Your grocery bill is up, your healthcare costs are up, but is your retirement income keeping pace? Today, we’re gonna show you exactly how to make sure that inflation doesn’t win. I’m Anthony Saccaro. Thank you for joining us for our Providence Financial Retirement show. We are your retirement income source, and this is the place where retirees come for income.

We’ve got a great show for you today because inflation is high, and we’re gonna spend some time talking about what you can do to protect yourself, and we’re gonna spend some time talking about fixed income and, in particular, bonds. Should they be a part of your portfolio? Should they not? Are they boring?

Where do they fit in? We’re gonna answer those questions and more as we continue throughout our show. And of course, as we always do, many of you have written in questions, and we’ve chosen a few of those to answer as well. So I know you’re gonna wanna stay tuned. It’s also a good time to remind you that if you have a question for the Providence Financial Retirement Show, all you have to do is go to our website and you can ask it.

The website is providencefinancialradio.com. Go there and you can ask your question. Maybe we’ll get a chance to answer it in a future episode. What about inflation? Well, inflation is hot right now. All of the recent reports show that it’s climbing. A lot of it has to do with the supply side. As a matter of fact, all of it has to do with the supply side.

It’s not that the demand is creating the inflation, it’s that the supply is reduced, and much of that traces back to the energy, which, of course, traces back to everything that’s going on in the Strait of Hormuz and the war in Iran and everything else. And that’s caused energy prices to skyrocket Oil is well over $100 a barrel again, and that trickles down to everything in the economy.

And unless you have more income than you know what to do with, you’re feeling it in your pocketbook. Every time you have to pay a bill, every time you go to the grocery store or doctor’s office, almost everything has gone up in price. If you’re not careful, then you could be putting yourself in a position now to be spending too much money and not have enough later in life.

Most retirees focus on how much money they have, not on how much income they can get from it, and that’s not only true for now, but it’s also true for how much income can they get on it later in life as well, and if you don’t factor in inflation, that could lead to devastating consequences. I wanna move to our first listener question of the day because it ties in nicely with what we’re talking about now.

It comes from Sarah in Costa Mesa, and she wrote in this: “I’ve been sitting in cash for two years waiting for rates to fall. Should I just bite the bullet and buy bonds now, or am I gonna look foolish if rates go higher?” Well, Sarah, that’s an interesting question. I’m glad you wrote it in, and I’m not even sure if I understand the premise behind it because you almost seem to believe that if rates fall, it would be then a better time to buy bonds.

That’s usually not the case, though. If you own bonds now and rates fall, then the value of your bonds is likely to go up because interest rates and bond values have an inverse relationship. But if you’re looking to buy bonds for the first time, you really have an opportunity now that you haven’t had in several decades, and that is the ability to lock in higher rates for longer, and you can’t do that if rates fall.

If rates go down like you’re thinking and you waited, you’d actually be locking in lower rates, not higher rates, and I know that that’s not what you wanna do. Regarding the second half of your question, should you just bite the bullet and buy bonds now, or are you gonna look foolish if rates go higher?

Actually, I think it’s a great time to buy bonds. When you look at bond returns and yields over the last four decades, this is one of the best times to buy bonds over that entire period because rates are already higher. Because inflation is high, interest rates might go up a little bit, but probably not a lot, and we don’t even know for sure that that’s going to happen.

To answer your question, I think it’s actually a really good time to buy bonds or other fixed income investments because all rates tend to rise at the same time. You wouldn’t be foolish at all to take some of that money and lock in higher yields now. As a matter of fact, that probably would be a smart move if you’re looking to get as much income as possible from the money that you’re thinking about putting in bonds.

Thank you, Sarah, for the question. Certainly hope my answer has given you something to think about. If you’re wondering the same thing, whether or not it may make sense for you to put some of your money into income-producing investments, and you’re trying to determine whether it’s a good time, but you wanna get more information, I’ve got something for you.

We’ve put together an animated video that’s really short, but pretty powerful because it talks about the idea of investing for income. You’ll learn what you need to lock in higher rates for longer, as we just talked about in answering Sarah’s question. I’m gonna email this video to you absolutely free of charge.

