Answering Questions from Activators

January 25, 2022 00:47:53
Answering Questions from Activators
Retirement Results
Answering Questions from Activators

Jan 25 2022 | 00:47:53

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Show Notes

This week, Ford answers questions sent in from Activators that are pre-retirees and retirees. He also outlines all the elements of a smart financial plan for 2022 and beyond. Activators, if you’d like to get more information you can call us at (770) 685-1777 or go to www.ActiveWealthShow.com and set an appointment. We will give you a free portfolio analysis and a free financial plan to your 95th birthday.

Book your free no-obligation consultation: www.ActiveWealth.com

Watch more episodes: www.ActiveWealthShow.com/podcast

Request your free copy of Annuity 360: www.Annuity360.net

Active Wealth Show Answering Questions from Activators: Audio automatically transcribed by Sonix

Active Wealth Show Answering Questions from Activators: this mp3 audio file was automatically transcribed by Sonix with the best speech-to-text algorithms. This transcript may contain errors.

Producer Sam Davis:
Fixed annuities, including multiyear guaranteed rate annuities, are not designed for short term investments and may be subject to restrictions, fees and surrender charges, as described in the annuity contract guarantees are backed by the financial strength and claims paying ability of the issuer. Any examples used are for illustrative purposes only and do not take into account your particular investment objectives, financial situation or needs, and may not be suitable for all investors. It is not intended to project the performance of any specific investment and is not a solicitation or recommendation of any investment strategy.

Producer:
Welcome to the Active Wealth show with your host Ford Stokes Ford is a fiduciary and licensed financial adviser who places your needs first. He’ll help you protect and grow your wealth. The Active Wealth Show has grown because activators like you want to activate their retirement planning with sound tax, efficient investing and now your host Ford Stokes

Ford Stokes:
And welcome to Active Wealth Show activators. I’m Ford Stokes your Chief Financial Advisor and I’m joined by Sam Davis, our executive radio producer. And Sam and I are in Tampa. We’re in Clearwater, Florida, getting ready for the AmeriLife kick off meeting where I’m an advisor mentor with AmeriLife and their companies, their member companies. And we wanted to answer a bunch of listener activator questions today. We wanted to do that and then the next thing we wanted to do is we want to talk about what we promised last week, which is getting started with the Smart Financial Plan, at least understand all of the elements of a smart financial plan. Today, we’re going to give you a lot of information today. Today is actually want to consider taking notes or hit record on your phone to get that that audio memo because there’s going to be some really good nuggets in here today. Sam, your thoughts on today’s plan for our show today?

Producer Sam Davis:
I love hearing from the activators. We’re so excited that so many activators have been reaching out and they’re interested in getting 2022 off on the right foot and really making it the best year yet when it comes to planning for their retirement and their legacy and their financial future. And so we’ve got a bunch of questions from some activators around the Atlanta metro area and we’re going to get those answered for him.

Ford Stokes:
That’s awesome. Yeah, I love it, and you’re going to be the one posing all these questions. Also activators. If you want to submit a question, you can either do it two ways or three ways, really. Number one is you can just send me an email at [email protected]. That’s [email protected]. The other is just send us a question on Twitter or our Facebook page. It’s Active Wealth m for management and we’re happy to help you get going with that. And then you can always, you know, just visit our website ActiveWealth.com and and submit that way as well. So go ahead and try to reach out to us and submit your questions. If you want questions answered, we’re happy to help you do that. So, Sam, why don’t we go ahead and get started on these activator questions? Also, it’s probably a good idea to let everybody know, Hey, here’s what and who an activator is. It’s somebody who wants to plan for a successful retirement, somebody who is inspecting what they expect about retirement. It’s also somebody who understands, Listen, if you’re going to be a bear, be a grizzly, be aggressive about what you’re intending to do and anything you do, whether if you’re going to try to learn how to play golf like Sam has over the last seven months, you’re going to be aggressive about learning how to play golf. If you’re going to be aggressive about learning how to retire successfully, then you need to be aggressive about learning how to retire successful. I mean, knowledge is power at any situation. Our goal here on this show is to help people basically build a tax efficient, fair, efficient and market efficient portfolio.

Ford Stokes:
And we kind of do them in those orders because tax efficient and fee efficient are things you can control. You can actually make the right decisions on building a tax efficient and fee efficient portfolio, and you don’t have to worry about how the market’s doing. Obviously, the market is giving back some gains in the beginning of the year because the concerns about the Fed tightening and also labor shortages and high inflation and cost of capital going up and things like that. And so therefore, the economy may not expand as much, but it also likely won’t contract or constrict either because we’re in a secular bull market still. And so it’s just something to consider and also listen if you want to take your role as an activator to that next level and really start inspecting what you expect about your retirement and get that free custom financial plan and also portfolio analysis, all of that for free. It’s a fifteen hundred dollar value. We’ll give it to you. Absolutely at no cost. All you’ve got to do is reach out to us at Active Wealth. That’s Active Wealth. We’ve got to set an appointment button in the upper right corner and you can just click that and you’ll get placed directly into my calendar. We’re happy to help you any time you want. And also, you can always pick up the phone and give us a call at (770) 685-1777 again (770) 685-1777. Sam, go ahead and let’s start with our activator questions.

