Smart Safe, Smart Risk and Smart Tax Planning for Your Retirement

Episode 2: Audio automatically transcribed by Sonix

Episode 2: this mp3 audio file was automatically transcribed by Sonix with the best speech-to-text algorithms. This transcript may contain errors.

Producer:
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.

Producer:
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.

Matt McClure:
Hello once again. Welcome to Take Pride in Retirement. I'm Matt McClure, your host, your advisor. And that that voice that you just heard was someone who is very special to me. That was actually my husband. My husband, Josh I got him to do the voiceover for the intro to the show just so he could be a part of the show, because I love hearing his voice. It provides me with a lot of encouragement as we start the show each and every time around. And I'm glad that you are here with me for episode two of the show. This time around, we're going to be talking about the Smart retirement plan. We're going to kind of continue that series. We'll apply it to the LGBTQ+ community specifically and and, you know, just go over a lot of different things. Some tips talk about things that have been going on financially and in the markets and all that stuff. So it's all good. It's all fun, it's all love, it's all encouragement. And mostly it's all about you having the best retirement possible, the retirement that you can take pride in, as we say at the beginning of the show, no matter who you are, no matter where you're from, no matter who you love, no matter what your relationship status, any of that stuff, no matter how you identify this show, is for you. And you deserve a retirement that you can be proud of, that you can take pride in.

Matt McClure:
And that's really the whole point of this show, right? I mean, that's why I wanted to start it. That's why we do this. We do a new episode here every week, and I am just thrilled that you are here and that you're along this journey with me because it is exciting and I'm excited about being able to help you. So so coming up, you know, I talked about kind of the things that we're going to go over today. We've got the Smart Retirement Plan series that we started on episode one talking about that. So we're going to talk more about some different aspects of it. You know, we sort of set the stage right with our Smart Vision segment and the first couple of steps here of the Smart retirement plan. Well, this time we're going to continue that with talking about smart, safe ways to keep your money. You know, you've worked so hard for your money. You've saved it. You've you've been so diligent about doing that. And you don't want to lose it. Right. There is at least a portion of your money that you're always going to want to keep in a safe investment but still get growth out of it. We'll talk about that. We'll talk about different ways that you could possibly do that. Right. So that's number one. Number two, smart risk. I talked about safety, and it's an important thing to have at least a portion of your money that you plan to retire on safe from market risk.

Matt McClure:
You got to have some at risk, though, in the market because without risk, there is no real reward. Right. That's sort of to paraphrase an old saying, the way that it goes in life, where there's risk, there is reward. And so you want to take at least some risks so you can get that payoff. And here's the thing. I'm not saying, you know, there are some truths that are universal. I'm not saying that you should put exactly 60% of your money invested in the market and exactly 40% in safe. No, this is not a one size fits all thing that we talk about here. One of the most important things that I like to stress every time we get together and I know it's only episode two, but I'm going to say it every time, so get used to it, is that everybody's situation is unique. Everybody is an individual. Every couple, every family, no matter what it looks like. You're all we are all as a human family. Different inherently so, right? If we were all the same, this wonderful tapestry of humanity that we have would be really boring if it was all the same color and size and style and all of that. We're not. And so your situation is different than someone else's. Than someone else's. So. That being said, your solution could be different too. Might you have a lower percentage than 60 at risk in the market? Yeah.

Matt McClure:
I mean, it depends on your risk tolerance and that's something that we go through in a free consultation. We'll talk about that. Right. So bottom line, it's not one size fits all. Everybody's situation is unique. And, you know, we're going to talk more about that as we go along as well. Also, smart tax. You know, I'm the kind of person who. Yeah, you know, paying taxes, not fun. It's not April 15th, not my favorite day of the year. I imagine it's not yours either. I don't mind, though, paying my fair share of of taxes. This is how we, you know, as as a nation function. Right. We got to have a functioning government. We've got to have a functioning, you know, Social Security and Medicare system to fulfill promises that we have made as as a nation, as a society. So I don't mind paying my fair share. There are ways, though, given current tax law, the way the system works right now, that you could potentially save some money when the tax man comes a knockin. Right? Just reminded myself of Sophia Petrillo there. There's a hurricane coming, but there's a tax man coming. And he's knocking on your door. He's going to want to have his hand out and get that money. And but there are ways to minimize that tax burden if you're smart about it. So that's why we talk about smart tax strategies. We're also going to have a problem solver.

