1.6.23: Audio automatically transcribed by Sonix

1.6.23: this mp3 audio file was automatically transcribed by Sonix with the best speech-to-text algorithms. This transcript may contain errors.

Producer:
Any examples used are for illustrative purposes only and do not take into account your particular investment objectives, financial situation or needs, and may not be suitable for all investors. It is not intended to predict the performance of any specific investment and is not a solicitation or recommendation of any investment strategy.

Producer:
Welcome to Money Matters with Mike, with your host, Mike Zaino. Get set for a full hour on 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. Happy New Year, people. 2023. Can you believe it? What a great day to be alive in these United States of America. Money Matters With Mike is a show designed to arm you with information and give you plenty of meat on the bone each and every single week. And today is no different. We're bringing the heat again. On today's show, we're going to talk about how to make the most of today's difficult financial landscape. And as always, I have the distinct honor and privilege of being joined by the one, the only my co host and producer extraordinaire, Mr. Matt McClure. Matt, happy New Year to you. How are you doing today?

Producer:
I'm great, Mike. Happy New Year to you as well. I hope you celebrated and get into too much trouble.

Mike Zaino:
Oh, we didn't. We? The older I get, we watch the ball drop and it's like, good night.

Producer:
I'm lucky if I can stay up that late. Yeah, There you go. No. Yeah, I'm lucky if I can stay up that late period. So I'm. I'm right there with you.

Mike Zaino:
But it's funny, You know, when we were younger, we used to go out to New Year's Eve parties and, you know, go have a late dinner and then cocktails with friends. And, you know, you just you just do it up right now. Like you said, I'm lucky if I get to watch the the ball drop and kiss my wife good night. Wish her a happy New Year. And then 30 seconds later, I'm snoring.

Producer:
Yeah, right, exactly. That's that's my my thing is I stay up until midnight. I call my mom and wish her a happy New Year every year, right at right at midnight. And then I'm in bed now. So, yeah.

Mike Zaino:
We do the phone call thing, too, with just our brothers and, you know, immediate family. But then as soon as that's done, I kiss my wife and see tomorrow.

Producer:
Right, Exactly. See? See you next. Well, that wouldn't be next year anymore. But anyway, you get the idea. But yeah, So the more time that passes, the more lame my New Year's gets anyway. But. Yeah, but no, we're going to start off on a great foot on 20 in 2023, I should say, with some great info for our listeners today. Mike, we've got a lot coming up. Of course, we want to mention to folks before we get too deep into things here that you can always go to, MoneyMattersWithMike.com, that's the website where you can find a lot of information about the show. All of our past episodes is so that you can share those with your family, with your friends. If you've got family or friends who you know might need some financial help as the New Year begins here, as we're just not even a week into the new year yet. Everybody's got those New Year's resolutions and a lot of them have to do with finances. And so if they need or if you need some financial help, money matters with Mike is a great place to go. Or you can always call Mike Zaino directly. 704 560 1573. And you can call him. He's got his phone on him right now, but don't call him right now because, you know, we're doing the show. So wait, at least, you know, about an hour and then you can give him a call and he'll pick up.

Producer:
And if he doesn't pick up, he'll call you right back, because that's the kind of guy he is. That's what he does. And you can also subscribe to us wherever you listen to podcast as well. Send us a message. Leave us a rating. We would absolutely love to hear from you there. As I mentioned, Mike, we get a lot coming up here. I think, you know, we talk a lot about, you know, getting a free financial consultation. That's that's one of the things that you offer to all of our listeners. And we're going to kind of go in depth on that a little bit this week, I feel like, because, you know, it's it's when you talk about needing help with your finances, if you're if you're sick, you go to the doctor, right? If you are just an annual checkup situation. I actually did mine just before the end of the year so I could get my my discount on my insurance premium for 2023 because that's how it works. And so I you know, you go you do that once a year. Well the beginning of 2023, I think, anyway is a good time to get a financial checkup. Right. And just make sure that everything's going well for you if it is great. If not, you can help them, right?

Mike Zaino:
Matt? That is so true. I always say that it is never too early, it is never too late, and it is never too often to give yourself a financial checkup and start planning for a successful retirement that you can be confident in. And that is exactly what we do during our one-on-one consultations. And I'll go much, much more in depth than. Ill in that later on in the show.

Producer:
Yeah, because people will be surprised about how much you can can learn, how much information you can get in just, you know, a conversation or two and, you know, really get a full financial picture. So we've got all that coming up. We've also got a bit of a reprieve for people who might sell things on on eBay, on Amazon, on Etsy, those kind of websites. You've got a little bit more time before the IRS is going to come knocking at your door one more time for a little bit more money because, you know, Uncle Sam wants his due, but they're giving you a little bit of a break there. So we'll explain that via this. A good story on it in The Wall Street Journal. And then we've got a problem solver. We're going to have a great discussion about life insurance as well, because that needs to be a part of your financial picture, part of your financial thinking heading into the new Year, making sure that you are prepared for whatever comes, and also that you realize there are ways that you can actually use life insurance as a part of your retirement plan as well to provide some tax free income in retirement. I think that's a huge overlooked thing that people don't really think of.

Mike Zaino:
Mike Yeah, it is. And it's just, I mean, a smart way of allocating 20 to 30% of your portfolio, believe it or not, in that particular asset in life insurance because of the tax free death benefit and as well as living benefits that the correct type of life insurance provides.

