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Decoding Annuities: Should They Join Your Retirement Portfolio? · Money In Motion with Klaas Financial

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Speaker 1: Fun, informative and interactive as well. Great opportunity if you've
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Speaker 1: got a question, love to have you join us on
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Speaker 1: the program this morning, Get some get some answers from
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Speaker 1: our retirement planning professionals from Class Financial, CJ. Closs and
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Speaker 1: Eric Schwartz. The telephon number to get on the air
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Speaker 1: six oh eight three two one thirteen ten. That's six
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Speaker 1: o eight three two one thirteen ten. Our retirement planning
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Speaker 1: professionals are here for you to answer your retirement related questions. Again.
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Speaker 1: Teleph number to get on the air six so eight
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Speaker 1: three two one thirteen ten. Learn more about Class Financial
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Speaker 1: on their website Coss Financial dot com. That's Coss k
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Speaker 1: Laasfinancial dot com. Not only can you learn more about
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Speaker 1: Class Financial on the website, you can also schedule a
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Speaker 1: complimentary chat, or of course, you can always call the
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Speaker 1: office right here in Madison at six oh eight four
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Speaker 1: four two five six three seven. Don't forget that initial
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Speaker 1: get to know you appointment at Class Financial. It will
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Speaker 1: be complementary to you again their number six oh eight
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Speaker 1: four four two five six three seven and the number
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Speaker 1: to get on the air this morning three two one
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Speaker 1: thirteen tens three two one thirteen ten and joining us
1:02
Speaker 1: this morning our CJ Class and Eric Schwartz of Class
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Speaker 1: Financial CJ. How you doing this week?
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Speaker 2: I'm doing great?
1:08
Speaker 1: How are you?
1:08
Speaker 2: Sean?
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Speaker 1: I'm doing really good? And uh I mentioned the phone
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Speaker 1: numbers to get on the air. I know, and for
1:13
Speaker 1: folks that don't know this, I know. One of the
1:16
Speaker 1: things you absolutely love about doing this show is the
1:18
Speaker 1: opportunity to answer folks questions live on the air. It's
1:21
Speaker 1: one of your It's funny, it's one of your favorite
1:23
Speaker 1: People don't know this, but one of your favorite things
1:25
Speaker 1: to do on the program, isn't.
1:27
Speaker 2: It It is?
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Speaker 3: Yeah, we love when people call in, and I kind
1:31
Speaker 3: of every once in a while will say, try to
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Speaker 3: stump me.
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Speaker 1: Yeah, but we enjoy that.
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Speaker 2: We enjoy the call ins and certainly call it you have.
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Speaker 1: Questions, Love to love to have you join us. Six
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Speaker 1: eight three two one thirteen ten. That's six eight three
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Speaker 1: two one thirteen ten. Eric. Do I hear you dialing
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Speaker 1: in in the background trying trying to stump CJ. How
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Speaker 1: you doing? Eric?
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Speaker 4: Not too bad? Sean?
1:52
Speaker 2: How you doing doing really well?
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Speaker 1: It's great to talk with both of you, and we've
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Speaker 1: got the conversation that had involves a word that I
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Speaker 1: think a lot of folks here and sometimes I would
2:03
Speaker 1: say sometimes I'll speak for myself. I always wonder about
2:06
Speaker 1: what annuities are exactly, and we're gonna kind of break
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Speaker 1: down what they are and what you need to understand
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Speaker 1: when it comes to annuities. We'll do that with ce
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Speaker 1: Jan Eric this morning on Money and Motion. Mention the
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Speaker 1: phone number to get on air six oh eight three
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Speaker 1: two one thirteen ten. The telephon number for COSS Financials
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Speaker 1: office to schedule that appointment six oh eight four four
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Speaker 1: two five six three seven. Don't forget that initial appointment
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Speaker 1: not going to cost you a thing. It'll be complimentary
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Speaker 1: to you. Their number six oh eight four four two
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Speaker 1: five six three seven. The website colssfinancial dot com. Before
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Speaker 1: we start talking annuities, one of the cool features of
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Speaker 1: the program is the Class Quiz Question the week your
2:39
Speaker 1: chance to win a fantastic prize. This week, no exception,
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Speaker 1: our friends from Class Financial provided a twenty five dollars
2:44
Speaker 1: gift card to Texas Roadhouse. We'll tell you a little
2:47
Speaker 1: bit later on in the program in detail how you
2:49
Speaker 1: can win that little tip. Though just about every show,
2:52
Speaker 1: the question answer come up during the program, so you
2:54
Speaker 1: want to pay close attention to the show. And before
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Speaker 1: we get rolling on this week's conversation, let's actually look
2:59
Speaker 1: back at les last week's program and get the question
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Speaker 1: and answer there to the classquiz question the week.