Producer Sam Davis:
Yeah, so this first one forward comes from Mike in Dunwoody. Thanks for listening to the show. Thanks for sending us your question. And Mike wants to know, will Social Security keep up with the cost of living?

Ford Stokes:
Yeah, it’s interesting. And and I actually know who Mike is. He is a great guy who works at a large corporation right down the street from where he lives and Dunwoody haven’t been to his house. He’s come to the office. And but here’s here’s the answer to your question, Mike.

Producer:
It’s time for an Active Wealth inflation demonstration.

Ford Stokes:
It is likely that such security is not going to keep pace with inflation, usually it’s lower because the government doesn’t want to give out money, right? Because they’re trying to balance the budget or they’re trying to make sure that they can provide for lots of folks who are enrolled in Social Security and Medicare. And so here’s the deal. In October of twenty twenty one, just a few months ago, the Social Security Administration, they announced a five point nine percent cost of living adjustment that they’re giving out this year. That all kicks in in January of this year, which is this month, right? So the latest COLA is five point nine percent for Social Security benefits and the Social Security income payments. This is from SSA govt. Social Security benefits will increase by five point nine percent, beginning with the December twenty twenty one benefits, which are payable in January of twenty twenty two. Federal SSI payment levels will also increase by five point nine percent, effective for payments made for January twenty twenty two. Because the normal Social Security income payment date is the first month and January is January one was a holiday. The Social Security Administration payment income payments for January are always made at the end of the previous December. Just so you know, and they have looked at a lot of different ways. If you’re wondering how the cost of living adjustment is calculated, the Social Security Act specifies a formula for determining each cost of living adjustment from the associated administration. According to the formula, Colas are based on increases in the consumer price index for urban wage earners. That’s CPI and also for clerical workers at CPI. Dash W CPI are calculated on a monthly basis by the Bureau of Labor Statistics.

Ford Stokes:
A cola effective for December of the current year is equal to the percentage increase, if any, in the CPI W for the average for the third quarter of the current year, to the average for the third quarter of the last year in which the COLA became effective. There’s an increase. It must be rounded to the nearest tenth of one percent if there is no increase or if the rounded increase is zero. There is no cola for the year. So just, you know, that’s kind of how they do it. And they’re looking at CPI W CPI Q, by the way, is what’s called the consumer price index urban one, which is basically what we call and I’m doing air quotes here with Sam. It’s called the headline CPI. That’s what they read on Fox News, Fox Business and others. I don’t want to talk about the other extremely leftist folks that don’t want to give any shout outs to some of the more liberal side of the media that aren’t telling us a hundred percent of the truth. I wish they would, but. So those are CPI, do you believe or not? Is five percent lower than CPI? And also, my question to everybody is, do you really think CPI w? Do you really feel like the inflation rate was only five point nine percent based on the groceries you’re buying the the gas or purchasing at the pump? And I would say that, no, it’s not keeping pace on inflation and it’s not going to. So you need to stay invested to do everything you can to make sure that your money continues to grow.

Producer Sam Davis:
All right. So our next question comes from Suwanee, Georgia. Jack and Deborah are writing in. They’re married and they’re asking, wanting to know how much will our income need to increase to keep up with inflation? How can we ensure that we’ll have enough to live on in our later years?

Ford Stokes:
Yeah, it’s similar to the last question. You know you want to stay invested, you’re going to have to to outpace inflation. You’re definitely going to have to get more than a three to five percent rate of return. And historically, that’s kind of what the do it yourself or an investor is done over the last 20, 30 years. They have not performed as well as the indexes have the indices have it, just people get scared, they react. They’ll they’ll sell when there’s a quick shortfall and they won’t be invested in the top, you know, positive trading days for the year, things like that. And so you need to be very careful and stay invested. I encourage you to work with a fiduciary advisor or somebody that puts your needs ahead of their own, just like I do. Somebody has a serious sixty five financial securities license and also is a life and health license so they can give you holistic planning, both for income and also for taxation and and also put you in managed portfolios that don’t just hang in there and can get you the rate of return that you desire while while also protecting your wealth. The number one rule, you know there are two. The two rules of investing is Warren Buffet. Said, which is rule number one is just don’t lose the money.

Ford Stokes:
Rule number two is, don’t forget rule number one. And so we want to do everything we can to make sure we don’t lose your money. So our goal is to protect your, your principal first and foremost and then grow it from there. And we’re going to have a few more questions from Sam, from our activators. And thanks so much for so many of the questions right when we come back from the break. And again, if you want to submit questions to us for us to read in next week’s show, all you have to do is send me an email at Forwarded Active Wealth or submit that to our Twitter handle at Active Wealth m m. As for management? And then also on Facebook Active Wealth Management on Facebook. We’re happy to answer your questions right here on the air. And when you come back from the break, we’re going to hear more from the activators. We’ve got some incredibly insightful questions that I think are going to be great educations for everybody, and we’re gonna be telling some serious stories about what we’re experiencing out there and helping clients protect and grow their wealth. You’re listening Active Wealth Show right here on AM920 The Answer.

