This is the Truth Network. Yeah. Welcome to Finishing Well, brought to you by CardinalGuide.com with certified financial planner Hans Scheil, best-selling author and financial planner, helping families finish well for over 40 years. On Finishing Well, we'll examine both biblical and practical knowledge to assist families in finishing well, including discussions on managing Social Security, Medicare, IRAs, long-term care, life insurance, investments, and taxes.
Now, let's get started with Finishing Well. Welcome to Finishing Well with Certified Financial Planner Han Scheil, and today's So how about this? Monthly income for life. turn part of your 401k into a pension. And so there's a lot in there and understanding pension, which Actually, before I started doing these shows with Hans, I wouldn't have been able to tell you what that meant.
But now that I know, it's a pretty cool thing to have an income for life. And as I was thinking about this from a biblical standpoint, you know, Jesus said it. in many ways that give us this day our daily bread. And that idea that God does, he provides for us every morning. And he was illustrating this to the Israelites.
you know clear back When they got the manna, which is the idea of daily bread, and they had enough for that day, they couldn't store it up, they just had enough for that very day. And the idea of an income for life that we're going to talk about. in today's show these annuities Is that yeah, every day, or essentially every month, you're going to get a check, and boom, that's not for that month, and that's going to happen for the rest of your life.
So, you can just get rid of the idea that I'm not going to outlive my money. But then there's also a little bonus thing we don't want to go too well, but that that Adds a little bit of long-term care into the deal as well. And it's kind of neat to me that not only does God provide, obviously, our daily bread, but in Psalm 20, it says, God is our refuge and strength and a very present help in trouble. And so, you know, here is an investment strategy that not only, from my standpoint, provides. You know, for your daily bread, but also could be there in your times of trouble.
And so I'm sure your appetite's wetted like mine.
So, Hans? Yeah. So You know, a long time ago, Parents, or actually our parents. And our grandparents and pensions. I mean they would work somewhere.
And in order to Get the pension. You needed to stay there forever, like 30 years or 20 years or 40 years, but You know, you'd put in your time. And then you were guaranteed. When you got done. and you retire that you would get A check.
a pension check for the rest of your life. And then if you Died before you got the check or you started the checks. And you went along and you were married. And then your widow. would get like half your check or all your check.
Or in some cases, none of your check. if you'd signed it away, but. That's how our pension system worked in the United States. And it still works that way for government workers and some people with large corporations, but all that has been replaced. By the 401k or the defined contribution benefit plan.
Yeah, some of us Um are really better off with the 401k. Because of what the stock market has done. Um over the last Several years is that people that had hundreds of thousands of dollars Some of them are into the millions now. And people that had you know, 100,000 or 150 or 200. are up around four or five hundred.
So, people, I mean, I don't want to get into whether they're better off or not better off, because whatever they are, it just is. But there's a problem with having a lump. of untaxed money. Because that's really what it is, is it's a lump of money. that you've accumulated.
uh through your contributions and through your employer contributions. And then you retire. And you got this lump of money and a lot of people are just afraid to spend any of it. They don't really know what to do with it. And they remember the boy, wouldn't it be nice to have a pension?
Wouldn't it be great if I had uh just a check coming in like my dad did or my grandpa did Um My grandma, that would be wonderful. Instead, I've got this lump of money, and I don't know what to do with it.
Okay. Yeah. I don't know that we hear that much out of people. that are coming into us for retirement. Where they're just saying, oh, I have this lump of money and I don't know what to do with it and I don't know when to pay taxes.
But by the time they get done talking to us, We've identified that as a problem. Is that, you know, so great, you got X amount of money that you've saved, you've been a good saver. And you got your social security check. And maybe we don't want to start that right away. And then perhaps you have other saving.
But the the real problem is here We got to live off of this money. for the rest of our life. and the rest of our spouse's life or our wife or husband.
So And then a lot of people, this is the main savings that they have, so they've been staring at this money. They're thinking about inheritance. And they're thinking about You know, not only do I need to live off of this. But then I you know my I'm gonna die and then my wife She needs to live off of it to the rest of her life. And then, after she's gone, I want to leave it to the kids.
Yeah. It now all of a sudden it this gets kind of difficult and it calls for getting some professional help. It's really You know what I'm what what I'm setting up here. And I don't think this is news to a lot of people listening.
So, what the theme of this show is, is we're just showing you how we set up. A retirement income or a pension, how you turn your 401k or your money that you have in savings. into a pension-like check for the rest of your life.
