Retirement Income Planning

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Sit back, enjoy it, share it, but most of all, thank you for listening and choosing the Truth Podcast Network. care, IRAs, long-term care, life insurance, investments, and taxes. Now let's get started with Finishing Well. Well, welcome to Finishing Well, a certified financial planner, Hans Shyle. And today, talking about planning, we got retirement income planning. And so I think you probably like that word.

I do. Who wouldn't like the idea of income? And so how about a neat Bible verse to go with that to make you think a minute? In Genesis 26, there's this really cool verse 12, where it says that Isaac sowed in the field and reaped a hundredfold. So talk about income, right? He sowed a seed and reaped a hundred more. And so there's two things that are kind of in God's economy right there that are important to note that may seem simple, but I don't know if you really ever thought about them, is that you do have to sow in order to reap, but actually you got to reap it or you won't be able to sow anymore. In other words, if you keep hoarding that money and you don't ever reap any of it, then you can't re-sow it, so to speak.

And so that's a lot about what these strategies are that we're going to talk about today, right, Hans? Well, they are. And in my job, I always have an eye to people when they're in their 80s and 90s. And immediately some people would say, well, I'm never going to get there.

I'm this and that, and my parents died. But let's be clear from my perspective, there's a reasonable chance, especially if you're a couple, that one of you is going to make it into the 90s, okay? And there's a very high probability one or both of you are going to make it into your 80s. And one scenario that people fear that hoard their money is, and a lot of them hoard it in an IRA and don't spend any of it, is they say, I'm going to run out of money. So the people are in sync with me right from the beginning as a financial planner that I don't want to run out of money in one of my 80s and 90s.

And so they're in sync with me. But where we're not in sync is, we need to start living off of some of this money now if you're in your 60s and you're retired or retiring. We've got to start spending this money, using it or reaping it, as you're saying. We've been doing all this sewing. We're still sewing. And one day we're going to stop sewing because we're going to be retired and we're going to maybe be old enough that we're not doing that anymore, and we're going to start reaping totally. So then the other extreme to that is, we don't want to reap so much out of there that we're broke when we're 75 or 80.

Yeah. And the thing that strikes me is how fun an adventure, right, to ask God, I mean, just in your prayer life, what should we do with this money that we've accumulated? Show me the desires of my heart, of my kids' heart. Tell me where you would like me to go with this because I think that'd be an amazing adventure now that you've got it. I mean, you got to start reaping it, but it requires planning and that's really your strong suit.

Well, it is. And when I ask people that, so you've got this amount of money, people come out with it and they're showing me and I'm kind of like, well, what's it for? What do you have all this for? And they kind of look at me like, duh, for my retirement. Okay, given the fact that you're now retired or you're going to retire in six months, I'm going to ask the question again, what's it for?

Or if they're 70 years old and they retired five years ago and they haven't spent taking a dime out of their IRA, but now they're coming into me because they just lost 20% of it or some number, 15% of it, and they're wondering, you know, like, what should they do? And then I go back to my question, what's it for? And so that connects to the prayer that you just came up with is asking God, like, what's it for?

Answering Hansa's question, what do you want it for? What's this money? And for a lot of folks, this is several hundred thousand dollars in IRAs and 401ks and then money outside of 401ks and IRAs, just money that you've already paid taxes on that's in an account. And, you know, if you don't have any of that money, well, then I guess this show isn't totally for you.

We can still help you, or if you have little of that money, we've got to really make that, stretch that and make it work well for you. But who we're really talking to here is people that have accumulated a good bit of IRA money and, or not IRA money, just money they've already paid taxes on, and they've done it under the whole thing that is for their retirement. Well, now you're there. What's it for? What do you want to do with it?

And I think we got to get clear on that before we start talking about solutions or what these people are going to buy from me to help solve the problem. Yeah. And to me, that seems like an amazing adventure. Using the resources, God has blessed you with it. I mean, right. And so how can I be a blessing with the way that you blessed me, whether that's within my family, whether that's within my church, whether that's within all sorts of different ways, you know, how fun. And what's neat about it is with these strategies that you're going to talk about today that are from the video on retirement planning, you and that you and Tom did is, wow, you can do great combination platters, right?