Matt McClure:
This is the first time we're going to do this segment on the show. But it is it's an important one. We'll we'll talk about it. I'll basically present a problem and then I'll look to solve that problem for this couple that presented a problem to us that needs to be solved. And we will also do a little segment called our Cost Cutter of the Week. I put these together actually every week for the past several weeks. We got 23 retirement cost cutters for 2023, and we'll go through one of them today. It'll be a good one, I promise. I mean, I really do. So. So there we go. By the way, folks, the show, of course, is Take Pride in Retirement. I'm Matt McClure. You can go to the website TakePrideInRetirement.com that's TakePrideInRetirement.com. You can email me. It's Matt@TakePrideInRetirement.com or you can give me a call for that free consultation the number is 855 246 9211. There are many reasons that I actually picked that number one of them being that 11 is a very special number to my husband and I. So there you go. (855) 246-9211. The number to call for a free consultation. Of course, we'll talk more about that whole process as we go along as well. And those are absolutely complimentary, 100% free of any charge, any obligation as well. First, though, let's get into things with our Quote of the week.

Producer:
And now wholesome financial wisdom. It's time for the Quote of the week.

Matt McClure:
I like to feature quotes here on the show from prominent LGBTQ community members. And this time around and allies as well. We'll get to that. I know. But this time around, it's from the legendary tennis player, Billie Jean King, who, of course, beat Bobby Riggs, that big battle of the sexes tennis match back in the day. Right. Billie Jean King said this, quote, and I love this. Don't let anyone define you. You define yourself. Oh, that's powerful, powerful stuff. And, you know, I mean, it's true in life, right? I mean, we don't want anybody else. We see this going on in the world right now where people want to tell members of the LGBTQ+ community Right. What we can and can't say or what we can and can't do or how we can and can't define ourselves. Don't let anybody do that for you. You define you. You are the one that matters. That's true in life. It's true in financial planning. It's true in retirement as well. What do you want to do in retirement? What do you feel like you're going to want to be doing with your husband, wife, partner? You know, you know, longtime companion, whomever, your family, if you have kids, what do you want to do there? Like it's all up to you. Don't let anybody else try and define what's right for you because they don't know you know who does. You only you can determine what is right for you according to your conscience, according to your planning, and hopefully according to to some of the advice and tips that you'll get here on Take Pride in Retirement.

Matt McClure:
Well, great words there from Billie Jean King. Now as we continue on. You know, it's the smart retirement plan. We talked last week about smart, smart vision. Right. Having a good vision for your retirement and having, you know, starting off that smart planning kind of process, reaching out, getting things started in in having a smart retirement plan. And, you know, working with an advisor. I am an advisor, by the way. I should have mentioned that more at the top. But I am an advisor. I'm a series 65 licensed financial advisor. An investment advisor representative is the technical term for it. I work with Brookstone, Capital Management and all the great folks there who really do a great job at managing a lot of the different sort of investments that we work with, a lot of the different programs that we work with as well. And I am able to also work with a lot of different annuity characters carriers rather, and characters too. I'm sure. I work with a lot of characters, but I do work with a lot of different annuity carriers because I'm also an independently licensed and appointed agent with a lot of different carriers who do annuities. And you might say, okay, Matt, well, what exactly is an annuity? Well, we're going to talk about that right, right here and now.

Matt McClure:
Because as the Smart Retirement Plan series continues, it's smart. Safe is what we're going to talk about, first of all. And our annuities is a safe investment. Yes, they are. And we'll talk about why in just a few minutes. You know, back in the day, not so much anymore. I mean, still, it can be kind of a prevalent thing. But back in the day, it was the old 60 over 40 portfolio. Right? That's what people always talked about when they looked at investing. It was kind of a written or unwritten rule that you have 60% of your investments as your long term investments. You have those at risk in the market. You have the other the remaining 40% in bonds. Traditionally, those would be government bonds. The ten year US Treasury, for example, those are always considered safe investments, right? Because they have the backing of the full faith and credit of the US government. And so, yeah, safe investment, absolutely. And it was always seen as having that balance of risk and safety. It's still important, but maybe the the mixture of your different assets is a little bit changed or maybe quite a bit changed from years past because the old 60 over 40 portfolio really, I believe last year had its worst year in I think ever. But if not ever a really long time. So that I say that to say you know it used to be that those safe investments there was always this inverse relationship right when stocks would go down the value of bonds would go up.

