Secure My Retirement Podcast: Where Is My Episode?

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People lose a lot of things. One of the things that people lose a lot of is information. Open up your smartphone, and you’ll be bombarded with info from multiple sources:

  • News outlets
  • Blogs
  • Podcasts
  • Etc.

Well, as we’re moving closer to podcast 200, we’ve realized that our podcast list is massive. Navigating all of these episodes is difficult for us, so it must be extremely difficult for our listeners and readers, too.

We know that we have a ton of resources available, and today, our goal is to help you find the podcasts that you’re most interested in.

Note: We listed some of the most popular episodes, but we’re always expanding our library with new, great content.

Estate Planning:

  • EP 1 – Chess Griffin – How to Know What You Need for Your Estate Plan: Tips and information on how to know when an estate plan is good for you.
  • EP 73 – Chess Griffin – Do You Need a Trust?: Guide on the basics of a trust and what they can do for you.
  • EP 106 – What Should You Consider If Your Spouse Passes Away?: Episode about death. When a spouse dies, life changes and can be uncertain. We discuss this in greater detail.
  • EP 109 – Chess Griffin – Special Needs Trust – What You Need to Know: All about special needs trusts, what they are and how they can help you.
  • EP 135 – How to Create an Estate Plan Without the Stress: Episode on how to create an estate plan the stress-free way.
  • EP 160 – 6 Considerations for Your Estate Plan: A great episode where we discuss all of the things to consider when making an estate plan.

Retirement Planning:

  • EP 8 – Planning for Retirement – How the Process Works – Part 1: 3-part series covering the entire retirement planning process.
  • EP 10 – Planning for Retirement – How the Process Works – Part 2: 3-part series covering the entire retirement planning process.
  • EP 12 – Planning for Retirement – How the Process Works – Part 3: 3-part series covering the entire retirement planning process.
  • EP 18 – How to Build an Income Plan For Retirement: A great episode if you’re worried about running out of money in retirement.
  • EP 22 – Looking at The Whole Picture in Retirement: Episode covering the multiple parts of retirement that go beyond just your total investment portfolio value.
  • EP 44 – How Do IRA and 401K Rollovers Work?: Key episode that walks you through rolling over an IRA or 401K.
  • EP 48 – How Much Do You Need to Retire?: An overview of how much money you need to truly retire.
  • EP 52 – The Retirement Planning Checklist: Complete checklist to have to plan for retirement.
  • EP 58 – Social Security – When is The Right Time?: A guide to knowing when Social Security is the right choice for you.
  • EP 88 – Having a Team Approach in Retirement: Informative episode on why having a team approach makes retirement easier.
  • EP 97 – Social Security Strategies: More key strategies that you can follow when considering taking Social Security.
  • EP 118 – 4 Questions to Help Your Income Plan: Key questions that everyone should ask themselves when trying to create an income plan.
  • EP 157 – The Retirement Bucket Strategy: A key episode on creating a simple, three-bucket strategy that helps you have confidence in your retirement plan.
  • EP 162 – 401k Versus IRA: Episode on removing the mystery of a 401k vs. IRA.

Taxes:

  • EP 13 – Tom Turner – Planning Taxes and Retirement: Insight from Tom on how to plan for taxes and retirement to keep money in your retirement.
  • EP 66 – How To Convert an IRA to a Roth IRA: Guide that talks about converting to a Roth account to let your money grow tax-free.
  • EP 94 – Tax Strategies for Non-IRA Brokerage Accounts: A key episode for someone with a non-IRA brokerage account.
  • EP 124 – IRAs – Required Minimum Distributions: Perfect for those reaching 72 and a half because you’ll need to take distributions.
  • EP 130 – Considerations For Charitable Giving: Are you charitably inclined? If so, this is the episode for you.
  • EP 133 – Steven Jarvis – Tax Planning for Retirement: Steven provides his insights on tax planning and how to plan around retirement.
  • EP 158 – Tax Planning Versus Tax Preparation: Learn the major differences between tax planning and prep and how they benefit you.
  • EP 161 – How Required Minimum and QCDs Work: How to leverage RMDs to contribute to a charity and not pay taxes on distributions.
  • EP 163 – Steven Jarvis – Mid-Year Tax Strategies: Steven is back again with an episode on mid-year tax strategies everyone should consider.

Portfolio Management:

  • EP 16 – Investing During Retirement – Buy and Hold or Active Management?: Learn about buy and hold, why we recommend active management and why buy and hold may not be the best option.
  • EP 19 – Bill Sherman – Buy and Hold is Dead: Bill shares his insights on why the buy and hold strategy is truly dead.
  • EP 56 – Asset Allocation or Strongest Assets: Learn the strongest assets to own and how to allocate them the best.
  • EP 146 – Risk Adjusted Portfolio – How It Works: Risk is scary because no one wants to lose the money they have invested. Learn what a risk-adjusted portfolio is and how it works.
  • EP 150 – What’s The Difference Between a Mutual Fund and an ETF?: Uncover the key differences between a mutual fund and ETF to understand which is better for you.
  • EP 153 – Bonds Versus Bond Alternatives: Bonds are not doing well. Learn about bond alternatives that can help you profile.
  • EP 159 – When Cash Is Good: Should you cash out of the market? Learn when cash is good and why you need to consider it at times.

Annuities:

  • EP 26 – Annuities – Why Ever Use Them: Major series on annuities, part 1 of 8.
  • EP 30 – Annuities – Why Ever Use Them – Part 2: Part 2 of 8.
  • EP 34 – Annuities – Why Ever Use Them – Part 3: Part 3 of 8.
  • EP 38 – Annuities – Why Ever Use Them – Part 4: Part 4 of 8.
  • EP 41 – Annuities – Why Ever Use Them – Part 5: Part 5 of 8.
  • EP 46 – Annuities – Why Ever Use Them – Part 6: Part 6 of 8.
  • EP 47 – Annuities – Why Ever Use Them – Part 7: Part 7 of 8.
  • EP 54 – Annuities – Portfolio Implementation – Part 8: Part 8 of 8.
  • EP 128 – Should I Consider an Annuity in My Financial Plan?: Learn how to structure an annuity into your overall retirement plan if you think an annuity is right for you.

Whew! What a list. And we intend to keep producing great content for our podcast to help you learn how to secure your retirement and reach your financial goals.

Want to talk to us one-on-one?

Click here to schedule a call with us today.

401k Versus IRA: Which is Better for Your Retirement?

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If you’re saving for retirement, you’ll need to know the difference between a 401k versus IRA. You may even have both types of accounts. While trying to secure your retirement, it’s crucial to know what each account type offers you.

We’re going to discuss a few important details of each:

  • What is a 401k?
  • How does a 401k work?
  • What is an IRA?
  • Should I transfer to an IRA?

