The information and discussion on this show is for informational purposes only, and is not intended for specific tax, legal or financial advice. Exposure to ideas and financial vehicles discussed should not be considered investment advice or recommendation to buy or sell any financial vehicle. Past performance is not a guarantee of future results. Investments will fluctuate. And when redeemed, may be worth more or less than what originally invested. You should always consult your tax or legal professional and financial advisor or representative before making any financial decisions.

Neither Retirement Wealth Advisors, Bulman Wealth, WORLD EQUITY GROUP Securities Inc, it’s representatives or affiliates have any liability for investment decisions or other actions taken or made by you based on the information provided on this program. Christopher James Bulman is a registered representative offering securities through WORLD EQUITY GROUP Securities Inc Member FINRA-SIPC an investment advisor representative of retirement wealth advisors. Neither the Financial Compass or Bulman Wealth are affiliated with WORLD EQUITY GROUP Securities Inc or Retirement Wealth Advisors licensed in California number 0D57586.

Speaker 2:

This is the Financial Compass with Chris Bulman. At Bulman Wealth we use results in advanced planning to help you grow and protect your money. And now setting a course for a better retirement, it’s the Financial Compass with Chris Bulman.

Melissa Carter:

And welcome to the Financial Compass with Chris Bulman. My name is Melissa Carter. We would love for you to give us a call at (916) 458-8199. And the reason that number is so important is because it’s going to get you your own complimentary financial plan if you stay tuned. (916) 458-8199, and we will explain how you can get that free service here in a few minutes. Chris, how are you, sir?

Chris Bulman:

I’m doing fantastic. We’re heading into April. It’s golf season and flowers are in bloom. The windshields are covered with green stuff from the trees and yeah, all the allergies are kicking up. But it’s golf season. So sometimes…

Melissa Carter:

Yeah. So it’s worth it to be outside and fight it.

Chris Bulman:

Yeah. It’s really.

Melissa Carter:

Yeah. I was telling Chris off-air that I have my pocket full of peppermints in case, because I’m more susceptible to the tree pollen, which is out right now. So I am hacking my way through the week, but I was telling him that I’m a big basketball fan. So I’m all about the college tournament. But within the college tournament, I thank you, Chris, because the Masters commercials keep coming on and reminding people Masters is around the corner. And I know you’re going so…

Chris Bulman:

Yeah. That’s amazing. It’s one of those dream come true my whole life. You want to go to the Masters or US Open or St. Andrew’s, something big. And now two years in a row, I’m getting to go to the Master. So I’m really excited about that. It’s such an amazing place. Although I say last year when I went, I went two days, and I was exhausted. That course is nothing but uphill and downhill and tons of people as well.

So you don’t really need to spend a whole week there, maybe four hours, six hours, then you’re ready to go watch it on TV. So this I’ll be there on a Friday. So I’ll be able to see the Friday round at the Masters and that’s a big day. It’s the last day before the cut, obviously. So yeah. And then I’ll be able to come home on the weekend and actually watch it on TV and see something. So it’ll be good.

Melissa Carter:

All right. Well, let me explain when I talked about the complimentary financial plan and we’re going to give this away after our first question. But the first five callers who texts a certain word to the number I’m going to give is going to get complimentary services from Chris. Your financial plan will be for free, but like I said, we’ll give that information out here in just a second. But first in our day-to-day lives, we often have to weigh the risks of something against the potential reward. And when it comes to investing CNBC’s Sharon Epperson says, we need to decide how much risk that we are comfortable taking.

Sharon Epperson:

It really is important for people to understand risk tolerance. And what is risk tolerance? Risk tolerance isn’t just your willingness to take risks, but how much are you able to take based on your income and based on other commitments you have. And then how much risk do you need to take because you have to reach certain goals. Set up an investment plan and stick to it. And don’t be afraid to talk to someone about how you feel about your investments and what frightens you, what you’re emotional about. You don’t want to invest based on that emotion, but you want to be clear and you want your advisor to be clear about what your concerns are.

Melissa Carter:

All right. So Chris, do you find that the clients you work with usually have a pretty good grasp of their risk tolerance or is it something that most of us need to work on?

Chris Bulman:

That’s a great question. So there’s a couple of things that pop into mind there. One is the desired return versus the required return. And I had a client in the office this past week that we were talking about that a lot, because some people will come in and they’ll say, I have a desired return. They don’t use that word. But they say, I would like to see a 10% return or 11 or eight, whatever it might be. And then when we do a financial plan and we see how much does this person or this couple actually need for their retirement planning, for their income plan to work throughout the rest of their life, what we don’t want to have happen is that we have more life than we have income, right? We don’t want to live into our 90s and have our income run out in our 80s. That’s a big problem.