Producer:
It's not your grandfather's life insurance anymore. And we'll have a lot more to say about that coming up in just a bit as well. But first, let's kick things off with the quote of the week.

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

Producer:
So the quote this week might comes from Robert G. Allen, who is a pretty successful author of financial books out there. He's got several of them that are out. A couple of them have been on the New York Times bestseller list. So so, you know, as a guy who might know a thing or two here and I have to say I love this quote because it's a it's very apropos when we're talking about planning for the future and about, you know, accumulating some sort of wealth. Right. So Robert G. Allen once said, quote, How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case. Hmm.

Mike Zaino:
The answer is the answer is zero. I don't know any millionaires who've kept any any considerable amounts of money in the bank. Period. End of story. And that kind of leads me into our Meat on the Bone segment for kicking off 2023. And that's all about rebalancing your portfolios.

Producer:
Hungry for something that you on? Here's some meat on the bone.

Mike Zaino:
So if you are one of those people who finds themselves with a considerable amount of money just sitting in an account at the bank, whether it's a checking account, whether it's a savings account, whether it's a money market account, we need to talk because the stock market always has its ups and it always has its downs. In some sectors overperform and then others underperform in 2022. Last year was a pretty grim year for most of those sectors. So by rebalancing your portfolio either to its original asset allocation. So if you're a relatively new investor, you would want to do that. Or if you want to update your asset allocation, especially if things have kind of gotten out of whack. So say that when you started investing 30 years ago, you had a 70% risk portfolio. In other words, 70% of your money was exposed to the volatility of the market. And now you are in the retirement red zone, right? You're either in those five years right before or the five years immediately starting out retirement. You need to definitely rebalance your portfolio and take steps to lock in the gains from the sectors that had the best returns and protect those dollars that are in the sectors that had the largest loss or that had lagged behind. Now, if you rebalance your portfolio with a broker, they are likely charging you up to five and one half percent in rebalancing fees. That's not a fee efficient strategy in my mind. We recommend that you work with somebody who has your best interests in mind and who looks to save you money, not lose more of it, and then rub salt in the wound by charging you to do so.

Producer:
Yeah, that's absolutely right. I mean, you know, people don't realize a lot of the time, you know, they think, okay, well, I'll just go in and I can, you know, reallocate some of these these assets that I have into different areas. And it might cost a little bit, whatever, you know, But you say that number up to five and one half percent, rebalancing fees, that's really people are like, oh, wait, hold on. That's a good chunk of change. I don't need to be just basically throwing that money away.

Mike Zaino:
I mean, think about it. That's $5,500 for every 100,000 that you have with them. If you have $1,000,000, that's over 25 grand in rebalancing fees. That, to me is absurd.

Producer:
Great for the broker. Not necessarily so great for you. So, yeah, I mean, you have to look at rebalancing, but make sure you do it in a smart way and in the right way. Great way to start out 2023. You know, as you sort of head into the new year with kind of a fresh start, fresh pair of eyes on your finances and I think a great thing. And so, you know, we teed this up kind of at the beginning a few minutes ago, Mike, and that is this full retirement plan, consultation and sort of the financial checkup part of the show. And we're going to go in depth on this today. You know, we talk about it pretty much every show with maybe maybe a couple of exceptions here or there, but pretty much every show, we at least mention it, right. What kind of touch on the things that you can talk about? But it is and I use the analogy earlier, it is kind of like going to the doctor for your annual physical. You know, you get everything sort of checked out to make sure that you are in good health. The same is true for your finances. You'll want to make sure that you are in good financial health. And what better way to to start off a new year than to make sure that that's the case?

Mike Zaino:
Yeah, there are a lot of institutions and advisors out there that are only really concerned with the money that you have with them. And I like to take a much more holistic approach because you may have pieces of the puzzle that are over here and pieces of the puzzle that are over there, and I need to bring them together and merge them into a comprehensive plan that makes sense for your retirement. So these consultations that we do are complimentary to our listeners. There is absolutely no obligation whatsoever, and we're going to dive deep and analyze your financial situation. So we're going to look at all of the different types of investments that you have, whether they're with us or not. That's any accounts that could be IRAs, that could be annuities, that could be old 401 K, any where you hold assets, including cash and life insurance. And we're going to check the balances of each of those accounts. We're going to review their rates of return over the past year, over the past three years, over the past five years. We'll try to figure out what fees that you're paying will help you cut out unnecessary costs. I mean, answer this question, right? Do you have an income gap or is there going to be an income surplus? And it's much, much more. More of a better situation to find yourself with more money than month. You don't want to ever go into retirement and figure out that you can't afford to retire because there's a huge difference between, you know, eligibility and affordability.

Mike Zaino:
Also, what percentage of your income is either coming from or is going to come from your Social Security. If you need to plan for those of you who have several years to go before you're even drawing Social Security, I tell people not even to count on it. If it's there, great. But the last statement that I said or that I got said that it was only going to be eligible to meet 70% of its obligation in the year 2034. Well, that's 11 years. And they just gave current recipients an 8.7% cost of living adjustment. So that's going to strain the remaining coffers, if you will, for future recipients down the road. So these are things that we're going to do. If you have current pension plans or annuities, we can really take an x ray of those and find out how much you're paying and fees inside of the annuities. Pensions are most often funded by what's called a single premium immediate annuity. And these Spear's that's their their acronym SP I A they're very very good at paying you your own money back, but they aren't so good at growing your money. And so I think that's probably where annuities have gotten a bad rap. But again, that's your grandfather's annuities and there are many different types of of ones that I love. We'll do some tax planning. Do you have a tax problem? Are you going to have a tax problem from your different income sources in retirement? Using Roth IRAs to reduce your future tax risk might be good for you.

