8.25.22: Audio automatically transcribed by Sonix

8.25.22: this mp3 audio file was automatically transcribed by Sonix with the best speech-to-text algorithms. This transcript may contain errors.

Producer:
Any examples used are for illustrative purposes only, and do not take into account your particular investment objectives, financial situation or needs, and may not be suitable for all investors. It is not intended to predict the performance of any specific investment and is not a solicitation or recommendation of any investment strategy.

Producer:
Welcome to Prosperity Principles with your host, Ed Cruz. Each week, Ed and his company seek to educate Americans like you by providing real strategies for protecting and growing their hard earned money. Get it for a full hour of financial information and economic news affecting your bottom line. Ed wants you to reach the financial freedom you've worked so hard for. So now let's start the show. Here's Ed Crews.

Ed Cruz:
I want to thank the audience again for tuning in. And welcome back to Another Week of Prosperity Principles.

Producer:
Hello. Hello, sir. How are you doing so far? This nice, lovely Florida weekend.

Ed Cruz:
Yeah, well, doing well. You know, everyone around me now seems to be healthy, and that's always a plus.

Producer:
Oh, yes, definitely. So you love to hear that, especially after these these past couple of years that we've all been through and our crazy times that we've had, of course, here in this country, but around the world as well. But I'm excited, though, Ed, to to share more this weekend in our Smart Retirement Plan series. We've got some rules to follow to talk to people about. And people are probably hearing that and they're like rules to follow. I kind of follow rules every day. Why are you talking to me about more rules? But these are good ones to follow and they're really helpful rules for you to follow. We've also got more on taxes. Another fun topic, but we're going to make it fun because we're going to tell you how to minimize them and then income streams as well. So a lot of great stuff coming up over the next hour.

Ed Cruz:
Yeah, you're right. And you know, if you don't know what challenge is you're bound to face in the future, you're going to make some mistakes. And we want to help you avoid that. So let's let's buckle down for an hour and let's get some information across to the people.

Producer:
Yeah, absolutely. That's right. And folks, if you want to check out the website, feel free to do that. It's my prosperity team dot com. That is my prosperity team. You can go there. You can book an absolutely free consultation with Edwin Cruz going over all of your financial picture and what you have in the works right now as far as planning for your future and your retirement, go and see if you could possibly be doing better there. Also, the telephone number, if you'd like to give at a call, 3862285769. That's 3862285769. You can also subscribe to the show. Check out past episodes as a podcast as well. Leave us a rating there. Wherever you get your podcasts. And we just absolutely love hearing from our listeners as well. Well, it's been kind of another busy week in the markets and in the financial arena here. And we had a revision of GDP numbers this week showing still negative growth in the previous quarter. So still technically meeting the the definition of a recession right now. But it was not quite as bad as the original estimate when they went in, revise the numbers. So at least that's kind of, I guess, a little bit of a silver lining around that big cloud.

Ed Cruz:
Yeah, you can say that. And then but you know, as soon as we get that type of information, what do we hear next? Well, we have student loans being forgiven. So. Well, us taxpayers, you know, if someone's not paying, paying for it, somebody else has to pay for it. Right. And for some reason, our government just doesn't understand. And then we throw in on top of that some type of a reduction package, inflation reduction package, which for the world of May, I can't understand what these people are trying to say by that. When you start talking about the spending that this country is is doing and that's what's causing inflation, then you add just a little more fuel to the fire. I don't know how you expect to extinguish that fire.

Producer:
Yeah. There you go. Get out the fire extinguisher, not the gas can. That's basically the the advice here. But, yeah, you know, it's been a weird, weird couple of years and weird year economically, especially in 2022 with inflation, but still having a lot of strength in the jobs market. But we've got other signs that are not so good. Of course, with all those consumer prices going up and things like that, supply chain issues still rearing their ugly head, gas prices especially. So it's it's been a lot and it's been really just a strange, strange. Each time and and the times keep getting weirder for a lot of people. And as a matter of fact, I put together I want to go ahead and share this with our listeners. I put together a piece this week on how people are changing their habits because of all of this inflation that we've been experiencing. And you might be surprised at what some people are doing. Let's have a listen to that. We can chat about it here on the other side. Inflation is hitting us all in the wallet and changing many of our habits. I'm Matt McClure with the Retirement Radio Network powered by a mirror life.

Producer:
Well, there are some signs inflation could be easing off. Prices for goods and services are still significantly higher than this time last year. Across the country, the Bureau of Labor Statistics says consumer prices rose eight and a half percent in July compared to a year earlier, with the cost of everything from groceries to appliances to travel going up at levels not seen in four decades. Americans are changing the way we behave with our money. The New York Times recently reported, quote, Some are starting budgets and shopping at discount stores. Others are skipping red meat and fish, walking dogs for extra cash, cancelling subscription meal kits and more. The paper spoke with one man who even tries a psychological trick filling up his gas tank when the level only goes down by a quarter. That way, a trip to the gas station only costs about 25 bucks. But some people are taking things a lot farther. Try more than a thousand miles farther. With many of us still being able to work from home. Many Americans are moving to places like Mexico City, where the cost of living is much cheaper.

