9.22.22: Audio automatically transcribed by Sonix

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

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

Producer:
Welcome to Prosperity Principles with your host, Ed Cruz. Each week, Ed and his company seek to educate Americans like you by providing real strategies for protecting and growing their hard earned money. Get it for a full hour of financial information and economic news affecting your bottom line. Ed wants you to reach the financial freedom you've worked so hard for. So now let's start the show. Here's Ed Crews.

Ed Cruz:
Thank you for joining me this week on Prosperity Principles on Ed, when crews located right here in central Florida for over 24 years now and to go along with me on today's show is my co host, Matt McClure. Welcome, Matt.

Producer:
Hi there, Ed, how's it going?

Ed Cruz:
Going well, I think I may mention this to you just a little while ago, but my my granddaughter got me a got me good on one eye here. So I'm going to I'm going to go through this whole session with one eye closed, but we'll make it.

Producer:
Yeah. You don't need two eyes to see. Come on, you'll be just fine.

Ed Cruz:
Yeah, that's overrated.

Producer:
That's right. That's right. Nobody. Who needs sight. That's. That's not. Not not a thing. No, it's. Sorry about that. But at least you got to have some good fun with your granddaughter and. Until that happened anyway? Absolutely. Yeah. Well, yeah, kids will do that. But anyway, no, it's going to be a great show. We've got some great stuff for our listeners this weekend with five important things to own during retirement. We're going to talk about that. We'll also talk, of course, about the Federal Reserve and interest rates and what this latest increase could mean for our listeners. We've got more a little bit of a review of last week's show because we're going to talk about Medicare. We're going to kind of play a game and see what our listeners might remember and maybe see what I remember, too, about our discussion last week on Medicare and on long term care as well. So really a lot of great information and education and a little fun, too, coming up for our listeners.

Ed Cruz:
Absolutely. And, you know, one thing that we always want to remember to offer to our clients or to our listeners out there is the Annuity 360 book. And, you know, when when they call in for that. The basis that we want them to understand. In. What we're doing in the planning that we try to do here is we want to make sure that they realize, first of all. The safety involved in what we do. We're not like any other typical adviser. That's going to put you in harm's way. So safety is one of those things. Tax deferral. You know, we want to make an impact on your on your on your net results. So being having tax free access and tax deferred benefits are a blessing to your to your retirement. But while we do all these things, we also want to make sure that our listeners know that we offer a very competitive yield on on anything that we do. So, you know, you're not sacrificing their. And we'll educate people and making sure that they maintain liquidity while while investing. Because I definitely believe that that's quite important. And make sure that the the the listeners understand. Do you have enough lifetime income set up in your in your retirement, or are you leaving everything to chance? And. And last but not least, I will add that. You know, while your annuity is sitting, these products are sitting inside of these surrender periods. You know, we we want to make sure that you understand also that, you know, your assets are creditor proof. Let's say you get into an accident out there. Let's make sure that your assets are protected from from a creditor reaching into your retirement basket. And last but not least, let's make sure that your assets are left probate free. We want to make sure that the government, again, doesn't get their hands or anyone that's unwanted gets their hands on your on your retirement account. So these are things that we want people to understand that that they have available. And by reading this book, The Annuity 3060 book, this will help them understand all these benefits that we can offer them.

Producer:
And that is absolutely true. They adding for folks, if you want to get a copy of the Annuity 360 book or, you know, talk to Ed, get a free full retirement plan consultation, you can do that at the website for the show. It is my Prosperity Team. My Prosperity Team is, again, that website. Or you can give out a call directly at 3862285769. That's 386228 5769. And you know, I mentioned that full retirement plan consultation there. And it's not something where it's a high pressure situation for folks. It's it's a conversation. And you're only going to work with someone if you both agree that that's that's what needs to happen. It's not some high pressure sales pitch kind of a thing where you're going into the shark tank or something.

Ed Cruz:
Right. Not only is it complimentary, but it's not complicated. Right. We want to provide you with a comprehensive consultation at no cost. There's no obligation. Only work with us if it's best for you, if it feels right. You know, there has to be a trust factor when you work with someone and you know, it goes for me as well. I want to make sure that when I'm speaking to someone that they are being upfront with me, that they're disclosing everything so that I so that I can make the appropriate recommendations. Let us help you analyze your specific and unique financial situation. You may have a pension involved. You may have other sources of income or military retirement. So situations are going to be different. Your your needs and wants are different. And this is where we'll try to tailor something that fits your lifestyle. Let us closely examine any annuities that you may currently have. Are you paying too much in fees? Are you too much at risk with the annuity that you have? Do you want an annuity that will help you de-risk? Those are questions that you may have and we could help answer. Let us discover exactly how much you're paying in fees.

