Transitioning from saving for retirement to spending in retirement

This episode of the Reliable Wealth Financial Hour focuses on one of the biggest concerns in retirement; running out of money. 

Bob and Cole Falter discuss their approach in helping retirees navigate the transition from wealth accumulation to the distribution phase.

For additional information and important disclosures please visit www.rwfhour.com

Transcript

SPEAKER_01 0:01

This is the Reliable Wealth Financial Group podcast with Robert and Cole Falter, their family, and they're a team helping you navigate your retirement journey with tips to optimize your savings, strategies to protect what you've earned, and ideas to help keep your retirement assets on track. Now, from Reliable Wealth Financial Group, here are Robert and Cole Falter.

SPEAKER_02 0:26

Good morning, good morning to our listeners out there. This is a Reliable Wealth Financial Hour. This is a show designed around your financial future. It's where we talk about income. Don't we talk about a lot of income, don't we, Cheryl?

SPEAKER_00 0:39

We do because that's so important as you go through your retirement years. You know, Bob, I was thinking the other day, you could just sit down at your kitchen table, take how much money you've saved for retirement, and divide it up over the number of years that you'll think you'll need it, and you'll come up with an answer.

SPEAKER_02 0:55

Yeah, you could.

SPEAKER_00 0:56

But wouldn't you really like to be generating some income along the way?

SPEAKER_02 1:00

Yeah, we see that a lot. You know, it's interesting. We've talked to a lot of clients this last couple of weeks. And it's funny, those are the meetings when we sit and look at each other at the end of the meeting after the client has walked out. I said, you know, that whole meeting was radio show material. And that's where we get a lot of our ideas. We've seen people that come into our office and all of their money is just either sitting in the bank or all of their money is sitting in other products that they think it's going to work, but they're not sure if it's going to work. Or we've seen a lot of clients come in recently that have had a lot of money in the market. And you know, the market right now is doing extremely well, but what happens when it isn't? What happens when it starts down? And that's kind of why our business model is different than most other financial advisors or stockbrokers. We have a business model that we kind of swim upstream in this financial world because we focus on income. We don't focus on growth, right?

SPEAKER_03 1:57

Yeah. Yet what we do is not new. It's been around for years and years and years. And for retirees that are focused on income and generating income, it works great. Yeah.

SPEAKER_02 2:09

And it's a strategy where we're using bond and bond-like instruments. Basically, Cheryl, I would say there's three boxes of investments or three categories of investments. On the left-hand side, let's just call that category. If you drew a T and divided it with two pegs on the bottom, you got the left-hand side that's the aggressive box. Okay? We all know what goes in the aggressive box. All the stocks, mutual funds, 401ks, all those aggressive investments. They can make a lot of money, but they can lose a lot of money. So on a risk scale of one to ten, that's a 10. Okay?

SPEAKER_04 2:44

Mm-hmm.

SPEAKER_02 2:44

Then you have clear over on the right on the other side is the conservative box. The conservative box. What are some things that you can think of, Cole, Cheryl, that are conservative that our listeners are out there thinking? CDs? CDs, for sure. Conservative. How about government bonds? That's pretty conservative. Government bonds are pretty conservative, you know? How about uh, well, there's some other things over there, you know, but then in the moderate box, most people don't even know the moderate box exists because most financial advisors don't spend any time in the moderate box. The moderate box that we specialize in is corporate bonds, preferred stocks, exchange traded funds, business development companies, real estate investment trusts. There are a whole lot of things that are in that moderate box and it's different than the aggressive box. Why is it so different? Because the moderate box is designed to create income. That's what you'll generally see on an investment portfolio that's all in bonds. Now, could you do that yourself? Yes, we've seen clients that have done it themselves. The gentleman we talked to this morning on the Zoom meeting, right? He's up in Maryland. Wonderful guy, very, very intelligent guy, you know, very wealthy guy, too. And he's been doing it himself for years. And he said, I just put some in bonds, I put some in preferred stocks, I put some in treasury notes, but he set himself all up for income. And yet he has a lot of money in the market because he can do it himself. He's not an investment advisor, he doesn't have the licenses, but he's a computer scientist and he's a doctor. I think he can figure out the stock market, you know. So with that in mind, you can do it yourself if you're knowledged. But if you're not, then you need some help. If you went to the doctors, let me just use a short analogy to show you the difference between financial practices, because there's a lot of places out there on every corner. You could go to Edward Jones, Merrill Lynch, T Rowell Price, um, you know, any of them, Janny and Janny, they're all around us. At Wells Fargo, Truist Bank, you're gonna get a different investment advisor at every place. Um, but if you went to a doctor, let's say, Cheryl, I know you just recently came from the doctor.

SPEAKER_00 4:54

I did.

