Debbie has nearly 20 years of investigative experience and journalism on topics of insurance, mortgage, and financial advice.

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Money Strategies with Debbie

TDD 110 | Market Fluctuations

Market Fluctuations And Retirement And Estate Planning With Brad Williams

TDD 110 | Market Fluctuations

 

When the news channels are on a 24-hour cycle, it’s hard to keep our emotions in check. In this episode, Debbie Bloyd talks about how headlines are going to lead you down the wrong path and affect your finances. When the market goes down, you should not get your money out. Learn why you should put money in instead of out and the importance of maintaining discipline in your finances. Debbie also tackles long-term care, how long term care insurance has changed throughout the years, and the need for consumers to be knowledgeable about their options. Lastly, Brad Williams, Founding President and CEO of Brad Williams Financial Services, joins Debbie to talk about retirement and estate planning.

Listen to the podcast here:

Market Fluctuations And Retirement And Estate Planning With Brad Williams

How are we supposed to keep our emotions in check when it comes to our finances? That’s difficult when the news channels are on a 24-hour cycle. It comes through our phone. It’s on our computers at the office. It’s everywhere. The internet has made the cycle hard to get away from. I’m telling you to put your phones down and quit watching the national news. It’s depressing, it’s hard to handle and it’s going to scare you. I don’t want you to be scared when it comes to your money and your finances. Emotions can take over and the negative effects that it has on our retirement and our finances are great because once you understand what triggers you to make those calls to me saying, “Debbie, the market is down. I need to take the money out now. I need to move the money now.” I’m not paying attention to that on a daily basis. I have to keep looking out for you for the long-term. Let’s talk about how headlines are going to lead you down the wrong path.

Psychologically, it’s hard for the human brain to take bad news and not do anything with it. You’re going to call your friend, your advisor or somebody and start doing some talking. The average investor has underperformed the major market indexes often because of emotional reactions and trying to time the market. My advice is when the market goes down, you’re not taking money out. You’re putting money in. It’s like going to Macy’s with a sale, 75% off or 25% off. You’re going to buy some stuff. We should be doing the same thing when it comes to our finances. Investors can help themselves avoid emotional reactions by relying on several key investment principles and working side by side with an investment advisor. One thing you can do is maintain your discipline and avoid overreacting to the news headlines. Now that you know more about the media coverage of the market events, it’s got to push your buttons. You have to prepare to maintain your discipline and avoid making rash investment decisions.

Here are a few principles that can help. Tune out the noise from the financial news media and don’t take any action in response to the news events without first consulting someone like me, your financial advisor. Number two, stick with investments for the long-term to help achieve long-term goals. If you’re a day trader, I’m not talking to you. If you’re putting the money in, taking it out tomorrow or doing it the same day, this doesn’t apply to you. This is my long-term. I’m not going to return to my 70s. I’m a long-term investor. Most of my other clients are long-term investors too. Help lessen the impact of market fluctuations by maintaining a diversified portfolio with your investment advisor. Not everybody does this. Some people don’t even know what they’re invested in. Give me a call. My number is (979) 220-3018. If you have a 401(k) that you’ve had forever, I restructure those two. I help you rebalance those and look at what you’re in.

A lot of times, that money is sitting there for 10 to 12 years and you haven’t looked at it, neither has anybody else. We need to stop that and take advantage of the markets. Take advantage of the opportunities to invest when others react and that’s what I said. Make sure you’re investing when you’re supposed to, not when you’re scared. Staying invested is the key to success. To make the most out of market opportunities, it’s best to look at the S&P 500 Index going back to 1929. Annualized overall negative returns become much less likely when you stay invested for a 10-year or 20-year period. A balanced portfolio offers significant potential value. If you avoid the temptation to trade in or out of the market and stay invested in a balanced portfolio based on long-term goals that you make with your advisor, the better you’re going to be over time. I have a lot of people that want to jump out of the market all the time and then they would have missed going back up in the market.

TDD 110 | Market Fluctuations

Market Fluctuations: Take advantage of the opportunities to invest when others react. Make sure you’re investing when you’re supposed to, not when you’re scared.

 

Portfolio performance suffers from individual investors because you get in and get out. We’re going to talk about long-term goals. Reacting and trying to take your market timing takes a toll on your money. You’re going to get less money because you’re going to realize that taking your money out, maybe you didn’t go all the way down but you didn’t get the kick back up either, so you missed that whole market gain. You never realize the loss until you cash out. It’s like your house. The market can fluctuate on a daily basis higher or lower, even years at a time. If you’re not going to sell your house, why does it matter? We’re going to wait on when we’re going to sell this stuff. There’s a neurological connection. The same part of your brain that regulates your emotions is also used when you make decisions. Because of that, it’s easy for your emotions to take over, especially in stressful situations.

