NEW EPISODES! This past Saturday we premiered one of our new episodes of the Money Puzzle TV Show. This week Brian Ramsey and Chris Vaughn are talking about Permanent predictable income. Permanent predictable income is what it sounds like. You can’t outlive it, It’s permanent. So we don’t have to worry about running out of this money. Predictable meaning, we can forecast with a certain amount of accuracy. The amount of money that you’re going to be receiving from this source at any given point in the future, five, ten, or twenty years down the road.

Watch the full episode or to catch up on all our podcasts just click the link below! If you’d like to speak with one of our advisors or need more information regarding any of the topics discussed on our show, please give us a call!


Speaker 1 [00:00:19] Hi. Welcome to the Money Puzzle. I am Brian Ramsay. That is Chris Vaughn sitting across the table from me. Our phone number, 8449005210. We’re taking the topic that has been the most discussed topic that we’ve had over the last week from callers in complaining. That’s what we’re talking about today on the money puzzle. Chris, before we get started, tell the folks where we’re located. We’re by the flashy building, but no, it looks better for.

Speaker 2 [00:00:48] Family wealth planning partners is our firm. We’re located at Hirschman Lane and Shelbyville Road, right behind the Flash Q Building. So if you’re under 40, you won’t get that. But easy to find, great place. We have lots of events there, so please come by and check it out.

Speaker 1 [00:01:03] Yeah. So real quick, what did you tell the folks about the money puzzle? Right, because that’s something that we get lots of questions about. What is it? Why did we come up with? What does it mean?

Speaker 2 [00:01:12] So the money puzzle is based on an analogy that, you know, we and other financial advisors have used for years. The idea is that you when you’re putting together a jigsaw puzzle, you’ve got to figure out certain pieces first. You got to get those edges. And in particularly the corners, that’s how you get started. And then you figure out how all the other pieces go in there. Or maybe if you’re missing a piece, that’s how you do that. When you’re putting together a good financial plan, it’s really the same process. There are certain things that are corner pieces. You got to get these right first. Then you fill in those edges and then you figure out how to fill out that picture to be what the client’s dream actually is. Yeah.

Speaker 1 [00:01:48] Yeah, exactly. All right. So we start off the show, I said probably the most discussed topic that we’ve had, and this is from callers either from our podcast or for them TV show they’ve called in. And we as people call in and we sort of take note on what their topic of conversation is. And so it really helps us derive content. Right? Right. And so overwhelming the last week, I’d say two weeks. Right. It’s been in complaining to some very degree. It could be so security of things, but for the most part, it’s it’s income planning. And so we thought we would take today to talk all things income planning. Right. All right. So starting off our firm, we do a lot of adult financial literacy programs in town. Right. And that’s why we do that, because we are a firm based on planning. But we also believe that education information is key to all financial decisions. Right. Making a good financial decision. You have to be educated. You have to be knowledge and you have to have the right information in order to make the right financial decision. So we do adult financial literacy programs, and in that financial program that we run, Chris does an awesome job of talking about the different sources of income, and we call them permanent, predictable income sources. So why don’t we start off just by sort of walking through? Don’t take as long as you do during the show or during the program, because.

Speaker 2 [00:03:11] I’ll show.

Speaker 1 [00:03:12] You the abbreviated version. Okay. No, but why don’t you start off by talking about that first, the permanent predict. Okay, what is it? And then what makes up what makes up the income?

Speaker 2 [00:03:24] So permanent predictable income is what it sounds like. You can’t outlive it. It’s permanent. So we don’t have to worry about running out of this money. Okay. Predictable meaning we can forecast with a certain amount of accuracy. It’s never going to be perfect, right? The amount of money that you’re going to be receiving from this source at any given point in the future, five, ten, 20 years down the road. So that’s what we mean by permanent and predictable income sources. Now, here’s where people when they come to one of our workshops where they’re really taken aback, there’s really only one true permanent, predictable income source, and that is an annuity. Now, this is the definition of annuity. Get screwed up a lot. All it is is simply an agreement or a contract between you and an entity. So the most famous annuity out there is Social Security. People don’t realize that Social Security is an annuity, but once you turn that income stream on, you can’t outlive it. But you can with a certain amount of accuracy, predict how much you’re going to be getting at any given time in the future. Then you also have pensions, especially some of the major employers here in Louisville, like UPS of LG and places like that have pensions, state employees have pensions. Those are another form of annuity. It’s an agreement between you and the employer, one that you don’t have a choice on whether you participate in, but you pay into it at a certain given time. It starts paying out. You can’t outlive it and you can’t predict how much it’s going to be. And then the third type would be what we call a personal pension. And this is where people will use the word annuity, albeit somewhat incorrectly. That’s where you choose to go out and buy that pension that you cannot outlive and you can predict how much it’s going to be in the future. And that’s what we mean when we say permanent, predictable income.