You’re gonna enjoy watching it ’cause it is animated, and it’s only seven or eight minutes, but you’ll learn a lot. To get your free video about fixed income investing, just go to providencefinancialradio.com/video. Again, it’s providencefinancialradio.com/video, and we’ll email it to you. You’ll have it in your inbox shortly.

One more time, to claim your free video about income investing, go to providencefinancialradio.com/video. I’m Anthony Saccaro. Thank you for taking some time from your day to join us here. You’re listening to the Providence Financial Retirement Show. Inflation is hot, so we’re gonna spend some time today talking about inflation and what you can do to protect yourself and investing for it, and that’s gonna include a conversation about bonds.

We’re really gonna intertwine the two. Inflation, bonds, how do they interact? How do they work together? We’ve also gotta throw in interest rates because that’s a part of the mix. As you might have picked up as I was answering Sarah’s question, interest rates and bonds go hand in hand, and you really need to understand that relationship.

Let me take a minute and just give you a couple of basics about bonds. How do they work? What are they? And how do they tie into interest rates? What impact does our current interest rate environment have on bonds? And I wanna clear up that confusion. When you buy a bond, you’re buying a debt instrument.

It’s a contract that essentially says you’ve loaned money to whoever issued the bond, and in return for loaning them money, you expect them to pay you interest. So bonds always pay interest Because you own the bond, the contract that is, you get the guarantees that the contract gives you. And bonds give you two primary guarantees.

The first guarantee is a guaranteed interest rate or a guaranteed interest payment, and the second guarantee is that at some point down the road when the bond matures, you’re gonna get all your principal back. And those are two strong guarantees that you can count on for the life of the bond. That assumes that whoever issued the bond is solvent.

Let me give you an example so you can just have a visual of how this works. Let’s say you invest one million dollars in a bond that’s paying 5%, or better said, $50,000 a year. That $50,000 a year is guaranteed every single year until that bond matures. If it’s a 10-year bond, you’re gonna get that $50,000 a year every year for 10 years, which means that cumulatively you’ll have earned $500,000.

And when the bond matures, if it’s a 10-year bond, you’ll get your principal back. And all of that’s guaranteed as long as the bond issuer is solvent. Between the time you buy the bond, though, and the time the bond matures, the value of that bond’s going to fluctuate. And there’s a lot of reasons why bond values fluctuate, but I’m gonna say that the biggest reason that they fluctuate has to do with interest rates.

And bond values fluctuate opposite of interest rates. So if interest rates go up, then the value of your bond’s gonna go down. And if interest rates go down, the value of your bond is going to go up. They have an inverse relationship. The crucial point of this relationship is that regardless of this fluctuation at any point in time, that $50,000 a year is going to stay the same.

If you’re counting on that $50,000 a year, because you own the bond, you know that you’re going to get it. It’s gonna come in year in and year out, and you can count on it for your retirement. And once again, when that bond matures, you know you’re going to get your principal back. All of this to say that the fluctuation along the way is just noise unless you have to sell the bond early.

If you’re looking to some portion of your portfolio to generate income that you know you can spend Without ever having to worry about depleting your principal, bonds are not a bad option, but they’re also not the only option. There are a whole universe of investments that are not bonds, but work very similarly to bonds.

They’ll give you income without touching your principal. And ultimately, when you know you can get the income from your portfolio and you’re leaving your principal alone, it gives you the freedom to be able to spend that income because you never have to worry about running out of money. That income will always be there, especially if you do it right, like we teach here at Providence Financial.

If that’s of interest to you, but you wanna learn a little more, in my book, More Life Than Money, I wrote an entire chapter about investing for income, how you can take your portfolio, turn it into an income stream, and never have to worry about running out of money. And no, I’m not talking about an annuity.

There’s a whole universe of options that have nothing to do with an annuity that will give you the type of income you’re probably looking for. I wanna send you More Life Than Money free of charge because you’re a loyal listener of the Providence Financial Retirement Show. You have to claim it, though.