Matt McClure:
That was there's always this kind of seesaw effect. So stocks go down on one side of the seesaw. The other side of the seesaw goes up. And it was, you know, the value of bonds. Well, not necessarily anymore. We've had this sort of weird economy over these past couple of years and stocks had been suffering. They've they've recovered quite a bit in in the new year, not so new, but in 2023. So far, it's we're getting close to August. It's not so so much a new year yet or any more rather but stocks have have started to come back. But you know, the bond market when it's like last year when stocks were down, way down, you know, bonds were suffering as well. So that inverse relationship didn't really work out well. What does so so what what do you do to sort of battle against that? Well, something that I recommend to clients, to listeners of the show as you are, is bond replacement and replacing whatever the portion of your investments you might have in bonds. Right now, if it's 40%, if it's 30%, 50%, whatever. Replacing those with something called fixed indexed annuities. So bond replacement, you're going to remove those bonds from your portfolio. They've been suffering. Don't don't overpay. I mean, you can you can be paying some hefty fees, things like that.

Matt McClure:
So don't overpay for an underperforming asset. Because you don't want to just be throwing away money when you're trying to plan for your retirement. This is what you're going to have to live on eventually. Right. And so. There are a couple of reasons here that we want to replace bonds. You know, those historically low bond returns, as I mentioned, liquidity is a concern as well. You know, you would have your money tied up in those assets for a long period of time and not necessarily be able to get to that money if you were to need it. For some reason, the bonds really used to be, as I said, considered that safe portion of your portfolio. Investors were really dead set on this fact that that bonds were kind of the bedrock of a stable retirement income. That's the income portion of the portfolio because you know, those you would get a return on those on those bonds and they would pay you. You could get income from them. Well, here is something from Kiplinger, though, that says, you know, the Federal Reserve has, of course, raised interest rates over the past year plus now it had slowed its purchase of bonds so that climate for long term bonds less favorable. These days, bonds have been paying historically low interest rates. That means if long term bonds fall in price, you're going to be looking at low yield investments there for years to come. If bonds have maturity dates that are set in stone, they have set interest rates.

Matt McClure:
That's the coupon on those bonds, Right? Those are set. Those don't fluctuate up and down. You buy a bond at a at a so and such coupon is going to be a so and such coupon, you know, for the life of that bond. And, you know, the maturity date on those. It depends on the type of bond or other type of federally backed security, government backed security that you get. But the maturity date could be 1 to 40 years. You don't want to tie up those investments for 40 years. For four decades. Right. I mean, bonds have that par value of $1,000. That's where they're issued. So you're loaning the government or a corporation, if you do corporate bonds, $1,000. And so you have to leave that alone for that whatever time period. That is up to 40 years. So when interest rates rise as they have been, bond prices fall. There's another sort of seesaw that we're looking at there. So the price of bonds falls as interest rates go up. Well, interest rates are the highest now that they've been in decades. And so there's no guarantee exactly when you're going to be able to get your money back because the bond prices are falling. So you can't then go and sell that bond for that $1,000 coupon rate or more, a $1,000 coupon value, I should say, or the $1,000 par value, not coupon coupons, the interest rate essentially, but the $1,000 par value, you're not going to be able to get that for it if that value has fallen.

Matt McClure:
So you don't want to take a loss on that. So so what do we do? So fixed indexed annuities are a great way to replace, I believe, the bonds in your portfolio. We have fixed indexed annuities. We talk about a long term investment. They're kind of like kind of like bonds, although I have yet to see any way a fixed indexed annuity. That's up to 40 years. But you know, we're looking at it usually around there are some that are seven years, there are some that are, you know, eight, nine, ten, up to 14, 15 years that are very common out there in the marketplace right now. You can. Fund, an annuity, a fixed indexed annuity by taking money from your retirement plan. For example, if you have an IRA 401 K, whatever, if you want to take that money. And we can help you do that, by the way. Take that. Take those funds, transfer them from a retirement plan and make a lump sum deposit. That's one way you can fund a fixed indexed annuity. You can also make multiple payments over time, like a lot of them will say, okay, we want this lump sum payment up front. Then you can add funds to it for a specific period of time. There are other types of annuities that you can make monthly payments on for quite a bit of of time as well.

Matt McClure:
But this fixed indexed annuity, what it does is it follows or tracks the performance of an index. That's why it's called an indexed annuity. It's a fixed indexed annuity. Right. So the indexed part of that. Is it tracks the performance of an index like, say, the S&P 500, which everybody knows about. So the S&P may be the Nasdaq, the Russell 2000, which is like the the small smaller company index. It'll track one of those indexes. And a lot of some of them have proprietary indices as well. You know, the Credit Suisse, Ravenpack, for example, is one that's that's. Been used by a particular carrier as well. So they have some different indexes that they might follow. But. And there are different ways that the under the hood, the fixed indexed annuity kind of works to track that and and follows along that performance. And you say, well Matt Well, here's the thing. I thought you said this was a safe investment. Markets go up and markets go down. If the market goes down, won't that then affect negatively the money that I have put inside this fixed indexed annuity? Well, no, it won't, because the fixed part of the fixed indexed annuity, you're not going to lose any of the money that you put into that fixed indexed annuity based on, I should say, the claims paying ability of the the issuer. And that's not something that you should be really worried about because we only work with the highest rated issuers.

