Business Innovators Radio - Interview with Mehran Rad Founder & President of R & AP Financial Discussing Guaranteed Income

Episode Date: August 13, 2024

Mehran Rad is an Investment Advisor Representative with a passion in helping retirees, and those approaching retirement, to avoid the common financial mistakes of retirement through comprehensive financial planning.As a Fiduciary, Mehran works diligently with his clients to help them take control of their financial future through education and use of financial strategies designed to help them with the critical areas of retirement planning, including:• Retirement Income & Social Security Planning.• Tax Minimization Strategies.• Investment & Risk Management Strategies.• Estate & Legacy Planning.Mehran started in real estate development and investment back in 1988 and has been in the financial service industry for the last 22 years. He is a graduate of Guilford College with a BS degree in Business and a minor in Economics. Mehran has passed the NASD Series 65 (Investment Advisor Representative) and has met all requirements for Life insurance and Long-Term Care licenses in several States.PersonalMehran grew up in Chapel Hill, NC, and is a big Tarheels fan. Soccer has been a big part of his life as he played in college, and several years after. All three of his boys have played professionally for teams such as Sporting Kansas City, Hartford Athletic, Huntsville FC, and Portland Timbers.Outside of the financial world, Mehran enjoys walking, golf, hiking the Arizona trails, and watching soccer, but above all, he loves spending quality time with his family.Learn More: https://www.retirementap.comInfluential Entrepreneurs with Mike Saundershttps://businessinnovatorsradio.com/influential-entrepreneurs-with-mike-saunders/Source: https://businessinnovatorsradio.com/interview-with-mehran-rad-founder-president-of-r-ap-financial-discussing-guaranteed-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 us, Mayeron Rad, who's the founder and president of R&AP Financial, and we'll be talking about guaranteed income. Mayeron, welcome back to the program. Thank you for having me back. You know, I always love certain words.

It makes you think of certain things and the word guarantee. That's just a great word. We all love guarantees. And when we hear guaranteed income, that just makes me go, tell me more. So I want to hear all that you have to talk about regarding guaranteed income. So actually, let's just define it. Could you explain what guaranteed income is? And then when you're talking to clients about planning for their retirement, why is it such an

important consideration to make sure you've got that in your retirement plan? Sure. Guaranteed income means a program that provides regular direct payment to the individuals or households without condition or restrictions for as long as you live, you live, meeting lifetime. And examples of guaranteed incomes are most people are familiar with, are social security payments and pension benefits. So in retirement, especially guaranteed income is king. It's the foundation of one's overall retirement plan. And there are many ways to plan on having income retirement, but most plans can fluctuate from year to year due to performance of the underlying assets, which is not guaranteed.

So once the income needs are planned for, then the rest of financial plan can be tailored and implemented. So it's the first step. You know, and that makes me think of, you know, volatility in the market. You know, if you've got your entire retirement portfolio and you're looking at your statements every month or quarter or how often they come out and then you watch the news and you hear the market tank, you're really worried that, wow, maybe the interest or dividends or. income that I take off of my, you know, portfolio is going to be impacted negatively. So when you have that guaranteed income layer in there, whatever percentage of that that you recommend,

then you're going to know that I've got that solid foundation. And wouldn't that take a lot of the anxiety out of, you know, clients that know that you've got a big portion of that bucket, you know, set to be guaranteed. Right. Yeah, that's awesome. So what are some other,

and I know you mentioned social security, but what are some other types of guaranteed income? And then how is it different than, you know, traditional income in a retirement plan? So do a little comparison there. Like, you know, what, get it, get us clear in our minds, what typically is income in a retirement plan. And then how does guaranteed income differ from that?

Yeah. As we just mentioned, the other types of income fluctuates from year to year due to the gains of and the losses of the market or accounts. It's a moving target. So how can you count on meeting your monthly needs or income when they have a moving target? So for most people, their two biggest assets by the time they retire are their home and their retirement accounts. You know, the 401Ks, IRAs, TSPs and so on.