What is a 401k?

A 401k is an employer-sponsored plan. It’s set up by a business, and you can contribute money to it for your retirement.

What is an IRA?

An IRA is an individual retirement account. Virtually anyone can open this type of account and contribute to it.

Both a 401k and IRA are meant for anyone planning for retirement.

401k Versus IRA

A 401k and IRA have two main types:

  1. Pre-tax, or “traditional” 401k/IRA
  2. Tax-free, or “Roth” 401k/IRA

The main difference between pre-tax and tax-free is that contributing pre-tax has tax benefits. However, when you take a withdrawal in the future, you’ll pay taxes on these withdrawals.

With a Roth account, you pay taxes now and don’t have to pay taxes on withdrawals. Roth accounts allow your money to grow tax-free. Many companies are beginning to offer these types of accounts because they’re advantageous, as their money grows without further tax liability.

Let’s say that you have tax-free investments at 20. You can grow your money for 45+ years tax-free.

Funding a 401k vs IRA

When it comes to a 401k or IRA account, a 401k allows you to fund the account a little more than an IRA. An IRA allows you to contribute $6,000 – $7,000 per year. However, a 401k will enable you to put up around $19,500 per year.

Additionally, a 401k may have an employer contribution or an employer match.

If an employer puts money into your account, you may reach $50,000 a year in contributions in a single year.

Rules for a 401k

A 401k is started by an employer, and they choose:

  • Which brokerage the account is handled in
  • What types of investments are available

Employers make the rules for 401k accounts. It’s crucial to understand that these rules may change or be a bit more specific to the employer. However, the general rules that are followed by most employers include:

  • As long as you’re an employee of the company, you cannot move the money from the 401k to an IRA until you’re 59 and a half. At this point, you can do an in-service rollover. You can choose this option to take full control of your investments.
  • In-service rollovers keep the 401k account open to allow your employer to keep making contributions on your behalf.
  • You do not have to pay taxes when rolling over funds in these accounts because you’re not withdrawing the funds yet.
  • If you’re under 59 and a half and you have a 401k from another employer, you can move the money into an IRA.

One thing we hear a lot is that many people think that their employer negotiates better rates for them for their investment accounts. However, this is not the case. Mutual funds, which most people are investing in with their 401k, charge the fees and don’t lower them for employers.

Your employer may have fees, and the company can absorb these fees, but you wouldn’t have these fees with an IRA.

Quick Note on In-Service Rollovers

An in-service rollover is a simple process and not something that you need to be overly concerned about. The rollover is a basic decision that requires:

  • Advisor calling the 401k
  • Ask the rep for an in-service rollover
  • Walk through steps with the rep
  • Funds are sent to you directly
  • Funds are then deposited into your IRA

You may need to sign a paper every once in a while, and that’s really it. A rollover is straightforward and something that we do all the time.

Rules for an IRA

An IRA is an individual retirement arrangement, which means that as an individual, you’re 100% in control of the account. You can choose what brokerage to open an account with and where you want to invest your money to help it grow.

When you have an IRA, you can invest in:

You don’t lose any benefits when going to an IRA. Most of our clients opt for an IRA because we’re able to direct their investments.

How an Advisor Can Help You with Your Retirement Plan, Even If You’re Younger than 59 and a Half

For a long time, advisors couldn’t really help people who were younger than 59 and a half with their retirement accounts, aside from taking an advisory role. There are a lot of rules and regulations in place that make this process very difficult, specifically with sharing account usernames and passwords. 

Here’s a concept that we’ve been using as an advisor to manage a 401k:

  • You set us up with a login
  • We monitor and make trade allocations for you

We’re able to take a peek at your 401k and the options available to make allocation changes. We’re not granted the power to change contribution amounts or anything of that sort. These accounts are an overlay of your account that allows financial advisors to make trades on your behalf.

Our clients love the 401k option that allows us to manage a 401k on your behalf.

Moving from a 401k to an IRA is often ideal for clients, but you may find the tax advantages of a 401k to be the better option for you. The tax advantages include being able to deduct contributions from your current year’s taxes, but when your money grows, it will be taxed, which is something to consider.

If you’re trying to secure your retirement and aren’t an expert in retirement planning, we can help. We have a wealth of information available for free on our podcast (sign up here), or you can feel free to schedule a call with us.

June 6, 2022 Weekly Update

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We do love it when someone refers a family member or friend to us.  Sometimes the question is, “How can we introduce them to you?”   Well, there are multiple ways but a very easy way is to simply forward them a link to this webpage.

Here are this week’s items:

Portfolio Update:  Murs and I have recorded our portfolio update for June 6, 2022 

CLICK HERE TO WATCH THE UPDATE

This Weeks Podcast -How Required Minimum Distributions and QCDs Work?–

When it comes to taking your money out of your IRAs and 401ks after retirement age, you might need to understand the terms RMDs and QCDs.

At age 72, you’re required to start taking distributions out of your 401k and IRAs with a formula based on your life expectancy. The key here is to be tax-efficient or even go tax-free in any way you can without breaking the law.

CLICK HERE TO LISTEN TO THE PODCAST

 

CLICK HERE TO WATCH ON YOUTUBE

This Weeks Blog –How Required Minimum Distributions and QCDs Work?–

It’s important to understand how required minimum distributions and qualified charitable distributions work, even if you’re under 72. We’re going to discuss a strategy that is crucial to you, even before you can begin taking your RMDs.

CLICK HERE TO READ THE BLOG

How Do Required Minimum Distributions and QCDs Work?

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Today we’re going to discuss two main, important aspects when trying to secure your retirement: RMDs and QCDs. But before we go any further, it’s important to define these acronyms for you:

  • RMDs: Required minimum distributions
  • QCDs: Qualified charitable distributions

It’s important to understand how required minimum distributions and qualified charitable distributions work, even if you’re under 72. We’re going to discuss a strategy that is crucial to you, even before you can begin taking your RMDs.

So, if you’re under 72 and don’t think this post is for you, trust us: it is.

Understanding Required Minimum Distributions

RMDs are attached to your 401(k), traditional IRA and other retirement accounts that are out there. If you have an account where you defer taxes until the future, the IRS requires you to take money out of these accounts and pay your taxes.

When you place money into these accounts, the deal is, “I don’t want to pay taxes now, but I will later.”

At age 72, you’re required to begin taking RMDs out of these retirement accounts, using a formula that is based on your life expectancy. These figures are generalized, and right now, at age 72, you have a life expectancy of 27.4 more years.

Using your balance from December 31 of the year prior to taking the distribution, you would do the following:

  • Balance / 27.4 = RMD

For example, let’s assume that your IRA had a balance of $500,000 on December 31, 2021. When you take the distribution in 2022, you’ll receive $500,000/27.4 = $18,248.18. However, you may not need to take your distribution at 72.

