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

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

Mike Zaino:
What's up? What's up? What's up? It's Mike Zaino coming to you live from Fort Mill, South Carolina. Happy Saturday, people. What a great day to be alive in these United States of America. And today we are absolutely going to bring the heat again and give you plenty of useful information that you can take with you this week. The goal of this show is to educate and empower folks to make better financial decisions. And once again, it is my distinct honor and privilege to be joined by the one and only Mr. Matt McClure. Matt, how are you doing today?

Producer:
Hey there, Mike. I'm doing great, sir. How are you? Nice weekend so.

Mike Zaino:
Far. I will not complain. It's a great weekend so far. Yes, it is too.

Producer:
Yeah, like, you know, I could complain, but it wouldn't do me any good anyway. So. There you go. Yeah, there you go. But no, you're absolutely right, though. It's a great show every week. But this week I'm really excited because we're going to continue this series on the Smart Retirement Plan, which I think we've got some great stuff in here for folks and some things that they might not have even thought about for retirement. It's going to be really great. And to talk about smart, safe retirement planning and smart tax retirement planning. Now, I know now when I when I'd say the word tax, a lot of people are like, yeah, it's a three letter word, but it's really a four letter word, you know, because nobody likes to think about it. But it's something you got to think about. And I think we're going to help people along with that coming up a little bit later on in the show today.

Mike Zaino:
Yeah, there's a there's a little thing that I saw on I think it was on Facebook. It might have been on Instagram, but there's this little kid in he's he's sitting on the floor and they're playing Monopoly and he's leaned up against the couch and he's just boo hoo crying. And they're like, Well, honey, what's wrong? And he's like, taxes. And the woman's like, What do you mean? You know, that's just part of the game. He goes, Yeah, but it's the worst part of the game, you know, and and he is just just absolutely booing and wants to just quit because of taxes. And every time I see that, I get a good chuckle. I share it with my audience. And so many people just comment on it and say, yeah, he's got a point, doesn't he?

Producer:
Exactly. We have we have all been there at one point or the other, I'm sure. Yeah, no, nobody likes them. But we're going to talk about them and we're going to hopefully make you like them a little bit more because there'll be fewer of them using some strategies that we're going to talk about a little bit later on in the show. But we also, folks, I should mention as well that if you want to find out more about the show or anything that we talk about today, money matters with Mike Dotcom is the website that's money matters with Mike Dotcom or you can give Mike a call and this is his direct number, folks. No joke. 704560 1573 7045601573. It is his number that rings right there in his pocket, and if he doesn't answer immediately, he'll call you back quickly. So that is great to know that you can get in touch with the man himself, Mr. Mike.

Mike Zaino:
Zaino It is one of the things that I always commit to. My people that call in to me is that you're going to get me if I want to call a company and I need to have questions answered. The last thing I want to do is leave a message that's never returned or send an email that's never returned. Or if it is returned, returned 14 days to a month later. It's just I forgot what I even asked by that point. So that's why I make it a commitment. I just try to treat people as they want to be treated, and I know that that's the way I would want to be treated. So that's why I do it.

Producer:
That's right. And that that's the way to go about it. And for our listeners as well, you also provide a great service, which is a comprehensive consultation, absolutely no cost. And they can actually go to money matters with Mike or call that number to to set this up. It's free of any costs, as I said, also free of any obligation. What is that process like when you start looking at somebody's finances? I mean, this isn't just a, you know, kind of a och, I'm going to get basic details of, you know, your name and address and how much money you make. And that's it. This is a detailed, comprehensive consultation. Yeah.

Mike Zaino:
So we'll have a discovery call first where we get those basic details out of the way. And then if I see that there's some areas for improvement, we'll schedule a follow up meeting where we'll get together and analyze your complete financial situation. So any anything that you currently. You have. If you're good in them, we'll say, hey, keep them. If there's some tweaks, some things that we can change that will put you in a better position down the road, then we're absolutely going to make those suggestions. Whether you take us up on those, that's completely up to you. You're only going to work with us if that is the best fit for you. And so even if you already have a financial adviser, that's fine. A second set of eyes, a second opinion has never hurt anybody. And if you're happy with that person, then that's fine. I'm not trying to take you away. I just want to help give people the peace of mind and the confidence that the direction they're heading in is the right one for them. So also, if you're ready to talk about Social Security planning or Medicare planning, we can handle that as well. And again, you're only going to work with us if it's the absolute best thing for you.

Producer:
Yeah, right. And you know, when I say you're talking about the comprehensive consultation, it's no cost, no obligation and no pressure. It's not like it's going to be, you know, some some high pressure sales pitch sort of a situation. It's you're going to be talking just to Mike and it's going to be a casual thing. And if you want to continue working together, then great. If not, go your separate ways and you're fine. You know, it's not like there's some sort of right. You're not going to hold them over a pit of lava or something. And, you know, I sign here or else, you.

Mike Zaino:
Know, a wise man once told me that a man convinced against his will is of the same opinion still. So, no, not my job to convince you that you need to make your financial situation better.

Producer:
Yeah, there you go. It's always up to you folks and that that is the point. Money matters with Mike Dotcom, once again is the website. And that direct line to Mike Zaino is 740 5601573.

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

Producer:
Of course we like to share some wisdom with our listeners, Mike, and we like to use the words of someone else to do that sometimes. And this week in our Quote of the Week segment, it is going to be the words of Henry Ford, who's a guy you might have heard of, of course, the founder of the Ford Motor Company, an extremely, extremely smart, inventive man, because he, of course, also developed the assembly line method of mass production, and that's influenced industry worldwide in the decades since. So this is one you can take to the bank, I think literally here when we do our quote of the week from Henry Ford. And it is whether you think you can or you think you can't. You're right. And that's right.

