Erick details a list of five important things to own during retirement, and offers strategies for protecting and growing your hard-earned money during this volatile time in the U.S. economy.

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9.21.22: Audio automatically transcribed by Sonix

9.21.22: this mp3 audio file was automatically transcribed by Sonix with the best speech-to-text algorithms. This transcript may contain errors.

Producer:
Any examples used are for illustrative purposes only, and do not take into account your particular investment objectives, financial situation or needs, and may not be suitable for all investors. It is not intended to predict the performance of any specific investment and is not a solicitation or recommendation of any investment strategy.

Producer:
Welcome to take point on retirement with your host, Eric Arnett. Eric is a fiduciary and licensed financial advisor who always places your needs first. The experienced team at Tape Point Wealth Management takes pride in knowing they've helped so many pursue the financial future of their dreams. And they can help you, too. And now let's start the show. Here's Eric Arnett.

Producer:
And welcome back to Take Point on Retirement. I'm Sam Davis, joined by the founder of Take Point Wealth Management, Erick Arnett. Eric, how are you doing?

Erick Arnett:
Hey, Sam. I'm doing great, man. How about yourself?

Producer:
Doing awesome. I'm happy to be back on the air this weekend across the Sunshine State. And Eric, I know that you've got a lot to talk about today. You've just recently returned from a big conference out in the Valley, Las Vegas. How is that? You know, let's get a little market update going and tell the listeners what you've learned.

Erick Arnett:
Yeah. First, welcome to the show, everybody. Welcome Tampa Bay, welcome nature coast. Super excited that you're all listening today. Thank you so much for listening. You know, this show is all about education and just trying to provide good, solid information to help our retirement warriors, whether you're in that retirement red zone or if you're getting close to retirement, or even if you're a younger person and you're you're looking for answers on how to construct a portfolio and build a retirement plan for you for your future. We love the opportunity to chat with you. You can certainly go to our website, take point wealth. You can just Google take point wealth in your phone or on your computer and it'll come our website will come right up and you can in the upper right hand corner, you can just book a consultation. You can also just reach out and give me a call. Today, we're standing by to answer your calls. It's 3526160511. That's 3526160511. And then, of course, if you don't catch all the show or you want to catch up on some past shows, we have our podcast as well and you can get a hold of our podcast and listen to our podcast on any podcast app that's out there or even go right to our podcast website, take point on retirement radio. So with that being said, Sam, coming back from the conference this week, I spent a week out in Vegas at a conference with the best and the brightest in the investment industry.

Erick Arnett:
You know, I'm talking about the largest wealth managers in the world, the Brookstone or the Brookstone capital management, Blackstone, JPMorgan, to name a few. You know, the best and the brightest, the big money managers. And so just came back with a wealth of information, a lot of insight. And one key point that I point out is that working with an advisory team, I think it's important to know if they're students of the game and they're constantly seeking new ideas, constantly educating themselves and and bringing those strategic solutions to their clients. So a lot of folks out there I've been hearing are just haven't heard from their advisors lately, you know, and this time more than ever. And we're going to get into hopefully some of these details in today's show. So I hope you stay tuned and listen, because I'm going to share a lot of information with you. But this kind of keeps me up at night. I think that more than ever right now, at this time, this day and age, there's got to be some changes made. And there has to be you have to look at your retirement in a different way. And so coming back from this conference and sitting with the brightest in the world, quite frankly, the largest money managers in the world, I've got a lot of key insight led a key matrix into the economy, the data, the numbers.

Erick Arnett:
You know, we're going to try to eliminate the emotion and really focus on the key data and what are some solutions for our clients and for our listeners out there in order to build a solid retirement plan, even in these tumultuous times. But you have to look at things very differently than you have in the past. You've got to kind of flip your brain, throw conventional wisdom out the door. You know, that traditional investment portfolio, that traditional retirement plan is just not going to work going forward over the next ten, 15 years. And trust me when I say this, it's just not going to work. And so we'll get into some of the details. But, Sam, this is this is really what keeps me up at night, because I know that 95% of our listeners out there, you just have this old conventional portfolio and they're hoping for the best. Their broker or their advisor really isn't making any tactical changes, as in calling them, you know, talking about new ideas and ways and. To enhance portfolio returns, to mitigate risk, to mitigate fees, to mitigate taxes. I mean, all these things are the silent killers. And more than ever, not last week, not a year ago, not two years ago, but right now you've got to be active.

Erick Arnett:
You've got to be proactive. I'm urging folks to pick up the phone and please give me a call or to go to my website, take point wealth and click on that upper right hand corner and get you a free consultation. The time is now. I can't stress it more and so stay tuned. Let's listen to the show today and hopefully take some notes. If you have any questions, just feel free to give me a call. We can chat for 15 to 20 minutes. Absolutely no problem. You know, we would love to be able to provide you with that comprehensive consultation at no cost to you. There is no obligation. So we're going to we're going to do a complete optimization of your retirement plan. We're going to introduce these new strategies that you have to have to have to implement into your retirement plan going forward in order to be successful. And we're going to do this all for free and in hopes that obviously, yes, you'll work with us at some point down the road. However, there's absolutely no obligation to work with us. You can take this plan, take our ideas and do whatever you wish with them. You don't have to work with us, but we really think that this is what's best for you. And we feel like now is the time, more than any, a critical time to optimize and to really change the focus and to really be hands on.

