Investment Tools and Strategies You Should be Considering Right Now

March 26, 2022 00:47:45
Investment Tools and Strategies You Should be Considering Right Now
Retirement Results
Investment Tools and Strategies You Should be Considering Right Now

Mar 26 2022 | 00:47:45

/

Show Notes

On this week’s show, Ford gives a market update and highlights some positive indicators in the economy. We also debut a new segment, “The Rate is Right”, and give details on the latest structured note offerings. The latest structured note comes from UBS for the month of April and is offering a minimum of 12.75%! If you’re looking for investment tools and strategies to enhance your wealth, get in touch with Ford and the Active Wealth Team! You can get a free consultation that includes a portfolio analysis and a financial plan to your 95th birthday.

Call Ford: 770-685-1777
Schedule a conversation with Ford now: ActiveWealth.com
Watch more episodes: www.ActiveWealthShow.com/podcast
Request your free copy of Annuity 360: www.Annuity360.net

Investment Tools and Strategies You Should be Considering Right Now Transcript: Audio automatically transcribed by Sonix

Investment Tools and Strategies You Should be Considering Right Now Transcript: 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 Advisor representatives act as fiduciaries for all of our investment management clients. We have an obligation to act in the best interest of our clients and to make full disclosure of any conflicts of interest. If any exist, please refer to our firm brochure, the ADV to a page four for additional information.

Producer:
Welcome to the Wealth Show with your host. Ford Stokes Forde 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 to Active Wealth Show Activators on Ford Stokes, your chief financial advisor. And I’m joined by Sam Davis, our executive producer. Sam, say hello to the folks.

Producer Sam Davis:
Welcome to the Weekend Activators. It is March and so quickly. We are coming up on the end of March and spring is here in Atlanta and we’re glad you’re here on the Active Wealth Show.

Ford Stokes:
Well, it’s also great to get the weekend ambassador here when we’ve got better weather and so it’s great to have you. Welcome to Right of the weekend, Sam, and thanks for everything you do for us. Also, everybody out there, all the activators. I wanted to recognize Sam Davis because two years to the day, Sam Davis started producing the Active Wealth Show. And Sam, we sincerely appreciate you. You always give us great insight, but also you do a great job at producing this show. And the Active Wealth Show wouldn’t be what it is today, which is the number one listen to radio show on AM 920 answer on the weekends without you and just for me, your host Ford Stokes. I just want to say thank you, Sam.

Producer Sam Davis:
Well, thank you. It’s it’s good to be here. And I always love hearing from the activators that have grown in number over the last couple of years. And we’ve got another big show coming up for them today, no doubt.

Ford Stokes:
And in case you’re wondering, folks, he doesn’t take compliments very often very well. So we’re going to keep moving. So. All right. So here’s what we got on today’s show. Other than celebrating everything that is Sam Davis to for being our radio producer over the last two years. We’re going to give you a really kind of a really cool market update today. And we’re also going to give you a brand new segment called The Rate is Right. And we’re going to try to do that at the beginning of segment two. And so you’re going to stick around for that one. It’s I think you’re really going to enjoy it. And for all of those folks who stayed home sick and watched The Price Is Right at 11 a.m., when you stayed home sick from school, you’re going to love the ratings, right? I think you’re going to love that that segment. And then we’re going to talk about, hey, if you don’t have a plan, here’s what you need to do during this difficult time with social unrest into the pandemic and Russia invading Ukraine and things like that, we’ve got we’re going to walk through kind of a smart financial plan for you. We’ll also share this week’s cross cutter and kind of a it’s an interesting cost cutter, but there’s also kind of a rudimentary version that SunTrust moving to Truist Bank did for a lot of folks. And we’ll talk through that. And then we’re going to talk in detail a couple of times about structured notes because it’s a really big deal and it’s a what we think is a is a good place to consider placing your money. Obviously, it does involve market risk, but our new structured note for April is paying a significant interest rate over the next 12 months, and we’re going to share that with you during the Rate is Right segment as well. So let’s get right into this market update. Sam.

Producer:
Your active wealth market update.