Mike Zaino:
We'll look at your life insurance coverages. If you have cash value, life insurance, what's the value of those policies? We might consider doing what's called a 1035 exchange and moving cash value over into a different form of life insurance that can both protect but also grow your money. How much do you have available to you for tax free withdrawals? In other words, creating a tax free income? We'll look at your real estate, whether it's your family home. If you have land, if you have rental properties. We'll look at all of that. And we can also help with Medicare, with Social Security planning. Bottom line is we'll compare your situation currently to what's possible if you work with us and if you haven't heard from your advisor lately. And let's face it, 2022, there weren't a lot of advisors that were proactively contacting clients. You need to call us, talk to us, get a second set of eyes on your situation in the second opinion, and then you're going to determine whether you want to work with us. We're only going to work with the people who feel like they want to work with us and it's for their best situation. So if we can help you, we'll make every effort in our arsenal possible to do so. And it's not going to cost you a penny.

Producer:
And that is something that I think is music to the ears of a lot of our listeners here, Mike, because, you know, we talked about those hefty broker fees that you could be paying for rebalancing your portfolio a few minutes ago. This is something that you can do a positive step that you can take in your financial life that's not going to cost you a thing. And you know, you go to MoneyMattersWithMike.com, you can reach out there or you can give Mike a call at 704 560 1573. I know the guy. He's always got his phone on him and he will answer and if he doesn't answer, he'll call you right back. So there we go. That is that, I can guarantee you. But, you know, it's it's funny there because, you know, you talked as as you were mentioning, all the different aspects. Two things popped into my mind when we're talking about the free consultation. One of the things was that thank you for using the term x ray because that just goes right back to the the whole annual physical sort of analogy. And it really is what it is. You know, you're getting an inside look at all of your finances and all of the different accounts and places that you might have your money and your investment for the future.

Mike Zaino:
And Matt, I don't mean to interrupt, but I just need to get this in there while you're talking about this. You know, a lot of people get the statements from their institutions and they have no earthly idea how to read them. Like they have no clue what all of the gibberish and the numbers mean as it pertains to them in their current situation. I'll help you decipher that and put it into terms that you can actually understand. Right. And that, I think, is what helps people's light bulbs go off to really just have it feel like they have a much better and tighter grasp on their financial situation as opposed to getting a five, six, eight page statement that they don't really know how to read anyway.

Producer:
Yeah. Is this is this Portuguese like, what is it I don't understand or. Yeah, it's kind of crazy. Well, then that's. And that's the other thing, too, Mike, that. That I thought of as you were talking. I mean, people may or may not realize that there are all of these different aspects that go into it, into, you know, planning for your future, planning for your retirement and all of that. And so, you know, it's it's not a one size fits all solution. It can't be because there are all of those different aspects. Right. It's it's based on the individual and that's what you try to do is is really, you know tailor a plan and your recommendations to the individual, not just try and sell somebody a package of something that may or may not work for them.

Mike Zaino:
Yeah, right. I'm not selling them anything. First of all, if they're never going to pay me anything. Right. So that's the thing. And we can tailor make because no two people are the same. Everybody has different DNA. Well, everybody has different financial DNA as well. So some people are going to have 100 grand in the bank that is sitting there doing the in their checking account. Your checking account should be for operating capital. Right? That's the money that comes in and the money that goes out. You should not have more than a few hundred dollars left over in your checking account at the end of the month. If you do, you're not utilizing money as a tool to grow your assets. Right. And then some people are going to have $1,000,000 in investments and other people aren't. So obviously you can't have a one size fits all solution for each and every single person. It has to be tailor made to the individual, to their goals, to their objectives, to what they see themselves doing in retirement. I mean, if you're going to sit on the front porch sipping lemonade and watching the grand Young'uns play in the yard. Right, that takes a dip. A different capital requirement than flying first class or business class across the pond. Right. And staying at the Four Seasons on a regular basis, it just it's going to require more money. Well, if that's what you want to do, then we need to plan for that. Right. And we need to put steps into place that are actionable steps, that are measurable steps so that you can track your progress at each and every point along the way.

Producer:
Yeah, make it happen. You know, I mean, if you if you have those goals, keep those goals in mind and then take action to make those goals a reality to my mind. Like you can't really do it alone. At least I know that I could not. So I would want to call somebody like Mike Zaino or Hey, Mike Zaino in particular. MoneyMattersWithMike.com. Once again, the website folks in 704 560 1573 is the phone number. Well, a little bit of good news from the IRS here, Mike. I know that we don't really ever say those words that that sentence may or may not have ever left my lips before.

Mike Zaino:
I don't think it's going to leave mine.

Producer:
Yeah, right. But and when I say a little bit, I say, you know, a little bit of good news from the IRS for those people who are gig workers, especially those who who have the gig of selling items online, like, say, on eBay, on Etsy or Amazon. Right. You know, the IRS last year announced this plan and it was part of a piece of legislation, I think, that passed during the pandemic, but that they were going to start requiring people who make more than $600 a year selling items online to make that income known and to pay income taxes on that money. Right. So if it's more than $600 a year and then there was all this big hubbub at the time, too, about, well, if people like a family and friends transfer me money via like PayPal or Venmo or something like that, am I going to have to pay taxes on that If the amount goes over $600 a year? You know, there's all that kind of concern. Well, you can at least take a breather here because they're delaying that move for one year.

