Avoid Biden’s Tax Increases with a Roth Ladder Conversion

Avoid Biden’s Tax Increases with a Roth Ladder Conversion: Audio automatically transcribed by Sonix

Avoid Biden’s Tax Increases with a Roth Ladder Conversion: this mp3 audio file was automatically transcribed by Sonix with the best speech-to-text algorithms. This transcript may contain errors.

Producer Sam Davis:
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Producer:
Welcome to take point on retirement with your host Eric Arnett. Eric is a fiduciary and licensed financial advisor who always places your needs first. The experienced team at Tech Point Wealth Management takes pride in knowing they've helped so many pursue the financial future of their dreams. And they can help you, too. And now let's start the show. Here's Eric Arnett.

Producer Sam Davis:
And welcome to Take Point on retirement. I'm Sam Davis. Joined, as always by Eric Arnett, the founder and CEO over there at Tech Point Wealth Management. Happy to be here. On the air in Florida today. Eric, how are you doing?

Erick Arnett:
Hey, good morning, sir. How are you?

Producer Sam Davis:
Doing? Well, you know, one of the reasons I'm doing so well, it feels good when the market's up, right. And the and the markets have seriously had a nice bounce back. We've been talking the past few weeks as the market was kind of creeping down with all these different global conflicts and uncertainty in the news. But kind of as you predicted, Eric, the markets rebounded fairly quickly from from one of these global black swan events.

Erick Arnett:
Yeah, certainly not our first rodeo here at Tech Point Wealth Management. And then obviously I've been through quite a few of these situations in my 24 year career. So we've talked about it endless times on the show and it never hurts to stop talking about it because it's the most important. Aspect that people truly, really need to grasp and understand and even get a hold of is quite simple is just emotion, trying to keep the emotion out of investing in your long term retirement plan. And I'm not just talking about investing, you know, to try to make capital appreciation. I'm talking about having a good, solid retirement plan in place to get you to and through your retirement and being able to be with a team that can take all of the emotion out of that plan for you and that investing for you and stick to the plan, test the plan, make sure the plan is going to hold up in all different environments, which is what we do here at Take Point. Wealth management absolutely free. By the way, if you just get a hold of us, we will take your current retirement plan and test it for you. We'll pull out the fees, all the expenses, we'll pull out the risk, which is the most important part, the standard deviation. And how risky is your portfolio? How much volatility do you have in your portfolio? And then what does the performance what are the returns been? And is it tax sensitive or is it tax does it does it make sense tax wise, long term? So there's so many things that go into a good, solid retirement plan.

Erick Arnett:
But getting back to the markets, you know, we not to toot around horn, but we've we've been calling these things, you know, right on for the last three years. We knew that the markets were going to have some type of correction in 2022. And we prepared our clients for that well in advance. And what's important is, if anything, we learn from COVID. We learned once again from the Ukraine Russia crisis that making that knee jerk reaction when the markets are falling and fear is the highest is truly when you need to be buying. And, you know, I've said this so many times in my career, in fact, way back in zero eight when things were falling and we were at a low, I was out there doing seminars and workshops and telling people, you know, I don't care if you have to mortgage your house, sell your kids, however you need to raise money, you need to raise money and put it in this market because it will create the next generation of millionaires and billionaires. And it certainly did. And not saying that this is the same market cycle, but when COVID hit, the market just sold off, you know, emotional sell off and all the news is negative, negative, negative, negative.

Erick Arnett:
And the rhetoric out there on TV in the media is negative, negative, negative. So people just panic and it becomes a self-fulfilling prophecy. And you have all this downward selling pressure. And that's the worst time to sell. The very, very worst time to sell. And I think we said it on last week's show, you know, when fear is the highest, it creates the wealthiest people. And, you know, just I can just think of a couple of examples of some clients that knew people that were on the street coming to us looking for guidance that we brought in recently. And we positioned their portfolios to take advantage of the turmoil and buying into this weakness. And it's created great upside. The Nasdaq is up 16% or more from the low that it hit in March. So, you know, we had the strongest four day run in the Nasdaq in history. And that's typically what you're going to see in oversold conditions. And we talked about it and hopefully we were able to reach some folks and get out there and head some of them off at the pass. And I think a lot of people did hold on, which I'm very proud of them and I'm happy for them that they did do that. And that's that was a great decision. And that means you're learning and you've probably been through a few of these before.

Erick Arnett:
And we focus on the data, the true economic data and the true. You know, things and mechanics behind the market. We look at sentiment. We look at breath trust indicators, the breath of the market, which is which simply just means the money was flowing into all areas of the market, all types of stocks in the Nasdaq, which is great, as opposed to what we had in 2020, 2021, where all the money was just flowing into five companies in technology. And so that's a great sign. That's a bullish sign when you see the breadth of the market participating and once again, pessimism. It was at an all time low. It hit an all time low in 2020, 2018, 2016. We hit that low again. And sure enough, when pessimism and fear was as high as it was the best time to buy or at least stay in the market and get through it. And we were able to do that for our clients at Take Point Wealth Management and had some people come to us recently, which I think was exciting and a win because their current advisors or wherever their money was being managed or or brokered, they weren't getting no help that no one was calling them and no one was making changes and nobody was guiding them. So that's why it makes sense to have a team and advisory team by your side.

