Tag Archives: Dave Stanley

Diversify for peace of mind in retirement planning

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By Dave Stanley
Integrity Financial Services LLC

“Dollars saved 20 years ago have lost nearly HALF of their purchasing power. Such inflation poses a serious threat to seniors entering retirement, as well as those already in retirement.”
 

Since 2000, the US dollar has lost an incredible 44.2% of its purchasing power. Reports from the government’s Bureau of Labor Statistics (BLS), the official tracker of inflation statistics, indicate inflation may be worse than we think. Even as interest rates remain at their lowest ever, Federal Reserve policies may be pushing inflation higher.

The good news is that taking advantage of viable alternatives to traditional planning and creating a safer, more robust “hybrid” portfolio can help you avoid making those mistakes. (pxhere.com)

What does this mean for retirees and pre-retirees?

If you have an advisor or team of advisors, they most likely have mentioned the idea of “diversification” at least once. Since 2020, however, the concept of diversification has morphed from a “nice idea” into an absolute necessity. Multiple asset classes, particularly cash-flowing assets, seem to be the only cure for thriving in an increasingly volatile investing landscape. Diversification or developing so-called “hybrid” retirement strategies is essential to avoid a retiree’s most dreaded scenario: outliving their savings.

Proper diversification and risk reduction are part of well-designed, customized financial plans. Contrary to what some advisors preach, there are no shortcuts, no “one size fits all” templates to shorten the process. Portfolio allocation is unique to every individual. Some financial professionals believe the only way to ensure a diversified plan is to invest in every kind of asset.

How does one achieve diversification?

Many people don’t want to spread their cash out in multiple assets because they find it too difficult to monitor and maintain. If that is the case, retirees and those nearing retirement should consider several potential sources of income streams. Each of these assets offers different benefits and risks, and growth potential.

Social Security

Although it is a dependable income source, retirees should not regard Social Security as their sole source of retirement money. In 2020, Social Security paid out an average of $1,503, an amount that is insufficient to meet most retirees’ needs.

Fixed instruments

Debt instruments that pay fixed amounts of interest, such as bonds, are commonly used to build diverse retirement blueprints. Interest from these kinds of assets is usually paid on a semi-annual basis. The principal invested goes back to the investor upon maturity.

Stock market

While the market offers high growth potential, recent volatility makes it clear that such growth often comes with higher risks.

It’s critical when considering this option that you clarify how much risk you are willing to take and whether you have time to recover from any losses you might incur. The COVID-19 pandemic has made Wall Street’s outcomes even more unpredictable, meaning it could take years for seniors who invest too heavily in the market to recover from a downturn. Retirees could find they must withdraw more significant amounts of their cash when stock prices are down, leading to faster depletion of retirement savings.

Be sure you consult with a knowledgeable financial planner to determine whether you have the right amount of money invested in stocks.

“Safe money” vehicles 

The cornerstone of a sound retirement is safe money products such as permanent life insurance and annuities. Instead of adding these proven products as afterthoughts, building your portfolio around them makes sense. Owning risk-averse, tax-advantaged products, many of which provide guaranteed income streams, will help you in several ways.

You will be able to plan better, knowing that you have a predictable source of income. Also, unlike stocks and other assets, your principal is protected. And you have the opportunity to use these products to create a legacy for your loved ones. Safe money products like annuities and life insurance also have unique tax advantages that other cash management tools lack.

Depending on your appetite for growth and risk tolerance, there are other possibilities to diversify your retirement portfolio. Before committing to any of these more “exotic” investments, you need to spend time doing your research and due diligence. Then speak to a trusted advisor who will tell you the TRUTH about money and not just try to sell you something.

Financial mistakes can be detrimental to your happiness when you no longer work. The good news is that taking advantage of viable alternatives to traditional planning and creating a safer, more robust “hybrid” portfolio can help you avoid making those mistakes.

Dave Stanley is the host of Safe Money Radio WOOD1300 AM, 106.9 FM and a Financial Advisor and Writer at Integrity Financial Service, LLC, Grandville, MI 49418, Telephone 616-719-1979 or  Register for Dave’s FREE Newsletter at 888-998-3463  or click this link:  Dave Stanley Newsletter – Annuity.com  Dave is a member of Syndicated Columnists, a national organization committed to a fully transparent approach to money management  

Financial Perspective: Are you comfortable with risk you are taking?

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By Dave Stanley
Integrity Financial Service, LLC

“Risk can be a hard concept to calculate, remember, it is not a calculated risk if you haven’t calculated it.” – Dave Stanley

Photo from Pxhere.com

In the 2009-2010 NFC Championship Game, the Minnesota Vikings and the New Orleans Saints were tied 28-28 late in the fourth quarter, with the Vikings close to field goal range. Vikings quarterback Brett Favre took the snap, rolled to his right, and saw about 30 yards of open field in front of him. Even though he had injured his leg in the third quarter, all Favre had to do was lurch forward for 10 yards, fall down, and have a first-and-10 inside field goal range.

