Welcome to how to retire on time, a show that answers your questions about retirement, income, taxes, Social Security, health care, and more. This show is an extension of the book, How to Retire on Time, which you can grab today on Amazon or go to www.how to retire on time.com. My name is Mike Decker. I'm the author of the book, How to Retire on Time, but I'm also a licensed financial adviser, insurance agent, and tax professional. Which means when it comes to financial topics, we can pretty much cover it all.

Now that said, please remember this is just a show. Everything you hear should be considered informational only as in this is not financial advice. If you want financial advice, then request your wealth analysis by going to www.yourwealthanalysis.com. That's www.yourwealthanalysis.com. Doesn't cost you a dime to start exploring your lifestyle and legacy potential with someone from my team here at Kedric.

Now with me today, part of my team, one of my colleagues, mister David Frandsen is joining me. David, thanks for being here today.

Yeah. Glad to be here.

Now David's gonna be representing you. He's gonna be reading your questions, and I'm gonna do my best to answer them. So you can send those questions in right now or really anytime, but right now especially. Just text them in 913-363-1234. That's 913-363-1234, or you can email them in hey mike at how to retire on time dot com.

That's hey mike at how to retire on time dot com. Let's begin.

Hey, Mike. I am mostly in CDs, and I'm concerned about the market. That said, I am concerned that the Fed will drop rates and that I won't be able to keep up with inflation with income from CDs. What else, is out there besides buying an annuity?

K. So when you look at protection, there's really 5 technically, five investments or products to consider. You've got CDs, treasuries or bonds, as long as you hold it to maturity. Bond funds don't count. Bond funds can lose money.

They also can make money, but they also can lose money. Then you've got fixed annuities, which are basically a CD from an insurance company, so it grows at a fixed rate. And then you've got fixed indexed annuities, so they're not guaranteeing the growth but you can grow the assets as long as you don't add the riders and the fees and all the extra stuff to it. You just use it from a cash accumulation standpoint, and then you've got cash value life insurance. Let's address them and eat 1 by 1.

Makes sense. Yeah.

Cash value life insurance, like an indexed universal life insurance policy, is a very powerful tool as long as you also want the death benefit, and you're okay paying for the death benefit. If you don't want the death benefit, you don't need the death benefit, then why would you pay for something like that? Well, oh, well, there's tax benefits and you can yes. But there's also Roth accounts that are available. There are ways to get money into a Roth account.

I get that cash value life insurance can be a strategic play from a tax standpoint. An indexed universal life insurance can grow. It does offer some protection, principal protection, but you're still paying the fees. But it needs to be funded right. It needs to be managed correctly.

It needs to be built correctly. Many times I found that none of these are true. And that, you have to be young enough and healthy enough to even consider it. So like a 65 year old or a 70 year old, I don't see how or why they would get an an IUL or or any sort of cash value life insurance. It doesn't make sense to me.

Oh, well, you know, they're healthy enough. They qualify. Yeah. But you don't wanna touch it for 10 years because it needs to kind of sort itself out from a cost standpoint. People don't look at it from cost.

So be careful of that. I mean, if you're listening to the show and you're 40 years old, yeah. And IUL, if funded correctly and structured correctly, can be an incredible resource in retirement as long as you need the death benefit and the rest of it makes sense. This is an insurance product. It's not an investment.

Yeah. K. So I wanna be clear about that.

Interesting. Yeah.

CDs. Let's talk about CDs. The problem with CDs is they're they're I believe they're not competitive after one and a half years. Banks don't wanna take that much risk. It is a bank product or a cash equivalent product.

And so for short term, yes, these are great, but once the Fed drops rates, where are you gonna go? Treasuries, in my mind, are similar to a CD option. It's protection. You can do a or a bond ladder as long as you're okay with whatever company is backing it. So a high quality bond, not a high yield bond.

High yield bond is also known as a junk bond. You know, Toys R Us bonds, those didn't go very well. But a bond ladder or a treasury ladder may be effective maybe 3, 4, 5 years or so later. So a blend between the twos might make sense. Fixed annuities, those tend to, but not always, but they tend to offer a more competitive rate than a CD if you're looking past 4, 5, 6 years.

Not a lot, maybe 1% more. I mean, it just depends on the interest rate environment, what insurance companies are willing to do, but that's a fixed rate. That's a rate that that's not supposed to change. It is what it is. It's a contract, and that's it.

Right? As long as you don't turn on the income stream, your cash value should be growing at the declared rate for the the agreed upon period of time, whether it's 2, 3, 4, 5, 6, 7 years, whatever it is. And then once it's done, you can move the assets. You can adjust the assets. You can move it to another fixed annuity.

You can cash it out. You can move it to the market. That's up to you. But, I don't think people really understand, they felt like, oh, it's an insurance company. Yeah.

I mean, the insurance company, they need money too. So they offer fixed annuities, a CD alternative to do just that. Very boring. Very, very boring. And you know it's boring, and you know it's very simple because it doesn't pay insurance agents much commission.

So it's not talked about a lot, but that exists for those that want that stability. But if you want stability, you lack upside potential. The reason why I want to bring these 3 up is because after 5 years, in my mind, there's a concern about inflation risk. All of them revolve around the Fed's rate or a riskless rate or an inflationary rate. The Fed's rate really is based on trying to combat inflation.