Ford Stokes:
Us stocks rose as oil prices ease Thursday. Investors are watching to see the outcome of the NATO European leaders summit and the latest on Russia in Ukraine. President Biden also was delivered an address on Thursday. All three of us major averages rose with the Nasdaq composite pacing early lead. You basically had Dow Jones Industrial Average was up 235.98 points at a 0.69% change. S&P 500 was up 43.90, which was almost a 1% change at just 0.99%. And Nasdaq composite index was up 148.34 points at 1.07%, respectively. Bond yields remained elevated with the yield on the ten year treasury at 2.36, which is a lot higher than the 1.3 it was at some point last year and US crude held around $114 a barrel, while Brant, the global benchmark, hovered above $120 a barrel. Gold continued its climb to $1,960 per ounce. And another neat update that I thought was really telling of The Times and it’s aggressive and I just like how entrepreneurial the governor of Florida is. But Ron DeSantis signed a bill requiring a financial literacy course for graduation. The governor said the bill will help students get ready for life after high school, which was, I thought, one of the smartest things I’ve seen in a long time. Sue Sue. In her high school in the 2023 2024 school year will be required to take a financial literacy course to be able to graduate under a bill signed on Tuesday by Governor Ron DeSantis, DeSantis touted the bill SB 1054 as a way of getting students ready for life after high school.

Ford Stokes:
We think that it will help improve students ability in financial management for when they end up in the real world, but also using these skills as pathways to high demand fields which are very high demand fields in this regard, DeSantis said during a bill signing event in Wesley Chapel. Listen, I realize he is the governor of the state of Florida and not the governor of the state of Georgia. But I thought it was just wide sweeping and a really smart way to go it ready to go about it. Under the measure, students will be required to take a half credit course in personal financial literacy and money management. The course will include instruction on concepts such as different types of bank accounts, how to open accounts, credit and credit scores, types of savings and investments, and completing loan applications. The bill will reduce the number of required electives from the current eight credits to seven and one half credits. Lawmakers, including Senate President Wilton Simpson, who’s a Republican out of Trilby, Florida, and Educational Consumer and Education Commissioner Richard Corcoran joined DeSantis for the event. I happen to really I know Jimmy Petronas, who’s the chief financial officer and he for the state of Florida and he praised the bill. Financial literacy is an important key to a strong financial future, and I’m proud that learning the basics of credit, budgeting, savings and investing will now be taught throughout Florida’s schools, Petronas said in a statement.

Ford Stokes:
I would just say this. The gantlet has been laid down. Governor Kemp I would I would strongly recommend that you do something similar. I think it’s incredibly important that all of our children learn financial literacy and stop this rampant credit card stuff and buying things. And and and also realize that not not all is cryptocurrency. Right? You should be investing in in stocks. You should be investing in whether it’s bonds or structured notes or even fixed indexed annuities, maybe not at a young age for fixed indexed annuities. But you’ve got to watch the credit card debt. You’ve got to watch what you’re doing. You need to be saving. You know, ten, 15, 20% of your income and living off the rest. So therefore, you can plan for a rainy day and you can plan for retirement. All of us need to do a better job at planning for retirement. But specifically the kids as they get started out, when they have a high amount of human capital but a low amount of actual wealth capital, they need to start saving 15 to 20% of their income and live within their means so they can build up the wealth capital as their human capital depletes. And I’m just hoping. That Governor Kemp will do something about this and follow suit and not just think it’s a me too, Bill. He should do something. And we’re calling out Governor Kemp on this radio show right now on the Active Wealth Show to implement something like this for our children in Georgia.

Ford Stokes:
It really needs to happen. So that is a different type of market update than probably you were anticipating. But we think it’s a really big deal. When we come back from the break. We’re going to talk about the rate is right. We’re going to unleash our new segment. I think you’re really going to like it. Also, I want to make sure everybody understood that we had jobless claims. The dip was down the lowest since 1969 and are down right around 189,000. And I’m glad that we finally got. In a percentage lower where it continues to go down. There’s a lot of jobs out there. And please, if you’re hearing the sound of my voice and you’re thinking about going back to work or you’re trying to figure out what you’re going to do, get out there and get a job, start working. Dave Ramsey says the greatest wealth generator for yourself is your personal income. And I agree with him. And it’s it will make more than any financial adviser can for you off of your your principal, and especially when you’re still in your working years. So do everything you can. Two Don’t continue to take time off. Do everything you can to get out there and work and contribute. I think there’s over 7 million open jobs out there and Atlanta’s got a lot of them. We’ve got within five miles of my office, there’s 150,000 jobs that make over 100,000 a year. Within five miles of my office here in Sandy Springs and Dunwoody, we’re on the 29th floor of the King Building and the king and queen buildings over in the concourse area.