Instead, Favre reverted to what has made him a legendary hero (and sometimes a goat) many times in his Hall of Fame career. He planted his foot and threw cross-field where Tracy Porter intercepted him at the 22-yard line. At that moment, Minnesota’s fine season, Favre’s great comeback, and Vikings fans’ hope for a Super Bowl were thrown away. The Saints ran out the clock and kicked a field goal on the first possession of overtime.

What happened? In a pressure situation, with everything on the line, instead of making the high percentage play, a superstar did what felt familiar and comfortable – not what was safe.

You see the analogy coming. Quarterbacking a football team and managing your retirement portfolio are wildly different activities. It is doubtful that we will ever achieve a “Brett Favre” status within your success. Yet, a failure on our part to “read the field” could be more devastating to a family than the shock and disappointment felt by the players, coaches, and fans after that heart-breaking loss.

It is common for us as individuals to be the “quarterback.” If that’s the picture we are projecting, who is the head coach and team owner? Making all of the decisions in your planning can be very difficult, but help is often needed.

We have moments when we cannot handle any more risk (take the first down!). We know we do not want to lose another dime (just get me into a good field position!). It does not make any difference if you are convinced you can choose the stocks, funds, IPO’s, REITs, or whatever will right their portfolio and make you look like a hero. Most of us may not be ready to take that step with you.

During that game, there were millions of people watching. Some of those people were former NFL players. Some were Hall of Famers. Some were even Hall of Fame quarterbacks. But, when Favre planted his foot, there was no one on the planet more comfortable than he was. A lifetime of training, conditioning, practice, big games – even Super Bowls, had prepared him for that throw. It was the most comfortable thing in the world until Tracy Porter.

We may have the knowledge and experience but being all things in all situations just isn’t possible any longer. We all need a “Coach” to make sure we call the correct play. The disappointment over a lost opportunity while “going for field position” will be nothing compared to the fury if you try to “force a throw” they did not want you to make in the first place.

In plain English, we should never be comfortable with risk unless we know and understand all your options.

Dave Stanley is the host of Safe Money Radio WOOD1300 AM, 106.9 FM and a Financial Advisor and Writer at Integrity Financial Service, LLC, Grandville, MI 49418, Telephone 616-719-1979 or  Register for Dave’s FREE Newsletter at 888-998-3463  or click this link:  Dave Stanley Newsletter – Annuity.com  Dave is a member of Syndicated Columnists, a national organization committed to a fully transparent approach to money management.

Financial Perspective: Are you planning to retire? Here are a few things to consider

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By Dave Stanley
Integrity Financial Service, LLC

Photo from Pxhere.com

“Planning to retire? Be sure you have your exit plan in place and remember, when you retire, you never have a day off.”  Dave Stanley

Retirement is not likely to look anything like your parents’ retirement. The economic impact of government actions related to the pandemic, inflation caused by loose monetary policy, and stock market volatility have created craters in even the best-laid retirement plans. Many Americans are considering taking the money and running, opting for early retirement.

Joel a long-haul trucker, says he was initially going to wait another five years before retiring. “Dealing with a lack of parts for my trucks because of supply-chain problems, frustrating and time-consuming regulatory changes, and inflation have made my life challenging. I’m retiring now instead of later,” he explained.

Retiring early is a decision many Americans have already made, mainly because their workplaces reduced or eliminated staff. Some workers were offered attractive incentives for taking early retirement by companies feeling the pinch of COVID lockdowns.

Regardless of whether your retirement plans look solid, it’s still a great time to review your portfolio’s balance and think about for how long you want to continue working. Fortunately, the basics of creating a secure retirement remain the same, except for perhaps a few additional COVID-related caveats. Here are a few things to consider:

  1. Don’t count on working forever. Until COVID- working until you dropped seemed like a viable plan. However, results from a 2021 study by the Employee Benefits Research Institute (EBRI) confirm previous findings that indicate nearly 50% of all retirees left the workforce before the original target retirement date. This reality means that people in their 50’s and 60’s should have emergency plans solidly in place.

  2. Reduce or eliminate as much debt as you can. It’s common sense to make debt reduction a priority. You don’t want to take a credit card balance, car payment, or student loan with you when you retire, especially when retiring in an unpredictable economy.

  3. Have a health insurance strategy in place. If you find yourself retired before you are eligible for Medicare, you may have to find an affordable policy for those “gap years.” Even if you do get Medicare, you’ll need to plan for things like co-pays and uncovered expenses. One thing to consider is a health savings account, or HSA, which can help you grow a pot of emergency cash you can use when you retire. Ask your financial advisor to explain the many benefits of HSA plans and help you determine if starting one will work for you.

Finally, no matter what you decide about retiring, meet with a qualified retirement income planner. Ultimately, deciding when to retire may or may not be up to you. However, if you are thinking about leaving the workforce, you should sit down with your advisor and discuss every potential pitfall and how to avoid them.

