Welcome to ManufacturingRetirement.com. I’m Sam Davis, senior financial advisor and co-host of Retirement Results. I’m joined, as I always am, by Ford Stokes, our chief financial advisor over at Active Wealth Management and Retirement Results. We wanted to create Manufacturing Retirement because we have so many pre-retirees and retirees that are operating in this space, and many of our clients wanted us to create this resource so we can connect with more people like them. So that’s exactly what we did. We’re excited to connect with some new clients.
This is our response to an overwhelming number of requests we get from our manufacturing clients saying, “Hey, I need to help out more of my colleagues.” We work with a lot of manufacturing professionals and a lot of manufacturing executives who are looking for a smart, safe, and smart risk solution so they can protect and grow their hard-earned and hard-saved wealth, and plan for a successful retirement. And that’s what Manufacturing Retirement is all about. We just want to put it in one spot and really try to reach out to those professionals and executives in manufacturing who want to count on their retirement. They want to have some bedrock, some foundational aspects of their retirement. And that’s why we got this site up and running.
We wanted to quickly go through seven quick tips for success for all you manufacturing professionals out there who are looking to chart your course toward a successful retirement. Step number one is really to give your pension a boost. You know you’re going to need that income in retirement. We can help you really boost that pension.
In 1975, over 30% of the S&P 500 was offering pensions. Today, that number is more like 13.5%. So a lot of those pensions have gone the way of the dodo bird; I mean, they just don’t exist anymore. There are still a lot of manufacturing folks who have pensions, and what I would encourage you to do is consider getting that pension x-ray with us and reach out to us through this site or by calling us. Just reach out so we can give you that pension x-ray so you can potentially get a 20% immediate bonus on that pension lump sum that you may take and also get up to 8% guaranteed interest a year, and/or also get market-like gains without market risk.
When you’ve got that regular pension that’s usually implemented by a product called a SPIA, a single premium immediate annuity, those are very flat; they’re not market-linked. The fixed index annuities that we market, sell, and offer to our clients actually offer market-like gains because they’re index-linked. Additionally, there’s a huge trust factor with these. Sam knows, we have put a lot of clients in these fixed index annuities for bond replacements and lump sum pensions as well. The states regulate fixed index annuities, not the federal government. They have to balance their budgets, so they require all the annuity companies to reserve 100% of the money you give them. So if you put $100,000 in a fixed index annuity, for example, the annuity company has to put $100,000 into the ten-year U.S. Treasury. They use the interest generated from that ten-year U.S. Treasury note to invest in options in things like the S&P 500, the Nasdaq 100, or the Invesco QQQ, or the BNP Paribas Global Factor Index. There are a lot of indexes available, so you can get those market-like gains without market risk.
One smart thing you can do is reach out to us to see what your options are with those highly rated carriers to give that pension a boost. That goes a long way toward building a strong income plan in retirement. And that leads us right into step number two, which is maximizing your Social Security benefits. Our president and chief financial advisor, Ford, is also a registered Social Security analyst. Let’s talk a bit about those Social Security maximization reports that you can put together for folks. I think it’s just an incredible planning tool, especially for married couples approaching retirement, to see exactly what their benefits would look like depending on when each spouse decides to turn on that income.
I’m proud to offer the Social Security maximization services here at Active Wealth Management and also on ManufacturingRetirement.com. I’m one of only 15 registered Social Security analysts in the whole state of Georgia, so there are not a lot of us out there. We’re pretty busy running these plans. But what we do is take your top 35 earning years for you and your spouse, and we put them into our SSA Roadmap portal system, which will output a great report that gives you some what-if scenarios, some break-even analysis, and so you can really understand when you take on Social Security and when you start that Social Security income benefit—how much you’re going to make. The longer you wait, the more you can make, obviously. But we also don’t want you to overdraw your assets. While you’re waiting to take Social Security, sometimes it’s better to go ahead and turn it on at, say, 62.5, 63, 65, or your full retirement age at 67. Other times, if you’re a manufacturing executive, you may want to wait until 70 because you don’t actually need the Social Security income benefit yet. We also see a lot of people investing that Social Security income benefit they’re receiving from age 65 or 67 and extending it until 70 to make up the difference. There are a lot of different options out there. There are over 2,500 decisions that you can make with Social Security, and we want to help you make the right decision for you on when to turn on that Social Security income benefit.
