Surviving a Stock Market Crash: Five Steps to Get Prepared

10.6.23: Audio automatically transcribed by Sonix

10.6.23: 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 Retire 360 with your host, Dwight Mejan. Dwight is a licensed fiduciary and financial advisor who always places your needs first. Dwight works hard each day to educate Americans like you on how to reach the financial freedom they've worked so hard for, and he can help you, too. So now let's start the show. Here's Dwight Mejan.

Dwight Mejan:
Okay. Well, listeners, welcome back to the Retire 360 show. Can't believe how fast a week comes and goes. Can't believe how quick this hour goes. So we're going to jump in here. But you're listening to Retire 360 show. Brought to you by 360 Capital Management. I am Dwight Mejan, your host, along with our other host, Mitchell Keiser, who is sitting next to me or near me, I should say. And we're glad to be back for another week of helping you with your money, helping you win with your money. We've had a lot more questions coming in. Today's show is really designed around many of those questions and some recent scenarios where we've helped some people win with their money, and we're going to talk about some of those. And many of our listeners are going to find themselves perhaps in similar situations. So stay tuned for that. Today's show is going to be some hands on practical advice, specific steps that you can be looking at in terms of helping you. If you're concerned about where the market's at, concerned about just the overall accounts that you have, how to responsibly grow and protect them. That is what this show is always about. But we're going to get into the nuts and bolts of that in today's show. But Mitchell, how are we doing over on your end today?

Mitchell Keiser:
All is good over on this side of the office. We are just getting ready to prepare for our upcoming event. If you guys have been listening to us, we do a series of educational events here in the Moore County Lee County area, as well as the Avery and Watauga County area. So we have offices in both counties. Most recently, we were in the Avery Watauga County. We did an event there in downtown Boone. But it is. We're coming to you in downtown or not downtown Pinehurst, but we're going to Sandhills Community College. So if you guys are in the Pinehurst Southern Pines area and you would like to learn more about taxes and retirement, you can. The best way to sign up for that is to give us a call so we can make sure that we have a seat reserved for you. And when is it? It's going to be the week of October 16th and that is going to be on that Thursday, October 19th. So if you guys would like to attend that class or learn about when our upcoming classes are, give us a call at (910) 235-0812. If you're curious about what it is that we're going to be talking about, we do talk about taxes and retirement and how to best utilize that. But we also talk about a little bit on Medicare and a little bit on Social Security. Now we do teach separate classes on each of those topics, but we will just dabble on it a little bit. So if you guys have questions as far as the full landscape of your retirement, I'm sure we touch on it just a little bit throughout that presentation.

Dwight Mejan:
Yep. Great. Well, and they can also I know we have probably some new listeners coming into our show here. We want to welcome them. Of course, if you want to learn a little bit more about us go to Retire360Show.com. You can also check us out on Facebook and Instagram. We also have our own YouTube channel so you can download previous episodes. You can watch us there. Retire 360. Just put that in the search bar and you can locate us there. But hey, we are glad that you're spending a little time with us in the cities here where we're broadcasting and yeah, get in touch with us, our listeners. I know a lot of them probably know this. Mitchell, but 2022, the bond market had their worst year in more in more than four decades. So not the kind of records we'd like to set, but we meet with so many people who discover how much they were paying in fees on the bonds they didn't even know that they were holding in their portfolios. So if you're interested in learning about some bond replacement or bond alternatives and how you can delete that from some of the fees you might be getting charged in your portfolio, reach out to us for a free consultation. We'll send you a free report on bond replacement. You can call us at one of those numbers.

Dwight Mejan:
Keep those numbers nearby (910) 235-0812. And if you're in the western part of the state, (828) 278-7814. So today's show, we always start out with some words of wisdom. Mitchell is going to get to the quote of the week, and then we're going to do some what we call problem solvers. Kind of like, you know, we're going to be artists today, so to speak. We're going to be painting a picture. And you may see yourself in this same picture when it comes to your finances. So we're going to kind of paint what that picture is. And then we're going to give you some ideas and some ways to address that area. If it's a concern of yours, we'll get into some right and wrong questions. Kind of test your financial knowledge on real estate, safe investments and more. And with that, we're also going to talk a little bit about maybe preparing for further market downturn. We don't know exactly what this market's heading for this last quarter. But we've certainly seen some more volatility the last 45 to 60 days. Many of you have seen it when you've opened up your accounts and logged into your portfolio. So we're going to talk about ways that you can buffer and really be a little more defensive to prepare for what could be a further downturn in the market.

Producer:
And now wholesome financial wisdom. It's time for the quote of the week.

Mitchell Keiser:
Yeah, so our wisdom this week is brought to us by the one and only Dave Ramsey. And that is one of his famous lines. Hear him say this a lot. Your income is your most important wealth building tool. And when your money is tied up in monthly debt payments, your working hard to make everybody else rich, which is a very true statement. When you're leveraged in debt, you're making the credit card companies, you're making the automobile companies, you're making the mortgage companies rich. So we don't agree with everything that they say. But we definitely do agree with that.

Dwight Mejan:
Yeah. Well, the you know, I don't think Dave Ramsey said it this way, but there's somebody before him. I heard this 30 years ago when I got in the business is I used to think that the most important asset or the largest asset that we owned was if we owned a home. And certainly if we've been in it for a while, we've got equity. Your home was your biggest asset. Used to used to be the saying when I grew up, hopefully that's not the case. As you get near retirement, you should have other assets, hopefully that are worth more than your home. That's the goal anyway. But I always heard your ability to earn an income is your largest asset, and that's very, very true if you think about it, if you're still working, that ability to earn that income is what provides the savings and, you know, the lifestyle target that you're shooting for when you are able to retire. So definitely very true there. Definitely good wisdom. Yeah.

