12.17.22: Audio automatically transcribed by Sonix

12.17.22: 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 Retirement Unbroken with your host, Merrit Strunk. Merrit is a licensed fiduciary and financial advisor who always places your needs first. Merrit works hard each day to educate Americans like you on how to reach the financial freedom they've worked so hard for. And he can help you, too. So now let's start the show. Here's Merrit Strunk.

Merrit Strunk:
Hey, welcome again to the Retirement Unbroken Show. This is Merrit Strunk. I am the chief investment advisor at Momentum Financial and the host of the show and the podcast. I want to thank you for being here. And if you're here and you're a regular listener, then you know what our charge is? Our charge is to educate you, equip you, give you the knowledge so that you can unlock the potential for your financial future. We're going to have a great show here today. We've got a lot of stuff going on. But look, before we do that, have you ever been to our website RetirementUnbroken.com? And if you do that, you can always reach out to us. You can click a button here and say, Hey, I want a complimentary consultation online. I got some questions about what's going on in the world of financial and retirement planning because there are so many things that are going on and it helps to have a sounding board. You can reach us at the phone too at 858 521 9700. And on the podcast site you can listen to us pretty much anywhere you can find podcasts. Just type in Retirement Unbroken and you'll see my face and retirement unbroken and you can just subscribe to that. Give a like for us we love that's going to help us with our ratings there and we appreciate that. So let's touch on the market and then we'll get into the rest of the show here. Big day-to-day. The markets were up this morning across the board until Mr. Jerome Powell, the Fed chairman, started talking.

Merrit Strunk:
And as he started talking and sharing information, then the markets went down so that basically he just announced that we're going to do a 50 basis points, not a 75 basis points hike, but a 50 basis points hike in the lending rate. And the market didn't like it. And future looking into, say, 2023, he also said, look, we're going to raise rates as appropriate. That was his comment as is appropriate. And that really kind of hurt. You know, and I would have to say that that just is more of the same. It's more of the same that we've been experiencing right here. So, again, I guess the word of the day is caution. Some of the other things we're going to bring up here real quickly is we have a great interview in the show today. And it's going to be talking about an author of a book that's called Annuity 360. And we're going to have him on here. That's Ford Stokes out of Georgia, and he's going to be here. And I'm going to ask him all kinds of questions here. So his book is called Annuity 360. Learn All You Need to Know About Annuities and which ones to avoid and which ones to buy for accessible retirement. Then we've got some updates, important updates for the end of the year here that you want to hear. And then we're going to talk about RMDs. If you know what an RMD is, then you certainly need to do something before the end of the year here and that would come into your deferred tax accounts, retirement accounts, the word Roth conversion.

Merrit Strunk:
Ever heard of that? That could be your secret weapon in retirement. We're going to touch on that and then we're going to hit through a financial checklist to jumpstart your new new year. So, all right, here we go. So again, I touch on the markets that that bump and the in the Fed lending rates and people were anticipating that that was going to happen. But for some reason market went down. I thought actually the market might have stood a chance to go up. And that just shows the uncertainty and the market of a lot of people, you know, going, you know, certainly, Wall Street insiders know that the 50 bips were going to be coming. So that whole comment about raise as appropriate. Again, we're just going to be in for some more pain here. And the reason why it's less than 75 basis points and it's 50 is that we did see the inflation rates come down. My question and as I saw the questions being fielded by Jerome Powell is with energy costs still up with scarcity of energy and fuel being still expensive, you could do all you want. And if that cost is still high, manufacturers of goods still have to pass that cost along to you. So interesting how that's going to come down here. All right. So before we get into the rest of the things here, let's have that financial wisdom quote of the week here. Matt, Matt, our producer, and I forgot to even introduce you, my brother. Here you are and you're going to help me out. Hey, bring us some wisdom here.

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

Producer:
And I love to bring wisdom, wisdom from people who are wiser than myself. And that person this week is Will Rogers. Yeah, that guy. He was he's a pretty much a legend, was an American performer, actor, social commentator, was known as Oklahoma's favorite son, and he did a lot of stuff in his life. He traveled around the world three times, made 71 films, wrote more than 4000 nationally syndicated newspaper columns. So, yeah, accomplished, knows a lot about a lot of things. And so Will Rogers said this back in his day. He said, quote, The difference between death and taxes is death doesn't get worse every time Congress meets. Oh, I love that cowboy philosopher.

