New Year's Resolutions for a Better Retirement Transcript: Audio automatically transcribed by Sonix
New Year's Resolutions for a Better Retirement Transcript: this mp3 audio file was automatically transcribed by Sonix with the best speech-to-text algorithms. This transcript may contain errors.
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. Erick 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 Take Point Wealth.
Producer:
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. 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 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:
Welcome to take point on retirement radio. This is your host, Erick Arnett, and I'm joined by Mr Sam Davis as well today. Great week to be hosting the show this week. It's Christmas week and we're heading into the New Year. So super exciting. Hopefully everybody's getting prepared and have got all those last minute gifts put together. And Sam. Did you get your Christmas shopping done yet or what?
Producer:
All the gifts are wrapped there under the tree. I don't need to do anything else, but, you know, wrap up my responsibilities for work for the week and then really just enjoy spending time with family, which is what I enjoy doing the most around the holidays.
Erick Arnett:
That's impressive, man. That's impressive. I've still got a few things I got to pull together at last minute, but that's usually what I like to do. I like I like the intensity of the pressure. Yeah, I mean, sometimes the Christmas Eve.
Producer:
Yeah, no pressure, no diamonds and some. And sometimes that pressure can can inspire you and bring about the best gifts. But yeah, it's absolutely my favorite time of year, the holiday season. And you're right, you know, New Year's is right around the corner and we're going to be talking a little bit today about making twenty 20 to your best year yet, especially when it comes to personal finances and planning for retirement. And really, there's there's no need, you know, for twenty twenty two not to be your best year yet when it comes to planning for retirement. And we're speaking with Erick Arnett. He is the founder of Take Point Wealth Management, and you're listening to take point on retirement and one of the fastest ways you can really get a start on that New Year's resolution to start planning for retirement and start getting your personal finances in order better than they ever have been. It's just take point on retirement. Click that schedule appointment button and the upper right corner, and you'll be speaking with Erick directly and he can help you out. So we talked to a little bit about this last week, Erick, but let's just touch on it again. You know, what's it like to work with? Take point wealth management. And so when someone comes to you, what can they expect?
Erick Arnett:
Yeah, thanks for asking. So super. You know, it's first of all, let me just tell everybody Merry Christmas and and happy new year. And let's make it a great twenty twenty two. In the way that you can do that is just simply by picking up the phone or, like said, go to our website. Take point on retirement. Click on the upper right hand corner and start by setting an appointment. Just get on my calendar in twenty twenty two and let's talk about your future, and let's talk about setting you up for the best retirement possible. And I'm telling you, if you if you go through this exercise in twenty twenty two, you're going to set yourself up for many, many, many new years to come. So but to answer your question, Sam, it's pretty simple real laid back here at take point on retirement. You know, schedule an appointment with us if you have some questions or concerns or some things that are kind of keeping you up at night. And you know, you can do that by either calling us three five two six one six zero five five one one or you can like, say, go to the website, click on the upper right hand corner and you can go ahead and schedule an appointment. And what we're going to do is just really chat for about 15 20 minutes. It's that simple. I just want to get to know you a little bit. So our process is very disciplined. But the first initial, you know, discussion or consultation is extremely laid back.
Erick Arnett:
It's just, like you said, to get to know you and find out, you know, when are you planning on retiring? How do things look currently? Do you have a plan? If you have a plan, great. Let's talk about it. Maybe you don't have a. Planned at all. And it's been kind of weighing on your mind and you've been putting it off, putting it off, and it's like, Hey, I know I need to put a plan in place and talk to a professional, but I just haven't done it yet. So make that New Year's resolution to go ahead and get that done once we sit and talk for a little bit. What I'm going to do is I'm going to kind of digest all that information. I'm going to go back and start building out your optimized retirement plan. So I'm going to optimize your plan from A to Z. You know, it's encompassing everything from Social Security, when and when to take Social Security, how to take it. So for couples, there's multiple strategies, so we've got to talk about that. And one very important thing to point out where I think take point. Wealth management is a little bit different than other firms and other advisors out there is that we have in-house accounting. We have a CPA on on board and we actually are joined today by our co-host and co-sponsor, Mr. Randy Woodruff from Suncoast CPA Group. And so Randy is going to be jumping here in a little bit, but so we also want to look at your taxes, OK? Of course, we talk about it all the time on, on our shows and our seminars and our workshops and everything we do.
Erick Arnett:
But taxes are really important, right? So in how your retirement plan is positioned and is it tax efficient? Is your retirement plan market efficient? Are you? Is your portfolio too risky? Is it not risky enough? You know, should I have long term care insurance? Do I have an estate plan? You know, everything you can possibly think of that's maybe rattling around in your head that you're not quite sure about. We can help put that together for you here at take point on retirement and take point wealth management. And by the way, my it's always been our commitment to you, our listeners. If you're out there listening and you call in. It's not going to. It's not going to cost you a dime. Ok? And you know, quite frankly, we kind of struggle with that for a long time. Do we charge people? Do we not charge people? And I just didn't want it to be a hindrance or a barrier to folks picking up the phone and getting some help because they were concerned about costs. So initially, there is no cost at all, and we will actually take you through and build an entire retirement plan for you. And at the end of the day, if there is something that we have done, that makes sense. And at that point you want to implement a strategy with us. Great. If not, that's OK. It's your plan to take and keep and go wherever you may need to go.
