Business Innovators Radio - Interview with Erich Castillo, Founder of Cornerstone Wealth Management-Building a Reliable Retirement Income Plan-Part 1

Episode Date: March 10, 2025

Erich Castillo is the founder of Cornerstone Wealth Management established in 2004. He began his professional career in 1997 at American Express Financial Advisors, achieving numerous accolades and awards. Erich is currently an Investment Advisory Representative. He also has his Life, Accident, Health, Insurance and Annuity designation so he can act as a comprehensive resource for his clients. To round out his financial education, he holds a Chartered Life Underwriting Designation and Chartered Financial Consultant Designation.Originally from San Francisco, he has traveled and lived all around the world, eventually landing in Lexington, Kentucky. While earning a Bachelor’s degree in both Finance and Education at the University of Kentucky, Erich had the opportunity to work as an athletic trainer for several sports teams at the University of Kentucky, where he met Emily, his wife, and mother of his two sons, Brandon and Carson. Though Erich has an accomplished career, his greatest treasure is his beautiful family. Erich met his wife, Emily, at the University of Kentucky.Learn more: http://www.retirewithcwm.com/Investment Advisory Services offered through Southland Equity Partners, LLC an SEC Registered Investment Advisor.Influential Entrepreneurs with Mike Saundershttps://businessinnovatorsradio.com/influential-entrepreneurs-with-mike-saunders/Source: https://businessinnovatorsradio.com/interview-with-erich-castillo-founder-of-cornerstone-wealth-management-building-a-reliable-retirement-income-plan-part-1

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, Eric Castillo, who's the founder of Cornerstone Wealth Management, and we'll be doing part one of a two-part series, all three. focused on building a reliable retirement income plan. Eric, welcome back to the program. Hey, thanks, Mike. Thanks for having me. Hey, I love the sound of this series because everyone wants income and retirement and everyone wants reliable income and retirement. But guess what?

It might take a little teeny bit of effort. So I love that you are focusing this on building this reliable retirement income plan because it takes a little bit of effort and most people cannot do it on their own. They need a financial professional to guide their way. So where do we start? When you are sitting down with a client explaining a retirement income plan, where are you starting to help them understand the concept before you even explain the components of it? Well, where I like to start is understanding what are their goals. What is it that they're trying to achieve? But then the big part of that is honing in on what is that number that we need to target to make sure that their expenses are met, their lifestyle needs are going to be up to date. And so what is it that we need to do to hone in on that number first?

And then once we hone in on that number, then we can fill the gaps with something that's going to be reliable, sustainable. They don't have to panic if the markets are all over the place. They know that money just keeps hitting the bank account every single month, which is something that's really important for a lot of the retirees that we work with. Now, is the word guarantee? Does that fit into that conversation? Because to me, reliable makes me think like there's got to be some guarantee in there where we have as little risk as possible.

Yeah, that is part of that conversation. And so I think when you start thinking about what are some of the components of that income plan, Social Security is a good example, right? Social Security backed by the government. Pensions, those are backed by the assets of a company. And then guaranteed lifetime private pensions or annuities, those are always backed by the claims paying ability of an insurance company. So that is part of that conversation. And then we want to continue to build around that. but that would be part of that foundation of where those predictable, reliable income sources are coming from.

You know, I even feel like it would seem like in the conversation before you even get into some of the vehicles or tools or financial, you know, investment buckets you could talk about. Some of those components might be what you just mentioned there is like to have that reliable retirement income. We want to make sure you've got safety. We want to make sure you've got peace of mind. So what are some of those components that you're going to lay out like from the 30,000 foot view to then ease into the conversation of, okay, now that we have these components clarified? Let's talk about some of the vehicles we can consider. Yeah. We just mentioned a couple, right?

Social Security, pension, some other vehicles like fix index annuity. So I like using a holistic approach, not just one approach. So when you combine some of that reliability with growth-oriented investments, that's going to give the balance that a lot of clients are looking for. How do you let your income be income, but let's let your growth be growth? And so that balance of predictability, reliability with growth, that is going to provide a lot more financial success in the long run. Yeah, and I think that's important because there's too many times that someone might sit down and say, hey, historically, this fund or this block of stocks has done great and let's put your money in the market. And that might not provide a reliable retirement income. So you are providing people ideas and components of structuring the plan to put into place where they could feel like, okay, I'm confident moving forward. You mentioned one of the vehicles as being a fixed index annuity.