Mitchell Keiser:
And you know, I'd even just add to his quote just a little bit and say, you know, income is important, but your discipline to keep your income and to save is also equally important. Now, if you guys feel that you are, I think there is probably a point where if you are sacrificing to a situation that it's no longer making you happy, or you're pinching the budget too much, that you know, you don't feel like you're getting the most out of, quote unquote. Life. I heard Elon Musk say one time that it's easier to make $15,000 more a year than it is to cut out $15,000 a year. So, you know, maybe if you're having trouble spending money and you still are cutting back on your spending and you want to save more, maybe the option is to earn more. So what does that look like for you? Does it look like a side gig? Does it look like a promotion? That could look different for everyone, but just another perspective to think about.

Dwight Mejan:
Good. Good point, good point. Well Mitchell let's I want to dive in with a little economic update here. I know you had been doing some research. Actually filled me in on some specifics that are in the news. I don't know that a lot of our listeners are getting some of the global perspective of what's going on, and you had an interesting story that I know you've been following with regard to specifically inflation. And I'll let you kind of I'm just teeing it up for you. But not every country is seeing inflation in, you know, regress and come down. We've had some good numbers recently here in the last, you know, six months. We've certainly seen it a little bit of a downward trend. So that's been optimistic overall for the market and just for budgets and pocketbooks. But it's not the case everywhere is it.

Mitchell Keiser:
No absolutely not. You know we talk a lot on our show about inflation and how high inflation has gone, especially these past three years. And it seems like, you know, the US like what's going on, what's going on, you know, politically, financially. Where's all our money going. We're watching, you know, billions of dollars getting handed to Ukraine and all these other places. But found this article that was talked. Well, there's several articles talking about the inflation in Argentina. I don't know if any of our listeners are keeping track with that, but the inflation in Argentina rose 12.4% in August alone. And I had to. What attracted me to this article was the overall annual inflation. So the overall annual inflation in Argentina is 124.4%. According to figures released by their governments index statistics. And this was just this past Wednesday. So yeah, they had double digit inflation in just one month. And the high inflation, there was another part of the article that said that the overall evaluation of their peso had gone down about 20%. So the acceleration or deflation is the pass through their devaluation of their currency. So that's some crazy stuff. You know, we think just about how much we've seen loss and that we've seen inflation rise in the value of our dollar, which is true, but definitely is worse in different parts of the world.

Dwight Mejan:
Yeah. You know Mitchell the you know, inflation there I know they've been printing a ton of money, which sounds familiar here for those of us in this country as far as the printing. And we're seeing a lot of infighting right now. You know, even in Congress, you know, we're seeing this week, you know, one of the representatives, Matt Gaetz, down in Florida, you know, he wants to try to oust or get rid of McCarthy for promises they say were broken. And regardless of what side of the aisle, you know, anyone's on any of our listeners. We don't go political on this show. But, you know, we've got to get in control of our spending. And 40% you might have mentioned this, Mitchell 40% of Argentinians are at the poverty level, and some of that is being driven by just printing more and more money. And if I'm not mistaken, I don't know if your research came across this. They're not the largest country right now or the biggest dealing with inflation. I'm not mistaken. Saw Zimbabwe was over 280% inflation year to date. So it's a it's a big problem across the globe. And you know we're by no means you know out of the woods with it. We you know continue to watch that. But yeah don't.

Mitchell Keiser:
Know I didn't see that about Zimbabwe. I had just read because somebody had brought it up to me just this past weekend. We were at a local community event, and a lady was asking me if I knew what was going on with Argentina, and we kind of went home and did some research. One of the things I also found in that article, Dwight, was that the price of beef went up between 40 and 70% since July. I just think that's crazy. You know, you think of people that are buying food and people that are already living paycheck to paycheck. An article that I had read also just continued to talk about how people are just not buying beef. They're not buying certain types of foods, which I'm sure is, you know, in effect, going to cripple those industries. Yeah. But I know the lady that I was talking to, she told me. And what attracted me to even look up this article is that she said there was physicians in these countries that were struggling to pay for their grocery bill. So people were interviewing physicians, and the physicians were saying that they were struggling to pay for their groceries. And I don't think it matters necessarily what type of doctor you are if you're a physician struggling to pay your grocery bill. I think that means a lot more people are in trouble.

Dwight Mejan:
Yeah, inflation is a very real problem for us. And, you know, hyperinflation is the is the concern. And that's exactly what's happening in countries like Argentina.

Producer:
It's time for this week's Problem solver.

Mitchell Keiser:
So last week we left off with a segment that we do called the Problem Solver. So that is going to be a problem that I'm going to give Dwight from. We get these problems from questions that are asked over the radio, questions that are asked during some of our classes or that we get from some of our clients. So I'll give a problem and Dwight will go ahead and give the solution. So problem number one, we have a female listener who is a marketing executive recently reached out because she is concerned about her assets. She's looking to retire in ten years. Market volatility has her scared about how much she will have to live on during her golden years. So what could she do?