You can do that by going to providencefinancialradio.com/book. Again, it’s providencefinancialradio.com/book. Leave us your information, we’ll get a brand-new copy of More Life Than Money right out to you. You’ll learn about the idea of investing for income, so you can start generating reliable cash flow from your portfolio.

To claim your free copy of More Life Than Money, once again, just go to providencefinancialradio.com and we’ll get it right out. But I know you’re gonna enjoy reading it

Thank you for staying with us. You’re listening to the Providence Financial Retirement Show. My name is Anthony Saccaro. We’re talking inflation and income, fixed income that is, and we’re in the middle of a conversation about bonds. One of the things that I mentioned in the last segment is that bonds have an inverse relationship to interest rates.

When interest rates go up, bond values go down, and when interest rates go down, bond values go up. This tends to be confusing to a lot of you, so I wanna take some time and really clarify it and explain why that is. Why is there an inverse relationship? Imagine with me for a second that five years ago, you bought a 10-year Treasury bond that was paying you 2%.

Well, today, Treasury bonds are paying somewhere in the range of 4%, which simply means that if you were to commit new money to buying a Treasury bond today, you’d get 4%. If you owned a Treasury bond from five years ago that was only paying 2% and you wanted to sell it today, it’s still gonna pay 2% to whoever the new buyer is.

The Treasury Department doesn’t care who owns the bond. The bond is a contract, and it’s gonna pay that guaranteed 2% every year for life, the life of the contract, that is. If someone’s gonna buy your bond, they’re only gonna get 2%. Why would they do that? Why would someone buy your bond at full value if they’re gonna get 2% when they could buy a bond at full value today that’s gonna pay 4%?

They wouldn’t. What does that mean to you? It means then that you have to discount your bond, and you have to sell it to them cheaper because it’s paying less. It’s locked in at a lower interest rate, and that’s exactly why bond values go down when interest rates go up. And the opposite is also true. If you buy a bond today that’s paying you 4% and interest rates go down over the next two or three or four years or more, and in the future, someone can only buy a bond that’s paying 2%, then they’re gonna pay you more for your bond when you wanna sell it because your bond is paying more than what they could get if they were to buy a new bond.

All of this to say, though, that as interest rates go down, bond values go up, and as interest rates go up, bond values go down. Hopefully, my example and explanation made sense. I should also point out that this is not only true with regards to bonds. It’s also true when it comes to any fixed income investment.

Anything that is gonna give you some type of promised interest rate or promised dividend, for the reasons that I’ve already mentioned, the values are going to fluctuate opposite of interest rates. There are two very specific takeaways, though, that I want you to get from this. Number one is if you’re living off the interest and dividends, then the fluctuation underneath is all noise.

It doesn’t matter because you’re spending your interest and dividends. And that’s one of the reasons we focus so much on investing for income here on the Providence Financial Retirement Show, because you can count on that income regardless of what the underlying value of your portfolio is. And that’s the first takeaway.

Long as you’re spending your interest and dividends, it doesn’t matter the fluctuation. It’s just noise. The second takeaway, though, is this. When you’re buying bonds, it’s really important to know what the interest rate environment is. Right now, interest rates are high, and over the next few years, they’re projected to go down, which means that for the first time in a few decades, you can actually buy fixed income and lock in higher interest rates and dividends than you could have even just a few years ago.

And if interest rates do go down, then those fixed income investments have a good shot of actually going up in value. That’s a double win. Higher interest rates for longer And potential capital appreciation if interest rates go down. And that’s one of the reasons why investing for fixed income today just makes a lot of sense, especially if you’re looking to get income from your portfolio.

Because I want you to learn more about this and become better educated, I’ve created a short animated video that talks about the idea of investing for income. When you watch this video, you’re gonna learn what I just shared with you, but else in more detail. I wanna send you this video free of charge, and in order to get it, all you need to do is go to providencefinancialradio.com/video.

Again, it’s providencefinancialradio.com/video. Leave us your information and we’ll email it to you. You’ll just need to press play on your end, and you’ll be able to watch this video. But you’ll learn a lot, and it’s fun because it is animated. If you’re looking to learn more about the concept of investing for income, just go to providencefinancialradio.com/video.