Speaker 1 [00:05:11] Got it. Okay. So let’s take a little let’s take a look at an example. Okay. So let’s focus on it now. We could do an entire show on Social Security. We easily do an entire show on company provided pensions because you have all kinds of different options. But even the Social Security really don’t have a whole lot of options with that, right? I mean, you have options of when you can take it, things like that. But beyond that, you have survivor benefits and things like that. But beyond that, you don’t have any control.

Speaker 2 [00:05:36] Over not matching.

Speaker 1 [00:05:37] Up. Right. Company pensions, kind of the same thing. Yes, you have options how you choose to take it, but you really don’t have a ton of options there when it comes to personal pensions that you can create. Right. You have lots of. It’s up to you. Right. Flexibility. You can you can customize it to your situation. However, we also know that in our world, annuities are way oversold. Yup. And there’s this weird love hate relationship. Right. You have advisors that think that’s the end all, be all that it’s everything. And, you know, it’s the greatest thing since sliced bread. And then you have other folks that say, no way in this world am I ever do anything with an annuity? And we use the analogy. I use the analogy. I play golf. Okay. So I use the analogy in our world is, you know, annuity is like a club in your golf bag, right? It’s not your driver that you hit a lot. It’s certainly not your putter that you use on every single hole. Right. But use a club that you may not necessarily need during that round, but then you might play a couple of rounds where you use it all done in this kind of way. We see them, right? They have to be the right fit for the right person at the right time. That’s how we see it. I’m going to give you an example. So two years ago, we had Bill and Michelle came in and they were with an existing advisor and weren’t very happy. So they started they went out and interviewed other advisors like happened to go to this one particular person that was on the previous scale, which is annuities are everything. Right. And so Bill had just recently retired from Al Jean and he had about $750,000 in his IRA. Now, they had some other assets accumulated. Michelle had worked, too, but Bill had the largest asset they had. Okay. And so what what they had come to us and said, hey, we want your opinion. So they came in and we sort of walked through the planning process to the complimentary retirement plan or a plan that we offer everybody. So if your caller and you want to see what that looks like, just pick up the phone and call us. 8449005210. We’ll do the same thing for you as we did for for Bill and his wife. And we did a complimentary plan. And what we did was we’re in the middle of it, if you can. I don’t know if you were in that particular meeting anyway. They said, well, what do you think about annuities? And it was sort of an oddball question, what do you think? And they were sort of digging. And I said, Well, here’s how we’d use them. And Bill was a little skittish on the market. He he didn’t want to be completely out of the market, but he had kept a lot of cash. And we had mentioned cash at some point, kept a lot of cash in is in his IRA. And so the reason why he did it was because he just didn’t want the volatility. Okay. So as we were talking, he had told us a story about him going to see this other advisor. And this advisor said, well, now that you retired, you should take all 175 or $750,000 and put it into an annuity. And here’s how great and wonderful it is. And I just posed the question, what happens if you need X amount of dollars? What happens if you need money? Well, he told me there was liquidity. Yeah, but what if you need more than that, right? Then all of a sudden you penalize for.

Speaker 2 [00:08:56] You only get a certain percentage of liquidity each year in that.

Speaker 1 [00:08:59] Right. But you’re still now you’re having to pay a penalty to get your money out. Right. And I’m like, no. Now, did we show him how annuities might fit in his portfolio and work? We did. And we talked about how we can position it to provide pers a permanent, predictable income in retirement. He’s not turn to David on, but we did put that in place and it’s good because now it’s personalized to him. So we we set it to pay a certain amount. Right. And then we’re, you know, we’re going to be ready to turn on when we need it. Right. So, Chris, real quick. Well, we’ve been talking here for a few minutes about permanent, predictable income sources. Once you tell the folks, what is that we can do for them when it comes to permanent, predictable income sources?

Speaker 2 [00:09:43] Well, what we can do is give us a call at 8449005210, and we’ll look at what permanent predictable sources you’ve already got and then look at how those can be used to accomplish what your goals are. Should you have more of those or should you have less of those sources? And we’ve got a couple examples coming up after the break on where these get a little bit overused. But we’ll go ahead and we’ll do an analysis of that for you and find out if you’re using them correctly.

Speaker 1 [00:10:10] All right. Very good, Chris. We’ll be right back. Make sure you continue watching. We’re talking about annuities, which is that funky word, but stay. We’re going to have more with you in just a second.

