Tax Free Investing & Bond Replacement Strategies

47:55
 
シェア
 

Manage episode 291446942 series 2846013
著作 Active Wealth Show and Ford Stokes の情報はPlayer FM及びコミュニティによって発見されました。著作権は出版社によって所持されます。そして、番組のオーディオは、その出版社のサーバから直接にストリーミングされます。Player FMで購読ボタンをタップし、更新できて、または他のポッドキャストアプリにフィードのURLを貼り付けます。

Radio Show Outline

Producer: [00:00:00] Fixed annuities, including multi-year guaranteed rate annuities, are not designed for short term investments and may be subject to restrictions, fees and surrender charges as described in the annuity contract guarantees are backed by the financial strength and claims paying ability of the issuer.

Speaker2: [00:00:15] Welcome to the Active Wealth Show with your host Ford Stokes. Ford is a fiduciary and licensed financial adviser who places your needs first. He’ll help you protect and grow your wealth. The active wealth show has grown because activators like you want to activate their retirement planning with sound tax efficient investing. And now your host, Ford Stokes.

Ford Stokes: [00:00:37] Welcome to the Active Wealth Show everyone. This Ford Stokes your chief financial advisor, we’ve got an action packed, really busy show today. So bear with us. We’re going to talk about tax free investing. And we’re also going to talk about bond replacement today on the Active Wealth Show. We’re also doing this on the heels of President Joe Biden’s State of the Union address that many of us conservatives couldn’t bear to watch. And I am one of those people. I did not watch it. And but there are the it was interesting. That The Wall Street Journal just called him the Six Trillion Dollar Man, which I thought was really interesting. We’ll get into that here in a second. But let’s go straight in the market.

Speaker2: [00:01:23] Update your active market update.

Ford Stokes: [00:01:27] So U.S. equity markets were under pressure Friday as investors dissect another batch of earnings that included Amazon’s blowout quarter. The Dow Jones Industrial Average was lower by 151 points or point for four percent, respectively, while the S&P 500, the NASDAQ composite, or weaker by five point five, three percent and point seven three percent respectively. Both the S&P and the NASDAQ finished at record highs on Thursday after data from the Commerce Department show the US economy grew faster than expected during the first three months of the year in stocks, Amazon Inc reported quarterly sales surged over forty four percent year over year as consumers continue to shop from home amid the pandemic. The company’s second quarter sales guidance exceeded Wall Street estimates Twitter shares were sharply lower after the social media company reported daily active user totals that fell short of analysts expectations and provided disappointing revenue guidance for the current quarter. Elsewhere in tech, Apple Inc distorted competition in the music streaming market. The European Union said Friday in a preliminary ruling. The tech giant, which could face a fine of as much as twenty seven billion. Again, these are the EU’s looking for money here. It must respond to the EU in writing or at an oral hearing. Meanwhile, Chevron Corp. announced quarterly profit fell 29 percent versus last year as winter storms resulted in reduced production and lower margins and. Clorox company reported mixed quarterly results and trimmed its fiscal earnings forecast due to higher manufacturing, commodity and logistics costs. And on Saturday, Warren Buffett led Berkshire Hathaway will hold its annual shareholder meeting with investors.

Ford Stokes: [00:03:19] On the look out for the company’s succession plans in commodities, West Texas Intermediate crude oil fell a dollar forty one cents to sixty three dollars and sixty cents a barrel, and gold ticked up a dollar thirty to one thousand seven hundred sixty nine dollars and sixty cents per ounce. So let’s get into the six trillion dollar man. It was it’s actually grabbing traction, especially among the hosts here at and the producers here at A.M. nine to one of the answer and within Salem. And we’re a conservative talk radio station. And so, you know, when we hear something that rings true this true, we’re going to jump on it. But here’s the deal. The Biden administration acts as if it has a broad mandate, which it clearly doesn’t, to pursue the most ambitious left wing agenda in the history of our country involving a massive expansion of federal government and unsustainable spending increases. One example is the one point nine trillion dollar covid relief package, which goes mostly to new programs that have nothing to do with the coronavirus. Similarly, Mr Biden’s two point three trillion dollar infrastructure proposal would spend hundreds of billions on roads, bridges, ports, airports, utility grids and broadband, but almost one point five trillion on other things. All of this largesse requires cattery tax increases that would punish savings by by raising capital gains tax rates, devastate small businesses that that pass profit through to their owners by taxing income more heavily and make US businesses less competitive abroad by raising corporate rates well above those of foreign competitors.