Ed Cruz:
Again, fees will will eat away at your retirement. So helping to unnecessary cost in those ways are very helpful in your IRAs for one case or any other type of retirement savings account that you may have. We can also help you with Social Security planning and Medicare planning. Those are it's very important to know, should you take it sooner than later when it comes to Social Security, are you are you taking your Medicare on time? You could be penalized for not taking your Medicare on time. So, you know, these are things that if you don't understand, you need someone to talk to so that you don't make these mistakes. And lastly, I'll say that we'll compare your current financial situation to what's possible if you work with us. So if you have a thought out income plan, but it's not in stone, let us show you what it would look like if it's if it's a guaranteed income solution versus an income solution, as I've said before. Right. So let us compare these things and let us help you get a better understanding of where you can be. Yeah.

Producer:
And even if you have someone who is helping you with your retirement planning right now, a financial advisor or, you know, an agent who's helping you out, you know, chances are you might not have heard from them lately because of all the craziness in the markets. And some of them kind of had their heads buried in the sand at this particular moment because it's just a little bit scary. And they're like, Nope, don't look over here. I know. I don't want you to pay any attention to me at this particular time. But, you know, and even if you think that things are going fine for your financial plan headed toward retirement, give Ed a call at 3862285769 or go to my prosperity Time.com and reach out for that full financial consultation, full retirement plan consultation that is. And again, free to all of the listeners of Prosperity Principles.

Producer:
And now of wholesome financial wisdom, it's time for the. Of the week.

Producer:
Well, this week's wise words come from Zig Ziglar and his quote that is this Expect the best, prepare for the worst, capitalize on what comes. I think that's very appropriate for these these days when we're looking at the economy and especially the equity markets right now and the craziness that has been Wall Street over the past several months.

Ed Cruz:
Yeah. During these times, people don't want to pay attention to what's going on. You hear people say, I don't even want to look at my statements because the last time I looked at it two months ago, you know, it's just not going in the right direction. And that's just not where you want to be. You want to know where you stand. And you also should be finding out what options you have that are out there so that you can capitalize on what's up and coming. And I will say, even though this market's down, you know, there are still ways out there that you can make money. And whether it's in annuities or securities, you know, if you're not getting the the proper guidance, you know, you really need to get that second opinion. It's out there. I know accounts today over this or I should say year to date right now. I know accounts that are up anywhere between eight and 12%. Would you like to be in that situation? Would you like to have guarantees going forward rather than then not knowing where you're going to stand in six, 12, 18 months from now? This is why you should call for that second opinion.

Producer:
Yeah, definitely so. And of course, you know, as we always say, past performance is not indicative of future results, but it's the the thought of that, I'm sure, is very appealing to a lot of folks, especially the way that the markets have been behaving this year with kind of the ups and downs and the uncertainty there. And, you know, I mentioned it a minute ago in the kind of the opening of the show that we were going to talk some about interest rates and the Fed, which all, of course, is tied to inflation. And I actually I wanted to recap a little bit of that in the discussion that I had with a Georgia Tech economics professor last week. And let's give a listen to this as he kind of explains why the Fed is doing what it's doing and what it could do in the future, and most importantly, how it could all affect you as our listeners. Let's take a listen to this and we'll talk about it and some more about inflation and interest rates on the other side. The Federal Reserve keeps raising interest rates to combat inflation. But how could it affect your retirement? I'm Matt McClure with the Retirement Radio Network. Powered by Emera life supply chain issues, the pandemic, energy prices and Russia's invasion of Ukraine have all been contributing factors to runaway inflation to fight rising prices. The Federal Reserve has been using one of its most powerful tools, raising interest rates.

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

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

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

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

Economics Professor:
Securing any sort of balance on any loan that doesn't have a fixed interest rate? Is it going to become more expensive?