Erick Arnett:
If you have a current adviser that you're happy with, that's fine. We just want to make sure people are actively taking a look at this and preparing themselves once again for a market efficient, tax efficient and a fee efficient retirement. And so, you know, it's a real simple process. We do it every day here. And you know, I think it's it's it's exciting because it's truly educational for folks to walk through this path. And then once we deliver the plan to them, you know, by the way, we can do it over Zoom. You don't even have to come into our office. We can click right into your home and bring up the screens, and I can show you the charts. I can show you the plan, I can show you the projections. And what we do, which is kind of cool, is we take one thousand scenarios and throw it at your plan. So it's called a Monte Carlo simulation. And so good markets, bad markets, inflation deflation combinations thereof, and we see how your plan is going to hold up. So like I said earlier, maybe you already have a plan. Well, let's test it and see how it's going to hold up 10, 15, 20, 30 years into the future and get some probability of success because that's going to build confidence and clarity. And by the way, once that plans in place, you need a strong advisor, a good advisor that believes in communication that's going to sit down with you every year and look at that plan and make sure that that plan is still on track because so much change is right.
Erick Arnett:
We talk about it all the time on this show. You know, maybe five years ago, it was great to have bonds in your portfolio. Well, guess what, this year, this past year, twenty twenty one and twenty twenty two and maybe into twenty twenty three and even maybe in the next five years, it's not going to be a good idea to have a lot of bonds in your portfolio. So we're actively need to make those shifts, right? So you just can't set it and forget it. It's just not going to get to your goals and maybe you will get to your goals. But are you truly achieving the best that you can? And the only way that you can do that is to constantly, constantly look at your plan, massage it, change it, you know, and have an advisor that's truly in the game with you. So with that being said, say. I'd like to introduce Mr. Woodruff, and so we're new in Tampa now, so our Tampa listeners, everybody up here in the Nature Coast already knows Mr. Woodruff. But I'd like to introduce him to our Tampa market seems how we're broadcasting down in Tampa now as well, which is super exciting. And just have Mr. Woodruff, you know, talk a little bit about about himself, explain what he does and kind of what his passions are and what drives him. Is that OK? Do we get time to do that?
Producer:
Yeah, we absolutely have time to do that. So, Randy, tell us, tell us what you're all about.
Randy Woodruff:
Great. Thank you, Sam. Erick and I have been together doing this for years, and Erickk and I together help, you know our current clients and new clients achieve financial freedom. That is our goal. I come in being a CPA. I've been a CPA for over twenty five years, almost 30 and helping clients out that are individual clients, business clients, retirees, younger folks put together a plan that's going to help them achieve financial freedom. And as Erick mentioned, having a tax efficient portfolio and plan is very important to achieving financial freedom. So when my main focus is with take point is to clients, come in, get a look at their taxes. And as Erick and I strategize, find ways to not only help them make money, protect their assets, preserve their assets, create financial freedom, but do it in a very tax efficient way.
Erick Arnett:
I like to talk about real world examples, so and just kind of explain to people how Randy and I work together every day. So as an example, you know, throughout November, December, we're meeting with our clients, all of our clients, to do year end street tax strategies. So it may be tax harvesting in your portfolio. It may be coming up with, you know, some new ideas for deductions and so forth. So I strongly urge if your current advisor isn't having those year end meetings with you, say in November or early December to go through your portfolios and make changes and to take advantage of potential losses or even even gains like, you know, we met with some clients last week and they had some realized losses that they had way back when in their account. And this year they had some big gains. So we harvest those and without creating any taxation, we can take advantage of, you know, profit taking and then setting up the portfolio once again for success in the future. So I encourage our retirement warriors out there. It's a little late at this point, but, you know, never, never too late for next year. Make sure your advisory team is doing that kind of year end planning with you very, very important and make sure you have. That's the cool thing about take point wealth managers. We wrap a team of professionals around you. It's not just myself as the lead advisor, it's Randy as the lead CPA. We have certified financial planners, we have CFOs, you know, we have a wealth of talent behind us delivering the best options and the best plan for our clients.
