Business Innovators Radio - Interview with Corey Baker Discussing Sequence of Returns Risk

Episode Date: August 19, 2024

Corey is originally from the Chicago area and is a lifelong Cubs and Bears fan. He and his wife Julie have 2 daughters and an incredibly spoiled poodle. As a former minister of one of the fastest growing churches in Florida, Corey has extensive experience connecting with people and assisting them to become the best versions of themselves in every area. In 2017, Corey and his family relocated to Lexington, Kentucky where he now has dedicated himself to helping families and individuals all across the Midwest thrive with their retirement, and with their money.Corey is also a best-selling author, accomplished motivational speaker and personal health and wellness coach. His life’s passion is working with people and is tenacious in his dedication to helping others win. In his spare time, Corey loves to travel all across the US pursing his other life passion, which is bowling.Learn More: http://www.kkandb.com/Influential Entrepreneurs with Mike Saundershttps://businessinnovatorsradio.com/influential-entrepreneurs-with-mike-saunders/Source: https://businessinnovatorsradio.com/interview-with-corey-baker-discussing-sequence-of-returns-risk

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 us Corey Baker, who's a retirement specialist with KK&V Financial Services, and we'll be talking about sequence of returns. risk. Corey, welcome back to the program. Thanks for having me.

I had a great time when we had a previous conversation, and I look forward to get into this. This is one of my favorite topics. Yeah, and you know, I think that if someone, you were to stop 100 people on the road and go, hey, define sequence of returns. They would say, what? So let's start with, you know, yeah, there's a risk associated with sequence of returns, but first define what is sequence of returns?

Yeah, that's a great question. I think honestly, you know, I deal a lot in retirement and I specifically talk a lot with people about the purpose and power of what an annuity can do, which, you know, this is kind of like giving, you know, you ever read a book, you read the end of the book first, you watch the end of the movie first and then you come back. This is like me telling you the end of the story, giving you the play and then kind of backtracking. So an annuity is such a powerful thing. But I reach, I use that example with this because I don't. know what anew I sell annuities. I purpose. I use them. I believe in them wholeheartedly. But before this several years ago, I didn't know what annuity was. So a lot of people don't have any clue what it is. And if they don't know what an annuity is, my guess is they probably don't know what sequence of returns is. That sequence of returns, essentially, if you want to break it all down, it's when your retirement account is moving backwards because of market volatility. And you are needing to draw from that account at the same time. Recently, we had one of the worst days. The

Dow had one of the worst days. S&P had one of the worst days that it has ever had. And you sometimes see those images of people on Wall Street that just look so dejected and papers are flying in the air and they have their hands in their face in their palm and they're just kind of looking really helpless. That is the picture of what happens. And you know, there's some people that are long-term players in the stock market to where days like that don't really impact you too much. If you're younger and you're not drawing on your retirement and you've got several years left, the odds are. Now, I don't know this, but the odds would be a pretty good bet that that is going to bounce back, right? The stock market has bounced back from some pretty terrible things. 2008, we bounced back.

2020, we bounce back. The Great Depression, we bounced back. Some of the major inflation issues that we face in the 80s, we bounce back. Now, the question is, we don't know when it's going to bounce back. There's these things called bear markets and bull markets, right? Bear markets are tend to be marked by a decline of 20% or more from recent highs in the prices of stocks or other assets. And they can occur in different individual securities, sectors, markets. they're really associated with economic downturns or the dreaded R word that we hear on news

all the time, recession, right? Where the markets, the line that we see that kind of goes up and down, it's moving in a downward direction, right? And people, investors specifically are incredibly fickle and fear-based. So when we see people sell, that triggers in us, we have to sell. And then everybody wants to sell. and it just becomes like a train that you can't get off. And so these bear markets, they can last for a very of time.

They could be a few weeks long. They can be several years long. But it depends on the underlying causes. Like one of the big ones that I think many of us can remember is back what happened in 2007 to 2009, where we had this great recession that took place. And yes, we bounced back. But I often think about how difficult it must have been. if I was 75 or 80 years old in 2008, when I just saw my nest egg that I'm living off of go backwards by 30 or 40 percent and I'm trying to draw on that the same time just to get my bills paid.

So you're really not giving your portfolio a chance. You know, what crazy thing is if you had $100,000, right, if you had $100,000 in your retirement account or whatever, and you lost 50% of that. How much do you have left? 50,000, right? Now, now that it would stand the reason, okay, well, if I had a 50% loss and then the next year I had a 50% gain, how much would you have? I think you'd assume you'd have the same amount back, but I don't think you'd quite get there, would you?