Eric Rodriguez:
In San Diego. My apartment was probably 20 $500. One bedroom for a forever studio or studio. Here I have a one bedroom and I pay $800 a month.

Producer:
That's Eric Rodriguez speaking to CNN. He says the transition to Mexico City has gone well.

Eric Rodriguez:
I think there was a sense of we want people to come here to stimulate the economy. Thank you for being here. But I know that recently there's been kind of complaints from locals about the effect that ex-pats living here has had on their own lifestyles.

Producer:
And many locals told the news channel that prices have gone up for them, while some businesses are being displaced to make room for luxury apartments. So what changes are you making because of inflation? That's a key question to consider as we all pinch pennies. With the Retirement Radio Network powered by Emera Life, I'm Matt McClure. So there you go. And I mean, people taking things as far as even moving out of the country because of, you know, cheaper cost of living somewhere like Mexico City, that, you know, obviously costs of living much cheaper there. That one guy said, though he lived in I believe it was, it was somewhere in California, whereas rent for a studio apartment was 2500 bucks. It went down to 800 when he moved south of the border.

Ed Cruz:
Yeah, it's unbelievable. You know, when you think about rent and where they've gone, gosh, for us here in Florida, if we if we go north, we end up in Georgia. If we go south, we end up somewhere in the Gulf of Mexico here in the waters. So we really don't have anywhere to run on. And if we took a short plane ride, where are we going to go? Let's say Cuba, Dominican Republic, I guess I have no choice. I'll be staying right here. I'll stay right.

Producer:
There you go. Absolutely. Well, you know, hey, you're always welcome in Georgia. We'll always have you up here at any time.

Ed Cruz:
So just get in the water.

Producer:
Yeah, well, not that the cost of living is any cheaper up here, but I'm just saying you're welcome to come. Well, there you go. That's a look at what some folks are doing to kind of deal with inflation that we've been experiencing this year, especially.

Producer:
And now of wholesome financial wisdom. It's time for the Quote of the Week.

Producer:
And Ed, this week's Wise Words come from maybe a little bit of an unexpected source for our listeners. P.t. Barnum. Yes, of Barnum and Bailey circus fame. And he said this, quote, Money is a terrible master, but an excellent servant. I love that one.

Ed Cruz:
Yeah. I mean, when you think of P.T. Barnum, that's all you're thinking about is the is the circus. But he's more than that. He's he's an author, a philanthropist, and surprisingly, a politician. And he became one of America's first millionaires. And his quote illustrates the importance of making your money work for you. And, you know, if all you do is work for your money, it essentially becomes your master. But if you put your money to work paying bills for life's necessities, purchasing assets and other investments, money will be serving you. And so strive to be the master of your destiny by making sure that you're the master of your money.

Producer:
Yeah, that's it. Control it or it will control you is the way that things will go here. And yeah, I love that. And I didn't even know, you know, until we were sort of doing some research into P.T. Barnum that he had such a successful career outside of the circus. Because, yeah, as you said, that was that's what people think about when they think of him. And I actually will now always think of Hugh Jackman because of that movie, The Greatest Showman that he played P.T. Barnum in that movie. So now I'm just going to think of Hugh Jackman when I think of P.T. Barnum. But yeah, I mean, just a wild life that he had and very successful and obviously had some financial wisdom. And we're glad that he could share it with us all these years later here on the show. Well, I mentioned this a little bit earlier, Ed, and it is that time for us to continue our series Installment three this week of the Smart Retirement Plan series. We've got some some rules to follow. We've got taxes to talk about and we've got income streams. I want to start off, though, with to go ahead and get everyone's favorite subject out of the way, and that is taxes. Yeah. We started a little bit on this last week mentioning taxes, but we want to continue that this time around and talking about smart tax. So what does it mean when we say that people need to be smart when they think about their taxes, especially when it comes to planning for retirement?

Ed Cruz:
Well, most people wouldn't know this, but did you know that different investment accounts are taxed differently? By understanding how these accounts are taxed differently, you can ensure that your money is working, how you need it, and when you need it.

Producer:
You know, a lot of people don't know this and I feel like, Oh, well, I know this, but probably only because I work with you. Do I know this? But yeah, there are different types of tax ways that accounts or investments for your retirement are taxed. Talk about those two terms that people should be familiar with. We've got tax exempt and tax deferred. What's the difference between those two?

Ed Cruz:
Yeah, there's there's a big difference between those two. A tax exempt account is tax when you contribute, but not when you withdraw. This is a great benefit in retirement because you don't have to worry about being in a different tax bracket than when you contribute it versus being tax deferred. A tax deferred account gives you the tax benefits upfront, but you you won't have to pay when you contribute, but you will have to pay on any distributions. So, you know, when you think about that, you have the most popular type of accounts here, traditional IRAs, Roth IRAs and 401k plans. People know about those. Right. But traditional IRAs are tax deferred. Right. We while we're working, if we're self-employed, we can stock some money away or even just regularly employed. We can we can open up an IRA account, put that money in there. The rules that we have to follow are that we can't exceed a certain amount of an investment. So this means that you'll have to pay taxes when you withdraw from these accounts. You have no way of knowing what tax bracket you'll be in when you start withdrawing these funds from a traditional IRA and you're in retirement. But, you know, you could be looking at a reduced payout if you're in a higher tax bracket. Right. And so the way that we can escape the taxation later in life is by doing Roth IRAs, which are tax exempt, which means that qualified distributions are free of taxes and penalties, and you will only be taxed on your contributions.

