Coach Pete D’Arruda and Mike Milligan discuss dedicating part of a retirement plan to income and understanding how an income rider works. They examine why a saver’s priorities can change near retirement, the importance of asking how a strategy is structured, and the difference between product recommendations and a plan built around a client’s needs. Part two of their Financial Safari conversation. Call 800-661-7383 or text PLAN to 600-700. Transcript Automatically transcribed from this episode; timestamps are approximate. 00:00 Welcome back into the Financial Safari. Loving the conversation today. I'm Thomas Lipscomb in studio with bestselling author Coach Pete D’Arruda, also joining us today, host of the One of a Kind Financial Show. He's an author. Mike Milligan, catch up on the show by heading over to FinancialSafari.com. Mike, I'm sure you've been talking to clients for years, and when you talk to them about a true retirement plan, true or false, I mean, we really haven't talked about this ahead of time, so I'm kind of leaving myself out there. But do you believe that if someone is approaching retirement, they need to have some of their money dedicated to lifetime income? Oh, yeah. Like, you know, the book that I'm most famous for is a book called The One of a Kind Financial Plan. Our company, One Oak Financial, stands for one of a kind. So the one of a kind financial plan, the book I wrote, 00:46 says that you have to answer the question, why is money important to you? Because if you don't answer that question, how can an advisor really do their job, right? So answer the question, why is money important? You have to put a vision for what your life's going to be like. You know, what your community is going to be, what your focus on health is, and what's your impact. But then we get to, like, the actual tactical side. Taxes being the biggest expense you ever have, that's what we start with. Number two, then we go to retirement income. Because at the end of the day, right, most investment people, most one-size-fits-all advisors out there, they actually want to talk investments because that's how they get paid, and then they abdicate responsibility. They say, go to this CPA, go to this attorney, go to this insurance guy. 01:32 Because what they want to do is they want to solely focus on investments. But if you don't focus on taxes being your biggest expense, and retirement income being guaranteed that keeps up with inflation, you're just going to be finding a new advisor in retirement, and nobody really wants that. Because at the end of the day, the biggest thing that keeps people up at night is the fear of running out of money. And if I've done my math right, Pete, you can tell me this, but guaranteed means that you would never run out of money. Is that still true? Yeah, and the guarantees, again, they are only as good as the institution backing them. So you need to make sure you only put your money away long-term with companies that are going to be here for a long, long time, if not forever, right? And so how do you really know that? Well, you have to trust the numbers they put out, their books. 02:20 We've analyzed that all the time. We don't let our clients get in any company that's below an A rating. And so because of B or C rated companies, of course, they're going to offer more. But I'm not willing to take that risk with my clients. So they've got to be at least A rated. And there's something called an income rider that some insurance companies offer on annuities. And annuities are great because there are streams of income you can't outlive. The Roman Empire days, annuities were there. The soldiers would give some, when we're going to battle, they'd find the local financial guy. They'd put money in an annuity, which basically said, I want to make sure my spouse gets income when I'm gone. And if I don't show up back, I want that spouse to get the income forever. And that's how long annuities have been. And so the income riders, we've heard some objections, though, usually ignited by the advisor who doesn't want to let go of the money they have in the market, right? 03:07 Because if they let go of the money they have in the market, they lose their planning fee, their quarterly fee, which they call a fee. I call it commission, money's coming out. But here's one, Mike. I don't want to lose control of my money, somebody would say about an income rider. What would you say about that? Well, I mean, like, you're not going to take all of your money at one time. So, you know, the biggest question is, is what's the biggest check you've ever written in your life? So, you know, a listener out there has $2 million, and I'm like, I don't want to put a million of that into an annuity because I lose access to that. Well, what's the biggest check you ever wrote in your life? It's probably the purchase of a car. Maybe it's a college loan payment, or maybe it was that last check you wrote to pay off your mortgage. But for most people, that biggest check they ever wrote written in their life 03:52 is $10,000, $20,000, $30,000, $40,000. Why do you need access? Well, going back to that advisor for a second, Pete, that says they want to keep control of the money, most advisors out there don't leave all the money in the market because their compliance arms make them spread risk around between stocks and bonds. Yep. Well, you know, those income riders, you know, not to talk product or anything, but there's 6% and 7% withdrawal rates that you can get on that guaranteed income. Well, right now, what's the best bond investor in the world getting? Three and a half? Yeah, maybe four. Yeah, I was going to say between four and a half. Yeah, and so, but that's not a guarantee. The bonds can't guarantee you a lifetime income, can they? 04:38 No, no. 2022, bonds went down just like the stock market did, right? Because interest rate risk is a real thing. It's a big one. And so, like, using an income rider from an insurance company is a promise. It's a promise that the money's going to show up every month. It's a promise that it will never end, and it's a promise that you don't have to worry that money's going to be in your account. It's a promise that you won't run out of money. And that's the benefit of an income rider. And that's a big one. And so, like, the strong institutions that offer them, and again, we only talk about the strong ones, and some of them don't fit. I mean, everybody's different. So, there's all different ones. I like to put two different streams of income together for my clients. One for their bills. Those are the bills that are going to come, the housing, the car, whatever else, 05:25 and a little bit extra for emergency bills, or we factor inflation in, too, so put more than you're paying now because we've seen how inflation can affect your net worth down the road. And we also put a stream of income together for you that's going to come every single month all the way through retirement for fun, fun money. Who doesn't want some fun money? You're allowed to spend it for fun. You know, the reason why people don't spend, Mike, is because they're worried in their go-go years, they're worried that they're not going to have enough money. But if you have a guarantee in place that a new check is going to come every 30 to 31 days, showing right up, we call it the green flag on the mailbox, there's no worries anymore. Matter of fact, that's why people pass away when they have too much risk. They're always worried about spending, and they usually don't spend what they should or could. Holy cow, preach it, buddy. Keep going. Keep going, man. That's good. I mean, it's just mind-splitting sometimes how people don't take the right step for themselves, 06:12 and the right step for you listening is to get your very own total retirement plan. But inside there, make sure if you have a retirement plan, make sure it has the retirement income you deserve and you need, and you've been told you need to have. So if you don't have income that's guaranteed, you're not. You're just guessing. Thomas, we got the e-book on lifetime income. Probability is shot down by certainty. You've got to have certainty first. Let's get that e-book in people's hands. All they have to do is call right now. And that number is 800-661-7383, 800-661-7383, or just text keyword PLAN to 600-661. 700, that is keyword PLAN to 600-700. So, Mike, why do you think, you know, well, I know, but why do you think that this one side of the financial world that is constantly lobbing grenades over to the fixed side, the side that guarantees income? 06:58 Well, listen, guys, it comes down to that word fiduciary. A fiduciary is going to do what's in the best interest of the client. Yep. But these firms that manage money for a fee have owners, stockholders, board of directors that are telling you, keep the stream of money coming over to our business over and over again. Pete, do you know what a stream of income is? Oh, yeah, I do. It's an annuity. Yes. It's an annuity. Right. So an annuity, you know, staying in the market, paying a fee every month or every quarter is a stream of income to the business. And so why is an annuity, the stream of income, good for the business, but they will tell you it's bad for you as the consumer? 07:43 It's, you know, it's people who act one way and say something another way. I think we call those hypocrites. And there's a lot of hypocrites in the financial market because how they run their business is how they tell the consumer to not run their household. And all the risk is put on the individual. People, if you have money invested in the market, you have control of that. If you're paying somebody a fee, you have control of that. You can end that. You can use their business model, guaranteed streams of income in your life to reduce fear, stress, and anxiety in your life. And that's probably worth a call in to the show today to see if the