No, no, you'd have 75, right? Because half of 100 is 50, half of 50 is 25. So you could go backwards 50% and lose half of it. you're going to have to get a 50% return over the next two years just to get back to even from where you were. So you can see how if we're in a negative downturn that you are going backwards in your account and you are trying to draw on that money because you need to, you're going to pickle. And so it makes me think of something too and tell me if you've seen this working with clients. If someone had that drop, whatever the percent, 20, 30 percent, whatever it is, and they need the money.

and that sequence of return, you know, like snowball is happening. And they're like, ooh, I need, I feel like they would have this feeling of I need to catch up. And then to catch up, I need to get that 50 or 70 or 80% return, which is highly unlikely. So they're going to end up taking more risk than they need to. And then what happens when you're taking that risk, you've got a higher chance of taking another hit in the gut. So isn't that a feeling of like, you know, when you get hit, then you want to take more risk to catch up? but then you end up chasing your tail and you don't ever catch up. Well, yes.

And I'm going to use an analogy. I love analogies because I feel like financial things, specifically annuities, insurance products, they can be immensely complicated. I think sometimes people shy away. We shy away from things we don't understand. If we don't understand it, then we're not going to invest in it,

especially if it's our life savings. If it's our retirement account, if it's our nest egg, we're not going to invest in something that you don't understand, nor should you. I feel like that's, my goal. That's why my first and foremost goal with every single person I talk to is education and not coming from a place of expertise in the sense that I'm trying to educate or teach or

instruct or any of those kind of things. I'm trying to help understand. I want people to be able to understand. I think there's a lot of potential things that people could do to protect their life, not because they are not smart enough to understand it, just because they don't know about it. They don't know. They don't know that it exists. Or maybe they have kind of, you know, annuities, like especially, you know, index annuities are a phenomenal thing, but there's a lot of brokers that don't really buy into them a whole lot. And a lot of people have some myths when it comes to annuities because they think all annuities are the same. They're not. There's a lot of different, there's like, you know, six different types of annuities, you know, the most, the, the, the,

the annuities that a lot of people are scared of, the variable ones that have, you know, high fees, they tie up your money, you can't get access to it. Those kind of ones are not a great play, right? But there's other ones that are. So here's an example. Okay. Now, I don't know if I should admit this or not, but we're already into it. So I might as well go for it.

I tend to have a good time with my brothers when we go and hang out in the casino. Now, I know that casinos get a bad rap. And here's the thing. Is it possible for people to lose a lot of money in the casino? Absolutely. Is gambling an addiction? Yes, right? Can you view it as entertainment and go put $20 into a slot machine and have a good time?

Sure. But here's the thing. You mentioned to me that a lot of times what happens is people get into these losses. And so what they do is they tend to double down because they want to recoup what they lost. That happens in a casino every single day. And we've heard this talked about, right? ball three to casino. It's a big giant casino. Now, you could make educated guesses, just like people do when they bet on sports. When people bet on sports, they make educated bets. They know all

the stats and they know all the things and they know all the players and they know all the home field advantages and they have all the certainties they think that they want. And then something happens that's unexpected that they didn't plan for and they lose. And what happens is casinos are betting that you don't want to lose. You know, I looked into this. I looked into this. but the we are twice that listen to this we get twice as impacted by money that we lose as we get excited about what we win meaning yep that I would be more upset about losing $20 than I would be excited about winning $40. So we get negatively impacted by this right.

So you're in a casino and you lose $100. What do you tell yourself? Oh, I need to get my $100 back. So you put another $100 in. Now you're down 200. Now you got to bet bigger because you got to get back what you lost. And all of a sudden, you know, not to get too graphic here. But this is why they make, you know, windows and high rises not able to be jumped out of the casinos anymore because people would just end their life because when you lose that much money, you feel hopeless and you don't have any other options. At least that's what you tell yourself. So think about this. All right. I think most people understand the game of Blackjack. blackjack you get cards you're playing against the dealer and you're trying to get the closest to 21 right so i want you to think about this this is the best analogy that i can think of for a fixed index annuity and why somebody should want to do this because here's the here's what a fixed index annuity is right a fixed index annuity with an income rider is you are taking zero risk that if the market dips below zero, that you are going to follow that along. Your floor is zero. Whether the market stays flat, whether it goes backwards 5%, 10%, 20%, you will never ever go below zero, ever.

And what's even better about that is if it goes, if it goes down 15, 20%, that's setting a new floor for you, which means if the market goes backwards 20%, and then the next year it rises by 5, you just gain 5%. Everybody else is still backwards 15. But you just gain 5% because you have a new floor and you can only go up from there. So when the market goes backwards,

it actually could be a good thing for you. And you're not getting any money in interest, which means you're not getting taxed on that. So that's a good thing too. So you're playing blackjack. All right. Now I want you to picture this. So with an index annuity,

you have a 0% floor. You're not going to go below zero. And you get to, to share in a portion of the success. Meaning, let's just say that the market return 10%, and you're getting eight of it. You're getting seven of it. Now, you can look back and say, man, I wish I would sure would be nice if I got the full 10% of my gains. Okay, I hear you.

