Keeping Fear out of Your Portfolio and Retirement Plans : Audio automatically transcribed by Sonix

Keeping Fear out of Your Portfolio and Retirement Plans : this mp3 audio file was automatically transcribed by Sonix with the best speech-to-text algorithms. This transcript may contain errors.

Producer Sam Davis:
Registered Investment Advisors and Investment Advisor representatives act as fiduciaries for all of our investment management clients. We have an obligation to act in the best interest of our clients and to make full disclosure of any conflicts of interest. If any exist, please refer to our firm brochure, the ADV to a page four for additional information.

Producer:
Welcome to take point on retirement with your host Erick Arnett. Erick is a fiduciary and licensed financial advisor who always places your needs first. The experienced team at Take 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 Erick Arnett.

Producer Sam Davis:
Yes, this is Take Point on Retirement. I'm Sam Davis, joined as always by Erick Arnett over at Take Point Wealth Management. Erick, how are you doing?

Erick Arnett:
Just fine. Good morning, sir. And how are you today?

Producer Sam Davis:
Doing good. Happy to be here. You know, we're you know, we really seek to help retirees, pre-retirees, anyone in general that's looking to protect and grow their wealth. That's what we're out here helping people to do week in and week out, bringing you information that's that's important, you know, information that changes. You know, there's a lot going on that people are reacting to right now, Eric. You know, the headlines are filling up again on all the news channels. You know, what's going on in Eastern Europe. You know, it's it's making an impact. You know, oil prices are going crazy. So let's give an update, a basic market update and thoughts off the start here for the retirement warriors out there.

Erick Arnett:
Let's say turbulent times. Right. And what the situation with Ukraine and Russia and the war that's going on there and we would call this a black swan event, you know, an event that we really couldn't see necessarily coming ahead of time, long range. And so, you know, it's important, I think, that we kind of dig in today and talk about black swan events and how they can affect our portfolios and our retirement plan and our goals based planning. But, you know, when this is this the Ukraine Russia situation is a very different situation and a different, let's say, geopolitical event that we've had in the past, because obviously we can see it every day on TV, on social media. You know, the Internet is alive and well there. And so maybe in past and in history when one of these situations occurs where there's an invasion or something to that effect, we weren't live right there watching it. So emotions tend to run very high. I mean, we're seeing things, you know, tragic things right before our eyes that probably in the past have been concealed and really didn't create so much emotional reaction. And so, you know, it's simply it's absolutely a terrible situation over there. And we see how, you know, it can really one person in a sense or one country can impact the world. And but more importantly is if you're a retiree or a pre retiree, how are you feeling these days? You know, are you I I coach my clients and ask them just simple questions, like, are you sitting there behind the TV all day, you know, Fox News or whatever news channel is, you're watching CNN, whatever it may be, and you're just glued to the TV.

Erick Arnett:
If you're just glued to the TV and you know, all this emotional, hyper media stuff is coming at you all day long, of course it's going to build fear. That's what you know, that's what the news and media does. Right? They sell fear. They sell catastrophes. You know, this is all about ratings and and whatnot. And but so I see, you know, the biggest concern that I have is how is it affecting my clients and even those folks out there that are considering retiring soon? So I want to get into that today and talk a lot about that. But, you know, already we're seeing so making any making any knee jerk reactions in this type of situation is just the wrong thing to do, right? So whenever we have periods of high volatility, you really have to sit back and not make any knee jerk reactions. You can't let fear and emotion build up inside you to where you're making the wrong decisions. And that's something that we do at take point. Wealth management is we try to help people take the emotions out of investing because it's so important, because really investing is 100%, unfortunately, driven by emotions. And so when fear is high, you know, it tends to just get higher and higher and higher and that. Fear level builds to where we almost feel a sense of panic.

Erick Arnett:
It will make an instant decision or instant reaction. And as an example, just a couple of days ago, the pundits on TV, the talking heads, the people that unfortunately, a lot of my clients and even our prospects out there listening, our retirement warriors listen to we're just talking about how oil is going to go to $200 a barrel overnight and we're going to be paying $8 a gallon at the pump. And everybody is going to be fighting this massive amounts of inflation. We're going to go into a huge recession. They are all this fear mongering, fear mongering, fear mongering. And it's just not true. It's just talking heads or as an example. Oil last night has completely reversed itself and is down this week dramatically and now in what they call a bear market. So oil hit $120 a barrel and all the speculation and fear and emotion. And once things kind of calm down and there's time to really evaluate how much oil do we have in reserves, how much oil is coming, how much is going to be pumped? You know, like a true analysis. All of a sudden, oil is trading below $100 a barrel instantly. And so that's a 20% decline overnight. And so gas prices are already starting to come down a bit. Now, that's not to say we don't know what's going to happen long term. And we still have a lot of things to discuss there today with inflation. And how long is the Russia-Ukraine situation going to last? But also there's countries out there.