When you turn 72, you’re required to take a distribution for the year. So, for example, if your birthday is in November, you’ll still take the distribution in January of that year.

However, on your first RMD, you can decide to take the RMD in the next calendar year by April 1.

Delaying Your First RMD Until April 1

If you want to delay your first RMD, normally for tax reasons, there are some pros and cons that go along with it. For example, let’s assume that you must take an RMD in 2022, but because you turn 72 this year, you decide to take your first RMD by April 1, 2023.

In the 2023 calendar year, you’ll take two RMDs of:

  • approximately $18,248.18
  • approximately $18,248.18

After this period, all RMDs must be taken by December 31 of the calendar year.

You can also withhold taxes from your RMDs, so you won’t need to worry about:

  • Quarterly payments
  • Surprise tax bills

However, it’s up to you to decide whether you want to pay taxes quarterly or not. You can also opt to take a monthly distribution from your account. The main goal is to take out the full amount required by the end of the year.

Custodians of your account will take care of the calculations on your RMD amount, so we suggest following the amount they recommend for distributions.

If you’re 65 and retired, you can still take money out of your account for:

  • Living expenses
  • Placing funds into a Roth account
  • Lowering your future RMDs

When clients opt for this strategy, they can grow the money in their Roth accounts tax-free, which is very beneficial.

Sometimes, people have five different IRA accounts with $100,000. You can take the RMD from a single account. The IRS doesn’t care as long as you take the money out of the account. However, if you have a 401(K) and 4 IRAs, you need to take the portion out of the 401(K) and then the remaining from your IRA.

When retirement planning and trying to secure your retirement, you’ll find a lot of buzz around RMDs and QCDs.

Why?

Let’s find out.

Understanding Qualified Charitable Distribution

QCDs are another tool that you can use in retirement planning, and it’s one that the IRS allows you to begin using at 70 ½. If you want to give money to a charity that qualifies for a QCD, you can donate a portion or all of the RMD to the QCD.

Many people will take the RMD, pay taxes, and then give the money to charity.

However, with a QCD, you can:

  • Skip paying taxes
  • Setup a QCD directly to the charity

Since the check goes directly to the charity, you’re erasing the taxes on the distribution and helping a charity with the full amount of the RMD.

You can begin using the QCD strategy at the age of 70 ½ and above.

If you’re interested in QCDs and RMDs but have more questions, we’re more than happy to help. You can schedule a call with us.

We also have two great courses that you can sign up for today for free: 4 Steps to Secure Your Retirement and 3 Keys to Secure Your Retirement Master Class.

May 31, 2022 Weekly Update

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We do love it when someone refers a family member or friend to us.  Sometimes the question is, “How can we introduce them to you?”   Well, there are multiple ways but a very easy way is to simply forward them a link to this webpage.

Here are this week’s items:

Portfolio Update:  Murs and I have recorded our portfolio update for May 31, 2022 

CLICK HERE TO WATCH THE UPDATE

This Weeks Podcast -6 Considerations for Your Estate Plan–

When it comes to estate planning, some things are essential and required at all times to simplify the process for your family when you’re no longer here.

Learn the purpose of having the durable and healthcare power of attorneys to make things simpler for your family in case you become incapacitated.

CLICK HERE TO LISTEN TO THE PODCAST

 

CLICK HERE TO WATCH ON YOUTUBE

This Weeks Blog –6 Considerations for Your Estate Plan–

Have you thought about your estate plan? If not, it’s a crucial element of retirement planning because it dictates how you’ll save and plan for the future. And even if you already have an estate plan in place, it can and will adapt and change over time.

CLICK HERE TO READ THE BLOG

6 Considerations for Your Estate Plan

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Have you thought about your estate plan? If not, it’s a crucial element of retirement planning because it dictates how you’ll save and plan for the future. And even if you already have an estate plan in place, it can and will adapt and change over time.

In our most recent podcast, we walk you through six things to consider for your estate plan.

If you’re thinking, “I don’t need an estate plan,” you do. In fact, creating an estate plan is something that we recommend for all of our clients because they’ve worked hard during their lives and should have a say as to what happens to their estate when they pass on.

The six things that we recommend you consider for your estate plan are:

6 Considerations for Your Estate Plan

1. Will

Everyone needs a will, but why? A personal story I remember from school is that the #1 thing to do is to have a will. They drilled it into our heads that everyone needs a will. Why?

  • Wills dictate who gets what in an estate.
  • Wills dictate how assets get into someone else’s name.

In a will, you outline how your heirs will receive your assets and who gets what. If you don’t have a will, the courts will decide who gets what assets and how they receive them. Without a will, your assets may go to someone you don’t want.

Additionally, in 30 minutes or so, we can have most questions answered that populate your will and make your death much easier on your estate. Without a will, you’ll leave a mess for your estate and family that you leave behind.

2. Healthcare Power of Attorney

A power of attorney (POA) is someone who has the power over decisions. A healthcare POA can make decisions on your behalf while you’re alive. The individual steps in to make decisions for you if you’re unable to make them yourself.

For example, if you’re in a coma, this person could dictate your healthcare.

When you create a healthcare power of attorney, you can outline:

  • What care you would like
  • What care you reject
  • How someone can make decisions on your behalf

No one wants to be left with a decision that can impact their loved one’s life. When creating this document, you outline the care you would like and not like. Perhaps you don’t want to be on life support.

If you put in this document that you don’t want to be on life support, you’re saving someone else a lot of heartache because you’ve made the decision yourself.

It’s crucial to remember that a healthcare POA only allows the person to decide if you cannot make the choice for yourself. A stroke or brain damage are just two times when the person given power of attorney can step in and make decisions for you.

Everyone, even if you’re just turning 18, should have a healthcare POA because you just never know what the future holds.

3. Durable Power of Attorney

A durable power of attorney involves decisions outside of healthcare, such as:

  • Accessing retirement accounts
  • Writing checks for you
  • Controlling your finances and assets

The individual is acting in your interest, and you can outline how this individual may act. Perhaps you don’t want them to have the power to take money out of a retirement account.

If you have an IRA, you need to have a durable power of attorney in place. Why? An IRA is an individually held account. Your spouse has no right to access these accounts, even if you have a stroke and cannot access them yourself.

Instead, many IRAs will require you to have a durable power of attorney with them so that they can allow your spouse to access these funds.

4. HIPAA Form

HIPPA forms are for medical purposes, and they augment the healthcare power of attorney. The form allows access to your medical records. If you have a spouse or a child who needs access to your medical information, a HIPPA form is crucial.

Once your child turns 18, the hospital will not share your child’s medical information with you.

Filling out a HIPAA form allows someone access to your medical records so that they can know the status of your condition and how to make the best decisions on your behalf.