Ed Cruz:
So early on in life. You take take the tax hit so that when you're in a fixed income. During retirement, you won't have to worry about putting yourself in another tax bracket. So, you know, all these years your money will grow tax free and any withdrawals are tax free because you're taxed when you contribute. So your money is protected from increased tax rates that are out of your control. And of course, the, the the third popular plan here is a401k plan similar to to an IRA. A41k plan is tax deferred. If you're self employed, obviously, you you have to go through some special measures to open up a, let's say a simple 41k plan, a small business for one K plan, but most large companies have 41k plans. And again, it's tax deferred. And these accounts differ from IRAs that your employer sets it up for you. You still contribute to them, but your employer can also match your contributions. And that's the nice part. About four one KS, you have somebody else adding to your pot. The employer matching is essentially free money, so why wouldn't you take it? The contribution limits employers and employees. And so the combined effort of these, if you're younger than 50 years old, total contributions can exceed 61,000 a year. And if you're over 50 years old, you're eligible for a catch up contribution of up to an additional 60 $500 a year. So those are your three more popular plans for retirement. Yeah.

Producer:
And each of them, as you said, has has its advantages and its disadvantages. You know, particularly like with the 401. K, the big advantage there being the employer match those contributions really essentially doubling what your funds are that are going in. But of course, that's going to be taxed later on when you have payouts from that account. A Roth IRA is not taxed when you take out those withdrawals, but then again, you don't have the employer contributing as well. So it's each of those and the traditional IRA has its pluses and minuses, too. So, you know, it's there are different situations for different folks. And it's not necessarily it doesn't necessarily mean that just because, you know, your coworker, your mom, your dad, your friend, whoever has a particular type of account that that's necessarily going to be right for you. It could be that your particular situation calls for something different, right?

Ed Cruz:
Yeah. You know, I'm asked all the time, Ed, is there a right way to do this? A wrong way to do this? And and I tell them, no, it's, you know, implement pieces of these strategies. And every way, you know, if you have a41k your job and you want to additionally contribute into a Roth IRA and a traditional IRA, you just split the contributions, right? And you can have a piece of the pie in all three. So you can have your hands in all of these buckets. And why not why not take advantage of it? You know, if if if you really are concerned about taxes in retirement, then skip out on the traditional IRA, go to the Roth IRA and make your full contribution there. So, you know, there's no right or wrong way. It's just like I always say, it's it's it's about discipline. You just have to be willing to part with that money for now and have it later in the future.

Producer:
Yeah. You say your goodbyes. Well, you don't really say your goodbyes. You say your clatters laters to the money. You let it go off. You let it grow, you let it become you know, you let it multiply and then you have it later on. That's the thing is being right, being disciplined and being patient. Two of the biggest things when you talk about that and saving for the future. Well, let's also speaking of the future, let's talk a little bit about life insurance here. You know, because folks might not necessarily associate life insurance with retirement planning, but just because they're used to not really life insurance being life insurance, they're used to it being death insurance, basically. So what is life insurance and how could it work for folks in retirement?

Ed Cruz:
Well, you're right. Most people don't think of this as an option in retirement. And this could be it could pretty much mirror within what what a Roth IRA would do for you. Right. So it's important to know the different types of life insurance, what type of different life insurance policies are out there and available and which is right for you. Life insurance will help support your family when you pass away, and it can help cover the cost of final expenses depending on what type of life insurance you choose. It can also give you extra income in retirement, and that's what people never think about. So life insurance is a contract between you, the insurer, typically a company in you, the policyholder. A combination of this contract solidifies a promise to pay a death benefit to your designated beneficiary when you pass away. And of course, we have term life insurance and we have permanent life insurance. Those are two different types of life insurance, and they're differentiated. Bye bye. How long you want the the insurance? How long you need the policy to last? If you only need the policy for a short amount of time, then you might want to choose term insurance to cover your year, let's say your mortgage, should you pre decease any type of expense. That way, this type of life insurance can be set for a number of years of ten, 15, 20, 25, 30 years. Those are the ones that are commonly used. Permanent life insurance lasts the the entire lifetime of the policyholder unless you stop paying paying premiums.

Ed Cruz:
These plans are typically more expensive. Now, as far as permanent life insurance, you have whole life, you have universal life, and you have indexed universal life, which is the the newer one of the bunch. But when we speak about whole life insurance that's been around forever, right? This type of insurance will accumulate a cash value over time. And you can use the accumulated amount to cover policy payments, loan repayments or simply for for cash. Now, universal life similar to whole life. This type of insurance accumulates cash value over time. And the big difference is that cash value will will earn interest. You will also get flexible premiums during the lifetime of the policy and the simple way of of thinking about universal life. It's a combination of like whole life and term life wrapped up in one. And so it just gives you more flexibility. Now, the last one in the newest one of the group would be indexed Universal Life. And this is another type of insurance that earns cash value indexed. Universal life policies give the policyholder the chance to earn a fixed or equity indexed rate of return. So you have, instead of a universal life policy, paying 5% or whatever it may be into the policy here, you may have years where you earn far above that six, seven, 8%, 9%, depending on what the what the indexes do. So, I mean, there's there's an array of different insurance options. And, you know, let's talk about what might be right for you.

