What You Need to Learn About Securing an Income Stream Throughout Retirement

6.2.23: Audio automatically transcribed by Sonix

6.2.23: 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 Safe Money Masters with Greg Castle. Get ready for a full hour of financial information and economic news you can't afford to miss. Greg works hard each and every day to help hard working Americans like you navigate challenges and reach the financial freedom they desire and deserve. So now let's start the show. Here's Greg Castle.

Greg Castle:
Hi there and welcome to Safe Money Masters, where we help you become masters of your money and teach you how to keep it safe. I'm Greg Castle with a bad voice today. And I'll be your host, along with my co-host and producer, Matt McClure. Say hi, Matt.

Producer:
Hi there, Greg. You know, you sound great. Don't don't sell yourself short there.

Greg Castle:
Got it. Got a got a catch in my throat today. Don't know what's going on. But speaking of catches, you can catch us every Tuesday evening at 6:00 pm on Money Talk, 1010 and on your local FM stations, 92.1 and 103.1. Now, if you want to learn how to keep your retirement funds safe from market volatility. Or you want to create an income stream that you can't outlive and you want to be able to mitigate taxes and inflation. Then I'm here to tell you you're in the right place. Now, if you happen to miss an episode, you can catch the replay at SafeMoneyMasters.com or wherever you listen to your favorite podcast. You can also check out our YouTube channel and subscribe to see weekly video highlights and special content. And if you've got any questions or comments, feel free to email me personally at Greg at SafeMoneyMasters.com or call me at (813) 430-7100. Hi Matt. How was your weekend?

Producer:
You know, it was good. It was kind of busy. It's funny because we we talk about it was one of the things that I kept busy with was we talk a lot about retirement, obviously, on the show and planning for that. Well, my my sister Jill was able to actually retire early this year from teaching. She's been teaching almost three decades, was able to retire early. And so we had a little celebration for her. So it's it was good.

Greg Castle:
Sounds like a great weekend. I was pretty relaxed and I did nothing except spend some time with family. And I think we actually, you know, we're getting ready for a for an anniversary trip down to the key down to Key West before too long. So, um. We thought we'd better get rid of our, you know, our winter whiteness and go out to the pool and get a little bit of sun before we went down to the keys and get totally toasted and roasted. So it's pretty relaxing weekend all in all.

Producer:
Oh, that's good. Yeah. You don't want to go to the keys and come back looking like a lobster, you know?

Greg Castle:
That's a good point. You want to catch a few? You just don't want to come back looking like.

Producer:
One, Right? Right.

Greg Castle:
All right, so why don't we get things started out with our quote of the week.

Producer:
And now wholesome financial wisdom. It's time for the quote of the Week.

Producer:
Our words of wisdom here, coming from renowned motivational speaker, author and life coach Tony Robbins. You know, Tony is just a really inspirational guy. He has inspired millions worldwide to overcome obstacles, unlock their potential, achieve extraordinary success both in their personal and professional lives. And he has some some applicable words for us this week, Greg.

Greg Castle:
That's right. So Tony's quote is working because you want to, not because you have to. Is financial freedom. So what are your thoughts on that, man?

Producer:
I mean, that is just that really hits the nail on the head because in retirement especially, you don't want to be in a situation where you are, you know, having to go back to work because you have to because you have to do that to make ends meet, because you can't enjoy your retirement. The retirement that you've dreamed of, you know, you can't be on on the beach every day or whatever the thing is that you like to do. You got to go back to work for a lot longer than you might have planned on or wanted to or needed to. So, yeah, that really does hit the nail on the head.

Greg Castle:
Yeah, I agree with that too. You know, actually. And the first motivational course that I ever bought was a Tony Robbins course. And this was way back in the mid 80s, and it was called Personal Power. He still sells it today. You can buy it for $250 on his site. I went to check it out. Um, anyway, yeah, Tony is actually ask a lot of folks when because I use some of his material. There's a chart and this newest one of his new books from 2017 Money Master The Game. There's a chart in there that I use when I'm doing screen shares with clients and to sort of help them understand a certain thing about how annuities perform and those type of things anyway. Tony. Most people are familiar with him, those that aren't. The best way to describe him is he is the nation's and probably the world's number one personal and business coach. So he's highly respected in both industries. Anyway, last week we had a section of the show where we talked about various types of annuities and the pros and cons of each one of them. Now, we actually jumped the gun a little without realizing it, Matt, because I just found out last Thursday that June is Annuity Awareness Month.

Greg Castle:
So with that said, I think we'll be able to find a way to incorporate them into today's topics one way or another. I think we got a packed show today. Time permitting, we're going to talk about a number of topics, such as the number one fear of retirees. And we'll talk to you a little bit about what you can do about it today. We're going to talk about the four things a fixed indexed annuity can do for your wealth and retirement. Uh, one of the things that I actually included in a book that I wrote for federal employees is actually and it applies to everyone but just happen to be in the book I wrote for federal employees called a Creating a Worry-free Federal Retirement. Anyway, we're talking about the leaven. The leaven. Ugly truths that could unravel your retirement. There's some of those are pretty interesting. We'll talk about covering retirement gaps. And of course, we'll get into this week in History where we'll share with you some historical birthdays and also historical events at the end of the show. Time permitting, we'll end the show with a question from one of our listeners in our Ask Greg segment. So, Matt, if you're ready, let's jump right into today's topics.

