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 of FINRA SIPC, and 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:

Chris is here, and I am here. My name is Melissa, and our phone number is (916) 458-8199. (916) 458-8199. And we’ll tell you how that phone number and your texting thumbs can get you a complimentary financial plan with Chris coming up. But first, I want to ask Chris a question about a new study from Allianz Life, that finds that middle-class Americans are more worried about a recession now than they were just a few months ago. So if that’s the case, do we just sit back and hope for the best, or are there things that we can do to prepare ourselves in case that happens?

Chris Bulman:

Yeah, that’s a good question. And that’s a question that comes up almost always with people that call into the show or people that come in to see us. And the reason is on this show, most of our listeners, not all, but the majority of our listeners are conservative older, maybe in our 50s, and our 60s or older. We’ve spent our entire lives saving investing, right? And we’ve gotten to the point now where we don’t want to lose the money that we have. So it’s a different thinking process than as we’re investing when we’re in our 20s in our 30s, we don’t have much money and we don’t have much money to lose. And so if we’re investing along the way and the market drops 10, 20, 25%, it doesn’t affect us very much for a few reasons. One, we don’t have very much money, and two we’re investing. So it actually helps us when the market’s volatile, because as it goes down and we invest, we get things on sale, and the stuff that we already own, it drops temporarily, but it comes back. So that can be helpful early on.

Now, as we get into our 50s and we’re getting nearer and nearer retirement, hopefully now we have a nest egg. And if the market drops 20 or 25%, we could be losing 200, $250,000, $500,000. And so it’s a lot different than dropping a couple of thousand dollars from our 30s. So everything changes. I always want to make sure people understand, when you’re doing financial planning and income planning in your 50s and 60s, it is nothing like the planning that you would do early on in life. There’s a whole different box of topics that we need to go through. So it’s important. Now, with respect to a recession and planning currently, if you are in your 50s and 60s, or 70s, or 80s, you don’t want to lose what you have, right?

Melissa:

Right.

Chris Bulman:

And the majority of our clients are 50 and older, 55 and older, so this is a space that we spend nearly all of our time in. And when we’re doing income planning, retirement planning, tax planning, all of these different things. One of the things that comes up frequently is the fact that we are in the longest bull market in history at this point. And so, what follows every bull market, eventually? Every single one, 100%, bar none, is then a bear market. And so when you go through this full market cycle of a bull market and a bear market, you want to come out as well as you can, as unscathed as you can, which means we need to have an exit strategy when that bear market hits.

Bull market means the market’s going up. The horns of the bull is pointing up, so you can remember that means going up. And a bear market is going down. And when that bear market hits, do you have an exit strategy? Do you have a plan in place? What did you do in 2008 when the bear market hit and the recession hit? And do you want to experience the same types of losses that you did in 2008, or would you like to have a smoother retreat?

So one of the things that a lot of clients want to talk about, fixed index annuities, for example, is a big topic in the news all the time. Also, people are looking at CDs. People are looking at safe places to keep their money, money market funds, so that if the market drops, they won’t lose any money. So when we look at CDs, we’re going to be pretty safe in CDs. The problem is we don’t get any tax deferral in CDs, and we don’t really make any money right now because interest rates are so low. So although CDs are a safe haven, we don’t make any money. The 10 year treasury is low, it’s 2%. we’re not going to make any money on fixed annuities because fixed annuity rates are so low.

Fixed index annuities are a bit different and we don’t talk about them much in detail on this show, but it is a big topic. And we do five events a month, locally around Sacramento, Roseville, Folsom, Carmichael, and Granite Bay, different areas where we do these workshops. And I always open the workshop every time by asking people, “What’s on your mind today? We’re going to do a specific presentation today called The Four Retirement Headwinds,” and we go through these four different things that we’re all going to face into retirement. “But before I get started, I want to know what everyone is thinking about.” And nearly every single time, the main topic people want to know is should they look at annuities? And if so, what kind of annuities and income riders, and all those things.

Now, sometimes people ask about mortgages and reverse mortgages and taxes, and the president and the economy, different topics, but annuities is always a popular topic. And I always say stay away from variable annuities for the most part, because a variable annuity is all in the market. So when the market goes down, you will lose money and you’re going to lose money, plus your three or four or 5% fees because they’re very high fee.

