2024 May 21 Lead a group of one!

May 21, 2024

Hi, this is Jim Cranston from 7EveryMinute and 7EveryMinute.com, the podcast and website about reimagining your life. Thanks for joining me today to talk about how even a group of one person can make a huge difference in the world going forward. We'll also talk about financial investing. I have an interesting news story about a different type of retirement plan. If you like what you hear today, please leave a like, tell your friends, send me a message. 


Today, let's talk about some new retirement plans that are coming on the market. There's a new type of retirement fund. It's probably more relevant to your kids or grandkids, but it may apply to you as well. If you're going to bring it up— because it's the type of thing somebody might ask you about it—One of your kids might say, Hey, did you ever hear of this? Is that what you have? It's a little bit different from the types of funds that we had available to us up to this point. 


Big disclaimerI am not a financial advisor. Before you make any investments, I recommend you speak to a registered financial advisor.


This is from a Wall Street Journal article on this topic. It was in their financial section in a recent issue. The title is BlackRock's Plan for Your Retirement: a 401k with a monthly check.


An annuity is a kind of life insurance plan, but turned completely upside down. With a life insurance policy, you typically make a whole bunch of little payments, and then when you perish, the beneficiaries are paid a large sum of money.


There are different types. There's a whole life policy, and that's what I just described. The whole life may accumulate a cash value that you can claim at some particular future age and borrow money against.  


Then there's term insurance. You might see that often. AARP is famous for that. You can get insurance for only $9/month for a $100,000 policy, for example. (Those aren't real numbers.) Term insurance is the kind of insurance where it goes for a certain term, a certain number of years. It's a lot less expensive because they pick those years on their actuarial tables based on expected lifetimes. They pick those number of years, assuming that you're not going to have perished before the insurance timetable runs out.


These term policies typically don't have any cash value.  They have a defined end date, at which point you don't have insurance and you don't get any cash back, but people get them because they're a lot less expensive. So, if you're starting out and you buy a house, you get some insurance to cover the mortgage. You figure you're only going to want it for 30 years, the same as the length of the house. At the end of the term insurance, you don't have any insurance. You're not getting any cash back, but it's a lot lower cost.  You can get insurance to cover something specific, such as your car or your house. But it's the same concept. You make little payments for a semi guaranteed large payment at a future date, if need be. 


So if you take the whole life model and turn it completely upside down, you end up with an annuity, where you give an insurance company or other financial institution either a bunch of money up front—some of them do take little payments along the way—a lot of them are like that too. Basically you're putting money in and it has nothing to do with your death, but at a certain point in time in the future, they agree to pay you back a regular amount at some point in the future.


It's like putting it into a bank account, except hopefully it pays more than a bank account would. It wasn't very long ago that bank accounts were paying about 1% interest on their accounts. An annuity pays something higher than that, but it also doesn't usually pay as much as stocks and bonds. It's a middle ground between the two. 


Talk to a financial advisor. There's a thousand points about it I'm not going to cover, and I'm not an expert, but  the takeaway is that it's a different way of taking some money and saving it so you get a guaranteed amount of money back in the future. There are different types of annuities. Some of them do allow you to make multiple smaller payments, but it's the same core principle. You're getting your own money back at a known rate. That's the really important part. 


BlackRock has a new retirement plan called Lifepath Paycheck. It's a hybrid annuity target date fund, which is a type of 401k. A target date fund is just an investment account to which you make typically regular payments. It's expected, known up front, that at some point in the future, you're going to start withdrawing money—maybe it's your retirement date. You could set up a fund for anything like that. A lot of banks now will offer things in their savings accounts or checking accounts where you can set aside a certain amount of your deposits and put them into this little side fund. You write down what you're going to use it for, like a vacation at Disney World or something like that. 


In a sense, that's a target date fund. You're saying to yourself, If I put in $200/month, at the end of the year, I'll have enough money to go to Disney World. It's the same concept on a much bigger scale, however. So, what do these new hybrids do? I'm just going to talk about the BlackRock one, because that's the one that I saw. What they do is at a certain point in the future, they start investing in annuities on your behalf before your full retirement age, so that some fraction of your retirement savings basically gets turned into a regular known amount of guaranteed retirement income.