Ford Stokes: [00:05:06] That’s where we’re at with the Six Trillion Dollar Man. That is Joe Biden. And, you know, I don’t know what else to say about it, but I do know that we’ve got to figure out what we’re going to do about it with our own personal portfolios. And what I would recommend that you do is stay invested. I would also recommend that you consider. Doing a bond replacement and reducing the risk on bonds as inflation is likely going to tick up and interest rates are likely tick up, and I want to be clear about this. So if interest rates go up. In the near future or they continue to go up, the bonds that you currently hold are going to be worth less if you got questions about how an effective bond replacement strategy could benefit you and help you get a higher average rate of return and better protect your assets, then I would encourage you to check out bond replacement dotcom. We’ve got a free report there at bond replacement dotcom. It’s exactly how it sounds. And I feel like we need to do a better job at managing the bonds within our portfolio. It used to be, you know, when Harry Markowitz came up with modern portfolio theory in nineteen fifty two or when he was given credit for it. That’s almost 70 years ago, and it used to be where have you got 60 percent stocks and 40 percent bonds? You’ve got a moderate portfolio and that’s the typical construction of a portfolio.

Ford Stokes: [00:06:35] So you’ve got a modern portfolio that’s got 60 percent that are traded on the same exchanges as the bonds, but they’re both negatively correlated or non correlated assets between stocks and bonds. Usually when the stock market goes down, money will rush into bonds and it’ll give you an uplift, but also give you protection in income. You’re also paying advisory fees on stocks and bonds when your financial adviser manages that portfolio. But if you were to replace your bonds with a fixed indexed annuity that gets you market like gains without market risk. Did you know that there are no advisory fees associated with fixed index annuities because the insurance company pays the adviser? Well, that’s something to really consider, and so I would encourage you to check out bond replacement dotcom for sure, and really get an idea of how you can replace the bonds, your portfolio. Let’s also talk about tax free investing. We’ve talked about that. Each of the last four weeks and I promised that we would talk about tax free income planning, but let me just quickly give you a really great scenario. There’s only two types of tax free investing. No. One is a Roth IRA. And the number two is life insurance. The type of life insurance we like are indexed universal life insurance products that are index linked. So you get a portion of the gains of the growth on the index.

Ford Stokes: [00:07:59] The insurance company keeps a portion, but you get a vast majority of that growth. So that is something definitely to consider. But let me an example. I’ve got two clients. We’re going to call them Tom and Liz today. We try to change the names to protect the innocent here at the active Wilsher. But Tom and Liz, Tom is paying in two thousand dollars a month for a 10 pay. That’s for 10 years in a row. He’s 55 years old. He’s in retire at 65. When he’s done at 65, he no longer has to pay any premiums. He’s paying two thousand dollars a month for ten years. But when he’s done, he’s able to take out twenty five thousand six hundred dollars per the illustration from the issuing insurance company. A year tax free because distribution’s against a life insurance policy are basically loans against the life insurance policy and there’s no income tax on those types of distributions. He’s getting almost an entire third Social Security payment into the household upon his retirement tax free. No questions asked, no problems. And that’s remarkable, he’s getting more than 2000 dollars a month tax free. They could go to pay for, you know, a beach house mortgage or could go towards paying helping out grandkids with college or could go towards groceries or living expenses or whatever or travel and. That is tax efficient investing, so if you want to understand how you can invest, tax efficiently and generate a tax free income, you can never outlive and also give your family an important death benefit protection on the primary breadwinner, then I would encourage you to give our office a call at 770 685 1777.

Ford Stokes: [00:09:57] And also you can check out activewealth.com and click that set an appointment. button in the upper right corner, we’re happy to help you. And we come back to the break, we’re going to hear four important chapters over the next three segments from my new book, Annuity 360, that talks about this bond replacement strategy that we’ve been talking about here in segment one. We need to do a really good job at reducing the risk in our portfolio, reducing the fees in our portfolio, and specifically reducing the future tax risk within our portfolio, at least growing our money tax deferred and at a maximum, growing our money tax free. We need to consider a Roth later. Conversion will go over an example or two of those in segment three and four. And we’re so happy you’re with us here on the Active Wealth Show. It is a jam packed show today. Apologies for that. But, you know, coming off of Joe Biden’s State of the Union address that very few conservative conservatives watched, we’ve got to do a really good job. At managing our portfolio tax efficiently, act well show right here, and I am not sure of the answer. We look forward to you coming back right after the break.