Erick Arnett:
You know, this isn't a time where you can just kind of set it and forget it. You know, we've kind of been in a period of time where I think folks have been lulled to sleep. And quite frankly, probably a lot of advisors out there have been lulled to sleep and feel hopeless in this type of environment where we just came through a 12 year bull market of stocks and fixed income, 12 years of stocks and bonds, record performance. And now that's topping. And so and we don't think in listening to some of the best and the brightest in the industry, we don't think anything is going to change any time soon. And we'll try to get into why we think that is. So please stay tuned to the show and also reach out to us if there's something that we say to that today that makes sense to you. Write our number down. 3526160511. That's 3526160511. And just reach out and give us a call and we'll chat 15, 20 minutes. That's all it is. It's just a phone call and we'll chat for a little bit. I'll try to get to know you, try to understand kind of what's going on in your life and what's going on in your retirement plan, and then see if we're a good fit and potentially if there's a way in which we can optimize your plan and we'll just gather some data and some information from you and we'll go to work, we're going to examine everything from top to bottom.

Erick Arnett:
You know, Social Security maximization report. When do you take Social Security, Medicare talking about income? You know, do you have enough income? Are you going to run out of income? We'll test that plan to see what are the probabilities of success. And so we can discover exactly how much you're paying in fees. Do we need to cut costs? How much are you paying in taxes? Do we need to develop a more tax sensitive plan? And then most important, Sam, what keeps me up at night is risk. Risk is very different right now because not only do we have risk in the stock market, but we have a huge amount of risk in the bond and the fixed income market. So that traditional conventional 6040 portfolio, we call it the 6040. And that's simply if you're a moderate investor, you're kind of you're in your fifties or early sixties or even in your seventies, you're in retirement or close to retirement. That moderate portfolio that we've typically used in order to kind of hedge against the market and to also create some income, isn't working because bonds are down almost 12 over 12% this year, a -12.6 on what was supposed to be the hedge in your portfolio, what was supposed to create income in your portfolio.

Erick Arnett:
And if we look over the last three years, it's down about 2%. So it's just been a dead asset class and you're paying fees on that debt asset class on top of everything and at the same time. So you're not getting any return in the stock market as well. So nothing's working right now for the majority of America. If you talk to anybody, more than likely people are losing money today. And so we have the strategies, we have the solutions. We have the best and the brightest in the industry that are bringing these to the table for us so we can execute these for our clients. And so I'm really excited about it, but at the same time, people have to act. So if you're listening to this show today, it's just going to take a second to pick up the phone or just go to your phone and click on our website and let's get started so we can build and consult with you and build what we call an optimized retirement plan that will weather all storms, including when do you take. Money. When do you take Social Security? From what buckets do you take it? So a total comprehensive plan of 5500 to 2000 value completely free to you today's.

Producer:
And now for some financial wisdom, it's time for the Quote of the Week.

Erick Arnett:
Zig Ziglar had a quote and basically said, expect the best, prepare for the worst, capitalize on what comes, expect the best, but prepare for the worst. That's what jumps out at me. You know, we can be optimistic. We can expect the best, but we have to prepare for the worst. And no matter what plan you put in place, you know, you have to prepare for the worst and make sure that it can weather all storms. And so, you know, that's really what we need to get into today. And with that being said, let's talk a little bit about some of the basic rules that we see in retirement. I think it's important to kind of review these and really focusing on risk here first and foremost, because I think in this environment, risk is is coming at us from all from all angles. And there was a gentleman that made a quote out there in the conference, and it really made sense, obviously, and rang true to me. And I thought, you know, I got to share this with our listeners, but we have to we're in an environment where we really have to limit our losses now and going forward, the next ten years in the marketplace will not be like the last ten years. We just came through a 12 year bull run. So, you know, it's just an interest rates were at 0%. So the Fed is aggressively raising rates here.

Erick Arnett:
And and they have to raise rates because we were at artificially low rates. That was actually hurting the economy in a sense, because we are overheated. And so they're they're trying to reduce the inflation. We've seen record inflation. By the way, this is the highest inflationary numbers we've had in the history of our country. It's also the first time. Well, it's the second time, actually. We'd have to go all the way back to the 1930s. But it's the second it's only the second time where that conventional 6040 portfolio is not working. You're in you're in double digit negative returns in a conventional 6040 portfolio. So imagine that if you're in retirement or close to retirement, you can't be losing money because you're in that retirement red zone. And we'll talk about something called sequence of returns later on in the show, which is very important to to kind of hang on to and listen to. So but getting back to the rules, I mean, risk managing risk rule 100, I think, is a great a great rule to to really take a close look at. And it's just taking your age and subtracting it from 100. So as an example, if you're 70 years old, you should take that from 100. You you're at 30% risk. You should have about 30% of your assets at risk. The other 70% should be in some type of insured product or a principal protected product or some type of stable income or stable strategy that's going to mitigate risk.

Erick Arnett:
So but the challenge is, is with being in a fixed income portfolio, if you had 40% in fixed income right now, you've lost money and you probably will continue to lose money. So first and foremost, I urge everybody I've talked about this on our shows. Just stop right now. Go to your computer or go to one of your statements, pull down your statement. Look at how much do I have in fixed income? Typically on your portfolio printouts or your statements, you'll have a pie chart. It'll tell you how much you have in fixed income. And more than likely, the reason that you have haven't done real well over the last year or two is because you have a lot of fixed income in your portfolio and that traditionally has been the hedge against the stock market, but it's not anymore. We've got to look at different strategies. We're going to talk about options, strategies, ways in which the high net worth, the high net institutions are hedging their portfolios. We can deliver those high level, high net worth institutional style management strategies that the smart guys are using. The big guys are using the hedge against the markets. We can implement those to our customers and to our clients no matter what the size of your portfolio is.