Producer:
Yeah. And that's the thing is finding, you know, as I said a little bit earlier, what is right for you? Because it's not one size fits all. And with all these different options, you know, one of those options may be perfect for you. Something might not be quite right. You know, something may perform better for you or be of more use to you and to your family. But it's nice to know to when you talk about life insurance, as we say, it's not just the old death insurance anymore. There are ways that you can make it work for you in in retirement. So what do people need to ask themselves? And when they're thinking of what you what you were just saying, finding what's right for them, what are some questions they might need to ask themselves?

Ed Cruz:
Yeah, well, obviously is how much do you need? Right? How much debt do you have? What type of income might you need in retirement? Are you looking for that tax free income? What do you plan on using this life insurance for? So, you know, the the impact on how much you need and what type of policy you'll choose. You'll also want to think about how much your family will need to maintain their standard living should you pass away, right? Because just because you receive a death benefit, you get left 50,000 behind. But if your husband was making or wife was making, it depends on who's the higher bread earner here. Right. But if they're making 100,000, you leave behind 50,000. I think you left your family short. Right. So you need to think about possibly 2 to 3 years of income replacement because you're going to leave your family in a hardship and you have debts to cover, you have income to replace. There's a lot of changes happening here. And don't forget that funeral expenses today are quite expensive. The average funeral cost is between 7012 thousand. And I'll tell you, that's based on averages. Most of them that I've seen and I've been to too many, unfortunately, they actually range more from 12 to 15000. And so these these are some some things to really, really think about. And I would say that if you don't have life insurance, I don't want to say you're selfish, but you need to think about the people you're leaving behind.

Producer:
Absolutely. And I think I've mentioned this on the show before, but, you know, when my my dad passed away back in January of this year and when just that really him having a life insurance really gave my mom and my my whole family a lot of peace of mind. And, you know, I mean, he also did some some pre-planning for his services at the funeral home and what all he wanted and all of that which and started like a payment plan on that so that. Really helped as well. So it was just so, so helpful to be thinking of what's going to happen after you're not around. And that is life insurance is the way to go to to do that and to make sure that your family gets that benefit when you're gone because you're not always going to be around. I know that we like to think as human beings that we are invincible and that we're always going to be here. But no, that's not that's not how the world works. Unfortunately.

Ed Cruz:
It's not. And you know what? People right away, they'll start asking you. So, you know, if I get life insurance, here's my age, what is it going to cost me? And, you know, it's a little more complicated than that. Right. But, you know, there are multiple factors that affect premium payments. And it's not just your age, but that is one of the biggest factors. Obviously, how much insurance you're looking for is another is another factor, your personal medical history. And they'll even look back at family medical history because a lot of things, as we know, are hereditary. So all these things are going to impact how much you're going to end up paying. And the insurance company will also consider whether you're a smoker, non smoker. Are you a reckless driver or unsafe driver? You know, they don't want to pay out if you have five D or at least don't want to set up that life insurance. If you have five DUIs on your record. Right, your chances are you're going to hurt someone. You're going to kill yourself. You know, they want to they want to make good decisions. And, of course, we want you making good decisions out there. So dangerous lifestyle choices are going to have an impact on your life, life insurance premium. All of these factors combined together are going to determine the risk and your premium payment. So a lot of things to consider here.

Producer:
Yeah, that's the thing is you have to have to remember that the life insurance company is going to assess that risk and that is what they're going to base the premium payment on in a lot of in a lot of ways, they're they'll they'll take that information and run it through the algorithm or whatever they use and then determine that premium payment from there. And so, of course, you know, we've talked about a little bit about the benefit of life insurance as far as the payout, but there's actually a benefit that I wanted to ask you about and that that has to do with the payout itself and how that's kind of treated by the IRS.

Ed Cruz:
Well, you know, obviously, when we hear of death benefits, right, people will sometimes confuse and they'll hear death benefit in annuities. Right. And they'll say, oh, that's tax free. It's not. But in life insurance, we we actually see that the death benefit is tax free. And and I will say that when we talk about income in these in these choices of life insurance and again, going back to it, indexed universal life, the income that we derive from these, that's also tax free. So again, that's another that's another option that we that we should be thinking about. It's not just a death benefit, but let's start thinking of life insurance as being able to use it as a living benefit as well. So, you know, let's not lose sight that that the tax free part of it in every way will help you divest from the IRS when it comes to your retirement account. And think of life insurance as a as a living benefit, as I say. And the index universal life insurance plan is the one that I would use for for for an income in the future. So I think there are some some good use here. There's a lot of good conversation we could have based around all this. And if you're ready and you know you need it, call in and let us help you with with the life insurance needs.