Erick Arnett:
And why wouldn't you? You know, the the best leaders in the world, the best corporations, the the best successful people in the world have a consulting team by their side to help them make decisions to bounce ideas off of. And you know what? Maybe you have good ideas. We like to hear those, but it makes sense to have somebody else by your side. And Sam, what we show people over and over again is it really doesn't cost. That much more than what you're currently doing to have an advisory team by your side to get you to and through this stuff and make sure your plan is going to hold up. We talked about this on a show previously, and one of the things that we extract from our our annuity stress tests and our and our free financial smart plan that we put together and we do that stress test on your plan, we'll pull out fees. And we found that this one lady was paying close to 5% a year in fees. Right. Which is just absolutely outrageous. How are you ever going to grow your money when you're paying that much in fees? And so just by pulling that information out in our stress test allows us to see and pick out where we have inefficiencies in the portfolio and how it can improve things. And that person was also close to capitulation, was like, I got to get out of these markets.

Erick Arnett:
I can't take it anymore. And we're able to rescue that person, educate them, show them, keep them invested, and then also put them in a better program that's less fees. And they're extremely happy today. And so just as I just throw that out there as an example and yes, there's still a lot of uncertainty out there, and that's what we focus on. We still have the Fed raising rates, which I think is pretty much baked into the market. We still have the inflation situation, inflationary fears, and then of course, we have the tax rate increases that are being proposed by the Biden administration. So, Sam, what have we been talking about for almost three years on this show? Tax increases are coming because of all of the spending and because of the huge deficit that we run in this country, we've got to raise taxes. And so taxes are going to be raised on the wealthy and taxes are going to be raised on the retirees. These are the people that are going to get taxed. And we need to keep as much of that money in cash flow in our retirees pockets as possible. So that's why we have these programs in place to look at that and make sure that we have the most tax advantaged plan in place, the most efficient and the most risk efficient.

Producer Sam Davis:
Yeah. And I would encourage people to be considering that this probably isn't the last tax increase that we will see in the near future. You know, with the spending in Washington, if anyone's been following what's been going on over in Russia and Ukraine and all the aid packages and what that costs, in addition to just the spending that every decade seems to seems to go up, you know, our government operates at a at a budget deficit. So, I mean, they're going to have to increase their revenues or cut their costs. And it doesn't look like they're going to cut their cost, does it?

Erick Arnett:
Yeah. The last thing in the world that a politician is going to do is cut costs. You know how many politicians can win an election by saying, hey, we're going to cut all these programs and it's just, you know, and then they they're only running for two year, three, four year terms. And so they're willing to do whatever it takes to get them elected in the short term. I find it funny that current administration will say, well, the last administration ran up the deficit, yet you're trying to pass a budget that's twice as expensive as the former administration. Yet you're going to say, well, we need to raise taxes in order to do that. And this is something that we've been concerned about for a long time. And that's why we promote this. We promote that book, taxes are on sale. We promote the book Power of Zero. So these are great books. I mean, you can get them on an audible version right on your phone, but if you want a free copy, just give us a call at take point on retirement, (352) 616-0511. Or you can just go to our website, take point on retirement and click on the upper right hand corner and just set up a chat session with me. I'll get you the education, I'll get you the books completely free. Read for yourself. Educate yourself as to what's going on.

Erick Arnett:
But taxes are on sale right now, so we've got to talk about things that we're going to do to position your retirement in order to take advantage of that. And there's a lot of strategies that we can put in place the Roth, the Roth conversion, life insurance, retirement planning, where we can put money, it can grow tax free and you can take it out tax free and retirement. So paying taxes now and doing some of that conversion to a Roth probably makes a lot of sense because if you're going into retirement, good Lord willing, you're going to be in retirement for 30 years. And our plan does just that. We plan for 30 years. We plan out to age 95 on our retirement plans, and we test them and back test them left and right with 1000 different scenarios. Good markets. Bad markets, black swan events like. It just currently had. And if it's got too much risk and too much volatility in it, it's going to have a tough time holding up. And so these are some of the things that we really key in on. And I think it's so, so important. We talk about it all the shows act now. Please act now. Get it. Get in front of this stuff now. Don't sit around and wait before it's too late.

Producer Sam Davis:
And you're listening to Take Point on retirement. And as you listen to us today, it is the month of April, which means we are in tax season. And a lot of people don't consider taxes when they look ahead into their retirement. Maybe their retirement strategy is just building up that one big nest egg and they don't understand the tax tax risk that they could currently be sitting on. Some people expected expect that their taxes will drop significantly during retirement. But if you don't have a plan in place, that definitely won't be the case for you. So how important is it to have a detailed tax plan, Eric, and what are some of the things you mentioned? Roth But what are some of the things that you guys can do to help people be more tax advantaged?