Let's say you're playing blackjack. Let's say you're betting $100. And with every $100 you bet, if you win the hand, you get $100 back. If you lose, you have to pay that $100. So if you win the hand, you're getting $100, 100% return. If you lose the hand, you have to give the dealer $100, right? Or what if I told you that you could play with a $100 chip. And every time you won, they gave you $25.

And every time you lost, that chip stays right where it's at. Which one would you rather do? That'd make you feel pretty safe, huh? Well, it makes you feel, you're literally playing with house money. So you're not going to get, you, the aspect of you losing money, right? You know, Warren Buffett's rule, right? Rule number one, don't lose money. Rule number two, see rule number one.

We help you never lose money. Now, you can look at it. say, well, yeah, but I'm not getting as much of a return as I would be if I was getting 100% of the return. Okay, but again, over time, but you got no downside. Over time, I guarantee you. And you can see this when you compare a lot of mutual funds with, you know, with fixed index annuities, you know, there are sometimes when those funds hit bigger, right? But if you at a blackjack table, I don't care if it was $15, $20, whatever, if I was sitting there and you had to give $100 for every time you lost, but you gained $100 every time you win, my hundred stays there the whole time. And I only got $20 for every time I won. I guarantee you I'm going to beat you. It might take me longer. I might have to have more patience. But I can also promise you that I'm going to be having a lot more fun. The losses won't impact me nearly as much because I won't feel them because I won't have lost anything.

Now, I'll be a little bit disappointed that I didn't win more. But just like I said before, we are way more negatively impacted by money we lose than we are positively impacted by money we win. I help you not lose money. That's what I do. I'm not the retirement expert. There's a lot of people that are, I'm sorry, I am the retirement expert, but I'm not the investment expert.

There are, my job is not a broker. Some of those brokers, they are amazing. They are so good at what they do. They help people make money. They know the deals. They know the markets. They know the mutual funds. They know all these things.

I feel that my role as a retirement advisor is this. There's brokers and people that are out there, investment people that help people get up the mountain. And that's fantastic. My job is to help you get down the mountain. And more people, when they climb Mount Mount Mount Everest, there's been more people that have died on decent. than on the incline, right? More people die going down. You stop focus.

You stop focusing and you think everything's good. And you know, what you just mentioned about, you know, winning 100 and losing 100. It reminds me the old Benjamin Franklin quote, you know, a penny saved as a penny earned.

Well, you, if you save a penny, meaning you didn't lose it, you're not under. And so if you help people not lose money, what a huge gift that is. And yeah,

they might look at their friends that go, oh, hey, I was up 20% last year. What were you up? Oh, six. Well, guess what? The next year, when they're down 26 and you say, well, I was down zero or I was up one, that's a huge, huge. That's the tortoise and the hair example, if we're going back to analogies.

That's a huge, huge piece of mind that you're bringing. Well, you know, you mentioned Benjamin Franklin. He was one of the first proponents of annuities. I mean, annuities have been around for thousands of years going back all the way to the Roman Empire, right? But Benjamin Franklin, in fact, when he passed away, Benjamin Franklin had an annuity that he left in the name of the city of Philadelphia that paid them for well over 100 years, maybe more than that. So that's a pretty cool. That's a pretty cool thing. You mentioned about your buddies, right, golf course buddies.

And this is the way that we are as people. This is how it is on social media. This is how it is on the golf course. This is how it is in the church parking lot. Yeah. We will share all day long with our buddies how much our 401k went up last year. But when it went down, we go silent. Nobody wants to talk about how much it went backwards.

We want to share and brag about the things we got right. We want to talk about the bets that we hit on. We want to talk about because I think it makes us feel like we are an expert that we know what we're talking about. We like to position ourselves in this position of knowledge, of, of, achievement, that that's a good thing. That's a normal thing. But it's like the, you know, people are going to think of a degenerate by using all these gambling illustrations.

But I think so much of what we do can be compared to gambling, you know, it's like people play these scratch-offs. You get scratch-offs at a gas station. And you buy a $5 scratch-off and you scratch-off and you scratch these numbers off and you win $50. What do with that? We take a picture of it. We post it on social media.

Look at what I did. I had my, I won $50. I guess today is my lucky day. But for whatever reason, they don't show the piles of scratch off cards that are thrown in the trash can that they have lost over the previous couple of months. We don't share our losses. We just share our wins. And that's okay. We like to have people celebrate with us.

But the whole point of this is sequence of returns risk is a massive, massive issue. And what I help you do is make sure that you do not lose your $100 chip. We want you to get some money back on your winning hands. We want you to benefit when you have a good play. We want to put you in positions to help you get the biggest return. That's what so many people talk about. What kind of return can I get? What kind of return can I get?