Erick Arnett:
Venezuela, Saudi Arabia, Iran, you know, all these all these countries, the USA has the ability to pump and flood the market with tons of oil pretty quickly if they want to. That will dramatically change prices. So people have to understand, if you're listening out there, please remember this and just write it down. The markets in general. And when I say markets, I mean all markets, oil markets, commodity markets, stock markets. There's multiple markets out there. International markets, institutional investors push the markets up or down. That's the big, big, big money, the billions of dollars, the pension funds. So they're always looking ahead and forecasting a year in advance. So things that we see baking into the market now is really predictions and forecasts of what they think is going to happen a year from now. And it's the same in the oil market. People, institutions, companies, the market drivers of the oil market, they'll buy market they'll buy oil on the market today and guessing what they think it's going to be a year from now, it's called futures. They buy and try to stockpile, stockpile or whatever. So they're always looking ahead. And that's why oil prices are extremely volatile, even more volatile than stock prices. And we're seeing commodity jump, we're seeing gold go down. So all these things are going all over the place and going haywire. And that's truly a sign of emotional investing. And that's the time where you really get to sit back and evaluate my plan and do I have a plan.

Erick Arnett:
And so we want to get into that today, too. But most importantly is unfortunately, fear is a very strong emotion. And so we've got to take fear to the side and really look at things analytically. And one thing that I've seen in history is no prediction of the future, but history tends to kind of rhyme. And we see that, you know, when fear levels are high, that's really the time that you want to be investing. And so the biggest mistake that I see people making right now, folks that I'm talking to, is I'll hear. Well, Eric, you know, and I've heard this since December, January, February, March, now three months. I'm just going to sit on the sidelines because I don't know what's going on. And I'm really fearful. And, you know, all this news is out there that we're just heading in this doomsday scenario and the world's coming to an end. I mean, I literally hear this stuff. And so, unfortunately, those people that let fear drive their investment decisions in their retirement planning decisions are the ones that are going to be left on the sidelines and are really going to lose out. And so fear when fear is at its highest level, it creates the wealthiest people. So I'll say it again. When fear is at the highest level, it creates the wealthiest people. And I've seen this numerous times in my career. So when the fear levels are high, that's really when you need to be investing and come up with a plan. And so if you're working with an adviser, then now is the time to really sit down and start developing a plan and get that.

Erick Arnett:
And what are your goals? It's got to be a goals based plan. And so as an example, you know, we we talked about this stuff happening with our clients almost a year ago. We could see the Federal Reserve was going to have to raise interest rates. And I would tell people like, hey, at some point the Fed's going to end the party. And the party was just cheap, cheap money, you know, free money in the system, flooding the money with flooding the system with money and cash and low interest rates. So if you could go out and buy a home and finance it at 2%, I mean, that's like free money, you know, and the interest rate that banks borrow from the Federal Reserve was zero. So they were charging them nothing. They were giving them free cash to pump into the system. And so we were already preparing our clients for rapid increases in interest rates. And so that was going to create a contraction in the economy and a slowdown in the economy, which they purposely do. It's a healthy thing. We have to have that every 3 to 5 years. There's a contraction. And by the way, people have very short term memories. But we have these black swan events like Russia invading Ukraine all the time, literally all the time. These things are happening. And so if you have a good plan in place, you can weather all storms.

Erick Arnett:
And our clients here at Take Point Wealth Management, the phones just have not been ringing throughout this whole time period. We obviously call our clients and touch base with them, say, hey, how you're feeling and but the phone is not ringing because of panic, because we've already prepared for this. We're already prepared for black swan events and things that are going to occur. And guess what, Sam? There's going to be more black swan events ahead of us. We're not going to live in a utopian world where we don't have black swan events. It's just not going to happen. They're happening all the time. And so this particular one is a little bit more in our face because of the media and because of civilians and things like that being involved in the conflict. And that's very tough to see. But emotions when emotions run high and fear runs high, you really got to sit back and take a pause and talk to somebody, talk to an advisor, give us a call at Take Point Wealth Management. We're happy to talk you through it. But if you I venture to say if you had a good solid plan in place, you're comfortable right now, you're okay. And guess what? The markets are rallying this week as oil goes downward. So if you sold out last week because the market was declining and you're in panic mode, you just missed out on a nice recovery this week. So you just can't be making those decisions during periods of high volatility.

Producer Sam Davis:
You can learn more and reach out to Erick at take point on retirement. That's take point on retirement or you can just give him a call. (352) 616-0511. That's (352) 616-0511. And we've been talking about fear here off the top of the show and how powerful of an emotion it is. And I like what you said, that the stock market is really sort of a chart of how people feel about the market. You know, it's kind of just a representation of people's feelings about these these different investment options. It's such a powerful emotion. And we were also talking about how the media is really spreading fear. We're talking about what's going on in Russia or Ukraine or if it's COVID 19 and everybody's got a camera in their pocket now. So we just get every single angle of every single story. It's so much easier to to spread around. I mean, think about two years back, almost two years, exactly what were we doing? We were all just recently shut in to our homes and we have to work from home. There was a lockdown order. And so what do we do? We start reading news. We're trying to learn about what's going on. We're scared because there's a lot of a lot of unknown. And then the stock market, what did it do in March two years ago? It fell dramatically. So dramatically, I believe they even stopped trading on a couple of instances. And now, you know, and it did bounce back relatively quickly, you know, and now look at what's going on in in Ukraine, you know, a drop. But now we're starting to see a bit of a correction. And we were talking about this just a few weeks ago on take point on retirement here on the radio. And, you know, these these conflicts globally, you know, it's not a long term drop in the market tip. Typically we see what was it about a 30 day correction, Eric?

