On The Money Transcript | July 31, 2021

The largest increase in Social Security in almost 4 decades is around the corner. What does this mean and is it going to happen?

Chris:

You’re listening to On The Money, presented by the Certified Financial Group right here on WDBO 107.3 FM and AM 580 Orlando’s News and Talk. And those phone lines are open at 844-580-WDBO. 844-580-9326. Financial Times calls them one of the top 300 firms in the country and while you listened on the radio, you can join us online as well, facebook.com/onthemoneyfl. It’s facebook.com/onthemoneyfl, where you can join into the show live. You can watch and interact that way. Leave some comments and we’ll read them out live on the show, but the easiest way to get in touch with us right now through those phone lines at 844-580-WDBO. 844-580-9326.

Chris:

With me this morning is Joe Bert and Aaron Bert. They are both certified financial planner professionals at the Certified Financial Group. What kind of calls we’ve taken on the show this morning, gentlemen?

Joe Bert:

Well, as we have been for over 30 years for our WDBO listeners, Aaron and I are here to take your questions and anything might be on your mind regarding your personal finances. Like every other program or show on the weekends on the radio, they’re all one-hour infomercials. This is an infomercial designed for you because it’s built around you. We actually take calls. We want to help you. We want to find out what’s on your mind, what’s concerning you, decisions that you have to make regarding your personal finances decisions about a mutual fund, about your IRA, about a 401k, longterm health care, annuities, life insurance, reverse mortgages, all that and more. These are the things that Aaron and I and the 12 other certified financial planners here at Certified Financial Group deal with for our clients day in and day out, working for them, providing investment management and financial planning and retirement planning for a fee.

Joe Bert:

But, as the intro says, on Saturday morning we are here absolutely free. If you have any questions that’s on your mind, things that might be bugging you, things you’ve heard, things you’ve read, things your coworkers are telling you. You’re concerned about this, worried about that, that’s why we are here. We’re your financial body shop. We’ll take out the Bondo, patch you up, and get you on your way. Once again, as Chris said, the lines are absolutely wide open and the good news for you, there’s absolutely nobody in line, so you can be first in line ahead of the class. Pick up the phone and dial these numbers.

Chris:

At 844-580-9326. 844-580-WDBO. 844-580-9326. We do have a great topic to get us started with though today. In the meantime, while we wait to get some people called up, the largest increase in Social Security in almost four decades is right around the corner. What does this mean and is it actually going to happen?

Aaron Bert:

Well, currently, this is a hot topic right now, just because of what’s been going on in the world of inflation. As you may or may not know, Social Security is indexed for inflation and the way that they index it determines how the benefit increases every year. This past year, I think it went up 1.3%. And for those people who received that increase in their Social Security benefit, it was pretty much eaten up by the cost of everything that’s out there.

Chris:

Plus their Medicare premium went up.

Aaron Bert:

A lot of stuff happened. Medicare premiums went up and the cost of everything from plywood to gasoline to groceries to everything else. That 1.3% was eaten up pretty quickly. But what that means though, as the price of things increase in the economy in our world that the Social Security benefit then increases accordingly as well and that’s kind of been a hot topic for a long time about how they’re going to continue to index those things. Some people want the Social Security increase to be done based off of a senior index where they take a basket of things that seniors are more likely to buy versus other people. Seniors probably aren’t buying diapers and formula and things like that, so that really shouldn’t be factored into.

Chris:

Well, you never know.

Aaron Bert:

Well, I hope not. Well, I won’t go there. Anyway, so they’re projecting based off of what’s been going on in all these price increases, almost a 6% increase in the Social Security benefit that will go into effect at the end of the year. Now it hasn’t officially been calculated yet, but based off of what they’ve been seeing, that’s what they’re currently projecting and that would be the biggest increase since 1983.

Joe Bert:

6%? Are you sitting down? That’s huge.

Aaron Bert:

It’s a big jump.

Joe Bert:

It makes up for all those years when we were flat. We had a couple of years where it was nothing, so that’s the nice thing about that. In addition to that, you get that 6% and then if you have deferred-

Aaron Bert:

Or you’re in your delayed retirement [crosstalk 00:04:40]-

Joe Bert:

Let’s talk about that. Let’s talk about.

