Business Innovators Radio - Interview with David Smart CEO of Smart Benefit Group Discussing Ensuring a Lifetime Income

Episode Date: September 7, 2024

With over 20 years of experience in financial services, I have focused for the last 12 years on providing retirement planning services. Our approach is guided by the golden rule of treating others as we would like to be treated. We prioritize understanding the needs of our clients before seeking to be understood.Learn More: https://www.smartbenefitgroupllc.com/The following concepts have been simplified; however, each individual has a distinct situation and should, therefore, consult a tax preparer about how the concepts will impact their tax outcome.Influential Entrepreneurs with Mike Saundershttps://businessinnovatorsradio.com/influential-entrepreneurs-with-mike-saunders/Source: https://businessinnovatorsradio.com/interview-with-david-smart-ceo-of-smart-benefit-group-discussing-ensuring-a-lifetime-income

Welcome to influential entrepreneurs, bringing you interviews with elite business leaders and experts, sharing tips and strategies for elevating your business to the next level. Here's your host, Mike Saunders. Hello and welcome to this episode of influential entrepreneurs. This is Mike Saunders, the authority positioning coach. Today we have back with this David Smart, who's the CEO of Smart Benefit Group, and we'll be talking about how to ensure a lifetime income. David, welcome back to the program. Well, Mike, thank you. I'm glad you asked back.

You know, I always love when you hear one thing and you think, you know, what does that really mean? And boy, ensuring lifetime income has got a powerful punch to that. So I'm excited to hear what you serve your clients in doing that. Let's first start with defining what is lifetime income. Well, I guess the best example I can use. is your Social Security check. Okay. Once you turn on that switch,

that income is going to keep on continually coming to you month after month after month for as long as you live. And so, and that's, you know, those are dollars that you can count on. You can say, well, on the 15th of the month, I'm going to have X number of dollars in my account.

And I can plan around that. So when I talk about lifetime income, that's what I'm talking about. You know, so having sufficient income that you can never outlive, that's the important thing. And so. That is. Yeah, because I know that there's a lot of times the gap. Like when you sit down with a retirement specialist and go, okay, well, I know I'm going

to retire here. I want the money to last until there. And I'm going to need this much per month. and then you crunch the numbers and go, ooh, there's a gap. So lifetime income is a pretty big thing. What are some of the strategies that you're working with your clients on to recommend to make sure that they get that sustainable income? Well, because of the miracle of technology and the software that's available,

because I can remember trying to figure this out on a calculator and a slide rule in the years past. but today with the algorithms that they have, you're able to put in the numbers. So let's say, for instance, Mike, you said, you know, I'm seeing an income cap of $2,000 a month that I need to have to meet my expenses. And for my wife and I feel like we're not having to do without. And so you put in those numbers and then all of a sudden it tells you, how much money you need to have to be able to create that kind of income. Now, if you go to the typical financial advisor that works in the investment house, they're going to say you need around 4%.

We're going to figure 4% off of your income pile here, your stockpile of money that you've accumulated. Well, if an individual wanted to have a $1,000 a month, starting at the age 65, he'd have to have over $300,000, withdrawing 4%, which it annually gave him $13,208 a year. but he had need to have $300,000. So from age 60 to 65, there's accounts at $141,000. It's got to grow to $300,000. Using an annuity, an income annuity,

and there's all kinds of annuities, there's income, growth, and legacy annuities. So when we look at an annuity that is designed for income, this same individual at age 60 by putting in $141,000 into this annuity, five years later, that annuity has a value of $290,000. Now, there's quite a difference between $300 and $219, correct? Yeah. But the distribution rate of that is figured at 8.75%. So 8.5% of that money is paying out directly to him, which equals that same $13,208 annually. And the nice thing about it is especially if it's a joint income.

unlike Social Security, their surviving spouse is going to take an income hit, whether they get the larger amount of the Social Security of the deceased spouse, or if they lose the lesser amount of Social Security from the deceased spouse, there's still an income gap. But in an income annuity, when it's done on a joint basis, that factor doesn't even enter into it because that income stream is paid out for the lifetime even to the surviving spouse at the same dollar amount. What a win-win.

Yeah. And what a piece of mind that you're providing to clients to be talking about those kind of things because when you can look ahead and go, I've got my basis covered. that's that's pretty powerful it's a gift that you're given to your clients so let's let's think a little bit deeper how can guaranteed financial products be integrated into a retirement plan and we don't need to get into the weeds of all the intricacies of products but just kind of clarify a little bit of what types of tools that you're able to show your clients as options well okay first of all you know we have to do a needs analysis

and just like if you go to a doctor and you say, hey, Doc, I've got a pain on my shoulder here. It's killing me. The doctor acknowledges it. But then they do a complete workup, don't they? They don't take your word for it. They need to know all the contributing factors. I'll use myself as an example.

