RJS 7-19-25

Speaker 1 (00:00):
Good morning to all. Craig Shillig here and this is
Safe Money. I'm here every Saturday to talk with our
listeners about financial strategies we use to manage and protect
assets safely. I've been an insurance agent for over twenty
four years. During that time, I've learned a few insurance strategies,
like using annuities as safe money harbors or using cash

(00:24):
value life insurance to supplement retirement income. Just a reminder,
you can call our office at five six three three
three two two two zero zero if you'd like to
enroll into one of my virtual Medicare community meetings I
give two every month via zoom, or you can email

(00:44):
me at Craig at Craigshillig dot com. And that's my name,
cr Aig at cr Aig scchi lllig dot com. Today,
I'd like to discuss the market, inflation and how annuities

(01:08):
can help in those two arenas. How an a media annuity
can help you close your income gap. You and your
spouse or your significant other met with your financial advisor
to come up with a plan to secure your financials
for the next twenty years of your retirement. You've concluded

(01:32):
that you will have eighty six thousand, four hundred dollars
of annual income from your Social Security and employer sponsored
retirement plans. Meanwhile, your annual expenses are assumed to be
around one hundred and twenty thousand dollars a year, leaving
you with a gap of thirty three thousand, six hundred dollars.

(01:55):
Let's also assume you've accumulated one point five million and
other investable assets. So how can you fill this thirty
three thousand dollars thirty three thousand, six hundred dollars gap.
You have a few options. You could keep withdrawing your

(02:17):
assets over time when you need them, but those funds
won't last if you end up living longer then expected
or you encounter sudden unforeseen costs. One way to ensure
that you never run out of money is to buy
an immediate annuity with a lifetime guarantee option. By purchasing

(02:40):
an annuity rather than using managed maintain your current maintain
your current lifestyle, and have an extra two hundred and
fifty six and twenty one dollars to spend on your
retirement goals or leave to your loved ones. The annuity

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could also provide guaranteed lifetime income that can continue to
pay out beyond the twenty years you would planned for.
If you would draw four percent a year every year,
you will need eight hundred and twenty five thousand, one
hundred and ten dollars to close the income gap. If

(03:23):
you bought an a media annuity, you would only need
five hundred and sixty eight thousand, two hundred and eighty
nine dollars to close that thirty three thousand, six hundred
dollars income gap. You're one point five million, you would
have six hundred, six hundred and seventy four hundred and

(03:44):
ninety dollars remaining. Then you would if you purchase the annuity,
you'd have nine hundred and thirty one thousand, seven hundred
and eleven remaining. It's time in the market. It's not
at timing the market. It's very hard for most investors

(04:05):
to know when to invest for growth and when to
pullback to protect against losses that can cost future opportunities
for growth. Let's talk about downturns. Downturns in the market
are normal, but what you want to focus on is

(04:25):
what happens afterward. The negative returns in all four downturns
were followed by periods of above average growth. These results
show that sticking with a long term, diversified portfolio over
time may be the best way to capture growth through

(04:46):
both bowl and bearer markets. The key point to remember
here staying in is very important given that institutional investors
always do better than individual investors because they have time
and they don't put emotion into their decisions. Maximizing market growth.

(05:10):
If you're investing for the long term and hoping to
potentially beat inflation, investing in products that take advantage of
market returns may help you to maximize your savings. When
you're invested. The message is clear, it's time in the market,
not timing the market. Since nineteen twenty six, there's been

(05:32):
four times when the market failed to reach returns above
zero for two or more consecutive years. Okay, those years
were nineteen twenty nine and nineteen thirty two, nineteen thirty nine,
in nineteen forty one, nineteen seventy three to nineteen seventy four,

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and more recently two thousand to two thousand and two.
A compounded stock market annual return from nineteen twenty four
to twenty twenty four was ten point four percent according
to morning Star. How many people do you think were
able to keep their money invested for one hundred years

