Debunking Myths About Annuities Transcript: Audio automatically transcribed by Sonix

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

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 interest of our clients and to make full disclosure of any conflicts of interest, if any exist.

Producer:
Welcome to the Act of Wealth Show with your host. Ford Stokes Forde is a fiduciary and licensed financial advisor who places your needs first. You’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:
Hey, welcome to the Active Wealth Show, everybody. I’m Ford Stokes or Chief Financial Advisor. I’m joined by our executive producer, Sam Davis. Sam, say hello to the folks.

Executive Producer – Sam Davis:
Welcome to the Weekend Activators. I hope you’re enjoying a lovely, warm spring weekend here in the state of Georgia. Love it.

Ford Stokes:
Yeah, we’re getting a little bit warmer. We had a few BlackBerry winters here where we got some cold days in the spring, you know, where our blood’s thinned out, getting excited about spring and summer, and all of a sudden we get some cold days sitting at the Braves game or whatever and, you know, saying, we’ve really enjoyed going into the Braves game with clients and where they’re bringing friends and things like that. And so that was been a big new fun partnership that we’ve done. And one other thing that we want to we’ve got two other things to announce today. One is we’re now part of the retirement radio network, this show, and another show in Florida where kind of the the founding shows of the retirement radio network that’s going to have advisors across the nation. And Sam, you’re leading that charge, the producer, for all all those shows overseeing the production of all those shows in different towns. Obviously, you can’t do produce all of the shows individually like you do this show. But I wanted to say congratulations to you and also thanks for making us a part of the retirement radio network. We think that’s a big deal and we’re just always happy to try to help people retire successfully, how to invest tax efficiently, fee efficiently and market efficiently. And that’s just going to give us a greater voice and it’s just nice. Also a big thank you to the activators out there because you’re you’re growing the Active Wealth Show and you’re you’re helping the Active Wealth Show have more influence and also reach more listeners through the retirement radio network. And if you want more information, you can always check it out at retirement radio. But Sam, again, congratulations on putting all this together.

Executive Producer – Sam Davis:
Well, thank you. Well, the awesome thing to me is that how many more people are going to be able to receive this information that we’re sharing on your show and the other shows that are currently and will soon be a part of the retirement radio network, really just educating more Americans, pre-retirees and retirees, helping them live longer, happier, healthier lives is what it’s all about. So when I think about how many more lives are going to be improved, based off what we’re doing on this show and all the other shows, it’s it’s just it’s a good feeling. And and we’re excited to bring you important information today.

Ford Stokes:
Yeah, no question. We’re here. Our primary focus is obviously to take care of the great folks here in Georgia, specifically those in the kind of the Atlanta area. We’re here to help you, your retirement. You also get a chance to meet with me directly. We don’t pass you off to another advisor, although we have other advisors that work in the firm, the radio listeners that listen, the Active Wealth Show get the opportunity to just work directly with me. And if you are interested in scheduling a consultation, you can click that schedule a consultation. But in the upper right corner we’ve changed that from set an appointment to schedule a consultation because people tend to prefer that and just go ahead and check out a ActiveWealth.com. That’s ActiveWealth.com. And we’re happy to meet with you and give you a free portfolio analysis, a free financial plan, also a free financial plan with a Roth Ladder Conversion and a retirement income gap analysis with a Social Security maximization report. All of that together is a $4,200 value. And we’ll give it to you. Absolutely. At no cost to you. All you’ve got to do is reach out to us at ActiveWealth.com. That’s ActiveWealth.com. So today’s show, we’ve got one more announcement. But I want to give you quickly, here’s the here’s what we’re going to talk about on today’s show.

Ford Stokes:
We’re going to give you a really in-depth market update and aq2 outlook. We’re also going to give you kind of what’s going on with the housing store. We’ve got a new retirement radio, our first news article that that has been recorded by Matt McClure, who’s one of our retirement radio reporters. And then also we’re going to talk about the myths about annuities today and kind of give you some additional detail you may not have known before about whether you should consider doing some bond replacement with a fixed indexed annuity, just at least give it a shot for 10 to 20, even all the way up to 40% of your portfolio. So you can get important income. Also grow your money without market risk and hopefully get some market like gains without market risk and also try to do all that fee efficiently. And we’ll we’ll talk to you about how we can do that. And we’re also going to give you an opportunity for a free annuity x ray. So if you’ve got a variable annuity, which is what we call a variable, don’t do annuities. But if you’ve got a variable annuity that’s offered from a bank or you bought it from an advisor or a bank advisor a long time ago or even recently, I would encourage you to pick up the phone and give us a call, because I think it would surprise you to know what’s going on with your variable annuity.