I had a five-way bypass many, many years ago. ago. And about three years after I had that bypass, I thought I was still having heart problems. So I went back and saw my cardiologist, explained my concerns to him. Well, he did a complete workup on it. And it wasn't my heart that was giving me the problem. It was the fact that I had now colon cancer at a stage three. Had he not done the complete workup, that would not have been a relevant factor in my health. And it would have gone undetected. So we do a complete analysis of, I need to know where your assets are, your liabilities, and so forth. And then we can turn around and create a map. Now, we have various products. And each product or solution is designed to

fulfill a particular need. It can be in the insurance, life insurance products are the best ones for it because there's guarantees built into them. So you can use a life insurance product for a particular need or you can use an annuity that will fill a particular need. And so, you know, all depends upon the need, Mike, well then determines the solution that we then offer up as a, you know, just like when I had cancer, here was the solution that we need to do. Here's the treatment program. And knock on wood, it's been 15 years. I've been cancer-free.

That's awesome. It sounds to me like the way you approach working with your clients is not a one-size-fits-all. You know, oh, you need this next. You need this next. You listen and ask questions and assess their retirement goals. And here's some ways you can accomplish those. goals, here's this and this. And I feel like when when people have been treated the other way, which is not having explanations and education of some options and just being bullied and forced

into things, the way that you are educating your clients and providing these options becomes really refreshing, I would suspect. Well, when I formed smart benefit group, you know, you say, what is your mission statement? And the first thing I put down was seek first to understand, then seek to be understood. And the second thing is that the golden rule, do unto others as you would have them do unto you. And so I'm in a position or I've put myself in that position to be able to say, okay, this is your need. I will go find the solution for it. I'm not limited as somewhat we refer to in our industry captive agents because their company says these are the only products you can sell.

Whereas I'm turning around and I can go out to the industry and find the solution, the perfect solution for you. And I can tell you why it's there. So that's the process and that's why I have to do a needs analysis. I need to know your story. Then what is the concern you have? Then let's take care of that concern. Let me show you how we can solve that problem. So it's several steps in getting to that conclusion.

But that is, that's how we work here. That's a smart benefit group. Yeah, that's really huge to be able to articulate that. When you're making your recommendations, talk a little bit about how you are factoring in protecting retirees income against market volatility, A, and then B, inflation. Because I feel like when we're tying in the concept of lifetime income, we want to make sure there's lifetime income without having these hiccups and potholes and, and hurdles on the road of, oh, well, volatility killed the last two years of return, so we got to start from scratch. So there's going to be market volatility.

Inflation is going to happen. What are some of the ways that you help retirees protect their income in that respect? Well, I always tell my clients that a certain amount of their assets need to be in the marketplace because that's where you're going to get your greatest gains, as well as you'll suffer some of the greatest losses. But if we can control that, then take the balance of that asset base and then put it into guaranteed products.

Therefore, we avoid what we call being dollar cost ravaged. and I'm not sure that when I look at that, Mike, I think about, okay, here's your need, here is the solution. And whatever that solution is, then I can turn around and give the profile of the product, the company. So one can be very assured that where we're putting our money and how it's going to perform for us. is there. So, you know, you said something and kept right on going because it's just part of who you are,

but I want to just put a pin in something that I think is really powerful. We've probably all heard of dollar cost averaging. And that's, it's a really powerful concept. And it's like putting the same amount into your retirement accounts, you know, the market. And if it's up, then great. If it's down, it's great. You keep on going, keep on going. And if it's down, then, you know, you can, you keep buying because you're getting that stock or that index at a lower amount. Then when it comes up, then you're getting momentum. Well, that problem with that is the roller coaster ride of volatility. If you're in your 50s or 60s, you might not want to be taking that really big, big risk.

You said dollar cost averaged versus dollar cost ravaged. Talk a little bit about how that ravaged aspect factors in. Well, you know, everybody's heard of BlackRock. It's one of the largest financial investment entities out there. And there was this strategist. His name is Mark Peterson. And he made this comment. He says, recent retirees are at an unprecedented juncture in this environment

with missteps in financial planning, such as unrealistic income targets, lack of diversification, and bad market timing, potentially lead to catastrophic consequences. So what worked for the individual while they're in their workable years does not work in their retirement years? So as we talked in our earlier conversation, this accumulation and distribution, we have to be able to realize that we need to turn around and do things differently because we're no longer going to be able to have dollar cost averaging at our fingertips. But missteps can cause a dollar cost ravaging. I mean, it's, you think about it. You know, it's a timing issue.

