S10 E221 - Money Matters

In this informative episode, host Wendy Jones sits down with Brian Kurtz, a seasoned financial advisor with AIP Financial.

Brian breaks down complex retirement planning topics in a simple and practical way, including how RMDs work, why they matter, and how failing to take them properly can lead to IRS penalties.

We dive into the world of annuities, explaining the differences between immediate and deferred , as well as fixed, indexed, and multi-year guaranteed annuities (MYGAs). Brian highlights how these tools can provide guaranteed income, protect against market losses, and offer stability in uncertain financial times.

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Key Highlights in this Episode:

Understanding RMDs (Required Minimum Distributions):
Brian explains how RMDs begin at age 73, how they are calculated based on retirement account balances and life expectancy, and why missing them can result in IRS penalties. He also shares strategies for managing withdrawals across multiple accounts.

Tax-Smart Retirement Strategies:
Learn how Qualified Charitable Distributions (QCDs) can allow retirees to satisfy RMD requirements while reducing taxable income and supporting charitable organizations.

Annuities Simplified:
Brian breaks down immediate vs. deferred annuities, and explains how fixed annuities—including indexed annuities and MYGAs—can provide guaranteed growth, income security, and protection from market downturns.

Safe Money vs. Growth Investing:
A practical discussion on balancing retirement portfolios.

Podcast Schedule: Tune in to Next Steps for Seniors with new episodes dropping twice a week at 7:00 AM!

Every Tuesday: Educational and insightful content to help you navigate the practical steps of aging.

Every Friday: Spiritual and emotional support to encourage your heart and mind.

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Transcript

SPEAKER_00 0:00

This is Next Steps for Seniors with your host, Wendy Jones. Each week, Wendy brings resources and information to help guide you through those next steps with elderly parents and loved ones. If you have questions or topic suggestions, you can call us at 248-651-5010.

SPEAKER_02 0:19

Hello and welcome to Next Steps for Seniors Conversations on Aging. I am your host, Wendy Jones, and I have a very special guest in the studio who actually was a radio host for 25 years, right, Brian?

SPEAKER_01 0:33

25 and a half.

SPEAKER_02 0:34

Drumroll, please, Brian Kurtz from AIP Financial. How are you, Brian?

SPEAKER_01 0:40

I'm doing well. Thank you. It's good to see you again, and thanks for having me on. Wendy was the one, by the way, who got me on this station back in 2018. And then I stopped doing my show at the end of 24.

SPEAKER_02 0:52

And it was called Money Matters because Money Matters. And that's going to be the title of our show today. Money Matters. And it does because I gotta be honest, we all plan for retirement, but we don't plan for something to happen to us as we age. And 70% of the people actually need some kind of care as they age. And guess what? Care costs money. It's all private pay. People think it's covered under insurance, but Brian and I know not so much.

SPEAKER_01 1:21

Not always. I had a I had a guest that was kind of a frequent flyer on the show named Gene Pastula, and he was the creator of MoneyGuard, Lincoln Financial, which was the first kind of annuity that has some long-term care benefits. And the way he put it when he was for the most part, very few of us go from being completely healthy to being completely deceased without some period of declining health in between. Right, something else. And so that's what this product was designed for. And they've done very well with Money Garden. Now there's a whole bunch of other hybrids and other, you know, ways to skin the cat. But he was the he was one of the pioneers.

SPEAKER_02 1:56

Well, this is a huge topic for me because the average assisted living, Brian, is like $7,000 a month for one person. Now that includes all your care and food and you know, everything's included in that. However, that's a lot of money a month. Especially where on when you're on a limited income, right? So all the money you've saved your whole life that you didn't spend in retirement, you're gonna need.

SPEAKER_01 2:20

Absolutely. It's a good, you know, and there's different products that you can use to help set you up for that. But as you found out, not everyone plans for that. That's why you were kind enough to start the foundation, which has been so useful to so many people in helping them find a safe place to stay.

SPEAKER_02 2:36

Exactly. It's shocking, it's very expensive, and I feel like we're pricing ourselves out of the market. But let's talk about money now. So I had a client, this is just a quick story, told him I was doing a financial segment with AIP financial, and they said, Wendy, I would like to know how RMD works because I got a fine this year. And I'm like, a fine from the IRS? Why why would somebody Yeah, the IRS can fine you?

