2.10.23: Audio automatically transcribed by Sonix

2.10.23: 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 from Fort Mill, South Carolina. Happy Saturday, people. What a great day to be alive in these United States of America. Money Matters with Mike is a show that is designed to arm you with information and give you plenty of meat on the bone each and every single week to chew on. And today, we're absolutely bringing it again. We're going to continue our discussion on the Smart Retirement Plan series. 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, how are you doing today, sir?

Producer:
I'm doing great, Mike. I'm just a button pusher, basically. I don't know. I guess I'm extraordinary at that. I think that's all I can say.

Mike Zaino:
Really. Hey, man, you might just go happen. That makes you a super extraordinary to me.

Producer:
Hey, there we go. Yeah. I won't sell myself short then, but I appreciate it. I appreciate it very much. And yeah, no, we do have we got a lot coming up here on the show, really a lot to cram in. And I almost hesitate to tease what's coming up because I don't know if we're going to get to it all. There's so much and it's only an hour. So we've got like trying to cram an hour and a half show into an hour size bag or whatever that metaphor is. But that's what we're going to do. And yeah, the Smart Retirement Plan series is going to continue. We're going to talk some about taxes, some smart tax strategies for you. Also, do a little smart review, smart rule following smart income if we get to it. We've also got a good topical inflation demonstration this time around to where we're going to talk about Super Bowl ticket prices. Yikes. Yes. And then going to review Secure Act 2.0 as well and just kind of hit the high points of that discussion we had last time. So, like I said, a lot to get to. And it's going to be it's going to be fun and it's going to be educational, which is which is really the point, right?

Mike Zaino:
Absolutely. That's the whole point of the show.

Producer:
That's right. Just to teach people how to make their situation better and how they can go about getting help with their particular financial situation. You can go to MoneyMattersWithMike.com. That's one of the ways that you can do it, folks. That's money matters with Mike. All one word dot com. You can also call Mike Zaino at 704 560 1573. He has his phone with him at all times including this very second but if you call him right now during the show, it'll be after the show when it gets back to you. I'll tell you that. You can also listen to us wherever you get your podcasts. I'm talking Apple, Spotify, iHeart, all the biggies there. Go and search for Money Matters with Mike. Subscribe to us. Leave us a rating. Reach out to us. Send us a message we absolutely love hearing from our listeners. Well, so as I said, Mike, a lot coming up over this next hour. So let's get it started with our.

Mike Zaino:
Quote of the Week.

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

Producer:
While our words of wisdom this time around might come from Will Robinson and no, not Will Robinson from Lost in Space. You know, it's not it's not danger. Will Robinson, this is the author, Will Robinson. And he said, quote, Financial fitness is not a pipe dream or a state of mind. It's a reality if you're willing to pursue it and embrace it. And I think very wise words there.

Mike Zaino:
Pursuing and embracing, you know, those are those are the things we talk about all the time. You go after what you want. And I know last week we had really just touched on a topic as far as smart tax, where you're able to divest the IRS from your retirement accounts. What does that mean? It means kick them out, get rid of them. And we didn't really go too much into depth or detail on the two strategies that will help you to do that. So in today's Meat on the Bone section, that's what really where I want to concentrate on. And that's those two strategies to help kick the IRS out of your retirement plan.

Producer:
Hungry for something to chew on. Here's some meat.

Mike Zaino:
On the bone. The first one we've talked about this before is the Roth IRA. And a Roth IRA is a type of individual retirement account that allows you to contribute after tax dollars to an account that then grows tax free for the rest of its life. This means that you pay taxes on your money when you contribute to the account up front, but you never have to pay taxes on that money again, especially when you go to withdraw it during retirement. So that makes these things huge In that future, tax increases won't affect or should not affect this portion of your portfolio. And so, again, some of those benefits, tax free withdrawals, withdrawals from the Roth IRA in retirement are tax free, which means you don't have to pay the taxes on the money that you take out of that account. A lot of folks have traditional IRAs. Well, if you have room in your tax bracket to do what's known as a Roth conversion, if you're eligible, you can convert your traditional IRA into a Roth IRA, which can obviously be beneficial for you if you expect your tax rate to be higher or the same even in retirement. And remember, we can't predict future tax hikes by the United States government. An advantage of this is that there's no age limit for contributions. Unlike a traditional IRA, you don't have to worry about what age you are. As long as you have earned income, you can contribute to a Roth IRA. And unlike a traditional IRA, there are no RMDs and those are called required minimum distributions and the Secure Act 2.0 that we're going to touch on a little later in the show has now changed that age.

Mike Zaino:
If you haven't started taking them this year to 73 and eventually will push it out to 75. So with the Roth IRA, you have a potential for compound growth because that money is growing tax free, which means the money in the account grows faster than a traditional IRA or a taxable investment account. You also have liquidity, which means that you can withdraw your contributions to a Roth IRA at any time, although you will owe taxes and penalties on the earnings of that money only if you withdraw them before age 59 and one half after 59 and one half. No taxes, no penalties. So from an estate planning standpoint, Roth IRA assets can be passed on to beneficiaries without the need to pay those taxes on the inherited assets. That's number one. Probably one of the best ways. Well, there's only two. So it's definitely one of the best ways to make sure that you're kicking the IRS out of your retirement plan. The other way is through life insurance. And most people, when they hear life insurance, they think of death insurance. It is very important to know what type of life insurance policies are available and which policy type is right for you. Life insurance can obviously help support your family when you pass away, but it can also provide living benefits and income if used as a tool. So there are different types of life insurance. The first type is permanent life insurance, and that's permanent in that it lasts you for the rest of your life. A lot of people think that it's called whole life. Well, that is one type of whole life.

