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Listen Up and Stop Worrying: Investments

Finishing Well / Hans Scheil
The Truth Network Radio
June 22, 2019 8:30 am

Listen Up and Stop Worrying: Investments

Finishing Well / Hans Scheil

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June 22, 2019 8:30 am

In Romans 10:17, Paul says “Faith comes from hearing, and hearing comes from the word of God”. This week, Hans, Robby, and Tom discuss people’s biggest worries in retirement and how to confront those worries with faith and smart planning. Tom says the number one worry he’s confronted as a CFP ® Professional is the question: “Am I going to run out of money?” People thinking about retirement are concerned they won’t have enough money to live comfortably or have the financial resources when and how they need it.

 

Hans and Robby discuss how understanding the debate between the investment and insurance communities is crucial to confronting this fear. The debate argues whether investments or insurance is better for generating retirement income. Hans says this is largely presented as a good vs. evil issue, but, in reality, having a basic understanding of both and a good mixture of investments and insurance is ideal. His goal is to help his clients figure out which mixture of the two is best for them.

 

The advantage with investments is that your money is easily accessible and they can produce a huge return. However, you could also lose it all or outlive your money. Insurance products are the opposite, they’re safe, because you can’t outlive your money, but your money will be harder to access.

 

Hans talks about how people have become too comfortable with stock indices and this has created a problem where some people put all their money in stocks. The stock market could crash at any moment and people in this situation could lose all of their money and savings. Tom adds that the stock market can spiral down just from fear of the coming recession and widespread panic at the first sign of a downturn. In the long run, this will make the crash worse. Hans says he still recommends that a significant part of your portfolio should still be in stocks. The goal is not to convince people to avoid stocks, but to keep them informed.

 

Income is more important than your account balance when you retire. Most people are used to focusing solely on accumulating money, but once you retire your strategy has to change because now you’re withdrawing money in addition to needing a small return. Hans recommends diversification across life insurance, annuities, and stocks.

 

Next up, Hans, Robby, and Tom define some important insurance terms. Fiduciaries are financial planners that looks at each client’s information specifically and must put the client’s best interest ahead of their own. An Annuity is an amount of money placed with an insurance company and credited with interest continually. This interest can never be lost once its credited to your account and you can benefit from stock market indices without the risk. Annuities can then turn into an income that exists for the rest of your life.

 

Hans then talks about a 70-year-old client who wasn’t focused on investments, her retirement income, or taxes and wanted to help her properly plan. Hans eventually found out that she had a 7-year-old annuity generating very high returns along with hundreds of thousands of dollars sitting in a stock that was earning almost zero interest. This extreme example illustrates how insurance products really do have an advantage sometimes. Another advantage is that you don’t have to watch the money you put in insurance accounts like you do with stocks.

 

Finally, Hans discusses another woman he met who wanted to put all of her money in a risk-free retirement account. Hans helped her see that too much money in annuities wouldn’t be smart planning and was able to assist her into diversifying her accounts and minimizing her taxes in stocks, bonds, and annuities. This gave her the retirement income she wanted and now she’s living comfortably, and her income is still growing a bit. The point is, most retirees are willing to trade a high return for some basic guarantees in retirement.

 

Don’t forget to get your copy of “The Complete Cardinal Guide to Planning for and Living in Retirement” on Amazon or on CardinalGuide.com for free!

 

You can contact Hans and Cardinal by emailing  hans@cardinalguide.com  or calling 919-535-8261. Learn more at CardinalGuide.com.

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You're listening to the network and TruthNetwork.com welcome to finishing well brought you by Cardinal Certified financial planner belonged to Schild, best-selling author and financial planner helping families finish well over 40 years of finishing well will examine both biblical and practical knowledge to assist families in finishing well, including discussions on managing Medicare IRA long-term care life insurance and investments and taxes. Now let's get started with finishing well.