Okay, because none of us we don't we don't know how long we're going to live And as long as we're walking the planet, we're still going to need income from this money. And we have a product, it's called an annuity. Yeah, it's called a life annuity. And we're going to walk through the details of that today. Yeah, that's the thing, is that You know, there's a difference between seeing a paycheck come in every week.
I mean, every month, in some cases, every week, but or every two weeks, whatever it is. Um And there's a big lump of money and You know You spend a certain amount every single month based on your bills etc etc and the beautiful thing about The annuities and the way that you can set them up and the way you're going to go into is hey. Here, just like a pension, this check coming in, and it's spendable, right? You can determine, I need this much money to live. And that's a big part of what you do in your planning, right?
Is you start out with. We need a starting point of how much do you need, right? Yeah, so we're gonna we're we're gonna get you to tell us And we have a process for this. How much do I need? Good then.
If you've been fortunate enough to save money and you have. money in a 401k ira and you You've done all this. There's things beyond needing. Then we're going to get into that section. How much do you want?
I mean, what how do you want to live in retirement? Do you want to live like you did before retirement? Um and you want to live And so we got knee. And then we have want. We have charitable giving.
We have all kinds of things. That we need to package into here, but we're going to put together a desired cash flow.
Okay. And then The other piece that we got to add to that. is income taxes. Because you can't spend the tax money.
So, like, for instance, if people, you know, they say, well, we need $4,000 a month to pay our bills. and just to meet our basic necessities. And then we'd like another 1500 a month. for extra stuff Yeah, vacations. Uh gym membership.
to take our family somewhere. Um whatever it is, and so we build in a want. But then we got to build in tax. Because we have to pay Income taxes because we can't. We, if it's fifty-five hundred dollars a month that we're going for here.
We we can't Um then Um Budget for $5,500 a month because we've got to pay income taxes, and that's part of why people come to us.
So it gets a little bit complicated. But not for us. But it it it you know we put together the desired After text. cash flow And then we've got a social security jacket.
So if if you know, with a couple, we got two Social Security checks. And then a lot of people take their Social Security too early. They just think when they retired, as soon as I retire, I'm going to take the Social Security check. When if they have a bunch of money. over here on the side in this retirement account.
They got options.
So it might be beneficial for you to not take your Social Security. and then to wait until you're 70. had to pull out your Social Security check. Out of You're IRA.
Okay. So I don't want to get too bouncing all over the place here. But If you've got a hunk of money in a retirement plan, And you got a Social Security check. And then you've perhaps got some other savings that's not in the retirement plan that you've already paid taxes on. And you come into us and you hire us to do a financial plan.
We're going to get all this stuff. organized for you. I mean, you're going to be running the show here. We're just giving us the amounts and all that kind of thing. And so what we're doing today is how can we create Yeah, cool.
Like your social security check. That's going to go on. As long as you're alive and as long as your spouse is alive. And so, what we're going to show today is the price of creating a check. for $1,000 a month.
For life For either one person or two people.
Okay, so that's the crux of the show, and I'm going to actually give you the numbers. But I fall on that. Yeah, that's really cool. And so people can obviously extrapolate that to whatever their need may be. That it would take this much to get a check for $2,000 or $3,000.
But to give you $1,000, it gives you a baseline to go, okay. That's how much it costs to do that. And then there's some options in there too, based on the way you set it up.
So I'm excited to hear it. Yeah. So what we've done is we've made The the example's 65 years old.
So and we've got a single It doesn't matter whether it's These things are all the same price. of a single person who's 65. Yeah. Uncertain how long they're going to live. And then we have a couple.
Um husband and wife, who are both 65. Yeah. Bring it. This annuity Either way... On the single, it's going to play out a monthly check.
For as long as There, a lot. And this would be a good point to point out that a good time to point out that all this is brought to you by Cardinal Guide at CardinalGuide.com. You're going to find the seven worries tabs, and one of those worries is income. And so, if you click on the income tab, you're going to find a video along these same lines with show notes, all sorts of information on what Hans is talking about today. That's all available at CardinalGuide.com, as well as Hans' book, The Complete Cardinal Guide to Planning for and Living in Retirement.
And of course, ever needed, contact Hans or Tom Page to get this done for you individually.
So when we come back, we're going to have a whole lot more on. Monthly income for life turn part of your 401k into a pension. Investment advisory services offered through Brookstone Capital Management LLC, abbreviated BCM. a registered investment advisor. BCM and Cardinal Advisors 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. Cardinal Advisors is not affiliated with or endorsed by the Social Security Administration or any other government agency.
So, welcome back to Finishing Well with Certified Financial Planner Hans Scheil. In today's show, we're talking about this monthly income. For life, turning your 401k into a pension. And Hans? Take a look.