Erick Arnett:
Right. Yeah, absolutely. And you know, we can go back throughout history, the worst conflicts, World War two, the Korean War or Vietnam. And when the invasion or the, you know, the the war kicks off, yeah, there's an immediate knee jerk reaction and there's fear and you'll see a sell off. And but then the market tends to digest things and focus back on what's important. How is this truly affecting growth? How is this affecting the economy in general, corporate earnings? How is it going to affect corporate earnings? And so, I mean, putting things in perspective, if I look at the the Dow right now, which is the our largest kind of value companies are established companies that pay a nice dividend. You know, those the Dow itself is is down 7% year to date. So think about that, just 7% with all of the supposed turmoil and all this World War Three stuff. I mean, we actually have people talking about we're going to nuclear war or World War Three. This fear mongering is unprecedented. And so think about it. Despite all that, the Dow is only down 7% and the the S&P 500 is down 9%. But guess what? That market was already going to be down like that was already correcting way before the Russian conflict even started, because the markets were focusing on the Federal Reserve and what the Fed was going to be doing, raising interest rates to slow down the economy, which was going to cause a contraction. And yes, we had some other things kind of pile on, like inflation, which is driven by the supply chain breakdown, driven by higher oil prices.

Erick Arnett:
But we've already seen that oil prices might be coming way down again. You know, this is all speculative. The oil market is very speculative as well. And so we may have a very soft, soft landing here where we just had a blip on the screen. So earnings in general have still been very, very strong. The jobs market, the job report is is fantastic. People are going back to work. Earnings are increasing. And so, you know, another reason that we have the supply chain issues that we have is because demand is so high, people are still spending. And so we would have to have a very prolonged period of extremely high oil prices to really send us into a potential deep recession. So all of a sudden people are talking about the recession or it's way too early to even talk about that. The probability is a little bit higher. Yes, but we have already prepared and built our portfolios to be able to weather that storm of inflation because we do something. I think that is really important for people to think about. When we build a portfolio or build out a retirement plan. We do goals based planning first and we focus on the goals. And what are your goals getting from point A to point B and to and through retirement, first and foremost? And then how can we achieve those? It's not about specific investments, specific markets. You know, what are we doing here? What are we doing there? Nobody can make those calls, but it's about putting a very well, broadly diversified portfolio together.

Erick Arnett:
And then what we do is we test that portfolio, we stress test it. So once we build this risk adjusted portfolio for you, we stress test it to see how it's going to hold up in good markets, bad markets, black swan events, periods of high interest rates, periods of low interest rates. And so we test that plan over and over again, and it's called the Monte Carlo simulation. And it will spit back to us the probabilities of success. So we can see ahead of time how that portfolio and how that retirement plan is going to react during different times, good times and bad times. And so that's why we are always prepared for this ahead of time. So if you don't feel like you're prepared and you weren't well prepared for this, then it's time to do that. And I compel people to please give us a call. Let us put together this goals based plan for you. And most importantly, let's look at your measure of risk. So when we do that stress test, we look at what's called the standard deviation. And I'm not looking for anybody to be mathematicians out there, but the standard deviation is simple. It's just a fancy word for a mathematical way of measuring risk inside your portfolio. And so if we can measure that risk inside your portfolio, we can predict how it's going to react during volatile times. We can predict how it's going to react during nonvolatile times, and we can see with great high degree of probability what we can expect.

Erick Arnett:
So it's about having confidence in. Clarity. And one thing that I love, love, love and take pride in it, take point. Wealth management and I say this all the time is we have a lot of clients in the phone, just didn't ring. And when I did call people and reach out to them, say, hey, how are you doing? Let's talk about this. We're fine. We're we're good. We feel prepared for this. We know we're going to get through this and and and continue on the right path. And, and so broadly, diversifying that portfolio, introducing multiple asset classes. You know, a lot of times, Sam, when I look at people's portfolios, when they first come to me, they have a fruit basket. Let's just let's just envision a fruit basket. And inside your fruit basket, you really want to have bananas, apples, oranges, grapes, you know, lemons. You want to have a little bit of everything in there. But most of the time what I see and people have no idea is it just have one fruit and they might just have bananas in there. And I say this because they may just have a portfolio with a bunch of growth funds or a bunch of tech funds, or maybe they've got bond funds, they don't even know it. So they're not well diversified in those multiple markets because guess what? When stocks are down, when bonds are down, money is going somewhere. And that's why we saw energy prices increase.

Erick Arnett:
We saw commodities go up. We saw energy stocks go up, you know, so money is always going to flow somewhere at any given time. Money does not typically stay static very long. And so if you have that broad basket, you're not susceptible to just bananas going rotten, right? You got the apples and the grapes and the and everything else to kind of keep your portfolio strong. And in the risk adjusted portfolio, we look at that standard deviation. And so what that is, is how much risk am I taking for the expected rate of return that I'm going to get? And so if you have a high standard deviation or low expected rate of return, there's something wrong with that portfolio internally. We've got to fix it. And so it's very simple process. Just I encourage people to just give us a call. It's very laid back process. We're going to chat on the phone a little bit, (352) 616-0511. Or you can go right to our website, click up in that upper right hand corner, set up an appointment and we'll sit down with you, will gather that data, that information, and we'll run a goals based plan for you. We'll stress test that plan. Heck, maybe even you have some ideas and we'll put that in there. But most importantly, we want to test that and see how it's going to hold up against these type of events. And you'll be prepared in the future for something like this when it does occur, because it will occur again.