Erick Arnett:
So super excited about that. But to answer your first question, Sam, is we see this every every day and it's it gets more and more concerning to us going forward and why we talk about this all the time on our show and we're trying to motivate folks to get in to talk to us and to get on the right path and start making some changes. But there's really three buckets that you can put your money in. You've got the taxable bucket, which is, you know, just your regular investment accounts, your savings accounts, your checking accounts, those those accounts that you're getting that ten point ninety nine on every year, you're getting interest and dividends and you're paying tax on that annually. And Randy can tell you attest to that, that you know those dividends, those interests go to your bottom line and you are taxed on those depending on what bracket you're in and and how many deductions you have and whether you're married, not married or not. So forth what exactly you're going to pay on those dividends, interest and even capital gains. So that's important. So those are your taxable accounts. Then you have your tax deferred accounts, which are your IRAs, your 401Ks, you know, these accounts that I think probably ninety five percent of AmEricka who saved for retirement has and most of our listeners out there today, if if you're listening kind of sit there and think about taking inventory real quick of of, where is your money? Is it a tax deferred account like a four one K or an IRA? Or is it in a tax free bucket? So the third bucket, the bucket that we love most as tax planners and investment advisors and retirement planners is that tax free bucket.
Erick Arnett:
So how much money do you have in your tax free bucket? Sit there and think about that for a second and ride it out. How much do you have in your taxable? Your tax free and your tax deferred buckets? You know you should have at least in an optimal plan. You know, some I would say it would be nice if you had, you know, 30, three percent and each, you know, kind of a nice even distribution across all those buckets. But what we find, unfortunately, is that everybody has all of their money. Most of the time in the tax deferred bucket, which is their 401ks or IRAs and and most people think, you know, because they've been kind of told this through conventional wisdom over time that, oh, don't worry, you know, you're going to be in a smaller tax bracket when you get into retirement. And Randi, I mean, you've been doing this for almost 30 years. What do you see? I mean, do you see that that's actually true or is it sometimes just the opposite?
Randy Woodruff:
I think it's very true, and a lot of people you mentioned do have a lot of their retirement savings in those tax deferred accounts. And what we're seeing and not just seeing what we're hearing, we're not really seeing it yet, but we're hearing a lot of chatter on Washington, D.C. about tax rates, you know, potentially having to go up in the future. We've been talking on our show for over a year. We know that there's a lot of government spending going on. Eventually that's going to come home to roost. And I heard a I was listening to show this morning on finance.
Erick Arnett:
And all right. Well, wait a second. Were you you were listening to somebody else's show? Oh, come on, man.
Randy Woodruff:
It was a national show, though
Erick Arnett:
I don't know if, folks, I don't know if we should allow them to continue listening to other shows. There's only one show in the Tampa Bay Area. You know that, right? All right. I'm just kidding.
Randy Woodruff:
I was. It was. But it was an interesting comment and that our our national deficit is one and a half times our national GDP. You know, that's a staggering number. The things that our deficits are at around twenty nine trillion, our GDP around twenty. And so as we've been saying on this show for a long time, you know, we feel like tax rates are going to have to go up to keep up with our, you know, the amount of money we're spending at the national level. And so for years back to your point, people have been told when they've been putting money into four one KS and IRAs. Hey, yeah, you're making all your money now. When you get to retirement, you're not making as much money. You'll be in a lower tax bracket, then you can pull them, pull the money out, then. Well, that may not be true. Yeah, it depends how much money you have in your having your four one K or your IRA and other tax deferred accounts. What tax rates are then? So one of the things we like to do is to get people to that nice, harmonious balance of, you know, part of your money in tax free, tax deferred and taxable. I mean, the more you have in tax free, especially going into retirement, you know, I don't say the better off you are.
Randy Woodruff:
But the the the more flexibility you're going to have in planning and tax planning because as we as Erick mentioned, we look to harvest gains and other other things that we do at the end of the year. If we bring Erick and his advisers have more of, say, tools and those tools are again taxable tax free tax deferred buckets, the more the better allocation we have of assets in those buckets. In terms of how much is allocated in those buckets, the more we can pull from different accounts based on what you have going on during the year. So all that all works together and planning earlier, earlier in life to have that better allocation is better off than waiting till you get to retirement and trying to allocate then is it's I'm not saying it can't be done, but it may be not as efficient as it is if you plan earlier in life. So as we've said along on our shows all the time, you know, playing early and maintain that plan, update the plan, modify the plan, monitor the plan and as you get into retirement, you have a much better chance of of having a more stress free retirement in terms of participating in the market taxation and enjoying those golden years.
Erick Arnett:
And I know this is going to seem a little painful and sometimes I tell people this in meetings when I first meet with them, you know, you've worked your butt off your whole life to save this money and think about this for a second. Just stop and think if you're listening Uncle Sam, more than likely with what Randy just alluded to with the complete just utter chaos up there in Washington and the unlimited spending that these guys are doing that you're going to potentially be a partner with the IRS, your 401k, maybe 40, 50, 60. We've seen as high as even 70 percent tax rates in our historical past on your retirement account. So you've worked hard your whole life, you've paid taxes, you saved this money for retirement. And now guess what? You could actually be giving up 40, 50, 60 percent of that we have to get. Out in front of that, now, I don't care if you're in your 30s, 40s, 50s or even in your sixties or seventies. There's things that we can do. Heck, we just did a Roth conversion for a 78 year old man. Mm hmm. Because he has a younger wife, OK? You know, a few years younger than him. But irregardless of that, it's never too late. And so we've got to get really serious about this and kind of get our head out of the sand and stop just pretending like it's not going to happen.
