Business Innovators Radio - Interview with Brendon Murphy, CEO and President of Compass Financial Solutions Discussing Personal Pensions

Episode Date: February 10, 2025

As the CEO and President of Compass Financial Solutions Inc., in Havertown, PA, I provide professional expertise in Long Term Care, Business Insurance, Life Insurance, and Personal Pension Fixed Annuities products. I’ve been helping families, individuals, and business owners secure financial peace of mind since 2013.At Compass Financial Solutions Inc., I currently service individuals, families, and businesses throughout the Greater Philadelphia Region, New Jersey, Delaware, North Carolina, Las Vegas, and Georgia.Learn more: http://www.mycfsi.com/Influential Entrepreneurs with Mike Saundershttps://businessinnovatorsradio.com/influential-entrepreneurs-with-mike-saunders/Source: https://businessinnovatorsradio.com/interview-with-brendon-murphy-ceo-and-president-of-compass-financial-solutions-discussing-personal-pensions

Welcome to influential entrepreneurs, bringing you interviews with elite business leaders and experts, sharing tips and strategies for elevating your business to the next level. Here's your host, Mike Saunders. Hello and welcome to this episode of influential entrepreneurs. This is Mike Saunders, the authority positioning coach. Today we have back with this Brendan Murphy, who's the CEO and president of Compass Financial Solutions, and we'll be talking about personal pension approaches with fixed. index annuities. Brendan, welcome to the program. Mike, thank for having me back.

Hey, you're welcome, and I think that a lot of times people hear pension. Nobody gets pensions these days. Well, we're talking about a personal pension, so I'm excited to hear how you serve your clients that way. Let's kind of define, actually, what is a personal pension? So a personal pension is just exactly like it sounds. I mean, if you remember what your grandparents had, and maybe you don't, but they work for a company for a certain amount of years.

and at the end of the day, the company paid them for the rest of their life and left a little bit over for the misses. So the personal pension these days is really just taking your own dollars of some sort of IRA dollars at the end. You have a 401k, let's say it's worth a million dollars or $500,000. You take a portion, say $200, and then you're going to roll that to what's called a fixed index annuity with a lifetime income benefit rider. And then it's going to pay you for the rest of your life an income stream that you cannot live. And then the rest of your money, you can reinvest into the market or whatever you decide you want to reinvest in. But the number one part about the pension is that you're getting guaranteed income. I love the word guarantee.

And I want to go a little bit deeper on that, but also something you just said to income, you cannot outlive. Well, I think one of the big fears that people have in their mind is, oh, I need to save X number of dollars because what if I retire here and I live to X and I need to have enough money? well, how can you say you'll never outlive this from this type of annuity? Right. So it's a contract between you and the insurance company. So client A insurance company. What happens is that you, whatever dollar amount you invest, they use that money to give you a percentage, a payout percentage is what it's called. And it's based on your age.

Right. So let's say you're 65 years old. Your payout percentage is 5.5%. and the value of the annuity is $300,000, you're going to take that times the 5.5%. They're going to give you a yearly income that you can get monthly, quarterly, or annually, and they're going to pay that every year of the rest of your life. And that's what's called a fixed annuity with income benefit rider. So they'll pay that either single or joint, just like a pension would, if you received it from a company.

So for, like, 50 basis points, so if I said, 5.5%, So for 5%, they'll pay that to you, and then they'll pay that to your spouse for the rest of their life as well. You know, in life, there's not many guarantees, you know, ha-ha, death, and taxes. You know, that's funny. But when we start getting into guarantees in money and income and you can't lose principle, and here's a guaranteed income of X percent and a guaranteed income stream, that's huge because I know that a lot of people go, oh, well, I'm just going to pop out 30, 40 grand out of my portfolio. Well, if you still have it in the market and you're taking out that amount of money,

what if the market was in a downturn at that moment? Well, now you've taken money out and it's at the lower rate. And now that creates a whole avalanche of other issues. This is a powerful concept that I think a lot of people don't even realize it's available. Yeah, I think they miss of that. So if you go back to even 2008, you know, people lost 50% of their portfolio at the time, Well, they were taking money out of their account. Say they were taking $40,000 and you just lost 50%.

And then you're taking the $40 on top of it, right? So you had a million dollars and you lost 50% and now you're taking $40,000 because that's what you have to live on. Well, what if we replaced that $40,000 you were taken out of that account and we put it into a fix and next annuity? Well, that would continue to have paid you that $40,000 of income while the market over the next six years was coming back. Okay. Same thing even now, even in the bull run. If you had taken some money out of the 401k or out of the IRA, if you left your job, 401K, you rolled it to an IRA. And then you put some of that money into the annuity.