Ford Stokes:
Chances are they’ve got 3 to 6% of additional fees that come out of the value of the portfolio of the actual investment into that variable annuity each year. And most of that feeds into mortality and expense fees, what they call M&A fees in the industry. Also sub account fees and administrative fees because a variable annuity is a mutual fund wrapped onto an annuity chassis. And so you have fees upon fees upon fees and it starts adding up to real money and it makes it difficult for the account to actually grow. And we don’t want to see you be that fee efficient. With a variable annuity, we encourage you to consider a fixed indexed annuity. Instead, a fixed indexed annuity can give you market like gains without market like risk. We’re going to talk about that on today’s show. But now I want to go ahead and give you kind of the the next big announcement we had. I’m really pleased to announce that I’m going to be appearing with Laura Ingraham on the Advisor Radio Summit to help other advisors, you know, reach and serve more clients on May 6th. And we may play some of that interaction where I’m going to get the chance to ask her a few questions, what she sees out there in the market and politically and in the landscape out there.

Ford Stokes:
And we’ll share that with you guys and gals in that next week. After that Friday the sixth, we’re super excited to be on the same panel as Loring. We’re big fans of hers. We’re on a conservative talk radio station for a reason. We are conservatives. We do believe in less government, and we’re also trying to get the government out of the pocket of the retirees we work with. That’s part of the job we do as fiduciary is try to take tax risk off the table and future tax rate hikes in that risk associated with those off the table for our clients. But we’re super excited to be on the same panel with Laura Ingraham. So thanks again to Laura Ingraham and to financial marketing for making that happen. And I wanted to now just give you a brief outlook from our chief investment adviser, Mark Diorio, and his Q two outlook. He’s got he’s going to talk about two really important topics. One is kind of the price of oil. And then also he’s got some inflation perspective that he’s going to share as well. So go ahead and say him and roll that message from Aaron Kennedy interviewing Mark Diorio about the Q to market outlook for 2020 to.

Producer:
Your Active Wealth Market Update.

Executive Producer – Sam Davis:
The price of oil. We haven’t seen these numbers since 2011, 2014, but you say these prices will incentivize production. Can you explain that? Sure. Usually the solution to higher commodity prices is higher commodity prices. And why is that? It’s because now it really incentivizes more production and more players get involved and they ramp up production as quick as they can really to take advantage of the higher prices. So we definitely see this rise in oil incentivizing those producers to really increase production. And that’s what we expect. And our early look at the numbers suggest that that has happened, that the number of oil rigs has increased by about 20%. But that’s still a far cry from where we were in 2011 to 2014 when oil was about this $100 level as well, where we had about 1000 rigs operating today, it’s about 525. So we still have a long way to go to be able to ramp up that production. Yeah, that is significant. Another challenge, of course, facing the markets inflation, which is why the Fed is raising rates. A slowdown doesn’t mean a recession. And I do want to take a look, though, at consumer confidence right now. And you share this information with all Brookstone capital management advisors.

Executive Producer – Sam Davis:
You say that consumer confidence here, these numbers will alleviate inflationary pressures. Does that kind of happen organically? Definitely. So I think you saw a little bit of what was used in the late nineties, something called The Wealth Effect, which really helped spending. And in other words, if your savings and your for one case and your investment investments were rising in value, you feel better about spending. And we saw that as the economy reopened in 2020 and you had this burst of demand and consumers were flush with cash, and all of a sudden you see prices start to rise. You see interest rates recently really start to rise, particularly in the mortgage market, and make some of that housing costs a little out of reach and then you get hit again with prices at the pump. So consumer confidence has come down. So that should actually translate into demand. And demand should definitely slow and we’re already seeing it. And you could see in that chart, if you look closely that consumer confidence, the light blue bars there are almost as low as they were back in 2008 during the global financial crisis. So that was really a big reversal of fortune here for us consumers.

Ford Stokes:
And thanks again to Marc Giorgio, our chief investment adviser, for providing that important insight on what’s going on with commodity pricing and the price of oil and gas. And then obviously kind of given us what’s going on with inflation as well. And when we come back from the break, we’re going to talk more a little bit about what’s going on in the housing market. Matt McClure, one of our retirement radio news reporters, has got a really great two minute segment you’re going to want to hear. It gives you an update on what’s going on in the housing market. You might want to consider downsizing to grab more cash and also invest for the long haul and take advantage of this high market. That that story’s coming up right after the break. And then we’re also going to talk about the myths about annuities. There’s 5 minutes that we want to address right here on the Active Wealth Show and how that could benefit you and your retirement. Listening Active Wealth Show right here on AM 920. The answer will be right back.

