Episode Transcript
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(00:01):
In your corner, saving one investorat a time, working for clients,
not companies, all while bullyproofing portfolios, totally committed to sharing academic truths about
missing always representing Main Street and notWall Street. Team, It's your Son
Money team, and this is theSound Money Investment Show with Drawn Financial Advisors.
(00:26):
Hello and welcome to the Sound ManyInvestment Show with Brown Financial Advisors.
I'm Greg Brown and I'm James Boort, and we are a registered investment advisor
firm. We are independent. Wedo our for clients, not companies.
Our fun number five one three,five seven, five nine sixty five four.
Visit our website Brownfinancial Advisors dot com, email share your thoughts to team
(00:46):
at Brownfinancial Advisors dot Com and ourhome offices in Milford, but we also
have locations in Blue Ash, Westchesterand Florence. Greg. Today, let's
discuss risk reward in safer ways toget more from your retirement assets. Despite
the solid link that's between risk andreward, safe or safer ways to improve
your retirement income also do exist.So let's repeat that we all know that
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there is some kind of unbreakable relationshipbetween risk and reward. If you're on
the right curve here that increasing therisk will also increase a net reward for
the risk taking over time. Soif you're an appropriate mix of assets and
investments, that should be true foryou as well. Now safe or safer
ways, because what is truly safe? I mean even a dollar left in
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account a year later won't be exposedto market risk. That's true, may
not go down to become less thana dollar, but you could find yourself
in a safe way to lose moneyif you know that inflation would rob or
take away some of the purchase powerof that same dollar. So does it
actually still be a dollar? Maybenot right, but that's considered safe and
treasury safe and you know the USgovernments considered a non default haven. And
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to whatever extent that you believe thatdeficit spending is okay? Yeah? Is
there a balance to debt? Wetalk about safety and appropriate amount of debt
relative to asset appreciator timement without appreciationdebts just debt. Now, are there
safer ways to improve your retirement income? And with that your retirement investments absolutely
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now to be safer. That impliesthat something is protecting against the risk aspects,
and that would be in this caseinsurance, so they're fully insured ways
to ensure the safety of your accountand to get certain promises. That's what
insurance companies do. So when peopletalk about safe or safer investments, it's
kind of like code work, codeword and kind of wink in a NodD
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towards fully insured investments. Just FYI. So in the big picture of today's
show, this very definite and unbreakableconnection between risk and reward, we'll look
at choosing financial instruments that help youprovide in provision towards you kind of a
greater potential returns relative to risk.Inevitably, the increased degree that your money
is exposed to risk, the increaseexposure has to loss correct and with that
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risk though, you'd better be lookingat the trade off, and that trade
off needs to be an improvement ofreturns. It makes it worth the journey
of risk in handling the ups anddowns the volatility of those movements. Now
another hand, if you choose safetyand growth over safety and risk, what
that sounds combobulated. It is,if you want some protection, you could
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say that's safety. If you wantmore protection with some growth, and you're
choosing the safety over growth itself,then we need to look at some fully
insured investments. It just is whatit is. It's not a bad word.
Annuities aren't a bad word. Thereare less good annuities bad annuities.
There are high commission products that lowerthe features and benefits to you, the
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consumer investor out there. So weneed to have the source of advice checked
in. Our source being your sourceof advice is out of a financial finiiary
where we put your interest first.So when we scope out the entire market
of product, services, solutions,and we're looking at safe only insured solutions,
you can rest assured that you're notjust dealing with an insurance agent being
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steered by commission and payment. Wecan't do that. So we'll be surfing
looking for the right product that hasthe feature and benefit matches your actual need
and those benefits from insurance companies thathave more benefit less commission because it cannot
be commission driven in our business model. That's just the way it works.
It sounds pretty good, doesn't it, And it's meant to be good.
Be good for you, and ifit's good for you, it's good for
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us because we're in this to winthis together. So when you look at
safety and protection over growth. Youkind of expect going in that you might
have a little lower rate of return. Well maybe that's true, maybe it's
not right. Some people say,well, those safe money products out there,
how good are they at fighting inflation? I could turn the tables on
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you and say how well does losingmoney work against inflation? So anyway,
many retires retirees rather if you're outthere listening, don't get too frustrated,
because the search for the perfect investmentends with empty hands. If you get
down to the basics of defining whatyou need for the purpose of your money,
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well, ah, you can findsomething pretty darn near perfect. What
do I mean by that? Well, in any investment, you can pretty
much get about three things. Butyou can't get all three things. You
can get two out of the three. You have things like liquidity, you
have growth, and you have safety. So which two do you want?
If you want growth, you giveup some safety and you pick up liquidity.
