How Inflation Impacts LGBTQ+ Retirement

Episode 17: Audio automatically transcribed by Sonix

Episode 17: this mp3 audio file was automatically transcribed by Sonix with the best speech-to-text algorithms. This transcript may contain errors.

Speaker1:
Any examples used are for illustrative purposes only, and do not take into account your particular investment objectives, financial situation or needs and may not be suitable for all investors. It is not intended to predict the performance of any specific investment, and is not a solicitation or recommendation of any investment strategy.

Speaker2:
Welcome to Take Pride in Retirement, the podcast dedicated to helping members of the LGBTQ+ community protect and grow their hard earned money. Get set for a show full of education and insights with your host and advisor, Matt McClure. We recognize every family is unique. The goal of the show is to help you achieve financial freedom so you and your loved ones can have the retirement you've always dreamed of, a retirement you can take pride in, no matter who you are, where you're from, or who you love. So now let's start the show. Here's Matt McClure.

Speaker1:
Well, hello there, and welcome once again to take pride in retirement. I'm Matt McClure here with you, your host, your advisor, your good pal, your buddy, your friend and all of the above. I want to thank you for taking the time to be a part of things today. I know how valuable your time is, and the fact that you are taking some of that time and spending it with me just really means an awful lot. So I really do appreciate it so, so much. As my husband who does the, uh, the intro to the show each and every week, uh, just said there. I want you to have a retirement that you can take pride in. And the whole point of the show is to educate you along the way, and hopefully to spark something in you so that you can reach out and get some individualized help. Because a lot of the things that I talk about or, you know, general sort of educational things, and then there are a lot of things too, that, you know, you really need to and I'll bring those up along the way that you need personal guidance about. Right. Because retirement has to do with your individual situation and with what's best for you. It's not one size fits all. I'm a fiduciary financial advisor, so it is all about what is best for you now, what's best for me or what's best for you? Know, your friend Joe who lives down the street or whatever, your aunt, your uncle, somebody.

Speaker1:
It's all about what's best for you. So that is what I want to make sure and get across. Today, here at the very beginning of the show. Got a lot to get to today, by the way. It is going to be kind of pretty much all about inflation and understanding its impact on your retirement. You know, inflation has come down significantly from where it was when we were, you know, like what was it, 9.7% or it was over 9% anyway, inflation year over year. Um, several several months back. Now it's come way down from there. But still it's been stubbornly high above what we, um, really would like for it to be. What a, you know, above what anybody would like for it to be. Uh, which, of course, according to the Federal Reserve, their target is always 2%. Right. So they've got that 2% target, and now we've been at 3% or a little above for a while. And getting it to come down below that has proven to be a task. So that is what we're going to talk about a lot today. Also wanted to say again, thank you so much for listening to the podcast. You can subscribe wherever you listen to podcasts. I what I would love, what I would absolutely love, is for you to take just a moment of your time.

Speaker1:
Just a moment. You can even do it right now. Leave the leave the podcast playing and go on a different device, or maybe even on the same device if you are on your phone or something like that. But leave us a rating. Subscribe, comment, share the podcast with your friends, your family, your loved ones, whoever is out there that you think might be someone who could benefit from the information that we share, because that's my whole goal, is to spread the word about how to give yourself a retirement. You can take pride in. Period. Period. End of story. All right. So that's it. And that's my spiel on that. So share the podcast. Uh, far and wide wherever you, um, want to share it. Right. I always love I think it was Dolly Parton who said, uh, once, you know, if you if you love it, you know, tell your friends, if you don't love it, hey, tell your enemies. Maybe they'll love it, you know? So it's it's one of those kind of things. Tell everybody that the podcast is here and that it is around to educate you. Also tell people about our YouTube channel getting that geared up here. Um, check out videos there. Subscribe to watch some highlights from the show. We'll get more special content out on a more regular basis here very soon, and don't hesitate to contact me with any questions.