Producer:
Yeah, let's dive on in here. And you know, we're going to start this show kind of the meat of the show here this week, Greg, on a very revealing survey, I think, about the the attitudes of retirees, the fears of retirees, especially because this survey by AIG life and retirement actually revealed that retirees fear running out of money even more than death itself. That's that's huge.

Greg Castle:
Yeah, The actual the survey actually showed that almost 60% of responders said that. So it was a it's pretty interesting. So what are the solutions if there's a few? One is make sure you don't withdraw more than 4% of your assets each year. There's you know, it's well known the 4% rule. But what's not really understood about that is, is 4% of what? 4% of your big nest egg. You started out with 4% of whatever you have at the current time. Should you always throw out 4%? Is 4%. The top 4%. The bottom. You know, what is the 4% rule? So there's a lot of economists today and financial advisors that will tell you that 4% may not be the right number anymore because of inflation and some other things. It may be actually less than that. It's probably better to start out with a lower percentage. Some recommend anywhere between two and a half to 3.3% of your savings to start out if you can afford it and don't need to cover the income gap. You don't want to you don't want to run out of money too soon. And we'll talk about. We'll talk around that a little bit later on in the show. But anyway, so just make sure you don't draw out more than 4% of your account value or your existing assets at the time you get ready to make them draw. For example, if you start drawing down if you have a bad year and your and your accounts deplete or your assets deplete, it's not 4% of what you started out with. It's 4% of what you have left. Another thing you can do is pay off your home.

Greg Castle:
You know, a mortgage payment is going to assume a lot of your monthly and Social Security benefit. Now, bear in mind, if you're especially in Florida, here in Tampa, the East Coast over near Miami, Fort Lauderdale, some of the other major cities in Florida, property taxes are obviously very, very high. So a lot of time if you've got a good interest rate, your mortgage payment itself isn't all that much. You probably have a hard time, you know, renting a place for that. If you keep your home and it's paid off, you've still got to pay the property taxes and insurance on it. So you need to sort of do a sort of an evaluation. We can help you out with that a little bit and take a look and see. Okay, you know what? What can you afford to do once you retire? Another thing you can do is consider a fixed indexed annuity to help beat inflation and build your own personal pension. That's what annuities really help you do is to generate an additional stream of guaranteed lifetime income, because one of the biggest mistakes that people make when planning for retirement is focusing on building the big nest egg. You don't retire on a big nest egg. You really retire on income. So you have to consider the importance of generating a guaranteed lifetime income, money that you can outlive. So if you look around, this is kind of interesting. As a financial advisor, advisor or a strategist, I still do the same thing. I look around and talk to people I play golf with and some other things or other people people.

Greg Castle:
And you'll find that the happiest people around. Arthur was associated with the most money in the bank. They're the ones who have a guaranteed income for life. They're the ones who work for the federal government for a while, or work for the police departments or fire departments or teachers work for the state in some ways. They have a pension in addition to Social Security. They've got guaranteed income coming in. So if your money is sitting in the bank somewhere, you're not doing anything with it and you know you've only got a limited amount of income coming in. You're not sure what's going to happen. Just remember that as long as you got a guaranteed paycheck coming in the mailbox every month, you'll be a much happier person because your assets, the big pile of money that you got can be lost in the market. It can be stolen, it can be swindled, it can be divorced, it can be well, it can be done. A lot of things can happen to it. So but you can't beat that guaranteed paycheck that comes every month for the rest of your life that you can't outlive. So if you're looking for a guaranteed paycheck for life, you know we can help you find strategies and ways to achieve that. Be sure to give us a call at (813) 722-0020. Or if you just want to talk about it, give me personally a call at at or on a call, but give me an email personally at Greg It's SafeMoneyMasters.com. I'll be happy to answer anything that you send to me. All right. What is next on the agenda, Matt?

Producer:
Well, now, you know, we've got we mentioned they're fixed indexed annuities, right? We've got four things that an a, a fixed indexed annuity can do for your wealth and for your retirement. There are probably a lot more things that the these types of annuities can do for you and your in your retirement. But these are kind of top line big things that we wanted to focus on today. And I think that especially with all of the volatility, Greg, that we've seen in the market over these past several months, you know, for over a year now, really a lot of people are going to really be, you know, having their ears perk up at number one here, which is a fixed indexed annuity can protect your money from market loss.

Greg Castle:
Yeah, that is one of the biggies for a fixed indexed annuity because fixed and fixed indexed annuities offer a highly rated annuity characters. You know, remember back to the market crash, the housing bubble back in 2007, 2008, or even the beginning of 2009 and during the worldwide recession that was caused by the mortgage loan crisis. Um, the S&P 500 lost 50.1% of its value from March 1st of 2008 to March 31st of 2009. And that's a that's a big part of your nest egg. So ironically, those folks that had fixed annuities from from decent carriers during that period of time didn't lose a dime of account value. Those people that were invested in the markets, those people that were even day traders or whatever, you know, saw their saw their holdings, you know, drop drastically. And they didn't lose everything. But it took them a while to get back because if you suffer a 50% loss in the market. Matt, If you lose a 50% in your market, 50% of your assets in the market. How much does the market have to go back up for you to get back to even?