Producer:
Yeah, absolutely, folks. And you can do that at the number to reach Ed directly. It's 38622857693862285769. Or you can go to the website my Prosperity Team dot com and you can also go to the website. There's a lot of information about a book called Annuity 360 and just mentioned annuities a second ago. And we're going to get into more of that here in in a moment. But I wanted to mention the book, because you can actually get a copy of the book absolutely free of charge to you. There's no charge to be sent. Just go to my prosperity, Time.com. All the information is there and you can get a free copy of this book with a lot of great info in it. Really, pretty much everything you ever wanted to know and didn't know that you. Needed to know about annuities in this book. But it's an easy read. It's not it's not a thick book. It's not it's not a heavy book. You're not going to build your arm muscles up trying to carry the book around or anything. But there's so much great info all in it. And that sort of leads me into this next section here, end of Smart Rule following, because I wanted to as we go into this section of our Smart Retirement plan, I wanted to play a chapter from the Annuity 3060 book read by the author Ford Stokes. And we're going to actually talk about one of these rules here. So we'll play that here in just a second. But there are a few rules that can help folks when they are trying to build a solid foundation for their money and for their retirement. And let's play this because the first one is the rule of 100. And give us the sort of I guess, what is it, Spark notes or Cliff Notes version of what the rule of 100 is, and then we'll get more details from Ford.

Ed Cruz:
Yeah. You know, simplified rule of 100 is just simply that you take 100 minus your age and the remaining amount that's there would be the the level of risk that you should be taking. And I think people need to follow that a little tighter because, you know, as we age, first of all, we don't know when our date of death is coming. And if you don't if you don't prepare ahead of time and start divesting some of this risk, you could be caught up instead of leaving your family. Family with more in the future, you're going to leave your family with less in the future. And so that's how we try to help you with these simple rules.

Producer:
Yeah, absolutely. So it is a simple one to understand. But we're going to get, as I say, more detail about it. From Ford Stokes, the author of the book Annuity 360. Here is the chapter about the rule of 100 from that book, and we'll continue talking about these helpful rules on the other side.

Producer:
Chapter six, The Rule of 100. Big idea. You want to risk less as you get older because you have less time to make up any big losses. As you get closer to your golden years, many financial professionals advise gradually reducing your risk. Retirees and pre-retirees don't have the luxury of waiting for the market to bounce back after a dip. The dilemma is figuring out how safe you should be in certain stages of your life. For years, a commonly cited rule of thumb has helped simplify asset allocation. This rule states that individuals should hold a percentage of their stocks that is equal to 100 minus your age. For example, a six year old would have 40% of their holdings in stocks and 60% in fixed income products like bonds or fixed indexed annuities. Why you should follow the rule of 100. Take our current example of a 60 year old at age 40. Your risk capacity is higher. You have more time to rebuild your wealth should you experience a dip in the market. However, at age 60, you can't afford to risk as much of your portfolio in the market because the time horizon to rebuild your wealth is much shorter. Rule of 120. Many financial advisors now advocate the rule of 120 so they can get a significant rate of return for their clients and maintain management of the portfolio. I disagree with today's market volatility. A retiree does not want to go back to work in a job making less than what they made before. They must consider following the rule of 100 or at least a 5050 smart financial plan that is built equally with smart risk and smart, safe investments.

Producer:
Fixed annuities, including multi year guaranteed rate annuities, are not designed for short term investments and may be subject to restrictions, fees and surrender charges as described in the annuity contract. Guarantees are backed by the financial strength and claims paying ability of the issuer. That was a clip from the book Annuity 360 read by Ford Stokes, the author of the book Talking about the rule of 100. So a lot of great detail there, Ed, but there are three rules. We have the trifecta here for our listeners today. What's the next rule that folks need to know about?

Ed Cruz:
The next rule is the 4% rule. And, you know, the one thing I didn't mention about the rule of 100 is that that longevity risk, right. We're living longer. And I think it ties in well with this 4% rule. And the 4% rule says that retirees can withdraw an amount equal to 4% of their savings in their first year. Retirement and withdrawal percentages in every subsequent year would then be adjusted for inflation. As with any rule, there are some exceptions, right? Depending on the situation. Some experts suggest abiding by the 3% rule to help with the protection and growth. And like I always say, you know, when the when the market drops or your assets drop by 20, 25, 30%, how many people out there actually adjust their income to what just happened to their finances? They can't afford to. They're accustomed to living on X amount of dollars and no one's going to cut their pay by 20, 25, 30%. And that's a big problem. So again, that's why we say the rule of 100 is the one that you need to truly abide by because it will help these other rules, or at least this 4% rule. It will help it significantly while you're while you're in retirement. And then we have the famous rule of 72. And, you know, it's the way to estimate how quickly your investments will double given a fixed rate of return. Or investors can divide 72 by the annual rate of return to get an idea when your investments will duplicate themselves. For example, if we're looking at a dollar at an annual fixed interest rate of 10%, the rule of 72 states, that it will take 7.2 years to grow to $2. Or you can flip that around and say if it grew by 7.2, it would take you ten years to to double your money. So the rule of 72 is only an estimation tool, but with lower rates of return can be very accurate.