Producer Sam Davis:
And welcome back to the Active Wealth Show activators, I’m Sam Davis here with Ford Stokes, your chief financial advisor at Active Wealth Management. We are starting off segment two of the show and we are answering more questions from activators. These activators have written into the show they’ve emailed for to Active Wealth, or they’ve just gone over to Active Wealth and submitted their questions there. And we’re going to get things started. We’re going to jump right into it. And the first question here in segment two is from Gary and Noel in Peachtree City, and Gary and Noel are asking, why should we consider rollovers from our 401Ks to IRAs?

Ford Stokes:
And Gary Noel, that’s a great question, and we’d love the opportunity to give you a free 401K review and for all of you activators out there. If you’re looking for somebody to kind of give an understanding of, Hey, what’s going on with my 401K? What mistakes could I be making and how can I fix them? We’re happy to give you a free 401k review absolute no cost to you. All you have to do is reach out to us at Active Wealth and click that set an appointment button and we’ll go ahead and take care of that for you. The next is so here are some of the real reasons why you want to move money out of an old 401K where you’re separated service, you’re no longer working with that company. Number one is you can’t invest any more money into that for one K after you’ve separated service. And so you’re better off, you know, moving that money to an IRA and therefore you can manage it and also keep contributing to that New IRA and you do that through it what’s called a traditional rollover. So you’re going to roll that money over from your 401 K to your IRA. That is a non taxable event as long as you roll it over properly within 60 days of the money being withdrawn. You do it as a rollover, you don’t do it as withdrawal and then a deposit later. But in the event somebody messes up and classifies your rollover as a withdrawal, you have 60 days in which to fix it. So just make sure you know that.

Ford Stokes:
So you shouldn’t be too scared about rolling money over from a 401 K to A to an IRA. The next is is really a big deal. You have limited investment options within a 401 K. You want to have all the investments, investment options out there, specifically, if certain sectors are really hot, like last year and the year before, the tech sector kind of exploded right at at the at the outset of the COVID 19 pandemic in March of 2020. I mean, you know, look at what happened to the FAANG stocks, you know, Facebook and Apple and Netflix and Google, they went sky rocketing or even Zoom and other other stocks, other technology. So technology stocks had a really great two year run. And if you didn’t have the option to invest in, you know, different portfolios or different indices or different ETFs or mutual funds out there that had things like the QQQ or had Nasdaq 100 ETFs and and also mutual funds that kind of mirror the Nasdaq 100, you really missed out. And so if you’ve got a chance to move money out of an old 401 K into an IRA that you can manage and take control over it and have as many investment options as possible versus only having limited of, say, six to 12 investment options, which is typical of a 401 K plan, then I would strongly encourage you to reconsider and go ahead and do that and go ahead and invest into an IRA. I think this is a great raw converter for this week, Sam, so hit him with a Roth converter sounder.

Producer:
It’s time for an Active Wealth Roth IRA converter.

Ford Stokes:
When you’re doing a rollover and you want to implement a Roth Ladder Conversion, you first must move your money from a 401 K. So you move it from a 401 K to your individual retirement account and that is about you, and nobody else doesn’t include your spouse. And then you can start moving money from your IRA into your Roth IRA. And I want to give you a hint here on how the best way to implement it. Roth Ladder Conversion. Number one is, let’s say, OK, let’s say you’ve got half a million dollars sitting in a 401 K and you roll it over to an IRA and you want to convert it 100 percent of it. And let’s say you are sixty two years old and you want to get out in 10 years or less before you turn 72. You want to start converting, but you want to have enough money also to start living on when you fully retire. You say you just joined a new job, but you’ve got access to that five hundred grand. So you roll it over into an IRA. What we want to do is we want to convert like one hundred, one hundred and fifty thousand a year. Let’s just say we do it for one hundred and fifty thousand a year for six years or at least five years.

Ford Stokes:
So the five years would take care of if you did it for five years, it would take care of the principal and the gains you would have over that five year period. And by the end of you implementing the Roth Ladder Conversion, you’d have zero dollars in your IRA account and you’d have one hundred percent of those dollars plus the growth in those dollars in your Roth IRA. But the way we are able to accomplish that is we pay the taxes from a taxable account. Let’s say you had a brokerage account or a joint investment account or an individual investment account. We use that to pay the taxes on each conversion because when you convert money from your IRA to your Roth IRA, you owe taxes on that and whatever you convert is counted as ordinary income for that year. Yes, it’s going to take you up in a higher tax bracket, but we don’t like to go beyond. We don’t like to go beyond the twenty four percent bracket when we do conversions, although we are very comfortable at converting it between 15 and 20 four percent and most of the time, it ends up averaging out. Because we’re in a progressive tax system, it ends up averaging out right around close to twenty point five eight percent. So in total, if you’re bumping up against the three hundred and forty one thousand, the top end of the threshold of the twenty four percent bracket for married filing jointly, it’s three hundred and forty one thousand.