Oh, what a treat. We have today on finishing well. They show is listen stop working, you may have heard that a different form from Nepal in Romans 1017. Actually, he said, faith comes from hearing, and hearing by the word of God. Now IIS Tom is with us today. One of our financial planners with with cardinal guide to what's the number one worry that you hear from you people as they enter into retirement. So what what would you say that is Tom and I would say the biggest worry that we hear the most frequently is MI going on out of money do I have enough money to be okay is again the last as long as I needed to last right and so if that's the number one worry in retirement.

You know, am I gonna run out of money. You know how do you get past that kind of worry and I think the answer is oh ultimately faith right and fortunately for us, Paul gave us an antidote for fear. It's called faith. What is that look like faith comes by hearing and hearing by the word of God, and I know that I personally came to faith through that in this interesting thing. The more I read the word of God, the more faith I have and the less worry I have well interestingly Hans you sent me this article on investments today is ours. As I was think about the number one worry of people and going in retirement. Megan run out of money.

That article spoke to it, but it was kinda complicated, but fortunately he gave me the distorted investments for dummies version at the bottom of each paragraph so that I could see what it was actually talking about will yeah I said to you, because there's a there's a debate going on out there between the investment community and the insurance community and it's really kind of a one-sided debate because the insurance community is not speaking up very much on their behalf in the investment community. In many cases are calling annuities or insurance products or life insurance it comes to putting cash value in their in creating returns. No really it's it's it's it's gone almost like good and evil and so I really wanted you jerks address it on the show and I'm specifically addressing it in the second edition of my book when you read the first chapter the investment chapter in the first book, the complete cardinal guide to planning for living in retirement. It it pretty much talks about investments and gives you some education on asset allocation, and just just a whole different things that have basic consumer needs to learn about investing their money in it doesn't talk much about insurance products and so in the second edition is on writing. Now I'm preparing and I'm in a just get this discussion out there and want to bring it onto the show and just talk about today and brought my associate, Tom in here into the studio and so were going to work in a talk today about really not which one is better which one is good and which one is evil working to talk today about perhaps a mixture of the two, and getting the right mix Source I read this back with it was clearly the discussion between which is better investments for insurance products in any it separated them between the two and he talked about that. Wow. You know the advantages to investments was that you could get your money easily and that you know if if the stock market went up great that you're gonna be in great shape, but of course the disadvantages are, is that you could a lose your money in the stock market and be all you can outlive your money, which is obviously one of those fears that we talked about that if you know that a lot of people are worried about in retirement. So I like that the insurance products are exactly the opposite where there safe but a little hard to get your money and you can outlive it. So those of the big advantages to the insurance product lot. You know, as I was reading through the article, I couldn't help but note that one of the things that I'd always heard about the investment peep from the investment people as they were concerned about the big commissions on the side of the insurance people and as I reason through that amount and I went wait a minute. I've never seen any of the investment people I personally know you know driving around and hung days for probate as effectively as every investment I ever thought you must be making some got a commission to the they look like they're living pretty good. Most insurance people I know don't look like the limit is.

I don't know that that particular argument holds water as far as you know, based on the commission side but as I look at it I think about while for me to have faith and not fear right I'm in have to have trust them and have to have understanding.

I know God's going to be underneath both but it would really help to have more understanding on Willie Wood and that's what we want to do on every one of these shows as we want to give the listener give you the listeners some teaching and some really coming from a fiduciary and so you laid it out pretty well is is that the problem when you have all your money in stocks is first of all, very few people have all their money in stocks at retirement.

