We continue the Smart Retirement Plan Series by discussing the importance of tax planning. Woody explains some important rules to keep in mind when planning for retirement and shares news updates about inflation in America today.
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8.26.22: Audio automatically transcribed by Sonix
8.26.22: this mp3 audio file was automatically transcribed by Sonix with the best speech-to-text algorithms. This transcript may contain errors.
Producer:
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 predict the performance of any specific investment and is not a solicitation or recommendation of any investment strategy.
Producer:
Welcome to the Buckeye advisor with your host, Woody Bowling. Woody is a fiduciary licensed financial advisor and Medicare expert who always places your needs first. Woody works hard each day to educate Americans like you on how to reach the financial freedom they've worked so hard for. And he can help you, too. So now let's start the show. Here's Woody Bowling.
Woody Bowling:
Good morning, everybody, on this beautiful Saturday morning, August 27th, 2022, officially the last Saturday in August. And this is Woody Bowling. I am the Buckeye advisor and I am super excited to join everyone today for our program. We've got a lot of great information coming at you shortly. I want to welcome in, as always, my co host and producer, Mr. Matt McClure, who's beaming in from hot lanta. And I want to say good morning to you, Matt, and welcome.
Producer:
Good morning to you as well, Woody. Yeah, it has been hot in Hotlanta this summer. Luckily, though, we're, you know, kind of staring fall right in the face here. As you said, I can't believe it's the end of August already.
Woody Bowling:
Oh, my gosh. Just the time is continuing to fly. They say the older you get, the faster it goes. I think I can officially vouch for that, although I'm not officially old yet. But anyways. And you'll be there one of these days.
Producer:
No, I hear you. And I get that way year by year as well. You know, it just feels like the time is just going going by even faster than it did last year. Definitely true this year. But we got a great show coming up today, Woody. We're going to continue our Smart Retirement Plan series. We're going to talk some more. You know, we talked about that that word that you love so much taxes. We talked about taxes last week. We're going to continue to do that a little bit this week, but we will try not to linger too much on it. But we're also going to talk about some rules to follow smart income as well. So we've got a bunch coming up. And and that's what the show is all about, is helping folks understand their their finances, help helping folks plan for the future. And folks, if you would like to get in on the action on the Buckeye advisor, it's the Buckeye advisors dot com that's the Buckeye advisor or you can call Woody 9379746201.
Woody Bowling:
Yep. Matt Inevitably we do like to help people. That is our main primary mission and goal here at the Buckeye Advisor and I am super happy to be an independent fiduciary and that is the name of the game. I want to be able to work with people and offer them simply the best advice and the best service that I can provide. And whether someone is five or ten years from retirement and maybe they just change jobs and they have a 401. K As a gentleman who's also a listener that I met with this past week, I met with him. He has been gone from his prior job for a couple of years, has a41k that he wanted to know really the best way to do it and what to do with it today to work for him. And there's a lot of different things that we've gone over with him. So, you know, I do want to get the show started by saying we have officially one week from today until the kickoff of Ohio State and Notre Dame couldn't be more excited to see what the Buckeyes are able to do this year.
Producer:
Now, there you go. I mean, and talk about time flying. I mean, football season literally just a week away. It's it's a little bit crazy, but oh, my gosh, it's exciting. I know that you're looking forward to that. Definitely. And I you know, since since since we're talking Ohio sports, I will not mention my team, but I don't want to I don't want to ruffle any feathers or anything like that. So I'll stay out of that. But hey, I'll root for the Buckeyes. Sure.
Woody Bowling:
Absolutely. Yeah, no doubt about it. And the Bengals are going to be the week after. So, you know, we just made it to the Super Bowl. So us in southwestern Ohio and in mid central Ohio are great unless you're a Cincinnati Reds fan like me. So let's move through the sports and all the other fun and let's get started with the show. I want to give a quick market update map because, you know, people are still concerned. I talk to people every week that are still very, very concerned about the direction of inflation and home prices, interest rates, food prices, all those things that we've talked about and that we're going to continue to talk about because people need to really hear what's going on. I mean, you can do snippets of this show and that show, but, you know, we try to take a comprehensive approach to helping people understand some of the factors involved and really give our opinions on certain topics. And then the goal is to really help people plan for and achieve a good retirement based. On their own lifestyle. So inflation is still super hot. We'll have the new inflation numbers in early September for the month of August.
Woody Bowling:
You know, on the one hand, it's bad because inflation was running in July at 8.5%. That's the bad news. The good news at the end of September for people on fixed incomes, Social Security recipients, those folks are going to be in line for possibly one of the largest cost of living allowance increases in the history of Social Security. So depending on where those inflation numbers land in September, they could be looking anywhere from nine and a half to a little over 10% increase in their pay, their gross pay on their Social Security benefits. And of course, that's before Medicare Part B is taken out for their Medicare. So, look, inflation is hot. We don't think it's going to go away in the near future. Is it moderating a little bit? It is. But you know, the other parts of the economy, like new home sales, for example, new home sales from July of last year to July of this year, down 29.6%. That is a large, large number. And as you and I know, new home sales and just home sales in general, they really are big drivers of the rest of the economy. Right?