Matt McClure:
We only would recommend the highest rated issuers, those who have been around for decades and decades, if not a century plus. Right. The highest rated in the business in the industry. So you're protected against the loss of any of your principal. And that means that you're not going to lose any of that money. And. You're also once those gains, those say yearly gains or however long you are, those gains are measured and then credited to your account based on the growth in that index that it follows. Again, whatever that formula is, once a year, every other year, whatever that gain is going to be credited to your account, then that just for our purposes here, not technically terminologically wise, if that makes any sense at all. Not it doesn't technically become part of the principle because the principle is what you put into it, but that growth gets added to that principle and then that growth is locked in. So you're not going to lose. Any of the principle that you put in or that growth that's been credited to the account that becomes part of that that fixed portion, Right. That's that is fixed. That is your floor again. And you're only going to go up from there. You know, if you look at if you think about a chart, right, like you've seen stock charts, I'm sure if you think about looking at a stock chart.

Matt McClure:
It looks kind of like an EKG, right? It goes up. It goes down. It goes up. It goes down. It goes up, it goes down. And it's kind of like, you know, an EKG or a roller coaster. But if you're if you're looking at a fixed indexed annuity chart, it's much more like stair steps. Right? You'll see it, here's your floor and then you'll go up a step. Once that interest gets credited from based on the growth of whatever index is tracking, and then you're on that next level and there's your floor. And then it goes up from there. Same thing. There's your floor again and then it goes up from there. So it's stair steps. It's not that that wild ride like you get in the markets. So, I mean, you're protected against that loss of principle. That is wonderful. That's the one of the primary reasons that I would recommend a fixed indexed annuity for anybody. Not that I'm saying I recommend it for everybody. There are situations where it doesn't necessarily fit in what you need. And that's why we go through and we assess your situation. Again, not one size fits all. And then you can also establish a source of retirement income, right? So that once you reach a certain date, that's determined when you establish that annuity. Then you can turn on income. That date and you have a steady stream of income that is guaranteed income for the rest of your life for no matter how long you live.

Matt McClure:
That annuity is guaranteed to pay out a certain amount of income each and every month. And we can take a look at an illustration when you come in for your your consultation. And we actually go through the process. We can take a look at an illustration of exactly how much. If you put in a certain amount of money that you have and are able to to put inside a fixed indexed annuity, how much income that will generate in retirement based on a lot of different factors, your, you know, amount of time that you have until you turn on income, until you retire, the amount obviously that you put in there, the amount of projected growth, all of those things and will determine what income you need in retirement. We'll see if that as a fixed indexed annuity will fulfill a good portion of that need. And so you'll have that steady income stream that you can never outlive. It's guaranteed by an insurance and annuity carrier to be paid out to you as long as you live. Guaranteed. That is something that should give you peace of mind right there. There's so many things in this world right now that don't. Give you peace of mind. So many different things that can go wrong, so many different scenarios in which you might be a little scared or you might be uneasy about life and about the future, that your retirement should not be one of them.

Matt McClure:
And this is one of the reasons I love doing what I do is because I'm able to help people have. A peace of mind, I'm able to give people a certain assurance. That their retirement is going to be. As. Stable, as steady and as wonderful as they want, need and deserve. And that's really why I'm in this, not in this for I'm not in this for me. You know, I'm really not. I do enjoy what I do and that, you know, I love seeing the satisfaction on people's faces when I'm able to help them. I love seeing that light bulb go off when they say, oh, I didn't even know about this particular kind of investment. I didn't even know that that was a thing. I didn't know I could have guaranteed income for life. That's kind of wild. But yeah, I mean, it's. I just love what I do. And I. Really love helping people. I love helping members of the LGBTQ+ community specifically because as I said in the first episode, you know, it's a community that's given so much to me. This is my way of helping sort of pay back a little bit of that. Um, but get to work with great people who just want to have a great life and who want to have a successful retirement. You want to keep their money safe, but also get growth.