But if you if you had most of your money or a lot of your money or a significant part of it in stocks is we are all pretty well aware that the stock market should go down could go down drastically at any moment. I mean we could wake up one day next weekend. You know, 20% of our money is missing and so I don't want to put fear in people, but I think most folks are you know that so there's an inherent risk, and is well this folks been making over the last few years. The last really 10 years significant money and significant percentages of return if they're just invested in the stock market indexes and they just have their money all thrown into stocks and people have been walled to degree any time you were just mentioning on the way over here once you talk about that a little bit which you gathered from a podcast you yes I was into another podcast and I was talking about different things that you know we should be worried about her that could potentially happen. And one of the things they retirement in the stock market is this idea that there is fear just inherent in a lot of people who've been tested there money there is this idea that if something were to happen and people get scared they start selling their possessions to try to not lose more money, which causes a stock market to go down even further and encourages in a spiral from there on making things even worse. And so I now just I was thinking about that is, is that so that's the effect that which I am in agreement with that. A lot of folks were enlisting in talking to clients and I'm listening to them. Most people are just convinced that at some point were going to have a pretty severe stock market reduction that is coming and it is just mainly because it's just gone so well for so long and so I think that with the were speaking about what I asked you to ring opposite. There's this phenomenon that that crash.

If you want to call it that could be made worse by just the fact that everyone's expecting it.

And so when it starts to happen. People will start selling which will make it even more severe.

So look we we put a lot of our clients in and we recommend that you know a significant portion of their investment portfolio of their retirement portfolio in stocks so were were not here to disc one thing and talk about another thing, all I would like to do on this show is really get people to understand both sides right argument that information obviously helps produce faith. It understanding what's underneath some of the stuff that you're facing everyday today show is the investments and income side of our complete cargo guide to planning for living retirement.

That's the book Hans wrote that's available. Of course, the Cardinal guy.com. In today's chapter right investments is obviously very fond of the seven worries tab which hopefully were replacing with faith as you begin to understand more about what these insurance products are specifically annuities and long-term care insurance and life insurance as well as investments over talk about all the things little bit it says right in the book is when you become retired when you retire you can.

Income becomes a lot more important to you than your growing account balance. Okay, so if you think about it before you retire. You're in the accumulation part of retirement planning.

So your putting money in their every week, every month and is accumulating and it's also accumulating because it's growing. If it's invested in answering return. Now when you retire. Now you're going to start distributing the money. You can start pulling money out and you still need to earn a return so it calls for an entirely different strategy based upon how long you live. A lot of factors and so what we want to give people a group most clients we end up recommending to them a mixture of both investments that are in stocks and then some life insurance and annuities to buy the guarantees in the safety and the fact that you cannot live your money right which I've experienced even just this week, but again we want to remind you that if you go to Cardinal guy.com that you can get this tab absently free the PDF I have to do is go to the investments one and then in a download that or you can email Hans and asked for the whole book, which again is gonna provide more so that you know it when you start to worry. Obviously it's time to list, not because God may have somebody wants to speak to you if that is get it ultimately be behind was going on but I can tell you from my standpoint in a year and 1/2 ago I would've been able to spell annuities. Better yet, one is but the more that I can't understand the difference between these kinds of investments and insurance products really the rate I the diversification of it and haven't a mixture of all you can see since the completely almost opposite one another on how they work at the you know from the standpoint of liquidity and risk and those things it's it's a pretty cool strategy. If you asked me to have a little bit of old yeah yeah now we come back from the break were going to talk about the different types of annuities that we have is tools Serena going a little bit into the different types and life insurance products and what they can do for you and your returns were tepid guarantees. Yet others and how the back will be talking more about you want to replace fear is not Hans and I would love to take our show on the road to your church, Sunday school, Christian or civic group. Here's a chance for you to advance the kingdom through financial resources and leveraging Hans expertise and qualified charitable contributions veterans aid and attendance IRA Social Security care and long-term care.

Just go to Cardinal guy.com and contact Tom to schedule a live recording of finishing well at your church Christian or civic group. Contact Tom to Cardinal guy.com that's Cardinal guide.com welcome back to finishing well, a certified financial planner Hans Schild and also today we got Tom Griffith with us so we got twice as much fun for you today and Tom by the way, is a certified financial planner as well right at 27 years old, which is pretty is he a fiduciary is a fiduciary wound which I did not, as another word I can spell probably still can't spell. If I was at the today show is replacing essentially fear not and listen up, you know, don't worry, and was not the idea being the more you understand and one of the things we can understand just what the word fiduciary means that if I'm not mistaken, Tom does not mean that essentially you make all your investment advice based on what's in my best interest you never look at what your commission might be in those structures. Yeah, that's correct, sir. Fiduciary essentially means that we're having to put the clients best interests ahead of our own.