Merrit Strunk:
That's what he was. Cowboy philosopher. Well, he's just full of one liners here. Well, thank you for that, Matt. I do appreciate it. Sorry for not introducing you as we got into it. Just so excited about the interview that we got coming up that I just completely blanked out. No worries. Can't. Cannot do this without you, man. So one of the reminders for the end of the year here at 2022 we wanted to touch on is that Social Security and 2023 will be getting its cola adjustment. So COLA, we've talked about it before. Just as a reminder, it's the cost of living adjustment. It's adjusting for what I hope you all said inflation as I teed up that questionnaire, it's adjusting for inflation. What kind of increase did grandma, grandpa, mom, dad, whatever. Who is taking Social Security right now? What kind of increase can they expect? Well, it was a whopper one compared to what's been happening in the last ten years or so. So they got an 8.7% increase in their benefits and don't get carried away. It's not that big of a deal. If everything is costing you more, you're just getting a level to where you need to be so that you can afford these things. But those colas are compound over your lifetime. So it's a huge deal and that's why it's so important to make sure that you maximize your Social Security when you are electing it. If you're getting ready to say, say you're 62 and you're thinking about electing your benefits, but you don't know some of the factors about Social Security that, you know, let's just say 8% delayed retirement credits.

Merrit Strunk:
You need to take a look at your retirement income situation, your income gap or your income surplus, and then talk to somebody. You can help walk through that with you to make sure that's the right choice. If you're 62 and you're single, maybe that's the right idea for you. If you're 62 and no one in your family has lived until 62, then maybe that's the right choice for you, you know? But if you're married and you're both in reasonably good health and all your family has lived a long time, maybe there's other choices for you. But I will tell you this, a lot of people elected 62 and they don't know they're leaving hundreds of thousands of dollars on the table that they could get. So make an educated, informed decision about your Social Security benefits. By the way, Social Security Administration, you call them up, they're not going to tell you how to maximize your Social Security. They're specifically told not to do that. They can't give advice on it. They can take your election. And they can give you some specifics, but they're not going to tell you under the heading of how can I get the most out of Social Security? They're not going to tell you that they don't do that.

Merrit Strunk:
Another one is that the there are new tax brackets for 2023. You can simply go to Google and type in what are the new tax brackets for 2023 and check out what's going on there. You'll need to know those for a variety of different reasons, but good to know taxes, taxes that impact you. Another one is required minimum distribution. Though that acronym is RMD, RMD required minimum distributions. So let's just say at one point in your life you had an IRA or you worked in a for a company that you had a41k and it's a traditional tax deferred for a1k. Then when you retired, you, you wrote, you rolled it out, you rolled it out into a traditional IRA. So the rule used to be that by 70 and one half you had to take what was called a required minimum distribution, and that got pushed back with some legislation and now it's 72. So if your birthday has happened on your 72nd birthday, that's a new thing for you. And by the way, here we are at the end of the year and all these 72 year olds are rushing at the last minute to take their RMD. Why? You have to get your required minimum distribution withdrawal done by December 31st. And if you don't, the government can penalize you up to 50% of the withdrawal that you should have taken. Ouch. Just because you didn't know about it, forgot about it.

Merrit Strunk:
Nobody called you about it. Those kind of things. So. Required minimum distributions from employer based retirement plans that you may have rolled over into a traditional IRA December 31st. If you're 72 years old. Okay. But those distributions are what all that money that you had there in your traditional IRA that you've never paid taxes on. Now, that's why they're requiring it. The government is requiring it. They want to get their tax money. Okay. So get that done. Don't forget about it. There's a penalty that's there. And by the way, if you need help doing that, give us a call. 858 521 9700 or RetirementUnbroken.com. And you can reach out to us and we can figure out what that multiplier is. We just need to know what the balance of those accounts are in the previous year to help you do that. Okay. So is there a way to get rid of those RMDs, those pesky RMDs? It's not like you can invite an exterminator over your house and spray the whole place down to get rid of those pesky RMDs There is. It's a little bit more complicated and it's related to your retirement plan, so. If you quick poll here and Matt, you already know the Answer to this. I think I've even pulled you before on this. And do you think that taxes are going up or down in your lifetime?

Producer:
Don't we all wish they were going down? But I am afraid they're probably going up.

Merrit Strunk:
You are correct, sir. Well, who did that? Who does that old Johnny Carson?

Producer:
Yeah, that was Ed McMahon. Yeah.

Merrit Strunk:
You're correct, sir.

Producer:
But of course, the best was the best impersonation, though, was Phil Hartman on on SNL back in the day. You are correct, sir. You know, the whole the bravado and the whole thing.

Merrit Strunk:
That's right. So. I happened to agree with you. And this is an opinion, not a fact. Right? So I happen to agree with your opinion in that taxes are going to go up. I just don't see any way that that's not going to happen. So if you think taxes are going up. Yes. Think about that, Ira, that you have this tax deferred, that you've never had taxes paid on it and and at a point that you are then required to take that money out whether you want to or not. By the way, you think most people just wait till the last time. If they don't need it, then they wait till 72 and wait till the end of the year and I've got to take an RMD out. They do. What? Why would you do that? Is there another way to do that? You could just take distribution earlier than 72 to start thinking about it and put a plan in place and then take money out of one of the lowest tax rates you're going to have in your lifetime? Okay. That's that's one strategy that people never get talked to about. Is there another one? Yeah. You can do a calculation on a Roth conversion. So you're moving one pocket of tax deferred, going to pay taxes on it forever and you're moving it over into a tax free forever bucket.