SPEAKER_02 4:54

Yeah, but I'm glad you're feeling better. Thank you. Thank you for that. Thank goodness. We were kind of at a loss without our lead paddler in the canoe, weren't we, Cole? You know, for a couple weeks you were down and we were just like we can't do this without her. Well, I'm glad to be back, by the way. So if you hurt your back really bad, this is just a silly analogy, but if you hurt your back really bad, you have a choice. You know, and it's been bothering you for a year or two, and you knew you lifted that thing, and it just really something popped, and it just wasn't right ever since then. It's worse when you get up in the morning. You could go to an orthopedic doctor, right? We know what an orthopedic doctor does. He does some x-rays, he looks at things, he said, I'm gonna fuse this, I'm gonna cut that, I'm gonna do that. That's his business model. Or you could go to a chiropractor, right? Chiropractor does things very differently. They're both doctors, though. They're both gonna fix your back, but a chiropractor is gonna manipulate, he's gonna adjust things, he's gonna give you some vitamins to take. Then you could go to the holistic doctor. The holistic doctor, she's gonna sit down and show you some yoga stretches, she's gonna show you why you're 20 pounds, 25 pounds overweight, you need to get your stomach down, it'll help your back. She's gonna put you on a diet. All three of those will fix your back. But it's which one do you want to use? But in the financial practice, you could tell which doctor to go to because there's shingles hanging right over the door, orthopedic, you know, chiropractor, uh, holistic. But in the financial world, it just says financial advisor. And that can be really confusing because you don't understand their business model. And that's why a lot of people that look at our show or listening to our show, they call us right after that and they said, I like the way you're investing because we invest for income. We invest for, I shouldn't say the word safety because nothing's really safe, you know, except for CDs, maybe. But with our financial practice, we focus on the moderate box generating income and the conservative box, and there are items in both. So that'll kind of give you an idea as to where we're going with this show. The title of this show is How Should You Be Creating Income in Retirement? How should you create income? Because you can take income a lot of different ways, can't you, Cole? Yes, you can.

SPEAKER_00 7:00

Let me ask you this, guys. What are some questions? If someone is looking for a financial advisor, they tuned in today to see what you guys are all about. What are some questions that they would be smart to ask financial advisors as they're looking for the right one?

SPEAKER_02 7:16

That's a great question, Cheryl. Can you think of one, Cole? Because I can think of one right away.

SPEAKER_03 7:20

Yeah, well, I think it's important to really identify a few things. Number one, depending on where you're at in life, your goals with your retirement funds may be different than you know when you were in your 20s and 30s and forties. Right. Right. And so when you are interviewing investment advisors, or maybe you have one that you're really happy with, and you just want to make sure he's on the same track as you. Um, it would be important to know how much risk am I taking. Correct. And see, risk means different things to different people. If you go in and ask that question, you might get an answer that sounds good, but it doesn't really answer the question.

SPEAKER_02 7:58

Right.

SPEAKER_03 7:58

And so it's really identifying what is risky, what is not risky, what does this mean if I see another 2007, 2008 market crash? And I identifying, is my gut okay with that? Do I feel as if losing X amount in a serious correction is okay?

SPEAKER_02 8:16

Yeah, that brings up a question, Cole, and you know the answer to this because he's really the specialist for this. Uh he works with all of our clients. How do we determine the risk when a client brings their investment statements into our office? And let's say Jane and Mary or Jane and John come in for their first um they come in and sit down with us, they have six hundred thousand dollars in their portfolio or a million, it doesn't make any difference. The first thing, one of the first things we do is we analyze the risk and where they are. That's right. We give their accounts a stress test. Yeah.

SPEAKER_03 8:48

Yeah, and it we have software that does this, but it's it's really useful because the way that it represents how much risk an investment is exposed to is by a speed limit sign. Yeah. So it's very easy to figure out. If it's a low speed limit, like 25 or 30, it's pretty conservative. If it's a high speed limit, like 85 or 90 or 95, it's a very aggressive investment.

SPEAKER_02 9:15

And what that means is when the market does fluctuate and the market starts down, like we saw it just recently when we started bombing Iran. The market started down by a 10 or 15 percent. Those 98, 95, 90 mile an hour investments, they're going to go down with the market, right? And so because of that, we stress test the entire portfolio, don't we, Cole? Yeah, we do. And then they can see accurately what their investments are looking like in their portfolio. Because the other thing that we stress test is the client. And we ask them questions and we put them in a, you know, it's not a Monte Carlo simulation where we run a thousand different scenarios. We simply ask them, what does your gut tell you? You know, now you've moved from 55 years old to 65 years old, and you're ready to go through out of the accumulation phase and into the distribution phase, that's the biggest thing. And the question you asked, Cheryl, what should you be asking if you were going to take income? Let's say I brought you a million dollars, 14 or 15 or $20,000 a year, how are you going to give me income? And if the answer is, well, I'm going to count on the market, it's going to stay up, and when the market generates that and it grows, I'm going to pay you by selling shares of your investments. That's kind of the wrong answer. Because what happens then if you're doing that? Was that the uh that was the buzzer for wrong answer? Was that the stop problem? Yeah, that's I just heard that, and I was like selling shares and the market starts dropping, now you've created an entirely new problem, haven't you, Cole? Yes. That is called dollar loss averaging.