Producer:
Yeah, and that's the one where it's like, okay, when I hear the rule of 72, I immediately thought, okay, what am I supposed to do when I'm 72 years old? But that's not what it's about. It's it's it's about doing a little simple math there to help you figure out how your investments are going to perform and how long it's going to take for that money to grow. And I think that there is one thing here that we should emphasize. We've said it, but I think we need to emphasize it for our listeners here is these rules really are just just guidelines, right?

Ed Cruz:
Right. Absolutely. You know, we just we use these to help along the way. Obviously, we can always bend these a little, but they're guidelines to help you build your ideal retirement portfolio. You know, inflation, other market conditions can affect how well your investments perform. And you might need to take additional measures to protect your money. Again, talk to me. Talk to someone in the industry of your concern about your investments or if you have any questions regarding your savings. But again, not listening to these rules, it's just not financially prudent to do.

Producer:
Yeah, exactly. And use them, as we say, as as guidelines to help you along and build that foundation really for a successful retirement. Okay. So we've been through smart tax. We've been through the rule following. And now that comes the time where people I think their ears might perk up a little bit because it's smart income time and people are like, Ooh, income, I like that. So we'll talk about smart income here with a little bit of background to start off with on Social Security. And I'll just I'll just kind of run down a couple of these facts about Social Security. You know, it was first signed into law by President Franklin D Roosevelt back in 1935. I think we just celebrated the anniversary of that Social Security Act being signed not all that long ago. The first payments were made available in 1940. So obviously, this is this has been around a while, folks. Social Security, one of the largest government programs, not only here in the US but in the world, because 176 million people paid Social Security taxes last year, as of April of this year, more than 65 and a half million Americans were receiving Social Security benefits. And of course, as the life expectancy of Americans increases, though, there are some concerns the program is not going to be able to support retirees with fewer people in the workforce. Social Security Board of Trustees is estimated that funds will be depleted by 2034 and will only be able to pay out right around 77% of scheduled benefits. Surely, to goodness they'll find something to to change that outcome, we hope. But that's the thing. We got a we got a plan just in case. Right.

Ed Cruz:
You know, I always say with the trillions that we give away around the world, we can surely find the money to help boost this Social Security trust fund again. And I think it's a shame, you know, the Social Security, when it was set up, if you look back at the time frames that you're talking about here, Social Security was set. In a period where the average person passed, you know, your life expectancy was right around 66 years old, I believe, if I remember correctly, in the read that I did years ago. And so they were thinking that this would be a kitty that they would be able to abuse and use. But it's come back to bite the government because people are just living longer. And that's a big part of why we're here. Right. We're here to help with with that risk with that longevity risk and income. You know, it'd be nice if it was just a want, but for I would say 99% of America, it's a need that we have. Right. We just don't have tens of millions of dollars in the bank just in pulling from it.

Ed Cruz:
So, yeah, you know, Social Security, it's just one of those things. We need it. It's not that we just want it. And so let's dig a little more into Social Security. Right. You become eligible for benefits when you reach 62 years old and and been contributing to the program for at least ten years. Sometimes they look at that and form quarters. However, waiting for full retirement age gives you an increased monthly benefit. The the FRA, which is the full retirement age, is determined by the year you were born. If you were born in 1955, your FRA is 66 years and two months. Fra increases gradually to 67 for those born in 1960 or after. And obviously being a seventies baby, I already know where I stand and when I look at the numbers and I did after reading all this stuff, I took a look at the numbers that I'm saying, gosh, they're going to decrease it by by a certain percentage here. And, you know, it's not what we want to see because we say we've paid into it, but it is better than receiving zero, right?

Producer:
Absolutely. Anything is better than zero. Right.

Ed Cruz:
Our our spouses because this gets lost in the shuffle sometimes. But when we're eligible, you know, you can actually have your spouse begin collecting benefits based on your earnings. And so that it doesn't affect their Social Security. Obviously, for or if you don't know this out there for every year that you wait, it goes up 8% simple interest. And so if you can afford to wait to to to age 70 which is the maximum if you can afford to do that, do that because you'll have a much larger Social Security paycheck in the in the future. And that's part of my planning. But for everyone, it's going to be different, right? The amount of dollars that you can receive from Social Security is determined from the average indexed monthly earnings. Or Amy, during your 35 highest earning years as of April 2022, the average monthly benefit was $1,588.89, or for a total of $19,066.68 annually. For every year you delay collecting your benefits starting at 62 and ending at 70. Like I said, your benefit amount will increase by 8%. It's worth repeating. So your monthly, your maximum monthly benefit in 2022 for people age 62 is 2364. And the maximum monthly benefit in this year for people age 70 is 4194. What we all like to receive that one.

Producer:
Oh, yeah, that's that's what I'm talking about.

Ed Cruz:
There you go. So there is also an annual cost of living adjustment that ensures that your retirement funds don't lose value due to inflation. And in Social Security, they're expecting to see increases of somewhere between eight and 10% from what I. What I've seen and heard so far. And I think you touched on that subject possibly last week.