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Speaker 4: Eric, absolutely congratulations to our winner from last week, who
3:08
Speaker 4: was Neriene from Sun Prairie. The question was question was
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Speaker 4: true or false? Medicare is structured in two parts, Part
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Speaker 4: A and part B, and the answer to that was true.
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Speaker 1: Nice work, Lourene, very very cool and don't forget if
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Speaker 1: you missed any part of that program. There was a
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Speaker 1: ton of information. As always, you can listen back at
3:28
Speaker 1: class financial dot com. As mentioned this week, we're going
3:31
Speaker 1: to be talking about annuities, kind of one of those
3:33
Speaker 1: buzzwords that you hear all the time when it comes
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Speaker 1: to retirement planning and it seems like everyone and I
3:38
Speaker 1: see it on TV and social care, social media, those
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Speaker 1: influencers out there, they all have different opinions on it.
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Speaker 1: So today I think we're gonna break it all down
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Speaker 1: and Cej I guess the first question is what exactly
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Speaker 1: is an annuity and how do you know if they
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Speaker 1: make sense for you?
3:58
Speaker 2: Yeah, great question. On and you're right.
4:01
Speaker 3: Annuities are definitely having a moment in the retirement world.
4:05
Speaker 2: We'll call it.
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Speaker 3: They've actually been around for centuries, but they're getting a
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Speaker 3: lot of attention right now because so many people are
4:12
Speaker 3: trying to figure out how to create steady income in retirement.
4:16
Speaker 2: But here's the deal.
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Speaker 3: While annuities can be helpful for the right person, they
4:20
Speaker 3: are not a one size fits all solution. These are
4:24
Speaker 3: actually complex contracts with a lot of moving parts, so
4:28
Speaker 3: you really need to know what you're getting into before
4:30
Speaker 3: signing on the dotted line.
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Speaker 2: So let's start with the basics.
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Speaker 3: An annuity is essentially a contract between you and an
4:38
Speaker 3: insurance company. You pay them either a lump sum or
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Speaker 3: a series of payments, and in return, they agree to
4:44
Speaker 3: send you regular income, usually during retirement. That income can
4:49
Speaker 3: start right away those are known as often as SPIAZ
4:52
Speaker 3: single Premium immediate annuities, or you can delay it until
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Speaker 3: a later retirement date. So think I give money now
5:00
Speaker 3: ten years, I'll start my income stream at that time.
5:03
Speaker 3: And clearly people are buying these contracts like big time.
5:07
Speaker 3: In twenty twenty four, a loan Americans put over four
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Speaker 3: hundred and thirty two billion into annuities of all shapes
5:13
Speaker 3: and sizes. That includes fixed annuities, indexed annuities, variable annuities,
5:17
Speaker 3: immediate annuities. You name it, four hundred and thirty two
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Speaker 3: billion with a B. So certainly it's something that interests people,
5:26
Speaker 3: and I guess kind of more broadly that people find attractive. Now,
5:31
Speaker 3: at our firm, we do have some of our advisors
5:33
Speaker 3: who are insurance license and we do certainly consult on annuities,
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Speaker 3: but we always stress well, but we do not sell
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Speaker 3: generally new annuities through a registered representative, and we are
5:47
Speaker 3: very cautious about how we suggest people engage them. Now
5:51
Speaker 3: that being said, there are circumstances that can absolutely have
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Speaker 3: an annuity fit your need. They can provide what it's
6:00
Speaker 3: called longevity risk, a solution, So like if you're worried
6:04
Speaker 3: about living too long and running out of income, annuities
6:06
Speaker 3: can be a great solution to that. They can be
6:08
Speaker 3: a way to kind of de risk markets over time.
6:11
Speaker 3: So there can be great fits for annuities, but we
6:14
Speaker 3: would say we think on average they can be over
6:17
Speaker 3: sold at time, or maybe if not over sold, under
6:21
Speaker 3: or misunderstood.
6:23
Speaker 2: But before you even consider an annuity here.
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Speaker 3: Are a few key things to understand. Number one, they're
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Speaker 3: built for retirement. If you take money out before age
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Speaker 3: fifty nine and a half, you'll face a ten percent
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Speaker 3: IRS penalty plus potential surrender charges. So if you're under fifty,
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Speaker 3: an annuity might not be the best fit for you
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Speaker 3: unless you're planning on leaving it alone until after fifty
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Speaker 3: nine and a half. Now some of you are saying, wait, wait,
6:50
Speaker 3: but I have IRA money that can't be touched to
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Speaker 3: fifty nine and a half anyways.
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Speaker 2: That's true.
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Speaker 3: So if you have IRA money and you can't touch
6:57
Speaker 3: to fifty nine and a half anyways, then not as
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Speaker 3: big of a deal. Referencing non retirement after tax dollars.
7:02
Speaker 3: If you take those non retirement after tax dollars and
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Speaker 3: put them in into an annuity, generally speaking, they're locked
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Speaker 3: up until fifty nine and a half.