Fixed index annuities are a bit different. I’ll skip over to fixed annuities. Fixed annuities are almost like a CD these days. It’s very low rate. It’s a tax-deferred investment and you’re going to get maybe two or 3%, 4%, if you’re lucky, fixed rate of return. A fixed index annuity is in the middle there of a brokerage account and a fixed annuity. So what you can expect on a fixed index annuity, a good one with a good A-rated carrier, these are put out, it’s a contract between you and an insurance company, is that a fixed index annuity, you put your money in, for example, you put $100,000 in. If the market goes down, you still have your $100,000. If the market goes up, you’ll get a percentage of that gain. So, maybe if the market goes up 20%, you get 10%. so if you have $100,000 invested and the market goes up, you’re going to get $10,000 if the market goes up 20%. if the market goes up 10%, maybe you get $5,000.

The key feature here is at the end of that year, when you get that five or $10,000, it’s now locked in. So Melissa, if you have 100,000 and it goes up to 110, and then the market drops 30% or 40%, like it did in 2008, we still have $110,000. That’s number one. If you were in the market, your 100 might’ve gone up to 120, and now it’s down to 70 or 80. So you’re well ahead of that. Now, the next thing is, as the market comes back, the market always comes back from a down year eventually, right?

Melissa:

Mm-hmm (affirmative).

Chris Bulman:

So if the market comes back 30%, like it did in 2009, if you dropped 40%, your 100 went to 60, now it comes back 30, stick with me, you get 30% of 60. So you only come back 18,000. You don’t get 30% of the 100.

Melissa:

Right, mm-hmm (affirmative).

Chris Bulman:

So you’re back to 78,000. So two years into it, you’ve gone from 100 to 60, back to 78. If you’re in a fixed index annuity, however, the first year, if the market drops 40, you still have your 100. The next year, if it goes up 30, you might get half of that, you’d be up to 115,000. So you’d be up literally, what is that? $37,000 in two years in 2008 and nine, over what happened in the markets. And so, when people see that and actually understand how it works, they understand that they can actually get decent returns, four to seven or 8% average returns in these investments with zero risk to principal from market downturns. And so, that’s a safe place for people to put some of their retirement assets.

Now, most people don’t put all of their assets in there, although some people want to. And we usually discourage you from doing that, but it’s a safe place to put some of your money versus bonds. If you invest in a bond right now, as soon as interest rates go up, you’re going to lose value in your bond, right?

Melissa:

Right.

Chris Bulman:

And interest rates will go up eventually. Your original question here, I apologize-

Melissa:

No.

Chris Bulman:

… I’ve gone on a big loop of answering it. But your original question comes back to, are we in a recession or what should we do if we’re preparing for a recession? I call this the one foot in, one foot out of the water approach. a lot of us go, “Well, we don’t want to take our money out of the markets because what if it goes up?” But in the same breath, we’re saying, “Well, we don’t want to be in the markets if the markets go down.” Well, that’s almost the exact definition of a fixed index annuity. We can be in the markets if they go up and we can be out of them if they go down. In other words, I just explained, if the markets go up 30%, you get 15 or so. If the markets go down, you get zero. And whatever you do get credited can never be taken away. It’s locked in.

So it’s very interesting investment. If people want to hear more about that, certainly you want to give us a call, text the word annuity, and we’ll give you a call. Answer all your questions about that. Lots of different fine-print details. Annuities are, I always tell people there’s no perfect investment, number one, whether it’s stocks. Stocks can be great one year and they can be the worst thing you ever thought of the next. Annuities. Same thing, annuities can be great if you’re talking about the right annuity for you. And it can be the worst thing if you’re talking about some variable annuity that could drop 30% the next year. So you need to understand what you’re looking at. They’re a lot like presidents.

Melissa:

Right.