Mike Zaino:
That is correct. What makes one person great with money and finances and another person? Not most of the time. It's pretty simple. It's their it's their money mindset. So we have beliefs in whatever we do and those beliefs tend to propel us into action or not. Right. And then those actions are either going to give us results or not. And so the way you think about money defines and influences how much you save, how much you spend, how you manage your debt. It's your core beliefs about money and your attitude towards it. And this could include what you think that you can or cannot do with money, how much you think that you actually deserve in life. Because, believe it or not, there are some people that don't think they deserve to make a lot of money or to have a happy retirement. How you believe you should manage your money and how you should manage your debt, your ability to grow wealth, and your overall financial confidence. That all starts with your money mindset, right? Yeah.

Producer:
So it goes back to that saying I think your perception is your reality, right? So it's like if you if you have this perception that you don't deserve good things, that you don't deserve a good standard of living, that you don't deserve a happy retirement and you can apply it to really any aspect of your life, then that is going to be your reality. That sort of another way to kind of rephrase this and think about it.

Mike Zaino:
Yeah, I mean, and it's unfortunate that people think that way. They beat themselves up and unjustifiably so. So if you believe you're bad at money, you're bad at math, you're bad at investing, you're bad at saving. Guess what? You're probably right. But the first steps are to, number one, acknowledge that you have a problem. It's kind of like, what is that Alcoholics Anonymous or name? And then number two, be willing to make a change. You have to first believe that it is possible and then get motivated and motivate yourself to make that. Well, how do you do that? I've got some some suggestions. You know, if you're if you're the smartest person in the room or you're the wealthiest person in the room, you probably need to change rooms. There's a saying that misery loves company. And you've also heard that birds of a feather flock together. Well, if you're hanging out with a bunch of broke people, chances are you're going to be broke, too. If you have the ability to meet some people who have more of whatever you want and you start asking questions and you start learning from them from them, chances are you're going to be able to better your situation. There was a study conducted, Matt, that involved over 10,000 millionaires and one I guess one of the more fascinating statistics was that 97% of the millionaires actually believed that they could become millionaires. They believed that it was within their control. They believe that they held the key to success and having that mindset. It's not about getting an inheritance from mom or dad or from your grandparents. It's not about having a fancy education or having wealthy parents is exactly what caused them to succeed.

Producer:
Yeah, and it makes me think of Robert Herjavec. I don't know if you've ever watched Shark Tank. I've loved Shark Tank for years now, came from absolutely nothing and built this multibillion dollar empire and is able to now have be part of a TV show where he, you know, invests in other people's entrepreneurs, ideas and companies and startups and and products and all of that. And, you know, he was one of those people who really believed that he could make something of himself and not just not just get by, but make something great of himself and influence others. And that's just goes to show you how far that can take you.

Mike Zaino:
It can take you so far as as can your negative mindset toward money. And a lot of people in today's environment are just stressed about their finances. And financial stress is a killer. And one of the hardest things to do is to actually look that financial stress in the eye, stay present, confront it, deal with it. Because of the fact that we're conditioned from a very young age, as far as money is concerned, makes it that much harder to confront an over. Come that conditioning. So to begin relieving that stress, you should start to reflect on where your financial perspective came from. You know, ask yourself, what did you hear when you were young? What did you see when you were young? What experiences did you have while you were young? Is there anything that you heard that you saw, that you experienced that you want to do differently? Maybe you saw your parents do something or your grandparents do something. You want to do it differently. Is there anything that you either heard, you saw or you experienced that you want to do the same because you had really, really good examples? So that's one thing. The next thing to do is to try to adopt a positive mindset and start thinking positively about money and your finances and your retirement. Think about all the things that you want to do in the fun that you're going to have as a retiree. Then you have to actually shift your mindset to saving money instead of spending money. So think, where do I want to see myself in five, ten, 20 years? And how are you going to make those goals happen? What steps do you need to take in order to reach those goals? Really try to break it down to the basics as far as the steps you'll need to take so that your financial goals feel more attainable.

Producer:
Yeah, and that's great. Actually sort of goes back to what we talked about last week on the show, which was that smart vision being the first part of the Smart Retirement plan. And you've got to know where you want to go before you can plot out the course to get there. Right? So that's like the first sort of thing is picturing in your mind where you want to be, what you want to be doing, and who you want to be doing it with. And then get get to work doing it and know how to get there. And you know, a lot of times we talk about it, a lot of times here on the show, chances are you probably can't do it alone. You need some help. You need some guidance along the way, right?

Mike Zaino:
Yeah, definitely. And I would start by, you know, number one, listening to the show.

Producer:
Oh yeah.

Mike Zaino:
Reading, reading some books, listening to other financial experts that are that are in the arena. But when it comes to you as an individual, you have to monitor your spending and I mean literally track every single penny that you spend for at least one month and then track how you feel when you realize how much you're actually spending and you're watching it. Leave your account and then ask yourself and be real. Is there anything that you can possibly eliminate? And the bottom line is you have to commit to changing your money habits because now that you know kind of what to do, all that's left is to just do it. So again, read some books on the topic, listens to podcasts. And again, I think we know of a pretty good one, don't we?

Producer:
Yeah. Oh yeah, absolutely do. And you can subscribe to it wherever you listen to podcast, folks. It's Money Matters with Mike.

