Analyzing the Right Annuity for You

This episode explores strategies for retirement planning, focusing on guaranteed income solutions like annuities, social security timing, and tax strategies to ensure a secure financial future.

Transcript

SPEAKER_01 0:00

Welcome to the Heart of Your Money with Joe Yakovic, president and founder of JML Financial Group. We hope today's show can help you on the road to your financial wellness. Now, here's Joe Yakovic and the Heart of Your Money.

SPEAKER_02 0:15

Have you figured out how your 401 is going to go from an accumulation vehicle to a distribution vehicle? Meaning that you have to now have the money taken out and given to you on a timeline, you know, for the rest of your life or some certain periods because RMD will kick in. You know, have you have you thought about the math and the science of not running out of money? You know, that's just the things that we do. Have you set it and have you set a plan for taxes and RMD altogether? I mean, these are a lot of things that we talk to clients about every day. So when I'm sitting down with a client, and luckily for me and and our firm, we use AI at the highest level. So it really helps us organize our thoughts, our processes, but give them a real, you know, a lane to follow, and then give them some, you know, choices in the overall plan. You know, getting down a mountain is the most difficult part of planning, and no one has ever talked to people because why? You had that pension plan. You never worried. You knew that check was coming every single month. And if you can do that with what we do, and we do that exactly, we we mimic a pension plan when we give put plans together for clients. A portion of your money is specifically designed just for that, working similar to a pension plan.

SPEAKER_00 1:36

Joe, I want to talk about the strategies that you recommend for guaranteed lifetime income.

SPEAKER_02 1:42

Um I'm good friends with some of these uh really, really smart guys, and one guy in particular is uh a guy named Lawrence Kulakoff. And uh he uses calculus, which we do, uh he is a master uh of math and science when it comes to social security. So the first thing that we talk to clients about is when we take Social Security, when is the right time to take it? And we'll show the numbers to you, we do the math and science on it, we find out about who makes the most amount amount of money, their ages, their health, etc. etc. So we we determine you know what makes the most sounded situation for that individual, because it's always different for every s single person that we talk to when they take it or how long uh when they start it. Because again, you can take it at 62 or you can take it at 70. And again, that's that's a 76% difference from 62 to 70 in terms of uh the income. So again, it's a longevity factor, which is a major concern, especially in an environment with volatile uh oil prices. You say, well, what has that to do with that? Well, don't forget something before I get into the final answer of why I'm gonna tell you why I'm using the type of vehicles that we use for for income. Remember, when oil prices surge, people don't realize this, it drives inflation up higher, it erodes purchasing power and potentially squeezing those fixed income vehicles that we look at for retirees. So again, addressing the longevity risk. So we use guaranteed lifetime, and you hear me say lifetime annuities despite market shifts. And we can build this multi-phase withdrawal plan in the earlier years. So again, we draw upon growth assets and later switch to more of a conservative holding, and then finally we stress test your projections. Sometimes we get caught off guard. We use annuities specifically just for that. Then you have long-term care, who's gonna pay for that? And and some of these benefits and these annuities, they'll pay double the income that it spits out. So it depends on the type of annuity that we present, but I want to go over that because it's something that people need to be aware of. It's another component of all the other components. If you could say to me, Joe, I need $5,000 or $6,000 or whatever dollar amount that you need going into retirement, I'm gonna ask you a few questions.

SPEAKER_00 4:01

You know, now you're talking about monthly income.

