Are you investing tax-efficiently? | TRANSCRIPT

Speaker 1:
Stay tuned for On The Money, Central Florida’s most listened-to financial call-in show, brought to you by Certified Financial Group in Altamonte Springs. It’s the only show hosted exclusively by certified financial planner professionals. Monday through Friday, their CFPs provide financial planning and investment advice for a fee. But on Saturdays, the advice is absolutely free and has been for more than 30 years for their WDBO listeners. If you have a financial question you want answered by real fiduciaries, the lines are wide open call (844) 580-WDBO. That’s (844) 580 WDBO. And enjoy the show.

Josh McCarthy:
Good morning and welcome to On The Money right here on WDBO 1073 FM/AM 580, always streaming live in your very own WDBO app. My name’s Josh McCarthy sitting here in the studios, and I’m joined by Matt Murphy and Aaron Bert of the Certified Financial Group. This is your time to call in anything going on in your financial future, anything you’ve always had a question pop into your head and you’re wondering, “Man, I wish I knew a guy, I wish I knew someone who could answer these questions for me,” because that is what this whole show is. Those questions pop into your head and we have the experts on standby. Again, Aaron Bert and Matt Murphy with the Certified Financial Group are here answering your questions. By here, I actually mean something a little special today. Isn’t that right, guys?

Aaron Bert:
Yes, Josh. Good to talk to you here in the studio. We are here live at the WDBO Studios right off of John Young Parkway. We have a live studio audience. They’re sitting here watching us. They’re eating, they’re drinking, they’re getting to know us a little bit better, and we are happy to be here live in the studio for this show for the next hour. Then Matt’s actually hosting a workshop here in the studio as well. So we’re super excited to be here. This is a new experience for us. Never done this before. What do you think, Matt?

Matt Murphy:
I got a little butterflies. I got to be honest with you.

Aaron Bert:
Little bit.

Matt Murphy:
Very cool.

Aaron Bert:
I feel like I’m in an aquarium here. We’re under some lights. We got people staring at us. It’s like-

Matt Murphy:
They look really nice though, I have to say.

Aaron Bert:
But we did give them stress balls that they may throw at us, so we’ll see how this show goes. It could turn south, but hopefully, we get some good questions from the audience. We show off some of our knowledge. As we like to say, money through Friday, we meet with clients, we help them with their personal financial situation, whether they’re preparing or going to retirement or through retirement. We like to help them day in and day out at our office Monday through Friday. But on Saturday, we show up for one hour to offer free advice to help answer questions that may be burning on your mind, stuff about Social Security, long-term healthcare, mutual funds, portfolio diversification. We’re going to talk about tax planning through the stages of retirement. We talk about all sorts of things again Monday through Friday. Matt and I and the other 14 certified financial planner professionals at Certified Financial Group are all qualified to answer any of these questions. So we are here live to do that today. If you have a question, you can pick up the phone and dial these magic numbers.

Josh McCarthy:
Wonderful. The number is (844) 580-9326. That phone number is (844) 580-WDBO. The topic of today’s show is, appropriately, are you investing tax efficiently?

Matt Murphy:
Yeah. Josh, I think the main theme here is it’s not what you earn, it’s what you keep. Just like in your working years where you get a paycheck and in that paycheck you see the deductions for various things, maybe your health insurance, maybe other group benefits that you’re paying for, but also you have tax withholding. So what your gross income is isn’t necessarily what your net income is. I think a lot of people, particularly when you get to retirement and you don’t have a normal paycheck anymore, people forget that it’s very important still to pay attention to what types of taxes you’re paying on the investments that you own.
So there’s some ways that you can navigate through that process and make sure that you’re being as tax efficient as possible. We’re going to talk about some of those things here at 10:00 in my workshop. But those items more kind of relate to how you structure your financial planning to minimize taxes. This morning, we want to talk a little bit about being tax efficient specifically with your investments. I’m sure this is a topic that everybody’s gone through filing their taxes here recently. You got your 1099s, 1099-Rs. Maybe some of you had some surprises in those tax forms. So we want to help you understand what’s in those tax forms, but more importantly, how to reduce the tax burden that you’re paying on some of your investments. Aaron, I know you and I have talked about this quite a bit with some of the clients you’ve worked with as well.