SPEAKER_00 11:04

Well, one thing, Bob and Cole, is that if you start to pull money, make withdrawals from your retirement savings accounts, if those accounts require you to pay tax when you pull that money out, then you're really taking out much more than you think you're taking out sometimes. Because you on occasion, we don't really wrap our heads around the fact that, okay, if I need to take out, I don't know, $2,000 a month, but I haven't paid taxes on that yet, I'm gonna have to take out more than that.

SPEAKER_02 11:35

Yeah. And one of the things we do, Cheryl, is we find out if the need that you have for income, that $2,000 a month is the amount that you need, then we have to take out $2,500 a month. Because 10%'s got to go to the federal government. We can take it out prior to you getting to your check, or you can take it out the whole year and settle up with the government at the end of the year. That's totally up to you. But we'll accommodate you either way. We just need to know what you'd like to do. But taking income from interest and dividends, if we're creating three, four, five, seven, eight percent interest and dividends somewhere in there, and you need to take your required minimum distribution at 73. We just recently had a client that came in, and we've seen this before. They had been taking their required minimum distribution from their IRA by selling shares of their account. And their balance goes down and down and down because they're not making five, five and a half percent. And that's what their RMD is five and a half percent, because she's you know, the the client is closing in on eighty years old. You know, when you get up around eighty, that starts at four percent. By the time you're eighty, you're taking five, five and a half percent of your account balance. So you can imagine RMDs, you really have to understand how they work, and that's a whole different show that we're gonna go over in the next couple weeks. How does that RMD really work? But the thing that we're talking about here is why do we invest for income? Because we can generate income, and we can generate as little or as much based on your risk score as you feel you need, and we can show you interest and dividends. There's a formula that we use for this, Cole, right? Can you explain that and go over that formula?

SPEAKER_03 13:16

Sure, yeah. So the formula is TR equals I plus g. That stands for total return equals income plus growth. Growth being capital appreciation. So if I buy the stock at 50 and it grows to $100 per share, that is your G. Right. And then what's the I? Well, income comes from two things, interest and dividends. And so my total return of my portfolio consists of a combination of growth, capital appreciation, and income from interest and dividends. Right.

SPEAKER_02 13:52

And so when we factor those in and we sit down and show you, one of the first things we do when you walk into our office after you've listened to us on the radio, or a client refers you to us, or we see you at a seminar, and you bring your investment statements in, you know, kind of like going to the doctor's office, he checks your blood pressure, then he checks your pulse, then he checks your oxygen and all that stuff. One of the first things we do when we open up your investment statements, I look for your total interest and dividends. I look over the last year and the year before, and I see how much income is your six hundred thousand dollar portfolio producing. What I normally see is one, two, two and a half percent on a six hundred thousand dollar portfolio. That means you're getting about ten or twelve thousand dollars a year. You can't really take more than that out because if you do, you're cutting up the chicken. You're cutting up the balance of your account, you're selling shares. But if you're generating four, five, six percent interest and dividends, and a lot of your income is coming in from six percent, you can afford to take out a four percent RMD from that account. So, how do we do what we do? How do we generate income? Well, there are a couple of investments in the moderate box that work really, really well.

SPEAKER_00 15:03

When someone comes in to speak with you, how do you begin? I mean, can you kind of pull back the curtain a little bit and let us in on how you start this discussion?

SPEAKER_02 15:13

Yes, I sure can, Cheryl. What we do is we sit down with them and we tell them, if you like our business model, we explain our business model, okay? That we specialize in the moderate and conservative box, and we'll go into a little more detail. We will set up a time, one whole meeting, that we will go into what we call a conservative money 101 tutorial. And that conservative money 101 tutorial means we're gonna explain every type of investment you could get. Well, within reason. The aggressive box, stocks, mutual funds are all over on the left, the moderate box, corporate bonds, preferred stocks, ETFs, exchange traded funds, business development company, and then the conservative box, items that are in the conservative box. We're gonna go through all that in detail so you understand how we invest, and then you tell us, John and Mary client, you tell us how you'd like to invest. Because we don't want to invest choosing our way, we want to invest choosing your way.

SPEAKER_03 16:09

Does that make sense? Yeah, and I think the content, you know, when we get into some of this stuff, this is after we've we've met, we've gotten to know each other, we understand that we can work together, and we've really walked through some of the goals that you have for your investment portfolio. Typically, the content we're gonna share today is something that's exclusively for clients. Right. So I think you guys are in for a treat today because when we get into the details of some of how this works, this is really the X's and O's of what we do. Right.

SPEAKER_02 16:40

And I think it's important for them to know because in the business model that we're gonna go into today, this is a business model, like Cole said in the first segment. It's not new. This is definitely not something new. You know, way back in 1929 and 30, you remember when the Roaring Twenties was going on, Cheryl?

SPEAKER_00 16:56

Well, I've read about it.