Speaker 3 [00:10:22] How confident are you in your current financial plan? Do you know with certainty how the recent market volatility will affect your future hopes and dreams? How much are you paying in taxes and how much are you losing to unnecessary high fees? You didn’t work to save this money so that you could spend your time worried in retirement. Now is the time to take charge of your finances so you can feel confident about your future. Call in during the next 30 minutes of today’s show, only to set up an absolutely complimentary, no obligation, full blown financial review that will result in your own customized written plan. This is a $999 value that we’re giving away, complimentary to the first ten people who respond. We’ll start with a full blown analysis of what you already have by running a report to untangle how much you are currently paying in fees, how you’re allocated for risk, and what it’s costing to work with your current advisor. Next will identify your goals. Where do you see yourself in the next five years? Where do you want to go? And who do you hope to go there with? Is your current financial plan set up to get you there without mishap? Let’s design a roadmap to create a financial plan you can follow with confidence. Get the peace that so many people are missing from their retirement. Find out how having a written plan can make a difference to your retirement dreams. Call now to schedule your complimentary, no obligation, full blown Financial Review today.

Speaker 1 [00:11:57] Welcome back to the Money Puzzle. I’m Brian Ramsey. That’s Chris Paul. And we are part of Family Wealth Planning Partners that does a TV show called Money Puzzle. Today, we’re talking about permanent, predictable income sources. And one of those happens to be annuities. Well, it’s all annuities, all compact. Right. But really, what we’re doing is to explain to you that the word just means what it does. Right. Right. There’s other sources of permanent, predictable income sources that are classified as annuity, Social Security, company provided pensions and personally provided pensions. So with that being said, we thought we do spend a couple minutes sort of giving you an idea of how annuities can be used in a portfolio to solve issues, right? Yep. So, Chris, don’t you want to share one?

Speaker 2 [00:12:41] Okay. So a good one that we’ve got. Mike and Cindy came in a couple of years ago after one of our workshops, if I remember correctly, but they came in, they had saved up about $2 million. And the they needed a strategy on how to go about using that money. We call that an income strategy. How do you how do you have that money dispersed to yourself and not be worried about running out? So there’s a lot of options on that. The one that we decided to go with is what’s called a bucket strategy, right? Well, in a bucket strategy, basically, you’re segmenting the different parts of somebody’s life based on risk. So the early part of it, you’re going to be very, very low risk cash heavy. Then each different segment is going to be a little bit higher risk all the way up to the stuff that you’re not going to use for 20, 30 years. In the second bucket in their portfolio, we only had about 3 to 5 years before we’re going to start tapping that. We used an annuity in this case that was a fixed annuity, basically works a lot like a CD at the bank, but with considerably higher interest rates typically. And what it did is it gave that particular portion of their portfolio a guaranteed growth rate that we could then count on, predict that one out. But it took a lot of the risk off the table for the early part of that retirement plan, and it got them through about eight years worth of their retirement without any concerns. So what we did is we mitigated risk by using an annuity.

Speaker 1 [00:14:05] Yeah. And so I’ll tell those stories. So we had Rick. Rick and Rick had actually retired before he came to meet with us. But what’s interesting is this is a situation where you can position a permanent, predictable income source to achieve a certain goal that no retiree really likes. And that’s a required minimum distributions. It’s 70 now. It’s 72 was 70. He’s he’s now beyond that now. But at 72 years old, you are required to take out a certain amount of your IRA for one K for three B, whatever the case is, you’ve got to take out a certain amount, even if you don’t need it doesn’t make a difference. You still have to get it out, right? So what we did with Rick, Rick, in 2008 when he retired from G.E., he had taken a sum of money. He had worked with another advisor at the time. He had taken a pretty good chunk of of his retirement and invested in an annuity that had an option for income at some point in the future. Okay. So he he comes to meet with us in 2017. He’s no longer with that advisor. He comes to meet with us and says, hey, let’s do some planning. So when he turned this was in 2000, 2019, he to 2018, he turned 70 and a half, which back then that was the number. That was the rule, right? So in 2018, we looked at all of his income sources and determined that, well, hey, why don’t we call the insurance company to find out what your lifetime income would be if you turn this on, let’s just see. So we called the insurance company and he got I don’t remember what it was, $3,000 a month, whatever the number was. Well, that actually turned out to be more income than what his R&D was for the year. So here’s the beauty of this situation. We took part of his investments. All right? We turned the income stream on, which is permanent, predictable income source. He can never outlive it more than pays out. The distribution is more than what his required minimum distribution is every year. So now he has a big chunk of change that’s still in his 401k. They doesn’t have to touch and he’s not. He’s just letting that grow and grow and grow. Now, at some point he may have to take a little bit out of that account, but for the most part, we’ve been years now and the distribution from the annuity is still more than his RMDs require. So again, it’s not all about protecting assets. It’s it is. But it’s also about putting in place permanent, predictable income sources that you cannot live. And that’s sort of the first. Strategy. We look at it, we talk about income sources. What sources do you have in place that are permanent, predictable? And we use that to strategize, to put things in place that can benefit you down the road. It was a great it was great for him to real quick. So let’s get let’s get to a break. We’re kind of looking to like what’s going on? All right, let’s get to a break. But before we do, let’s tell the folks what how we can might help them strategize around permanent predictable income sources and specifically annuities.