Remember, remain calm and call your advisor. If you can’t reach your advisor and they don’t call you back, contact me. My name is Debbie Bloyd. I’ve been on the radio with you for many years now. I’ve been investing your money, doing mortgages for you and watching after your finances for a long time. Let me help explain what’s going on in the market for you. My email address is Debbie@MoneyStrategiesWithDebbie.com and my direct phone number is (979) 220-3018.

Let’s talk a little bit about long-term care. I’ve got some old interviews that I’ve done and I was going to replay and I’m like, “I’m going to give you some new material because stats keep changing on long-term care.” Baby Boomer generation and the cost of healthcare are continually rising and the issue is long-term care. It’s of major importance to both consumers and our legislative bodies that helped make up the laws. Some individuals are able to rely on friends and family in the event they need to extend care and help with activities of daily living. Many others do not or will not have a support system. These individuals must determine how they’re going to live and meet the potential need for long-term care. Also, how they will fund this costly and extended home health services, assisted living or potential stay in a nursing facility. This is important when we talk about aging because I had one client and she was like, “Debbie, I don’t want to talk anymore about long-term care. I am going to die healthy.” That’s not going to happen.

There are few people who pass away in their sleep without any assistance. Hospice, stroke, falls, hospital stays, rehab. All these things happen, and we need to plan for those. We need to talk about long-term care insurance and how it’s changed over the last 40 years. Long-term care insurance has expanded from simple nursing home coverage to covered care in assisted living facilities to an individual’s own home. Policies have become more broad-based and now, they offer more benefits than ever before. At the same time, they have also become more complex and their comparison is sometimes hard. You’ve got to look at, do you think you’re going to be in a facility or want to stay at home? How much care do you need? The consumer needs to be knowledgeable and I try to help people by helping them even go around and tour these facilities here that we have in town and look at the cost of long-term care.

The negative effects emotions have when they take over your finances are great. Click To Tweet

Long-term care is super expensive if you plan on paying for it yourself, but you have to define the need for long-term care. These are all kinds of things that long-term care encompasses. Conditions that may lead to the need for long-term care include disability, mental decline, or illness, AIDS, stroke, or simple frailty. The need for long-term care is primarily measured by assessing limitations and performing the regular task of daily living. That includes dressing, eating and what you can do for yourself around your house. You’re assessed by a doctor or a home healthcare company, and that’s how you get your policy. There are a lot of different policies that are out there. Some are older policies that have 90 to 120-day waiting periods. That means before the policy kicks in, the family would have to pay for those 3 months or 6 months out of pocket before the policy has even started. My policy has 30 days where I pay in case something happens and then the activities of daily living that we were talking about, eating, bathing, dressing, toileting, maintaining continence and transferring.

There are things that are also included but it’s not the daily living things. Sometimes, they can’t use the phone or they can’t hear. What happens when you call these home healthcare companies? They can do a lot of this for you. They can help you with meals, do light housework, manage money, pay bills, and do some basic things. Who needs long-term care? Seventy percent of individuals over the age of 65 will require some type of long-term care services during their lifetime. Over 40% will need care in a nursing home for some period of time. Are you the 60% or the 40%? We’re not sure, but I want to make sure you’re covered. Marital status. Single people are more likely to need medical care from a paid provider because they don’t have anyone else to help them. Lifestyle, if you have poor diet and exercise habits, that can increase the long-term care risk. Family history, if your family history has a lot of health problems and needs medical assistance and you are similar to them, what makes you think you’re going to be any different?

I was like, “Look at your family.” They’re like, “My mother died in her 90s.” “That goes to longevity for you so you may live up to 90s too. Can you do that?” Care can now be delivered in homes. It can be delivered at adult foster care systems. It could be boarding care homes. There’s a living facility I toured where the people live in a neighborhood. They live in a house and they converted all the bedrooms and expanded the house for twelve people to live there independently in a home together. There are going to be continuing care retirement communities of which I interview here all the time. It’s important to know the high cost of care and planning for long-term care, so you might want to tour some of these facilities. I know nobody wants to do that until they’re forced to. Sometimes, the scariest part when mom takes a fall, they’re not going to let her out of the hospital unless she has around the clock care, and you have to shop for it fast. That seems to be stressful for families. You might want to look at that sooner rather than later.