Erick Arnett:
This country is on a crazy, crazy spending spree right now, and that's one of the reasons why we have this insane inflation. And there's a bill being run up out there that I don't know how we're going to pay it back unless they start taxing the Baby Boomers and that 60 odd trillion dollars or so that's sitting in retirement funds. Ok, so they're coming for you. There's no doubt about it. So we need to start planning now. Right now, please pick up the phone, please go to the website and set an appointment so we can start putting a plan in place now. You know, the Roth has just been an underlying underutilized tool, and it's just because there's no billboards out there on seventy five or I-4 or, you know, the government isn't putting forth any public service announcements that say, Hey, we got this great thing over here called the Roth account. You can put your money in it and then you can take it out tax free. Ok? You just hear me. I just said free. Everybody should their ears should perk up. Right? Free is me, right? You love the word free, tax free.
Erick Arnett:
So if you could actually build a retirement and then be able to take that money out tax free? So if tax rates go to 60 70 percent, it doesn't matter 70 percent of zero zero. And so the Roth conversion is simply this. I mean, you can take your current qualified funds, your IRA, your four one K, you can roll it over to a Roth. And you're going to pay taxes on that. Ok, so, you know, depending on where you're at tax wise, that's why you need to come in and sit down and talk to us or do a live chat with Randy and I so we can really get a true picture of where you're at. But we can sit there and say, Hey, we know exactly how much you would pay in taxes if you did x amount and conversion. So once you convert those dollars, they go into your Roth and they have to stay there for five years. And once they're there for five years now, you can pull that money out tax free in retirement. And the most important thing that I love, love, love, love that isn't talked about that much. With the Roth is once your money is in that Roth, there is no required minimum distributions.
Randy Woodruff:
I was going to bring that point up.
Erick Arnett:
Yeah, yeah, I mean, that's that is huge because I know Randy can attest to this as well in his practice is that a lot of times we have folks, you know, seventy two, seventy three, seventy four years old and there they have to take this money out, you know, 40, 50, 60 thousand that goes to their bottom line and they're taxed on all that money. Plus it causes taxes on their Social Security, right? Maybe their Medicare is going to go up. So, you know, it's really, really, really important that we talk about this and get a handle on it. And, you know, so you know a lot more to talk about there. Obviously, it's not just that simple, but that's why folks need to give us a call (352) 616-0511 call today, and we'll do this absolutely free analysis for you and and get you guys started on. I'll do a Roth conversion for you. Pop it in your email and you can open up and we can go through and talk about it and show you just how huge it's going to be in those latter years. So we talk about all the time on the show is we're trying to get people to think, not just about today. What would the markets do today, what the markets do gesture what's market going to do tomorrow where I want people to talk about what their plan is going to look like five years from now, 10 years from now, 15, 20, 30 years from now? What is your plan going to look like and how is it being taxed?
Randy Woodruff:
I want to share a brief success story about Roth IRAs and we this happened last year during towards the end of 2020 and had a client that became a client about five years ago. They've been in business for many, many years, and with the pandemic that hit back in 2020, it had a significant impact on their business, negative impact on their business, and they had losses in the seven figure dollar range. And so but they had at least that much in their traditional IRAs and four when actually was a rollover for one K from prior employment and prior retirement planning. So we were able to offset that entire loss in their business with a Roth conversion. So basically, the Roth conversion for them that year cost of no money in taxes. And as Erick mentioned, there are no RMD requirements in the future and they can now pass this Roth IRA onto their family through there, through it, through an inheritance and the children. All of this all the time, this money is growing tax free, growing tax free. So when the children get to retirement age, they get to pull this money out and it's tax free to them as well. So we're talking about a seven figure number that is now growing tax free, probably for the next 40 years.
Randy Woodruff:
And so when the children get to retirement, they will be able to pull that money and get it's tax free. So here again, that's kind of a rare example of Roth. Iras are good for everybody to take a look at a Roth IRA conversion of that size and the magnitude we talked about in terms of passing to the children and everything here again with proper planning. And here again, we use the negative with the pandemic turned it into a positive so it can't be in distress enough as distressing to Roth IRA conversions. Everybody that has money in a tax deferred account at least needs to consider, do some projections and see if it's a good thing for you to do here again. Nobody likes paying tax before they have to, right? But you may want to pay tax today when tax rates are lower than paying them in the future, when tax rates are a lot or could could potentially be significantly higher. And it gives you the ability to pass that IRA onto your children and they don't have to pull the money out. They can pull it out when they get to retirement. So you have years, perhaps decades, of tax free growth as an inheritance tool and mechanism.
