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The Retirement-Income Ad That's Actually Two Red Flags · How to Retire on Time

• 0:00
  Mike: Hey, thanks for joining. Here's a question I was recently asked on my show, how to retire on time. Take a look. Now, I'm gonna go into a couple of different strategies here when it comes to income. It looks like I'm reading the poll here.
• 0:11
  Number two, Tied for number two of highest concerns is running out of money and market crashes. Those are the two highest. Health care cost is actually the number one concern right now. So we'll talk about health care cost. That'll be fun.
• 0:25
  But, running out of money and market crash. Here are the two simplest ways that you can solve that. Okay. The first one, just buy guaranteed income from an annuity. The only thing that can guarantee cash flow.
• 0:39
  Now don't go overboard with it. I know there's a lot of advisors that will put as much as money as you can in annuities and say, there you go, we've solved everything. That's not how tax planning works. That's not how income planning works. You need to look at the sequence or your withdrawal strategies and how it works.
• 0:54
  And there's a lot that goes into it. But there's only one thing that can actually guarantee cash flow for life. And if you're going down this path, I typically would favour flat income. It front loads your income during your travel years, not your casual years. But that takes less pressure off the portfolio in the early parts of your retirement.
• 1:13
  So that later in retirement, your other assets were able to grow and compound and offset inflation and so on. Also, the thing about flat income, there's no insurance ambiguity. It is contractual and it is straightforward. This is.
• 1:28
  David: Yeah. This is what you get.
• 1:30
  Mike: Yeah. All those like, oh, well what they have What if they change their rates? Or what if they do this? Gone with flat income.
• 1:37
  David: Income multiplier, but it's dependent on this market trigger, etcetera, etcetera, right?
• 1:42
  Mike: Yeah. No. If you want lifetime income, get rid of any ambiguity with the insurance company. That's generally speaking what I like to use for the tool. Because you don't want to get that clause that says, oops, we gotta change things.
• 1:55
  David: Mhmm.
• 1:56
  Mike: Just as is. Nice and simple and predictable. And that might be maybe like up to half of your portfolio income that you need. So let's say you needed 80,000, maybe you guaranteed 40,000 of your income. Guaranteed for life.
• 2:13
  That takes a lot of pressure off the portfolio. Now, and I see this over and over again, people will say, oh, would lower my income because I'm just kinda concerned about it. And I say, well what if we forced you? We gave you a payment every single month. Would you change?
• 2:28
  No. No. We'd keep going because we knew the payments were going. The prepared reaction was right for that person. Now, we've got other clients that have $57,000,000.
• 2:42
  And they don't want a lot of income. In fact, they're act I call them accidental dividends. Because if you invest in the S and P 500, for example, you're gonna get some dividends. Yeah. Like it's just a part of the beast.
• 2:53
  Nature of the beast. That the dividends that they would get from the portfolio based on the cash flow they want is probably more than the income they would spend anyway. An annuity might be not appropriate for them. Unless there were other reasons why they wanted it. So, again, plan first, strategy second.
• 3:13
  And then that strategy, before you talk about investments or products, what is your reaction gonna be in these different scenarios? That's the most honest conversation you can have with yourself because it's not dependent on your neighbour, what your neighbour wants. It's not dependent on, you know, what you think you're supposed to do. A lot of people say, well I wanna do what the wealthy are doing. Well first off, one, you're not with $50,000,000.
• 3:36
  Yeah. So it's a very different situation. And second off, a lot of very wealthy people keep things simple. It's not about what someone else is doing, it's what's right for you. So, and then the other one I talk about is you can be more dynamic with it.
• 3:53
  So that was the thesis really of the book, How to Retire on Time, was having some assets that are protected. So if the markets go down, you just have those reserves. Originally I called it a reservoir. Just like a city has a reservoir of water in case of a drought. Just have some protect assets that you can tap into and wait for your other accounts to recover.
• 4:10
  It's more dynamic. Some people are more wired to want that prepared reaction. Some people want more of guaranteed income or flat income. Both are fine. Yeah.
• 4:21
  What's right for you? Not your neighbor. Not what does the Kiplinger article say. And I'm not ragging on Kiplinger, I write for Kiplinger.
• 4:27
  David: Yeah, right. Love Yeah, we love Kiplinger.
• 4:31
  Mike: But there's a lot of opinions. Yeah. And that's information, not advice. Advice is one on one. Information is one to many.
• 4:37
  Yes. Now, David, I wanna pause real quick and just ask you something here. If your retirement had a leak, okay? So let's say money was quietly draining out through fees or tax inefficiencies, Maybe the social security time was gonna put an unnecessary burden on the plan for one way or the other. Maybe you're just paying more in health care premiums because you didn't know how optimize all of this.
• 4:57
  How would you know? And how would your AI even know? You have to have the right questions to ask. It's a whole problem. And the truth is, these leaks, they're often silent.