Producer: [00:11:23] 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 protect the performance of any specific investment and is not a solicitation or recommendation of any investment strategy.

Ford Stokes: [00:11:47] And welcome back to the actual show Activators, and we’re talking about bond replacement and tax free investing on today’s show. And specifically, we’re going to start planning some chapters from my new book, Annuity 360, that details the strategies on bond replacement. When I asked Sam to go ahead and play Chapter one, which is why you should consider investing some of your hard earned wealth into a fixed indexed annuity. Go ahead and roll Chapter one from Annuity 360. My new book, Chapter one Why you should consider investing some of your hard earned wealth into a fixed indexed annuity. Big idea. Protect your hard earned wealth with annual point to point protection periods that lock in your gains each year. A fixed indexed annuity can help you do the following with your wealth. Number one, protect your money from market loss. Fixed index annuities offer by highly rated annuity carriers did not lose a dime in account value in 2008 or 2009 during the worldwide recession caused by the mortgage loan crisis that resulted in the S&P 500 losing fifty point one percent of its value from March one, 2008 to March 31st, 2009. No, to grow your money with market like gains, typical annual growth of five to seven percent. Number three generate a lifetime income. Your retirement will likely last 30 plus years. It might be a good idea to play some of your assets into a fixed indexed annuity to set a safety net around a portion of the retirement income that you wish to generate.

Ford Stokes: [00:13:23] Number four, eliminate market risk associated with bonds by replacing the fixed income bonds in your portfolio with a fixed indexed annuity. Number five, eliminate the advisor fees you’re currently paying to generate fixed income with bonds in your portfolio by replacing them with fixed indexed annuities, the annuity companies pay the adviser you don’t. This is called a bond replacement. If the above fixed indexed annuity benefits sound appealing to you, then invite you to listen to the rest of this book and ultimately invest a portion of your hard earned wealth into a fixed indexed annuity to build a successful retirement. For more important information on annuities beyond this book. I also invite you to visit our website, Annuity 360.net. Let’s consider a one hundred thousand dollar investment in the S&P 500 versus a 100 thousand dollar investment in a fixed index annuity with a 50 percent participation rate in the S&P 500 from 2000 to 2013. Here’s a hint, folks. The annuity wins from January one, 2000 to December 31st, 2012. The S&P 500 experienced negative two point nine four three percent growth over those 13 total years. People who retired prior to 2000 experienced 0 growth over 43% of their estimated 30 year retirement question. Do you want to live your life during retirement without any growth over 43% of your retirement years? I don’t think so.

Ford Stokes: [00:14:51] Conversely, if you had invested it into a fixed indexed annuity with a 50 percent participation rate in the S&P 500 in January 2000, you would have seen a growth of sixty five point five three percent. That’s a significant total account growth difference of sixty eight point four seven three percent. Do I have your attention now? The account value growth chart below shows the one hundred thousand dollars invested into an S&P 500 spider in January of 2000 versus one hundred thousand invested into a fixed index annuity with a 50 percent participation rate in the S&P 500. Also, in January of 2000, the fixed indexed annuity achieved a total growth of ninety point zero three eight percent versus just twenty five point seven eight six percent growth in the S&P Spyder by December 31st, 2013. This chart shows the power of one year protection periods called annual point to point features. The gains from each year were locked in on each anniversary of the annuity policy effective date. When the S&P had negative years, the S&P Spyder 500 S.P.I experienced losses. In those same years, the fixed index annuity experienced zero losses. This proves that you don’t need double or triple digit gains if you don’t experience losses. In this author’s opinion, every sound portfolio with a smart financial plan includes fixed index annuity investments with tactically managed portfolios in hopes to minimize market risk, reduce advisory fees and deliver a reasonable rate of return.