Merrit Strunk:
But there's a catch here. You've got to pay the taxes at your current tax rate on that conversion amount. And we've talked about it before addressing myths in financial planning that you don't have to do this all at one time. You don't have to do a what's called a mega backdoor. You can do a strategic conversion process. But if you wait until you're not working anymore or 72, then you have waited to address and ask questions about these things and whether or not it could work out for you because it's math. You've got to figure out does it work for you If you're if you're in retirement and you've got all this taxable money, then, you know, the calculation probably will not be headed for you. Now, look, if you got all the money in the world and you've got kids and your legacy minded, maybe that makes sense, right? So talk to somebody. Reach out to us at retirement and broke in. We'll figure it out. We'll run the calculations, see if it makes sense for you. Real quick here. With the time that's left, we're going to give you some ways that you can jumpstart your new year. With this financial checklist.

Merrit Strunk:
All right, you're ready. Think about paying off your credit card balances. So if you if you want to minimize all your debts, you can start with. The highest interest rates. Most credit cards have an APR somewhere in 20% and up. The debt snowball philosophy, there's there's a couple of ways you can do this. If you're the kind of person that needs encouragement and achieving your debt payoff goals, you can start with the lowest and that'll help you pay it off. And then you move up to the highest and then the next highest and so on. Mathematically, it's actually the reverse of the debt snowball. You would address the highest interest rate and pay that off, and that's going to just free up more income for you to pay off the lesser interest rates. It makes sense. Right. And there's there's a philosophy on both ways that depends on who you are and where your head's at. All right. How about maximizing your tax bracket with a Roth conversion? We just hit on that. So there are no RMDs on a Roth IRA. You're not compelled. You know, the power of the government compels you. The power of the government compels you. So they're not going to compel you because there's no RMDs on a Roth IRA.

Producer:
Don't throw the holy water at me now.

Merrit Strunk:
Yeah. There you go. Yeah. So the IRS has already received its cut some time ago. So if you've taken the the bitter pill and done that, then you know what I'm talking about. We have clients that have done that in their lifetime. They already converted into tax free forever money, and now they have no RMDs and they don't have tax on on Roth distributions. Okay. And you'll want to complete that Roth conversion before 72 when the RMDs kick in. Okay. How about set a monthly budget for your retirement? Oh, my gosh. He said budget, Honey, change the channel. Change. Change that channel. Right now, we're going to be fighting the whole way through until we get to where we're going. So, yeah, set a monthly budget for your retirement. So here's the point about it is how much income is required to meet your lifestyle needs in the future. Have you ever had that conversation? It's a tough one sometimes for some couples write budget budget smudge it, you know, but figuring out how you're going to be happy in retirement is a lot about making sure your lifestyle. Requirements of the income you're going to need is met.

Merrit Strunk:
So figure that out. And if you don't know how to do that, we can do that for you in a comprehensive planning way. So you need to plan for the big gotchas here. Inflation. Okay. Inflation your your 6000 budget today monthly can be 14,000 double in the future monthly inflation is going to go up and. And future taxes. So inflation and taxes need to be included in that. And you could probably include that higher medical cost later on in your life is going to come up because it may if you're still living, it may you know, we're living longer and or sometimes we're doing it with replacement parts. Right. So. The song used to be I've Got Friends in Low Places. You know that song, Garth Brooks? Oh, yeah. I've got friends in low places now. The song has changed because we're living longer, so now it is known as I've got friends with hip replacements. I've got friends with hip replacements because they slipped in, fell in their garage or basement. Yeah, that's it. If you didn't know that song, then it's going to stick in your head forever, right?

Producer:
Definitely. It's like Merrit Strunk is the new weird Al. Everybody.

Merrit Strunk:
Yeah. Nobody can butcher a great song like American. All right. How about developing? Developing a plan to possibly pay off your mortgage So no more mortgage payment. That gives you what I call psychological error. I don't. I don't have that. The main mostly the largest payment a lot of people have. So it's the easiest way to increase your net worth is to eliminate those debts, isn't it? So. Okay. And then we talked about. Maximizing your Social Security and how important it is. And maybe getting what's called delayed retirement credits before the laws change at some point. In case you'll get delayed. Retirement credits compound 8% before you move into retirement. And lastly, here, I'll share with you. Implement a bond replacement. And the components of your investment, say people who have a 60 over 40 think about a bond replacement and delete those fees and stop the bleeding of your safe money. By the way, a 60 over 40 portfolio has had the worst performance in 100 years because bonds are down and stocks are down. There was no hedges that were working there in your favor to guard you from that market loss due to volatility. So you may consider alternate fixed income options within that strategy that can provide you with guaranteed income too, with zero fees to make that happen. So that is an option that we've talked about pros and cons, We've lifted the hood and kicked the tires on that one quite a bit.