Producer:
Bostic says it's important for consumers to cut back where they can to lessen the blow of inflation and interest rate hikes. And if you're in the market for a new home, it could be good to delay the purchase until rates or home prices come back down. So how do the Fed's actions on interest rates affect your wallet? That's a key question to consider as higher costs eat away at your hard earned money with a retirement radio network powered by a micro life, I'm Matt McClure. Remember, all of Ed's listeners receive a free financial consultation just for listening to the show. Visit my Prosperity Team to learn more and schedule an appointment. Thanks for listening to Prosperity Principles and subscribing wherever you listen to podcasts. So you just heard from a professor of economics at Georgia Tech talking about the Federal Reserve and the raising of interest rates, which of course they did just last week with that three quarters of a percentage point increase or 75 basis points, if you rather look at it that way or say it that way, means the same thing that they raised that benchmark interest rate by last week. And it just sort of sent during that trading day that I was telling you this ad earlier as we were chatting before we went on the air here that I was watching, I had the Wall Street Journal website pulled up and I was watching a chart of the markets that day, and I had all three side by side, the Dow, S&P, Nasdaq, all side by side. And you could tell the exact moment that that announcement was made by the Fed that they released the decision after their two day meeting, because it was just like, you know, normally it looks like it's a little roller coaster chart every day on on the exchanges and and then off a cliff right at 2 p.m., which was when that announcement came out, it was pretty startling.

Ed Cruz:
Not shocking. But I will say, you know, for as much as the Fed is trying to do, it just seems like our government can't keep their hands out of the cookie jar they want to continue to spend. And the Fed's I say I call it like a game of chicken. Right now they're trying to see who's going to blink first. Are we going to stop spending first or the Fed is going to stop raising rates? And if we keep doing this, what's going to happen is instead of a mild recession, we could fall into a deep recession with these high interest rates. That's that's that's continuing along with inflation. This is just this could lead to to pretty bad times, you know, looking forward, six, 12, 18 months ahead.

Producer:
Yeah. And that's the reason why I think a lot of people are looking for some security, some stability in their portfolios and in their retirement planning right now, because they're looking at all of this going on. And, you know, they're saying and it's a very human reaction. Right. We we want to control everything, but there's a lot that's out of our control as people. So it's like, you know, control what you can. Right. And so speaking with someone like you, Ed, is a great way to help get control of your financial picture, your planning for retirement, your, you know, saving for retirement and and earning for retirement as well.

Ed Cruz:
Yeah. Luckily, when our clients wake up in the morning, they don't have to rush to see what's going on in the markets because they're not going to lose money. You know, every time the nice part is that as the as the months and years go by, every time that this that they earn a rate of return, it gets locked in. So regardless of what's going on throughout the year, you know, when when we have a down year, I tell people it's the best thing that may have happened. You get a you get a reset. And now what happens is that you you start at that new low end of that index. So when it goes up, it's like making money during the same period, twice where other people that are tied into securities, what's going to happen to them? Well, they have to wait for the market to come back up. You know, they may be stuck for 2 to 3 years while you just got a reset and you got to basically it rebalance for you. You're making money all over again. So, you know, the main thing about all this is looking for that security, not sitting back, that time horizon. How much time do you really have to sit around and make nothing? This is where we make a difference in in our clients portfolios and in and in their lives.

Producer:
And if you want to find out more about it, folks, it's my prosperity. Time.com. My prosperity. Time.com is the website once again. And the phone number 3862285769. Well, I teased this a little bit earlier in the show and we're going to talk about it now. Now is the time for five important things to own during retirement. And, you know, I think some of these will just on the surface make a whole lot of sense. Right. And, ah, stuff that, you know, you would actually think about like first thing that would be something good to own during retirement. And some of them might be things that you're not thinking about being nice to own during retirement. So this is part of the, the educational portion of the show because we really like to help our listeners understand a lot of these different concepts. And the first in our five important things to own during retirement, Ed is a reliable vehicle.

Ed Cruz:
Absolutely. We could all use one of those. Right. The last thing you want is for your vehicle to constantly be at the at the garage somewhere getting maintenance, because that's obviously costing you dollars that you don't want to spend. But of course, we don't want to sit there and rely on others for a ride to to the store, to go get a meal, to go food, shopping, whatever it might be. We just don't want to depend on anyone, not even our children. Right. So let's get that one right out, right off the bat there. You know, when we go to and from medical appointments, church, seeing family, anything that we want to do, we just don't want to be dependent on anyone. We don't public transportation, I guess if you have to. But most of us just don't want to deal with public transportation. So most retirees don't have access to adequate, adequate public transportation. That's another big problem. Heck, in my town, if you're looking for that, not going to happen. It's a town next to us. So again, having that reliable vehicle goes a long way, especially in my town. I know. Go where you want to go. You know, road trips, vacations, you really you really want to get out there and see things when you're retired, you just don't want to be cooped up and surrounded by your four walls. And the safety the safety of being able to get yourself somewhere, you know, at any given time and I don't know if you've heard this, but this is maybe a little bit off topic. But you look at the tragedies that have happened with people that travel with Uber or any of those transportations, transportation companies that are available out there. You know, there have been people that don't make it to their next destination or are injured or assaulted. And so a reliable vehicle, definitely one great thing.