Erick Arnett:
So the cool thing about what we do and with our partner and our our parent company, Brookstone Capital Management, is that we can deliver high net worth strategies and boutique like strategies to our common investor through us, through our channel, so we can bring the best and the brightest and the greatest strategies, the one the strategies that are being utilized out there today by the high net worth and the institutions right to our everyday Main Street client. So that's exciting to me. However, people have to pick up the phone, people have to reach out, people have to be willing to make a change. And I know change is scary, but now's the time. If you haven't heard from your advisor, or if your advisor isn't proactively calling you on a quarterly basis and just running through things and showing you new ideas and making changes to the portfolio. If you're just kind of business as usual and things are just kind of static, that's the wrong answer. So we hope to change that for you. So please give us a call. Reach out to us today. 3526160511. Or just go to take point wealth dot com. So the rule 100. You know if you're in the sixties and seventies, you really should have about 30 to 40% at risk. And and then the 4% rule, super, super important. This is a rule that's broadly talked about and broadly used across the industry.

Erick Arnett:
But quite simple. The 4% rule is just how much should retirees be withdrawing from their portfolio savings in their in their years of retirement. And so 4% is kind of been the number that the experts and the actuaries and folks have come up come up with. If you're only drawing 4% from your portfolio and if your portfolio is properly constructed, that it should last about 30 years. And so if you're some but some people say them have to take more than 4%, and I get that. So there's ways that we have to try to enhance or create a portfolio that might be a little bit different for them than others. But for the most part, we should be saving enough money. In order for us to be able to rely on that 4% rule, because that gives us the best chance for our money to last throughout retirement. You know, the number one cause for concern for retirees today is running out of money. And so and what's also important is within that 4% rule is the sequence of returns. And so if you're listening and that's kind of a term sequence of returns, you may or may not hurt, but I urge you to educate yourself on the sequence of returns. If you're near retirement or in retirement, you're in that retirement red zone. You have to have to educate yourself on the sequence of returns and the way that you can do that.

Erick Arnett:
Just simply Google it, Google it, and there's a ton of information on it. Or you can call me. Reach out to us and I'll get you a white paper on it. We have a plethora of white papers and educational tools here at Take Point, and we're happy to send those out to you and walk you through it and educate you if you need your own personal professor where your answer. So we're happy to educate people and no one's going to hold a gun to your head. You have to work with us and and move all your money over to take point. That's not the case at all. We we get excited and we're passionate about helping to change the world, helping to change the industry, helping to change folks out there as retirements. And that's what we're passionate about. So if we can help one person make a few changes, that's going to protect their money and provide income and and give them some solutions that they need to get through this tumultuous storm that we're in right now. Then that's what that's what drives us every day. So reach out to us. We're happy to get that information to you. But going back to the 4% rule and sequence of returns, you know, quite frankly, what it is, is if you could take just as an example, let's take a moderate portfolio.

Erick Arnett:
You know, that 6040 portfolio we've been talking about 60% stocks, 40% bonds. So after fees traditionally and historically prior to the last three years, anyways, that portfolio has probably yielded, you know, around 6 to 8%, maybe 6%. And so if you're earning 6% on your portfolio on average and you're only taking 4%, then you should maintain the principle. However, what we'll show you is that we can take over a five year period, a ten year period, even what I like to look at as a 20 year period, and we can take the S&P 500 returns over a 20 year period and and then jumble them all up. And it doesn't matter if you get good returns at the beginning of your portfolio, in the beginning of your retirement or at the end of your retirement, you're going to end up with the same amount of money at the end of at the end of the day, however, where it changes is if you're withdrawing money. So if you have to rely on your retirement or your portfolio to provide you some supplementary income to get you to and through retirement, if you've got to pull money from your portfolio, then that's where it can have a drastic, drastic effect. So if you get those negative returns in the first five years of your retirement and you're withdrawing 4% or even more, it has a drastic, drastic negative effect on the long term longevity of your portfolio.

Erick Arnett:
And you can there's actually calculators out there there, spreadsheets I'm happy to share with you to illustrate that sometimes we're we're better looking at pictures and whatnot. So I'd be happy to show you that. But this is kind of what keeps me up at night is if we're getting if that conventional if everybody out there is kind of in that old conventional portfolio, it's getting negative returns and they're also pulling money from it. And we're you know, so how long is that money going to really last? You know, and they're right now they're experiencing those big negative drawdowns in the beginning of their retirement. So we've got to change something. We've got to change it fast. And we do have the strategies and the solutions to do that. What the big challenge is with all this and the 4% rule and low returns in our portfolios, low returns and fixed income low returns and stocks right now, the big challenge is, is we also have record inflation at the same time. So inflation's coming in higher than 8%. This is the highest it's been in our nation's history. So if we're only getting, you know, 3 to 5% returns and inflation's at eight, 9%, then we have a huge gap between us running out of our purchasing power.