Last December, back in 63. What? Very special time for me, as I remember.

Producer:
Thanks for listening to the Active Wealth show. If you like what you’re hearing, make sure to rate our show on Spotify or wherever you listen to podcasts.

Executive Producer – Sam Davis:
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.

Ford Stokes:
Welcome back to the Active Wealth Show Activators. I’m Ford Stokes, your chief investment advisor. And for those of you who are wondering about, hey, who is an activator, somebody who listens to this show, somebody who wants to protect and grow their wealth, somebody who wants a peaceful retirement, kind of a retirement where they’ve got peace of mind, where they’re not having to watch the stock ticker every day. And it’s somebody who is looking to build a tax efficient, fee efficient and market efficient portfolio. What we’re trying to do is give you as much information as possible when you’re dealing with retirement. If you’re going to be a bear, be a grizzly, we want you to seek as much information as you can so you make an informed financial decisions about your financial future. Specifically, how are you going to invest and enjoy retirement? How can you reduce the fees? Whether you’re trying to reduce Medicare surcharges, where we partner with professionals like Bonnie Dobbs with Medicare and other red tape, or how do we reduce the taxes you’re going to pay during your 35 plus year retirement? We’ve got Roth Ladder Conversion plans and indexed universal life policies, plans for that. But one of those things is also we’re trying to help you make right decisions about one of the primary assets of every family, which is the family home. And Matt McClure, our reporter for Retirement Radio and the Retirement Radio Network, has got an interesting piece that talks about what’s going on in the housing market. I think you want to give this a listen.

Producer:
How could the housing market affect my retirement savings? I’m Matt McClure with the Retirement Radio Network Red Hot. From a seller’s point of view, that has been the state of the US housing market for the last couple of years. But in March, existing home sales fell. However, that does not mean sales prices are down. Actually, it’s the exact opposite. Here’s what reporter Diana Olick said about it on CNBC.

Executive Producer – Sam Davis:
But the headline here is that prices are still on fire. The median price of an existing home sold in March was $375,300, an increase of 15% from March of last year. And the highest price the realtors have ever recorded, at least since they started in 1968.

Producer:
So what could explain the high prices? Well, it all goes back to the basic laws of supply and demand. The supply of new homes on the market fell nine and a half percent over the last year, but demand is still sky high and that has driven existing home sales prices to the highest level ever on record. The higher prices, coupled with rising interest rates, also mean monthly mortgage payments are up, with Realtor.com saying the average borrower is now paying nearly 40% more each month than they would have a year ago. Diana Olick once again on CNBC.

Executive Producer – Sam Davis:
Now rates then really jumped in March and April now were around 5.35%. And that’s why we’re seeing serious bleeding in mortgage demand. It’s nearly half of what it was a year ago. According to the mortgage bankers, refis are down nearly 70%. But even applications to buy a home, they were down last week, 14% from a year ago.

Producer:
So with supply still low and demand through the roof, could there be a way to take advantage of the situation when it comes to retirement savings? If I’m close to retirement and own a home, might it make sense to sell my current home, downsize and then put the difference toward savings or investments? Those are some key questions when it comes to the state of today’s housing market and your retirement with the Retirement Radio Network. I’m Matt McClure.

Ford Stokes:
And I just thought that was a great piece. And for Matt it’s really great. That’s his first piece he’s done on the network for us and just thank him for us. And then also I think he brings up a lot of really good points. One is if you’re thinking about downsizing and you want to get that high check ring from selling your buck at home, or you’re Dunwoody home or Sandy Springs or Alpharetta or Roswell or Cumming, Georgia or Cherokee County or Marietta or wherever, or even Peachtree City in Stockbridge. You want to trade in the golf cart, you know, lifestyle, and you want to move somewhere else. I would beg you to consider downsizing and then buying a home that is two or $300,000 less. Because if you can put that money into a managed portfolio and or structured notes and or into a combination with a fixed indexed annuity, and you can generate income from that, that could really help out your retirement. But also the key is growing that money. We don’t just saying we don’t just grow people’s IRA accounts. We look at the whole picture. So we’re looking at money and proceeds that come from the sale of the family home or or just other investment accounts they’ve had in stocks that they’ve had or things they’ve inherited or in beneficiary IRAs with inherited accounts. We’re really adept at helping protect and grow those monies. And safely, too, we try to implement a multi level strategy to do that.