Producer:
To have a good alternative to that type situation. And as you say, it's a it's a it's a rare thing, but that that kind of thing has happened. And so if that's a concern of yours, then absolutely. Safety is a huge, huge thing. And you mentioned public transportation there. I mean, I am kind of the same way. Like my mom actually was just in a situation where her car was in the shop. She took it to like her normal mechanic. And it was a problem that he you know, he kept the car for several days and and didn't know what in the world was wrong with it, couldn't figure it out and finally did. And it wasn't something that he could do. So then she had to take it to the dealership and get the dealership to do it. And so it was just a whole big mess. And she's been without a car and having to call her friend who lives down the street to give her a ride places. So we've just been through this and there is zero public transportation where she is. So she would she'd have to call an Uber or Lyft or a, you know, a cab or something to get anywhere. So, yeah, that's not a situation that you want to find yourself in. So a vehicle. Yes, a reliable vehicle. Reliable being the operative word. There is number one. And number two on our five important things to own during retirement is a home.

Ed Cruz:
Absolutely. You know, just like the freedom of being on the road, you want the freedom in your own home, right? You don't want to move in with your children. A home is a valuable asset to have a safe, clean and comfortable place to lay your head. Like they say, there's no place like home. And I got to tell you, so many of my clients, their kids will talk to them. Oh, Mom, you know, you're you're 80 now. It's time for you to sell this move in with us. And my clients say that's not going to happen. And sometimes I'll sit there in Alaska, you know, would you prefer to go to assisted living versus your children? And even though they know that that cost is extremely high, they would rather do that than move in with their children. So it goes to show you how much seniors and people in general just value their independence.

Producer:
That's very true. Well, and my speaking of my mom, which I just did after after my dad passed, she was one of her first thoughts was, oh, well, should I sell the house? And then she said, actually, you know what? No, because it's not. She's like, I love this house. They've lived in it for like 30 years. And she she was worried about the upkeep and, and also like memories of my dad being there and all of that. So there was an emotional thing component to it as well. But she she decided, no, I don't want to sell it because it's not the biggest of houses. Like it's a three bed, two bath, it's all on one level. So she doesn't have to climb stairs to get in or out. So that was fine. And she said, No, I'm just going to stay where I am, not go through the hassle of selling the house. So yeah, I mean, a lot of people do want to stay in that home and that's a good thing to have during retirement. Well, number three, on the list of important things to own during retirement, this is a biggie and one that I think people struggle with an emergency fund.

Ed Cruz:
Right. You know, when unexpected problems arise, you want to have enough liquidity, cash to cover your emergency expenses, and you should your fund should have enough to cover 3 to 6 months of expenses. And when I sit down and speak to my clients, you know, we go over this, we go over what their monthly expenses are like. And we definitely want to have in some way, shape or form the availability of these funds, whether it's through the penalty free provisions of annuities, through cash accounts, short term CDs, whatever it may be, they're securities. You know, how fast can you get it and how fast might you need it? For any given reason, we'll go over reasons that you might need cash instantly. The list is not terribly long, and if it's something that's, you know, for a lot of people, they say, well, what if I need nursing care? Well, you know, when we speak about emergency funds and we we lump that in, you know, a long term care, generally all assets become liquid in that case. So that's one that I kind of exclude. But we talk about it, but it's not part of that emergency fund because an emergency fund is not meant to cover long term care expenses.

Producer:
Well, speaking of that, long term care is one thing that could be covered by insurance, and insurance just happens to be the next thing. Number four on our list of the five important things to own during retirement.

Ed Cruz:
Yeah. Well, you definitely want to be covered from health care costs. That could be a drain on your assets. You know, and again, that long term care issue, you know, what I like to tell people is if this is something that's prevalent in your family history, you might want to look at some alternatives out there. Long term care insurance could be quite expensive. So I tell people there are alternatives like annuities, that will provide you 2 to 3 times your premium deposit, that will cover long term care expenses. And that is one great way to keep dollars in your pocket and only use up, you know, these these dollars if you need the care because it's not you know, you may only need three, six months of care. You may need two years of care. We don't know. But there are ways that we can cover this long term care insurance. For some, it's an option, but you need to understand how that could affect you long term. And so, again, we can have these conversations. And again, as I mentioned, annuities can help provide the answer for that long term care needs. So, you know, some people will use annuities, their income stream, an income stream from an annuity just to cover that type of cost for long term care. But you definitely want to have cost of living increases in there because again, long term care insurance does become a little more expensive as you age. So you need to be ready for that.