Yeah, so so What we do for most people. Yes. They buy two policies. You say, well, why two policies? You know, just so we break it up because we can get more.
Or in other words, we can play less in this example. to purchase $1,000 a month. Lifetime income. We can pay less by buying food policies.
Okay. So let me just give you an example. And I use $1,000 a month just so you can do the math. Yeah, because that's this is how we do it is If we're trying to solve for $5,000 a month, you just take all these numbers down.
So So the two policies We have a couple, they're both 65. Yeah, we're going to take this out of their retirement account. If we took $54,428 out of their retirement account, and rolled it over it. to this annuity that pays a thousand dollars a month. Starting next month.
for 60 months or five years.
So this annuity is not real. really that interesting or that spectacular. It's just It's a way of letting the other one. you know, create its real benefit.
Okay, so we got the first annuity. $54,428. There's going to pay out. Eventually, it's going to pay out $60,000. or $1,000 a month.
for the next five years. Perfect. The second annuity, now this is on two people. cost one hundred and twenty thousand 482 duck.
So By taking that 120,482. and rolling it over Into an annuity, a separate annuity, a second annuity. and then letting it sit there for five years. gaining interest. And you're also gaining years because this couple, by the time we start taking checks out of this, they're both going to be 70.
Okay. Yeah. Beginning the 61st month. We start taking $1,000 a month out of this one. And it's going to send a check.
Every month. for the rest of both of their lives.
So if one of them lives to You know, like I said earlier. Eighty. and the other one moves to 97. The check at 80 is really kind of unchanged. It's just It's going to keep sending $1,000 a month.
every month and if that second person Lives to 97, this is going to be one of the best decisions you ever made.
Okay. And it's removed the uncertainty. of spending some of the money.
Now we never throw all people's money into this.
So it's a total for the couple of $174,000, almost $175,000. That they're going to move into these two annuities. And all our clients know: if you go back and interview them, They Okay. They couldn't re-spit all this back to us. They just know that a check started 30 days after they got these things for $1,000 a month, and that check is not going to stop until both of them are deceased.
It's really to a degree that's all they need to know. And then, you know, we do the math. you need per month for life. Yeah If we move to the single. In the single, and I'm going to let you, Robbie, just stop me wherever you need to stop me because you can be all the.
Customers, that if you've got a question, you just need to stop me during the audience.
Okay. Um The single Person. And again, it doesn't matter whether it's a man or a woman who's 65. Um It's the same price for that first annuity that pays a thousand a month. for 60 months or five years.
Because that doesn't matter. Where is it? It it's fifty-four thousand four hundred and twenty-eight dollars. But the price of that is the same. And that's just going to start a check.
coming in thirty days from now if you need it. And then the other annuity The second annuity that's going to start in the 61st month, that's less expensive for the single. than it is for the couple because it's only based on one life.
So that one starts the 61st month. That costs $108,000. $992. Or It's 163,000. Oh.
Yeah. The only difference between these two things is one is based upon two lives the other one's based upon one Okay. Um Now I think that I really left out of the video. When you watch the video, which I'd encourage you to do is to go to YouTube. and watch our video on this episode.
because I lay it out, you have the visual there. I left out one of the key points on that second annuity. That if either one of you needs nursing home care or you need help with the activities of daily living. Um and this thing is in its income phase. The $1,000 a month doubles to $2,000 a month.
You know, so another way to put that is if you had $5,000 a month. If you had five of these things going. Or essentially, you're done with the multiplier, and then you needed assisted living, your $5,000 a month. We turn into $10,000 or something. And it would stay doubled for up to five years.
So we could go over the particulars of that. Mm. But there are some limitations to it.
So I don't want to overblow this thing, but it's just not only are you getting longevity insurance. or you're getting insurance. that you can't outlive the income. That's really longevity insurance. you're also getting some level of long-term care insurance.
Um th that that if you needed care, this thing is even going to spit out More about So I know I don't want to complicate things, Hans, but A couple of things I'm curious about since you know. Mm-hmm. Is I'm looking at this. It sounds like the single person saves about twelve thousand dollars over Essentially Yeah. Maybe a little bit more than that because of the two lives, but In either case, When you're taking this and you're getting, here comes this check for $1,000 a month.
If it was coming out of a regular 401k, That income is still taxable, am I right? That's correct. And so Wouldn't that also count as your RMD if you were after 70? That money That was going into the, or essentially it doesn't because, or how does that work? The money came out originally.
Okay, well Any money that comes out before 73. Is not going to count as an RMD because you don't have an RMD until you're 73, or cases with people a little bit younger, 75.