Matt McClure:
Who want a lot of the same things that everybody else wants. Just might look a little bit different. Might be the makeup of it. The puzzle pieces might fit together a little bit differently. But it's it's life and we all want a good one. So with a fixed indexed annuity, you limit your losses. You can protect those gains as well. There's inflation protection in there. Also, tax deferred growth. You don't pay taxes on it on that growth that you've added. So you put in that principal and the you know, you've paid the taxes on the principal already, but that growth will still need to be taxed, right? So then when you are in retirement, when you've turned on income and you start taking that payment, that income payment each and every month or however often. You then. Will pay taxes on the growth portion of that then. There are some disadvantages to it. You know, there are potential limits on your gains depending on what product you go with and what your advisor says. Hopefully your advisor is me. And all of the good folks at active wealth Management. We would love to help you, but if it's not me, hopefully they will get you in the best possible scenario with a product that has a great participation rate. You know, there are there are products out there where the participation rate and by participation rate, I mean, what percentage of the growth in a particular index will be credited to your account? Like how much of that growth? So let's say the market goes up 10%, for example, just for easy math.

Matt McClure:
I love easy math. Um, but to say the market goes up 10%, you have 100% participation rate. Great. Good for you. That entire 10% is credited to your account. Period. Let's say you've got 100% participation rate and there's no growth in the market that year. Things are flat. Well, obviously you don't get anything. And that's the same no matter what your participation rate is, right? If there's no growth, you don't get any growth credited to your account. But let's say you have like a product that that I know about that's out there in the market right now, a participation rate of like 300%, let's say if the market only goes up 1% in a year, well, you're going to get 3% growth credited to your account because you've got that 300% participation rate. Right. And the good thing is, on the downside, you're protected because if the market goes down, that principle, that growth from the previous year is protected. So, you know, that's a great another great reason to call me because, you know, we know about these things have access to these things. (855) 246-9211. All right. So potential limits on gains. That's a disadvantage. Surrender charges if you you know, I talked about liquidity earlier if you want some of that money. Out of that account. Let's say you need access to some money.

Matt McClure:
You have an emergency that you need access to some of that money. You can get with a lot of fixed indexed annuities, up to 10% of that without penalty. Now, there are surrender charges. If you need more than that, you'll pay a penalty if you need to. You know, the whole thing, the whole shebang. You're going to pay a surrender charge. We can talk about that. We can get you in a product that will work for you. But there is liquidity there. You just have to be aware of the surrender charges and the fees that might be there If you were to need access to more than 10% of your principal at any time. There's uncertainty also about the exact returns that you're going to see. It's linked to a market index. Right. So you don't. My crystal ball is broken. I don't know exactly what the markets are going to do in the coming decade, for example. So you don't know the exact returns. You do know, though, that you will get growth when the markets go up and you'll be protected. That principal will be protected on the downside. So great things to ask about when you go to TakePrideInRetirement.com and request a free consultation that's TakePrideInRetirement.com. Well okay so that is the smart safe portion of things. Let's talk about smart risk a little bit. You got to take some risk with your investments.

Matt McClure:
You just you have to there's got to be some risk there. Now, if you have a low risk tolerance, maybe you only have a very small portion of your investments at risk in the market. Maybe you're just very risk averse and you want to be, you know, completely in a fixed annuity, a fixed indexed annuity. Not completely, because I wouldn't recommend completely for anybody, but I am a fiduciary, so I have to work in your best interest and work with you, not work for me. You know, that's not what I'm in it for. I'm in it to work for you and with you to get you the best results and get you the best retirement that you can possibly have for you, your husband, your wife, your partner. Your family. So there has to be some risk. The amount of that risk will vary. If you're very risk averse, it could be very small amount of money compared to your entire portfolio that is at risk. But you could see some great returns if you take some risk. If you take some more risk with your retirement money, with your investments. So I recommend smart risk. And what do we mean by we say when we say smart risk? Well, I am talking about. You know, you don't want all your money underneath your mattress. It's not going to be doing anything for you. You don't want it in a regular savings account in your brick and mortar bank down the street because it's not going to be working for you.

Matt McClure:
You'll get some return on that money, but it'll be minuscule compared to what you could get in the market. But you've got to take that risk, right? It's all about stepping out, taking a little bit of a step of faith, a leap of faith. So what exactly how much money goes into your risk portion of your portfolio remains to be seen because, as I say, it's up to you and it's up to you and me when we work together. But there are a few things that you should consider here when we talk about smart risk. Number one, you should consider something that I think flies under the radar a little bit. Structured notes, and we'll get into structured notes a little bit more in detail in a future episode. Don't want to get too into the weeds on it right now because I'm throwing a lot of information your way already, but. Structured notes. Definitely something to consider as kind of this a little bit of an alternative investment. You can also, if you work with us at active wealth management and if you work with me specifically, I can help you lower your fees. Do you even know what you're paying in fees right now? Well, I can tell you, if you if the answer is no, chances are we can help lower those for you can pretty much do that for anybody with a few exceptions out there.

