I am super happy for her that she doesn't have to significantly worry about what is going on in the stock market or with the current political environment or with the current tax environment, because we all know those can change. She is building a fortress on bedrock, not one built on sand.

Producer:
Well, Mike, we mentioned a moment ago, you know, building your own personal pension for your retirement. And that's a lot of what Linda is doing there as she she builds that foundation on on bedrock for her future. Let's actually listen. I want to give the folks a bit more insight into how they could create their own personal pension through something like an annuity. And this is actually from the book Annuity 360 by our good friend Ford Stokes. It's read by the author himself from the audiobook version there and it's the chapter on just that creating your own personal pension in retirement. There is just a lot of great information in here. Give this a listen, folks who really, really soak it in because I want you to get this because it's very, very important. Just a couple of minutes here, but just give this a listen and we will have more on the other side.

Ford Stokes:
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 I 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.

Ford Stokes:
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 an annual payment. 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.

Ford Stokes:
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.

Producer:
So, Mike, that is a look at how folks can build their own personal pension that they can never outlive. And of course, that is from the book Annuity 360 by Ford Stokes. And folks, if you have any questions about annuities, if you have questions about any of the things that we've been talking about so far today, you can just go to MoneyMattersWithMike.com And reach out to Mike Zaino, that Web site once again, as MoneyMattersWithMike.com Or you can give him a call at 704 560 1573. And Mike, when they do that. Talk a little bit about what that consultation is going to be like. I know you like to start off with just sort of like a I want to sing a song now from a from from a musical or something. I'm getting to know you kind of a thing. You want to get to know people first, like just kind of lay the groundwork and see if you want to work together, right?

Mike Zaino:
Absolutely. So So if you out there in listener land, you're interested in the possibility of even investigating what a personal pension looks like for you. Give me a call. Right. We're the first call we're going to have is going to be a very brief call. Just tell me a little bit about you. I'll tell you a little bit about me. Where I come from, my background, my credentials. I'll give you some links that you can follow. And we're just going to kind of find out if you think that we're a good fit for each other. Right. And then we also offer complimentary for all of our listeners once we get past that discovery call a full retirement plan consultation. And that's going to typically take about an hour or so. Again, that's a comprehensive consultation at no cost to our listeners, and there's absolutely no obligation either. You're only going to work with us if it's best for you. If you and I gel, then we're going to work together. If for whatever reason we don't, then you don't have to work with me and you'll go on and I'll have more folks that I can help you reach their financial destinations. All right. We're going to help you analyze your specific situation and unique financial situation, because there is no such thing as a one-size-fits-all when it comes to retirement planning. I realize that everybody out there listening has a different situation.

Mike Zaino:
Most of you are different ages. You drive different vehicles. Some of you plan on taking Social Security as soon as you hit 62, some of you plan on delaying Social Security. There is no one size fits. All right. I'm going to try to discover exactly how much you're currently paying in fees, number one. And if I can help you cut unnecessary costs, whether it's in your 401. K, an IRA or any other retirement savings vehicles that you may be participating in, then I'm going to do my best to put that hard earned money not in advisor's pockets, but back in your pockets. We can also help you with Social Security planning, Medicare planning. If you're if you're about to be 65 or if you're already on Medicare right now is open season four, you can change your Medicare Advantage plans in your supplement plans if that's something that interests you. Bottom line is, is that we're going to compare your current situation to what's possible if you work with Mike Zaino. All right. So all of those things lead up to you taking the first step, picking up a phone, calling me at 704 560 1573 or just going to my site. MoneyMattersWithMike.com And filling out a contact us form. I'll get back in contact with him with you. You have my word.

Producer:
And if you get Mike Zaino's word, you can take that to the bank, literally. Well, figuratively, Really? Not necessarily literally. But then, you know, you'll eventually have more money to put in the bank. So there you go. It all works out for everybody involved. And the and the, you know, the metaphor or the old saying or whatever you want to call it, it works out. And one of the things, Mike, that you can help people do, I know is reduce their tax burden and help them grow their assets during retirement. We actually have a little bit of a checklist that that we're going to share here with the listeners to kind of go through in general terms anyway, some things that people need to do. So walk us through this checklist to to help people reduce their taxes and grow their assets and retirement.