Ford Stokes:
So as long as you stay below three hundred forty one thousand for twenty twenty two, you can do a Roth conversion. Let’s say you make one hundred and let’s say make one hundred grand a year and you want to do a conversion of, say, one hundred and fifty. You’re just at 250, you’re well below the three hundred and forty one thousand twenty four percent bracket. But you’re going to need five years, at least because you’re going to have growth on that money over the five year period. If you’re trying to move five hundred grand and five years right, you’re going to have to move one hundred and fifty grand or more. So that’s a really good idea is to take the money from your taxable account and pay the taxes on it. You’re taking taxable bucket money and using that to pay taxes on the tax deferred accounts that is transitioning and converting to the tax free account. So that is fantastic and a great result because we really want to kick the IRS out of being your partner in retirement. All right. Sam, I know, went along with it on that answer, but that one was kind of important.

Producer Sam Davis:
No, that was great. And I think you may have answered our next question, but I’ll go ahead and ask it because I’m so glad that our activators are writing in Lynn and John’s Creek asks, Is there a way for me to safely and legally reduce my income taxes during retirement? And I think that plays right into what you were just talking about with Roth conversion?

Ford Stokes:
Yeah, I mean, there’s two types of telegraphy, but I’m going to expand on that a little bit. So there’s two types of tax free investments out there. Roth IRAs, which we just talked about. And then there is life insurance. And for folks that are in their forties and fifties, anywhere where we’re kind of younger than 60 years old, you’ve got the cost of life insurance is lower and so you can build up cash value in life insurance and take distributions and withdrawals from your life insurance policy in the form of a loan against the life insurance policy. You don’t have to pay back and there’s no taxes on loans, so therefore it’s called a rule. Seventy seven hundred two plan. You can look it up in the IRS Code I.R.S. Internal Revenue Code seventy seven oh, two. And that’s something to really consider. That’s one way to get to generate tax free income during retirement, and the other is Roth IRAs and just withdrawals from your Roth IRA accounts. And also, did you know that you can invest Roth IRA money and even implement a Roth IRA within a fixed indexed annuity product with certain carriers? We work with several carriers that will do that.

Ford Stokes:
American Equity and Allianz and and others are willing to do that, and so we can help you do that, for sure. We happen to really like working with Sentinal and CELAC, and those companies are well capitalized and they’re highly rated carriers and they’re they give you more bang for your buck and give you a higher interest rate and higher participation. Nation rate and lower fees, and also some even have free income riders, so you don’t have an income rider fee, but you can implement a Roth IRA within a fixed indexed annuity and generate tax free income is another way to do that. To answer Len’s question up there in Johns Creek and we do have several clients in Johns Creek. We love the folks up there in Johns Creek and obviously we’re we really enjoy working with the folks in Dunwoody like Michael, because they’re right there in the shadow of our headquarters office at the King Queen building. But there’s some really great folks up there in Johns Creek as well.

Producer Sam Davis:
Jim and Claire in Buckhead are asking before we retire, Is there a way for us to project our retirement income?

Ford Stokes:
Yeah, absolutely. There’s a way for you to project your retirement income and we can help you do that. We also one I would encourage you to conduct a retirement income gap analysis so you won’t understand what your all of your expenses are running. So first and then the next is what are the what are the different sources for income, whether it’s Social Security or pensions or withdrawals from your IRA accounts or withdrawals from your investment accounts? You know, we can help you do all of those things. All you have to do is reach out to us at ActiveWealth.com. Click that set an appointment button to schedule your free consult, and we’re happy to help you do that. And again, it’s a $1500 value, but the way we do that, we will give you a retirement income and we put your entire plan, your entire retirement in advance in two pages. So you can understand year over year what your nest egg, how much your nest egg is growing or diminishing based on withdrawals, and see if you’ve got a successful retirement or not. We even put a grade from one to one hundred, and you’ll get an understanding if you’ve got a 90 percent chance and not running out of money before you turn 90 five years old. And we run those plans to age ninety five for retirement, I would say, is more about income than it is about building just one big nest egg.

Ford Stokes:
No, you really do need to understand. The income you can generate in retirement also can make it more tax efficient. So there’s a lot of factors that go into that, but we can actually give you a full projection and it’s something we call results and advanced planning so you can understand your retirement results all the way to age ninety five before you embark on your retirement. So that way you can make an informed financial decision about the different financial vehicles you’re going to invest in, or if you’re just going to invest in portfolios and and see how it goes, or if you’re doing a buy and hold strategy, we’ll show you how your current plan looks versus our recommended plans, and we’ll also do a Roth Ladder Conversion for you when we come back from the break, we’re going to talk more in segment three about we’re going to take more of your questions that Sam is going to read off. And then also we’re going to start talking about how to build a smart financial plan and all the factors that go into a smart financial plan that includes smart save, smart risk, smart tax decisions, smart health decisions. And we hope you stay with us right here on a.m. nine. The answer we’ll be right back with the Active Wealth Show.

