If You Fail to Plan, You Are Planning to Fail

February 14, 2022 00:47:53
If You Fail to Plan, You Are Planning to Fail
Retirement Results
If You Fail to Plan, You Are Planning to Fail

Feb 14 2022 | 00:47:53

/

Show Notes

On this episode of the Active Wealth Show, Ford and Sam discuss how inflation has impacted every part of our lives, including Super Bowl Sunday!
Then, Ford explains the importance of having a plan for retirement, and what working with private wealth management looks like.
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. We’ll see you next week on the Active Wealth Show!

Schedule your free consultation now: ActiveWealth.com
Watch more episodes: www.ActiveWealthShow.com/podcast
Request your free copy of Annuity 360: www.Annuity360.net

AWR 021122.mp3: Audio automatically transcribed by Sonix

AWR 021122.mp3: this mp3 audio file was automatically transcribed by Sonix with the best speech-to-text algorithms. This transcript may contain errors.

Producer Sam Davis:
Registered investment advisors and investment adviser representatives act as fiduciaries for all of our investment management clients. We have an obligation to act in the best interest of our clients and to make full disclosure of any conflicts of interest, if any exist. Please refer to our firm brochure. The ADV to a Page four for additional information.

Producer:
Welcome to the Active Wealth show with your host Ford Stokes. Ford is a fiduciary and licensed financial advisor 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 the Active Wealth Show activators I’m Ford Stokes your Chief Financial Advisor and I’m joined by Sam Davis, our executive raider producer Sam. Say hi to everybody.

Producer Sam Davis:
Welcome to the weekend activators. So happy that you’re here listening to the Active Wealth Show wherever you might be. It is a bit warmer than we expected. Despite the groundhog seeing his shadow last week. We’re getting a little bit nicer temperatures here in the Atlanta area and it’s perfect for a Super Bowl weekend, so get outside and enjoy the big game.

Ford Stokes:
Yeah, I think we’re going to be able to actually get out there and hit some golf balls around and play a little tennis. And I do both. I play tennis and I play golf. Both the country club sports and also shout out to my club, the River Club, over there in Suwanee. Love you guys and gals and everybody just does a great job taking care of us over there at the River Club, but it’ll be great to get back out and and get going a little bit with slightly warmer weather. But Sam, you mentioned the Super Bowl and we’ve got some really breaking information, some great information on Super Bowl inflation, Super Bowl party inflation.

Producer:
Specifically, it’s time for an Active Wealth inflation demonstration.

Ford Stokes:
Just get your thoughts on what it’s like and how it’s going to be about eight to 14 percent higher to put on a Super Bowl party than in twenty twenty one? Yeah, for

Producer Sam Davis:
Sure. Well, everyone knows that it’s expensive. If you actually want to get your butt in a seat for the big game, I mean, get in price this year around $5000 for the cheapest ticket out there in L.A. So we all know that’s expensive, but inflation is at its highest point in 40 years, and we’re going to talk about that later in the show. And that’s hitting not just home prices and vehicle prices, but it’s really hitting hard in the grocery store as well. So when you’re stocking up for the big game, you might be surprised when the cashier tells you the total and you walk away with only four bags and it’s one hundred and fifty dollars. So there’s some there’s some expensive food out there.

Ford Stokes:
I mean, especially when you’re dealing with a Super Bowl party, I mean, you’ve got to plan your work and work your plan. Also remember with financial advising and when you’re dealing with retirement planning and you’re trying to just plan your own retirement, if you are failing to plan, you’re planning to fail. And that’s kind of the theme of today’s entire show. But we’re also going to talk through this this food dove article on the Super Bowl party. And what was interesting, Sam, you said, Oh, there’s probably at least 20 articles on that, and there were there were over 20 articles on Super Bowl party inflation. It was pretty crazy. So we picked the best one and had the most specifics. And everybody on here who listens to us really likes specifics. Of course, the Super Bowl party this year will be about eight to 14 percent higher than in twenty twenty one, thanks to mainly higher meat and soft drink prices, according to an analysis done by Wells Fargo economist Michael Swanson. He cited Bureau of Labor Statistics data from January showing 12 percent to 18 percent higher prices for grill proteins. That’s grill able proteins. I didn’t know that was such a thing. And then while the price for two liter bottles of soft drinks were up 12 percent with 12 packs of cans, six percent higher, and Sam, you and your wife Bailey probably would be interested in that. Guacamole will also hit Super Bowl fans pocketbooks, according to The Washington Post. Avocado shipments have not shifted from the five year average despite growing demand. This, in turn, has pushed the prices up one hundred percent of avocados higher than they were a year ago 100 percent higher. Unbelievable, according to data shared by the publication by Rabo Research, Food and agribusiness. Your thoughts on that on avocado costs?