Mike Zaino:
Exactly. It was set to take in effect in 2022, meaning that many Americans would have to fill out 1099 forms during that first part of the year to to then report the income to the IRS. Well, now they are delaying that one year at least. We hope to help avoid the confusion around what is already expected to be a very messy tax season. I mean, after all, don't forget the IRS hired 87,000 more auditors to to go after middle America. Isn't that nice of them?

Producer:
Well, you know, there's also this in the report that we got this information from on the wall in the Wall Street Journal, rather. They there's actually a coalition for 1099 K, which is that form you just mentioned, 1099 K fairness. They're advocating for a higher threshold than that $600. Right? So people want changes. And so they're hoping that now that the IRS is delaying this move, that there will be those changes. Right. So so maybe that threshold will get increased from that $600 to something that that might be quite a bit higher than that so that you can still still make. Living, or at least something like it, or have a side gig, a side hustle selling things on eBay or Etsy or Amazon.

Mike Zaino:
True.

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

Producer:
Yes, the drama of the intrigue of our Problem Solver segment intro. I love it. It's still one of my favorite things ever. But yeah, so the problem solver this time around, Mike and and if folks if this is the first time if this is you know your New Year's resolution has been to listen to money matters with Mike and this is the first time you're tuning in what happens during our problem solver segment is I will present a problem to Mike Zaino, as I so often do. And then he will present the solution to that problem. And so that's why we call him the problem solver around here. That's what he likes to do is solve problems. So here we go with the problem to solve. So, Mike, you know, a lot of people own and we were talking a moment ago and you mentioned about annuities getting a bad rap. I think this is probably another reason that that's also the case is that many people own variable annuities that they just really don't understand. Right. I mean, they're they might not know. They think, oh, an annuity I've got I'm going to have a guaranteed income in retirement and that's great and wonderful and my money is going to grow. But if you have a variable annuity, your money is at risk in the stock market. That principal that you put in in the in the beginning that is at risk in the stock market. You also could be paying a bunch in fees 3 to 6%, for example. They're also paying income rider fees just to get their money, their own money paid back to them. So that is something that I think is is a problem that a lot of people don't understand what they've gotten themselves into a lot of a lot of the time. So what is the solution if you find yourself in that predicament?

Mike Zaino:
Yeah, You know, again, this is another reason that annuities get bad wraps, right? Sometimes they're sold by people who don't completely understand them. The very word variable means change. That means it can change for the better, but it can also change for the worse. So you might be a person that should consider a different type of annuity that would better protect and grow your wealth. We believe that your money should be working just as hard as you worked for it. So a different type of an annuity, one that we like. It's called a fixed indexed annuity that can both protect and grow your wealth. So I've used this analogy before in talking about the different types of annuities. Everybody can remember back to their childhood in the fable of Goldilocks and the Three Bears. Right? A variable annuity is way too hot. It's in the market, it's at risk. It has fees. A fixed annuity, 180 degree difference is too cold. It's like a bank CD. It's not beating inflation and you earn very, very low interest. But a fixed indexed annuity is just right. And the reason that it's just right is because there are zero fees. It only participates in the gains of the market index and none of the losses.

Mike Zaino:
So when the markets drop, you just flat line zero becomes your hero. When everybody else is losing money, you don't lose a penny. So all of my clients that had annuities last year, they were sending me Christmas cards saying thank you so much that I didn't lose a single dime. I had one guy actually tell me that if I was a woman, he would have kissed me on the lips. His name was Jim. I'm like, Jim, thank you for, you know, thank God I'm not a woman. But, you know, there are many, many, many different ways that that fixed indexed annuities can benefit you. We can set them up for growth. If you just need growth for several years, we can set them up for income if you need immediate income. Or we can use a combination approach where we set it up for growth for a few years and then turn on a guaranteed lifetime income stream that you can never outlive. Guess what? You know a lot of old annuities. You didn't have access to your money while it was inside the annuity. Well, that's not how the new school annuities operate. You actually have a certain degree of liquidity where you can if something comes up and you need to grab ten grand.

Mike Zaino:
Well, if you have over 100,000, you can easily grab 10%, which would be 10,000 to take care of your emergency situation. So you have a lot more added flexibility within today's new school type annuities than you did with your grandpa's annuities. So, you know, people that say, I hate annuities, that to me that's like saying I hate food, right? You might not like mushrooms. Like I'm not a big mushroom fan, but I've got to eat. I love to eat. It's amazing. I don't weigh £400 as good of a cook as my wife is. So when I hear I don't like annuities or I hate annuities, often it's people who don't truly understand how they work because or at least the ones that that I'm a big proponent of because poke holes in something that has zero fees only participates in the gains of the market none of the losses and so only stair steps in value still offers you flexibility as far as access to your money and can guarantee a lifetime supply of income, your own personal pension. Where's the downside in that?

Producer:
Yeah, I mean, it's true. And you know, I mean, you use the Goldilocks sort of analogy there and it's it's I think it's very appropriate for that because, you know, a lot of the time when folks in the financial world are thinking about a plan for a particular client, you know, a couple of the considerations we talked about last week, one was the time horizon, right? People have different time horizons. So that's got to be a consideration there. But that goes right hand in hand with that is how much risk are you willing to take? Right. Are you risk averse? Do you not want to take any risk or do you just want to really play it safe but hopefully not putting? Cash under your mattress, that kind of thing. But actually actually getting some gains, but not putting money at risk. Or are you willing to go to Vegas with all your money and sit at the craps table all day?