Some folks about me to wave the flag who read.

Producer Sam Davis:
And welcome back to the Active Wealth Show activators, we’re so happy you’re with us today, and before we get started, don’t forget you can schedule your free no obligation retirement consultation with Ford Stokes, your chief financial advisor. Just go over to Active Wealth. Click that set an appointment button in the upper right hand corner and you can schedule your first appointment with Ford. It should take no more than a couple of minutes and you’ll be on the right track to making twenty twenty two. Maybe your best year yet when it comes to planning for retirement and your financial future. Ford, you told me between breaks, you’ve got a couple activators you need to shout out. So you have the floor.

Ford Stokes:
Yeah, absolutely. So we had a a gentleman named Jerry who reached out to us on the Active Wealth Show from the Active Wealth Show. He reached out to us on Monday after Saturday’s show and he was fixing up houses. He works for a major Fortune 500 company here in Atlanta, and he works on his own houses. He’s single ladies, he’s single and he’s thinking about retiring here in the next few years, and I think I need to introduce him to Debra, actually Sam. But he’s really sharp and he likes listening to us while he’s working on his houses on the weekends because we’re on, you know, from twelve to one on Saturdays and also 11 or 12 on Sundays. So he’s he’s listening to us a couple of times each weekend, and I want to give a shout out to him because he’s done a fantastic job at living below his means and building up his his wealth. He’s got a pension, he’s got real estate and he’s also got just an incredible nest egg that he’s been able to build. And I just want to give him a real shout out and say thank you for reaching out to us. We look forward to working with you. But also he just shared one thing he’s like for I just really appreciate you being very specific on your show instead of this general stuff, so I can really learn.

Ford Stokes:
And he’s he’s also a CPA as well. And so he’s a multifaceted kind of a renaissance guy. He’s a guy that works on houses, he’s a CPA and everything else is pretty remarkable. And so I just wanted to just give a shout out to him and then also for our our kind of longtime clients, Lucy and Al. I’m not going to share their last name, but they’re really great folks. And she retired from a major corporation, and so did he. And he’s got the pension and she’s got the the IRA. And they had been kind of struggling on trying to figure out if they were going to pay off their credit cards or not. And I want to just give them a shout out and say, I’m so proud of you all because they paid off their credit cards and in their house and they’ve literally reversed their expenses. They’ve they’re now spending $3500 less money during retirement and have taken a huge income burden off of themselves. And and they they they just do. They’re doing a great job now. They just there’s so much happier they’re able to travel kind of reasonably and just really enjoy retirement more than they were. And they’ve done that literally in the in the last few months. And I’m just super proud of them. And so I just want to give a shout out to Lucy now.

Producer Sam Davis:
Yeah, great job, Lucy and Al. We’re so proud of them. And you know, that just goes to show sometimes it’s not about how much you make, it’s about how much you spend and just relieving themselves of three thousand five hundred dollars a month. That’s really going to open up their options moving forward. But what do you say? We get back into the questions.

Ford Stokes:
Yeah, absolutely. So go.

Producer Sam Davis:
Darryl in Lilburn is wondering about annuities, he asks what type of annuities should I avoid and which ones should I consider the most?

Ford Stokes:
Yeah. So the number one annuity I would say to avoid and we don’t sell these because we just don’t believe in them, is one I would say just don’t sell very. I mean, don’t buy variable annuities. A lot of variable annuities are sold by advisors who work in banks and who work at major wire houses, and they sell them for commissions. They get like three and a half to five and a half percent somewhere in that range on upfront commissions. So let’s just say it’s five percent. You walk in to buy a $20000 annuity, you’re going to walk out a variable annuity, you’re going to walk out with a $19000 variable annuity and the bank advisor and the bank are going to take a thousand bucks. That’s OK. But if it gets up to two hundred grand or 300 or 400 grand, its stuff starts out in a real money and they’re making five percent of the day when they meet you and they haven’t earned it, in my opinion. And so also variable annuities are annuities that I call variable. Don’t do annuities. So here’s why. Bottom line is the expenses. I mean, they charge between three and a half three to six percent a year in charge. You’ve got things like mini fees, which are mortality and expense fees. You’ve got sub account fees because, you know, a variable annuity is an annuity is a mutual fund wrapped inside of an annuity. So you’ve got layers and layers of fees. You’ve also got admin fees. You’ve got all and you’ve got brokerage commission fees.