Chris Bulman:

If you type the word Donald Trump into the internet, you’re going to get a percentage of people that love him, and everything that’s happening good in the economy is due to Donald Trump. And you’re also going to get the other half of America that thinks he’s the worst villain that’s ever been born in America, and everything’s bad about Donald Trump. That’s just the way it is in America these days. We talked about this last week. There are a lot of things, everything from sports, everything is divisive at this point. And you’re going to find the same thing if you investigate stocks, if you investigate annuities on the internet. Whatever you look up, there’s going to be pluses and minuses.

So as a fiduciary here at Bulman Wealth Group, we talk about the pluses and minuses of every investment that you can choose. For example, in a fixed index annuity or in any annuity, there’s a surrender or liquidity charge period. And so if you pull all your money out in a couple of years, there might be a six or 7% surrender charge. Well, that’s stated in your contract from the start, it’s no surprise, right?

Melissa:

Mm-hmm (affirmative).

Chris Bulman:

And so, in stocks, however, what people forget is there’s a surrender charge there too. If the market drops 30%, you want your money back, what’s your surrender charge? It’s 30%. So you have to understand the whole spectrum. And I think what’s great about what we do here, what we’ve taught and trained all of our advisors to do is there’s no selling at Bulman Wealth Group. It’s all about just educating you on your options because we do stocks, we do ETFs, we do annuities, we do life insurance.

You don’t have to be put into one corner because you’re meeting with a sales person instead of a financial advisor, you’re meeting with a salesperson that’s just trying to sell you mutual funds, or just trying to you annuities. If you actually meet with a fiduciary and a financial advisor that can do all of those things, it opens the door to actually just having an honest and transparent conversation, and so you get to make the choice what’s best for you.

Melissa:

(916) 458-8199 is that number. Like I said, you can text the word annuity, A-N-N-U-I-T-Y, off the top of my head, (916) 458-8199. And you’re going to be texting something here soon, also to that same number. But first, you mentioned interest rates, I want to go over this really quickly. We have another fed meeting coming, up and many financial analysts are expecting them to cut interest rates again. And if that happens, bestselling financial author, Patrick Kelly says it would be another blow for retirement savers.

Patrick Kelly:

We have been in an interest rate environment that has been low for over a decade now, based on coming off of the last financial crisis. And the problem with that is it’s made it almost impossible for individuals to find a place they can put their money, that they can safely grow it and still beat inflation.

Melissa:

So Chris, if interest rates do go lower, what other options are out there to help us grow that nest egg?

Chris Bulman:

Yeah, that comes back to, well, first of all, savers versus investors. If you’re a saver, my kids have been savers. My son, Luke never spends a dollar. Every dollar he gets, from whatever it is, birthday money or whatever, he just saves and he never wants to spend it. He can tell me he wants something, a golf club or new golf balls. But as soon as I say, “Well, hey, that’ll be $25,” or, “$39,” he says, “Well, maybe I’ll wait till my birthday and you can get it for me.” So he’s a saver. But what we’re teaching him is saving doesn’t do much for you. All it does is lose you two or 3% a year to inflation, and it’s a little too big of a topic maybe for an eight year old.

But when you save, all you’re doing is putting money in a place that’s not earning anything for you, and you’re falling behind two or 3%. Now, when you invest, it’s different. When you invest, you’re putting money into a place that can earn returns and stay ahead of inflation. We always want to have money saved in our checking savings, et cetera, to cover at least six months of living, or maybe more depending on our situation. Beyond that, we should be investing that money, and you’re absolutely right with yields as low as they, our 50, 60, 70, 80-year-old clients that don’t want to lose any money, we’re now losing that potential of just putting your money in a CD or in a bond that gets you eight or nine or 10%.

Now you guys remember, right? You remember getting that in the ’80s and ’90s, maybe even as late as early 2000, interest rates have been dropping ever since and we haven’t been able to find those yields. So what is the place you can put money now to get as close as possible to that type of a yield, without putting your money at risk? And that investment is, as we were just talking about, the fixed index annuity is the closest thing we can find now to get you that type of return without putting your money at risk.

Melissa:

All right. Well, let’s talk about people’s financial plans because that’s the theme of the show is for people to have a plan in place and to put all these elements together so that they can feel safer about their investments or their future. And this is where you text the word plan, P-L-A-N to (916) 458-8199, because the first five callers are going to get a complimentary financial plan from Bulman Wealth. So Chris, what does that entail?