So the only thing that's going to count toward your R and B Yeah. Money that comes out in the year where the RD is due. like with this couple For instance. L let's just say they bought the thousand dollars a month.
So, in the eighth year of this thing, they're already into the second annuity. They're getting their $1,000 a month.
So during that year, they're getting $12,000 of income. coming out of their IRA. They've made 12,000 of their R and D. That's what I meant. Yeah.
And so Yeah, that was the question. That that even though you originally bought the the annuity with Okay. IRA money as you're getting it back out It's counting toward, yes, it's taxable, but it also counts towards your RMD, whether you're the single one or the couple, right? It's still doesn't matter. Actually, with the couple.
We're only using one of their IRAs. I mean you can't You know, you can't have a joint IRA.
So the coloring. both people. of the $1,000 a month for life. but we're only using one of their IRAs.
So sometimes we have couples. that by There's so much a month. out of one of their IRAs. They're done. They buy so much a month out of the second IRA, but it covers both of them.
So Uh and it's only going to count for the RMD of the one that's in their name, okay? Right. And on the single, it works exactly the same way. Yeah. Um And let me add a point with that.
A lot of people buy these with Roth IRAs. Or you can You got. five years here if you buy it initially as a traditional IRA. you know you put that 107 100 excuse me 120 000 into the traditional IRA annuity. You got five years to convert that.
you can't convert it after you start the income but you could turn that into a roth Piece by piece. You could take $25,000 a year. You know, from 65 to 70 and convert it to a roth, and then that $1,000 a month. would be tax-free. And it does not have a Roths don't have RMDs.
So I mean, there's just all kinds of ways.
So we've kind of bring in tax into required minimum distributions into income and we're covering a lot of ground here. But that's what we do as financial planners is that we We're considering all these things. And then we're also Looking at your situation, and a lot of people buy these things for RDs.
So, you mean, we don't have to start the income in five years. You could have somebody buy this at 65. don't buy both annuities, they just buy the second annuity. And they don't start it at 70. They start the income at 73, it'd be more.
by waiting three more years it'd be a lot more And then they turn on the lifetime income. At 73 And then the whole thing counts as an R and D at a larger amount.
Okay. And I know we don't have a lot of time left and You might want, I know a lot of people are wondering what happens with your beneficiaries if you die. Um Before You know, either of you. Right. A lot of people think with annuities if you die early.
If you die soon, you lose your principle. And that's not the case with this. Is that if you died in the first five years where you were using that first annuity? those payments of the thousand dollars a month would just come to your beneficiaries.
Okay. Now, if you died after the five years and you're into the income years. And let's just say he died at 75. And you've been collecting off the thing. You're the single, you've been collected on the thing for five years.
You know, I always remind people, you're not going to get anything because you're deceased. But your beneficiary is going to get the remaining money that's in that account. And I've got to remind people that this show is brought to you by Cardinal Guide, CardinalGuide.com. And there you're going to find the video we're talking about under the income portion of the seven worries at cardinalguide.com. Of course, Hans's book, The Complete Cardinal Guide to Planning for and Living in Retirement.
And the all-important contact Hans and Tom Page. Great show, Hans. Thank you, and God bless you. The opinions expressed by Hans Scheil and guests on this show are their own and do not reflect the opinions of this radio station. All statements and opinions expressed are based upon information considered reliable, although it should not be relied upon as such.
Any statements or opinions are subject to change without notice. Investments involve risk and, unless otherwise stated, are not guaranteed. Past performance cannot be used as an indicator to determine future results. Any strategies mentioned may not be suitable for everyone. Information expressed does not take into account your specific situation or objectives and is not intended as recommendations appropriate for you.
Before acting on any information mentioned, please consult with a qualified tax or investment advisor to determine if it's suitable for your specific situation. Finishing Well is designed to provide accurate and authoritative information with regard to the subject covered. Investment advisory services offered through Brookstone Capital Management LLC, abbreviated BCM, a registered investment. Advisor. BCM and Cardinal Advisors 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. Cardinal Advisors is not affiliated with or endorsed by the Social Security Administration or any other government agency.
We hope you enjoyed Finishing Well, brought to you by CardinalGuide.com. Visit CardinalGuide.com for free downloads of this show or previous shows on topics such as Social Security, Medicare, IRAs, long-term care, life insurance, investments, and taxes, as well as Han's best-selling book, The Complete Cardinal Guide to Planning for and Living in Retirement and the Workbook. Once again, for dozens of free resources, past shows, or to get Han's book, go to CardinalGuide.com. If you have a question, comment, or suggestion for future shows, click on the Finishing Well radio show on the website and send us a word. Once again, that's CardinalGuide.com.
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