Producer:
Yeah. You know, and that's that's one of the big numbers that that we always kind of look at to see what the housing sector is is doing. And then that can kind of give you kind of read the tea leaves on what's happening in a more broad scope to the economy. You know, it's been a weird just a really weird time. That's the technical term for it. Weird where that you know, it's just been a strange it really has been a strange time in the economy where, you know, we've got a lot of positive signs. I mean, the job market has been doing well and that still continues to to be the case. A lot of people have left their jobs, but a lot of people have been hired at the same time. So it's so it's like we've got this sort of mixed bag with inflation running so high and all of that now with interest rates going up as the Fed tries to battle inflation, we've got interest rates rising. So that's causing a lot of cooling down in parts of the economy, including the housing market, because that I mean, the housing market has just been red hot over these past couple of years. And, you know, I think anybody who might be in the market for a new home or an existing home is glad to see some cooling off in the housing market, although they're not glad to see those interest rates. But then when interest rates come back down later on, you can refinance and save you some money there. But but that's just.
Woody Bowling:
That the days of multiple offers and homes selling in hours with multiple showings, you know, those days are long gone already. The 30 year fixed rate, average rate this week on mortgages was 5.13%. In January, that same number was 3.22. In a eight month time frame, it is now 59% more expensive to buy a home when you're calculating your principal and interest repayment on the mortgage. So that has driven a ton of first time homebuyers out of the market. Plus you have about a third of the home sales now being bought by these large corporations like BlackRock and some of the other people. They're buying real estate. They're gobbling it up to try to rent it out later to people. Yeah, doesn't seem like a fair deal to me, but, you know, that's what's going on. So and then on top of that, this week, as if inflation isn't enough of concern, our dear president appears to have come up with this great idea and I say it great in quotes about canceling 10,000 of student loan debt for certain individuals. So, you know, according to neutral parties and their analysis, that could add another 400 billion or more in some of the other estimates onto the total of inflationary pressure that's just going to do nothing but drive things up from there. So, you know, it's probably a very late in the game play by the president to appeal to a certain demographic of voter.
Woody Bowling:
And unfortunately, those political choices people make, they do have consequences. So, you know, the market stock market for had a good, good run. They're up about 17% over a four week period in July. So nice little bounce back there. And you know, the clients that I work with on the investment advisory side of their investments and retirement are very happy to see some stability return. It's nice to see the arrow being green instead of red. So good things are going on, you know, just a lot of things and, you know, steady as she goes. Hang in there. Things will turn around. But also you really need to consider the right strategy to make sure that those savings and for one case and those retirement accounts that you've worked hard to save are treated the right way that are going to produce the best results for you at retirement, whether you're ten years away or whether you're in it right now and already been in it. You know, getting a second opinion is always something that I do. I do for a lot of people, and they're happy to get the information. And most of the time I can come up with a strategy that's going to be better than the course that they've been.
Producer:
On, and that that is the goal. Their focus is to, you know, improve your your status of where you are along your journey toward retirement. And again, if it sounds like something that's good to you and that you'd like to find out more about, the Buckeye Advisors is the website that is the Buckeye advisor and that's advisor with an or dot com.
Producer:
And now of awesome financial wisdom. It's time for the quote of the week.
Producer:
And yes, we do like to share a little bit of financial wisdom with our listeners, and it actually kind of comes from the circus tent this week, Woody. It's from P.T. Barnum, who as as we know, was not only the founder of the Barnum and Bailey Circus, he became one of America's first millionaires. He's an author, was an author, philanthropist, a politician as well. So he's you know, he he got around he was a trailblazer in a lot of ways in this country. And so P.T. Barnum said, quote, Money is a terrible master but an excellent servant. What do you think?
Woody Bowling:
Very well said. You know, I didn't know some of the things about P.T. Barnum until you informed me this week. But, you know, the circus was a tremendous, tremendous asset to this country for so many years. And, you know, unfortunately, you have these people ultimately that want to shut things down because of quote unquote, animal cruelty and all that. So, look, you know, that's the thing today. People's feelings are hurt very easily. And, you know, and that's part of the problem, I think, with our society these days. Everybody's hurt very easily on something. But P.T. Barnum, a great guy, great American, and that quote is super duper true. I mean, you know, when you're a slave, when when money is your master and you're a slave to it, meaning a lot of high interest rate credit card debt, a lot of just high personal loan debt, when that is the case, it just really can be devastating to recover from that. And, you know, and of course, bankruptcies have been inching back up as well in the last couple of years since the pandemic started. And I would encourage people, if you can, if you have credit card debt, start with the smallest one, then get that one knocked out, then move up to the next smallest one or the next larger one. Increase your payments, pay it off early, you know, card by car, try to live within a budget. We've talked over and over again about the importance of having a budget. So, you know, I'm a big believer in it and I live it and it's not easy to do sometimes. But, you know, if you look at the long run picture, the long running total picture, that's where you got to go. And you short you set up some short term objectives to get to those and then mid-range. And then if you'll work each day and each week and each month to achieve them, you'll ultimately wind up getting across the finish line to where you want to be.