You would get a retirement check every month. They take some of your retirement fund, that's probably heavily invested in stocks and things like that, and they put it into this annuity. Why is this a good thing? If you listen to the stock market reports at all, and it's hard to miss them—there's always talk of the market going up or down. It hit a new record. It's the highest it's ever been. It's the quickest it's dropped in 10 years or whatever.


Over the long term, all these ups and downs average out, but it results in this average, long-term return. You can think of a long-term return like a bank account  earning interest. It's typically around 6-9%, and it's pretty constant. The stock market generally goes up over the long term. 


Annuities typically have a lower return, so why would you ever get an annuity if you can get a stock. Some go get a mutual fund from one of the big mutual fund companies. Why would you get an annuity?  The magic words: long term return.


Depending on when you started putting money into your 401k retirement account, you might remember the 70s and the 80s. If you put money into a retirement fund at the wrong time, that fund actually lost money for a couple of years because the stock market went down. 


Now fast forward to today, when you're actually going to be mostly retired or fully retired in a few years, maybe a decade. You're counting on your 401k or other savings plan to be making you money at that point.


You want to retire. You set that money into the 401k. You expect to start taking out interest and maybe a little bit of the principal depending on how you structured your plan. That's what you're going to be living on. But if the stock market is falling, your investments aren't making any money. Any money you take out means you have to take from the principal, the savings, and that means you have less money to retire on in future years.


That's a very bad situation, and that's going on a lot right now. There's a lot of talk about that. The interest rates were low for quite some time, and we had a period where the stocks went down and inflation is up, and all of a sudden they're actually taking from the principal retirement savings. Sure, it makes retirement nicer now, but it means you're going to get less interest on the money that's there, so in the future you have less money.  


Back to the annuity, though. The annuity pays the same amount of money every month, month after month, regardless of what the stock market's doing, because it's been making money on the money that you gave them.


It can cover those down times. That's why they pay less. Yes, in strict numbers at any instant in time, they might be paying less than the stock market. But even if the stock market goes way down, they're still paying you that same fixed amount every month. This means that part of your retirement money is in a regular target date fund.


That's when you give them money and you start taking it out, and you expect them to be making money. Part of it's in an annuity, and the amount from the annuity will guarantee some minimum payment every single month, regardless of how the other retirement fund is going. It's just a regular check.


It's really a hedge against unfortunate timing between your retirement years and the stock market, but it's also a nice backstop. You're saying, Well, I don't want to not get to take any money from my 401k, but I sure would like to have some money coming in my retirement that I can absolutely count on every month.


That's what an annuity gives you, and that's why they put these plans together. Just to note (and this is something you should definitely check with your financial advisor on), I think if you're under the age of 72 that you may be eligible for the same sort of thing, either on your own or possibly through one of these combined retirement funds, very specific to your financial situation. Look into it if you're interested. As always, talk to your registered financial advisor. Even if you think you're pretty well set, it doesn't hurt to review things, because tax logs change, markets change, even your own needs change.


We're done with the financial stuff, and now something that is much more fun to talk about. Finances are important, obviously—probably as important or even more now than they were in our earlier years. As we get older, our income sources are a little more limited. Retirement is pretty interesting. 


The next topic is all about being a person who makes a huge positive change to support something that really matters to you.


This is about a fellow, Michael Kidd Gilchrist. He's a former NBA basketball player. He was big in college. He was famous, but he didn't have a stellar career. He had a bunch of injuries, and he only played for a few years, so he wasn't a household name. He made some money and did pretty well for himself, but now that career is over. The other thing that isn't so well known about him is that he stutters. He has a significant stutter and has had it since he was quite young. He's actually worked on it over the years, but it certainly afflicted him a lot when he was young.


He knew what it was like to grow up with a stutter, and he made it his goal, as he got older, to help others who stuttered in their speech—to see what he could do, either to help them directly, or to make it possible for them to get speech therapy and other things. This was the subject of a recent article. NBA Veteran Helps Stutters. It's in the Wall Street Journal by Andy Kessler. One of his sons also stutters. It turns out that Andy was introduced to Michael through a common friend who also worked in basketball. Andy's one of the opinion writers for the Wall Street Journal. He has no  big connection into medicine or anything like that, other than just through the financial side of it and the world news side of it.


So Andrew is introduced to Michael. Michael politely said that it was very nice to meet Andy, but he really wanted to talk to his son, which I thought was very cute. Michael's goal was to get children's speech screening and speech therapy covered by insurance.