SPEAKER_02 16:57

No, you've read about it. I'm sorry. Cheryl, I didn't mean to ask it that way. Cheryl, do you remember reading stories about the Roaring Twenties?

SPEAKER_00 17:06

Yes, I do, Bob.

SPEAKER_02 17:07

And you probably saw the Great Gatsby movie. Well, when the market dropped 85 to 90 percent in 1929, and then it bounced for another 10, 15, 20 years after that, those people that lost millions, literally millions of dollars, you couldn't drag them back to a stock market that did that with a team of horses. So they invested with bond and bond-like instruments, things that pay regular interest and dividends that are set up for income, which is exactly what we do today. It's just a different business model.

SPEAKER_03 17:39

Yeah, it's predictable. It's very predictable. It's uh consistent. Yes. You know, it's controlling what you can control and not hoping with your fingers and toes crossed that things continue to go well in the economy. Exactly.

SPEAKER_02 17:52

Right. Now, we could invest in mutual funds, we could invest in stocks because we have the license to do so.

SPEAKER_03 17:59

Yeah, and for some clients we do. Yeah. You know, so it's not to say that those instruments are off the table.

SPEAKER_02 18:04

No.

SPEAKER_03 18:04

But I think ideally for our ideal client, when a couple walks into the office and we sit down and we talk about some of their goals that they have for their money, typically these are people that are nearing retirement or in retirement. Yeah. And, you know, when we talk about these strategies, I don't think we feel comfortable gambling with a retirement.

SPEAKER_02 18:24

That's that's exactly right. And what they'd like to do, even if they were the we call them do-it-yourself advisor, where they did it all themselves, like the gentleman we spoke to earlier today, you know, he said his concern was he's going on 80 years old. He's my concern is something happens to me and my wife cannot do what I do. Now she's gonna need an advisor like you to show her how to set things up for income so that she can take income the rest of her life, because statistically, he's a doctor, he should know. Statistically, his wife's gonna outlive him, and she's not gonna be able to do what he does, and he doesn't want to set her up for failure, you know. Although she's 78 or 80 years old, too. She doesn't want to take a three semesters of courses in how to invest so she can do what he does. You know what I mean? So, with that thought in mind, that's why we coach them and show them what we do, because we invest very conservatively to moderately based on their risk temperament. Right, Cole?

SPEAKER_03 19:22

Yeah. So let's jump into it. Let's talk about the three boxes and what we discuss. This is typically after a few meetings when they're ready to jump on board. Right. So we go through the three main boxes of investments. We've talked about this before, but we have the aggressive box. Imagine a T with one extra tail. Okay, upside down T. Yeah. Well T. Yeah, it's a right side up T. Right side up T. Two T's smash together. Two T tops are connected. Right. And you have two tails that come down. On the far left quadrant, that's the aggressive box.

SPEAKER_02 19:55

Right.

SPEAKER_03 19:55

And so in the aggressive box, this is where a majority of this box is focused on capital appreciation. Right. The problem is with growth comes risk. Right. And so because of that, your growth could easily turn into a loss, depending on how the stock market does. Right. In the middle box, we have the moderate box. And my dad's going to talk about this in great detail here in just a minute. But on the far right side, that's what we call the conservative box. And inside of the conservative box, there's three main institutions that control what is available in the conservative box. We talk about it in the acronym of big. It's banks, insurance companies, and the government. Those are the three main institutions that give investors conservative vehicles to invest in. And so what are some of those? I'm sure our listeners are familiar with some of these out here. Yeah, if I went to a bank, what would I get, Cole? CDs, right? CDs at the bank. That's pretty conservative. Yeah. Or money market accounts or savings accounts. Is there market risk in a CD?

SPEAKER_02 20:57

No, not to speak of. The only risk in a CD is that the bank might have a problem. Right. You know? And we've seen that happen in the last couple years. Yeah. Signature bank and some other banks out on the West Coast, you know, had a problem, you know. But normally banks are as conservative as you can get. But how much interest in dividends are you going to get? Two, three, four percent, maybe? You don't need us to do that for sure. You can put it in CDs. You probably have it in CDs, a lot of you listening. You know?

SPEAKER_03 21:23

And they're very predictable, interest-bearing accounts. Right. Right. You get what you sign up for, and it's no different. It's no different. Right. Very consistent. Now that's banks. Banks also provide liquid accounts like checking and savings accounts, but because it's so liquid, you really don't get very good interest. Yes, right. And so that's the banks. Insurance companies provide a couple different instruments, but let's jump to the government real quick. Yeah, the government.

SPEAKER_02 21:49

You could do a 10 year treasury note. You know, you could do a three year treasury note. You could do just a regular one year treasury note. You get about four, three, two percent, maybe three or four percent. Government bonds. Yeah, government bonds. You can always go into government bonds, but now you're basing everything on our government staying afloat. But you can do that yourself too. They don't really need us to get into government bonds, do they, Cole? I don't know, do they? No, they don't. No, they don't know. No, they don't. You don't need us to get into government bonds. You can buy them at the bank or you can buy them from the government. Now, what you do need us for are to explain the last part of the conservative box and tell us more about what insurance companies do, Cole.