Mike Zaino:
That's it with Mike. Absolutely. Watch videos, search for resources, resources, anything that will help you learn more about money in order to change the way that you think that you feel and act about it. The fact of the matter, it's that simple, but it's not easy. The good news, though, is that anyone who sets their mind to changing their financial situation can absolutely change their financial situation.

Producer:
Yeah, that's right. And attitude, as you say, can take you a long way. You've got to roll up your sleeves, you've got to get some elbow grease going and actually do it because it is work. And I love the way that you put that. It's it's a simple concept, but it's not easy. And it's going to take it's going to take some some work and some sacrifices potentially. But there is a way to get there. There is a way to do it for happier times ahead.

Mike Zaino:
So again, again, your belief solidifies your actions. Your actions solidify your results, and then those results in turn solidify the belief. So if you think you can or you think you can't, you're right.

Producer:
Absolutely brought that one full circle. I love it. And of course, our eternal thanks to Henry Ford for providing a little meat on the bone for us to chew on this week here on Money Matters with Mike. Well, as I've sort of been teasing as we've started the show and gotten into it now, Mike, we're into part two of our Smart Retirement Plan series. Last week, of course, we talked about smart vision. We talked about Smart Plan. Get it. Getting that plan started, getting you on the road to a smart retirement and a happy retirement. That's the goal, of course. Well, this week, the Smart Retirement Plan series continues. And we're going to talk about a couple of things. One of them is called Smart, Safe, and we'll talk about that first here in just a second. The other is Smart Tax. Now, that one I know, as I said earlier, three letter word, but it's really a four letter word. We'll get to it. And we will we will not torture you with it. It'll be happy tax news for a change once you once you're done with what we have to say. So so stick around for that. But right now, Mike, Smart safe. What do we mean when we say smart? Safe. As far as a strategy for saving for retirement.

Mike Zaino:
So we on this show talk a lot about smart or safe money strategies. Safe money strategies. And when we think about that, it's about as we are nearing retirement or in retirement, it's about not giving back what you've just spent 20, 30, 40 years of your life earning. So we like to use those smart money strategies, the safe money strategies to allow for a reasonable rate of growth, but then also 100% downside protection. And so in the past, people used to put a significant portion of their portfolio about 40% into bonds because bonds were deemed the safe income providing asset. Well, this year, I think bonds had had gone down by almost 13%. And every time that the Fed raises their interest rates, there's an inverse correlation, which just means the value of bonds tends to go down. And so my question is always, why would you pay for an underperforming asset when there is something out there that is much, much better? And so bond replacement we talk a lot about is removing bonds from your portfolio in favor of investments that have potentially higher returns and zero fees.

Producer:
Yeah, and you mentioned this a moment ago, but as the Fed raises their interest rates, there is that inverse correlation that goes along with it where those values of the bonds go down. Well, you know, there is this a report in Kiplinger, and we talked about it here even on the show today and previous shows that the Fed is is going to be raising interest rates again this year. You know, maybe not quite as as high as we thought that three quarter percentage point increase that that we've already seen a couple of times we've sort of been anticipating another three quarter percentage point increase. It could be half a percent we're kind of going to see. But, you know, it's going to go up regardless. And so the outlook for long term bonds is going to be less favorable in the future. And, you know, and bonds historically low interest rates. But that means that if long term bonds fall in price, we could be looking at a low yield investment for years to come here.

Mike Zaino:
Yeah. And historically low bond returns are on the horizon. So why would you put your money in something that you know is going to go into historically low returns? And so these are these are big things. Plus, when you when you purchase these bonds that are a long ways off, typically 30 years. Right. Liquidity becomes a huge concern because you are tying that money up and you don't have access to it without prepayment penalties. So for sure you are.

Producer:
I mean, you're literally when you talk about tying it up, you're literally tying it up like that. That money is it might as well be gone for that whatever period of time that is, unless you want to pay those those hefty penalties there. And, you know, I mean, as you say, they have set interest rates. They have, you know, set maturity dates as well. They issued a par value of $1,000. So that means that you're loaning either the government or corporation 1000 bucks. And so that that money then goes goes to them, whatever that entity is. There's also this length of time that you have to leave your bond alone, because we've been saying that duration until, you know, and that ranges from, you know, one year, which might not be so bad a couple of years, maybe, you know, three or four. But it can range all the way up to, say, 40 years. You could do a 40 year bond and and there's a set interest rate during that time. You also are locking that money away during that time. So as you say, those liquidity concerns are a big, big thing for folks.

Mike Zaino:
Yeah. And I think also that's a huge concern, too, is that when interest rates rise and bond prices fall, there's no guarantee that you're going to actually get your money back. None whatsoever. So to me, that's that's just why why would I why would I risk my principal for potential gains when there is a way to guarantee gains without risk of principal? Yeah.

Producer:
It's absolutely right, because, you know, it's just not the kind of trade off that you want to that you want to make, right. You you want to invest in something where you know that you're going to get gains and you know that that principle is going to be protected from the downs of the market. Because as we know, you know, you could have a have an investment portfolio that looks great. And then all of a sudden the market has a couple of bad days or a bad week or a bad month. And you're and you're just it's all gone out to pasture. You know, you just just say goodbye to a lot of your retirement. A lot of people found that out, of course, in 2008 after Lehman Brothers and the big economic downturn and the Great Recession that.

Producer:
We need a higher rate of return from your safe money. Listen up. It's time to beat the bank CD rates.