Merrit Strunk:
Okay. And then lastly, if your advisor is helping you, you might look at tax loss harvesting, taking a loss now of a position that is gone down so that you can offset gains that you may have had in terms of income and so on. So that pretty much brings us up to the end of the first section here. And hey, have you ever been to our website at retirement and broken dotcom up at the top there and also right below in the field, you can reach out and contact us and get a complimentary consultation. It costs nothing. And I do talk to everybody personally, and I want you to come back here for the next section. We're going to have a great interview with Ford Stokes out of Georgia. He is the author of Annuity 360, and he's going to be talking about annuities. What's all this hubbub about annuities? Why are they so popular? This is the year where it's just sold sky high and the Google searches on annuities is amazing. So why is it so popular? How does it fit into a retirement plan? You want to join us back here for the next segment.

Producer:
Miss part of today's show, Retirement Unbroken is available wherever you listen to podcasts and online at RetirementUnbroken.com.

Producer:
Registered Investment Advisors and Investment Advisor Representatives act as fiduciaries For all of our investment management clients. We have an obligation to act in the best interests of our clients and to make full disclosures of any conflicts of interest, if any exist. Refer to our firm brochure the ADV two A page four for additional information, any comments regarding safe and secure products and guaranteed income streams refer only to fixed insurance products. They do not refer in any way to securities or investment advisory products. Fixed insurance and annuity product guarantees are subject to the claims-paying ability of the issuing company and are not offered by BWA.

Producer:
As the song.Says, it's the most wonderful time But don't let holiday spending wreck your retirement plan. I'm Matt McClure with the Retirement dot Radio Network. Powered by Amerilife. Just over $832. That's how much the National Retail Federation says the average American plans to spend on holiday gifts, food and decorations this year. Many of us will spend much more than that. So how do you keep from overdoing it? Financial website Investopedia has some tips on keeping holiday spending under control. Number one is perhaps the most important set spending limits for yourself. Tyler Ferguson with Jax Federal Credit Union agrees.

Tyler Ferguson:
Some can even go old school.Like myself and use a cash spending.Plan to ensure that you're staying.Inside of your budget. You're actually.Using cash to mitigate those swiping of the Cards.It's also an effective.Plan if you havWanting to shop as well.

Producer:
That from News4Jax. The number two tip from Investopedia is to make your own naughty or nice list. In other words, if you're shopping list includes more than five people outside your immediate family, start cutting it, then bake cookies or other treats to give to those who didn't make the cut. That way you spread holiday cheer without breaking the budget and you don't seem like Scrooge Humbug. Other bits of advice from Investopedia include being realistic about your budget. Collecting coupons or discount codes and organizing group volunteering instead of holiday parties. Ferguson says one thing you should not overlook is getting the kids involved.

Tyler Ferguson:
For the.Younger kids.You want to give them a smaller.Dollar amount, maybe a $10.Cash.Transaction to kind of.Help provide them a visual.Observation of what they're using the funds for.And then for your older kids who have either.Been saving themselves alreadOr they have a.Lump sum to kind of go shopping.With can open up an account for them.Go over how to budget and how to spend.

Producer:
So how can you give this holiday season without busting your budget? That's a key question to consider. As Santa starts warming up the sleigh with a Retirement dot Radio Network powered by AmeriLife, I'm Matt McClure.

Producer:
Are you concerned about market volatility, rising taxes, economic uncertainty and how it all can affect your future in retirement? Then tune in to Retirement Unbroken with your host, Merrit Strunk, to learn how you can protect and grow your hard-earned money. Retirement Unbroken every Saturday at 1:00 PM right here on FM 96.1 and AM 1170. The Answer Protect your hard earned money today and schedule a free no obligation consultation now at RetirementUnbroken.com. Are you concerned about inflation, political uncertainty, rising taxes, and how it could all affect you and your family during retirement? If you have an IRA balance over 400,000, you could save six figures in retirement taxes that you would be paying over a 35 plus year retirement. Find out how much you could save today by scheduling your free Roth conversion consultation with Merrit Strunk at RetirementUnbroken.com.

Merrit Strunk:
Okay. That brings us up to the next segment here. I'm really excited about this. We have a special guest that's going to impact a particularly popular topic. And if you're in the retirement red zone, if you're listening right now and you're either five years before retirement or you're already in retirement within the five years or so, you're going to want to hear this. And so this is on a very popular topic of annuities. And our guest is going to unpack that for us. But first, I want to share a few statistics with you and some research that we found that you might be interested in. There was a study and you could find this on Plane Advisor Dotcom, and it was conducted by the Insured Retirement Institute. The name of the study was the Language of retirement for advisors and consumer attitudes towards income and retirement. Well, who doesn't want income or retirement? Right. So pretty, pretty important here. And it turned out amongst 1300 investors, 300 of whom own an annuity or work with an advisor on this. 35% of those consumers said they are familiar with annuities and believe they are useful. 37% also said they're open to learning more about them. So that's a combined 72% and 48% of investors currently own right or previously owned an annuity. So in comparison, right, they say they own or previously own annuity in comparison. The only 31% said they are owning exchange traded funds or a target date fund. That's 31% and 21%. Interesting. So you've got all this annuity ownership that if you listen to the mass media, they're not going to tell you that.