What kind of return can I get? I get that. I know we want big returns. I understand that, but we got to think differently. And what we want to look at first, before we talk about returns, Let's talk about storing up and protecting the base that we have. We are not going to lose that. We are going to start with that and we are going to then proceed from there.

And that's what I can stand on. And that's why I love what I can do. Again, I'm not bad mouth than brokers, but brokers, they can't make guarantees. Nobody's going to make a guarantee telling you that they guarantee that an investment. We can make an educated. We can't guarantee that you won't lose money. Now, we can make an educated guest. that based on previous performance, this is where we predict or project the market is going to be.

But you can't make guarantees. But in your world of putting people into a properly structured fixed index annuity, you can make that guarantee. You won't lose money. We can guarantee that you will not lose money. Now, here's the thing, right? If you have an indexed annuity with an income rider, you are going to be withdrawing from that money. So the only one that is going to be taking money from you is you. Yes.

The market is not. Right. Your balance might go down, but it'll only go down when you took money out to live. Correct. That's you taking it out, not the market dropping. Right. Right. You are in control.

And that's, you know, again, I say this at just about every interview I always do. But, you know, this, because I think it's such a valid question, you know, the money that we have. What is the purpose of it? Is it a plan for living or is it a plan for dying? And if it's a plan for living, you should not be leery of withdrawing your money. This is your money. Let's say you've got a million dollars and you want to try to protect 500,000 of it to give away and leave behind and you want to live on 500,000 of it.

Well, our job, and here's the great thing about these fixed index annuities with an income writer is even if that 500,000 that you had designated for income for you, even if, over a period of 20, 30 years, you bled that down to zero. It's still going to pay you. Even if there's no money left in that annuity, it's still going to pay you or your spouse, whatever you designate for the annuity that you get. It's going to keep paying you even if there is no money there. And there's a lot of, you know, we've talked about this on previous things. You know, healthcare is getting better.

Medicine's getting better. People are living longer. And outliving your money is, real concern that people have. I've talked to so many people that I've been able to to help with this and just have they've been able to have so much peace of mind knowing. And it's great because we get to have numerous opportunities, right? So a lot of these indexes are set on one year or two year different bases and you revisit it. So we look back on a year. We look back on two years and see how these indexes perform. And then we can reallocate. So I love that.

having these ongoing conversations with clients, but it starts with, here's what we know. You didn't lose. And you're reallocating not to fix mistakes and catch up because it was a big drop. You're reallocating to go, hey, you know what? You didn't lose any money. But let's just see if we could tweak this to make a little bit better next year. And then you reallocate again the next year or the year after because, oh, you didn't lose money, but let's just see if we can polish it up and make it better.

I think you've explained it so well to say when you have the markets going down and your portfolio is taking hits and you have to take money out to live, boy, that's just like getting hit in the throat and the stomach because it's like a double whammy. But when you can provide people that peace of mind to know, you'll never lose money. Even if the market drops completely, you at least will retain your principle and not lose money. And I think that is just a spectacular mindset. and what peace of mind that provides client. So that is just really spectacular, Corey. Any final thoughts before we wrap up and then let people know how they can reach out and connect with you? Yeah, no, I think, you know, again, this is an area that I am, you know,

just incredibly, incredibly passionate about just because I think that this is the best flex. Fixed index annuity with an income rider is the absolute biggest flex that you can have to protect yourself against secrets of returns. Again, I am not a doom and gloom guy. I am not one of these financial guys that stands up and tells you that the sky is falling. Are we going to have more inflation? Probably. Are we going to have more corrections? Definitely. Are we going to have growth at some point? Probably. We just are. But I think that there's that there's hope, you know, that people can find hope. And that hope comes in finding a plan. A plan. that works for you, that you make an educated guess or an educated decision to say,

hey, I'm going to, I correct myself, not educated guests, just an educated fact of I am not going to go backwards. And so, yeah, I, again, my favorite thing in the world is whether I, I love having conversations with people to help them see possibilities. I understand that, you know, people have so many different voices coming at them. They got family, they got friends, they got neighbors, they got golf course buddies and church friends and kids and everybody else that is trying to get in their ear, trying to tell them the best way to go. My job is not to sell you anything. My job is to sit down, have a conversation.

Let's talk about what's possible. You are in control of what you do. You are in control of how you use and allocate your resources. But I at least want to do my very best. You know that there are other options out there for your consideration. and I'd love to have a conversation. So people can find me on my website, www.kK&B.com. I, you know, not everybody does this, but here's my personal.

This is like, you know, I have a bunch of different offices, but this is personal. This is personal if you want to personally get in touch with me. It is 859-880-2164, or you can send me an email at Corey, C-O-R-E-Y at K-KN-B.com. But thanks for having me on. Awesome, Corey. Thank you so much for coming back on. It's been a real pleasure. 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.