The American Retirement Advisor
Retirement should feel like freedom, not a puzzle. The American Retirement Advisor is your daily dose of straight talk on the three decisions that shape every retirement: your healthcare, your income, and your inheritance plan.
Each episode is a short, focused read of our latest article, drawn from real conversations with real families at American Retirement Advisors in Scottsdale, Arizona. No jargon. No sales pitch. Just the kind of advice you'd want from a trusted friend who happens to do this for a living.
Hosted by Ian Schaeffer, author of Medicare Made 123Easy, COO of ARA, and founder of 123Easy Studios. Articles read by Betty.
American Retirement Advisors has served over 14,900 families since 2001. Featured in Forbes, a 4-time America's Select Financial Advisors honoree, a 3-time Inc. 500, and a Nextdoor Neighborhood Favorite.
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The American Retirement Advisor
My Father Made a Huge Mistake With His CDs
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On our live show, my father admitted something most advisors would never say out loud. His accountant screamed at him. Here's what he got wrong.
Read the full article: https://news.americanretirementadvisors.com/my-father-made-a-huge-mistake-with-his-cds/
American Retirement Advisors helps families in Arizona and Nevada navigate healthcare, retirement income, and inheritance planning.
Welcome to the American Retirement Advisor, coming to you from One to Three Z Studios. Real stories, real strategies, and straight talk about healthcare, retirement income, and inheritance planning. I'm Ian Schaefer, joined with Eddie and Betty. Let's get into it.
SPEAKER_02There's a segment on the live show Fiscal Fridays called The Rant. It's where Ian Schaefer's father, David Schaefer, shares something that's been bugging him, something he's seen that week that he thinks everyone needs to hear. Last Friday, he didn't rant about a client's mistake. He ranted about his own. I'm gonna share it with you because I don't like making mistakes, and I'm guessing someone else has too. The audience leaned in. So did Ian.
SPEAKER_01Remember when Silicon Valley Bank collapsed, the 16th largest bank in America, gone overnight. Everyone panicked about FDIC limits. Business accounts only get$250,000 in protection. And if you're running a company with real payroll, you've got real cash sitting in the bank. David did what a lot of smart people did. He started opening accounts at multiple banks, spreading the money around, keeping each one just under the FDIC limit. And the timing was perfect. Banks were desperate for deposits. Money market rates were 4%, 5%, some CDs were offering 6%.
SPEAKER_02Every bank I went to, I brought a significant sum of money, he said, and they were very happy to see me. He was pretty happy too. Who wouldn't be? Safe money, earning real interest for the first time in years. But here's the part nobody thinks about until the bill shows up. And it's the question the team hears constantly at the office. A client called in just a few months ago asking about moving money out of CDs, specifically to protect it from the tax liability. He'd figured it out the hard way, just like David.
SPEAKER_01CD interest is taxable income the year it's earned, whether you take the money out or not. The same is true for money market accounts and high yield savings accounts. It doesn't matter if you never touched a dime of it. The bank sends you a 1099 int, and the IRS expects their cut. David put it in plain English for the audience. That's$4,000. Woo-hoo, look at that. But I didn't need the money. I didn't use it. It just sat there. And then the tax bill came.
SPEAKER_02At his bracket, he owed nearly half of that interest in federal and state taxes. That$4,000 in interest became roughly$2,000 after taxes. On money he never withdrew. On money he never spent. On money that was supposed to be sitting safely in the bank, doing nothing but growing. It's great for the banks, he said. Great for Uncle Sam, not so great for me. After the numbers came in, their new accountant went through the returns and lost it. You should have seen the new accountant lady screaming at me, he told the audience, laughing. I'm supposed to be the boss.
SPEAKER_01The room cracked up, but his point was serious. If an advisor with 25 years of experience can walk into this trap, anybody can. There are fully insured savings programs offered by insurance companies that work a lot like bank CDs. You choose a term, three years, four years, five years. The rates are competitive, often matching or beating what banks offer. The money is fully available at the end of the term. The team gets calls about these constantly, especially after people see the rates published in the newsletter. One client called, asking if the 5.6% rate she saw was a CD or an annuity. The answer was an annuity, and the difference matters.
SPEAKER_02The difference is how the interest is taxed. With a bank CD, you owe taxes every year on the interest earned, even if you don't touch it. With a tax-deferred fixed annuity, the interest grows without triggering a tax bill until you actually take a withdrawal. If you don't need the money, it just keeps compounding. David calls it triple compounding. Your principal earns, your interest earns, and the money you would have paid in taxes stays in the account earning alongside everything else. Banks don't tell you about it, he said, but if you don't need the money and you don't want to pay taxes on money you're not using, put it in there.
SPEAKER_01If you're in a 25% federal bracket or higher and you've got cash sitting in CDs or money markets that you don't plan to touch for a few years, you're probably in the same boat David was. That 4 or 5% the bank advertised is not what you're actually keeping. After federal tax and state tax, if you're not in a tax-free state, your real return could be half of what the statement says. Arizona isn't terrible on state taxes, but if you're in Massachusetts, California, New York, or anywhere with a meaningful state income tax on top of federal, the math gets ugly fast. This isn't about chasing returns, it's about keeping more of the returns you've already earned.
SPEAKER_02At American Retirement Advisors, the team publishes current rates for these programs in every issue of the newsletter. They search nationwide for the best available terms. If you want to see how the math works for your specific situation, give the team at American Retirement Advisors a call. No pressure, no pitch, just the numbers. You can watch the full Fiscal Fridays episode on YouTube. New shows are posted every other Friday.
SPEAKER_01A quick note before we wrap up: today's episode covers financial topics for educational purposes only. American Retirement Advisors does not provide tax or legal advice. Please consult a CPA or tax professional before making any decisions based on what you heard today.
SPEAKER_02This is Betty with the American Retirement Advisor. Thanks for listening. If this episode helped you think differently about your retirement, share it with someone who needs to hear it. You can read the full article and browse hundreds more at AmericanRetire.com. And be sure to subscribe so you never miss an episode. We publish daily. See you next time.
SPEAKER_00Thanks, Eddie. Thanks, Betty. Until next time, this is Ian Schaefer coming to you from 123 Easy Studios. I hope you've enjoyed this recording of the American Retirement Advisor, where we make healthcare, income, and inherence planning 123 easy.