Speaker 2 [00:17:14] All right. So if you give us a call at 8449005210, we’re going to have a look at the type of income that you want to have so that if that’s an appropriate thing for you, we’ll put together that permanent, predictable income with the personal pensions, with your pension from your company, with your Social Security, put together that income stream so that you don’t have to worry about whether you’re going to outlive your money or not.

Speaker 1 [00:17:39] Yeah. So real quick before we head to the break, we’re going to talk about Don on the other side. I know we talked about Don a quite a few times, but Don’s got a really cool story about how we use the annuity for her. So make sure you continue to watch. We’ll be right back. On the money puzzle.

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Speaker 1 [00:19:19] All right. Welcome back to the Money Puzzle again. I am Brian Ramsay. That is Chris Paul. And we have two of the partners in the office, Eric Douglas and Eric McAndrew. So if you were to call right now and you wanted to set up time to come be with us, you will get one of us on the phone. So if you get here, Chris or Erin or Eric, don’t think that somebody else, it’s actually just one of our partners. It doesn’t happen to be here today. So. All right. We’re talking about permanent, predictable income sources, specifically annuities. Right? Right. It is a hot button, let’s be honest. Sure. It’s the elephant in the room outside of what’s happening in the market. So it’s good that we address it to let folks know how we use annuities and how we see folks outside our business or in our business, but outside our firm use annuities because we can see both sides. We see the good where people put good annuities in place and use them properly. And we also see the bad side of it before we get to Dan, because I kind of teased them before before we left for the break, why don’t you tell the folks about the one that you. Yes, it is.

Speaker 2 [00:20:16] So this is a great example of what you shouldn’t do. And this is unfortunately where a lot of people get themselves in trouble by overselling annuities. So Joanne and her husband, both were retired teachers right here in Jefferson County, and they both had what’s called a joint life annuity option on their pension, meaning when they retire, they get this amount of money. And when one of them passes away, the survivor continues to get that same amount. He passed away several years ago. Her income stayed the same. And this is an income that is over $100,000 between the two of them. Now, she’s got that much money coming in for the rest of her life and it’s just her. But they’ve got about $900,000 that they’ve saved up. And the adviser they’ve been working with kept putting that money into different annuities. Unfortunately, she didn’t need that personal pension in her case, but her money ended up getting locked up where she couldn’t access it. So what we did was it took us some time. We just finished this one up two weeks ago. Periodically we’ve been pulling those apart and moving that money into more appropriate things, and now her money is freed up where she can actually spend it on our kids. She’s got adult children and grandchildren and she’s taking money now. And because it’s available to her, she’s actually taking the whole family to Hawaii for Christmas. How cool is that? If you’ve got all of your money locked up, that’s a problem. So that’s where you’ve got to get that balance of the personal pension, the pension and the Social Security set up correctly in the first place.

Speaker 1 [00:21:49] A child of a little less relative. Yeah.

Speaker 2 [00:21:52] I’ve been trying to get her to take me on that one. Didn’t work. Yeah.

Speaker 1 [00:21:55] All right. So I would tell a story about Dave and Lisa. I changed my mind. I was going to be Donna, but I don’t do Dave and Lisa because it sort of fits to what to what you’re talking about right there, I thought was a little bit better example. So, David, Lisa came to us a couple of years ago. They had about 1,000,005 all in in all their assets, not including their home. But the interesting thing was they had they were working with an existing advisor and had worked with this gentleman for a long, long time. But really, up to the point of when they retired, once they were nearing retirement, they actually got one of those little dinner seminar things in the mail. Right, that, you know, if you’re close to retirement, you get your mailboxes.

Speaker 2 [00:22:34] They get invited to steak dinner a lot.