Erick Arnett:
Yeah, well, first and foremost, I think what's important and what's a great asset here at Take Point Wealth Management is we have our own tax team, we have a CPA on staff, we have tax enrolled agents, and we have a complete tax staff to handle those situations. So it's so important to have your advisory team and your tax team on the same team. And I feel really, really strongly about this because I hear it all the time. I was actually I was talking to a lady just yesterday and her advisor never even talks about taxes, never even asked her about taxes, and neither does her CPA, which was shocking to me or CPA never brings things to the table and of ways to save on taxes on an annual basis. Little things like just making an IRA contribution this year or setting up a health savings account, you know, instead of paying those high taxes. But it's so important, Sam, to do that overall tax review. And we do that annually, religiously with our clients here at Waypoint Wealth Management to make sure that there hasn't been any big changes, number one, in what you're doing and also in the tax codes and the tax laws. But, you know, if you're paying too much in taxes, it's really going to erode your retirement over time. It's kind of like a silent killer. So what things that we do is, number one, we just get your tax returns and review them and go through them line by line and really try to analyze them and figure out, is there anything that we can do better, first and foremost? And then second is just bring strategies to the table that just makes sense, like doing Roth conversions, just considering a Roth is so important.

Erick Arnett:
And do you do you have an IRA or a41k and does it make sense to start converting that to a Roth? And how much should you do each year and how is that all going to interact on your tax return? But most importantly, what people don't understand is the way in which you receive income and based on the tax brackets that you're in, has a huge impact on your Social Security, on your Medicare. You know, should you take Social Security early? Should you wait until full retirement age? Should you defer it even longer? You know, these are all just questions that we really need to get right in the very beginning because they're so, so important because there are big tax penalties on early Social Security. And if you have a pension or you have other income coming in on top of that, then that's going to tax your Social Security and really take away some of your benefits. So little things like that. It's just being vigilant and kind of being mindful. And guess what? You can't just set it and forget it. You cannot have a set it and forget it attitude. You've got to be constantly, constantly monitoring this stuff and evaluating it at a minimum on an annual basis. Because what you were doing last year doesn't necessarily mean it's going to be what's going to work this year.

Erick Arnett:
So just using life insurance, we have the life insurance retirement plan where you can actually invest in whole life insurance. Your money grows tax free and then when you want to take it out in retirement later on, it's tax free if you don't want to use the death benefit. And so depending on where you're at in the income brackets and how much income you earn will determine where we where we need to go to put the best plan in place for you. But there's so many questions that need to be answered, and it's pretty simple. We just get together on the first appointment. We can do a 15 to 20 minute chat over the phone, and then we'll gather some data and some information on the second appointment and we'll really analyze things for you absolutely free and then come back with you, come back at you with a really solid plan and you can execute that plan if you want, or you can just do it on your own, whatever it is best for you. But please do something because there's so many people out there that need that help. And when these taxes start incrementally going up, it's going to really eat into our wallet. You know, we're paying already enough at the pump and the grocery store and medical costs are going to continue to rise. So if we can somehow control something and get in front of it and alleviate that huge potential tax hit or burden, then let's do it.

Producer Sam Davis:
Yeah. And if you would like to book a free consultation with the experienced team over at Tech Point Wealth Management, you can give them a call. (352) 616-0511. That's (352) 616-0511. Or you can just book online at takepointonretirement.com. And Eric, one of the things you guys do specifically when it comes to tax planning is you take a look at where is their income coming from. You know, because a lot of people don't think about that, that retirement is really about replacing that income that you were making during your working years. So if you've got money coming from personal savings and investments, earned income, maybe you're still working a part time job in retirement or past retirement age, pensions, Social Security. So you have all these different tax buckets. If you're over leveraged in a tax deferred situation, you know your big nest egg might not be as big as you think, right?

Erick Arnett:
Yeah, that's right. I mean, that's that's the common problem that I see daily. And it's that tax deferred bucket, which is your IRA, your 41k, you know, you've been told since you were a kid, go to work, work hard and just keep pumping money in as much as you possibly can into those IRAs. And for one case, and you get that match from the company and, you know, we go about our life and we just keep putting money away, putting money. We kind of have our head down. We're working hard, raising kids, and all of a sudden we lift our head up and we're in our fifties and we've got this bucket of money that Uncle Sam is a big, big partner and they actually own that. 41k It's not even your money. And I know that's hard for people to, to, to, to understand and even fathom. And it might be a little of a radical comment on my part, but it's true because if the government can tax that potentially up to almost 40% in your retirement, then you've got a pretty big partner. Once you turn 72, you have to turn that for one K or that IRA on to start taking income from it. And if you have a pension required, minimum distributions, Social Security, maybe some earned income, maybe some rental income, who knows? And all that's piling on top of on top of each other and putting you up into higher tax brackets.

Erick Arnett:
Then you could be looking at a considerable amount of taxation on your hard earned retirement dollars. And so if we can get out of front of that and help, we're not going to potentially be able to alleviate it. All. But if we can help reduce it by doing the Roth conversions early in life, then, then that's, that's what we're going to do. We've had people do their entire for one case all in one shot and just get it over with. And then some people we do a five year plan. Some some people want to stretch it out even longer. That's okay. But think about it. Here's the most incredibly powerful tool that doesn't get talked about enough, Sam, with the with the Roth. To me, this is the most exciting. Because throughout our entire throughout my entire career, we're faced with this problem a lot of time. I have people in their seventies that will say to me, Eric, I just don't need this money. Is there anything we can do? I don't want to take this out of my 41k or my IRA and pay the taxes. I don't even need the money.

