Business Innovators Radio - Interview with Ft. Worth Financial Professional Guy McCord, MBA Discussing Annuities

Episode Date: June 9, 2023

Guy McCord lives in the Dallas/Ft. Worth area with his lovely wife of 30 years, Patricia, and their son, Andrew, who will soon be a senior in high school.Growing up in Plano, Texas, his grandparents were his heroes. One of his grandfathers served in Germany US Army and received a Purple Heart. His other grandfather was a West Texas rancher and worked for 40 years as a rural mail carrier. Guy’s grandmothers were steadfast in their faith.Guy has served in staffing as CMO, logistics and commercial building maintenance as both a CFO and CEO. He has also served many small businesses in consulting.Guy is a retired Texas rugby referee and serves Dallas County as Presiding Election Judge. After earning his MBA in 2007, he authored 7 articles. He supports the Monastery of the infant Jesus of Prague and St. Joseph.His faith is his foundation, and he lists Jesus, Mary, Joseph, his wife, his son, and his great friends among the most important things in his life.By structuring client retirement money to minimize taxes, safeguard against market losses and allow for upside gains while allowing for lifetime income.Learn More: https://guymccord.com/http://www.guymccord360.com/Influential Entrepreneurs with Mike Saundershttps://businessinnovatorsradio.com/influential-entrepreneurs-with-mike-saunders/Source: https://businessinnovatorsradio.com/interview-with-ft-worth-financial-professional-guy-mccord-mba-discussing-annuities

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 with us Fort Worth financial professional Guy McCord, and we'll be talking about annuities. Guy, welcome to the program. Hey, Mike, how you doing? Doing awesome.

Looking forward to talking to you. I know that we've talked several times before, and it's always a pleasure to talk to someone that is really just down to earth and real and personable. So I'm excited to learn from you because I know you've got a really great perspective on helping people understand complex financial topics. But before we dive into that, what's your story? What's your background? And how did you get into financial services in the first place?

Well, thanks, Mike. That's great to be here today. well back in the early 90s I took a test that told me that I needed to be a stockbroker so I went to work with a company called Payne Weber which is now a UBS out of Switzerland and I worked there for a while and then went into business for myself and kind of got away from that as a like a nine to five thing, but I kept doing it on the side because I had clients that I was helping in the Houston area, Houston, Texas.

And I just never let go of it because I really enjoy helping people take care of what they've worked so hard to accumulate in their life and not lose it all. So that's what I do, and that's where I am. You know, and I get the feeling that you

are like you you you left your stockbroker boiler room weighs decades in the past and now you take the approach of helping people understand and you teach and you educate because when you start talking about money and retirement and wealth and how to make those plans it is not a cookie cutter approach that fits everybody you've got to really understand what someone needs their specific circumstances and then make some recommendations that way so is that kind of your approach is kind of coming alongside and helping someone just kind of from an educational approach. Oh, absolutely. Every time I get on the phone call, at nine times out of ten when I'm talking with somebody, I'm asking a lot of questions. They're like, you're not trying to sell me anything

today. I'm like, that would be malpractice. I don't even know you yet. Okay. So we've got to get to know each other. We got to know, you know, first of all, is that, is this person, going to be a client that I can help. You know, what I do is not for everybody. I mean, if, you know, if a guy's got $50 million in cash in the bank, it's not my guy. It's not the person I help. I really help the mom and pop retiree, people that are, you know,

looking not to lose what they spend a lifetime trying to build. You know, that's a huge point. And I think that we need to really put a pin right there and clarify that. because I think that when you hear the phrase the market or stock market and you turn on the news and you hear the Dow Jones went up, this, down that all around, there's a time and place to put your money in the market, but then there's a time and place where it's like, okay, we better circle the wagons and make sure we're not going to lose anything. So what is your approach when you're helping your clients understand? Okay, the time for kind of volatility and fast growth, that's past because now we need to really solidify and make sure you. you don't lose a dime and have guaranteed returns. What does that look like? Exactly. You know, so you're talking about really two phases or really three phases in life.