Your advisor will suggest more strategies and recommend the right products to help you avoid running out of money when you stop working.

Dave Stanley is the host of Safe Money Radio WOOD1300 AM, 106.9 FM and a Financial Advisor and Writer at Integrity Financial Service, LLC, Grandville, MI 49418, Telephone 616-719-1979 or  Register for Dave’s FREE Newsletter at 888-998-3463  or click this link:  Dave Stanley Newsletter – Annuity.com  Dave is a member of Syndicated Columnists, a national organization committed to a fully transparent approach to money management.

Financial Perspective: Do you want green sauce or red sauce with that?

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By Dave Stanley
Integrity Financial Service, LLC

“If you are within a couple of years of retirement, you will want to know the answer to this critical question.”- Dave Stanley

Photo from pxhere.com

Here in New Mexico, it isn’t unusual for someone ordering Mexican food to be asked, “Red or green?” In fact, “Red or green?” was adopted as the official state question in 1999. (Did you even know such a state question existed?) Chile is the fiery soul of New Mexican food, and everyone here has their opinion about which chile sauce goes best with which dish.

I like to ask my clients and prospects the same question regarding their retirement savings. “Do you prefer green money or red money?” Red money, I define as that portion of savings a person is willing to expose to market risk. With red money, you accept the possibility of losses, even significant ones. The desire to chase after market gains is perfectly understandable given our current low-interest environment that punishes savers. Nevertheless, risking your life savings in hopes of getting (often mythical) higher returns may not be the ideal decision for those who are within a few years of retiring. That’s because when you choose red money, your wealth is exposed to both upside and downside risk.

On the other hand, green money is the portion of your savings you want to safeguard. Green money is cash used to create income streams that provide you with more safety and peace of mind. Green money is for those who are unwilling to accept even small losses. Instead, green money people add products offering lower rates of return in exchange for low to no market risk. Real green money has no downside risk and only upside potential.

Choosing red or green is not black and white. Despite what you may have heard from your advisor or some TV money guru, neither red money nor green money is inherently bad or good. After all, you are an individual with your own level of risk tolerance and unique money goals. What you need your savings to do when you retire may be very different than what your friend, neighbor, or co-worker needs.

Knowing this, you shouldn’t be asking, “What’s better, red or green money?” but rather, “What percentages of each type should I have in my portfolio to achieve my goals?” “What portion of my cash am I comfortable with exposing to risk?” “What do I ultimately want this money to do for me?” If you’re wanting to move forward slowly and consistently, instead of getting caught in a cycle of two steps forward, three steps back, you’ll need to examine products that can help you accomplish that.

For example, certain types of life insurance and annuities offer you the possibility of creating predictable retirement income with little to no risk exposure. Exploring your safe money options is not only prudent but necessary as we continue to experience market upheavals and a precarious and unpredictable economy.

Summing it up: A successful retirement requires that you know with what percentage of risk you are most comfortable with, how much you can afford to lose during a market downturn, and what you want your wealth to accomplish. How much red or green money you put into your portfolio is a critical decision that every retiree needs to make. A seasoned retirement income planner can assist you in making that decision and ensuring that every one of your dollars does the work of three or four.

Dave Stanley is the host of Safe Money Radio WOOD1300 AM, 106.9 FM and a Financial Advisor and Writer at Integrity Financial Service, LLC, Grandville, MI 49418, Telephone 616-719-1979 or  Register for Dave’s FREE Newsletter at 888-998-3463  or click this link:  Dave Stanley Newsletter – Annuity.com  Dave is a member of Syndicated Columnists, a national organization committed to a fully transparent approach to money management.

Financial Perspective: How are inherited annuities taxed?

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By Dave Stanley
Integrity Financial Service, LLC

Photo from pxhere.com

“It’s fantastic if you inherit an annuity, but you need to understand the tax implications and how to make them more favorable.” – Dave Stanley

You cannot escape taxes if you inherit an annuity. Fortunately, though, understanding how inherited annuities are taxed can help you avoid paying more in tax than necessary. Your beneficiary status and how the payouts are structured determine tax liability for inherited annuities. You can do a few things to ease that tax burden and perhaps defer payment.

For instance, if you are a surviving spouse inheriting an annuity, you have a few options. You can choose to pay taxes on all the money right now or exercise what is called the “spousal continuation provision.” The spousal continuation provision is a tax strategy you use to avoid paying taxes now. You could also spread your tax payments over time by opting for non-qualified stretch payments based on your life expectancy. All of these options have their pros and cons, and you should always involve your financial or tax advisor in the decision process.

If you are a non-spousal beneficiary who inherits an annuity, the rules work a bit differently. Still, there are ways to help minimize your tax bill. For example, you could use what’s called a bonus annuity to help mitigate your tax burden or choose periodic payments. These types of annuities provide bonus money to incentivize you to purchase them.