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If you want some safety, youmight lose some liquidity. If you
think about like CDs and fixed annuities, they have terms and they're surrendered for
early you know, surrender of thosetypes of products, you have to hold
them to term, So there's alittle bit less liquidity. What do you
get in exchange? Safety? Safety, fully insured, guaranteed against loss or
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risk of market risk? Investments rightzero is your hero and bad markets you
can get some of the upside ofthe market and on the downside that gives
you some safety, a little lessliquidity, and what else, probably a
little lower return. So you kindof get the picture those three key ingredients
of the perfect investment, which wouldbe what if it could be safe,
growth, and liquid all in one, Well, then you found the perfect
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investment. That's why through planning webalance it out. We have different investments
queued up and teed up for differentpurposes, different intervals, different objectives and
expected outcomes. And it the blendingof that landscape brings about an orchestration pit
of some beautiful music being made.And that's importance of a plan. The
right product's right purpose and these beingselected by financial fdiary, not a broker,
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not an insurance agent, not abanker, and not you trying to
do it yourself surfing the internet.We can really bring this together and make
it happen, make it happen quitewell. So anytime you hear people getting
taken advantage of and become the targetsof fraud and financial abuse. And it's
typically because they wanted to believe thatthere's something magical and some magic bullet and
way to get high returns and norisk. And unfortunately such excellence does not
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exist in the world of investing.And the more a person searches for false
protection and refuses to recognize unyielding relationshipbetween risk and reward, the harder it
will be to achieve true retirement security. So let's get to the thought provoking
questions that tie into today's show.So starting maybe with some self analysis,
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you know, think about yourself.How do you consider yourself as an investor?
Are you aggressive? Are you conservative? Are you somewhere in between,
like a balanced or moderate investor?And does your current investment portfolio reflect your
risk tolerance? Are you aligned?Are your investments aligned with how you feel
like you should be invested? Now, I get it. Some people say,
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well, when the market's doing well, I want to be aggressively invested,
and when the market's not doing sowell, when it's maybe having a
pullback, I want to be conservativelyinvested. Sounds a lot like market timing,
doesn't it. Have you had yourretirement portfolio stress tested to see how
market losses, maybe just a pullback, maybe a full on bear market,
how that might impact your future retirementsecurity. Hey, James, we'll do
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just that. Folks will come in, We'll lay out the plan and will
stress test it so you can avoidbeing stress tests yourself. Excellent point for
those that are already retired. Areyou still investing today the same way with
your risk allocation as when you werestill working? Is that appropriate for some
people? It is? For manypeople, it's not. At what rate
will your retirement savings need to grow? Your investments? Your savings need to
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grow so that you don't run outof money prior to what running out of
life? Do you really understand yourcurrent investments? What do you own?
Why do you own it? Whatis your investment time frame? What's your
time horizon? What that means iswhen are you transitioning from needing growth from
your investment from your portfolio to needingincome from that portfolio? Sometimes that changes
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dramatically. How you should be investedwith at least some of your money.
How would your retirement lifestyle be impactedif you were able to significantly reduce the
amount of taxes and also the expensesthat you're currently paying. You know,
it kind of goes like this,lower expenses with the same outcome of the
portfolio equals higher returns to you.Are your investments properly diversified. That means
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not just simply what you own insideyour portfolio diversification, but amongst different asset
classes and the tax status of theaccounts. Tax status means between traditional I
rays which also includes the set andthe simple I rays versus roth I rays.
And then for those who think aboutinvestment accounts, it's just well,
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I just have a brokerage account.Well, if you're in the phase of
life where you're retired, well yourinvestment account, your brokerage account is a
retirement account. It just simply isn'ttied up inside of an IRA. Did
you carefully read the perspectus? Iknow this is a rhetorical question because most
people don't read this. Did youread the perspectives for those mutual funds,
for those variable annuities and other securitiesbefore you invested? And would it be
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wise to get a second opinion regardingyour investments and your retirement plans? Again,
assuming that you have a plan Gregany thoughts. Yeah, you're inspiring
me to just have entire show formatsto where we talk about safe money solutions,
maybe jump into some market based solutions, break down the elements of financial
planning. Occasionally you mentioned variable annuities. We ought to turn those boogers inside
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out and show people what's really insidethose It's like boom, it'll get you.
It will get you when you leastexpect or need it, and that's
when you transition to retirement. You'vetrusted some instrument to take you into retirement,
only to find out then and onlythen what it is and what it
isn't and it's a little too late. So yeah, I do have some
thoughts. It makes me want todive in a little deeper to some of
these mechanics of the solutions themselves andnot as much narrative about them. But
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anyway we will. We're going topick up with this subject risk rewards,
safer ways to get more from yourretirement assets. When we return our fund
number five one, three, five, seven, five, nine, six
five four calls we can help,but stay tune listening to the Sound Money
Investment Show with Brown Financial Advisors hereon fifty five carrec DETAK Station. Opinions
expressed are solely those of Brown FinancialAdvisors and should not be interpreted as specific
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advice. Materials presented are believed tobe from reliable sources and no representations can
be made as to its accuracy.All ideas and information should be discussed in
detail with one of our qualified investmentadvisors prior to implementation. Market based investments
involve risk, and past performance isno guarantee of future results. Insurance based
investments offer guarantees based upon the claimspaying ability of the issuing company. All
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insurance, tax and mortgage services areoffered through Brown Insurance and Tax Advisors LLC.