Erick Arnett:
And unfortunately. That's probably I mean, that's already happened to all of America and most of our retirees out there. We were out there five, six years ago warning about this exact event that's occurring right now, the topping of the markets and how that was going to change retirees strategies going forward. And hopefully we were able to save a lot of people out there. And there's a ton of advisors out there like myself that are also preaching this and trying to help folks. So hopefully people out there got the help they needed. But if you're in a current situation where you just don't feel real comfortable and some of this is making sense, please reach out. But the big that's the big challenge is is a ten year treasury or a safe investment right now, Sam is 3.2%. Well, if we're running at eight 9% inflation, you know, you've got a 6% gap there. And so that's where folks are losing purchasing power and portfolios are eroding. And on top of that, they're having to take money out. So this is the big, big challenge. And so you've got to look at things very differently. We've got to look at total return. You know, we've got to put things together that can provide a total return for the portfolio, provide income. The good news is, is that there are strategies out there and we'll probably get into those in the second segment.

Erick Arnett:
But, you know, if you ever heard of about options, strategies is a really cool, exciting way that, you know, options strategies can be delivered to the common investor. Now, it used to be something that was much more difficult and more sophisticated, and you had to kind of be an expert on options. But we have the ability to deliver that to portfolios now. And so, you know, this is another way to enhance and protect the downside of portfolios. So it's super, super important during these periods of big volatility and down downward pressure on the markets to minimize risk and to minimize the downside. If we can if we can minimize the downside by ten, 20, 30%, but still capture 70% of the upside when the markets are good. This is a huge win long term. And so we've got to look at ways to to provide different strategies to hedge against the market. So we have also something called structured notes Brookstone. Capital Management is a proprietary provider of these. It's exciting. There's really nobody else in our marketplace that that provides these. You probably never even heard of them before, but we actually negotiate directly with the big banks to provide structured notes for our clients. It's super exciting. You owe it to yourself to get our white paper to reach out. Give us a call. We'll get you the paper.

Erick Arnett:
We'll educate you on it. There's all different kinds of there's principle protected notes, there's market enhanced notes. You know, there's downward protection notes. And so and we're talking about, you know, single, high single and double digit returns, net coupons to our clients. And so a great way, another tool to enhance portfolios and to get rid of fixed income and bring in other things into the portfolio. You know, maybe you don't have any value stocks, maybe you don't have any dividend paying stocks. We have dividend paying portfolios that pay on average a 4% in dividends. You know, so we're going to bring together strategies. Your stocks should be paying you something for the risk that you're taking. So let's look at going out and getting the highest dividend paying stocks out there. So that's another tool that we're using. And so then also using what we call the buffer ETFs, we can these are the new tools that are exciting that the big guys are bringing to us. And it's just an awesome way to provide options, strategies inside of our portfolios to hedge the downside, but also to create some total return. So just holding a basket of our mutual funds, stocks and bonds is not going to work going forward. And so you owe it to yourself to open yourself up to some of these new tactical ideas and strategies that we have.

Producer:
You can reach Eric and the Take Point Wealth team at Take Point Wealth or you can give them a call at 3526160511. That's 3526160511. And take point on retirement. We'll be right back.

Producer:
You're listening to Take Point on retirement. To schedule your free no obligation consultation visit take point on retirement.

Producer:
The Federal Reserve keeps raising interest rates to combat inflation. But how could it affect your retirement? I'm Matt McClure with the Retirement Radio Network, powered by Emera Life. Supply chain issues, the pandemic, energy prices and Russia's invasion of Ukraine have all been contributing factors to runaway inflation. To fight rising prices, the Federal Reserve has been using one of its most powerful tools raising interest rates.

Erick Arnett:
So they started increasing the interest rates about.

Producer:
I guess, two meetings ago. So about three months ago when when they had the first increase of three quarters of a point percentage points to 75 basis points, which at that point was the largest increase in about 30 years.

Producer:
Tibor Best is an economics professor at Georgia Tech. He says it's surprising that the August reading for inflation did not see a decrease, especially given gas prices have been plummeting from recent astronomical highs.

Producer:
Inflation is not going to stop all of a sudden, but what one is hoping for is that these increases start to decrease so that we start getting to levels that are a bit more manageable and more pleasing to the eye. If nothing else, it was very surprising.

Producer:
That's why. Besides says many analysts now expect the Fed to be even more aggressive with interest rate hikes in coming months. So what does this mean for you? Potentially higher payments on mortgages, other loans and credit cards.

Producer:
Securing any sort of balance on any loan that doesn't have a fixed interest rate, it's going to become more expensive.

Producer:
Bassett ish says it's important for consumers to cut back where they can to lessen the blow of inflation and interest rate hikes. And if you're in the market for a new home, it could be good to delay the purchase until rates or home prices come back down. So how do the Fed's actions on interest rates affect your wallet? That's a key question to consider as higher costs eat away at your hard earned money with a retirement radio network powered by a micro life. I'm Matt McClure.

Producer:
Welcome back to take point on retirement schedule your free financial consultation now at take point on retirement.

Producer:
And welcome back to Take Point on retirement. I'm Sam Davis. You've been listening to Eric Arnett. This is take point on retirement and you can visit them online at take point wealth dot com. And Eric in the first segment we were getting a little bit of a market update. We were learning a little bit about what you learned at this recent conference for investors and financial advisors out in Las Vegas. And on this segment, we're going to talk a little bit of a cost cutter, a little bit of a way to save money. You were talking about the traditional 6040 portfolio. You know, that's something we need to maybe put in a museum and not actually implement for for people moving forward. So know talking about bond replacement with annuities, what can you tell the people? Let's get the one on one on bond replacement.