That’s exactly right. I mean, these individuals, these married couples, really only have one chance to get that decision right. Knowledge is power, so putting those tools in their hands helps them lead to the best decision for them.
Making the decision on when to take that Social Security income benefit is really important. It’s going to be the number one or number two most significant decision you’ll make regarding your retirement income throughout all of retirement. So let’s get that one right.
If you’re able to do that, and going back to step number one, giving your pension a boost goes a long way toward protecting your income in retirement. As fiduciaries, the advisors here at Active Wealth Management say, “protect and grow,” and you should do it in that order. You should seek to protect your retirement income because that’s really what you need when you step away from the office. When you step away from your career in manufacturing, you need to find a new way to generate those paychecks that will keep coming throughout your retirement.
Absolutely, you do. What we like to do is implement bond replacement strategies so that we can remove bonds from your portfolio that may have been in your 401(k), and then you can do an IRA rollover when you retire or when you turn 59.5 to gain access and control of your money. We try to replace 20% to 40% of the overall portfolio by placing it into fixed indexed annuities to ensure safer income. This creates a nice, safe boundary around the income source derived from that fixed indexed annuity so you’re not exposed to reinvestment risk or interest rate risk with bonds. You really want to protect 20% to 40% of your portfolio to generate that important income, ensuring you can outpace any withdrawal rates you need to meet your monthly expenses.
If you’ve given your pension a boost, made the most of your Social Security benefits, and made the right decision for your income in retirement, that leads you right to step four: you can afford to take those smart risks with tactically managed portfolios because you know your retirement income is protected.
Here’s what we do with the remainder of that portfolio: now that we’re protected, it’s about growth. We try to tactically manage a majority of our portfolios, rebalancing at least on a monthly basis. You’re not riding the lowest lows of the market; you may not ride the highest highs, either. But we don’t want to just say, “Hey, just hang in there, Mr. and Mrs. Client.” We want to ensure we’re taking smart risks. We’ve got tactically managed portfolios, structured notes, and other ways of effectively managing to avoid riding all the way down to the bottom of the market when there’s a downturn. Tactical asset allocation is a great approach. We also have strategically managed portfolios, but we prefer tactical management with rebalancing each month toward the asset classes we think will perform best over the next six months.
Some might think the plan would be done at this point. For many other advisors, that might be where they stop. But we don’t stop with just the smart safe plan and the smart risk plan. We believe you can get even more efficient. Step five is to become more tax-efficient, effectively removing the IRS from being your partner in retirement.
What I like to emphasize, Ford, is that if you’ve got money sitting in an IRA or a 401(k), we need to break the unfortunate news to a lot of people: not all that money is yours. You hold that money in a tax-deferred account, and the IRS is your partner in retirement. What’s the process like when we build out these plans to help people create a more tax-efficient strategy?
Well, first of all, the IRS is not the kind of partner you want in your retirement accounts. They will have their hand out each time you take withdrawals from that IRA. We want to make sure that we’re doing a great job converting money from your IRA over to your Roth IRA, dollar-for-dollar. Here’s one hint we give to many of our manufacturing professionals and executives who are our clients: Let’s take the tax-deferred dollars from your IRA, that we rolled over from your 401(k), and also from your lump-sum pension if you want to. Let’s go ahead and move, say, $100,000 a year. Let’s say you have $1 million in your 401(k). Let’s do $100,000 a year before you turn 73. Let’s start this maybe when you’re going to retire at 63. Let’s move that $100,000 over, and let’s use a taxable account, a brokerage account, or checking or savings, or even real estate rental income. We’ll go ahead and pay the taxes on that conversion. So if you move $100,000, we’ll take that amount, and if you’re in a 20% tax bracket, we’re going to pay $20,000 in taxes within the quarter that we do the conversion.