Producer:
Now, a lot of people might say, oh, well, it's got to go back up 50%, but oh, no, it's got to go down 100%.

Greg Castle:
Exactly. Because the market only goes back up 50% and you lost 50%. You know, let's say, for example, you started out with $100,000 and that was your that was your assets, $100,000 and it lost 50% of its value. You're down to $50,000. So the market goes back up 50%. You only gain $25,000 because 25% of of 50,000 a correction, 50% of 50,000, which is what you had left at the point, is half of that, which is 25,000, which brings you back to 75,000. So 50% increase does not get you back to where you started out with. It takes 100% of a gain to get you back. If you lose 50% of your money. So fixed indexed annuity is one of those products to where, you know you can't lose a penny of your principal or credited interest and interest is credited once a year. So once it's credited, it's yours. And then down the road somewhere, should you choose to, you can turn it on for guaranteed lifetime income, which we talked about earlier. It's one of those important things that will make you very, very happy if you happen to have.

Greg Castle:
Um.

Greg Castle:
So what's the second one, Matt?

Producer:
Well, the second one is, is super important, kind of piggybacking off the first, you know, you're going to protect your money from market loss. But number two says you're going to grow your money with market like gains.

Greg Castle:
Yeah. Market. You know, people are used to the market. You know, they're seeing reports on their statements and stuff saying, hey, again, you know, 14% or again, you know, 12% or whatever. The reality is, according to a source that I use called Measuring Worth, it's a you can see it online. It's measuring worth.com. You can go in there, do some calculations. If I were to ask you, Matt, what the what the growth rate was of the Dow Jones, the S&P 500 and the Nasdaq from January 1st of 2000 to December 31st of 2022? How much would you say the gains would be.

Producer:
The total gains over that time period?

Greg Castle:
You know, the average the average annual gain over our average annual average growth, the average annual growth over that period of time.

Producer:
Yeah. I mean, I would say probably an educated guess. I'd say maybe 3%.

Greg Castle:
No, it's actually for 4.1. 4.2.

Producer:
Oh, I was I was a pessimist there.

Greg Castle:
You were a pessimist. But bear in mind, you know, the S&P 500, for example, from 1998 to 2008. Uh, actually later than that, closer to 2010 was sort of the lost decade because, you know, your money, the market index only got back to where it was in 1998. By 2010. So that period of time, your money, the growth of your money was actually zero. So you just don't do that. So actually. Go back to your point and you'll grow your money with market like gains. A typical annual growth of 5 to 7% plus is what you can most likely expect with the fixed indexed annuity. Sometimes you're going to get more, sometimes you might get a little bit less, but you'll never get less than zero. You're never going to lose anything. So that's that is a great benefit of the product. So what's number three? Matt?

Producer:
Yeah. You know, and just before moving on to number three there, Greg, you know, if you look at, say, a chart over time of the performance of a fixed indexed annuity, it'll look like stair steps, you know, yeah, it'll go up, but it won't go down unlike the the markets, the, you know, the Dow, the S&P, Nasdaq certainly, which looks like kind of like an EKG. You know, I mean, it's up and down and up and down and up and down all the time.

Greg Castle:
So that's actually that's actually the chart that I showed from Tony Robbins book, Money Master The Game. It shows a comparison between the actual performance of the S&P 500 from 1998 to the end of 2016. And you see all the little lines going up and up and up and down. And then you'll see the performance of a fixed index product. And it's astonishing at the end of the period, at the end of the 18 year period, the the S&P 500 would have turned your $100,000 into $182,000. The fixed index of product, even with a cap of 13%. Um, your return was $25 short of $333,000. So I was asking, with the blue line or the red line, no one's chosen the red line yet, which is the actual S&P 500. Everybody wants the blue line. Yeah. So the blue line is actually a fixed index product. So if you want to see that blue line, give me a call. (813) 430-7100. Or email me personally at Greg at SafeMoneyMasters.com. I'll be happy to show it to you.

Producer:
I love it. Yeah, we'll we'll show you that blue line and a lot more. All right. So number three here on our list of four things that have fixed indexed annuity can do for your wealth and retirement is here we go again with that generation of a lifetime income. So it will generate that lifetime income. And you've got some, you know, flexibility there as to maybe when you want to flip that switch and turn that on.

Greg Castle:
We're beginning to sound like a broken record here, aren't we? Yeah. You know, you got to bear in mind your life expectancy is is is getting longer and longer as time goes on. Again, we'll talk about that later in the segment as well. Um. You know, your retirement is likely to last 30 plus years. The. Uh, and it could be longer, depending on how young you are when you retire, how good your health is when you retire. The it might be a good idea to place some of your assets into a fixed indexed annuity, to set a safety net around a portion of the retirement income that you want to generate and make sure that you cannot leave that money. Because if you live to be 120. I know that sounds kind of strange, but if you live to be 120, they still got to pay you. So it'd be it'd be the same income over and over and over again to say the same income. There are some products that are geared for their inflation adjusted is something that different products have different purposes within the fixed index spectrum. Some have riders, some are included. However, you know, there are some fixed indexed annuities that have inflation adjusted riders available to them to where you start out with a little lower income when you first retire and it grows as you go into, you know, further and further into retirement. So, um, just consider, you know, again, a broken record. Consider getting yourself a guaranteed lifetime income if you've got a pension already as something else to it. If you don't have a pension, this is a great way to generate your own personal pension. So but you need lifetime guaranteed income. So what is number four?