Ford Stokes:
And what I want to. Urge everybody to do is just pick the phone up and give us a call. If you’ve got questions about downsizing your home. I would encourage you to pick up the phone and give us a call. But and you just call us at (770) 685-1777. Again, (770) 685-1777. We work with a lot of real estate agents here in North Atlanta on this very subject, and we will refer them to folks that have, you know, pockets of expertize geographically around the city. Because we get asked quite a bit about this and we don’t make money, we don’t share in fees or anything like that with real estate agents. We just try to put people in touch with reputable real estate agents that are going to do right by our clients and our prospects. But one big thing, Sam, that you and I have talked about is when you downsize, you ought to downsize to a place where people are really going to want to come visit you. And one of the ways to do that is go get on a lake somewhere, go to north Georgia, go to the coast and coastal Georgia and, you know, go get the house. That’s fun to visit on Memorial Day, July 4th and Labor Day. So you can see your kids a lot more often than just Thanksgiving and Christmas, right?

Executive Producer – Sam Davis:
Yeah, I know. Whenever I make a trip out to the beach or up to North Georgia or North Carolina to see the mountains, it’s just it’s so refreshing. It’s a different pace of life. I think that’s super attractive for retirees. I mean, I think about that all the time. Whenever I need a quick getaway, go to the beach, go to the mountains, see some space, get that sunshine on your face, it feels good. So I think it’s an attractive lifestyle. And so if I think that now I’m a bit younger, of course, yeah. The grandkids are going to come out and see you.

Ford Stokes:
Yeah, I’ve got clients who’ve moved in. Murphy, North Carolina. I’ve got clients who’ve moved to the Highlands area. I’ve got clients who’ve moved to Blue Ridge. I’ve got clients who move to Fernandina Beach or Amelia Island. One client got like a $340,000 house down there. Amelia Island, not on the water, but in the golf course area, and they love it and are having a blast down there. I would just encourage you to consider that they said that their kids come and visit them every major holiday because they want to go to the beach and other I’ve got friends who who’ve got houses on Lake Martin and they can’t keep their kids away on Memorial Day, Labor Day and in July 4th, they just can’t. They’re all coming there all the time and they’re having a blast with the grandkids and they’re seeing their kids a lot more. And believe it or not, you can sometimes get on the lake, even though it’s slightly elevated and pricing or get down at a certain beach communities, not necessarily if you’re going to be on the water, but you’re just steps away from the beach. You can actually still save that two or 300 grand lower than what your buck had or Dunwoody or Sandy Springs or Roswell or Alpharetta or Cumming, Georgia or Peachtree City or Stockbridge House was because all those areas are really desirable.

Ford Stokes:
And Atlanta real estate, I think we’ve reported on this show, it’s gone up 17 plus percent last year. You might want to start it might be time to get off, you know, get off the roller coaster from a real estate perspective, especially if it’s just two of you living in a 5 to 6 bedroom home and it’s going to save you in maintenance fees, it’s going to save you in taxes more than likely. And you’re also going to be able to enjoy lifestyle. And if if your neighborhood’s kind of grown up and already turned over and turned over to families with young kids, and you’re not necessarily a fit for hanging out with all those folks. You might want to go get around folks who are kind of in your same age range and same lifestyle. And, you know, even being on Lake Martin in Alabama, you can get on Willow Creek and get into a golf community and go play golf and go get on the lake whenever you want to and and play tennis like like I do. I play golf and tennis. I grew up kind of being a country club kid, and and I love playing both.

Ford Stokes:
And I’ve made lifelong friends playing Alta for 20 years here in Atlanta. But I also have a lot of friends on the coast that I play a lot of tennis with or play golf with. And I’m a little bit better tennis player than I am a golfer. But it also is going to keep you younger and more active. But the bottom line is we’re trying to help you spend more time with your family. I mean, in our family, we spend a lot of time and and we want to help you spend more time with your family, but also get you get that money working for you, not just that equity sitting in a home. You’re better off just paying cash for the new home, selling the old home, paying cash to the new home, and then investing the difference and living off the interest. And let that money work for you and let that money work as hard as you did to go ahead and afford that home when you originally bought it 20 plus years ago. And and Sam, I just kind of your thoughts on downsizing and and what you’re seeing out there.

Executive Producer – Sam Davis:
Yeah. I mean, it makes me think what you’re saying forward about going to my family events, whether it be holidays or birthdays or even just getting together for for no other reason than to be together. And my grandparents homes, wherever they were, being the anchor location for those family events and how special that must have been for them to host all of us and. Their whole family that they’ve seen grow as the decades go by before their eyes. I know it was special for them because it was it was special for us. And, you know, as you get older, you kind of you kind of miss those things and you want to take advantage of as many of those opportunities as possible.