Dwight Mejan:
Yeah, and maybe just a little bit more backdrop before just go into the solution for this particular client. You know, we had met with her and asked her a series of questions. She was doing a really good job because she was maxing out not only her 401 K, but she was contributing outside of that into another IRA account. So she was doing everything proper to max out the places where, you know, she was taking advantage both of the tax code, trying to do a Roth with the money outside of her 401 K, and then she was actually doing a contribution, some Roth and some traditional IRA in her retirement account. So she was doing a great job there, but she was looking for a place. She was very conservative minded and she, she had a she had a family and she was wanting to make sure they were taken care of. So what we talked to her about was an indexed universal life. She had life insurance. Most of it was term insurance. So as we got to ask her a series of more questions, she was looking to get more a target for more tax free income in her retirement and still maintain a portion of some life insurance.

Dwight Mejan:
So we talked to her about an indexed universal life insurance, and this just happened to be an ideal solution for her. These policies can be considered for a lot of different reasons depending on an individual's financial situation, depending on their goals, depending on their risk tolerances. But we're going to give you three reasons why someone might consider an indexed universal life, but want to just caution people. Before we give you these, some of you are funding life insurance that has cash value in it, somewhat like this type of policy. But if you're doing that and not funding other retirement accounts first, we believe that's the wrong way to do it. This is for people who are maxing out everywhere else, and they're looking for more tax strategies and more tax shelters because they want to take income out later in life. And that's what this is really designed for. So if you're somebody who's listening to this and you know, you think this is the first strategy you should take, or perhaps maybe someone recommended it to you and you're wondering, hey, is this a good idea? Because you're not funding some other places? First, definitely give us a call at the end of this segment, and you may be kind of out of the wrong order, so to speak, in terms of what you're funding.

Dwight Mejan:
But here's here, here, if this is a good fit, this would be number. The first thing that would be a consideration and a common reason why you might consider it. Number one, the market, your growth is linked to the market. And it's got potential with limited downside risk. So indexed universal policies offer potential for cash value growth. That's linked to the performance of a specific market index for example the S&P 500. So this allows policyholders to potentially benefit from market gains, which provides opportunity for higher returns compared to traditional fixed universal life policies. So that would be, you know, one reason. Importantly, indexed universal life policies typically have a floor that protects against losses in the in the linked index. So even if the market index performs poorly, the policyholder is usually guaranteed a minimum interest rate, which ensures that cash value won't decrease due to market downturns. So you got to be looking at illustrations properly. That's something that we can run for any of our listeners, if we feel like that's a good fit for you to consider. But that would be the first advantage. Mitchell I'll give.

Mitchell Keiser:
You. Yeah, I'll give me another one. Another advantage would be tax advantages and savings on potential income. So the cash value accumulation inside the rose on a tax deferred basis. This tax advantage means the policyholders will owe taxes on gains as long as the funds remain inside the policy. So as long as they're in there, they'll pass to the beneficiary on a tax deferred or they'll they'll go to the beneficiary on a tax free basis. Another. Just add on to that was that you can access the cash value during that time and have withdrawals on their policy loans, without having to pay taxes on it. Yeah, but.

Dwight Mejan:
Point. Mitchell. So number three, this would be just the third reason we would give. And there are some others but flexible premiums and customizable coverage. So we always got to remember that when we're talking about insurance, insurance is always first and foremost it's an expense. But these types of policies have these side accounts that again, if you've done a good job funding other retirement accounts, this could be another outlet where you have tax free money that you can borrow out later in retirement. Indexed universal life policies offer flexibility, though, in the premium payments, which allows policyholders to adjust the amount as well as the frequency of payments, basically to suit whatever your financial situation is. This can be particularly helpful for those with variable income or with changing financial needs. So there's flexibility in these policies. That's why they're called flexible premium policies. So if this is something that you'd want to consider for we'll give our number here at the end of this segment before our next commercial break. But ask us about that. We'll be happy to, you know, look and see if this is a good fit for you. But also if you're in an existing contract and you're wondering, is this the right direction for me to go? Or this doesn't seem like it's performing like it should, we could take a look at that and give you a free analysis on that and give you our opinion on that. So, Mitchell, you've got another scenario here that you're going to kind of paint the backdrop.

Mitchell Keiser:
And so scenario number two, we've had a client, a gentleman in his 50s. He called us because he was concerned that he was too heavily invested in one particular stock. And that was of his longtime employer. He is 51 and his goal of retiring is at 65. So he has 14 years.

Dwight Mejan:
Yeah. Remember this situation, this particular situation, we were able to liquidate half of this client's holdings in his company stock. And then we were able to diversify investing that money in a little different portfolio, a different setup. So we kept the other half invested in his company stock. He felt very loyal to this company. He worked for a good company. The stock had performed very, very well, but he was sensing that he had all his eggs in one basket. So what we did, we kept half of his stock. We implemented implemented a Roth conversion, making his portfolio more tax efficient. Again, our listeners, if you want to learn more about the Roth conversion and those strategies, that's something that we teach in that taxes and retirement course. And we'll kind of lay out some ideas for you in that regard. He's also purchasing a fixed product that is principal protected, but similar to the universal life policy we were just talking about. This doesn't have an expense to it. He's got no fees on this other solution. But when he turns his income on at 65, in about 14 years, he's going to generate guaranteed income payments from that $75,000 investment of $33,000 per year. And that's income that he can never outlive. So it's basically giving him another pension check. So if you've got money saved and you think you can do better, chances are you're probably right. So if you are absolutely fatigued, perhaps by taxes and you have to withhold on IRA withdrawals, then consider a Roth conversion and you can contact us for a free consultation today our number is (910) 235-0812. If you're in the Moore County area, and if you're in the mountains, you can call us at (828) 278-7814. And we'll we'll help you sort through that. So Mitchell, before we get to that next one here, why don't we take a quick commercial break and we'll be right back.