Ford Stokes:
And we overlook Georgia 402 85 and also Perimeter Mall and all have Dunwoody and Sandy Springs and. I’d say there’s a lot of commerce that’s going on around here, and we’d love for folks who are looking for jobs to be part of that for sure. But again, if you want, if you’ve got an old fall in Kay and you don’t know what to do with it and you’re trying to figure out how to grow your money, I would encourage you to schedule your free consultation with us at Active Wealth. Just visit ActiveWealth.com, click that. Set an appointment button in the upper right corner and we’re happy to help you out again. When we come back from the break, we’re going to unveil our new segment, The Rate Is Right. I think you’re going to like this segment. I think you’re going to learn a lot in this segment, too, about what’s working and what’s not working out there to help protect and grow your wealth. And we’re so glad you’re with us here. So glad you’re listening to us on this two year anniversary of Sam Davis, our executive producer, producing this show. It’s a very special show for us here at on the Active Wealth show. And you’re listening to Active Wealth Show right here on AM 912. The answer, come right back.

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 and as promised, we are going to play the rate is right. So many of you have been fans in your lifetime, so the price is right, just as Sam and I have been. And again, I want to mention that this is Sam’s two year anniversary of first producing this show. He’s produced our show for the last two years. And again, thank you, Sam. And we’re we’re going to play. Right up and right down. But we’re going to start with rates down first. All right. Here’s a rate down. Rate down is even though corporate bonds have gone up over recent months and we’re in a slightly rising interest rate environment. But write down on a 6040 portfolio where the bond portion of the portfolio in 2021, the Saint Louis Federal Reserve on Fred St Louis Fedora, they said that the 12 month look back in December was 3.30% on the Moody’s Bank corporate bond yield, so 3.3% a year, that’s pretty low compared to rate up would be a structured note. Both are securities, both are involve market risk and both can give you a significant interest rate. But we think that 12.75%, we’re actually incredibly confident and we know that 12.75% is greater than 3.30%. And our APR note that is offered by UBS is offering it at 12.75% minimum annualized rate. And the underlying indexes for this note are the S&P 500, the Russell 2000 and the NASDAQ 100.

Ford Stokes:
The principal is protected up to the downside barrier or level of the underlying equity index, and that bearer index is 30%. So as long as the S&P 500, the Russell 2000 and the NASDAQ 100 do not lose 30% of their value over the next 12 months, your principal would be protected. Also, we do one other thing to further protect you from this rate up opportunity is we will ladder these over the next five months. So let’s say you had 100,000. You want to put in structured notes. So we would take 20,000 a month over the next five months and then we would invest it with five different banks, five different starting points of the indices, five different interest rates to diversify your risk with the structure notes. Because the premise there is, listen, if the Nasdaq 100, the Russell 2000 or the S&P 500 were to lose 30% of their value, if one of those three were to lose 30% of their value, chances are that the other four months and the other four structured notes as you bought those starting points, the indices would be at a lower point and it probably wouldn’t go down another 30%, another 30%, another 30% to the point where you get to the end of the fifth month and the fifth note you’re looking at, you’d have to go down 150% to hit that lower number and to hit the principal barrier.

Ford Stokes:
So again, I want to be clear, a structured note is a bond plus a derivative. But your principal and it does involve a principal buffer. And as long as the Nasdaq 100, the Russell 2000 and the S&P 500, don’t lose 30% of its value of their value in over the next 12 months, your principal is 100% protected and you get a minimum of 12.75% as guaranteed by. The financial cable paying ability and capability of UBS, which is obviously an R-rated wirehouse and bank and. And so we think that’s the right way to go. We, we think structured notes, you should be taking 10 to 20 up to 40% of your portfolio right now when you’re dealing with market unrest and market volatility to get a disproportionate share and a disproportionate interest rate growth. On your structured note and 12.75% is very attractive right now. Imagine if your entire portfolio. Was due in 12.75% this year versus what it’s doing. Also, if your advisor is not currently offering structured notes that are offering a minimum of 12.75% for April, then I would encourage you to give us a call at (770) 685-1777. Again, (770) 685-1777 or visit Active Wealth. Sam, you and I were also talking about write up and write down and we want to talk about the Price is Right. What is your favorite prices right game?