Producer:
Yeah. And as we discussed last week, you know, a lot of people use annuities as well. And that income stream from the annuities to pay things like, you know, Medicare co-pays and other health care costs also. So that's another thing that people will put that funding to use for as well. And the last thing on our list of five important things to own during retirement and this is not so much a physical thing as it is a very important thing, obviously, but it's well, it's your schedule, which is not not a physical thing, but it is important to own your time.

Ed Cruz:
That's right. You know, if you want to go golfing, you better have a free schedule. If you want to go boating, you better have a nice free schedule. You'll be out there all day. Right. So retirement is about enjoying the life that you've worked hard to build. You know, you really don't want to go back to work. You don't want to spend time watching the stock market, as I said earlier, and managing your own assets, although I do have clients that may want to keep 10% and and play with it. And, you know, whatever the dollar amount may be or percentage may be, that's fine. You know, if if if you're not worried about what happens to that. But if you're if you're constantly looking at the market and you're worried about what's going on, then you shouldn't be there. You should already know that that's not right for you. You need to be somewhere that's going to free up your time so that you can go out and enjoy what is you want to do. You want to travel, you want to spend time. That's time with loved ones. You know, you want to go out, see this great country, enjoy it with them, take your family with you, maybe even travel the world, whatever you might want to do. But you want to own your schedule. Yeah.

Producer:
Can't do any on any of it if you can't or if you don't own your schedule rather. Well, that's great. So we got a reliable vehicle, a home, an emergency fund, insurance and your schedule. Those are five important things to own during retirement.

Producer:
Come on down as we test your financial knowledge in right or wrong?

Producer:
Yes. It's everyone's favorite game show sort of segment on on prosperity principles here. We've got right or wrong and we invite you to play along with us and see what you remember, folks, from last week's show. Yeah, all of the statements here are going to be kind of a bit of a review of last week, and we'll see what you remember from our discussion about smart health and smart care. In last week's show, we talked a lot about Medicare. We've talked a lot about long term care and and all of that. So here we go. I'm going to give Ed Cruz three statements and then he is going to tell us if those statements are wrong or if they are right. Here we go with statement number one. Every day until 2030, 10,000 baby boomers will turn 65 and seven out of ten of them will require long term care at some point. Is that right or wrong, Ed?

Ed Cruz:
That is correct. And that's why it's essential to have a smart health plan in place for your retirement. Your health care costs are one of the biggest expenses for retirees, and you don't all add to that. You know, they're saying that by 2030, 20% of our population will be 65 or older. One out of every five. That's that's huge. And 75% of of of health care spending is going to go towards chronic care. So when we start thinking about baby boomers long term care, it's going to be draining. And it's estimated that about 45% of all seniors are going to exhaust their wealth on this long term care issue, about half of the population in retirement. So it's scary to think that this is that this can make such an effect in our in our retirement and our seniors. Today control about $17 trillion of assets. So think about that. About 45% of it will be lost due to chronic care needs, long term care needs. It's a serious subject.

Producer:
That's that's huge. It's just staggering numbers there. When you sit there and think about that, that big number like that is just gigantic. And so yeah. So that's that is just showing you kind of a little bit about how huge the baby boomer generation is and how much of a strain could be on our health care system coming up here in the very near future. It's already under strain. It's been under strain at least for the last couple of years. And that's just going to cause more and more. So we've got to be prepared for that. Well, okay, so that one was right. So here is statement number two. You can have both a medicare supplement plan and Medicare Advantage plan. At the same time, you can see an can have both the Medicare supplement and Medicare Advantage plan at the same time. Is that right or is that wrong?

Ed Cruz:
And no, that's wrong. You can't have both a medicare supplement and a medicare Advantage at the same time. You must choose which plan you want to go with. They have their differences. So it's either having a lot of freedom and go whenever you want to go with a medicare supplement plan or an advantage plan that is going to keep you with a certain group of doctors. Right. And so you can't choose both.

Producer:
Yeah. There you go. Easy, easy enough. You can't choose both. It's one or the other when it comes to meds up, which is Medicare supplement or Medicare Advantage plan. All right. So we're one for two right now, batting 500 at this moment, which is still good enough for the Hall of Fame. But we're going to see how we end up with statement number three as we continue to play right or wrong. And here it is. You can use an annuity to fund your Medicare expenses throughout your entire lifetime. I actually gave this one away a little bit earlier. And so if you were paying attention earlier in the show. Well, no. Is that one right or is it wrongheaded?