Ford Stokes:
You’ve got to pay when you buy one because you’ve got to buy it from a broker. We’re, you know, financial advisers. We just care about different investments, leaves and allocations, please. We don’t we’re not advocating one product or the other other than what makes sense for the client, what’s suitable for the client? And it really drives me bonkers when people come in and they’ve been sold variable annuities and the one to buy would be a fixed indexed annuity, but specifically try to consider an accumulation based annuity or at least one that has a free. You can have an income annuity, but at least it has a free income rider. Fee, because you don’t want to have to pay money for you to withdraw money, money from the money you give them. I mean, if you have an annuity with a you say you have a fixed indexed annuity where it can grow with market like gains without market risk, that’s great. But if you’re also paying them an income rider fee, you’re not withdrawing money from your annuity and you’re letting it grow. But they’re removing zero point nine five percent on an income rider fee or one, one and a half percent. Whatever the income rider fee is, you’re paying them money and you’re not even able to take advantage of the service the service is on. An income rider fee is like, Hey, we’re going to let you withdraw money from your account. Why do I have to pay you money to take money out of my own account? So, I mean, it seems like a really cool idea for you all, but it’s not really a cool idea for the investor.

Ford Stokes:
I wouldn’t encourage people to invest in accumulation focused annuity that is low in fees and can give you a high participation rate in indices like the Barclays Atlas five or the Credit Suisse Raven PAC or the Credit Suisse momentum or other things. We’re I mean, I saw a product that came across my desk where somebody had bought an annuity in in 2015, and they’re closing in on getting out of the 10 year period. But guess what? I mean, it was offering a reallocation to an S&P 500 index at only 19 percent. So the company got 80 one percent of the growth of the S&P 500 and the client got 19 percent. That’s not right. That’s not the right thing to do for the client. And so I’m a huge fan of accumulation based annuities that are sold the right way that aren’t sold for high commissions to the advisor that are sold so that the client gets a high accumulation and a high interest rate. And at least you can see a high illustrated rate in the non-guaranteed page of the policy, so you get an idea of what your upside is. So a fixed indexed annuity that’s accumulation based product that is low in fees and does not include an income rider fee is what I would recommend that you invest in.

Producer Sam Davis:
All right. So our next question comes from Alicia in Smyrna, and Alicia is a registered nurse, and she’s planning on retiring in the next two or three years, she says. And she asks, now that I’m going to stop working, won’t my taxes be lower?

Ford Stokes:
Yeah, Alicia, it depends, right? Number one is, is all of your money in an IRA or in a in a tax deferred account because let’s say you need to your income level needs to stay about the same when your retirement, but you’ve got a big enough nest egg. Let’s say you, you make seventy six thousand dollars a year. Well, if you make thirty six thousand dollars in Social Security income, and let’s say both of these are before taxes and then you’ve got a million dollar portfolio, so you’re taking out $40000 out of your portfolio every single year. That’s seventy six grand. But the problem is this your Social Security income is going to be taxed at eighty five percent because you’re making more than forty four thousand a year if you’re married, filing jointly and it’s more than thirty two thousand dollars a year if you’re if you’re a single filer. So the security administration in the IRS, they think you’re wealthy if you make more than forty four grand. And then the other part of it is when you withdraw money from your IRA. Guess what? That is taxed at ordinary income tax rates, so you’re going to be paying about the same taxes, unfortunately, then when you were working, if you’re if you’re trying to just replace your income now, there are strategies around that, whether it’s Roth IRAs or life insurance or trying to make sure that you don’t need as much income and reduce your taxes and by downsizing, reduce your fees and your monthly expenses. So if you can eliminate a mortgage, that’s a great way to pay less money in taxes because you’re going to have to withdraw less money from your IRA or your 401 K or 403 B four point fifty seven or Sep IRA or Simple IRA and and or from any investment accounts. So you’ll have less impact from your tax deferred accounts. And also remember, folks, make sure that you’re prepared to get your RMDs ready to go and especially in that first year where you need to start taking RMDs.

Producer Sam Davis:
Greg in Buford, he’s looking at his Social Security, he’s doing some Social Security planning and he’s asking, Is there a way to reduce the Social Security tax?

Ford Stokes:
The answer is yes. The best way to do that is do a Roth Ladder Conversion early and try to get out, even start converting even before you start taking Social Security or before your Medicare eligible and your Medicare eligible at age sixty five, obviously. But you want to do everything you can to try to get money out of your IRA and into a Roth IRA, if possible. The other way to do that is to put money into life insurance and build up cash value and then generate income from that because income from Roth IRAs and income from life insurance policy specifically, what we like is indexed universal policies in indexed universal life policies or ideals. So Roth IRAs and ideals when? They generate income. The IRS is not your partner in those accounts, and that will not count towards additional taxation on your Social Security income benefit, nor will it count towards additional Medicare surcharges. And those are the only two truly tax free investments out there. The third option would be a municipal bond. The problem is with municipal bonds, they’re just they’re still going to contribute to Social Security taxation and also additional Medicare surcharges. And listen as promised that promise throughout this whole show, we really enjoy taking your questions, but we are going to talk about all the elements of a smart financial plan really quickly. Also, if you want the free report on how to build a smart financial plan, all you’ve got to do is send me an email at Ford at ActiveWealth.com. That’s Ford at Active Wealth.com, or you can pick the phone up and give us a call. And we’re happy to help you. At (770) 685-1777 (770) 685-1777 or you can just reach out to us at ActiveWealth.com. And we come back to the break we were talking about more about. We might take one or two more questions, but we’re going to talk about in full how to build a smart financial plan and all the elements of a smart financial plan.