You're taking your guaranteed income. You had reinvested the rest of the money inside the market. And on this bull run, you've already made back what you put into the annuity. And you're living off the income. Now you're even more far ahead. Right? So if you want to start pulling off the money in the market, you're ahead of the game. That's huge.

And I think that a lot of times people don't really get, understand the level of what you just described because it's like, wow, you know, you can never time what the market's doing connected to when I need my money. And even if the market went down a little bit, they're like, oh, well, now I need to recoup that. And it just is a big domino effect. But when you have a nice percentage of your retirement income into these type of accounts where it's like, it's, it's. It's never going to change. You don't need to worry about it. It's never going to drop. You're going to get this amount and this amount per month or quarter of a year in income.

To me, that's a big, huge piece of mind aspect. For most of my clients, it is. I mean, most of our clients are saying, hey, we've made some really good money these last couple of years. We want to protect some of it now. So they're coming and having conversations about annuities because they know that they protect. Whether you invest a dollar, $100,000 or $1 million, the market goes down. you can't you don't lose any money of the principle inside the annuity if the market goes up and you're participating in whatever indexes or inside say s&P say russell and it goes up 10 percent and now you're

so you're 100,000 dollars or 110 that's your new principle so the next year you're at 110 the market goes down you didn't lose anything the year at that market goes up again you're you're not coming you're not waiting for the comeback you're already you're starting at the 110 you're starting at the one's yeah absolutely but what if the market crash is and everyone in your circle of fringe is going, we lost 20% of our portfolio and you just go down to zero. You just didn't make any money, but you certainly didn't lose it. That's a huge position to be in.

That's a huge position to be in in some type of recession. And then you can pull off of that to take income from that bucket while the rest of your assets are growing or trying to come back. So you have flexibility by using the annuities in retirement planning, especially in that fixed fixed asset portion of your either IRA or 401K, whatever it may be. Yep. So I think that when people, you know, you say, hey, what is your first thought when you hear this word? I think if people hear the word annuity, they think, red flag, sometimes.

What are some of the misconceptions that people have about annuities from years past and now how have they changed to where maybe they're not that way anymore? Right. Well, there's multiple types of annuities. So when you hear something bad, it might be that you associate the fixed index with the variable annuity. So the variable annuity that gives you some guarantees, but your principal goes up and down, like the market. But it can pay you a guaranteed income stream. The fees are also high in the variable annuity.

I mean, the M.E costs, life insurance costs, it could be like 4.5%. So you make 5%. You're paying 4.5. You only made 1% in that annuity. So a lot of people get misconstrued between the $4.5%. fixed the fixed ability, the fixed indexed ability, and the variable ability, because usually those are the most common utilities that are out there. So those are misconstrued.

The other part is that your principal is locked up. Yes, you can take a percentage withdrawal every year that the contract's there, or some of these contracts have what are called liquidity riders where you could get, if you don't take 10 in the first year, you take 20 in the second. So really, if you're looking at fixed income and you're trying to guarantee principle, you're not really taking it in the first couple years anyway. So it just depends on who you're having a conversation with, what advisor you're talking to,

and what is your plan going forward to use the annuity? Because if the person across from you tells you exactly how it works, where it works, how you take the withdrawal, you'll never have a problem. But if you don't understand. Yeah, because if you had X number of dollars and you needed it in a year or two,

then you're not going to lock it up in any kind of an account. So, you know, call it annuity or CD. you're not going to put it into a five-year CD if you needed it anyway. So it's kind of like know what you're getting into, know what you need anyway. So maybe that misconception was really amplified by a bunch of advisors giving bad advice in decades past. Yeah. And at the time, I think, you know, and then they were put on like income riders when you didn't need the income, right? So now there's, you have products that you can use, whether it be a three year, a five year, or seven year, you have different products you can use that have.

all different kinds of mechanisms inside of them, depending on what you need, do you need an ADL benefit? Do you need an excessive death benefit rider? Do you need lifetime income? Do you just want a guaranteed fixed rate of return, unlike a CD, right? So a CD, you put it in for, you know, three years

and say whatever, that rate is 4%. You're taxed on that every year. But you can use what's called a multi-year guaranteed annuity for three years, get 5%, and then you only pay the tax when you take it out. And you can just keep rolling it along the way. So you have multiple options. Annuities have fixed interest accounts. They have S&P accounts that are either a cap or a participation rate,

and that's how you make your money. And we can get into that at a different time. If people have questions, they can ask me, I would gladly explain it. But you have a floor in a ceiling. You're never going to get 30%, right? Yeah. Right?