Producer Sam Davis:
Well, you hit the nail on the head there. I and my wife, Bailey, we both love avocados on sandwiches, wraps and we love some guacamole. And I remember when you could get avocados two or three for a dollar, but I’ve seen them as much as over a dollar for one avocado lately at the grocery store. So, you know, if you’re having a Super Bowl party, you’ve got to have some dips, you’ve got to have some chips to put in those dips. And I think if you’re going to have guacamole on the table, it’s going to it’s going to have a big number on the receipt this year. So what are some of the favorite Super Bowl snacks over there at the Stokes household?

Ford Stokes:
Yeah. So we we love to cook us some buffalo wings on the Big Green Egg. We smoke buffalo wings and I’m going to give everybody my buffalo wing recipe right now. So my buffalo wing recipe is this you take two trays of buffalo wings, whole buffalo wings. You don’t want to do the cut because when you do the cut, then the fat leaks out of the buffalo wings. You want to keep all that stuff in there so you don’t flame out the grill or your big green egg. I’m a huge big green egg fan, so I take I put basically forty eight wings and in about three total one gallon freezer bag Ziploc bags and I pour. Italian dressing in them, then I also put in soy sauce, six tablespoons of of soy sauce into each bag. And it’s pretty remarkable. And then you let it sit overnight and you pull it out and you pat him dry and then you’re ready to put him on the big green egg. I put him on the big green egg with the plate setter, so I’m cooking an indirect heat. I’ve got my place that are wrapped with aluminum foil. Then I go and put the the wings on the grill after I patted them dry. They cook on three hundred. I’ve got the egg up to three hundred degrees. I cook them twenty three minutes aside, so I flip the wings over twenty three minutes later, so I’m cooking. Forty six minutes on three hundred. You can get away with probably thirty five to 40 minutes. I just like to cook them a little bit longer. And then I pull all the wings off. I dust them with Frank’s red hot sauce with butter and soy sauce all together. Wow. Then take the plates that are off and cook the wings one minute each side to to crisp them up. And then I pull them off and let them sit for about five minutes and then I serve.

Producer Sam Davis:
Wow, man, I love the Super Bowl. It’s, you know, it should be on all of our 12 month calendars when we get them at the beginning of the year, because it’s it’s one of my favorite holidays. Such a good American tradition as we say goodbye to the football season and kind of say hello to spring and enjoy a lot of good food. That recipe sounds fantastic, and if you didn’t catch all of it, you can go to the Active Wealth Show podcast feed wherever you listen to podcasts and you can listen back to that recipe and try out the Ford Stokes wing recipe for yourself. That sounds good.

Ford Stokes:
Yeah, I’ll also be on the transcription of the show. I’ll send it to Aliquippa’s all of our stuff. And so that way, you’ve got it. You can also just send me an email at [email protected], and I’ll just send you the the recipe. No questions asked. Here’s the cool part about that recipe, Sam. So you get to taste the the Italian dressing and the soy sauce. It’s a little bit saltier and smokier with the soy. Then you get to taste the actual smoke on the wings as well. You get to taste the chicken. And all that together, and even the butter that goes to the franc red hot sauce, then you’ve got the buffalo wing sauce and then the soy within the buffalo wing sauce, the the layers of flavor on this recipe, it’s the best thing I cook on the big green egg. I love cooking steak and then beer can chicken and beer, canned turkeys and and ribs on the on the big green egg. I haven’t graduated up to the brisket yet. I need to do that. But I’m a huge egghead and not just because I’m bald and and all the all my brain cells pushed all the hair out of my top of my head. I really have been focused on being a big green egg guy for a long time.

Ford Stokes:
I gave my brother one and he calls me all the time, and that’s a really neat thing that he and I kind of share, and he just cooked pizza on the Big Green Egg. And no, I don’t. I’m not endorsed by the Big Green Egg Company or anything, but that recipe for a Super Bowl party is really great. Also, my wife cooks, she bakes sour cream biscuits that are amazing, and they’re really an easy recipe there. I’ll give you that one right now. It is two cups of self-rising flour. It is one cup of sour cream and one cup of butter mixed all together and put in small mini sour cream tins because they’re so thick and rich and delicious that kind of stick to your ribs a little bit. And so you don’t want to have like the larger ones and you cook them for like 15 minutes and they come out nice golden brown and you’ll love them. So sour cream biscuits are really great. And then the last one, and I can’t really. It’s too involved to give you the recipe on this one, but they’re caramel brownies. My wife cooks caramel brownies, and they are the first dessert to go in any party we ever do.

Producer Sam Davis:
Yeah, you can’t miss on the dessert either. So if you’re if you’re listening to the Active Wealth Show in the middle of the day on Saturday or Sunday, don’t wait until Sunday afternoon right before the big game. It’s going to start at 6:30 Eastern for our friends here down in the south on Eastern Time. It could be a nice finish to a big few months for Georgia sports fans, with the Braves winning the World Series and the dogs winning the National Championship and could see a former Georgia quarterback lift the Lombardi Trophy. So pretty cool stuff.

