Erick breaks down the latest news regarding cryptocurrency before diving-in to tax-efficient investing strategies for your retirement. We are also joined by our tax expert, Randy, who shares some retirement tax tips you won’t want to miss.

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Call Erick today at 352-616-0511

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11.16.22: Audio automatically transcribed by Sonix

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

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

Producer:
Welcome to Take Point on Retirement with your host, Erick Arnett. Erick is a fiduciary and licensed financial advisor who always places your needs first. The experienced team at Take 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 Erick Arnett.

Erick Arnett:
So, hey, welcome, everybody, to Take Point on Retirement radio. So nice to have you here today. Welcome to the show. We've got Sam, our deejay extraordinaire, with us today. How are you doing this morning, Sam?

Producer:
Doing well, Erick. Happy to be back on the show. We are pushing through this year, 2022. We're almost to Thanksgiving and the holiday season. The time is flying. But we're happy to be back on the air this week, bringing important information to the people on the Nature Coast, Tampa, and all the way down there in Port Charlotte and Punta Gorda as well.

Erick Arnett:
Yeah, man, thank you so much for being here with us. And I think we might have Randy Woodruff, our CPA from Suncoast Group, chime in later on, too. So we might have him jumping in on the show today. And I'll talk about some tax tips and why that's important to long-term retirement income. We'll get some of that in today. I just wanted to say hi to everybody and wish everybody a happy holiday. Thanksgiving. I, I tried to lose some weight in preparation for this because I usually pack on a couple of pounds this week, but I did not reach my goal. So it looks like I'm going to be in a deficit after the holidays. So I'll be struggling to take off that turkey weight next week between Thanksgiving and Christmas. But hey, I know a lot of our listeners down south impacted by the storms and we hope everything's slowly cleaning up for you guys down there and and hope that things are looking a little bit brighter for the holiday and just really wanted to wish everybody a great Thanksgiving and enjoy your family, enjoy good food and and remember why we're so blessed and you know we we air this show once a week and then we also have our podcast. So if you happen to miss the show or, you know, you just can't listen to the entire show, we've got a whole stack of shows, past shows on our podcast channel as well, and you can listen to our podcast on any podcast app. Spotify, Apple. I don't know, Sam, you're one of those young guys. What's some of the other podcast stuff out there?

Producer:
Yeah, I mean, wherever you listen to podcasts, you'll be able to find Take Point on Retirement. Just search, Take Point on Retirement, you'll find it on Apple, Google, Spotify, Stitcher, really anywhere else. We've got it covered across the board wherever you listen to your shows.

Erick Arnett:
So there you go. See, Stitcher didn't even know that that was that existed. So that's why we had the young guns on the show as well to help bring us into the 21st century here. But, you know, listen to the show. If something makes sense to you, please reach out to us. I mean, this is purely educational. We love doing it. It's a lot of fun. And we try to put some information out there for folks so help you make some better decisions and hopefully act as a resource to put together a solid stress-free retirement. And we know that this past year has been a little stressful for our retirees and pre-retirees. So definitely more than ever is now a time to hone in, lock in review focus. Look at your plan. If you don't have a plan, please call us so we can get one for you. It's absolutely free. It's no cost to you. We'll usually just start with about a 15-minute phone call. You can always go to my website, take point wealth dot com or our podcast site Take Point on Retirement dot com TakePointOnRetirement.com And you can actually click in the upper right-hand corner and schedule an appointment with me and get right on my calendar.

Erick Arnett:
We can chat for a few minutes and then see if there's something that we can optimize for you or help you on. But feel free to reach out. Give us a call. 352 616 0511. Let's rock and roll and get into some of the show this week. I think we have a great show. We're going to talk about income, bond replacement, and annuities. We're going to do some right and wrong. Hey, we're even going to talk about that crazy stuff called cryptocurrency that we've been warning you about for years. Dive into that a little bit. We're going to talk about how interest rates and. The markets are impacting your retirement plan. And we're going to play some audio. I think we've got Mr. Buffett is going to be joining us today on the show, not live, but we got his audio and some snippets from him. Always nice to tune in to what Mr. Buffett says. So but with that being said, let's jump right into it.

Producer:
Come on down as we test your financial knowledge in. Right or wrong.

Producer:
All right, Erick, first item on this week's right or wrong, I'm going to read the statement and then you're going to help the listeners understand if that statement is right or wrong. All right. First one. Bonds are on track to have one of the worst years ever in 2022. Is that right or wrong?

Erick Arnett:
Yeah. So, unfortunately, absolutely right. You know, I think that people are probably feeling that impact right now. You know, this is why the markets are ever dynamic, always changing. You've got to be fluid, you know, just buying and holding that kind of conventional wisdom and hoping for the best is probably not going to work going forward. You know, we've had a nice run in the bond market and even in the stock market over the last ten, 12 years. And I certainly believe that the next ten, 12 years will be nothing like the past ten or 12. But all kinds of statistics out there, you know, that traditional 6040 moderate portfolio just hasn't worked for multiple reasons. But during these times of of rising interest rates, the older the bonds you may be currently holding are worth less so because newer bonds offer more desirable rates. So pretty simple when interest rates are going up, bond values are going down. And so we've been in a rising interest rate environment for quite some time and quite possibly may continue. We don't know when the Fed's going to pivot and change their stance, you know, so we still see inflation. And I know that the Fed is still really honed in on slowing that economy down. So, you know, one thing that we try to bring to the table.