Leave us your info. We’ll send you a free video about it, and you’ll get the information that you want. I’m Anthony Saccaro. Thank you for spending your day with us here on The Providence Financial Retirement Show. We’re talking about inflation, income investing, bonds, because they really all tie together.

And one of the misconceptions that a lot of people have is they think that bonds or fixed income don’t necessarily keep pace with inflation. Our next listener has the same question as well too. Here’s what he wrote in: “Hi, Anthony. This is Robert from Pasadena. Everyone keeps telling me I should get out of the market because of this AI bubble and go into bonds for safety.

But if inflation is eating away at my purchasing power faster than my bond yields are growing, aren’t bonds just a slow way to lose money?” Robert, that’s a very intuitive question. You’re not alone. That’s what I just mentioned a minute ago. A lot of people wonder and think the same thing. Let me be clear about this, though.

The answer is absolutely not. Bonds and other fixed income investments are actually a more guaranteed way to stay pace of inflation than almost anything else you can imagine. If you ask most people what’s the best way to stay paced with inflation or stay ahead of inflation, you’re probably gonna hear people say the stock market.

Over the long run, that’s a very true statement. But over the short run, who knows? If the market has a correction and goes down by ten or twenty percent or more, does that sound like a good inflation hedge to you? It doesn’t. And the shorter your timeframe, the more gambling the market is because you just don’t know what the value’s gonna be.

In any year, it could go up twenty percent, thirty percent, or it could go down by twenty or thirty percent, and may not be an inflation hedge at all. Robert also mentioned something about this AI bubble, and that’s starting to be a concern as well. When you think about fixed income though, as long as you’re getting an interest rate that is higher than what inflation is, then you’re gonna be inflation-proof.

We’ve already been talking about bonds, so let’s talk specifically about bonds and inflation. If you were with us earlier, you remember that I said bonds are gonna lock in an interest rate or a specific payment for a period of time. If you’re getting 5% on a bond and inflation is 3%, you know that you’re 2% ahead of inflation, and that’s what’s called the real return.

In the financial world, that’s actually a term, the real return. The real return is how much you get over and above inflation. If you’re earning a 5% interest and inflation is 3%, your real return is the difference between that 5% and 3%. Your real return in this situation is 2%. Because you own the bond, because you’ve got the guarantee that that bond’s gonna keep paying you that 5%, you have an inflation hedge of 2% that is locked in as long as inflation stays around that 3% mark.

And contrary to what most people think, fixed income is actually a more consistent way to stay paced with inflation than even the stock market. Yet, I find that most people think the opposite. Most people think that if you get involved in fixed income, that you can’t stay paced with inflation and you lose buying power.

That’s just not true. And in today’s world, with interest rates where they are, at Providence Financial, our firm is helping our clients get somewhere in the range of 5% to 7% per year of interest and dividends income without the risk of the market and with a portfolio that is fairly conservative. If that sounds attractive to you and you just wanna learn more, you’ve gotta read my book, More Life Than Money.

I spend a lot of time talking about the concept of fixed income and how you can generate that high of interest and dividends and lock in the income payments for a long period of time. That way, if interest rates go down, you know you can still count on your income. If you wanna learn more and you wanna get a free copy of More Life Than Money, I’ll send it to you.

No cost, no obligation, just because you’re a listener of the Providence Financial Retirement Show. You do have to ask for it, though. You can do that by going to providencefinancialradio.com/book. Again, it’s providencefinancialradio.com/book. Leave us your information. We’ll get a free copy of More Life Than Money right out to you.

You’ll be able to read it and learn how you might be able to start getting income from your portfolio as well without ever having to worry about running out of money. That’s gonna give you the peace of mind and confidence that you deserve in your retirement. To claim your free copy of More Life Than Money right now, just go to providencefinancialradio.com/book and you’ll have it in just a few days, I promise.

Thank you for joining us. I’m Anthony Saccaro. You’re listening to the Providence Financial Retirement Show. My only goal in doing this show is to help you have confidence and clarity in retirement. If you’re confused about retirement or you have a lot of retirement questions, you’ve come to the right place.