Clarify that a little bit because I think when people hear the word annuity, they might have some misconceptions on what that actually is. Yeah, I always like to think of these tools are attributes. And each of these attributes from CDs to Bitcoin and everything in between, they're designed to solve a problem. Fix index annuities are part of that. And there is a Limera study that was done. And what it said is when you implement some of these components, for example, a fixed index annuity, it can offer 20 to 30 percent higher guaranteed lifetime income, which when you have that income in place, it allows more of your assets to continue to grow because I don't need as much

money to basically draw on that income moving forward. So it's a nice balance. You can look at exploring other types of techniques, Roth conversions. How do you build that into your plan? Maybe a bucket approach where you can ensure that short, mid, long-term income stream, and then also build up a plan that allows your stock portfolio to grow to keep up with inflation. So I think index annuities can be a really, really great tool. You just need to make sure you're using it the right way.

Yeah, and I'm confident that you would agree with the point that there is never one plan that works for every single person out there. Everyone's different. Everyone has different goals. So helping people understand here is the broad brush approach to creating reliable retirement income. We need to have some guarantees and some, you know, a piece of mind put into place, things like that where there's lower risk. And then here's some tools to consider. Here's this feature, this financial instrument. it might be a fixed index annuity.

It might be another tool. Are there other tools or financial products that you would say, let's consider maybe this one, this bucket that people might not have thought of yet? Yeah. I think when you start thinking about creating a reliable retirement income stream, it's not just about picking the hottest investment. It's about using the right combination of tools to protect, grow, and to start. and distribute wealth efficiently.

And, you know, I've been doing this for almost 30 years. And one thing that I know is that your money, it has a hard time serving many masters. And what I mean by that is not all assets serve the same purpose in retirement. Some should, you know, provide stability, others' income. Some should still focus on growth. But as you're in retirement, it might have a different risk approach than the accumulation phase where you're just trying to build those up. So when you start thinking about the different tools, there are going to be tools that protect principle. They provide stability. They

allow that your retirement is shielded for market downturns. There are tools that provide reliable or predictable income. We mentioned a couple of those just a minute ago. These can provide fixed payments. And it's designed to be there regardless of what markets, are doing. We still want to have tools that are designed for moderate and steady growth. Those are going to be ways to keep up with inflation, but there's going to be some volatility around that. Tax-efficient tools, so those are ways to save money on taxes over time. And then are there other ideas, maybe long-term care and legacy protection tools? So what we typically see is the strategies of the past just aren't enough in today's world. If you really want to retire confidently,

you need to use some of these modern tools that provide safety, flexibility, income security. And the good news around this is these strategies exist. You just need to know how to use them. You know, you mentioned volatility and risk. And I'm certain that you also agree with the fact that when you mention to a client, hey, here's an option for you to consider. And they go, I love it. That makes so much sense. Let's put every dime I have in that. That would not be smart. So you've got to have balance and you have all of that.

But volatility in the market means maybe you took a hit. Maybe the returns went up, down and all around. And I think that in people's 20s, 30s, 40s, you can kind of stomach that a little bit. But at a certain age, that market volatility is such a huge factor because you've got less runway. And I think if someone has experienced volatility, they now have a fear. So how does your approach that you're describing help retirees overcome that fear of volatility because it's really going to impact their lifestyle in retirement?

I really believe retirement income plan is like raising children. And if you think about children, they go through different stages of life. Well, so should your money. And so a well-structured income plan, what that's going to do is it's going to separate assets into different life stages to ensure stability, flexibility and growth over time. So think about like how we raise our kids. When they're infants and toddlers, we provide everything for them, right? Constant care, safety, and structure. And then as they grow into young adults, we're going to give them a little bit more independence, but they still

need some of that guidance. And then by the time they reach full adulthood, now they're making decisions on their own. Hopefully they're thriving on their own. And so retirement income planning works the same way. Your money should be allocated across different lifespans to serve different purposes. In that immediate income phase, the infant stage, this is when money is set aside to cover that the next five to 10 years of expenses with very little risk. And so it's just like an infant needs constant care and protection. This portion of your portfolio should be stable, predictable, and insulated for market volatility. And one of the reasons, reasons why we try to target for our clients 10 years, there was a study done by the SMP,

standard and pores and fact set. And it demonstrated that over a 10-year rolling average, portfolios are positive 92% of the time. So we want to use that higher probability of allowing the portfolio to either one grow or number two recover over a longer period of time. It's not timing the market, it's time in. So that's that immediate income where we're carving out five to 10 years where there's very little risk. And then in that midterm growth, think of it as the young adults, that's when we want to give them some flexibility and still have that potential, but they might still need a little bit of that oversight. They might still need someone to look after them. And then the last part is that long-term growth. And then this is the money for the long haul. It's going to

support you later in life. It's going to keep up with inflation. It's going to create a legacy. So just like our kids or our adult children, this portion of your wealth takes on a lot more of that responsibility. And we want to withstand volatility. And then we want to work towards bigger financial goals moving forward. And so if all your money is in one life stage, you're taking on too much risk or maybe not enough. And so a balance, structured income plan gives the confidence to spend today, knowing your future secure, and then it makes sure that your money is still working for you at every stage of retirement. Yeah, that makes so much sense.