Erick Arnett:
For our clients and for our prospects and our listeners is solutions, ideas. You know, just kind of sticking with the old conventional way of doing things just probably isn't going to work and hasn't worked for you. I think it's the worst time since 1926, so maybe in centuries that bonds have underperformed the way they have. I think the bond market is down like 15%. So typically, if you use that rule 100, you take your age, you subtract it from 100. That's kind of the amount that you should have at risk. And then we would utilize bonds to kind of hedge against the market and act as a B per se, because typically stocks and bonds are not correlated. And we've seen where that conventional 6040 portfolio just hasn't worked this year and it's let a lot of people down. So do you stick with that and hope that it turns around and changes? Do you do you give us a call and start looking into making some changes and looking at alternatives? That's entirely up to you, the listener. But I would encourage you, like I've said on past shows, is to talk to your advisor, talk to your broker. Give us a call. 352 616 0511. But look at your statements on that.

Erick Arnett:
On that first page of your statements, you'll have an asset allocation chart and it'll show you how much you have in fixed income inside your portfolio. And it's okay to have fixed income during certain periods, but you've got to make sure that you get the right fixed income. So as an example, you know, you really need when interest rates are rising and there's pressure on rates to rise, you really need to be in very short term, we call it short duration bonds, you know, maybe even just 1 to 2 year Treasury bonds. Right now. You don't want to go out to long ten, 20, 30 year bonds because those are even more volatile and even more susceptible to rising interest rates have more volatility and more risks. So more than so. So now more than ever, you really owe it to yourself to dive in, focus and see what's not working, because there's definitely alternatives and things that we can do. And to get you out of that conventional 6040 portfolio and get you back on the path to a good solid stress free retirement, you know, utilizing indexed annuities. And I think we're going to talk a little bit about that later on in the show. But yeah, it's just, you know, it's one of the worst times for bonds.

Erick Arnett:
And so you've got to readjust, you've got to reallocate and you've got to reevaluate your plan. And we're happy to do that. Absolutely free of charge. You can give us a call right now. 352 616 0511. Take a few minutes, reach out and we'll start the process. We'll take a look at what you're doing. We'll evaluate it, and then we'll share some alternatives with you. And no one's going to hold a gun to your head. You know, this isn't a high pitched sales kind of firm. When we're not out here to sell you anything, we're just here to educate. And you can take that information and do whatever you want with it. But we're happy to give you that completely free consultation, free comprehensive retirement plan, going out 30 years and stress testing it to make sure that's going to hold up so you don't run out of money because what's the number one thing that most retirees are concerned about? It's running out of money. So we want to make sure you've got enough income to get you to and through retirement. So long winded answer there, Sam, but definitely bonds are on track to have their worst year since 1926, according to The New York Times.

Producer:
All right. And you can get in touch with Erick and his team at Take Point Wealth dot com. If you have more questions about bonds, here's the next item. On right or wrong, cryptocurrency is a safe and effective way to grow your money in a short time. Is that right or wrong?

Erick Arnett:
Erick Oh boy. So this one, this cryptocurrency thing, I mean, it's finally really blown up on people this year. And even recently I think that we were talking earlier, Sam in the news, one of the major exchanges and one of the major companies kind of behind cryptocurrency has completely blown up and is one of the world's largest crypto investing companies, is filing for bankruptcy. So I think like $60 Billion just evaporated pretty quickly. And so we've been warning people for years, you know, this is the wild, Wild West. Cryptocurrency is not an investment. It's kind of a gamble. So like cryptocurrency investments like Bitcoin offer no consumer protection at all. They're incredibly volatile and we still don't. Truly understand them. There's no real value behind them. And so, I mean, we had folks calling us last year when Bitcoin was at 66,000, a coin wanting to buy crypto because it was the hot thing, right? And unfortunately, we fall prey to the media and a lot of hype and people think, man, I'm missing out that that FOMO. Right. The fear of missing out. So they want to jump in and catch that ride too and make money because they hear these little stories like, Oh, I made all this money on crypto, but we knew it was a falling dagger.

Erick Arnett:
We knew that at some point we were going to have these problems. And so once liquidity dries up, once the economy gets a little bit slower and people tighten things up and they start taking money because they're concerned about, you know, the underlying economy and money flow. And so people start hoarding and trying to take their profits. And I think what happened was, is everybody starts selling at the same time and there was nothing really there so devastating. I hope that most of our listeners and our retirees, you know, more than likely, I think our retirement warriors are pretty smart and they probably weren't involved in this. It seems to be kind of a younger man's game. Sam I don't know if it's like I've had younger clients, you know, in their twenties and thirties saying, you know, I have this crypto portfolio and do you guys offer crypto investing and all this kind of stuff? So it seems to be kind of more the younger generation, but definitely probably no room for crypto in a retiree's portfolio, let's put it that way.

Producer:
Yeah, I think that's a good idea. Erick I mean the first cryptocurrency bitcoin only emerged in 2009, so I would not trust your hard-earned retirement savings on an asset class that has just emerged really only about 12 years ago. So not a good thing there with cryptocurrency. And we'll have some more news on that later in the show. Here's the next and third and final item on this week's Right or wrong. Higher interest rates combined with a down market make now one of the most opportune times to consider a fixed-indexed annuity.