Producer:
Talk about these bank CD rates that I actually did some research on earlier this week. It is astonishing.

Mike Zaino:
It's laughable. It's absolutely laughable. You know, according to a bank rate dot com as of this week, Bank of America, one of the biggest banks in the United States, is offering 0.03% interest. Let me say that again, 0.03% interest on a two year bank CD. And I want to put that into actual numbers for you guys. If you have $100,000 and you give it to the Bank of America for two years, you can't touch it. You're going to earn $30 in those two years. If you have $1,000,000 and you give it to Bank of America, you're going to tie that up for two years. You're going to earn $300 on $1,000,000 over the course of two years. Why would you settle for a fraction of a percent at a brick and mortar bank when there are fixed indexed annuities? For an example, from highly rated insurance companies that have been doing this well before, most of our listeners were even in diapers. All right. That offer a three and one half percent or better rate. To me, that makes absolutely no sense. And then to compound the pain of getting 0.03% interest, you should also know that you're going to be taxed on the interest that you're earned every single year with a bank CD, but with a fixed indexed annuity, you're only taxed when you pull that money out.

Producer:
Yeah, and that's a big advantage there. And, you know, it's so huge. And we're going to get and we're going to talk a lot more about taxes, of course, as we go on in the show. But, I mean, I just had to. Now, now, folks, you know why I was laughing so much? Because that that interest rate, that return on that, say even $1,000,000, 300 bucks, if you like, that money away with Bank of America for four, two years. And this is not.

Mike Zaino:
Trillion dollars, 150 bucks for two years.

Producer:
Yeah, come on. This is and this is you know, it's not to like bash on on Bank of America, the big banks or whatever, but it's like, come on, you can do a lot better than that with a different with a different product.

Mike Zaino:
And this is making money.

Producer:
With the big.

Mike Zaino:
Bank. Not you, not me.

Producer:
Definitely not me. I'm, I'm checking my bank account and I might as well have just put my money under the mattress, you know, and that's what that boils down to with the CD.

Mike Zaino:
Rate, for sure. For sure. So, you know, when we talk about fixed indexed annuities, these are longer term investments. And so just like a CD, you can make a lump sum deposit or you can transfer funds if you have existing retirement plans, maybe from jobs that you left a long time ago, you've never done anything with them. You can move those. It's called a transfer or a rollover, or you can make multiple payments over time. And so your money grows tax deferred unless what you opened up or what you rolled into. It was from a Roth account, and then it grows tax free, which is amazing. And so unlike a guaranteed rate of 0.03%, your investments performance is actually tied to the market but not directly invested in the market. What they do is they use different indices indexes, whether it's the the S&P 500, whether it's the Dow Jones Industrial Average, the Nasdaq, the Russell 2000. And if there is a gain in that index, then you're going to get a credit. But if there's a loss in that index, you don't lose a single red penny. Just having that protection against loss of principal means you won't lose. And that's contractually guaranteed any money that you put into the fixed indexed annuity.

Mike Zaino:
So these can be used to establish an incredible source of retirement income because we can set them up for growth, we can set them up for income, we can set them up for growth for a number of years. And then an income source if you need it. Some people come to me and they're like, Mike, I'm going to need this to live on. Other people say, Hey, Mike, I don't really have plans for this money and I may want to leave it as a legacy for my grandchildren. So whatever your goals and objectives are, we don't recommend the same thing to everybody. And not everybody is right for this type of of suggestion. So that's why it's important that we sit down and we understand where you are, what you have, where you want to go, and quite frankly, what you're willing to do and your risk tolerance. Do you are you a gambler? You want to throw all your money and move all in at the casino? Or would you rather have a little bit more of a predictable way of ensuring that you're not giving back what you've just spent your entire life earning?

Producer:
Yeah, and that's you know, when you talk about risk tolerance, too, there are other products like like just a regular plain old good old fashioned fixed annuity rather than the fixed indexed new. Anywhere in the contract up front. When you sign on the dotted line, you know what the return on that investment is going to be each and every year going forward. So like that, that rate of return is already written in. So if you're the kind of person who likes to know and be able to plan, you know what? What's going to be your situation in the future, then that could be a way to go for you.

Mike Zaino:
Absolutely. And those are called multi year guaranteed annuities. Right. So Mike is my go to for for the abbreviation. And with the Fed raising interest rates, it's actually allowed the rates on the Mica's to increase as well. And that's all based based on our Treasury yields. And so those have been performing favorably over the last little bit as the Fed tries to curb inflation. So if that's something you're interested in and you want a guaranteed rate, we can absolutely do that instead of tying that money up in a CD. Yeah.

Producer:
And see and this is why I say, you know, there are a lot of different options and folks really do need help sort of weighing the pros and the cons of each for them and their particular situation. I know that that is true for myself because a lot of these things, you know, before not not long before we started doing this show on my part anyway, I didn't even know that a lot of these things existed and that all of these options were even out there. And I think the same is probably true for a lot of our listeners. It's like, Oh, wait, I don't have to go to a traditional bank to invest in my retirement. There are options for me that I might not know of or have even thought about before or even imagine could be out there. So yeah, I mean, that's why I think folks need help and guidance moving forward in their planning and and doing better than they could potentially be doing right now.

