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, its 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.

This is the Financial Compass with Chris Bulman. At Bulman Wealth, we use results and 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:

Chris is here. And I am here. My name is Melissa. (916) 458-8199 is our number. (916) 458-8199. We’d love to hear from you, or you can always go to Bulmanwealth.com. Chris, my friend, how are you today?

Chris Bulman:

I’m doing fantastic. Looking forward to another good show today. How are you Melissa?

Melissa:

I’m doing great. I do have a question since we last talk, of course, the federal reserve gave a lot of investors what they wanted, which was to cut interest rates. And last week Fed chief Jerome Powell gave them again, what they asked for.

Jerome Powell:

We decided today to lower the target for the federal funds rate by a quarter of a percentage point to a range of 2% to two and a quarter percent. The outlook for the US economy remains favorable, and this action is designed to support that outlook, and to promote a faster return of inflation to our symmetric 2% objective.

Melissa:

So Chris, is this a good thing or bad for those who are approaching or already in retirement?

Chris Bulman:

Well, it’s like a lot of things in life. It can be good and bad. And if you started a new exercise regimen and you’re looking forward to getting into shape over the long-term, it’s a good idea. But in the short term, two days from now, you’re going to be really sore for like the next three or five days. And so you have to get through that hump. And interest rates are interesting because depending on where you are in life, we have listeners out there that are just loving this. They have a mortgage that now they can refinance, maybe, and get a better rate. They have a business loan or whatever it might be that’s tied to interest rates, now they might be able to get a lower rate.

But on the flip side, if you’re an investor or a saver, this can really hurt. If you’re an investor potentially, with rates low, it can drive people more into stocks to try to get the yield that they need. So maybe it might reduce that headwind and the stock market can go a little higher. If you’re a saver, it’s not a really good thing because now where are we going to save our money if we’re looking at the 10 year treasury? This past week it said around 1.7, it’s one of the lowest it’s ever been. And if you’re looking at CDs or bonds, it affects all of those rates. So if we’re a saver, it’s really going to impact the yield that we can get on our money which impacts the income that we can get and the growth of our savings. But if we’re an investor, it could be a good thing.

Now it affects everything from what you might get on your CDs and bonds to insurance contracts and annuities and it could affect a lot of different things. So again, good and bad about these interest rates and keeping them low, just depending on where you are. If you want to refinance your loan or get a new house, it can give you a good time and a good rate to be able to do that. But if we’re 60 or 70 and we’re just trying to put our money in a safe place, and we want it to stay ahead of inflation, now we have some issues, because it’s tough to get the yield that we need.

Melissa:

Well, and it makes me think about people who may not be as savvy to how everything is related to each other. And so they’re looking at information like, okay, I hear that they cut interest rates, but what does that mean? And it just is the broader topic of people who are trying to navigate through the ins and outs of retirement and needing to talk with somebody. And so I’m sure that you continue to get people who walk in your door, who thought, okay. I’m going to try it myself. Or I try with somebody that I didn’t feel comfortable with. And I really need help when it comes to not only how interest rates are going to affect what I’m doing, but also with taxes and with everything else that’s involved.

Chris Bulman:

Yeah. And that’s where we were talking earlier a little bit about robo-advisors and how they might be impacting the change in the investing world. And we really don’t see many people ever using robo-advisors and this is the big reason. You can go into one of these robo-advisors sites and slide your clicker from left to right or up or down, and it’ll tell you your risk tolerance and throw money in there and hope. But when you have real questions and you need real answers and real experience, it’s not going to help you. In times like this, when people come in and see us, and they want to know how this is going to impact them, where can they put their money that can be safe but can get growth.

Or what’s going to happen with the markets when they drop 700 points in one day and how do interest rates impact it and relationships with China and tariffs and Venezuela and North Korea and all these things, you don’t get that from a robo-advisor. So all of this stuff just hearkens back to the experience. You go to get your oil changed or get your car looked at, you love it if a guy’s been doing it for 15 or 20 years, because they can solve your problems pretty quickly and do it the right way. And that’s the same thing with a good financial planner, is you’re going to want to work with someone who has experience. And whatever you learned in school, speaking to our listeners now, you go back and think of what you learned in whether it was geography or geometry or algebra, and you’ve probably forgotten most of it. Unless that became your career. And then you do it every day.