Producer:
Matt Well, another good one here is to eliminate the advisory fees. That's another thing that a fixed indexed annuity can do for you.

Greg Castle:
Yeah, You know, you've got basically two types of advisors. You've got fee based advisors where it doesn't matter if the market goes up or the market goes down, you're going to pay a fee every year. That fee is based on your asset value. I kind of laugh when there's a commercial out right now on. I won't mention the company who's putting it on, but it says basically we do better when you do better, which is true because if they get charged the same fee, the same every year, if you do better, then your your account value has grown. If your account value has grown, they're going to do better. They're going to make more money because that fee is now on a higher amount of money on your account value. If you lose money. They still get the same fee, but it's based on a lower account value. So granted, they do better when you do better. I can't help but laugh when I hear that commercial because it's it's kind of misleading to me. You might call them and have them explain it to you, and I may totally misunderstand it. So I'll you know, but the way I understand it, it's it's comical. But anyway, um, you're likely currently paying fees on your portfolio if you've got a 401. K 403, B 457 TSP or whatever, there are fees are going to be placed with that. And granted, tsp's have pretty low fees. There are a lot of hidden fees, especially in your 401, 403 B's that you probably aren't even aware of.

Greg Castle:
But it's diminishing your return every year, over year, over year. By replacing them with a fixed indexed annuity, you pretty much eliminate the annual fees because the annuity companies are paying your advisor. You don't. In other words, if you were to put $100,000 into a fixed indexed annuity, guess what you don't know. Fees come out of that $100,000 goes in, the insurance carrier will pay that advisor or agent. They will pay them a one time commission as sort of a marketing fee. It's just like you don't pay it every year and you don't it didn't come out of your account. It's just part of the expense they expect for sort of a marketing expense because they have a number of independent agents around that are basically doing the marketing for them, that having to pay an entire sales team to to do that for them. And a good advisor will always choose the best products for you because every everybody's situation is different. There is no one size fits all retirement. Everybody's situation is different. If a fixed indexed annuity sounds like something that appeals to you, then I invite you to give us a call again at (813) 430-7100. Or you can email me personally at Greg at SafeMoneyMasters.com to see how investing a portion of your hard earned wealth into a fixed indexed annuity can help you grow your wealth and build a successful retirement. That's what we really hope you're able to do. What do we do now, Matt?

Producer:
Well, you know, we've got you sort of teed this up here at the at the beginning of the show with 11 ugly truths that could unravel your retirement. I think that, you know, this sounds like it could be all doom and gloom, but I'm sure we've got some great tips here on how to avoid those things. And of course, I know that I know a guy who can help if you experience any of these. And his name is Greg Castle.

Greg Castle:
I see that guy every day in the mirror when I'm getting ready.

Producer:
I know he's.

Greg Castle:
He's a pretty sharp guy.

Producer:
So he is. He is.

Producer:
And. And a snappy dresser, too, I must say. So. So there he is, Greg Castle, everybody. But no so 11 ugly truths that could unravel your retirement. Number one. Here's one that you know is like you take the good with the bad or the bad with the good, whichever you want to look at it, you'll probably live longer than you think.

Greg Castle:
Yeah, you'd be surprised because when President Roosevelt created Social Security way back in 1935, the average life expectancy of a male who is the primary the predominant work force at that particular time was only 59.9 years of age. So Social Security sort of diverged a little bit here. Social Security, you know, they set the minimum age at age 62 because a lot of folks would never reach that age. And the full retirement age at age 65, which fewer people would would return to. So the Social Security premiums were very, very low. Medicare premiums are very, very low. But anyway, fast forward from 59.9 years back in 1935. So Matt, would you guess what today's average life expectancy for male would be?

Producer:
I mean, I would if I had to guess, wild shot in the dark here. I would say not 59.9. I would say maybe somewhere in the upper 70s Yeah.

Greg Castle:
If you make it to 65 years old, the life expectancy for you is now is projected to be 84.4 years old. So if you retire at age 62, you've still got another, what, 22 years to live at least per life expectancy. And if you make it to age 65, they say that 50% of the folks that make the age 65 will make it at or near 90. If you make it to age 80 and still in decent health, the probability of you exceeding age 90 is very, very good. So with the advances in medicine and if we take good care of ourselves, you know, the probability of having a long life is is very, very likely. So you got to prepare for living longer than you expect. Also, according to the CDC, the Center for Disease Control. The population of adults 85 and older is projected to grow 351% by year 2050. So those kind of stats, you know, depending on your age now as you're getting closer to retirement, there's a strong probability that, you know, you'll be older than 85 whenever that you finally meet your maker. Also, according to experts on aging and longevity, I was reading about this, the first humans expected to live to age 150 are already alive. Can you imagine that?