Ed Cruz:
That's definitely right. We believe that this is a smart idea. In fact, ensure that you and your spouse, because it's not just you make sure that you both will be able to fund your expensive health care costs during retirement. And what better way than through the use of of some extra dollars that you put into an annuity so that you have that money for those needs?

Producer:
Yeah, absolutely. So that is right or wrong? Two of them, right? One of them wrong. But a good review of what we talked about on last week's show and a little bit of a recap of some things, Medicare, health care related and also long term care related as well. Now, we also want to go over a couple of things that we have spoken about before here on the show, but it's always good to review these kinds of things because people can think that they're overly complicated, I feel like. But I think the more that we repeat these, the better, because that helps it get through that. It's not that difficult as it might sound. And this is smart rule following, right? So we've got three different rules here. And they're not the bad kind of rules. They're not the oh, you're so square. You're making me follow rules and all this. No, it's good rules to follow because these can help you in the pocketbook or in the wallet. Right. So smart rule following the first one is the rule of 100.

Ed Cruz:
That's right. You know the rule of 100. Again, simple rule, don't overcomplicate it. It's just looking at your portfolio and minimizing risk. Right. So we take the number of 100 minus your age. So, for example, if you're 70 years old and you deduct the 100 from that, you're left with 30%. And that's the type of risk that you should, plus or minus have in your portfolio. And of course, we also have to think about additional risk that may affect this rule, which are that people are living longer, right? So we have longevity risk, which is going to add to outliving your money. And the old rules may not always provide you with enough money to maintain your current standard of living. So we want to make these these changes because again, a rule is just like we always say, a guideline, but what are the risk, you know, may affect this? Obviously, today's market is affecting the way that you may look at this rule, global health concerns, look at the pandemic, the way it just shut down the world, basically, and how it affected our finances. Again, rising health care cost. You might want to consider again that you can't take that much risk because of.

Ed Cruz:
The added pressures of of rising medical costs. And those costs are projected to to continue to rise at a pace of around 6% through 2024. You know, inflation is one thing, but when you start adding the additional effects of of other things that are projected to continue to go up, you know, that's that's going to hurt. And again, the rising cost of goods and services, you know, it goes beyond just the grocery store. It's all the other things that we're out there purchasing. So, you know, all these things will add to whether we should be following this rule of 100 loosely or if we should tighten up the belt. It depends on the amount of your finances, the amount of risk that you can take. So we want to we want to address these. And and one thing that we probably never speak about. Lifestyle risk. Are you one that likes to keep up with the Joneses? If so, we definitely want to talk about this. And maintaining a certain lifestyle and keeping up with the Joneses are two different things. So let's have that discussion.

Producer:
Those Joneses, I'm telling you, you got to watch out for them. All right. So that's rule of 100. So now take us through, if you will, at the 4% rule.

Ed Cruz:
4% rule. Now, I always say this one's a little trickier because the 4% rule says that retirees should only withdraw an equal amount of 4% against their portfolio. And, you know, I find that somewhat troubling, especially when we want to sit there and consider cost of living increases. You know, withdraw percentages increasing in subsequent years in all. The rule sounds pretty cut and dry. But what happens when we have strong market fluctuations? You know, if we look at today, the markets are down. If we just kind of lump it up, around 20% decline in the markets. Is your income following that? Are you dropping your income to meet the four or to follow the 4% rule? That's where I think it gets tricky. And most people will not make that adjustment because, again, that lifestyle risk that we just spoke about. So, you know, we have to be careful. In fact, there are many out there that are calling for this rule to be to be changed. And some experts are saying that it should be the 3% rule to help you protect the assets that you have. So it's that one's a little more complicated.

Producer:
Yeah, just a little bit more. It's still it's not like, you know, rocket science, as they say, but it's still it is a little bit more on the complicated side because there are some some nuance in there. Well, that's the 4% rule. So one more rule to go, and that one is the rule of 72.

Ed Cruz:
The one rule. This is the the way to estimate how quickly your investments will double given a fixed interest rate. Investors can divide 72 by the annual rate of return. And this will give you an idea of when your investments should double, should duplicate. So, for example, if you invest $100 in an annual fixed interest rate of 10%, the rule of 72 says that it will take 7.2 years to grow to 200. So the rule of 72 is only an estimation tool, but with lower rates of return, it can be very accurate.