So when were making recommendations were looking at what is best and further specific client and every situation is different, so not every recommendation is the same over looking at their situation specifically and doing what's best for them and so the cool thing is, we been talking about these different investment strategies today you I love this, that as we go into actually retirement. We go into a different season of life rather than being in the accumulation phase 1 now in the distribution phase and so you got a story obviously of negative stories in the just give a little background so we have a lady who came to us and she is quite well-to-do still working just turned 70 a little while back and she had to sick parents living with her and she's paying out home healthcare out of her pocket to take care of them during the day and then sometimes 24 hours a day when she would be out of town or something for both of her parents and her mother has since passed away and her stepfather is still there in the house and so we help them. About a year ago with all the money in paying for all this and just getting it all structured so that her parents get the care they need and then that got us into her finances and their business finances and we discovered a really kind of a cool thing is, she purchased an annuity. I believe it was 10 years ago, Zacharias something like that.

Yeah.

10 years ago with a particular company that we represent. Now that is who will go unnamed at this point, but he just this annuity has performed extremely well off elastically.

Don't know what annuity what Mike I would have a year ago. Can you can't explain what that means yeah it's just you. You put money with the insurance company you pay it in and it is credited with interest every year or every couple years, depending upon how it's set up, and then once you're credited with that interest you can never lose the interests of another word you you get some of the benefit of the gains in the stock market indexes and once you're credited with providing it went up to me and if the index went up over the. You get a credit based upon that you cannot lose that, so in future years. This lady just happened to own this annuity just through the whole 10 years, where the market is just been nothing but up up up up up and selling explaining what an annuity is she at any point over the last 10 years or any point going forward. She can turn on an income from that annuity and then that income is guaranteed for the rest of her life.

So I'm Social Security like you're going to get a check from that annuity for the rest your life. You cannot live if you live to be hundred and 40 and still send the check yet and she's not distributing money out of that thing now, but she's fixing to get in. She's hired us to help her decide the best way and when to turn it on and under the terms and we do a lot of that for even plans that somebody else sold this to now this particular lady.

What is noteworthy with her is when we have gone through all her stuff wheat week. She's been so focused on her business. She really hasn't been focused on, you know, the, the, the, the really her investments and she just should she pin her taxes and pay herself a salary and really taking care of yourself financially, or her husband who is pretty much retired or semi retired closer to the retired party semi and I mean they just make enough money that they don't really have to look at the stuff because she still employed and very successful. The thing we notice. This brings up another advantage to an annuity is she's made over 9%.

I did the reverse calculation because I'm showing it to her on this annuity which is just phenomenal. Not even though the market has done over the 10 years a bit more than that with an annuity you're knocking to get the whole market. Okay, you just can get a percentage of but it's is a phenomenal return as absently safe. She can never lose that right. It's it's completely see it is so safe is there's market crashes and I can lose one is put that way, and she may, in the sense get a smaller credited the end of the cycle or zero credit but she can't lose any of the money that's already in their now when I was can add to that is. We also discovered that there are several hundred thousand dollars.

This just is sitting in cash in IRA accounts.

Some of it since 2012 my get that right Tommy believes that and you take this cash and we haven't really been able to ask her yet. Like why did you do this and we want to be careful biases money just been sitting in cash or earning much less than 1% in my assumption was at some point she sold everything in account. She was either afraid or want to change, but this is sitting in cash.