We’re talking about inflation and we’re talking about fixed income. We’ve tied bonds into the mix because that certainly is the epitome of fixed income. It’s not the only fixed income. There are a whole lot of options that would be classified as fixed income that are not bonds, but when most people think of fixed income, they think of bonds.

So we’re spending a few minutes talking about those. Our next listener question ties in nicely, and she wrote in this, “This is Diana from Torrance. With inflation going up, should I be buying tips, corporate bonds, or some other type of fixed income to protect myself? What’s the right choice now?” I really appreciate the time you took, Diana, to write in the question, and I wanna take some time to answer it and talk a little bit about what TIPS are, ’cause it’s not something I talk a lot about here on The Providence Financial Retirement Show.

But you asked, so I wanna give you and the other listeners a quick explanation as to exactly what TIPS are. TIPS stands for Treasury Inflation-Protected Securities, and they’re issued directly by the US Treasury. Here’s how they work. The interest rate is fixed, and it’s typically a lot lower than what you can get on regular bonds.

You might only get one or 2%, but the principal amount adjusts upward with inflation. If inflation runs 3% this year, then your principal amount, that’s gonna go up by 3%, and you’re gonna earn interest on the higher amount. You’re really getting two things with a TIP. You’re getting a guaranteed interest payment, plus you’re getting inflation adjustment built in.

There’s a couple of challenges with TIPS, though, that I think it’s really important for you to understand. The first is that inflation has to remain at a fairly elevated level in order for them to make any sense. Right now, inflation’s hovering in the low 3% range, and as long as it stays in the low 3% range, then you’re gonna wind up getting 3% of growth on the value of your bonds, plus you’re gonna get the yield that the bond is giving you as well, too.

If it’s giving you 2%, then 3% plus 2% would be 5%, and that would be the total return that you would get by owning TIPS. Inflation, though, has to stay elevated in order for it to really make sense. If inflation goes down, though, as is expected over the next few years, then you’re not gonna earn nearly as much growth, and you’ll probably be behind by owning TIPS, and that’s a significant problem.

Another challenge, though, is that if you buy TIPS directly from the federal government, you can only buy $10,000 per year, and that’s per person, and you can even do some finagling to get more than that, but if you have a portfolio of any size, you’re not gonna be able to put it all in TIPS, at least not in one year.

And because of these, I’m just not a huge fan. Part B of your question, though, Diana, you also asked about corporate bonds or other types of fixed income to protect you against inflation And my personal belief is that you’d be better off buying some of these other investments. If you invest for income the way we teach here on the Providence Financial Retirement Show, you’re probably gonna do better than if you were to buy TIPS, and that even includes after inflation, the real return that we just talked about in our previous segment.

Before we move on, I’ll throw in one more thing as well, and that is because the interest that the TIPS are actually gonna pay is much lower, if you actually wanna use it for income, which is the reason most people have bonds in their portfolio at all, you’re not gonna get a lot of income from TIPS. That then means that you’re gonna have to sell your TIPS early if you wanna get the cash from that part of your portfolio in order to pay your retirement bills, and you know what I think about having to sell principal to get the income from your portfolio.

That’s a no-no. If you wanna learn why, and you wanna learn more about fixed income and how you can generate income from your portfolio without having to sell principal, we’ve created a video just for you. It’s animated, it’s fun to watch, it’s only seven or eight minutes, but it talks about fixed income, how you can generate income from your portfolio outside of annuities.

This is not an annuity video. I wanna send it to you free of charge. To get it, all you need to do is go to providencefinancialradio.com/video. Again, it’s providencefinancialradio.com/video. Leave us your information, and shortly, this video will be emailed to you. You’ve just gotta press play, and you will enjoy learning what you need to know about getting an income stream from your portfolio that you know you can count on.

To claim your free video about turning your portfolio into an income stream, just go to providencefinancialradio.com/video and you will have it shortly. I’m Anthony Saccaro. You’re listening to the Providence Financial Retirement Show. If you just tuned in, we’re talking about inflation, we’re talking about interest rates, and we’re talking about fixed income, and we’ve really spent a lot of time focused on bonds, just for no other reason than most people think of bonds as fixed income.