Speaker1:
Um, what I want you to do is go to the website, take Pride in retirement.com. That's take pride in retirement.com. Uh Matt at take pride in retirement.com is my email address as well. Just email me there Matt at take Pride in retirement.com. Uh like I was saying a lot of great things to get to today. We've got an inflation demonstration about how rising prices are making life harder for people who are in that age group of pre-retirees and retirees going to take some questions. They got a nice, uh, couple of questions here from a couple of listeners to the show that they've sent in. So, um, thank you for sending those in. And once again, if you have a question for me that you want answered on the show, uh, do that at uh, Matt at Take Pride in retirement.com. Yeah. Matt at take pride in retirement.com send it my way and I will answer it. All right. And then I've got a little bit of information about how you can inflation proof your retirement. Yeah a lot of talk about inflation today. And I'm going to, you know take a not so happy subject and make it happy for you by giving you some, some really good practical information there. So stay tuned for that a little bit later on in the show. Right now though, let's get some inspiration for our conversation, shall we? It's the quote of the week.

Speaker3:
And now for some financial wisdom. It's time for the quote of the week.

Speaker1:
And this week's quote comes from the Olympic gold medalist, legendary Olympic diver Greg Louganis, who won gold medals in 84 and 88 on the springboard platform, the only man and just the second diver ever in Olympic history to sweep diving events in consecutive Olympic Games. Also a member of the LGBT Q plus community, he is a big advocate for the community that he is a part of. And Greg Louganis said this. He said, quote, I am a firm believer that you don't achieve greatness on your own. There's always someone there to lend a hand. And boy, coming from someone who accomplished so much like Greg Louganis, as I said, 84 and 88 Summer Olympics. Won back to back gold medals and swept the diving events in those two Olympic Games. Um, he was, you know, just in his heyday. So just such an amazing, amazing athlete and really accomplished so much and continues to accomplish so much now, even, you know, many years later. Uh, because of his, um, his activism really. He is a gay rights activist. He's an HIV awareness advocate, being someone who is HIV positive himself and has, you know, survived for so long. He was very famously, um, you know, HIV positive and then was injured and, and all of that. And there was all kinds of concern and controversy surrounding that back at the time.

Speaker1:
Um, and, you know, now he's taken and dedicated his life to making LGBTQ+ folks lives better. And so coming from someone who has accomplished so much and has done so much to say that he's a firm believer that you don't achieve greatness on your own, that there's always someone else there to lend a hand. You know? I mean, in his life, I'm sure there was that coach or that, um, that parent or that relative, aunt, uncle, cousin, whomever. Someone. That lent him that helping hand that really made such a huge difference in his life and was that was the difference maker from him to be going from someone who had a lot of talent and all, to someone who honed in that talent, dedicated himself to it, and set Olympic records that are still held today by him and him only. In your personal financial life. I would love it if I could be that person for you who lends a hand, and who helps you improve your personal financial situation so that you can have a retirement you take pride in no matter who you are, no matter where you are on the journey of life, no matter where you come from, no matter who you love, how you identify any of those things, no matter anything, I want you to be someone who has a successful retirement, as absolute, absolutely successful as it can be.

Speaker1:
And someone who can take pride in that retirement. Whether you want to be sipping Mai Tais on the beach or, you know, going and traveling all over the world and seeing the different continents and doing all of the things. Um, you know, it's really something that no matter what you want to do, I want to make those dreams a reality. And that is. That's what makes me smile. That's what makes me get up in the morning. That is what really motivates me. And what really did motivate me to start this podcast to begin with, to spread the word among the LGBTQ+ community that we deserve retirement, that we can take pride in all of us, no matter who you are. No matter any of the things that we the divisions that we put among ourselves. Because there was another quote when I was I was researching for a quote this week. There is another quote that I came across that said something to the effect of, and I hopefully I don't butcher this, but, um, something to the effect of, you know, it's not our differences that divide us. It is our biases and, and our unwillingness to learn and our unwillingness to accept the differences between us and to and to learn and grow from each other. That is what divides us, not our differences.