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Speaker 2: So that's what you need to be cautious about.
7:11
Speaker 1: Fascinating stuff this morning, and as we talked this morning
7:14
Speaker 1: with CJ. Closs and Eric Swortz, they are our retirement
7:16
Speaker 1: planning professionals from Coss Financial. Don't forget if you've got
7:19
Speaker 1: a question about annuity or anything related to retirement, they'd
7:22
Speaker 1: love to answer your question this morning, get you on
7:24
Speaker 1: the air. Six oh eight three two one thirteen ten.
7:26
Speaker 1: That's six oh eight three two one thirteen ten. The
7:29
Speaker 1: website cossfinancial dot com. That's Cossfinancial dot com. Teleph number
7:33
Speaker 1: six oh eight four four two five six three seven.
7:35
Speaker 1: No charge for that initial get to know you appointment
7:37
Speaker 1: to at Coss Financial. That first appointment will be complimentary
7:40
Speaker 1: to you again their number six oh eight four four
7:42
Speaker 1: two five six three seven. So CJ laid out kind
7:46
Speaker 1: of what the annuities are, and then I guess the
7:47
Speaker 1: next question, Eric is what type of annuities are out there.
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Speaker 4: That's a great question, Sean. There's basically two main categories.
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Speaker 4: I'd say one would be a deferred annuity. The other
8:00
Speaker 4: would be an immediate annuity. So let's start with deferd annuities.
8:04
Speaker 4: These are the more common ones that we see, and
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Speaker 4: they generally start in what we would call the accumulation phase,
8:10
Speaker 4: so basically when you're putting money away for retirement or
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Speaker 4: just for use later in, letting it grow until you're
8:19
Speaker 4: ready to start taking income later on. And if we
8:22
Speaker 4: were to drill down a little bit more on deferred annuities,
8:26
Speaker 4: it generally breaks down into two types, which would be
8:30
Speaker 4: fixed annuities and variable annuities. Now, fixed annuities, just like
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Speaker 4: their name kind of suggests, they offer a guaranteed interest
8:38
Speaker 4: rate for u set number of years, so they're very predictable,
8:43
Speaker 4: pretty similar to the predictability of a CD. Now, variable annuities,
8:48
Speaker 4: on the other hand, they let you choose from different
8:50
Speaker 4: investment options, kind of like a four oh one K.
8:53
Speaker 4: Your balance goes up and down based on market performance. Now,
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Speaker 4: these are not quite as straightforward as as fixed annuities.
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Speaker 4: They can be really complicated and come with a lot
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Speaker 4: of fees and optional add ons, So we really want
9:08
Speaker 4: people to tread carefully when it when it comes to
9:10
Speaker 4: those types of those types of products. Now, on the
9:13
Speaker 4: other hand, we have immediate annuities, so those first those
9:16
Speaker 4: first ones are really are deferred. Immediate annuities are some
9:20
Speaker 4: sometimes called spias, so single premium immediate annuity. These these
9:27
Speaker 4: skip the accumulation part altogether. Okay, so you're basically just
9:31
Speaker 4: handing over a lump sum of money to the insurance
9:34
Speaker 4: company and they're going to start sending you payments right away,
9:38
Speaker 4: usually within thirty days, maybe up to a year.
9:41
Speaker 1: A year later.
9:42
Speaker 4: These can be helpful if you're retired and you don't
9:44
Speaker 4: have any other steady income. They can they can kind
9:47
Speaker 4: of behave kind of like a pension.
9:51
Speaker 1: Fast That's okay, I'm trying to hear you guys do
9:55
Speaker 1: a great job explaining this stuff. I'm still trying to
9:58
Speaker 1: fully wrap my head around this stuff, and we're going
9:59
Speaker 1: to actually get get into some of those complexities and things.
10:04
Speaker 1: Of course, when it comes to fees and other things
10:06
Speaker 1: in the fine print of annuities. We will do that
10:08
Speaker 1: in just a moment. If you get a chance, I
10:10
Speaker 1: hope you do. As you're heading on into work this morning,
10:12
Speaker 1: head on over to class financial dot com. That's coss
10:15
Speaker 1: k l aas financial dot com mentioned earlier that you
10:18
Speaker 1: can schedule a free complementary conversation right on the website. Also,
10:22
Speaker 1: while you're there, you can get to know the team.
10:23
Speaker 1: You can also get to know the separate divisions at
10:25
Speaker 1: COSS Financial. Also an opportunity to sign up for the
10:27
Speaker 1: weekly Market Pulse newsletter. It's a great weekly email arrives
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Speaker 1: in your inbox, gives a little snapshot of what's been
10:32
Speaker 1: going on in the market. It also provides a link
10:34
Speaker 1: to the most recent podcast again available to you at
10:37
Speaker 1: cossfinancial dot com. Speaking of the podcast, you can listen there.