Producer:
You're listening to Retire 360

Producer:
You're listening to Retire 360 with Dwight Mejan. Now back to the show.

Mitchell Keiser:
All righty, folks, we are back. And you are listening to the Retire 360 show. Brought to you by 360 Capital Management. Next we're going to hop into another problem. This is evolved around the S&P 500. So far this year we've had a pretty significant increase in the S&P. But that's not to be followed by a certain decline these past couple of months that we had seen with some of the recent market volatility. So Dwight with a problem that we're seeing some folks have is they're seeing this volatility with their portfolio. They have a long time that they need this money to last them. And they're wondering what could I do to maybe limit some of this volatility. Is there ways to continue to capture some of this gain of the S&P while maybe limiting some of my downside risk? Is there ways to potentially hedge some of the risk people want to know how can I, you know, not just put all of my money into bonds? I know you mentioned earlier in the show that the average bond portfolio over the past, I think it was 15 years has averaged 2%. So if somebody wants to get more than 2% and they want to be conservative, what is the way that they could do that and what could that look like? Maybe with figures, could you give us a range of, you know, maybe if they did this strategy, this it could look like this. Or if they did this, it could give that. Just give us maybe a few examples.

Dwight Mejan:
Sure. Yeah. Just to kind of recap what you're saying there, Mitchell. The numbers show, you know, the benchmark index is up so far in 2023, but things have taken a u turn the past couple of months for sure. From August 1st through the end of September, the S&P has lost more than 6% of its value, wiping out a big chunk of the chunk of the gains from earlier this year. And something I want our listeners to understand about the S&P 500 is what's driving most of that growth right now. It's really coming from less than a dozen companies are accounting for 85 to 90% of the growth. And it's a lot of, you know, tech it's it's AI. So there's some big companies in that S&P index that are driving much of what we're seeing in this growth. So the rest of those companies, if you're kind of looking at your portfolio and you're wondering, well, why am I not seeing that unless you own like an S&P 500 index or that type of fund, it's going to be difficult, you know, for your portfolio to track what that's doing. Some people are concerned about the so-called October effect. And Investopedia, they define this as psychological anticipation that financial declines and stock market crashes are more likely to happen this month. For example, you know, there was a bank panic in 1907. The stock market crashed. Many of our listeners are familiar with in 1929. And then how can we forget Black Monday, 1987? All that happened during the month of October.

Dwight Mejan:
So a lot of people are wondering what to do with their investments, you know, during these uncertain times. And this show is about what to do. So you haven't made a decision unless you've taken action. So solution wise, it's natural for your risk tolerance to go down as you age, especially if you're in that retirement red zone, which is, you know, approaching five years or so before you get ready to retire. And then certainly if you're, you know, after retirement, you need to be a little more defensive. So if you've been kind of in that buy and hold type strategy, but you've been wanting to take some risk off the table, now might be a good time to consider it. And I'm going to give you some specific ideas and give you, you know, some ideas. One area and I would split the portfolio basically in two segments here I'm going to talk to both sides of it. One would be the completely protected side of your portfolio. And this would be what we call your smart safe money. When we say safe, we mean that it's completely insulated against market loss. We can put our guaranteed cap on as fiduciaries, which we are, and we can talk guarantees on this side of the portfolio. The good news about, you know, one thing that's good about somewhat about some of the rising interest rates is we've seen higher yields in the fixed arena right now.

Dwight Mejan:
You know, things like CDs, money market accounts, fixed term annuities from anywhere from 1 to 5 years. Many of those instruments right now are paying, you know, north of 5%. I saw some recently here in the last week, 6.15, I saw one company had a 6.15%, but they were locking in for ten years. That might. Be too long for some of our listeners, but anywhere that range today is somewhere between that four and maybe slightly higher than 6%. The other thing you have to consider, though, is what is my time horizon in terms of liquidity? So you need to understand with certain fixed instruments, you know, what are the potential penalties, if there are any, in getting my hands on this money, which is why we never advocate putting all your eggs in one basket. You know, if you're, you know, on that completely protected side, just make sure you're asking the questions on how you can access money. How liquid is the money? Is there any penalties? What is that schedule look like? That would be something to make sure you're you're asking those questions with whoever you're talking to about that. And then on the other side of the of the coin here is the we call your securities bucket. That's the money that you want to do. You know, you want to have some smart growth options in there. And when we say smart, many of our listeners, Mitchell, don't realize that there are products out there today where you can take advantage of some buffering.

Dwight Mejan:
Okay. And buffering is basically where your money is protected over a defined outcome period of time. For example, the defined outcome might be one year. That's a typical time frame that we use inside of client portfolios, where you can get a buffer product which essentially just says this. If the market goes down and you have a 15% buffer and the market drops 20%, this is a security. It's fully liquid. You can get your hands on it tomorrow if you need it. But if if you don't hold it till the end of the term and the market's down, if you liquidate that position early, you're going to be down whatever the market's down with that particular instrument. So you want to make sure even in that product, you have a time horizon where you could hang with it for a year. Because if the market is down let's say 20% and your buffered against the first 15%. You're only going to be down 5% if it finishes down 20 over that 12 month period of time. So that's what's known as a buffer. And I'll give you a specific product here in a minute. That might be a fit for somebody to consider. The other thing is there are products. Another another term that we use in the industry is there's a breach and a product that we use quite often with certain clients within their portfolio is we will use structured notes. A structured notes is an alternative asset class.