Producer:
I mean, that's kind of wild. It's almost like you're, you know, talking about science fiction or something there with, you know, living to 150 or some some kind of, you know, Space Odyssey or some something. It's kind of wild to think about. Yeah.

Greg Castle:
You know, it was actually in a magazine article. I remember it was Time or Newsweek or something. It was a year or so back. They actually had an article that said that, you know, the first person who lived to 150 has already been born. And. Now, granted, we don't know what they're going to look like when they get to be 150. We don't know what kind of health they're going to be in. But, you know, considering the advances, again, in medicine we've already had, considering the, you know, the lifestyle changes, I see so many changes already. I mean, back. You know, years ago. You know, kids grow up drinking sodas and and sweet tea. I'm from the south, so just, you know, sweet tea and other stuff. And, um, and now you go around and, you know, I take my grandkids out to, you know, get a bite to eat or something like that. What do you want to drink? They'll drink water. Kind of like, you know, they're they're living healthier lifestyles. Their their moms are most many moms are becoming much more picky about what they eat and what they do. Um, I think I think dietarily I think that if that's really a word dietarily it is now. It is not. It is now. Um, I think that, I think that, you know, kids, most kids or many kids are actually eating better. I think the biggest issue for them is going to be activity because a lot of kids are, you know, stuck behind a desk somewhere playing computer games and other things are watching T.V.. So activity is going to be a challenge. But provided you get some activity in and you get a decent diet and some good medicine, some good. Medicines as needed and medical care when needed. It's a good probability you're going to make it a lot longer than you expect to make it. So with Americans living longer than ever, you know, it's no surprise that their biggest concern is outliving their income, which seems to be a consistent theme of this show today. Matt.

Producer:
Yeah, definitely. So you know that that is such a big fear. It doesn't surprise me that conversation. But number two on our list of 11 ugly truths that could unravel your retirement. Well, you might not have saved enough. You know, that's that's a wake up call.

Greg Castle:
Yeah, it is. I mean, again, going back to one of the surveys that I looked at, according to a recent Gobankingrates survey, roughly 64% of Americans have less than $10,000 saved for retirement. In $10,000 won't go far. Especially you make it up to 85 or beyond. And if you're like me, you know, when you were taught at an early age or you were taught at an early age that you should always save at least 10% of what you earn. If you go to a company, sometimes they have mandatory contributions to or to mandatory enrollment in their 401. K. 403 B or TSP. You begin to start start socking away part of that money anyway because and once you get used to having it gone, you don't worry about it. It's gone. It's put away for you. Um, anyway, you should always put away a percentage of what you earn. Should it all go into a 401 K? Maybe not on this show, but another show. We'll talk about why that may not be the best idea. Uh, because of limited options that you have, sometimes you should always get the match or whatever your company is going to match 3%, 5%, 6% or whatever, because the matching amount is usually optional and it can be changed every year. But again, we'll go to another segment at some point. But, you know, if you've got a company sponsor, defined contribution plan, make sure you contribute enough to to get the match. And because it's hard, it's hard to pass on free money. If they if they match 5% and you put in 5% of your salary and their their matching 5% of your salary, you just basically got a 50%. You basically got a 100% match to your contributions. Hard to pass up on free money. So I would advise you to make sure you get that match. So what else do we got?

Producer:
So number three on this list of 11 ugly truths that could unravel your retirement, some of your investment success will be left to chance.

Greg Castle:
You know, we've talked about the retirement red zone before. So you know what happens in the five years before and after your retirement date can play a significant role in how well funded your retirement account is going to be. This is called sequence of returns. In other words, if you were to retire. Once you retire, you can't contribute to your plan anymore. Your qualified plan at work. So if you're retired and the market were to decline significantly in the first couple of years of your retirement and wipe out a portion of your of your nest egg, that can totally derail your retirement. So it's like tossing a coin, you know, you don't you have no control over what the stock market does. Um. I wish I had a crystal ball. As you said before, you know, yours is in the shop. Mine's been cracked and broken for quite a while. So if anybody out there that happens to have a crystal ball that's working, that that is accurate, I'll be more than happy to buy it from you. Okay. Um, I'll share a name with you, but I'll be happy to buy it from you. Right, Right. Anyway, so yeah, that's one issue is the probability and possibility of sequence of returns. Another is it's difficult to replace lost money during this period of time either because of time constraints of the lost earned income or just time constraints in general, because a lot of times we talk before, you know, if the market goes down 50% and your money is invested in equities, it also goes down 50% or around 50%.

Greg Castle:
You know, trying to get back is is difficult. It takes several years to recoup the money that you've lost. When that happens and the closer you get to retirement, the less time you have to to recoup those gains. So, again, you know, if I were to say if I were to just paraphrase what I think the three phases of retirement planning would be, you know, one would be the accumulation phase where you want to grow your money as quickly as possible. You're young enough, You can afford to take risk if the market goes down. You've got time to work to recoup and go back up. As you get closer to that red zone sort of enters the transition phase. The transition phase is basically that period of time where you want to make sure you start paying down debt. You want to become a little more conservative in your in your investment strategies. And then finally, you get to the distribution phase or the accumulation phase where you start using the money that that big pile of money that you've accumulated. You basically want to use that to pull from to cover any income gaps that you've got. You know, for example, we're talking about income gaps later, so I'll hold off on that. But anyway, so sequence of returns can hurt you and the period of time can where you don't have a chance to to recoup the money that you've lost can also hurt you as well.