Merrit Strunk:
Then 90% said they are receptive to the idea of guaranteed income. Now, that was people who said, well, let me give you the attributes of what an annuity can do, but I'm not going to tell you what it is and are you interested in that? So you completely eliminate the packaging, the name, and then you say, well, what if this was going to pay for the rest of your life and these attributes? 90% of people said they were open to them. That's amazing. Then the other one is we quickly did on Google Trends, we looked at on Google Trends and said, you know how many people are searching for the word annuity? And, you know, that's just about as popular as Taylor Swift, somewhere between 10,000 and 100,000 searches per month, according to Google Trends on the word annuities. So with so much interest, people are searching for it. Ownership is high. People are interested in this topic and the attributes of annuities. This is why we've invited our guest here today. I'd like to introduce Ford Stokes. Ford is the founder and president and senior financial advisor with Active Wealth Management. Much like myself. George is also an author. He wrote this book called Annuity 360, and the subhead in there is Learn All You Need to Know about annuities, which ones to avoid and which ones to buy for a successful retirement. Ford We're so pleased to have you here on the retirement Unbroken show. You, sir. Sound like you're the perfect person to help us unpack this topic of annuities. Welcome.

Ford Stokes:
We're happy to do it and it's great to be with you here on retirement. Unbroken. It's been something we've been trying to do for a while now. Merrit And it's great to be with you.

Merrit Strunk:
Thank you. Thank you. Ford As you know, the show we call this The Unbroken Nation, Right to Retirement Unbroken. And the premise is that for many people out there, retirement is already broken. They just don't know it yet. So our mission is to help and inform. And truthfully, we've touched on annuities as a tool for guaranteed income and as part of a comprehensive retirement plan that people may consider. It's got to fit in there right for their own situation. We've also talked about using it as a bond replacement strategy. So getting into this and using our time wisely, I want to ask you a question. Why do you think annuities are so incredibly popular right now with American retirees?

Ford Stokes:
Well, honestly, now is probably the best time in my lifetime to own an annuity or to buy one, buy a new one, because, you know, throughout most of our careers Merrit the ten year US Treasuries been hovering right around between 1.4 and 2%. Today, the US Treasury is now 4.2 and it's going to go up even higher because the US Fed went up this week another 50 basis points. And so what that means is you've got, let's say you, your listeners, do they invest 100,000 into a fixed indexed annuity that's 100% financial reserve requirement product, and it's also regulated by the states, not regulated by the federal government. And so the FDIC is a federally. It's the way they regulate the banks. And banks only have a 3 to 10% financial reserve to it. And in my opinion, it's a much better situation because here's the deal. If you invest, if your listeners invest 100,000 into a fixed index annuity, that is freeing up the annuity company to have 40 $200 today each at the end of each year to work from and to buy options into indexes like the Credit Suisse Raven Pack or the Credit Suisse momentum or the S&P 500 or the NASDAQ 100. There's hundreds of different underlying indices that annuities tie and hits your wagon to, and it gives you market like growth without market risk.

Ford Stokes:
And that is a lot more than the traditional 4500 to to 2000 that they had to be able to buy options. So you've got, you know, huge participation rates. You've got 10 to 20% bonuses on these products that are immediate bonuses and you've got higher payouts. You also have mortality credits that will allow you to get more than that typical 4% withdrawal that you would get from your IRA over time. And that's going to help the personal economy month over month for your listeners when they're trying to break their retirement. And I would also encourage everybody to reach out to you because you really can, as an experienced financial advisor, marry. I mean, you can really fix their retirement. So I would encourage folks to reach out to you as well. But for me, that's why I wrote the book. I wanted to make sure that people understood the power of annuities, why it was important. But specifically now, now is the best time to buy. Because bonds, if you held bonds a year ago, chances are you lost close to 14% or more. You wouldn't have lost that money with a fixed index annuity. I know that's a long Answer to your question, Merrit, but I felt like it was just a lot to unpack. I want to make sure I share that with the audience.