A lot of people self-fund for long-term care and that means that they’re going to pay for it themselves. The problem with that is you can run out of money. Let’s say you had home health aide services five days a week, that could cost you almost $40,000 a year. If that happens in ten years, you could be up to $50,000. If you go up to fifteen years, you’re at $60,000 and in twenty years, I’m not sure how we’re going to know how much that is. It’s going to be considerably more than it is now. In an assisted living facility, the cost range is $50,000 a year, all the way up to $80,000, depending on the part of the country that you’re needing assisted living. Private room nursing homes cost in the hundreds of thousands. You can have a $100,000 bill for the year. In ten years, it could cost you that same room for $200,000, depending on what part of the country. A big debate is, does Medicare cover it? No, it does not cover it. You’re going to need long-term care self-funded or you’re going to have to deplete all your assets and use Medicaid.

TDD 110 | Market Fluctuations

Market Fluctuations: There’s a lot of variables that go into income planning, and it’s not a cookie-cutter approach, so it requires a unique plan for each individual.

 

There are a lot of problems with doing this ourselves. We can always run out of money. I know a lot of people that use annuities for funding long-term care and that is an appropriate way to have a vehicle fund in long-term care for a number of reasons. Annuities are designed to accumulate a sum of money for a future point in time and then they distribute those funds systematically over the life of the annuitant or any time period. You can start an annuity now and then not need it until you’re 70 when you hit time to need assisted living or you need someone to come into your house. That annuity can fund that care. It’s also a tax deferral. One of the advantages of using an annuity as a way to accumulate funds for long-term care is a tax deferral. As the funds accumulate on the contract, they are credited with interest earnings declared by the insurer and they grow in relation to the performance of the underlying stock or bonds in which they’re deposited.

Under any annuity earnings and growth are not subject to income tax until the funds are withdrawn. They’re interest-free until the end and you don’t pay interest until you take it out. You don’t pay tax on it until you take it out. This is a great way to fund long-term care. There are riders. Life insurance also funds long-term care. I have a policy that is cool. It does several things. It is a life insurance policy. In case I’m hit by a truck or die of a heart attack, it pays my children whatever the value of it that I have is upon my death. If I don’t die that way, I get to use it for long-term care or chronic illness rider. It’s a multiple policy. It’s called a hybrid. There are only a couple of companies out there that make them. Call me and I would love to explain it to you to give you the information. That way, I feel like I’ve doubled down. I am going to get my money back one way or the other. Either I’m going to die and the policy will pay off or I will need it and the policy will pay off.

A lot of these policies, you need to look at what people bought years ago. I saw a sad story about a couple over in Huntsville that had bought a long-term care policy and they’d have to pay the first 90 days themselves. They don’t have the cash to pay the first 90 days, so they can’t use the policy. The policy has been paid off for years. They don’t like their options on how to come up with the money to pay the first 90 days. The husband will not be able to get assisted help at the house and he desperately needs it. Look at these policies before you get too old. Make sure they don’t need to be updated. A lot of times, we roll them over into something more current if there’s not a surrender value or not. I’m trying to put you in a better position. I’m not trying to make you pay taxes early or penalties. We do need to make sure that you’re covered and you have enough in case you will live into your 100s. A lot of people are living in their 90s, so that’s right around the corner.

Staying invested is the key to success. Click To Tweet

If you have questions, the website you can find me on is Money Strategies with Debbie or everywhere on social media. I’m Dlb Mortgage Services on Facebook and Instagram. Also, on Facebook, I’m under Debbie Bloyd or Money Strategies with Debbie. My direct phone number is (979) 220-3018. If you have questions, please give me a call. I’ll be happy to meet with you and talk on the phone. We FaceTime, we Zoom call, we do all kinds of things, and we even meet up in person.

I’m speaking with Brad Williams. Brad, you have your own financial company. Tell me a little bit more about your background.

I’ve been in financial services for many years. I have operated Brad Williams Financial Services, which is a firm that caters to the needs of retirees and pre-retirees. I help people transition from the workforce to retirement.

Brad, in your practice, what are you seeing? Are people noticing that they’re living longer? I noticed that seems to be a catch for a lot of people. They don’t realize that they have to project some of this income out in their 90s.

It’s the main thing. They may be in good shape right now, but they’ve got to factor in inflation and healthcare costs. There are a lot of variables that go into income planning and it’s not a cookie-cutter approach, so it requires a unique plan for each individual.