The one account that can provide income for them in their retirement is their retirement account in their retirement, which took them 30, 40 years to build. And because they massed these retirement accounts investing in the stock market during their working years, some believe that staying the course and be fully invested in the markets during their retirement years still will give them the income that they cannot outlive. The financial plan is different in the accumulation phase of life than the distribution phase. And there's been numerous studies that in retirement, a few market down years, especially prolonged periods while you're taking income from them,

increase the chances of running out of money. Of course, this all depends on the size of your retirement account and how much you're withdrawing or taken out every year. You know, the example that comes to mind is the year again 2000 to 2010, which is called the last decade because after the correction of 2002, it took the market 10 years to get back to his highs. So can you imagine if you were totally dependent on a market returns for your income at that point? You know, a lot of people had to go back to work.

And once you set aside and convert a portion of a retirement account to lifetime guarantee income to supplement the Social Security and pension to meet the monthly needs, then the fluctuations of the market on the remaining balance is acceptable and doesn't cost much fear or anxiety or stress. You know, you mentioned, you know, many people, most people have, you know, a house and their retirement plan, their 401k and all of those things. And I know this is not a financial advisor investment type question, but what do you say to clients that come to you and say, you know, we've got our house and it's free and clear, is a reverse mortgage a good source of guaranteed income because I've, you know, they've been getting fly.

liars in the mail about, you know, getting a thousand or two thousand a month from your, your house if it's got a lot of equity. What are some thoughts that way? It all depends on a situation. You know, the only times that I've ever maybe have talked to a client or considered is that if that was going to be used to be taking care of their long-term care needs. But in general, I'm not a big proponent of reverse mortgages because you still, that money has to be paid. If you're going to leave it for the family, obviously you'd be taking some from them. But unless you're in a very, very tight situation, there are other options that are much more

attractive than the reverse mortgage option. Yeah. And I think you, it's different depending on from advisor to advisor. It can be different. I personally, I'm not a big proponent of it. And you kind of started off probably just even subconsciously saying it all depends because it really is the case. It's not the perfect solution for 100% of the people out there. It all depends.

And I think that's really great. And I agree with that. But I think a lot of people, though, they start hearing about and they see online and get flyers and is it a good deal and they get confused. So you mentioned that there's other sources of guaranteed income. What are some of those other common sources that people can consider? and be thinking of or planning of for, you know, really filling in the gap during those retirement years? Yeah, there are basically three sources of guarantee. And I always like to call it lifetime guarantee because, again, we talk about longevity.

You know, we're all living longer. But there are three basic ones. One is obviously the social security that everyone is familiar with. The other one is pensions, which is less and less available these days. And finally, they're also fixed. annuities or annuities in general. Types of annuities, there is an immediate, fixed, fixed index, and variable annuity. And annuities by definition are fixed sum of money paid to someone each year, typically for

a rest of their life. So if you win a lottery, you have an option of, let's say, taking a lump sum or taking equal payments over 30 years, which is an annuity. A lot of people don't like the award, or maybe some people don't like the award. annuity, maybe because they don't understand it. Also, lawsuits and some legal settlements at times have the same annuity payment options. So it's been around for a long time. Social Security has been around pensions, although they're going away. So these are the other ways. But to find out which annuity is right to meet the income needs, really you must find the knowledgeable and

experienced advisor that specializes in the distribution phase of that income planning that can explain the pros and cons of the annuities. And for example, variable annuities to me may not be the option because they fluctuate in their income stream based on a performance of their funds. And it may not meet the guaranteed income needs, but certainly the fixed immediate and fixed index are the other examples of providing lifetime income besides Social Security and pensions. Yeah, I love how you add that word lifetime guaranteed income because it's like guaranteed income, but if you have a little asterisk down there only for the first five years, but lifetime guaranteed income is huge. It makes me think back to a previous conversation we had

on inflation. How does inflation impact lifetime guaranteed income? Because is it something where it's like, oh, it's guaranteed income for the lifetime only if inflation is between this and this? Or is it, you know, like almost a contract where it's like guaranteed income is this and you can rest on that? Good question, Mike, because there's two ways to combat that or plan for that. There are currently annuities available that provide you the lifetime income guaranteed lifetime income that have an inflation adjusted built inside of that. So that would provide for that need. But also as part of the planning, we can also create a bucket. I believe in a four bucket strategy. And obviously there's the income bucket. There's the growth bucket. There is the,

emergency bucket, your check-in savings account and three to six months of your expense needs. But one of the buckets that always like to create is called the inflation-adjusted bucket. So it's still growing, but if inflation gets out of hand and our income, the first bucket of guaranteed income, is not sufficient, then we turn on the second bucket, which has the inflation We increase their income with a second bucket. There's no reason to give them more income that they need, but it's there when it's needed. So that's the way we usually allow for inflation if they don't have an annuity that has the inflation adjusted built in. Yeah.