Mike Zaino:
We say this all the time. You don't know what you don't know. And that's why you want to speak to a professional who might have some ideas that you've never thought of. And these things, you know, they're not all like rainbows and unicorns. They have advantages. And there's some disadvantages, too. And people need to be aware of that. Like, for example, potential advantages, right, are, number one, you're limiting your losses. Number two, you're going to protect your gain. So anything that you gain gets locked in as principal, you're inflation protected, your growth is tax free. If it's a traditional sense or if there's a Roth set up, then it grows. Excuse me, tax deferred, if it's in the traditional sense and if you have a Roth tax free. So and then potential disadvantages is that you might have limits as to how much you're going to gain. Typically not going to see double digit growth, although that has been possible in the past. And if you don't follow the rules that govern how much you can access on each and every year because you actually can maintain some degree of liquidity, there are possible charges if you go above what you're allowed to take. So if you're a rule follower, these are great for you. And then there might be some people like the comfort of knowing, for an example, in a multi year guaranteed annuity that they're going to get X percentage, whether that's 3%, three and one half percent, 4%, whatever it is that's guaranteed. And on a fixed indexed annuity, you might get six, seven, 8%, but you might also get zero if the markets are underperforming and the index is at a loss for that particular year. So definite advantages, disadvantages. But we talk about all that. Again, our goal is to educate you, to empower you, to make great financial decisions so that you can get from where you are to where you want to be.

Producer:
Yes. And for your free financial consultation, completely obligation free as well as being free of charge. You don't have to pay a penny for it, folks. Money matters with Mike dot com is the place to go. That's money matters with Mike Wwe.com. Or you can give Mike a call at 7045601573. So that is the smart, safe portion of our discussion, the smart retirement plan this week. Mike So we're going to move on to that three letter slash four letter word that everybody loves tax and talk a little bit. Yeah, I know. I know. I can I can sense the frustration of all of our listeners right now. Collective sighs and groans, but nobody likes it. Nobody likes to talk about them. But you've got to keep them in mind for planning for your future, for planning for retirement, because if you don't, there could be some big consequences.

Mike Zaino:
There could be huge consequences. And a lot of people just think automatically that they are going to be in a lower tax bracket when they retire. That might be true, but it might not be true. And unless you've actually taken some steps and planned ahead to not be in a higher tax bracket in retirement, then you may end up paying more money in taxes. And so part of what we do is just help you plan with tax efficiency in mind. In other words, we want to help you divest, get rid of the IRS. From your retirement accounts and at least from a portion of them we can have in life insurance, we can have in indexed universal life policies, where if you have other monies from old life insurance that used to be called death insurance, really, if we want to boil down to it, there were no benefits for anyone's life while they were alive. You can take the money inside of an old policy and do a 1035 exchange, and that is tax free exchange of your cash value into an index linked universal life policy that can protect you from dying too soon. So there's the death insurance component. It can protect you if you live too long because we can structure them to pay you an income in retirement. And it also gives you an opportunity to protect yourself if you get sick in between. So if you ever have a stroke, you're diagnosed with cancer, you have a heart attack, you have any of these qualifying events. They'll allow you to tap into the death benefit while you're still alive. And you can help use that money as a source to help relieve some of the financial strain that you may be experiencing. So I'm not sure if our if our listeners understand that different types of investment accounts are actually taxed differently. And by understanding how they're taxed, you can ensure that your money is working for you and not necessarily against you. And then it's there when you need it and how you need it.

Producer:
Yeah, it is true. And that's the thing is you're not paying the same amount of tax, the same type of tax or even the same, you know, the same tax on the same money per account. So let's say you might be taxed on the the interest, the growth that that has happened in one particular account. You might be taxed on the back end. On another account, you might be taxed on the principal on that. So it can be a confusing thing. It's like, you know, people's eyes sort of glaze over when they think about it and they're like, oh, just just give me my money, for crying out loud.

Mike Zaino:
And they'd rather stick scissors in their ears than listen to people talk about taxes.

Producer:
Right? So so boil this down to us before before everybody starts reaching for the scissors. Boil this down for us a little bit, Mike. What's the difference between the different ways that that retirement accounts are taxed?

Mike Zaino:
Yeah. So before we talk about the different types of accounts, there are two terms that everybody should be familiar with. Number one is tax exempt. A tax exempt account is taxed when you contribute, but not when you withdraw. And this is a great benefit in retirement because you never have to worry about being in that different tax bracket than when you contributed those dollars. So take for an example, a Roth account that's perfect right there. The other term that people need to understand is tax deferred. A tax deferred account gives you all of the benefits from a tax standpoint up front. So in other words, in your 401. Ks or 403 B's or if you're a federal employee or TSP on the traditional side, you don't have to pay the taxes then on the money that you are contributing to the plan. And so that money grows, but it grows tax deferred. So you don't pay any tax on the money that you contribute into the plan. But then in retirement, when you're going to need the money, guess what? You or who you have to pay. All right, Uncle Sam, he's out there. He's greedy, he's got big paws, and he's going to be like, pay me. And so one of the questions I always ask folks is, do you think taxes are going to go up or going to go down in the future? And, Matt, I've never not one time has anybody said to me, Mike, I think taxes are going to go down in the future. So then my question is, why in the world would you contribute on the harder to a tax deferred account where you're eventually going to pay the tax on the harvest instead of the C?

Producer:
Yeah, it's very true. And you know, and that's a great way to think about it. Like when would you rather pay the pay the taxes on that money for retirement or would you rather pay them when taxes are going to be higher? Would you rather pay them now when as I kind of like to think about it, taxes are on sale. Taxes are on sales taxes right now compared to what they're going to be.