SPEAKER_02 4:04

Monthly, monthly, correct. And I'm gonna ask you these questions. I'm gonna ask you very point blank, you know, how much do you need to live the lifestyle that you're accustomed to? What kind of hobbies do you have? How much money have you saved? I mean, these are all questions that we have, and we get personal, but we also more concerned about you know helping them get the maximum benefit of every dollar they worked hard for. And one of the things that we talk about is there's different types of annuities. There's a fixed annuity, there's a variable annuity, and there's an index annuity. Each one positions the dollar amount differently. So it depends on um you know what type of product that you pick, and these your objectives may be, and how old you are. The other thing is we use a lot of income rider annuities where in the event that that person becomes incapacitated, they're actually paid double their normal monthly income for five years straight. So again, it depends on the type of income annuity and rider that you have built into the annuity. We realize that in in our case, um Fidelity just said this guaranteed lifetime annuity, a paycheck that will never stop. You know, it's a spending decision that you have. You know, some of them are deferred, some of them have um Roth IRAs connecting to them. But it's not a free pass everything. I mean, as the new the annuity grows, the withdrawals are sometimes, in a lot of cases, taxed at ordinary income tax. So you have a tax deferred annuity and you have an income smoothing out the income. But again, a lot of these type of vehicles coincide with pensions, IRA distributions, and Social Security. So it gives you an overall tax strategy going into retirement. Again, anything other than above that dollar amount. So for instance, if you said to me, Joe, I get a pension, I got a small pension, whatever, I get some Social Security, and uh that amounts to husband and wife will say four or five thousand dollars a month, and I need six thousand dollars. Well, I have to fund for that thousand dollars a month, and where do I find that dollar amount? Everything above that, we are putting in the equity market. We want to make sure that your rest of your money is growing, and at that time you don't need the money, at least for a number of years, because we set it up purposely for you to grope your money and you have all that guaranteed income that is covering your bills that you have to pay every month. Yeah, every month. I just covered everything you needed. You'll never have to worry. And believe it or not, Sari, people that do what I'm explaining to you, their spending habits actually increase. See, what happens is when you're going into retirement and you know your income every single month, it's different than having a uh you know, a lump sum of money and doing your best to try to take enough dollars out when the market's going up and down, and you might not pull out or pull too much at the wrong time. So you're you're hesitant. It's scary. Very scary. So what we try to do, we try to help our clients at least fund for the guaranteed things that they need and they want to live the lifestyle. Everything else, and what we found that people live with guaranteed incomes like annuity, like a pension, like a social security. Guess what? They live better. They spend actually more money that way because they don't they're they know exactly what they're gonna get every single month. Where somebody has a lot of money, they don't know what what they're looking at. And anything could change with them. You know, if you think about it, you know, a 20% up on a million-dollar pol or a million-dollar contract is, you know, um $1.2 million. But if if they lost 20% in the market, that's $800,000. Those people that have that issue that they're faced with, they start getting concerned. So what we do is we put plans together specifically to fund for that that spread different, that we call it the gap, so to speak, and we keep them on point. We use the master plan to monitor it every single year to make sure we're on point and we're going down the right road for them.

SPEAKER_01 8:19

Securities and investment advisory services offered through Integrity Alliance LLC, member SIPC. Integrity Wealth is a marketing name for Integrity Alliance LLC and is not affiliated with Integrity Wealth. Joe Yakovich is an investment advisor representative and registered representative with Integrity Alliance LLC, a registered investment advisor and member SIPC. Integrity Wealth is a marketing name for Integrity Alliance LLC. Integrity Wealth is not an affiliated company. Opinions expressed on this program do not necessarily reflect those of Integrity Wealth. The topics discussed and opinions given are not intended to address the specific needs of any listener. JML Financial Group does not offer legal or tax advice. Listeners are encouraged to discuss their financial needs with the appropriate professional regarding your individual circumstance. Past performance is no guarantee of future results. Diversification does not guarantee a profit or protect against the loss in a declining market. It is a method used to help manage investment risk. Fixed annuities are long-term insurance contracts, and there is a surrender charge imposed generally during the first five to seven years that you own the annuity contract. Indexed annuities are insurance contracts that, depending on the contract, may offer a guaranteed annual interest rate and some participation if any of a stock market index. Such contracts have substantial variation in terms, cost of guarantees, and features, and may cap participation or returns in significant ways. Investors are cautioned to carefully review an indexed annuity for its features, costs, risks, and how the variables are calculated. Any guarantees offered are backed by the financial strength of the insurance company. Surrender charges apply if not held to the end of the term. Withdrawals are taxed as ordinary income and if taken prior to 59.5%, a 10% federal tax penalty. Converting an employer plan account or traditional IRA to a Roth IRA is a taxable event. Increased taxable income from Roth IRA conversion may have several consequences, including but not limited to a need for additional tax withholding or estimated tax payments, the loss of certain tax deductions and credits, and higher taxes on Social Security benefits and higher Medicare premiums. Be sure to consult with a qualified tax advisor before making any decisions regarding your IRA. Rebalancing reallocating can entail transaction costs and tax consequences that should be considered when determining a rebalancing reallocation strategy.