Producer:
Yeah, you know, take control of it or it will take control of you. That's kind of the bottom line here. And yeah, absolutely. Great advice there from perhaps unexpected source in P.T. Barnum. Well, that, of course, folks, is our Quote of the week. And as we continue on, I mentioned this earlier, but we are now going to continue our Smart Retirement Plan series here on the Buckeye Advisor and we're going to start out I had to get this part out of the way because it's that three letter word that's actually a four letter word and that word is tax. So we're going to continue talking about smart tax a little bit here and start off our conversation, Woody, if you will. Maybe a little bit of a refresher for folks with the way that investment accounts are taxed. They're not all equally treated under the tax code, right?
Woody Bowling:
Well, even though the word tax is definitely, definitely offensive to most Americans, the good news is, is, you know, we have ideas that can help our clients try to minimize the impact of those darn taxes. You know, since we have to deal with them, why not deal with them effectively and come up with a plan that makes sense to minimize their impact on your wealth and your retirement and your ability to do things now as well as later in life. Perhaps most for most people, as they reach later in life, their income is going to go down. So certainly the last thing you can afford or you want to afford as you get older and you get into those retirement years where you're making less, the impact that taxes can have is a large one. And, you know, depending on who's in charge, which party is in charge, you know, taxes, we think, are going to go up down the road. Most people surveyed do believe that. So we've got tax exempt and we've got tax deferred. So, you know, if you set up a Roth IRA, you're going to pay that money. You're going to pay taxes on that money as it comes into it. So that's but it's going to be tax exempt later when you start taking distributions. So what more of a beautiful way to prepare for retirement or as you're closer to retirement than to take an asset that is potentially going to be taxed at a very high rate today and potentially later on down the road.
Woody Bowling:
So if you can make the move to a tax exempt strategy like a Roth IRA, you know, it's. Very well. Something to consider for a lot of people that I meet with, and it's not right in every scenario. So let's get that out there on the table. But you know, a Roth IRA converting a traditional IRA or a 401. K plan, which is tax deferred because it's not going to be taxed until later when you take the money out. So a lot of the folks I work with are looking for strategies to minimize taxes, maximize how much they can take out later in retirement. And that's what we do. We come up with strategies to do that. So tax deferred, tax exempt, you know, basically the goal is whichever way is right for you, we're going to come up with a unique strategy and unique recommendations that are going to fit your goal set. And that's what we want. You know, when we get together and talk about that, we initially meet with folks and we want to know really what's their goal? What do they want? Do they need more income in retirement then their Social Security? And maybe they're fortunate to have a pension? Are they going to have their home paid for? How much traveling are they going to do? Do they want to help pay potentially for colleges, for college, for their grandkids? Perhaps because some people do that, it's not out of the question.
Woody Bowling:
So whether traditional IRA, which is tax deferred, you're going to pay as you pull it out later, doesn't always make sense to convert it to a Roth IRA, but it may make sense to do it over a three or four year period where you can fill up a tax bucket based on your income of today, fill that one up and then do the same thing the next year and the year and the year after that. So, you know, we want to make it tax efficient. So I've got tax people, I've got attorneys that I work with that are close referral partners and that we can come up with a strategy to really help come up with the right plan. I mean, that's what it's all about. And so many people are just I think so many people are. They won't make the first step in talking to an adviser. And, you know, and I think I've said it before, whether you have 50,000 or whether you have 5 million every. Bit of money that people have saved is valuable to them and therefore it's valuable to me. So whether it's 50 grand or 5 million anywhere in between, you know, that's something that I'm interested in helping people understand what they can do to put together the best plan to mitigate tax problems. And tax efficiency is the name of the game.
Producer:
It really is. And that's, you know, as you say, very important to point out that it's not one size fits all here. It is an individualized thing based on your particular circumstances. And so that that's something that that folks really need to be aware of, because what's great for your neighbor or your friend might not be a great strategy for you, because unless you've lived in a completely parallel life to that person and every T has been crossed, an eye has been dotted exactly the same between the two of you for your entire lives. Chances are things are going to be pretty different in your financial picture. So, yeah, that's that's absolutely right. And one thing to Woody, that I think people might not necessarily think about when well, when it comes to taxes or when it comes to retirement in general is life insurance. Because I think at least I know that, you know, for for myself, I think when I think of life insurance, I think of two things. I think of the traditional whole life policy. And I think of a term life policy, which is basically a whole life policy. Without the cash value, you get a death benefit paid out if you were to die within the term. So that those are kind of the two things that I think about. But but it's not just those two things that people need to think about anymore. Those are not the only policies that exist. As I kind of like to say. It's not your grandfather's life insurance anymore.