Producer Sam Davis:
Yeah, well, when I think of the price is right, I definitely think of spinning the big wheel. But my favorite game is probably Plinko and watching that chip. Sometimes it would move all the way across the board and you’d land in a big one. And yeah, that looks fun. If I was on The Price Is Right, I’d want to be playing Plinko.

Ford Stokes:
That’s awesome. So if I was on The Price Is Right, I’d love to be playing Cliffhanger where they’ve got the little guy. And I think you’ve got a sound here for us where he’s climbing up the hill. That one I love. Also, like the golf game. That’s a good one. And then just also, when you’ve got a dollar to spend, that’s a pretty neat one on the grocery store items and all great games. I’m obviously huge fan of the showcase showdown and a a young lady, a friend of mine who went to college with me. She was a flight attendant at the time and she had a layover in Los Angeles and she was based out of here and she was on The Price is Right. They put her on there and she won a boat and a trip and everything else as she cast it all out right there and got all her money within 72 hours. So it was a pretty neat thing. But we we like the price, right? And so we want to give them credit. Make sure you guys watch the price is right. And I just we we wanted to do this this new segment, right up and right down. There’s all there’s always other different types of things that are right down and right up that we’ll cover. But today we’re covering bonds kind of right down with a Moody’s Bar index last year, performance of 3.30% over a 12 month period. And. We’re looking at write up with structured notes that do involve market risk, as do bonds as well.

Ford Stokes:
But we’re looking at a minimum interest rate of. 12.75% over the next 12 months. And we think that’s a big deal. And listen, structured notes do involve market risk, like we said. They are bonds plus a derivative to be able to do that. But as long as the S&P 500, the Russell 2000 and the NASDAQ 100 don’t lose 30% of their value over the next 12 months. Your principal is protected. And we like to further protect you by doing a structured note ladder where we do five consecutive notes in equal amounts with five different banks, five different starting points in the indices, and five different interest rates to kind of diversify your risk. And I want to go into a little bit more information about structure and structure. Notes are a large part of today’s financial landscape globally. Investments allocated to structure notes are estimated to be in excess of $2 trillion. Even though structured notes have been issued in the US since the mid 1990s, the availability of information for structured notes have been relatively scarce. That’s why we talk about them here on the show. With equity markets at near all time highs and interest rates at near historical lows, even though we’re going up slightly. But chances are the US government’s not going to continue to do rate hikes way too much. Because you’re looking at. At huge problems when you do that, when you’ve got $30.3 trillion according to the US debt clock, you know, that’s they’re not going to increase the rates that they’ve got to pay on their debt.

Ford Stokes:
There’s been a growing interest in the use of structured notes in the portfolio construction process, and that’s what we we’ve pivoted to. We, we feel like the safe leg of the stool with bonds, it’s got a little bit of an issue because the go forward price to earnings ratio on US corporate bonds right now is over 135, whereas the go go forward price to earnings ratio on or a PE ratio on US stocks and equities is between 22 and 23. Considering the size of this market and limited available information, it really strikes us as an opportunity for us as fiduciary based advisors to really help our clients generate a unique and significant rate of return. And that’s also a differentiator for us and gives us a competitive edge against other wirehouse and other banks. Because we we’re looking at at if you walk into your bank and you want to talk to that advisor, they’re going to sell you a structured note that involves a brokerage commission. Are commissions are fee based. So we don’t it’s just a different allocation and investment sleeve for us so we’re able to pass on. The amount that you would have been charged on the brokerage commission. We’re able to keep that in the product and keep that earning and growing for you. And so it is a higher rate of return than you can typically get with a brokerage commission based structure. Note A structured note is a financial instrument generally issued by a large, well-known financial institution.

Ford Stokes:
The terms vary in both in time to maturity and market exposure. Each month, banks bring out their list of calendar offerings. It’s important to point out that issuers split their calendar terms between brokerage offerings, where brokers are paid an upfront commission and advisory offerings. Because advisory offerings, like I said, are fee based for fiduciary advisors like me and like our firm. The issuers can strip out the commissions and provide a more competitive term for the end investor. And when we come back from the break, I hope we’ve answered a lot of questions about this rate up, write down the rate is right segment, but also on structured notes versus bonds and use corporate bonds. I would encourage you to consider structured notes as a bond replacement. And again, feel free to give us a call at (770) 685-1777. Again, (770) 685-1777. Or visit Active Wealth to schedule your free consultation with us. We’re happy to help you understand your portfolio and what what opportunities there are for you and how you can build a smart financial plan and help you protect and grow your wealth. When we come back from the break, we’re going to talk about how to build that smart financial plan. Is the Active Wealth Show right here on AM 920 the answer? And welcome back Activators, the Active Wealth Show here on this special edition of the Active Wealth Show on the two year anniversary of Sam Davis being our executive producer. And we appreciate you, Sam. Sam, let’s hit him with a costcutter.