And different things that you can do in different buckets, as you always call it, in order to have all sorts of different desires of your heart covered in the same package, right? Well, right. And a lot of folks, if they have money, I mean, the first thing that's going to come up that they're living off of is social security. And many of them haven't taken it yet.

So they're just approaching this time, or they can take it, they can delay. And then they've got this other money. And it's just kind of all a mix out there.

And they're all mixed up. So then a lot of folks just take their social security, maybe earlier than they have to, because that's a pretty simple thing to do. And then they just tell you how much you're going to get, and they start sending it to you, and you start living off of it. There's a lot of folks that just do that that's all the retirement planning they do. And then they just hoard this IRA money until they reach minimum distributions, RMDs, at 72. And then they just start taking out as little as they have to, still kind of hanging on to it and never really defining like, what's it for? So I'm going to answer the question for a lot of people.

It's for you. It's to live off of. It's to supplement your social security, maybe magnify your social security, and it's money that is, you know, can be sent to you every month, like your social security check. And then you pay taxes on it.

And, you know, we can help you try to minimize those. And then now you've got a problem is you got to tell me what are you going to do with that money? And if you've already got that figured out, you need the money to live to pay bills, well, then we don't have to spend it.

You had a pretty easy answer to the question. But for a lot of folks as they get older, I'm struggling with this bit myself is that, you know, I don't really want a lot that, you know, beyond I mean, I have a lot and I have a lot of things that are very nice. And I play golf, and we take a couple of vacations a year, and we got a place in the mountains and, you know, all that's paid for. And it's kind of like, well, what do I want to do with the rest of the money? And for me, I want to do things for my kids.

And I want to give to the church. And I want to add to the security, I want to make sure Rhonda's real well taken care of. If she lives way beyond me up into the 90s.

And, you know, her aunt lived to 101. I mean, so I got a lot of answers to that question. And what the topic of the show is I'm going to show you once you enter that answer that question, that you want to agree to start living off of and spending some of this money, then we need to figure out how much how much you can spend, how much you can draw down without robbing your 80 or 90 year old self in your budget. So and we're going to get on and talk about four different solutions that are all annuities, different kinds of annuities that we can patch together and come up with a guaranteed income for life so that you can have a surety that you take out this much money. And one of you lives up into your 90s and beyond, that there's going to be a check coming in every month from this extra money.

Yeah, I mean, how cool is it? It's it's like, in Isaac's case, right after he reaped, he had to sell it again. Right. And so here's just another opportunity is you're selling this money every month coming in on these annuities as we just get into these descriptions. Well, that doesn't mean you've lost anything. You just have new opportunities to sell it.

But if you just leave it in the field, you know, it doesn't do anybody any good. Yeah. So I want to talk about a case study that I just ran into in the last couple weeks. And this couple, you know, in the what we have on the board and the YouTube show is both age 65, Bob and Sally, and Bob and Sally have substantial resources. I mean, they, their IRA used to have about 2 million in it. And they have dropped it this top drop down to 1.6 million this year. And he's almost ashamed of what he's telling me that.

And then when I went through, he makes about 100 grand a year, travels a lot, going to retire soon. He's really worried about that loss of money. And boy, I hit these folks with the what's it for. And, you know, they're, they're like, boy, they had a hard time answering that. Well, I just want more of it.

You know, it just, you know, what's it for? What's going to happen if it goes down from 1.6 to 1.2? How's that going to affect you?

And they've had trouble answering that. And what happens if it goes back up? And then it goes to 3 million? How's that going to affect you? And, you know, both the best you could come up with is happy. I'd be happy. Okay, well, then you'd be happy. But how much happier than you are at 1.6 million?

Well, you know, and it just, we kind of went around in a circle. And then he went and got his budget, which he had prepared in advance of talking to me. And it's 1 point 1500 a month is what their expenses are. That's why he saves so much money is because it only costs them 15. Everything's paid for. They don't spend a lot.

They go on vacations by visiting their kids. It isn't going to change much when they retire. And, you know, that's $18,000 a year. And then, you know, he agreed he needs more than that, because there's things that he didn't have in the money. So he went to $30,000 a year. They're going to have way more than that in Social Security. So I said, you've got a real problem here. It's not the 1.6 million going up and down. It's how are you going to selectively enjoy some of this money over your retirement? So, and boy, he's all ears.