Erick Arnett:
And so unfortunately, the answer is no, it's too late. You know, there's some things you can do, like maybe some charitable contributions with your IRA that would help alleviate the taxation on it. However, what I'm trying to stress here is if you're 55, 60, 65 years old. Guess what? You don't have to start taking money out of your IRA until you're 72. So we've got a long period of time where we can get that IRA or that four way convert it to a Roth. And when you're 72, guess what? There are no required minimum distributions on a Roth account. This is the most important thing to me that's not even talked about enough. Because think about it. You can now leave your money in a tax free account that will grow tax free for a long, long period of time. And then if you ever need to take money out, it's tax free as well. So what an amazing tool. Think about how many people out there that just have a regular old brokerage account and it's just growing and investing and they're putting money away and they're paying taxes on that money every year. And later on in life, even the dividends and interest in that account could kick out onto your tax return, causing higher taxation on your benefits.

Erick Arnett:
And so why not build that Roth IRA? And guess what? Then when you leave the money to somebody else, it grows. It goes to them completely tax free as well. So it's a huge, hugely powerful tool that's been given. It's it's been it's a gift. It's it's been given to us as a gift. We don't get a lot of gifts from Uncle Sam very often. But this is a gift. This is a it's a it's a shining light in retirement planning. I had a lady tell me the other day she called her adviser and asked them about Roth and Roth conversion. And the adviser just said, well, I don't know, just call your CPA and maybe they'll have some information for you on how much you should do or didn't help the lady at all. And unfortunately, that's the conventional wisdom. Even in our in our industry, with the majority of of the advisors out there, they just won't think outside the box. And advisors have to educate themselves as well, just like clients do. You can't just keep doing the same old things day in and day out. And I've been driven my whole career to constantly search out on a daily basis tools and ideas that are going to complement or increase or better my clients portfolios and retirement plans over time.

Erick Arnett:
And someone that's vigilant and active. And you have to have a team like that like we have at take point that has a true passion in that it's so, so important that you're getting the best advice in a team that's willing to go do the digging for you to bring those tools and to actively manage your portfolio and to constantly make it the most efficient, potential, potentially optimized plan that you can. And because we've talked about this, too, Sam, as a fiduciary. We're paid. We're paid a fee based on the growth of your account. So if your account's going up, our fees go up. If your account goes down, our fees go down. So we want to grow that pot as well. We're invested in the game. We're a partner. We're a true partner because we want to make sure that your retirement grows and your nest egg grows and it's protected. And so that's so, so important that that people just even reach out and just ask for the book Power of Zero. And it's going to talk about the wrath inside and out. Don't take my word for it. Read the book and I'd be happy to get you a copy of it. But so, so important. Just just a tool that's not used enough, unfortunately.

Producer Sam Davis:
Yet we're here to educate people about people's finances, how to live a happier and healthier retirement. And if you want to find out what your tax risk might be, you can give Eric and the team a call. (352) 616-0511. That's (352) 616-0511. Or just book a consultation online at takepointonretirement.com. You know, if people are overleveraged in these tax deferred buckets, you know, like you said, the government does own quite a large percentage of that money in that account. And then the other thing to kind of take away from what you were just saying, Eric, is, is they can tell you when to take it as well. And those to me are the two biggest benefits of the wrath. Get the taxes out of the picture. I mean, how many opportunities do you have in life where something is tax free? I mean, you can't go anywhere and get things tax free. Often the taxes are rolled in to the prices you're seeing. So even if you think you're not getting charged taxes, you're like, oh, this was only, you know, $10 flat or $100 flat. Well, the taxes are actually rolled into that cost as well, you know, so to have a tax free opportunity and also to not be told when you have to take your money and you can let it grow, you know, those are two biggest reasons for me to consider a Roth.

Producer Sam Davis:
You know, it's why I consider a Roth personally, even even at my age, even though I'm hopefully decades away from from retirement and stuff like that. So I want that money to have the opportunity to grow and I don't have to worry about it. So those are the two biggest things to me, and you can just give them a call at (352) 616-0511 and find out if if a different plan is a thing you need to go with. I would encourage people not to consider, you know, the cost of of working with a private wealth management firm, but to consider the opportunity cost of sticking with their current plan and what they currently have going on. You know, when we come back, we're going to talk more about what's going on in the markets lately. There was a big bounce back. You're listening to Take Point on retirement and take point on retirement. We'll be right back.

Producer:
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Producer Sam Davis:
Fixed annuities, including multiyear guaranteed rate annuities, are not designed for short term investments and may be subject to restrictions, fees and surrender charges as described in the annuity contract. Guarantees are backed by the financial strength and claims paying ability of the issuer. 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 project the performance of any specific investment and is not a solicitation or recommendation of any investment strategy.

Producer:
Welcome back to take point on retirement schedule your free financial consultation now at take point on retirement.