Woody Bowling:
True. Yeah, very well said. And you know, that's the thing. As an independent advisor, you know, with a fiduciary background, you know, we're looking for the best fit for our clients and that's really all it's about. I simply have to put the client's best interests forward and foremost ahead of all others, ahead of mine and anyone else's. So I'm not I don't care what the beneficiaries think. I don't care about that. I just think about what the client wants to do and wants to accomplish. That's the number one goal. So let me go back quickly, because if we talked about for one K's and Roth IRAs and those things, if you're still working and you have the opportunity to contribute to a401k, do it. Very simple. Just do it. Put as much in as you can afford that doesn't harm your lifestyle today because that tax deferred money is going to grow and a lot of times employers are matching up to a certain percentage. It just depends on the company. But do that, please, please, please. I beg you, please contribute to your 41k403b, whatever that account is, it's tax deferred, different terms for it. And also, if you're doing a Roth IRA or a41k, you can if you're age 50 or over, you have an opportunity to add more to it and to play catch up. It's called a catch up provision, not as in Heinz ketchup, but as in catch up.
Woody Bowling:
So the government actually does some good things sometimes, and that's one of the few things that is a positive. They allow you to add extra money to that for one K over and above the normal maximum. Also a Roth IRA the same way. So that's good stuff. So enough about that. Back to your question about life insurance. I mean, life insurance, everybody needs it. Not everybody has it. I understand that sometimes when people get to a certain level of wealth that they really don't maybe they feel they don't have a need for it. Although for some people that are very wealthy, having the right life insurance policy in place can help pay the taxes that might be due for their children. That may be receiving an inheritance. And because those children are potentially going to be taxed at their own rate of taxation based on their current income level. So life income, life insurance, excuse me, that can be valuable not just because of the death benefit, but it can also build future tax free income. And again, if we can do something for our clients, that's going to help them avoid taxation or minimise it. That's what we're looking to do. So it's another creative way that we use clients money to buy this policy and you know, you have your traditional whole life insurance. A lot of people are aware of whole life. Maybe they buy a policy for 10 to 20000 bucks.
Woody Bowling:
They want to get buried. They're going to have their funeral paid for out of that policy. That's a good thing. Most of those policies don't really build any cash value anymore. They're not participating. So if a life insurance policy is non participating, it just means that basically the life insurance is going to pretty much be there as long as you pay your premium. It's good to age 100 or 110 in most cases, and it will be there to pay those funeral expenses. Term life. Really, probably the closest thing I can relate to it is it's just like renting an apartment. You're just spending that money on the rent, you don't own it. So that term life policy eventually is going to come due, whether it's a ten, 15 or 20 year policy at the end of that period, that monthly premium is going to skyrocket because the life insurance company locked you in for that amount of time and they want you out so their risk is over and to for them to go with any more risk on that policy, it's usually good to pay off a mortgage or something. They are going to raise that rate dramatically to get people to either pay it, but in most cases, people are going to bail out. And that's what I recommend a lot of people to do at that point. I've done it myself. Yeah.
Producer:
Well, very good. Well, it's actually time for us to take our first break here of the show. What he. But we've got a lot more to come. We're going to talk more about the smart retirement plan. We'll continue that as we move along here. We'll also talk about annuities as well and have some insight on those and kind of a fun way from our good friend Ford Stokes and his book Annuity 360 coming up in a little bit as well. And speaking of fun, the dad joke of the week is coming up. Everybody's favorite part of the show and it's right after this. Stick around for more of the Buckeye advisor.
Producer:
You're listening to the Buckeye advisor to schedule your free no obligation consultation with Woody visit the Buckeye advisor dot com. Once I was a singer.
Playing in the rock and roll band. I had no problems.
Producer:
Miss part of today's show. The Buckeye Advisor is available wherever you listen to podcasts and online at buckeye advisor dot com.
Producer:
Welcome back folks. This is the Buckeye Advisor. I'm Matt McClure. I am not the Buckeye advisor, but I'm here with him. His name is Woody Bowling and he now has everyone's favorite part of the show.
Producer:
Some people roll the dice, some people roll their eyes. It's the dad joke of the week.
Woody Bowling:
I am excited to bring another one to you. I think it's a good one, but I'll let everybody in the audience judge as well as you. Matt, to you, the question is this week, why is it a bad idea to iron your four leaf clover?