Matt McClure:
Reduce your expense ratio and avoid mutual funds. And that's, you know. Avoiding mutual funds. That's like a not a universal rule, of course, because a lot of mutual funds are very popular investment vehicle. But at the same time, there might be reasons that you want to avoid those expense ratio. Could be one of them. It could be a lot of high portfolio management fees associated with what you have going right now in your investment portfolio, especially if there are mutual funds there. So let us help you with that. Now a tactical asset allocation strategy is what we do. And so what is tactical asset allocation? Well, it's a really active and that's one of the reasons that the company that I work with, the good people that I work with, are, you know, as active wealth management, right? It's an active portfolio management strategy. So you're not going to set it and forget it. You remember the old the old infomercial, set it and forget it. You know, it's like, you know, the Ronco cookware thing, whatever it was. I don't really know what it was off the top of my head, but the infomercial, very famous. Set it and forget it. God, it was a dorky kid. I literally would sit up and watch infomercials at night. Uh, that explains a lot about my life. So it's not a set it and forget it kind of scenario when you're talking about tactical asset allocation.

Matt McClure:
You're going to be looking at your investments, you're going to be reviewing those investments and then potentially shifting them around in your portfolio to take advantage of strong market sectors, whatever is. Behaving, whatever is performing the strongest in that moment, or maybe some pricing anomalies in there, take advantage of those, but you want to keep your portfolio as strong as it can possibly be by this more active strategy where we do tactical asset allocation, maybe shift around things in your portfolio to take advantage of current market conditions. Because let me tell you, if I invested my portfolio of assets. Or if I invested my assets into a particular portfolio ten, 15 years ago. Okay, let's let's say even let's go back, you know, 20 years ago, for example, if I invested my assets inside a particular portfolio 20 little over 20 years ago. A little over 20 years ago, the dotcom bubble was about to burst. So what? I want to still have all of my assets tied up in dot coms necessarily, or any of those if they're still around any of those that I was invested in back then. If they still happen to still exist all these years later. And probably not. I probably would have wanted to reassess. And manage things tactically. So that's what we mean by tactically is, you know, you're looking at switching things up. Your your tactic is being willing to switch things up. In other words. So.

Matt McClure:
Thatrillioneally does give you extra value because your portfolio is going to benefit from market changes that are advantageous to you, right? So so it's you're not just letting it be at the mercy of whatever happens in the market. Oh, I'm just going to throw it up into the air and whichever way the wind blows. No, you're actually you working together with your advisor. You're taking more control over your investments and over your future control the things that you can. I can't stress that enough. There's so many things that we cannot control in life. But there are things that we can. So control the things that you can. And that's one of them. Tactical asset allocation. And also, you know, it's it's considered kind of this moderately active strategy really, because the portfolio manager is going to return the investments to their original arrangement. Once the desired once the desired profit is is realized. So you reach a certain point and then you sort of go shift back toward maybe what you're originally allocated toward. Again, I use sort of a an exaggerated example with the whole.com thing, but. Do, I would I still want to be involved in, say, tech stocks, for example, if not necessarily all those dot coms when that bubble burst? Yeah, of course, you know, you want to be invested in that, but you've got to look and and manage things tactically so you can take advantage of the different situations that are happening in the market each and every day and not not that you're going to change up your allocation each and every day.

Matt McClure:
I'm not saying that because Lord knows that would be a full time job for you, me and everybody else. But. You're going to want to periodically take a look at things, see where how the market's been performing, how it's projected to perform in certain sectors, change things up so that you can take advantage of current market conditions. That's what it comes down to. You can reduce your risk by doing that. You can increase your returns. By doing that, you can also truly diversify your portfolio. I am all about diversification. I am all about diversity in life. I think that diversity is what makes us beautiful. The fact that we are all different makes us interesting. It makes us beautiful. It makes. It just gives life so much more color and so much more interest. And it really does. Make things more beautiful in this world. It really does. And I'm all about diversification when it comes to your investments as well. You don't want to all be invested in one thing. You don't want to put all of your eggs in one basket. You don't want to completely be invested in tech stocks. Right? What if there's another.com 2.0 bubble that's going to burst? Well, you are up the creek. Essentially with no paddle at all. And there's a big waterfall right down there and you're about to go over the edge.