Ford Stokes:
Yeah, absolutely. And good luck to all the dogs out there. So the rest of the show we’re going to talk about, if you’re failing to plan, then you’re planning to fail. Just trying to get a really good idea on and a handle on your investments, whether you want to see, Hey, what are the fees you’re paying? What are the risks you’re taking? What’s the allocation of your assets? How do you get in a better spot? How do you plan for the long haul in the long term? Also, what do you need to do about bond replacement should you be replacing bonds and our slightly rising interest rate environment, where the Fed says they’re going to go up on rates five times this year? What else do we need to do and we need to do everything we can to make sure that we’re minimizing the taxes you pay during your thirty five plus year retirement and also try to get you a good rate of return and also try to minimize risk, although we realize we can’t eliminate all risk. We want to do everything we can to kind of minimize the risk that you’re taking. And also part of that is fee risk and tax risk. And we’re going to talk a lot about that today on today’s Active Wealth Show, where we’re talking about if you’re failing to plan, then you are planning to fail and we want to do everything we can to build a smart financial plan. Thanks so much for being with us here on the Active Wealth Show. And when we come back right from the break, we’re going to talk more about rising inflation and what you need to do to protect and grow your assets. And also, if bonds aren’t offering enough protection and income, then what are a couple of alternatives for you? You’ll see the Active Wealth Show right here on +9 20. The answer?

Late December, back in 63. Very special time for me,

Ford Stokes:
As I remember.

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.

Ford Stokes:
And welcome back activators, the Active Wealth Show, I’m Ford Stokes, the chief financial adviser. And I’ve got Sam Davis on the radio board with us as our executive producer. So what we’re talking about right now is we’re talking about if you fail to plan, then you’re planning to fail. And we want to make sure that you can kind of inspect what you expect about your retirement. You need to think about retirement as a journey. So let’s say you’re going across the Atlantic to back to Europe. Ok, we’re going to try to talk about this, this journey. Ok, so imagine if you’ve got a boat and you’re setting sail to to go back to London, England and you’re leaving Savannah just like they did in Oglethorpe times and you’ve got a small hole in the boat on fees. And you’re taking a little bit more water, but you still can easily make it back to, you know, to the homeland there in London, England. Then you’ve got a larger hole in the boat on market volatility and losses. Ok, you’re still going to be able to make it. But then you’ve you’ve got another situation called taxes, and then that is a really large hole in the boat, in the bow of the boat. And it’s a real or an issue and you’re having to bail water a lot and you’re really having to deal with taxes quite a bit. And then if you also have got another hole in the boat on withdrawals, if you include all of those holes in the boat and you don’t fix them and you’re not bailing fast enough and you’re not proactive about dealing with those issues, your boat’s going to sink somewhere in the middle of the Atlantic, and it’s not going to make it back to the next port in London.

Ford Stokes:
That’s what retirements like over thirty five plus year retirement you’re going to. The retired almost as long as you when you worked, that is a very long time, you know, CDC says if both folks within a married couple lived to be the age of sixty five years old, it’s more than likely. In other words, over 50 percent likely that at least one of them is going to live to age 90 years old. So if you don’t have a plan for living for your household, someone in your household, Olivia, over 90 years old, then I would beg you to reconsider your plan because let’s face it, guys, we pass away first. Usually we also marry women who are slightly younger than we are in a lot of ways. And that compounds the issue, and it’s likely that your wife is going to live five to seven, even 10 plus years longer than you are. And that means you’ve got to make that money last also. We deal with a lot of folks that we would consider do it yourselfers who kind of invest their own money and they rebalance all their own stuff. And then when they pass away, the wife has no idea what to do. She doesn’t have a financial adviser that she trusts.

Ford Stokes:
And then she’s got a. Embark on that plan, and she doesn’t have any comfort with it, there’s a high level of stress right after her husband passes away. Also, you need to plan for the eventual retirement income gap that’s going to happen. So we’ve given this, you know, the Bob and Janice example before. So I’m going to give you Bob and Janet’s example here. So Bob, let’s say he he’s making $3000, so $30000 a year. So Bob’s making thirty thousand dollars a year in Social Security income. Janice, who stayed home and raised the kids and worked harder than he did because she was raising the kids and it’s, you know, a thankless job. Even though she she took great pride in it. The kids love her and all that stuff. But at the same time, it never shuts off and she’s always working really hard. She never worked outside the home, and she’s going to get 50 percent of his security income benefit, which is 15 grand a year, so the households making forty five thousand dollars a year. Well, OK, that’s great. And then when he passes away, she loses hers, but she gets his, so she loses her 15 grand and she picks up his 30 literally on the day she he dies like the next month. That’s what the Social Security income benefits are going to be. Well, that’s the 33 percent loss of the total Social Security income that is coming into the home. Now, granted, she’s not going to have as much food cost or as much travel costs or as much entertainment costs, but she’s probably still going to have the same mortgage or the same rent, or she’s going up the same pretty close to the same power bill, pretty close to the same water bill, pretty close to the same trash bill.