(06:17):
and not flinch. Time in the market is safer than
timing the market. When you're invested in the stock market,
it's very tempting to try to time the market and
make emotional decisions, especially when the market is being volatile.
Don't let this fear derail you from your long term

(06:39):
retirement planning goals. Sometimes the best thing to do may
be nothing at all. Annuity products can offer certain guarantees
and protections through optional benefits and features, and they partner
with world class, multinational, brand name investment managers to provide

(06:59):
d first investment options with the potential for unlimited growth.
Let's take a retirement road trip. If you started your
journey in the market with one hundred thousand, here's what
that road trip would look like in thirty years without
trying to time the market. Let's see what would happen

(07:23):
if you kept going in and out of the market
and missing some of the best market days. If you
stayed the course, your one hundred thousand dollars would result
in one million, eight hundred and seventeen thousand, six hundred
and forty dollars, actualized return would be ten point one percent.

(07:46):
If we missed the ten best days results, instead of
getting a million eight, you would have eight hundred and
thirty two thousand, seven hundred and twenty seven actualized return,
which would be fifty five percent lower return than my

(08:07):
one point eight number. If we miss the best twenty days,
that eight hundred and thirty two thousand and seven to
twenty seven would be about half that number, four hundred
and eighty eighty seven hundred and forty four. That would
be seventy three percent lower return than my one point

(08:28):
eight return. So let's talk about the impacts of inflation.
Inflation causes purchasing power erosion and can impact your retirement savings,
but there are strategies that may help you offset inflation.
The average inflation rate for the past twenty years is

(08:49):
two point six percent. The inflation rate for the last
twelve months has actually been about four point one percent.
If you bought something for one hundred dollars in two
thousand and two, you would need about one hundred and
sixty nine dollars today, so three hundred and four thousand,

(09:18):
eighty eighty seven, four hundred and twenty nine thousand, one
eighty seven or three hundred and fifty one eighty two.
Let's talk about tex deferral here for a second. So
which would you choose? Do you want gas at one
hundred and twenty nine dollars gallon or unletted gas at

(09:40):
three twenty nine a gallon? One twenty nine a gallon
is what we had back in two Today three twenty nine.
I would argue, I think it's more than that, but
it might be around three. Right now. Let's talk milk
prices two ninety five a gallon today, I think there

(10:02):
are four or five bucks a gallon. Bread used to
be a buco five a loaf. Now this is white.
This is white bread per pound. That numbers doubled about
two ten a loaf. Beef prices used to be two
dollars and sixty two cents a pound for ground eighty

(10:24):
percent lean. Today that's around six bucks. Fuel oil used
to be ninety nine cents a gallon. Now it's above
a buck forty five. Let's talk about a hypothetical one
hundred thousand dollars investment. So if we took one hundred

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grand on earnings, that are attacked annually with a growth
rate over twenty five years, that would grow to three
hundred and four thousand, eight eighty seven. So if we
took a one hundred thousand dollars investment, we grow it

(11:09):
to four hundred and twenty nine thousand and one eighty
seven before a tax. My after tax over that twenty
five year period is going to be three hundred and
fifty thousand, one eighty two. The reason I'm bringing this
up is remember it's not what you earn, it's what

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you keep. Your goal while saving or investing is to
earn more after taxes than the inflation rate earnings in
an annuity or tax deferred until they are withdrawn, allowing
your investment to benefit from fully compounding interest. There are

(11:52):
a variety of annuity options in the market that can
help you meet your retirement income needs. And going back
to this before and after tax scenario, the best simple
example of that's going to be taking annuity versus the
cd CD. You're gonna get a ten ninety nine every January,
regardless of if you tap that account or not, versus

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an annuity which would be tax deferred, and that interest
keeps growing. But there's no ten ninety nine tax generated. Okay,
more impacts of inflation. Inflation causes purchasing power erosion and
can impact your retirement savings. But there's strategies that can
help you offset inflation. So again, my average inflation rate