Merrit Strunk:
That's a ton of knowledge. It's like somebody just got an MBA and annuities and like, you know, a minute or so. So Ford, you covered a lot of those things and you gave us a peek of under the hood and how how insurance companies can do what they do and give the guarantees that they're doing. Thank you for that. But because annuities in the information you just receive can be a little difficult for some people to understand. I just wanted to point out here that something you and I know in essence and boiled right down to its essence, a an annuity that provides income to a retiree is essentially a contract between the annuity and the person who who who buys that annuity for the guaranteed income. And then the insurance company is in that contract and guarantees, you know, the guarantees that come all with a different type of guarantees that come with an annuity. So at the very basic, that's the guarantee. And then how do they do that for just kind of hit that here. So having all that incredible knowledge about that. Can I ask you something forward? What caused you and motivated you to write that book? Annuity 360 Which ones? You all the information you will ever want to know about it. But then also the ones you you don't want to do and the ones you want.

Ford Stokes:
To think about. I'm glad you asked that and thanks for the opportunity to explain it. I, I got to tell you, there's so much misinformation or disinformation or a lack of information, almost a void of information about annuities and about how to generate consistent retirement income during the accumulation phase. I mean, the accumulation phase of retirement is the most complex. It's also the thing that gives people the most angst. But specifically, you know, you got wirehouses and banks and everybody else and brokerage houses that are running around saying, hey, you know what? Be careful on annuities, because the bottom line is they don't want to lose assets under management to annuities because that's going to an insurance company. And so it's been kind of a PR campaign, a negative PR campaign since the seventies against annuities. What was interesting, during 2008, it slowed. Why did it slow in 2008 and 2009? Because the S&P 500 lost 50.1% from March oh eight to March zero nine. And guess what? The people that were invested in fixed indexed annuities lost $0 during that time period because each year or every two years or however long your protection period is what what you and I call a point to point, it will lock in your investors gains and it will also lock in the principle itself.

Ford Stokes:
Each year. So, you know, if you go up, if let's say you have that same 100,000 and you go up 10%, you've got 110,000. If it goes back down the next year, guess what? Your gains were locked in at the end of the first year period where that index did well. And if the index goes down again in year two, guess what happens? You still stay at 110,000 and you sidestep the market. So for me, I wrote the book because I felt like it was important to educate people on annuities and also educate them on the ones that they really should avoid. And there really is kind of that, you know, like the three Bears, right? Mama Bear, the baby bear, the mama bear and the, and the papa bear. That fixed index annuity is really the porridge that's just the right temperature.

Merrit Strunk:
Mm hmm. You know, it's interesting. You lock in your gains, but you were somewhat lock out the losses that people in the market are exposed to. The annuities don't do that. So you don't. You don't go and participate in the loss. You have the upside potential to get credits to your contract. Now, interesting you talked about the 2008 situation that people are marketing, you know, on the the annuity train. And right after 2008, boy, they came back with a fury. Why? Because they lost clients. They suffered all these incredible losses and people fled for safety and guarantees. Interesting. When we were researching the Google searches for the word keyword term annuity searches and also sales went up in 2020, according to for a record year for annuity sales. People said, look, I don't want to lose it. I want to lock in my income. I want to protect my principle. Thank you. Thank you for all those points.

Ford Stokes:
Really quick on that point on 2020, the reason for that is people were sitting at their homes, they were dealing with a pandemic and they're like, I'm not willing to risk it, especially folks that are in their sixties seventies. And eighties, they weren't really to risk losing 50% like they did and likely experience part of that during the 2008 2009 mortgage crisis. And so they jumped on the bandwagon and said, Hey, wait a second, I need to do something to protect and grow my wealth. And most people don't want to have to go back to Wal Mart and say, hey, welcome to Wal Mart. They won't go back to work making a fraction of what they made before. And I mean, I've got an 80. They were 79 years old and and 82 years old when they came into my office six months ago. And and they had lost 24% in the beginning of this year because bonds were down and everything else. And I mean, at that age, you just can't do it. And and I was able to point out some things on annuities and everything else because also they had a 79 year old female in the marriage. And so that worked out well for them. It's just a better situation, especially when you're in that de accumulation phase. You really need to have a good plan for it. And also what I've found for my clients here in Georgia, and you probably find the same thing, Merrit, where you are, there are too many people that do not have an any idea on a retirement income plan, and they also have no idea the risks they're taking and the fees they're paying and and all the the risk that they are facing with bonds right now. And you've got great solutions. You and I both have access to the best products in the industry. They're even proprietary products. And I would encourage folks to reach out to you and and try to get started with them just sitting down with you.

Merrit Strunk:
Yeah. Thank you for it. I mean, the way the way that I consider and we meet with people who aspire to retire in a comprehensive planning fiduciary relationship is I don't want to be without a tool in the toolbox. You know, for the people who say, Oh, yeah, I'm not going to do that. Well, you just missed out on a valuable tool. So if you've got at risk assets, you've got risk protection assets and you've got guaranteed lifetime income, What's wrong with that? You know, nothing's wrong with that. So we on occasion have people that reach out to us for investment advice or retirement planning that I would call annuity curious. So I have a question for you. A little bit of a challenge here, since you're so incredibly knowledgeable about this area. Is is there a metaphor or a allegory to think of what an annuity can do for you in in retirement?