Matt McClure:
That's that situation. But if you have true diversification, if you're managing your assets tactically, meaning you're willing to change things up, that really does help you achieve that true diversification. If you also have a certain amount in safe investments, if you have, say, a fixed indexed annuity, some other type of safer investment, that is what true diversification is. And so we want to help you achieve that. One more thing to talk about in the Smart retirement plan this time around is smart tax. You know, I said it in the beginning that I don't mind at all paying my fair share of taxes. Don't don't mind it. I don't have fun on April 15th every year. I was actually this year, this previous year for 2022 tax year, I got my stuff filed super early. It was great. She got a little bit of a tax refund. It was great. I usually do not do that. And so April 15th or 18th, as it's been for a couple of years now, it's just not fun for me generally. But this year was not so bad. So I don't mind paying my fair share of taxes. If we can minimize that, do it in the most up and up sort of way and minimize our tax burden both now. In our working years and during our retirement. Great. Wonderful. You don't want the IRS to be your partner in retirement. In other words, you don't want to be just paying so much of your taxes.

Matt McClure:
You don't want to sit and look at and calculate the income that you're going to need in retirement and then think, okay, I'm going to draw down my 401. K or my 403 B or my IRA, whatever. I'm going to draw that down and that's going to last me 30 years at X, whatever. Well, factor in taxes, because if you take a look at that dollar amount in that 401. K and that IRA. That money is not all yours. A lot of it good chunk of it belongs to Uncle Sam. So that's the thing that you have to really consider here. And what we want to do is divest the IRS from those retirement accounts. Couple of different ways you can do that. Index universal life insurance. And you say life insurance? Yeah. How can life insurance help me? I thought it was just the death benefit. So if I die too soon, my beneficiaries, my family is taken care of. They've got some money to to pay final expenses. They've got money to to, you know, help them live and all that. That is a big part of it. Traditionally, life insurance, that's kind of all it was. But now there's a lot more to it than that. And indexed Universal life is one of those things that can really help. You can be a benefit to you in retirement. You can get retirement income from an indexed universal life policy and you're really you're technically taking policy loans, but that's a loan that you never intend to pay back.

Matt McClure:
So you're kind of loaning yourself in. In other words, you don't you don't intend to pay back that loan and you don't have to pay that loan back in the long term. So you can get that income and it's tax free income because it's from a life insurance policy. You can also do a 1035 tax free exchange of cash value life insurance into that IUL that indexed universal life insurance policy as well. Now, here's the thing. Did you know that different investment accounts are taxed differently? I just alluded to this. Understanding how those different things are taxed is really super important. There are tax exempt accounts. Tax exempt account is taxed when you contribute, not when you withdraw. So when you put that money in to, let's say, for example, a Roth IRA. So one of the only tax free investments out there. You pay the money. You pay that tax money up front at today's tax rates, which are honestly the lowest that they've been almost in my entire lifetime. But they're the lowest definitely that they've been in several decades. So that's something to keep in mind as well. And they're they're poised to go up here probably at the end of 2025. So I've got a plan with that in mind. But a Roth IRA, you pay taxes at today's rates.

Matt McClure:
When you put that money in, you've already paid the taxes on it. Then it goes inside the Roth IRA. That growth then and that principal that you put in and any contributions that you make thereafter, that all grows tax free. So when you make withdrawals from that in your retirement, you don't have to pay the taxes because you've already paid the taxes. It's almost like if you if you plant something and it's a seed, you've paid taxes on the seed rather than on the big harvest at the end, because then you're going to owe a lot more in taxes at the end. You've paid money on that small bag of seed and you don't have to pay it on the harvest. Great, wonderful advantage to have. And, you know, sort of surprising that the federal government has has kept these around these Roth accounts. We can help you do a Roth conversion as well. That's something that you can do when you call us. 855 246 9211. You can go to TakePrideInRetirement.com that's TakePrideInRetirement.com reach out for that free consultation as well. So tax exempt is that tax deferred you get tax benefits up front right so like in your 401. K for example through work, those payroll deductions are made without paying the taxes on them. It's pre-tax money goes into your 401. K and so that yeah, you do get a larger sum up front because you don't take the taxes off of it.