Producer:
Ready to save some money. Here’s our retirement cost cutter of the week.

Ford Stokes:
Here’s our retirement cost cutter for the week. We’re going to talk about utilizing true bill or trying to figure out how do you get rid of those old subscriptions so you can get rid of that leaky hole in the bucket and you want to eliminate those unwanted and unneeded monthly subscriptions that people that companies have loved to to burden us with. And Sam, you’ve got some experience in working with Bill a little bit and kind of going around the site and wanting to kind of bring you in and get your experience.

Producer Sam Davis:
Yeah. So I actually downloaded True Bill a couple of weeks ago, you know, just sitting at home over the weekend. I had heard about it, wanted to play around with it. I thought it was pretty cool. You know, it’s you sign in with your bank and everything’s all secure and verified. And then once you get into the app, it almost starts building a budget for you right away. It can see how much money is coming in, how much money’s going out. You can look at different categories like, Hey, look at your grocery spending and it’ll tell you, Hey, every time you go to Publix, you’re spending an average of this much. Or every time you go to Costco, you’re spending an average of this much. That’s an interesting thing to look at. But the the main point and the value is getting rid of those subscriptions. I know, especially over the last couple of years with everybody just being at home, watching movies, TV, you know, subscription services for deliveries and the rest, you know, some of those subscriptions have really added up. So true, Bill kind of helps shine a spotlight on some of those corners that you haven’t been looking at. And you can just unsubscribe from those right away. And in some cases, you know, free up maybe even 100 plus dollars a month.

Ford Stokes:
Yeah, it’s definitely a cost cutter. It’s definitely a cost saver, for sure. One interesting thing with SunTrust moving from SunTrust to Truist, they changed the check card numbers, the actual credit card check card numbers. And you cannot imagine how many emails I’m getting on old subscriptions that I had that I didn’t. You know, we’ve been able to do a pretty close monitoring. We’d be like, Oh, do you want to update your payment records? I’m like, you know, no, not really. So it was almost a free true bill when we changed the credit card numbers on our check card. So that was an interesting thing that happened in many folks that are on their list in the show are probably you know, we’re former SunTrust or you know now they’re truist and they’ve changed everything so that was kind of my own amateur true bill foray into it. And we’ll try to get somebody from True Bill actually on the show because we do appreciate what they do and we’re glad that they’re helping out with budgeting, which is one of the biggest important parts of retirement budgeting. You want to if it’s not just income. Right. And it’s also not just building one big number. It’s kind of looking at your spend and we want to try to stay within that 4% rule. Right. And Sam, I think you’re going to go ahead and play the 4% rule.

Ford Stokes:
Now, I want people to hear the 4% rule chapter from my book I 8360. Also, if you want to get a free copy of my book, all you have to do is is an annuity 360 net, that’s annuity 360 net and you get a free download copy. And also if you want to get a free copy of my book, Annuity 360, go ahead and reach out to us and send us an email at Forward at Active Wealth. That’s free at Active Wealth and we’ll send you a hard copy. We just need your name, mailing address, email and phone and we’ll send that out to you. Chapter seven The 4% rule big idea withdrawing 4% or less annually from your portfolio will ensure that you will not draw down your account too quickly and that your income lasts for your entire retirement. The 4% rule is a rule of thumb used by investors to determine how much retirees should withdraw from their retirement account each year. This rule should ideally help provide a steady income stream for the retiree, while also maintaining an account balance that keeps their income flowing throughout retirement by withdrawing only 4% from your account, many financial professionals believe this will help your wealth last through your retirement and that you will be able to live comfortably with this withdrawal rate. This rule helps financial planners and retirees set the withdrawal rate for their portfolios.