Greg Castle:
Another thing is to protect your retirement savings. During this retirement red zone, consider taking a conservative approach with your investments. I think I mentioned that just a second ago. You want to make sure that as you enter that transition phase, you become more conservative. And as you retire, you want to become even more conservative unless you've accumulated, you know, multi millions of dollars or you've got, you know, way more than you're ever going to need in your mind. You've got good pensions coming in. You don't really need to withdraw from your from your nest egg at all. You can take chances that way if you if you feel like you have enough money coming in and guaranteed income that you can cover your expenses. And expenses aren't just, you know, the daily household stuff. Your expenses are basically, you know, gifts for the grandkids, gifts for, you know, anniversaries, which got coming up. I got to buy one before long. But you've also got, you know, vacations that you want to plan. You've got travel you want to do, you've got other things. That's got to be part of your plan for expenses. And we can help you with that if you want to give us a call. Again, the number is (813) 430-7100. So what do we have next, Matt?

Producer:
Well, as we continue this list of 11 ugly truths that could unravel your retirement, number four is taking Social Security too early. It could cost you dearly.

Greg Castle:
Yeah, There's a natural tendency to start receiving Social Security benefits around 62 because, you know, God, we've worked so long. We're tired of our job. We hate our boss. So 62, we're going to get out of there. We're gone. Not always the best idea because if you start taking Social Security payments before your full retirement age, a couple of things could happen. Number one. And most importantly, you're going to permanently decrease your payments. Most people don't realize it, but probably if I were to ask you what your greatest asset for retirement would be, most people would tell me it would be their, you know, 401. K, they're there for 3D or whatever, or the bank account. They've got the reality is one of the biggest and best assets you have for retirement is actually Social Security. Because you got to figure if you add up the monthly payments, multiply that by 12, which gives you your yearly amount you're going to get and multiply that amount by your life expectancy. Sometimes, you know, if you take it too early, you can leave 3 or $400,000 on the table over your lifetime and you really don't want to do that. Also, if you're still working or you want to work part time or whatever, there's a limit on what you can make if you if you retire or take Social Security prior to your full retirement age. It's called the Social Security earnings test. In which case this year it went up. From last year it was $19,560. You can make before the earnings test came into play. This year is 21,240. But the earnings test basically is for every $2 you make above that amount. You got to give $1 back. So that basically means that if you were to make somewhere close to $50,000, you work yourself completely out of the Social Security you've already started taking. So you limit on what you can make once you retire and once you reach full retirement age, there's no limit. You make whatever you want. No big deal. So make sure you don't limit yourself. Uh, let's move on, man.

Producer:
Sure thing. So, number five here, you might regret skipping tax free growth options. That's a big one. You know, if you are, there are tax free growth options. In other words, instead of tax deferred, which is delaying all of the taxes that you're going to pay on that money until you begin to draw it down in retirement.

Greg Castle:
So true. Traditional retirement plans again, the Tsp's 401, four three B's and other qualified IRA plans. Basically, they're a huge moneymaker for the federal government for for some reasons that are pretty obvious anyway. Traditional plans when you retire and you start taking money out of the plan, your tax not only on your contribution but also on your employer's contribution and all the growth of those contributions. And that's why we say that it's a big you know, it's a big moneymaker for the federal government because you're going to have to pay taxes based on the amount of count value that you have and whatever the tax rates are going to be in the future. And considering how much money we've spent just over the last couple of years from government spending, if you ask any economist out there and even if I were to ask my listeners out there, do you think taxes are going to go up or go down in the future, you're not going to get a lot of votes, is going to say they're going to not going to say they're going to go down. Most everybody's going to tell you they believe they're going to go up. So you're never going to find a or most likely never going to find a better tax rate than you've got right now. So it's like pay me now or pay me later. So some of the options I know Tsp's, for example, have a Roth TSP option. It works a little bit differently than an outside Roth, but because the contribution limits really aren't there, but it still works the same way in regards of tax free growth and distribution. The sum sum for one case for three bees may have those really don't know of any off the top of my head. But anyway, you need to make sure that you're taking into account the tax you're going to pay when you retire or if you're still young enough. Now start contributing some money to tax free offices like a Roth IRA and you'll be better off for it down the road somewhere. And next, Matt.

Producer:
Well, another ugly truth that could unravel your retirement. Here is number six. It is your your health care is going to cost more than you expect.