Ford Stokes:
Yeah, I have one. I'd love to hear yours first for sure.

Merrit Strunk:
It's well, it might be the same as yours. So I think of it as a a private pension you create for yourself to guarantee lifetime income. You know, if you're using it for the income as opposed to the bond alternative angle.

Ford Stokes:
That's what I would have said. But let me follow on with that. Here's the thing. Pensions are usually spears. They're single premium immediate annuities because when somebody retires, they want to turn on income the next month so they don't miss the paycheck. Right? Well, spears are really good products and you can sell them and so can I. But they're really good at doing one thing and that is paying you your money back. A fixed index annuity is good at paying your money back, but also growing your money with market like gains because they take a portion of the assets and they reinvest it into into indexes, index options, if you will. And the annuity company takes a portion of the gains and you get a portion of the gains. And sometimes those the way they make money off of you is either with a fee which is up front or a spread, which is only they may take the first 1% that they make for you, but that's only when they actually are generating a return on your money. That's incredibly attractive. Also, I know you're really good, Meredith. You and I have had several conversations because it's it's always nice to have advisor friends out there. You and I talk about a lot on how to make people's portfolios, you know, fee efficient, market efficient and tax efficient.

Ford Stokes:
And an annuity is all three. I mean, number one, if you want to just talk about tax efficient, I'll go in reverse order. Tax efficient. You you've got a tax deferred product. You only have to pay taxes when you withdraw money from the policy fee efficient. There are no advisory fees or portfolio fees with a fixed indexed annuity. So you're reducing the amount of fees that you're paying to that financial advisor because the the annuity company or the insurance company is paying that advisor. And then number three is you've got market efficiency because your money is not invested in the in the financial markets. Your money is invested in a ten year US Treasury, which is considered one of the most safest investments on the planet. They've never defaulted on paying the interest or paying the principal back. And also, by the way, one of the largest investors in the ten year US Treasury is the US government. So. It is something to consider. And I just I would just say, I don't know why you wouldn't at least pick up the phone and call Merrit Strunk to try to understand a little bit more about annuities, for sure. If you are to your point that annuity curious.

Merrit Strunk:
Yeah. Thank you. Oh wow. That was awesome. You know, one of the things too, when I think about an annuity in a financial plan and I love that you brought up what's your retirement income plan that's going to be so foreign to so many people It's like, wait a minute, what retirement income plan? Right. How are you going to how are you going to how how is your lifestyle going to be funded in retirement? Another point I wanted to make about the having an annuity in the mix within your comprehensive plan. We always test it out. We always stress test it, and sometimes for folks it's just not the right situation for them. There's pros and cons to each thing, and sometimes we put it in our our software and test it and it's it's no bueno for them. The other one is it works. You can't beat it. Matter of fact, it's it's outstanding and it works so well in a in a plan. One of the observations I have is when you have income coming in, in retirement and you can count on it, you don't have to go at unnecessary risk in your investment at risk portfolio because where you would have to do to support your drawdown of your income, it takes the pressure off that now you can reduce your risk because you have income coming in. So so in retirement and if the markets go down and you're you're withdrawing income, you're exposed to the sequence of risk risk sequence of returns risk. So and having that annuity as a factor in your entire plan is a is a wonderful thing. Question for you. Yes, sir. There are thousands of these things. And I know I see ones that are amongst you know, they raise rise above the others in terms of for the right person and the right situation. These are the right products. They do exactly what we wanted to do. But there are others. Yeah. You know, I'm not in favor of them. So are there types of annuities that folks should think about avoiding out there?

Ford Stokes:
Yeah, I would say be very careful on investing in variable annuities. A lot of people and a lot of little old ladies and aggressive security growth minded males invest in variable annuities because they walk into a bank and the advisor sitting there in the bank advisor gets paid five and one half percent to sell that variable annuity. And you could walk out, let's just say round numbers at 5%. You walk in and you want to buy a 20,000 variable annuity. You're going to walk out with a 19,000 variable annuity. And that advisor in the first day they met you in the first 5 minutes going to make $1,000. That's not a great way to do. Also, did you know that variable annuities what we call variable don't do annuities as kind of an air quotes here. They come with about 3 to 6% of fees every year, which is a significant drag on the growth of of the annuity of the variable annuity. I would just say be very careful about that. Also, a lot of annuities are variable. Annuities are mis sold where they're saying, oh, well, your money is guaranteed where your income may be guaranteed, but the account value is not. And you can lose money because a variable annuity is a security, it's a mutual fund wrapped into an annuity chassis. And so you have fees upon fees upon fees, and they have something called mortality and expense fees that almost 100% of the people that are listening to this show right now probably don't know what mortality expense fees are with variable annuities, but they are definitely something to avoid because they are going to cost you a lot of money.