Erick Arnett:
Yeah, thanks, Sam. And once again, I mean, this is just I mean, we may talk about this for the next year on our shows because I have to reach folks and get this word out. You know, it just like we just spent a week and in Vegas in an investment summit with the best and the brightest in the industry, in the world, really. And so just came back with a wealth of information, kind of confirming a lot of our concerns and things that we already knew. But it was a good confirmation that we're headed in the right direction and doing the right thing for our clients, but really just going to have to hammer and keep hammering away at that conventional 6040 portfolio. It's not going to work. Bonds are not going to work in your portfolio and nothing's going to change anytime soon going forward. The big market update, obviously, is that the Fed is aggressively raising interest rates and so they're coming out this week and probably going to raise another point, 75 basis points. They'll come out and raise again another point 75 basis points prior to year end. And so their goal is to get it at about a four and a quarter of the Fed funds rate. And the Fed funds rate is just the rate, folks that people that banks lend money to each other overnight. And and this really dictates our interest rates and how everything else is factored in as far as how home mortgage rates, car rates, credit card rates.

Erick Arnett:
I mean, so it's going to have a massive effect on our economy because the Fed, we have record inflation. It ran out of control because of the pandemic. And you just can't shut down an economy for a year, two years, three years. Think about that. I mean, just think about the do people really sit and think about that? The global economy, the entire global economy was shut down for a year or more. I mean, what kind of impact does that have? And I think we're starting to see that now. And I think we're going to be working through it for a long time to come. And there really isn't a good story or a good picture for stocks and bonds going forward. And so we have to implement new strategies and new ideas in order to protect our clients portfolios and protect our retirees retirement plans. And so if your advisory team or your broker or whoever you're working with isn't delivering those strategies and those ideas and constantly talking to you about them and making changes and and preparing you for this next decade, I urge you to give us a call or reach out to us. And so, I mean, that's that's 6440 portfolio is not going to bonds are not going away. We've got to get bonds out of your portfolio. So just real simple things like the interest rate risk on bonds. Okay. So we're seeing this and we've been seeing this for the last two years is when interest rates increase, bond values go down because they just become less attractive to investors who are out there looking for a higher rate of return.

Erick Arnett:
So you just can't be holding bonds in a rising interest rate environment. And too bad if you were. But let's make a change now because it's not too late. And guess what? Nothing's going to change any time soon. You know, some of those best and brightest, these I call them super brains in the industry. We sat and listened to them for two or three days and they really don't see anything changing going forward. And so, you know, and the crazy thing about it is if you do have bonds in your portfolio, they're not they're not hedging against the stock market like they should. So you don't have the old correlation story anymore where, you know, bonds are negatively correlated to stocks because, look, bonds are getting hammered just as much as stocks. Bonds are down 13% year to date. I mean, it's unprecedented, right? Stock market down 2020, close to 20%, the NASDAQ and upwards of -15 to 16% in the S&P. So, you know, the stocks are getting hammered because the Fed has to continue to be aggressive to raise interest rates, to put the brakes on this economy. And so they got to slow the economy down and they're not going to stop anytime soon and quite potentially could put us into a recession. I don't think we're in a recession right now. We're in a contraction, for sure. But the real concern is that in 2023, late 2023.

Erick Arnett:
23 for the over tightening or the tightening that the Fed is has to do in order to put the brakes on the economy, will send us into a recession. And and let's not count on the Fed to be perfect, because historically the Fed has always gotten it wrong. They either over tighten or overcorrect. I really wish the Fed would have been raising interest rates a couple of years ago, but I know politically that wasn't the thing to do during the pandemic. But we're we're we're seeing the repercussions of this now. And it's going to be a hangover for quite some time. But there is some good news. There is some good news. We can reinvest those bond funds into other strategies that are going to provide income, going to provide principal protection, going to provide nice yields, but it's not your traditional bond portfolio. So I venture to say that most folks out there have not been introduced to these types of strategies and ideas from their current advisory team. I was talking to a gentleman the other day and I was actually shocked. I mean, this guy had close to $1.5 million in the market and he hadn't heard from his broker from one of the big firms. I'm not going to mention any names for over two years. So think about just hung up the phone and aren't talking to their clients right now. So if you haven't spoken to your advisor and they're not proactive and calling you then, then you deserve better.

Erick Arnett:
You really do. So think about that for a minute. And when we sit down with clients, the first thing we get out in front is how often do you want to hear from us? What type of communication do you need? What type of relationship are we going to have going forward? And at a minimum, particularly in this environment, I want to talk to my clients every six months at a minimum. And with most of my performance orientated portfolios and retirement plans, we're talking to them at a minimum of quarterly right now, and we're bringing new ideas to the table constantly. That's why I spent a week away from my practice, away from home. I spent a week diving into this stuff in this conference, and I'm excited to be able to create a transformation and to really help folks. But you have to pick up the phone. You have to make the take the first step, and then I'll make it really easy from there for you. But it's three 5 to 6 160511. Give me a call or just go to take point wealth and an upper right hand corner. You can click and set up a 15 minute chat session with me. We're just going to talk on the phone for a little bit and see if there's a way in which we can help you. And at that point, if we decide that it makes sense and we're a good fit, then we'll just start gathering some data and some information and really take a look at what you're currently doing.