Greg Castle:
As we age, health issues become more inevitable. You know, we visit our doctor and our dentist more often. And both of those cost money. They don't work on charity. I haven't found one yet that does anyway. Anyway, I had to have a tooth. What do they call it? An implant or whatever. Last year. Oh, yeah, yeah. That was, that was a six grand, one year long debacle. Anyway, worked out great. He got a tooth that looks real, but it's pretty expensive. I had to pay for it out of pocket because insurance did not cover it anyway. You got to factor in the cost of medical cost of Medicare when you retire as well, because a couple who are similar in age in today's dollars will pay $164.90 per person, not counting what they'd pay for Part D, which is the prescription portion of it all, which is based on what your things are going to be. Now, the one 6490 is contingent upon how much money you make if you make over a certain limit. And I'm not sure what the dollar amount is off the top of my head right now, So I won't I won't misquote it. But, you know, you could end up paying double, triple, even quadruple that 164 to 90. For your part B coverage, your part coverage is a given. You still got to file for it, but it's a given. That's the hospitalization portion. That's what the Medicare deductions from your paycheck for all those years have been for. So you don't pay for that. But part B, which covers everything else, or at least 80% of everything else, is one $6,490 per year per person. So it can be pretty pricey. Moving on, Matt, what's the next one?

Producer:
Number seven is most people are going to need long term care at some point. And that one kind of goes back to what you were just talking about a lot with Medicare, because a lot of people will be surprised to learn that Medicare does not cover long term care.

Greg Castle:
No, it really doesn't. As a matter of fact, according to the US Department of Health and Human Services, around 70% of people over the age of 65 are going to need long term care at some point in their lives. Now, long term care doesn't mean you're going to be confined to a bed for the rest of your life. It doesn't mean that you're going to be in a nursing home. You may have to have a serious surgery that requires you to be confined at home for a while in a body cast or something. It won't be permanent, but, you know, for a period of time you're going to need some long term care. And long term care includes at home care, according to a 2020 report from Genworth. Just to give you an idea of how expensive, you know, long term care can be, you know, here in Florida, the average annual nursing home, according to that report for a semi-private room, is somewhere around $104,000. And that's from a 2020 report. So this is 2023. And if you get a private room, it's going to cost you somewhere around $117,800 for an average private room. Pretty pricey. So basically, you've got three choices of dealing with the issue. You know, one is if you're healthy and can afford it, you can apply for long term care policy.

Greg Castle:
And you got to be aware that there's no guarantee that you're going to be accepted because, you know, your health could be a factor. They may decline you for long term care. And number two, you can get an annuity with living benefits. These don't pay a daily rate necessarily. They're not intended to replace long term care, but they do have an element of things that can be used for long term care. You know, however, your normal monthly benefit is usually doubled for a period of up to five years. So whatever your income would be at the particular time that you needed this particular benefit, it would double whatever the income is going to be, would double for a period of period of up to five years. At the end of five years, it would just automatically revert back to where it was originally. The other third way that you can do it is you can just pay the cost out of pocket, which is something you really may not be able to afford unless you've got a really, really, really, really big nest egg out there somewhere. What's next, Matt?

Producer:
Yeah, there's hundreds of thousands of dollars would just eat up most people's nest eggs just like that. It's crazy. Number eight on this list of 11 ugly truths that could unravel your retirement inflation. It's what we've been dealing with big time these past couple of years. Really? And it can eat away at your nest egg.

Greg Castle:
Inflation is still high, not as high as it was back in June of 22. Back in June of 2022, it was at 9.1%.

Greg Castle:
Uh, which.

Greg Castle:
Is high at its highest it had been since back in the 80s. I bought my first house back in the 80s and I remember feeling really thrilled. I got an 11% interest rate. And of course, it could be even more. You know, if if inflation continues to rise at the point, you've got to consider that from a 2000 to 2021 inflation range, somewhere between 1 and 3%. And the most recent ten year average was actually 3.27%. So we're still in a period of high inflation. Currently it's right around 5%. So, you know, it could go up or go down from where we are depending on our political environment and what the the Fed and what the Fed does with interest rates over the next year or so. And also if you're in retirement for 30 or 40 years and got a fixed income stream, purchasing power can be cut anywhere between 60 and 70%. You just got to be aware that you've only got so much money. Inflation is reality. You need a retirement plan that takes into account inflation and you need someone that can guide you through. Options of what various scenarios of of what inflation would actually happen to be. And again, if you need someone to do that for you, we're happy to do it. Just give us a call. (813) 430-7100. Uh, what's number nine?

Producer:
Well, number nine is a big one. You don't really know how much you are spending. To put it all down and have a budget that you stick to every month.

Greg Castle:
Yeah. A recent survey by the Penny Hoarder found that more than 55% of Americans don't use a budget. Now, personally, I would think that would probably be higher than 55% because I know a lot of people that have no idea what a budget actually is. And a lot of those folks were my clients before they got started. So now they've got a budget anyway. Retirees, you know, you really need to know this information since you really you need to use your retirement savings to cover your income income gap.

Greg Castle:
Uh, so.

Greg Castle:
There's a huge difference. If you're expecting to need $20,000 annually from your investments to cover the gap versus actually needing $50,000, you know, for for that. So what's an income gap? Income gap basically is you take a look at all your expenses, including those things we talked about already, not only your basics, but also gifts for grandkids, anniversary gifts, birthday gifts, Valentine days, gifts, your nails and hair and grooming and and and all that kind of stuff. Vacations, trips. It's all that stuff you need to budget in for. And then you take the guaranteed income sources you have coming in and you subtract that list of expenses from it. And if you've got more expenses, then you've got income coming in or guaranteed income coming in, that's your income gap. So how are you going to fill that gap? And again, one of the best ways to do that is with fixed indexed annuities or annuities in general for that matter. But fixed indexed annuities I think are probably one of the better options for most people. And we're talking about other options if you need to. So what's the next one, Matt?