The first part is when a person starts their career and they're working and they're putting money in their retirement plans, you know, whatever it is. And that's what we call the kind of the accumulation phase. You know, I'm trying to build my assets, build my wealth, build my retirement. But then when they get up towards 59.5, as the government defines, when they start getting beyond 59.5, 60, now we're moving into what I call the preservation phase of life where I don't want to lose what I've built. And then after that, as we pass, because we're all going to pass one day, that's what really I call the legacy phase. So three phases, the accumulation, the preservation, and the legacy. Yeah. And so in this preservation phase, like what we said on the outset of our conversation, we want to talk about annuities. And I think that in my opinion, you know, I'm not an expert. You are. I think when you hear the word annuity, I think some people go red flag. You know, so let's define what's an annuity and kind of how does it work so that we can really clarify some of the benefits and some of the things that that client should be considering. Well, you mentioned the word market earlier. Well, market has a lot of definitions. I mean, when I talk about market in this application, I'm really talking about, you know, a free market.

You know, goods and services, I mean, meeting the needs of people. Okay. So the annuity industry has really changed a lot, not just in the last decade, really in the last two to three years. COVID did a lot to change the entire marketplace for all goods and services and the way we get them. And with annuities now, you know, it used to be a dirty word. You know, stockbrokers don't like annuities because most of them can't sell annuities. There are people on the radio and TV that run ads and say, hey, I'll never do an annuity. Well, those same people won't tell you that they actually are talking about what's called a variable.

annuity. And what we like to do are more towards a fixed annuities where there's really a floor, a guarantee that you're not going to lose money in your account if the market goes negative, but then you have the ability to participate when the market takes off and gains. So it's really, because your money is really not in the market, per se, in a fixed annuity, or a fixed indexed annuity. And so it's really a way to kind of smooth out the bumps and eliminate the volatility. And so when I hear the word, there's a lot of words that, you know, when you've heard the old test, like, you know, when you hear this, what do you think of? Like, when I hear the word fixed and I hear guarantee and I hear secure and those are all words that kind of make you feel warm and fuzzy, like, okay, tell me more.

So when you say fixed, this means that this type of annuity that you work with can't change. Like one year it's this return to this year it's up and down. So a fixed annuity is something that is going to be. Right. What we're talking about when we say a fixed indexed annuity is that your money can be allocated, similar to what you would do in a mutual fund, per se, where you say 25% of your money was tied to an index that measures. the year-to-year performance of the S&P 500, for example, or Credit Swiss indicator. Or let's say, I want to put my money into what's called a fixed account.

Say, I want to put 25% of my money in that account into a fixed account where I'm going to get a guaranteed rate of about maybe 3, 3.5% a year, regardless of what happens in the market. So, and that's what I really do with a lot of clients, especially when they're in the 50,000 to a million dollar range, is I want to make sure that my strategy is that they never not get a return on their money. So on a lot of these accounts, I will take about a 25% position in the fixed account rate so that 75% of their money to be tied to indexes that are working with the market. but let's say the market goes down year to year and in a 75% of their money they're going to their index is down so they're going to be at zero as far as a return but in that 25% of that money if it was at 3.5% for example they're still going to get a little bit of interest on that

account and see that is such a comforting thought because from what you just said and let me make sure i'm i'm explaining the right way you can never lose money when you're putting it in that account. And if it's tied to that index, whichever index that it is, if the market totally crashes, you don't lose money, you just are flat. But then in whatever percentage that you put it into the fixed section, and it's, you know, whatever the earning is, it doesn't matter because that would change whenever you lock it in.

But then you're going to go, well, you know what? The whole market went to pot. I didn't lose a dime, but actually, I'm up X number of dollars because this percentage of my annuity was set at whatever rate of return. To me, that gives peace of mind that let you sleep well at night. And then you don't even need to worry about what the news is saying the market is doing because you know you've got it dialed in and locked in. Exactly. Exactly.

So if that's the case, what are some of the potential drawbacks that people should consider? Because like what you've said, maybe one product is good for one client and it's not good for another. What would some drawbacks be that someone should consider? Well, you know, you hear a lot of people say, they will say that, hey, I can't, I can't time my money up. And I'm like, okay, how much of your money do you need access to? Let's say, let's say you put that money into a CD, for example. Well, how much money would you want to take out a day to give it time? Oh, I don't know, five or 10 percent.