Producer:
Ooh, a bad idea to iron your four leaf clover. I don't know why. Why would that be a bad idea?
Woody Bowling:
Because you shouldn't press your luck.
Producer:
There we go. I actually didn't see that one coming. And I. Now I'm kicking myself for not seeing it coming. All right. Well, there it is, folks. The dad joke of the week, all right?
Woody Bowling:
And we love it and we enjoy bringing them to you because, you know, life is too short to be frowning all day long. Right. And there's a lot of craziness out there. But we like to seize to the positive. And, you know, each day is going to be something where we try to laugh and have some fun along the way. And that's the part I enjoy about working with clients, you know, getting that personal relationship one on one, getting to know them, their family. And it's a lot of fun.
Producer:
It's this week in history. Well, a lot of interesting and significant things happen this week in history. What do you start us off here? A big, big thing in sports.
Woody Bowling:
Yeah, I enjoy you know, I'm a big sports guy, as you know. And I enjoyed this segment of our show this week in History, believe it or not, August 26th, in 1939, the first baseball game was televised. I mean, that's hard to believe. It was the the game was narrated by Red Barber. I remember the name. I didn't have any of his baseball cards growing up or anything like that, but it was the Cincinnati Reds against those Brooklyn Dodgers back when they were still in Brooklyn at Ebbets Field. And the game was televised, the very first one. And of course, now every game is televised. And I watched those stinky, smelly reds quite a bit on they call it now the Bally Network or something. It used to be Fox, now it's the bally. But anyways, very interesting fact.
Producer:
Yeah, it really is. You know, I can't imagine a time when baseball wasn't on TV because that's if I had a dime for all of the hours that I've spent watching baseball on TV, I'd have a lot of dimes. So there we go. And that's when it all started, 1939. Well, also on this on this very day, as a matter of fact, in the year 1964, a little film in TV history for you, because Mary Poppins premiered in Los Angeles. What? Yeah, 1964 with, of course, being a being a family film by Walt Disney, directed by Robert Stevenson and the one and only Julie Andrews as Mary Poppins was just an absolutely great, fantastic and fantastic whole film. And I still enjoy watching it today. I the only thing that I can't get past, I think, is, is Dick Van Dyke's Cockney accent is just bad, but I mean, which is sad because I love Dick Van Dyke so much. He's so great and he's still going today. He's in his nineties now and can still get up and move and dance around, which is kind of insane.
Woody Bowling:
Great movie, great fun, great family entertainment. You know, they don't make a lot of that anymore with just live people like that, but such a great opportunity to watch those two interact. It was just a great film. And last but not least, the third thing in history this week, August 28th, Dr. Martin Luther King in 1963 delivered his I Have a Dream speech. That, of course, is probably one of the most memorable speeches in history and the impact that it had on those tens of thousands of people that were marching at the time for equality that still still survives today and will live forever in the hearts of American people. And, you know, I wish Dr. King that he would have lived another 50 years or so or 60 to see what kind of impact he could have had on the world in a positive way. But, you know, another interesting fact about what's happened this week in this great country of ours.
Producer:
Yeah, absolutely. So and you're right about those those words really reverberating throughout the decades since he delivered them. Just absolutely powerful and timeless as well. So that's a little bit of a look back on This Week in History and some very, very interesting things there. And speaking of being interesting, we're going. Continue on with the smart retirement plan, what he is. We've been focusing on that series over these last few weeks and this next sort of section of things might sound slightly boring to people, but it's not, I promise. But it might sound that way because it's called smart rule following. And people are like, oh, you know, following the rules. That's like that's that's so boring. I want to break the rules. I want to make my own path. I want to be a rebel, you know, which is obviously you can tell it's not me, but I, I think a lot of people are like, you know, it doesn't seem like something's going to cause a lot of excitement in your life, but it's a good thing to do, right?
Woody Bowling:
Mm hmm. Yeah. We all need rules. And I think we've all been to a restaurant or we've been to the grocery store, and we've seen the child that evidently has no rules at home. And that child is bouncing up and down on the grocery cart, screaming or laying on the floor in the grocery store, screaming and yelling and throwing a tantrum. And the mom is rolling their eyes and just saying, hey, you're going to go to timeout, right? So kids need rules and we need rules in general. You know, we're talking about financial rules today in our show. And the first one we want to really touch on is the rule of 100. And what is that? I mean, it basically says if you're 65 years old, that no more than 35% of your investments should be at risk. And we spend a lot of our time on the show talking about fixed indexed annuities and how they are a wonderful component to the portfolios of many of my clients, not all of them, but many. And you know, because we believe that as you get older, there should be a portion of your assets base that should be principle protected. But still you want to grow it at a reasonable rate, at a much higher rate than bank savings and bank CDs and things like that, because they're not going to pay anything. So the rule of 100 simply says if you're 65, 65% of your money should be in in safe principle, protected areas.