Speaker1:
Our differences can really make us stronger. That's really number one, what this nation is all about. It was founded for, you know, uh, and has come a long way since, of course, but to toward a more ideal scenario of this. But it was founded because not everybody was the same. Basically, uh, if you want to look at it and frame it that way, um, by a certain point of view, that's absolutely why this nation exists. And so, you know. I want you to know that our differences don't divide us. It's those other things that I just mentioned. And that being the case. No matter who you are, I want to be able to help you. So I want you to reach out. Take pride in retirement. Dot com is the website. The consultation is free. It's no obligation at all to actually, you know, continue on to work with me or whatever. We'll just have a have a quick conversation, have a call, go through your specific financial situation, decide if it's a good fit, and if it is, then we can work together. If not, we'll both go along our merry little way and there's no high pressure in the situation at all. I can, I can promise you that. Take pride in retirement.com is the website Matt at Take Pride in retirement.com. That is the email address.

Speaker4:
Want to know where your hard earned money is going. It's time for an inflation demonstration.

Speaker1:
So when we talk about inflation in the context of retirement, we're going to do a lot of that today here on the show. And inflation really does pose significant challenges for people who are, you know, a few years before retirement and or entering retirement specific challenges for those age groups, just simply based on the stage of life. And it it, you know, challenges us all, obviously. Um, but really, when you're in retirement or just about to retire, it really does affect your financial security. And so let's take a look now at the impact of inflation specifically on retirement, and how you can take some proactive steps to build a more secure financial future. So some concerns here. There was a survey by Schroders that found 68% of US retirees are worried about outliving their assets due to inflation. Rising prices really are taking a toll on retired Americans 89%. So nearly nearly nine out of ten people who responded to this survey are concerned about inflation reducing the value of their assets. Look, when you can get 90% of people to agree on anything these days, that's a big accomplishment, right? Because it seems like everything is so polarized that nobody can agree that the sky is blue on any given day. Right? Um, there was, uh, another survey. I found this one in Out magazine, one third of LGBTQ+ older adults now live at or below 200% of the federal poverty level. That's according to Christina D'Costa, who is senior director of marketing and communications at Sage.

Speaker1:
That's a national advocacy services organization. 200% of the poverty level in the United States was $27,180, according to the Department of Health and Human Services. So that means a third of LGBTQ+ older adults live at or below that level of income, $27,180 as of 2022, which was the latest time period that we had these, um. These numbers for. And what Cristina da Costa said was that any increase in basic cost of living can dramatically impact older members of our community. She says due to a lifetime of discrimination, LGBTQ+ elders have had so many socioeconomic disadvantages compared to their straight or cis peers. In 2020, sage released a free financial wellness app to help LGBTQ elders and others shore up their financial literacy. So that is a great thing, and more than half of those users have reduced their debt by at least 200 bucks, which is good news. At least it's headed in the right direction, and 42% have improved their credit scores by 25 points or more. That is a great thing. And yeah, managing inflation is challenging. Because the price of everything is going up, right? The price of everything is going up. Not just the price of gas, not just the price of food, not just the price of, you know, going out to eat. Uh, of course that would be food, but that's a service industry as well. It's not the price of hotel rooms and and airfare and all of the things.

Speaker1:
It's literally all of the things. So here are some strategies to help you protect your financial future. Number one is to diversify income sources. So a lot of people in retirement, especially in the LGBTQ plus community, may say, look, I'm going to rely on Social Security and it's going to it's going to be there. And that's going to be my retirement plan. The government has has made this promise to me, and that is what I'm going to rely on solely for my. Income in retirement. But here is a bit of a reality check. Relying solely on Social Security is not going to be sufficient to cover your costs, most likely, especially with inflation doing what it's done. So explore additional income streams. Personal pensions from annuities, which we'll talk about. Part time work, potentially safe withdrawals from retirement investment accounts. That's something that we can go into in detail when we meet for that free and no obligation consultation. Another step you might want to take is to delay Social Security benefits. Because delaying the start of those payments can actually increase your monthly benefits and provide a higher income stream to combat inflation. Because then, you know you'll take that higher payment, and then from there, it'll get adjusted upward each year with the cost of living adjustment, which, you know, there's a lot of question, does it actually keep up with the real rate of inflation versus just kind of the calculation that they use.