Brown Financial Advisors and Brown Insurance andTax Advisors are affiliated companies and may
only transact business in those states inwhich registered or were otherwise legally permitted.
Welcome back to the Sound Many InvestmentShow with Brown Financial Advisors. I'm Greg
Brown and I'm James Boorton. Weare an independent oria that's a registered investment
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advisory firm. We do work forclients, not companies. That's main Street
and not Wall streets. Our funnumber five one, three, five,
seven, five nine, sixty fiveto four website Brownfinancial Advisors dot Com,
email team at Brownfinancial Advisors dot Com, and our home offices in Milford,
but we also have locations in BlueAsh, Westchester and Florence. Greg Well
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as mentioned looking at this risk rewardrelationship and safer ways to get more from
retirement assets too, and that wouldimply balanced investing. So we're going to
provide some techniques for the balancing ofthat risk and rewards in investing. I'm
going to tell you about at leastfour risk free ways of getting more from
your retirement assets. Now, whenit comes to the way you've invested your
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retirement savings, is the amount ofrisk you are taking and have taken appropriate
for your circumstances, Is it appropriatefor your tolerance, Is it in line
with your expectations both emotionally experientially andhow comes outcomes in terms of returns necessary
to succeed on purpose. Lots oflittle things hidden behind these doors, and
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they can all be dragged out,smoked out, and laid right in front
of you clearly, and it canbe done in an organized way that you
can embrace your retirement with a greatdeal of confidence and comfort even when markets
get a little goofy you can stillfeel secure, particularly the more balanced you
are. And does that I meanmake sense? Right? If you ask
a person how secure they feel whilethey're standing on a balance beam, well,
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the degree to which they're balanced wouldalso equate to their comfort level of
staying. So same with all ofthis, so thinking of an appropriate level
of risk of potential investment losses.It's kind of like the Goldilocks and the
Three Bears fairy tale. See thatthe bears when they were not at home,
Goldilocks not only invited herself in,but she also took the liberty to
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sample all three bowls of porridge.Of course we know one was too hot,
one was too cold, but thethird what it was just right.
Your portfolio is like one of thesethree bowls. Some people out there you
just know, Like when markets arevolatile. I don't know when this show
will airs, specifically the first,second, third winever if it's in rotation,
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but the markets are up, downor sideways right when they're down,
then you find if your porridge isa little too hot, okay, you've
got so much risk and that itseems like ill timed. The market could
crash or it's pulling back or it'scorrecting, and it could destroy and wipe
out your entire retirement security, orat least your emotional security before even it
would destroy your actual monetary security.And by then, what kind of reactions
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will you be? Taken? Overreactions, gross over reactions, mental, physical
breakdown, but no changes in yourportfolio itself? Sound familiar anyway? How
about another bowl of porridge here?This one's too cold. You may have
gone so far of an extreme ofsafety that the returns earned in your savings
have no chance of keeping up withinflation, let alone buying you actual soup
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to consume too well, when youhave a properly balanced, say, level
of risk and assortment and collection ofinvestments that are appropriate for you and the
potential reward of growth, the growthinvolved that's needed to secure your lifetime and
tirement income, then let's say thatyour portfolio has just become just right and
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that's what we want, and wecan do that again on purpose. So
in this uncompromising link between risk andreward degree, the actual degree which you
can reasonably expect to be rewarded byany financial investment or instrument, it's linked
directly to the degree of volatility andrisk of the investment lost associated with that
instrument. Hey sound familiar, morerisk, more return. Ideally there should
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be that linkage stock and stock markettype investments. Well, they offer the
potential at least over time, sayyou need ten year period, you often
find a greater average rate of returnin reward in the form of the possible
higher returns because on a compared towhat basis well, compared to something like
a bond, you're going to findequities or stocks that can perform better as
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a proper collection of growth oriented instruments, but with what more risk, more
volatility than the bonds. Exception,last year twenty twenty two was a tough
year for bonds, third worst inhistory than net aggregate bond loss. What
was it, James negative eleven tothirteen, somewhere in there at least ten.