Mike Zaino:
But then there's also one called Universal Life that has some additional flexibility and then another one called indexed Universal Life that even has more flexibility. So if you've ever read, read books, write if you read books and you've ever read a book called The Power of Zero, The Retirement Miracle Stress Free Retirement, Tax Free Retirement, Be your own bank bank on yourself. A banker like I can go on and on and on. All of these books have been written on specifically the indexed universal life insurance policy and how to utilize that as a tool to not only give you death benefit protection, to not only give you access to your death benefit while you're still alive. If you have a need for chronic critic or terminal illness or assisted living or in-home health care or nursing home care, you can actually tap into the death benefit. But then they can also be used as a tax free income stream in retirement. So the bottom line when it comes to life insurance, folks, is that don't look at it as as a as a just another bill. You got to pay. There are people who dump thousands upon thousands of dollars in these on a monthly basis, monthly basis to utilize it as a tool instead of contributing to a Roth IRA. If your income restricted. Right. Forbes magazine calls the IUL. It's the rich person's Roth. So these two things are some some of the ways or the only two ways that you want to make sure you are pursuing inside of retirement because you can kick the IRS out of your retirement accounts altogether.

Producer:
Yeah, absolutely. And people don't, as you say, they might really associate life insurance with retirement, by and large. But many, many books, as you say, have been written on it. And it can be a big part of your retirement. And that, you know, tax free portion of the equation is really, really enticing for a lot of people.

Mike Zaino:
It is. And it's never too early to get it. You know, it's funny there. I've shared this before. I had a plan to do this type of life insurance when I turned 50. And then the month before I turned 50, I had a kidney transplant. So guess what? I can't qualify for life insurance anymore. So the younger you are, all right, the younger that you are, the more of a chance you're going to have to qualify if you have children, grandchildren, even. Can you imagine starting one of these for one of your grandkids so that by the time they're in their sixties and they've had 40 or 50 years worth of compound growth, we're talking millions folks, as far as the ability to withdraw during their during their retirement. I mean, it makes a huge difference.

Producer:
It really does. And, you know, folks, if you want to find out more about how you can utilize these types of accounts or investment vehicles for your retirement, go to MoneyMattersWithMike.com. Reach out there. You can schedule a free consultation. We'll talk more about that during the show as well. Or call Mike at 704 5601573. You can also hit us up on social media. You can go to Facebook, search for money matters with Mike. We'll pop up right there. And you can you can reach out there and see videos from the show. You can comment and can can interact there as well. So, yeah, it's it's a great place to go also on Facebook and subscribe to the page there for the show, too, because we want to want to get those subscriber numbers going.

Mike Zaino:
Absolutely. And remember that quote that Will Robinson said, you know that financial fitness is not a pipe dream. It's that state of mind. So if you are willing to both pursue it and embrace it, the Roth IRA and life insurance are two great tools for you to use in retirement to kick that IRS out.

Producer:
Absolutely. And kicking the IRS out sounds like a good idea. I'm sure it it is. So. So here we go. As we move along in the show, Mike, with our market update section now as we talk about some recent developments from the Federal Reserve, not not this past week, but just a few days before that, the Fed actually approved a quarter of a percentage point hike in their benchmark interest rate, 25 basis points, if you will. Talk about that and what it really means when it comes to people who are planning or investing for their retirement right now.

Mike Zaino:
Well, I mean, a couple of things, right? I mean, the Federal Reserve said last Wednesday that it was raising the short term borrowing rate, that that fourth of a point, because it's their attempt to slow inflation. Inflation was out of hand, especially last year. Got to a four decade all time high that we've seen in the past 40 years. And so they've put forward a string of these borrowing cost increases as it tries to slice slice a little bit. The first day with my new tongue slice those price hikes by slowing the economy and choking off demand. And this approach, however, risks tipping the United States economy into a recession and putting millions of people out of work. That's their effort to cool the economy and dial back inflation. But it's a very, very double edged sword, if you will. Matt.

Producer:
Yeah, and that's the thing, is trying to strike this balance right, between, you know, slowing down the economy enough so that inflation comes down. So you so you're trying to tamp down demand the demand side of the supply and demand equation to to match the supply side really, which has had of course, it struggles over the past couple of years as as we all know, but trying to trying to tamp down that demand so that things kind of balance out. But you don't want to go too far so that you take an overheated economy and really, you know, flip it on its head and turn it the other way. It really is a balancing act.

Mike Zaino:
It is. And, you know, their fear is putting us into a deeper recession. You know, if you listen to to the folks out in Washington, they're denying the fact that we're in a recession. But the very definition of being in a recession is what? Two declining quarters of gross domestic product. And guess what? We've had two declining quarters of gross domestic product. So we are in a recession. It's just how deep does that recession go and how are you who are listening, able to best protect and insulate your retirement accounts from the effects, the negative effects, the potentially catastrophic effects of a recession?