Joe Bert:

Yeah. For those people who don’t know, Social Security benefits, the age at which you reach full retirement age for a lot of people, now that’s getting up to 67, so 67 for a lot of people. In the younger crowd, it’s 67. That’s your full retirement age for those people. Currently, it’s 66 and for each year that you delay past your full retirement age, you actually earn an 8% increase in your Social Security benefit. So those people whose full retirement age was 66 and they delayed to 70, that’s a 32% increase in that benefit plus cost of living. Like Joe saying with that 6%, you just kind of add that onto that benefit increase that you would be receiving otherwise. It starts to turn into some pretty big numbers.

Joe Bert:

Yes. For those folks that have deferred, that’s a 14% increase and that’s the base in which it’s going to increase. The 8% will be added to next year in addition to any cost of living.

Aaron Bert:

Right.

Joe Bert:

That gets to be a huge number, so that’s why financial planning is so critical. And Aaron and I sit down with clients and look at their situation. One of the things we really spend a lot of time on is guaranteed income. Where’s it going to come from? When you stop working, we like to have as much guaranteed income as possible right, Aaron?

Aaron Bert:

Yeah. Social Security is about as guaranteed as it gets at this point and by delaying those benefits you may have to spend down some of your assets in order to delay Social Security or do some planning leading into retirement so that you have enough cash to cover those shortfalls. But it’s really all part of the planning process of how we can get as much money out of the system as possible to get guaranteed income. And, basically, it’s like buying a bigger pension from the government if we can continue to delay those benefits. A lot of people they’ll jump out there and they’re like, “Yeah, I’m going to start as soon as possible. I want to get my money,” but they don’t understand the longer term repercussions. And we kind of have to look further out and think of them in their 70s and 80s and 90s and what those benefits actually mean to them at that time. And so, that’s all part of the planning process that we do day in and day out for our clients.

Joe Bert:

What we’re able to do is that we bring you into one of our state-of-the-art conference rooms, put your situation up on the big screen, and show you on a year-by-year basis, the pros and cons of waiting for Social Security. And show you in actual dollars hat it means if you take it now or if you defer. And if you defer, how are we going to cover that deficit? That’s what we do day in and day out as certified financial planners is we do financial planning and investment advice for a fee here in Altamonte Springs. And we’ll be glad to talk to you. If you want more information about how we do that you can go to our website. That’s financialgroup.com, financialgroup.com, and you can learn all about us. And if you’re so inclined, and we can drop by for a no-obligation visit here in our office in Altamonte Springs. We also have an outpost down in Windermere for our clients. Windermere.

Aaron Bert:

Windermere.

Joe Bert:

Windermere for our clients and prospects and people who are interested in us down in the South Orlando area. Give us a call. We’re not here this morning. Well, we are here this morning in our new studio here in Altamonte Springs, but nobody’s answering the phone, so go to our website. I see we have a call, right? Chris, let’s hit it up.

Chris:

Yes, we do. We’ve got Skip calling in from Oviedo. Skip, welcome onto the show.

Joe Bert:

Good morning, Skip. Thanks for calling.

Skip:

Good morning.

Joe Bert:

What’s up?

Skip:

You’re welcome. I was wondering, do you recommend stop losses to your clients on their investments?

Joe Bert:

Well, first of all, let’s define what a stop-loss is for our listeners that may not be familiar with that term.

Aaron Bert:

I guess I’m doing that.

Joe Bert:

That’s your cue.

Aaron Bert:

That’s where Joe’s looking at me. Stop-loss, if you own anything that trades intraday, so stocks or ETFs, you are able to put … And they’re trading at a particular price, you are able to put triggers for selling that stock once it triggers through that price. For example, let’s say you own a stock it’s trading right now at $100 and you want to put a stop loss in that says if this stock drops below $90, I want to sell it at the next price once it triggers through that $90 stop. That’s what a stop-loss is. It’s meant to protect people from big losses if a stock were to drop, but it really has some issues when there are big moves in the market like we saw maybe the flash crash or just any real big movements. It could really turn out to hurt you pretty bad.