Erick Arnett:
And then we're going to take the time. We're going to go back. Our team of financial planners, chief investment officer is research team myself is an advisor of 25 years in the industry. We're going to build what we think is the optimized, tailored portfolio and the retirement plan for you going forward in this crazy, crazy environment that we're in. And it's going to be introducing some new ideas and bringing some change. And that's what you deserve and that's what you need, because the next five, ten, 15 years will be nothing like the past folks. And I think a lot of people out there listening are getting that sense that things are very different. And so, you know, the reinvestment risk of bonds is is is the likelihood that the cash flows were earned less in a new security. So like, if you have to reinvest your bonds and you're going to bond ladder, you're constantly reinvesting in these low rates, you're just not getting ahead. And so we've got to look at cash flows. You know, it was interesting, a gentleman said this out there at the conference, Sam. It was like, wow, I have to tell this to my radio listeners was that, well, we have insurance for our cars. We have insurance against fire on our homes. We have flood insurance, we have health insurance. We have long term care insurance. We have life insurance. We'll talk about insurance and we'll pay for insurance on all these different things.

Erick Arnett:
But nobody ever takes the time to think about or to educate themselves on providing insurance to their retirement plan and to their portfolios. So more than ever, you need insurance on your money. And there's ways in which we can implement that. Structured notes, indexed annuities, buffer protected ETFs option strategies multiple ways, alternative types of investments. There was a gentleman there who was like one of the world renowned options strategy money managers for huge firm JPMorgan, the leader in option strategies. And basically he was saying, quite frankly, how, you know, this is one of the only ways going forward that we're going to be able to mitigate some risk and lower the risk of the portfolio. So we have to find ways of lowering the risk that standard deviation, but still providing some good returns and some good total return so people can fight inflation and also provide them with an income two and three retirement. But these are ways that you insure your portfolio. And so, you know, if somebody is out there just constantly just pitching index annuities, I mean, and just that might not be the answer for everybody. And we're not that type of firm that's going to do that, if it makes sense to. I have an annuity. Great. But there's other ways, smart ways to implement different strategies to provide a good total return that's going to mitigate that risk. So we've got to mitigate systemic market risk. Unsystematic risk is stuff like geopolitical events, things like that. We've got a lot of that stuff going on and most important, reduce your fees if you're paying fees on a bond portfolio right now or if half of your portfolio is in bonds, you're also getting feed for a non performing asset class and it's not going to change anytime soon and not going to go into all the details of why bonds are ineffective.

Erick Arnett:
But there's a ton of markup in them by the time you get to them. So it's just not it's just not a good strategy going forward. And unfortunately there's no correlation or non correlation to hedge against the market. So with that being said, we have some great audio. I think we're going to annuity 360. I mean, we talk about this on the show all the time. You owe it to yourself to reach out to us. We'll get you the book for free. You can call us at 3526160511. Get your information. We'll send the book right out to you. Or you can just go on to that chat session in my website, take point. Well, click on there and just say you're looking for the book. We'll provide your information, address, phone number and we'll get that out to you. But you owe it to yourself to listen to read this book. And then once you read the book, let's get together and talk about it. But annuity is a great tool and it talks about this bond replacement strategy. So with that being said, I think we're going to hear a little bit about that right now with Ford Stokes.

Ford Stokes:
Chapter 15 Bond Replacement With Fixed Indexed Annuities. Big idea. Historically, bonds have seen volatility when the market is volatile. Fixed indexed annuities are not subject to the same volatility, which makes them a much safer investment. You might have heard a financial advisor talk about replacing your bonds with annuities to protect your wealth and grow your retirement funds. At my firm Active Wealth Management, we believe this is a smart way to protect your future. Many people have learned that bonds are a safe way to invest your money, but there are some downsides to bonds that should make you think twice. We'll talk about some reasons why you should consider replacing your bonds with annuities first. Here's some information on the history of bonds in the United States. Historical bond volatility. The 1900s saw two secular bear and bull markets in US fixed income. Inflation peaked at the end of World War One and World War Two due to increased government spending. The first bull market started after World War One and lasted through World War Two. The US government kept bond yields artificially low until 1951. The long term bond yields were at 1.9% in 1951. They climbed to nearly 15% in 1981. In the 1970s, globalization had a huge impact on bond markets. New asset classes such as inflation protected securities, asset backed securities, mortgage backed securities, high yield securities and catastrophe bonds were created.

Ford Stokes:
Early investors in these new asset classes were compensated for taking on the challenge. The bond market was coming off its greatest bull market coming into the 21st century. Long term bond yields declined from a high of 15% to 7% by the end of the century. The bull market and bond showed continued strength in the early 21st century, but there is no guarantee with our current market volatility that this will hold. See Chart 15.1 to see the incredible difference of investing in a fixed index annuity versus investing in bonds. Why you should consider replacing your bonds with annuities. The first question you should ask yourself is this Why would you take market risk with your bonds when your bonds can lose their value? If you just look at the history of loan. You can see how uncertain the future of bonds is. Inflation and fluctuating interest rates play a big role in bond yields. Interest rate risk of bonds. Bonds and interest rates have an inverse relationship. When interest rates fall, bond prices rise. Due to the COVID 19 pandemic, investors have moved their money to bonds because they believe it is a safer investment option. However, this has caused bond yields to fall to all time lows. As of May 24, 2020, the ten year Treasury note was yielding 0.64%, and the 30 year Treasury bond was at 1.27%.