Ford Stokes:
And her cable bill is going to be probably exactly the same unless she gets rid of some of the sports channels that she doesn’t like. Maybe. And her monthly expenses aren’t going to change. They’re not going to go down nearly as much as thirty three percent. And so I would make sure that I would just urge everyone listening is please do me a favor plan for that loss of up to at least 30 three percent of your income coming into the household. If you do that, you’re going to find yourself in a much better position for retirement because retirement is more about income than it is about building for one big nest egg. No. Now, the big nest egg no helps. And we’ve also talked about the four percent rule on this show quite a bit. But again, the four percent rule is basically if you don’t spend more than four percent of your assets. In other words, you don’t withdraw more than four percent of your portfolio. Any given year, it is more than likely that you’re as long as you stay invested, that you’re not going to run out of money and your money is going to outlive you rather than you outliving your money.

Ford Stokes:
And again, that’s part of building a smart financial plan. Last week, we talked about it. The Smart Financial Plan had 11 elements to it, but the main ones are smart. Financial plan equals smart risk investing so you can get rates of return plus smart safe investing, which is with bond replacements, with fixed indexed annuities and also with with structured notes as a bond replacement strategy. And we can implement both of those. And then it’s also smart tax solutions with having part of that smart tax solution as part of your overall smart financial plan with either Roth IRAs or life insurance. It’s there’s only two types of tax free investments out there, and that’s Roth IRAs and life insurance. And so we would encourage you to consider investing in a smart financial plan inspecting which you expect with smart inspection. You can also give our office a call at (770) 685-1777 (770) 685-1777 or you can just visit ActiveWealth.com and we’re happy to help you. And on ActiveWealth.com, we’ve got to schedule an appointment in the upper right corner and that’s a great way to get just get booked directly into my calendar. So that’s a lot of fun. Also, you won’t get passed off to another downline advisor and we’re happy to help you any, any way, any time. We’ve got to do everything we can to plan for that eventual thirty three percent loss and Social Security income right now.

Ford Stokes:
The number one or number two source of Social Security income in the United States is Social Security. It’s not withdrawals from IRAS, it’s not pensions. I mean, less than 16 percent of all S&P 500 companies still have a pension. I mean, pensions are going the way of the dodo bird, which is no longer on the face of the Earth. It went extinct. Pensions are on the way to doing just that. And they’ve all given away to the for one K, so if it is to be, it is up to me when I’m planning my retirement and I would say the same thing is true for you. You’ve got to do everything you can to plan for successful retirement and that is inspecting which you expect. And you can’t expect the U.S. government to take care of you. You can’t expect your kids or your extended family to care for you because that’s really not a plan. And we want to make sure we help you plan so. Also, here’s what happens when you make an appointment with us, you’re going to get booked into we can do a Zoom call or you can come into our office, we even offer a free lunch on the 29th floor overlooking Sandy Springs and Dunwoody. It’s a pretty nice deal. We’ve got two hundred and seventy degrees view out of our office and you get to meet Deborah, my office manager, and sometimes Sam’s in the office as well. You can say hi to Sam if you want to do that.

Ford Stokes:
And we bring in lunch from La Madeleine or Honey Baked Ham or or anywhere that we’re Uber Eats or folks will deliver. And that’s great. And then we’ll take in all of your information. We’ll do all of your the analysis of your current statements and try to assess the fees you’re paying and kind of analyze your risk tolerance and understanding the geographic risk you’re taking, the market risk you’re taking and the sector allocation risk that you’re taking. Also, the correlation of your current, the current correlation of your assets and when the market goes down, what happens to your assets and when the market goes up, what happens to your assets? And then we’ll also just get a whole understanding on your standard deviation, which is a measurement of risk. We give you a free portfolio analysis and a free financial plan your ninety fifth birthday with your existing current plan that has nothing to do with us. And then we give you a financial plan to your ninety fifth birthday with our recommended portfolios and our recommended investment mix. And then we give you the lastly, we’ll give you a Roth Ladder Conversion plan with our recommended portfolios as well. And again, if you want to get this free fifteen hundred dollar value, I would encourage you to visit ActiveWealth.com and click that set an appointment button in the upper right corner. We’re happy to help you at any time. I hope this helps. I hope this gives an idea of, OK, how do we plan for successful retirement? What do we need to do? And the first step is really taking that first step and booking an appointment with us so that you can understand the fees you’re paying, the risk that you’re taking.