Producer:
We're talking to Erick Arnett and Randy Woodruff with Take Point Wealth Management. A fantastic team can help you with your retirement planning, tax planning, estate planning the whole thing and go ahead and get a head start on your New Year's resolution to make twenty twenty to your best year. Yet when it comes to planning for retirement, give them a call right now. (352) 616-0511 That's (352) 616-0511 or just visit take point on retirement. When we come back, we're going to talk about a few of the key rules to keep in mind when planning for retirement, and we're going to get to some of those questions that we've been asked. You're listening to take point on retirement.
Producer:
You're listening to take point on retirement to schedule your free no obligation consultation. Visit take point on retirement. 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. Erick 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 Take Point Wealth. Welcome back to take point on retirement schedule, your free financial consultation now at take point on retirement.
Erick Arnett:
Hey, welcome back to take point on retirement radio. This is Erick Harnett, your host. And with me as Mr. Randy Woodruff, so wanted to get into talking about the three rules for building a better retirement. And so maybe these could be some of your New Year's resolutions to really sit down and get with your spouse or your partner or yourself or whoever it is that you may be with and kind of write this down and start thinking about it, you know? And then I want to get into some actual specifics as to what we can do and how we can position our retirement plans for twenty twenty two and for success. So one of the things that we talk about and you know, is is having a market efficient portfolio. And part of that is is, you know, what type of risk are you taking in your portfolio? Are you taking too much risk for the return you're getting? Are you not taking enough risk? Are you not getting enough return? So I wrote a book about this call What is your financial speed? Everybody out there has a different financial speed. So, you know, so one of the rules of thumb, that is a great rule. It's not applicable to everybody by any means, but it's definitely something that is worth further discussion as the Rule one hundred. And so we've heard this rule before, and this is just a kind of a jump off point to kind of figure out what type of risk you should be taking in your portfolio. So Rule one is pretty simple you just take your age.
Erick Arnett:
So as an example, let's say you're 60 years old, you're going to subtract it from one hundred and you're going to get 40 40 percent. So 40 percent of your assets should be at risk in the market. And so and like I said, this isn't necessarily for everybody. I mean, we have folks in their nineties that, you know, because of their objectives and their goals, they might be one hundred percent stock, you know, so but this is actually a pretty good starting point. And so 40 percent in risk, right in the markets. So what do you do with the other 60 percent right now? So traditionally and conventional wisdom has told us and probably every broker or advisor or planner out there that you've spoken to, they're going to run you run you through this standard kind of questionnaire and then it's going to spit out a score and it's going to say, OK, you're a moderate investor, which means you don't want to take too much risk. You're not real comfortable with high risk, but you're also not comfortable with having your money on all under the mattress. You need to make a little bit of money, you know, for six eight percent somewhere in there. So we're going to put you in this thing called the moderate portfolio, and it's about 60 percent stocks, 40 percent bonds or 50 percent stocks, 50 percent bonds somewhere in there. Well, the 50 percent in the 60 percent in bonds is typically what's been utilized to minimize risk and to hedge against the stock market.
Erick Arnett:
And this is the conventional portfolio that probably ninety nine percent of our listeners out there have. And so we are kind of flipping the industry upside down and kind of flipping it around and and it's hard for some people to grasp. But we absolutely feel very strongly that you've got to be really careful about having so much money in bonds going forward. So as an example this year, right now, the aggregate bond index, which is a which is the barometer for all bonds out there, is down about four percent negative four percent year to date. And so in that portfolio, you have, you know, if you're in that moderate portfolio, 60 percent of your assets are down four percent and you're probably paying a fee also on that 60 percent. So let's just say I have a million dollar portfolio and six hundred thousand of it's in bonds or fixed income allocations. You get your little report every month and you look on the chart and it has fixed income. And most of you have out there probably don't even know what that means, but it means 60 percent of your accounts sitting in a dead asset class bonds and they're losing money. And you're also probably paying a one percent or even higher fee, maybe one and a half two percent fee on that portion of your portfolio. So now you're looking at a negative four or five, six percent on six hundred thousand. Do the math, folks. That's real money, right? And so.