Producer:
Yeah, absolutely. As we all remember, I think back to 2008 and really like to forget. Yeah, exactly. That's. Excuse me. Excuse me, Doctor, Can you wipe my memory of just the financial markets in 2008? I would love it. And in 2022, basically to when we had all the volatility last year. But hopefully things are headed in a better direction as we go deeper into 2023. Hey. Well, speaking of last year, Mike, of course, very late in the congressional session and by late I mean close to the last day of December of last year of the Secure Act, 2.0 passed in Congress and was signed into law. Let's go through we went through it in depth last week. But I think it bears repeating because we just really drive home some of these changes because they're really important to what what it means for people in their retirement. So hit the highlights here for us.

Mike Zaino:
I think some of the biggest highlights, I'll discuss them. I'll start with number one required minimum distributions. And for those of you who don't know what they are, you haven't listened to this show because we talk about them a lot. But required minimum distributions are from your tax deferred accounts. So if you have an IRA, if you have an old 401 K or an employer sponsored plan, like a 401 or 403 B or TSP, if you're a federal employee. Right. If you don't need that money, if you've done a good job planning and your pension, if you're lucky to have one, or your Social Security and other investments, if that money is enough and you don't need to touch those IRAs when you turn now 73, the IRS comes knocking at your door saying, gimme, gimme, gimme, All right. With their big greedy paws out. And what they're looking for are they're going to force you to take money out of those tax deferred accounts. Why? To collect the minimum taxes by forcing you to take it out. So that used to be 70 and one half. The original Secure act pushed it to 72. Now it's 73, and it'll eventually be pushed out to age 75 by the time the year 2033 rolls around. So that's a big deal because with the age for RMDs increasing, we're going to suggest that you actually let your money grow.

Mike Zaino:
If you can afford to postpone taking money and withdrawing from those accounts from an income perspective, one of the things with regard to the RMDs as well is that the penalty for failing to make the correct RMD that used to be the largest penalty in the IRS's arsenal. It was 50%. That's a50 50%. They have decreased that to 25% and then even decreases further to 10% if you correct it. But you obviously must file the corrected, amended tax return. Another thing that changed due to the secure Act are catch up contributions. So those are going to increase in 2025 for for one case for 403 B's for all governmental plans as well as IRA account holders, which gives pre-retirees more room to catch up and save. And this one I absolutely love those of you who saved money in 529 college saving plans for your children and they didn't use all of that money or they decided that college wasn't for them and they took a different path. Well, now, after that money has been in those plans for at least 15 years, all of the assets left over in those 529 plans can be rolled over into a Roth IRA for the beneficiary. Obviously, they're still subjected to the annual Roth IRA contribution limits, and they have a lifetime contribution limit of 35,000. But that in and of itself is huge, folks, for your kids.

Producer:
Yeah, it absolutely is.

Mike Zaino:
It is. So bottom line, there is, you know, let me help you navigate these new changes. And I'm always going to strive to help our our prospects and our clients adapt to the ever changing landscape of taxes and public policy.

Producer:
And that's the thing that is, you know, as we we talked in in the sort of financial world, we talk about all the different risks that people face. And legislative risk is definitely a big one because the rules and the laws and the regulations, they're always changing. And you never kind of know exactly what's going to change. You know, something might be worked into a bill that has absolutely nothing to do with the thing that changes, and it's just sort of hidden in there and, oh, wait, this law or this regulation changed it. Having someone who knows what in the world they're talking about and does this every day for a living is so helpful and I think really needed for a lot of people today.

Mike Zaino:
No, I agree 100%. And that's why I make myself available. If you have a question, pick up a phone and call me. Reach out on on the website, you know, DM me on Facebook. There's lots of ways to get a hold of me. And I promise you I will get back to you.

Producer:
If you're not reaching out to Mike Zaino. That's that's why you haven't heard from him, because if you do reach out to him, he's going to get back to you. If he doesn't immediately just pick up the phone when you call. No doubt.

Mike Zaino:
Another thing, too, if you have questions that you want addressed on air, if you think that could help a lot of folks, to then send in your questions. And the best way to do that is definitely on the website at MoneyMattersWithMike.com and just fill out the contact us page. Any questions you guys send in, we'll be sure to address and answer on future episodes.

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

Producer:
So, Mike, I hear that there is there's a football game coming up here, a pretty big one. Yeah. Yeah, I think it is. Anyway. It's the Super Bowl. Of course it's out. It's out in Phoenix this year and it is going to be a big a big game. Obviously. It is. Every year is like one of the most watched TV events of the year, if not the most watched. And I don't understand just from from myself, how they can get tens of thousands of people to fill a stadium to watch the game when the prices are as high as they are. And that is the subject of today's inflation demonstration. Go kind of run through this list here for us, Mike, because it's astonishing.

Mike Zaino:
It is OC the Super Bowl that kicked off way back in 1967 and many of our listeners were around back then. And if you wanted to attend the Super Bowl, it cost you a whopping $10 per ticket to go see Super Bowl number one. Fast forward a decade and it doubled in price in Super Bowl ten. Now, that was 1976. It went from $10 to $20. Well, let's go another decade forward to to Super Bowl 20 in 1986. And they had more than tripled. They were $75 back in 1986. But still, heck, you and your spouse or you and a buddy could go and it cost a whopping 150 bucks. Pretty good deal. Another ten years pass by comes 1996. Now they jumped up more than tripled again to $350 apiece. Then go another ten years. Super Bowl 42,006, they doubled $700 apiece. That's nosebleed seats, people OC buy 2016 in Super Bowl 50. That $700 became $2,500 per ticket. And Matt Super Bowl 57 is this year like you said here in 2023 in Phoenix, Arizona. Tickets start the starting price is $5,400. How in the world do they fill an entire stadium with tens of thousands of people who have an extra 5400 bucks to go see a game that lasts about two and one half to three and one half hours? Wow.