Dwight Mejan:
And what a structured note is, it's a debt obligation similar to a bond that also contains an embedded derivative component. Now if some people hear that word derivative and that's intimidating to some, it's unknown to many people listening to this. Or it's even scary to say derivative. That sounds risky. Okay, you got to know what you're in, of course. But according to Investopedia, a structured note is a debt obligation that also contains that embedded derivative component that adjusts the security's risk and return profile. I'll give you an example of that here in just a minute. The return on a structured note is linked directly to the performance of an underlying asset, or a group of assets or an index, and the flexibility of structured notes allows them to offer a wide variety of potential payoffs that are difficult to find elsewhere in the market. So I want to give you an example of one type of a structured note that might be a fit. Let's just say that you're an investor and you're looking for income. So income is your objective and you're taking income right now, perhaps through dividends. Maybe you have a dividend portfolio that's yielding 4%. There are structured notes that by the way, are double that more than double that yield. And the way they work is this there. There's an index that that structured note is, is linked to or it's tied to. And published on that note is a specific amount of downturn that that index or that basket of indexes has to drop over a 12 month period of time.

Dwight Mejan:
And if it doesn't hit that, if it doesn't breach that level. And I'll just use an example here of 30%, because we use structured notes, a lot of the income ones that we use have a 30% buffer on them. So in the course of a year, if the market doesn't fall and we'll use the S&P 500 again as an example, since it's a widely known index, if that S&P does not fall 35%, it could fall I'm sorry, 30%. If it doesn't fall 30%, all of your interest that's being paid on that note and it pays it monthly is given to the investor and at the end of the 12 month term, if that's the term we're talking about, that principle is returned to the investor. So simple number here. If you had a $10,000 in a structured note paying 10%, and it has a buffer of 30%, even if the S&P were to fall 20% over the next 12 months, none of your 10,000 lost any money. It's just benchmarked against that index. So if it does, if we don't have a breach of 30%, 100% of your principal is returned in my example, $10,000 plus your interest, if you had a 10% interest yield, you would have gotten your $1,000 back plus your ten. You would have $11,000 your principal plus your interest. So so let me ask.

Mitchell Keiser:
You a question on that, Dwight. So for that, because people are wondering that sounds great. So the downside of that is when they breach. So could you tell us of the breaches what percent of contracts have breached since 2008?

Dwight Mejan:
Yeah, it's a great question Mitchell. So when we when we studied that on the terms of the note that I just kind of outlined with a 30% buffer or a breach, that has to happen. We went back 30 years to see what percentage of those structured notes would have defaulted under that, under that strategy. And it was about 3.4% actually breached. And what would happen? Because I know some of the listeners. Mitchell, on your question, would wonder that. So let's say it does breach. Let's say there is a 35% breach on the S&P. So it crossed that barrier of 30%. What do I get back? Did I lose all my money. No you didn't lose all your money. If the index is down 35% let's just use your $10,000 note investment. You would get back 65% because you lost 35 on the index. So $6,500 is returned to you, the investor, plus your interest. Your interest payments are a guarantee. So they would have to pay the $1,000 back on the 10% example of interest. So you would have got back 6500 plus your 1000. You would have got back $7,500 of your original ten. So even though the S&P fell 35%, you were down 25%. But if you don't see a breach of of more than 30%, then all of your principal plus the interest would be returned. So one of the ways that we mitigate risk in purchasing structured notes is we do what's called a laddering concept, where we look at the proper allocation for a client's portfolio. And just as a rule of thumb, we'll use anywhere from 10 to 30% at times depends on the client's objectives.

Dwight Mejan:
But let's just say we were using 20% allocation to structured notes. We would put that in there and we would ladder that amount of money over a period of months. It might be 3 to 6 months, so that every month we're, we're we're setting a new 12 month term so that if there was a breach, it gets more difficult for the next month's note to be breached as well. So we just spread that risk out over a longer period of time. So no, the structured notes is probably a new concept or a new investment to a lot of our listeners. But if you'd like to learn a little bit more about those, feel free to call us. We can get you a white paper, or it'll describe a little bit more about that. You can reach out to us here at the show, and we'll be sure to get you some more information. And we can go over some more specifics with you. And I just gave our listeners Mitchell one example of an income note, but there's also principal protected notes that remove the downside completely and just give you an upside with a cap. So for a lot of our listeners who are, you know, risk averse and they're looking for ways to potentially, you know, yield more than what they may be getting in some of their fixed accounts, but they want the assurance that they're they have safety from the downside. There's a whole different type of note for that. And we could probably do a whole show one time on the different types of notes. But we wanted to give you just an example.

Mitchell Keiser:
Of.

Dwight Mejan:
Of one of them today. So Mitchell might be a good time here. I know that after that explanation of structured notes, some of our listeners might need a breather. And why don't we just take a quick break and we come back, we'll pick it up where we left off here. So we'll be right back.

Producer:
Like what you're hearing, you can watch the show to visit youtube.com and search Retire 360 to watch clips from this program. You're listening to Retire 360 to schedule your free, no obligation consultation with Dwight, visit Retire360Show.com.

Mitchell Keiser:
All right. And we are back. You guys are listening to the Retire 360 show, brought to you by 360 Capital Management. Next, we are going to move into our new segment. And that is going to be five steps to prepare for a stock market crash. While the market isn't exactly crashing at the moment, many big name investors are calling for turbulent times ahead. We have seen some of that, and Dwight and I had talked about some of that in the beginning of this show. But if your crystal ball is broken, as is ours, here are a few steps. That we are going to talk about to help you prepare for a crash on Wall Street. Do you want to start us off with number one?