It’s true that bonds are certainly a type of fixed income. It’s also true that there are many other asset classes that could be classified as fixed income that are not bonds. I don’t want you to believe that bonds are the only source of fixed income. That’s not true. I wanna turn our attention to another question that we have, and it comes from Michael in Manhattan Beach.

And Michael, I know exactly where that is ’cause we have an office in Manhattan Beach. And Michael wrote in this: “I’ve got some dividend stocks that pay 3% and I’m looking at bonds that pay five or 6%. Should I sell my dividend stocks and move everything to bonds or are dividend stocks better for long-term inflation protection?”

Michael, fantastic question. We get some variation of that question very frequently and I wanna put it to bed. I wanna answer your question And my gut reaction, my initial instinctive answer is this, you don’t have to choose. Most people need both. But let’s settle it once and for all. Can dividend stocks beat bonds for inflation protection?

Well, the short answer is yes, over the very long term, but you have to survive the short term If you have a stock portfolio today, even a dividend stock portfolio, what is the portfolio gonna be worth in a year, or two years, or five years from now? The answer is you don’t know. You don’t know, I don’t know, your advisor doesn’t know.

No one knows. It’s a guess. It’s unknown. We don’t know what a stock portfolio today is gonna be worth at any point in time. We do know that if you give it at least 20 years, you’re probably gonna average 8 or 9%, but even then it’s questionable because there have been multiple time periods in history of 20 years where the market has had no growth at all.

Now, that statement probably shocks some of you. 20 years of no growth at all in the stock market, Anthony? Did I hear you right? Yeah, you heard me right. There’s been multiple times where the market’s gone 20 years or more where there’s absolutely been no growth in the stock market, period, end of story.

That is not a good inflation adjuster. Now, if you own dividend stocks during this period, that’s certainly gonna be better than non-dividend stocks because at least then you’re earning the dividends on your portfolio while you’re waiting. If your dividends are averaging 3%, which is really a high dividend stock portfolio, then at least you’re getting 3% a year to wait, which is certainly better than owning growth stocks where you’re just earning nothing, though dividends definitely have their place.

If you own a dividend stock portfolio, you could have a surprise to the upside or you can have a surprise to the downside. You just don’t know. If you own a bond though, a bond that’s paying you 5 or 6% a year, those surprises go away. You know you’re getting 5 to 6% a year because that’s what the bond’s gonna pay you, and you don’t have to worry about whether the market goes up or down.

You’re gonna be able to count on your income regardless of what direction the stock market goes. Michael, then, I don’t think it’s either/or, I think it’s both, and most of our clients have some of each in their portfolio. Some bonds that are gonna get them higher income in the part of their portfolio where they need to draw income from, and some dividend stocks in the part of their portfolio that they can let sit for a while.

Hopefully, Michael, that answers your question. Certainly appreciate you taking the time to write in. If you wanna learn more about dividend stocks or income investing in general, how to turn your portfolio into a portfolio that will give you consistent dividends and interest and yet still have potential for growth like we’ve been talking about, you’re gonna wanna read my book, More Life Than Money, because I spend a lot of time talking about that, especially in chapter five.

I wanna send you More Life Than Money free of charge just because you’re a listener of the Providence Financial Retirement Show. You do have to ask for it, though. You can do that really easily by going to our website. It’s providencefinancialradio.com/book. Again, it’s providencefinancialradio.com/book.

Leave us your information And we’ll get a brand new copy of More Life Than Money right out to you. To claim your free copy, go to providencefinancialradio.com/book and you will have it shortly.

I’m Anthony Saccaro, host of the Providence Financial Retirement Show, which you’re tuned into. We are your retirement income source, and this is the place where retirees come for income. Thank you for joining us today. Really glad that you’re here. I certainly hope you’re learning something about fixed income and our interest rate environment and bonds and inflation, which is what we’ve spent our time talking about.