Mike Zaino:
Yeah. And I think that most financial advisors who don't offer these types of annuities, their biggest comeback is is that well, your your your investments are not going to grow at the same rate that the S&P will grow. Your returns won't be as high. Well, we have different strategies that have uncapped potential. I'll say that again. Uncapped potential. And so when I look at like, say, even the last ten years of this, I'm thinking of a particular index. It actually outperformed the S&P over the last ten years. Well, guess what? The last ten years was the largest and the longest bull run in the history of the market. Yet my fixed indexed annuity indexed outperformed it. So, I mean, again, punch holes Matt you can't in the people who trash talk them either don't know about them can't sell them because they don't have the proper licenses or just ill informed and don't have the current information.

Producer:
Yeah, they've just heard that the, you know, misinformation and disinformation that's been out there about annuities in general and that just sort of gets scared. And and as a matter of fact, let's let's take a listen to something here, because, you know, we're talking about annuities and we've spent a few minutes here talking about fixed indexed annuities. But as you mentioned, there are several different types of annuities. And, you know, maybe finding the one that might be right for you is a is a thing that you need to do, but you don't quite know how to navigate all of them. You don't quite know what they are. Let's get a little bit of an education on that here for just a couple of minutes from the book annuity 360. This is actually going to be Ford Stokes, who is the author of the book talking about the different types of annuities. Just a just a couple of minutes here. And then we're going to continue our discussion on the other side with some more information about annuities themselves and then some other ways that you might be able to get some tax free income in retirement through life insurance and then other aspects of life insurance that you might be more familiar with. But let's go ahead and listen to types of annuities. This is annuity 360 with Ford Stokes reading from his book.

Ford Stokes:
Chapter five Types of Annuities. Big idea. There are several options for you to consider when choosing an annuity. Be confident in knowing that there is an annuity out there that can meet all of your needs. Fixed annuity. A fixed annuity offers a specific guaranteed interest rate on their contributions to the account. Fixed annuities are often used in retirement planning fixed indexed annuity fire. A fixed indexed annuity is an accumulation based product offered by an insurance company. A fixed indexed annuity has features of both a fixed annuity and a variable annuity. The growth of your fixed indexed annuity is dependent on the performance of a chosen stock market index, but your money is not actually invested in this index. This offers you great growth potential and exceptional protection for your investment. We will talk in depth about fixed index annuities in a separate chapter. Immediate annuity. This is sometimes called a single premium immediate annuity or a CPA SPEA. An immediate annuity is able to pay the policy owner a guaranteed income starting almost right away. Some speakers allow you to defer payments for up to one year. You can purchase an immediate annuity with a lump sum and you are assured a consistent annual payment of an agreed upon amount. Variable Annuity. Here's the definition, but please don't invest in a variable annuity. Disclaimer I strongly recommend that you do not invest in a variable annuity.

Ford Stokes:
I feel compelled to describe what a variable annuity is for you as the reader of this book. This type of annuity includes an investment feature managed by mutual fund managers. Because the funds are exposed to the stock market, they are exposed to higher risk, which means they carry the potential for substantial losses. How does it work? A variable annuity is a mutual fund wrapped inside an annuity product. There are two elements that contribute to the value of a variable annuity the principal, which is the amount of money you put into your annuity and the returns that your annuities underlying investments deliver over time. You can get variable annuities in two forms as deferred or immediate deferred. Variable annuities are the most popular type of variable annuities and are most often used for retirement planning purposes because they are designed to start paying out an income at some point in the future. Immediate variable annuities begin paying you right away. Other things to know. Some advisors would say variable annuities are great products for young high income earners. These types of investors have a much longer time horizon when it comes to recovering losses from stock market volatility. Variable annuities are tied to specific investments, which is a double edged sword for most investors. There is the possibility of impressive growth, also a very real danger of major losses, including your principal.

Ford Stokes:
The bottom line here is if you are currently investing in a variable annuity, your funds could be in serious trouble if the market experienced any downturns. Two basic configurations immediate versus deferred. The option you select will depend on your financial goals. If you want to begin receiving annuity payments right away, you will choose an immediate annuity. Alternately, if you would like to set your payments to begin at some point in the future, you will purchase a deferred annuity and specify the start date in your contract. Income Now immediate annuity features number one funded with a single lump sum payment. Number two, guaranteed monthly payouts. Number three, supplement your retirement savings income later deferred Annuity features. Number one Tax Deferred Premium growth. Number two, guaranteed lifetime income that begins on the date. You specify number three more income later because your money accumulates longer phases of your annuity accumulation phase, the deferred growth phase, you defer withdrawals and the principal invested grows without asset subtraction. This refers to the period when an individual is working, planning, and building up the value of their annuity through savings. It is a specific period when the annuity investor is in the early stages of building up the cash value of their annuity. The accumulation phase begins when a person starts saving money for their retirement and ends when they begin taking distributions.