Can you think of an example of when you work with a client to help them implement that? Yeah. So let me use David and Susan. They had done a great job of building out a portfolio. And when I met them, they've done very well, a million and a half dollars in savings. And on paper, they look financially secure. But when I asked them, how do they plan to turn that money into reliable income? They looked at each other and just weren't really sure.

And what David shared with me is he just assumed, we'll just take out what we need and hope the market does well. And it's that word hope. Well, here's Susan, and Susan's going to say, well, what if it doesn't? What if we live too long or if the market crashes? What if we overspend? I was trying to share with them that hope isn't a good plan. They've worked for decades to build their wealth, yet in that moment when they should have felt the most freedom, they were overwhelmed with fear and doubt.

And a lot of people, when we meet them the first time, when it comes to build, building that reliable income stream, it's overwhelming. They have done a great job of getting to retirement, but now it's that next phase. How do you transition through retirement? And so what we did for David and Susan is we built a plan. The first part is that foundation piece. Let's build that guaranteed income. And that's going to provide security. So social security, pensions, an income annuity. It's there to provide their essential expenses, housing, food, health care utilities. All that's going to be covered for the rest of their lives. So no matter what the stock market does, their basic needs are met.

Then we want to build in some of that liquidity. That way they have the reserves in place just in case something happens. But that's going to give them peace of mind for those unexpected expenses. And we looked at some of that midterm where there's still a little bit of accessibility, lower risk, but they have access to those funds just in case. And then the last part is, let's take the rest of the money and let's let it grow. Instead of taking unnecessary risk where we kept a portion of their portfolio and equities and inflation protected assets, we're letting that grow. We're letting it thrive through retirement. So the whole idea is you can let it run,

let it build up. If markets pull back, you still have money that's going to to be there. And so for David and Susan, if you can imagine for a second, what typically happens when people retire or they put money in the market? Well, usually they see maybe a year later the market dropped. Well, that's what happened with David and Susan. The market dropped. And instead of panicking, David called me up and said, hey, you know, for the first time, I'm not needing to check the market every day. I know we're covered. With a well-structured income plan, it replaces that unsurbed. It replaces that uncertainty with confidence and that fear with a lot of freedom. That's huge.

It's like the old saying, money can't buy, peace of mind, like you just mentioned there. If you got to check the market every day and open, took a dip. So what's that going to do to my? You're just living in a constant state of fear and panic. And I feel like today so many people just rely on our devices and technology and, hey, Alexa, tell me this. And let me go Google that. there's a lot of people that could go Google a lot of these things you're talking about and just get

so confused. So why is having a trusted professional so important when trying to set up retirement with reliable income? You know, retirement income planning, it's not just about investment returns. It's about creating security and freedom. And when you're working with a trusted professional that focuses on a retirement income approach, it's going to help fill in the gaps. We're going to optimize other types of strategies like Social Security pensions, private pensions, guaranteed income annuities. We then look at tax strategies and protect against market downturn and create peace of mind. There is a stat by Morning Start.

And it was really interesting. retirees withdrawing money from a market-only portfolio during downturns can see their wealth depleted two to three times faster than those with a structured income plan. And then J.P. Morgan talked about 60-40 portfolios with a systematic withdrawal. If market conditions aren't favorable early in retirement, they could see as much as a 15% increase in failure rate when it comes to their overall. retirement plan. So we need to switch the narrative here. Having that reliable retirement income plan, that's going to be really crucial. And that's why it's important to work with a trusted advisor.

Well, Eric, this has been so helpful to run through some of these initial thoughts to creating this reliable retirement income plan. If someone is interested in giving you a call, learning more about what you do, and maybe having their plan a second opinion to see what their options would be, what's the best way they can learn more and reach out and connect with you? Yeah, they can reach out at Eric, E-R-I-C-H at Retire with C-WM, so Cornerstone Wealth Management.com, or they can give our office a call, 859-381-0-5-55. Excellent. Well, Eric, thank you so much for coming back on. It's been a real pleasure talking with you.

I appreciate it. Thanks, Mike. 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.