Aaron Bert:

And the reason being is that it just triggers at the next price after it falls through that price. What happens is, like I said, you have it at 100, it falls through 90, but the next trading price might be 50 and you may not want to sell at 50. And so, that’s kind of the concern that you have. In normal trading, stop losses work, but in times of big volatility, it does become an issue of having stop-losses sometimes on your accounts. That’s what we’ve seen in the past with our clients.

Joe Bert:

It’s really not apropos for ETFs, although you can use it. It’s more apropos, excuse me, for stock.

Skip:

Why is that? Why is it not apropos for ETFs?

Joe Bert:

Well, because ETFs by their very nature are diversified, whereas when you own an individual stock, you’re betting on one particular company that could be hammered for a variety of reasons. You have far more exposure in individual stocks and you do in an ETF. If your ETFs are really designed for the longterm, they’re really not designed for active trading. Although some people like to do that and think they can do that successfully. I haven’t seen anybody do that yet.

Aaron Bert:

I think there’s a bigger risk with a stop-loss on the ETFs because of what I was saying earlier. If you’re going to have an ETF, that’s going to have a big … Just saying, it’s a normal, large blend ETF or S&P 500 ETF. They’re going to have those really big moves when there’s unusual situations [crosstalk 00:10:25].

Joe Bert:

And then you have tax cuts.

Skip:

Can I make this-

Joe Bert:

Sure, go ahead.

Skip:

Can I make this personal?

Joe Bert:

Of course.

Aaron Bert:

Of course.

Skip:

I’m not longterm, I’m 78 years old. I’m living on my RMD, so stop-losses are maybe different to me than the guy that’s 40 years old.

Joe Bert:

The portfolio that you have should be designed to get you through drops in the market and this is where I think we’re different than a lot of folks out there that try to sell market timing and sell you … Get out of the market at this point. We’re going to get you back in at that point. First of all, the starting point is to have a plan. If you don’t have a plan investing, you’re just kind of speculating and hope where you’re going and taking the right amount of risk and accepting the volatility that comes with that. If you have a well-diversified portfolio, you can get through those tough times and we have 30 years of history to prove that. I understand what you’re saying. You want to protect yourself when in the market goes down. If that gives you comfort, that’s what you need to do, but that’s not the way we do it.

Skip:

Okay. In other words, you’re saying you don’t recommend that to your clients.

Joe Bert:

Not in all circumstances. We do definitely recommend it for individual stocks, not necessarily in ETFs, because ETFs should be part of a well-diversified portfolio. Now there are exceptions. I appreciate the call, Skip. Thank you.

Aaron Bert:

Thanks, Skip.

Skip:

You answered my question. Thank you. You’re welcome.

Aaron Bert:

Thank you.

Chris:

All right. Good call there from Skip. If you want to join in the show, open line’s still 844-580-9326. That is 844-580-WDBO. We’re going to hit you with the three big things you need to know in the meantime but, again, give us a call. Phone lines are open 844-580-WDBO. We’re planning tomorrow-

Aaron Bert:

Today.

Joe Bert:

Today.

Chris:

– with the Certified Financial Group on WDBO. Welcome back to On The Money, right here presented by the Certified Financial Group on WDBO 107.3 FM and AM 580, Orlando’s News and Talk. Still got some open lines for you at 844-580-WDBO. 844-580-9326. Got about five, six minutes left before we got to hit another news break, so feel free to call him right now and get you lined up real quick and live on the air. 844-580-WDBO. And Joe, I’m curious, is there anyone at the office taking calls today or you said the phones weren’t-

Joe Bert:

Actually not. In fact, I’m glad you brought that up. Gary Ably is having his very popular, everything you want to know about Medicare and Medicaid-

Chris:

Oh, that’s right, that’s today.

Joe Bert:

… and health care options. Retirement. He’s doing that today at 11:00 and he had a few late minute cancellations, so if you have any interest in that, I encourage you to come on by. The doors will be open. He’s going to provide some refreshments it’s from 11:00 to 1:00 and this is the most popular one that we do. It’s well-received because when people get to be Medicare age or when they get to be near Medicare age, I should say, your mailbox literally explodes with information and it is very, very confusing.