10:40
Speaker 1: For example, if you miss part today's program or you
10:42
Speaker 1: want to listen back to a previous show, you can
10:44
Speaker 1: always head on over to class Financial dot com. There
10:46
Speaker 1: telephone number six oh eight four four two five six
10:49
Speaker 1: three seven. No charge for that initial get to know
10:51
Speaker 1: your appointment at Colss Financial. It will be complimentary to
10:54
Speaker 1: you again their number six oh eight four four two
10:57
Speaker 1: five six three seven. We're going to continue our conversation
10:59
Speaker 1: with CJ and Eric will talk a little bit more
11:01
Speaker 1: about annuities and some of the complexities and some of
11:03
Speaker 1: the things you just want to be aware of of
11:06
Speaker 1: involving annuities. We'll get those details from Eric and CJ.
11:09
Speaker 1: We will do that next as Money in Motion with
11:11
Speaker 1: Coss Financial continues right here on thirteen ten. Wu Iba
11:15
Speaker 1: and our phone lines are open for you if you
11:17
Speaker 1: have a question for our retirement planning professionals. So I
11:19
Speaker 1: got to do is dial in get you right on
11:21
Speaker 1: the air six oh eight three two one thirteen ten.
11:23
Speaker 1: That's six oh eight three two one thirteen ten, gets
11:26
Speaker 1: you on the air with CJ Closs and Eric Schwartz,
11:28
Speaker 1: speaking of telephone numbers, tell phing them for Coss Financials
11:31
Speaker 1: office right here in Madison at six oh eight four
11:33
Speaker 1: four two five six three seven. No charge for that
11:36
Speaker 1: initial get to know your appointment at Loss Financial. It
11:38
Speaker 1: will be complimentary to you again their number six oh
11:41
Speaker 1: eight four four two five six three seven. Talking about
11:44
Speaker 1: annuities this week on the program, and I was kind
11:47
Speaker 1: of left speechless at the end of last that last
11:49
Speaker 1: segment just by kind of mentally going through and trying
11:53
Speaker 1: to just put this together. And I'm like, Eric did
11:56
Speaker 1: a really good job laying it out, but I still
11:58
Speaker 1: don't know that I fully understand all the complexities. And Eric,
12:02
Speaker 1: let's talk a little bit about some of how complicated
12:05
Speaker 1: these things can be. And also fees. What are we
12:08
Speaker 1: talking about when it comes to fees with annuities.
12:12
Speaker 4: Yeah, there's a reason, Sean that insurance companies that sell
12:15
Speaker 4: these annuities provide really really nice looking, fancy promotional materials
12:21
Speaker 4: that try to simplify things and make them easier to understand.
12:26
Speaker 4: But fees are probably the biggest knock on annuities from
12:31
Speaker 4: consumers and frankly advisors too. And so I'm going to
12:36
Speaker 4: go through there's usually layers layers of fees when it
12:40
Speaker 4: comes to when it comes to annuities, the first one
12:43
Speaker 4: I want to talk about is the commission. So most
12:46
Speaker 4: annuities come with a sales commission, which can be anywhere
12:49
Speaker 4: from one percent to ten percent depending on the product.
12:53
Speaker 4: So that is a one percent to ten percent of
12:56
Speaker 4: the amount that you put into the annuity. You won't
12:58
Speaker 4: see it taken out directly, but it's baked into the
13:02
Speaker 4: cost of the annuity. Now, usually a commission is compensating
13:07
Speaker 4: the representative that's selling the product. The next fee that
13:12
Speaker 4: we see a lot is a surrender charge. So if
13:16
Speaker 4: you change your mind and you want your money back early,
13:18
Speaker 4: you could face really steep penalties, often starting around seven
13:23
Speaker 4: percent in the first year, in decreasing over time. But
13:27
Speaker 4: these surrender periods can last seven to ten years. I've
13:30
Speaker 4: seen even longer than that. And the thing about the
13:35
Speaker 4: surrender period is, if you think about it, an insurance
13:38
Speaker 4: company is paying a commission or is receiving the commission,
13:41
Speaker 4: and they're paying an advisor. The insurance company wants to
13:44
Speaker 4: recoup its money so that they want to keep people
13:47
Speaker 4: in these annuities for a minimum amount of time, so
13:51
Speaker 4: that's where the surrender charge is built in. And then
13:55
Speaker 4: finally the annual fees, So especially with variable annuities, you
13:59
Speaker 4: can expect to see even more layers of fees. You'll
14:02
Speaker 4: see insurance charges which can be you know, often around
14:06
Speaker 4: one and a quarter percent per year. You'll see investment
14:09
Speaker 4: management fees which can be half a percent to upwards
14:13
Speaker 4: of two percent, and then what are called writer fees,
14:16
Speaker 4: which can be you know, zero point six percent up
14:19
Speaker 4: to one and a half or even two percent. And
14:23
Speaker 4: these are basically fees for just add on, add on
14:26
Speaker 4: options you can you can put in there, so very
14:29
Speaker 4: quickly you can you can find yourself paying you know,
14:32
Speaker 4: two to three percent or even more each year, and
14:36
Speaker 4: that is a big drag on returns. And in general,
14:40
Speaker 4: these are not cheap products and in a lot of
14:43
Speaker 4: cases the cost really can outweigh the benefits.