5. IRA/401(k) Beneficiaries

Your IRA and 401(k) have beneficiary forms that you ought to review annually. These beneficiaries are who will receive your assets upon your demise. Often, a person assumes that their will dictates who receives the assets.

However, there are more costs involved with a will than if you just added a beneficiary to your accounts.

Also, you can add:

  • Primary beneficiaries
  • Primary contingent beneficiaries
  • Secondary contingent beneficiaries

In this case, the funds go to the primary beneficiaries if they’re alive, then the contingent beneficiaries and then the secondary contingent beneficiaries if the other beneficiaries are no longer alive.

You can also add a charity or other entity as a beneficiary.

We recommend filling out a person’s full information, Social Security number and so forth. You can also leave money to a person, and if they’re no longer living, it will go to their heirs instead. Adding beneficiaries makes transferring these accounts much easier when you pass on.

6. Transfer on Death Brokerage and Bank Accounts

First, there are two types of accounts. Joint accounts are the easiest because if you have a joint account with someone and you die, the account becomes 100% their account. However, what happens if:

  • Both of you die at the same time?
  • You don’t have a person to have a joint account with?

A transfer on death or beneficiary is the easiest way to transfer these assets from your account to your heirs. Otherwise, the assets will be divided by the courts, which can take time and money in many cases.

Filling out a transfer on death makes it super simple for the person inheriting the account because they only need to fill out a form and supply your death certificate to receive the funds.

Yes, you can create your estate plan and add in a trust, but a trust is not an essential item of every estate plan. However, these six items above are the six that we believe are essential to an estate plan and must be included in every plan.

If you would like to learn more about estate plans, schedule a call with us today.

Don’t need help with an estate plan and want to begin securing your retirement? Sign up for our four-step course on securing your retirement.

May 16, 2022 Weekly Update

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We do love it when someone refers a family member or friend to us.  Sometimes the question is, “How can we introduce them to you?”   Well, there are multiple ways but a very easy way is to simply forward them a link to this webpage.

Here are this week’s items:

Portfolio Update:  Murs and I have recorded our portfolio update for May 16, 2022 

CLICK HERE TO WATCH THE UPDATE

This Weeks Podcast –Tax Planning Versus Tax Preparation-

Did you know that you can legally and ethically avoid paying unnecessary taxes by working with the tax code? With tax planning, you can avoid tax risk.

Tax preparation is about being reactive while tax planning is about being proactive all year round every single year.

CLICK HERE TO LISTEN TO THE PODCAST

 

CLICK HERE TO WATCH ON YOUTUBE

This Weeks Blog –Tax Planning Versus Tax Preparation–

One thing that most people are concerned about is their taxes. People work hard for their money and want to keep as much of it in their pockets as possible. However, taxes come along and take a major chunk of your earnings.

CLICK HERE TO READ THE BLOG

Tax Planning Versus Tax Preparation

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One thing that most people are concerned about is their taxes. People work hard for their money and want to keep as much of it in their pockets as possible. However, taxes come along and take a major chunk of your earnings.

Today, we’re going to discuss tax planning versus tax preparation.

Why?

They’re often lumped into the same definition, although they’re two completely different things. Tax preparation is when you put all of your numbers on a tax form or add it into TurboTax or something similar, and you pay the amount you owe to the IRS.

However, if you’re in retirement and on a strict budget, tax planning works to save you money on the taxes you need to pay.

We recommend tax planning for everyone because it saves you a lot of money.

Tax Preparation Basics

When you have your taxes prepared, it goes something like this:

  • You file your own taxes, use software or hire a CPA
  • Based on the calculations, you pay the taxes for the previous year

In 2022, you’re paying your 2021 taxes. All of the preparation happens the following year after the money is earned, and there’s no real planning involved.

This is where tax planning could have helped.

How Tax Planning Differs

Tax planning happens for the tax year. For example, if you want to save money on your taxes when you file in 2022, planning needs to occur in 2022, not 2023. Tax planning is a proactive approach taken during the year to reduce taxes.

Otherwise, there are only so many ways to reduce your tax burden in April if you didn’t plan for it throughout the year.

For example, let’s assume that you made a ton of money in 2022, received a great bonus and will need to pay a lot of money in taxes. If you engage in tax planning, you may be able to reduce your taxes when you file in 2023 by:

  • Using charitable contributions
  • Roth conversions
  • Etc.

And if done correctly, tax planning can be done over the course of years to reduce your taxes drastically.

Tax Planning Strategies to Save You Money

Reduce Taxes on Social Security

Many people entering retirement don’t understand that they have to pay taxes on their Social Security income. While there are some exceptions to this rule, many of you reading this will still need to pay money to the IRS based on the benefits you receive.

If you make an income in retirement, somewhere around $40,000 for a married couple filing jointly, you will have to pay taxes on up to 85% of your Social Security benefits.

Tax planning can help you reduce your tax burden.

Let’s step back for a moment and consider how people plan for retirement. Many people save for retirement using:

  • 401(k)
  • Traditional IRA

Using these accounts, people plan to supplement their Social Security benefits. However, when you paid into these accounts, you didn’t pay any taxes. You’ll now need to pay taxes when you withdraw from these accounts.

Let’s assume that you take $30,000 out of the IRA per year to supplement your income.

Now, you have $30,000 of income that is taxable and $40,000 in Social Security benefits. Since you “earned” an income from these retirement accounts, you’ll need to pay higher taxes. Utilizing the right strategy, you can move money out of these tax-deferred accounts into accounts where you pay taxes first, but when you make withdrawals in the future, you don’t have to claim the income.

If all you have in income is your Social Security, you’ll:

  • Pay less in taxes
  • Pay less in Medicare premiums

However, tax planning in this scenario needs to take place 5 or 6 years before you plan to retire.

Roth Conversions to Reduce Taxes

Roth conversions are one of the best ways to get your tax-deferred money out of your 401(k) and Traditional IRA and into an account that allows you to have income in retirement but not pay taxes on it.

In fact, using this strategy, most of our clients earn the same or even a higher income in retirement than when working.

But here’s the problem.

  • Tax-deferred accounts mean you pay less taxes now and more taxes when you make withdrawals
  • People assume that when they’re in retirement, their income will be lower, so they’ll pay less taxes
  • Based on this assumption, people think a tax-deferred account is the best option to pay less taxes

The problem is we’re seeing people earn more in retirement than when they’re working, causing them to pay higher taxes because they’re in a higher tax bracket.

And you have to start taking a required minimum distribution (RMD) at 72 and a half due to tax laws. 