Producer:
Yeah. Yeah. Last week or week before, I think. And yeah, they're talking about possibly one of the largest cost of living increases ever because of the inflation numbers that we have seen. But also some potential unintended consequences where it could actually throw some beneficiaries into a higher tax bracket. So then they're being taxed at a higher rate. So they won't be seeing that money necessarily in their checks or their deposits from the Social Security Administration each month. But, yeah, you know, it's it's a very interesting times that we live in where you've got that the potential for what looks like a big pay increase. But it could be that it you don't really feel it because of the extra tax burden that you might have to bear if it does throw you into that higher tax bracket. So that's just something to be aware of. For listeners out there.

Ed Cruz:
You remember last week I said what the bold print given the fine print it.

Producer:
To.

Ed Cruz:
Another great example of it. Right. We're you're going to receive a large or the largest one of the largest increases in Social Security. But it came after the one of the largest inflationary periods in history. So yeah, I think things are going to kind of wash out there.

Producer:
Yeah. Yeah, exactly. So there we go. Well, hopefully you don't end up in that higher tax bracket and you can enjoy some of that extra payment there. But we time will tell, as they say. So talk a little bit about as we as we continue our discussion on smart income as part of a smart retirement plan here and talk about the retirement income gap, what does it mean the retirement income gap is is it basically having more month than money? Is that what we're talking about here?

Ed Cruz:
Well, you know, according to the VP Foundation, 62% of baby boomers believe Social Security will provide at least half of their income during retirement. The average again, the average monthly benefit right now is $1,542.22. You know, I don't know about you, but for me, that would that would not cover, I think, the first week of of any month out there. So exactly the the the maximum max monthly benefit if you're 62 is is 2364. And the the maximum benefit if you're 70 is 4194 for a total of 50,328 annually. 76% of retirees say income stability is a top concern for their retirement. But when we talk about a retirement income gap, you know, it's it's covering our core expenses are food, clothing, shelter, taxes, health care, discretionary expenses. You know, we go out and eat and we want to go watch a movie. And, you know, we got to watch out everything that we do here versus our guaranteed income sources, which are our pensions and Social Security. That's that's when we take a look at both of those, you know, are we going to have more money or less money at the end of the month? Are we going to be in a negative? Are we going to depend on a credit card? I hope not. But, you know, we have to look at all these things. You know, if you don't sit down and actually and you should be doing this already so that you can prepare in the future, but you should be looking at how much your Social Security is going to be. What do you have saved aside? You know, and we can take a conservative estimate and we do have income calculator tools to show you what your income will actually be in the future.

Ed Cruz:
So if you have no idea, if you're looking at at all this and saying, well, I don't have a way to calculate any of this, but we have those those ways to calculate that and actually show you, for the most part, exactly what your income will be in the future. So if you're needing to check to see if you have an income gap or an income surplus, you know, we can help you figure all this stuff out, make sure that you're saving enough money during your high earning years. And typically, that's for most people beyond the age of 40, right? All the way up to about 60. Those are going to be your your high earning years, you know, review your monthly expenses for for anything extra that you're paying out there. You know, like I said earlier, consider delaying Social Security. You know, I've already made the conscious effort to say I'm going to delay it to to the maximum. And, you know, these are things that you figure out if you know, where you stand. So if you don't know where you stand again, reach out to us. You know, you will know where you stand when you're done with with a consultation with us. And so, you know, review your investments, your withdrawal strategies. Consider investing in annuities, which are truly the only form of guaranteed income that you can receive out there other than a pension or so to establish an income stream that you can never outlive. So give us a call. Let us help you. There's there's there's nothing you have nothing to lose and everything to gain by calling us and figuring out where you stand income wise in retirement. Yeah.

Producer:
And as we say, often, you know, knowledge is power. And so that's what I know you really like to to do here at is, is educate listeners and your clients as well about their options for retirement. And it's really. You know, a helpful thing because you don't know what you don't know. And so you learn what you don't know and then you'll know it and you'll be in a much better position going forward. Once again, the telephone number, if you'd like to reach out, is 3862285769. The website my prosperity team dot com. It's this week in history. Some big significant things happening this week in history. Ed, start us off here. There's a there's a big one in sports. If you're a big baseball fan like I am.

Ed Cruz:
Yeah, well, so am I. And thanks for letting me cover this one on this date in 1939, the first baseball game was televised. The game was narrated by Red Barber, pitted the Cincinnati Reds against the Brooklyn Dodgers at the famous Ebbets Field in New York. The game was televised on WSB, later known as W NBC TV, and paved the way for what we have grown accustomed to is a multibillion dollar industry. The game was shown from just two camera perspectives and that would have driven me nuts. But then again, back then, you know, it was it was exciting enough. So, you know, there was a camera down the third base line and a camera high atop home plate. In today's game, you have about 50 different camera angles, which I love. But anyway, that's that's a great week in history tidbit there.