So when inflation is under control, the Fed will then be dropping rates, but it doesn't really hover much above inflation, historically speaking. So if growth is one of the primary objectives, and I believe everyone needs to have growth in one one facet or another within the retirement plan because growth allows future flexibility in life. You don't know what's going to happen in 10 years or 20 years. You don't know if you're gonna have life events happening. You don't know what inflation is going to do if it's if it's going to get out of control in the future.

You don't know if tax rates are going to increase. I mean, they're likely going to increase, but you you don't know if tax rates are going to increase in the future. All of that affects your ability to afford the lifestyle you want. You can't guarantee success in retirement. You can't guarantee a riskless retirement.

There's always a risk associated with a strategy. So when you focus on growth, and that's specifically growth after 5 years, I have found that fixed index annuities from a cash growth standpoint are more competitive than CDs or treasuries or fixed annuities. Here's here's why. If you don't care about the income and you only care about the cash, then you don't pay these rider fees. Rider fees are all the fees that make annuities uncompetitive.

If you don't want your annuity to be a long term care or, you know, a death benefit accelerator, wherever whatever these bells and whistles are, if you get rid of all that, then it's just a cash vehicle for an insurance company that can grow. And all you're asking the insurance company to do is to guarantee its principal.

Mhmm. That makes sense. Yeah.

So if that's all you're asking an insurance company to guarantee and and insurance is the transference of risk, that's a very easy thing for an insurance company to offer, is that protection. And then they take it and they do their thing, and we don't have time and it's a very complex conversation to explain how they do this. But basically, it's not hard for an insurance company to just guarantee your your principal.

Mhmm.

So if the markets go up, you get some of the growth. If the markets go down, you you don't go backwards. So if that's how you're treating it, and if you pick the right fixed index annuities, you have more growth potential, in my opinion, based on my research, 5 years or later. The reason why I wanna go down that tangent is because too many people don't realize that you can use annuities for protected growth.

That's interesting.

The ones who who dig into the details realize this, and it's almost like unlocking a secret strategy. It's not a secret. I mean, it's it's on the insurance applications. Yeah. What's the purpose of this annuity?

Income. Nope. Principal protection. Yep. Growth.

Yep. Like, that's a thing. It's not gonna grow as much as the market. But if it can, over the long term period of time, outpace CDs and treasuries, you've got more growth potential, which means you have more flexibility in the future. And then the other thing I wanna say, because this person was saying that they're concerned about the market.

They're mostly in CDs. I would suggest that do you understand portfolio design? Plan efficient portfolios. What's your lifestyle plan look like? And how much do you need in income for the next 10 years?

How much do you need in income after that, so maybe year 11 through 20. And what if you did put some assets in the market and you did not need to touch it for 10 years? Would that be mindful growth? Would that be a calculated risk that you're willing to take? You would have more growth potential long term in the market, and you're basically sectioning off parts of your portfolio for very specific purposes in very specific seasons of your life.

Might seem morbid, but we we wanna plan as if you're gonna be around for a while.

Yeah. We wanna protect your cash. Your cash is for legacy purposes. So how do we divide and conquer? No.

And this is important. So listen up. No investment can offer you growth potential, protection, and liquidity. Does not exist. Yeah.

You can't have your cake and eat it too. But if you look at your portfolio and you allocate some that are protected in liquid, some that are liquid with growth potential, they might have risk, more risk, but they're they're liquid with growth potential, more growth potential, and some with growth potential and protection. The portfolio can let you have your cake and eat it too because you're not trying to have one thing do everything. You're dividing and conquering. And it's just so interesting to see people have most of their assets in CDs or most people that have all of their assets in annuities, the people who have all all of their assets in the stock bond fund mix.

It's like, tell me who you're working with, and I'll tell you what your plan, quote, unquote, looks like. It's just it's incredible. Plan efficient portfolios, put the lifestyle together, look at the strategies, and then diversify based on objectives. It is incredible how much risk you can eliminate from your overall plan and how you can still preserve the growth potential, which leads to more flexibility in the future, while also making sure that your cash is not just going to an insurance company, that whenever you do pass, your cash goes to where you want it to go. It's a it's a concept a lot of people don't understand.

Sounds reasonable. So and

if you wanna see what that looks like, by the way, that's that's a Your Wealth Analysis situation. Go to www.yourwealthanalysis.com and request your analysis. We'll show you what a plan looks like, what efficiencies you may not be implementing, and what a portfolio that's diversified by objectives looks like. It might just blow your mind. I mean, it really is.

It's it's quite remarkable. The light bulb goes on when when they see what they people feel this. They feel like there's something better, but when they see it, they go, yes. Finally. That's that's what I've been looking for, a balanced and more sophisticated, more comprehensive approach.

So you can also text analysis to 913-363-1234, or just send us questions to 9133 6 31234. We are here for you. Now that's all the time we have for today. If you want more tips about retirement, income, taxes, social security, health care, and more, make sure you subscribe to this show wherever you get your podcast. Just search for how to retire on time.

Also, you can catch this show via our 247 digital broadcast by going to www.retireontimeradio.com. You can stream various episodes on your phone while you're on the go, in the car, or wherever you are on a run. Just go to www.retireontimeradio.com. From everyone here at Kedrick Studios, thank you for spending your time, your most precious asset, with us today.