So when we look at desired return versus required return, first, we need to hit the required return. The required return is what we need to make sure we have sustainable income for the rest of our life. To live the lifestyle that we want to live and maybe leave the legacy that we want to leave. And then there’s the desired return. And they may not have anything to do with each other. You just say 10% because it’s what you hear around the water cooler. It’s what you hear on TV that the S&P average is over the last hundred years. Wherever it might come from, there may be really no realistic background for that to be in your life as part of anything that you’re aiming for, but it’s just what you’ve heard. So it’s what you want.

But then, once you start to realize maybe that that 10% average return comes with the potential that every five, 10, 15 years, your account’s going to drop by anywhere from 15 to 30 or 40%. Then all of a sudden, maybe we don’t need to have that desire to return of 10%, because what comes with higher returns is more risk. And what comes with more risk is more volatility. And all of that stuff’s great in your 20s, 30s, 40s, because as you have more volatile environments and investing as the market drops, your dollar cost averaging out of your paycheck investing every month, and you’re getting things on sale. As we get into retirement, we can’t afford those big drops in the market because we’re not investing anymore.

What we’re actually doing now, most of the time is taking money out of the market. And if we’re taking money out while the market’s down, we’re locking in those losses every month, maybe every week. So it’s important to know that. And it’s important to know that the difference between what your desired return and your required return is, because the desired return can get you into a lot of trouble. If you only need a 5% rate of return or a 6% to make your retirement work, and you’re shooting for 10, you’re adding a lot of extra risk that could kill your retirement income stream rather than going with what you actually need.

So those are some of the conversations, that was a long answer, but those are some of the conversations we have when folks come in and talk about what they want with respect to the return and the risk inherent in their current portfolios and what they’re actually comfortable with. I must also touch on most people that come in, when they tell me their risk, what they’re comfortable with. And then I do an analysis on their portfolio.

The portfolio does not line up with what their comfortability is. So some people come in and say, I don’t want to lose any money, I only want to lose the most 5%. And then we look at their portfolio and it’s invested in all large cap growth stocks international. And if we have another downturn, they’re historically liable to lose up to about 30 to 40% and they have no idea. So it’s interesting the disconnect between the whole scenario of desired return, required return, actual return and what they’re actually invested in it’s pretty interesting.

Melissa Carter:

Well, and Chris, you tease about that being a long answer, which it was very informative, but I would assume that the answer that you give a personal couple is longer than that. Because I would assume that in a relationship, normally, you are attracted to the opposite of who you are, you compliment each other. So when it comes to investing and you have a couple in there talking about their risk tolerance, if it’s something they both need to make a decision on, I’m assuming that conversation can get quite lengthy.

Chris Bulman:

It can. And sometimes investment accounts are built in different ways. Sometimes you see a couple that both feel exactly the same way. Sometimes you see a couple where… For example, just a few weeks ago, I’ve got a couple who the husband’s very conservative and the accounts need to be conservative. And his conservative accounts are outperforming. He had a million dollar account, it was up $60,000 already in a very short period of time in a fixed index annuity. And then the wife’s account, the other account, million dollars was down $80,000 during the timeframe. And what was funny was the husband’s looking at the wife going, because trying to prove their point. But in the long-term, the wife’s accounts will probably outperform the husband’s. In the short term, there’s going to be more volatility in that account.

So everyone’s different and we need to talk about it. And then I’m no marriage therapist, but the couple needs to figure out what they want to do together to make sure that the plan works. Because again, at the end of the day, it’s what does the plan need to do for the rest of your life to make sense. I had a client in one time and we were talking, they had about $15 million portfolio and about 6 million was in one stock. It happened to be the stock of the company that this person worked for. And so obviously, he’d done very well, both in that stock and outside of that stock.

And so I said, that is a large position to hold in one stock. We typically don’t like to see any more than 5% in any one holding. And he said, “Hey, listen, if I lost the entire thing, I’ve still got $9 million. I think I’ll be okay.” So you talk about different approaches for different people. And this person felt he had faith in his company stock, and even if he lost it all, he’d still have $9 million. He would be just fine. But he’s more of the opinion that the stock is going to continue to skyrocket. So everyone’s different. There’s no two people that are the same.

Melissa Carter:

Well, and also to finish the point that you do need to know your own personality. That applies in anything. To know yourself well is to have a more joyful life. And I think the same with investing. If you find it fun and you are willing to take that risk because you find joy in it, then you should. But if you don’t, like me, then you shouldn’t.