• 5:07
  Many people miss them. So here's what I wanna do. Everyone right now in Kansas City area, they're listening in right now. We're gonna offer you something real real cool. Look, if you're within five years of retirement and you've saved at least $500,000 or more, I would invite you to book your retirement leak test.
• 5:25
  It's a 47 inspection on your retirement. Two visits with my team won't cost you a dime. The first visit is gonna be finding the leaks. The second visit, we're gonna show you how to plug them. You walk out with that leak report, every leak that we found, dollars, all of it right in your lap.
• 5:41
  It costs you nothing. There's no obligation. We're doing this because we are genuinely concerned about some of the stuff that we've seen lately and the risks and the market conditions that are out there. So we're gonna be offering this report at no cost. The report is yours to keep regardless of if you work with us from that point on or not.
• 5:59
  Now if you decide you wanna work with us, we can we can do a one time written plan that we teach you how to fish. We're gonna teach you how to fish step by step, plug in the different leaks so you can manage your plan on your own and potentially save yourself a lot of money and fees. I mean, heck. You got a million dollars in retirement, that's like $10,000 in fees you could be saving your saving for that. That's like a leak unto itself.
• 6:22
  Now if you want maybe a little bit more help, we also have ongoing services at a flat fee, but it's okay either way. The point is we wanna help you find the leaks, plug them up, and then if you wanna keep talking, give you a plan that's kinda like a recipe. If can follow recipe, you can follow the plan even if you don't have a financial background. That's it. Nice and simple.
• 6:44
  Now fair warning, some of you may have one of the biggest leaks is that advisor fee. So, if you're open to a nice conversation about finding leaks in your system, trying to get more out of your money, here you go. We've only got room for five this week. That's it. So in order to get the leak test, the retirement leak test, here's what you gotta do.
• 7:09
  What you're do is you're gonna text radio to (913) 363-1234. Text radio right now to (913) 363-1234. That's keyword radio. (913) 363-1234, and then what we'll do is we'll text you back. If you're one of the five, we'll give you a link to schedule the thirty minute call.
• 7:28
  Just gotta schedule the call within the next two weeks, very limited times, but we do have some slots open for us right now. Text radio to (913) 363-1234. The first five people to text us. You'll get those two sessions, no cost, no obligation. We're gonna help raise your awareness towards your retirement preparation.
• 7:47
  Again, you must have 500,000 or more to qualify for this specific offer, but let's find the leaks. Let's expose them. Let's have some fun plugging them up and help you get more out of your money and be better prepared for your retirement. Got a question that popped up here. Can you further define flat income?
• 8:06
  Is this income from an annuity or something broader? So by definition, the only thing that can guarantee is an annuity. Right now, you can buy private equity that gives you income. And I'm gonna joke about that in just a second, but they're great. So real estate, private equity, so private placement, different developments, there's a lot of things that can provide income.
• 8:30
  But those income strategies, though they're flat, are temporary. So for example, let's say you invest in some sort of real estate or real estate influenced asset. You put money in there. Your basis or your investment's probably gonna stay roughly the same in most of these, not all of them, but most of them. It's gonna be as is.
• 8:51
  So let's say you put in $25 per share, put as much as you want in there, you're gonna get maybe $8.09, 12% back annually in monthly checks.
• 9:04
  David: Alright. Okay.
• 9:06
  Mike: Now, the more that you get, the more risk you are taking. Be very careful with that. But, that income's gonna keep coming until either rates change and they redeem it. So it's a callable investment, as in they can give you then your $25 per share back and they stop paying you that. Or they just can't keep paying anymore and they go bankrupt.
• 9:28
  Right. I see these ads like, oh, if you're gonna buy an annuity, stop. We'll pay the surrender policy or the surrender fees for you and take your money and we'll give you a better rate. Well those are two huge red flags. How are they giving you money to get you out of something?
• 9:44
  And how in the world can they afford them pay another rate? Because they're not guaranteeing it. It's an apples to oranges comparison. So for some people, saying, hey, that's a good income strategy. Maybe you want it for a couple of years and you just needed to bridge a
• 10:00
  David: gap. Okay.
• 10:01
  Mike: That would be an appropriate situation. But if you're gonna be retired for twenty or thirty years, and you're looking for stability, nothing else can guarantee it for the long term. And what's interesting is, because the ten year treasury is pretty dang high right now, all things considered, that's why flat income from an annuity is higher. If you go back ten years, the payouts were garbage. I'd be saying stay away from it.
• 10:26
  Mhmm. Because it wasn't competitive. It's kinda like, did you like buying a house or refinancing your house when rates were low?
• 10:34
  David: Yeah. Remember That's
• 10:35
  Mike: 2018, 2019? Yes. Good times, right?
• 10:38
  David: Really good time to refinance and Is lock in something it a good time now? No. Not a good time now. So the moral of the story being that rates change, things change, right?
• 10:47
  Mike: Offers change. Yeah. So right now, might be a good deal. If that's the right prepared reaction for you. If it's not, that's fine.
• 10:56
  It's a difference.
• 10:58
  David: Yes.