SPEAKER_03 22:29

There's a couple different reasons why we look at insurance companies as a good investment institution now to use when you look at your different options in the conservative box. A couple things. So insurance companies, they're very different than banks for a couple of reasons. The biggest one is the amount of reserves that they're required to keep on hand. Meaning, you know, let's say you open a savings account at the bank. If you give them $100,000, how much of your $100,000 is actually held there at the bank? Not $100,000. No. I can tell you that. Because banks, like any business, they're trying to make money. And so their idea is if you give them $100, they're going to take 90 of it, loan it out, and make money on it, and you have $10,000 available to where if you need something, it's still kind of there. Kind of there. But I'm sure I don't know if our listeners have ever experienced this, but there are times where we have clients that that have tried this. They go in and they ask for a big chunk of their money, and the bank says, sorry, that's not available right now. Come back in two weeks and we'll have it in-house. Right? So your money is there, but it may not be all available to you at that time.

SPEAKER_00 23:39

Well, Cole, let me ask you this about annuities in particular, because there are still a lot of people who say, Oh, annuities. No, I'm not going there. There's still a bad feeling among some people about annuities. First of all, can you explain why and then tell us how they're different now than they used to be?

SPEAKER_03 23:57

Sure. Yeah. Well, I think step one is what is an annuity, right? If our listeners have heard the word but they don't really know what it is, Social Security, the idea is over your working years, you're taking a portion of your paycheck and you're putting it into a fund that you never see again. But the hope is this fund will pay you income for the rest of your life. That's an annuity. And so when we hear the word annuity at its most basic form, that's what it is. You're taking a lump sum of your money, you're putting it away with an insurance company so that at some point down the road, the insurance company will pay you for the rest of your life as long as you live. So it's a guaranteed income stream. Now, with that, annuities come in all different shapes and sizes. And this is where annuities tend to get a bad rap because of a few reasons. Number one, they come with surrender charges, just like CDs, there's a time commitment piece to an annuity. So if I put $100,000 in and next year I say, I want my hundred thousand back, I'm not going to get a hundred thousand because there's a penalty if I don't keep the annuity within the amount of the contract. Three years, five years, seven years, ten years, whatever it might be. And so that's one piece to where, you know, if if someone's putting all of your money into an annuity product, it's not a fiduciary decision right there. No. Because you don't have access.

SPEAKER_02 25:20

There's not liquidity. And actually, most insurance companies won't let them do that, will they? Hopefully not. Hopefully not. At this point.

SPEAKER_03 25:28

Because I do think suitability is pretty strict on what they approve now. But it didn't used to be like that.

SPEAKER_02 25:33

No, it didn't. And you know, back up 10, 15 years, you know, I've been doing this for a long time. There were agents out there, insurance agents out there, because there are commissions involved in annuities. You all know that. All right. If you don't know that, we'll tell you. But there were agents out there that would put all of Mrs. Johnson's, and she's 89, all of her 300,000 in one single annuity. Mrs. Johnson, 10, 15 years ago, needed to fix the windows the next year and she couldn't get to her money. What's Mrs. Johnson do? She sues the annuity company. So they don't do that anymore. They've developed suitability departments that look at everything to make sure it's in Mrs. Johnson's best interest. That's right. That's why we're fiduciaries. Everything's in the best interest of the client, not in the best interest of a commission or a stock or a whatever. It's in their best interest, your best interest if you're listening today. That's right.

SPEAKER_03 26:27

Yeah. And so along with annuities, you know, I could get into all of the details of why they are or are not a good investment for you. But I think to kind of broad brush today, what we're looking at is why is it a conservative investment? Well, inside of annuities, they work two different ways. This is how your money is invested in an annuity. Typically, the type that are good, the good annuities that we recommend to our clients, they index with the stock market.

SPEAKER_02 26:56

That's an interesting concept. Right. So I've got an upside, but no downside? No downside. Wow, that's interesting.

SPEAKER_03 27:02

And that's why we would consider it conservative, because you may find annuities out there that do have a downside. Those are not conservative investments. No, those are different types of annuities, aren't they?

SPEAKER_02 27:12

Yeah.

SPEAKER_03 27:13

Called variable annuities.

SPEAKER_02 27:14

Variable annuities. We don't sell variable annuities. As a matter of fact, I've done whole shows on annuities, and Cheryl, I think variable annuities, and they have huge amounts of fees, three and four percent, five percent fees in variable annuities. So we don't even sell those in our office. We do look at investments that have fixed indexed properties, and we explain indexing in detail when you come in for the meeting, show you how and why it works and why it works in your upside. It's kind of like if you're driving down the windy roads of West Virginia and it's dark and there's no guardrail going over that 300-foot drop. Okay? That's a variable annuity. But if you're in a fixed indexed annuity, there's a guardrail to protect you on the right. You don't drop at all. Got it?