When you talk to clients, you have to work through all this with them. How many of your clients have thought about all this stuff when they come to you to start with? It’s probably not a lot.

Many have but not enough. A lot of them have an unsettled feeling in their stomach that they know they need to do something different, that their working career is coming to an end. I look at things in terms of two stages of life, the accumulation stage and the distribution stage. I draw on my board a mountain and I share with them, “Your accumulation stage is almost like climbing a mountain. You’re building up and you’re adding assets. When you get to the top, you need to retool because you’re getting ready to go down.” The downside of the mountain is the distribution stage. Most people don’t realize that most deaths that happen on mountain climbs are on the way down, not the way up. It’s key to look at things from that perspective so that you don’t run out of money before you run out of life.

With the stock market doing what it has in the past, what is your take on that? How can we protect ourselves from freaking out every time the stock market does something? It’s going to keep doing that. It’s normal to have it freak out, right?

Yes, it is. The stock market has repeatable, predictable patterns. You may not be able to predict them in the short-term, but you can predict the trends. A typical full stock market cycle is about 35 years. You’ve got a secular bear market and secular bull market. It takes about 35 years to get through a full cycle, but the key is knowing where you are in the cycle. I’ve gotten little phone calls from my clients based on the turbulence because of their position. When you’re in the accumulation stage, you’ve got time working for you so you can take a risk. As you’re in the distribution stage, you can’t take a risk because if you’re withdrawing from your accounts, you’re going through down cycles, and you’re not replacing what you’re taking out, then you’re going to end up like a 30-year mortgage.

When you think about a 30-year mortgage, most of the first payment is interest and a little bit of principal. Eventually, it gets down to where most of it, if not all of it, toward the end is principal. If you look at retirement as a mortgage in reverse, then you’ve got to be careful that you’re taking dividends, interest and guaranteed income sources from your accounts and not selling in a down market. If you’re taking required minimum distributions, then you need to make sure you’re doing it for dividends and income, and not for the principal.

TDD 110 | Market Fluctuations

Market Fluctuations: If you want a stress-free retirement, invest for the I and offer the G because total return is income plus growth.

 

Once we spend our principal then we’re out of principal. We don’t have it anymore.

That’s the mortgage analogy that I like to share with people because they can put their arms around that and they’re like, “I understand that.” The problem with most financial advisors is they’re oriented toward the growth side and a lot of them do a great job doing the growth side. The tools that they have are not oriented toward the distribution side because we’re looking at a lot of portfolios and people come in and they say, “We’ve got stocks and bonds.” I look at what they have and their bond portfolio is all in bond mutual funds. There are a lot of problems with that. You don’t own the bond in the bond mutual fund. The bond fund does. You lose the two biggest guarantees a bond owner has which is the return of your principal loan maturity and a guaranteed contractual interest rate. What I show people is how we could build portfolios for them of interest and dividends to provide the income. They can have some growth in there and some risk, but it needs to be pared down once they retire versus with their own when they’re still working.

When people age, I know some of my clients don’t want to think about anything going wrong or them getting sick. They have no idea how expensive the medical side of their retirement is going to be.

They are going to be astounded when you look at the expected lifetime expenditures for healthcare, and they’re only going up. They could eat up $200,000 to $250,000 of money over a 25 or 30-year retirement.

Most people don’t have that cushion. They would rather not spend it on medical. They would probably have got a long-term care policy to help with that and leave more money to their family or a charity or anything rather than spend it.

If you’re in the financial services industry, there are a lot of changes in the long-term care arena, so you’ve got to be careful which route you take there. You’ve got some clients who can reasonably self-insure, so that’s an option. Setting it up properly and setting the expectations that you’ve got to have these things in your budget, you’ve got to predict them. Whether you use them or not, you’ve got to have that in the plan. When you look at your retirement, it’s almost like three phases. You’ve got your Go-Go Years, Slow-Go Years, and No-Go Years. The Go-Go Years is right when you first retire, maybe from 65 to 75. You’ve got money, you’re feeling good and you’re enjoying trips by yourself or with the family. You’re enjoying retirement. Somewhere around 75 or so, you don’t want to deal with the airports anymore. “I’ve seen what I want to see,” so maybe the trips are shorter and closer to home. Once you hit about 85 and have health issues, those are the No-Go Years. You’ve got to plan for all three phases.

Brad, what can you tell us about the year that we’re going to have in 2020? I know a lot of people ask me for the mortgage world to predict 2020 and I’m already wrong because who knew that the Fed would lower rates and we would be in this shape with the Coronavirus and everything. What is your outlook for 2020 for the most part with the elections and everything going on?