SPEAKER_01 3:03

I'll tell you, Wendy, I uh just by way of background on me a little bit, I've been a full service financial advisor for 32 and a half years. Of course. From ever since October 1st, 1993. And we do investments, we do insurances and annuities, estate planning. We have an attorney right next door to me in the office. So revocable trust, powers of attorney, all of that. IRAs and IRA distributions are probably the number one thing that people get confused and concerned about, and rightfully so. The reason why they got a fine would be that they did not take out enough. The RMD stands for, as you know, required minimum distribution. It used to be that you had to begin withdrawing money from your IRA accounts, 403Bs, 401ks, you know, all of that, at age 70 and a half. Whoever came up with that, I have no idea. That's the dumbest thing I've ever heard. 70 and a half. Okay, let me figure out the math. What that is, right? Right. And then but then you had till April 1st of the year after it was weird. Then the Secure Act 1.0 changed that to 72. Secure Act 2.0 changed that to 73. So now the minimum distribution beginning age is the year that you turn 73. And you have to take out a certain percentage based on your life expectancy. We keep copies of the chart in my office. Any of your listeners that want one can call you or call me and get one. But if you don't take out the required minimum distribution, there can be fines and penalties for not having done so. And the reason is simple the IRS allows you to defer tax on this money that you've saved all your life working, whether it be an IRA or 401k or whatever. But then once you do retire, they want you to start taking it out so that they can collect their taxes on it and uh and go from there. So the RMD, based on a sliding scale, you do not have to take, here's another misconception since we're on the subject. Yeah, no, this is good. You do not have to take money out of every IRA you have. Let's say you have a 401k $600,000, you roll it over into a couple of different IRAs. Two, three, six, you can have as many IRAs as you want. At the end of, let's say you turn 73, or we're gonna turn 73 this year. Okay. If we're figuring out the RMDs for a client, we would take the total of all your IRAs as of 1231, 2025, the end of last year. Got it. And divide it by the factor corresponding to your age, meaning your life expectancy, and then you come up with a number, and the IRS says you have to take out at least that much by the end of this year. They don't care where you get it from. They don't care if you get it in a lump sum or if you spread it out over time or you could wait till the end of the year and take it on December 29th. You could. I well, I wouldn't cut it that close, but yes, you could theoretically.

SPEAKER_02 5:56

I'm just wondering if this guy did that.

SPEAKER_01 5:58

A lot of my companies say we have to have the request by the 10th of December because we're not working the holidays either.

SPEAKER_02 6:04

Exactly. So better sooner than later, too, so you can spend the money.

SPEAKER_01 6:07

Well, and depending, this is offers the opportunity for some planning. If you have a modest IRA and your RMD required minimum distribution for the year is six or seven thousand, I have a lot of people who say, Well, let's do it November 1st. I like a little infusion of cash before Christmas. Good idea. If you have substantial retirement assets and maybe you've got a million dollars in your qualified accounts and your required minimum distribution is forty-two thousand dollars for this year. Well, let's plan for that a little bit, and a lot of my clients will opt to take that as a monthly check. $42,000 divided by $12 would be $3,500 a month. Let's treat it like another pension. You know, the IRS just cares that you get it from somewhere by the end of the year so that it shows up on your 1040 form. And there's ways to avoid that too that I can tell you about if you want to know.

SPEAKER_02 6:55

I kind of do now. Aren't we all interested?

SPEAKER_01 6:58

Well, you know, you have a foundation that I have donated to and encouraged other people to donate to. It's a 501c3 organization. Your listeners have their own charities that they support, whether it be a church or the Humane Society or St. Jude's or what have you, right? So a lot of us are charitably inclined and give regularly to churches, whether it's tithing or what have you. Well, let's say you regularly give $12,000 a year to a charity, $6,000, whatever it is, okay? I have a lot of clients that are a little bit annoyed, frankly, that they have to take out these RMDs. They have pensions, they have Social Security, they'd rather keep the money in there than in the IRAs than take it out. Well, if you are charitably inclined anyway, you can choose to do what's called a directed donation, meaning you can have your custodian wherever the IRA sits, Charles Schwab or an insurance company or whoever your brokerage, cut a check directly to the charity. They can even send it to you because so you can deliver it to the charity or they can send it right to the charity, and then it satisfies your required minimum distribution requirement. The IRS allows for that, and it never hits your 1040 form. It's not like you have to declare it and then deduct it. And the reason that makes a difference is it doesn't adjust your gross income so you don't run into having to pay more for Medicare Part B, you don't run into IRMA or any of that, you know? And so directed donations. I have a number of my clients that do them, and I highly encourage that. Particularly if you're charitably inclined anyway, why not use part of your RMDs and do it with tax-deductible dollars?