You're not going to get 30. But if you can get 20, and then if the market crashes, you made 20, but you didn't lose anything after that. That's the give-up. You're just not going to get that 30. Yeah, but the benefit is you've got that floor to protect you. Right.

So that's the give-up, right? Hey, I'm going to give up the 30 to have the floor. Yes. And at this point, if you're in your, you're from 63 to 75, and you're getting ready to retire, somebody need, you need a floor. You need a floor because you worked hard for all these dollars. you don't want it to be taken away

if the market does take a little step back. And don't get me wrong, the market will come back at some point, right? Yeah. But what, you know, Goldman Sachs just said at some point, the SEP can only do maybe 3% for the next 10 years. They're called it the last decade. Well, what if it's not running at 7% to 10% historically like it is, and it's only running in three?

You might want to have some guaranteed income to make sure that you're protected going further down the line. And that's just one example. But I just read that the other day, and it kind of just stands out. You know, I want to talk a little bit more about something you mentioned, some of those added features, you know, like long-term care. And so talk a little bit about some of those other living benefits types things that in reality,

you know, I don't know your business, but I've never thought of those kind of benefits being associated with an annuity. I always thought you have to go get a policy for this and another policy for that. So talk a little bit about now how some of these kind of, you know, are enhanced. benefits. Yeah, so you're putting money in and I'll look for the ADL benefit. Let's use the ADL benefit. If you can't perform two of the six acts of daily living, okay, the policy will pay out over a seven year stretch monthly to you and then God forbid you pass away, it will pay to your spouse for the rest of that time. So all the dollars will be used to help pay for your care why you're getting it,

whether it be at home or wherever you may end up. adult daycare at nursing home. But if you couldn't get some type of long-term care, this ADL benefit, because it's not long-term care, it's ADL, like actual, you can't perform two and the six, you can turn on this benefit. As long as you let this, you know, we're going to be prepared and we're going to do it a couple years, you know, before, while we're healthy. And if, you know, something comes up, it pays out a benefit. You also have what's called an excessive death benefit. So most times when you pass away and you have an annuity, the cash value goes to the beneficiary. okay and in this situation in this you can either take the cash value of what it is or get a payout

higher if you take it out over five years so if it's IRA dollars which is which this would be helpful because of the rules you know the Secure Act 2019 you have to take it out over 10 years so if you took this excessive death benefit you would actually get more money than the policy actually had in it because of the benefits that were built inside those policies okay so that's huge yeah that's huge. And then guaranteed income, if you have a spouse and maybe your spouse didn't make as much money as you did, but you have a large bucket of IRA dollars, you could turn that IRA into a guaranteed income stream that you both can't outlive and then still leave whatever's left in your other assets to your spouse and to your great and to your kids. So if you can use these vehicles

to kind of checkboxes along the way to make sure a guaranteed income, your income and retirement is where you need to be. You know, besides Social Security, which Social Security is an annuity. It's a personal pension that the government controls, but it's paid out like an annuity. And then if you have your own personal annuity or your own personal pension, just to make sure that your guarantee your incomes there where it needs to be. So here's a question for you. And I'm always one that as I'm talking and learning from people like you, it makes me think of, you know, ooh, how about this work? So let's say that someone hears, Okay, annuities, they've got some great, great power.

I'm not 75, I'm 55, so I'm going to get an annuity, but I don't need an income stream right now. I don't need to have that coming back. Can you get an annuity and just set it up for returns now? And then when you need the income in however many years, you switch it and go, okay, now I don't need the return side. I need the income side. Yeah, we just did that with a couple clients, so we just came on. We had a couple of college professors in their early 50s. You know, 52, they're looking towards retirement but want to protect some other assets.

So we looked at a five-year fixed annuity, fixed index annuity. So it has a fixed bucket of four and a half percent right now. I mean, those rates, they change all the time, right? And then it has S&P. It has InvestUQQQ index in it. It has NASDAQ in it. But it's a five-year product. So for five years, we protect those dollars.

Whatever the interest is, the indexes, that gets locked in every year. That's called the annual reset. At the end of the fifth year, they have the option to move it to wherever they want, whether it's moved to now at income because now at 52, they're 57, they only have, they want to retire at 62, or they can stay what they're doing, or you find the next thing that's giving you a better fixed interest rate and better option rates at the time, and you move it again. And then we waded out, hey, I'm not going to push off 62.