Ford Stokes: [00:16:25] The annuity can also deliver consistent income with or without the added feature of an income rider that also charges fees within the policy. I recommend avoiding income riders. I strongly recommend investing a portion of your hard earned wealth into a fee efficient, accumulation based fixed index annuity with no more than five percent annual penalty free withdrawals to allow your money to grow and to generate important income during retirement. Refer to your audio book companion PDF that comes free with the purchase of this audio book see chart one point one for annuity account growth examples. Greenline, a one hundred thousand dollar investment into a fixed index annuity showing the net growth of the annuity with a 50 percent participation rate with zero withdrawals from January one, 2000 to December 31st, 2013, the resulting account value is one hundred and ninety thousand and thirty eight dollars by the end of December 31st, 2013. Red line, one hundred thousand dollar investment into the S&P 500 spider ticker symbol spy, this investment carried one hundred percent market risk with 100 percent opportunity for market gains on the performance of the SBI from January one, 2000 to December 31st, 2013. The resulting balance of the account is one hundred and twenty five thousand seven hundred and eighty six dollars. Your human capital versus your wealth capital, human capital is an intangible asset or quality not listed on a company’s balance sheet, you can think of this as an economic value of your work.

Ford Stokes: [00:18:06] Your human capital will decrease over the course of your career. Your peak amount of human capital is at the start of your earning years, whether that be right out of college at 22 years old or at age 30 after completing your advanced degrees. This is the time where your productivity levels are high and you are contributing to your company’s wealth. You have all of your earning years ahead of you. During this time, you have to protect your hard earned wealth capital. This is not something you can recoup. You can’t go back and relive your prime earning years or the years where your human capital was the highest. There are many barriers to going back to work at retirement age. Unfortunately, age bias is a real issue, especially in certain industries, those who might have been an engineer during their younger years might be forced to take a retail job to make some extra cash because companies in their field won’t invest in older employees. Many employers focus on what you can’t do when you’re older. Instead of thinking about the experience and the expertise you could bring to a project, you will most likely have to rely on your wealth capital during retirement. The idea of losing capital as you go farther in your career sounds a little scary, but you can rest easy knowing that this new form of capital will kick in as your human capital dwindles.

Ford Stokes: [00:19:21] As you earn and invest throughout your career, your wealth capital will grow exponentially. You’ll need this wealth capital for your retirement. So it is important to choose investments that will protect and grow your wealth. Annuities, specifically fixed index annuities, can offer you market like gains. Without the market risk, your money never goes below zero. By investing in a fixed index annuity, you’re taking money out of the Wall Street casino and we think that’s a good thing. Annuity guarantees like guaranteed lifetime income and the guaranteed growth of your principal are based on the claims paying ability of the issuing annuity company. It’s a good idea to buy annuities from highly rated annuity carriers that are rated by Standard and Poor’s. And at best, we consider a highly rated annuity carrier to be rated at least a triple B rating by S&P or with a B plus rating by a.m. best. The impact of loss on your portfolio specifically, it can be devastating to your retirement. When we look at market volatility risks, the risk of loss and the potential impact on your retirement income is the important thing to understand. This chart shows the impact of losses on your retirement accounts. If we take a look at an example, let’s say you have an account that is at risk.

Ford Stokes: [00:20:37] If you start with one hundred thousand dollars and lose 20 percent, you lose twenty thousand dollars and you were left with eighty thousand dollars. If you gain back the same 20 percent, are you back to even as you can see in the graphic below? The answer is no. In order to get back to your original 100 thousand dollar investment, you would have to gain back 25 percent. If we add an additional five percent for armed R&D, we would now have to gain back thirty three point three percent to get back to even understanding. This concept is one of the keys to a successful retirement income distribution plan because you no longer have time on your side. The last thing we want to do is run out of money when we are 90 or 100 years old. How much do you have to gain to make up for a market loss? See chart one point two. After reviewing the above chart, I’m reminded of Warren Buffett’s two rules of investing. No. One, never lose money. No. Two, never forget. Rule number one, we invest in a fixed index annuity with a highly rated annuity carrier that has a high financial solvency ratio. Then it is likely that you will be able to follow Warren Buffett’s two rules of investing. Exactly. You’ll likely not lose any money with the amount you invest in a fixed index annuity offered by a highly rated annuity carrier with a high solvency ratio.