Aaron Bert:
Taxes, I mean, nobody likes to pay taxes or unnecessary taxes. Obviously, we pay taxes to help the greater good of providing some of the services we need in this country. Taxes are a necessary thing, but nobody likes to pay more taxes than what they’re legally obligated to. So there’s different scenarios or different ways that you can minimize the taxes that you pay. The number one thing that we usually talk about people that are accumulating or still working is contributions to retirement plans because really that’s the cleanest tax break that any of you can get is by putting money into your 401(k), 403(b) or possibly an IRA if you don’t have a plan at work. That’s the number one way to help minimize the taxes and help with that W-2 that you get where you are getting that clean tax deduction.

Matt Murphy:
Yeah. There’s some things that people don’t realize too. One of the things that you always want to be cognizant of is there’s a difference between capital gains taxes and income taxes. Specifically, right now, let’s just use some numbers here. If you’re married, filing jointly taxpayer, up to about $89,000, I believe it is, of taxable income. So meaning after you’ve taken either your itemized deductions or the standard deduction, if you have up to $89,000 worth of income, you are in the 12% ordinary income tax bracket. Well, if you fall within that 12% ordinary income tax bracket, take a guess what your capital gains tax rate is. It’s zero. We’re getting a little in the weeds here, but I think it’s important to note that.
Let’s say you have $60,000 worth of income and you have an investment that you’d like to sell, but you’re reluctant to do so because you don’t want to pay capital gains taxes on it. Well, if you’ve got $60,000 worth of income, so long as that capital gain that you take is less than $29,000, so that $60,000 plus the $29,000 would get you to $89,000, you’re going to pay zero capital gains tax on that. This is an interesting strategy. I’ve had clients in the past that maybe you inherited a stock 50 years ago from mom or dad or from grandma and grandpa for that matter, and it’s got a lot of capital gains in it, and you’re reluctant to sell it, but you really would like to sell it if there was no tax consequence to doing so, you’d drop that thing right away.
Pay attention to that. You may be able to get away with selling that stock without any capital gains tax at all. Another strategy just to build off of that is let’s say you do like that stock, you could sell that stock and literally the next minute buy it right back. But now what you’ve done is you’ve reset your cost basis to today’s value. So it’s almost like you’re starting over from a tax perspective. Those are the types of things that we talk to clients about. It’s not that information isn’t available to everybody, but most people I tell that to have never thought through that type of thing before. That’s the type of thing we do in our practices at Certified Financial Group.

Aaron Bert:
Right. Day in and day out, it’s all about taxing or taxes. It’s all about minimizing taxes. It’s about proper diversification, it’s about allocation, like Matt said, it’s what you keep, not necessarily what you bring in or what you spend. That’s really what we focus on when we meet with clients day in and day out.

Matt Murphy:
Yeah. The other thing too is to understand how the different types of accounts that you own are taxed. Most people have accumulated the majority of their wealth in their retirement accounts. So that’s your 401(k)s, your IRAs, maybe Roth IRAs. But a lot of times people will also have non-retirement accounts. Those could be brokerage accounts, they could be a trust. The types of investments you want to own in those types of accounts is different than the types of investments you’d want to own in a retirement account.
For example, in your retirement accounts, you may have investments that pay high levels of dividends or high levels of interest. In your retirement account, it doesn’t matter, right? Because when you pull that money out later on in retirement, you’re taxed at ordinary tax rates, ordinary income tax rates regardless of the type of investment that you own. In a taxable type of account, so a non-retirement account, you have to be aware of how the capital gains, how the interest, how the dividends will be taxed inside of those accounts. So there’s some strategies probably beyond the scope of our show this morning, but there’s some strategies to minimize the taxes that you pay on those types of things.

Aaron Bert:
We call that in our world asset location. If you have multiple types of accounts, if you have a retirement account which is pre-tax, or even a Roth account for that matter, but something that’s not taxed every year, and you have a brokerage account, what we like to do is diversify that portfolio. So say you’re in a moderate portfolio where you’re 60% in stocks and 40% in bonds for downside protection, you want to put those bonds in your retirement account in order to minimize the taxes that you pay because those bonds are throwing off income every month. As those throw-off income, why pay taxes on the income today if those were in your brokerage account? We like to put different types of investments in different types of accounts based off the taxation of those different accounts.