Erick Arnett:
Yeah, absolutely. You know, it's exciting because and that's you know we talk about a little bit earlier is like if you've been that conventional 6040 portfolio and you feel like, man, I'm kind of stuck here. My advisor hasn't or my broker hasn't offered me any alternatives. You know, they're still maybe too, too risky, have a lot of stock in the portfolio. And man, you know, if I'm in a moderate portfolio, why am I down 20%? This isn't what was supposed to happen. So we love, love, love. You know, with these interest rates that are increasing and quite frankly, interest rates are at their highest level since 2007. Annuity companies are able to generate more interest that they invest in the options. So not to get into all the mechanics, but basically the way that the very basics, the way that an index annuity works is when you invest into an indexed annuity, your money is not directly invested in into the markets what the annuity companies do or the insurance companies. They actually take your money. And by law, they have to invest it in US Treasury bonds. And so think about it. Like six months ago, US Treasury bonds were like paying nothing, almost zero. And right now, because the Fed has raised rates so quickly and rapidly on the front end of the yield curve, you know, you have one-year treasuries, two-year Treasuries paying almost 4% or more.

Erick Arnett:
So these companies all of a sudden are making all these profits because they invest your money in US treasuries. These US Treasuries spin off interest. So then these companies use that interest to purchase options on the various indexes. And I say market indexes, stock indexes, bond indexes, stock and bond indexes. So, you know, basically your money is 100% protected. No potential for downside risk at all. And these companies will buy options on the market. So if the if the markets do do well and go up, you're going to you're going to make money. If the markets go down, your money's 100% protected Index annuities are and have been I think we've been talking for a while on this show a great alternative to Bonds. And I think it's going to continue to be that way. And I think that it's a great opportunity now more than ever. I mean, these these things are more attractive than they ever have been. In fact, for years we've been talking about this. There's there's a two even there's two world known economists, Mr. Shiller and Ibbotson. And they've actually you can Google this if you want, but they actually have studies that have shown where index annuities have outperformed bonds.

Erick Arnett:
Considerably over the past 20 years. And we can get that study out to folks if they want to reach out to us. I can email it to them. But, you know, so there's a lot of evidence out there. Don't just take our word for it. But why would you have bonds in your portfolio? Acting as an anchor, you're paying fees on them, but that anchor is actually sinking you even more when you could free that part of your portfolio up. Have the safety, the principal protection and outperform bonds. And so, you know, we think that that conventional portfolio, the 6040 portfolio, is dead and gone and for quite some time. And so we would do a 6040 portfolio, 60% stocks, 40% index annuities. And that way that percentage of your portfolio is 100% protected. No downside risk. And and it's just going to offer really good, strong performance going forward. And, you know, so it's just a great alternative. You've got to kind of flip your mind, think, think, think about things a little bit differently these days. And so I just want to offer you some some alternatives there.

Producer:
Yeah. Erick And I think this would be a good time to kind of remind people of one of the general principles, rules, if you will, when it comes to managing risk. And and that's the rule of 100. You know, that 6040 traditional portfolio is is about a 70 year old strategy. And I don't know too many areas, especially something as important as your finances that you want to be implementing a 70 year old strategy. But could you walk the folks through the rule of 100 and kind of help them wrap their minds around how to manage risk during retirement?

Erick Arnett:
Yeah, So rule 100, I mean, you take your age, you subtract from 100. And that's really what we feel pretty strongly if you're retired or going to retire. Getting close to retirement should be allocated. So as an example, you know, if you're 60 years old, you take that from 100, you get 40. So we would like to see you have only about 40% of your portfolio at risk in risk type investments. Now, that includes real estate, that includes bonds, that includes equities, stocks, mutual funds, ETFs, you know, things that have don't have principal protection. And then on the other side of the coin, you know, instead of putting 60%, imagine if you had 60% of your money in bonds or fixed income right now, because, you know, you've been told for years that that's how you hedge against the stock market and protect your retirement. Well, imagine if you have that 60% in there. You've you've been paying probably 1 to 2% fees on that, plus it's down 15% this year. So just, you know, we've been warning and talking about this for years and it finally has come to fruition, unfortunately. So I hope that that this people out there that are listening will prompt them to take action and make some changes because, like I said, the next 10 to 12 years will be nothing like the past 10 to 12 years.

Erick Arnett:
And, you know, so if you're taking too much risk and those bonds aren't providing you the hedge that you need or that bui you know, think about it. We do a we do some educational seminars and I love this one slide and it talks about if you it shows if you lose let's say you lost 30% this year in your portfolio, you've actually got to make 43%. That's not even including fees. So if you have fees on there, maybe 45%, you've got to make you've now got to make a 45% return on your money just to get back to where you were prior to when the losses started. If you go down 50%, you've got to make over 100% back. So when you're getting close to retirement or you're in retirement, managing that risk is one of the most important things that you need to be doing. And we talk about on the show all the time. You know, Randy and I, the three main things that we focus on when we sit down with clients and I know, you know, when Randy is talking to his clients when it comes to taxes, is one is how are taxes impacting your retirement and your cash flow and are we do we have the the most optimized tax strategy and income strategy in place for you? So taxes can be the silent killer.