I'm not going to retire to 66. You know, we wouldn't be closer to by that Social Security of into 70s. But either way, it's more of like, hey, we can keep pushing this off right now. And then, hey, we're, you have, you have flexibility. But then you don't lock it up for nine years when you know you might need it in five. So in that scenario, you did like the five year now. But then in five years, you might go, oh, you know what? What do we put it in a three year, um, uh, uh,

product because we don't know, you know, we don't want to lock it for 5, 7, 9. So it just all gets into planning. And I think that misconception from years past, like, oh, it's locked up. Well, right, but you just lock it up for a time that fits your needs. Because you're not, so like it's the same thing. If you were trying to take money out of your 401k or IRA, if you're under 59 and a half and you're 55, you're not, you don't want to pay that penalty, right? You can borrow from your 401k, but you're not going to rent money out of your IRA because you're going to pay the taxes. plus the penalty. It's the same thing with the annuity. But when you hit 59.5, same thing as

your IRA. You can take money out of it. Yes. If you have qualified dollars, you can take, you know, each, mostly every annuity, regardless of the first year, you can take 10%. And if you don't take 10 in the first year, it gets 20 to the second year. It just depends on the companies you're working with. Yeah. And when I do a business, I'm only looking at a plus rate of carriers and above, the A plus. Because they always have the feature in the renewal rates. that make sure that my clients stay where they're supposed to bid and make sure that they're earning what they're supposed to be, right? Even in the down market, if we're in some type of fixed bucket,

you're going to get some kind of fixed return on what you are. And if the S&P only does seven and we're in the, you know, if the S&P does three, we're going to make sure that you make some of that S&P month, right? So here's an observation. You know, you always hear about, you know, oh, let's do an annual review to make sure, well, if you hear annuity fixed guaranteed, You might think, oh, I don't need to have an annual review. But now what you're saying right there makes me think you might need to just have a quick little cursory check to make sure that, you know, the SEP this and to fix that to make sure that the annuity itself is in the right spot for you.

So have that annual checkup. Well, because also what has changed in a year? You could need money. You might have to tip into that money. Yeah. Yeah. So people, everything's changed on a daily basis for people. Yep.

The plan we put together today might not be the plan five years from them, right? So everything changes in people's lives. Like, oh my God, I had a tap into that earlier. You know, we just had a client that we've had for years. Her husband died. I don't expect him in the last week. And she's like, I don't want to tap on the utility, but I need money until the insurance money comes in. No problem.

You know, that wasn't part of the plan. Her husband dying at 62 wasn't part of the plan either. But you just sit there and you're going through it and you go, what do you do? need. How can I help you? I need this. We can do this right now. We did the withdrawal. It'll be there. It's there in two days in her bank account and everything's covered that she needs to have covered until we help her with the process of filling out the claims for everything else. So the bottom line, don't try to figure it out on your own and have someone sit down with you to put together a plan that works and then don't just set it and forget it because life happens.

your needs change, the markets change, the whatever the case is, come in for that annual review just to give a quick checkup, thumbs up. Okay, we're still good to go. Oh, you know what? When you need to make this tweak, I think that too many people are so self-sufficient, they think I'm going to Google this, set this up. But did you do it the right way at the right time? And then you need to just make sure that you've got those. Mike, one other thing I just I just remember, if you purchase an annuity back in the day, like say 10 years ago and it's just sitting there. call someone, call, you can call me, you can call whatever advisor you want to talk to,

the rates that they were then, compared to what they are. Now, you're doing yourself an in-service, a disservice by not having someone review that. Wow. Okay. Yeah. Yeah. And it could be, it could be the, that's a really great point because guess what? That happened to me.

And it was like, it was like double the rate of return. So that's an excellent point. I'm glad you thought to bring that up because you might, go, oh, yeah, yeah, I don't need an annuity now because I've got one. Check the box. Well, you know, give it a second opinion because what if it is something where it's like, oh, well, we just file a piece of paper, move it from this fund to that fund or this company, that company, and you're going to now double your rate of return and it's just sitting

in a fresh annuity. Have someone look at it. That's a really, really great point. We call it the retirement reset. You just, you did it because you did it for a specific reason. We'll make sure it's doing what it's supposed to do. And if it's just sitting there, give us a call. we'll make sure that it's doing what it's supposed to do.

Awesome. Well, if someone is in that situation, Brendan, how can they reach out and learn more and connect with you? We can reach us at 610-449-99-100. That's our office. We're on the Compass Wealth podcast on IHeart and Spotify, and then our website, my, M-Y-C-F-S-I.com. Excellent. Well, thank you so much for coming back on. It's been a real pleasure talking with you.

You also, Mike. I really appreciate you having me on again. You've been listening to Influential Entrepreneurs with Mike Saunders. To learn more about the resources mentioned on today's show or listen to past episodes, visit www.com.