Producer:
There you go. And that is. Yeah, I always liked that one too, because it's a little bit of simple math, but it can help you along in determining exactly how long it is going to take for that to to double their for your your given investment to double given a fixed interest rate. So that's great. So that's rule of 72 4% rule and the rule of 100. And that's all the rules that we have for you today, folks. The rest of it is all fun and games from here on out. But like I said, those are some good rules to follow. Well, so everybody is feeling the pain of inflation and we want to help all of our listeners minimize that pain.

Producer:
Here's the cost cutter of the week.

Producer:
So, yes, cutting costs definitely important during these Times. Editor, what have you got for us as far as the cost cutter goes this week?

Ed Cruz:
Well, we want to replace bonds in in your portfolio with fixed indexed annuities to get a better rate of return and to eliminate financial advisory fees. No. Why would you take market risk with your bonds when your bonds can lose their value, especially now with rising rates? If you look at the history alone, you can see how uncertain the future of bonds are and inflation. Inflation and fluctuating interest rates play a big role in bond yields. Here are some reasons that we think you should consider replacing the bonds in your portfolio with fixed indexed annuities. First of all, there's interest rate risk of bonds. When interest rates increase, current bond values decrease as they immediately become less attractive to investors looking for a higher rate of return. And that's what's going on with our with our government right now. They they're always selling bonds. But right now, those bonds are decreasing in value because interest rates keep rising. So who would want to buy a bond and immediately start losing value? So that's one of the risks that we face. Number two, reinvestment in risk of bonds. This is the likelihood that an investment's cash flow will learn less in a new security. We have number three, which is systematic market risk. This refers to risk that is inherent to the market as a whole. It will affect the overall market, not just a particular stock or industry. This can be unpredictable and it's impossible to avoid.

Ed Cruz:
And diversification cannot fix this issue. But the correct asset allocation strategy can make a big difference. Number four, unsystematic market risk. This type of risk is unique to a specific company or industry, similar to systematic market risk. It is impossible to know when unsystematic risk will occur. Number five Reduced advisory fees. Investors who trade individual stocks may know how much commission they're paying for their broker, but individuals who buy bonds often have no idea what type of commission they're paying. Bond dealers collect commissions on bonds. They sell called markups, but they bundle them into the price that is quoted to investors. This means that you're unaware of how much commission you're actually paying. There are no financial advisory management or portfolio fees associated with fixed index annuities, as the life insurance company or annuity carrier pays commissions directly to the advisor. So this can help you reduce up to 40% of your advisory and portfolio fees just by replacing 40% of your portfolio that is invested into bonds. You know, I see that strategy kind of dying somewhat as far as the the mix of bonds and the inequities. But that just means it doesn't mean that's a good thing. It means that you're actually facing more risk in your portfolio. So, again, that's that's not much of a help if you're trying to avoid that. So again, it's a no brainer. As fixed indexed annuities earn market like gains without market risk.

Producer:
There you go. And actually, you know, you talked about earlier in the show the book Annuity 360. I think it's actually a perfect time to share a little bit of that book with our listeners because there is a chapter about this very thing that is our cost cutter of the week. It just so happens and that is bond replacement with fixed indexed annuities. Here is the author of the book Ford Stokes Reading from Annuity 360. And it's everything you need to know about annuities. And we'll talk about how you can get a copy of the book. On the other side, here's Ford Stokes.

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

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

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

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

Producer:
Fixed annuities, including multiyear guaranteed rate annuities, are not designed for short term investments and may be subject to restrictions, fees and surrender charges as described in the annuity contract. Guarantees are backed by the financial strength and claims paying ability of the issuer. That is a snippet from the book Annuity 360 by Ford Stokes, and that was the author himself reading that book for you, just that one chapter. Now, if you would like to get the entire book, all of the chapters of Annuity 360 and it's not it's not like it's some, you know, war and peace kind of a long, you know, thousands of page novel here or anything. It's a good read, but it's also an easy read as well. And very understandable for you. That's the way that Ford writes it here. And to do that, all you have to do is just go to our website, which is my prosperity team. It's my prosperity team. You can find all the contact information there and how to get your copy of Annuity 360. Or you can just give Ed a call at 3862285769. That's 3862285769. And add that number is also the thing to do the thing to call or go to going to the website as well for that free full retirement plan consultation that we mentioned earlier. Recap that for our listeners, if you will, and what that initial conversation is like. Because I know obviously, as we've been talking about, there's a lot of uncertainty out there right now in the economy and particularly in the equity markets. So people, I think, are really hungry for something like this right now.