(12:41):
over twenty years is two point six. In the last
twelve months, that inflation rate's actually running four point one.
If you bought something for one hundred dollars back in
two thousand and two, it'd be one hundred and sixty
nine dollars today is what you would need to buy
that same item. Three key and potentially overlooked tax benefits

(13:04):
of fixed indextinuities. Most clients are probably familiar with the
four oh one k and iras, but there are other
tax advantage retirement products out there that can be purchased
with non qualified money. A fixed indextinuity funded this way
combines growth potential and protection from market downturns with tax

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benefits that can complement other financial vehicles. Here are three
tax benefits of fixed indexinuities. There are no contribution limits,
so on your iras you can only put in so
much subject to income and or I mean, you're capped

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once your capture done. A fixed indexinuity can be non qualified.
You can put more in that than needed. While qualified
plans like four one ks and iras offer tax advantages,
they also have caps contribution limits each year. The IRS
imposes contribution limits on on iras and for one ks

(14:21):
or tax advantage accounts. We're on non qualified money such
as cash value life insurance and fixed indexinuities. You can
max those out to go along with your FURRO one
K or your IRA contribution. Another benefit is taxed deferred growth,
with interest credits tied to performance of a stock market index.

(14:44):
Fixed indextinuities give clients the potential to benefit from index
gains without investing directly in the market. The growth within
an FIA is not tax until it's withdrawn, similar to
retirement savings vehicles cha as a four one K or
non roth IRA. Because fixed indextinuities can also help protect

(15:07):
retirement savings from market downturns, there is less downside risk
than a four oh one K or an IRA asset
that's invested directly in the market. There are no additional
tax benefits to purchasing an FIA with qualified money. Please
remember that I do have people that roll money from

(15:29):
a four to one K over into a fixed indextinuity,
so it'd become a fixed indextinuity IRA. There's no tax
benefit to that. However, the issue would become you're still
subject to our MDS at age after age seventy two

(15:51):
favorable tax treatment for retirement income. This is a big one.
Most retirees don't get this until they get to retirement,
and then sometimes it's too late. Withdrawals from four oh
one ks and iras are fully taxable. However, clients only
pay taxes on interest earned in their FIA funded with

(16:12):
non qualified money. Since this income may consist of interest
and the client's original premium, only a portion of your
fixed indexinuity distribution may be taxable. This feature can help
clients use non qualified FI income in conjunction with fully

(16:34):
taxable withdrawals from other sources to help lower your overall
tax burden while you're in retirement. Okay, again, it's not
what you earn, it's what you keep in retirement. Remember
I've said before the only certainties are death in taxes.
Taxes is the biggest argument and or a grape I

(16:59):
get from the over seventy crowd. If you can pull
money from buckets of money like cash trouture, life insurance,
or non qualified annuities. You can actually lower your tax
bracket in some cases and or minimize the taxes you're
gonna spend when you have to pull your rmds. So

(17:21):
a few fixed index annuity reminders fias are funded through
a rollover from a tax qualified vehicle or subject to
the same tax rules as IRA or four oh one
K rules. Yeah, don't forget that. Like a four oh
one K and IRA, an FIA may be subject to

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federal and state income tax and, except under certain circumstances,
subject to IRS penalty if payments start before the annuity
owner is age fifty nine and a half or older.
So yeah, if you're under fifty nine and a half
and you own an annuity, now don't touch it. You're

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gonna have a minimum ten percent withdrawal penalty plus income taxes.
Leave it alone, Let it sit there, let it do
its work for later in life. Like let's see withdrawals
that exceed the free withdrawal amount allowed maybe subject to
a withdrawal charge or a possible market value adjustment which

(18:29):
could result in loss of principle. That's true. All annuity
contracts have provisions in there, i e. Time periods of
how long you have to keep the money vested within
the account. That's why I go back to a seven, ten,
or fifteen year annuity. Now you can get shorter durations.