Producer:
Oh yeah. And you got cameras now that like they fly above the field and you're getting all kinds of angles that you never got before. And it's kind of crazy. And, you know, you go back to 1939 and you think, okay, well, they couldn't put the strike zone up on the screen. So you don't know if the umpire is crazy or if your eyes are deceiving you or anything like that. So it's like they didn't have all these fancy tools and 900 cameras and everything, just two cameras on the field, which is kind of wild. But yeah, that's black and white. A good one. Yeah, I know. It's crazy. Well, that is a great sports one. And there's also another one just right about this date in 1964. It has to do with entertainment. And it was the movie Mary Poppins was premiering in Los Angeles this date back in 1964. It is, of course, a wonderful and fantastic and fantastical film by Walt Disney. It was directed by Robert Stevenson and starred Julie Andrews. Mary Poppins, just a timeless classic there. It was shot at Walt Disney Studios in Burbank, California. And the film actually became the highest grossing of 1964. And at the time, it was Disney's highest grossing film ever. Of course, Disney is Disney, and now a million films have grossed more money than that in the years since. But the movie did receive a total of 13 Academy Award nominations and won five, including Best Picture and Best Actress for Julie Andrews. Just a great, great film there. And actually like that movie that they did a few years ago, I was saving Mr. Banks, the one with Tom Hanks in it at playing Walt Disney. That was a cool like look by sort of behind the scenes at how that Mary Poppins film almost didn't happen. So it was kind of cool.

Ed Cruz:
I missed that one.

Producer:
Yeah, it was. It was a good one. I pretty much like anything with Tom Hanks, but there you go. Well, and then there was one more that happened on this date back in 1963, and it was a big one. And if you want to run us through this.

Ed Cruz:
One and this is historic, right back in 1963, Dr. Martin Luther King Jr delivered his famous I Have a Dream speech that addressed the March on Washington for Jobs and Freedom Civil Rights March. And at the Lincoln Memorial in Washington, D.C., with tens of thousands of marchers in an effort to press the United States government for equality. And, you know, that was that was great. And, you know, sometimes you think about what changes history and he surely was one great one.

Producer:
Yeah, absolutely. So and those words still ring through the years and continue to mean a lot today. So that's sort of a look back, folks, at This Week in History. And speaking of history, the show is pretty much history for this week here. Ed on Prosperity Principles. Our time has come and gone as it quickly does each and every week. But once again, folks, we want you to go to that website. It's my prosperity team. My Prosperity Team dot com. You can get a copy free of the book that we played a little bit from earlier. It's called Annuity 360. Send you a free copy of that there. You can also reach out to Ed for a free consultation either at the website My Prosperity Team dot com or you can give them a call. 3862285769. That's 3862285769. And it's been great. I hope you have a great rest of the weekend, sir.

Ed Cruz:
Thank you so much. And I hope that, you know, our listeners have have have heard something that was challenging to them, and hopefully they have a need to reach out. And again, thank you, everyone.

Producer:
Thanks for listening to Prosperity Principles. You deserve to work with a financial and insurance expert who can offer strategies for protecting and growing your hard earned money. To schedule your free no obligation consultation, visit my Prosperity Team dot com or pick up the phone and call 3862285769. That's 3862285769.

Producer:
Not affiliated with the United States government. Edwin Cruz does not offer tax, legal or investment advice. Consult with your tax advisor or attorney regarding specific situations. Opinions expressed are subject to change without notice. These opinions are not intended as investment advice, nor do they predict future performance of any product. All information provided is believed to be from reliable sources. However, we make no representation or warranty as to the accuracy of any statement. This information is intended to be educational in nature and does not provide a guarantee or a specific result. All copyrights and trademarks are the property of their respective owners. A merrill life assumes no responsibility or liability for the content of this message. The information contained herein is provided on an as is basis with no guarantees of completeness, accuracy, usefulness, timeliness, or of the results obtained from the use of this information. It seems like prices are going up everywhere, but that's not 100% true. I'm Matt McClure with a retirement radio network powered by a micro life. We've all been feeling the pain of inflation, which is causing consumer prices to soar at levels not seen in more than 40 years from the gas station to the grocery store. We're paying more for just about everything we buy. But not every product is causing our dollars to fly out of our pockets. Take Costco, for example. The big box membership chain's CEO had a one word answer recently during an interview with CNBC when asked if the company would raise the price of a signature food court staple. No, the hot dog and soda combo is staying where it's been for years. A dollar 50.

Producer:
You know, we're a volume business. We're not a margin business, and we drive a lot of sales.

Eric Rodriguez:
That's all we know. That's what we do.

Producer:
Ceo Craig Jelinek also said something else is staying unchanged. Costco's membership fee, an increase from the current $60 one year membership or $120 for a premium membership is not on the table. So what about his overall feelings on the economy?

Eric Rodriguez:
You know, overall, I.

Ed Cruz:
Think the consumer is.

Eric Rodriguez:
Not doing bad, as you can see. Unemployment is down significantly. If people want to work, they can work. So, you know, my view at the moment, things aren't so bad.

Producer:
Costco is not the only place you can find some steady prices. According to the World Economic Forum, there are at least three things not affected or barely affected by inflation. They are public transit, which saw prices increase by just 1.9% year over year, at least as of May. Some vegetables like tomatoes and potatoes as well. They rose much less than meat, fish and poultry prices and surprisingly, electronics. The price of a TV actually fell one and a half percent. Audio and video equipment fell by at least 3%, and the average price of a smartphone nosedived more than 13%. So will you spend your money on any of the categories where inflation is having the least impact? That's a key question to consider as overall prices continue to climb with the retirement radio network powered by a married life. I'm Matt McClure.

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