Randy Woodruff:
Well, so you're paying money to lose
Erick Arnett:
Money, so you're paying money to lose money, and it's not right and it's not fair. And I get pretty pumped out about pumped up about it. I'm passionate about it when and this is why we became independent and we don't work for one firm because we know there's better things out there for our clients and we know there's better strategies and better solutions. And we are we're forward thinkers and we're always changing our portfolios, massaging things, looking for better options for our clients. But if you have 60 percent of your portfolio just kind of deteriorating now, you add inflation this year, which was like six percent to it. So what's your real return on that portion of your portfolio? Negative 10, negative 10
Randy Woodruff:
Plus plus plus fees,
Erick Arnett:
Plus your fees? I mean, so listen, folks, we've got to reposition your portfolios and look at bond alternatives, alternatives to the portion of your portfolio and the bonds. So wouldn't it be nice if you had the 40 percent of your portfolio at risk in the markets being actively managed and monitored, which is, you know, for your goals and long term needs, but that other 60 percent of the portfolio is paying no fees. Has no interest rate risk, because keep in mind, folks. Yes, twenty twenty one was a bad year for bonds, but guess what? Twenty twenty two, twenty twenty three is probably going to be even worse because what the Fed just come out and say, the Fed just came out and said. We're going to have to raise rates three or more times next year, and so little education on bond pricing is as interest rates go up, bond values go down. And that's why bond buyers have already gone down so much this year is because it's already anticipating the markets are forward looking. It's anticipating these increases in the bond market. Maybe it was OK, you know, and you just didn't know better. But for twenty twenty two, if you're listening to this show, you do know better.
Erick Arnett:
So we need to reposition things going forward. So Sam, I would love for you to play an audio clip from a good friend of mine, Mr. Ford Stokes wrote a book called Annuity 360. Learn all you need to know about annuities. Ford's a great friend of ours. We have a ton of copies of these here in the office. Please, please, please. If you don't do anything as a free Christmas gift. Click on and set an appointment with me real quick up in the upper right hand corner of my website or give us a call (352) 616-0511 And I'm going to send you a free copy of this book for you to read at your own leisure with no pressure. And then once you're done reading that book, all I want to do is talk about it. That's it. I just want to circle back and talk about it and see what you got from it. But Sam, right now, I'd love for you to just play that clip about bond alternatives and what an index annuity could potentially do and fill that to fill that bond replacement that we're so passionate about.
Ford Stokes:
Chapter 15 Bond replacement with fixed indexed annuities Big idea Historically, bonds have seen volatility when the market is volatile. Fixed index 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. Am I 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 nineteen hundred saw two secular bear and bull markets in U.S. 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 U.S. government kept bond yields artificially low until nineteen fifty one. The long term bond yields were at one point nine percent in nineteen fifty one. They climbed to nearly 15 percent in nineteen eighty one. In the nineteen seventies, 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.
Ford Stokes:
Early 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 twenty first century. Long term bond yields declined from a high of 15 percent to seven percent by the end of the century. The bull market in bonds showed continued strength in the early twenty first century, but there is no guarantee with our current market volatility that this will hold. See Chart fifteen point one 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 twenty four twenty twenty. The ten year Treasury note was yielding zero point sixty four percent and the 30 year Treasury bond was at one point twenty seven percent.
Ford Stokes:
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, one hundred thousand Treasury note with an interest rate of six percent. They expect it to earn $6000 a year at the end of the term. Interest rates are four percent. If the investor buys another 10 year note, they will earn four thousand instead of six thousand 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.
Ford Stokes:
Business risk There are two types of risk Internal and external internal refers to operational efficiency and 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 were actually paying. Standard & Poor's estimates of bond markups is zero point eight five percent of the value for corporate bonds and one point twenty one percent for municipal bonds. However, markups can be as high as five percent, up to 50 dollars 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 once again.
Erick Arnett:
Super Super important. Get your free copy of Annuity three sixty right now.
Randy Woodruff:
It's a very easy book to read. It's I mean, it's probably what's maybe 80 pages of that, and it's it's it's fantastic.
Erick Arnett:
I mean, it's about 80 pages is a quick, easy read. And I think that the education that folks will gather from that will be tremendous. But utilizing the index annuity as opposed to bonds, at least for the next five years, you know, and once five years is up and maybe bonds reset to a more normalized value and not it's not as volatile, then we can always pick up bonds again. I mean, your portfolio with us, as always, it's always moving. You know, it's not just a passive kind of static, it's an active portfolio. We can make changes, but that's why we're so right now. If your advisor is not calling you and making changes, there's a reason why they don't have the tools. So we've got the tools we need to make these changes. And the indexed annuity is fantastic because it's only going to give you market upside, no downside risk, no fees. And it's also tax deferred, by the way, which is which is excellent. But we like that it's going to give you that bond alternative to where we can take out the volatility and the negative returns in your portfolio, which is which is huge. So, you know, think about this, folks, if we have negative returns in the stock market next year or some volatility and you have negative returns in the bond market, which can happen, you know, typically they always acted inversely to each other. But that's not necessarily the case all the time. You can have a double whammy in your portfolio. In fact, I've listened to a lot of experts and economists, and they say that going forward, a moderate portfolio of 50 50 blend is really a dismal return. They're looking at three percent returns and that type of portfolio, potentially. So we need to do much better, better than that. And that's why we love, love, love this book, so please call and get your free copy.