Mike Zaino:
Yeah. Yeah, they are on sale because a lot of people think we pay high taxes now and you know, relatively speaking. Okay, we don't. If you look at history and you go back to even like the Carter administration, a lot of our listeners were around when Jimmy Carter was was president. The highest tax bracket, I think was 74%. I mean, imagine that if you were wealthy, you only got to keep $0.26 on the dollar. And we're nowhere near that right now at 39%. So for the highest the wealthy of the wealthy. So if you look at where we are, we are in a relatively low tax environment. They really don't have any way to go but up because the government is certainly not going to spend less money. They've. Shown us that they are not willing to do that and they are willing to print money to help bail institutions and the economy. And just we had COVID come up and we had all the stimulus come in. Somebody has to pay for that. Well, guess who? That somebody is mad at you. It's me. It's our kids, our grandkids. Eventually it's the listeners out there who are who are having to pay their hard earned dollars. And you guys might not understand what the national debt means, but somebody has to pay for all of that money that the government likes to spend. I know that I can't spend more than I make or more than I can afford to pay on my credit cards.

Producer:
Can you right now. Hey, I can barely afford that.

Mike Zaino:
Exactly. So what makes the government think that they can? Well, they'll just print some more money again, which deepens the debt and somebody is going to have to pay. So we have to get that under control as a country for sure. Yeah.

Producer:
Well, and you talk about the tax rates sort of relative to where they have been in the past. And you you look at some other countries as well right now and our taxes are are relatively low compared to a lot of civilized countries, particularly in Europe, where, you know, those tax rates can be very, very high even for for middle class folks. And that's because, you know, things like other government programs that are being paid for universal health care and things like that in a lot of these European countries. But the tax rates are really, really high compared to what we are paying right now. So perspective is key as far as knowing that taxes are on sale, knowing that they're only going to go up really in the future over the long term and saying, you know, okay, so how can we use that to our advantage? So that's that's a great way, I think, to think about it. How can you use the situation right now looking in your crystal ball to the future and knowing that taxes are going to go up at some point? How can you use that situation to your advantage?

Mike Zaino:
Yeah, and I think that's one of the greatest benefits to of life insurance because death benefit is paid out by the insurer. It's usually tax free unless it's unless your policy is being paid by a corporation or somebody else. And sometimes the beneficiary is required to pay taxes on any interest accumulated but the policy, but never on the base amount. So I know people that have literally changed their family tree. Think about that for a second. They grew up in in the trailer park and now their children and grandchildren because of how much life insurance they had in the planning and the steps that they took. Now they're living in middle class America. And I think that's an amazing way to do that, whether that's through just a basic life insurance policy or an index universal policy that again, is tied to those indexes that we spoke about within the fixed indexed annuity. So you have a chance to earn either a fixed or equity indexed rate of return. I think those are absolutely powerful ways of passing on tax free benefit to your heirs.

Producer:
Yeah. And I know that my in my particular family situation, my mom was extremely grateful. Yes. After my dad passed away that that that money was there from it, he said, you know, the old fashioned death insurance whole life policy. But, you know, we call we filled out the paperwork. We sent in a copy of the death certificate. And a week or two later in the mail, certified mail. Here's a check from for the full benefit amount from the insurance company. Yes. So your taxes taken out and all that. Yeah, it was it was it was fantastic to to her. I mean, that just helped her so, so much. And, you know, in the aftermath of of everything happening, the last thing that she needed to be worried about was her finances and you know, how she's going to make ends meet.

Mike Zaino:
This is true. And the last thing you want your tombstone to read was that you were too cheap to buy life insurance. Yeah. Okay. You don't want your I mean, there are people that I know that can't afford to die, literally. They have no idea how they're going to bury themselves. And so, I mean, a small 10,000 final expense policy is something that you can just give you the peace of mind knowing that you're not passing that burden to your children, or if you have the means and you're able to actually utilize it as a financial tool, you have ways of making sure that your family tree has the potential to be changed for the positive for all of eternity, as long as they don't blow the money.

Producer:
Yeah, exactly. And yeah, there is the rub. Then it's up to them at that point. But at least on your card, right. I was going to say you've done all that you can for them. So so there we go. Well, a good discussion there, Mike, about, I think, helping people understand a lot more about taxes and how they are applied to different types of accounts and how, you know, you can sort of use that situation to your advantage going into retirement. Now, speaking of taxes, you know, one of the things that people are taxed on each and every time that that deposit happens is Social Security.

Mike Zaino:
So.

Producer:
Yeah, it's it's something that, you know, we all pay into and we all look forward to getting those checks. In retirement or those deposits in retirement, do they still send out paper checks?

Mike Zaino:
You know, I think some people some people actually have requested paper checks, but they're trying to get everybody to go digital.

Producer:
Yeah, I keep I keep saying, oh, yeah, when that Social Security check comes and I'm like, oh, wait, there's a thing called direct deposit these days. Welcome to the 21st century. But. But yeah, I mean, you know, when, when that check comes, everybody looks forward to it and we all pay into it. And it's, you know, of course, a bedrock of of society and our contract with with America and Americans, where we, you know, say that we're going to take care of our people in retirement. So it's a great thing. But there could be some changes coming, which on the surface look positive over the next year. Right. There could be a big increase in the benefit payment because of cost of living adjustment.

Mike Zaino:
On the surface.