Instead, a Roth conversion works like this:

  • Roll pre-taxed money into a taxed account
  • Convert money into a tax-free bucket
  • Reduce your long-term taxes

Let’s assume that you have $1 million in a tax-deferred account. When you convert to a Roth account, you’ll pay taxes on the $1 million. However, the money can now grow tax-free, meaning as the account grows, you don’t have to worry about taxes.

We know that if tax laws do not change, everyone is going to pay higher taxes in 2026.

If you convert to a Roth account, you’ll pay taxes today and avoid the higher taxes that are coming in just a few years.

Tax planning helps you account for all of these factors, save money when you’re in retirement, and have a lot less to worry about as a result. Tax-free buckets are ideal for everyone planning to retire because your money can grow tax-free.

And we have one last tax planning strategy that we must discuss: planning for your surviving spouse.

Planning for Your Surviving Spouse

In 99.99% of marriages, someone is going to outlive their spouse. Of course, there are the rare occasions when spouses pass on the same day, but this often involves a very tragic occurrence. Tax planning for your surviving spouse is not something many people want to think about, but it’s a way to ensure your spouse is financially stable when you’re no longer here.

When you pass, your spouse needs to file as a single person, and this does a few things:

  • Increases tax burden
  • Reduces standard deductions

Setting up a tax-friendly account for your spouse is the best option if you don’t want to transfer money to the IRS. Planning ahead allows you to save your spouse money on taxes and ensure that they have the income necessary to live comfortably after you’re gone.

Work with a CPA or us (click here to book a conversation) to start working through in-depth tax planning to save you and your spouse money on their taxes.

One last thing before you go:

Click here to subscribe to our Secure Your Retirement podcast for more great information on retirement and tax planning.

May 9, 2022 Weekly Update

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We do love it when someone refers a family member or friend to us.  Sometimes the question is, “How can we introduce them to you?”   Well, there are multiple ways but a very easy way is to simply forward them a link to this webpage.

Here are this week’s items:

Portfolio Update:  Murs and I have recorded our portfolio update for May 9, 2022 

CLICK HERE TO WATCH THE UPDATE

This Weeks Podcast –The Retirement Bucket Strategy-

Have you given thought to how you’d like to structure your retirement plan? How about a strategy that ensures you have both income and growth in retirement?

The bucket strategy is a simple strategy that will give you peace of mind through your retirement. The goal for your retirement should be to have access to money, an income stream, and growth on your money.

  

CLICK HERE TO LISTEN TO THE PODCAST

 

CLICK HERE TO WATCH ON YOUTUBE

This Weeks Blog –The Retirement Bucket Strategy–

Structuring your retirement plan is key if you want to secure your retirement. If you’re younger and still earning a healthy income, your goal is likely to have more risk. However, if you’ve been retirement planning and are just a few years away from finally reaching your milestone, your plan’s structure will be different.

CLICK HERE TO READ THE BLOG

The Retirement Bucket Strategy

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Structuring your retirement plan is key if you want to secure your retirement. If you’re younger and still earning a healthy income, your goal is likely to have more risk. However, if you’ve been retirement planning and are just a few years away from finally reaching your milestone, your plan’s structure will be different.

One thing we talk about a lot on our podcast is buckets, and today, we really want to go more in-depth on the retirement bucket strategy and how it works.

Here is the strategy we use to:

  • Build wealth
  • Generate income

And the retirement bucket strategy is simple. In the next few minutes, you can learn how to use the same strategy we use to be comfortable in retirement.

How Do I Structure Everything I Have in Retirement?

If you’ve been putting money aside for retirement and making your money work for you, you will come to a point where you need to structure your accounts differently. Structure provides security, emergency money, income, and growth.

When people are working, they generate income and it’s easier to put money away.

However, when you retire, you flip a switch and then must use the money you saved to generate an income. Stopping work is a major shock for most people, and the vast majority are often concerned about whether they have enough.

Whether clients have $1 million or $10 million in their retirement accounts, they’re always concerned that they’ll run out of money. Many people rely on the growth of 7% to 10% in the market, and then when you have the Ukraine / Russia war and pandemic, anxiety sets in due to market volatility.

The retirement bucket strategy helps you structure your retirement in such a way that you don’t have to rely 100% on volatile markets.

Introducing the Retirement Bucket Strategy

Our bucket strategy has three main buckets, each with its own roles and purposes.

Bucket 1: Liquid Cash

You can view liquid cash as sort of an emergency fund or a feel-good fund. Many clients have this cash tucked away, often in an FDIC-protected bank account, for when any of life’s unexpected events that pop up.

Bucket 2: Income

You rely on the income bucket to generate income now that you’re no longer part of the workforce. Many people have the following in this bucket:

Income buckets often do not generate enough income for all your needs and wants if they only include Social Security and pension. However, when appropriately structured, these buckets do generate nice income streams that allow you to pay your bills.

Income Buckets Disconnect from Markets

Your income bucket is crucial to your survival. If you’ve been looking into retirement for a long time, you may have heard of the 4% rule. The rule states that you can take 4% out of your retirement each year because it will be made back up with market gains.

However, let’s assume the following:

  • $1 million in retirement funds
  • 4%, or $40,000, taken out of these accounts to live each year
  • Market slump cuts retirement down to $600,000

In the above scenario, when the market fluctuates and you’re using the 4% rule, you’ll either must live on $24,000 a year or take out 7% that year to live.

These risks are far too great when you’re not in the workforce or generating income. Instead, we recommend all the accounts in your income bucket be 100% detached from the markets so that you can be confident that you have the money each month to pay for your necessities.

Bucket 3: Growth

A growth bucket is designed to help you grow your retirement over time. These buckets have risk and volatility. In many cases, the growth bucket is a long-term bucket that often includes investing in the market.

Retirement Bucket Strategy in Practice

After structuring these buckets, let’s assume that you have:

  • $1 million in retirement accounts
  • Social Security/pension
  • Need an additional $2,500 a month in income

In this case, we may recommend the following retirement bucket strategy:

  • Put $50,000 in your liquid cash bucket that’s easily accessible
  • $450,000 goes into your income bucket
  • $500,000 into your growth bucket

With this structure, we can run some modest numbers here and see how all of this works out in the long term. In your income bucket, let’s assume that you want a 3% rate of return on your $450,000, and this would generate $2,500 a month for you for 20 years before the money in this account runs out.

At the end of 20 years, the bucket is eliminated if the rate of return is just 3% per year.

Now, during this 20-year period, you’ve had your $500,000 growing at a very conservative rate of 6%. The growth bucket would have $1.7 million in it if you didn’t touch it at all.

If you retired at 65 (you’re now aged 85), you would have $1.7 million left in your growth bucket to do a few things. Ideally, you’ll place some of this money into your income bucket to help fund your lifestyle for the next 10 – 15 years – easily.

The retirement bucket strategy makes it simple and easy to retire with peace of mind.