Let's just put it that way. And so what the topic of the show today is we've got four different classifications or types of annuities. And I've got them on the YouTube video in $100,000 denomination.

So it makes the math easy to buy some of one, some of another, and still leave some of your money at risk. Unfortunately, we got to go to a break real quick. But when we come back, we're going to dig into those four ideas, which is really cool.

I mean, whether you live to $160,000, the way he says income for life, man, he's not kidding. So we'll be right back. Don't forget, this show is brought to you by Cardinal Guide, where you can get Hans's book, The Complete Cardinal Guide to Planning, Forward Living and Retirement. It's all there at cardinalguide.com. And again, you're going to want to get up with Hans. I just know you will. And so you do that at cardinalguide.com.

We'll be right back. Well, at your church, Sunday School, Christian or civic group, contact Hans at cardinalguide.com. That's cardinalguide.com. Welcome back to Finishing Well with certified financial planner, Hans Scheil. Today our show is retirement income planning.

And boy, do we have some strategies for you, right Hans? Yeah, in the YouTube video, I encourage you to watch that if you wanted to look and learn further. And you know, that's at Cardinal Advisors. And if you get on our email list, we'll send these out to you every week.

And you can subscribe on the YouTube channel. But we're going to talk about that. So this one retirement income planning, we showed four different annuities for this couple, age 65, male and female, Bob and Sally, both age 65. And one thing I want to note is the statistics from Gallup to tell us that if you have a couple that's 65 years old, 63% of them, one of them is going to live to 90. So if you had 100 couples that are both age 65 now, 63 of them are going to have one member that's going to make it to 90, which is telling me we better plan for this.

Even if it was 23%, we need to plan for people living up into their 90s and making sure they're not running out of money. Okay, so the first annuity that's up for this couple is a single premium immediate annuity. Immediate annuity.

And it's abbreviated, the acronym is SPIA, S-P-I-A. And we're showing $100,000 premium. And that $100,000 premium will generate a check of $576.17 a month. And those checks will continue to come in as long as either Bob or Sally is alive for the rest of their lives. So the insurance company is just insuring the lifespan. Now, the first question that people have is what if we're both killed in an accident in three years?

And, you know, we're gone. And so what I included in this example is a 20-year period certain. And what that means is if this couple were both lost their lives and they've gotten three years of payments, there will be payments made for 17 more years or a total of 20 years to their beneficiaries.

So all is not lost. So this annuity is guaranteed to pay out for 20 years or 240 payments. And that total is $138,280 at a minimum. Now, never do I recommend people put all their money in this. But this is really insuring against longevity. And I used $100,000 because if somebody wanted more income than that, we simply would sell more of this. And you could take a part of your IRA.

We do this with a lot of people. And we just put some part of it in a SPIA so they have something that kind of resembles their Social Security check just to increase it. Right. And by the same token, so if somebody's sitting there looking at their retirement and they go, golly, I need another $1,200 a month, you know, then obviously you just create one of these SPIA's that would create that amount of income, right?

Yeah. And that would probably be $205,000 if they were both 65 years old. And we would just carve off that piece. And they'd start getting the checks for $1,200 and they'd keep coming in as long as one of them's alive. That's simple.

Okay. So next up is kind of the opposite of that. It's an annuity that is not designed to shoot off an income. It's an annuity that is intended to just accumulate money at a very good guaranteed rate.

And that currently is 5.4%. And people say, well, really, it's a five-year guarantee, so it's a five-year lock-in. You're basically signing your money over to the insurance company for five years. You can get it a little piece of it. There's some liquidity options, actually easier than a lot of CDs.

But just to understand this thing clearly, you only have to get the stuff. You're locking up your money for five years. That's what it takes to get 5.4%. And at the end of five years, your $100,000 will have turned into $130,000.

It was pretty sweet. And furthermore, if this was not an IRA, if it was just after-tax money that you put in here, you're not going to pay any tax on that interest until you actually draw it out. And so the assumption when we use these in planning is we're just going to wait five years to do something with this piece of the money. We just want it to accumulate at a good rate. And then if we're in the same situation in five years, we don't really have a plan or a need for the money, we might just buy another one of these for another five years. And then it'll be $160,000-something at the end of five more years. So this is the simplest form of annuity that we sell. It's called the multi-year guaranteed annuity. And we can sell these for two years, three years, four years, all the way up to 10 years.