Producer Sam Davis:
Yeah. So whether you're out there and you really have no plan for retirement or if you're out there and you have a plan but you're not sure how it's going to be able to withstand the coming years of of uncertainty or even if you do feel good about your plan and you just want to get all of that double check to make sure that you're on track. Erik and his team, they're fiduciaries and they can help you out. Give them a call. (352) 616-0511(352) 616-0511. Or another easy way to find them is just to go to take point on retirement. The folks that take point wealth management are there to help you. And Eric, we've got about 4 minutes left here in the first segment. And, you know, I used that word fiduciary and not all of our listeners may know what that means. So what does it mean to be a fiduciary? What is fiduciary responsibility? And how does that play a role in what you guys do every day?

Erick Arnett:
Sure. A fiduciary is a licensed professional in the industry that is held to a very high standard compliance wise. And so first and foremost is we sign an oath and we're held to that oath that we have to put the interests of our clients first and foremost. And so if they don't benefit, we don't benefit. So as an example, if you have an investment portfolio, we're charging a flat fee on that portfolio. And so if the portfolio goes up, our our our value and our revenue goes up, if your portfolio goes down, our revenue goes down. So it's in our best interest to do the very best job we can to, number one, keep you happy, communicate well, but also keep your portfolio headed in the right direction and constantly bring new ideas. Be tactical. We're not a set it and forget it. We can't be right and we don't want to be. But that's and that's also not what's best for clients. But I tell people straight up, look, this, your money is my money. I treat the same. I'm sitting on the same side of the table as you. It's you and I against Wall Street, you know. And so we're Main Street. And so we want to build a really great, solid plan that's going to be able to weather all storms.

Erick Arnett:
But most importantly is once again, what are your goals do? How many goals? I mean, just talk about that. And what I mean is it some people might think, well, what what is he talking about? Well, it's when are you going to retire, how much you're going to need in retirement, and how long are you going to be retired? You know what other sources of income are you going to have? And so by doing all that and testing our plan, I can extract that and specifically show people like, look, you know what, we need to have a run rate or around 7% or so to meet your goals. Or it might be 3%, it might be 10%, I don't know. But we have to find that financial speed and and then build a portfolio that can accomplish those goals over time with the least amount of risk possible. And so and then we constantly monitor that to make sure it stays in line with your goals. So, you know, as an example, we'll sit down with all our clients again this year and go over their plans and say, are we reaching our goals? Know so if you don't have a goals based plan or by your side, you've got to have one because just having a set it and forget it portfolio or for one K or a hodgepodge of mutual funds and you know you're picking a fund based on what it did ten years ago.

Erick Arnett:
It's just you don't and you don't know what your diversification is. You don't know what your fees are, you don't what your risk are. You're just basically kind of hanging out there in the wind with no true plan. So we've got to get a plan. We've got to be goals based. And then first and foremost, we got to test it and see how it's going to hold up during these black swan events or even these rough economic times. We're always going to have rough economic times going forward. We have recessions, we have contractions, and then we have bull markets, bear markets. We're ready for it and we're prepared for it. So you just can't stress it enough. Salmon Got to, if anything, this time right now, where we have these periods of uncertainty, volatility is the best time to come in and start doing some planning and really learn what drives everything and what drives you and what what you're going to need to get two and three retirement and reach your goals.

Producer Sam Davis:
Yeah. And you and the folks that take point wealth management are offering really comprehensive financial and retirement planning. It's not just taking a look at what you're invested in. It's taking a look at, hey, when you're in retirement and you decide to step away from the office or whatever it is that you do, then we're going to take a look at the pensions that you may be receiving, the Social Security income that you may be receiving, income that you're receiving from your investments. You know, how are we going to plan for the taxes that you're expected to be paying over your 30 plus years of retirement? Because people, frankly, they're living longer. More and more people are living well into their nineties. And the folks over at Tech Point Wealth Management can help you get a plan in place so you don't have to worry about what's going on in the news anymore. You don't have to fear. There's a lot of people out there that are interested in protecting and growing their wealth. They want to have, you know, a very low downside. They don't want to be able to to lose the money that they've worked so hard to earn and also to save. So when we come back on the other side of the break, we're going to be talking about annuities. There's a lot of talk out there about annuities. Some people have some preconceived notions about annuities. There's a lot to know. We're going to be talking about it on the other side. You can book an appointment or just give Erick a call at (352) 616-0511. That's (352) 616-0511 or visit. 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. At Take Point Wealth Management. We know you've worked hard to earn your money and you've worked even harder to save it. When it comes to wealth management and planning for retirement trust, Erick Arnett and his team of experts who have been helping individuals, families and business owners find financial freedom for more than 20 years. Let us help you protect and grow what you've worked so hard for. Schedule your free no obligation consultation now at TakePointWealth.com.