But also equities was probably around negativefifteen. Yes, so you see
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how close that something deemed safer becameless so in that specific period. So
there are going to be exceptions alongthe journey. That's why when you look
at safer investment asset classes, youmay go as far as fully insured so
you can guarantee have a guarantee ofan insurance company based on the claims paying
ability of the company, which isstrong for US insurance carriers. That you
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will be indeed protected against downside lossof principle guaranteed not to lose money or
go backwards. So it's a matterof how much you get to the upside,
not the downside. So you've heardus in past shows talk about using
annuities, positioning them as fixed andfixed index annuities, that is, the
fixed products that don't go backwards asbond alternatives, and in such an environments
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last year and sometimes when anytime theinterest rates are going up, the market
value bonds go down and perform negativelyin your portfolio, we have a solution
that will not go negative, butit can still give average bond rates of
return over time of a reasonable rangeof return. We've seen between four and
six percent, and for the saferside of your money to become safe and
fully insured and pull that off withoutany negative territory as a pretty decent bond
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alternative, just the thought. Comesee us on that. Anyway, the
instrument's offering protection against investment loss willgenerally less risk, lower reward in terms
of yield or interest or earnings thatis typically true, but a positive yield
versus losing money can look pretty darnpositive in contrast in such times. So
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it's all a matter of perspective really, and your actual need. So,
I mean, an example, theirbaseball season is is wrapping up in essence,
you know, if you need adouble or a single, but you're
up at the plate swinging away becauseyou're just greedy to park it and get
it over the fence, and youwhiff out and you strike out. Your
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team was counting on you. Justkind of come on, Greg, just
give us a single, double,it's all we need. Oh no,
man, Look look James, he'sswinging away and getting Oh man, we're
gonna lose again. He got greedy, don't get greedy. Emotions and investing
don't mix well. But there arefew people out there, let's say,
who would seriously argue that certainty andthe logic behind this unbreakable link between risk
and reward. It's interesting to considerhow often you hear stories about people getting
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duped by scam artists. Why,because you're looking for something that doesn't really
exist you want. It doesn't matterhow bad you want. Something sometimes is
just not there to get. Buta slew of famous actors and actresses and
movie directors, bank executives, evenfinancial economic leaders in other countries. I
think it was in Canada, evenJames back in the day of Bernie Madoff,
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when we heard about the numbers ofpeople from all walks of life and
knowledge base and skill levels and expertiseand I know better than this, but
did in any way type people gotfooled by the Ponzi schemes of the day,
including mister Madoff himself. Every crookand Ponzi scheme operator in history knows
the simple answer that these people wantedto believe and understanding and always remembering that
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there is an inseparable connection between riskand rewards should be the first lesson to
avoid financial catastrophes and being misled sogrossly. It was like another example of
the six degrees of Kevin Bacon rightyep, not just in movie roles but
also in investing. Kevin Bacon,Yes, he and the misses got duped
seemingly like everyone else associated with Bernie. Like you said, they wanted to
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believe it was too good to betrue. They should have known better,
but somehow they didn't. Right anyways, So what is your investment objective.
And this is like saying each differentof your investments could have different job titles,
job descriptions. So for most peoplethink about this, the objective is
to accumulate when you're in the accumulationphase, enough money to meet future income
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needs. So at what point inyour life are you transitioning from accumulation to
your distribution phase so that your growthbecomes now the need for income and you
can make it be I'd say maybelook at two different ways that you can
try to increase retirement income. Oneapproach is to achieve higher growth rates or
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returns on your savings and your investments. Even a one or two percent increase
in returns each year can here's thekey over time make a big difference in
the amount that you have for incomethat your portfolio can provide. Now,
unfortunately, as we know Greg discussed, you get a boost in return,
but you must also select financial instauminvestments with a greater risk of what investment
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loss. So here's a second way. A second approach of increasing future income
is to take advantage of opportunities bemore efficient with your investment and retirement assets.
Efficiency means get away from things likeyour variable annuities, which try to
do two very different things at thesame time and to do neither one very
well. So what's great about thisapproach is that it does not need to
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or has not required to take onmore risk. And we'll give you some
examples of that after the commercial break. But keep in mind that when you
look at the different job descriptions orjob titles growth, safety, income,
sometimes one has a much more orimportant pressing need than the other one,
depending upon the phase of life.That's you're in our fund number five one
(21:49):
three, five, seventy five nineto sixty five four calls we can help,
but stay tuned listening to the SoundMoney Investment Show with Brown Financial Advisors.
Here in fifty five KRC detaxation,Welcome back to the Sound Many Investment
Show with Brown Financial Advisors. I'mGreat Brown and I'm James moore Than.
(22:11):
We are a registered investment advisory firm. We are independent. We do work
for clients, not companies, andit does all start with the plan.
That means actually having a plan,knowing what you own and why you own
it. So whether you're seeking adviceon an old four one K four three
b irate rollover, investment planning,retirement planning, income planning, tax planning,
(22:33):
social social security maximization are Roth conversionanalysis, INUA analysis and for some
perhaps even in service rollover. Allthese and more we can help five one,
three, five, seven, five, nine, sixty five four.
Visit our website Brownfinancial Advisors dot com, email share your thoughts to team at
Brownfinancial Advisors dot com. And ourhome office is in Milford, but we
(22:55):
also have locations in Blue Ash,Westchester, and Florenshaw. When you come
and see us, we'll review everythingthat you currently have aligned with your objectives.