Producer:
Yeah. Wow. Yeah, exactly. I mean, just almost no words here to because, you know, that jump from, say, 2006 to 2016, that's where it just starts to get stupid, you know? I mean, it's like just just like grew almost exponentially the price there. And then now it's just since 2016 has more than doubled the price starting at $5,400. You know, we talked on last week's show about how there was some inflation, obviously, with some food prices for people, Super Bowl parties at home. And I think especially after seeing these prices like you're getting the better deal if you sit at home and you watch it on your big screen TV, even with some prices of food items that have gone up.

Mike Zaino:
Brother, I will be on the couch.

Producer:
You and me both. I'll be on the couch with some chicken wings and an adult beverage.

Mike Zaino:
Absolutely, buddy.

Producer:
Oh, there we go. Well, that is our inflation demonstration. And as we continue with our Smart Retirement Plan series, now, that's going to take up pretty much the rest of the show. The chunk of the show today, the biggest chunk that is. And we're going to go with our Smart Review first. That's the next step in our Smart Retirement Plan series here. It's an important step, Mike, because it really does involve taking this comprehensive look by not only just by yourself, but by a third party, someone who is an expert in this field who can come in and review your finances.

Mike Zaino:
Matt, you know, we say a lot you should you should inspect what you expect, right? And part of that in the Smart review process is you need to review the performance of your investments. I know a lot of people just kind of stick their head in the ground and hope and pray. Well, hoping and praying is not a strategy when it comes to your investments for retirement. So if you're not looking at this stuff on a quarterly, semiannual or at an absolute minimum annual basis to ensure that you're staying on the right track to meet your goals, I'm here to help you. We all need to retire someday, and that's why we want to help each and every one of you retire better. So my commander in chief, when I served in the United States Army, was Ronald Reagan. And he used to say trust but verify. So, you know, give me a call for a for a full retirement plan consultation. I'll help you do that at absolutely no cost and no obligation. You're only going to work with me if it's better for you. I can look at your complete. Financial situation closely examine anything that you might currently have going on, how much you're paying in fees, help you cut unnecessary costs from IRAs. If you have annuities, you may have one of the old kind that's not the best kind anymore. And we can look at different options for those. We can help you with Social Security planning, with Medicare planning. And bottom line is we're going to compare your current situation to it's possible if you work with us. And I talked about the hoping and praying and the sticking your head in the sand. Well, I know a lot of advisors out there last year were sticking their head in the sand mat. And if you out there listening haven't heard from your advisor lately, please pick up a phone, talk to us, get a second opinion. I want to help set you on the path to the retirement that you've always dreamed of.

Producer:
Yeah. When a lot of those advisors and other financial pros saw these big double digit losses in the major indexes last year, it's, you know, caused them to put their head in the sand. And that was really the only thing that they could do. It was their natural reaction. And but it wasn't necessarily the right thing to do because those are the times really when you need guidance and when you need to know that somebody is actually has actually has your back and is watching out for you in your particular financial situation, in the good times, it's it's pretty easy. Yeah. But in those difficult times it's hard.

Mike Zaino:
Yeah. Matt you should never judge a captain in calm seas. And for the better part of the last 12 years, from 2010 to 2020, the seas were really calm. A monkey could have made money in the market by investing in mutual funds or index funds or what have you. But now that we have volatility and volatility is back and a normal part of the market, you need to make sure that you're working with somebody that actually can help you navigate that and look at ways to protect your hard earned savings. You should never pay somebody to lose your money.

Producer:
Right? And that's something, too, I think that's important to remind the listeners, Mike, is that prior to the recovery, after the Great Recession, the market volatility was a thing. But then we had that long stretch where it was just this slow and steady growth and there'd be a little bit of volatility here or there, but nothing like what we had seen before, certainly nothing like what we are seeing in recent months and years. But it is a normal part of the markets over their history.

Mike Zaino:
Yeah, people were lulled to sleep during that ten year period. They really were. Matt And now that it is back, the likelihood of us getting another ten year period like we had from 2010 to 2020, hey, it had never happened before. So the likelihood of it happening again is slim to none. Now my crystal ball, it's been broken for a long, long time. Matt, I know yours as we've had this discussion before. Oh, yeah. But, you know, past performance is not indicative of future results. That's on every single prospectus that you have out there. But I mean, the bottom line is it just doesn't happen. And it happened once. So the likelihood of it happening again don't count on it. And this is where you really need to make sure that the people you have managing your money can protect those dollars into retirement to guarantee that you never run out of money. And that is my specialty, guaranteeing people never run out of money while they need it.