Producer Sam Davis:
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. 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 project the performance of any specific investment and is not a solicitation or recommendation of any investment strategy.

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

Producer Sam Davis:
And we're back on Take Point on retirement. I'm Sam Davis, joined by Erick Arnett. You know, before the break, we were talking about how we've had a lot of people reach out. They're interested in growth, but they want growth with safety. We talk a lot about annuities, specifically fixed indexed annuities on the show, Eric, and there's a lot of people wanting to learn more. So what do you have for the listeners, the retirement warriors who tune in to our show every week? What information do you have to offer for them, these people who are interested in learning more about annuities?

Erick Arnett:
Yeah, absolutely. We have a ton of information. We're happy to share it with you because at the end of the day, it's all about education. If you reach out to me, it's not going to be a sales pitch, it's going to be an education. And I'm going to send you different things, materials that you can read and make your own decisions, but and kind of guide you through that process. And so one of the things that we offer completely free of charge, if you just get a hold of us by calling us (352) 616-0511, or just like I say, we go up to our website, TakePointWealth.com. You can click that button and upper right hand corner to set up a chat session with me. And we'll send you this book called Annuity 360. It's a fabulous book written by a friend and a good colleague of mine. And it's I love the book because it's just real simple, but yet concise and gives great information. It's just a great educational piece. So in order to learn, it doesn't have to be complicated, right? And so this is everything you need to know about annuities. So stop going on the Internet and Googling annuities and looking at all these opinions and ratings and reviews and all this stuff. It's just junk, right? It's noise. Do your own education, read for yourself, study it and then decide without other opinions and all these expert opinions out there whether this is appropriate for you going forward.

Erick Arnett:
Call us now. Get this book. Annuity 360. I also have white papers galore talking about the pros and cons of annuities and all the different annuities out there. There's a great one by Ibbotson. She's a Nobel Peace Prize winner or Nobel Prize winner. And it's a great tool. And it talks about how indexed annuities have outpaced bonds and they're much better investment than bonds. I mean, so you even you have a lot of big industry economics professionals even touting that these are great parts of your portfolio. So I want to stress that we think it's an important piece of your overall plan and your overall portfolio, and there's multiple types of annuities. So we have to find the right one that fits your plan and your needs. But we feel that there are great tool within the portfolio, within the plan, not putting all your money in an annuity and not putting all your money in stocks. You have to have a very well balanced plan, one that works for you and depending on the allocation of those different asset classes, is really what we're going to hone in on to make sure that we have the right allocation for you. So I tell people we talk about this all the time, the rule 100, you know, you probably shouldn't have more if you're 60 years old, you're probably shouldn't have more than 40%. If you take that 60 or your age and divide from or subtract from 100 and you get 40, you really shouldn't have more than 40% of your money.

Erick Arnett:
In what we call risky investments or growth type investments, you should have about 60% in safe investments. And so there's we're going to have multiple so our portfolios, our retirement plans has some annuities in them, some stocks in them, some structured notes in them, all kinds of different investments. And we're very broadly diversified with that's low standard deviation with a good strong expected rate of return. And that's that's the key. So, you know, there's so many different annuities out there. So, you know, I work I can think of this one couple I'm working with and they've listened to the radio show and they just don't really know a lot about annuities. So we first had a chat, then I made them take the book home and read the book and study the book. These people read the book six times. It's fantastic. They studied it, they highlighted things. They came back and we discussed them and I said, Go talk to your current advisor, go get another opinion. I don't care, but get as much information as you can and then you need to decide because it's your money if this is the best choice for you. But ultimately you want to have a multi disciplined, multi diversified portfolio. And I feel as though the indexed annuity is a big, big important piece of this. And so there's multiple indexed annuities out there, multiple companies that issue them. And so we have to find the right one for you and you've got to be careful because there's a lot of different ones and some are better than others.

Erick Arnett:
And so you have annuities that are set up to just have. Be a good, safe growth. Then you have annuities that are set up to provide guaranteed income and they're all different and you kind of really don't want to co-mingle the two. And so just that's just a little bit of information, but truly educate yourself, reach out, get this book. I think it's super important. I think it's a super important piece of your overall portfolio. And once again, stress your overall portfolio. You don't want to have some people say, hey, I want to put all my money in indexed annuities. Like, No, no, we can't do that. You know, so and I have some people just fearful because they go on the Internet and they see the word annuity. Oh, annuities are bad. Well, guess what? There's hundreds of types of annuities. So how do you know which one is right or wrong for you? You've got to study them. You've got to understand them. So reach out for this book. And I think I think you have a couple of chapters that you're going to play today of the audio piece for our folks listening today, which I think is great for them to tune in and kind of listen and get a little piece of what they can expect when they read the book.

Producer Sam Davis:
Yeah, we're going to play chapter one of Annuity 360 here in a moment to get your free copy of Annuity 360, just reach out to Eric. There's a couple of ways to do that. You can give them a call (352) 616-0511. Or you can just go online to take point on retirement or even just Google Take Point Wealth Management. You'll find the contact information there. Reach out to Eric, get your copy of Annuity 360, read it for yourself and then schedule that free consultation. So we're going to go ahead and play Chapter one of Annuity 360. Now that's going to give you a general overview of fixed indexed annuities.