Ford Stokes:
Life expectancy also plays an important role in this process. By determining if the selected rate will be sustainable, retirees that live longer will need portfolios to last longer, and medical costs and other expenses could increase as retirees age. Where did this rule come from? The 4%? Rule was created using historical data on stock and bond returns over a 50 year period from 1926 to 1976. Before the early 1990s, experts generally considered 5% to be the safe amount for retirees to withdraw from their portfolio each year. In 1994, William Bengtsson, a financial advisor, conducted a study of historical returns. He focused heavily on the severe market downturns in the 1930s and the 1970s. Bingen concluded that even during those markets there was no historical basis that a withdrawal rate based on the 4% rule would exhaust a retirement portfolio in less than 33 years. What about inflation? Some retirees will choose to stick to the 4% rule all the time and never adjust for inflation. However, the rule allows retirees to increase the withdrawal rate to keep up with inflation. There are two options to do this. The first option provides steady and predictable increase, while the second option will more effectively match your income to cost of living changes. Option one Setting a flat annual increase of 2%, which is the Federal Reserve’s target inflation rate.

Ford Stokes:
Option two Adjusting withdrawals based on actual inflation rates. The first option provides steady and predictable increase, while the second option will more effectively match your income to cost of living changes. Two scenarios where you should avoid using the 4% rule. Scenario one A severe or protracted market downturn can erode the value of a high risk investment vehicle much faster than it can in a typical retirement portfolio. Be cognizant of the health of the market and talk with a professional if you have any questions or want to make changes to your portfolio scenario too. The 4% rule does not work unless you commit to it year in and year out. Violating the rule for one year to splurge on major purchases can have severe consequences down the road. It will reduce the principal, which directly impacts the compound interest that the retiree depends on for sustainability. Chapter six The Rule of 100. Big idea you want to risk less as you get older because you have less time to make up any big losses. As you get closer to your golden years, many financial professionals advise gradually reducing your risk. Retirees and pre-retirees don’t have the luxury of waiting for the market to bounce back after a dip. The dilemma is figuring out how safe you should be in certain stages of your life. For years, a commonly cited rule of thumb has helped simplify asset allocation.

Ford Stokes:
This rule states that individuals should hold a percentage of their stocks that is equal to 100 minus your age. For example, a six year old would have 40% of their holdings in stocks and 60% in fixed income products like bonds or fixed indexed annuities. Why you should follow the rule of 100. Take our current example of a 60 year old. At age 40, your risk capacity is higher. You have more time to rebuild your wealth should you experience a dip in the market. However, at age 60, you can’t afford to risk as much of your portfolio in the market because the time horizon to rebuild your wealth is much shorter. Rule of 120. Many financial advisors now advocate the rule of 120 so they can get a significant rate of return for their clients and maintain management of the portfolio. I disagree with today’s market volatility. A retiree does not want to go back to work in a job making less than what they made before. They must consider following the rule of 100 or at least a 5050 smart financial plan that is built equally with smart risk and smart, safe investments. I hope you guys enjoyed Chapter seven the 4% rule in Chapter six, the rule of 100 from my book Annuity 360. And I wanted to I want to reiterate.

Ford Stokes:
In 1994, William Bennion, a financial advisor, conducted a study of historical returns, and he focused heavily on the severe market downturns in the thirties and seventies. And he concluded that even those of those markets, there was no historical basis and withdrawal rate based on 4%, or the rule would exhaust a retirement portfolio in less than 33 years. Bottom line is, if you can stay in that 4% rule area where you’re only taking out 4% withdrawal rate. From your portfolio each year, it is likely you’re not going to run out of money in your 30 to 35 plus year retirement. So that is something to really consider. We want to make sure that your money outlives you, not you outliving your money. We don’t want you to become burdens on your kids. Also, rule 100. We want to make sure we’re doing everything we can to be smart about things and not take too much risk. And also, let’s do some smart risk and smart, safe elements to the portfolios. Here, Markowitz in 1952 was given credit for being the founder of the 6040 portfolio of Modern Portfolio Theory. That’s a 70 year old strategy. I would beg you to consider something different. Take the 40. It was 60% stocks and 40% bonds. Both traded on the same markets in the US markets, but also negatively correlated bonds. And stocks usually don’t don’t move together.