Speaker1:
And how accurate is that calculation. You know, you can you can argue that until the cows come home and a lot of people will, but. The one thing that is for sure is delaying the start of your Social Security payments gives you a raise. And you start from a higher amount each and every month. Right. So that would be a good thing to do. You can delay those payments out until the age of 70. Delaying beyond age 70 doesn't do you any good. It doesn't go up from there. But each year between 62 and 70 you get an increase 8% increase each and every year. So that's like giving getting an 8% rate of return on an investment, which is pretty darn good. Shop the market for an annuity that's right for you. So yeah. Annuities offer guaranteed income streams. They can protect against inflation and market volatility. And there are a million. Well, not really a million, maybe 100 different types and different payout options and all of that. So look at those research those. To find the one that best fits your needs, and I will gladly help you do that. We work with a lot of different carriers who are highly rated, uh, well known in, in the industry and in the public at large and offer some great features. And one of them, chances are, will be right for you.

Speaker1:
But it all depends on your individual situation, of course. And the most important thing here is to consult with a financial advisor. Hi. I'm. I'm that guy, um, who wants to talk to you. He wants to help you out. Because here's the thing. I am not in this job that I am in to get filthy rich or anything like that or heeheehee. Uh, no. I became a fiduciary financial advisor for a reason. Fiduciary means that I am bound to act in your best interest. I cannot act in my interest. I cannot put my interests above yours. Everything that every recommendation that I make to you has to be in your best interest. Not mine. Not anybody else's. Yours. And so that's why I'm in this business. Because I want to help. I want to help you avoid some mistakes and pitfalls and all the different things that that we'll talk about today and more. Right. So I can help you assess your financial situation, create a personalized retirement plan and provide guidance on some strategies, even more of them than I've talked about right now, uh, to protect you from inflation. To make sure that you have a plan in place. The most important thing is that you have a plan and that you can control the things that you can control. Can I can any individual. You? Me? Anybody else control the rate of inflation? No, we cannot. Individually. Right. Collectively, we can affect it, obviously.

Speaker1:
But individually we cannot control the rate of inflation. So. Control the things that you can control. And what you can control is reaching out to me. Go to the website at Take Pride in retirement.com. You can go there and send me an email in the contact form on the website, set an appointment with me or go on your computer and open up your email app, or on your phone or tablet, or wherever. Open up your email app and send me an email. It's Matt at Take Pride in retirement.com. Because you know what? It's really time to get serious about your finances in 2024. It's it's a big year. It's an election year. There's already a lot of uncertainty out there in the world affecting retirees and pre-retirees especially. So do not wait until you're ready to retire to start planning. That's not the time to start planning. The time to start planning is right now. All right. So let's take a look here at some a couple of questions. Just just a couple that I got from some listeners to the show. And I thank you so much um, from for sending these in really, really do appreciate it. Um, David sent in this question. He said, I'm the guy who never opens his investment account statements because I'm scared to look and because I don't really know what I'm looking at anyway. How do you help a guy like me? Well, David, I have to.

Speaker1:
I have to laugh. I have to giggle here. Um, not because it's a it's a dumb question or anything like that. Absolutely not. I have been there and done that. And that's kind of why I am amused. Um, because. Don't be. Don't be afraid. Don't be scared to look at your account statements. I know that it can be a scary thing because of, you know, the volatility in the market. You know, things have been headed upward. You know, the Dow Jones just crossed the 40,000 mark for the first time ever. Not that long ago just a few days ago now at least, um, as of the time this podcast is is coming out. But so, you know, things overall have been have been improving. But there's still been a lot of volatility over these past months and and couple of years. And so yeah it can be scary to look. But here's the thing. Look. Look, because knowledge is power, right? And applied knowledge is power especially that's the real power is applied knowledge. So take the knowledge that you gain from looking at those statements and act on it. And if you need help because you said, you know, you don't really know what you're looking at when you open up those statements, when whenever that happens. Rarely. But. You don't know what you're looking at. So here's the thing. Ask. Ask someone who is an expert who's been trained to recognize these things, to look at these things.