Right now, it's not. Children who stutter tend not to talk. Often, they just never talk or only talk under duress and then dread every second of it. That has a real impact on education, social skills, self perception, and career costs. Those things can affect you for the rest of your life.


However, with early diagnosis it can be reduced or managed, and the child's outcome improves dramatically. So, you might say, That's all nice, but what's this one guy going to do? It turns out, that this one person, since 2021 (only three years ago), has met with 21 senators, including some of the senior members of Congress. He's met with 25 House representatives. He's met with 137 state representatives. He's met with aides to President Biden. He's met or spoken with interested parties at 62 different universities, met or spoken with interested parties at 12 children's hospitals, and appeared at 26 special events.


Three years. One vision. A lot of determination. There's no magic here. He was just totally committed to his goal and his vision, and to keep finding ways to move forward. And boy, did he ever!  He's even received some business approach guidance from Andy Kessler, the journalist. As a result of that, Michael is now in discussions with IBM's Watsonx AI group for research into automated screening for stuttering, and potentially even some training assistance.


Plus, he's gotten Bill 111 under discussion in Kentucky, which is "To require health insurance coverage for speech therapy as a treatment for stuttering." Not bad for three years of effort for a guy who, you could say, is technically unemployed.  


He had a vision, and he just fulfilled it.  The fact that he actually got it and it's being presented in Kentucky is a huge step. Because of that Kentucky breakthrough, now similar bills are being considered by representatives in Pennsylvania, New Jersey, Utah, and California. These are some really influential states. 


Not bad for a guy who stutters and played basketball for only a few years. He had a real personal hindrance that he needed to overcome in his career and move forward through. It's not like he just had scads of money and nothing to do, and thought this was going to be a fun thing to do. He worked really hard every single step of the way to get all those introductions, to keep pitching it again and again and again.  


So what's the takeaway? If it's your vision to accomplish something and you can totally envision the outcome, your brain will find a way to help you reach your goal. It's absolutely true.  Michael didn't have every detail worked out, but he knew what he wanted to accomplish, imagined how he wanted to get it done, and was always open to help and opportunities that arose.


Many of those opportunities arose simply because he was always willing to take a chance and make a call. A meeting with an editor from a financial newspaper with a son who stutters probably didn't seem like a huge opportunity, but Michael took the chance, made the call, kept in touch, and ultimately, Andy helped explain both one of the resistance points of the whole process and the way around it.


Michael then took that, ran with it, and that ultimately led him into discussions with IBM and the Watsonx team.  Michael probably had hundreds if not thousands of no's and could have easily rationalized giving up at any point.  He's not done yet, but he still continues to push ahead. That's the power of living in your vision.  


That's it for the evening. Remember the power of one. If that one person is living into their vision and will just always find a way around the no. The difference between could have and did is often determined by attitude and commitment. If it matters to you, it probably matters to other people as well.


Your job is to find your vision and then live completely into it.  Your homework (always optional) is to think about something that really matters to you. It can be huge. It can be tiny. But it should be something you're really passionate about or interested in or just really matters to you and  something that you hold close to your heart. 


Now imagine a future where you have reached your goal, and how things would be.  Extra points if you write down three steps in reaching that vision, but  start from the perspective of having already accomplished it.  Then work backward to the present.  That's it for the evening. 


Please remember the many wars that are going on. We have UKR7.com, which has various  donation links to help Ukraine.  Help is desperately needed right now. There's also World Central Kitchen at WCK.org. They are active throughout the world in disaster areas of all sorts and provide food assistance. I highly recommend them. 


You can alternately donate locally. If you can't donate, you can still make the world a brighter place. A simple smile or a kind word to somebody can change their whole day. Do what you can to live outside yourself, be aware of others, and change the world a little at a time. 


Remember, one of the best ways to care for yourself is to care for others. So if you can and you're able, check out one of the links or just make somebody's day a little brighter. As always, thank you for stopping by. If you found something interesting or useful, please pass it along and please hit that like button. And if not, please drop me a comment as to what you'd like to hear.


Have a great week. Remember to live the life that you dream of, because that's the path to true contentment. Love and encouragement to everyone. See you next week on 7EveryMinute and 7EveryMinute.com. Thank you.


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