Dwight Mejan:
Yeah. I think, Mitchell, the first thing here is just know what you own and and why you own it. You know, we we like to say, you know, what we do here is we we do risk managed portfolios. So we're not trying to time the market. And if you're one that does that, chances are good you're missing a lot of opportunities because some of the worst days in the market historically are followed by some of the best days in the market. So we say it's not timing the market here. The importance is your time in the market and making sure that you have the proper risk adjusted portfolio to suit your long term objective. It's not just trying to get rich quick or get some of that quick upside, because if you're panicking and you're pulling out of the market, chances are good you don't have the right allocation within that portfolio. So avoid making fear driven decisions and stick to your investment strategy. Again. Know what you own. Know why you own it and and hang in there. So that'd be my first piece of advice. Mitchell.

Mitchell Keiser:
Yep. And then I will follow that with trust and diversification, diversifying your investments across different asset classes to help mitigate those risks during market downturns. So Dwight just gave a whole bunch of great examples. I would venture to say that most of our listeners had not heard of most of those. I will say that before, I was a registered financial advisor, that I had not heard of most of those. So I would imagine that the average listener had not. But Dwight, you were spot on. I just wanted to mirror what you said with people being making sure that they're in the right risk class, because Dwight and myself are in totally different risk classes, and that's not because I'm so risky. And Dwight is so conservative. It's because I'm 27 and Dwight's 54.

Mitchell Keiser:
54. I'm so yeah. So you different stages of life calls for different types of risk class. So if you guys are nearing retirement or you are retired and you're starting to see big fluctuations in your portfolio, that it could be a call to you to make some changes as far as how you're invested and what the risk is that you're taking in your overall portfolio. So diversify and just mirror what he said about making sure you're in the right risk class.

Dwight Mejan:
And you know, Mitchell, I know you don't mind me sharing that with our listeners, as am I'm always encouraging Mitchell to, you know, be aggressive, you know, with his portfolio to, you know, not not to the degree that I'm telling him to buy load up everything on crypto. You know, we got Sam Bankman-Fried in the news again this week. You know, his trials all starting with this whole crypto exchange and all the charges against him. And he's pled not guilty to all of them. But they've got, from what I understand, 1300 pieces of evidence that they're going to be presenting against him here this week. So that'll be an interesting case to watch. So I'm not saying go into the crypto market. If you're young you want to dabble in it. I certainly wouldn't put too much percentage of your portfolio in it. But I'm telling Mitchell all the time, he's got time. He's got years ahead of him to make up difficult years. You know, I'm 54. I can handle some risk, but I want to be smart about it as well. So there it's a good point Mitchell brings up. So you want to kind of invest according to your age. We use that hunted rule here.

Dwight Mejan:
You know if you're if you're 5,050% of your portfolio, try to have it, you know, very conservative if not completely principal protected. And the other 50% take that measure of risk that you want to take. And on that note, too, I tell this more to our listeners as they get closer, particularly to the forced distribution age, which for many people, if they haven't started, is either going to be 73 or age 75, depending on what year you were born, but to to be cautious of having a lot of money in the market, if you if you're even if you're comfortable with risk, the reason why you want to have a percentage of money somewhere where it's principal protected is if you have to pull money out when the market's down, you run a greater chance of running out of money. And I know for our clients, the ones that we serve is when they have to pull these distributions out of their portfolio. One of the things that we look at is, you know, making sure they have a fixed bucket that they can pull from, particularly in years where that market is down. So we can let that side of the portfolio recuperate and get back some of those losses that they experienced.

Dwight Mejan:
And we could pull that required minimum distribution out of that fixed allocation where it's not it hasn't been affected by the market declines. So yeah, that that next tip here would be consider. Ion. The dip market dips can be buying opportunities for long term investors, especially if you've got cash on the sidelines. And we still have in the market a lot of cash piled up on the sidelines. So I know maybe some of our listeners are waiting for this next big dip so they can buy back into the market. So it's a good idea to have cash available for that reason as well, other than it's just a good idea to keep cash. And it's also a good point and a good reminder to let our listeners know we're huge proponents to have at least three months of your living expenses. I would prefer that you have six months, and if you're self-employed, I would say it's probably closer to nine months of your living expenses, if not even up to a year. That would be a wise thing to do. Rachel, we got a couple more here we want to share.

Mitchell Keiser:
Yeah. So I would just kind of follow where you just said and say take advantage where you can, exploring the opportunities like a Roth. So Roth's sometimes have income thresholds and limit thresholds. So if you're a under 50 you can contribute up to 6500. If you're over 50, you can contribute an additional $1,000. So 7500. They have a little catch up contribution there. However if you make over for a single person these numbers are not correct. But there are certain income thresholds that you have for a single person. It's somewhere around 170 175 married couple. It's somewhere around a little over $200,000. As far as how much you can make before you can contribute. Now, there are ways around that. Like you could do a backdoor Roth where you pay all the tax up front. However, if you guys are considering doing any kind of Roth conversion, whether you are in your working years or whether you're retired, we strongly, strongly, strongly recommend that you guys consult with a tax professional because you don't want to be in a big pickle when the IRS sends you a ginormous bill for all the taxes you owe. So just to give you guys an example, if you are in a high income threshold, let's just say you're in 25% and you wanted to convert $100,000 into a Roth, if you were still in the 25% tax bracket, you would owe $25,000 in taxes.