Randy Woodruff:
So how long have interest rates been? This low interest rates have been historically low for several years now, so if your portfolio was being actively managed, your your financial advisor would have been saying, hey, eventually more than likely rates are either going to go up, which is going to call you your bond values to go down or rates. You're going to stay low for a long time, which means you should get out of bonds as well and find other alternatives. So as you use the term, conventional wisdom dictates there's a ton of different products out there that that give you some flexibility and allow you to eventually achieve a better return.
Erick Arnett:
Yeah, so so jumping right to our next rule, the four percent rule, it's all. Tied together, so think about this, the four percent rule is, you know, if really the max you should probably be taking or drawing off of your retirement portfolios. So a four percent withdrawal rate, you know, world renowned economists and underwriters and actuaries have done these studies and they say that this is a pretty good rule to live by, you know, so if you have a million dollar portfolio, four percent is 40 grand a year, that's really what you should be taking from your portfolio each year so that the value of your portfolio remains healthy throughout your retirement. But think about this if you have to pull four percent, but your bonds aren't making anything. In fact, I'm losing money now. You're pulling four percent off of a portfolio that is deteriorating, you know, on top of the fees and everything else. So. And think about this, if your portfolio goes down five, 10 percent, you now have to make twenty twenty one percent or more to get that back. And that's not easy to do. So the four percent rule is and also a great rule to live by, and that's why it's synonymous with this rule one hundred and making sure that your portfolio has the right amount of risk in it. And also utilizing right now, I'm super passionate about this. Please call. We've got to get those bonds out of your portfolio, reconstruct it and allocate to index annuities, plus your your equities in your market. And that's going to set you up much better for a better future in that four percent rule. Your portfolio is probably going to be a lot more likely to hang in there and be able to keep up with that. So we don't need those big down negative years.
Randy Woodruff:
It's important to that four percent rule, not just talking about annuities and allocation, but just what you need to have for retirement. We've had clients that come in over the years and you know, they're in their sixties and they're like, What? How am I looking? And they haven't really done any really planning and preparation their entire life. And so if they're going to follow the four percent rule, they're not going to have a lot to live on. So if you're listening out there and you're younger, now's the time to start. Don't wait until you're in your 50s or 60s. The more the earlier you plan in life, the more your money has time to compound, and the more likely you are to be able to achieve a portfolio that's large enough to allow you to live comfortably on this four percent rule.
Erick Arnett:
Yeah, but also not only. Is are the bonds in the fees potentially kind of deteriorating your portfolio, but we don't even mention the taxes, so yeah, when you take that four percent out, you're going to pay tax on top of that as well. So the real effective rate of that four percent could be, you know, much, much, much, much lower. So we don't want to see portfolio portfolio values deteriorate because the number one concern for all retirees is what will I have enough money to live on? Well, have enough money to live on and I don't want to run out of money. So we've got to create that perfect income stream or that best the best potential income stream that we can for you.
Randy Woodruff:
One of the things I've noticed over the years is working with clients, whether it be in their financial portfolios or their taxes or their business making it. Sometimes they need to make a decision to close their business down. You know, the sooner you get in and the sooner you confront the reality of, Hey, I don't have enough money for retirement, I'm not saving enough money for retirement. You may not like what you hear. You may not like the results, but at least, you know, and certainly you can't just keep burying your head in the sand because you know you're you're not there. You got to get in. You got to get a plan in place to just start solving the problem.
Erick Arnett:
Yeah, I was reading a blog this morning. I I tune into a few blogs and some way, way, way, way, way, way. I was tweeting earlier in the show, Now you're doing the same thing. This was not a financial necessarily financial one, but but but it was talking about that as like people will spend a bunch of time planning for vacations, planning on trips or planning things that may be fun or whatever it may be like. We'll spend a lot of time at work, you know, doing all kinds of planning, but we won't just sit down for an hour or two with our wives or our spouses or our partners and our advisor and do some planning for our retirements in our future, which, by the way, with us here at take point on retirement, cost you nothing but time. We're not going to charge you a dime. And when you walk away with that plan, it's yours to keep. Ok. And so and there's no pressure. Randy and I are going to be here with a gun to your head like, Hey, you got to do business with us. Of course, we would love to earn your business, no doubt about it, but it's your plan to take and you're planning to walk away with so real important to get this last ruling before we wrap up today, the three rules for building a better retirement is Rule seventy two. So this one here is super important because are you actually monitoring the performance of your portfolio? Are you monitoring how your portfolios are doing versus the benchmarks? How do you know if your portfolio is performing well? I mean, I do these reviews for clients all the time, and I pull out the data show, you know, you're averaging about three percent in your portfolio and like, well, I had no idea.