Matt Murphy:
What’s happened with money market and interest rates here recently last year or so?

Aaron Bert:
Well, with interest rates going up, money markets have been going up significantly.

Matt Murphy:
Significantly. Let’s say money markets are more attractive today than they were two years ago when they were paying nothing. It’s a double-edged sword. Again, if you own a money market fund that maybe is paying 4% right now, which is actually pretty typical if you’re owning that inside of a non-retirement account, so not a 401(k), not an IRA, not a Roth, you may be seeing a considerably higher tax bill this year than you’ve seen in previous years. You may be wondering why is that. That’s because those money market funds typically pay what’s called non-qualified dividends.
So non-qualified dividends are taxed at whatever your ordinary income tax bracket rate is, whereas qualified dividends, for example, if you own a stock, if you own Apple stock and it pays a dividend, those are qualified dividends. You may not pay any taxes on that. Again, it’s one of those things where, yes, your cash is paying a higher rate of return when it’s all said and done, it’s great. But there may be alternatives to that, maybe not depending on your particular tax situation. But again, something that a planner like Aaron or myself or the other 14 that we have at Certified Financial Group can help you navigate through and make the right choices on that.

Aaron Bert:
Yeah. Taxes are, like I said, when I first started, it’s not something that we all like to do or to pay, I should say. But again, if we can minimize what you are giving over to the federal government every year, we like to do that as often as possible or as much as possible.

Matt Murphy:
For sure. Before we wrap up the first segment, I just want to say thank you all, everybody for here. The listeners can’t see these folks that are here this morning, but there was a threat of bad weather. We weren’t sure if everybody was going to show up this morning. We’ve got a great group here that got up early to come out and see us.

Aaron Bert:
I appreciate it. Thank you.

Matt Murphy:
Yeah, we really, really appreciate all you coming out. Thank you very much.

Josh McCarthy:
Thank you so much, everybody, in the studio. I’m saying hello from a distance waving through a few walls and windows, and my name is Josh. If you’re listening on the radio, this, of course, is a financial call-in program where you can get your question answered by a couple of certified financial planners. The number is (844) 580-9326, (844) 580-WDBO. Or feel free to send us an Open Mic right there in your very own WDBO app, free in the Apple App Store and the Google Play Store. Download the button, click the Open Mic button, and send in your question. That way, we’ll play them back to you live on the air. You are listening to On The Money where we’re planning tomorrow, today with the Certified Financial Group. Welcome back to On The Money brought to you by the Certified Financial Group with an office here in Central Florida.
If you want to pop into that office, know the second you open that door, you will be in the presence of some of the financial advisors of one of the top 100 firms in the country. That is such a significant thing. So you know that whenever you work with the Certified Financial Group, you are getting people that the industry recognize as credible, as experienced, as people that they want you to work with. So that’s just not something we can talk about enough here on my end, here on my end. I’m proud to be involved. I’m assuming this is the first time you’ve got it and it just so happens be the first year that I was a part of the show. So I’m going to go ahead and take the credit, pat myself in the back, and move on. If you want to hop on and talk to me with a question before I pass you along to Matt Murphy and Aaron Bert standing by here answering your financial questions, the number is (844) 580-9326, (844) 580-WDBO.

Aaron Bert:
We did have a couple of questions from the audience during the break, and one of them was in regards to these luncheons, or I shouldn’t say luncheons, free dinner seminars that people are offering out there. We get these postcards, I live in Longwood, oftentimes in my mailbox about, “Come learn about how you can guarantee your retirement and never lose money and make a lot of money. By the way, we’re going to host it at one of these fancy steak dinner places where you can come in for an hour, learn about the product, and have a fillet.” Matt, what are they talking about usually at those types of events?