Ford Stokes:
For many people, this period begins when they start working and it ends with their retirement. The sooner you can begin your accumulation phase, the better. The long term financial difference between starting to save in your twenties versus starting to save in your thirties is substantial. Not only will you have more of a financial cushion in your retirement, but you will also have access to advantages such as compounding interest and protection from business cycles. Remember, the more you invest during the accumulation phase, the more you'll receive in the distribution phase. Annuities in phase the payout phase. This happens when you turn on income with your annuity and begin monthly income payouts or penalty free withdrawals. This refers to the period when the annuity starts to receive payments from their annuity. After annuities move into the annuity ization phase, they will provide periodic payments to the annuity. The more money you invested in your annuity during the accumulation phase, the more that is available to you. In the annuity ization phase, there are four options when it comes to receiving your payouts during the annuities option, life option period, certain systematic withdrawal or lump sum payment life option. This option typically provides the highest payout because the monthly payment is calculated based on the life of the annuity. This option will provide an income stream for life, which helps retirees with their fear of outliving their wealth.

Ford Stokes:
There's also a joint life payment option that lets you continue the payments to your spouse upon your death. This means that your monthly payment will be lower because it is based on the life expectancy of both spouses. Period. Certain. This option means that the value of your annuity is paid out over a time period that you choose, such as ten, 15 or 20 years, if you choose a 15 year payout period, but pass away within the first ten years, your contract is guaranteed to pay your beneficiary for the remaining years. Systematic withdrawal. This method involves withdrawing funds from an annuity account in specified amounts for a specified payment frequency. The annuity is not guaranteed lifelong payments with option. Instead, the annuity chooses to withdraw funds from the account until it is empty. The risk here is that funds could become depleted before the annuity passes away. Lump sum. This option is a one time payment for the value of the asset. The value of your lump sum payment would most likely be less than the sum of payments you would receive If you choose another payout option. This is because the party in charge of the payout is being asked to provide more funds up front than they would have otherwise been responsible for.

Producer:
This part of today's show, Money Matters with Mike is available wherever you listen to podcasts and online at MoneyMattersWithMike.com.

Producer:
So there you go Mike a lot of great information there with types of annuities that is from annuity 360 Ford Stokes the author there reading from his book.

Mike Zaino:
Yeah I mean I think I think he has a great point in educating folks about those different types of annuities and folks if anybody out there wants a copy of Ford's book, I'll give it to you free. Just just give me a call. 704 560 1573. Hit me up on the Contact US page at MoneyMattersWithMike.com on Facebook. At Money Matters with Mike, Just say, Hey, I'd love a copy of the book and I'll ask you for your contact information and then get one to you. But annuities can offer a solution to the number one fear that retirees have today, which is running out of money and then having becoming a burden on the rest of their family that has to help supplement their income. And so many people falsely believe that retiring is about just accumulating this big, huge nest egg, this one big magic number. And it couldn't be further from the truth. In retirement, it's all about income and how much cash flow you have going through each and every single month. And hopefully you have an income surplus and much more money than month and not more month than money. I mean, also, wouldn't you delete the fees or like to delete the fees that you're paying on on the bond portion of your portfolio? A portion, by the way, that's having the or just had the worst year in the history of bond performance and then replace those bonds with a fixed indexed annuity that can only participate in market gains and give you market linked returns with zero risk. I mean, again, to me that just makes sense. So if you want a copy of his book again, just reach out and I'll get you on.

Producer:
Yeah. And it's a good read, too. It's, it's it's really a lot of great information in a very approachable way that it's that it's delivered and explained because it's it's not intimidating at all to sit down and read. It's not the longest read in the world we're not asking you to read, you know, War and Peace or Moby Dick or something here. It's it's, it's, you know, like it's it's a book with a lot of great information crammed into not as many pages as you would think it would take to, you know, tell you all of that information. So it's a great opportunity for you folks. 704 560 1573 and request that book Annuity 360 from Mike Zaino. Of course, the book itself written by Ford Stokes, as we said, though. All right, So moving on from annuities to to life insurance, which can be a you know, a related sort of discussion here as we enter into kind of the final. Trunk of the show. Life insurance. I think people we've mentioned that they often think of annuities as your grandfather's annuities, right. Where it's the spears like you mentioned earlier, whereas a single premium, immediate annuity where you don't see really any growth much at all and you know, it's good at paying you back your money, but that's about it. And so that is what people have in their minds, I think, as well about life insurance. Is that, okay, I'm going to go buy a life insurance policy, pay a premium on a life insurance policy, and then when I die, my family or my my beneficiaries, whomever they might be, will benefit. They'll get that money. I'm never going to see a penny from it. But that's really not the case anymore. Those life insurance policies obviously still exist, but there are many different kinds of life insurance policies. And that's, again, one of these things that I think people just may not be aware of.

Mike Zaino:
Mike Yeah, I think I think you hit the nail on the head there too, because a lot of people look at life insurance as a bill that they have just another bill. But again, I talk about things that can be utilized as a tool. And so if you have tools in your tool shed that just is going to make you better at whatever you're trying to accomplish. So the first question that I'll ask folks is what is life insurance? Well, it's a contract between an insurer that is typically a company and you which you're known as the policyholder. And that contract solidifies a promise to pay a death benefit to a designated beneficiary or beneficiaries when you pass away. And I think it's very, very important to know that there are different types of life insurance policies that are available. And it's even more important to figure out which one is right for you. Bottom line on life insurance is it can help support your family when you pass away and it can help cover the cost of of final expenses. But it can also help protect you in other ways that I'll talk about here in a few minutes. And depending on the type of life insurance that you choose, it can also give you extra income in retirement. So there are two main types of life insurance. There is temporary life insurance and permanent life insurance. Temporary is better known as term, and these two different types of life insurance are differentiated by how long you either want or need the policy to last.