Speaker1:
There are very few things that we haven't seen, uh, with the good folks who I work with at Active Wealth Management. Collectively, there are very few things that we haven't seen. So we know that we can help you, David, and really do thank you for reaching out with that question. Um, because I'm here to help, I really am, and I don't just say that I really, really am here to help. Um, and once again, the website is Take Pride in retirement.com email Matt at Take Pride in retirement.com. If you want to reach out and send me your questions, I'll be glad to answer them. Uh, one more here. This is from Mary who reached out and said this. I've done a pretty good job saving for retirement as I worked as a nurse for 30 years. Thank you for that. One of the hardest jobs out there, Mary. Really appreciate it. I'm ready to retire. Congratulations. But I do not have a pension from all my years working at a local hospital network. How can I be sure that I'm going to have the income I need in retirement? I've become scared of the stock market, uh, ever since going back to even 2008, which I don't blame you, Mary. That's enough to scare anybody. You know, Lehman Brothers went under and, um, there was the subprime mortgage crisis and all of the things. And that just sent the economy into the tank.

Speaker1:
And we were paying, you know, much higher gas prices than we are right now. Most of us at that point in time, right, at least for a while. And then things got much better. And there was this slow, steady growth for several years. But yeah, that can leave a really bad taste in your mouth after something like 2008. So here's the thing. You say you don't have a pension, but you have saved up a lot of money. You've been good at saving for retirement over your 30 plus year career. So why don't you take some of that money that's in? I would imagine it's in a qualified retirement account, something like a 401 K. Um, and just kind of depending on your, uh, individual situation and what the types of accounts that were available to you at your workplace. So that is a great thing that you've been able to save up that money. Take control of it. As I said a few minutes ago, control the things that you can control, right? So take control of it. Can help at looking at the possibility of looking at, um, rolling that. Fund roll, rolling that money over. Rather, I should say, into an IRA. Rolling that money over, perhaps into a Roth IRA. Going ahead and paying the taxes. Now while we're at historically low tax rates. And then in the future, you're not burdened with another, um, you know, higher tax bill down the road in retirement because you can make withdrawals from a Roth in retirement tax free.

Speaker1:
All right. It's tax free growth and tax free withdrawals in retirement. One of the only two ways that you can have a tax free income is with a Roth IRA. The other is life insurance that is structured properly to let you do that. Um, but so you don't have a personal or you don't have a pension, rather. So there's a good possibility that setting up a personal pension would be a great thing for you that would provide a lifetime income stream, much like a pension, through your job. And I'll go through some of the other advantages of doing something like a fixed indexed annuity. For example, in just a little bit, because I want to kind of go in depth on that as we go through some ways to sort of inflation proof your retirement here momentarily. But those are a couple of options for you, Mary. And I really do appreciate your asking the question, and I hope that you reach out for some personalized advice, because really, all that this boils down to everything that we talk about. It all comes down to what is best for you, the individual. I don't do one size fits all. I don't do anything that is, you know, a blanket endorsement or a blanket statement. Speaking in absolute terms, any of that stuff. I don't do that because it's so customizable to you.

Speaker1:
Everybody's situation is different. And so we're all our financial situations are as different as we all are. And so when you realize that, you'll know that working with a financial advisor who is committed to you and committed to planning for your individual situation, no matter what it is and no matter who you are, and so you can bring your whole self to the table, right? Then you're going to be in a good situation, because then you take back the power. You're not. You're not letting things and your situation take the make the best or take take away from you or or make you scared or any of that stuff. You are taking advantage of the situation and making it better. You're taking a potentially bad situation and turning that into a positive situation. So that is the message that I want to hone in on there when we're talking about, you know, listeners who I'm very grateful to, Mary and also David as well. Thank you both for sending in those questions. When we're talking about sending in questions, send me yours. First of all, Matt at Take Pride in retirement.com Matt at take pride in retirement.com. But also you know I want to help you out with your individual situations. Uh by coming up with a retirement plan that's tailored specifically to you. It's what I do each and every day. So go to take pride in retirement.com, and I can provide you with a complimentary consultation and retirement plan.