Ford Stokes:
Chapter one Why you should consider investing some of your hard earned wealth into a fixed indexed annuity. Big idea to protect your hard earned wealth with annual point to point protection periods that lock in your gains each year. A fixed indexed annuity can help you do the following with your wealth. Number one, protect your money from market loss. Fixed indexed annuities offered by highly rated annuity carriers did not lose a dime in account value in 2000, eight or 2009. During the worldwide recession caused by the mortgage loan crisis that resulted in the S&P 500 losing 50.1% of its value from March one, 2008, to March 31, 2009. Number two Grow your money with market like gains typical annual growth of 5 to 7%. Number three, generate a lifetime income. Your retirement will likely last 30 plus years. It might be a good idea to place some of your assets into a fixed indexed annuity, to set a safety net around a portion of the retirement income that you wish to generate. Number four, eliminate market risk associated with bonds by replacing the fixed income bonds in your portfolio with a fixed indexed annuity. Number five, eliminate the advisory fees you're currently paying to generate fixed income with bonds in your portfolio by replacing them with fixed index annuities. The annuity companies pay the advisor you don't. This is called a bond replacement. If the above fixed indexed annuity benefits sound appealing to you, then I invite you to listen to the rest of this book and ultimately invest a portion of your hard earned wealth into a fixed indexed annuity to build a successful retirement.

Ford Stokes:
For more important information on annuities beyond this book, I also invite you to visit our website Annuity360.net. Let's consider a $100,000 investment in the S&P 500 versus a 100,000 investment in a fixed index annuity with a 50% participation rate in the S&P 500 from 2000 to 2013. Here's a hint, folks. The annuity wins from January one, 2000 to December 31st, 2012. The S&P 500 experienced -2.943% growth over those 13 total years. People who retired prior to 2000 experienced zero growth, over 43% of their estimated 30 year retirement. Question. Do you want to live your life during retirement without any growth over 43% of your retirement years? I didn't think so. Conversely, if you had invested into a fixed indexed annuity with a 50% participation rate in the S&P 500 in January 2000, you would have seen a growth of 65.53%. That's a significant total account growth difference of 68.473%. Do I have your attention now? The account value growth chart below shows the $100,000 invested into an S&P 500 spider in January of 2000 versus 100,000 invested into a fixed index annuity with a 50% participation rate in the S&P 500 also in January of 2000. The fixed indexed annuity achieved a total growth of 90.038%, versus just 25.786% growth in the S&P Spider by December 31st, 2013. This chart shows the power of one year protection periods called annual point to point features. The gains from each year were locked in on each anniversary of the annuity policy effective date when the S&P had negative years.

Ford Stokes:
The S&P Spider 500 spy experienced losses in those same years. The fixed index annuity experienced zero losses. This proves that you don't need double or triple digit gains if you don't experience losses. In this author's opinion, every sound portfolio with a smart financial plan includes fixed indexed annuity investments with tactically managed portfolios in hopes to minimize market risk, reduce advisory fees and deliver a reasonable rate of return. The annuity can also deliver consistent income with or without the added feature of an income rider that also charges fees within the policy. I recommend avoiding income riders. I strongly recommend investing a portion of your hard earned wealth into a fee efficient, accumulation based, fixed indexed annuity with no more than 5% annual penalty free withdrawals to allow your money to grow and to generate important income during retirement. Refer to your audiobook companion PDF that comes free with the purchase of this audio book. See Chart 1.1 for annuity account growth examples. Green Line A $100,000 investment into a fixed indexed annuity showing the net growth of the annuity with a 50% participation rate with zero withdrawals from January one, 2000 to December 31st, 2013. The resulting account value is $190,038 by the end of December 31st, 2013. Redline 100,000 investment into the S&P 500 spider. Ticker symbol SPI. This investment carried 100% market risk with a 100% opportunity for market gains. On the performance of the Spy from January one, 2000 to December 31, 2013. The resulting balance of the account is $125,786. Your human capital versus your wealth capital.

Ford Stokes:
Human capital is an intangible asset or quality not listed on a company's balance sheet. You can think of this as an economic value of your work. Your human capital will decrease over the course of your career. Your peak amount of human capital is at the start of your earning years. Whether that be right out of college at 22 years old or at age 30 after completing your advanced degrees. This is the time where your productivity levels are high and you are contributing to your company's wealth. You have all of your earning years ahead of you. During this time, you have to protect your hard earned wealth capital. This is not something you can recoup. You can't go back and relive your prime earning years or the years where your human capital was the highest. There are many barriers to going back to work at retirement age. Unfortunately, age bias is a real issue, especially in certain industries. Those who might have been an engineer during their younger years might be forced to take a retail job to make some extra cash because companies in their field won't invest in older employees. Many employers focus on what you can't do when you're older. Instead of thinking about the experience and the expertize you could bring to a project. You will most likely have to rely on your wealth capital during retirement. The idea of losing capital as you go farther in your career sounds a little scary, but you can rest easy knowing that this new form of capital will kick in as your human capital dwindles.