Yeah, really good point. It's kind of transition into some other pieces of advice. What advice would you give listeners who are just starting to think about the retirement? retirement, and now they've kind of thought in their mind, well, I just put it in the market and hope for the best. But now you keep mentioning this lifetime guaranteed income. What is some of those pieces of advice that you would add there? Yeah, well, the first thing is to understand that they're transitioning from the accumulation phase to the distribution phase.

Kind of the example sometimes I use with my clients is that when we're traveling down the highway and flying at 70 miles an hour. And then we're coming on an exit. We don't still fly or we're trying to go home. We come off the exit, go to a four lane or two lane road and then eventually to our neighborhood. The speed changes, right? We're not flying at the same speed. So it's the same analogy here that we're on a highway when you're in accumulation phase, but when it comes to the distribution phase, you're coming off the exit. You got to slow down, change, change of mentality. it's a change of a mindset to go, go, go, grow, grow, grow mentality to keeping their heart and money by reducing or eliminating losses if possible. So the next step is to know how much

money they need every year to live a happy and comfortable life. And we talked about this, knowing the gap or the shortage from their social security to what they need to have that comfortable life is to convert again, portion of their retirement accounts to generate the guaranteed lifetime income for both you and the spouse. So the rest of the savings can be invested in the low risk growth accounts to replenish the overall net worth. So although we're spending money over here, this account now is growing. So the goal is to retire and stay retired, safe, secure, and and worry-free. But I want everyone to think back about the analogy that I like to use. Think back about 10 or 15 years ago, you were working, getting study monthly paychecks,

and contributing money to the retirement accounts. During the last 10 or 15 years, there's been several market corrections. Although we lost or you lost money, you didn't panic and you'd continue to contribute because you were still getting your paycheck every month and you had time to recover the losses. So that's the one I want the mentality to be in retirement is the same. You can create the same scenario as you were working by taking, again, portion of the investment or retirement accounts and creating that personal pension or the paycheck for yourself along with your Social Security every month for the rest of your life.

So the fluctuations and the balance that's in the market now becomes more bearable just like it was when you were working because you're getting that paycheck every month. So you can retire and write it out, write out the ups and downs of the market and just let that be the safety net for you. The guaranteed income plan in my mind is the main pillar of a sound and successful retirement plan. You know, I think you just have brought up such huge points here. and I think let's wrap up with this thought that comes to my mind, which is not strategies, not annuities, not tactics, but the more personal, emotional side of things. It sounds to me like when you were working with your clients, helping them allocate and

pick the right buckets and the right percentage of guaranteed income for lifetime, they almost would take a deep breath and feel such a relief to know, I no longer have to work. about those market volatility, those statements coming in the mail, seeing my portfolio drop. It's just that peace of mind. And it's just got to be such a great feeling that you're able to provide that to your clients. Talk a little bit about that emotional side that you are able to deliver. Isn't that what's all about? It's the person. It's not the, it's the person, not the money. Yeah. Our job as advisors to mold and fit the money to the person, their emotions, their plans, their needs, because once that's met, the money will automatically do its job. So the plan is based

on what the client, my clients tell me. What is their goals? What is their dreams? What are they trying to accomplish? What trips they want to go on? What do they want to leave for the family? So a financial plan is just not for me to have income. The income is the base to make sure you have the rest of the money for it to work for you, for you to accomplish and live that happy retirement life that you have envisioned for yourself. So yeah, I think emotions is about everything. We try to match the money to their feelings and emotions on who they are and what they want to accomplish. Yeah. That just takes it to a whole new level of building that relationship, not just having a transaction. And once we come up with the plan and let's execute this, it's the,

It's the relationship and it's the trust that's built. So I think that is spectacular. Well, Maran, it's been such a pleasure talking with you again about how people should plan for the retirement as it relates to guaranteed income for life. If someone is interested in learning a little bit more and also reaching out and connecting with you, what's the best way that they can do that? Website is a great source to start with. It's www. atirementap.com. My email address,

Mayron, M-E-H-R-A-N dot retirement AP. I'm sorry, Mayron at RetirementAP.com, and the phone number 602-561-2-2323. Excellent. Well, thank you so much for coming back on. It's been a real pleasure talking with you again. Thank you, Mike.

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