Producer:
Yeah, and hey, if that sounds like something that's good to you folks, just reach out. I mean, it's that easy, and there's no obligation there. Once again, MoneyMattersWithMike.com is the website 704 560 1573 is the phone number. Well so that is smart review getting that expert set of eyes on your your assets, your retirement plan, whatever financial plan you have in place right now. That's the smart review part. So here's the part. It doesn't sound fun when when I when I say this smart rule following, you're like, oh, God, I have to follow the rules now. But these are they're more guidelines than they are rules. They're not like, you know, don't know, running in the halls, kids. It's not that kind of rule. They're actually rules that can be helpful.

Mike Zaino:
They are met. And so when we talk about smart rule following, right. I know a lot of folks out there want to be rebels. I was probably one of those. My wife calls me a challenger. If something is stated, my first thing is y right. I want to know the why behind what is stated. But the first one is called the rule of 100. And that's a very simple but effective way to help diversify your investments and plan for retirement. And the way it works is that you take the total of an individual's age plus their percentage of investments in stocks, and you make sure that it doesn't go over 100. For an example, if you are 30 years old, then 70% of your portfolio should be allocated to equities, to stocks. And if you are 80 years old, no more than. 20% should be allocated toward those risky things. So as you age, your percentage of investments in stocks and equities should decrease so that your total age plus your percentage of investments in stocks and equities does not exceed 100. And the benefit of that rule is that you're able to reduce the risk by limiting your exposure to market volatility the closer you get to retirement. Because when you're still young and you still have decades to go before you retire, you want some risk in your portfolio. That is how you are going to capitalize on market gains. And you still have time to make up for those market losses. However, when you are in the retirement red zone five years before or five years immediately following retirement, you can't afford to lose. And so this can help you protect your retirement savings and ensure that you have enough money to last through the entirety of your retirement years.

Producer:
Yeah, we talk about a lot whether you have a retirement income gap or an income surplus. And we always say like, do you have more month than money? You also don't want to have more retirement than money. If you want to scale it out like that and think about it that way, and that's sort of what this this rule of 100 when you're when you're in that accumulation phase, can really sort of help you as a general kind of guideline there, help you with that, that asset allocation. So, you know, okay, am I taking too much risk, not enough risk, and then kind of hone it in and based on your personal risk tolerance and all of that, working with someone who's a professional in this field can kind of determine what you want your particular portfolio to look like, right?

Mike Zaino:
Because somebody who's 20 or 30 or 40 or 50 even is going to have an entirely different risk tolerance than somebody who's 65 or 70 or 75. Right. Those people are in retirement and can't afford to lose.

Producer:
Yeah, absolutely. So. Well, so that is the rule of 100 here. Talk now about the 4% rule. I know this is one that that we have we've discussed we've discussed all these previously on the show. But the 4% rule is one that I think people might be like does is that going to make sense for me? And this might be the one that they kind of need a little bit more guidance through for their individual situation anyway?

Mike Zaino:
Yes. So so the 4% rule is a very popular rule of thumb for retirees to follow when it comes to managing their money. And it basically suggests that you should withdraw no more than 4% of your retirement savings on an annual basis in order to maintain your nest egg. I mean, if you really break it down, 4% will last 25 years. Four times 25 equals 104%. Times 25 years equals 100% of your money over that time span. Now, that that makes two very bold assumptions. Number one, you're not making any money. And number two, and more importantly, you're not losing any money. So if your money is in a vacuum, if you take 4%, it will last you 24 or excuse me, 25 years. And while the exact 4% withdrawal rate may vary upon an individual's financial situation, it's generally accepted as a safe way to ensure that your retirement savings will last throughout your retirement. And as with any rule, though, there are exceptions. Matt So depending on the situation, right. Some experts suggest that you abide by a 3% rule. So if you're retiring a lot earlier, if you're going to retire in your fifties, then you may only want to start taking 3%.

Mike Zaino:
And that's considered a safer way to keep track of your money, especially with the current inflation rate. With current uncertain market conditions, withdrawing 3% may be a much safer way to go, because here's what you don't want to do If your money is exposed to market volatility, you do not want to withdraw 4% and then also lose money to the market, because if that happens again, especially in those first few years of retirement, your money won't last, pure and simple. It just won't. And what happens is, is when do most people want to go and do stuff? Well, it's those first ten years into retirement. We call those the go go years. The next ten years. They're the slow go years. The last ten years are the no go year. So if you're wanting to finance your go go years and you're withdrawing and you're losing, guess what? It's never going to last. So develop a plan. 4% rule is a pretty good one. But if you really want to hone it in, make sure you get in contact with me for sure.

Producer:
Yeah, that's definitely one of those that is is one of those guidelines. And then, you know, so we got a rule of 104% rule about the rule of 72. This is one that I feel like is at least in my mind, the way I think about it anyway is more of a tool than a rule really.

Mike Zaino:
It. It is a tool. And it was it was invented by a pretty smart guy that I'm sure most of our listeners have heard of. His name was Albert Einstein. Well, he devised this straightforward calculation called The Rule of 72 that's used to estimate the amount of time it will take for an investment to double in value. And so to calculate, you divide 72 by an expected rate of return in order to get the number of years that it will take for that investment to double. So for an example, if you're expected rate of return is 8%, then it will take nine years. 72 divided by 8% is nine. So the way that you can use it and is to understand what your individual rates of return on are for your retirement accounts. And so then you can kind of estimate on how long it's going to take each of those accounts to double in value. It can also be used to help you estimate what rate of return is needed in order to achieve a desired goal. So if you want to double your money in three years, then you're going to need a 24% return each and every single one of those years, right? 72 divided by three would be 24%. So, you know, the rule of 72 comes in very, very handy when it kind of comes to setting your goals and seeing where you should be given an expected rate of return.