SPEAKER_03 27:58

But one of the reasons why a lot of our clients find it an interesting and intriguing investment tool to pair with their managed money and everything else that they have is because the rate of return, the return on investment, is much greater than a bank CD. Much greater than a bank C D or a government bond. And um depending on your scenario, you know, it certain companies and products and rates might make more sense for you than others. So it's very similar to a CD, maybe a CD alternative, if you will. But the idea is there's little risk and much greater upside.

SPEAKER_02 28:36

And so, Cheryl, did you upgrade your phone last year or the year before?

SPEAKER_00 28:39

It's been a couple of years. It's been a couple years.

SPEAKER_02 28:42

But when we get a phone that may work really well, but when they come out with a new iPhone Pro 16 Max.

SPEAKER_00 28:47

Well, I'm not saying I don't want a new one.

SPEAKER_02 28:51

We want to go look at the benefits. It might be time for our listeners to upgrade or at least look at what's available in annuities. Because there are people out there listening today that have had annuities for 10, 15, and 20 years. We've seen clients come into our office and their advisor has not talked to them in 10 years. And their annuities, all of the income riders that were guaranteed to make 7%, they were making zero because they were all turned off. You need to upgrade those things, you know. You need to have somebody look at them on a regular basis. The advisor should be calling you once a year to reallocate your annuity, shouldn't he, Cole? Or he, she or he.

SPEAKER_03 29:31

Yeah. And just like with life insurance, I know we've talked about this before on the show. Maybe you don't even understand how your annuity works. And, you know, we know the questions to ask because we do this every day. But if there is a product out there, an annuity product that you might own that you haven't looked at, and we call the company and find out it's a fantastic investment, it's growing well, it's reducing your risk, you know, it's got all of the things that you're looking for, we will leave it alone. We will be happy to tell you and pat you on the back. Yeah, and give you a you know, at a boy for that one. Because a lot of times you just don't know how it works. Right. Whereas on the other side, the flip side, we could call and realize that you're paying four and a half percent in fees every year that you weren't aware of. Yeah, I mean, we've seen all kinds of different annuities. So if you have any questions about annuities that you may have or even life insurance, and you just want a better clarification of how it works, yeah, we can make that phone call for you.

SPEAKER_02 30:25

Our job, as you can tell, maybe from listening to our show, we're not trying to sell you something like a lot of advisors do when you walk into their office. We're trying to help educate you. And education is a huge part of this business, isn't it, Cheryl?

SPEAKER_00 30:40

You know, it's so important. Yeah, because the more you know, the better the decisions you can make.

SPEAKER_02 30:45

Right, exactly. There's a lot of people that we see, and they say, Well, I've talked to my advisor over at Edward Jones or Merrill Lynch or T Row Price or any of those companies, and he tells me I'm invested moderately. Don't they say that all the time, yeah, all the time. He says I'm invested moderately, and then we start to look at their investment portfolio, and they're invested in mutual funds, which have high fees, two and two and a half percent in fees inside them, and the mutual funds are aggressive, and then they have a whole bunch of cash sitting in there, 50, 60 percent in cash, and a whole bunch in aggressive stuff. And it's like having one foot in the fire and one foot in ice. Oh, I'm moderate, I feel comfortable. No, you don't. You're not moderate at all. You're very aggressive and on zero, and he's using that to balance their number out because the aggressive is balanced by the zero and it pulls them down to 40 or 50. That's not moderate. That's aggressive and zero. Okay, call it what it is. So a lot of people don't even know the moderate box exists because most stockbrokers, most financial advisors that are working at the big cookie cutter firms, they don't have a bond guy. Do you know why they don't have a bond guy, Cheryl?

SPEAKER_00 31:53

No. Why?

SPEAKER_02 31:54

Because they use a computer that invests in mutual funds. They say, I want some moderate mutual funds. You're moderate. I ran the questionnaire. You said you were moderate, they pushed the button on the computer. The computer invests them moderately in bond funds, which are similar but very different than bonds, and then stocks. And that's as far as they are. And then once they've done that, then they're done, and they'll call you if there's a change, or they'll just set it and forget it. To invest in individual corporate bonds, we have to go through each bond and know the financial background of the company. We have to understand the duration, we have to understand the convexity, and investing in bonds is much more difficult, but it winds up being a lot less risk because there are parts of a bond that you want to understand how it works.

SPEAKER_00 32:43

Well, Bob, if I can just jump in here, would you explain what a bond actually is?