Ford Stokes:
So what I would encourage you to consider is taking the 40% and investing like maybe half of that or 20% of your overall portfolio into fixed indexed annuities and the other half of the bond portfolio. So another 20% would be invested into a structured note ladder. If you’ve got questions on this, I’d encourage you to visit Active Wealth, click that, set an appointment button the upper right corner and we’re happy to talk to you. Feel free to give us a call again at (770) 685-1777 as well. And we’re here to help you. And as we come back from the break, we’re going to talk more about a smart financial plan. We wanted to make sure we were at least covering our cost cutter with True Bill and take a look at that at True BILL.COM. And then we also wanted to cover kind of budgeting and what you should be doing and making sure you’re paying extra special attention to the amount of money you spend during retirement so you don’t over withdraw and overburden your portfolio. When we come back from the break, we’re going to talk about a smart financial plan that includes smart, safe, smart risk and smart tax investing and also smart health planning. You’re listening, Active Wealth Show right here on AM 920. The answer.

Ford Stokes:
And welcome back, activators, the Active Wealth Show. And if you’re wondering who an activator is, it’s somebody who wants to protect and grow their wealth. They want a peaceful retirement. They want to plan and build a tax efficient, fee efficient and market efficient portfolio to prepare for retirement. They also want to not over withdraw money from their retirement nest egg. And there’s somebody that’s making the right choices and we hope we’re helping you make the right choices. And part of that is a smart financial plan. And what we consider a smart financial plan, it basically equals smart, safe decisions and smart, safe investing. Smart risk investing or smart risk decisions. And also what we would call smart tax decisions and investing in diversifying your buckets of money into tax deferred and even tax advantage or tax free investment bucket. So let me just handle the the smart tax side really quickly. So there’s only two types of tax free investments out there. Number one is life insurance. And many folks that are listening to us that are 30, 40 and 50 plus years old, if you’re under, say, age 60 years old, I would encourage you to consider an index universal life policy. That would be a great thing to consider. So you can build a retirement that includes tax free retirement income. That would be kind of remarkable. And the second type of tax free investments are Roth IRA. So that’s what we’re trying to do.

Ford Stokes:
There is we’re trying to move money from your IRA to your Roth IRA in a laddered fashion. So we’re doing it a little bit of time, a little bit each year. So if you’ve got 500 grand to move out of your old 401k, that’s now in an IRA, you’re going to move say, you know, or maybe it’s 600 grand, you’re going to move 150,000 a year plus the growth money. So you have a five year plan to move all that money from your IRA to your Roth IRA. And I’m going to give you one special hint here. You want to use taxable money? So money that’s sitting in a savings account or in an investment account to pay the taxes on the money that is moved on, that conversion from your IRA to your Roth IRA. So therefore, the money moves dollar for dollar. So 100% of the money that you’re moving from your IRA moves into the Roth IRA and you’re paying that, let’s say it’s 20% taxes. You’re paying the taxes on with you’re using your investment account or your savings account or a check or money sitting and checking. It’s a really good idea to take tax deferred money, pay the taxes on that conversion with taxable money. And then the result is 100% of the money you’re moving goes into a tax free bucket again with a Roth IRA or a Roth Ladder Conversion The only medicine there is, you’ve got to wait five years to access the principal in the gains.

Ford Stokes:
So that’s the smart tax tip and hint for the day. And again, recap that hint or that tip is just let’s just make sure we’re doing everything we can, folks, to move all the money. We’re moving from our IRA dollar for dollar into a Roth IRA. And we’ve got a lot of clients have done that and they’re extremely happy with how much they’re Roth IRA has grown because there’s no RMDs, no required minimum distributions with Roth IRAs, and there’s no taxes on money withdrawn as long as you wait the five year period from the five year period, from the time you open the account or the time, five year period from when you do a Roth Ladder Conversion. Also the the mechanism and the function or the process in which you implement a Roth IRA conversion, you complete a Roth conversion form and you tell them how much money you want to move over and how you’re going to pay the taxes on it and all that stuff. And we submit it to our number one money custodian is TD Ameritrade and we move that money over and pay the taxes on it. And therefore, you’re taking the tax bite on the front end. But then the IRS is not your partner in retirement on that Roth IRA account, which we think is incredibly attractive, especially if you think taxes are going to go up in the future, which all of us generally do, or at least most of us do.

Ford Stokes:
Then I want to talk about smart, safe solutions. So there’s an investment option out there where you can invest in into a financial product that is not invested in in the market. It grows with safety. It’s got market upside. There’s limited to no downside principles and gains were protected or are protected and the low cost is usually around 0 to 1% annual fee. Most of the time it’s it’s it’s 0% the way we do it because we invest in things that don’t have income rider fees and other other types of financial products that usually carry income rider fees. We try to avoid those for our clients and then or try to help our clients avoid those income rider fees. And then there’s the time horizon on these products is generally between five and. 12 years or 14 years these days can go all the way up to 16 years on a surrender period, and you can potentially earn between five and nine plus percent per year on these products. And there’s also options for guaranteed income. The owners of not in the market investing of those products lost $0 in 2008 and 2009. That is a remarkable change to the buy and hold approach where folks lost 38% in 2008 and lost another 13% in 2009.