Joe Bert:

Gary’s a certified financial planner, in addition to being a CPA. He’s one of the 14 certified financial planners we have here at Certified Financial Group and he knows his stuff inside and out. He’s not going to sell you anything, so leave your checkbook at home. He wants to give you good information, so you can make some intelligent decisions. And people say, “Why do you do this, Joe?” We do it for basically two reasons. One, to avoid people, really becoming a financial disaster in their retirement years. And, secondly, to introduce you to what we do as certified financial planners, how we provide investment advice and financial planning for a fee, how we’ve been doing it now for over 40 years. And whether you need financial planning now, or sometime in the future, you’ll give us an opportunity to earn your business. I want to circle back to Skip. I really appreciated his call because he’s using stop-losses to manage his ETF portfolio and that’s fine. I want to be clear that our listeners don’t. Do you understand exactly what it is?

Joe Bert:

What you’re doing is you are telling the market, you’re telling your broker telling the firm, who’s holding your funds that if the investment drops to a certain point they’ll automatically sell you out. And that gives you protection on the downside, that certainly does happen. The challenge that you have though is a couple. Number one, who knows what your gains are and if the bottom falls out and you get whipsawed and you’re end up with huge maybe short-term gains or in case long-term gains and then you want to get back in, you’ve really haven’t gained anything. In fact, you’ve lost something. There’s a place for it. As I said, we use it for certain situations, but I strongly believe that if you’ve done planning and you have a well-diversified portfolio, you don’t need to be timing the market.

Joe Bert:

We actively manage portfolios. By that I mean we’re constantly looking at the quality of the investments in the portfolio and we’re not stock pickers. If you’re looking for somebody to find you the next Yahoo or Google, it’s not what we do. Our job and our responsibility and our proven system is to find you the very, very best money managers out there by using no load, no commission mutual funds, build a portfolio of those quality funds to get you through the good times and the bad. That does not mean that if you have a market correction that you won’t go down, but the thing is, we don’t want you to break a leg. You might skin a knee, but that’s the price that you pay for getting returns better than you can get in the bank. That’s how we do it here at Certified Financial Group. If you want more information, you can go to our website, that’s financialgroup.com financialgroup.com and learn all about it.

Chris:

And of course, you can also give us a call right now if you’ve got questions at 844-580-9326. And again, this Saturday at 11:00 a.m. Is when that class will be. It’s good update, by the way, because last I had seen it was full. But real quick, I am curious if there was maybe some people out there who were like, “That’s interesting to me and I don’t know where these guys are or how I can [crosstalk 00:16:14] get in the one last spot.”

Joe Bert:

I’m glad you brought that up. We are in Altamonte Springs, 1111 Douglas Avenue. 1111 Douglas avenue, just south of 434, just be just beyond the SunTrust, now BB&T bank building there and [crosstalk 00:16:29] right off of I-4 and 434. Think you’re in the Altamonte Springs zone. You don’t need a reservation. Starts at 11:00. He’s going to give you some great information to take home and clear up that mind fog that you’re going to have. I guarantee you, when you get to be near 65, your mailbox literally explodes with all this information and you’re trying to sort through it. Gary’s not going to sell you anything. We’re just going to give you some good information and there’s a lot of information for yourself to pass onto your parents, perhaps, or to your neighbor. Come on by 11:00 today and hope to see you here.

Chris:

All right. Good stuff there. And then, we’ve got about two minutes before we have to close up shop for this first half hour. Why don’t we go ahead and tell everyone about Score My Funds as well?

Joe Bert:

Well, Score My Funds is an opportunity for our listeners to really find out the quality and, in fact, Skip, if you’re listening, this is an opportunity for us to tell you the quality of those ETFs that you own, mutual funds, investments that you might have in your IRA or 401k or your individual brokerage account. We use a rigorous disciplined approach to sort through 11 data points to determine the quality of those funds. We look at things such as manager tenure, performance on a one, three, and five-year basis. We measure alpha and sharp.

Aaron Bert:

Sharp.