Erick Arnett:
And we know that taxes are probably going to go up in the future. They're just going to have to with a $35 trillion debt. I mean, it's insurmountable. So taxes are going to go up on our listeners 100%. So if you're a retirement warrior, you've got to fight this. You've got to put strategy, you've got to get active right now and let us help you with the different strategies that are out there to try to eliminate or at least alleviate some of that big tax burden that's coming for you here in retirement. So taxes, big stress on your retirement risk is a big stress on your retirement. You're taking too much risk and you're getting volatility in your portfolio. That's a silent killer. It slowly eats away. And then, of course, fees and expenses. So, you know, if you're paying 1% on a losing asset class, it's just you just digging a bigger hole. So let's cut your fees in half. At a minimum, we can cut your fees, we can lower your risk. And more importantly, we can put together a tax sensitive plan to optimize your cash flow and retirement. So when we do our retirement plans, we call it I want to call it the Freedom plan. I came up I'm going to start calling my retirement plan, the freedom plan, because it's the smart plan.

Erick Arnett:
Absolutely. Like we've been calling it the Smart plan. But this is freedom. If you can follow this plan and have the freedom to meet all your retirement goals and enjoy that stress free retirement, and to also have that financial freedom and that financial, say, confidence in what you're doing, you're just going to be able to enjoy retirement and you're going to be able to relax and not have to worry about the economy and the markets. And let us do that for you. Let's we'll be the ones that will manage it for you and be tactical. But, you know, you've got to take that first step and give us a call. 352 616 0511. Take that step today. Give us a call. We'll get to work for you. We've got to look at these different strategies because if you it's just because we are experiencing a market decline this year doesn't mean we won't experience another one next year or the year after. So, you know, I remember in my. Early in my career in the early 2000s late nineties, and we had three consecutive years. We had three consecutive years of double digit negative returns in the market. So imagine if you were retiring during that time frame or you were close to retirement during that time frame and you had three negative double digit returns in your portfolio and at the same time you had to start drawing off your portfolio.

Erick Arnett:
It was devastating. It really puts you behind the eight ball, maybe even delayed retirement. So you got to be active right now. You've got to give us a call. You've got to make some changes and it's absolutely free. There's no charge. It's absolutely free to you. It's over $4,500 value. We're going to put all that time in. We're going to build you an optimized plan. I don't care if it takes six meetings, six zoom calls, six phone calls. We want to get you on track to a solid stress free retirement. And it starts with you guys just reaching out to us and giving us a call. You can also go to my website take point wealth dot com. Just if you get your phone there just Google take point it'll come right up our website and in the upper right hand corner you can just click a little button and boom, you're right on my calendar for a 15 to 20 minute chat session just to get to know you and start start down the path to a stress free retirement, but start down the path to having true freedom. You know the freedom plan. I like it how you guys like that. The freedom plan. I just came up with that.

Producer:
That sounds good. Erick, we're going to head to a break, but you can give Erick and his team a call at 352 616 0511 or visit them online at Take Point Wealth dot and Take Point on Retirement. We'll be right back.

Producer:
You're listening to Take Point on Retirement to schedule your free no-obligation consultation visit Take Point on Retirement dot com. TakePointOnRetirement.com

Producer:
I'm Matt McClure with the Retirement Dot Radio Network Powered by Amerilife. If amusement parks are your kind of thing, roller coasters can be fun. But when it comes to investing for retirement, not so much. One of the most volatile investments around is cryptocurrency. That means, sure, there's some potential upside, but is it worth taking a ride on the crypto coaster? First, What is crypto anyway? The website Investopedia defines it this way. A cryptocurrency is a form of digital asset based on a network that is distributed across a large number of computers. This decentralized structure allows them to exist outside the control of governments and central authorities. Bitcoin was the first such currency out there, so it's been the most talked about and faced the most scrutiny. Like anything in life, crypto has its advantages and disadvantages. While it offers a faster and cheaper way to transfer money, its value is highly volatile. The Takenology has gotten some blowback from both sides of the political aisle. One of the most vocal critics has been Democratic Senator Elizabeth Warren of Massachusetts.

Elizabeth Warren:
Unlike, say, the stock market, the crypto world currently has no consumer protection. None.

Producer:
Republican Senator Pat Toomey, ranking member of the Banking Committee, who generally supports the industry, also acknowledges there are issues with crypto.

Pat Toomey:
Now, it's important to note that many people have raised legitimate issues about cryptocurrencies. These include their use in illicit activity and the possible effects on monetary policy and our existing financial infrastructure.

Producer:
But what do big time investors have to say about cryptocurrency? Here's Warren Buffett speaking at a recent Berkshire Hathaway shareholder meeting.

Warren Buffett:
Now, if you told me you owned all of the Bitcoin in the world. And you offered it to me for $25. I wouldn't take it because what would I do with it?

Producer:
Still, cryptocurrency has legions of fans who swear by it and enjoy riding the daily roller coaster. So are you willing to risk your hard-earned and hard-saved money in a volatile cryptocurrency market? That's a key question to consider as you invest in your future. With a Retirement Dot Radio Network powered by AmeriLife, I'm Matt McClure.