Ford Stokes:
We think not in the market. Investing with fixed indexed annuities is a really good idea. It’s something to consider. And if you’ve got questions about that or if you’ve got an old variable annuity sitting around and it’s costing you 3 to 6%, let us help you. Let us help reduce those fees, get you in a new product with a 1035 exchange and help you get a rate of return that’s 5 to 9 plus percent. We can help you do that. All you’ve got to do is visit ActiveWealth.com, click that, set an appointment button. We look forward to talking with you and we can meet with you in our office here in the King Queen building on the 29th floor. We’ve got a heck of a view in our conference room or you can take pictures and all that stuff if you want. You can bring the grandkids, kids or whatever you want to do, or we can get on a quick zoom call and make it convenient for you. Whatever you want to do. We’re happy to help you. We’re running out of time on the show, so we’re going to have final countdown. But what next week? We’re going to talk about the smart risk side of investing and also what happened to folks, again, invested in a buy and hold strategy and just hang in there approach during 2008 and 2009. It’s the.

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

Ford Stokes:
So on today’s show, we gave you a market update. We talked about the lowest jobless claims. We gave you updates on what’s going on with unemployment, and then we also gave you an update on it. Ron DeSantis signed a bill requiring financial literacy to be taught in schools, which we think is a really good thing for all Americans. And hopefully other governors follow suit. And we’re calling out Governor Brian Kemp to do everything he can and say to Georgia to do the same thing. We also played our news segment, The Rate Is Right. We talked about rate down being bonds and being something to be concerned with, with the yield on US corporate bonds and also with US corporate bonds trading at 135 times earnings, a go forward PE ratio. We think that is something to be concerned with and to try to start replacing your bond investment with structured notes or with fixed indexed annuities. We also talked about a smart financial plan with smart, safe, smart risk and smart tax solutions. We got into Smart, safe and smart tax. Also, when you’re investing, you want to consider the rule of 100 and not take too much risk. And we look forward to talking about smart risk solutions as part of a smart financial plan next week on the Active Wealth Show. Have a great week, everybody.

Producer:
Thanks for listening to the Active Wealth Show. You deserve to work with a private wealth management firm that will strategically work to protect your hard earned assets. To schedule your free consultation, call your Chief Financial Advisor Ford Stokes at (770) 685-1777 or visit Active Wealth. Investment Advisory Services offered through Brookstone Capital Management LLC. Become a registered investment advisor. Bcm and Active Wealth Management are independent of each other. Insurance products and services are not offered through BC but are offered and sold through individually licensed and appointed agents. Investments involve risk and unless otherwise stated, are not guaranteed. Past performance can not 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 sions prior to making any investment decision. A purchase of an asset 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 CSN before investing. An investment, in essence is not FDIC insured and is subject to credit risk. The actual or perceived credit worthiness of the issuer may affect the market value of SNS. Sns 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 SNS. 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 SNS 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. Price in any sale prior to the maturity date could result in a substantial loss. Sns 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 US federal income tax consequences of an investment in SNS. If an SN is callable at the option of the issuer in the SN 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 SN.

Producer Sam Davis:
Sns 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. 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.

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 subtitles, share transcripts, enterprise-grade admin tools, transcribe multiple languages, and easily transcribe your Zoom meetings. Try Sonix for free today.

Other Episodes

Episode 156

January 13, 2023 00:48:00
Episode Cover

How to Delete Taxes, Fees and Expenses from Your Retirement Plan

On this week’s show, Ford explains how you can delete taxes you would be paying during retirement. He also discusses reducing fees with a...

Listen

Episode 163

March 24, 2023 00:48:00
Episode Cover

Will Social Security Be Around When You Retire?

On this episode, Ford and Sam help answer one of the questions they get the most – will Social Security be around when I...

Listen

Episode 148

October 28, 2022 00:49:13
Episode Cover

Making a Head Start on Your New Year’s Resolutions

The year is flying by and it’s time to start planning for financial success in 2023. This week, Ford discusses some strategies to eliminate...

Listen