If you want peace of mind, this simple strategy can provide it. Of course, we are always here to help you with an individualized retirement plan that better fits your needs.

Click here to start our 3 Keys to Secure Your Retirement Master Class.

May 2, 2022 Weekly Update

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We do love it when someone refers a family member or friend to us.  Sometimes the question is, “How can we introduce them to you?”   Well, there are multiple ways but a very easy way is to simply forward them a link to this webpage.

Here are this week’s items:

Portfolio Update:  Murs and I have recorded our portfolio update for May 2, 2022 

CLICK HERE TO WATCH THE UPDATE

This Weeks Podcast –Lynne Bowman – Brownies for Breakfast-

How conscious are you about what you eat? Your health is indeed your wealth; staying healthy is one of the best financial strategies you can have.

Eating for health and wealth means eliminating sugar and bad ingredients from your diet and choosing to eat whole plant-based foods.  

CLICK HERE TO LISTEN TO THE PODCAST

 

CLICK HERE TO WATCH ON YOUTUBE

This Weeks Blog –Enjoying a Healthy Retirement-

After all, once you secure your retirement, you want to live as long as you can in optimal health. If you want to change your health drastically, one of the things that you can begin doing right now is to stop………..

CLICK HERE TO READ THE BLOG

Enjoying a Healthy Retirement

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We were very excited to speak to Lynne Bowman, author of Brownies for Breakfast: A Cookbook for Diabetics and the People Who Love Them, on our latest podcast. And today’s article and podcast are all about how to have a healthy retirement and life as healthy of a lifestyle as you can.

After all, once you secure your retirement, you want to live as long as you can in optimal health.

Who is Lynne Bowman and What is Her Mission?

Lynne Bowman is the glam grandma who knows how to get you to eat your veggies. Many people don’t understand the connection between health and wealth, and Lynne’s mission is to get you to eat your veggies.

As a Type II diabetic, she has been trying to stay on her feet and stay healthy since the 80s.

Lynne is a young 76, and she loves bringing the security of good health and money to people. After all, over 70% of people go bankrupt because of medical bills. 

Lynne wants to keep people on their feet:

  • Longer
  • Better
  • Stronger

Today, she shares her insights on what really works when you incorporate good habits into your life. Her new book, Brownies for Breakfast, sheds light on the emotional relationship with food and how to break free from bad habits and stay healthy.

Of course, there’s also a community that brings a healthier, happier life, too.

Who are you eating with? Are you eating in your car? Are you rushing from restaurant to restaurant? All your answers here have a direct impact on your health.

Lynne is going to share some advice that she’s learned firsthand through her own experiences with you today.

Lynne’s Most Surprising Advice for Our Audience

This tip, as Lynne warns us, is starting to become more mainstream, but it’s still a shock to a lot of people. One of the most important things that you can do for your health is not to eat so often.

If you want to change your health drastically, one of the things that you can begin doing right now is to stop eating all the time.

Eating in shorter-hour windows, ideally in the middle of the day and stopping eating at night, is an excellent way to start. And this isn’t just some new fad. Autophagy, or the way that your body cleans damaged cells and regenerates new ones, has shown that this way of eating can be very beneficial.

If you’re continually eating, it doesn’t allow the body to clear out these bad cells.

And since your body does most of the cleansing process when you sleep, eating late at night never allows your body to get rid of the bad cells that lead to health issues. A few things to keep in mind are:

  • Sleep is crucial to great health
  • Most of the body’s cleansing occurs when you sleep
  • You can’t fall into a deep sleep with a full stomach

Even if you fall asleep immediately after a big meal and feel great when you wake up, your body devotes more energy to digestion and less to cleansing, cell regeneration and repair. There’s also a major role of sleep in cognitive function, which everyone should worry about as they age.

Lynne recommends that you experiment with the way you eat because you’re the only one that will 100% cooperate with your plan.

What’s the Overwhelming Premise of What to Do and What to Avoid?

Lynne has a lot to share with us, and we asked her to tell us:

  • What are the things you should be doing?
  • What should you avoid to maximize your health? 

What Lynne Recommends Doing

  • Eat whole foods
  • Go plant-based

She recommends eating plant-based foods and avoiding processed foods. If you’re going to eat meat, avoid factory farming. You want high-quality meat from animals that are happy and healthy.

Of course, many people can’t imagine not eating meat, and if you fall into this category, just be smart with the meat choices you make.

What Lynne Recommends Against

Sugar. If you just cut sugar out of your diet, you’re going to eliminate so many bad food items. Reading labels is crucial to avoiding sugar, and then you’ll realize that almost everything you find in the food store in a box has sugar added.

And sugar is addicting. In fact, it’s more addicting than heroin and other opioids. You’ll also experience withdrawal and depression when you stop eating it.

Now, maybe you’re thinking: well, I’ll just cut back on sugar. Would you recommend someone just cut back on hard narcotics? No. It doesn’t work.

If you cut all sugar for two to three weeks, you’ll start noticing just how good you feel.

Brownies for Breakfast covers excellent recipes that don’t include sugar. You can still enjoy great-tasting foods without even realizing that there’s no sugar included in the recipe.

Best Exercises to Complement a Better Diet for People 55 and Older

Lynne recommends walking – often. She recommends walking anywhere you can and as often as you can. Humans are meant to walk, and this helps with:

  • Circulation
  • Weight management
  • Strength
  • Endurance

Additionally, she works out three times a week with a few gals around her age. She does TRX and Pilates, but she also does a lot of stretching. You benefit from seeing your friends and socializing, which is huge for your health.

People who are completely alone often aren’t in optimal health.

You can also join walking and hiking groups.

However, the truth is that you need to get moving. You can join dancing classes, go to a gym if you like, walk your dog a lot or engage in other activities that get you moving.

Starting Grandkids Off on Eating Their Veggies When They’re Young

Kids learn very young, and if you can do these two things, kids will eat veggies:

  • Get your kids cooking because they’ll eat what they cook
  • Get your kids in the garden growing food because they’ll eat it

If you make eating fun and get your kids involved in the cooking process, you’ll find that kids will eat their veggies.

Also, when they’re old enough, get your grandkids reading labels when they go to the store. Kids love sweets, but when you explain the dangers of sugar and processed foods and then back this up with growing and eating whole, natural foods, they’ll learn to eat better at a much younger age.

Anyone wanting to learn more about Lynne can visit her website at LynneBowman.com.

If you’re in the midst of retirement planning and need a little help, sign up for our free course: 4 Steps to Secure Your Retirement Video Course.

Social Security Questions Answered

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Social Security is such a key part of retirement planning, but people have a lot of questions that they never ask about. If you’re relying on Social Security to secure your retirement, you must know the answers to some key questions.

Don’t know what questions to ask?

We have you covered. We’ll be discussing the most important questions you should be asking about Social Security.