Ford Stokes: [00:21:56] A good financial solvency ratio is any solvency ratio over one hundred and four percent. The solvency ratio expresses financial soundness and a company’s ability to meet policy obligations as they come due. Assets divided by each one hundred dollars in liabilities result in a financial solvency ratio expressed in a dollar figure. Assets are bonds, stocks, cash and short term investments. Liabilities exclude separate accounts. The higher the amount, the stronger the company’s position to cover unforeseen emergency cash requirements. Right. Here’s the bottom line on why you should invest in a fixed index, annuities, a bond or place no one is. You’re going to eliminate your advisory fees that you’re paying. So you’re going to save. You know, one and a half percent on the money that you’ve invested in a fixed index annuity every single year just by eliminating the advisory fees. Number two is you’re going to grow your money tax deferred. Number three is you’re going to grow your money with market like gains. And number four is you’re going to grow those without market risk. That’s why you should consider investing the bond portion of your portfolio into a fixed index annuity is the new 60 40. And we’ll talk more about it. We come back from Brett. Welcome back to of well, show activators on four stocks, the chief financial adviser, and if you’ve got questions on who an activator is and activators somebody who listens to this show, it’s somebody who’s looking for a tax efficient, fee efficient and market efficient portfolio.

Ford Stokes: [00:23:46] And they want to build a retirement that they can never outlive. And that’s their number one fear. Their number one fear is running out of money in retirement. The number two fear is that Social Security benefits will be cut and their number three fear is death. That’s what retirees fear. And if you’re thinking about retiring or you are retired, we want to help you deal with those fears and actually combat them by helping you generate consistent retirement income that you can count on. That also is not exposed to market risk. We also implement tactically managed portfolios through our registered investment advisor, Brookstone Capital Management, than we are has over seven billion dollars under management. But you really should consider replacing let’s say you’ve got 40 percent of your portfolio in bonds. You really should consider replacing your bonds with fixed index annuities with the right kind of fixed index annuities that are fee efficient, that you can generate your own income without paying an income rider fee. And I want to go ahead and play what’s going on in the current economy and how to build for a modern portfolio for tomorrow’s challenges from our chief investment officer, Mark Diorio.

Mark Diorio: [00:24:56] Hi, this is Mark Diorio, chief investment officer. This is Mark Watch for the week of April 26th. When we think about portfolio construction, we’re building portfolios for tomorrow’s challenges, not tremendous challenges. By that, I mean, many advisors and investors overestimate the likelihood of another 2008 experience when considering a portfolio. And the 2008 experience is far from today’s challenges. In 2008, it was an over leveraged household sector. Today it is a government debt challenge which has vastly different investment implications. The most straightforward difference for investors is the interest rate regime, where in 2007, heading into the crisis, short term rates were near five percent. Today they’re near zero percent. So as the rates dropped from five percent to near zero percent, this helped push bond returns higher during the last twelve years. The effect of these conditions is that the traditional moderate 60-40 portfolio is showing a blended earnings and coupon yield down well below average. In 2008, this ratio was at its long term average, meaning that the 10 year forward return looked promising, even with a massive stock market bear market mixed in. And that’s what transpired from a portfolio construction perspective. Given this reduced outlook for core blended portfolios, we use a core plus satellite allocation framework. The satellite allocations are used to augment the core risk based portfolio with an enhanced opportunity set

Ford Stokes: [00:26:28] For all of us at Active Wealth and Brookstone Capital Management. We’re trying to do everything we can to optimize portfolios for our clients. If you’re doing the old 60-40 portfolio and you’re just doing a buy and hold strategy, you’re you’re losing value on the bonds that you hold more than likely. And so I would encourage you to give our office a call at 770 685 1777. We’re happy to help you. Since 1950, there’s been thirteen tax increases. The S&P 500 has gone up 12 times and one time it’s gone down. I would encourage you to consider staying invested because the S&P 500, over those 13 years since 1950 where we had corporate, personal or capital gains tax increases. It did. Twelve point one five percent in growth. That’s the S&P 500 did the S&P 500 grew twelve point one five percent on average in the last 13. Years in the market when we had tax increases from the US government. So what that tells you is if you don’t stay invested, you’re going to lose buying power and you’re going to lose buying power, your retirement lifestyle. And so I would encourage you to go ahead and give our office a call at seven seven zero six eight five one seven seven seven seven seven seven zero six eight five one seven seven seven. So annuity companies truly are competing for baby boomer dollars, are competing for your retirement dollars, and you can benefit from that both in the construction of the different types of hybrid annuity products out there where you’ve got index linked gains that you can enjoy and also downside protection as well.