When we start comparing that to the new Hansen IRA is Adam Roth Ira's regular regular IRA so it's been basically earning essentially nothing was pretty easy to compare this annuity, but the point I want to make is there's another advantage these insurance products is you can buy am working to keep an eye on them. If you buy them from Souris send but you yourself don't have to worry about reinvesting the money when you have a portfolio stocks you can either ask somebody like us or you yourself are going to need to be watching the stocks with an insurance product you really don't have to do that you can so that the next story I want to move on to as a client that I've had for about 10 years and I've talked about her previously. This is a lady who was about 62 when I first met her couple years away from retirement and she took her whole 401(k) balance and she was just sick of watching the stock market go up and down and it was a 401(k) balance from prior companies associate Artie left that company and it was about $200,000 and she came to me with this and she said you know I'm just this up and down, and what the market did. I'm just nervous about this. I want to I want to put all of this in an annuity wanted all guaranteed. And I want to know what I can draw on. I want to know that I'm not can lose it in the few years and I'm still work so that's what we did and that is now like eight or nine years old in a motel you with back on the first annuity what it was worth, and what we did with it. Then like two years after that's an hour moving up to about 2014. She comes back to me. She's retired or retiring, and she's got about $307,000 in this with her current companies like IRA thing, 401(k) and she says why want to put all that annuity to ISA value route. You really can't do that because that's just too much money in annuities where we can create from income. So, let's sit down and let's put some senseless to a financial plan and let's project your retirement income. So then we sat down and we figured that her Social Security when she retires is going to give her about 1800 bucks, that's and so she's been on 1800 may receive increases and so she she's a lady that's pretty easy deal was. She says well you know what I need to live off of is another $1800. So if I have two Social Security checks -3600 a month and we kinda figured out that she's not gonna owe she can know very little tax if she's in that situation. She's doing that so shoot most of that monies can be urged to spend so what we ended up doing is putting about $100,000 in a mixture of stocks and bonds in an account that was very liquid and we put another 200,000 in an annuity.

Okay, that is for the future Cisse and then of the hundred thousand dollars we started drawn out 1800 bucks a month now since that's gonna run out of money because if you start if you have $100,000 account started drawn out 1800 a month that's gonna have to have some really fancy performance to not run out of money and she particular about six years or so. She's out of money. Okay I mean it just that hundred thousand is down zero and that was just the point where we turned on the money from the original annuity that she bought me with 200,000 that is now producing 1800 a month for her arrest him or live the rest of her life okay and that's the part time. She still has the other annuity and its it's growing its banking aunties yeah I like that idea to listen when they rise. The point being is this lady a couple years before retirement took some of her money put into an annuity that had a guaranteed future income didn't have to worry about couple years later, she retires. Now she's got the money with the current company and now she's got a problem.

She gets her Social Security. She realized she needs a more income now it's too early to start with drawn on that original annuity so we just created an account that was very liquid and that would just pay her that money until it ran out, and then knowing that by the time that runs out of money. This other plan that she bought originally will be enough to shoot often income it was just coincidental and some good math that it worked out almost to the penny that she's drawn this 1800 a month and then she sees ahead of the other shower we talked about no worries.

Listen up. I mean who wouldn't want to go into talk retirement with no works, is like I'm not going out with my money is I've got Social Security which is an annuity I share with. I would not have known that up until I started to show that I understand now very clearly and so depending on other investment strategies into to have those things where you know that your income is you not gonna run out of money I mean is just wasted. To do this to her that the will and both of these clients had some concerns about buying these annuities about the insurance companies.

Things that had read in you know we call those concerns and adjust it showing that most retirees there willing to trade a future return, or a wonderful return or the prospects of a wonderful return for a lesser return and some guarantee sleep at night. She's just thrilled with it. So again you can find out more and I actually tons more by going to Cardinal guy.com and ordering the book the complete cargo guide to living for click planning for and living in retirement I get it eventually may be to Cardinal guy.com. Thank you for listing today so much fun. Thank you. We hope you enjoyed finishing well brought you by Cardinal guy.com visit Cardinal guy.com for free downloads of the show or previous shows on topics such as Social Security, Medicare and IRAs, long-term care and life insurance, investments and taxes as well as cons best-selling book, the complete Cardinal guy to planning for and living in retirement and the workbook once again for dozens of free resources past shows what to get Hans book go to Cardinal guy.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 Cardinal guy.com Cardinal guy.com


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