Woody Bowling:
The problem with that is people are living longer today than they used to. So as the life expectancy has continued to grow and increase, there's flexibility around that rule. So I'm not a hard and fast you've got to do this or else, you know, because that's not the case. Every situation is different. You know, you need your money to continue to grow because if you're going to live to be 85 or 87 or 88, you may need more than 35% of your money in market related accounts. And that's where the tactical money management that I do as an investment advisor comes into play, where we go out and we do constant evaluations quarterly of how things are going, which allocations are making the most sense, what are they doing? We're going to track the histories and we're going to make up dates. And so you need part of your money in the market, no doubt about it. We have decades of history behind us. The uncertainty of the market right now this year has been driven by inflation and a few other factors. So it may be a while before those get back under control, but you definitely need a portion of your income or I'm sorry, of your assets in a principal protected environment.
Producer:
Yeah, there you go. Well, that that is the rule of 100. There's also something called the 4% rule that folks need to know about. Lay that out for our listeners.
Woody Bowling:
You know, historically, advisors have always been asking, how much of my income, how much income can I create with my savings? Ultimately, that's really what it boils down to. The 4% rule has has been thought of for many, many, many years as kind of the thumbprint, if you would, of the industry. I'm not so sure it's 100% accurate because there are fixed indexed annuities. And that just means if you had 500,000 saved at retirement, the rule, 4% rule is you would take out 4% of that per year and that would be your income stream. So you can adjust those based on gains or losses throughout the history of your account. But so that would mean 20,000 is not a bad supplement to your Social Security, perhaps. Right. But again, everybody's situation is different. You may you may need more. I have fixed indexed annuities that offer guaranteed payouts at age 65 of up to 5.15% of whatever you put in the annuity and it's principle protected. So you have principle protection. You have potential gains based on an index that's going to be tied to the market. And you have an income payout potentially if you want and or need it now or in the future. That is way higher than the 4% rule. So very, very good stuff. The insurance companies that I use are very competitive with each other. They're all highly they're all highly rated. And, you know, and that's good for us as the consumer, because the competition drives them to be innovative and to be. Consumer friendly with the retirement planning opportunities that they present to us now.
Producer:
And keeping that money, as you say, principle protected is very important for folks as well. And that higher rate of return also important for retirees potentially. And again, folks, this is a customizable thing for you, right? It's not a one size fits all plan. So if you would like to talk to Woody about it, the Buckeye Advisors is the website to go to, that is the Buckeye Advisors. Or you can give what do you call at 9379746201? That's 937974 6201. And so what do we been talking about? Rules here we got the 4% rule. We talked about the rule of 100. What is now our our last rule that we'll discuss the rule of 72.
Woody Bowling:
The rule of 72, I think, is a pretty cool thing. And, you know, when I first heard of it 20 years ago or whenever it was, I thought to myself, that's a cool thought of that. So really, really 72 the rule is have to do is very simple. It's this you take 72 and divide it by whatever return you're getting on your money and that will tell you the approximate number of years it will take to double that money. So simply, if you have 100,000 and you're getting a return of 7.2% for easy math and we like easy math. Right?
Producer:
Math, absolutely love it.
Woody Bowling:
So what happens? 7.2% over a ten year period. That's how long it will take. So you divide 72 divided by 7.2. That tells you how many years before your money will double and that gives you the whopping ten year figure. But, you know, if you can get 7.2 or more as a return, that's very solid and very doable. So be optimistic that those kinds of numbers can be achieved in multiple ways and still do it with a reasonable degree of principle protection. And also, we're going to try to mitigate risk. We're going to watch the investment part of the portfolios very closely. And, you know, first thing I do every day is I scan the markets, I scan client accounts, middle of the day, same thing, end of the day, same thing. So is very important with my clients and they want to know when the market's doing well or when it's not doing well. You know, they want to know what's going on. And that's why the door of communication is always open and it makes it really an enjoyable experience to have that when people are there, people need to have someone to lean on, to hold their hand, so to speak. It's been a difficult market these last eight months. And, you know, it gives me a chance to solidify and cement those relationships that I have with clients because, look, their money, I'm going to treat it just like mine. And I have my own personal money invested in many of the same strategies that my clients are using. So, look, my money is riding alongside of the clients money in many of the same strategies. So I'm experiencing the same kind of ups and downs in that portion of their portfolio that's in the market and in market related strategies.
Producer:
Which is got to be a good piece of mind and something reassuring for for clients as well, saying, well, you know, if it's if it's good enough for Woody, it's good enough for me. So there you go. Well, the last few minutes that we have in the show here, what I want to talk about smart income that's going to be kind of the last bit of the smart retirement plan that we discussed today. One of the things that you have mentioned a couple of times that people I think can rely on and a lot more are these days are annuities. Talk about annuities, first of all, and then we'll come back to it a little bit more on Social Security. Just lay out kind of the groundwork, though. Somebody says, you know, maybe I've heard of annuities before, but I'm not exactly sure what they are, what's like the nutshell explanation of what annuities are. And then we'll actually get I want to play a snippet of the Annuity 360 book for folks as well.