SPEAKER_02 8:36

I love this idea. We actually do have a few people that are doing that for Next Steps for Seniors Foundation. And just to tag on what Brian said, so so many people don't have the funds that you need in order to move safely. And that's what our foundation does is we bridge the gap between what they have and what they need to live safely because it is so expensive. And we both physically, spiritually, and financially help our seniors. So thank you for that plug. I appreciate that you said that.

SPEAKER_01 9:04

And you knew I wasn't gonna get out of here without talking about the foundation.

SPEAKER_02 9:08

You have been a huge supporter, Brian, and I we appreciate that more than ever anything, honestly, because those of us who are blessed to have some funds, we do want to give back. And people are philanthropic, praise God, because why not help others? So I thank you for that. So let's talk about you because where is AIP financial located, right?

SPEAKER_01 9:27

We are located, and I used to love saying this on the radio. Our office is in the AIP building. It's a nice one-story office building on the northeast corner of Square Lake and John Ar in Troy, right across the street from Kensington Church, uh, if you know where that is. And I used to say we're located in the nice part of Troy that still has trees, unlike the concrete corridor along Big Beaver where you can't go for a walk at lunchtime without tripping over a financial advisor.

SPEAKER_02 9:53

You are so funny. So, yes, if you're in Michigan, AIP financial, he is your guy. If you're outside of Michigan, he's gonna tell you what to look for in a financial advisor because there is some very important things you should know.

SPEAKER_01 10:06

I can do things outside of Michigan as well. I am I am insurance licensed in the state of Michigan, Arizona, North Carolina, and South Carolina, and security is licensed everywhere. Perfect. So I have investment clients, as you might imagine, uh snowbirds, you know, that spend a good part of their time in Nevada or Arizona.

SPEAKER_02 10:23

And I can't blame them. Yeah, just saying this winter was brutal in Michigan.

SPEAKER_01 10:28

I would love to have a place in Florida, and I said, you know what? I could spend the first two months of the year driving around Florida visiting clients of mine who were smarter than me and already moved there.

SPEAKER_02 10:38

Brian's gonna give his number very quickly, and then you're gonna grab a pen and paper because we are gonna go into our next segment and talk about annuities, and this is info you are not gonna want to forget. Brian, share your number.

SPEAKER_01 10:48

You can reach us toll-free, 866-AIP money. That's 866-247-6663.

SPEAKER_02 10:58

Thank you so much for tuning in to Next Steps for Seniors. We'll be back in just a moment. Welcome back to Next Steps for Seniors Conversations on Aging. Our topic today, money matters. Why? Because it does.

SPEAKER_01 11:16

Because it does. We can't get around that.

SPEAKER_02 11:19

We could do anything we want to try to forget about money, but it still shows its ugly head all the time. And we are blessed to have Brian Kurtz here from AIP Financial. And we gave his phone number in the last segment. I'm gonna have him do it one more time.

SPEAKER_01 11:32

866-AIP Money. 866-247-6663.

SPEAKER_02 11:38

That was a smart number, Brian. Okay, so we're gonna talk about annuities. I would love you to explain to us what annuities are, how they work, and how we can use them to make some money.