Chris Bulman:

So the complimentary financial plan takes a look at… It’s basically a financial blueprint for you. So if you think of a blueprint on your house, it’s going to list where everything is. Sometimes when we walk in our house, my wife has noticed next to a closet and next to one of the sinks, there’s a warm spot on the floor, under the tile, and we’re wondering, why is that warm? And we don’t know what’s under there. Now, if we had the blueprints, if we had built this house, initially we would know if there’s pipes under there and we would know what’s happening. And I kind of wish I knew what was happening.

Another thing that happened recently is we had all this water coming out of our yard and just leaking across the sidewalk onto the cul-de-sac. Well, I don’t have a blueprint of what’s under our yard, so we had to call an expert in. They had to come in, do some tests, dig around and they found out that there’s a leaky pipe. So blueprints allow you to understand what you have and what’s going on. And a financial blueprint does exactly that.

So we take a look at all of your assets, your 401k, your CEP. We had a client in yesterday, a million dollars in the 401k, a million dollars in cash, $1.3 million still coming in from a sale of a business, a million dollars in cash value life insurance. And I think they had three rental properties, income coming, they had social security and a pension. But what they don’t understand is how does all that fit together and what does that look like for the rest of our lives? And so, we take all of that information, we list it all out into our planning software and we build a financial plan that shows what kind of risk we can or should be taking, how that looks over the next five, 10, 20, 30 years with inflation taxes, death of one, or both spouses, legacy planning, estate planning. All of these different things, it begins to make clear what’s going to happen in the future.

And for a lot of our listeners, for a lot of our clients, especially if you’re earlier in your planning, maybe around 50 or 55, there’s some big surprises coming for you at age 70, with respect to required minimum distributions and taxation, and income jumps and things like that. And when we do these plans, we might notice a few things early on, but every time when we get to 70, it shows some new things that we’re going to have to do to make some changes. So that’s the financial blueprint, the financial plan that we offer to everyone. And I think it’s been so valuable and helpful to so many people, so many of our listeners in Sacramento. We always say you want to remove the fear and uncertainty when you’re heading into retirement, or when you’re in retirement, especially with a looming bear market. And with so much going on geopolitically and internationally, you never know when something’s going to strike that sends us into a tailspin, and you want to be prepared for that.

Melissa:

And that’s why you should take advantage of this first five callers, complimentary financial plan, simply texting the word plan, P-L-A-N, plus your name to (916) 458-819. (991) 645-8819. Text the word plan and your name. So you mentioned 401ks a minute ago, and I think for a lot of people, yes, you have a 401k at your job, but what about when you leave that job? And The Molly Fool’s Robert Brokamp says that a fidelity report found too many of us are doing the wrong thing with that money.

Robert Brokamp:

36% of the people cash out their 401k. They don’t roll it over to the next 401k, they don’t roll it over to an IRA. They take the money, which means they pay taxes, they pay penalties if they’re not 59 and a half, and they miss out on all that future growth.

Melissa:

So, Chris, I guess first of all, to address the issue that people should be doing something with a 401k, instead of just leaving it where it is, even if you leave the job.

Chris Bulman:

We don’t see that much. To be honest, that number surprises me. I would guess if you dug deeper into that number of that 36% cashing them out, I would have to place a wager that almost all of those, a high percentage of those are going to be people in their 20s, 30s, maybe even early 40s. They’re entering into a place where they realize they’ve got to get rid of this debt, and the only way they can do it is by liquidating that 401k to pay off the debt. We partner with Dave Ramsey. Big believer in Dave Ramsey. So if you’re a follower of Dave Ramsey and you like what he talks about, certainly you want to call us because we work with him on a daily basis and his group, with a lot of the things that they talk about.