Producer:
Yeah. So definitely one of those that could be very helpful in sort of figuring things out and and getting an idea of where you might be in the future or how long it's going to take you, as you say, to reach that goal. And folks, if you want any more information on these rules or the ways that they can be used to help you in your retirement or the ways that they can even possibly be bent or broken to help you plan for your retirement. Mike Zaino is the guy to talk to, and you can talk to him via Money Matters with Mike Search for Money Matters with Mike on Facebook or call him 704 560 1573. All right. So that's all of the rule following that we have for for you, everybody. So you can go back to your rebel status now and just cut off all you want. But we're going to talk now about smart income in retirement. And Mike, I think that you would agree that there are a lot of people, I think probably too many out there who really believe that when it comes to planning for retirement, they have to have this one big nest egg sort of number in mind. And that that is the major goal. But really, it's it's more about the income.

Mike Zaino:
It is much, much more. Matt, about income in retirement. So one of the things that I help people do is determine what their net numbers are going to be in retirement. What does that mean? Well, that means before you retire, there's a huge difference between eligibility and affordability. Before you retire, please make sure that you're reaching out to me. You're reaching out to any other financial professionals so that they can determine whether or not you are actually able to retire. Because when you look at your retirement income and then you subtract all your retirement expenses, again, the goal is to have more money than month. And so you need to have a plan in place that is going to enable you to replace that income and fund those monthly expenses. And keep in mind, some income sources are going to be taxable. Taxes can play a huge and detrimental effect, have a detrimental effect on the amount of income that you're withdrawing from those 401. K from those 403 B's Thrift Savings Plan. If you're a federal employee from the traditional IRAs that you saved in, why do you think the government gives you an option to pay me now and pay the seed to go into a Roth? Or what we'd rather you do is pay me later. Don't worry about it. Don't pay the the tax on the seed. Go across the field and prepare all that soil over there. Grow that throughout the 20, 30, 40, 50 years of your life. And then in retirement, we're going to not going to tax the seed mat, we're going to tax the entire farm. So taxes can have an absolute devastating effect on your retirement income plan, which is more important. Why you need to have a smart income plan, because there are other sources that provide tax free income.

Producer:
And a lot of people, I think when when they think about income in retirement, their mind will immediately go to Social Security because it's that, you know, it's that benefit we've all paid into. You know, every time I get out the the the old pay stub or do my taxes every year I see Social Security withdrawals there or. From the government taking off, you know, just shaved right off the top. And so that, I think, is where people's minds really go and for good reason. But it's not it's not nearly going to be enough for the vast, vast, vast, vast, vast majority of people.

Mike Zaino:
I pray to God that and if you're a believer, great. If you're if you pray to somebody else, that's great, too. But I pray to God that you are not depending upon Social Security as your only retirement income source. Social Security. That act was signed into law back in 1935 by President Roosevelt, and the first people started making payments into it and were able to get from it in 1940. But guess what? People back then, you are supposed to have been dead for four years before you could ever draw out of the Social Security program. Why? Well, the average life expectancy mat was only 58 years of age, and you couldn't draw until you were 62. Well, fast forward that to 2023, where you can draw at 62 and people are now living longer than they ever have. Although the average life expectancy in the United States at least has decreased a little bit over the past couple of years, mainly due to COVID. Right. But people are living well into their eighties. And back then, when Roosevelt signed it into into law, there were three people paying in for every one person taking out.

Mike Zaino:
Now you've got 40 people taking out for every one person putting in. And so Social Security is one of the largest government programs in the world. And over 176 million people paid Social Security taxes last year or excuse me, in 2021. And then last year, more than 65 and one half million Americans were receiving Social Security benefits. So as the life expectancy of Americans increases, there are huge concerns that the program is not going to be able to support retirees with less people actually in the workforce. I know that the last statement that I got, according to the Social Security Board of Trustees, they had estimated that the funds, the Social Security funds would be depleted by 2034. All right. That's 11 years from now. And that they'd only be able to pay out about 77% of the scheduled benefits. So if you are depending on that, you're in trouble. I'm just being honest and you need help. So make sure you pick up the phone and let's get you a plan.

Producer:
Yeah. And that's the thing that you have to keep in mind is that as we said earlier, with legislative, we're talking about legislative risk and how, you know, changes to different rules and regulations could affect your retirement planning. This is also one of those as well. And it's like, you know, we see the warning signs out in front of us in the future. This is kind of one of those things that we can sort of see in the haze of our crystal ball. You know, what's exactly going to happen? Who knows? But that danger is certainly there for those benefits to at least be significantly decreased.

Mike Zaino:
Either decreased or, you know, and we talk about the full retirement age and we're going to get to this here in a little bit. But, you know, when it comes to Social Security, full retirement age, it used to be 65. Well, then they pushed it to 66 and then 66 and some months and then 67. You know, right now it's between 66 and 67. That's full retirement age where you actually get 100% of your benefit. If you take it before that age, you're getting pennies on the dollar at that point. So my belief this is just Mike Zaino's opinion. Nowhere have I seen this in writing. They're going to have to push the needle. And it wouldn't surprise me if they push it to 70 to 75, like literally out that far because they have to make the money last somehow now. Or they can raise the Social Security taxes. Right. Government only we've talked about this before has two choices spend less, which they're never going to do, or tax more Social Security. Be one of those ways.