(18:53):
Now some of those may be interest only annuities. You
can get some annuities there maybe only three, five or
seven years, but they're not going to offer you a
lot of the extra bennies that is seven, ten or
fifteen would. So just keep that in mind, risk versus reward.
If you want richer contract benefits, you can have a

(19:14):
longer hold period. That's kind of the give and take there.
But remember the insurance companies invest your money in long
term bonds so that they can then pay you whatever
bonuses or interest and or additional benefits that are recaptured
within that contract. So again, nothing is free. If you

(19:38):
don't like that or you think that the annuity contracts
a ripoff, yes, you can leave your money in the market,
but then understand your subjects to market risk. Then that
account can go up, it can go down. I don't
know what the market's going to do tomorrow, none of
us do. I'm hopeful it'll continue going up, but eventually
we're going to have another correction here. Annuities do do

(20:00):
not lose value, so keep that in mind. The big picture.
With their tax benefits and ability to provide growth potential
and protection from market downturns, Fixed index anuities can play
an important role within a retirement savings plan. They can

(20:21):
also complement other sources of growth potential and retirement income,
including stocks, bonds, and mutual funds held in taxable brokerage accounts,
savings in tax deferred accounts like a four to one K,
other tax advantage vehicles such as a roth IRA. Using
a mix of these tools and staying current on tax

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changes for the year can be vital to helping several
clients manage risk and provide growth potential before and after retirement.
Did you know that a bear market emerges every six years?

(21:06):
That means a familiar conversation with my clients, often not
about a true bear market, but a market correction will
trigger an emotional reaction and a rash decision. Clients will
see their balances dip and suddenly the sky is falling.

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I've been through this before, and so of many other people.
It's sometimes called a financial groundhog debt. Recently, GDP declined
by point three percent, reversing from a two point four
increase that previous quarter. Consumer confidence seems to be fading,
markets are volatile, inflation remains sticky, and the Fed's interest

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rate hikes from a pandemic low era low of point
two five percent in twenty twenty one to five and
a half percent going back to twenty twenty three. These
situations have made fixed income more attractive again. Pen Mutual, Athene,

(22:15):
and several under insurance companies offer interest rate surge, significant
rise and additional benefits built into their spears, which have
made them more popular as the years go by. So
what can I do to ease anxiety and help you

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seize some opportunity in uncertain times? Clients look for certainty.
This is where annuities come in. Whether you're facing market
headwinds or tailwinds, annuities can be a powerful solution. They
transfer some of the risk to the insurance company and
offer guarantees that my clients can't find in equities alone.

(23:06):
Don't forget I give monthly virtual meetings regarding medicare for
two different companies every month. In one meeting, I will
cover the Medicare supplement plan with a standalone drug plan.
That meeting is sponsored by well Mark. United Healthcare is
a sponsor for my other virtual meeting, I focus mostly

(23:26):
on Medicare advantage plans known as Medicare Parts C. I
will cover the benefits of that platform and the four
parts of Medicare. Some of my upcoming meeting dates for
my Zoom meetings are August fourteenth and August nineteenth, September sixteenth,

(23:49):
and September eighteenth, and going into October. I'll be giving
two meetings right now on October nine in October fourteenth. Again,
those meetings are by well Mark and United Healthcare. New
Medicare options will come out in October. I'll have new

(24:15):
pricing for twenty twenty six at that time, and we'll
see if there's going to be some more players in
the market for twenty twenty six. I'd encourage you to
get my office a call in fourth quarter. I'd be
happy to review your Medicare plan. If you need some
help with that, you can call our office at five

(24:36):
six three three three two two two zero zero for
if you need an appointment with me or if you
need the Zoom meeting codes and or additional dates and times.
You're also welcome to email me at my email address
at Craig at Craigshilly dot com and that's my name,

(24:58):
CRAI G at c R A I G S C
H I L l I G dot com. I can
send you the the virtual zoom link meeting codes, be
happy to talk to you at that time. This is
Craig Schillig with safe money.