• 10:59
  Mike: So when I talk about income, there are income mechanisms, and I don't like basing your retirement on income in that sense. Because let's say you do one, you're getting 9% income every year for up to five years, unless they call it, and then maybe it stays, maybe it doesn't. And then at some point, rates change, they call it, and they can issue back at 6%. You just took a 33% reduction on your income. Because you're dependent on something you could not control.
• 11:28
  That's the risk that a lot of people don't realise. And you see this in like certain ETFs, they're using cover called income. That's not always gonna be the case. Or different real estate deals where they can call it back, that's not always gonna be the case. It doesn't make the tool wrong.
• 11:45
  It's a mismanagement of expectations on that tool.
• 11:49
  David: Okay.
• 11:50
  Mike: So Steve, hopefully that helps you with it. With annuities, there's two trains of thought here. The first one is, you can buy index annuities specifically, I'm gonna talk about for a second. You can buy index annuities that have great cash growth potential, but terrible lifetime income. Or you can buy great lifetime income, but terrible cash growth potential.
• 12:08
  You can't buy either. Like you can, well you can buy either, I guess. But you're either getting one or the other.
• 12:13
  David: Yeah. Both of those Everything you just described is not in one product.
• 12:16
  Mike: It's not one product. You have to understand how to shop them. And then the other factor too to consider is when you have higher income, typically you can say, I want higher income, but I want a cost of living adjustment. That's a great thing. It is.
• 12:31
  Except for, this is the part people miss because they don't read the legal documents and I don't blame them. I only read it because I need to, it's my job.
• 12:39
  David: Yep.
• 12:40
  Mike: And I don't trust insurance companies as much as maybe the average person does. I don't know. But that cost of living adjustment is only gonna last as long as the cash value within the policy. So once that cash value is gone, your income isn't increasing with inflation anymore.
• 12:56
  David: Oh, right.
• 12:57
  Mike: So you might as well, in my opinion, take a higher income payout and let your other part of the other part of your portfolio grow to offset the inflationary risk when you have complete control over your portfolio. Not as much of what the lifetime income's gonna do. Yeah. So here's an example. I'm not quoting a product.
• 13:15
  But you know, if you're like 65 years old, you might get seven and something percent on whatever you put into a flat income stream today. Ten years ago, it might be like 5%.
• 13:27
  David: Oh. I
• 13:28
  Mike: say might, again, I'm not quoting any specific products. But that's a fundamental difference. Mhmm. I mean, you look at, I'm kinda going a little tangent here, but hopefully you all appreciate it. If you look at the average, like S and P performance since 2000, it's around 8%.
• 13:47
  So if you can guarantee a, basically a dividend from an insurance company, at like seven and something percent, that's a pretty good deal. Yeah. But don't go overboard with it. Because if you have too much, and this is the negative side, you have too much into annuity, when the spouse passes, the surviving spouse might get hit with higher taxes. You wanna cap how much you put into these products.
• 14:13
  Because you need to have the tax flexibility. You need to have flexibility for inflation. You need to have flexibility for all these other factors that play in to it. The point being, there's no such thing as a perfect investment product or strategy. But when you illustrate your plan, your projections, you explore these strategies and you start asking questions of, if this were to happen, how would you react?
• 14:40
  Then you can pick the right reactions for you so that your life is not interrupted. Your lifestyle continues on. Because if you adjust your life based on your money, your money controls you. Yeah. If you control your money, then you have the prepared reaction that works for you, that allows you to continue on when everyone else is panicking.
• 15:02
  David: Doesn't that sound great? I mean
• 15:04
  Mike: That's how it's supposed to be. Yes. And I know it's weird to say, oh, well he always probably does this or that. Like, no, if you were sitting in my seat, the planning process naturally kind of sorts itself out. And the plans that we put together are so wildly different.
• 15:18
  Because they're right for the individual. It's just, you know, client confidentiality is kind
• 15:24
  David: of important. Yeah. So we won't get any specifics, but Yeah. So basically, it sounds like you're saying that you need lots of different income streams coming in so that whatever happens in the market, it's okay.
• 15:38
  Mike: Yeah. I would say diversify by strategy, not ambiguity. A lot of people will go out there, and I even say this when people download our DIY annuity guide book. I wrote it to talk some people out of buying an annuity or at least lower it. Mhmm.
• 15:52
  And the reason is simple. You don't take a lump of money and then buy a bunch of random stuff and say, well, it should work out.
• 15:58
  David: Yeah. I mean, yeah. It may work out or it may not. Yeah. And then if it's not gonna work out, then your life is just
• 16:07
  Mike: I mean, can you imagine if the Chiefs, you know, we're biased, we're in Kansas City. Yeah. If the Chiefs had a huddle and said, alright, everyone, do your best. And everyone went to the the, you know, offensive line and everyone did their own play. Like, it's not gonna work out well.
• 16:20
  Yeah. There's gotta be a coordinated effort.
• 16:23
  David: Right.
• 16:24
  Mike: Same with your retirement plan.