Ford Stokes:
Yeah, we’re going to do everything we can to help you live off the interest and keep the principal going and growing. And when we come back from the break, we’re going to talk about the five big myths about annuities and give you a little bit more detail on annuities as a bond replacement option, a retirement income option, and a fee reduction option. Believe it or not, right here on AM nine, join the answer. You’re listening, Active Wealth Show. And we’ll be right back. Talking about the five myths about annuities.

Executive Producer – Sam Davis:
I see the crystal raindrops fall. And the beauty of it all is when the sun comes shining through to make those rainbows in my mind. When I think of you sometime and I want to spend some time with you.

Producer:
Thanks so much for listening to the Active Wealth show. Make sure to rate us everywhere you listen to podcasts, including Spotify. Fixed annuities, including multi year guaranteed rate annuities, are not designed for short term investments and may be subject to restrictions, fees and surrender charges as described in the annuity contract. Guarantees are backed by the financial strength and claims paying ability of the issuer.

Ford Stokes:
And welcome back, activators the Active Wealth Show. I’m Ford Stokes Chief Financial Advisor. I’m here with Sam Davis, our executive producer. And what we’re going to talk about now is the five biggest myths that we’ve found on annuities, just five biggest myths about annuities out there. What a lot of people have said and what’s right and what’s wrong. If you want to get a copy of my new book, Annuity 3060, all you got to do is visit Annuity three, 60 point net. That’s Annuity 360 net. We’ll we’ll send you a hard copy. We added the name email phone, but also the mailing address, city, state and zip code to the form. And so you’ll get a hard copy of Annuity 360 mailed to you directly, Deborah, and our team here at Active Wealth. We’ll go ahead and get that out to you on Monday. All you’ve got to do is just reach out to us and complete the form to get your free copy of Annuity 360. Basically, it helps you learn all you need to know about annuities, which ones to avoid, and the one you should consider purchasing for successful retirement. But let’s talk about these five myths. And Sam, I may have you kind of hang in here with me, but annuity myth number one is annuities are for retirees only. And actually, that’s not true. Annuities can be a great way to protect and grow your wealth without any advisory fees. You get to delete the advisory fees portion of what you’re paying for so that that means it’s more fee efficient right there off the jump.

Ford Stokes:
Also, if you buy the right type of annuity, like an accumulation based annuity that doesn’t come with an income rider and you can avoid that 0.95 to 1.5% that comes out of your portfolio. I mean, the amount of money you invest in that annuity each year. So annuities are not for retirees only. I’ll tell you, they’re great opportunities for people that have got divorcees who need just income and they want to make sure that they’re taken care of and they want to be able to grow that anybody that’s a divorce, say, listening to my voice, you really should get an annuity x ray. Even if you don’t own an annuity from me, we’re happy to give you a free, full financial consultation. But if you’re security minded too, and you just don’t really want to, you don’t like what’s going on in the market right now and you don’t want to overinvest your money and you’re too scared and you don’t necessarily want to go back to work or you are working, but you want to protect a portion of your assets. And annuity is a great way to do that. The other number one thing that I would say is a great idea for people that are younger than retirees. They’re still working would be business owners. Let’s say you’ve got a big windfall. You had a really big year. Your business generated a lot of income in one year and you put money into a SEP IRA.

Ford Stokes:
You’ve got additional money that’s in an investment account, but you want to grow that money tax deferred. Well, the best way to do that is to put it into a fixed indexed annuity. You’re putting in nonqualified funds into a fixed indexed annuity. We can get you market like gains. We’ve got some products that are illustrating at 9.61%. We’ve got five year products as well as all the way up to 14 year products. The years are basically talk about the surrender period, but a lot of people don’t realize that you can if you want to type your money, you’re not let’s say you’re 50 years old and you’re not going to retire till you’re 65. Like, Yeah, it’s not that big a deal for me to tie up money till I’m 55 years old or til I’m 60 or 64. Then that’s something you can do as a portion. You can take also some of those old foreign cars and put it into a fixed indexed annuity and an IRA account, and that money would be qualified, money growing, tax deferred. It just grows and grows and grows. Until you start taking money from that annuity, you’re going to be doing 5%, 5 to 10% penalty free withdrawals. Or you could be annuity using the money. Which annuity using an annuity just means that you’re turning on income and you’re taking income. So myth number one, annuities are for retirees only.