I’ve been telling people to be prepared for the correction because if we don’t have a correction soon, we’ll break several Guinness Book records. When we have the type of cycle that we’ve had, there are always three downturns and we’ve only had two. One from 2000 to 2003 and then, of course, 2008 to 2009.

We’re due for another one then.

This Coronavirus and several other issues have been the excuse because there’s a lot of money sitting with people who have a hair-trigger. They’re waiting to see if we’re going to have one of those downturns. One of the issues is when we had the first downturn, we had about $5 trillion national debt. When we had the second, we have about $9 trillion in national debt and now we’ve got over $22 trillion. Interest rates are already at historic lows. The 30-year Treasury and the 10-year Treasury are lower than they’ve ever been. The Federal Reserve doesn’t have a whole lot of ammo if we go into recession. Look at China. What a lot of people found is that maybe we don’t need to be so dependent on China because when you look at supply logistical chains, they are being shut down because people can’t get stuff out of China safely.

You never realize the loss until you cash out. Click To Tweet

That’s why they’re looking for global economic issues is because people don’t have the raw materials to build stuff. We need to be looking at alternatives to that. There are a lot of issues that could cause a downturn and this downturn could be hard, plus, we haven’t hit single digits in price-earnings ratios. There are a couple of other issues. My clients are prepared for that and we look at their risk investments or stock market investments as being down the road. We plan that out. Too many people think that they’ve got everything in mutual funds and bond funds, and they’re well-diversified so they’re going to make through it. When you look at most of those mutual funds and you look at the top holdings, many of them have the same top holdings.

You’re not diversified at all.

There are a lot of things in investing for income. I always say that if you want a retirement that’s stress-free, invest for the I and offer the G because total return is income plus growth. Income is steady. The growth can come and can go.

When you do that, what is your recommendation? It’s not mutual funds and it’s stocks.

Looking at things preferred stocks, individually help bonds, and manage a portfolio of income-generating securities. Annuities can be a part of that. Too many times, when you talk about guaranteed income, many financial advisors automatically refer to an annuity that provides you a set income for life or an income rider or something like that. Those can be valuable tools, but that’s not the only thing out there.

How do we know we have the right financial advisor? What are some of the questions? A lot of people will go to somebody that their neighbor uses or a friend or somebody’s kid. How do we know that they know what they’re talking about?

There are a couple of key questions you can ask them. If you’re 40 years old, you’ve got time and you can take a risk. Those aren’t the people I’m speaking to. The people that I’m speaking to are those who are 60 and up and getting ready to retire, especially if they’re getting close to 72, which is the new required minimum age with the SECURE Act. Asking their advisor, “My required minimums are coming up at age 72. How are we going to take those?” If he says, “We’ll sell the necessary shares to take that amount out and we’ll be good to go,” then you need to run. Another thing is when you say, “I want to make my portfolio more conservative.” All of a sudden, you’ve gone from a 70/30 stock-bond fund to a 60/40 or 50/50 stock-bond fund. All he’s done is moved into bond funds and he hasn’t got you into individual income securities. That’s another signal that maybe you’re not dealing with a distribution advisor or dealing with a growth advisor.

How do we find out more information about you? Can you help us no matter where we are in the United States?

The answer is yes, I can. If you’ve got a financial question, you go to AskBradWilliams.com and I’d be happy to answer whatever questions somebody wants to throw at me.

Thank you so much for your time. I appreciate it.

Important Links:

About Brad Williams

TDD 110 | Market FluctuationsBrad is an Investment Advisor Representative specializing in Retiree and Estate Planning. He has been an independent financial services representative and president/CEO of Brad Williams Financial Services, LLC since 1987. His wife Robin and daughter Bonnie work with him marketing the company, and coordinating and planning his many free educational seminars and events around town. In addition to owning his own company, he is a two-time past president and active member of Huntsville’s oldest and most well established Business Networking International (BNI) affiliate, Heritage BNI; and a past member of the Board of Advisors of Senior Market Advisor magazine. His company, Brad Williams Financial Services has an A+ rating as a member of the Huntsville Better Business Bureau.

Brad hosts his own radio show, The Ask Brad Show, which is every Saturday on WBHP 800/1230 AM or 102.5 FM from 9:00-10:00 a.m., 1:00-2:00 p.m., & 4:00-5:00 p.m. and is frequently sought out to appear on top financial news radio shows nationwide. Brad is also a regular guest on the Newsmax TV show, The Income Generation, hosted by David J. Scranton.

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