Here’s another hint: You need to wait five years from the time you open a Roth IRA or do a Roth conversion to access the principal and the gains tax-free. Additionally, you need to wait another five years for any conversions you perform. So I would say let’s do everything possible to start that tax-efficient Roth ladder conversion plan sooner rather than later. You don’t want to wait until after age 73, when required minimum distributions (RMDs) kick in. And remember, when you’re doing conversions, those conversions do not count as your required minimum distribution.
Instead of taking out 4% or 4.1% or 4.38% from your IRA and paying taxes on that, you’re going to have to take out even more if you’re doing conversions. So let’s strategize on a Roth ladder conversion year over year, saving for a five to ten-year period. Let’s get started sooner rather than later.
Yeah, we’ve found that’s the most effective way, and it’s a true conversion because your new tax-free account is growing at the same rate that your converted account is declining. Remember, with a Roth, your distributions are tax-free, your gains are tax-free, and when you pass away and leave that account to your beneficiaries, that will pass tax-free as well.
This brings us to step number six. Now that we have a well-rounded financial plan in place for you, we want to ensure that you leave the legacy you desire with an estate plan.
This step is straightforward. You really need to have a will or a revocable trust and even consider an irrevocable trust if you have a special needs child; you may want to create a special needs trust for that child as well. We have many manufacturing clients who have asked us, “Hey, Ford, can you help us find a less expensive alternative for estate planning?” because these estate attorneys are quite expensive post-COVID. And we did! We partnered with a service that has licensed attorneys. We don’t share fees with them or anything like that, and we’re able to offer it at literally a fifth of the price. So if you’re looking to get a will or a revocable trust done economically, I encourage you to reach out to us at the phone number provided on this site or just send us an email. We’re happy to help you get started on that will or revocable trust.
Now, for the final tip, tip number seven, we want to emphasize the importance of inspecting what you expect when it comes to your hard-earned savings. You’ve spent decades accumulating assets and saving; you really want to optimize that. Figure out what fees you’re currently paying inside your portfolio. That’s something we can show you. What about the correlation of your assets? If you’ve never looked at an investment correlation matrix, taking a look at that can paint a good picture for you. That insight will be part of building the most well-rounded plan that fits your needs.
Many people are learning for the first time about elements of their portfolio that they didn’t understand. You also need to comprehend the risks you’re taking, as measured by standard deviation. Standard deviation is a measurement of risk. If manufacturing professionals and executives who are watching this video found us online at ManufacturingRetirement.com, and you don’t know what an expense ratio is within your 401(k) or your IRA, then I encourage you to reach out to us. If you don’t know what the standard deviation is for your portfolio because it is a measurement of risk, please reach out to us. We can provide you with those numbers, and you’ll appreciate seeing that correlation matrix for sure.
Also, your risk-reward scatterplot is a real eye-opener for your top 20 holdings, showing you how much reward you’re getting for the risk you’re taking. I encourage everybody to contact us at (888) 814-0304. Let’s get started right away. I’d just say that manufacturing folks are really good at taking action once they have a good plan in place. Let’s establish that plan as soon as we can.
You can get started by calling that number or by submitting your financial workbook today. Just click on the financial workbook link above, and you can start taking advantage of that $2,500 value. It includes a portfolio analysis, a Social Security maximization report, and we will take a look at your current plan and actually give you a grade on your current plan. Then we’ll present our recommended plan and provide a grade on what our recommended plan would be, including a strategy that shows the Roth ladder conversion, if that’s appropriate for you.
I mean, Ford, it’s a fantastic value. All it costs is a little bit of your time. Our role as fiduciaries is to give you the information to make the best decision with your hard-earned and hard-saved money, and that’s what we’re all about here at Manufacturing Retirement.
That’s right. And listen, we’re here to help all those manufacturing professionals and executives working hard for their money. You have also worked diligently to save your money. It’s our job to help you protect and grow that money. Thank you so much for visiting us here at Manufacturing Retirement, and we look forward to helping you build a successful retirement plan.