Producer:
Welcome back to Take Point on Retirement schedule your free financial consultation now at take point on retirement dot com. TakePointOnRetirement.com

Erick Arnett:
Hey, welcome back, everybody, to take part on retirement radio. And I just wanted to get Randy to jump in here. We're we're excited. We got Randy Woodruff here, CPA extraordinaire with Suncoast CPA Group and Take Point Wealth. And one of the things that I think makes us a little bit different is when you work with our team, you're not just working with an advisor, you're working with a CPA and a tax advisor. And I don't want to date Randy, but I think he's been doing this for about 30 some odd years now.

Randy Woodruff:
Not quite 30 yet, but you're getting close.

Erick Arnett:
All right, All right. I didn't want to date you there, but, you know, I think it's important, I mean, especially in retirement and going into retirement to get these tax these tax strategies correct. And also, a lot of people out there probably have the question about Social Security. And, you know, when do I take Social Security? And then how is income that I currently have or income that I'm going to have in retirement? It's going to affect my Social Security benefits. And so, you know, you've got to be very careful there, folks, because there are certain income thresholds that if if you go over them, you're going to tax your Social Security greatly. And so, Randy, one of the things that. Probably would be beneficial to our listeners, and I think it is. Let's talk about this provisional income formula and how the IRS determines tax on your Social Security.

Randy Woodruff:
Sure. Great, great question, because we see this happening to retirees where they're especially if they have a jump in income, they they take money out of an IRA. Take money out of an annuity. You have a stock sale or whatever, a kind of a one time event. All of a sudden, not only does it cost them tax on the income that they're making or pulling out of an investment, but they also wind up now paying tax on their on part of their Social Security all the way up to 85% of their Social Security, depending in the tax rate, is based on your tax bracket. So so as an example, if you were to have your income dialed in so your Social Security isn't isn't taxed or taxed minimally, but then all of a sudden you want to take money out of your IRA, like an extra 10,000 distribution to put down on a brand new car or to make a home repair or something along those lines. You have to pay tax on the 10,000 that you pull out of that investment, especially if it's an IRA. You pay tax on all of that. And then you also now your provisional income bumped up by 10,000. And that means your Social Security is now going to be subject to income tax as well. A portion of it, again, up to 85% of it at whatever tax bracket you're in. So it's it's almost like it's it's hitting you twice. You're paying tax on the income that you pulled out and now you're having to pay tax on some or more of your Social Security.

Randy Woodruff:
So it's very important that retirees that are on Social Security understand this concept. And as Erick mentioned, I've been doing this almost 30 years. And these limits, when I say limits, that is the thresholds that you begin to trigger your Social Security being taxed. I have been doing this 30 years and those limits have not been indexed for inflation at all. So if you're married, filing joint, it's your income plus half your Social Security benefits. If that number goes over $32,000, begins to tax your Social Security, then when you get to 44,000, they tax up to 85. When you go over the 44,000 mark, they can begin to tax that 85% of your Social Security here again, at whatever tax bracket you're in. So if you're if you're single, it's 25,000 is where it starts. And then 34 is where it goes over the way they begin to tax up to 85, 85. So it's it's it's unfortunate that Congress has an index these numbers up every year. And they've indexed everything. They indexed the amount they give you for Social Security every year. But they should also index up these these thresholds as well, because if if if inflation is happening and it is, they could be indexing this as well. So this is in particular a we call it a silent killer, the taxes. And this is in particular this provisional income formula because of lack of indexing, is definitely impacting more and more seniors and taking more and more of those retirement income dollars away from you.

Randy Woodruff:
So here again, as you begin to plan for retirement, if you're in retirement, it's good to be aware of this. And it's also good, as Erick and I have talked about it, it's good to have several buckets of income to pull from, whether it be taxable income, non tax income, like we talked a lot about Roth IRAs. So as we plan with you at the end of the year, if you want to take some money out or you're doing some tax planning the earlier in life, you plan. So you in terms of having some taxable income, some non taxable income and maybe some income that has a blend of taxable and non taxable, like if you if you're selling some some investments like stocks or bonds, you get your your capital back, it's not taxable, just the gain is taxable. So giving us more options to pull money from to manage your tax liability helps us also keep you out of this provisional income area where you're Social Security is taxable. So and as we've talked on this show many times before, planning early in life, it will hopefully allow you to have more money in retirement and gives you more options to plan with. So that's my comment on the provisional income formula. Please be aware that it's there and please be aware that it's the thresholds aren't that high. So, you know, if you're married, filing joint $32,000 is not a big number. So it's very important to be aware of it and to try to avoid it if you can.

Erick Arnett:
Yeah, this is crazy stuff. I mean, you make a great point, Randy. I don't think this provision, these provisional income thresholds have been changed for more than 30 years. I think they might have changed the levels a little bit in the early nineties. But, you know, it's crazy that the IRS, our government, you know, are saying they believe that if you make over 44,000 that you're considered wealthy. So they're going to take 85% of your Social Security and tax it at your marginal tax rate. And so imagine a system that you worked your butts off folks your whole life, and you pay it all your taxes. And then you get this benefit, Social Security, that's supposed to help you in retirement. And they're going to take take it back again and tax it again, in fact. What's interesting is not interesting, but it's actually a bummer is that a big part of the revenue that comes into the IRS is re taxing that Social Security benefit on our on our retirees and people that are collecting Social Security. So it's just absolutely crazy to me. But, you know, your point is spot on for our retirement warriors out there. Part of that freedom plan that we've got to put in place for you is that we evaluate all this for you. You know, is it a good time if are you single? Are you married? You know, is it a good time to take Social Security at 62? Should you defer it to 70? You know, should your spouse take it? Should you take it? And then what kind of sources of income do you have in retirement? Do you have a pension? Are you taking some IRA distributions? Your Social Security? We're going to look at all that.