Producer:
On the surface, that's the key. And I actually put a piece together which I want to share with our listeners right now this week about what could be sort of the unintended consequences of a cost of living adjustment. We'll chat about it just a little bit on the other side and then we'll continue. We actually have a problem solver to go into after this and we'll close out the show after that. But this is a look at the cost of living adjustment for Social Security and what it could be in 2023. Social Security will get a big cost of living adjustment next year, but there could be some consequences you might not have considered. I'm Matt McClure with the Retirement Radio Network. Powered by AmeriLife, a new report by the Senior Citizens League says Social Security beneficiaries could see a cost of living adjustment or COLA as high as 10.1% next year. The reason? Inflation running at a 40 year high.

Mary Johnson:
This is a very, very unusual and unprecedented pattern of inflation that we're experiencing.

Producer:
Mary Johnson with the nonprofit group, told WFTV that surveys show inflation has caused about half of Americans to spend their emergency savings and people are carrying more debt on their credit cards. So the highest jump in Social Security payments since 1981 would be a good thing, right? Well, Johnson says it's better than no increase, but there are some things to be aware of.

Mary Johnson:
In fact, you can get penalized if you think your tax liability is going to be 10% more next year than you're paying now. You can be penalized if you don't send in estimated payments or have more money withheld.

Producer:
She told the TV station the increase would not be enough to cover a jump in Medicare Part B premiums, which are taken directly out of Social Security checks. And she says higher incomes mean some seniors could no longer be eligible for some other government benefits.

Mary Johnson:
And then a whole 15% were made in eligible because they were their incomes increased over the income limit for food stamps or rental subsidies or the programs in their area.

Producer:
So what should you do? Johnson says. Prepare now. Talk to a financial adviser to help you get ready ahead of time and contact local nonprofits if you need help paying bills. So are you prepared for the unintended consequences of a larger Social Security check? That's a key question to consider as inflation impacts all our lives with the retirement radio network powered by a micro life. I'm Matt McClure. So there you go, Mike. As we said on the on the flip side of this, it sounds on the surface like that you could potentially more than 10% cost of living adjustment in Social Security payments. Great. But there could be a lot of unintended consequences there if people aren't prepared.

Mike Zaino:
Yeah, I think the biggest one that stood out to me is that you could actually be elevated into a higher tax bracket. So you think that getting the whatever the cost of living adjustment was ten, 10.1%, if that's what they end up doing, great. That's amazing. Well, it's not amazing if that if that elevates you into another bracket and then has you paying more money in retirement on your Social Security income. So that one was like a double edged sword that you absolutely have to be aware of and cognizant and planning so that you're not going to be taxed more than your fair share.

Producer:
Yeah, and that's that was the rub for me was like, Oh yeah, this is great. I'm getting more money. Not really, because the amount that goes into the bank account is going to be less potentially if you're on that cusp of of being in a higher tax bracket. So yeah, that was kind of a mind blower for me that that that could actually happen. So there you go. What's good is not always what it's cracked up to be when we when we take a look, especially when it comes to things like taxes.

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

Producer:
Yes, it is that time again. Time for me to present a problem for my Zaino to solve. At least I'm not. At least it's not my problem this time around. I'm not. It's not. Not my, you know, cause I didn't cause the trouble.

Mike Zaino:
In other words, you're not the the the main person that has to be solved, right?

Producer:
I'm not the thorn in your side. So let's say that. Well, maybe I am, but hey, here we go. I'm presenting a problem, and Mike are going to solve it in our Problem Solver segment. And this problem is and it has to do with a married couple, they are ages 58 and 55. They want to retire in about 7 to 10 years, something like that. They're saving $52,000 a year in tax deferred, 401k accounts for retirement. Now they have saved $1.2 million total in their 401. K plan. So they're doing well there. And because this is all tax deferred money, they're concerned about just what we were talking about earlier, future tax risk. Right. So they're concerned about that. They expect to receive $47,000 in combined Social Security income per year and their expected retirement expenses are right at 6000 a month. So with all of that being said, how do you solve the the conundrum that they find themselves in right now?

Mike Zaino:
Yeah, because I mean, they should be concerned about their future tax risk and that potential liability, that ticking tax time bomb, as I like to call it, bye bye. Saving in tax deferred accounts in their 401. Case. It's great that they're maxing it out. They're almost maxing out, I think 26, 26,000 each if they're putting 52,000 a year. But instead of doing what they're doing now, my solution would be, let's redirect some of the money you're already saving. Let's put that into an indexed universal life insurance policy, which is going to reduce their taxable income today. And then later on it's going to generate tax free income because they'll take a guaranteed lifetime income against the death benefit for retirement later. And then we could also have them take that 1.2 million in their 401. Case and roll that over and directly into either one or a combination of a couple different types of annuities. So, number one, protect a percentage of their assets. That's the most important thing. And then to establish yet another income stream down the road. And then additionally, what we'd like to see them also do is to convert some of their tax deferred retirement savings into Roth IRAs so that once they stop working, that will also reduce their future tax exposure because they've already paid the taxes going into the Roth as opposed to deferring it and creating that ticking tax time bomb that will explode on them when they go to pull that money out in retirement. So that was a little bit of a complicated answer, but to a complicated problem. But that's just an example of the way that we like to think about having just reallocating where your money is going so that in retirement you are definitely protected from loss. You're definitely more tax efficient and potentially passing on a lot of money on a tax free basis to your heirs. So these are things that if they interest you, you should absolutely give me a call or visit us on our Contact US page at Money Matters with Mike. So I hope that was a good solution to your problem.