14:46
Speaker 1: It's really important to understand that stuff, as you talk
14:49
Speaker 1: about kind of you know, weighing things out and kind
14:52
Speaker 1: of understanding what you're getting into. Obviously, a fact of
14:54
Speaker 1: life is any service, it is reasonable do you expect
14:57
Speaker 1: that there'll be some fees and some charges, But when
14:59
Speaker 1: you start digging into some of this stuff and realizing
15:02
Speaker 1: some of the complexity and realizing fees upon fees, I
15:05
Speaker 1: think a lot of people's eyes really start to start
15:09
Speaker 1: to open up, like, oh, my goodness, and really important
15:12
Speaker 1: stuff on that front. And CJ. And bring you in
15:14
Speaker 1: on this conversation as well. I've talked about the tax word,
15:18
Speaker 1: and I know, as we talk about for every service
15:20
Speaker 1: there's a fee, and for every interaction there seems to
15:23
Speaker 1: be a tax and an obligation there. How does the
15:26
Speaker 1: IRS treat annuity income?
15:28
Speaker 2: CJ. Yeah, good question, Sean.
15:31
Speaker 3: And I'll before I jump into the kind of taxes,
15:34
Speaker 3: how taxes are handled with an annuity, I'll just say
15:37
Speaker 3: we try to do our best to be balanced in
15:40
Speaker 3: the way that we present information, and so you know
15:43
Speaker 3: you're hearing in our voices, we are very cautious of annuities,
15:47
Speaker 3: not because they're bad by definition. As a matter of fact,
15:50
Speaker 3: they're They're neither good nor bad by definition. They just
15:53
Speaker 3: are They just are something. But what we would say
15:57
Speaker 3: is that because of the complexity, if you were to
16:00
Speaker 3: look at the number of customer complaints or lawsuits related
16:04
Speaker 3: to annuities versus say an advisory investment account or a
16:09
Speaker 3: brokerage account or a money market fund. You know, the
16:13
Speaker 3: answer is a vast majority of the confusion lawsuits customer
16:19
Speaker 3: complaints come from complex products, no surprise right now. Again,
16:24
Speaker 3: just because there's fees, does that mean it's a bad thing?
16:26
Speaker 3: Well no, I mean every I have to buy a
16:28
Speaker 3: car and I got to pay a commission to somebody there.
16:31
Speaker 3: So commissions and sales charges and.
16:33
Speaker 2: Things like that don't mean something is bad.
16:35
Speaker 3: It just means customer beware. I think that's what we
16:38
Speaker 3: would say as it relates to this whole topic, is
16:40
Speaker 3: just like, hey, not good or bad, just customer beware
16:44
Speaker 3: because of the layers of complexity, the lock up periods,
16:46
Speaker 3: everything Eric was talking about. That's our main takeaway. Okay,
16:50
Speaker 3: now shifting over to taxes, this is another area where
16:53
Speaker 3: you have to be cautious. So how you pay taxes
16:57
Speaker 3: on an annuity depends on how you fund the annuity.
17:01
Speaker 3: I kind of hinted at this earlier. If you buy
17:03
Speaker 3: an annuity, whether that be a fixed ade equity indexed,
17:09
Speaker 3: a variable annuity, or any other type of annuity, if
17:12
Speaker 3: you buy one of these with IRA or four oh
17:15
Speaker 3: one k money, like, roll over your four one k
17:17
Speaker 3: into an IRA. All the money you take out will
17:20
Speaker 3: be taxed as ordinary income, just as it would have
17:24
Speaker 3: been if you had just left it in a you know,
17:26
Speaker 3: a custodial iray or an advisory IRA. So when you
17:30
Speaker 3: put it into the annuity, you get all the features
17:33
Speaker 3: of the annuity aka the guaranteed income stream, you know,
17:36
Speaker 3: whatever they're guaranteeing you in the annuity, but the income
17:40
Speaker 3: is treated the same way is if you hadn't put
17:42
Speaker 3: the money in the annuity, which is as long as
17:44
Speaker 3: you pull it out after fifty nine and a half,
17:46
Speaker 3: there's no penalty, but you're going to pay taxes as
17:48
Speaker 3: ordinary income. Where it gets complicated is that a lot
17:52
Speaker 3: of people will say, well, the annuity doesn't have as
17:55
Speaker 3: much advantage to me with IRA or four one K money,
17:59
Speaker 3: so I'm going to put after tax or what we
18:01
Speaker 3: will often refer to as taxable dollars. Think of this
18:04
Speaker 3: as money that's not in a retirement account, but it's
18:06
Speaker 3: just extra savings that you have sitting off off to
18:08
Speaker 3: the side. When you put that money into an annuity,
18:12
Speaker 3: only the growth is taxed. Your original contribution comes back
18:17
Speaker 3: tax free. But here's something people often miss. Annuities don't
18:22
Speaker 3: get the favorable capital gains tax treatment. We've talked a
18:26
Speaker 3: lot about capital gains taxes on this show, where we say, hey,
18:29
Speaker 3: you buy a stock and it grows over time, and
18:32
Speaker 3: then you sell it later on, you could pay zero,
18:34
Speaker 3: fifteen or twenty percent. We did a whole show on
18:36
Speaker 3: this with Jenny Doty, our accountant or internal accountant. Well
18:40
Speaker 3: what if I take those same after tax dollars, put
18:42
Speaker 3: them in an annuity and then it grows? Well, wank
18:46
Speaker 3: wonk That capital gains tax, that favorable capital gains tax
18:49
Speaker 3: treatment goes away.