Joe Bert:

Thank you. Alpha and sharp ratios, which determine how much return you’re getting for the amount of risk that you’re taking in that portfolio. There’s 11 distinct points. We look at … We grade every fund, totally objective, and we’ll be glad to send that to you. Just go to scoremyfunds.com. Scoremyfunds.com. Put in the tickers. The tickers is the five letter or three letter symbol for your fund or ETF. And if you don’t know the ticker, there’s a pull-down screen. If you put in the name, it’ll give you the ticker and we will send that to you probably within 48 hours. No obligation, absolutely free, but it’s once again, a service that we provide for our WDBO listeners, so take advantage of it. Scoremyfunds.com.

Chris:

Scoremyfunds.com. And you heard him, he does that for free, so go ahead and check that out. Scoremyfunds.com. Plenty more show on the way. Give us a call. Phone lines are wide open at 844-580-WDBO 844-580-9326. We’re planning tomorrow-

Joe Bert:

Today.

Aaron Bert:

Today.

Chris:

… for the Certified Financial Group on WWDBO. Welcome back to On The Money. That’s right. Those lines are open right now. 844-580-WDBO. Go ahead and give us a call right now. 844-580-9326. 844-580-WDBO. Joe Bert and Aaron Bert here with you on the show and you can join us live. 844-580-9326. Before we continue on here, Aaron, you wanted to go dive back into our main topic of the day.

Aaron Bert:

Yeah. So the main topic of the day was the increase that’s projected to come out on Social Security based off of what’s been going on in the world of inflation.

Joe Bert:

And that number again for those that might have just tuned in.

Aaron Bert:

Yeah. And, again, this isn’t guaranteed. This is currently projected, but they’re projecting, at this point, a 6.1% increase in Social Security benefits-

Joe Bert:

Yowza.

Aaron Bert:

… basically to go into effect in January. It’s easy for me to say. That 6.1% increase is basically because the cost of stuff’s going up. The index that they use has obviously been increasing and there’s always discussions about whether it’s too generous, not generous enough. Should they be increasing it more? Should they not be increasing it as much? What should they be doing to the Social Security system in order to protect that benefit for people? Another point I wanted to bring up regarding Social Security though, is that if you are on other governmental benefits that are also based off of your ability to receive those based off of your income, and those benefits are not being indexed at the same rate that Social Security is being indexed, some of those benefits may be in jeopardy to you as well.

Aaron Bert:

While your income may be going up, you may be losing other governmental benefits. If you’re on food stamps or housing assistance or other things that basically rely on income in order to qualify. As your income goes up, if it’s going up 6%, but those benefits are indexed at one or 2%, you could be a jeopardy of losing some of those benefits. The government gives and the government taketh away.

Joe Bert:

That’s how it usually works. Some planning that we do for our clients. We look at when’s the best time to take Social Security. We put it up on the big screen, show you money coming in money, going out, the effects of taxes and inflation. And then help you make an intelligent decision as opposed to picking up the phone and trying to get Social Security to tell you what to do because they can’t. They are not permitted to tell you what the best choice is. They can tell you what your options are, but then once you factor in all the other things in life, like inflation and taxes and the other savings and investments you might have. What you might think is the best choice may not necessarily be the best choice.

Joe Bert:

This is what we do as certified financial planners doing financial planning and investment management for a fee and we’re glad to talk to you about that. You can go to our website, financialgroup.com, financialgroup.com, and get more information. And I see we have a call here from Steve and Mount Dora.

Chris:

Yes, we do. Steve, you are live.

Joe Bert:

Good morning, Steve. What’s up?

Steve:

Morning. Forgive me, I had a stroke about 15 years ago and so I only get Social Security disability insurance. My only income is Social Security disability for 15 years. I’m 64 years old and I think it was 66 or 67 I dropped the disability and just go to regular Social Security.

Aaron Bert:

Correct.

Steve:

And I’m wondering what the difference will be.

Aaron Bert:

It’ll be the same benefit. You’re going to get the same. You’re basically getting your full retirement age benefit. Actually, you’re getting your primary insurance amount, which is the amount that you would get at your full retirement age and you’ll basically fall off disability at that point and then go to normal Social Security, but it’s going to be the exact same amount of money.

Steve:

Okay. So my Medicare part B. Right now, I pay $148.50-

Aaron Bert:

Yup.

Joe Bert:

It’ll be the same thing.