Ed Cruz:
Absolutely. I'll hit the quick key point, and that is that when you meet with us, first of all, there is no no cost, no, no consultation fee. There's no obligation. Again, only work with us if you're comfortable and it sounds right for you. You know, let us analyze your situation. Let us examine any part of your portfolio that you have so that we can disclose any fees that you don't even know about. And trust me, there are many fees out there that when I go over these things, people have no clue. Let's discover, you know what your IRA is invested in. What's your 401. K invested in? Where do you have your non qualified funds, your after tax money? You know, is that is that causing a tax problem for you? You know, let us help you figure that out. Let us go over your Social Security, your Medicare again. Let's compare your situation. You know, do you have do you have plenty of income in retirement or are you short in income? You know, let's get that right, because that's what's going to make the biggest difference in retirement. Are you going to be stressed out about the having too much month, not enough money? Or can we turn that around and make sure that you have plenty of money to cover that month? So these are the simple things that we go over. It's not complicated, but when you're done, you're going to have something in concrete. You're going to know where you stand and you're going to know how well your retirement will be if you plan properly.

Producer:
That's right. And to do that, to get started down that path, go to my prosperity team or call 3862285769. It's this week in history. So we like to take a look back at some things that happened this week in history. And yeah, a lot of big ones since the last time that we talked about these. You know, we like to kind of do it every week if we can. And this past week, on September 23rd, so just a few days ago was an important birthday for all you music lovers out there. Bruce Springsteen, born this day, 1949. The American singer, songwriter and musician, born in Long Branch, New Jersey. And I don't know if you ever saw this movie, and I can't think of the name of it off the top of my head. It just popped into my mind. But it was about this this kind of young kid, not like super young, but like teenager, maybe college years from England, who came over to the United States because he was this huge Bruce Springsteen fan. And like he was, you know, kind of obsessed and landed at the airport in New Jersey. And the guy at Customs asked him, so why are you here? And he said, Oh, well, yeah, I want to see the birthplace of Bruce Springsteen. And he goes, Oh, I can think of no more important reason to visit the United States of America than to see the home of the boss.

Ed Cruz:
Well, you know, and I being raised in New Jersey, obviously, that was a big name. So I kind of understand where that gentleman is coming from.

Producer:
Yeah, there you go. I mean, one of the one of the biggest names from New Jersey right there, currently 23rd on Rolling Stone's list of the greatest albums of greatest artists, rather, of all time. I'm sure plenty of his albums are on the lists as well from Rolling Stone also. But then there's also one editor, a little film and TV. Go through that one here. I don't know if you're a big fan of the show or not.

Ed Cruz:
Well, the love boat, huh? Not exactly. But on this date in 1977, I was a whopping seven years old. But The Love Boat made its debut on ABC TV and the American Romantic Comedy Drama Series aired from 77 to 1986 and was part of ABC's very popular Saturday night lineup. But I will say, I think that was a little, a little beyond my time because it was a little too, I would say, mature, you know, as a as a young man. As a young boy. Yeah. No, I really wasn't into the love boat.

Producer:
You just missed the boat on that one. Just no pun intended. But, yeah, I was thinking about this, too, as I was looking at that. I'm like everybody in there. Brother and sister and aunt and uncle was a guest star on that show, I think at one point. Like if you look back at the episodes of that, I remember just seeing something about it and it's like just this long list of celebrities that made appearances on it. So it was a great one, a big one in in our culture and in our history. And it debuted this week in history in 1977. Well, Ed is just about time for us to wrap things up here. I can't believe the show has gone by so quickly, but it has this has been prosperity principles, folks. And I hope that you add have a great rest of your week.

Ed Cruz:
Thank you. And thank everyone for listening.

Producer:
Thanks for listening to Prosperity Principles. You deserve to work with a financial and insurance expert who can offer strategies for protecting and growing your hard earned money. To schedule your free no obligation consultation, visit my Prosperity Team dot com or pick up the phone and call 3862285769. That's 3862285769.

Producer:
It's not affiliated with the United States government. Edwin Cruz does not offer tax, legal or investment advice. Consult with your tax advisor or attorney regarding specific situations. Opinions expressed are subject to change without notice. These opinions are not intended as investment advice, nor do they predict future performance of any product. All information provided is believed to be from reliable sources. However, we make no representation or warranty as to the accuracy of any statement. This information is intended to be educational in nature and does not provide a guarantee or a specific result. All copyrights and trademarks are the property of their respective owners. A married life assumes no responsibility or liability for the content of this message. The information contained herein is provided on an as is basis with no guarantees of completeness, accuracy, usefulness, timeliness, or of the results obtained from the use of this information.

Producer:
You're listening to Prosperity Principles to schedule your free no obligation consultation visit my prosperity team dot com.

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