Matt Murphy:
Normally, what’s happening there is… I mean, for lack of a better way to say it, they’re pitching indexed annuities. Now, annuities, it’s one of those things in polite company never discuss, what is it, religion, politics, and then annuities is the third one. Annuities can serve a purpose that other investment vehicles just cannot. For example, a guaranteed lifetime income like a pension or Social Security. So they can serve a very, very useful purpose in that regard. They also can provide some protection from or insulate you from market forces. However, with the free lunch… I mean, you could probably fill up your entire diet throughout the week by going to these free breakfast, free luncheons, free dinners, et cetera. There’s a reason for that. There’s a reason why they’re giving away those free dinners. Not to be overly cynical about it, but at the end of the day, they’re getting paid a large commission to sell those products.
I think the way that we approach it, at Certified Financial Group, is we would never, ever pitch a product like that before we know your situation. That really at the end of the day, that’s really what it’s about. There’s no way to tell whether somebody would be appropriate for that type of investment vehicle without going through. I got to know what your income is, what your expenditures are, I need to know what your risk tolerance is. I need to know what other investments you have. I need to know what your goals are. It’s like, I’ve always used the analogy and maybe it’s not a good one, but it’s like if you’ve got a Corvette in there, a new Corvette out right now, that’s really, really slick. That’s a great car, right?
That’s a super cool, incredibly cool car that probably just about anybody would want. But if I were selling cars, I would never pitch that to a single mom that has three kids. That doesn’t mean it’s not a good car, it’s a great car, it’s just not a fit for her. So a lot of times you’ll find with the annuity world, that’s how this is approached. It’s just like, “Hey, let’s pitch these products. We have 30 people in the room and 5 will bite on it, and that’ll pay for our dinner, and then we’ll move on to the next one.” What do you think, Aaron? What have you seen in your experience?

Aaron Bert:
Annuities is been a bad word. They call it A word in financial services. An annuity in and of itself isn’t a bad thing. It’s really just a investment vehicle offered by an insurance company. Anytime you hear the word annuity, think of insurance. The thing about annuities is you don’t have to be licensed as a financial advisor or a registered representative in order to sell annuities. Fixed annuities, all you need is an insurance license. If you’re going to sell a variable annuity, that’s a different type of annuity offered by insurance companies, you do have to be a registered representative.
So you do have to pass some exams and be registered with FINRA. Indexed annuities are strange because technically they’re offering investment market-type returns, but you don’t have to be a licensed registered representative in order to sell them. So all you need is an insurance license. There’s a very low bar for these people to go out and sell these indexed annuities. That’s why you see so many people out there selling them because all you really need is an insurance license in order to do so. I’m insurance licensed, I passed all the insurance licenses, but I’m also registered with FINRA and the SEC, and all these other exams, the CFP board, and all these other things that we do. So I can sell indexed annuities that’s why we know about them.
But there’s a very low bar in order to sell indexed annuities. The reason is because, again, you don’t need to pass those extra exams and have that extra scrutiny of FINRA or some of the other regulatory bodies in order to do so. But the challenge with indexed annuities is they sound great, right? Because there’s zero downside, right? Because the insurance company guarantees it, however, the upside is limited. They always like to talk about, you get market-like returns and that’s true. However, they always either have what’s called a cap or a participation rate. So, Matt, why don’t you talk about participation rates or caps?

Matt Murphy:
Yeah. I mean, so really at the end of the day, what it means is… I’ll give you an example. An indexed annuity may tie your returns to the S&P 500, just the US broad stock market. However, what they may do is they may say, “Well, you only participate in 60% of the upside of the market.” If the market goes up 10% this year, you go up 6%, the market goes up 20%, you go up 12%. You may say, “Well, that’s okay, I’m willing to give up some on the upside in order to protect the downside. I think what I’ve seen more often than not with those types of investment vehicles is they tie your money up for a long time, and a lot of time people aren’t aware of that when they sign up for it because they’re so caught up in how attractive the product looks that they maybe don’t pay as much attention to all the details as they should.

Aaron Bert:
We could talk more about this after the break, but I know we’re up against it. Go ahead, Josh.

Josh McCarthy:
Thank you so much for listening to On The Money, (844) 580-9326, (844) 580-WDBO is how you hop on with Aaron Bert and Matt Murphy to get your financial future in the right hands. (844) 580-9326. Or if you’re listening to us in the WDBO app, push the Open Mic button, and send in your question. That way we are answering your questions live from the Performance Studio brought to you by Stanley Steemer. This is On The Money where we are planning tomorrow, today with the Certified Financial Group.