Mike Zaino:
Yeah. So the first thing, like I just said, we're going to analyze your portfolios for the risks that you may be taking, whether they're necessary or unnecessary for expenses and fees and correlation. Then we're going to assess your income needs and look at your monthly expenses and your retirement income, which includes Social Security. And then we're going to determine whether or not you are going to have a surplus when you retire, which is good. That means there's more money than month or more. Potentially devastating is identifying a future retirement income gap. And if we do identify a gap, then we've got to look at what steps we can take to make sure that that gap is filled and we build a bridge into retirement. Instead of having that gap, we're going to help you to invest in a smart financial plan. So that's whether it's following the rule of 100, putting you in a smart risk or smart safe situation with fixed index annuities, whatever that might be. We're going to help you there. We're also going to, depending on where you stand now, help you invest in tax free accounts, whether that's utilizing the Roth IRA or doing some conversions or whether it's using indexed universal life insurance. And we're always going to make sure that you follow that 4% rule of never withdrawing more than 4% of your retirement dollars, and that way you never outlive your money. So, again, it's a it's a comprehensive consultation. We give you homework. We try to identify any traps and pitfalls that you might have so that we can help you avoid common mistakes and surprises in retirement. Because the last thing you want in retirement is to make a mistake and be surprised at the result.

Producer:
Yeah, and mistakes like that can can really compound, right? We talk about compounding interest a lot, you know, and there's there's good compounding interest and there's bad compounding interest. And and, you know, it's kind of like that if you if you make a mistake, it can sort of, you know, snowball or compound, as you know, if you especially if you don't catch it in time or something like that, you could really be paying the price for that in retirement. So it really helps to have somebody like yourself who knows the ins and outs of all of these things.

Mike Zaino:
Yes, sir. Yes, sir, I agree.

Producer:
Well, those are, you know, some of the things that you are, you know, going to talk about with folks as they go through that initial consultation. And I actually have a list here, Mike, of some common questions that that we get. And I know that you've gotten these in a lot of these consultations, I'm sure common questions from retirees and pre-retirees that we've actually compiled here. And and I want to have you answer a few of these in the last several minutes of the show here. So the first one I want to be like, oh, this comes from Bob in in Greer, South Carolina, or whatever. You know, I don't know. But it doesn't it just it comes from me at this moment. So I'll ask you these questions and you can can sort of give us the answers here as we go on. So the first one is where will my retirement income come from?

Mike Zaino:
Yeah, and that's a great question. And it actually shocks me that most folks don't understand where their retirement dollars come from, Right? So the first place they're going to come from is from personal savings and investments. You're going to be able to capitalize on the money that you have saved by working for however many years you worked and diligently and being disciplined by saving, you're going to be able to capitalize on some of that income. Right. A lot of folks will continue to work in retirement. We've talked about. Also retirements where they're staying mentally and socially and physically engaged in the workplace, whether it's two days a week, three days a week, just to put a little jingle in their pocket. And like I said, get them out of the wife or the husband's hair and create some family unity. If you're fortunate enough to work for a company that still offers pensions, then that pension plan will come into play. If you work for the government, they offer a pension, or if you were smart enough to create your own personal pension income from your fixed indexed annuities. That's the third area that you can get money from in retirement. And then the fourth one is Social Security income. If it's still around in the same format that we have currently known it as in the past. Right. So the last the last notice that I got was that Social Security is only going to be able to meet 70% of its obligation by the year 2034, which is barely over 11 years from now. So who knows what it's going to look like in 11 years. But Social Security income will be that fourth bucket that you can pull from for retirement income.

Producer:
And that's the one that people tend to think that that they're going to just be able to rely on and that all of their income in retirement is going to come from it. And, boy, that would be a shock to the system. I think if that were the only check that you got in the mail every month for a lot of the for a lot of the folks out there. All right. So that is question number one. So number two here, common questions that we're covering folks from pre-retirees and retirees. And this one is how much will my income need to increase to keep up with inflation? You know, we're a couple of weeks ago we talked about keeping up with the Joneses. Well, the Joneses and us are having to keep up with inflation. So how are we going to do that?

Mike Zaino:
Well, so the cost of living, first off, is measured by the Consumer Price Index. That fluctuates, but it's averaged somewhere between 4% and 5% each year over the past 20 years, all the way up until 2022. So we recommend that retirees compensate for inflation when they're preparing their retirement income projections. And of course, ever since COVID came into the world back in 2020, we've had this period of absolute runaway inflation, and that's made planning for inflation even more important. So we're going to look at all of that again on an individual basis when we sit down and we look at your numbers. So most people should have to increase at least 4 to 5% just to keep up with the cost of living.