We need to shift gears a little bit, though, and, and talk about the tax strategies when it comes to bond positioning and even other fixed income investments as well. And now that you understand bonds and TIPS and how to mix them with dividend stocks like we talked about our last segment, let’s talk about where to actually hold them.

This is where a lot of retirees are leaving money on the table. They don’t really consider the tax efficiency of these investments or actually where to put them. Here’s a simple rule. You wanna put your least tax-efficient investments in your taxed advantaged accounts, like your IRAs or your 401Ks or your Roth IRAs.

On the contrary then, you wanna put your most tax-efficient investments in your taxable accounts. What does this mean in practice? It means that bonds belong in your IRA or your 401K whenever that’s possible. Why? Because bond interest is taxed as ordinary income. It’s the same tax rate as your salary. If you hold a bond in a taxable account that’s paying you five percent, you might only keep three and a half or four percent after federal and California taxes.

But if you hold that same bond in an IRA, you’re gonna keep the full five percent, and you’re not gonna pay taxes until you withdraw it. Dividend stocks, on the other hand, are more tax efficient. Most of the stocks that you’re gonna own are gonna get preferential tax treatment known as qualified dividends.

Qualified dividends are taxed at a fifteen percent federal rate, not the higher ordinary income tax. This means that dividend stocks could belong and be better served in your taxable accounts, not your IRAs. When it comes to the capital appreciation of that stock, the same thing is true. Capital appreciation tax is gonna be a lot less than ordinary income tax, which generally means that it’s gonna be better to leave those in your taxable accounts as opposed to your tax-deferred accounts.

But this is the opposite of what most people do. Most people have the wrong investments in the wrong accounts, and they’re just being very inefficient when it comes to taxes. Municipal bonds are a special case. The interest for municipal bonds is federally tax-free, and sometimes it’s state tax-free. But because of that, they pay a much lower yield, so you’re not gonna get as much on them because the municipalities know that you’re not gonna pay tax on them, so they don’t have to pay as much And when you look at the math today, it’s a pretty interesting dynamic.

You actually have to be in the top tax bracket across the board for municipal bonds to even make sense. For most of you, when you buy a taxable bond and pay the tax, you’ll still wind up with more than the tax-free municipal bond interest that most muni bonds are paying today. But you do have to do a tax analysis and know your situation to know whether or not muni bonds make sense for you.

From a bigger picture standpoint, though, you can’t just look at what a bond or what a fixed income investment’s gonna pay you. You have to look at what the end tax treatment’s gonna be as well, and you have to put the right investments in the right place in order to be as tax efficient as possible. I know from experience, having been a retirement advisor now for over twenty-seven years, that most of you have the wrong type of accounts in the wrong place, and you could probably save a lot of money just by repositioning where you hold your specific investments.

When it comes to retirement, though, if you’re a regular listener of the Providence Financial Retirement Show, you know that I would rather you be proactive when it comes to taxes instead of reactive. I’ve spent a lot of time on this show talking about that. And if you’re in retirement or you’re close to retirement, the tax treatment of your investments, some people think, is even more important than the actual return itself, and I wouldn’t disagree with that.

And being proactive, in my opinion, is always better than being reactive. And it’s not just about where you hold your investment. There are a lot of other tax saving strategies that you can use as well. If you’d like to learn what some of these other tax strategies are so you can save money in taxes if possible, we’ve created a commission report just for you.

It’s called Proactive Tax Saving Strategies, and you’re gonna learn different ways to be able to save money in taxes in retirement. I’m gonna send you this report absolutely free of charge. We’ll just email it to you. And in order to get it, all you gotta do is go to providencefinancialradio.com/report. Again,

it’s providencefinancialradio.com/report, and we will get it right out. But you’ll learn about the tax saving strategies that are available to you in retirement, and then you can compare them against, uh, what you’re doing to see if you’re messing up or if there’s any way you might be able to save more taxes.

To get your free Proactive Tax Saving Strategies report, just go to providencefinancialradio.com/report and you will have it shortly. I’m Anthony Saccaro. Thank you for tuning in to today’s Providence Financial Retirement Show, where it truly is all about the income. We’ve spent our time talking about inflation and interest rates and income-producing investments.