Speaker 1:
Welcome back to On the Money, Central Florida’s most listened-to financial call-in show. Brought to you by Certified Financial Group in Altamonte Springs. It’s the only show hosted exclusively by certified financial planner professionals. Monday through Friday their CFPs provide financial planning and investment advice for a fee. But on Saturdays, the advice is absolutely free and has been for more than 30 years for their WDBO listeners, if you have a financial question you want answered by real fiduciaries, the lines are wide open. Call (844) 580-WDBO. That’s (844) 580-WDBO, and enjoy the rest of the show.

Josh McCarthy:
Welcome back to On the Money right here on WDBO 1073 FM/AM 580, always streaming live in your very own WDBO app. My name is Josh McCarthy, joined in studio today by Aaron Bert and Matt Murphy with the Certified Financial Group. Every single Saturday, at this time we are here live answering your questions. So if something pops up into your head, you hear something in the news, and you want to just have a friend break it down, that’s what we do here for the low, low price of free 99. There it is. Aaron, I hear you.

Aaron Bert:
There’s no 99 there, it’s just free.

Josh McCarthy:
Well, that 99 is commission for me. That’s what it is. Now, it’s going to be free 100. Thanks so much, Aaron, I appreciate that. (844) 580-9326, (844) 580-WDBO is how you hop on the air. You heard Aaron Bert, we also got Matt Murphy standing by answering your questions. Or you can send us an Open Mic right there in your very own WDBO app. How’s it going in studio today, guys?

Aaron Bert:
It’s going great. You just mentioned in studios, so the people that are just joining us from… Maybe weren’t listening to the beginning of the show, we are live here in the WDBO studios here in Orlando, Florida. Matt Murphy and I have a live studio audience in front of us. They’ve been kind of rowdy, so we just got them to calm down a little bit, which is good. We are here taking questions and actually, we’ve been talking with the audience during the break, we’ve had some great questions coming in from the audience, so we can talk about some of those as well.
But we’re super excited to be here to answer questions either if you want to call or you can use the Open Mic feature. Actually, we have Wynn Smith actually taking calls back in the office as well. His number if you want to call the office is (407) 869-9800. If you don’t want to get on the air, you can call our office. Again, that’s (407) 869-9800. He’ll take your call off the air as well. We are happy to be here and to entertain this live studio audience and answer all things financial.

Josh McCarthy:
We have an audience question as a matter of fact.

Aaron Bert:
Oh, we’ve got somebody standing up. Okay.

Speaker 5:
Hey, good morning.

Aaron Bert:
Good morning.

Speaker 5:
Just finished taxes. So got a question about estimated taxes. In this country, it’s income taxes what most of taxes are based on. If you’d used estimated taxes, it’s on a quarterly basis. If you had income over the year, you would pay it in a quarterly estimates. That aside, let’s say you retired and you want to sell some stock, but you only sell stock say in December. You see where I’m going with this, right?

Aaron Bert:
Yeah, I understand.

Speaker 5:
Do you have to pay the… You don’t know how much you want to sell in December, and you just sell, let’s say, you make $100,000 in capital gains.