And so you’re going to want to work with someone who does this stuff every day, because they… For example, with what we do here at Bulman Wealth Group, the learning that we get from doing our Series 7 license in 65 and 63, all the different licensing is one thing. But then you stack 15, 20 years, 30 years of experience on top of that, and the experience comes from working with a thousand different individuals and couples who have gone into and through retirement, that’s where the real value builds up. And that’s the type of person you’re going to want to work with.

Melissa:

Well, I like the analogy of the mechanic because when you drop your car off to get it worked on, usually you leave and come back. And you’re not going to the store to try to buy books about how to be a mechanic, like you [inaudible 00:06:31] all about money. And so, like you said, if you work with somebody like yourself and then people can walk away and realize when there’s volatility in the market, when these interest rates are cut, they already have a plan in place to where they don’t have to worry about it.

Chris Bulman:

You’re absolutely right. And it’s important to have that plan, a written plan, even. Even with the cars, I’ve driven a Volvo for several years and we typically take it to a specific Volvo place. You could take it to a import auto dealership to get it fixed, but if the people all they ever do, every single day, is work on Volvos, they’re going to have a better experience. And with Bulman Wealth Group, our focus is on retirees and pre-retirees. So if you’re nearing retirement or in retirement, that’s our focus. That’s what we do every single day. And that’s where we can really help people and give them the value they’re looking for.

Melissa:

And we’re going to tell people how you can text the word plan, P-L-A-N into our number and get a complimentary financial plan from Chris. We’ll talk about that in a second, but first let’s talk about something else that people tend to get hot under the collar about, and it’s their RMDs. Morningstar’s Christine Benz says that you can kill two birds with one stone by using your RMD withdrawals to rebalance your investment mix.

Christine Benz:

Look at your portfolio, size it up, see where you want to make adjustments and pull from those pieces of your portfolio that you want to trim back from a risk reduction perspective. For a lot of investors today, their equity component of their portfolios is a logical place to look for trimming specifically, the growth component of equities because they have performed so well.

Melissa:

So at what point should we start thinking about the RMDs and is this a way to use them without having to… ? I don’t know, for some people, their concern is that it raises their income level, their tax bracket potentially when you have to take those things.

Chris Bulman:

Yeah. So there’s a lot that comes into this conversation. This is a big conversation we have with everyone from age, maybe 45, 50 and up. Because the more that we build into those qualified accounts, whether they be IRAs or 401(k)s or 403(b)s or whatever it might be, if it’s a qualified account, a non Roth qualified account that has tax deferral, that’s going to be an income stream that’s building up all through our 50s and 60s. The reason we’re saving is so we can have this income in retirement. Now there’s a myth out there for a lot of us that when we get into retirement, we’ll be in the lowest income and tax bracket of our life.

And really what I see with a lot of people’s financial plans, is they enter into retirement with a good income stream from pensions or rental houses or whatever it might be, social security. And a lot of times more often than not, believe it or not, they don’t need that income from all this money they’ve been saving from their qualified accounts. And so what happens is, they’re humming along through their 60s and then they all over sudden turn 70 and at 70 and a half, we have to start taking these required minimum distributions or RMDs.

And now the income could jump depending on how much you have. If you’ve a million, $2 million, your income can jump another 40 to 70 or $80,000. And that’s just year one. If our assets continue to grow, we can be taking several hundred thousand dollars a year as RMDs of money we don’t even need. So back to the point of, I guess, the audio clip, absolutely, we want to be choosing where we’re pulling our income, that income that they’re making us take and rebalancing our portfolio. But also, we want to be looking as early as possible, at 50 even, or sooner how much money we’re going to accumulate in those qualified plans. And is that the best way to go?