Ford Stokes:
It’s absolutely a myth. It’s really for people who want to do a bond replacement, who want to protect and grow their assets and want to grow their money in a more secure fashion and also are a little bit scared of the corporate bond market. Right now, the current US corporate bonds are trading at 135 times earnings in a go forward price to earnings ratio. That’s a lot more than what US stocks are doing between 22 and 23 times earnings on a go forward p e ratio of 23 for US equities, whereas US corporate bonds again are 135 plus. Of a PE ratio that’s 135 times earnings to make sure that they can pay your money back. That’s a lot. I mean, that is that is a risk you’re taking with us corporate bonds. And most people don’t understand the bonds that are in your portfolio anyway. So I would encourage you to do something remarkable and consider a remarkable replacement of some of your bonds with fixed indexed annuities regardless of your age. Same. Your thoughts on you know, I know you’re young and you’re a saver, but your thoughts on just I mean, you’ve learned a lot about annuities know being executive producer of this show. But your thoughts, whether it’s for you personally or for your family because your dad is about the same age as me. Just your thoughts on that in general, using annuities, not just for pre for retirees, but also for folks who are still working?

Executive Producer – Sam Davis:
Yeah, absolutely. My first thought, especially when you mentioned if you’re a business owner and you have a have a very big year, I thought back to your book Annuity 30, 60, and one of the examples was Allen Iverson and his agent had him invest a good sized chunk of money when he was earning those big contracts when he was young. And it helped him be safe and be cared for when he almost became financially insolvent a few years later. So the annuity was kind of what was able to prop him up. So absolutely fantastic, not just for retirees and the security that I think it can provide you and your family is is a huge benefit.

Ford Stokes:
Yeah, no question. So that’s annuity. Thank you for that. I appreciate that, Sam. I completely agree. I love that story about Allen Iverson. I’m so glad that he’s not insolvent because I’m not a huge NBA fan. But I will tell you, I loved watching him. He was much, much watched TV when when he was there. Because when he’s running the point, man, it was his crossover dribble was something else. And I’m just so glad that he’s not completely insolvent because he was overgenerous and and spent through $163 Million worth of uniform player contract money, which is frightening to think of. But Reebok invested like a $2.4 Million annuity for him, and that allowed him to not be insolvent and allowed him to keep living just financially and and not being on the on the street. Homeless number two is. All annuities lock up money. Well, that’s actually not true. Not all annuities lock up money. Also, most annuities do allow you to take out a 10% penalty free withdrawal. And most people don’t write themselves a 500000 to $1000000 check. Most people, you know, they might write themselves a $50,000 check to, you know, to invest in a in a vehicle or something like that. So you can have some liquidity with annuities. Also, you’ve got Mica’s that are two, three, four and five year products, which is a multi year guaranteed annuity that could be a lot shorter. From a liquidity perspective, the surrender period is a lot shorter and you can also take out more of your money just as some surrender withdrawal penalties to it.

Ford Stokes:
But you can take out usually up to between five and 10% of of just about every single annuity out. The fixed indexed annuity out there, penalty free with like literally no surrender penalties even in the first year. And it just depends on the on the different annuities, but not all annuities lock up all of your money. And they they also will give you market like gains so that money grows. Someone will also offer you up to a 10% bonus, which is probably sounds pretty good to a lot of people right now. But imagine if you could get six, 7% a year on a fixed and annuity and in addition, get 10% get a 10% immediate bonus on your money right away. And we have client that. Invested $280,000 into a Skylark Denali, and he got a 10% bonus. So his account was worth $380,000. And he wants to turn on income starting in September, which is the one year anniversary that he bought it last September. And he’s really looking forward to being able to take out his withdrawal percentage off of the 308,000 principal, not the 280,000 that he originally put in. And that is allowing him to kind of increase the income right off the jump. And so he’s really excited about the start of that because he’s 66 and four months. He’s just reached full retirement age and he’s going to turn on he’s going to retire in October and he’s going to turn on Social Security and he’s going to turn on this annuity, and that’s going to take care of all of his needs.

Ford Stokes:
And this is a guy who also just went through a divorce and he and his fiance now they went through a divorce and now he’s he’s met someone and he’s he’s going to get remarried. But he’s they’re living in her place. And he and he they’re really watching their expenses. And he’s still finishing up child support. He’s his daughter’s 18 years old, but this all works for him because that fixed indexed annuity is going to pay him the income that he needs. And also Social Security will, too. He’s got a high $3,200 a month Social Security benefit, but he’s going to be making a significant amount of money from that $308,000 annuity. Plus, he’s got other money invested with us in a managed portfolio. So we think that’s a big deal. So not all annuities lock up money. Sometimes annuities are there to give the money you need the most, which is that monthly income, which is really what retirement is all about. It’s more than just being about one big number. It’s about generating tax efficient and fee efficient and even sometimes tax deferred retirement growth and then retirement income after that. So we think that’s a big deal. When we come back from the break, we’re going to talk about the next three annuity myths. And I’ll give you a hint. Annuity myth number three is that our annuities are expensive. Actually, we’re going to really dispel that myth right when we come back from the break. You’re listening to Active Wealth Show right here on AM 920. The answer.