Chris Bulman:

Right, Right.

Melissa Carter:

Now, if you want to know how your portfolio is, if you want to see if the numbers match your personality, then you need to call for this complimentary financial plan. Chris, if you wanted to talk a second about what they get with this complimentary plan, and then we’ll tell them how they can get it.

Chris Bulman:

We keep saying everyone’s different. I had a call this morning from a new person that came from the radio show and they want to have a financial plan done. They happen to have six different investment properties. I think two in Monterrey, two in Livermore, two in Pleasanton, and all of them have cashflow coming in, they all have amount of equity. Matter of fact, several are paid off. This person makes 150,000 a year. The wife makes 380,000 a year. 62 years old. He’s worried and he’s curious if he can retire. He wants to play golf all the time, but he doesn’t know if he can slow down. And so that’s a good question. Can I slow down? Can I retire? Am I going to be okay? What does my income look like for the rest of my life? I don’t know what it looks like. I know it feels like I’m successful and it feels like I’m doing well. And my wife wants to keep working, but I really don’t know if I can do it.

And so really what we do is we take all of that information, including the IRAs, the CDs that they have, the cash in the bank, the 401(k), the 457, we take all of that information. Take a snapshot in time of where it is today. What kind of risk tolerance we’re taking. We incorporate taxes now and in the future. Inflation. Income needed, all of those things and pensions, they all go into this plan. So we can see year by year where the income is going to come from. What kind of taxes are we going to be paying. How much risk do we need to take. And we can do multiple plans once we have the information in. But it’s easy to say, well, based on this, we only need to take a small amount of risk and we’re going to hit all of our goals, or even no risks. You can leave it all in the bank and you’re going to be fine.

But if you did want to take a risk similar to the S&P 500, here’s what it would look like. If you wanted to take a risk of maybe half the volatility of the S&P 500, here’s what that would look like. Here’s what a 60, 40 portfolio or a 40, 60 would look like. We call it results in advanced planning, because we’re able to, by running a thousand different scenarios, give you a pretty good idea of what the future looks like depending on your lifestyle. And at the end of the day, you may say, “I like this plan, Melissa, but I want to also go to Europe for $30,000 a year for the next 10 years. Can we do that?” And then we test that as well. So we can test all different options in that retirement plan.

Melissa Carter:

Well, the way that you can get this complimentary financial plan from Chris Bulman and Bulman Wealth, it only takes about 10, 15 seconds of your time. You need to text the word plan, P-L-A-N to this number, (916) 458-8199. Again, plan to (916) 458-8199. And the first five callers that do that will get an immediate response and you will get that complimentary financial plan. All right. So Chris, here is a formula that I want to pass by you to see if it’s anywhere in the ballpark of what people need to pay attention to. Okay? It’s a guy from MarketWatch and MarketWatch is a reputable site, and it claims that your house drives most of your spending.

So according to his formula, if you multiply the market value of your house by 0.3, that tells you how much annual income you’re going to need. So let’s say your house is worth $250,000, multiply $250,000-

Chris Bulman:

Which state are we talking about?

Melissa Carter:

[inaudible 00:13:14]. $250,000 by 0.3 and you come up with $75,000 a year that you’re going to need in retirement. So what do you think of that formula? So obviously that is a low, low number at another part of the country, but if you were in California and your house is worth, I don’t know, half a million, $750,000, is that realistic to assume that you’re going to need that number when you multiply by 30%, as we were talking [crosstalk 00:13:42].

Chris Bulman:

Yeah. That’s an interesting way to look at it. Honestly, I don’t think that has anything to do with it. Everyone is so different. I have a client with a million dollar home and she lives off of $800 a week, basically. Now she has to pay her taxes, but she’s owned the house forever. We have clients that live in a $400,000 home make $450,000 a year and their budget’s $450,000 a year. So everyone’s different. It depends on your spending habits. How many kids you have, grandkids. How much you enjoy them. Some people live a modest lifestyle, the people that usually accumulate a lot of wealth, not the Kardashians, not the people on the influencers as they’re called now, the new money. They don’t necessarily live a modest lifestyle, but the folks that are listening to us today, if you’ve got a million, 2 million, $5 million in investments in the bank, you probably live a fairly modest lifestyle.

That’s how you got that money. And those are the folks that we see a lot. We don’t start walking down different aisles in the grocery store typically when we retire. So grocery bills are usually fairly similar once we retire. The thing sometimes we start doing is eating out more, maybe even than we did before when we retire. Medical expenses can go up. So different things happen, different things shift. The first five, 10 years of retirement, there might be a lot of travel. After that, it may begin to slow down a bit. No one wants to be on an airplane for 15 or 18 hours. When you’re 20, let alone, when you’re 70 or 75, things shift around. But I don’t think there’s any formula that’s going to tell you based on the amount of your house.