Ford Stokes:
Reinvestment Risk of bonds. This is the likelihood that an investment's cash flows will earn less in a new security. For example, an investor buys a ten year $100,000 Treasury note with an interest rate of 6%. They expect it to earn $6,000 a year. At the end of the term, interest rates are 4%. If the investor buys another ten year note, they will earn 4000 instead of 6000 annually. Consider the possibility that interest rates change over time when deciding to invest in bonds. Systematic Market Risk. This refers to the risk that is inherent to the market as a whole. It will affect the overall market, not just a particular stock or industry. This can be unpredictable and it is impossible to avoid. Diversification cannot fix this issue, but the correct asset allocation strategy can make a big difference. Unsystematic Market Risk. This type of risk is unique to a specific company or industry. Similar to systematic market risk, it is impossible to know when unsystematic risk will occur. For example, if someone is investing in health care stocks, they may be aware of some major changes coming to the industry. However, there is no way they can know how those changes will affect the market. There are two factors that contribute to company specific risk.

Ford Stokes:
Business risk. There are two types of risk internal and external. Internal refers to operational efficiency. An external would be similar to the FDA banning a specific drug that the company sells. Financial risk. This relates to the capital structure of a company. A weak capital structure can lead to inconsistent earnings and cash flow that can prevent a company from trading. Reduced advisory fees. Investors who trade individual stocks may know how much commission they are paying their broker, but individuals who buy bonds often have no idea what type of commission they are paying. Bond dealers collect commission on bonds. They sell called markups, but they bundle them into the price that is quoted to the investors. This means you are unaware of. How much commission you were actually paying. Standard and Poor's estimates of bond markups is 0.85% of the value for corporate bonds and 1.21% for municipal bonds. However, markups can be as high as 5%, up to $50 per bond. Bonds have finite durations. Bonds only provide income for a finite amount of time, unlike an annuity which provides income for life. You must reinvest your money if you want to continue generating interest with bonds. However, reinvesting with a bond can sometimes come at a loss. As we discussed above, annuities will provide you with an income you can never outlive.

Erick Arnett:
Thanks for playing that audio with Forbes Annuity 360. You know, just a great tool, another free educational tool that we're happy to get out to folks. We got a stack of them here in the office waiting for you to give us a call. 3526160511. Or you can just go to our website, take point wealth in the upper right hand corner. You can request a copy and we'll get that book out to you right away. Study it, highlight it, and then if you want, we'll get back together and talk about it. But we don't we don't just need. I know probably what's been happening in the marketplace a lot these days is, you know, advisors, including us here at Take Point Wealth, we've been looking for ways to hedge, you know, the stock market, looking for ways to provide income for our clients and looking for ways to get that, you know, that principle protection and still a decent total return and kind of mitigate risk. Because if we use that rule 100 and you're 60 years old and that zone, you should only have 40, maybe 50% at risk. So we've got to find ways to get that other 40 to 56% working in a low interest rate environment that's going to provide good, solid returns. And so Brookstone Capital Management, my parent company, which by the way, I'm proud to say is the ninth largest investment advisory firm for independence in the country.

Erick Arnett:
Now, I think upwards of over 8 billion in assets under management, even in the down market we have. So it's not just me here on the front lines. I have over I think we have over 1000 employees now at Brookstone, financial planners, CFA's chief investment officer research team. So I have a huge team behind us, which I think is great. But Brookstone Capital Management, I think it's important to note is that we are a leading proprietary, proprietary provider. They've been doing it for years so they know how to do it. They go out with the big banks and then negotiate these short term notes and they're called structured notes. And so I want people to also reach out just like they would to find out information about annuities, reach out to us and we'll get you the White Paper on structured notes. We'll explain them A to Z so you have a good understanding of them. And and then we'll talk about how they can enhance your portfolio returns as well as mitigate risk and provide some downward protection. So as an example, there's we actually have multiple types of structured notes and we're putting 20, sometimes 30% of our portfolios in these now as an alternative to fixed income. So not only we use utilizing the indexed annuities to replace bonds, we're also using structured notes to replace bonds.

Erick Arnett:
And and some of them have upwards of double digit returns, coupons, you know, and some and then we have some that are 100% principal protected that have much lower coupons, but still right there at the inflation rate or if not higher. So we're going to beat inflation, provide income, provide total return. And so they're awesome tools. You owe it to yourself to get educated on them. But the structured note, there's some out there I can't for compliance reasons, I can't give you specific coupon rates, but there's some that have a -30 protection mechanism. So we're talking about minimizing risk on the downside, but still providing upward returns. Right. And we talked about that earlier in the show. The key to success is not what you make in the up years, but it's what you don't lose in the down years. And unfortunately, we're in that down year phase right now. We could be in a two year downward phase. We've seen it before. We've seen three negative consecutive negative years in the markets back in the early 2000. So it could be four three negative consecutive terms of downward of stocks. So so, you know, just not seeing any thing that's really exciting for stocks and bonds going forward. So Structured Notes is a great way that Brookstone Capital is enhancing portfolios and typically was only available to that big institutional investor, that really high net worth person.