Producer Sam Davis:
And welcome back to Take Point on retirement. I'm Sam Davis joined by Eric Arnett in segment one. We were talking about how the markets have had a nice little bounce back. You know, the Ukraine and Russia crisis has had led to a significant drop. A lot of people were worried with how that was going to affect the global economy. And, Eric, I really think that it's it's more difficult than ever to not be emotional when you are considering how much money you're investing. You know, this is the money that you're setting aside, you're putting away for a rainy day that is really, you know, decades of rainy days at the end of your life. You know, you've been working so hard to to earn this money and save it. So I think it's tough to not be emotional, period, but it's really it's not television and newspapers anymore. Everyone's got a TV in their pocket, the smartphones and social media, it's really tough. And then it just hits you in the face with gas prices. And that's that's something that you face every every week. Or if you're at the grocery store and you're seeing how the prices on your grocery bill are just going up every time you go to the grocery store, it seems so. You know, it's tough to not be emotional, but if if that's something that you're worried about and you don't want to be looking at stock tickers in retirement, there are options for you and Eric. That's what we want to talk about in this second segment.

Erick Arnett:
Sure. Yeah. I mean, there's so many options and I'm glad you bring that up because I like to talk about specific strategies on the show and not just talk in generalities and let's bring some real specific ideas and tools and educate folks. And and most importantly, we'll just touch upon this stuff on the radio, but please just give me a call and just have a nice little chat about it. And we'll also get you introduced to the topic and educate you as best we can so you feel comfortable with it, because at the end of the day, it's the people out there listening. It's your money. It's not the advisors money, it's not the brokers money, the insurance guys money or your kids money, your parents money. It's your money. So it's your responsibility to be a good steward of it and to make good decisions. And the way that you do that is, is you bring ideas to the table, you listen to the ideas, and then you choose the best path and the best course for you. But that reducing the risk in a portfolio is so important because risk is the measure of volatility. And so if you see a lot of volatility in your portfolio day to day swings, I mean, I had a guy call me the other day and he's like, you know, sometimes I see 80,000 swings in my portfolio on a day to day basis. So it tends to tell me that he probably has way too much risk in there and doesn't really know it.

Erick Arnett:
And so part of our planning process is to, number one, let's find out what what kind of risk you have in your portfolio, what kind of risk are you taking? And then are you are you being rewarded for the return that you're getting? So some people have high risk and they're not even being rewarded with decent returns. And so that's the most important thing to pull out right there. First and foremost, let's just figure out what kind of risk you have in the portfolio and then why we'll educate you as to why you have the risk and what's causing it. But sometimes going from point A to point B doesn't require the fastest, riskiest route. You know, I think of like this analogy where if you want to get from point A to point B, but you hop in a Corvette and you're racing down the Ventura Highway, these jagged turns and, you know, and this high speed kind of high risk type movement, you know, you could get hurt that way and fall off the cliff or make an emotional decision. Right. So maybe going from point A to point B down the road at 65 miles an hour of the speed limit in a nice, comfortable Cadillac on cruise control. Makes sense. You'll you might get there a little slower, but you'll still get to point point B. And so reducing risk is really simple. It's about building a tactically managed risk adjusted portfolio.

Erick Arnett:
And even if if you are diversified, are you properly diversified? Are you allocated to the right areas of the market that are going to help you potentially get upside based on the trends? So think about if you bought a stock, there's no floor on a stock, right? And you're guaranteed no return. You have no idea what you're going to make. So we can kind of buffer the downside with structured notes. And I love to educate people on those and get them a white paper. Or a book or whatever, but call us on it so you can learn more about it as your portfolio manager or advisor. Introducing new ideas during this period of volatility, I hope they are. But structured notes, indexed annuities, buffered ETFs are a great tool during highly volatile times, so a buffer ETF will put a portion of that in our portfolios where you're guaranteed upside based on what the market does, but you're also capped on your downside, so you can kind of protect the downside there. So a lot of really great creative investments have been created in order to help minimize this volatility during highly volatile times. Because volatility is a silent killer, some people call in and say, I don't understand why my portfolio has done nothing over the last year. Yet the stock market was up 30%. I just don't get it. I had a guy call me the other day. He's like, Eric, my portfolio, my 41k didn't move at all and. You know.

Erick Arnett:
So we looked at it. He had no idea that he had about 60% was in bonds and bonds in a bond and bond mutual funds. Well, bond mutual funds as a whole are down about 12%. Year over year. So it's just a dead asset class in a rising interest rate environment. So you could have mutual funds in there. And guess what? Mutual funds have hundreds of holdings. So do you. You might have 20 mutual funds in your portfolio, but those 20 mutual funds also have about 200 holdings in them. So you've got thousands of holdings in your portfolio. Do you have any idea what they are? I'm venturing to say no. So we extract that data for you was in some of our software data tools and we show you exactly. Are you truly well diversified, number one? And then introducing an index annuity as a bond alternative is just a great strategy. It has been and it will continue to be in this in this very tough interest rate environment, because, number one, it takes interest rate risk out of the portfolio. And what is interest rate risk? It's simply this if interest rates go up, the value of bonds go down. It's an inverse relationship. So that's interest rate risk. And so if you had bonds in your portfolio or bond mutual funds and guess what? You could own an advisor or a broker. I've seen several of them that have come to me recently. They were actually buying bonds in this environment, you know, last year.