Producer:
Yeah, it's true. And that's kind of a wake up call, I think, for a lot of people who are looking at their retirement right now and saying, okay, what's going to be if I'm am I relying too much on that? But talk about a little bit more about Social Security as it stands now, that's sort of the eligibility. We're talking about how the full retirement age and all of that kind of run us through a few more of the basics here.

Mike Zaino:
Yeah, so basics with Social Security. So as long as you've been contributing to Social Security for at least ten years, as soon as you hit age 62, you are eligible to draw benefits. Now, if you take it at 62, you're giving the government a 25% discount because you're only going to get 75% of your benefit. However, if you wait until your full retirement age, that's your FRA that. Gives you increased monthly benefits. So, you know, it's just going to gradually increase your FRA. Does 4 to 67 for those born in 1960 or after? Well, if you were born in 1955, well then you're you're 66 in two months. So the longer you wait and dependent upon the year you were born, that's going to determine what your full retirement age is. Spouses can also collect benefits based on their own earnings or their spouse's earnings, and sometimes it'll make sense to collect a spousal benefit in order to let theirs continue growing. So the average of money that you can receive from Social Security is determined from the average indexed monthly earnings over the course of your 35 highest earning years. So if you're 65 and you're still working and you're making the most money that you've ever made in your life, that's probably going to supersede a year that you were 20 years old and making a couple of grand, maybe a year working part time way back then.

Mike Zaino:
Now, for every year, you delay in collecting your benefits, starting at age 62, all the way up through age 70, your benefit amount increases roughly 8% per year. So if I look at the maximum monthly benefit for somebody who's 62 years of age, in 2022, it was $2,364. That's the most they could have gotten at age 62 last year had they waited until age 70. That almost doubles to $4,194. So you can see it is a significant increase. And according to the law of the land, as it stands at the as this show, the date of this show, it increases by 8% per year. And the most you can have is at age 70. So there's also an annual cost of living adjustment that ensures your retirement funds don't lose value due to inflation. So those are some of the basics when it comes to Social Security eligibility, spousal benefits, the amount increases every year past 62, all the way up to age 70, and the colas that are added to the payments so that you can try and try to keep up with inflation.

Producer:
Emphasis on try. They do index that to the consumer price index and all that. And so it's supposed to go up at the same amount as overall inflation. But you know, does it really who knows? But so that's kind of the basics there. And so that kind of leads me to looking at those sort of income levels, the maximum benefits and everything and the increase there, which is a great thing for for people who want to delay until they're 70, you know, and take that that maximum benefit being a higher percentage, 8% increase each year that they delay. So that sort of reminds me, draws my mind to that retirement income gap concept that I was talking about earlier. Do you have more money than month or more month than money? And so talk about that. I mean, it's a big issue and it's a big fear, I think, for a lot of people who are approaching and or in retirement.

Mike Zaino:
Yeah, we talk about the number one fear is is running out of money. Right. That is that is most retirees and most seniors number one fear outliving their source of money. Well, according to a recent study that we saw, 62% of baby boomers believe that Social Security is going to provide at least half of their income during retirement. Matt, that is scary. Your Social Security benefits alone, they're just not going to be able to maintain your current standard of living. For most folks, the average monthly benefit is a little over $5,500 a month. All right. Which is $18,500 a year, 18 grand a year. That's poverty level. Whereas if you're 62 right now, the most money that you can get if you take it at 62, like I said, was 23, 64 for last year and the most is 4194. Big, big difference. Now, a lot of people will say, I'm just going to do the Steve Miller Band and I'm like, What do you mean by that? And they say, I'm going to go on, take the money and run, right? And woo woo. But the thing about that is, is you've got to run the math. You really have to run the math. And you also need to take a good hard look at your health. How many people do you know who've retired and within a year or two, they're dead.

Mike Zaino:
Most of those people didn't know they were sick. So I know we don't like to talk about going to the doctor too much. And guys, we don't like to get the Roto-Rooter, you know, get that colonoscopy. But, you know. These things are important things as we age because as we age, our bodies break down. Well, here's my challenge to you. If you have a clean bill of health from your doctor and you know that you have some decent longevity in your family's history now your family people live into their eighties or nineties or beyond, then you definitely should think about delaying your Social Security. If, on the other hand, all your people are dying, they're in their early seventies then, and you're not a healthy person, then go on and take the money and run. But you need to make educated decisions instead of just kind of winging it and flying by the seat of your pants. And I can help guide you through that math and let you know when the break even points would be as far as how many years you'd have to live by delaying until a certain age in order to make it worth your while. But bottom line is, is when 76% of retirees are saying that income stability is a top concern. All right. Because they're they're worried about paying for core expenses, food, clothing, shelter, taxes, health care and other needs, plus discretionary expenses like eating out or entertainment or other wants.