18:52
Speaker 2: All of the.
18:52
Speaker 3: Growth as it comes out to you is taxed as
18:55
Speaker 3: ordinary income.
18:56
Speaker 2: And here's one final kicker.
18:57
Speaker 3: You also don't get a step up on basis at
19:00
Speaker 3: So back to that original situation, I buy a stock,
19:03
Speaker 3: it grows, I die with that stock, my children can
19:07
Speaker 3: sell it and pay no tax. When that same money
19:10
Speaker 3: as inside of the annuity, the step up in basis
19:13
Speaker 3: goes away. Now, for those insurance agents out there, because
19:16
Speaker 3: I know some of you are going, yeah, but but
19:17
Speaker 3: but but okay, there is one positive though. When you
19:20
Speaker 3: take taxable dollars and put them in an annuity and
19:24
Speaker 3: allow them to differ in growth, you also don't pay
19:27
Speaker 3: tax on the growth, so it compounds. Okay, Well, if
19:32
Speaker 3: your heads aren't spinning, or if they weren't spinning before
19:35
Speaker 3: they are now, certainly you can understand a lot of complexity,
19:39
Speaker 3: lots of pros, lots of coms related to this. You
19:42
Speaker 3: just really need to be mindful of how it fits
19:44
Speaker 3: into your financial plan.
19:46
Speaker 1: Important stuff and of course important time to have those
19:48
Speaker 1: conversations I mentioned. Also, CJ mentioned our conversation with Jenny
19:53
Speaker 1: Dowdy the other week. You can always listen back to
19:55
Speaker 1: that podcast and all the previous shows up at Clossfinancial
19:58
Speaker 1: dot com. That's coss kl AASO financial dot com. You
20:02
Speaker 1: can schedule a complimentary chat right online as well. Speaking
20:05
Speaker 1: of complementary things, that appointment that initial gets no you
20:07
Speaker 1: appoyment at Coss Financially, it will be complementary to you.
20:10
Speaker 1: Set that up. All I can do is give them
20:11
Speaker 1: a call six oh eight four four two five six
20:13
Speaker 1: three seven again the number for Class Financial Office right
20:16
Speaker 1: here in Madison six oh eight four four two five
20:18
Speaker 1: six three seven. Will wrap up our conversation on annuities.
20:21
Speaker 1: We will also head on over to the Money in
20:23
Speaker 1: Motion listener question corner and if that's not enough. We'll
20:26
Speaker 1: also do our class quiz question a week. We got
20:28
Speaker 1: an action pack. Final segment next right here on Money
20:31
Speaker 1: in Motion with COSS Financial on thirteen ten wib A
20:34
Speaker 1: talking this morning with our retirement planning professionals c J.
20:37
Speaker 1: Closs and Eric Schwartz. They come to us from class Financial,
20:40
Speaker 1: the website COSS financial dot com. That's Coss k l
20:43
Speaker 1: a A S Financial dot com. Telphone number six oh
20:47
Speaker 1: eight four four two five six three seven. No charge
20:50
Speaker 1: for the initial gets know you appoyment at COLSS Financial.
20:53
Speaker 1: It will be complementary to you again their number six
20:55
Speaker 1: oh eight four four two five six three seven. Talking
20:58
Speaker 1: this week about annuities and Eric, are there situations out
21:02
Speaker 1: there and when might that situation be where an annuity
21:05
Speaker 1: might make sense for someone?