Producer:
Matt Yes, it was. Absolutely. And and that's the thing just just sort of redirecting where those funds are can really make the world of difference when it comes to your retirement. Because if because of things like tax treatment, because if things like protecting the principal, because of so many different things that you just talked about. And again, everybody's situation is different. My particular retirement situation will probably not be quite as complicated as theirs is or was before you solve the problem just now. But you know, everybody's different, right? So that's why folks need to get a personalized consultation and have you or an expert like you take a look at their finances.

Mike Zaino:
And for me.

Producer:
I would prefer it to be you as well, because I know you. You're a great guy and you're a very, very smart guy taking a holistic look, you know, at their at their money, if their finances, at their retirement planning. So money matters with Mike, of course, as you said, is the place to go to get in contact. And you can give Mike a call. 704 560. 1573.

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

Producer:
Mike, just a couple more minutes here to remain in the show. And I wanted to talk a little bit more about inflation, if we could, because it's something it's a topic that keeps coming up here on the show. And, of course, that is because it's affecting everybody right now. But there's a little bit of a good sign. I alluded to this earlier, just slightly good sign in the economy right now in a sort of if you don't follow these things very closely, kind of obscure report that came out over the past couple of weeks here. And it was the producer price index. So when we're talking about the any sort of price index that comes out, people will associate that with inflation, but they'll probably think of the consumer price index, the CPI, that is inflation at the consumer level. So what you and I are paying when we go to the store, when we go to the grocery store, when we go to the gas pump, when we go to Target or Wal-Mart and buy whatever on off the shelves and do all of those things paying for goods and services in our everyday lives. That's what we're paying. Right. And that's what we feel. And that it goes up. It's been going up by leaps and bounds here over the past several months, growing by rates that we haven't seen in 40 years, at least on a year over year basis.

Producer:
So that's what we feel. So the producer price index is sort of seen as a barometer of future inflation at the consumer level. It's, you know, people people will refer to it as like a barometer or a measure of wholesale prices. So then that's what the manufacturers producers pay for the goods, the materials and all of that before they then have to manufacture whatever they're going to manufacture and then pass along those costs to us, the consumer. Right. So if producer prices go down, that's a good thing. And the thing that happened from June to July is producer prices went down. So that could mean at least the hope is that in the coming months, we'll see a little bit less inflation at the consumer level. So we'll feel it less. That could be very good news for us. But is it I have to sort of put things in perspective for myself here, Mike, and that's why I turn to you for this part. Is it going to be good or is it going to be just less bad?

Mike Zaino:
Yeah, you know, and I think I think we have been conditioned right now that with gas prices and with our grocery prices that have just doubled, in some cases tripled as far as what we were used to paying, we've become conditioned to pay those higher prices so that like for the last few weeks, gas has been coming down and we're like, oh, look, it cost me less than $100 to fill up my truck. And I'm thinking, Wow, that's a good thing. But then I'm like, No, wait a minute. It used to only cost me like 60 bucks to fill up my truck. I'm still paying 40% more than I was paying just a few years ago. Right. For all of my consumables, whether that's gas, whether that's eggs, whether that's mayonnaise, bread, my wife goes and does some some grocery shopping. And I just noticed that we're paying more for those things. So I think it is just less bad because of the fact that we have been conditioned to pay more.

Producer:
Yeah. And it's sort of like the theory of relativity, right? Where something, something small is only small when it's compared to something big and vice versa. So that's why it's a it's all relative, you know.

Mike Zaino:
And so while like our inflation was curbed a little bit because the Fed has been taking such aggressive measures, but I look on the global stage and I see where inflation is in the U.K. and in Germany and in other parts of Europe, where it's the highest there that it's been in well over four decades. And what happens on the global scale tends to affect us on the local scale. And so that's where I think when people don't want to have to worry about what's on the news, whether it's locally, regionally, nationally or internationally, and how it can affect the performance of their portfolios. Then they need to come and talk to me because we have solutions for people who have those concerns and are more concerned again with giving back what they've worked their entire life for and want to make make sure that they have a guaranteed income source for the rest of their lives no matter how long they live. And that's really our wheelhouse, really what we specialize in. And one of the things that I pride myself into is that I break down very complex financial situations into plain English so that even a third grader could understand what I'm saying. Because unless you have buy in on. My recommendation. You're not going to really fully trust what we're what we're suggesting. And so because I explain the why behind my recommendation, right. People understand what they're doing and why they're doing it and they sleep very, very well at night.

Producer:
Yeah. And that is the goal, folks. And if that sounds like something that you are interested in, because I know that we can all use more sleep at night. Money Matters with Mike is the website. It's Money Matters with Mike. Or you can give him a call. 7045601573 And as I said earlier, it goes right to Mike Zaino's phone right there in his pocket, and he will answer. And if he doesn't, he'll give you a call right back. So that that is a that is a guarantee. Well, just out of time here for this week's show, Mike, but it has been a pleasure, as always, on my part, and I look forward to do it again next time around.

Mike Zaino:
You know, I thank all the listeners out there. Without you guys, we don't exist. So if you know anybody that might be struggling with financial stress, we talked about some some definite things today that you can refer them to the podcast and share, share, share. Let people know about the show. So I want you to go out there and concentrate on the things that I've said today. Apply them to your regular everyday life and end up in a better financial situation. Thank you guys for listening. 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 money matters with mike dot com or pick up the phone and call 704560 1573 That's 7045601573 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. It does not provide a guarantee or a specific result. All copyrights and trademarks are the property of their respective owners. Amara Life assumes no responsibility or liability for the content of this message. The information contained herein is provided on an as is basis with no guarantees of completeness, accuracy, usefulness, timeliness. Are the results obtained from the use of this information?

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