Mike Zaino:
If you only need your policy to last you for a short amount of time. All right. Then you might choose a term life policy because that type of life insurance is only going to last you for a set number of years. The term. All right, normally ten, 20 or 30 years, those are probably the most commonly used terms. But when that term is over. All right, that's it. You've paid all those premiums for all those years and now you have nothing to show for it. Congratulations. You're still alive. The companies that sell these these term life policies, they built their slogans or built their company, rather, by utilizing the slogan buy term and invest the rest. I know everybody out there in listener land has heard that before, right? Buy term and invest the rest. People loved the super low cost of the monthly premiums of term life insurance. The problem is, is that instead of investing the rest, most people spent the rest. And so now at the end of their term, not only do they not have any more life insurance, but they also don't have any investments. And so it might shock people to know that 98% of term life policies don't pay out a death benefit. The insurers know this, and that's why they're charging such a super low and attractive cost because they know statistically you are not going to pass away during the term. Think about it. When do most people pass? What age mat would you say? After what age?

Producer:
I would say probably after the age of 65. 70.

Mike Zaino:
Yes. So most term life insurance policies expire at age 70 or age 75. Right. So, I mean, if your people are living past age 70 or 75, it's not going to be there as a death benefit that that is why most people outlive their term. Now, the ones they do pay of that percentage, the vast majority are from accidents, which nobody can predict when anybody's going to get in an accident. So term policies have their place. Like I said, if you only need a set amount of insurance for a set amount of years, normally a shorter duration, once you start getting into 20 and 30 years, I can almost always show you better options. And we're talking about permanent life insurance. And I'll get into those here in just a second.

Producer:
And it's important to know all these distinctions because, like you say, term term policies can have their their uses for different people in different situations. So, you know, not not to say that they are completely useless, but if you're thinking about a tool that you can also use to help you in your retirement, let's say, or where you were going to have some sort of, you know, cash value in in an account, in a in a policy built up over the years. That's not term. Term is not going to do that for you. But what can do that for you is some the some different types of the other kind of insurance, I should say, and that's permanent life insurance, which you mentioned a moment ago going through this. So break that down because there are some subcategories here that I think people should be aware of, too.

Mike Zaino:
Yeah. I mean, the most popular one, obviously, is whole life. And this type of insurance will will last you for your whole life. That's why it's called whole life. And it does accumulate cash value over time. You can later on then use the cash value that accumulated amount to either take a loan to do something with it. You can use it to cover the cost of the policy payments themselves, or you just simply have some extra cash on hand for liquidity purposes should you need it. There's also something that's called universal life insurance, similar to a whole life insurance. This type of policy will accumulate cash value over time, but the biggest difference is that the cash value also earns interest and you have flexibility with regard to your premium payments during the lifetime of the policy. So if you're having a bad month or month or bad season, then you might not need to pay as much of a premium or any premium during those bad times. And then when times are good, you can pay a little bit more so you have a little bit more flexibility. The the Goldilocks and the three Bears type that we really like again is what's called an IUL, an indexed universal life policy. This is another type of life insurance that earns cash value, but the value is tied to a market linked index, very similar to a fixed indexed annuity where you can only make money. You cannot lose any money at all, and it just gives you a chance to earn either a fixed or an equity indexed rate of return.

Producer:
Now, and that's the one I feel like people sort of I don't know, I guess it sort of gets overlooked because and I don't think it's, as I said earlier, any fault of of people. It's it's just that they don't necessarily know that it exists out there. And I think they just have that the whole life policy on their brain in other words.

Mike Zaino:
Yeah they do. I actually had a gentleman that heard about it, but he couldn't find anybody that that knew anything about them or that that could offer them as far as a solution for what he was trying to do. He heard about it on on YouTube or I think he may have read a book, I mean, on social media, which is honestly one of the worst places that you can go for financial advice, because there are a lot of so called experts out there. Right. And so, you know, a lot of people have a difficult time in figuring out what type of policy is the right type for them. And so I would just challenge you to answer these questions. Right. Number one, how much money do you need? Or would you like your your heirs to have as a tax free death benefit? Because as it stands now, when you pass away, the money that you leave behind is tax free. Are you using that for income replacement? Are you using it to. Take the place of a spouse's Social Security that's no longer there. Take me for an example. I'm married. I have a couple of children and statistically, I'm going to go first, right? My wife's the women on her side of the family. They refuse to die. They all live well into their nineties and my people give up a little bit sooner. Normally in their late seventies, I had one grandfather that made it to 85 and he was the only one that didn't inhale unfiltered cigarettes for 50 years of his life.

Mike Zaino:
So there's that, right? I've not done that. So that's a step in the right direction for me. But again, statistically speaking, I'm going first. I know that when I pass away, my wife is going to lose her Social Security. Meantime, before I died, we were used to living on on my Social Security and her Social Security. Well, when one of the spouses passes away, the surviving spouse gets whichever of those payments is greatest, but the lesser amount is gone. So if you need to replace that because you don't want their standard of living to to drop after you have passed away, then then you need life insurance. Right. What do you plan on using your life insurance policy for? Do you just need death benefit or would you rather have other benefits as well? And these will impact these. The answers to those questions are going to impact, number one, how much you need. Number two, which type of policy is best for you and therefore you'll choose about it. And then like I said a minute ago, you also want to think about how much your family needs to maintain their standard of living should you pass away. And don't overlook funeral expenses. Here in the Carolinas, the average cost is between 10 to 12000 and the more building and expansion and land that's being eaten up, that's only going to drive that cost a little bit higher.