Erick Arnett:
So we can offer that and get that to Main Street. You know, I can put that in small portfolios if I need to. So it's really exciting, it's super efficient. And so you don't lose any principle unless the market breaks through a -30. Once it breaks to it through a -30, then you start participating in the market. However, you're still going to get this high coupon rate, which even if we have a doomsday scenario and it would break through that -30, you're still going to get the coupon so much like a almost like a dividend paying stock. You know, stocks are going up and down, but if you're still getting that income in that cash flow into your account every day or every monthly or quarterly from the dividends on a stock, then at least it helps mitigate the risk and ease the blow and still provide some cash flow. Right. Even if the markets aren't going well, this is the same thing behind the structure. Note So Brookstone is a proprietary provider. We go out and negotiate those rates every month and they're one year terms and so we only have to be locked up into them for one year. And then we can decide, do we want to roll to another one? Do we want to build a ladder of these? We can we can build out a ladder to minimize risk even.

Erick Arnett:
More. So you're not just buying it at one point at the market and then if you don't want any risk, we also have 100% principal protected notes. And so those are going to give you a nice coupon rate. They have a they have a structured term that's been pre-negotiated. So a one year term, two year term, your principal is 100% protected. And if the markets do well, you're going to do well similar to an index annuity. If the markets go up, you make money, if the markets go down, your principal is protected. So now we can provide all that almost that same type of strategy inside a liquid portfolio. And we don't have to tie up the money for a long period of time. That way we can flow to other investments and reinvest later on at different rates and just gives us that more flexibility to be tactical with your portfolio. So great way to provide income, great way to provide total return. And so you owe it to yourself to reach out and give us a call. I want to walk you guys through those structured notes and how they work, but real important, protect your money from losses. Even just getting a flat return or a negative return of two, three, four, 5% overall in your portfolio is a big win because there's a lot of folks out there that are down 20%, Sam, 30%.

Erick Arnett:
If they're in a just even if they're in a conservative portfolio, 100% bonds, they might be down 15%. And so, you know, these are great, exciting ways that we can offer new strategies and new tools to our clients. And for the first time ever, it might be time to take losses and sell your bonds and take that tax loss harvesting so you can sell bonds and take a loss. Right. And utilize that to offset your taxes. We haven't seen that in a long time. So mostly everybody's always talked about tax loss harvesting in the stock market. Well, now we can do tax loss harvesting in the bond market as well. And so, you know, just another strategy in total money management, capital management that hopefully your current advisor is implementing with you today because we need to take some losses here and harvest some of these losses to offset past gains, future gains, and and they get a little help on our taxes. So and that's one thing about take point wealth is we also have a tax arm. So we have CPAs here at our firm that are also going to help you with your tax situation. We work closely with them to make sure our portfolios and our retirement plans are tax efficient. So reach out. Please schedule an appointment. Today it's 3526160511. That's 3526160511. We're standing by to chat with you.

Erick Arnett:
If you don't get me right away, please leave me a voicemail because I'm probably on the phone talking to somebody else and I'll call you right back as soon as possible or you don't have time to pick up the phone right now. You know, go to our website, take point wealth dot com and you can click on the upper right hand corner and set up a chat session with me. You'll go right into my calendar. One thing to share with folks is that our main office is in Spring Hill, Brooksville Citrus County. I know our our our radio show spans all the way down into Tampa and Sarasota, so that first consultation is just going to be over the phone. And we're happy to talk to you over the phone. Do Zoom meetings. We're really trying to reach as many folks as we can. And so you may not see that we have a local office near you, but we're willing to break through that first block and time of education for you and get you to where you need to go. And we can do that over the phone. We can do that through Zoom. And if it makes sense for us to get together and take the next step, we will come to you. So we'll come to you and we'll offer that service to you locally right there in your neighborhood.

Producer:
All right, Eric, that brings us to the end of a information packed show. If you'd like to hear the show again, you can find take point on retirement wherever you listen to podcasts. And don't forget to schedule that complimentary consultation today at tick point. Welcome, Eric. Thanks for another great show.

Erick Arnett:
Oh, thanks, Sam, so much. And to our listeners out there, thank you from the bottom of our heart for listening. We're hope. We're making a difference. We're hoping to make an impact and enjoy that amazing weather. But keep an eye on those hurricanes potentially brewing out there. And everybody, have a fantastic weekend and enjoy it.

Producer:
Thanks for listening to Take Point on retirement. You deserve to work with a private wealth management firm that will strategically work to protect your hard earned assets, to schedule your free no obligation consultation visit, take point on retirement, or pick up the phone and call 3526160511. That's 3526160511. Investment Advisory Services offered through Brookstone Capital Management LLC become a registered investment advisor and Tech Point Wealth Management are independent of each other. Insurance products and services are not. Offered through VC, but are offered and sold through individually licensed and appointed agents. Investments involve risk and unless otherwise stated, are not guaranteed. Past performance cannot be used as an indicator to determine future results.

Producer:
Fixed annuities, including multiyear guaranteed rate annuities, are not designed for short term investments and may be subject to restrictions, fees and surrender charges as described in the annuity contract. Guarantees are backed by the financial strength and claims paying ability of the issuer. Structured notes involve risks not associated with an investment in ordinary debt securities. The securities are not bank deposits and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency. Nor are the obligations of or guaranteed by a bank. The securities will not be listed on any securities exchange and the secondary trading may be limited. Therefore, there may be little or no secondary market for the securities. Accordingly, you should be willing to hold your securities to maturity. The securities are subject to the credit risk of the issuing bank, and any actual or anticipated changes to its credit rating or credit spreads may adversely affect the market value of the securities.