Speaker1:
I really look forward to helping you reach your retirement goals. All right. So a couple of ways to improve your income potential in retirement and sort of, um, inflation proof your retirement with multiple streams of income. That's what I want to go into next. And and here's the thing. You know, we talked about Social Security and someone had asked me recently, you know, is Social Security really going to run out of money? And, and, you know, is it going to be there when I retire? And I said, you know what? I really do think that. Despite all the odds, Washington will come together and will make some sort of decision, some changes to the system, something to shore it up and it's not going to go away. Will it look different probably, than it does today? But I don't think it's going to go away. Well, you get all of the money that you think you probably have coming. If you were to look at your, you know, statement on tsa.gov at this point, maybe, maybe not, it kind of remains to be seen exactly what happens. But, you know, in nine years, the Ossi that's the old age Survivors Insurance trust fund that funds Medicare or Medicare, that funds Social Security benefits, I should say that's going to run out of money. So that at least that's according to the projections from the federal government itself. So you need to be prepared for that possibility.

Speaker1:
And so that's one of the reasons here that we want multiple income streams also to protect you from inflation. Because if you have multiple income streams, especially those like say, Social Security, which is adjusted for inflation each and every year, then you've got some inflation protection built in. Okay. So here we go. Some suggestions here. Some possibilities for you depending on your individual situation. Of course to create multiple income streams and protect yourself from inflation in retirement. Number one of course Social Security, which is the big elephant in the room that we've been talking about. And it provides a monthly income to all eligible retirees in the US. The benefits are based on your earnings history, and they'll also be based on the age at which you start receiving benefits. So if you receive benefits starting at age 70, that monthly payment is going to be a lot higher than if you started when you were first eligible at age 62. Right. If you get, you know, the benefits starting at full retirement age, which is, you know, somewhere between 66 and 67, then that is going to be somewhere in between, right? Um, somewhere in between the the amount at 62, the lowest amount and the highest amount at age 70. And delaying your Social Security benefits, as I said, can increase your monthly payments. According to the Social Security Administration, payments from Social Security benefits make up about 33% of the income of the elderly population in the United States, a third.

Speaker1:
So it's huge. Which is another reason that I don't think that they're just going to let the system fail, right. Talk about a huge global economic catastrophe. Pensions are another income stream in retirement. Pensions generally are employer sponsored. Here's the thing, though. They've kind of gone the way of the dinosaur. Only 16% of private industry workers had access to a traditional pension plan as of a couple of years ago. This is from the federal government. The Bureau of Labor Statistics came out with these numbers, and just 16% of private industry workers had access to a traditional pension plan. Um, and the number is going to be higher, of course, if you work for the government, let's say, because a lot of government jobs do have pensions, but they've been becoming less and less common, though, with a lot of employers over the past couple of decades shifting toward 401 K plans. So a pension is what's known as a defined benefit plan. You work for a company for, you know, X number of years until you're vested and then you when you retire, you get a pension. Well, that if you let's say you work for 40 years for XYZ company and you retire, they give you the gold watch when you're done and shake your hand, you go along your way and the pension payments start coming in for the rest of your life.

Speaker1:
That is a pension, right? So that's a defined benefit plan. The what's defined is the benefit is, you know, the fact that you're going to get that income for life. A 401 K is an example of a defined contribution plan. What's defined, not the benefit, because you don't know how much money you're going to get in retirement or you're going to wind up with in a lump sum by the time you're ready to retire. So with a 401 K or a similar plan, an IRA, that those those types of of accounts, that is a defined contribution plan because the defined thing is the contribution. You, the employee in this case is responsible for putting money into that 401 K, then it can hopefully grow over the years. Um, and that you know, money is going in pre-tax. So it's tax advantaged money. You will have to pay taxes on it though in retirement because you haven't paid the taxes on it yet. So in retirement, if you have money in a 401 K, those withdrawals will be taxable as regular income. Here's the thing. If you have a pension, if you're part of that 16%. Understanding the terms and options for receiving payments is absolutely crucial. But as I said, only 16% as of a couple of years ago of private industry workers had access to a traditional pension plan. So that's why we encourage people, because chances are you don't have a pension to create your own personal pension.