Aaron Bert:
Right. Our tax system is pay-as-you-go, technically. The problem is if you do that, you have to prove that you earned that income in the court last quarter of the year versus throughout the entire year because the IRS really has no idea when you earn that income. That’s why they have the estimated tax payment system is because if the assumption is that you’re going to earn that income, they want their payments every quarter. I will say that there is some flexibility in there with those types of payments and when you make them, but really, it’s a best-guess estimate that your tax preparer probably gives you of when you should be making those payments.
But if it’s really truly that you’re not going to earn that income during the year, you don’t have to make the payments, right? Because if you did, then you’d just get it all back at the end of the year. That’s really probably your concern is you don’t want to give a free loan to the government and have them use your money. Technically, you’re not going to owe those taxes anyway. But I will say on the tax payment system when you do your taxes, they usually give you those little voucher thingies and then you’re supposed to mail in a check. There is a critical system called the EFTPS. I don’t know if you’re familiar with that term, EFFTPS. It’s the government’s online estimated tax payment system. So you can actually go online, create an account, it’s better than sending in those vouchers with a check every quarter.
You can go in and put out, however, much you want to pay in estimated taxes over the year. You can actually schedule them. You can say, “I’m going to send this much this quarter, this much this quarter.” It’s basically debited directly from your checking account or whatever account you hook up to it, and it’ll send those estimated tax payments directly to the government on your behalf. So EFTPS is the name of the system, and I’ll look up to see exactly what it… I think it stands for estimated federal tax payment system or Electronic Federal Tax Payment System. It’s a way to go on and be able to do those payments electronically. I feel your pain though, estimated taxes, nobody likes to pay.
One way to get around estimated tax payments, if you are of RMD age or you’re taking money out of your retirement accounts, the RMD or the withholding that you have from those payments actually will satisfy the estimated tax payments if you just do it at the end of the year. So they recognize that as if it was paid during any time of the year. If you are taking your RMD or some sort of withdrawal from your retirement account, instead of paying estimated taxes, just have it withheld from that retirement distribution and that’ll count for your tax requirement for the entire year. So something to keep in mind.

Matt Murphy:
Nothing like making it easy for the government to take more of your money.

Aaron Bert:
Yeah. Well, I like that better than writing checks.

Matt Murphy:
I agree.

Aaron Bert:
This is how I’d like to do it, but it’s the EFTPS is what it’s called. I appreciate the question. We do want to jump over to some of the upcoming events that we have and one of them is the shred event. We talked about that earlier during the break, May 6th in our office at Certified Financial Group, it’s going to actually run from 9:00 to 12:00. We’ll have an industrial shredder there. On our website, under events, we have a section of things that you should keep. So there’s a section called Forever, things like birth certificates, hopefully, your marriage certificate you want to keep forever, death certificates, military documents, immunizations, things like that, IRA contributions, Social Security cards.
Then there’s some things you want to keep during ownership, like car titles or warranties for appliances, or receipts for major purchases. Then ownership plus seven years, that’s things like records regarding your stocks and bonds, saving certificates, home improvement documentation, or real estate records. Then it goes into a whole bunch of stuff that you should keep seven years until specified date and stuff that you should just shred all the time. Again, that’s on our website. This is a free service. We ask people to limit to two bankers boxes. As you drive through, if you put the boxes in your trunk or bags, you can use trash bags too, so we can easily unload it and throw it in the shred bins for you.
Before we put the limit on it, we had somebody show up with a van full of boxes, and so we were shredding stuff for hours. Anyway, we learned, we all learn. That was probably the first one we did about 10 years ago. So we like to limit it to two bankers boxes, please. It’s really a quick drive-through service. We do it as a service for you because people accumulate these document don’t know what to do with it, and we don’t want your stuff getting stolen or identity theft because that’s like a nightmare. Anyway, that’s why we do that service. Then we have some other workshops coming up, Matt’s going to talk about.

Matt Murphy:
Yeah, we do. Before though, we’ve got another audience question.

Aaron Bert:
Oh, all right, we’re on a roll here.

Speaker 6:
I lost my longtime girlfriend of 34 years, and I was the beneficiary of a life insurance policy and as well as an annuity and an IRA. On the life insurance is there a… Excuse me. Is tax based on the life insurance amount?

Matt Murphy:
No. Life insurance proceeds are paid… That’s a good question. Life insurance proceed, death benefit proceeds are paid out income tax-free. The only scenario under which those would even potentially be taxed would be if it ran into an estate tax problem because the estate tax limit now is, what is it, 12?

Aaron Bert:
Yeah, it’s high.

Matt Murphy:
[inaudible 00:28:59] per person. It’s really high. The answer to that question would be, no, you would inherit that money tax-free.

Speaker 6:
What about the annuity and the IRA?