Producer:
Are you concerned about US tax rates being raised by the Biden administration and how that will affect your retirement? Tune in to 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 a.m..

We will try to.

Executive Producer – Sam Davis:
Put us down. My generation just because we get around.

Ford Stokes:
And welcome back activators the Active Wealth Show. I’m Ford Stokes, your chief financial advisor. I’ve got Sam Davis, our executive producer, here with me. And we’re talking about the five myths, five main myths we hear about annuities. And number one was annuities are for retirees only. We kind of dispelled that myth. And it’s really great for anybody that wants to protect and grow their assets. Also, annuity myth to all annuities, lock up money. We talked about how there is some liquidity with annuities like 10% penalty free withdrawals. And also my guess with two, three and four year and five year multi year guaranteed annuities, that wouldn’t lock up your money for as long. And then number three was annuities are expensive. Believe it or not, the right kind of annuity can actually be at zero fee cost to you. If you can avoid an income rider fee, you can delete that fee. Also, when you invest in a fixed indexed annuity, you delete the advisory fee and the portfolio fee. Because the annuity company pays me the advisor, I cannot charge and double dip and I wouldn’t do it anyway because I’m a fiduciary and want to put my client’s needs ahead of my own. But there there are no advisory fees or portfolio fees associated with a fixed indexed annuity, and that is a big deal. I mean, on a $400,000 bond portion of your portfolio, let’s say you’ve got $1,000,000 portfolio, 60% stocks, 40% bonds, typical 6040 portfolio.

Ford Stokes:
You take 400 grand and over a 35 year period that’s saving 210 grand over 35 years, because you’re saving if even if the bond portfolio remains flat, you’re saving 210,000 because it’s six grand a year at a at an average 1.5% portfolio and advisory fee combined total. That’s the average out there. It’s between one and a half and 2%. Ours is lower than that. And if you want to know how much money you can save from the portfolio fees you’re paying and the advisory fees you’re paying now and also in a reduced expense ratio, then I would encourage you to pick the phone up and give us a call at (770) 685-1777. Again, (770) 685-1777. Also, you can click that schedule a consultation button in the upper right corner at ActiveWealth.com and you’ll get booked directly into my calendar again. That’s Active Wealth. So annuities really aren’t expensive, especially if you can avoid that income rider fee. And I would also definitely encourage you to not invest in a variable annuity but into a fixed index annuity. Variable annuities are expensive. They cost you between three and 6% a year in mortality and expense fees, sub account fees and admin fees and other types of fees. Please do me a favor. Don’t invest in variable annuities and if you have a variable annuity, I would strongly urge you to just go ahead and give us a call at (770) 685-1777 or visit ActiveWealthShow.com.

Ford Stokes:
Click that schedule a consultation button in the upper right corner. We’re we’re happy to help you and we’ll give you a free annuity x ray so you can understand the fees you’re paying and any principal risk you’re taking with us. We’re going to talk about lifetime. Income is easy to come from retirement accounts. That’s not necessarily the case. You an annuity can generate consistent retirement income that looks a lot like a personal pension. The best way to describe this is just to play my Chapter nine from You Can Create Your Own Personal pension from my book Annuity 360 and you get that book at Annuity360.net. Sam, go ahead and play that chapter for us. Chapter nine, you can create your own personal pension. Big idea. Using an annuity to create a personal pension helps you create a lifetime income stream, but it also helps you leave a legacy for your beneficiaries. All annuities can create annuity income to supplement the income you need before or during retirement. Those who are approaching retirement are afraid that they will run out of money. But an annuity can help make sure you have an income you can never outlive. An annuity can be a great investment for your portfolio, but I encourage you to be careful that you don’t overpay for your annuity. When you put your money into an annuity, the annuity company will pay you your money back at a date.

Ford Stokes:
You specify you don’t want an annuity company to charge you too much to simply pay your money back to you. I’m confident that leaving a remarkable family legacy is important to you. You likely want to have money left over when you pass away to leave your beneficiaries. The goal of a personal pension is to generate lifetime income with no risk that grows your money and allows penalty free withdrawals. An annuity can create a lifetime income with market like gains and no market risk while also allowing you to build a. Enough wealth to leave for your beneficiaries when you pass away. Don’t give the annuity company fees for doing nothing. We prefer fixed indexed annuities for our clients that do not have an income rider fee. But you can still create a personal pension without an income rider on your annuity. If you get an annuity with an income rider but don’t utilize the features of that income rider, then you are not getting what you paid for. You are literally just paying the annuity company 1 to 2% each year. You defer annuities in your annuity without receiving a single benefit for that annual fee. This income rider fee will also draw down your account value or principal, depending on how that index is performing. The growth on your entire account value could be significantly and negatively impacted. Some accumulation focused annuities are built to deliver increasing payments without an income rider.