Erick Arnett:
Do you have some rental income from? Do you have some municipal bond interest that you're getting from your investment accounts? So you have all of these different mechanisms that are potentially creating more of a tax burden for you. And so that silent killer, you know, if you're we we've I mean, we have examples and we've seen where, in fact, I can run through one of the example ranges and I'm sure you've seen this before, if a client just calls in and says, Hey, I just want to take 1000 distribution from my my traditional IRA to give little Johnny a birthday gift or buy a little Johnny a car or whatever it may be, this might potentially be devastating to them and throw them up into a completely different marginal tax bracket. Like, you know, we've seen people go from a 12% all up to a 22% tax bracket. And then think about it, if you're married or even if you're single, I think those thresholds are if you're single, if you if you make over 34,000 in that provisional income formula, 85% of your Social Security is taxed. So what if you what if that IRA distribution or that pension that you took popped you up into that higher marginal tax bracket plus. Tax or Social Security. Now, 85% of it being taxed at that 22% versus maybe ten or 12%. It's hugely impactful. So you've got to be careful. And like Randy said, we've got to plan for these buckets and part of our freedom plan and our 30 year retirement plan that we put together for you is looking at those different buckets and putting together a strategy through in retirement and from which buckets to draw from.

Erick Arnett:
So we don't create that huge tax burden or even start to to tax your Social Security more than it needs be. So I'll give an example. This is a real case, just like Mr. and Mrs.. I'll call them Mr. and Mrs. Smith. But you know, they have if they if they take an IRA distribution from their portfolio versus maybe a Roth distribution instead of a traditional, traditional IRA distribution, you could be in a 0% effective marginal tax rate versus say, a ten, 12 or 22%. So very important for us to look at this for you so and so that's why we talk about moving towards Roths. If we can get to early and plan and do some Roth conversion with you, if we can do some Roth, some Roth contributions and start building up that tax free bucket. Unfortunately, 95% of us have most of our money in that tax deferred bucket. And so we've got to come up with some ideas and some strategies to optimize that, because that's one of the number one problems. And one of the number one mistakes that retirees make is with their Social Security and taking that Social Security at the wrong time or not deferring it. And so, you know, give us a call so we can do that. Social Security maximization report for you, which is part of the Freedom plan.

Randy Woodruff:
Erick, I want to mention something too, with the Social Security and the taxability of it, and you brought up a good point that there is some level of double taxation that's going on here on retirees, which in my opinion is not fair. So let me explain what I mean by that. So when you're working and you work, you work the job for 30, 40, 50 years, your employer takes out Social Security, Medicare tax out of your paycheck and then they match it as your employer. So all the money going into Social Security and Medicare half is paid by you and half is paid by your employer. So if in retirement, the government said, hey, we're going to tax up to half your Social Security benefit because half of that was money you put in and half, half of that's money the employer put in. I could I could I could say, okay, that's fair. Know I'm getting a benefit that I didn't pay for it. My employer pays for it and now I'm getting it in retirement. So I could justify in my mind, I don't want to pay taxes, but I could see some logic in, okay, we only tax you on 50% of your Social Security, but the tax you go on up to 85% of your Social Security. That means that the 35% of the income that they're taxing you on is money you've already taxed, you've already paid in, and now you're paying tax on it again. So it's definitely, definitely not a fair treatment of retirees, one to double tax part of their Social Security benefits or retirement and to to not index up the thresholds or the provisional income formula kicks in for the last or 30 years. Both of those things, in my opinion, are very unfair to retirees and makes it more and more of a of a reason why you need to plan early and make sure that you have conversations with your financial advisors so you can avoid as much tax or all the taxes you can on your Social Security.

Erick Arnett:
Yeah, thanks, Randy. And that's why we we we feel pretty strongly about the power of the Roth. You owe it to yourself to give us a call and explore that. You know, just a lot of benefits to the Roth. And imagine I'll never forget we were in a in an educational seminar and I was talking about the Roth IRA, and there was a gentleman in the crowd and he was in his seventies and he was kind of a big smile on his face. And, you know, he didn't seem real concerned. And I kind of called him out and he said, Oh, yeah. He said, I you know, when I was in my late fifties, early sixties, I ripped the Band-Aid off. I converted my IRA to a Roth, paid the taxes, got it over with. And now, ten, 15 years later, he's in his seventies. He could care less where tax rates go because his distributions now, when he does want to take a distribution because now he's free to take them whenever he wants, he's not required in the Roth to take a distribution. When he takes those distributions out, it's tax-free folks and it doesn't trigger more taxes on your Social Security and it doesn't throw you up into a higher marginal tax bracket. So you owe it to yourself. Let's put a plan in place to get you to and get you closer to that tax-free retirement. Super, super impactful. Randy, thank you for being on the show today and sharing that with us. And and once again, the strength of our team is having a CPA, right? Here on your team by your side. We got CFP, certified financial planners, CPAs, advisors. So we have a full team here, Medicare specialists, life insurance specialists, or a one stop shop. Give us a call. We're happy to help you out and get you on the right path to a stress free retirement and potentially a tax sensitive and a tax efficient retirement.