Ford Stokes:
And also, we give you a results in advance plan that will give you an idea over the next thirty five plus years of your retirement. If you’re 60 years old of what your retirement is going to look like and we give it to you and just a few pages so that you can really see year over year what your account balance should be and also year over year what your withdrawal rates should be in the type of income that you can generate and the type of lifestyle you can enjoy during retirement. We come back from the break. We’re going to talk about what happens when bonds are not offering enough protection and how we can change that out with some really strong sound bond replacement investment strategy. We have one that’s smart, safe and that’s a smart, safe strategy and one that is a smart risk strategy, and you can decide which one’s best for you or a little bit of both. So when you come back from the break, we’re going to talk about bond replacement and what happens when bonds are not offering enough protection for you and your portfolio. We hope you come back. Stay with us right here on Amazon. One of the answer I see the crystal

Producer:
Raindrops fall, and the beauty of it all is when the sun comes shining through.

Ford Stokes:
Welcome back activators, the Active Wealth Show and where we’re talking about on this show, if you’re failing to plan, you’re planning to fail. And we want to do everything we can to get the right type of financial plan for our retirement future. We want to protect and grow our wealth. We want to build a tax efficient fee, efficient and market efficient portfolio. And part of that efficiency is recognizing what’s going on in the bond market right now and doing something about it. Tony Robbins says if you don’t take action, you actually haven’t made a decision. And we want to make sure that you can make a decision and take action on your retirement. So let me give you some metrics here first. The current U.S. stocks are trading between twenty two and twenty three times earnings and something called a go forward p ratio. That’s a price to earnings ratio. Would it surprise you to know that bonds on the same markets that are traded on the New York Stock Exchange, the Amex that the Nasdaq U.S. corporate bonds are trading at a go forward price to earnings ratio of over one hundred and fifty? So if you don’t think there could be volatility in the bond market and potentially a bond bubble, then I would beg you to reconsider. What that means is we ought to minimize the risk. I mean, why? Why are you taking extra risk with bonds? I just don’t understand. And so what I want to do now is I want to quickly see him go ahead and play a Chapter 15, which is the chapter on bond replacement in my new book Annuity 360.

Ford Stokes:
And you can get a free copy of that book at Annuity360.Net. That’s Annuity 360.Net Chapter 15 bond replacement with fixed indexed annuities. Big idea Historically, bonds have seen volatility when the market is volatile. Fixed indexed annuities are not subject to the same volatility. You might have heard a financial advisor talk about replacing your bonds with annuities to protect your wealth and grow your retirement funds. Am I firm Active Wealth management? We believe this is a smart way to protect your future. Many people have learned that bonds are a safe way to invest your money, but there are some downsides to bonds that should make you think twice. We’ll talk about some reasons why you should consider replacing your bonds with annuities. First, here’s some information on the history of bonds in the United States historical bond volatility. The nineteen hundred saw two secular bear and bull markets in U.S. fixed income. Inflation peaked at the end of World War one and World War Two due to increased government spending. The first bull market started after World War One and lasted through World War Two. The U.S. government kept bond yields artificially low until nineteen fifty one. The long term bond yields were at one point nine percent in nineteen fifty one. They climbed to nearly 15 percent in nineteen eighty one. In the nineteen seventies, globalization had a huge impact on bond markets.

Ford Stokes:
New asset classes such as inflation protected securities, asset backed securities, mortgage backed securities, high yield securities and catastrophe bonds were created. Early investors in these new asset classes were compensated for taking on the challenge. The bond market was coming off its greatest bull market, coming into the twenty first century long term bond yields decline from a high of 15 percent to seven percent by the end of the century. The bull market in bonds showed continued strength in the early twenty first century, but there is no guarantee with our current market volatility that this will hold. See Chart fifteen point one to see the incredible difference of investing in a fixed index annuity versus investing in bonds. Why you should consider replacing your bonds with annuities. Why would you take market risk with your bonds when your bonds can lose their value? If you just look at the history of loan, you can see how uncertain the future of bonds is. Inflation and fluctuating interest rates play a big role in bond yields. Interest rate risk of bonds, bonds and interest rates to have an inverse relationship when interest rates fall. Bond prices rise due to the COVID 19 pandemic, investors have moved their money to bonds because they believe it is a safer investment option. However, this has caused bond yields to fall to all time lows as of May twenty four point twenty twenty. The 10 year Treasury note was yielding zero point six four percent and the 30 year Treasury bond was at one point twenty seven percent.

Ford Stokes:
Reinvestment risk of bonds This is the likelihood that an investment’s cash flows will earn less in a new security. For example, an investor buys a ten year, one hundred thousand Treasury note with an interest rate of six percent. They expect it to earn $6000 a year at the end of the term. Interest rates are four percent. If the investor buys another 10 year note, they will earn four thousand instead of six thousand annually. Consider the possibility that interest rates change over time when deciding to invest in bonds. Systematic market risk This refers to the risk that is in. Errant to the market as a whole, it will affect the overall market, not just a particular stock or industry. This can be unpredictable and it is impossible to avoid. Diversification cannot fix this issue, but the correct asset allocation strategy can make a big difference. Unsystematic market risk This type of risk is unique to a specific company or industry, similar to systematic market risk. It is impossible to know when unsystematic risk will occur. For example, if someone is investing in health care stocks, they may be aware of some major changes coming to the industry. However, there is no way they can know how those changes will affect the market. There are two factors that contribute to company specific risk business risk. There are two types of risk internal and external internal refers to operational efficiency and external would be similar to the FDA banning a specific drug that the company sells.