Ford Stokes:
As you earn and invest throughout your career, your wealth, capital will grow exponentially. You'll need this wealth capital for your retirement. So it is important to choose investments that will protect and grow your wealth. Annuities, specifically fixed indexed annuities can offer you market like gains without the market risk. Your money never goes below zero. By investing in a fixed index annuity, you are taking money out of the Wall Street casino and we think that that's a good thing. Annuity guarantees like guaranteed lifetime income and the guaranteed growth of your principal are based on the claims paying ability of the issuing annuity company. It's a good idea to buy annuities from highly rated annuity carriers that are rated by Standard Poor's and am best. We consider a highly rated annuity carrier to be rated at least a triple B rating by S&P or with a B plus rating by and best. The impact of loss on your portfolio specifically, it can be devastating to your retirement. When we look at market volatility risks, the risk of loss and the potential impact on your retirement income is an important thing to understand. This chart shows the impact of losses on your retirement accounts. If we take a look at an example, let's say you have an account that is at risk. If you start with 100,000 and lose 20%, you lose 20,000 and you were left with 80,000. If you gain back the same 20%, are you back to even? As you can see in the graphic below. The answer is no.

Ford Stokes:
In order to get back to your original 100,000 investment, you would have to gain back 25%. If we add an additional 5% for RMDs, we would now have to gain back 33.3% to get back to even. Understanding this concept is one of the keys to a successful retirement income distribution plan because you no longer have time on your side. The last thing we want to do is run out of money when we are 90 or 100 years old. How much do you have to gain to make up for a market loss? See Chart 1.2. After reviewing the above chart, I am reminded of Warren Buffett's two rules of investing. Number one, never lose money. Number two, never forget. Rule number one we invest in a fixed index annuity with a highly rated annuity carrier that has a high financial solvency ratio. Then it is likely that you will be able to follow Warren Buffett's two rules of investing. Exactly. You will likely not lose any money with the amount you invest in a fixed indexed annuity offered by a highly rated annuity carrier with a high solvency ratio. A good financial solvency ratio is any solvency ratio over 104%. The solvency ratio expresses financial soundness and a company's ability to meet policy obligations as they come due. Assets divided by each $100 in liabilities result in a financial solvency ratio expressed in a dollar figure. Assets are bond stocks, cash and short term investments. Liabilities exclude separate accounts. The higher the amount, the stronger the company's position to cover unforeseen emergency cash requirements.

Producer Sam Davis:
So that was chapter one of Annuity 360. And again, you can reach out to Erick and get your free copy of that. Just go to take point on retirement or give him a call. (352) 616-0511. So Eric, give us your thoughts on fixed indexed annuities. What makes them different than other types of annuities that we that we see often in the marketplace? And how are we implementing fixed indexed annuities into people's portfolios?

Erick Arnett:
Yeah, sure. I mean, the reason that I think they're a great tool to use, particularly for pre-retirees, people close to retirement and those in retirement is number one is it has a protection of principle. So your principle is 100% protected. So when we look for safe investments that are going to potentially yield us some type of return, but that we don't have to take risk in order to achieve that, I think that that's pretty strong. And so as an example, you know, we feel as though everybody should have some portion in an index annuity and drilling into that percentage for each client is is is a process. But having some index annuities where you have the potential to make market upside gains. So if the markets are good and we can tie your index annuity performance to multiple markets. And so if markets go up, you make money. And if markets go down, you don't lose any money. And we look for indexed annuities that have zero fees. And so you've got to be you have to be careful. You've got to be careful about indexed annuities that are offering bonuses and these things. You know, if we just want safe accumulation, which is what bonds were supposed to do for us back in the day, but they don't do that for us anymore.

Erick Arnett:
As an example, if you hold bonds in your portfolio, that bond portion is down about 12%, a -12% year over year. So you've lost 12% of your capital or principal in those bonds, and they might not even be paying that decent of a rate. So we're utilizing them to, number one, help us hedge against the market, but also create bond like returns over time and replace those bonds in our portfolios. Because with interest rates being so low and the pressure for interest rates to rise, bond values will have a very difficult time going forward. We were telling people this a year ago, get out of bonds. Get out of bonds. Get out of bonds. Sure enough, they're down close to 6% last year and they're already down 6% this year. So you can lose money in bonds. And so that old conventional wisdom that bonds are a great hedge against stocks, not under this current environment and not going forward over the next 5 to 10 years. So we've got to be careful. So we love them to offer some safety in the portfolio, lower that overall risk of the portfolio, but still be able to achieve good solid returns if the markets produce. And so it's so important to have that broadly diversified portfolio and that's why we think that one particular tool can help us out.

Erick Arnett:
And, you know, no fees. And if the markets go up, you do well. And once your interest credits and your your dividend or your interest credits, now you're locked in at that new high watermark and you can't go backwards from there. So let's say you purchase the index annuity and you made 5%. It locks in that 5% and you can't go backwards from there. Now you're locked in at that principle and can't lose that principle. So I just think that they're a great, great tool. The only trade off is you have to be patient and you have to invest in them long term, 5 to 10 years. And it's it's not an investment that you're going to be able to get in and out of, and you shouldn't be getting in and out of investments anyways. If if you're truly serious about building a solid gold based retirement plan to get you to and through retirement, you've got to look at this thing at like ten, 20, 30 year period. So one of the negatives that people always talk about as well, you know, these these annuities have these tie up periods or contract periods where it might be five, seven, ten years where you're locked into this one particular product.