21:08
Speaker 4: Yeah, it's a great question, Sean and s. CJ said,
21:11
Speaker 4: we don't We don't believe that annuities are inherently good
21:14
Speaker 4: or bad. And there certainly are situations where annuities can
21:18
Speaker 4: fit nicely into a retirement plan. For example, if you
21:22
Speaker 4: if you don't have a pension in retirement a lot
21:24
Speaker 4: a lot of folks don't have pensions, an annuity can
21:27
Speaker 4: act like a pension, it gives you predictable income for
21:29
Speaker 4: your entire life, and it pays as long as you live,
21:33
Speaker 4: so it helps reduce the stress of outliving your money.
21:38
Speaker 4: Along with that, if you have if you have good genes,
21:40
Speaker 4: you have a lot of longevity in your family and
21:42
Speaker 4: you expect to live into your nineties, an annuity can
21:46
Speaker 4: really provide a lot of peace of mind because again,
21:48
Speaker 4: it's going to pay as long as you live, no
21:51
Speaker 4: matter how long that is. Another way to look at
21:54
Speaker 4: an annuity is it can help you control your spending.
21:56
Speaker 4: So some people like to have a structured income and
21:59
Speaker 4: retur hirement so that they don't overspend. To be honest,
22:03
Speaker 4: if someone really wants to access the money, they'll probably
22:06
Speaker 4: find a way to do it, even if there are penalties,
22:09
Speaker 4: but it can be a good guardrail to put in place,
22:12
Speaker 4: at least initially. And finally, for people who are really
22:16
Speaker 4: uncomfortable with investing in the market, an annuity can provide
22:21
Speaker 4: some benefits as well. So if you're someone who panics
22:23
Speaker 4: during market tips and you want to stay away from risk,
22:26
Speaker 4: an annuity might help prevent kind of those emotional investing mistakes.
22:33
Speaker 4: That said, we always recommend that you explore other lower cost,
22:37
Speaker 4: more flexible options before jumping into an annuity, get a
22:41
Speaker 4: second opinion, and always always read that fine print. Now,
22:46
Speaker 4: one other piece of well, the last piece I'll touch
22:50
Speaker 4: on here related to annuities is what happens to the
22:53
Speaker 4: money when someone passes away? Okay, So the short answer
22:58
Speaker 4: is it depends on the type of contract. Some annuities
23:00
Speaker 4: will stop payments at death, while others let you name
23:03
Speaker 4: a beneficiary who continues to receive payments. There can also
23:09
Speaker 4: often be a standard death benefit. But again those details
23:12
Speaker 4: are all decided upfront and they kind of vary based
23:15
Speaker 4: on the contract. But one important thing to know is
23:18
Speaker 4: if you inherit an annuity, know that to some extent
23:21
Speaker 4: that money is taxable. So be cautious when just you know,
23:27
Speaker 4: drawing out the whole balance and consider spreading out the
23:30
Speaker 4: withdrawals over time just to help manage that tax hit.
23:34
Speaker 4: And really seek out advice in the space. These products
23:37
Speaker 4: are really complicated and it's just good to have a
23:40
Speaker 4: second set of eyes.
23:41
Speaker 1: It seems like like an area we could do like
23:43
Speaker 1: a whole series of programs on and talk about because
23:46
Speaker 1: there is exactly there is so much to know about
23:50
Speaker 1: these and that's one of the importances of having those
23:52
Speaker 1: conversations and of course understanding what you're getting into before
23:56
Speaker 1: you sign on the dotted line. Great opportunity today, speaking
23:59
Speaker 1: of really great information, classfinancial dot com. They've got a
24:02
Speaker 1: lot of great information about Class Financially. You can learn
24:05
Speaker 1: more about the team, their separate divisions. You can also
24:07
Speaker 1: schedule a complimentary chat right online classfinancial dot Com. Also,
24:11
Speaker 1: while you're there, you can submit a question to be
24:13
Speaker 1: answered in our Money in Motion listener question corner. Alex
24:17
Speaker 1: wrote in this week it says, Hi, I'm about five
24:20
Speaker 1: years away from retirement. I've got about seventy five thousand
24:23
Speaker 1: dollars in credit card debt. I'm still contributing to my
24:26
Speaker 1: four oh one K, but I don't really have any
24:28
Speaker 1: emergency savings built up. What should I be focusing in
24:32
Speaker 1: on right now? And CJ, we'll let you take this
24:35
Speaker 1: one away.
24:38
Speaker 3: Yeah, well, Alex, thanks so much for submitting the question.
24:41
Speaker 3: As as Sean just said, others can do the same
24:43
Speaker 3: on our website or by calling in certainly during the show.
24:46
Speaker 3: But yeah, so, Alex, one thing that I was noticing
24:51
Speaker 3: as we were I was reading this before the show
24:53
Speaker 3: is that you didn't say your exact age, which is fine.
24:55
Speaker 3: I don't expect you to submit your exact age, but
24:57
Speaker 3: therefore I won't be able to be as specific in
25:01
Speaker 3: my response. But you mentioned having seventy five thousand dollars
25:04
Speaker 3: in credit card. You're still contributing to your four to
25:06
Speaker 3: one K. So how do you get kind of an
25:09
Speaker 3: emergency reserve built up? We would say, based on what
25:13
Speaker 3: you have given us, tackling that debt and getting rid
25:16
Speaker 3: of that credit card debt.