Ford Stokes:
You should consider the features your income rider is providing you before deciding to purchase it as an add on. The longer you wait to turn on the annuity, the more you’ll receive in annual payments. This is because your annuity will spend a longer time in the accumulation phase, meaning it will spend more time building up your account value. Your annual payments will grow as your account value grows. Believe it or not, you can generate your own personal pension by distributing no more than 5% a year with penalty free withdrawals from your accumulation based annuity policy. Many accumulation annuities are set up to be RMD friendly, so you won’t suffer a penalty when you have to take your RMD. It would be silly for you to be penalized for something you are required to do. Annuity companies take this into account by creating products that make taking your RMDs easier. Inspect what you expect with any annuity. Don’t just go with what the annuity agent or advisor tells you. Read it for yourself. Specifically, you should read the annuity illustration guaranteed and non guaranteed tables included within the annuity illustration. Also, please remember that annuity policy is a contract between you and the annuity company. So caveat emptor or buyer beware applies here. Be aware of the annuity you are buying and choose an annuity that works best for you. They will help you build a successful retirement and they’ll offer you peace of mind whether you choose to generate income through penalty free withdrawals or invest annually in an income rider.

Ford Stokes:
Know the consequences of both. This is a decision you will make at the beginning of the investment process. One poor decision here can cost you 1 to 1 and one half percent of annual growth over a 30 year retirement. This could come out to be a significant loss. Educate yourself on your options and the specifics of each option you are considering. Making the right decision up front will save you a lot of frustration in the long run. Also, please remember that if you withdraw too much annually, say 10%, you will run out of money in 10 to 12 years. Make sure that you’re working with an advisor who can help you choose the appropriate withdrawal amount so that your money lasts for your entire lifetime. As discussed above, we recommend no more than 5% be withdrawn each year from your account. I want you to really consider generating your own personal pension because again, like we said earlier, retirement is more about generating efficient retirement income than it is about building your own personal nest egg bidding in some huge, big number. Although that helps. It’s it’s more about how are you going to generate the income? And if you’ve got a big IRA and not much else, you’ve got to you’ve got a significant tax problem that we’d love to help you with with a Roth Ladder Conversion or whatever.

Ford Stokes:
So let’s get let’s get going on that and go ahead and visit Active Wealth. We’re happy to help you. The number five myth about annuities is if an annuity holder dies, the money is gone for good. That’s not true. And actually, with our clients, we make sure that doesn’t happen. A lot of annuities where they don’t get the rate of return they were supposed to get in the illustrated rate that the client saw or there were too many fees. They didn’t understand. They didn’t understand the income rider fee. They didn’t understand anything else. That was part of it. They didn’t understand a lower participation rate. We try to put people in to higher participation rate products. And with indices like the Credit Suisse Raven Pack, where our clients are getting 95% participation rate, they get 95% of how the Credit Suisse Raven Pack performs, whereas and the company gets 5% of it. But we’ve seen other products where they’ve got an S&P 500 index is the underlying market index, and they’re only getting 32% of the participation rate. We don’t think that’s right. So we try to do all the things we can to do right by our clients and get them into high participation rate products with high participation rates, with the underlying indices. So again, those that myth is is a myth as well, and we’ve dispelled that as well. And now for the final countdown. It’s the final.

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

Ford Stokes:
So on this week’s show, we we announced the retirement radio network. You’ve got to hear also from Mark Diorio, our chief investment adviser, talking about inflation and commodities and the price of gas and fuel and what can solve it, which is higher prices and hopefully more production will ramp up. Next is we we played our first story about housing from Matt McClure, who’s our reporter with the Retirement Radio Network. And we’re happy to be part of the retirement radio network. We announced also that I’m going to be serving on the same panel with Laura Ingraham on May 6th, the Advisor Radio Summit, and we’ll play some excerpts from that and kind of get her take on what’s going on in the market and what’s going on with politics these days. And again, feel free to reach out to us at ActiveWealth.com. Click that, set a schedule and a consultation button and we’re happy to help you. Hope everybody has a great week. And we come back from this break. This next week. Next week, are we talking more about how to build a smart financial plan with smart, safe, smart risk and smart tax solutions?

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 through BCM, but are offered and sold through individually licensed and appointed agents. Investments involve risk and unless otherwise stated, are not guaranteed. Past performance cannot be used as an indicator to determine future results.

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