Matt McClure:
You get that larger sum invested up front and then that all can grow. But in the end you have to pay taxes on what's going to be a larger amount of money. You haven't paid taxes on it yet, so you have to in the end. So that's one example of a tax deferred account. But a Roth is not tax deferred. It is tax free inside that account because you've already paid the taxes on it up front. You don't have to pay the taxes on it when you come to take that money out in retirement when you need that retirement income. Well, you know, life insurance is the other sort of thing that I that I talked about here. And we'll just briefly go over this. The index universal life earns cash value. It gives the policyholder a chance to earn a fixed or equity indexed rate of return, kind of like an annuity in a way. It can grow in that sort of stairstep fashion. Right? You're going to see that that growth credited to your account every however, so often whatever time period you see that growth credited to your account. And then it's not going to go down from there because it's protected from market losses. So that's something else. It's also tax free. When you are in retirement, you're taking that income in. So ask me about that. When you go to TakePrideInRetirement.com, click the contact page and let me help you with anything that you need help with involving your investments.

Producer:
It's time for this week's Problem Solver.

Matt McClure:
All right. I told you. Problem Solver segment here and here it is. First time around, we're going to talk about this married couple who they're great actually know these people. And I and I love these people. So they are a married couple. I'm not going to give you their names because, you know, I don't want to. The names have been changed to protect the innocent. Now, a married couple, they're 58 and 55. That's another reason I'm not telling you their names because they would not like it if I told you their names and their ages. But they're 58. They're 55. They want to retire in about 7 to 10 years. Right. So fairly average, you know, mid to late 60s. They're saving $52,000 a year in tax deferred 401. Accounts for retirement. They have saved. They've done well for themselves. They've saved $1.2 million total in their 401. K plans. They are doing well. But because it's all tax deferred money, they are concerned about what we were just talking about, that future tax risk. They expect to get about $47,000 in combined Social Security income per year. And their expected retirement expenses are right at $6,000 a month. So they got a lot. You know, you think, oh, $1 million, that's going to go far, but not if they have to pay a big chunk of it in taxes.

Matt McClure:
Right. So the married couple is choosing to invest. Now, this is their solution in an IUL policy that indexed universal life that I just spoke about and that reduces their taxable income now. It also generates tax free income for retirement later. They're also investing in an annuity. Now that is really going to be that principal protection. They're protecting a big percentage of their assets there and they're establishing yet another income stream to be on top of Social Security that they'll get those checks every month in the mail or direct deposited into their accounts. And they're going to be converting some of their tax deferred retirement savings into Roth IRAs once they stop working to reduce their future tax exposure, do a Roth conversion now and then, you won't have to pay as much in taxes in the future. Is a Roth conversion right for you? Well, chances are probably is, but I don't know because I don't know your particular situation. That is why you need to give me a call. or you can email me Matt@TakePrideInRetirement.com. And you know, I am glad to provide comprehensive consultations at no cost to listeners of Take Pride in Retirement. There is no obligation to work with me any further. If you don't like it.

Matt McClure:
You know I'm not this is not a high pressure situation. I'm not forcing you to do anything at all that you don't want to do. You only work with me if it is the best thing for you to do. I'm a fiduciary financial advisor. That means that my obligation is to do what is in your best interest, period. I'm going to help you analyze your financial situation closely. Take a look at any of the accounts that you might have, whether those be annuities or whatever else you might be investing in right now. Discover exactly how much you're paying in fees. Help you cut unnecessary costs within some of those other accounts, like an IRA, a 401. K or other retirement savings accounts, 403 B, whatever you might have TSP. If you're a federal employee, also going to be able to help you with Social Security planning, Medicare as well. And really, the bottom line is going to compare your current situation to the custom plan that we're going to build for you, and we're going to do that together. We're going to work together on this. And so if you have an advisor and you have not heard from them lately because they've had their heads buried in the sand with some market turmoil going on. Just reach out, get a second opinion. Even if you have something in place and you think, oh, you know, I think it's fine, let us take a look at it.

Matt McClure:
Might be fine. You might have a plan that is working fine for you. And if that's it, great. But just because you think it's working fine doesn't mean it necessarily is. And just because it is working fine doesn't necessarily mean it can't work better. You've worked so hard for your money over the years. You've saved it away. You have invested it, put it to work as hard as possible for you so that you, your husband, your wife, your partner. Can have the best retirement possible. A retirement that you can take pride in. All right. That's going to do it for episode two of Take Pride in Retirement. Thank you so much for joining us. We're going to have some great guests coming up here on the show. We're going to do a lot of education that I'm huge on education, financial education, teaching you the things to do to make your retirement better, to give you a retirement that you can be proud of, a retirement that you can take pride in, be proud, be strong. And until next time, thanks so much for joining us. I'm Matt McClure with Take Pride in Retirement. We'll talk to you again next time.

Producer:
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 TakePrideInRetirement.com.

Producer:
Investment Advisory services offered through Brookstone Capital Management LLC BCM A registered Investment Advisor. Bcm and Active Wealth Management, Inc. 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.

Producer:
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.

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