Matt Murphy:
Good question on those too. The annuity, typically, if it was not held within a retirement account, there will be a cost basis, so an amount that she would’ve contributed throughout the years, and then there’s the current value at her death. I’ll just use an example. Let’s say that the cost basis, in other words, she put in $50,000, and it grew to $150,000. When you go to take that money out, if you took it in a lump sum, for example, the $50,000 that’s already been taxed will not be taxed again. So you’ll get that tax-free. The $100,000 that represented her gain would be taxed as ordinary income to you. That’s an important distinction too.
Even with annuities, even though there’s a gain per se, it’s not treated as a capital gain. It’s treated as ordinary income. You just want to be aware of that. Everybody’s situation is different, but chances are you wouldn’t take it out in one lump sum like that depending on the amount, and you could stretch those payments out over a number of years. What would happen then is you would have to take the gain on that annuity first, pay the taxes on it, before you get to the tax-free return of her basis. Then lastly on the IRA, since you were technically a non-spousal beneficiary, and, Aaron, check me on this if I misspeak. Since you were a non-spousal beneficiary, you’ll be required to take the money out of that IRA in 10 years.

Aaron Bert:
An annuity, unfortunately, is one of the worst things to inherit because you don’t get what’s called a step-up in basis on an annuity. If it was a stock portfolio that you inherited, you would get that stock portfolio like current market value. That meant if you turn around and sold it the next day, you’d owe very little in taxes. There’s no step-up in basis on an annuity. You’re going to pay taxes on the gain between what the contribution was, the cost basis, and what the actual value is. The other thing about annuities is there’s a five-year window, so you have five years in which to empty that account out. There is a way to stretch it possibly by moving it to a different annuity and then turning it into an income stream. That could be a possibility for you if that’s something that you’re interested in. So there’s a 5-year window on annuities, and then you have 10 years like Matt said on the IRA. There is a clock ticking for you of when you have to actually empty those accounts out.

Speaker 6:
Okay.

Aaron Bert:
Great question.

Matt Murphy:
Yeah, thanks for the question.

Aaron Bert:
I am told too that we have a call from Debbie [inaudible 00:31:35] Have we got time for that one, Josh?

Josh McCarthy:
Yeah, let’s take Debbie right before this break. We got a break coming up, but Debbie’s got a question about fixed annuity that she wants to know if it’s too good to be true. Go ahead, Debbie.

Speaker 7:
I recently went to one of the financial seminars where they were pushing the fixed index annuities, and they were offering a 35% bonus, which shows up on your account the very first month that you are in the program. How can they do that?

Aaron Bert:
Understood. We see these often and that’s one of the teasers that they throw. Did they have a bonus on the annuities that you guys went and saw? Okay. That’s something that we often see and it’s a sweetener, right? In order to get people to lock their money up for 10 or 12 years and go into these products, a lot of times those bonuses only apply to what they call the income value. There’s oftentimes different values on these annuities. There’s the surrender value, and then there’s the income value or the withdrawal base. So the withdrawal base is the amount that they use in order to calculate what your income benefit’s going to be if you were to start taking income payments for it. Then you also have to hold onto this thing for a long time in order to realize that full bonus piece.
Just as a rule of thumb if something sounds too good to be true, it usually is too good to be true. It’s going to lock up your money for a long period of time. You’re not going to get the types of returns that you’re expecting. For most people, it’s not the right fit. Now again, like Matt said, maybe it is a right fit, maybe you do want that Corvette and it’s going to fit, but usually, you got to do a little in-depth situation on your situation to see whether or not that is the appropriate thing for you to be doing. But that’s one of the sweeteners that they throw in there. It sounds too good to be true, “You get a 35% increase on your money, doesn’t go down, and, oh, by the way, you get market-like returns.” Who wouldn’t want to sign up for that? But there’s always a catch there. You got to read the fine print and understand what you’re getting yourself into.

Matt Murphy:
Debbie, Aaron just gave you a pro-tip and for everybody listening as well. Pro-tip here, which is cash surrender value. When you’re looking particularly at annuities, you need to know some of the terminology. Cash surrender value is the value that if you call that insurance company to cancel your policy, that is the amount that they are going to write a check to you for. At the end of the day, that’s really your walkaway money. Everything else is a phantom value really in some way, shape, or form. You just want to be aware of that, Debbie. We really appreciate the call and let’s wrap it up.