We will find the gap. Wewill help software that gap. We'll
provide a complementary comprehensive financial plan,income plan. We'll assess the portfolio and
look at the internal costs breads,fees, margins loads. We'll project that
(23:18):
out in such a way that we'llcome along with the recommendations. Will hold
nothing back. Litill investment, yourtime, our time and resources. Complimentary
still means free. If you finda fit you see that you'd like to
work together, you'll know exactly anycosts involved, and those costs are consumer
friendly, and we will make surethat you get up and going just right
it's kind of like a triage.We're going to assess and then we're going
(23:41):
to diagnose, and then we're goingto treat, and then as we treat,
we get you up going and stable, then come back around and start
solving for other things. Maybe youmight call it getting into the wellness aspects.
We'll look at ways improve tax efficiency, legacy, proper transfer. When
you're done with your money as livingbenefits, what's next. Make sure all
those legal documents are up to date. We'll check beneficiaries. We'll look at
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long term care if you're concerned aboutthat. People are concerned about long term
care and running out of money beforerunning out of life. It kind of
goes hand in hand. So we'llassess those. But you'll know what mix
of investments right to accomplish that plana balance of investments. Want to stress
that because when you look at safeways to have more, number one commitment
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is going to be to a longerterm success. You might even call if
the right products that align with yourlong term and what is your long term?
By the way, wouldn't you agreeit's the rest of your forever at
least? How long is that?Well? Hoping is pretty long how about
you. So there is this linkthat we kind of beat the dead horse
with the risk of reward. There'slinkage there. Give you an example,
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generally speaking, almost almost always true, thirty year government bond provides greater yield
than a ten year government bond.Right, more time, more money,
someone gets to use your money.In this case, Uncle Sam wants to
pay you a little bit more forit. Well, it's true, us,
it's not. And when is itnot? Well, low flat interest
rates or even current high tier levelperceived uncertain. It's to what duration these
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rates will be this high. Whenyou add that together, you kind of
get this following result, and it'scalled an inverted yield curve or one that's
flat, and it's not incremental instairstep. Now think about this quite logically.
Five years, ten years, fifteen, twenty thirty. You can imagine
you're going upstairs to greater heights.The heights represent amounts of time. The
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lower steps would be a lower interestrate. In a healthy environment, you'll
see the longer term pay a littlehigher rate, the even longer term even
a little higher rate. That's ahealthy looking curve and kind of an upward
curve. Well, when you don'tget paid more for obligating your money longer
term, then you lean to shorterterm. I mean, why take the
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exposure of time if you can getpaid sufficiently short term versus dragging out longer
term. So give me an exampletwo of some rates that we have currently.
We're aware of three year and fiveyear fixed annuities. We call them
CD type annuities. But here's why, because in your mind, you know
how CD works, don't you.It's interest and time three years at a
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certain interest rate, guaranteed fixed.You know the result, you can calculate
what you're going to get the momentyou hear the rate, and you know
the amount of time. Well,these works similarly, but we lean towards
the use of the insurance based fixedannuities that work like CDs because they're more
tax favored in a way, soyou can get tax deferral. You know,
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in a CD, you get paidinterest in the year that you earn
the interest, and that ten ninetynine it comes out costs you to pay
the tax on that you have todisclose it. Settle up with Uncle Sam
and the annuity family. Not onlycan you get competitive rates, oftentimes more
competitive than the bank rates on theirCDs, but you can get that interest
deferred and control the tax side ofthe equation. So as the taxes.
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We call it triple compounding. Ifyou think about it, you have interest
on principal, interest on interest intheoretically the interest on the money it's still
there that didn't come out for taxes, So there's three layers. Can't do
that with the CD, and thedeferred growth can stay deferred until you decide
to take out some money. Whenyou do, it's a lipho situation.
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Mean last in first out, sothe last in was the interest credited,
it comes out first. So ifyou were to have a one hundred thousand
dollars CD and it was at asix percent rate return after the first year
one hundred six thousand, if youdidn't take it out, you wouldn't get
a ten ninety nine on a CDtype annuity, a fixed annuity, but
you would get Italiana nine on theCD from the bank and pay interest on
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the six thousand. Well, let'ssay you did take a withdrawal from this
fixed annuity that was tax deferred afterthe first year, and you took out
five thousand dollars grow six, sofive thousand would have come out of the
growth, it would be taxable.If you took out seven thousand, six
thousand was growth, one thousand wasout of your cost basis, six thousand
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be taxable, one thousand wouldn't.Why am I saying this, Well,
no one said you had to takea taxable hit. You could have just
kept it deferred. Again, youcan't do that with the CD. Now
give you some actual rates. Rightnow, we have three year and five
year five year fixed annuities that arepaying and they're called mygas. There's there's
a little acronym for you, multiyear guaranteed accounts or annuities and five point
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seventy five percent yield to maturity andthis tax deferred, so you get that
extra compounding. Very competitive rates.And we have some you know, longer
term instruments that say fixed index annuitiesmore of a fully insured investment in savings
account, if you will, ratherthan a CD acting like account. So
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put this categorically in your in yourmind's eye, fixed annuities, it's kind
of like a CD. Fixed indexedannuity is more of an investment account.