If there’s a Roth option in the 401(k), let’s look at that Roth option and start putting money into that. We’re going to pay some taxes upfront, but it’s going to grow tax-free forever even into retirement. And it’s going to reduce those RMDs that you have to take when you’re 70. So these are the things that when we do a financial plan, they almost jump off the page. They jump off the computer screen at us in our meeting and really identify for people what the future looks like so we can start making changes today.

Let me give you an example. If I had a vision, if I sat down with a weight loss consultant or something, and they said, “We’re going to plug in what you eat every day and how much you exercise and what you do. And I’m going to build a computer analysis of your face and your body at age 60 and 70 and 80, and how well you can walk and all those things.” I bet if they did that for me, I would probably start exercising more every single day, eating differently and all these things, because it shows me what my future looks like. That’s what we do with financial planning. We show what the future looks like and we can make the changes today when it’s still relevant, rather than waiting until that point.

Melissa:

Well, we’re going to talk about this complimentary financial plan now. So get ready for the phone number. But before we do, let me tell you the statistic, 32% of baby boomers surveyed by The Associated Press say that they’re not financially prepared for retirement. 32%. A third of baby boomers are not prepared. Another 39% say they’re only somewhat prepared. So majority of baby boomers don’t feel confident walking into retirement. And if you’re one of these people and you want to talk to Chris and let him show you your future as it is and how it can be with working with him, then you text the word plan, P-L-A-N to (916) 458-8199. Also include your name. (916) 458-8199. Text the word plan, P-L-A-N for this complimentary financial plan for the first five callers who do that. So explain this financial plan. Again, I’m sure they come in with their goods and they let you show them their future.

Chris Bulman:

Absolutely. It’s similar to the example I was just giving the scenario of a future of yourself and your health and your body weight and all those things. And if I’m going to be using a walker or a cane or whatever it might be, because maybe I’m overweight or didn’t exercise enough or didn’t eat the right foods, or maybe I have heart disease. If I could look at all those things at 40 or 50 and get an analysis of what it looks like and then a blueprint of what to do next, that would be fantastic. And that’s what we do with financial planning if you’re 45, 50, 55, generally, right in that 50 to 60 and older is our age range that we focus on. But we do this financial blueprint. We take all the income streams that you have now, your rentals, your qualified accounts, your paycheck, your salary, your pensions, all the different things that you might have now, and also we’ll have in the future.

And then we overlay that with inflation, taxes, market performance, safety, exit strategies, all of those different things. And we put all of that into one written plan for you for the future so you can see what it looks like. And then what if we see that we have some overweight in the future and some high taxes, or we’re going to run out of money or whatever it might be? We can begin now making changes today to implement into the plan so that we don’t reach those situations that may not be in our best interest in the future. And we can drive to a more efficient and better run financial plan and financial strategy for our retirement.

Melissa:

First five callers to (916) 458-8199, by texting the word plan, P-L-A-N and your name. (916) 458-8199 just to take advantage of that complimentary financial plan. So Chris, you mentioned the word pension. And Forbes says that one of the biggest financial questions that many boomers will need to answer is how they should take their pension. So explain why that may be an issue for some and how you’ve help clients through that.

Chris Bulman:

Well, taking a pension is a big decision. And a lot of times you’re going to have maybe two, three or four options. One option might be take a hundred percent of the pension and if you pass away, you don’t leave anything to your spouse. Well, that way you get the most pension possible, but then if you pass away and your spouse doesn’t get anything, you’re putting them in dire straits. And so we look at that and we talk about different scenarios. What if you predecease the spouse? What if they predecease you? Are there enough other income streams? And then what if we, one option is what we call pension maximization. You can take the highest amount, but then buy some life insurance so that you’re getting the highest income stream in case your spouse predeceases you.

But then if they do, you can cancel the life insurance, Maybe you don’t need that anymore. And you just live off of that higher income stream. Or maybe you take the lower income stream and now the spouse gets a hundred percent of that for the rest of their life. Now, if they predecease you, you’re stuck with that lower income amount. But if you produce these them, they’re never going to run out of money. So there are a lot of things to think about when you are thinking about your pension and you want to work with someone. Typically you have some help lines at work, whether it’s CalPERS or STRS or [SKRS 00:15:05] or whatever it might be, there might be some helplines you can call and then also come and see us and we can help put it together with you. And a lot of times we’ll even get on the phone with them if we need to, to talk about different strategies.