SPEAKER_01 11:49

Well, we do a lot of annuities. It's not exclusively what we do. I don't love annuities so much that it's all I would do. I don't love securities so much that it's all I would do. A lot of my clients have a good blend, but just like stocks and some mutual funds, Wendy, there are good annuities and bad annuities, you know? And an annuity is in its simplest form a contract with an insurance company that gives you some guarantees and invests in certain things. There's really people make annuities complicated. I've seen a lot of negative articles about annuities. Most of the negativity surrounds variable annuities, and there's good reason for that, and I'll get into that in just a moment, too. But there's really only two types of annuities. There are immediate annuities and deferred annuities. An immediate annuity is like buying a pension. You give me a lump sum of money, and I will give you a check that you can't outlive, or that will pay out for a certain amount of time. Okay? The best uh example I can give you there is Social Security. Social Security, you've paid in a bunch of money, they give you a check that you can't outlive. The lottery gives you the option of buying an immediate annuity too, if you happen to be lucky enough to win. Most people don't do that because it's not that there aren't some, but most people don't do immediate annuities because it's irrevocable. You can't get that lump sum back. Okay? So that leaves us with deferred annuities. They are tax deferred, they range in time frame from two years to 16 years, and there are surrender penalties if you cash in early, much like a CD, and we'll get into that comparison too. But that leaves us with deferred. That's mostly what we do. Under deferred annuities, there are only two types fixed and variable. Now, I don't do variable annuities at AIP financial for the simple reason that I've yet to find one that I can sleep with. I have a conscience. I'm not saying there's never an occasion to use a variable annuity. I'm just saying I haven't found one yet. Okay. Because you never say never. So we do fixed annuities. It's the safe side of my business, okay? We do a lot of securities, we do full service investment planning, mutual funds, ETFs, tax efficient stuff, market-based. The market has done very well for the last several years. I have a significant portion of my clientele that likes to keep at least part of the money in a vehicle where it cannot go down. That just makes sense to me. It's how I've invested my own money. I've got, you know, two indexed annuities, one fixed annuity, and a bunch of securities. You know, I put my clients who are my age and and similar into a similar setup, you know, because there always should be a piece of it, in my opinion, that can't go down.

SPEAKER_02 14:31

Yeah, a little diversified. Right. Well, well, exactly.

SPEAKER_01 14:34

And under fixed annuities, there's really only two types an indexed annuity and a traditional, what we call a myga. Okay. An indexed annuity is based on the market in only one regard, in that your interest rate and your interest rate only can be tied to one of the market indexes. The one I use most often is the S P 500. So if you put, let's say, $100,000 in an indexed annuity, your interest rate can be tied to how well the S P 500 does. In other words, if the market goes up, you're going to get a piece of that gain. You will not get all of it because they are not allowed, they being the insurance company, are not allowed to put your money into the market because they're not allowed to lose it. So you might have a cap of six and a half percent. You'll get whatever goes up up to six and a half percent. If it goes up fifteen, you're only getting six and a half. What do you give up for that? Well, if it goes down twenty percent, you're gonna get zero. You won't ever take a loss. And then you will start over again. The indexed annuities, the sweet spot is kind of the ten years right now. You get four things with an indexed annuity. Big fat bonus. We've got bonuses up to twenty-one twenty percent.

SPEAKER_02 15:50

We like that.

SPEAKER_01 15:51

Yeah, so a hundred thousand starts out at a hundred and twenty-one thousand. And that's not because they're angels or anything, it's just because they get to keep a piece of that money for up to ten years so that you know they can make some money on it too. So big fat bonus, absolute safety, no fees, and a competitive return. What you give up in exchange is liquidity. You can't get at any more than 10% of that money for the duration of the annuity. And it's a good thing. And how long is that usually? 10% per year. You can take out up to 10% per year.

SPEAKER_02 16:25

If it's 10 years, like you mentioned, which was a good one, that would be you get 10% per year up to 10 years, and that's it. You can't take anything else. Okay. Right. So make sure it's kind of extra. Well, exactly.

SPEAKER_01 16:33

Like Axonic Life is one example of a company right now. They have a 20% upfront bonus. If you put it in $100,000, you start at 120, you're gonna make between zero and I think it's six and a quarter. And then each year we can take 10% of that contract and move it over to the security side, to the investment side, where we will also have a piece. So my mantra is take all the free money you can get, but don't fall in love. Don't stay there. You know, and we have annual meetings, at least annual meetings, and meet with clients and make that part of the strategy is that we're moving money in, you're dollar cost averaging, you're doing all kinds of stuff.

SPEAKER_02 17:09

Well, and what I love, Brian, is everybody's a little different, right? We all have a different risk, you know. I'm gonna just say the barrel, right? We're like, I'm not really there, I'm on the other end of that. Well, but you know, you talk to your clients, you get to know them, you care about them, you feel out where they're at, and then you meet their need, what they need, depending on the situation.

SPEAKER_01 17:27

You have to talk to them and get to know them. I'm a fiduciary, Wendy, so that means I have a legal obligation to act in the best interest of my client. And I'm not saying that advisors that are not fiduciaries don't do that anyway. Everyone should, right? And and most of them do. So that's part of the process. That's why I don't charge for consultations. I'm licensed to do that. I can charge by the hour, but I don't want people to feel like there's a meter running, you know, if we talk about the tigers, which I am a big tendency to do. Yeah, that you know, you're not gonna get charged.