Speaker1:
Through something called an annuity. And if you have heard of annuities, which I'm sure you probably have at this point in your life. The the thing with annuities is they've gotten a bad rap from a lot of people who may or may not have the best intentions here. And look, some annuities are bad. Some annuities have such high fees and and, you know, charges and all of these other types of things. I wouldn't recommend them to anybody. I wouldn't recommend them to my worst enemy. But there are a lot of pensions, personal pensions, I should say annuities that I recommend for a lot of people. Because they fit into a lot of different scenarios and are a good fit. And there are a lot of different types of annuities. There are a lot of different companies that that all, um, you know, structure these plans differently. They're generally the same. I mean, what you do is you put money in, generally speaking, in a lump sum, you put money into an annuity, then it grows either, you know, one of one of two ways, the kind that I would recommend would grow one of two ways, either with a guaranteed interest rate for a set number of years. And that interest is credited to the account each year. And, you know, it's a fixed rate annuity. So you know what the growth is going to be. Or a fixed indexed annuity is a different type.

Speaker1:
The word indexed in there does the majority of the work. Right. So there the fixed part is you can never lose money in your account each and every year in that annuity the value of the annuity can only go up. It cannot go down. Unless you make withdrawals, that sort of thing. That's something that we can go into when you, you know, come in for a consultation. But the amount of that annuity, if you, you know, make your lump sum deposit, you leave it alone. The lump the amount of that annuity can only go up. That's the fixed part. The index part is okay. So how do you calculate the growth? Well the growth is calculated based on the performance of an outside index. Right. So it's the S&P 500. Maybe it's the you know maybe the Nasdaq if it's a you know tech focused it's this that or the other. There are a lot of different proprietary indexes or indices if you prefer, that some companies use to tie your investment to the money is not actually invested in the S&P 500 or whatever proprietary index that's used there. The money goes to an insurance company where it is backed by a 100% reserve requirement, at least 100% reserve requirement. So that means that the annuity company has to keep at least as much money as you give them on hand, right, for liquidity reasons, in case you come knocking down the door in the moment of crisis and demand your money, they got to have it to give to you.

Speaker1:
Unlike the big banks, which don't, they have maybe 10% reserve requirement. So the money, though, um, an equal amount of money that you give the insurance company as part of that lump sum deposit into the annuity is invested in long term, um, fixed rate, safe money issues like generally government bonds and that kind of thing. Right. So that money is safe. It's guaranteed, um, by not only the insurance company, the claims paying ability of that insurance company, but also by the faith and credit of the United States government, if that money is invested in, uh, Treasury or something to that effect. So when you're talking about an annuity, you're talking about safety. You're talking about growth because your money is not, as I said, invested in that market index that it's tied to, but it grows based on a certain percentage of the growth that that index, um, experiences in any given year. So if let's say you have an annuity, it's $100,000 in your annuity. And. Let's say it's tied to the S&P 500. That's the outside index, the third party index that your annuity is based on that the growth in that annuity is based on. So if that index the S&P 500 were to go up 10% for ease of math, let's say this. Let's say you have a 50% participation rate, which means for the growth in whatever outside index that your annuity is tied to, 50% of that amount of growth is credited to your annuity.

Speaker1:
Right. So if the S&P 500 is up 10% year over year, if you have a 50% participation rate, then you. We'll see your account go up 5% year over year. Right? Could be higher, could be lower. But that's how the growth is credited. If that index in this case in this example the S&P 500. If that were to go down the following year, let's say it's down 30%, has a terrible year and it's just down 30%. For example, where are you? You stay exactly where you were. That's the safety part of it. Zero is your hero. You may not have seen growth, but while everybody else lost 30%, you're still way up here where you were the previous year because you were smart and invested in something like a fixed indexed annuity, where your growth is protected each and every year, and you can never see losses due to outside market fluctuations. So you can get market like growth without the market risk. And then when you reach retirement, annuities can provide a steady income stream. Of course, you have to consider any terms, conditions, fees, any of that will go through that in our consultation with you. Earned income from continued employment. That's another income stream. Look, if you want to work, work in retirement. If you have to work, that's a different story.