Mitchell Keiser:
So you want to make sure that you're aware of all those implications before you would just go and do something like a Roth conversion now, and also taking advantage of things where you can when markets are low. That's probably a good time to be buying into the market. There's a term in the investment world called dollar cost averaging. What that means is that you're constantly buying into the market, whether it's a certain stock mutual fund, ETF. You're constantly putting a certain portion of money. Say it's $500 a month or $100 a month, or $1,000 a month, wherever you're at in your earning and in your savings. So you're constantly just buying these funds. And then the objective in that is you're buying it when the funds cost are high and you're buying it when it's low. So it'll end up averaging out. That's why it's called dollar cost averaging. But that's a that's a strategy that we definitely recommend to people pre-retirement. Yeah. Take advantage where you can.

Dwight Mejan:
Good advice Mitchell. Very good advice. And you know on that note too, you know some of you are wondering you know what? I don't have professional help. I just invest through my company retirement plan. It's where I have all my money. I don't even know what it would cost me to get advice. Well, if you're a listener to this show, we always advise people, get expert help, and that's what we are. That's what we do here at the heart of 360 Capital Management. We are teachers. We are fiduciaries. That's why we go and teach classes in public areas where people can get, you know, objective advice. They can walk in, they can walk out and they can digest that material. We have people sometimes call us months later, we had that happen with a new client. This past week, they hung on to notes that we had given in one of the classes that we taught, and they were in a situation where they needed some advice and they decided to give us a call. And what would that look like for you if you did that? What does it cost on the front end? We don't charge for initial consultations, and we don't charge when we have a second meeting. And we lay out some solutions and some ideas, we recognize that people don't want to be put on the spot.

Dwight Mejan:
So we don't put people on the spot. We send them back from their second meeting with the solutions that we've recommended, and let them digest that a little bit. Some people need to do their own research before they feel comfortable, both with us as well as with the allocation strategy. And you're not you're never going to feel any pressure. That's not our style. And I would tell you, if you go to someone who does put pressure on you, that's the first indication you have not found the right individual, okay. Because somebody that's a fiduciary is not going to do that. They don't they don't need your money. Yes. We have to make a living doing this. We all make a living doing something. But we want to help guide you the right way. And that's what we're going to do through a complimentary consultation. And we'll lay it out. We're very transparent. If you were to hire us, we'll lay out the expenses, what that would cost, and we'll let you compare that, you know, in other places as well. And I think you'd find our value to be very good for what we're doing. So there's no cost or obligation. Just give us a call and you can reach out to us at if you're in the mountains at (828) 278-7814, or if you're in Moore County, we're at (910) 235-0812.

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

Mitchell Keiser:
All right. And we are going to move into our next segment. And that is going to be right or wrong. So I'm going to be asking Dwight a series of questions to test his financial knowledge. But I'm also going to be testing your financial knowledge. So if you guys are sitting in the car or going throughout your house or whatever it is you're doing, I want you guys to think about this before Dwight answers it, because we're going to go through a series of financial situations, and we're going to see how much you guys know. So number one, Warren Buffett says a commercial real estate crisis is coming. Is that right or wrong?

Dwight Mejan:
Well, I hope you said wrong. This is a little bit of a trick question. Buffett's right hand man. His name is Charlie Munger. He's a legendary investor and Berkshire Hathaway vice chair is warning of trouble in the US commercial property market. Emphasize commercial specifically regarding distressed loans held by banks. What Munger points out is that US banks are exposed to a significant amount of bad loans as property. Prices decline, although he notes the situation is not as severe as the 2008 financial crisis. Munger did highlight that challenges in the commercial property market, such as high vacancy rates due to the work from home trend which happened during Covid affected office buildings, it affected shopping centres and some other properties. So investor Ray Dalio is predicting, well, Michell I'm going to give you this one here. This I'll let you do the next one here. So investor Ray Dalio is predicting the economy will slow due to a debt crisis. Is that right or is that wrong.

Mitchell Keiser:
That is right. So according to insider, Ray Dalio is worried about America's borrowing binge economic growth, cooling. The billionaire investor warned of a debt crisis at a meaningful slowing of the economy. Dalio has pledged flagged interest rates, civil unrest and geopolitical tension as concerns. I'm not sure what you guys know about. Do you know who Ray Dalio is? Do you follow his.

Dwight Mejan:
Yeah, I don't follow him. I know I know who he is, but I don't follow his you know his blog or his post.

Mitchell Keiser:
So I'll share my share my age here. So Ray Dalio he's actually a big Instagram financial person. So I see some of his stuff there on Instagram. So for our listeners you're on Instagram. Ray Dalio he's got younger stuff.

Dwight Mejan:
The younger crowd.

Mitchell Keiser:
Absolutely. Dwight I'll turn it back to you. So if your employer doesn't offer a pension plan there is no other way for you to create a personal income stream that you can never outlive. So if you're not given a pension, can you still get one?

Dwight Mejan:
Answer that is, of course it's wrong. There are some different products that can help you protect and grow your wealth, and establish an income stream that you could never outlive. Now, some of those income streams can be completely protected, guaranteed, and some of them not 100% guaranteed. But they've got long track records of providing a steady stream of income that that's within a certain range, you know, like 4 to 6% or 4 to 7%. They've had a pretty good history of doing that. So, you know, it's different different strokes for different folks. But one of the things I love about the open market capitalist society that we live in, we have started, we have seen more and more creative ways today to generate income. You know, it's not just the old, you know, portfolio of traditional portfolio of cash, stocks, bonds and then collecting dividends. We mentioned earlier in the show we were talking about the derivative market, which again is confusing to a lot of our listeners. But that derivative market is a huge and growing market where there is a ton of wealth parked to generate things like income. So lots of different ways to do it. You can get market like returns in some of these instruments without incurring any market risk at all. And then there's others that have market risk, but it's it's diminished greatly by using some of these derivatives. So if you want to know a little bit more about that, we're going to give our numbers here in a little bit. And we can get you some free information or have a complimentary consultation with you.