Top Social Security Questions and Answers

How Do I Find Out How Much My Social Security Benefits Will Be?

Determining your Social Security benefits was, at one time, much easier. Many people probably remember the time when paper statements were sent to you in the mail explaining just how much your benefits would be if you retired now or in the future.

However, the Social Security Administration wants to save money and encourage people to use its website. As a result, you won’t receive these paper statements in the mail anymore.

Instead, you’ll want to go to:

We can run estimates to determine your benefits, but the only 100% accurate solution to find out about your Social Security benefits is to go straight to the Social Security Administration.

You can view how much you’ll have in benefits if you retire now or in the future. Additionally, you can apply for benefits right on the platform if you like. You should sign up about three months before you plan to take your benefits just to be on the safe side.

Bonus Question: What about spousal benefits and Social Security?

Individuals have two options for Social Security:

  1. Their own benefit
  2. Their spouse’s benefit

Why would you want to take your spousal benefits? Typically, one spouse works more than the other spouse or earns more than their spouse and can take higher benefits. Ultimately, most people want to maximize their benefits, so they’ll only take their benefit if it’s the higher of the two amounts.

Let’s see a few examples of this:

  • One spouse goes to work, and the other raises the kids. If you’re married for 10 or more years, your spouse can take your spousal benefits.
  • Both spouses are the same age (just to make this easy), and they’re 67 years old.
  • The working spouse has $3,000 a month in Social Security benefits.
  • The non-working spouse, who didn’t get to work and earn credits, may have a $1,000 benefit.
  • You can take your $1,000 benefits, or you can take half of your spouse’s benefit.
  • So, based on this, the non-working spouse will want to take spousal benefits because they’re $1,500 a month versus their own $1,000 a month.
  • In total, the couple would have $4,500 a month in Social Security benefits.

However, if the working spouse is 67 and the non-working spouse is 65, the math is a little different. If the spouse who didn’t go to work applies at 65, they’re applying early and will have the benefit cut down to $1,350 or a figure around this amount.

What is the Youngest That You Can Take Social Security?

Barring any disability or any other issues, you can retire at 62. However, the earlier that you take your benefit, the lower your benefits will be. Benefit increases will end at 70, so there’s no reason to wait longer to take your benefits.

If you take in around $20,000 or more a year, you are penalized for taking your benefits before full retirement.

If you don’t understand your benefits or want advice on the best way to maximize your benefits, schedule a call with us today.

How is Social Security Taxed?

Many people get upset that they have to pay taxes on their Social Security. For many of our clients, it’s a sore spot and a major topic of discussion. However, under current law, you may have to pay taxes on your benefits.

Married and Filing Jointly

Unless you have less than $32,000 in income, you’ll have to pay taxes on your benefits. 

$32,000 and $44,000 in Income

If your adjusted gross income falls into this range, you’ll pay taxes on up to 50% of your Social Security. For example, if your benefits are $3,000 a month, you’ll pay taxes on $1,500.

$44,001 and Higher

If you earn over $44,000 in adjusted gross income, you’ll pay taxes on 85% of your benefits. 

Single Filers

If you’re single, you’ll pay taxes on 50% of your benefits if you earn $25,000 or more. And if you earn over $34,000, 85% of your benefits are taxable.

Unfortunately, you’ll be taxed on Social Security in most cases. We recommend working with a financial planner to help you determine when to take your benefits and how to minimize your tax burden through strategic tax planning.

When Should I Take Social Security?

If you go to Google, you’ll find most people saying to take Social Security at 70. You’ll maximize your benefits by waiting, yet every family and situation is different. When we work through a person’s retirement plan, we evaluate:

  • Income
  • Assets
  • Health
  • Expected lifespan

When income is not coming from Social Security, it often comes from assets or retirement accounts. The impact on your retirement may not be much, but if you want to leave as many assets as possible to the next generation, your choice may be different than someone who doesn’t mind leaving a little less to your estate.

There are so many factors to consider aside from maximizing your Social Security by waiting until 70 to start taking it.

For example, if you have more than enough assets or you may only live to 75, taking Social Security earlier may be in your best interest. You need to consider your choice carefully to make the right financial decision for you and your family.

Do you want to skip the reading and listen to us talk about great topics, such as Social Security, financial planning, ways to secure your retirement and more?

Sign up for our podcast today, where we have great weekly discussions on the topics above and more.

5 Medicare Mistakes to Avoid

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Medicare is crucial when trying to secure your retirement because private health insurance is very expensive. And if you’re in retirement without any form of insurance, you’re one medical emergency away from depleting your funds.

We had the pleasure of speaking to Roderick Spann of Senior Advisors and discussed five Medicare mistakes to avoid so that you can enjoy a worry-free retirement.

5 Most Common Medicare Mistakes to Avoid

1. Not Enrolling in Part B Under the Right Circumstances

Medicare has what is considered an “initial” enrollment period. This enrollment period revolves around a person’s 65th birthday. The period is valid during the following time periods:

  • Three months before turning 65
  • The month of turning 65
  • Three months after turning 65

Generally, a person will enroll in the three months before they turn 65 so that Medicare begins on the first of the month that they turn 65.

If you have an employer with over 20 employees, you can remain on their group plan and not go on Medicare Part B. However, if your employer has fewer than 20 employees or you’re no longer employed, you need to enroll in Part B.

It’s crucial to enroll in Part B because it is the medical insurance portion of Medicare. Essentially, Part B covers any medical care outside of the hospital. Part A only covers your in-hospital care.

Part B covers your:

  • Outpatient surgery
  • Doctors
  • X-rays
  • CAT scans
  • Etc.

Ideally, if you need to enroll in Medicare, do it at the beginning of the initial three-month period. Delays can lead to penalties, and you never know what may go wrong during the initial enrollment that must be rectified.

2. Ignoring Medicare Part D

Medicare has a lot of parts. For example, let’s say that you get sick, visit the doctor and are prescribed medication. Parts A and B of Medicare will not cover prescriptions. Instead, you’ll need to have Part D, which offers you drug coverage.

Part D prescription plans are all very different, and there are 25 – 30 of these plans available. Many people choose a plan recommended by a friend or coworker, but this is a bad idea because you may need specific coverage not offered in the plan.

Plans have different:

  • Co-pays
  • Premiums
  • Etc.

If you’re not analyzing your prescription drug coverage when choosing a plan, you can spend thousands of dollars more than necessary. For example, plans have preferred pharmacies that offer the best prices and coverage. If you don’t go to this pharmacy because it’s too far away, you may spend thousands of dollars more per year than you would on a different plan.

Analyzing your prescription drug coverage is crucial when opting into Part D.