25:17
Speaker 2: Alex is going to be paramount.
25:19
Speaker 3: The main reason is because credit card debt will often
25:22
Speaker 3: grow at a pace that is higher than anything you
25:24
Speaker 3: could ever hope for in your four to one K.
25:28
Speaker 3: So Alex, as you can imagine, you put money into
25:30
Speaker 3: your four to one K, and even if it grows
25:32
Speaker 3: ten percent a year, that's going to be a far
25:34
Speaker 3: cry from the average of twenty to twenty five percent
25:37
Speaker 3: on your credit card.
25:39
Speaker 2: So we would say, probably reduce.
25:40
Speaker 3: Down that four to one K contribution to whatever the
25:43
Speaker 3: minimum amount is to still get some employer match. So
25:47
Speaker 3: if your employer matches the first four percent of your contributions,
25:49
Speaker 3: maybe just reduce your contribution down to four percent and
25:52
Speaker 3: then all of your excess cash flow needs to go
25:55
Speaker 3: towards knocking down that credit card debt. Now, obviously, when
26:00
Speaker 3: you don't have an emergency reserve, Alex, that's the reason
26:03
Speaker 3: why you have credit card debt, because anytime an emergency
26:06
Speaker 3: pops up, you have to use a credit card. So
26:08
Speaker 3: we would say, try to build up one to two
26:10
Speaker 3: thousand dollars in a savings account, So reduce the flow
26:13
Speaker 3: and K contribution. Build up one to two thousand dollars
26:15
Speaker 3: in a savings account, and then every dollar above and
26:18
Speaker 3: beyond that should just go towards eliminating that credit card debt.
26:22
Speaker 3: Once that credit card debt is gone, then certainly you
26:24
Speaker 3: can go back and start saving again into your four
26:26
Speaker 3: one K plan to build that up. And finally, you know, Alex,
26:30
Speaker 3: this is going to sound self serving, but it's really
26:32
Speaker 3: not meant to be. When we hear these types of situations,
26:35
Speaker 3: we would say there's probably some systemic items inside of
26:38
Speaker 3: your financial plan that need to be addressed as it
26:41
Speaker 3: relates to cash flow and savings and income and housing
26:44
Speaker 3: and cars. There's potentially a lot more than you submitted
26:47
Speaker 3: in your question here, and so we would say, potentially
26:49
Speaker 3: consider working with a financial advisor to kind of put
26:52
Speaker 3: together a plan.
26:53
Speaker 1: Really great to guidance and really good information. You two
26:55
Speaker 1: can be like Alex. If you've got a question like
26:58
Speaker 1: right right here on the program, you could set right
27:00
Speaker 1: at class Financial dot com. That's coss k l Aasfinancial
27:03
Speaker 1: dot com as CJ Magic. You can also call the
27:05
Speaker 1: office right here in Madison at six oh eight four
27:08
Speaker 1: four two five six three seven. Don't forget as well,
27:10
Speaker 1: no charge for that initial gets to know you appointment
27:12
Speaker 1: at Loss Financial. It is complimentary to you their number
27:15
Speaker 1: six oh eight four four two five six three seven.
27:17
Speaker 1: You're going to want to hold on to that telephone
27:19
Speaker 1: number as well. It's time now for the coss Quiz
27:21
Speaker 1: Question of the week. It works like this. In just
27:23
Speaker 1: a moment, I will ask you the coss Quiz question
27:25
Speaker 1: of the week. You will then have thirty minutes from
27:26
Speaker 1: the end today's program to call the Class Financial office
27:29
Speaker 1: right here in Madison at six oh eight four four
27:31
Speaker 1: two five six three seven. If you are the first
27:34
Speaker 1: call correct answer, you win this week's prize, which is
27:36
Speaker 1: a twenty five dollars gift card to Texas Roadhouse. This
27:40
Speaker 1: week's coss Quiz question week, is this true? Or false.
27:44
Speaker 1: An annuity is a contract between you and an insurance company.
27:48
Speaker 1: Is that true or is that false? Telephone number six
27:51
Speaker 1: oh eight four four two five, six three seven, first
27:53
Speaker 1: call correct answer when this week's prize. Don't forget as well.
27:56
Speaker 1: That's Class Financial's office right here in Madison. That number
27:59
Speaker 1: six oh eight four four two five six three seven
28:02
Speaker 1: CJ Eric. Great chatting with both of you. Guys. Have
28:05
Speaker 1: a most fantastic day.
28:07
Speaker 2: Thanks Sean, Sean, take.
28:08
Speaker 1: Care, guys. News comes your way next year. I'm thirteen
28:11
Speaker 1: ten wu ib A