Merrit Strunk:
I happen to agree with you and I've never heard the scary able annuity sort of air quotes, name of it. I call them fee monsters. So as many variable annuities that I've seen as we review portfolios and you look at all the fees and it eats away the gain and profit to the owner and the investor. And you know, there has been cases where we said, you can't stay in this. Now I've only seen one that did a really good job because the separate account was managed very well. Only one of all the many variable contracts that we've reviewed. Isn't that interesting? Yeah. Gosh, we could sit here and we could I mean, we could go on and on because there's so much information about this for you're so knowledge about this. I really appreciate it. And I just want to tell our listeners out there that Ford has given us the benefit of anybody that responds to us through our website. Right. Can go to RetirementUnbroken.com. We can send them a link to get a free book. We can send them a link to get a free book. And that is just so gracious of you for we really appreciate.

Ford Stokes:
Happy to do it.

Merrit Strunk:
Incredible and the incredible knowledge that's in there is amazing. Hey, so I can't thank you enough. I want to have you back here some time forward so we can have this conversation again. I really feel like we just didn't spend enough time on this segment. I wish we could do a whole show about it because there's so many questions out there and there. There's such a great component within a comprehensive retirement income plan. So thank you very much. Ford It's been great to have you. And I know, buddy, we're going to have you back here. We don't have too many interviews on the show, but I want to have you back here sometime. Oh, we love you. All right with.

Tyler Ferguson:
Yeah, I look forward to it. And again, I would encourage everybody just to pick the phone up and give you a call. I know you'll give them the phone number. I don't want to get that wrong, but I'm a huge fan of yours. It's always great to have colleagues that we can all work with and and also compare notes. And I know you do a great job as a fiduciary advisor taking care of your clients. And thanks. It's great to be with you today.

Merrit Strunk:
Thank you. Ford Folks, if you're listening, you can contact us at 858 521 9700. Or you can go to our website at RetirementUnbroken.com. So we'll catch you next time on the show again this is a retirement unbroken show and my name is Merrit Strunk and you can listen to our show at 1:00 PM on Saturday at 1170 AM or 96.1 FM or just listen anywhere you can find your podcast. We'll get you next time.

Producer:
Thanks for listening to Retirement Unbroken. You deserve to work with an experienced and licensed expert who will strategically work to protect and grow your hard-earned assets to schedule your complimentary no obligation consultation with Merrit visit RetirementUnbroken.com or pick up the phone and call 858 521 9700..

Producer:
Advisory services are offered through Momentum Financial and Insurance Services LLC. An investment advisor in the State of California. Insurance products and services are offered through Merrit Strong an independent agent. California License number 07510 Certified Financial Fiduciary as a FINRA recognized professional certification.

Producer:
A new payroll tax could be coming to your state. I'm Matt McClure with a Retirement dot Radio Network powered by AmeriLife.

Alison Hoffman:
We have seen a failure as a country to provide comprehensive insurance for long term care.

Producer:
America has a long term care problem, NPR reports. 70% of people who turn 65 will need some type of long term care, ranging from in-home care to a full time nursing home facility. And the costs can be astronomical. A Genworth study in 2021 found the median cost for home health was more than 61,000 a year. If you want a private room in a nursing home, the median cost there more than 108,000 annually. And Medicare won't cover the costs.

Alison Hoffman:
Medicare pays for short term post-acute care if somebody's been hospitalized or has other kind of short term medical needs. It doesn't pay for the kinds of things that we think about as long term care.

Producer:
Alison Hoffman is a professor of law and deputy Dean at the University of Pennsylvania, Carrie's. Rule of law, she tells me. Relatively few people in this country have long term care insurance. Washington State was the first in the nation to try to bridge that gap.

Alison Hoffman:
And what Washington state has done is it's done a payroll tax point five, 8%, that is for all W-2 workers or full time workers that comes out of their payroll. And then so long as they pay in for a certain number of years, when they have a benefit that they can use for long term care up to a certain amount.

Producer:
But it's not a cure all for the problem.

Alison Hoffman:
It is a little patch. I think the total benefits in Washington state are something like 36,000 and they increase with inflation over time. But the cost of a nursing home in most states is three times that. Over the course of a year, what it is, is the states trying to come up with a tool to fill in some of some of the gaps.

Producer:
Now, states like Pennsylvania, New York and California are looking to Washington's plan to implement their own solutions. Professor Hoffman says taxpayers can opt out of the payroll tax in some cases, such as those who have their own private long term care insurance.

Alison Hoffman:
So why would somebody want to opt out? Well, somebody might want to opt out because they're already contributing dollars towards towards long term care. And they think that that's sufficient. That's enough. But people also might opt out because they don't value it as a form of insurance.

Producer:
So could a program like this be coming to your state? If so, how could it affect your wallet? And what about your own long term care plans for your later years? Those are all important questions to consider as time continues to tick on by With the Retirement dot Radio Network Powered by AmeriLife, I'm Matt McClure.

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