Producer:
Well, number ten here, as we got just a couple of minutes left in the show. Adult children or aging parents could derail your plan.

Greg Castle:
Yeah, you know, we've all know we've all seen couples that have boomerang kids where they go out and live on their own. They get married. In some cases they come back. That definitely upsets the apple cart when it comes to finances because, you know, your electrical cost and utility cost goes up. So does your food cost. Because, you know, I know a lot of teenagers and 20 somethings that eat a lot. Also, something would have happened if your parents were to come back, something would have happened. You know, normally if the parents come back, it's because they can't they're not able to live on their own anymore, which means that that brings additional issues with them. Sometimes you've got to provide for an in-home caregiver, especially if you still work and other costs come into play as well. So yeah, that can definitely derail your plan. And what's. Number 11, man.

Producer:
Number 11. The final thing on this list of the 11 ugly truths that could unravel your retirement. You might overspend on housing or have to move.

Greg Castle:
And this was pretty obvious, you know. A survey by the American Finance by American Financing found that 44% of Americans aged 60 to 70 have got a mortgage when they retire, which is unfortunate, but it happens more and more. As a matter of fact, a lot of folks take out new mortgages once they retire. So hefty mortgage can seriously crimp put a crimp in your cash flow. On the other hand, you know, paying down your mortgage might not be the best solution if it leaves you without enough of a retirement cushion. You know, one option would be to downsize and and use some some of your equity to help fund your retirement. And finally, you might consider moving to a place where your retirement money goes further. You know, it's a move that can cut costs substantially. So, Matt, according to my clock on the wall, which is digital. The you know, our time is about up for today.

Producer:
So let's actually do our weekly mailbag, I think here. And we'll have time to do that quickly and call it a show.

Greg Castle:
Weekly mailbag. Very simple. The question we got this time is from from Ask Greg. Somebody wrote in. Stan from Newport Richie, you know, 63 and approaching retirement have a variable annuity that took big hits last year. Should I hang on to it? So my answer, you know, first, it'd be helpful to know more about your situation because, you know, I really don't know everything about it besides your nest egg, other things, but. And what other assets you're happy to have besides a variable annuity. However, I will offer some general guidance. You know, first of all, many people that own variable annuities really don't understand them or the principles at risk in the stock market. They're paying fees ranging between 3 and 6%. They're also paying income writer fees just to have their money paid back to them down the road somewhere. So you might want to consider a different type of annuity to better protect and grow your wealth. And also, you know, we believe that your money should be working as hard for you as you work for it. So fixing that again, fixing indexed annuities can both protect and grow your wealth. So let's take a look at the Goldilocks and the Three Bears scenario comparison. A variable annuity is too hot. It's in the market at risk. It has fees, a fixed annuity too cold. It's like a bank CD, not beating inflation, low interest rate, but a fixed indexed annuity is just right. So we've already talked about how fees can benefit you. We encourage you to give us a call at (813) 430-7100. Or you can contact me personally at Greg at SafeMoneyMasters.com. And if you have a question for us, you'd like us to read on air again. Contact us or send me an email at Greg The SafeMoneyMasters.com. So with that said, Matt, thank you for all your assistance today.

Producer:
Hey, no problem. I'm glad to do it. Greg. I look forward to next week's show.

Greg Castle:
Me too. So with that said, folks, we'll wish you all a great week and hope to see you next week. Same bat time.

Producer:
Same bat channel.

Greg Castle:
So long, Matt.

Producer:
Thanks for listening to Safe Money Masters with Greg Castle. You deserve to work with a financial expert who has a track record of helping clients exceed their financial goals by implementing safe and proven strategies to schedule your free No obligation consultation with Greg. Visit SafeMoneyMasters.com.

Producer:
Not affiliated with the United States government. Greg Castle does not offer tax, legal or investment advice. Consult with your tax advisor or attorney regarding specific situations. Opinions expressed are subject to change without notice. These opinions are not intended as investment advice, nor do they predict future performance of any product. All information provided is believed to be from reliable sources. However, we make no representation or warranty as to the accuracy of any statement. This information is intended to be educational in nature and does not provide a guarantee or specific result. All copyrights and trademarks are the property of their respective owners. A mirror AmeriLife assumes no responsibility or liability for the content of this message. The information contained herein is provided on an as is basis with no guarantees of completeness, accuracy, usefulness, timeliness or the results obtained from the use of this information.

Producer:
Fixed annuities, including multiyear 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.

Producer:
Any bonuses mentioned may be subject to additional restrictions and regulations based on the offering annuity company. You may not receive the bonus if the contract is fully surrendered or if traditional annuitization payments are taken and if the policy is partially surrendered, it could result in a partial loss of bonuses because these are bonus annuities. They may include higher surrender charges, longer surrender charge periods, lower caps, higher spreads, and other restrictions that are not included in similar annuities that don't offer a bonus feature.

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