3. Not Understanding Medicare Advantage vs. Medigap Coverage

Unfortunately, navigating Medicare is complex. Just when you think you have all the coverage you’ll possibly need, you’re presented with options for Medicare Advantage or Medigap coverage.

And these plans are worth considering because they offer additional coverage.

Before going into these coverages, let’s backtrack and discuss original Medicare.

Original Medicare

Original Medicare is your Part A and B coverage. Under these plans, just 80% of medically necessary services are covered. You’re responsible for an unlimited 20% of coverage.

So, what can you do?

Enroll in a Medicare Supplement or Medigap plan. These two plans do exactly what they sound like: fill the gap in original Medicare. However, Medicare Advantage is Different.

Understanding Medicare Advantage

Medicare Advantage works differently from Medigap and Medicare Supplement plans. You’ll move from original Medicare to private insurance under Medicare Advantage. The main difference here is:

  • Plan costs
  • Choice of doctors

Original Medicare allows you to go to 99% of hospitals and 90% of providers. Advantage plans are like HMOs, where you must go to specific doctors and hospitals. These plans are regional based.

4. You Have Retiree Coverage or Employer Plans and Don’t Think You Need Medicare

Retiree coverage may not be the most cost-effective or robust as you need. Some plans have $0 premiums, and that’s something you’ll want to stay on. However, we’re seeing many retiree plans that have monthly premiums, making them less effective than Medicare Advantage or even an Original Medicare plan.

You must sit down and analyze:

  • What your plan covers
  • Coverage and cost versus Medicare

Again, you need to analyze every portion of your current coverage to determine whether Medicare is a good option for you.

5. Selecting a Plan Based on a Friend or Family Member’s Advice

Friends and family may not have the best insight into the right plan for you. A plan may be optimal for you and horrible for your neighbor. Unfortunately, Medicare is not a one-size-fits-all solution.

You should speak to someone in the area who is a specialist and can help you sift through the plans and options that you have available through Medicare.

It’s important to have a thorough understanding of your:

  • Medical needs
  • Medicare options

This way, you can then weigh the pros and cons of supplement or Medigap plans or even the different parts of Medicare.

If you’re 64 and turning 65 soon, planning for Medicare with an expert would take an hour of your time and can be extremely beneficial for your healthcare needs. A few of the questions that are asked are:

  • Are you employed?
  • Do you plan to retire at 65?
  • Does your current insurance cover just you or others?

Once you answer all the questions, you’re presented with plans and options that will best fit your unique needs. Experts can even help and assist you with the actual enrollment process, so you know how to navigate Medicare from start to finish.

Did you spot the recurring theme with all these plans? You need to know the coverage you really need and to understand what’s available through Medicare that can help you maximize your coverage.

Roderick is a professional Medicare Agent, so if you need help with Medicare or have questions, reach out to him at (908) 481-5678 or send him an email.

If you need help with securing your retirement, schedule an introduction call with us today.

Bonds Versus Bond Alternatives

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If you’ve been learning or actively engaged in trying to secure your retirement, you know that investments are a wise choice. And a portfolio of 60/40 is what most people learn about. Today, we’re going to be discussing the 60/40 portfolio, what it means and a lot about bonds and bond alternatives.

What is a 60/40 Portfolio?

The 60/40 portfolio is one that many people hear about when starting their retirement planning. What does it mean?

  • 60% of your investments in equities
  • 40% of your investments in bonds

Bonds carry very little risk in traditional markets. You can take on the risk of stocks and still have 40% of your money in bonds that offer low returns.

And from the outside, the breakdown is good for investors because bonds have low risks.

However, due to the current economic state we’re in, bonds are riskier. Bond alternatives are available, which can help you further diversify your portfolio and possibly eliminate your traditional bond holdings.

Example of a 60/40 Portfolio

A 60/40 portfolio is easy to visualize if you have $1 million in investments.

  • $600,000 in stocks, mutual funds, etc.
  • $400,000 in bonds

If you have a portfolio like this, market volatility can’t wipe out your entire portfolio. However, we’re estimating that for the next decade, bonds will be volatile due to the low interest rates we’ve had since 2008.

Bonds and the Index to Examine

When you talk about the stock market, you think of the S&P 500, Dow Jones or NASDAQ as a gauge for how well the market has done or is doing. With bonds, you can’t look at the same indexes. Instead, you’ll want to judge the performance of bonds based on:

  • Aggregate bond index (AGG)

The AGG index has a very diverse building of bonds, and when you take snapshots of the index year-to-date (January – April 2022), it’s down 6% to 6.5%. If you’ve been told that bonds are a safe bet and then you see that the AGG index is down dramatically in the first four months of the year, it’s evident that there’s an issue going on.

Normally, bonds perform better when the market is performing poorly, but in this case, the markets are down just 3% this year.

For 10 years, interest rates were low, and now with the Fed raising interest rates to control inflation, the bond market is going to struggle for quite a while.

What are Bond Alternatives in 2022?

Bonds are having issues, and if you have them as a strategy to secure your retirement, it’s time to consider bond alternatives. A bond alternative needs to do a few things:

  • Offer a safe investment versus the market
  • Provide you with an income

Over the past few years, annuities have shown their strength and ability to offer a safe alternative to bonds.

Why?

First, a fixed annuity cannot lose in a year. In the worst case, you earn nothing in the year. You can never lose money, so from the risk perspective, annuities offer a low-risk alternative to stocks.

In our own experience, we’ve seen that annuities earn in the 3% to 6% range each year over the last decade.

While an annuity may not earn you 3% to 6% every year, it also won’t lose money. You can depend on the income of the annuity since it will never lose money.

Structuring an Annuity into Your Portfolio

You can choose a 60/40 portfolio if you like, but you also must understand that every family is different. There’s no right or wrong structure for your portfolio, and that’s the beauty of annuities.

We always start off with a retirement financial plan to:

  • View where you are today
  • View where you’ll be when it’s time for retirement

A retirement financial plan considers everything:

  • All income sources
  • Expenses

Annuities provide a safe, reliable, and non-reliable source of income. Plus, if you’re like most investors, you still have a growth bucket with your money tied up in the markets. If you’re not touching the investments, they’ll grow untouched for a long time while you rely on annuities to generate income.

Bonds aren’t a horrible choice for investors.

You can and should buy bonds when they’re stable, but with the Fed stating that they’re going to be raising rates multiple times in 2022 and 2023, it’s time to look at your portfolio as a bond holder.

The rising rates will have a negative impact on bonds.

In the meantime, we recommend a fixed annuity as a bond alternative because they offer a decent rate of return, cannot lose money, and provide a source of income that you can tap into at any time.

If you liked this article and would love to hear more from us, please sign up for our podcast.

And if you want to learn more about bond alternatives and fixed annuities or simply want us to run a retirement financial plan for you, schedule an introduction call today.