Mitchell Keiser:
Yeah I just want to yeah, I did just want to add to that because we have people that say that they have pension annuities. We've had quite a few people come in and they're like, oh, well, you know, this person gave me this and I have this pension annuity that will be with me the rest of my life. But they don't realize that they're account value within that can go down. There are certain products that can gobble up your account value. So what what does that mean? Well, what that means is that unless you are 100% certain that you're going to use that as income, it could just totally crush your account value. So if you ever just decided not to do it, then you know, your your account value is gone and all the money that you worked for could have potentially went down pretty significantly.

Dwight Mejan:
Yeah. Good. Good point Mitchell.

Mitchell Keiser:
Yeah. So you got to know your product.

Dwight Mejan:
Mitchell. And this is where I can't believe we're out of time here again. But maybe take the last 45 seconds here or so. Give our listeners I know you're going to be a busy man here in the next couple of weeks for at least a month and a half or so. Oh, yeah. Medicare enrollment. And just maybe share with the listeners what you could do for them as a service and don't plow the phones down. I know we're putting your information out here for a free offer to folks, but, Mitchell, share with the listeners what you can do to help them. Sure.

Mitchell Keiser:
Yeah. No, the the phones have already started ringing for our office. So just so you know, what we do on the financial side and on the insurance side is we seek out plans for our clients. So those are, you know, top plans that are offered to you. We have the ability to go get and bring to our clients. There are a lot of people that see value in that. We've helped a lot of people this past year save a ton of money. On the insurance side, I had a gentleman call me. It's kind of funny this week, and he said, Mitchell, he's like, I've saved over $10,000 this year. And he goes, am I going to be getting some big bill at the end of the year? He's like in his 80s he he was all like against the change. And he's like, Mitchell, what's the catch? And I said, yeah, there's there's no catch. The. Good news is, is that you didn't have to go to the doctor and you didn't have many co-pays, and you saved. Yeah, it was as close to $15,000 between his premiums and his strokes. So there are ways that you can benefit your situation if you guys have a Medicare supplement. You do not need to make any changes at this time. However, if you are in a Medicare supplement, you may qualify to get your premium reduced.

Mitchell Keiser:
That is possible, and it is something else that we do. We work with over 50 different companies and figuring out who has the cheapest and best rates, both on the supplement side and on the Medicare Advantage side. We're not on here pushing Medicare Advantage plans, but there are some very, very good ones that have benefited a lot of people. We've heard of people that have come in here and said that they've tried it, and it was horrible, and they ended up forking out tons of money. I'll tell you if you've heard of that situation, that situation came from somebody that didn't work with somebody that did it right. Because there's no way that that should happen where somebody is entered into a plan where. Uh, they end up extremely in the red. It hasn't happened yet. We have a couple hundred people that have done it, and I'm still yet to get that feedback. But if you guys have any questions on Medicare Advantage plans or drug plans, anything healthcare related, I'd be happy to give you advice if you would like that. Our office number is (910) 235-0812. If you're in the mountains, our office number is (828) 278-7814. We thank you guys for listening and we'll be back next week.

Dwight Mejan:
Have a great week everybody.

Producer:
Thanks for listening. To Retire 360. You deserve to work with an experienced and licensed expert who will strategically work to protect and grow your hard earned assets. To schedule your free, no obligation consultation with Dwight, visit, Retire360Show.com or pick up the phone and call (910) 235-0812. That's (910) 235-0812. Investment advisory services offered through Brookstone Capital Management LLC, BCM, a registered investment advisor. Bcm and 360 Capital Management are independent of each other. Insurance products and services are not offered through BCM, but are offered and sold through individually licensed and appointed agents. Investments involve risk and, unless otherwise stated, are not guaranteed. Past performance cannot be used as an indicator to determine future results.

Producer:
Structured notes involve risks not associated with an investment in ordinary debt securities. The securities are not bank deposits and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency, nor are they obligations of or guaranteed by a bank. The securities will not be listed on any securities exchange and the secondary trading may be limited. Therefore, there may be little or no secondary market for the securities. Accordingly, you should be willing to hold your securities to maturity. The securities are subject to the credit risk of the issuing bank, and any actual or anticipated changes to its credit rating or credit spreads may adversely affect the market value of the securities.

Producer:
At 360 Capital Management. We know you've worked hard to earn your money, and you've worked even harder to save it. When it comes to wealth management and planning for retirement, Dwight Mejan is passionate about helping people protect and grow their wealth. Visit Retire360Show.com to schedule your free consultation today. It's a 1000 hundred dollars value provided at no cost to you. Book yours now at Retire360Show.com.

Sonix is the world’s most advanced automated transcription, translation, and subtitling platform. Fast, accurate, and affordable.

Automatically convert your mp3 files to text (txt file), Microsoft Word (docx file), and SubRip Subtitle (srt file) in minutes.

Sonix has many features that you'd love including collaboration tools, share transcripts, automated translation, automatic transcription software, and easily transcribe your Zoom meetings. Try Sonix for free today.