Producer:
Here's the cost cutter of the week.

Producer:
Yeah. Erick And that kind of brings us to our cost cutter of the week. You were just talking about Roths there. You know, there's only two types of truly tax free investments out there. And if people do have a goal of getting to a tax free retirement or at least having a portion of their income in retirement being tax-free, and that sure sounds like a good thing. You know, there's only two types and those are Roth IRAs in life insurance. Do you want to talk a little bit about index universal life insurance for maybe some of our younger listeners that are still in their forties and fifties and taking advantage of an IUL?

Erick Arnett:
Oh, yeah. I'm so glad you brought that up, Sam. I mean, so yeah, the Roth IRA, of course, a tax free bucket. But there's one other tool that's so underutilized and it's, it's the universal whole life policy. And you can call it a lump, if you like, a life insurance retirement plan. So life insurance and whole life can have two dual purposes. One, it can protect a risk and traditional life insurance if something happens. You know, you've got that lump sum death benefit that pops in to take care of that, but it also can act as a tax free retirement tool and help you generate tax free retirement. So this is huge. You owe it to yourself to to to educate yourself on this and truly understanding. So investing in an IUL, an index universal life policy in your forties and fifties has a massive impact because it will help eliminate future tax increases and generate more tax free income. When you're starting at age 67, when you start your Social Security or whatnot. So and all the way through retirement. So, you know, as an example, it's just an example. If you take a 55 year old man, he invests in you invest 2000 a month into a ten pay IUL for ten years, and he no longer has to pay monthly premiums.

Erick Arnett:
After ten years, it's estimated that he will be able to take tax-free withdrawals of $25,600 each year, starting at age 67 for the rest of his life. And he will have a $480,000 death benefit also to protect his family in case he should pass too soon. So huge, huge benefit. There's only a there's only two that we can really think of. That's the Roth IRA and the IUL, that once you're in retirement, you can pull money out of those tax free. And what what a powerful tool. So it just takes, like Randy said, early planning. Let's think about this early. Let's not just sit here and wait. Let's implement some of these programs and strategies now, you know, so you've got to get out in front of it now and it's super important. But that IUL is super, super important, super attractive. And so the O two self, if you don't truly understand them, let us walk you through it. We'll run some illustrations for you or educate you to the cows. Come home, we'll show you some quotes and really truly so you can understand how this works. But it might make sense to be contributing to one of those IUL instead of a traditional IRA. Even so, if we we know that we have 35 trillion in debt and counting, there's only two ways that we can take care of that debt.

Erick Arnett:
One is to cut expenses. Right. And we know that politicians don't like to do that. The other thing is that they can do is raise revenue, right? So that's increased taxes and fees on US and retirees. And so we know that in order to cover that $35 trillion debt, which is extremely concerning, they're going to have to raise taxes in the future. So if you have if you have the ability to take money out of an out of a bucket that's tax free and it doesn't trigger all these other taxes on your Social Security and your retirement, that's huge. We're talking like a 20, 30 year plan. So if tax rates go to 50, 60%, it doesn't matter. 50% of zero is zero. You don't have to pay tax on that income. So it just offers you freedom. So that's why I love this freedom plan idea. You know, it gives you more freedom. It gives you more control in your retirement as opposed to being a victim of the IRS and Uncle Sam just taxing you to death. And so we've got to get those strategies in place. It's never too late. So let's act now. Give us a.

Erick Arnett:
We're standing by the phone. 352 616 0511. Or just reach out on my website, take point wealth dot com, and click that button in the upper right hand corner and get right on my calendar. And let's get to work on that.

Producer:
I. Again, that number is 352 616 0511. That's 352 616 0511. Or visit Erick and the team online at Take Point Wealth dot com. And the upper right hand corner you'll find a schedule a chat button you can click on that And Erick, once people do get in touch with you, what's that initial process like when you start working with people and building a retirement plan?

Erick Arnett:
Yeah, so we do all the heavy lifting. I mean, we do all the work for you. It's it's really pretty simple. You if you reach out to me, we'll go to work for you. We're just going to start with a phone call, you know, maybe a Zoom session or to chat a little bit, try to learn as much as we can about you. And you know the you deserve this, people. I mean, if you're out there listening, you deserve this because you've been in a bad program. I mean, you've been in an old conventional system, you know, and you deserve better. So we've got to truly look at optimizing your investment and retirement plan and looking at all these different factors. So it's going to start out with just a little chat on the phone and then we'll try to gather the data and the information that we need from you and and every family, every person, every individual that we sit down with or talk to is going to have a different plan. You know, it's you've got to have a plan tailored for you, You know, the fact that you're just in some kind of conventional portfolio that the rest of America is in, no matter what their age, what their risk tolerance is, no matter what their needs are, no matter what their retirement income is, no matter when they're going to take Social Security, you're just in some kind of blanket program for everybody. You know, you deserve better. We need to tailor something specifically for you and your needs and to get you to and through retirement and to create that stress-free retirement.