Erick Arnett:
So you need to know how is your portfolio performing what what kind of fees are you paying and how are you doing against your peers? So a benchmark is just this. If you have an S&P 500 type portfolio, you know it's a broad blue chip portfolio. Are you beating the S&P? Are you beating the Dow? You being the Nasdaq? If you have a bunch of technology stocks? How are your bonds doing versus the aggregate bond index? You know, so we look and compare it to these benchmarks and show you, Hey, are you performing well or are you underperforming your peers and the benchmarks that are out there? But Rule Seventy Two is really important. It's real simple. If you just divide seventy two by the annual rate of return that you're estimating or expecting. This is how many years it should take in order to duplicate or double your portfolio. So just a real simple example. If you have a one hundred thousand dollar portfolio and you've been averaging around 10 percent, you divide that 10 percent by one hundred, you get seven point two years. So within seven point two years, you should grow your portfolio to two hundred thousand or double it. So think about this look back over the last 10 years, you know, if your portfolio hasn't doubled or or is it close to that, then there's potentially a really good reason why there's probably a lot of inefficiencies in it.
Erick Arnett:
The fees are too high, the commissions are too high, the taxes are too high or the risk is too high. And you get too much volatility because think about it, if you have a high risk portfolio and it goes down 20 30 percent or even 10 percent, you've got to now make twenty twenty one percent, maybe twenty two percent with fees to get that back to its high water mark or back to back to its ground level. So if you have one hundred thousand dollars and it goes down 20 percent, you're at 80. Well, you've got to make a big return to get from 80 back to one hundred. Things fall a lot quicker than they than they rebound. Ok. It's real simple. I mean, it's. Easier to run down the stairs than it is to climb them, so real, real important. Make sure you know you're asking these questions of your current adviser if you're just kind of doing things on your own. Give us a call. We're happy to help you out. Let's see how you're doing. Are you? Are you set up for the four percent rule? Has your money doubled in the last 10 years or better? And then, you know, how is your portfolio allocated for the future? Is it allocated for success? You know, do you have too much in bonds right now? These are all the things that kind of keep me up at night, and I just hope that folks call. I hope that people set an appointment and just get a hold of us so we can help as many people as possible. And we're just super, super passionate about that.
Producer:
And Erick, we've got one question. We've got just a couple of minutes left in the show, but I want to get to this one question from a pre retiree. They're asking the idea of not working makes me feel uncertain about our financial future. How can I know that the resources I've accumulated will help me meet my needs for the rest of my life? And I really think this question hits at the heart of what you guys provide at take point wealth management. So could you help put this pre-retirees at ease a little bit and let them know what to expect?
Erick Arnett:
Yeah, it's perfect. I mean, this is a perfect candidate for our take point on retirement free analysis, free retirement plan, because we're going to answer all those questions and we're going to put it into a nice, clear, concise picture and answer all those questions for you to know, are you going to be OK? Are you going to have a shortfall? Do you need to spend a little less? Do you maybe need to make a little bit more? Do you need to retire a little bit later as your portfolio not properly allocated to get the returns that you need to and throughout retirement? Are you paying too much taxes? Are you paying too much fees and commissions? I mean, sometimes we pull out a portfolios that people are paying three, four or five percent in expenses and they didn't even know it. So to answer your question, the way that you do that is please, please get in here and let us do a plan for you so you can build the confidence. And more important, build the clarity, have clarity that you know what you're doing is working.
Randy Woodruff:
And one of the things too, we talked earlier and I want to touch you about it too. And people get to retirement. We talked about the, you know, the rule of one hundred and as you get later and later in life, you'd be taking less and less risk. And I can't tell me how many times we've sat down with clients and analyze their portfolios, and we were surprised or somewhat sometimes shocked at how much risk they had in their portfolio for their age. And so they would get another point. As you're as you're nearing retirement, you're concerned about not working anymore. You want to make sure your portfolio is properly allocated and that and that you're taking the appropriate level of risk for where you're at in life.
Erick Arnett:
Yeah, exactly. It's called standard deviation. We pull that right out of your report. It's called the wobble factor. So if you have a high standard deviation or high wobble factor, but your return is low, you're taking way too much risk for the return you're getting. We want to build the portfolio to where your risk is truly in line with with the returns that you're achieving. So let's get things in line for you.
Producer:
(352) 616-0511 Once again (352) 616-0511 We've reached the end of our time here today. You've been listening to take point on retirement, and all it takes is calling that number or visiting take point on retirement. You can work with Randy, you can work with Erick and the rest of the team over at Take Point Wealth Management, and they'll get you set up and you'll be on your way to having your best year yet in twenty twenty two. Well, gentlemen, have a great holiday season and we'll see you in the new year.
Erick Arnett:
Thank you, Sam. Same to you and to all listeners. Merry Christmas and Happy New Year!
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 the Brookstone Capital Management LLC. Bcm, a registered investment advisor and Take Joint Wealth Management, are independent of each other. Insurance products and services are not offered through VCM, but are offered and sold through individually licensed and appointed agents. Investments involve risk and, unless otherwise stated, are not guaranteed. Fast performance cannot be used as an indicator to determine future results.
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