Producer:
Yeah, if you look at those historical averages, that seems like a good guideline there because eventually hopefully knock wood and cross fingers and toes and everything, things will return to normal, return to something of a baseline and that will be where we'll go. Of course, the Federal Reserve. They'll say that their target is 2% inflation. And so if we got there, then if you plan for a little bit more, then you'll be in good shape. But yeah, hopefully it will return to some semblance of normalcy.

Mike Zaino:
Yeah, no doubt. And that's the way they currently figure inflation. If they use the old method of figuring inflation, that doesn't try to hide things and make things seem a lot better. Like you're looking through them with rose colored lenses, current inflation would actually be closer to 17%. Yeah, it's that is scary.

Producer:
Yeah, it really, really is. And you know, I'm no mathematician, but that 17% is a lot. Okay.

Mike Zaino:
Indeed.

Producer:
A couple more of these questions here from retirees and pre-retirees. Number three is so if that is the case, if inflation does average 5%, let's say, how much am I going to need in the future?

Mike Zaino:
Well, so let's just say for an example, you retire at age 60 and you need $4,000 a month in retirement income. If you assume that 5% annual inflation just in five years at age 65 instead of 4000, you're going to need $5,105 to be able to buy the same goods and services. And that's in five years, folks. At age 70, that amount will rise to $6,515. And then at age 75, you'll need at least $8,315 to maintain the same purchasing power as you did 15 years earlier at age 60 when you only needed 4000. So it's more than doubled. And again, we can thank Albert Einstein for the ability to come up with that because we use the rule of 72.

Producer:
He was a smart guy. You know, that's one thing. One thing that you can say about him. Well, and the last question that we have here is along those same kind of lines, Mike, and it is will Social Security keep up with the cost of living?

Mike Zaino:
I don't know. But what I can say is that although Social Security has had those colas is what they call them, cola cola, cost of living adjustments in the past. All right. Because of well known changes in demographics, we don't that's we do not recommend just relying on those colas or cost of living adjustments to increase benefits at the rate of inflation in the future. Bottom line is, is that if you are relying on Social Security and Social Security alone, you've kind of missed the boat. I mean, I don't know how blunt to put it. Please don't be that person who is relying on Social Security in retirement to be the savior because something is going to have to change. Otherwise it's going to run out of money.

Producer:
Yeah, and some people might say, oh, you see that word cola? I like cola. That sounds good. You don't. Not that kind of cola, folks. Well, we're getting here toward the end of the show, Mike, Only about a minute left in our time here together for this week's episode. If you thought that we crammed a lot of a lot of meat to chew on, some meat on the bone in this show, we got a bunch more episodes online for you to check out and you can see them all at MoneyMattersWithMike.com . You can click on the podcast page there as well and subscribe to us and get notifications whenever there's a new episode that's posted. We do that each and every week. That website, once again, MoneyMattersWithMike.com . Well, Mike, I've really enjoyed it. I look forward to talking again next week.

Mike Zaino:
I do the same. Thank you out there for listening. People without you, we do not exist. If you happen to know anybody that could gain from the information we're putting out over the airwaves or on the web, when you go to the website, please share the website. MoneyMattersWithMike.com Please share my telephone number. It is not a secret. I do hope you have a great rest of this weekend. And as always, make it a great day.

Producer:
Thanks for listening to Money Matters with Mike. You deserve to work with a financial and insurance expert who can offer strategies for protecting and growing your hard-earned money to schedule your free no obligation consultation visit MoneyMattersWithMike.com Or pick up the phone and call 704 560 1573 That's 704 560 1573.

Producer:
Not affiliated with the United States government. Mike does not offer tax, legal or investment advice. Consult with your tax advisor or attorney regarding specific situations. Opinions expressed are subject to change without notice. These opinions are not intended as investment advice, nor do they predict future performance of any product. All information provided is believed to be from reliable sources. However, we make no representation or warranty as to the accuracy of any statement. This information is intended to be educational in nature and does not provide a guarantee or a specific result. All copyrights and trademarks are the property of their respective owners. Amerilife assumes no responsibility or liability for the content of this message. The information contained herein is provided on an as-is basis with no guarantees of completeness, accuracy, usefulness. Timeliness or the results obtained from the use of this information.

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