Erick Arnett:
So putting your money in an asset class that had no potential then charging a fee on top of it. So just there's just no way to win in that situation. So an index annuity can offer you upside in the markets with no downside. It has 100% principal protection. And so we can get bond like returns. And even in some years, not all years, but we've had equity like returns in that portion. So for safe money. For real safe money, a safe money alternative. It used to be conventional wisdom. When I first came in, the industry was like, Oh, you know, you put bonds in the portfolio because they were inverse relationship. There was an inverse relationship to stocks, therefore protect you in a downward stock environment. Well, guess what? That hasn't worked right over the last year or so. This year, bonds are down 6% already and as well as the stock market being down. So it didn't give you that inverse hedge, did it? So we can utilize the index annuities as a portion of the portfolio to lower the overall overall risk of the portfolio by spreading the asset classes out. You know, we talked about this on previous shows. You just you want to have a fruit basket that has all kinds of fruit in it. Typically what we see when we do a data extraction and we look at these portfolios that people bring to us and by the way, we do this all complementary.

Erick Arnett:
And no one's going to hold a gun to your head and say, hey, you got to sign up with us. You know, this is all complementary stuff that we do. You may have a lot of inefficiencies inside your portfolio and just getting those cleaned up a little bit doesn't even have to be big changes. It can be just small changes and nobody likes change. I get that. So little small changes to tweak things that can really help improve that for you. So just getting a second opinion or if you're just working with some big firm and you get a one 800 number and you talk to some different kid every day that really I had a guy call me the other day and he said, Eric, I called, I'm not going to name the company, but it's a big, huge Fortune 500 investment management company said, I called this company, I've got quite a bit of money there and some kid answered the phone and he asked him a simple question about whether or not he could purchase something in his IRA. And the guy told them, Well, I can't. I don't really know, I can't really give you advice, but I'm pretty sure you can Google it. And so, you know, this is crazy stuff. People deserve more than that. I don't care if he got 50,000, 100,000, 200,000 or 20, 200 million. You deserve better than that. So at take point, wealth management, we don't discriminate. We help everybody. We made a pledge years ago that we weren't going to set account minimums.

Erick Arnett:
And so I'm going to help everybody. And I think that's important. You know, everybody needs that that value and that advice and deserves it, whether you have 50,000 or 50 million. So but I know it kind of ran off on a tangent there like I always do because I just like to chit chat and ramble because I get so passionate about this stuff, but just. Introducing an indexed annuity, I think is super important. And I think you have some really great audible chapters that we've been sharing with folks. I had a lady call in the other day that listened to the Audible chapter, and it was a huge value to her. So I think if he can, Sam, play some of those again and it will reiterate to people what they can do or what they should be doing to kind of lower that overall risk of the portfolio. So you can still get good returns, you can still get meet all your goals, and that's the important thing. Goals. Do you have a goal? Do you have goal based planning? That's the most important part. Let's get the goals first and then put the tools together to get you there. And you don't have to take a lot of risk to do it, to get to point A, to point B safely and reach all your goals. So I'd love for you to play some of those audio chapters for for for our listeners.

Producer Sam Davis:
Yeah, absolutely. And I love hearing that. And I love hearing that you guys do not set an account minimum because no matter how much money someone has saved, no matter how much they've set aside for retirement, you know, the money you have is important to you. And that's why we're here on the radio every week across the Sunshine State, seeking to educate people because we really want to help. And you know, Eric, you don't want people to just take your word for it. You want them to consider other sources, which is why we recommend books and recommend that people get second opinions and do their own research all the time. And yeah, like you mentioned, we're going to play an audio book chapter about this topic that we've just been talking about, bond replacement with fixed indexed annuities. So we'll play that. And then when we come back, we're going to talk about the free ebook that you can get and we'll get you a copy. So right now we're going to play the audio book chapter from Annuity 360 Bond Replacement with fixed indexed annuities.

Annuity 360:
Chapter 15 Bond Replacement with Fixed Indexed Annuities. Big idea. Historically, bonds have seen volatility when the market is volatile, fixed indexed annuities are not subject to the same volatility, which makes them a much safer investment. You might have heard a financial advisor talk about replacing your bonds with annuities to protect your wealth and grow your retirement funds. At my firm Active Wealth Management, we believe this is a smart way to protect your future. Many people have learned that bonds are a safe way to invest your money, but there are some downsides to bonds that should make you think twice. We'll talk about some reasons why you should consider replacing your bonds with annuities. First, here's some information on the history of bonds in the United States. Historical bond volatility. The 1900s saw two secular bear and bull markets in US. Fixed income inflation peaked at the end of World War One and World War Two due to increased government spending. The first bull market started after World War One and lasted through World War Two. The US government kept bond yields artificially low until 1951. The long term bond yields were at 1.9%. In 1951, they climbed to nearly 15% in 1981. In the 1970s, globalization had a huge impact on bond markets. New asset classes such as inflation protected securities, asset backed securities, mortgage backed securities, high yield securities and catastrophe bonds were created early.