Erick Arnett:
And I get that. But you shouldn't be investing in something if you're looking to get out of it in a year or two anyways, whether no matter what the investment is. And so super, super important piece. And and then there's index annuities that will also offer what we call guaranteed income. So as your portfolio grows, your income grows. And at some point in time, if you want to lock in a guaranteed pension, you can. But you've got to be careful of those, too, and make sure that that's really what you want. Because I see a lot of people have those type of annuities and they never even wanted guaranteed income. And so somebody sold them a product that had this high fee, this bonus up front, and it was going to create guaranteed income in the future and it wasn't even appropriate for them. So you've got to be very, very careful. We like to use index annuities to provide for income, but we also like them for just safe accumulation. And so that's why we love them here at Point Wealth Management. And once again, we're not just selling annuities, please hear that. But it is a I think it's a great tool for a portion of your overall plan.

Producer Sam Davis:
And there may be people listening, Eric, who have purchased annuities in the past and and maybe they're unsatisfied with how they're performing or maybe they're just unsure at this point if it's the right investment option for them. And you can take a look at those, give them an annuity x ray, so to speak. And and what's that process like if folks have an annuity currently and want to see if that's still the best option for them?

Erick Arnett:
Yeah, we do what we call it annuity stress test. I'm glad you brought that up. So just get us the actual annuity contract or a copy of the statement and we'll run a stress test on it and we'll extract all the data. And more than likely you're unhappy with it because it hasn't been performing. So it probably has a lot of high fees hidden that you don't know about or it has high cap rates and high internal spreads. And there's a lot of different ways that these insurance companies can charge fees and expenses. And so you've got to be careful and truly understand how those work. And so we screen and look for the very best performing indexes with the with zero fees or the lowest fees possible and the ones that have the best potential performance. And so, for instance, there's index annuities right now that you can purchase the Nasdaq inside of inside of the indexed annuity. So the Nasdaq is down almost 20%. It's a great time to do this and get in and have safe growth. If the Nasdaq goes up, you win, the Nasdaq goes down, you're fine. Your principal is still protected. It's better than having to just sit on the sidelines at the bank and where inflation is eating it alive. You know, and I had this one gal tell me she's 60 years old and she's like, well, I don't is this I don't know if I should be doing this at my age. It's probably too late to be doing this. I'm like, Are you kidding me? You're 60 years old. Now's a great time to be doing it. You know, I have people in their seventies and eighties that allocate money to these, and so it's never too late.

Erick Arnett:
And we've got to work through and make sure you have enough liquidity to meet your short term needs. But if you're truly ready to invest and build a plan, then you've got to commit to it and committing to that plan through good times and bad times because we've already stress tested. So as an example, if I if I have a portfolio in front of me right now, I take point wealth management portfolio and a retirement plan. And we have some in indexed annuities, some in the stock market, broadly diversified against markets, gold, real estate. You know, if the stock market goes down like it has 10%, our portfolios are maybe down two or 3% because we've we've prepared for that risk. And so if you can't stomach a two, three, four, 5% return, then that's a whole different discussion. But, you know, you're going to have periods where markets just don't go straight up and we just all make money all the time. You got to be prepared for those contractions as well. And it's about building wealth, growing wealth, having a successful retirement. It's not about the up years. It's about protecting that money in the down years because the down years of the years that really hurt you. And so if you all of a sudden find yourself dug in this deep hole because you weren't properly allocated, you had too much risk in your portfolio, then yeah, it's going to be a lot tougher to dig out of that hole. If you're down 10%, you've got to make 20 just to get back, right? So it's when you're in retirement or getting ready to retire, it's about protecting that downside risk. And this is a great tool to be able to do that.

Producer Sam Davis:
Yeah. If you want to make sure that your money that you've worked so hard to earn and save is protected. If you want to make sure that you have the best plan in place possible, just remember you haven't made a decision until you've taken action. So take action today. Give Erick a call. (352) 616-0511. That's (352) 616-0511 or just go to take point on retirement and the folks that take point wealth management are there to help you. Eric, it's been a great show and we'll see you next week.

Erick Arnett:
Hey, thanks, Sam. And I just wanted to close with one thing today. It's time to act. And it's time to act now and stop listening to the non-experts. Give us a call at take point wealth management. We are the experts and will guide you through it and to and through a great, successful retirement.

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 (352) 616-0511. That's (352) 616-0511. Investment Advisory Services offered through Brookstone Capital Management LLC, BCM, a registered investment advisor and take point wealth management are independent of each other. Insurance products and services are not offered through BCM, 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. At Take Point Wealth Management. We know you've worked hard to earn your money and you've worked even harder to save it. When it comes to wealth management and planning for retirement trust, Erick Arnett and his team of experts who have been helping individuals, families and business owners find financial freedom for more than 20 years. Let us help you protect and grow what you've worked so hard for. Schedule your free no obligation consultation now at TakePointWealth.com.

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