Ford Stokes: [00:28:19] Also, Sam’s going to play Chapter two right now in my book, Annuity three. And you’re going to understand why annuity and life insurance companies are competing for baby boomer dollars and how you can benefit. Chapter two, why annuity and life insurance companies are competing for baby boomer dollars. Big idea. Annuities counter one of a retiree’s biggest fears outliving their wealth. Annuities create lifetime income streams. There are seventy three point four million baby boomers in the United States that are close to or are already in their retirement years, baby boomers put between nine and 10 percent of their pay towards their retirement. Only 55 percent of boomers have any money save for their retirement. More than four in 10 boomers inaccurately believe that Medicare will cover long term health care costs. Baby boomers hold two point six trillion dollars in buying power. They’ve had more time to build their wealth in comparison to other generations because some might still be in the workforce and making more money. Baby boomers control 50 percent of the nation’s wealth, outspend younger generations and are more likely to spend their retirement savings on themselves rather than passing them down.

Ford Stokes: [00:29:33] Total U.S. retirement assets are about 28 trillion dollars. More than half of those assets were either defined contribution plans or individual retirement accounts. Some other facts about baby boomers and their spending habits, 69 percent of baby boomers either expect to or are already working past age 65 or don’t plan to retire. Only 26 percent of baby boomers have a backup plan for retirement if they are forced into retirement sooner than expected. Baby boomers make up forty six point eight percent of pet spending. Baby boomers are expected to spend three point four percent more on health related purchases than their parents did. WYO annuity companies targeting baby boomers. Boomers face many issues when planning for retirement. The three primary reasons are No. One, growing the money they have already saved. Number two, dealing with and preparing for unforeseen expenses, the largest of which are tied to health care and long term care. Number three, optimizing their financial plans when their exact lifespan is unknown. Annuities exist to help boomers with the last issue. With an annuity, a retiree gives an insurance company a lump sum of money in exchange for an annual income that will last throughout their lifespan. Annuities have the potential to become useful tools and baby boomers portfolios. When planning their retirement, they offer protection from market volatility, while also eliminating the risk of outliving one’s retirement savings, which are not guaranteed by portfolios that lean heavily on stocks and bonds.

Ford Stokes: [00:31:10] The demand for retirement income amongst baby boomers already exists, and annuities are the only products that can provide a hedge for a long life. Like longevity insurance reasons. Baby boomers should be interested in annuities. They are falling short of their retirement goals. Roughly 10000 baby boomers retire every day, but a very small percentage of them believe they can retire and live comfortably throughout their golden years. Only 25 percent of baby boomers think they have enough money to retire comfortably. Many couples may be on the right track, but unforeseen circumstances such as health problems or staffing cuts might force them into retirement earlier than planned, leaving a much larger income gap. Baby boomers are looking for a reliable source of retirement income, and annuity companies are beginning to tap into this market because they recognize the need. Not all annuities are created equal. There are two main types of annuities, immediate and deferred. The right kind of annuity depends on your financial goals, your situations and your needs. One thing that makes annuities so attractive is that there are so many options available. While it may seem overwhelming, a financial adviser can help you sort through all of your available options and make a smart choice for your money. Security for their income. Annuities can help build a secure retirement through different income strategies, while also alleviating any stress or fear they may have left over from the financial crisis of 2008 and the bear market annuities can play an important role in a plan, along with your Social Security, health care and other factors.