Speaker1:
I want to make it so you don't have to work in retirement. I want you to be retired and enjoy your retirement. But, you know, working part time, maybe starting a small business to supplement your your income if you have a. Hobby that you want to turn into another income stream. Great. Amazing. Then do that because you want to. Because it's a passion project, because you want to supplement your income doing something that you love and are passionate about. Labor force participation rate for people 65 and older, according to the Bureau of Labor Statistics. It's expected to reach 23.3% by 2028. So a lot of people in the retirement years, that retirement window, a lot of people are still working these days. Required minimum distributions and withdrawals from retirement accounts. Yes, RMDs. If you have a 401 K if you have a traditional IRA, if you have some other types of accounts that the money goes in pre-tax. Any type of retirement account where your money goes in without you having first paid taxes on it. The government, by the time you turn 73 says, hey, you have to start taking out distributions from that account because we want the tax money, because it's been sitting there growing tax free, you know, the deposits tax free, everything has been growing tax free. But when you make a withdrawal, you have to pay the taxes on it. Right. So required minimum distributions have to be taken starting now at age 73.

Speaker1:
Eventually it'll be age 75. But understanding things like that the rules the tax implications of withdrawals, all of that is crucial to maximizing your retirement income. And I want to help you have as much tax free money in retirement as you possibly can. Mentioned Roth IRAs, earlier life insurance policies that are structured in the right way can really help you in your retirement years as well, because you can make withdrawals from the cash value of that policy. And those are loans really, that you never intend to pay back. And you don't have to pay back, because that's the way that these particular types of policies work. And you can have that be a tax free income stream in your retirement as well. So a lot of different options and opportunities there to really help you and get the IRS out of being your partner in retirement. That's another thing that I want to do, is help you keep more of the money that you have earned. And the money that is working hard for you. You worked really hard for it. Let's put it hard to work for you. And then in retirement, let's keep as much of it as you possibly can. And then let's work on a legacy plan for you as well, where you can leave behind that money to whomever you want to leave it behind to or to whatever organization.

Speaker1:
If there's a charity that you're really passionate about, any of the things. I want to help you in that score as well. So reach out to me Matt at Take Pride in retirement.com. You can reduce the risk in your portfolio and establish a personal pension. Creating a lifetime income stream. I've got one simple strategy for you to do it, and I'll tell you about it when you schedule a complimentary consultation by giving me a ring 855246 9211 (855) 246-9211. You can also give me a shout out via email Matt at Take Pride in retirement.com. That's Matt at Take Pride in retirement.com. Or just go to the website and you can use the contact form there. It's take pride in retirement.com. Well that's going to do it for this time around folks I really appreciate it. Once again I don't just say this. I really do appreciate you joining me. Each and every time a new episode comes out. It's, um, it's just great to be, uh, have to have you be a part of the show. And I hope that you're getting you're getting something useful out of this each and every time a new episode comes out. Please don't hesitate to reach out. I would love to help you reach your financial dreams and goals and have the retirement that you deserve. Take pride in retirement.com once again is the website that'll do it again for this time. We'll see you next time. And until then, take pride in yourself and take care of each other. We'll see you next time.

Speaker2:
Thanks for listening to Take Pride in Retirement. Members of the LGBTQ+ community deserve to work with a fiduciary financial advisor who puts their needs first to schedule a free, no obligation consultation with Matt McClure and the team at Active Wealth Management. Call (855) 246-9211 or go online to take pride in retirement. Dot com investment advisory services offered through Brookstone Capital Management LLC. Bcm, a registered investment advisor. Bcm and Active Wealth Management Incorporated are independent of each other. Insurance products and services are not offered through BCM, but are offered and sold through individually licensed and appointed agents. Matt McClure, an active wealth management, are not affiliated with or endorsed by the Social Security Administration or any other government agency.

Speaker1:
Fixed annuities, including multi year guaranteed rate annuities, are not designed for short term investments and may be subject to restrictions, fees and surrender charges as described in the annuity contract. Guarantees are backed by the financial strength and claims paying ability of the issuer. Registered investment advisors and investment advisor representatives act as fiduciaries for all of our investment management clients. We have an obligation to act in the best interest of our clients and to make full disclosure of any conflicts of interest, if any, exist.

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