Ford Stokes:
Financial risk. This relates to the capital structure of a company. A weak capital structure can lead to inconsistent earnings and cash flow that can prevent a company from trading reduced advisory fees. Investors who trade individual stocks may know how much commission they are paying their broker, but individuals who buy bonds often have no idea what type of commission they are paying. Bond dealers collect commission on bonds they sell called markups, but they bundle them into the price that is quoted to the investors. This means you are unaware of how much commission you were actually paying. Standard & Poor’s estimates of bond markups is zero point eight five percent of the value for corporate bonds and one point twenty one percent for municipal bonds. However, markups can be as high as five percent, up to 50 dollars per bond. Bonds have finite durations. Bonds only provide income for a finite amount of time. Unlike an annuity, which provides income for life, you must reinvest your money if you want to continue generating interest with bonds. However, reinvesting with a bond can sometimes come at a loss. As we discussed above, annuities will provide you with an income you can never outlive. Now you get an understanding of of the risks that are associated with bonds with unsystematic and systematic market risk and interest rate risk and inflation risk and all that kind of stuff. And so what I would say is let’s do everything we can to consider replacing all of the money that we have invested in bonds into two different big buckets.

Ford Stokes:
One would be, Hey, let me invest in a fixed indexed annuity. We have a fixed indexed annuity right now that that illustrates at a nine point sixty one percent annual rate of return. That also has no income rider fees and allows you to take out, you know, depending on your age, right around five percent of the money you have in premium actually in principle in the account value each year, and it kind of goes up zero point one percent each year. So by the time you’re 80, you can take out like six percent of your money. And what’s great about this type of annuity, because it doesn’t have an income rider fee that is one of those holes in the in the boat that would be removing that would be helping you take on water, but it would take out principal if you’ve got a point nine, five or one and a half percent income rider fee. If you don’t have that fee, your money continues to grow much more successfully. So I would encourage you to consider a fixed indexed annuity and nine point sixty one percent is going to outpace the five percent withdrawal rate. And so therefore your money is going to continue to grow a lot of annuities if you invest in the wrong types of annuities to have high income rider fees and other types of fees, administration fees.

Ford Stokes:
And you’ve got things where like with fees and spreads and all kinds of different lower participation rates. But what we’re trying to do is put you in a fixed indexed annuity that’s going to continue to grow while you’re also withdrawing money from it. And if you want to withdraw more than four percent of your money each year and still have your money last, a fixed index annuities are a great way to do that. Because the fixed indexed annuity never retreats. It never loses value because contractually you have things like one and two and three year protection periods where you can lock in your principal and your gains based on the length of the protection period. We work with a lot of products that have one year protection period, so year over year you get to see your statement each year and you get the lock in your gains. The other type of bond replacement we only have like 30 seconds left in the segment is a structured note, and structured note is basically a bond plus a derivative. And those two things together combined equal a structured note. The structured note that we had that we have available for February is offering a minimum of thirteen point three five percent annual rate of return over a 12 month period. The buffer notes those structured notes actually have a buffer of 30 percent, so as long as the S&P 500. The Nasdaq 100 and the Russell 2000 don’t lose 30 percent of their value from the time you buy the structured note when the strike price of those indices.

Ford Stokes:
Then your principal is 100 percent protected and you get paid out one point one one to five percent a month. And for those of you who have bank CDs, that probably sounds incredibly attractive considering you’re only making point five or point six percent of one percent a year. And we’re happy to help you any way we can with either of these bond replacement strategies, whether it’s a fixed index annuity or we’ve got some that are illustrating at nine point sixty one percent or a structured note like the one we’re offering in February with a 30 percent principal buffer to help protect some of your principal, even though it is at risk and is a security. You do have some principal protection and then you also have a thirteen point three five percent 12 month interest payout on the principal you invest, which we think is incredibly attractive. We come back from the break. We’re going to talk more about this bond replacement strategy. And also we’re going to talk about how to generate tax free retirement income. I think you’re really going to like to hear this. We come back from the break. We’ve got an actual real story and you’re going to love what what this one gentleman who is a marketing executive here in Atlanta is doing. And you’re listening. Active Wealth Show writer on AM. Not when the answer. I hope you come right back with us.

Producer:
Listen to the number one show on the weekends on a.m. nine 20. The answer to protect and grow your hard earned money. The Active Wealth Show with Ford Stokes your chief financial advisor Saturdays at 12:00 noon and Sundays at 11:00 a.m.. We have Ford Stokes, author of two important personal finance books Annuity 360 and Taxes are on sale here on a.m. nine 20. The answer as the host of the Active Wealth Show Saturdays at 12:00 noon and Sundays at 11 a.m..