So when people are cashing these out, absolutely you’re getting rid of all of that future compound growth that you could have gotten. But I also tell people, “Hey, if you’ve got a $100,000 in credit card debt and you’re getting charged 20%, there is no investment, zero investments out there that are going to guarantee you a 20% return every year.” And if your credit card’s guaranteeing you a 20% interest rate every year, you’ll never get ahead by investing your money in a 401k or an IRA, while you have this debt that’s charging you 20%. So pay off your debt first, before you start investing. And if you’re always going to keep having debt, you’re never going to be able to invest, right? So that’s a personal decision that you’ll have to make. But as far as cashing out the 401k to pay off debt, you want to meet with someone first and make sure that that’s the best idea.

But if your debt’s out of control, I had a person call from the radio show one time and they said, “Hey, we’re interviewing five different advisors. We’ve got $10,000 that we want to see who wants to manage it for us. We’ve got $50,000 in credit card debt. Our income is 40,000.” And I’m thinking the priorities are completely backwards here. You’re trying to find someone to manage $10,000, yet you’re in credit card debt. You’re not making enough money to ever pay it off. You should be seeking credit counseling, trying to figure out how you can get out from underneath this debt, get rid of the $10,000 that you have saved to knock off the debt, and then start fresh. Get your budget under control, live within your means, save up your emergency fund. There’s something called the Dave Ramsey Seven Baby Steps, follow those steps. And then when you get to the step that says you’re ready to start investing, then you start investing. But getting ahead or doing it in the wrong order will just put you into trouble.

Melissa:

And I think that with the credit card debt, I’m sure that is something that has kept a lot of people from investing in their future. And like you said, I think a lot of people couldn’t even tell you what the rate is on their credit card. That they just have a credit card and they use that to pay things, thinking, “Oh, I’m going to pay that later,” then they ever do, and they don’t realize it’s 20% rate that they are charging you for that debt.

Chris Bulman:

Absolutely. And we see it way too often. Way too often. That’s what’s good about having a comprehensive plan. You’re looking at everything together, not a piecemeal. We had a person at one of our events recently and he asked me, “Are you insurance licensed?”

And I said, “Well, of course. I’m a financial planner. I wouldn’t be a fiduciary if I didn’t have the ability to look at everything.”

And he said, “Well, I’ve always thought that if you’re insurance licensed, then you shouldn’t be a financial planner.” And I thought that’s the most backwards thing I’ve ever heard in my life. And the reason is now, I understand there are some insurance people that have a bad rap, but I can tell you, if you go to see someone that’s a stockbroker or Series 7, or whatever, and you go in and you tell them, “Yeah, I have a wife. I have three kids, they’re all in grade school. And we have a $1,000 extra a month.”

And he says, “Well, let’s put it in mutual funds.” If you’re telling me that that person is doing the right thing for you before asking you, “Have you protected your family with term life insurance? What happens if Dad doesn’t come home from work today?” Well, I’ll tell you what happens without life insurance, Mom loses the house, if she’s a stay-at-home mom. Kids are uprooted and have to move to a new school. It’s a mess. So absolutely, you want your financial planner to have all the licenses, including life insurance, to make sure that you have a well-rounded plan. A financial plan, a financial blueprint is nothing if you don’t get to that retirement point, right?

Melissa:

Mm-hmm (affirmative).

Chris Bulman:

If you build a plan to get from 30 to 65, and you’re going to be a multi-gazillionaire, that’s fantastic. But if you die at 40 and only invested 20,000 so far, and now you’ve got your spouse and your kids that are never going to reap the benefits of the gazillion dollars that you were going to have, then how good was that plan, right?

Melissa:

Right.

Chris Bulman:

So the plan needs to be all encompassing and include everything.

Melissa:

Well, that’s why you need to go to Bulman Wealth and call Chris right now, (916) 458-8199. (916) 458-8199. Or go to Bulmanwealth.com. Chris, we’re out of time, but thank you so much. And I think that a lot of people have realized that maybe their priorities are not straight and that they need to get some work done this week.

Chris Bulman:

We sure look forward to talking to you. Call, email with any questions. At any time, you can email info@Bulmanwealth.com and we’ll get back to you. And we look forward to talking to you again next week.

Melissa:

That’s right. We’ll be back next week with The Financial Compass with Chris Bulman. We’ll see you 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 at 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 of FINRA SIPC, and investment advisor representative of Retirement Wealth Advisors.