Woody Bowling:
Yeah, annuities. You know, I can tell people in one sentence, today's fixed indexed annuities are not your father's or your grandfather's annuities. That is the biggest thing I can give you as a takeaway. So there's a plain fixed annuity, very vanilla, very much like a bank CD. You give the insurance company your money. That's who issues annuities, by the way, not banks. It's always an insurance company or an insurance carrier. So I only work with the best the highest rated ones. So a plain fixed annuity will give you a certain amount of interest. It's going to be low for a certain amount of time. A fixed indexed annuity is what I use with my clients versus a variable annuity. A variable annuity has nothing but mutual funds that make up that annuity sub accounts. They fluctuate daily with the market and. There are no guarantees with a variable annuity, but there are awfully high costs typically associated with them. And I've seen a lot of them. I moved a lot of money away from a variable annuity into a fixed indexed annuity, typically a 3 to 5% charge annually on those.
Woody Bowling:
So I don't do those. So the fixed indexed annuity is just right know we talk about the Goldilocks thing and the three bears. So, you know, the fixed indexed annuities just right. You get your money is indexed one year at a time. Can be up to two years at a time to a certain index strategy. They're going to measure what that was at the beginning. And then at that point, one year or two years later, and then you're going to get interest credited to your account, principal is protected. The insurance company is required to match whatever you put in in their reserves account. So it's regulated very highly and it's protection with a great potential for growth. And so annuities today are no longer what they were 20, 30 years ago where people had to commit their money for 15 or 20 years. Today, I can go as low as a five year surrender charge period on a fixed indexed annuity, which is phenomenal and still offer a client great growth opportunity and a five year CD is not going to pay. Pardon my french diddly squat language.
Producer:
This language what it is.
Woody Bowling:
It really is. So, you know, with a fixed indexed annuity today, you can look at returns that might be 2 to 3 or four times more than that same five year CDs offering with the same principal protection.
Producer:
Yeah, well, and you know, a lot of famous people have had annuities over the years. And as a matter of fact, our good friend Ford Stokes has written a book called Annuity 360. And one of the chapters from that book actually takes a look at that. Let's listen to it. We'll chat for just a sec on the other side, and then we'll we'll wrap up the show for this week. But here is a bit of Forde Stokes reading Annuity 360.
Ford Stokes:
Chapter three Famous people who invested a significant amount of their hard earned wealth in annuities. Big idea annuities are for everyone. Even if you're not worried about outliving your wealth. Annuities are safer for your money than investing in stocks or bonds or simply not investing at all. Babe Ruth, known as the Sultan of SWAT. Babe Ruth came into his glory days during the Roaring Twenties, and his manager was worried that he was blowing through all of his money without putting any of it away. He introduced Babe to an insurance agent from the Equitable Insurance company, now AXA Equitable. From 1923 to 1929, the slugger contributed more than half of his salary annually, purchasing between 35,050 thousand worth of annuities each year. The Great Depression hit the country hard. In October of 1929. Babe Ruth was forced to retire from baseball in 1935 due to health reasons. He was unemployed during the worst time in history, but Babe Ruth had his income annuity. It's been reported that he received an income of $17,500 a year, which would translate into an annual salary of more than 290,000 in today's dollars. His famous quote still resonates today. He said, I may take risks in life, but I will never risk my money. I use annuities and I never have to worry about my money. Steve Young. Steve Young was signed out of Brigham Young University into a $40 million contract with the USFL. That was the headline. At least in reality, Young was given an annuity that would pay out something like $40 million over the 50 years that followed.
Ford Stokes:
Given the fact that some players were not paid for playing in the final season or other seasons of the USFL, accepting the annuity appears to have been a genius move on the part of either young or his agent. The annuity payments have lasted longer than the league, and it's safe to say that he's made more money than probably anyone else involved with the league. To be fair, it couldn't have happened to a nicer guy. Even with a large signing bonus and salary, he continued to wear old jeans and drive a 19 year old Oldsmobile dynamic. In addition to outlasting the league, that annuity even outlasted the Oldsmobile car company with a staggering number of pro athletes going broke after they retire. It's refreshing to read stories about players who made smart financial choices. Shaquille O'Neal, one player who's used annuities to his advantage, is retired star Shaquille O'Neal. Over his 19 year career, he generated $292 million in total compensation. In retirement, he is projected to make as much as $1,000,000,000 from endorsements, even after his career is long over, thanks to a wise agent who made him put $1 million annually into annuities from his rookie year onward, Shaq lives off the income the annuity generates with his endorsement legacy for his children. Shaq scenario demonstrates how pro athletes and other prodigious earners can protect themselves against their own personal spending errors.