Ford Stokes: [00:32:46] Annuities can address issues such as maximizing your Social Security benefits, which help create an income that you can never outlive. How annuity and life insurance companies have responded to baby boomer needs interest in hybrid products, baby boomers don’t want to pay a fortune for something that offers them only a part of what they need. With less income to be counted in their retirement years already paying for individual products to meet each of their needs can be too expensive. Life insurance companies heard these concerns and responded with new hybrid products, meaning life insurance companies now offer some kind of long term care rider on their whole life or universal life products. Generally speaking, these riders provide coverage for long term care, should you need it, or you receive a death benefit if you don’t. These combination products have grown from six million in 2008 to two point six billion with a B. in 2013, and they are still growing need for guaranteed income. Baby boomers are also concerned with outliving their money. They want to enjoy their retirement, but they also don’t want to run out of funds. The industry responded to these fears by offering a variety of products with guaranteed lifetime income. These products include variable and indexed annuities with guaranteed living benefit riders, an immediate or deferred annuities. The annuity industry has been transformed by these new products, according to PricewaterhouseCoopers Employee Financial Wellness Survey.

Ford Stokes: [00:34:15] Since the economic downturn of 2008, 76 percent of retirees say that creating a guaranteed income is their top retirement planning priority. Annuity companies rose to the occasion to create products to meet the needs of baby boomers and provide them with a sense of security. The need for advisers, annuity companies have created many products to meet the needs of their consumers. This is a good thing, but it can make for a tough decision on the part of the investor with so many options to sort through. Some pre retirees and retirees can’t sort through all the information. Many are afraid to make the wrong decision, which leads them to make no decision at all. A large part of the planning process involves an adviser educating their clients on all of their options so they can make the right decision. When we come back on segment four, we’re going to play two chapters of my book, Annuity 360, The Annuity. That’s Just Right. And also more detail on bond replacement in Chapter 15. And we’re going to give you a Roth example for the week so you can understand how much you can truly save with a six figure secret. And welcome back to the actual show, so I’m going to play two chapters of my book and every 360 here in the last segment, there’s really on the annuity. It’s just right for you for a bond replacement.

Ford Stokes: [00:35:48] And also we’ve got the actual bond replacement chapter on here as well. I wanted to give you an example on a Roth Alattar conversion. So we’ve got a gentleman. We’re going to call him Ted and his his wife, Alice. So, Ted, Alice, he’s got seven or six thousand dollars in his IRA and they’re doing about one hundred and fifty thousand dollar conversion each year for the next four years. And they’ll convert the balance of it. He’s 60 years old and he’s trying to get done by the time he’s 65. And they’re also trying to stay within below the three hundred twenty eight thousand nine hundred dollar threshold, which is the 24 percent bracket. And they’re going to save 478 thousand dollars in retirement taxes over their 35 plus year retirement because they’re 60 years old, going to 95 years old because they they’re paying the tax man up front. And the tax man isn’t their partner throughout their 35 plus year retirement, which is great news. And they’re going to save almost another three hundred thousand dollars in taxes that would be paid on an inherited IRA that they’re not going to have because they’re their two children are going to inherit a Roth IRA instead of an inherited IRA. Arrival out of conversion is truly a six figure secret. And now let’s go ahead and play these important two chapters of my book, Annuity Three Sixty.

Ford Stokes: [00:37:05] And if you’re looking for a free copy of my book, visit Annuity 360 Dot Net and we’ll get it right to again visit Annuity360.net to get a free copy of my book, Annuity 360, Chapter 13, The Annuity that is just right. The fixed indexed annuity. Big idea. A fixed indexed annuity gives you a portion of market like gains without market risk. Your investment is tied to an index, but not directly invested in it. How does it work? And FAA gives the owners or annuitants the chance to earn higher yields than fixed annuities. When the index they are tied to performs well, they typically will also provide some protection against market declines. The rate on an FHA is calculated based on the year over year gain in the index or the average monthly gain over a 12 month period. Fees often have limits on the potential gain at a certain percentage. This is known as the participation rate. The participation rate can be 100 percent, which means the account would be credited with all the gains or it could be as low as 25 percent. Most fees have a participation rate between 80 and 90 percent benefits guaranteed income stream. With Americans living longer and spending more time in retirement, many retirees are concerned about outliving their savings. In turn, they are searching for a product that can help ensure a steady income stream phase or design with guaranteed lifetime income so you can never outlive your earnings.