However, based on the value of your house, it is going to tell you taxes that you’re going to pay. How much you’re going to have to probably spend on your yard person and your pool person. And I have one client that came in, she was spending $250 a month on a yard person. She doesn’t even have grass. All they do is blow and go. They just come out with the blowers. 250, and it’s in Granite Bay. So they just figured everyone pays a premium. So I gave her a number of a couple of people we’ve used and they cut it down to a $100 instantly. So it’s just everything’s different.

Melissa Carter:

Well, and that brings up a great point because I think that two things, this formula that somebody has put out that a lot of people may just use that as their one reference and that’s what they’re going to use when it comes to their retirement, which is erroneous. And two, like you said, with money and with things such as yard work or whatever, they may be insecure to talk to other people about it. People don’t like to talk about money. They don’t like to compare notes when it comes to money, because we have such an emotional attachment to it.

And so, I think that, Chris, you’re constantly making the point about having a plan. Everybody’s different. That you are your own unique person. And that is why it’s important for people to talk to someone like you who have done this for decades and have seen every scenario out there to be able to talk to them one-on-one. And instead of them listening for 10 seconds to a commercial, or see an article about that formula for them to actually take their portfolio and come to you and say, “What does my life look like?”

Chris Bulman:

Here’s something that you can take away with you today. The four L’s of retirement income planning we call it, you have longevity goals, lifestyle goals, legacy goals and liquidity goals. And just to touch on those briefly longevity goals, it centers around the lifetime sustainability of the core expenses in retirement. So those largely relate to housing, healthcare, basic living expenses, maintaining a basic sort of level of financial independence without becoming a burden to others. Others could be your own children. So how long are we going to live? And what should we be thinking about with respect to longevity and with our financial planning? And then we have our lifestyle goals.

And what is the overall standard of living we want to have in retirement? Some people have this desired standard of living to retire. I love my clients that come in and every quarter they’re on a new trip to Scotland or Ireland or Europe or Asia. And they bring back some amazing pictures and they bring back bottles of scotch for me, or t-shirts for the kids. And it’s fantastic. I love talking to those people. Those are lifestyle goals. How much do you want to spend on things like that? Self-improvement. Do you want to be involved in yoga or a gym? Gyms around here these days in Sacramento area are getting upwards of sometimes $200 a month per person. They’re like resorts, but what standard of gym do you want? The $19 a month or the $9 a month or the $200 a month? $200 a month comes with free towels every time. So that’s nice.

So then we have legacy goals. What do we want to do for our children, our family, our community? How do we want to leave those assets? Whether it’s the next generation or subsequent generations beyond that or to charities. And so legacy goals is always important. When I talk to people and they have all this money, whatever amount it might be, oftentimes I can see immediately, they’re never going to spend the money. So then what becomes important is what do we want to do with it? And if we want to leave it as a legacy somewhere to someone, how do we do that in the most efficient and expandable manner that guarantees that they get that asset in the most best tax efficient manner as well?

And then finally, the last L would be liquidity goals. How much money do we need to be maintaining in those additional assets that can be tapped quickly? Whether it’s checking savings, CDs, whatever it might be, how much do we need to keep liquid? Example, in California, of course, I get a lot of people that like to keep three, four or $500,000 liquid in case a real estate property comes up that they want to buy quickly and they can come in and purchase something with cash or at least put a big down payment on it so that they can get it. Flip it, whatever they want to do.

So everyone has different goals. Those four L’s of retirement income planning, though I think if you write those down. And you can always relisten to this show on Podcast, on SoundCloud, on Bulmanwealth.com, on iHeartRadio all over the place. So if you need to go back and listen to the four L’s and kind of see where they fit in your life, and then give us a call or text us at (916) 458-8199. And we’ll prepare that financial plan for you and talk through all these strategies as well.

Melissa Carter:

So we got a few minutes left. I want to point out something you mentioned about the cash flow for the people who want to make the down payment. Personally, when I got serious about my retirement planning, one of the people that were helping me talked about how I had focused so much on retirement and focused so much on retirement accounts that I failed to build my own cashflow in case of emergencies or in case of anything. Just when I had my child, that’s when I started really getting serious about it like, okay. I can’t mess him up too. And I have to take care of myself, but I need to take care of him. I would assume a lot of people were in that situation. And I just wanted to point it out again, I don’t really have a question with it, but just to see if maybe other clients, that is something that they also overlook. That they’re so worried about when they turn 65 or 68 or 70, that they’re not worried enough about the 50, the 55 year old.