So give me an example of oneof those. Let's see with or without
bonus. I'm glad you asked.There are companies out there paying upwards of
twelve percent, even as high assixteen percent upfront bonus. Well, how
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do they grow? Okay, let'ssay I just got a sixteen percent bonus
on one hundred thousand day one,my accounts one hundred and sixteen thousand added
to my money working. Is mymoney getting compound and to firm grow with
my money? But how does itgrow? Again? Well, if fixed
index annuity, there's two things youneed to know. One is they don't
go backwards. They're insured against marketrisk of exposure. Therefore, there's no
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downside based on market. So howdo they grow? Link to the performance
of a third party index. Let'ssay the S and P five hundred.
For example. Let's say this particularannuity that has the bonus has a seven
point seventy five percent participation rate openew word, new word alerticipate. A
patient rate is just how much ofthe upside do you participate in? Not
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complicated at all? Right, sevenpoint seventy five percent your participation rates the
market the S and P five hundredgoes up in a year by ten percent.
Your participation rate or cap In thiscase, we'll call it a cap.
It's capped at seven point seventy five. You get seven point seventy five
percent, so you got one hundredthousand. Day one added sixteen percent,
so sixteen thousand, and you hada good year. The market was up
ten percent. You capped out aparticipation rate at seven point seventy five.
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You got that added your money.You're rolling. Let's say the next year
the market goes flat or negative,you don't go backwards. All the prior
gains in bonusing is locked in.The market went down at your account didn't.
And this is really cool. Ifyou owned a stock for fifty dollars
and the market went down fifty percentand you were down at twenty five dollars
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the next year, you'd have togo buy a significant amount right at like
one hundred percent to get the twentyfive back to be back at fifty.
Not in the fixed indexinuity it locksin, and so in other words,
you locked in your previous gains andyear two it measures the performance of that
market index the S and P fromwhere it was closing the prior year to
where it moves up. So ifit moves up at all you're back making
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money again. You're in the moneyagain. That stock example, you wouldn't
be back in the money again untilthe market brought back all of the prior
value of losses because marketing investments don'tlock in. It's like a surfer.
You're on top of the wave,at the bottom of wave, and at
the conclusion, when you hit thebeach, you look back and say,
I hope I had a pretty goodride. What's that called? I had
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a decent average radar return? Tellyou what Will Rogers once said, I'm
more concerned about the return of mymoney sometimes right than the return on my
money. Think about that one.So there are some safe money solutions.
Last thought here, James. Manypeople I hope listeners out to here read
this and that may have heard thatthe old sixty to forty portfolio sixty percent
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equity forty percent bonds are fixed income. Historically, it's average pretty well between
risk reward trade off. It's beena pretty stable performer portfolio blender mix over
long periods of time. That's nolonger true in recent years. That just
has just fallen apart as being afavored model. So what is a better
model? Well, hold the pressIf you take the forty percent that was
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bond oriented in that sixty to fortyhistoric blend portfolio and insert the forty percent
as a fixed index anuity or afixed annuity, well, guess what,
shazam, It performs very well statisticallyagainst all the other allocations of portfolios.
Sixty percent stock, forty percent annuityfixed annuity. Family, folks, not
(32:37):
variable annuities. Run you hear variableannuity, a broker starts talking variable annuity,
or a banker starts chasing it outin the lobby trying to give you
a toaster in a tote bag fora variable annuity, you better come see
us. Just a couple of closingthoughts. So, if you're looking at
the current three year and five yearfixed annuity rates, they should be around
five and three quarters percents. Thatmeans five point seventy five percent, which
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should be slightly higher than what thebanks will be offering. But again,
if you're looking for a term lessthan a year, stay with the bank.
If you're looking for anything more thana year, an insurance company again,
and tax deferral will provide a betterrate and overall impact on your tax
return. There's more. There's muchmore. Our fund number office five one
three, five seven, five ninesixty five to four. Call us we
(33:20):
can help, but stay tune.You're listening to the Sound Money Investment Show
with Brown Financial Advisors here on fiftyfive cars Detax station. Welcome back to
the Sound Money Investment Show with BrownFinancial Advisors. I am Great Brown and
I'm James more Than. We arean independent RIA that's a registered investment advisor
(33:43):
firm. We do refer clients,not companies. Our fund number five one
three, five seven, five ninesixty five to four. Website Brownfinancial Advisors
dot com, email team at BrownfinancialAdvisors dot com, and our home office
is in Milford, but we alsohave locations in Blue Ash, Westchester,
and Floridas. Greg And if youfolks out there are receiving a lot of
mailers for dinner, seminars and workshops, We've been there and done that.