Ford Stokes:
And welcome back activators, the Active Wealth Show and Ford Stokes chief financial adviser. And many of you may have had questions about that last segment on bond replacement and you’re like, OK, Ford, I get it. Bonds are highly volatile. They’re not necessarily paying out high rates of return. So again, bond replacement strategies, we’re looking at one investing in a fixed index annuity and that is a policy contract. You basically invest with an insurance company that pays you income and in some can pay you in income you can never outlive. They’ll pay you income for life contractually, and some have no income rider fee, which we think is a really big deal. And because that way, you don’t have another hole in your boat when you’re trying to get from here to the end of your retirement without running out of money. And you also have money left over to give to your kids and grandkids as part of your legacy, which we think is a big, big deal. The other bond alternative was structured notes, and the one we’re offering from Bank of Montreal is offering a minimum of thirteen point three five percent. And that’s great. That’s much higher than bank seed money. And so those two things are a really good idea, and you can also use them in concert with each other.

Ford Stokes:
Let’s say you’ve got the typical 60 40 portfolio, you’ve got 60 percent stocks and 40 percent bonds. That’s a 70 year old strategy that is its 70th birthday is this year because that’s when Harry Markowitz was given credit for being the founder of Modern Portfolio Theory, and he basically said 60 percent stocks and 40 percent bonds. They’re both non correlated assets and they’re on they’re traded on the same exchange, so you have market efficiency as well. But let’s just say we do 60 percent stocks and 20 percent of it with 20 percent of the portfolio that would be would go to fixed index annuities and 20 percent would go to structured notes. That’s a good way to diversify risk. Also, a further way to diversify risk with structured notes is we implement a structured note ladder, so we do. A ladder with five consecutive notes, with five different banks, with five different starting points on the indices over the five month period, and you have five different interest rates that diversifies your risk. It diversifies your return and it also diversifies five different starting points in the indices. So therefore, it’s more than likely if one were to go down and hit that 30 percent buffer, it then rides the market until the end of the 12th month. Also, these notes cannot be called in the first in the first six months, so at least you know you’re getting that rate of return, that interest rate of return for the first six months.

Ford Stokes:
That’s a really big deal, but you’re diversifying the risk because chances are if it goes down 30 percent. It’s not going to go down 30 percent on the other four, because that means you have to go down another 30 percent, another 30 percent, because we’re doing different strike prices at different dates and points in time. And we’re pretty smart about this laddering process, and we want to do everything we can to diversify risk for our clients. And that’s just another way we do it. And so the way it would work is if you have $100000, we just put $20000 in five different notes. Over five consecutive months. And that’s how we would handle diversifying your risk with structured notes and with structured notes are there are there is money at risk. It is a security, but it is something we call smart risk and you’re taking an educated risk decision to get a higher proportional rate of return. Thirteen point three five percent is a lot higher as an example than, say, a bank CD, offering zero point five or point six percent a year. And now, Sam, let’s run 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 today’s show, we talked about the increasing rate of inflation on Super Bowl parties between eight and 14 percent, and we also gave you a couple of really great recipes for my smoke buffalo wing recipe on the Big Green Egg. And then we also gave you a sour cream biscuit recipe, and we talked a lot about, you know, the theme of today’s show was if you’re failing to plan, you’re planning to fail. Whether you’re planning for a Super Bowl party or whether you’re planning for your retirement, you’ve got to do a much better job at planning so that you can have a successful plan about whatever you’re going to do. But specifically regarding retirement, let’s get a plan on smart health care with getting a Medicare supplement, insurance illustration or a comparison schedule to see what. What are our options out there so we can minimize the money we’re paying every single month and also so we can cap our costs and cap our health care risk cost to the next is we we talked a lot about bonds and what to do if bonds aren’t offering enough protection for us and that safe leg of the stool and the two options we came up with that we shared today was one replace your bonds with fixed indexed annuities and to replace your bonds with structured notes and or a five consecutive month structured note latter.

Ford Stokes:
That would be a really good idea, and we’re trying to get you high rates of return. I’m telling you our clients love the structure that we offer and we’d love the opportunity to offer to you as well. And we also talked a little bit about what to expect when you come in to meet with us, whether it’s via Zoom or if you want to come in and get a lunch and and sit down with us and get a free financial plan. We have it’s kind of a two appointment process where you upload all of your information or you bring them in all of your statements. So we know what you’re invested in. And also, we need to know what your what’s going on with your monthly expenses. And when you plan on Social Security and what you think you’re going to make in Social Security. So we like to see that Social Security statement so we can run a Social Security maximization report for you where you’re doing all that stuff and giving you a free financial plan, your ninety fifth birthday with your current plan, then one with our recommended plan and also one with a Roth Ladder Conversion. If you have a lot of money in an IRA or for one K for 3B or four fifty seven or Sep IRA, hope all of that works.

