Tag Archives: Integrity Financial Service

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

March 29, 20223-bottom, Finances, Local Business, Our Cities, Senior LivingDave Stanley, Finances, Integrity Financial Service, Money, risk, understandingJoanne

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

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

March 22, 20223-bottom, Citizen Journalism, Finances, Local Business, Our Cities, Senior LivingDave Stanley, Finances, having enough, Integrity Financial Service, Money, retiringJoanne

By Dave Stanley
Integrity Financial Service, LLC

“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:

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.
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.
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.

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

March 15, 20223-bottom, Finances, Local Business, Our Cities, Senior LivingDave Stanley, Integrity Financial Service, Money, riskJoanne

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

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.

Financial Perspective: How are inherited annuities taxed?

March 8, 20223-bottom, Citizen Journalism, Finances, Local Business, Our Cities, Senior Livingannuity, Dave Stanley, inheriting, Integrity Financial ServiceJoanne

By Dave Stanley
Integrity Financial Service, LLC

“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.

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

December 1, 20213-bottom, Local BusinessDave Stanley, Finances, Integrity Financial Service, labelingJoanne

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.

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.