Aaron Bert:

… come August.

Joe Bert:

Yeah. [crosstalk 00:22:35] Nothing changes for you, Steve. You just roll into the regular system.

Steve:

Okay. Thanks very much. I really appreciate it.

Joe Bert:

You’re welcome, Steve. [crosstalk 00:22:44] Best wishes to you. That’s a tough deal.

Aaron Bert:

Yeah. The disability piece is a little bit … There are some other rules associated with that and it’s really more of a specialty, but I do know that the disability is the amount that you’ll continue to get when you go onto the full retirement benefits-

Joe Bert:

That you would’ve been eligible for had you-

Aaron Bert:

Right.

Joe Bert:

Yup.

Aaron Bert:

But you do lose some of the ability to do some more advanced planning because you started the benefits so early. You’re not able to get delayed retirement credits. And then, there was some issues in the old days where you used to be able to file and suspend and do stuff like that, but all of that’s gone now as well. You’re just going to be chugging along at the same benefit and God bless you. I hope you get a full recovery.

Joe Bert:

Hang in there, Steve.

Chris:

Appreciate that call, Steve. You can give us a call at 844-580-WDBO. 844-580-9326. 844-580-WDBO. Let’s go ahead and should we move on to some of the text questions that we get during-

Joe Bert:

Yeah, let’s do it.

Aaron Bert:

I want to jump … Before, we had the seminar coming in for those people that are just joining us in the bottom half of the hour, Gary Ably is hosting his Healthcare Options and Retirement seminar today at 11:00 in our office at 1111 Douglas Avenue. He does have a few openings still available, so if you’re interested in that seminar, feel free to stop by and attend that one. That one is extremely popular, but he did have some late minute cancellations, so there are a couple of openings available. We do these seminars regularly, actually, in our office and now that we have our new state-of-the-art learning center, as we like to say, right next to where we’re actually broadcasting, we host these regularly. We usually do one about once a month. The next one, after healthcare options in retirement is going to be key elements to a successful financial plan. That one’s going to be hosted by Rodney Onby, CFP, also CPA and AIF, accredited investment fiduciary. That one’s the 28th of August, again in our office from 11:00 to 1:00.

Aaron Bert:

And then, there’s another one, September 21st, Will Your Savings Last a Lifetime? That one also is presented by Gary Ably. That’s the 25th of September, also from 11:00 to 1:00, also in our office. All of these are available on our website financialgroup.com. Our website again is financialgroup.com. We have a little tab at the top, workshops and events. You can go on there, sign up for these seminars. They are absolutely free. It’s meant to be educational, provide you information, introduce you to us, introduce you to our office, and hopefully we impress you enough that maybe you want to work with us in the future. So again, financialgroup.com, workshops and events, and that’s where all of that information is.

Joe Bert:

Very well said.

Aaron Bert:

Thank you.

Joe Bert:

All right. Nice. Let’s hit that text question you had there.

Chris:

Sure. And again, we still got open phone lines at 844-580-WDBO. 844-580-9326. My daughter is getting divorced and her husband is trying to get half of her 401k. Can he do that and how does it work?

Aaron Bert:

Unfortunately, in the world in which we live, this happens. People get married and people get divorced. And through the process of divorce, a lot of times, there is a splitting of marital assets. Oftentimes, one of those largest assets is the retirement plans of each of the individuals or their 401k plans, especially if one person worked in the other one, didn’t. When you split a 401k or an IRA, for that matter, it’s done through what’s called a qualified domestic relationship order or a QDRO, as the lingo is we throw around here. And basically that’s a court order to whoever holds that account to split it in two. And so now, the one spouse has a QDRO account and the other one continues with their regular 401k plan as it originally was. The QDRO then is in that person’s name. It stays tax deferred and they are able to take distributions from it even if they are younger than 59-1/2 or 55 and not pay that 10% penalty, which I think is pretty interesting, as long as it stays in that QDRO account.

Aaron Bert:

It can continue to stay at the 401k provider or the IRA provider as in that QDRO and they can take distributions from it and keep it invested in and do whatever they want with it. However, if they roll it to an IRA and it loses that QDRO designation, then they lose the ability to take withdrawals and have that 10% penalty weight. So there are some-

Chris:

I just had a creative planning idea.