(34:06):
We made a lot of observations overtime. Some people are enjoying being there,
date night, evening out, listeningto some stuff about money, enjoy
your significant other and then feel awkwardsitting next to perfect strangers while you chew
your food. I'll just tell youthis. If you're interested in this subject
matter. You want a compimary approachto have where you are fully assessed,
(34:27):
analyzed, a plan, put togetherall the recommendations laid out for you by
financial fuditionary. It has a legalobligation to put your interest first. You
come in and see us instead ofsweating it out at the local restaurant for
a steak that you can afford topay for yourself. We're we're still going
to have dinner with you, right, we can have dinner with you,
or you can have dinner on us. We just asked this, come see
(34:52):
us. We're really going to helpyou. You're going to get in detailed
the information you actually need, stillwithout any obligation. You get a state
dinner to go where you all wantto go to with just you all,
and you can enjoy an intimate dinnerand again not sit in a room of
forty other strangers where it's elbow toelbow and it's just you don't have to
do it that way. Will helpyou out and still make sure you get
(35:14):
your nutrition. We just asked thefirst appointment, it's all about you.
We're going to sit down and learnall the things we need to know about
you to then have you back andshare all the findings, all the analysis,
all the recommendations in planning, andthen you're free to do whatever you
choose to do. Again, that'swhat no obligation means. And just for
going through that process, you canrest assured you can have a nice evening
(35:36):
out. Whether it's a Jeff Ruby'sor Eddie Marlow's or a JAG's on the
north side of town, you canstill get the stake dinner and really get
the information that could be life changingas well. Hey, James, tell
us a little bit about safe waysto have more when it comes to maybe
taxes. Well, when it comesto taxes, this is going back into
the comparison of CDs versus annuities shortterm annuities, and there's also this surrender
(36:00):
charges. Each of those has aform of a surrendered charge. We usually
associate annuities with having a more severesurrender charge kind of goes like this.
If you have a surrendered charge ofsay five to eight percent, that's not
a good thing to have to incur. But again, the suitability of what
you're investing in is tied to thetime horizon. Now, let's compare with
(36:22):
the CDs. If you break thecontract with the CD, and let's just
say you only give up three monthsworth of interest out of twelve. What's
three divided by twelve sounds like twentyfive percent? Right, Well it is.
That's the whole point is it's howyou phrase something that makes something sound
better or worse. But no matterwhat, if you're looking to suitably invest
(36:44):
into a CD or or our preferencewould be annuities because of the tax advantages,
then make sure that you are goingto be able to tolerate the time
horizon of your investments. Now,when it comes to being tax wise,
about this once again, how canyou save money? Well, how about
be more efficient with your taxes.Here's an example of that with the annuity
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versus the CD. The interest fromthat particular contract stays off your tax return
and then guess what. There's alsosomething called a section ten thirty five exchange.
So real estate, for example,as an investment, has the possibility
of a section ten thirty one exchange. Well, annuity contracts with the same
concept of how do you kick thetax can down the road? Is something
(37:29):
called it section ten thirty five exchangewhere you defer the gains the realization of
the gains from the first contract tothe second contract and perhaps to the third
contract. It's a great way toagain stay tax efficient. What's the benefit
of that, Well, depending uponwhat stage of life you're in, especially
those who are in retirement. Itmay save the indirect taxation on things like
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your Social Security benefits, which alsomay impact what you pay for your Medicare
premiums. So, yes, ifyou're in a higher income bracket and you
pay more for your Medicare the sametype of insurance that someone else is paying
for and they pay one seventy amonth and you're paying three seventy a month,
doesn't sound fair, does it?Well? Guess what the tax?
The penalty is a form of tax, no matter what the government wants to
(38:13):
call it, a penalty in thiscase is a tax. You're paying more
taxes on your Medicare insurance. Sothe message of how to get more and
save more is to be more taxefficient. Greg any thoughts, Yeah,
that was I learned a lot,James. I've never heard that you have
to share that more often about howyou approach the actual surrender charge percentage cost.
As an example, on a CD, people just don't think of it
(38:36):
that way. I also like youranalogy where you're basically saying, hey,
if you're out there and you're likingCD rates, well you're gonna love fixed
annuity rates because they're highly competitive andhave this tax deferral mechanism. Another way
to look at it is if youhad a CD that you didn't have to
pay the taxes on the interest earnedin any specific year, but you could
(38:57):
keep deferring it, and then onceone CD term ended, you could just
just flop it right into the nextCD and still not recognize the gains and
they keep rolling growing, deferring compounding. Then that's what we're telling you we
can do with the fixed annuity productsbecause they have a principal amount of investment.