Ford Stokes: [00:38:31] Diversification of portfolio. A balanced portfolio is essential for managing risk and reward in the financial markets designed for the long term phase. Are a great retirement vehicle. To ensure you’re not putting all your eggs in one basket phase, offer the ability to make some money without the risk of losing it. Secure principal. Even with market volatility, investors will not lose value on their fixed indexed annuities. Your savings aren’t exposed to market fluctuations, so even in a negative market return, you will not fall below zero. You can never lose your interest once it is credited to your principal tax deferred growth phase, offer long term tax deferred savings. As long as your money stays in the annuity, you will not be taxed on the interest earnings. Once you receive a payout, the annuity will be taxed just like ordinary income, predictable earnings. Because fees offer predictable income, Americans feel more comfortable when withdrawing funds from these retirement vehicles as opposed to an IRA or 401K. Choosing an FAA is an efficient way to plan for your future as your interest earnings rate always remain somewhere between the interest rate floor and the cap. No matter what happens to the market, you can still count on payments throughout your golden years. Potential drawbacks of fixed indexed annuities, surrender charges. A surrender charge is a type of sales charge you must pay if you sell or withdraw money from a fixed, indexed and even a variable annuity during the surrender period.

Ford Stokes: [00:40:02] A set period of time that typically lasts six to eight years after you purchase the annuity, surrender charges will reduce the value and the return of your investment withdrawal limits. Almost all fixed indexed annuities play surrender free withdrawal limits within the annuity contract that generally range from five to 10 percent of the principal. While all annuities must be armed, friendly and provide for a penalty free withdrawal from a qualified annuity account equal to the armed requirement for the client’s age, carriers limit the amount of withdrawal to enable them to grow the. Money invested for themselves and the client not suitable for short term investing if you want to grow your money, but you also need access to 100 percent of your money than a fixed indexed annuity may not be right for you. Chapter 15, bond replacement with fixed indexed annuities. Big idea. Historically, bonds have seen volatility when the market is volatile. Fixed index annuities are not subject to the same volatility, which makes them a much safer investment. You might have heard a financial adviser talk about replacing your bonds with annuities to protect your wealth and grow your retirement funds. And my 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.

Ford Stokes: [00:41:26] 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 1900 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 1951. The long term bond yields were at one point nine percent. In 1951, they climbed to nearly 15 percent in 1981. In the 1970s, globalization had a huge impact on bond markets. 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 21st century. Long term bond yields declined from a high of fifteen percent to seven percent by the end of the century. The bull market in bonds showed continued strength in the early 21st 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 replace your bonds with annuities.

Ford Stokes: [00:42:58] The first question you should ask yourself is this why would you take market risk with your bonds when your bonds can lose their value? If you just look at the history alone, 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 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 24th, 2020, the ten year Treasury note was yielding point six four percent and the 30 year Treasury bond was at one point to seven percent. Reinvestment risk of bonds. This is the likelihood that investments cash flows will earn less and a new security. For example, an investor buys a ten year one hundred thousand dollar Treasury note with an interest rate of six percent. They expect it to earn six thousand dollars 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 inherent to the market as a whole.

Ford Stokes: [00:44:22] 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 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.

Ford Stokes: [00:45:53] Standard & Poor’s estimates of bond markups is zero point eight five percent of the value for corporate bonds and one point two one percent for municipal bonds. However, markups can be as high as five percent, up to 50 dollars per bond. Bonds have finite duration. 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. We wanted to share some great audio from our audio book, Annuity 360. And also, if you want a free copy of the actual book, you can just visit Annuity 360 dot net. Go ahead and visit ActiveWealth.com click thet set an appointment, button in the upper right corner and we are happy to talk to you about it for free. And we’ll do full planning for you. That’s a fifteen hundred dollar value at no cost to you. So you can make an informed financial decision about your financial future. Trustee bond replacement Rothblatt or conversion are cornerstones to successful investing these days. You’ve got to do it. Habra has a great week. We’ll talk more about tax free investing and bond replacement next week in more detail. All of us have a great week, everybody.

Speaker2: [00:47:12] Thanks for listening to the Active Wealth Show. You deserve to work with the 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 1777or visit ActiveWealth.com Investment Advisory Services offered through Brookstone Capital Management LLC become a registered investment advisor. VCM, an active wealth management, are independent of each other. Insurance products and services do not offer to BCA, but are offered and sold through individually licensed appointed agents. Investments involve risk and unless otherwise stated, are not guaranteed past performance going to be used as an indicator to determine future results.

37 つのエピソード