Aaron Bert:

You want to talk about this later?

Joe Bert:

No. Well, we can talk about it now on the air and you can blow a hole in it. What you just said, you avoid a 10% penalty if you use the QDRO and it stays in the account. That’s the 10% penalty for early withdrawal.

Aaron Bert:

Don’t encourage people to get divorced so they can-

Joe Bert:

Do get divorced on paper-

Aaron Bert:

Oh, geez.

Joe Bert:

… and avoid the temporary … I’m just planning tomorrow today. It’s what we do here.

Aaron Bert:

[crosstalk 00:27:34] [inaudible 00:27:37] No, no, no. Don’t do that.

Joe Bert:

I’m not suggesting that but you’ve got to plan tomorrow today and this is an opportunity here.

Aaron Bert:

No, we’re not doing that. But that’s how the QDRO works. Yes, the question was, can they do it if the court orders it’s going to be done and that’s kind of how it works. The QDRO again is the splitting of retirement plan marital assets from the one spouse who has the account to the other spouse who doesn’t have the account and, again, allows for withdrawals from that account without that 10% penalty.

Joe Bert:

And if you move it to an IRA, then you’re then-

Aaron Bert:

Then you lose the QDRO designation and you lose that advantage of that 10%. Now, if you’re over 59-1/2, it doesn’t matter anyway, but it only applies to those people that are a little bit younger.

Joe Bert:

There you go.

Aaron Bert:

That’s how the QDRO works.

Chris:

All right. [crosstalk 00:28:27] There you have it. Let’s go ahead and take a quick break. We got another text question to get to and hopefully some more calls as well. We got open lines. 844-580-WDBO. 844-580-9326. We’re planning tomorrow-

Aaron Bert:

Today.

Joe Bert:

Today.

Chris:

… with the Certified Financial Group on WDBO. Welcome back to On The Money presented by the Certified Financial Group on WDBO 107.3 FM and AM 580, Orlando’s News and Talk. We are live and you can join us right now at 844-580-9326. 844-580-WDBO. Let’s go ahead. And we got another text question we can get to here before we close up shop. What do we say?

Aaron Bert:

Sure. Let’s do it.

Chris:

All right. I have an annuity that I don’t need anymore. It’s not an IRA and is worth much more than I paid for. The fees are high and deducted every year. What are my options?

Aaron Bert:

Let’s talk about annuities real quick. Annuities are offered by insurance companies, are sold by insurance companies. They are a way to be able to put money into a insurance product, and there’s several types of annuities. But, in general, an annuity, the way it works for tax purposes is you put money and hopefully grows over time and it grows. If it’s not an IRA, which is what I believe they said in the question, it grows tax deferred, which means that you don’t pay taxes on the gains every year. And at some point in the future, when you decide to start cashing it out, hopefully it’s worth more than what you initially put into it. As you start drawing money out of it, if you do not annuitize it, which means that you give up the principal in exchange for a income stream, so if you don’t annuitize it and you just start taking withdrawals from the annuity, the money that you draw out of that contract will come out as income first until you reach your basis.

Aaron Bert:

And then, once you reach your basis, which is what you paid for it, then that amount comes out tax-free going forward. The fact that it’s worth much more than what they paid for tells me that they have obviously have a gain in it. It’s probably what’s called a variable annuity, which means that it has underlying investment options in it and they have not paid any taxes on it along the way. What do you do with something like that? Well, what we’ve been seeing a lot of lately is in one feature of annuities is that you are able to move them between annuity companies or annuity contracts without incurring any sort of tax issues at the time that you do that.

Aaron Bert:

There’s lots of things that you can do with annuities, but generally it’s going to have to stay within an annuity in order to keep it in that tax-deferred status. A lot of people have been moving them to a lower cost annuities where you strip out some of the expenses that were in those older annuities. You can move it to a longterm care policy using an annuity as the base of that policy. And this is what we’ve been seeing a lot of people interested in lately, called asset based long-term care, where basically you can take that annuity with all those gains, keep them deferred and turn it into a two, three, maybe four times multiple for long-term care, if you needed that type of coverage later on in your life. Annuities, they were very much maybe oversold. They’re probably oversold now still too because they generally pay higher commissions to the people that sell them.