You can also use other techniques if you have access to a tax planner. Your planner may recommend what’s known as a “1035 exchange,” in which you exchange an inherited annuity for a different annuity that is similar but could provide better benefits. The main reason you would even consider doing a 1035 is if a newer annuity offers you better benefits or more favorable terms. The main thing to remember with a 1035 exchange is that you can’t swap a qualified annuity for a non-qualified annuity to avoid paying taxes.

If you inherited the deceased annuitant’s IRA and the annuity, you might be able to roll the inherited annuity into a personal IRA in your name. The roll-over option is only available to those who inherit both the IRA and annuity. If you could do a roll-over, you would have to follow the inherited IRA tax rules.

Qualified versus non-qualified annuities.

If you want to understand how an inherited annuity is taxed, two terms that are critical to grasp are “qualified” annuities and “non-qualified” annuities. An annuity is qualified if you purchase it with pre-tax dollars via a tax-advantaged account such as an IRA or 401k.

The IRS treats distributions paid to an annuitant from qualified annuities as taxable income in the year they are received. Qualified annuities are also required to follow required minimum distribution rules. Any withdrawals before age 59 ½ may be subject to the 10% early withdrawal penalty.

Non-qualified annuities are funded with after-tax dollars in a fashion similar to a Roth IRA. There’s a caveat, though. Although contributions to a non-qualified annuity are not taxable, growth and earnings on the initial investment are tax-deferred. Tax-deferred means you will pay ordinary income tax on the earnings portions of your distributions. However, there are no RMD issues, and you won’t have that 10% early withdrawal penalty.

Summing it up: An inherited annuity can be a welcome windfall or a potential liability. If you inherit an annuity, be sure you find an expert who can help you navigate the rules and suggest ways to avoid paying more in taxes than you must. The key is in understanding how the IRS treats specific kinds of beneficiaries and annuities.

Dave Stanley is the host of Safe Money Radio WOOD1300 AM, 106.9 FM and a Financial Advisor and Writer at Integrity Financial Service, LLC, Grandville, MI 49418, Telephone 616-719-1979 or  Register for Dave’s FREE Newsletter at 888-998-3463  or click this link:  Dave Stanley Newsletter – Annuity.com  Dave is a member of Syndicated Columnists, a national organization committed to a fully transparent approach to money management

Financial Perspectives: Labels can lead to retirement planning bias by advisors

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By Dave Stanley
Integrity Financial Service, LLC

“Don’t let your financial advisor put you in a ‘box.’ You need to have your plan customized for your specific situation.”  Dave Stanley

Social science researchers and best-selling authors Neil Howe and William Strauss were among the first to track and qualify American generations. In their famous book, “Generations,” Strauss and Howe introduced the concepts of “Millenials” and “Gen-x” into the modern vocabulary. Their new generational theory attempted to explain various societal shifts in terms of when a person was born.

Photo from Pxhere.com

The popularity of “Generations” led to widespread acceptance of the idea that it’s OK to overlook the complexities of human life, ignore diversity, and reduce people to one variable (birth year).

Unfortunately, this tendency to label retirees and pre-retirees as “Boomers,” “Millenials,” and Gen-Xers has crept into financial services and retirement planning and is responsible for a lot of bad money advice.

Like an old newspaper horoscope, generational theory lumps everyone born within an arbitrarily designated period (1961-1981 is Gen-x, according to Strauss and Howe.) into one broad category.

“You are a Millennial. You are lazy, entitled, and easily triggered.” “You are a Boomer. You hate risk and change.” “You are a Gen-Xer; you are a self-sufficient critical thinker.” Financial advisors who use these types of oversimplifications as guideposts may not bother to see beyond the labels.

For example, Harry, who was born in 1946, falls squarely into the Boomer category. His advisor believes that because Harry is a Baby Boomer, he is challenged by technology and won’t be open to virtual meetings, video training, online client portals, or other modern tools.

This advisor also buys into the stereotype that all Boomers are risk-averse, so he aggressively de-risks Harry’s retirement portfolio without bothering to discover more about his client. He doesn’t even ask Harry his thoughts on risk and investing or if he’d like to do more business online because he assumes that all Boomers are the same.

Generational theory in financial services is dangerous because its assumptions influence advisors to take paths that may or may not be in their clients’ best interests. Generational theory can also prevent your advisor from developing a deeper relationship with you and discovering your unique connection to money, your retirement goals, and your true risk tolerance.

Perhaps your advisor builds you a more generic financial plan or doesn’t offer you certain products because they think you hate risk. It could be because they put you into a generational box, ignoring the diverse environments and upbringing which have shaped how you relate to money. You may feel as if the advisor isn’t listening to you or is refusing to take you seriously.

Suppose you suspect your retirement and income planner may be buying into generational stereotypes. In that case, the best thing to do is ask the advisor to explain their process and how they developed it. Having an open dialogue with your advisor will help ensure they listen to your concerns and offer solutions that align with your attitudes and desires.