And this is the most popular is the five-year MIGA. And then the next one in the lower left-hand box is the fixed indexed annuity that has an income rider. And this has some similarities to the first annuity that we talked about because it's designed to produce an income. But the income is best if it's left alone and not taken for like five to 10 years. So the longer you wait to take money, the more you're going to get. I mean, that's a pretty simple concept. But once you start the income, it is then guaranteed that as long as one of this couple is alive, that it's going to keep sending out the checks, even if the annuities used up all the money. Okay. Does that make sense to you, Robbie? Oh, absolutely.

It's absolutely wonderful. And this one shows that if we waited five years, we put $100,000 in, we waited five years for this couple, that at 70, they would be guaranteed right from the start $756 a month. But if there was good performance or good interest crediting in the annuity, it's showing, and this is not guaranteed, $810 a month.

But this annuity with good performance will have a growing income over time to give you a little bit of an inflation hedge. And I don't want to get too much into the details. I'm simply showing an example for this couple. And I'm doing everything in $100,000 units. It'll make sense to you in a minute what we're doing. Okay?

Okay. Now, the fourth annuity that we have in here is the five-year structured annuity. And what a structured annuity is designed to do is to pay you a monthly income, but to only do it for a set number of years. And this example is five years.

So you say, well, why would I want that? Well, let's say you needed income right now, and you were going to purchase some other annuities, one of these other ones, to kick in the annuity in the income right when this five-year one ran out. So let me tell you about it first, is you put $100,000 in there, and it immediately, 30 days later, it kicks you out of check for $1,837.70 a month, and it continues doing that for five years, or 60 months. So the total payout on this thing is $110,000. So it's not a huge amount of interest, but it's not bad because you've got a declining balance.

And so let me give you an example of how we use this. Let's say this couple came to us and they had $500,000 in their IRA, and it was all at risk. So maybe this IRA had $650,000 in it at the beginning of this year, and it's just gone down some, and they're wanting to add some stability to their deal.

And then once I start talking to them about annuities, they say, we don't want to put it all in an annuity. We want to keep some of it at risk. So maybe we decide that we're going to take $200,000 of it and we're going to just leave it invested, maybe even a little more aggressively, to try to make back money. And they're fully aware of the risk.

They just live through it. And then we're going to take $300,000 of it and we're going to put it in something that has a lot more certainty or protection to it. And if this couple wanted between $1,500 and $2,000 a month, I can show you exactly how we would do this, is we would put $100,000 of the $300,000 in the five-year structured annuity. And they would start getting checks for $1,837 a month.

And that would just wind down by the time they're 70 to zero. And just when they're 70, we would put $200,000, actually at 65 right now, we'd put $200,000 in this fixed indexed annuity. And that's guaranteed to generate about $1,500 a month.

Starting at 70, that's if there's no performance in the annuity. It could generate $1,620 a month if there was just some decent performance. And then once they turn on that income in the fixed indexed annuity, it would generate that for the rest of their life. So, you know, we've taken these people's $500,000 and we've left $200,000 where we've got the potential for some really good growth. We've taken $100,000 and put it into something that will create an immediate income for five years that's suitable to them. And then we've taken $200,000 and we've put it into something that we're not going to touch for five years till the first one runs out of money.

And then this $200,000 fixed indexed annuity will generate income for the rest of their life. You know, if you've got this situation and you're trying to figure out how to sow and how to reap, right? Because it takes both. God doesn't want you to sow and never reap. You know, he wants you to get the desires of your heart, the desires of your children's heart, the church, all those things. But the cool thing is that this could be a really fun adventure if you've got that kind of resource and you get together with somebody who wants to go after the desires of your heart, like Hans. And I hope you hear that.

And I know that's what he wants to do. So again, to get up with Hans, you just go to cardinalguide.com and it's right there, as well as his book, The Complete Cardinal Guide to Planning for and Living a Retirement. And of course, all of the YouTube videos and other stuff is all there at cardinalguide.com. And Hans, another great show. How exciting. Yeah, thank you.

And God bless. 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.

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