SPEAKER_02 32:49

Right. That's a great question, too, because when you invest in stocks andor bond funds, you are buying a share. You are putting your money into a stock and you're buying a share of the stock. A bond is a hundred percent, there's a whole different market than the stock market. It's called the bond market. And in a bond, you are loaning your money to a company and the company owes you. Let's say you're buying a bond from Coca-Cola or you're buying a bond from Budweiser or Dell Notes. Dell Notes today has a coupon rate. It has four parts of that bond. Cheryl, it has the duration, how long it lasts, and let's say it's a 10-year bond. April of 2026 to April of 2036. It's a 10-year bond. Okay? So you know on April 13th of 2036, that's the maturity date on that bond. Now, it also has a price, a thousand dollar price, okay? But I can buy it because we buy multi-million dollar blocks of it, I can get it for $900 instead of a thousand. Okay? Discount. Like a discount. Like a discount, like you're going to Costco, exactly.

SPEAKER_00 33:55

Okay.

SPEAKER_02 33:55

Right on, thanks. We shop at Costco. Yes. All right. Now there's another part to that that's very, very important, and that's the coupon rate. There's a coupon rate stamped right on that bond that says five, five and a half, six. Today, Dell Notes bond is six and a half percent. That means if you put ten thousand dollars in a Dell Notes bond and you loan them ten thousand of your money, they owe you ten thousand back. It's a debt instrument, not a stock. What did you purchased? Very, very different. Because if something should happen to Dell Notes or Amazon or any of those bonds that you bought, you can buy bonds from any company that sells stock because that's how they invest. That's how they make their money. They sell stock and then they sell bonds. So just like Treasury notes, the government's selling bonds, okay? So when you invest in that bond, now that company, that corporate company, Dell Notes, Amaco, Firestone Tires, whatever company you're investing in, they owe you money. And if the company should have a problem and there's a market crash and the company should fold, bondholders get their money first before stockholders. So you're in a different order of dissolution. That's important to the client. That's what makes it a little bit safer. But it also reduces risk because bonds don't fluctuate like stocks do. Stocks may have well, we saw Costco today, Costco stock. It was up to $1,089 a share. Well, it's now down to $920 because there's pressure on their stock. But their bonds are holding strong. Okay? So we invest in bonds because they provide just like having a renter in a house. If you had a house for $600,000, that was the amount of your house. You own that house, you're not planning on selling that house. You put 10 renters in there, each of those renters has a different amount of investment that they're paying interest on. They're paying you the rent. So you're collecting from that six hundred thousand dollar house, let's say the total average investment for everybody is eight percent. That's forty-eight thousand dollars a year that you're getting in rents from your investment house. Right? Does that kind of make sense? So if the balance on the house fluctuates, six hundred thousand goes to six fifty or down to five fifty, it doesn't affect your rents at all. Your rents are contractual and there are four or five, six-year contracts signed with those rents. That's how bond and bond-like instruments work. We're fixed income specialists that pick the investments in the moderate box. We can use preferred stock that you can see anywhere from five to seven or eight percent. We can use business development companies that are a little higher in risk. So it really depends on your risk temperament when you come in. There are exchange traded funds in there, ETFs, which act like very, very different than mutual funds, much lower, lower in fees. And so all the investments in the modern box we analyze carefully, and it's all individual investments, as opposed to the aggressive box in a 401k where they throw you into a murky pool of mutual funds, and you don't even realize you're paying two, two and a half percent in those mutual funds to get in or get out. So that's why we specialize in the modern box and the conservative box, and then with those, then we take the next step after the third or fourth or fifth meeting, and we find out what's a good blend for the modern box, what's a good blend in the conservative box in the annuities that Cole was talking about, we figure out what's your portfolio, what you want it to do. Are you based on performance and trying to grow it? Or are you looking at the purpose and it's to provide income so I never run out of money during my lifetime? Because at the point you get to 65 to 75, your goal in life is to watch the grandkids play softball. To watch the grandkids kick the soccer ball. Okay, you don't want to watch the needle of the stock market. That's why you pay us to do that. And we charge as low as we can, we charge a 1% fee. So if you're earning six or seven or eight or nine percent, whatever, we take one percent out of that, you're still netting more than enough to take your required minimum distribution out. And you don't have to touch the principal. Yeah, that's right.

SPEAKER_03 38:01

Yeah, so today we talked about the details of how we do what we do. But for some of our listeners out there, they love it. Like we have clients come in that are engineers and they're like, I want to know exactly every little stat that you've tracked on this bond.

SPEAKER_02 38:16

The gentleman today, today was our second or third meeting with him, and he says it's gonna take me till October to figure this out.

SPEAKER_04 38:22

Yeah, that's fine, man.

SPEAKER_02 38:25

But he is a computer scientist that wants to understand how everything works, which is fine. That's cool. We say to all our clients when they come in, when you sign up with Reliable Wealth Financial Group, if it takes one meeting or ten meetings, we roll up our sleeves and go to work for you.

SPEAKER_05 38:39

Yep.

SPEAKER_02 38:40

So that we can show you and we earn our fee. Right. Yeah.