The bottom line:

Many contemporary sociologists feel that generational thinking is invalid pseudoscience. Unfortunately, though, the generational theory continues to influence financial services marketing. When looking for an advisor, strive to find someone who avoids generational stereotypes and connects with various people across multiple demographics. Your financial future is too critical to trust someone who wants to keep you in a box.

Dave Stanley is the host of Safe Money Radio WOOD1300 AM, 106.9 FM and a Financial Advisor and Writer at Integrity Financial Service, LLC, Grandville, MI 49418, Telephone 616-719-1979 or  Register for Dave’s FREE Newsletter at 888-998-3463  or click this link:  Dave Stanley Newsletter – Annuity.com  Dave is a member of Syndicated Columnists, a national organization committed to a fully transparent approach to money management

Perspectives: When Harry and Sally met their 401(k)

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By Dave Stanley
Integrity Financial Service, LLC

“Harry and Sally White are regular people.” Dave Stanley

Harry and Sally happen to work for the same company; actually, that is where they met 30 years ago. Harry runs a forklift in the warehouse on day shift, and Sally works in accounting. They are just regular people working at regular jobs, saving for retirement using their company’s 401(k) as the chosen vehicle. The company they work for is not huge; about 600 employees in several offices scattered around the state. Their company is generous with company contributions to their employee’s 401 (k) retirement account, adding about $2,000 annually to plan participants.

Time to consider retirement has finally arrived, and Harry and Sally asked me to help them roll over their 401(k) to their own self-directed IRA and use an annuity for the income stream. I had known them for several years and was delighted to help while at the same time acquiring a quality client.

Harry had $426,000 accumulated in his 401 (k) and Sally just under $200,000. In previous meetings, I had suggested they begin to make small changes to their asset allocations to help reduce the exposure to risk since retirement was on the horizon.

I was curious about the fees being charged to them for the administration and management of their accounts. The question had been raised at a company employee meeting, and the group was assured by the plan administrator that there were no fees other than the annual $50. Of course, he didn’t happen to mention the expenses charged by the guys managing the money — the mutual fund managers.

Harry had always assured me that there were no fees other than the annual $50 administration fee needed to prepare IRS reports. Of course, I knew there had to be additional fees, but I decided not to press it since I had no actual connection to the 401 (k).

An excellent software piece came to the market a few years back called Brightscope  https://www.brightscope.com/ This database tracks 401 (k) plans. It discloses actual fees being charged by the investment management of the individual 401 (k) plans around the country. Now I had the tool I needed to take an in-depth look at Harry and Sally’s 401(k) fund management expenses. I confess I could have looked the other way and never said a thing; I acquired a nice client with the rollover. Why not just be quiet and go along?

I couldn’t keep my big mouth closed and gave Harry and Sally the report on their 401 (k) annual expenses being charged to manage their funds. These expenses were in addition to the $50 per year administration fees and were tied to the actual account value of the funds in the 401 (k). 1.27% was the average expense being paid to the fund managers for Harry and Sally to have the privilege of investing their hard-earned money with them. 1.27% per year of their full investment account value.

Just last year alone, these insane expenses were over $8,000. $8,000 out of Harry and Sally’s pocket and into the pocket of these Wall Street bandits.

Now consider how many years these fees had been charged. The total amount paid could easily be greater than the entire 401(k) account belonging to Sally.

The Securities and Exchange Commission (SEC) fought long and hard to have these fees disclosed in a more open forum for all 401 (k) investors but to no avail. The Department of Labor has ruled in the financial industries side, and as of now, fees will remain as they always have been buried deep in paperwork none of us can even understand. (prospectus) Harry is a great forklift driver, but he has no chance against this level of thievery.

Simple math can certainly indicate the annual amount of expenses being paid to the money managers at the 401 (k) companies: multiply Harry’s annual expense times the number of employees (600).

Usury and disgusting.

Just think how much more money Harry and Sally would have for their retirement years; now it has gone to increase some Wall Street firm profits, which is probably paying some lobbyist to keep disclosure hidden away. Harry is in an odd way funding his demise — the demise of his account value.


It is time to put an end to these outrageous fees and expenses.

The long-term loss of value hidden behind a 401(k) plan provided to hard-working employees is considerable. Plus, the fund managers still get paid regardless of whether they make or lose money. Their commissions based on total account value.

Dave Stanley is the host of Safe Money Radio WOOD1300 AM, 106.9 FM and a Financial Advisor and Writer at Integrity Financial Service, LLC, Grandville, MI 49418, Telephone 616-719-1979 or  Register for Dave’s FREE Newsletter at 888-998-3463  or click this link:  Dave Stanley Newsletter – Annuity.com  Dave is a member of Syndicated Columnists, a national organization committed to a fully transparent approach to money management.