Ford Stokes:
I hope all that helped you guys and gals this week. Remember with anything. Knowledge is power. We want you to be a bear. If you’re going to be a bear, be a grizzly. Be aggressive about seeking information and knowledge about how to plan properly for retirement. And we’re so glad you’ve been listening with us for so long. I’m sure so many folks have been listening for a very long time. We’re so glad you tuned in to listen to us this week and we look forward to talking with you next week when we come back. We’re going to talk more about how to plan for a smart financial plan. So we’re going to talk more about how to plan for a successful retirement by implementing a smart financial plan. And remember. If you do not take action, you have not actually made a decision, so I’d encourage you to visit ActiveWealth.com and click that set an appointment button in the upper right corner and we look forward to work with you. Thanks so much for tuning in to the Active Wealth Show this week. Hope everybody has a great rest of the week, everybody, and we’ll talk to you next week on Saturday and Sunday with the Active Wealth Show right here on a.m. nine 20. The answer?

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.

Producer Sam Davis:
A purchaser should evaluate and understand all of the risks and costs of an investment in structured notes since prior to making any investment decision, a purchase of an SSN entails other risks not associated with an investment in conventional bank deposits. A purchaser may not have a right to withdraw his or her investment prior to maturity or could incur substantial penalties for an early withdrawal if permitted. A purchaser should carefully read the disclosure statement and any other disclosure statements for a person before investing. An investment, in essence, is not FDIC insured and is subject to credit risk. The actual or perceived credit worthiness of the note issuer may affect the market value of SNS. Essence will not be listed on any securities exchange. Even if there is a secondary market, it may not provide enough liquidity to allow purchasers to trade or sell Essenes. As a holder of SNS, purchasers will not have voting rights or rights to receive cash, dividends or other distributions or other rights in the underlying assets or components of the underlying assets. Certain built in costs are likely to adversely affect the value of Essenes prior to maturity. The price, if any, at which the notes can be purchased in secondary market transactions, if at all, will likely be lower than the original issue.

Producer Sam Davis:
Price in any sale prior to the maturity date could result in a substantial loss. Essenes are not designed to be short term trading instruments. Purchasers should be willing to hold any notes to maturity. The tax consequences of SNS may be uncertain. Purchasers should consult their tax advisor regarding the U.S. federal income tax consequences of an investment. In essence, if a S.N. is callable at the option of the issuer, in the essence is called, the holder will receive only the applicable redemption amount and will not receive any coupon payments that would have been payable for the remainder of the term of the S.N., as since are not FDIC insured, may lose principal value and are not bank guaranteed. This material is provided for informational purposes only and should not be construed as investment advice or an offer or solicitation to buy or sell securities. All data believed to be reliable but not guaranteed or responsible for reliance on this data. Past performance is not indicative of future results, which may vary the value of investments and the income derived from investments can go down as well as up. Future returns are not guaranteed and a loss of principal may occur.

Producer Sam Davis:
Brookstone does not provide accounting, tax or legal advice. Investors should be aware that a determination of the tax consequences to them should take into account their specific circumstances and that the tax law is subject to change in the future or retroactively. And investors are strongly urged to consult with their own tax advisor regarding any potential strategy, investment or transaction. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will either be suitable or profitable for a client’s investment portfolio. Historical performance results for market indices generally do not reflect the deduction of transaction and or custodial charges or the deduction of an investment management fee. The occurrence of which would have the effect of decreasing historical performance results, economic factors, market conditions and investment strategies will affect the performance of any portfolio, and there are no assurances that it will match or outperform any particular benchmark. The investment strategy and types of securities held by the comparison indices may be substantially different from the investment strategy and the types of securities held by the strategy, not FDIC insured may lose principal value. No bank guarantee.

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..

Sonix is the world’s most advanced automated transcription, translation, and subtitling platform. Fast, accurate, and affordable.

Automatically convert your mp3 files to text (txt file), Microsoft Word (docx file), and SubRip Subtitle (srt file) in minutes.

Sonix has many features that you’d love including automated translation, upload many different filetypes, transcribe multiple languages, world-class support, and easily transcribe your Zoom meetings. Try Sonix for free today.

Other Episodes

Episode

April 09, 2022 00:47:51
Episode Cover

Learn All You Need to Know About Annuities with Annuity 360

On this week’s Active Wealth Show, we play select chapters from Ford’s book, Annuity 360. You can request a free copy of Annuity 360...

Listen

Episode 194

February 02, 2024 00:47:59
Episode Cover

Avoid These Common 401(k) Mistakes!

Ford Stokes and Sam Davis explain why a bond replacement is one move you can make to eliminate a significant amount of risk and...

Listen

Episode

January 17, 2024 00:17:54
Episode Cover

Ford Stokes Explains Why Social Security is Running Out of Money on the John Fredericks Radio Network

Listen to Ford's interview with John Fredericks as they discuss the projected cuts to Social Security in 2033.    Call Retirement Results now at (888)...

Listen