Melissa:

Bulmanwealth.com is where you can find Chris anytime. Going from all the issues with retirement, we talked about RMDs. We talked about pensions. Now let’s talk about social security, because Laurence Kotlikoff a Boston University economics professor writes that some of the statements people are receiving from the social security administrations are flat out wrong. He says there are major benefit errors which could lead people to make mistakes in deciding when to retire and when to take their benefits. So is it possible to double-check those statements before we make a decision that might be based on incorrect information?

Chris Bulman:

Yeah. Absolutely. And you want to dig into that. When you get that statement, by the way, if you’re looking for a statement and you don’t see it, the social security administration made some changes a few years ago. They were spending, what I heard was like $70 million a year, sending out all these statements. And so now a lot of times they don’t send the statements until you’re a certain age, if they send it even then. And so what you can do is you can log on to ssa.gov for social security administration. So ssa.gov, and you can go in and create an account and you can download your information. You can check that income. It will list on that statement what your different benefits are at age 62, 66 or 67 and 70. And then it will list all the different years that you’ve been working and how much income was reported in those years.

So if there’s faulty information or missing information in there, you want to identify that, because that can affect your ultimate benefit. And then also there used to be a lot of different ways that you could plan social security to optimize your benefits. A lot of those have been taken away as of this year. The law was passed or the change was made a few years ago, but this is the final year for people that can use those different options to your advantage. So if you’re of social security age 66, 67 this year, and you haven’t looked at those different options, they might be able to utilize. Give us a call and we can walk you through those. And if you’re 60, it’s going to be pretty straight forward in the future what you can get, but you still want to check those numbers and make sure they’re accurate.

Melissa:

(916) 458-8199 is the number. (916) 458-8199. Now, when you do your grocery shopping, do you buy only name brand items? Well, according to the Wall Street Journal, a growing number of people are making the switch to generics.

Christine Benz:

A sales of big national brands struggle. Store brands are seeing growth. Most people think of store brands as cheaper alternatives to the big national brands, but a new wave of premium store brands from chains like ALDI and Whole Foods are taking on the big national brands. Consumers see better value for their money.

Melissa:

So the reason I bring that up is because many of us seek the best value for our dollar in most of our lives. But let’s transition it to investments and make sure that we’re getting the best value, but maybe make sure that we’re getting the best value, not necessarily the cheapest value when it comes to those investments.

Chris Bulman:

That’s a good point. And when you look at investments, you want to look over the longterm. You want to look over a full market cycle, because you might be working with your advisor right now on the S&P 500 has been going up, up and up the last couple of years and maybe your account isn’t performing as well as the S&P. You need to understand that the value of an advisor is to look over a full market cycle, the upmarket and the downmarket, and to be diversified. So when the market drops 750 points in one day, maybe your account barely dropped at all because you’re fully diversified.

And also over a full downmarket, a bear market, if the market’s down 40% hopefully, your accounts are only down five or 10%. Maybe not even down at all if you have some tactical management and some changes were made along the way, in 2008, maybe we didn’t lose any money. And so that’s the value. When the markets are just going straight up, it’s hard to see value in a full service financial planner, because it looks like you can just throw darts and make money. The value is really there with exit strategies built in, legacy planning, things like that. So when you look at a full market cycle, which is an a bull market and a bear market, we’re able to get better returns than you could otherwise get just throwing your money at some index.

Melissa:

Well, I just think about the show today as we’ve talked, and we talked off air about the robocalls, because I do think there’s some people who want to use technology to make their lives easier. But when it comes to retirement, there’s too many facets to think about. Because when you talk about the stock market, we always talk about having a plan. And of course, here in recent history, we’ve had a little volatility, a little burp in the stock market. And I think for those who don’t have their plan in place, like you mentioned, then they get nervous, because you, again, tried it for yourself.