Perspectives: Inflation can be a terrible retirement partner

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By Dave Stanley
Integrity Financial Service, LLC

“Warren Buffet once pointed out that when you do the math, it is obvious that inflation is far more destructive to wealth than any tax levied on us by the government.” Dave Stanley

It probably hasn’t escaped your notice that consumer prices have gone rogue in 2021. Prices for goods and services are surging at the fastest pace in over ten years, threatening to squeeze households and squelch a potential post-COVID economic recovery. Economists, bankers, and pundits insist that inflation rates reflect pandemic-induced trends and are only temporary. However, many retirees, pre-retirees, and investors are concerned that prices will keep going up, stalling economic growth and causing stocks to plummet. If you are a certain age, you might remember the double-digit inflation of the 1960s and 70s, which reached its’ apex during the Jimmy Carter Administration. Like all inflation, the price hikes were due to several factors, including an oil crisis in the Middle East, excessive government spending, and a slow-acting Federal Reserve.

Inflation is the silent thief of retiree wealth.

Unfortunately, it is impossible to know if our current rising prices are temporary or a sign of things to come. Yet, many economists believe that the diversified, globally integrated US economy is big enough and robust enough to avoid the hyperinflation found in countries such as Zimbabwe.

Still, if you are about to retire, you should maintain vigilance when it comes to inflation. Even if increased inflation lasts only a few years, it can wipe out a significant part of your retirement savings. An annual inflation rate of just 3% seems insignificant. However, at a 3% rate, if you currently have monthly expenses of $4,000, they will be $5,000 a month in just ten years. For this reason, it is critical for those within ten years of retirement to review their plans and adjust for worst-case scenario inflation levels.

Many people fail to realize just how significant the impact of inflation is on their savings. For example, if you own an asset that is bringing in 4% returns with no income tax, and the annual inflation rate is also 4%, that scenario is equivalent to a 100% tax in a time where inflation is at ZERO! If the inflation rate were to go to 5%, and your asset will still making only 4%, you would be paying a tax equivalent to 125%.

Bake inflation protection into your financial blueprint

Inflation is a stealth tax that, although it doesn’t go entirely unnoticed, is not as in-your-face as government-levied taxes. Government tax increases, such as those on income or property, are more readily identified and felt. On the other hand, inflation is like bleeding to death from a thousand tiny pinpricks rather than one gaping wound. Inflation expresses itself as a few cents more for a loaf of bread, a five-cent price increase on coffee, and so forth. Inflation leaves you scratching your head, wondering how your paycheck could vanish so rapidly.

Retirees and those leaving the workforce must partner with their advisors to put some armor around their wealth in a few years. Your savings must be protected as much as possible, or you risk running out of money when you need it most. Your advisor or advisory team may recommend various strategies using things such as certain types of annuities, cash-flowing investments, or even precious metals or cyber currencies.

Depending on your goals and risk tolerance, alternate investment strategies can form a protective barrier against erosive elements, including inflation, sequence of returns risk, and other attacks on your wealth.

The bottom line is: Like an unwelcome house guest, it’s bound to show up when you least expect it, and it will outstay its welcome nearly every time.

Don’t forget to plan for inflation.

Dave Stanley is the host of Safe Money Radio WOOD1300 AM, 106.9 FM and a Financial Advisor and Writer at Integrity Financial Service, LLC, Grandville, MI 49418, Telephone 616-719-1979 or  Register for Dave’s FREE Newsletter at 888-998-3463  or click this link:  Dave Stanley Newsletter – Annuity.com  Dave is a member of Syndicated Columnists, a national organization committed to a fully transparent approach to money management.

Perspectives: Here is a guaranteed way to become a millionaire

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By Dave Stanley
Integrity Financial Services, LLC

“Using inflation as a tool, governments can confiscate, secretly and unobserved, an important part of the wealth of their retirees.”  Dave Stanley

You can almost imagine the unrestrained joy politicians felt upon reading John Maynard Keynes‘ words back in the early 1920s. Finally, they had discovered an easy way to finance the government’s wild spending sprees and pork-barrel projects without raising taxes (and losing votes!) Inflation gave governments a powerful yet discrete method of taxation, requiring no approval from the voters. The icing on the cake was that inflation’s consequences were much less detrimental to political careers than making unpopular budget cuts or increasing tax rates. Thus began the era of addiction to the printing press, unrestrained deficit spending, and an increasingly intrusive government.

Where are we today?

The “easy money” inflation genie rocketed out of the bottle with the force of a cork exiting a champagne bottle. No amount of pressure or commonsense economics could push it back inside. Even the Great Depression, funded partly by easy money economics, could not reverse a course of uncontrolled government spending and money printing.

Inflation is a misunderstood concept that threatens your wealth.

Inflation is one of the most misunderstood economic ideas and the source for much of the evaporation of middle-class wealth in the United States. In simple terms, inflation is a measure that determines the rate of rising prices in an economy.