Josh McCarthy:
Thank you so much, Debbie. If you want to hop on with the Certified Financial Group for one more segment coming up next, the number to call is (844) 580-9326, (844) 580-WDBO. Or if a question pops up to you at 10:01, and you’re like, “Oh, I should have called an hour ago.” Luckily, for all of us, the team at Certified Financial Group has an after-the-show number and Wynn Smith is standing by if you call (407) 869-9800, that’s (407) 869-9800. You are listening to On The Money where we’re planning tomorrow…

Matt Murphy:
Today.

Josh McCarthy:
… with the Certified Financial Group. How about that? Welcome back to On The Money right here on WDBO 1073 FM/AM 580, always streaming live in the WDBO app. We got about 90 seconds. We got about 3 minutes left of today’s show. If you want to hop on the air, quickly, 407… Forgive me, that’s the number to call them in the office. I’ll get to that in just one second. (844) 580-9326, (844) 580-WDBO. But what I’m going to call foreshadowing, if you had a question for Wynn Smith standing by in the office, whether you want to get specific with your finances or your personal information, and you don’t want to do it on the air or, well, if the show is over and you want to talk to an expert with the Certified Financial Group, call (407) 869-9800, (407) 869-9800. Matt Murphy, Aaron Bert, got just a couple of minutes left. How’s it going in there?

Aaron Bert:
Yeah, it’s going good. The room’s full. We’re super excited about this upcoming seminar that Matt’s about to do. Speaking of seminars, we have a lot more on the schedule here that Matt’s going to run through of where you can go over to our offices in Altamonte Springs to get to know us a little bit better and get some free information.

Matt Murphy:
A couple more that we’ve got on deck here. So on Wednesday, May 10th, we have Social Security planning basic rules and claiming strategies that’s hosted by Charles Curry in our learning center at our office on Douglas Avenue in Altamonte Springs. That’s again, Wednesday, May 10th. That’s one of those topics, once you make that Social Security decision, it’s pretty much irrevocable. You can’t undo it. So it’s so important for our listeners that have not made their Social Security elections as of yet, you need to get educated on it, and this is a great first step to do that. The next one that we have after that is on Saturday, May 27th, Gary Abely is hosting his famous healthcare options in retirement workshop in our learning center from 10:00 to 12:00. Gary talks about…
Just like Social Security is really important, you also need to be really educated on your Medicare and healthcare options in retirement because oftentimes, and I’ll be talking about this in my workshop here in just a few minutes, the decisions you make there, while maybe not irrevocable, can create some penalties and taxes and so forth that are really hard to dig yourself out of. So you really have to be educated and well-prepared going into both Social Security and Medicare. So, fortunately, you have us and the team here to educate you on those things. Once again, that’s Saturday, May 27th, hosted by Gary Abely. Gary’s also a CPA, incidentally, for those of you that didn’t know that, as well as a CFP. That’s 10:00 to 12:00. You can register for all of these workshops on our website at financialgroup.com. Again, that’s financialgroup.com. Go to the Workshops tab at the top of the page, and you’ll see all of the upcoming events on the website there.

Aaron Bert:
Yeah, super excited about those workshops. It gives people an opportunity to come in, get to see where we are, get to feel comfortable with our space, and obviously, get some free information, but we’re not selling any products or anything like that. We’re really there to provide information to help educate you and hopefully, give you a sense of comfort with what we do and why we do it, and how we do it. So super excited about those as well. I know we’re coming to the end of our segment here. We’re really, really appreciative for the audience that showed up today. This is kind of fun for us and maybe we’ll be doing some of these more in the future. We got someone that drove all the way over from Melbourne, and I believe we got someone from Groveland as well. So people are coming in to get our great advice here on the radio and then also to listen to Matt’s upcoming workshop. Again, super excited, appreciative of the audience. Thank you so much for coming out. We are very, very appreciative.

Josh McCarthy:
Thank you so much. Audience from the studio, I have one request from you, you all did such a great job going out of the last segment. Let’s see if we can get a big today from the room again. Ladies and gentlemen, thank you so much for listening to On The Money where we are planning tomorrow…

Audience:
Today.

Josh McCarthy:
… with the Certified Financial Group.

 

Leave a Comment

Your email address will not be published. Required fields are marked *

Translate »

Schedule A Virtual Meeting From Anywhere In The World