SPEAKER_03 38:44

Yeah, but you know, not all of our listeners out there are like that. No. And some of them just say, Okay, great. I got that you can do all of these fancy things with bonds and stuff, but I just want to, like you said, go watch the grandkids play soccer. And so that's where taking this business model and creating a plan is really where action happens, right? I mean, hearing about bonds and preferred stocks and all this stuff is great from our perspective of here's how we do what we do. But even though it's great detail and some of them may love it, at the end of the day, they just want to know that I'm getting my fixed income checks every month that I can live on, that I can do the things I want to do in life in retirement and not have to worry about my money. Right. And so that's where taking this business model and taking it one step further to the retirement income map is really where our clients see this plan come to life. Right. And what that looks like is taking all of these income streams that we're talking about that we're generating with investments, but also incorporating Social Security and pension funds and life insurance and long-term care and estate planning and putting that into one plan so that you and your husband or wife and your children, they know how to execute. Right.

SPEAKER_02 40:00

And remember, I told you, Cole, and and just so you know, Cheryl, this last weekend I went down to the lake, Smith Mountain Lake, near Roanoke, okay? Beautiful lake. And we own a place to stay down there. It's not a house, not a house at all. It's a big fifth wheel that sleeps eight, okay? And then we have a boat, pontoon boat, and then we have a golf cart that we ride around in, so we can be like the happy retiring couples that are riding around down there, you know? Yeah. While I'm down there, I'm eating dinner with our neighbors. And he says to me, Bob, I'm I know you're a financial planner. He said, and I'm not going to use their names because they live really close here and they'll probably listen to the show. All right. But he said, I'm 55 or 56, and I'm getting close to retirement, and I could actually retire now, but I'm not sure since I bought this new fifth wheel down here, and I now want to get a boat. I'm spending money like it's water. I'm not sure if I can retire. I said, You need to talk to us about the retirement income map. We can show you exactly how long you need to work. We can show you different scenarios on if you retire next year or if you retire three years from now, or if you start taking income or how to pay for that boat. We do all that with the retirement income map, don't we, Cole? Oh, yeah. Can you explain a little bit on how that works for our clients? That's the best part of the secret sauce, I think.

SPEAKER_03 41:13

Yeah. Yeah, because it turns the detailed instrument X and O investment plan into real life. And that's where, you know, if there are questions about whether it's big or small, you know, we're looking at moving and buying a new house, or we have this pension that we haven't turned on yet. Should I take the lump sum or should I take a monthly payment? All of that stuff, we can factor in different scenarios and show you on paper here's what would happen if you did buy the new house, or here's what would happen if you did take the lump sum option. Or my car just crapped down on me.

SPEAKER_02 41:46

I need to go get a new car for $28,000. Do I have enough income coming in? We can show you that on paper.

SPEAKER_03 41:52

Some clients love to calculate this stuff on spreadsheets, and that's great. And honestly, that's me. I love spreadsheets. But when it comes to retirement, there's a lot of factors to consider, like taxes, nursing care, like nursing care. Right. You know, what happens to your estate? What happens to your total investment income? You know, all of that is important to consider. So I think if you don't have something like this that you're tracking on your own, or if you have an advisor that hasn't really gone into the planning part and just talked about the investment part, reach out to us and we can at least come up with some ideas on how to either ask your advisor to do this or maybe consider, you know, working on a plan that will actually solve the problem.

SPEAKER_02 42:33

Yeah, and we've even gotten into the point now, Cheryl, after a week-long stay, I guess almost up in Minneapolis, we're working with a program where we can do wills and trusts.

SPEAKER_05 42:42

Yeah.

SPEAKER_02 42:43

And so we can help you with your estate planning in great detail. Yeah.

SPEAKER_03 42:47

So just to you know, disclaimer, we are not estate planning attorneys.

SPEAKER_02 42:51

No. But we work closely with them. With a team of estate planning attorneys that will write the trust and the will. We just guide them and direct them. So, Cheryl, thank you for guiding us again down our journey of the moderate box and conservative money 101 and how do we create income in retirement? You want to make sure your money lasts longer than you do. Mm-hmm.

SPEAKER_01 43:14

Be sure to like, follow, or subscribe to the Reliable Wealth Financial Group podcast so you'll never miss an episode. To learn more about the Reliable Wealth team and to check out the Reliable Wealth Financial hour, be sure to visit our website, Reliablewealthfinancial.com. Insurance products are offered through the insurance business of Reliable Wealth Financial LLC. Investment Advisory Services is offered through Single Advisor's Wealth LLC. Single Wealth and SEC Registered Investment Advisor. Reliable Wealth Financial and Single Wealth are unaffiliated companies. Single Wealth does not offer insurance products. Registration with the SEC does not apply a certain level of skill or training. The insurance products offered by Reliable Wealth Financial Group LLC are not subject to investment advisor requirements. Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss. Insurance and annuity guarantees are backed by the financial strength and claims spending ability of the issuing company. Past performance may not be used to predict or project future results. Neither the firm nor its agents or representatives are affiliated with or endorsed by any government agency and do not give tax or legal advice. This material is for informational purposes only and should not be construed as a recommendation or advice for your particular situation. Consult with qualified financial tax and legal professionals for guidance before making financial decisions.