Catalysts of inflation can include

  • Increases in the costs of raw materials
  • Wage increases
  • Poor fiscal management by the government.

Specific government actions are undertaken to jumpstart a lackluster economy, such as the so-called “quantitative easing” pursued by the Federal Reserve a few years ago, which also contributes significantly to rising inflation.

Inflation is the “silent” tax.

Sometimes referred to as the “stealth tax,” inflation is a more significant threat to your financial future than state or local income taxes. Inflation has proven to be particularly problematic for seniors who are retired. That’s because retirees live mainly off the income generated by their retirement accounts, along with Social Security. So, when money loses its purchasing power, the price of necessities increases. Such increases mean that seniors will use up their savings faster, perhaps putting themselves in the position of running out of money early in retirement.

Could we see “billion-dollar” currency denominations?

Disastrous monetary policies such as shameless deficit printing and currency devaluation have existed for the greater part of human history. Unfortunately, though, the United States has taken fiscal irresponsibility to new heights, becoming the most indebted country in world history. Currency turmoil is almost always the outcome of reckless fiscal policy. For example, inflation in the country of Zimbabwe was so high for so long that their entire economic system crashed. This hyper-inflation arose when Zimbabwe’s government responded to the out-of-control national debt, political corruption, and a weak economy by increasing the money supply.

Zimbabwe’s government caused some of the highest inflation in human history. At one point, it took 1.2 QUADRILLION Zimbabwean dollars to equal $4,000 U.S. dollars! Some scholars suggest that if the U.S. continues on its present course, we could experience similar issues.

The bottom line: Inflation is just one of the erosive factors that can undo your best-laid retirement plans and cause you to experience stress and worry when you no longer work. Inflation may be the greatest threat of all because it is little understood and anticipated. If you have a retirement plan in place, now is an excellent time to review that plan with your advisor to ensure you have included provisions to see you through in the event of hyperinflation.

Dave Stanley is the host of Safe Money Radio WOOD1300 AM, 106.9 FM and a Financial Advisor and Writer at Integrity Financial Service, LLC, Grandville, MI 49418, Telephone 616-719-1979 or  Register for Dave’s FREE Newsletter at 888-998-3463  or click this link:  Dave Stanley Newsletter – Annuity.com  Dave is a member of Syndicated Columnists, a national organization committed to a fully transparent approach to money management.

Perspectives: There is a secret about longevity, living a long time

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By Dave Stanley
Integrity Financial Service, LLC

“The secret is simple: The longer you live, the longer you live!”

What happens if you live longer than you expect? How do you make sure your funds last as long as you do?

Do you invest in stocks? Bonds? Keep your money in the bank? Increased life expectancy is extending the time needed for our retirement funding, making sure our money lasts as long as we do has become the new “mantra” of the Baby Boomers.

Many financial planners are turning towards products that remove the risk of the longevity problem, allowing an insurance company to bear the longevity risk, annuity companies issue and manage annuity products.

Many types of annuity products are available, even those who pay interest (yield), which are similar in structure to bank CDs. However, the real benefit of annuities is the income provision, income that can pay for any period, even a lifetime.

The question often asked is “What happens to the money in an annuity if a person dies early? Does the annuity company keep the money?”

The answer is no; it is an old wives’ tale that insurance companies profit from an early death. The unused portion of the annuity is merely refunded to the named beneficiary. Funds are always accounted for, and it is the law.

Consider letting an insurance company be responsible for your important long-term safe and secure retirement income. Safety and security is their first and foremost goal.

One last tip: shop around for the best rates; rates can often be based on age, and numerous options exist.

Dave Stanley is the host of Safe Money Radio WOOD1300 AM, 106.9 FM and a Financial Advisor and Writer at Integrity Financial Service, LLC, Grandville, MI 49418, Telephone 616-719-1979 or  Register for Dave’s FREE Newsletter at 888-998-3463  or click this link:  Dave Stanley Newsletter – Annuity.com  Dave is a member of Syndicated Columnists, a national organization committed to a fully transparent approach to money management.

Perspectives: From the NBA to annuities, from free throws to guaranteed income

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By Dave Stanley
Integrity Financial Service, LLC

I recently read an article about Shaquille O’Neal and his after basketball life that was truly amazing. Did you know in his 19 -year NBA career, he earned a total of $292 million in compensation? He was the highest-paid player over that time period, making enough money for a couple of hundred families to live in complete comfort. With the athlete’s age, we have watched salaries skyrocket to levels we cannot comprehend as just regular folks.

Shaq was one of the all-time greats, and he proved it on and off the basketball floor. Did you know he also starred in movies and had three very successful records with more than 1.3 million copies sales? Shaq became a brand, and he used his celebrity to put in place a money-making machine for his retirement from basketball.

The article mentions his endorsement life: products we know nationally, such as Buick, Icy Hot, Reebok, Zales, Foot Locker, Arizona Tea, and many more. The list includes more than 20 products and companies. His endorsement income is now greater than his salary as a top NBA center, and more to come.