Chris Bulman:

Yeah. When we have calls like that or questions like that, I always go to the Dave Ramsey’s seven baby steps. Now I don’t agree with everything Dave Ramsey says, I’m going to put that out there, but he has a lot of good nuggets. And we work with tons of Dave Ramsey clients. So if you’re a Dave Ramsey acolyte or follower, we get calls every single day. We get between two and four calls a day referrals from the Dave Ramsey show that come in to see us. So I’m just going to go through those seven baby steps real quick. Number one, save a thousand dollars for your starter emergency fund. This is if you have debt, you have credit card debt, different places. That’s step one.

Step two, pay off all of your debt, except the house using the debt snowball. And that basically means, well, you can look more on daveramsey.com, but the debt snowball is you start paying off one credit card at a time. And then the money that you’re using to pay off that one, you snowball into the next one. And pretty soon, hopefully within six months to a couple of years, you’ve got all of those credit cards paid off. Step three is to your point, save three to six months of expenses in a fully funded emergency fund. And that means somewhere that’s liquid. You can get to it. And if you lost your job, if anything happened, you’ve got six months of income of money there that you can live off of while you’re trying to get back on your feet.

Melissa Carter:

Yeah. That’s what I had to learn how to do it right. Exactly.

Chris Bulman:

Yeah. Everyone. Or it could be a roof. How many times has roof ruined someone’s life. They needed a new roof and it puts them like 10 years back.

Melissa Carter:

Exactly. And then you think about it until it falls apart.

Chris Bulman:

Yeah. Yeah. So then you have a baby step four is invest 15% of your household income in retirement. And this is depending on where you are. If you’re starting early, that’s a good number. If you’re starting late, you may need to do more like 20% or 25, but 15% is a good starter number. And then baby step five is save for your children’s college fund if that’s something that you need to do. Now, I wouldn’t start saving for the kids’ college fund, unless you’ve started saving for retirement. There’s been so many people that can’t retire because they’re worried about paying their kids’ college. Kids can figure out college. Adults need to retire someday.

Melissa Carter:

There’s options.

Chris Bulman:

Exactly. You don’t want your last day of life being at work. And then you have, pay off your home early, if that’s something you desire to do. And then the final step is legacy planning. Build wealth and give, be able to give more money. If you have no debt, if you have no monthly payments, if you have no debt anywhere, it allows you to give more money to the places you want. Whether it be family, friends, church, school, SPCA, whatever it might be. Lots of different places you can do, but you shouldn’t be doing that until you’ve hit the other steps. So it’s a great, simple little roadmap. Sometimes people call us and they’re already beyond step seven. They just need wealth management help and tax efficiency help. And that’s where we can help. Some people calling their baby step one, and we can help just make sure that you stay on track from there as well.

Melissa Carter:

Well, just give Chris a call, (916) 458-8199. Again, you can also text the word plan, P-L-A-N to (916) 458-8199 or go to Bulmanwealth.com. Chris, it’s been a pleasure as always. Thank you so much.

Chris Bulman:

Thank you. It’s been a great show. And again, go to SoundCloud, go to Bulmanwealth.com. You can listen to all past podcasts there, and we look forward to talking to you again next week.

Melissa Carter:

That’s right. We’ll be back next week. Same time, I can’t talk either, for the Financial Compass with Chris Bulman. We’ll talk then.

Speaker 2:

You’ve been listening to the Financial Compass with Chris Bulman. For your complimentary Morningstar report, or to explore the options and strategies Chris talked about today, call (916) 458-8199. That’s (916) 458-8199. Find us online @financialcompassradio.com. Join us next week for more navigation tips to a successful retirement on the Financial Companies.

Speaker 1:

Annuities are generally considered long-term investments. It is intended for a person who has sufficient cash or other liquid assets for living expenses and other unexpected emergencies, such as medical expenses. A fixed index annuity is not a registered security or stock market investment, and does not participate directly in any stock or equity investment or index. Annuities are not deposits of or guaranteed by any bank and are not insured by the FDIC or any other agency of the US. All guarantees are solely backed by the financial strength and claims paying ability of the issuing insurance company. Insurance products including annuities are offered through Christopher James Bulman, a licensed insurance agent in the state of California. Christopher James Bulman is registered representative offering securities through WORLD EQUITY GROUP Securities Inc Member FINRA-SIPC an investment advisor representative of Retirement Wealth Advisors.