(39:19):
They have a guaranteed interest rate froman insurance company. Okay, real
assets backing it. You might putin your mind somewhere and for a certain
time, and then the interest earnedcompounds triple, and that triple compounding can
remain deferred, and then when oneterm is up of one account or contract,
you can roll it into another theten thirty five exchange James mentioned and
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keep everything deferred. That's rather amazing, just you know, three little gifts
in one package under your Christmas treethis year, and you can get it
all year long. Just give usa call on that. How about ways
to save more by reducing investment fees? Past six to seven years, we've
been reducing fees year over year.You know, it's been measurable, it's
(40:04):
been significant, and we'll continue todo that. As financial fudiciaries, any
efficiencies and cost savings we pick upwe pass on to you. We don't
increase our net margin or our bottomline. We increase yours. And that's
different than Wall Street and the brokeragesand the banks. They're increasing their net
operating margin. They find efficiencies,they keep it, they don't share it.
Way different world, but that's adifferent story. But it is part
(40:28):
of reducing costs, increasing savings bya decrease of investment fees. So let's
say on a certain day you stopworking. You have a million dollars in
a retirement account. You're moving alongyou side that. As long as you
can make thirty thousand a year fromthat account, about three percent per year
that can be your withdrawal rate.Three percent of millions, thirty thousand that
you'll be fine. Now stop andconsider if you're paying investment fees of two
(40:52):
percent. If you're using mutual fundsthrough a brokerage firm, you might be
surprised. The funds owned funds ownedfunds. You're only aware of a certain
fee or cost within that expense ratio, but it can be compounded, multiplied
because the funds of fund nature ofthose owning in duplicity, different positions,
and then plus the fee itself,the fee from the platform, the advisor,
(41:14):
it's your total cost of ownership youneed to keep your eye on.
We talk in terms of total costof ownership because that's what's real. But
anyway, let's say two percent fees, that's twenty thousand a year, So
that's a fifty thousand total withdrawal rate. That's a five percent withdrawal rate.
That's above the target morning Stars saidyou should target two point eight percent withdrawal
(41:34):
rate if you want to sustain yourinvestments over time. We're still comfortable with
the old four that's because we pickup more efficiency, so we're fine with
that for planning purposes. But investmentfees, let's look at together your total
cost of investing, not just yourfee, not just the internal cost,
all cost. You might just besurprised. Well, another way to save
more, a safeway maybe to savemore or have more, is to maximize
(41:58):
your social security. May not bewhere everyone can do the absolute maximum of
their benefits, but there's ways toget more out of this particular program kind
of works like this, if overyour lifetime you can you can basically maximize
your benefits, which increases your lifetimebenefits by say fifty thousand dollars. Well,
guess what, that's fifty thousand dollarsthat you don't have to spend out
(42:20):
of your portfolio to make ends meetto meet your income needs. When it
comes to retirement, so whether itbe from you're still working, you're not
yet to the full retirement age,so there's subject to taxation and takebacks of
your benefits depending upon what age you'returning on your benefits. That there's also
different components of the program that manypeople kind of overlook, as far as
(42:42):
your own individual retirement benefit, theespousal benefit, family that means child benefits,
potentially parent dependent parent benefits, survivorbenefits. There's so much to this
program that can be complicated, butit really doesn't have to be that complicated.
If you come see us or seesomeone who knows what they're talking about.
So the call to action here verysimply is call come see us for
(43:06):
a social Security maximization report. Greg. When I think about the savings that
we're discussing so far, they're quitesubstantive, they're very measurable. You should
know these things. We want youto at least come in and let us
assess this and give you a pictureof total cost of your current investing,
the likelihood of your success with holdingthese instruments, how it will work throughout
(43:27):
different iterations of volatility over time,and if you're comfortable with that relative to
your actual risk tolerance, and we'lltake a look at how can we reduce
cost When we talk about balanced investing, James, we know that fully insured
instruments that are used as some ofthe solutions come with no fee. So
let's say if someone back on thatexample has a million dollars invested and half
(43:47):
of it is in the market,and maybe there's a fee of one point
two percent annual total cost, buthalf of their money is in a fully
insured investment, their total cost ishalf of that one point too. Well,
there people out there paying you know, anywhere from one and a half
to two percent annually on all oftheir money, and with groups that won't
use some of these solutions. Sodon't worry about the volatility. If you're
(44:09):
in the right positions, you canturn lemons and eliminade, and we can
help you buy things wisely, goodthings on sale when the markets pull back
a little bit. You know,being the right plan for the right purpose,
you'll feel a lot more comfortable,and we can help you do that.
There's more. There's much more.Our fund about the office five one
three five seven, five nine sixtyfive four again five point three five seven,
five nine sixty five four calls wecan help down behalf of Greg myself,
(44:32):
James, thank you for listening today. Have a great week and remember
this sound money, where good thingsare believable, achievable and true for you