I said, well, you know, there are accounts that you can take up to 10. percent per year, plus after 73 years old, you know, because of the CARE Act, you have to take out required minimum distributions if that money is qualified, meaning that you moved it from a 401k into an annuity product for, let's say, for example, because you wanted a provision to be able to get guaranteed income for life, you'd be able to take out 10% of that money plus your RMDs each year in the first, if it was a seven-year contract, you could take it out for those seven years. But they also, we also have accounts with certain companies that if you need to take money out because you have to be confined to a nursing home. You can take all your money out penalty free.

So, so I'll ask him. I said, well, you know, if you put that money in a CD, I've never seen a CD where you can take money out without penalty. for any reason. So actually, I've got more flexibility in an annuity. And once again, this is all because of the needs of consumers in the last three to five years have changed the market. Yes. These companies are doing these things that people really don't know about. And, you know, I think that's a big piece that you just brought up about maybe health or long-term care. It used to be that these types of products did not allow for that. It was, you know, like only if you had a long-term care policy. Well, now with these kind of annuities, you're saying that there's some

flexibility given how people's needs are. So now they've baked this into the actual product. And if you set it up the right way and you do need access to that, there is a way to get those funds for that purpose without incurring a penalty. And to your point, if you have it in a CD, they just go, penalty. You can get your money. It's just that there's going to be a penalty there. So talk a little bit about some of those living benefits that it provides that maybe some people might not realize. Well, I really, I guess this is telling you how old I am, because I know what the, what we call the essential activities of daily living or ADLs. So if you, so anybody that's of my age is going to know, hey, there's several of these

activities of day living, you know, feeding yourself. clothing yourself, bending over to put your, tie your shoes, just, you know, going to the bathroom by yourself, those kinds of things. So if you can, if your doctor was to certify with a letter that you are unable to perform at least only two of the activities of daily living, you get access to your money in a lot of these things. Um, here's a question. And again, I love, I love when I ask these kind of questions because I'm putting myself in the shoes of one of your clients where maybe they would have the same question. If you needed that and one of a couple, three of those factors were deemed, yep, you qualify. Does the check come to you or does it have to be sent to that care provider?

No. It goes to you. If you're the account owner and or the annuitant, it would go to you. See, that's a really big piece of flexibility that I think people would feel comfortable with because if somewhere buried in the fine print, it's like, oh, great. Now I've got to have this one certain in-network provider that they send the check to and I didn't want to use the, well, that doesn't give me much flexibility. But if you qualify, yeah, this is not a health policy. This will be your money. So it's your money, you own it. Now, one point I would make. Now, there are a lot of myths and misconceptions about annuities.

One of them is taxation, you know, with what we're seeing with what the federal government is doing with taxes and so forth. I think taxes are going to, they're going to have to go up because they're not cutting spending. So the way annuities are taxed is really, it's kind of like three, think of it as three buckets. Let's say you take money that you paid your taxes when you earn. the money and you just had the money in your checking account and then you say, hey, I want to, because really with annuities, a lot of companies are flexible. There are many companies, you can get into an annuity account with as little as $5,000. Okay.

Up to usually a million dollars after a million dollars, there may be where we have to get a special approval is because it's a big account. But typically, $5,000 to a million dollars with no big deal. And so if you've already paid tax on that money when you earned it, when you put that money into an annuity account, let's say you, let's say in 10 year, because you don't need access. See, first, let me back up, you don't put money into an annuity if you need the money tomorrow, okay? Right. It's not a liquid investment, okay? It's right.

Long-term planning for long-term retirement needs. It's not for, you know, I'm going to put the money in like a CD for 30 days. I'm going to take it out. That's not what this is for. Okay. So let's say, for example, I'm 50 years old and I'm buying an annuity and I put that money in. And 10 years after 50 and I have, so I'll be 60 years old, I want to start taking my money out because I want to quit. I want to go travel for, you know, five, 10 years, whatever.

So when I take that money out, because I already paid taxes on it when I earned it, the money is going to come out what's called FIFA, first in, first out. And that's an accounting term that means the money that. went in first is the money that's going to come out first, which means the principle that you put in when you open the account will come out tax-free, okay? And not until you start depleting and taking out the money that was your return on investment, your interest, okay, or your gain, only then would you pay ordinary income tax on that gain at the end of that money trail. Okay. Okay. Yeah, totally does. So the second qualified, second category, would be a qualified annuity account.