Mike Zaino:
And the only guaranteed income source they have is Social Security. Maybe you have a pension if you are fortunate enough to work for one of those companies that offered them, guess what? That's going to equal a retirement income gap. And so there are different steps that you can take to fill that retirement income gap. Number one, make sure that you are saving money during your highest earning years. Number two, review your monthly expenses for any extraneous payments, payments that are just kind of ridiculous that you can get rid of. Number three, consider delaying taking Social Security. Number four, review your investments and your withdrawal strategy. Here's the thing. I find that most people have a strategy for accumulating their nest egg. They don't have a strategy for the preservation and the distribution, which is known as the accumulating side of retirement. When you're actually withdrawing those funds, consider investing in annuities to help establish a guaranteed income stream. Folks that you can't outlive. I know annuities get a bad rap, but the truth of the matter is there's over 100 different types of annuities, some of them I hate and some of them I absolutely love and have my personal family members in as well.

Producer:
Yeah. And so that if it's good enough for Mike Zaino's family, it's good enough for you folks, but it's all about your individual particular situation there. And I love what you said, Mike, about the accumulation phase. And this just brought to mind something about, you know, planning for retirement, being almost like planning for a wedding in a way, whereas people will will plan, plan, plan or save or have some sort of, you know, all these grand plans or heck, run up a bunch of debt to plan to plan for the wedding, to pay for the wedding. Every all the planning goes into the wedding, maybe the honeymoon for that week or two after the wedding and then after that, Oh, we didn't plan for this. We plan for the wedding. But. But you've got your entire life to live after that.

Mike Zaino:
Yes. So? So, you know, every speaking engagement, I ask people, you know, who here married off a child and a bunch of hands go up and I'll ask the women, how long did you and your daughters plan on on on your wedding? And some people say, you know, eight months to a year, some people say a year to two years. I've even had several people say over three years, when you're talking about everything, right, getting the venue, picking out the dress, picking out the wedding decorations, doing the invites right, And then I look and say, all right, you spent one, two, three years on average planning for that wedding. How long did the ceremony last? And they go 15 minutes. And I'm like, exactly, maybe 4 hours with the after party and the celebration. Right. People spend more time planning a wedding or here's another one more time planning a one week vacation, Matt, than they do something that lasts them for the rest of their life. For example, retirement. That is what I am here for. That is my plea to folks out there in the community. I'm here to educate you. I'm not here to sell you anything. If you appreciate the show and you can you like my demeanor? I don't mince words. If you're in trouble, I'm going to tell you, hey, let's wake up. You're in trouble. Let's do something about it. But then I'm not going to be the one that tries to twist your arm and beat you on the head. All right. I'll arm you with all the information you need in order to have a successful retirement. And if you think we can work together, then guess what? We will. And I'll be there for you throughout your retirement. And I'll be there for your kids as well. When it comes time to make sure that money transitions to them.

Producer:
Yeah. Which is so, so important for everybody. And really, folks, I can attest from working with the guy for quite a while now, what you see is what you get with Mike Zaino. He's going to be honest and straightforward with you about your particular situation and and. He's not going to steer you in the wrong direction. But here's the thing, too, Mike, with just the last couple of minutes here of the show, left that consultation. We mentioned it earlier and I want to kind of close out with that because it's important that people know that there is no cost, there is no obligation for that. It's not like you're going to go meet with Mike Zaino and then you're signing on the dotted line immediately and signing in blood and all that stuff. And you're in this long term agreement right then and there. That's not how it works.

Mike Zaino:
I require no fluids.

Producer:
Yes. Yeah. No bodily fluids aren't necessary at all.

Mike Zaino:
No doubt. So. So I mean, bottom line, like I've said before, is you're only going to work with me if I can do better for you. And in your current situation, even if you have another advisor that's out there, get a second set of eyes. It is never a bad idea, right, to get a second opinion. I mean, if you were told that you needed a surgery, you'd probably get a second opinion to make sure, right? Well, I'm not calling myself a surgeon. Maybe on the financial side, but there we go. Get a second set of eyes just to make sure that you're at least heading in the right direction.

Producer:
Yeah, and that really is what it's all about. And, you know, in addition to the education that comes along with the show, the Help is available there as well. And that's what we're here to let you know out there as as we say in listener land, you can go to MoneyMattersWithMike.com to reach out or you can give Mike a call. Do it. Do it the old fashioned way, folks. He's got his phone with him all the time. And unless he is just absolutely busy spending time with the family or, you know, here on the on the air or whatever, he's going to answer or get right back to you as soon as he's done with whatever it is. 704 560 1573 7045601573. Well, Mike, that is just about all the time we've got. But I once again have really enjoyed it. I have learned something over this last hour. I know our listeners have as well. So thank you for that knowledge and the passion that you bring. And I'll talk to you next time.

Mike Zaino:
Absolutely. Matt, Thank you for co hosting and being my producer extraordinaire. Thank you. Out there in listener land without you guys listening to this show, tuning in each and every single week at 9:00 in the Charlotte metro area, or if you are listening on podcast or if you're catching up on past episodes on on MoneyMattersWithMike.com or you're watching us on on the socials without you guys, this show doesn't exist. So I really do thank you. And if you know anybody that can use a lift for their financial waters, I'm the guy. Mike Zaino. Give me a call. I hope you all have a great week. 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 AMR Life assumes no responsibility or liability for the content of this message. The information contained herein is provided on an as is basis with no guarantees of completeness, accuracy, usefulness, timeliness, or the results obtained from the use of this information.

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