And I know Warren Buffett would probably say, yeah, I says, we've always thought we've been able to time the market correctly. But let me tell you about some of my losses. Never tells us about them, but I'm sure he's had them because maybe he's estimated or estimated that this is where the market's going to be going and it's unpredictable and it goes in a different direction. But he's not married to what he buys. He sells and buys again. And he pulls out of the market when he feels the timing's correct. In retirement, you don't have that option. Yep. So let's talk a little bit about when we started off this conversation, lifetime income, which is so powerful because you want your income to remain for your lifetime.

Talk a little bit about the big concern that people, most people have is outliving their savings. So, okay, I've got X number of dollars set aside from my retirement. I'm retiring next year at the age of X. I need it to last till this age, which I feel like should, you know, get me through retirement. But what if? What if I outlive my savings? What are some of the ways that you are helping your clients, really dial that in well. Well, there's a couple of ways that that can be done. Of course,

my favorite go-to solution is looking at an income annuity. We know, statistically speaking right now, that mortality rates have changed dramatically. As a matter of fact, when you turn 65 in this day and age, your life expectancy on the average is to be about 93. So, you know, that's almost like I'm going to be retired as long as I have worked for some people. Therefore, in this situation, you know, by using an income annuity, we can then dial in whatever the solution needs to be done. And then it tells us how much of the asset needs to fund that solution. And because it's guaranteed, and the reason they're able to guarantee that,

there's no other financial product or institution has this ability other than the life insurance company. And that's the thing they call actuaries. And they do what they call mortality studies. they know almost to the day within 10 days when somebody they could expect somebody in their client base is going to die. So with that, they create what we call mortality credits. As an example, Mike, let's say that you and I and two other friends of ours joined together

and we each put $100 in a shoebox. and we say, okay, one year from today, we're going to get together, we'll take the money out, and we'll divide it among ourselves. While that year comes, guess what? Instead of four people sitting around the table, there's only three. The next year, we say, hey, this isn't too bad. We've had a 33% increase in that $100, haven't we? Now we wait another year. There's only two of us.

Now we've had a 50% increase in our return. That's how a mortality credit works. And the industry, the life insurance industry, knows this. It's a mathematical equation and science that they have. So an individual can buy an annuity that's designed to be for income, and sleep at night because it has been mathematically figured out. I remember when I first bought life insurance when I was in my early 20s. And I look at that same policy, at that same age that's being sold today,

and there is a significant difference in the premium, which is less than it was when I bought my first life insurance policy. And I'm trying to remember, I think it's probably about maybe, five years ago, the mortality tables were readjusted because, like you said earlier, we're living longer, we're healthier, we're taking better care of ourselves, medical sciences, doing everything they can to keep us healthy. And so as a result of that, we know what mortality is going to have an impact on that income stream. I kind of chuckle. Why did they set age 65 for Social Security? know, Mike? I don't, no. Because that was the age people were dying. Oh, my. So back in the 1930s, when Social Security finally became, or 1940s when Social Security finally became a part of our,

you know, the Franklin, Delano or Roosevelt era and put into four into into into place, that's why 65 was chosen. And now people who live into 85, 95. Yeah. And at one time, at 65, you could get what you called your full retirement account. That as people are aging in to Social Security, you notice their full retirement account age has gone from 65 to 66 and six months, 66 and seven months now up to 67. Why is that? One, mortality and two, people are working longer.

Yep. And there's a lot of factors that go into that I'm confident of, but people are working longer because maybe they've not prepared for retirement properly. Maybe they've got a lot more debt than they should, you know, and maybe they just really enjoy working and they're structuring their day to go, you know, maybe I'm going to work three days a week versus five. But I think that's really an interesting correlation between back and the day. hey, 65 was when people, the administration felt like that's the end, end, end of the line. Nowadays, people are like, hey, I'm 65. Let's, let's start a new business. Let's start a new hobby.

Let's start mountain climbing. So we got to factor longevity into these equations. Well, you know, you think about Colonel Sanders and Kentucky Fried Chicken. When did he start that enterprise? I think I heard in his mid-60s. He was in eight, when he got his first Social Security check when he was 16. I don't know how many people he went to to try to sell the idea of this finger-looking good chicken, but look what he created. And he was 65 when he started it.

I mean, amazing, isn't it? It is. So because of that, we need to make sure that we have dialed in these numbers and calculations to make sure you don't outlive your income, have that lifetime income in place. So, David, if someone is interested in learning a little bit more and reaching out and connecting with you, what's the best way that they can do that? Well, I have a website. It's, you know, www. Smart Financial Benefit Group, LLC.com. Or you can text me at D-Smart, N-A-Z at gmail.com. or if you just want to talk to me, you can call me at 480-600-3806.

Any one of those ways, you can reach out to me and we will get back to you. Excellent. Well, David, thank you so much for coming back on. It was a real pleasure talking with you today. Well, thank you, Mike, and I appreciate the opportunity. You've been listening to Influential Entrepreneurs with Mike Saunders To learn more about the resources mentioned on today's show or listen to past episodes, visit www.

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