Annuity 360:
Investors in these new asset classes were compensated for taking on the challenge. The bond market was coming off its greatest bull market coming into the 21st century. Long term bond yields declined from a high of 15% to 7% by the end of the century. The bull market in bonds showed continued strength in the early 21st century. But there is no guarantee with our current market volatility that this will hold. See Chart 15.1 to see the incredible difference of investing in a fixed index annuity versus investing in bonds. Why you should consider replacing your bonds with annuities. The first question you should ask yourself is this Why would you take market risk with your bonds when your bonds can lose their value? If you just look at the history of loan, you can see how uncertain the future of bonds is. Inflation and fluctuating interest rates play a big role in bond yields. Interest rate risk of bonds. Bonds and interest rates have an inverse relationship. When interest rates fall, bond prices rise. Due to the COVID 19 pandemic, investors have moved their money to bonds because they believe it is a safer investment option. However, this has caused bond yields to fall to all time lows as of May 24, 2020, the ten year Treasury note was yielding 0.64%, and the 30 year Treasury bond was at 1.27%.

Annuity 360:
Reinvestment risk of bonds. This is the likelihood that an investment's cash flows will earn less in a new security. For example, an investor buys a ten year $100,000 Treasury note with an interest rate of 6% they expect. It to earn 6000 a year at the end of the term, interest rates are 4%. If the investor buys another ten year note, they will earn 4000 instead of 6000 annually. Consider the possibility that interest rates change over time when deciding to invest in bonds. Systematic Market Risk. This refers to the risk that is inherent to the market as a whole. It will affect the overall market, not just a particular stock or industry. This can be unpredictable and it is impossible to avoid. Diversification cannot fix this issue, but the correct asset allocation strategy can make a big difference. Unsystematic Market Risk. This type of risk is unique to a specific company or industry. Similar to systematic market risk, it is impossible to know when unsystematic risk will occur. For example, if someone is investing in health care stocks, they may be aware of some major changes coming to the industry. However, there is no way they can know how those changes will affect the market. There are two factors that contribute to company specific risk.

Annuity 360:
Business risk. There are two types of risk internal and external. Internal refers to operational efficiency. An external would be similar to the FDA banning a specific drug that the company sells. Financial risk. This relates to the capital structure of a company. A weak capital structure can lead to inconsistent earnings and cash flow that can prevent a company from trading. Reduced advisory fees. Investors who trade individual stocks may know how much commission they are paying their broker, but individuals who buy bonds often have no idea what type of commission they are paying. Bond dealers collect commission on bonds. They sell called markups, but they bundle them into the price that is quoted to the investors. This means you are unaware of how much commission you are actually paying. Standard and Poor's estimates of bond markups is 0.85% of the value for corporate bonds and 1.21% for municipal bonds. However, markups can be as high as 5%, up to $50 per bond. Bonds have finite durations. Bonds only provide income for a finite amount of time, unlike an annuity which provides income for life. You must reinvest your money if you want to continue generating interest with bonds. However, reinvesting with a bond can sometimes come at a loss. As we discussed above, annuities will provide you with an income you can never outlive.

Producer Sam Davis:
So you just heard a chapter from Annuity 360 about that topic. We were discussing bond replacement with fixed indexed annuities. And if you want to get a copy of Annuity 360, Eric, how can the listeners do that?

Erick Arnett:
Yeah, it's really easy. Number one, hopefully you'll call me because I'd just love to chat with you. It's (352) 616-0511. Or you can go to any one of our websites. If you're just driving right now, pull over, get your smartphone and just Google, take point wealth management or take point on retirement. Our site will come up, click on it and you'll see an upper right hand corner. You can just click a button and schedule a chat session and we'd love to just chat with you and truly understand what it is that concerns you, what your true questions are. And then we're going to give you the right material to educate you because we talk about it all the time. Right? Fear. Well, fear we fear the unknown. Right. I mean, I was watching this show the other day, a Netflix. I was bingeing on a Netflix show, the Vikings. And I just love this old historical stuff. And so one man finally jumped in a boat against the will of as king and sailed west and found England a Viking. Right. And so in all the Vikings and Viking Kings would never venture West because they didn't believe anything existed. You would just fall flat off the earth and had this fear of the unknown. Right? But this one crusader said, I know better. I'm making this trip. And he's discovered a new land and and discovered new riches and built wealth for his kingdoms. But if that one person was just so fearful and didn't educate himself on a new way to sail, there would be nothing, nothing gained, nothing ventured, nothing. Nothing would have been gained. So you have to educate yourself first and foremost. So if you have the education and truly understand things, then you're going to lose the fear.

Erick Arnett:
And unfortunately, we have so much fear mongering and emotional stuff that hits us every day, and you just can't take the first meme that comes across your earphone, or you just can't take the first story that comes from somebody that just is blasting some out there in Twitter. You've got to go do the. Digging and educating yourself. And that's why we feel education is so, so important. And we love our clients to be truly educated and truly understand what's going on. We had a guy, new client came to us recently from the radio show and he read this book, Annuity 366 times. Six times he studied it and highlighted it. And I know we talked about it before, but I love this because he would absolutely not even consider an annuity prior to this book. He thought they were the world's worst investment and heard all kinds of negative things. And you can just Google annuities on the Internet and find all kinds of negative stories about them. But he truly educated himself and read the book, and then he stepped forward and made a decision and said, You know what, this is the right plan for me. And he's super happy, super content, and it's because he truly understands what's going on in his portfolio now. And that's how you're going to be able to rest and put your head on the pillow at night is if you're truly educated in that, fear is alleviated and you know you're headed in the right direction and you know that you can weather all storms no matter what comes your way throughout retirement. And that's that's exciting stuff.