Erick Arnett:
So you've got to take the first step, reach out to us. It's completely free. You have no obligation to work with us. You can take that plan and our ideas and do anything you want with them, you know, So we'll build the plan out for you and we'll share it with you. And basically what we do is we test it and we we try to optimize it. We'll throw 1000 scenarios, we'll stress test it. So we throw 1000 scenarios at good markets, bad markets, high rates, low rates, combinations thereof to to to to test the success and the probability of success for that plan. You may currently have a plan in place and you may think, Hey, my plans, great, it's working for me. So let's test it. You know, you know, you still have to take your car. You might you might love your car. I love my truck, but I still got to take that thing in for a tune up, you know, and make changes to it, to keep it running and keep it going smoothly and to to create longevity. You know, you just can't kind of keep doing the same thing. So, you know, and then we'll we'll basically deliver those ideas to you. We'll test them and then then do everything we can to optimize and back into what the best plan is for you. And so completely free to you don't have no obligation to do business with us. All you got to do is call and spend a little time and help us gather the data and information that we need.

Producer:
All right, Erick, And before we go, we promised the people that we would play this audio from Charlie Munger and Warren Buffett about cryptocurrency. Of course, crypto is in the news this week with FTC's filing for bankruptcy. You know, local athlete there in the Tampa area, Tom Brady was an investor in the Miami. The Miami Heat's basketball arena was named FTC's arena. And so now that is is likely to change. But let's take a listen to this clip from Warren Buffett and Charlie Munger. And this is actually from a couple of years ago. And they were warning on the dangers of cryptocurrency.

Charlie Munger :
In my life, I try and avoid things that are stupid and evil and make me look bad in comparison with somebody else. And Bitcoin does all three and it's stupid because it's very likely to go to zero and saying this is evil because it undermines the Federal Reserve system and the national currency system, which we desperately need to maintain its integrity. And and third, it makes us look foolish compared to the communist leader in China. He was smart enough to ban Bitcoin in China.

Warren Buffett:
If the people in this room owned all of the farmland in the United States and you said for a 1% interest in all the farmland in the United States by our group $25 Billion, I'll write your check this afternoon. 25 billion. Now I own 1% of the farmland. If you tell me you own 1% of the apartment houses in the United States, I'll write you a check. It's very simple. Now, if you told me you owned all of the Bitcoin in the world and you offered it to me for $25, I wouldn't take it because what would I do with it? It isn't going to do anything. The apartments are going to produce rental. And the farms are going to produce food that explains the difference between productive assets and something that depends on the next guy paying you more than the last guy got.

Producer:
All right, Erick, so moral of the story there is cryptocurrency, folks. Not a good place to put your hard-earned retirement dollars. Erick We had a good show today. It's the Thanksgiving season, so I'll turn it over to you for the final thoughts and we'll wrap up the show.

Erick Arnett:
Just want to wish everybody a great Thanksgiving hoppy holiday, enjoy your family, enjoy a good meal. And thank you so much for listening to us here on Take Point on Retirement radio. Give us a call. Reach out today and we'll get to work for you and look at all of these different options that are available to. But more than ever right now, take this time to enjoy your family and then give us a call when you're done.

Producer:
All right, Erick, And one more time. That number is 352 616 0511. That's 352 616 0511. Or visit them online at take point wealth dot com.

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 TakePointOnRetirement.com Or pick up the phone and call 352 616 0511. That's 352 616 0511.

Producer:
Investment Advisory Services offered through Brookstone Capital Management LLC Become a registered investment advisor 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:
They say you don't know what you don't know. But a growing number of states are trying to fix that when it comes to finances. I'm Matt McClure with the Retirement Dot Radio Network. Powered by Amerilife. In high school, students are often required to take advanced math courses like algebra and trigonometry. But for years, the basics of budgeting, bank accounts and savings have been neglected in the classroom. But that seems to be quickly changing. 21 states now require at least some form of financial education before students graduate high school. One of those states is Nevada. Governor Steve Sisolak recently told CNBC.

Steve Sisolak:
A great percentage, I think 50 some odd percent of Americans can't cover $1,000 emergency costs if it comes up without borrowing the money. So it tells us that we need to invest more. We have invested $2.5 million from the state into these programs and to make sure that it gets out, we address access and equity so that everybody gets this education. It's not just reserved for the upper class.

Producer:
Mississippi Governor Tate Reeves also told CNBC he knows firsthand how valuable a financial education can be. He graduated with a degree in economics and worked in the financial arena before running for office, which is.

Tate Reeves:
One of the reasons that I'm so passionate about trying to encourage my fellow Mississippians and really my fellow Americans to to make sure that financial literacy is available to as many people as possible. Because I really do think it can help Americans have a better life.

Producer:
In New Jersey, Governor Phil Murphy says programs there start as early as middle school.

Phil Murphy:
There's a temptation that comes with A lot of different things that you. All of a sudden think you can afford and you don't realize the consequences on the back end, whether it's physical items, whether it's meme stocks or whatever it might be, it's of getting kids at the earliest ages possible we. Think is critical.

Producer:
How well are the programs working? Well, it could be too early to tell. Money rates found mixed results in a recent survey, but its authors note that financial education itself is not a quick fix, so with more time results could improve. So how educated are you when it comes to your personal finances and planning for retirement? And are you going to pass down that knowledge to future generations? Those are key questions to consider as our financial lives become more complicated with the Retirement Dot Radio Network powered by Amerilife. I'm Matt McClure.

Producer:
Fixed annuities, including multi year 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.