Producer Sam Davis:
And welcome back to the Active Wealth Show activators. We’ve made it to our final segment of the show here today. We’ve been answering questions that activators sent in, and if you have questions, just send them over to Ford Floyd, like the truck at Active Wealth, or just head over to Active Wealth and ask your question there. You can also schedule that free retirement consultation Roth IRA Active Wealth as well, and we’ve got more questions. So if you didn’t get your question answered today, we haven’t forgotten about you. We’ll get to you on the next show. But for the sake of time, we’re going to get into smart financial plan because Ford has some really important information to share with you guys.

Ford Stokes:
Number one is number one element of a smart financial plan is smart inspection. So you want to analyze your portfolio, you want to get an income gap analysis. Also Social Security maximization report and get a tax plan as well. And Medicare review. So you want to get all of that? That’s smart inspection. You want to inspect. You expect about your current plan, right? Then the next is smart, safe. You want to build a smart, safe and smart way of investing, and that is a combination kind of between, you know, not in the market investing and also bond replacement. And you can invest in things like smart, safe with fixed index annuities. Or if you want to do bank CDs, you could. But that’s not really an intelligent way to go because they’re paying so little right now, with banks only paying, you know, brick and mortar banks only paying zero point zero five percent on a one year bank CD. But you want to consider investing in to a fixed the next annuity as a bond replacement that is not in the market investing. Number three is smart risk, so we implement tactical tactical asset allocation with all of our portfolios also some strategic allocation. We also try to reduce the fees. Specifically, we try to reduce the expense ratio within the portfolios. We use exchange traded funds or ETFs to implement our portfolios and our allocations. Tactical asset allocation within smart risk is rebalancing every single month and really doing more than just hanging in there with your investments.

Ford Stokes:
It’s not really a buy and hold strategy, and strategic allocation is a little bit more of a buy and hold over a year period and reevaluating. And we have portfolios that combine both of those investment strategies. The number four is smart income. You really got to understand how much income you’re able to generate on a monthly basis so you can really enjoy your retirement. That includes income planning and also maximizing your Social Security and getting that free Social Security maximization report from us. It’s also rule following. You need to do a really good job at following rules like the rule of one hundred and the four percent rule and the rule of 70 to. So rule of 100 is, you know, an allocation side of it and make sure that you’re not taking too much risk as you get older. So if you’re you take one hundred, subtract your age. Let’s say you’re 60 years old and you’ve got 40 left over. That means 40 percent of your portfolio should actually be at risk in the market. Many of you probably just get a hard gulp there, and we’re like, Wait a second, I’m like 80 percent invested in the market. Well, that’s fine. But you ought to consider trying to follow more closely and doing a bond replacement strategy and still get market gains with fixed index annuity and generate smart income. It’s even better to be even smarter with the income when you combine it with smart tax, right? And in that allows you to get tax free income from life insurance and from from Roth IRAs.

Ford Stokes:
Then number five is smart health. You don’t want to do a Medicare plan review of your Medicare A, B and D, and if you want to consider whatever your situation is for long term care, if you want to sell finance long term care later on in life, here’s a quick hint. On average, the gentlemen that are in long term care facilities, they live about 18 months on average, and the women live over three years on average. So long term care premium premiums on long term care policies are actually higher for women because you’re likely going to utilize the long term care service longer, then number six is smart tax. You want to diversify the types of investments you’ve got into different taxable and tax deferred and tax free accounts. So different buckets, if you will, of your money so you could invest in tax deferred, which is IRAS, Roth IRAs 403B’s for four, fifty seven for one, Kazan and Sep IRAs and simple IRAs, et cetera. Or you can invest in tax free, which is Roth IRAs or life insurance. And then taxable is just your investment account. You can have a joint investment account or, you know, an individual investment account. Then the next one is Smart Plan. We want to have smart planning, we want to have a comprehensive retirement plan, and we want to get our results in advance.