Shaq is booked all day, every day, in a nonstop worldwide promotional endorsement and entertainment tour. In addition to product endorsements, he is also a TV analyst, an international motivational speaker, and a private party DJ. Yes, you can have Shaq come to your house for 2 hours, have him DJ your party for only $50,000.

It was estimated he could earn more than a BILLION dollars in just his endorsement career. Certainly a lot of money and reason to be concerned about how the money is invested and protected to ensure his and his family’s financial security.

In the article, he was asked about the income he is now earning. He said, “I don’t pay any attention to the money. If I lose it all, it is no big deal, myself and my family are already financially secure because when I started in the NBA, every year I invested in annuities.”

Annuities now provide more income than myself and my family need. The money I earn now is just for fun.”

Annuities? Yes, a man who in his lifetime will earn in excess of a BILLION dollars is depending on annuities to guarantee his financial future.

Dave Stanley is the host of Safe Money Radio WOOD1300 AM, 106.9 FM and a Financial Advisor and Writer at Integrity Financial Service, LLC, Grandville, MI 49418, Telephone 616-719-1979 or  Register for Dave’s FREE Newsletter at 888-998-3463  or click this link:  Dave Stanley Newsletter – Annuity.com  Dave is a member of Syndicated Columnists, a national organization committed to a fully transparent approach to money management.

Perspectives: Have bonds earned a place in your portfolio?

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By Dave Stanley
Integrity Financial Service, LLC

Beginning in 2020, the Federal Reserve cut interest rates to multi-decade lows, dropping the rate on 10-year Treasuries from a robust 2% to 0.5%. This steep decline was a blow to savers, especially those who traditionally look to bonds as safety anchors for their retirement portfolios. Since Treasury 10-year rates determine approximately half the yield of corporate bonds, convertibles also feel the sting of near-negative interest rates.

Discouraged by a cooled-off bond market, many who count on bonds for retirement income are looking into convertible bonds as an alternative. Corporate bonds that can be swapped for common stock in the issuing company, convertible bonds can lower the coupon rate on debt, thus saving a company interest.

Convertibles allow a holder to exchange them for a predetermined number of regular shares in the issuing company. For the most part, convertibles function just like traditional corporate bonds but with somewhat lower interest rates.

Since convertibles may be changed into stock and benefit if the underlying stock price rises, companies offer lower yields. If the underlying stock does not perform well, there is no conversion, and the investor is stuck with the bond’s sub-par returns.

How do convertible bonds work?

Convertibles operate according to what is known as the “conversion ratio.” This formula determines how many shares will convert from each bond. The conversion ratio expresses as either a ratio or as the conversion price.

For example, if the conversion ratio is 40:1, with a par value of $1,000, shareholders may exchange the bond for 40 shares of the issuing company’s stock.

The price of convertible bonds starts to rise as the company stock price nears the conversion price. When this happens, your convertible bond performs somewhat like a stock option. If the corporate stock experiences volatility, so will your bond.

Why would anyone consider adding convertible bonds to their portfolio? 

Investors add convertible bonds to their investment mix because convertibles offer guaranteed income with built-in downside protection. Provided an investor does not convert before maturity, they get their initial investment back, plus earned interest. There is also the potential for higher returns than traditional bonds.

What are some convertible bond pitfalls? 

The “forced conversion” element of a convertible bond is one of these instruments’ most significant downsides. The bond issuing company retains the right to force investors to convert the bonds into stock. Such conversion typically occurs when the stock price becomes higher than the amount would be if the bond were redeemed.

A specific type of convertible bond, known as a reverse convertible bond (RCB), lets the issuing company decide to convert the bonds to shares or keep them as fixed-income investments until maturity. RCB’s, unlike common stocks, can cap the bond’s capital appreciation. Such caps mean that these bonds’ principle protection element may not be as worthwhile as it first appears.

Summing it up: Convertible bonds are somewhat complicated instruments designed to create guaranteed income while protecting against market losses. Companies usually issue convertible bonds with less-than-exceptional credit ratings but expectations of high growth. Convertibles allow these companies to get money to expand at much lower costs than those of conventional bonds.

If you are considering purchasing a convertible bond, you need to understand the basics of how they work and all the associated risks.

Always consult an authorized and licensed financial professional to map out convertibles’ pros and cons relative to your situation and risk tolerance. Your advisor may suggest other products, such as Fixed Indexed Annuities, that also guarantee principle with growth potential.

Dave Stanley is the host of Safe Money Radio WOOD1300 AM, 106.9 FM and a Financial Advisor and Writer at Integrity Financial Service, LLC, Grandville, MI 49418, Telephone 616-719-1979 or  Register for Dave’s FREE Newsletter at 888-998-3463  or click this link:  Dave Stanley Newsletter – Annuity.com  Dave is a member of Syndicated Columnists, a national organization committed to a fully transparent approach to money management.