We’ve already covered a lot of ground. We’ve talked about bonds, we’ve talked about tips, we’ve talked about dividend stocks, and just talked about some tax strategies. Here’s the question, though: What are you actually gonna do with this information? I’m gonna recommend that the first thing you do is assess your current situation.

How much income do you need for your retirement right now? You need to write that number down. Once you have that number, you need to figure out what you’re actually earning on your portfolio today, and I’m not talking about your total return, I’m talking about your dividends and interest only. How much income is your current portfolio giving you?

You can’t confuse that with total return, because total return is growth. When you buy low and you sell high, that’s a part of the total return equation. You cannot spend growth without selling something, and if you’re gonna sell parts of your portfolio every year to live your retirement lifestyle, you’re putting yourself in danger of running out of money before you run out of life.

The only part of your portfolio that you can actually spend without having to worry about cannibalizing your principal is the interest and dividends. So you need to know what the interest and dividends from your portfolio is right now, because that’s the amount that you get to spend. Once you’ve looked at that number and you figure out how much interest and dividends you’re currently getting from your current portfolio, you have to ask yourself, is that number enough?

If not, then you have an income gap, and that’s what we talk about a lot here on The Providence Financial Retirement Show, is how to fill that income gap, how to get more income from your portfolio by investing for income. Once you know what that gap is, though, you need to go on and you need to ask yourself how long are you going to need this income?

Your timeline’s gonna change everything. The strategy that I’m gonna recommend for someone who is 60 is gonna be a lot different than the strategy I would recommend for someone who is in their 80s. When you’re a little older, you just have less time. More things can go wrong and you’d probably be okay, but not so much when you’re younger.

If you’re a lot younger and you can afford to take on more risk and maybe you don’t need a lot from your portfolio, or maybe you’re still working and not retired yet, you don’t need anything from your portfolio, dividend-paying stock might have a substantial role to play. But if you’re a little bit older and you need to get maximum income out of your portfolio, probably gonna have less in dividend stocks and more in other fixed income type of investments.

You then also have to consider the tax treatment. That’s what we spent part of our last segment talking about, is the tax treatment of your different investments. But you can’t possibly invest properly if you don’t know how each investment is taxed and what that means to you. I realize that I’ve just thrown a lot at you.

The good news, though, is that it doesn’t have to be shifted all at once, because changes like this are often better if they’re done gradually. I’ll also have you know that you don’t have to go it alone. If you’re concerned about the amount of risk you might be taking or wanna get more income from your portfolio, I wanna make an offer to you that I don’t make a lot here on the Providence Financial Retirement Show, but I wanna offer you a retirement risk report that we make available through my office, and I wanna make it available to you absolutely free of charge.

It’s a full analysis of your entire retirement situation, and we’re gonna take a look at taxes. We’re gonna look at whether Roth conversions make sense. We’re gonna focus on how much current income in the form of interest and dividends you’re getting from your current portfolio. We’re also going to stress test your portfolio to pretend like another major market crash, which a lot of professionals are worried about, and see how your portfolio would hold up if that happens.

And that’s gonna help you determine whether or not you’re actually taking too much risk. I’m gonna offer you this complimentary analysis absolutely free of charge. You just have to ask for it, though, and you can do that by going to providencefinancialradio.com/report. Again, it’s providencefinancialradio.com/report.

Leave us your information, and someone will get back to you and let you know if it’s something that makes sense for you and what the process would be. But if you’d like a full analysis on your retirement scenario to make sure you’re being as tax efficient as possible and not taking too much risk, and even getting as much income as possible, I’m gonna offer that to you free of charge.

We’ll get you this retirement risk report as long as you go to our website and ask for it, and that’s providencefinancialradio.com/report. I’m Anthony Saccaro. Thank you for taking time out of your day to join us wherever you might be. Really glad that you’re here, and hope you’ve certainly learned something that you didn’t know before, something that’s gonna help you have the confidence and clarity in retirement that I want you to have.

You’ve been listening to the Providence Financial Retirement Show. Have a great week, everyone. God bless.