And that would be where, like, you would take a 401k or an IRA or a 403B or a 457, or all the different types of IRA accounts are, move that money into an annuity account. It would still be taxed at retirement starting at a minimum. Because it never got taxed in the first place. Exactly. So you're going to have paid taxes on it.

I don't like doing that for clients. And the reason I don't like doing it is because that is a tax. You end up paying tax on the money when you can least afford it when you're off fixed income. So there's a third way and it's called a Roth conversion. That's where we'll take, let's say a person has they want to move $500,000 from a qualified 401. They move that into a Roth account annuity, an annuity account, okay? And they have many years where they can take out money, let's say $50,000 a year, pay the tax on it for that year. And then, And it goes into a portion of that, a different wrapper of that account where they're going to pay

income tax only on segments of that money over five or ten years. Unless they can afford to pay the tax on the whole 500, that's a different story. But a lot of people can't. So we kind of segment that off, five, ten years, or paying tax on a portion of that $500,000. And when they do that, when they start taking that money out at retirement, it's all coming out. tax free. Principle and interest because it's a qualified Roth rapper. Yep. Isn't that kind of like the concept of, you know, some people would say, well, why would I want to

trigger taxes now on that qualified money for my 401K? Well, pay taxes now because who knows what the tax rate is going to be in 10, 15, 20 years. And if you could pay it now, and then you let it grow in one of these accounts so that down the road, you're not paying on the big question mark of what the tax rate will be, because we know taxes are going to go up. There's no question about that. Yeah, yes, sir. That's a, that's a huge, huge point there. So, you know, I think this is something that is really interesting that if you were to pull 100 people and say, you know, annuities, good or bad, you'd probably get a whole bunch of people that are saying bad, bad, bad because of misconceptions. And a couple of the points you brought up

are valid misconceptions that are common, but when you can say, but if you look at it this way, and like to your point, if you need the money right now, don't put all your money in annuity. Well, also don't put your money in a CD either if you need it all. So some of those misconceptions are misplaced from just the past. So I'm glad you cleared those kind of things up. And an annuity can be accessed for liquidity in those qualifying circumstances. So that's wonderful. But I think the biggest thing that people really don't really wrap their head around as much as, boy, you can never lose money.

And if you give your money to a quote unquote, you know, Guy McCord back 20, 30 years ago as a stockbroker, there is no guarantee that you're going to not lose money. So in this account, this is when you need to preserve the hard earned cash that you've accumulated over the decades because you're facing retirement, either currently or moving forward. you just can't lose you can't lose sleep over that so you need that guaranteed return Mike are you sure you don't write a noity account really I just I'm just listening intently and trying to say did I hear this right guy because in reality and I know this sounds kind of strange but it's like where's the catch there's really not a catch and even some of the things that you mentioned was like well if you need the money now don't put all of your money into this product. Well, you would not want to put all your money into a life insurance policy or a

mutual fund. You would want to be balanced anyway. So I just think that this is so interesting and some of the changes from the recent years that you've mentioned like, ooh, what if you needed it for health or long-term care? You can access it without penalty. Some of those other accounts that you mentioned like a CD, like so many people think, I'm just going to keep my money safe and go put it in the bank. Yeah, but CDs don't pay as well as this annuity. And if you do need to access it, there's going to be the penalty there. So I think that this is so powerful that I'm glad you brought these points to our attention. And Guy, I think I would just like to say, what are some final thoughts if someone, when you're working with clients? What are some of the other, you know, final points that you would

want them to understand about annuities? Well, if, you know, if you're getting close to or even five years out from your projected retirement date and you're tired of losing 20 to 30 percent being in the market. You know, the market's rebounded recently, but, you know, if you feel like you're in your preservation stage of life and you're just tired of having to look every day at what your funds are doing, give us a call, guy mccor.com. Real simple. Very simple.

I'll make sure that's in the show notes. And Guy, I think that last point you made is so critical, which is this, boy, if you're tired of just watching the returns and being nervous and you don't want to turn on the news because what if the market did this or that or what is your portfolio going to be doing, boy, if you want that peace of mind so you can sleep well at night, boy, you can, even there's research out there. I'm sure that it shows that it extends your lifespan by not worrying as much. So that is just that is just huge. Well, Guy, thank you so much for coming on. It's been a real pleasure talking with you. Thank you, bye. 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.com.