Ford Stokes:
We want to understand what our retirement is in advance over the next two to three decades and if we don’t, shame on us. And number eight is a smart launch. We want you to actually take informed action. We don’t, you know, Tony Robbins says if you don’t take action, you actually haven’t made a decision. And so we want to make sure you take action on whatever plan you’ve got set forth and agreed to. Number nine is Smart Legacy if you want a plan to tax efficiently, pass your assets to your loved ones. Roth IRA is a great way to do that. Setting up a trust is another great way to do that. Also, just make sure you at least get a will because you don’t want the state to make decisions on where your money goes. And then number 10 is a smart review. You want to assess the metric performance and the progress of the plan that you’ve implemented and see how that’s going. Year over year and do an annual review. And then. Number 11 is just kind of doing a smart adjust to it, you want to make changes based on your plans, performance, current income tax situation and also your current expenses. That’s a lot, and there’s a lot to it. And if you haven’t thought about all of those different elements of a smart financial plan, whether it’s smart, safe or smart risk or smart income or smart tax or any of the other ones, like with smart legacy and, you know, just smart assessment, really just smart inspection and smart launch, just trying to actually launch your plan and, you know, plan your work and work your plan on retirement, that’s a really good way to go.

Ford Stokes:
And we want to do everything we can to help you protect and grow your wealth and help you outpace inflation. And so you don’t have that melting ice cube retirement, you’ve got a retirement that’s growing and it’s robust. And and also one that allows you to spend more time with your family. We spend a lot of time in our family and we want you to be able to spend more time with your loved ones. Here’s another great hint. Sell your house and move to a lake somewhere or go move to a affordable beach community somewhere so your kids and your grandkids will come visit you on holidays, not just during Christmas and Thanksgiving. And so if you want to build a smart financial plan that includes smart risks, smart, safe smart tax decisions, it helps you build for smart legacy. I would encourage you to go ahead and visit Active Wealth and schedule a free consult with us. Absolutely no cost to you. It’s a $500 value and we’re happy to offer to you. Now let’s go ahead and share our final countdown. It’s the.

Producer:
So let’s recap what you may have missed. It’s the final countdown.

Ford Stokes:
So on today’s show, Sam asked us a lot of questions that you had ask us through Active Wealth M on our Twitter handle or through our Facebook page at Active Wealth Management or on Active Wealth com or by sending me an email at forwarded ActiveWealth.com, or just even face to face that you wanted me to ask the questions online when you came into our office at the King Queen building, we’re on the 29th floor of the King Building, which is building six, and we’re happy to help you. And then we went through all those different things. We also recognized Jerry, who is an activator. Listen to our show for a long time while it works on houses, and he’s done a great job living below his means and building a strong retirement. He’s getting ready to retire here in the next several years, and we’re really proud of him and looking forward to working with him to protect and grow his assets. And then we just want to give a big congratulations to Lucy and Al because they’ve just done an incredible job are clients of ours. And they paid off credit cards, paid off their house and they have reduced their monthly expenses because they were doing stuff to pay down the house and pay down the credit cards and everything. And they’ve been able to do that. And they are now reduced their monthly expenses by three thousand five hundred dollars a month, which is fantastic. And then we went through what a smart financial plan is. That includes, you know, smart assessment, smart risk, smart, safe smart income and smart tax decisions, including also smart health and just a host of other ones that also rounds out all the way to smart legacy and a smart assess and reviewing it.

Ford Stokes:
But more importantly, the most important thing is the smart launch to try to really launch your smart financial plan because you’ve got to really plan your work and then work your plan, and we’re not doing a good enough job for that. I think more people need to do a better job at planning their work and working their plan with their retirement. And remember, if you’re going to be a bear, be a grizzly in all of your retirement planning. Knowledge is power. Do everything in your power to do what it takes to learn as much as you can about retirement, much as you can about investing and also how to reduce your taxes during retirement. We’re happy to help you do all that. All you’ve got to do is visit us at Active Wealth. Click that set an appointment button the upper right corner. We’re happy to help you, and we’re so glad you’ve been with us here on the Active Wealth Show. Next week, we’re going to talk more in detail about how to build a smart financial plan. We’re going to break down the first half of the list, actually, and I think you’re really going to like next week’s show. We’ve got real plans for that show, and thanks so much for being with us on Active Wealth Show. Have a great week, everybody.

Producer:
Thanks for listening to the Active Wealth Show. You deserve to work with a private wealth management firm that will strategically work to protect your hard earned assets. To schedule your free consultation, call your Chief Financial Advisor Ford Stokes at (770) 685-1777 or visit Active Wealth. Investment Advisory Services offered through Brookstone Capital Management LLC become a registered investment advisor. Bcm and Active Wealth Management are independent of each other. Insurance products and services are not offered. The BCM that are offered and sold through individually licensed and appointed agents. Investments involve risk and, unless otherwise stated, are not guaranteed. Past performance cannot be used as an indicator to determine future results.

Producer Sam Davis:
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 interest of our clients and to make full disclosure of any conflicts of interest, if any exist. Please refer to our firm brochure, the ADV to a Page four for additional information.

Producer:
Are you concerned about U.S. tax rates being raised by the Biden administration and how that will affect your retirement? Tune into the Active Wealth Show with Ford Stokes, your chief financial advisor, to learn how you can reduce the taxes you pay before and during retirement. The Active Wealth Show Saturdays at noon and Sundays at 11:00 a.m..

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