Producer Sam Davis:
Yeah. And it's so important to do some research to educate yourself before you take action, especially on something this important, you know, consult with an expert, give Eric and his experienced team of call (352) 616-0511. Take point. Wealth management is the name of the firm and you can go to takepointonretirement.com to book a consultation as well. But again that number is (352) 616-0511. And I love talking about the fear of the unknown. It is so interesting to put yourself in the in the shoes of those people so long ago that didn't know what was beyond what they couldn't see, you know, just looking out at the horizon and yeah, it's, it's hard to blame them, but yeah, I would just encourage people, you know, find out for yourself like that guy did when he sailed west. You know, you don't want to be emotional just when you see the market start to go down for a couple of weeks and all of a sudden you just start thinking, well, it's just going to never come back up again. It's just going to go down forever and you react and you move stuff around. And we talked about the importance of not missing those best days in the market, those best days. And there.

Erick Arnett:
You go.

Producer Sam Davis:
The series of days, you know, because like like we said in segment one, you know, that's really the time when you want to be taking advantage of that opportunity.

Erick Arnett:
There you go. And I've never doubted it and I never will doubt it. And that's why I'll always protect my clients in their money and their retirement plans. And and sure enough, you know, not making that knee jerk reaction was important. And like I said, if you did, you would have missed a 16% recovery that we've already had in the Nasdaq. And I think the S&P is up a little over 12% from the bottom. So that's a huge move and that's a huge amount of money in portfolio. So hopefully our listeners are out there and they're making those same good decisions. And if you're not quite sure what the path is for you, please give us a call and we'd love to work with you.

Producer Sam Davis:
Yeah. And so, Eric, we've got just a couple of minutes left in the show. So after a listener gives you a call, (352) 616-0511 or books an appointment online at take point on retirement, they can book right into your calendar. They're on the website. What can they expect after that?

Erick Arnett:
Yeah, it's just a no obligation chit chat on the phone just to get to know you and figure out what's going on. Just a quick, easy 15 to 20 minute conversation. And then if we decide that it makes sense to move forward and to truly build a plan for you, then we're going to go ahead and gather that data and information from you. And we're going to build out what we feel is is the most optimized plan for you. And then we'll show you that plan and it can be done right over a Zoom call. You don't have to come to my office and it's not very time consuming at all. The only homework that we ask of you is to get your statements together, your tax returns together, and get those to us and we'll build out a truly solid plan. I know we talk about it all the time on the show, but during this tumultuous time that we had in January, February and March, our phones never rang. Really take point wealth management. Other than new people seeking help our existing clients. The phone never rang. In fact, we reached out to them just to say, Is everything okay? You guys okay? And Oh yeah, Eric, we're fine. We truly understand what's going on in our portfolio and we're so happy that we were out ahead of this and we built a plan that we know can weather storms and we're fine. Everybody was fine. In fact, I was I was probably more concerned than they. My own clients were. So, you know, and that's the way we like it. I mean, I want happy people out there that are focused on retirement and what what they're doing to enjoy the rest of their life and their retirement that they've worked so hard for. Let us worry about all the other stuff.

Producer Sam Davis:
All right. One last time. We'll give you the phone number (352) 616-0511(352) 616-0511 or visit. Take point on retirement. That's it for us this week, Eric. Have a good weekend.

Erick Arnett:
Thank you so much, Sam. You have a great one as well.

Producer:
Thanks for listening to Take Point on retirement. You deserve to work with a private wealth management firm that will strategically work to protect your hard earned assets, to schedule your free no obligation consultation visit, take point on retirement, or pick up the phone and call (352) 616-0511. That's (352) 616-0511. Investment Advisory Services offered through Brookstone Capital Management LLC, BCM, a registered investment advisor team and take point wealth management are independent of each other. Insurance products and services are not offered through BCM, but are offered and sold through individually licensed and appointed agents. Investments involve risk and unless otherwise stated, are not guaranteed. Past performance cannot be used as an indicator to determine future results.

Producer Sam Davis:
Fixed annuities, including multiyear guaranteed rate annuities, are not designed for short term investments and may be subject to restrictions, fees and surrender charges as described in the annuity contract. Guarantees are backed by the financial strength and claims paying ability of the issuer. 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 project the performance of any specific investment and is not a solicitation or recommendation of any investment strategy. Registered investment advisors and investment adviser representatives act as fiduciaries for all of our investment management clients. We have an obligation to act in the best interest of our clients and to make full disclosure of any conflicts of interest. If any exist, please refer to our firm brochure, the ADV to a page four for additional information.

Producer:
At Take Point Wealth Management. We know you've worked hard to earn your money and you've worked even harder to save it. When it comes to wealth management and planning for retirement trust, Eric Arnett and his team of experts who have been helping individuals, families and business owners find financial freedom for more than 20 years. Let us help you protect and grow what you've worked so hard for. Schedule your free no obligation consultation now at takepointwealth.com.

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