So not to belabor the point, but I just think that every subject we talk about makes me realize that I personally could not do it on my own. And I would feel overwhelmed if I tried to do it on my own. And I would lose sleep if I tried to do it on my own. Because I would be paying attention to so many things and getting overwhelmed, and this is something that you do all the time, and it’s not something that’s overwhelming to you. It’s something you enjoy. And so I think a partnership with you is something that would be beneficial for people, especially with the stock market being the way it is and what people predict may come.

Chris Bulman:

Everyone’s at a different stage in their financial planning life or their income life. And just in the past week, we’ve had two new clients come in who really were aggressive their entire career. One was averaging over 20% returns, throwing their money at all these different stocks and things. He’s [inaudible 00:20:28] all of his money in cash for the past year and his risk tolerance has just completely changed. He’s tired of the rat race. He’s tired of the highs and lows of trying to make all this type of return. He wants to sit back. He wants to retire early. And he doesn’t want to worry about his entire retirement being destroyed by the fact that all 20% gains could be wiped out by one 40 or 50% loss. He’s having a complete mind shift.

And we see this a lot as pre-retirees get to age 50, 55, 60, they start to have a shift in the way that they feel about risk and potential loss in their portfolio. And a lot of times, they’re now, I don’t know, happiness in returns is at 4%, 6%, 7%. They don’t need the 10 to 12% returns because with those types of returns, typically come 20 and 30% losses in some years and they’re over it. They don’t want it. They just want to see some steady growth. Stay above inflation. And it’s okay to be at that point in your life, I want to make sure people know that. You don’t always have to try to shoot for those 10, 12% returns. If you’re at the point where we have enough money, the goal now is to stay out of inflation and don’t lose money and have a good retirement.

Melissa:

Well, and you don’t have the luxury of time anymore. Because for investors who may be doing this and have done this their whole lives, if you invest in something in your 20s and 30s and even 40s, you say, well, I got plenty of times. I’ll do that. I won’t think about it. Or I’ll do that and let my financial advisor think about it. And I won’t even double-check my accounts necessarily, even though you should, but you know that you’ve got time. So if something happens in the market, you know you’ve got time to recover. But like you said, when you’re at 50, 55, 60, 65, it’s like, well, I don’t got the time anymore. I got to figure out what to do in the now.

Chris Bulman:

Absolutely. And there’s different ways you can plan for that too. Some people that still have that itch of big returns, we can set up more of a bucket strategy or a bucket approach just to, in your head, get it straight. And maybe we prepare a bucket with enough income or enough assets in there to provide guaranteed income for the next 10 years. So we know over the next 10 years, we have plenty of income coming in for a lifestyle. And then in another bucket, we can get more aggressive. Maybe we put 500,000 or a million dollars in the growth bucket, which is, this is money that we know for sure we are not going to touch for at least 10 years. Well, over 10 years, we should be able to at least double that money, maybe if not better.

So that bucket of money, we can watch it go up and down because we’re not concerned. We don’t need it for at least 10 years. And maybe you even have a third bucket that we don’t need for at least 15 years. So in this way, you can have peace of mind and safety of that principle that we’re going to need over the next 10 years or the first 10 years of your retirement, while we’re letting some of the other money take more risk and build up more over the longterm. So lots of different ways we can approach this. And whatever works best for you, we give different options and ideas and walk through all of those things and whatever works best for our clients is what we end up doing.

Melissa:

(916) 458-8199. Again, (916) 458-8199, or go to Bulmanwealth.com. Chris, my friend, it’s been a pleasure.

Chris Bulman:

It always is. And I enjoy talking to you and all of the wonderful listeners we have and the people that call in. And thank you so much. And we’ll be back here again next week. We’ll talk to you soon.

Melissa:

That’s right. Next week 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 Compass.

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 a registered representative offering securities through WORLD EQUITY GROUP Securities Inc Member FINRA-SIPC. An investment advisor representative of retirement wealth advisors.