Speaker 1 [00:22:35] So they so they go in. Obviously, that person that was doing that had a lot of conversation around annuities, which is typically how they work. But the interesting thing was they went back and met with their current advisor and said, hey, what? What do you think about annuities? And as soon as she said that, he snapped back and said, Under no circumstance are we ever doing an annuity here. It’s just not ever going to happen. And to me, when I gave the example of Bill in the beginning of the show, we were talking about how Bill went and met with an advisor. Advisor said, Hey, put all $700,000 into an annuity. And now here we are with David and Lisa. Now they’re talking about somebody that says ante annuity. No way in this world am I doing it. It’s really doing the client a disservice on both ends. Yeah, right. Very similar to the story you had. So they came to me and they said, Well, what’s your feelings about annuities? And we said, Well, it’s kind of the same story we told Bill, right? That it’s a tool in the toolbox or a golf club in the golf bag. We may not use it, but we might make might make some sense. And so we wound up with a very nice client because we just spent time to educate them and provide them the information they need around annuities and how it might benefit them. And then we showed them in their financial plan. Here’s how we would implement one, if that’s something that we decided that all parties want to do. And that and that’s really the approach we take is let’s make sure that clients are educated, informed about how annuities work, how we position them in a portfolio, how we position them in more importantly, income planning. Right, because that’s kind of what we’re talking about today, Ben. What you educate them and you show them. This is how I. She works. They go, okay, I see the benefit behind them and we wind up gaining a very, very nice client and they’re thrilled, tickled to death with it now. They haven’t turned anything on yet because they’re not to that point yet, but they’re tickled to death work with how we handle that situation.

Speaker 2 [00:24:33] I think, you know, if you are willing to just completely open the box up, open your mind up, and there are amazing things that you can do with annuities and other financial tools. And I’ll give you another example of one you remember, Suzanne, that came in back in the spring this year. In her case, she came in, she had a concern about taking care of her mom. Her mom is elderly. She and when I say elderly, she’s in her nineties and wanted to put her in an assisted living facility. That’s what mom wanted. But they were concerned about how are we going to be able to pay for this? We didn’t take out a long term care insurance policy or anything like that. Well, they were in the process of selling mom’s home. And I said, You know what? Why don’t we do this? Why don’t we take a portion of the proceeds from that home, purchase an annuity, and let the annuity pay for the assisted care facility? Well, sure enough, now there’s no concern that we’re going to run out of the ability to pay for that. And that put it where excuse me, it took a lot of pressure off of Suzanne and her family on how do we make sure that mom is going to be taken care of. So there’s a little outside the box way to use annuities and tools like that?

Speaker 1 [00:25:44] Yeah. I mean, the whole conversation we’ve had today is really coming from the conversations we’re having about people that call it right and they call us. They’re saying, Hey, this is what I’m concerned about. It could be market volatility. It could be of course, inflation has been an issue. But all that volatility, uncertainty around markets is what’s causing people to call in. And you’re probably no different. I’m sure you look at your situation and say, man, I’m, you know, inflation markets going crazy. Maybe my income plan is not quite what it was when I started. You know.

Speaker 2 [00:26:20] Maybe it’s not a plan.

Speaker 1 [00:26:22] Maybe it’s not even a plan. So maybe I need to get a plan. Maybe I don’t even know where this fits in the piece of the puzzle. Certainly don’t. Maybe you have or maybe you haven’t put your puzzle together. But all this is critically important. And that’s to say that if that’s a topic of conversation that most people want to talk about is income playing is probably on your list of things that you want to talk about or need to talk about. So, Chris, why don’t you for the next we’re getting ready, wrap up the show here. Why don’t you sort of lay out what we how we work with clients when they come in and we talk about income planning and permanent predictable income sources?

Speaker 2 [00:26:59] Well, the first thing that we do and I had a great conversation with the lady on the phone this morning, what she was wanting to do is figure out how much she could pay herself. So what? We can do it that way. But a really better way of doing it is how much do you want to make? What do you want to pay yourself? When you’re putting together a vacation, you don’t start out with, Where can we afford to go? You start out with Where do we want to go? And then you figure out how you’re going to go about paying for that. And a good income strategy is just like that. Figure out what you want to accomplish and then we can help you put the pieces of that puzzle together to figure out the most effective and efficient way to get that, be it the permanent predictable portion of the income, or maybe using an annuity here or there, or maybe not, maybe using some other pieces the best way possible.

Speaker 1 [00:27:46] Great. Well, listen, if you’re if you’re watching and you want us to do an income plan for you, call us. We’d love to hear from you. See you next week on the Money Puzzle and.