Ford Stokes:
Allen Iverson. Nba player Allen Iverson earned $200 Million during his career. $155 Million in Salary and 40 to $50 Million in Endorsement Deals. Iverson ended up going bankrupt because of his overly lavish lifestyle in a December 2012 court filing. Iverson told the court that his monthly income was $62,500, but his expenses were 360,000. Luckily for Iverson, Reebok saved him from becoming destitute by paying him an annuity worth $2.3 million in 2001. Iverson made a very smart decision that would ultimately save him. He signed a unique endorsement deal with Reebok. Not only will Reebok pay Iverson 800,000 a year for life, they set aside a $32 Million trust fund that he can begin accessing when he turns 55 years old in 2030. Since he divorced his wife in 2013, he will receive half of the trust. Another way that Iverson will be able to protect himself against future bankruptcy is his access to the NBA pension. He is eligible for another 8000 a month. The lump sum of this pension is between 1.5 and $1.8 Million. Most pensions are set up with single premium immediate annuities. Benjamin Franklin. When Benjamin Franklin died, he requested that the 2000 sterling he earned as the governor of Pennsylvania from 1785 to 1788 be divided equally between Boston and Pennsylvania. He wanted the money to be dispersed as a legacy 200 years later in the spring of 1990. The balance in the Philadelphia account was valued at approximately $2 million, and the balance in the Boston Trust was about $4.5 million.
Ford Stokes:
This was sometimes called Franklin's IRA. The money in the Boston Trust was invested using a new take on an old idea the annuity using a tax deferred index variety. The money was able to benefit from exposure to stock market growth without stock market loss. This allowed the trustees of the Franklin Institute in Boston to turn an estimated $4,400 into 4.5 million, even while it was paying out an income for 200 years. Beethoven, the social luminaries of Vienna, wanted to keep Ludwig van Beethoven from leaving their country. And so in 1809, two princes and an Archduke Guarantee the musician a generous annuity. All he had to do was stay in Vienna and compose and perform his music. His benefactors have supposedly been quoted as saying something along the lines of only a man free of worries can create with such genius. Interestingly enough, Vienna also saw its time of economic downturn, and one of the annuities guarantors tried to stop paying Beethoven claiming financial hardship. Beethoven sued one and continued to receive his annuity payments. Perhaps this is what inspired the literary genius of Jane Austen, whose character Fanny observes in sense and sensibility. People always live forever when there is an annuity to be paid, and annuity is serious business. It comes over and over every year and there is no getting rid of it.
Producer:
Well, that was a snippet of Annuity 360 and the famous folks who have had annuities over the years, Woody.
Woody Bowling:
Very, very cool stuff. I just enjoy the heck out of that segment. And, you know, it's a surprise every time I listen to it, so. Good stuff.
Producer:
Yeah, 100%. And folks, also, we should say, if you would like a copy of that book, Woody will send you one. Just go to the Buckeye Advisors dot com that is the Buckeye advisor with an or or you can call Woody at 9379746201. That number once again 9379746201 for a copy of that book, Annuity 360 and a lot of great insights on annuities and what they could potentially do for you as you plan for your retirement. Well, what are just about time for us to wrap up things on the show this week? But I can't believe how how fast time is flown once again.
Woody Bowling:
You know, it just it's amazing each week that we just simply run out of time. And the good news is, is we're going to be back again next week. We've got plenty of more show time for next week. And I can't say how much I'm thankful to you for being here week in week. Out to Sam Davis for his appearances here and there and all the help that you guys do with our show. And I'm thankful for the listeners and all my clients that are listening and all the people that are going to be future clients don't be afraid to reach out because it's not going to hurt. It's not going to cost you anything to sit down and talk with me. And you just may find that we like each other a lot, and we're going to come up with some great strategies to help you be successful.
Producer:
Absolutely. Well, what do you have a great rest of your weekend and I hope that all of our listeners do as well. We will see you right back here next week, folks, for more of the Buckeye Advisor.
Producer:
Thanks for listening to the Buckeye Advisor. You deserve to work with an experienced and licensed expert who will strategically work to protect and grow your hard earned assets to schedule your free no obligation consultation with Woody, visit the Buckeye Advisor dot com or pick up the phone and call 9379746201. That's 9379746201. Investment Advisory Services offered through Brookstone Capital Management LLC, BCM, a registered investment advisor, BCM and the Buckeye Advisor are independent of each other. Insurance products and services are not offered through BCM, but are offered and sold through individually licensed and appointed agents. Investments involve risk and unless otherwise stated, are not guaranteed. Past performance cannot be used as an indicator to determine future results.
Producer:
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.
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