SPEAKER_02 17:58

By the way, they're not doing so bad. They actually have one. You know what?

SPEAKER_01 18:01

They had the worst May in 30 years, but in June so far they've been doing pretty well. So we'll see. And then the other type of fixed annuity is a myga, multi-year guaranteed annuity. These are the simplest. We do a ton of these two simply because they pay better. I'm gonna compare a myga to a CD. Everyone knows what a CD at a bank is, right? Certificate of deposits, a contract between you and the bank where you get a specified rate for a specified amount of time, and that's that. It doesn't matter what happens on Wall Street or Baghdad or China, right? And a MIGA, multi-year guaranteed annuity, is a contract with an insurance company that says the same thing. You get a specified rate for a specified period of time, and the rate does not change. And then at the end of it, you can take it out. The difference is with a CD, if you take any money out, there's usually a penalty. With a fixed annuity, you can always get at either the interest or again the 10% per year. I have put together a sheet. I'll read the rates on the air if you want me to. I put together a sheet that I used to do. This was kind of fun. I haven't done it for a year and a half.

SPEAKER_02 19:07

See that? He used to have his own show. You put them in front of a microphone and he's like, I got that. Yeah.

SPEAKER_01 19:12

I would I would do my interest rate update. I'd give the highest CDs anywhere in the nation, six months, eighteen months, two-year, and then the highest fixed annuities anywhere in the nation, three year, five year, and six year. And in the CD realm, this week, anyway, they're all the same, 4.2%. You can get 4.2% for six months, you get 4.2% for two years or 18 months, all different credit unions. I've got the contact information on the sheet here. In the fixed annuity realm, the rates are higher. They usually are. And the other thing with fixed annuities is the interest is tax deferred unless or until you decide to take it out. You can take it out when you want to and decide when you want to pay taxes on it. Would you like me to give the highest three-year fixed annuity right now is with Axonic Life, 5.45% APY, and that is compounded upon itself, and that'll go for three years. At the end of that three years, you have 30 days to decide whether you want to keep it, cash it in, and pay the tax on the interest, or move it somewhere else via what we call a 1035 exchange. The highest five-year in the nation, and still the Fed has been very slow to cut rates. And so these rates have stayed high for a lot longer than any of us thought they would. Revel One Financial out of Grimes, Iowa, is paying 5.8% each year for five years. And there are no fees to these either. There's no commissions or anything up front where comes out of it. You put in $10,000, it all goes to work for you. And then the highest six-year, I've had some people doing six years too, because they know rates aren't going to be this high for that long, is Oxford Life out of Scottsdale, Arizona, and they're paying 5.7% guaranteed for a six-year period. And those are just C D alternatives.

SPEAKER_02 21:02

Right, right. So most people, when we say diversify, you don't put all of your money in annuities. What percentage would you like just a hypothetical number?

SPEAKER_01 21:10

We won't hold you to it. One of my favorite questions to ask is let's say you've got six, seven hundred thousand that's saved up for retirement. What percentage do you want to see safe and protected where it can't go down? What percentage are you willing to take some level of risk with? And then we go from there. And usually it's about fifty-fifty.

SPEAKER_02 21:27

I was just going to say that.

SPEAKER_01 21:28

Yeah.

SPEAKER_02 21:29

I'm with 50-50. Yeah. And if I'm up, I'm always like, take 50% out and then keep it the rest of it.

SPEAKER_01 21:34

That's why we have annual meetings. You know, the when people move from another advisor to me, it's usually because, hey, I never heard from the other advisor. We make sure that doesn't happen. Trevor Burrus, Jr.

SPEAKER_02 21:44

Brian Kurtz, AIP Financial, the man of the hour. That was fantastic education. I already feel more knowledgeable. And this is information that we need every single day to be paying attention to. There is a way to save enough money to have the money that we need for the future because 70% of people need some kind of care, and then you're not in a crunch when the going gets tough, to be quite honest. Absolutely. So thank you, Brian. Thank you for what you do every day. We appreciate you.

SPEAKER_01 22:09

Wendy, thank you for having me on. This was a blast.

SPEAKER_02 22:11

Thank you for tuning in to Next Steps for Seniors. Our podcast drops twice a week, Tuesdays and Fridays at 7 a.m. Find us on your favorite podcast platform and be sure to subscribe so you never miss an episode. To learn more about Next Steps for Seniors, visit us at Next Steps Number Four Seniors.com.