Joe Bert:

That’s the free lunch and dinner payment.

Aaron Bert:

But an annuity in general isn’t necessarily a bad thing. If you have one there are things that you can still do with it and that was part of our annuity rescue program that we continued to do. If you have one of those contracts that you’re interested in seeing what your options are with those contracts, you can call our office, sit down with one of our certified financial planners, and we can see how that fits into your overall plan, whether you actually still need that annuity, what we can do to help lower the costs for you in that contract so maybe you can get more bang for your buck within that contract, keep it tax deferred, maybe turn it into long-term care. Lots of things that you can do with it. Just because you have one doesn’t necessarily mean it’s a bad thing, but it’s really examining what do you do with it now that you have it and how can we make it fit within your planning going forward.

Aaron Bert:

Again, if you have one of those and you are interested in learning how you can best maximize the annuity benefits that you have or that contract that you have, call our office and we’ll be happy to sit down with you with that annuity contract. And you can reach us Monday through Friday at our office, but the best way to find us as go to financialgroup.com, that’s our website, financialgroup.com. And, again, you can sit down with one of the 14 certified financial planners in our office and all of us are especially trained in annuities and investments in portfolio construction. Feel free to call us and we’ll be happy to sit down with you and see what your options are.

Joe Bert:

That’s what we do.

Chris:

And then very, very quick, let’s head to the phones lines. We’ve got Manuel calling in with a quick question here. Manuel-

Joe Bert:

Manuel.

Chris:

Appreciate you calling.

Joe Bert:

Good morning.

Manuel:

Yes. Good morning.

Joe Bert:

What’s up?

Manuel:

Yeah. My question is, if you retire at whatever age, 66, 67, and you’re in the real estate industry, once you have your retirement check, are you allowed to make money working real estate?

Joe Bert:

Well, you’re allowed to make money, but you’re going to have what they call a Social Security offset. This year, if you earn more than $18,960, you’ll give back $1 for every two that you earn over that amount. Now that means that it’s going to be pushed out into the future, so you can’t keep your Social Security and continue to earn if you’re earning above those threshold amounts.

Aaron Bert:

Assuming you’re under full retirement age.

Joe Bert:

Right.

Aaron Bert:

How old are you Manuel?

Joe Bert:

He said 50-

Manuel:

57.

Joe Bert:

  1. You’re not on [crosstalk 00:34:10] Social Security though?

Manuel:

  1. No.

Aaron Bert:

Oh, 67? Oh! Yeah, 67. I thought 57. That’s what it sounded like at least.

Manuel:

No, no. I’m not on Social Security yet but, yes, I’m planning in the near future.

Aaron Bert:

Yeah, so if you’re over full retirement age, there is no income limitation, so they don’t offset your Social Security if you are over for retirement age. You can earn as much money as you want and still get your full Social Security benefit. Now, the question is, is whether you should do that or whether you should continue to delay it and earn those delayed retirement credits because if you listened to the first segment of the show your benefit will go up 8% per year for every year that you delay, so it may make sense for you to delay another three years and get a 24% jump in your benefit plus cost of living increases, which was our topic today at 6% is what they’re projecting. Every year you delay, it may make sense to do so, but that assumes that you can afford to do it or maybe spend down some of your assets in order to do so. But you are over full retirement age and there is no income offset for Social Security.

Joe Bert:

Yeah. Thanks for the call, Manuel. We’ve got to wrap up once again. There’s a few seats open for Gary’s Retirement Options in Retirement, All About Medicare. You can come to our office at 1111 Douglas Avenue. It’s absolutely free from 11:00 to 1:00. He’s going to provide some refreshments. And if you want more information about me and the other 13 certified financial planners her at CFG go to financialgroup.com. That’s financialgroup.com.

Chris:

Don’t forget. Also, check out, scoremyfunds.com as well. Appreciate everyone tuning in this week. We’ll be back same time, same place next week because we’re planning tomorrow-

Joe Bert:

Today.

Aaron Bert:

Today.

Joe Bert:

… with the Certified Financial Group on WDBO.

 

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