Producer:
Yeah, it's true. And people, you know, need to think about that, you know, and that's just talking about the funeral costs itself. I mean, you've got to also think about, you know, if you're going to to be, you know, buried in a in a cemetery, you got to think about the cost of the plot. You've got to think about those making those payments as well. Any pre planning expenses that you might undertake. Like it's it's a lot I just use the word undertake you might completely right I need a I need a rim shot there completely unintentional pun but but you know I mean it is true all does add up and so you know that money and I'll say say it again that I said it quite a long time ago so I will for those listeners who are maybe their New Year's resolution was to listen to Money Matters with Mike and they haven't heard it before. My when my dad passed away, that meant so much to have that income, that tax free income. Now, thankfully, he did do a lot of preplanning, so it didn't have to there weren't a lot of decisions for us to make. He had made those decisions, thankfully. But then that tax-free death benefit just meant so much to my to my mom, to myself, to my sister, just really was a godsend. So that is something that that I think, you know, people need to think about not only for the benefit of your loved ones, which is obviously the, I guess, the most important thing, but obviously making sure that those funeral expenses and other expenses related to your death are taken care of.

Mike Zaino:
Yeah. And so there are a lot of different factors that will affect your premium payments. Obviously, if you're listening right now, you're the youngest and the healthiest you're ever going to be at this moment in time unless you go on some massive diet and some massive workout routine, that that makes you as healthy as you were when you were in your twenties. Right. So so obviously, the most important is age, because life expectancy is one of the biggest factors that the insurance company looks at when determining risk. But your personal medical history plays a big role as well as your family medical history. So if your family, if everybody that has deceased in your family has deceased of, say, cancer or has had strokes, I mean that then the different companies are going to look at you as a potentially higher risk. They'll look at other factors. Do you smoke? Do you have a poor driving record? How is your credit? Do you like to bungee jump or jump out of airplanes or go base jumping or rock climbing things that would could potentially significantly decrease the longevity that you have on the earth? So all of those factors come together in determining both your risk and your premium payment.

Producer:
Yeah, and that's a different kind of risk we're talking about there. You know, we often talk about how much financial risk are you willing to take. Yeah, I am not. I will say I will not do the bungee jumping thing. I will not go skydiving. I won't even get on a zip line thing like I am, just not. It's the heights and the not being in control. Those are the two things that really get me about those.

Mike Zaino:
And Matt, I think we work well together because we're completely opposite. While I am extremely conservative fiscally right, I am an adrenaline junkie. I was airborne in the United States Army, so I used to jump out of airplanes, you know, as many times as I possibly could. I like to go rappelling. I would if somebody said, Hey, we're going skydiving tomorrow, I'd be like, count me in if I if my schedule was cleared. My wife got me an extreme driving experience a couple of years ago where I got to drive a Ferrari 488 Gtb around the Concord Motor Speedway on their road course. So, I mean, I was pushing the limits of that vehicle. I love adrenaline, but when it comes to money and when it comes to planning for retirement, that's where I draw the line. The adrenaline in the risk taking is not for your retirement dollars. Leave that to for for your younger self and be much, much more cautious when when it when it comes to your retirement dollars because in retirement it's not how much you make. It's how much you get to keep. And you want to make sure that you don't run out of money while you're there.

Mike Zaino:
So the greatest benefit of life insurance is that the death benefit that's paid out by the insurer is usually tax free. But new school life insurance comes with what are called living benefits. In other words, you don't have to die to use it. So it truly is a life insurance that protects your loved ones if you die too soon. But by virtue of the death benefit, it protects you if you live too long because you can generate tax free income for life and it protects you if you get sick in the middle with a chronic critical or terminal illness. And did you know that different investment accounts are taxed differently? By understanding how different accounts are taxed, you can ensure that your money is working, how you need it and when do you need it. And and this is a big one. You can remove the IRS from your retirement accounts by using life insurance as a tool, specifically the IUL or indexed universal life insurance as it's commonly referred to by doing a 1035 exchange. So if that's you, you're looking to utilize life insurance as a tool. Get in contact with me and we'll get you straight.

Producer:
Yeah, absolutely. Well, folks, that is just about all of our time for this time around on Money Matters with Mike, but I just wanted to mention one more time, go to the website MoneyMattersWithMike.com. You can reach out there for that free of any cost and free of any obligation, full financial consultation. Well, Mike, I think we've gotten 2023 off to a great start here and I look forward to many more weeks to come in the future.

Mike Zaino:
Matt, thank you so much for everything that you do for the show people and Listener land. Thank you for listening. And and once again, happy New Year to you. Let's make 2023 the best year yet from a financial perspective. I hope that you enjoy the rest of your 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.

Producer:
Not affiliated with the United States government, Mike Zaino 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 to the property of the 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.

Sonix is the world’s most advanced automated transcription, translation, and subtitling platform. Fast, accurate, and affordable.

Automatically convert your mp3 files to text (txt file), Microsoft Word (docx file), and SubRip Subtitle (srt file) in minutes.

Sonix has many features that you'd love including world-class support, automatic transcription software, enterprise-grade admin tools, collaboration tools, and easily transcribe your Zoom meetings. Try Sonix for free today.