Avoid Top Fears of Retirees – Make Sure Your Money Lasts

Episode 24: Audio automatically transcribed by Sonix

Episode 24: this mp3 audio file was automatically transcribed by Sonix with the best speech-to-text algorithms. This transcript may contain errors.

Speaker1:
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.

Speaker2:
Welcome to All Things Financial, the show that helps upgrade your financial literacy. Trey Peterson and Yellow Coots are retirement planning specialists here to provide a unique and conservative approach to managing your money. Now, here are your hosts, Trey Peterson and Yellow Coots.

Speaker3:
Welcome to All Things Financial, our podcast episode number 24. I think, uh, really excited to be on with all of you today. Trey Peterson.

Speaker4:
Yellow coots.

Speaker5:
And we've got a great name too. That's right. Uh, I.

Speaker3:
Want to start off with a quote that's a little bit different. So the quote today is if you want to be great. You have to start by being grateful by yellow business coach Keith Kraft. So the reason I started off with that quote is because even though we're talking about retirement planning, you know, one of the things that we talk about is being excellent in all areas, being a great steward. And one of the things that I've found is if I want my finances in order, a good place to to start as I set goals is to be thankful for what I've already done. So I just want to encourage you, if you're jumping on here because you are in or nearing retirement and you're interested in learning more about tax strategy, investment recommendations, Social Security, Medicare, estate planning. One of the things I would make a list of is not just the things that you still need to do, but the things you've already done. Well, many of you have already saved well. Many of you have already started a great investment strategy. And I think a great place to start is write down the things that you're grateful for. So we have a great talk today on avoiding fears or I would say the number one fears of most retirees are looking forward to our podcast today.

Speaker5:
Yeah, for sure. And I think that a lot of times we focus on the dollars and cents and, you know, making sure that you have a plan. Everybody knows the famous quote, right. A failure to plan is a plan to fail. But if you if you were to look at it and you were to say, hey, aside from all of these things that you can measure, aside from just putting the best plan in place, um, you know, we talk a lot about having peace and retirement and, you know, your quote about gratefulness. Um, what would you say? Like the biggest thing that that people need to focus on, aside from just like, like, you know, the metrics, the logistics of retirement?

Speaker3:
Yeah, I think most people are visual. So what that means is, you know, we meet with a lot of people. And one of the things I hear a lot is, you know, I meet with my financial advisor and he says a lot of things that are not in English that I don't understand. And I walk out and he thinks we had a great meeting, and my spouse and I look at each other and we're like, well, hopefully everything's in good order. So I think the first thing I found is most people are visual. Obviously some people are auditory, but the first thing you should do is you should get your retirement plan in writing. You should have either a virtual copy or a physical copy. That way, whenever you're feeling stressed or anxious or you're wondering, are we going to be okay? You can go back to the plan. And one of the things that people know is that you and I see this often is even though you have a plan, your plan continues to change. Your expenses change. Uh, maybe you were going to retire at 67. At 65. Your company lays you off. Maybe you had this idea that you were going to travel significantly, but you have a child that needs you to step in and help take care of your grandkid, and they move into your home.

Speaker3:
You know, we see all these different variables. So number one I would say is start with having your retirement plan in writing and make sure that gets updated every six months. You know, I think a lot of people that we meet with, they set out with their advisor. You know, every 4 or 5, six months, and they talk about what the return is and what's happening in the market and if they should increase their risk, reduce their risk. But how many of you actually have your retirement plan in writing, where, you know, if we were to have a correction like 2008, which I know a lot of people listening have not forgotten about that. If we have a correction like 2022, but instead of the market bouncing back quickly, what if it takes 13 years like it did in 2008 for the S&P 500? You know, what does that actually look like? And so one of the things I would just encourage you is to have a written plan that you can look at. What is your risk tolerance. And again, it doesn't mean that you have to move all of your money into a CD.

Speaker3:
Maybe you stay 90% stock and you say, I'll let you focus on that, being that that's your area in our office. But, you know, whatever your risk level is, what does that look like? If we have a bull market, what does it look like if we have a bear market? You know, when I look at my arena, which is safe investments, you know, one of the things that people always ask is when is a good time to go from high risk to moderate risk or high risk to moderate aggressive. And it really depends on what are your expenses, how willing are you to take risk and what is the current environment look like. So get that plan in writing. Have it so that you and your spouse can take a look at it. And I think one of my favorite things is when people leave our office, you always say the families that we serve and they say, hey, uh, I never have more peace around my finances than when I come in to meet with you guys. And really, we want that for everybody. So step number one is get your plan in writing and update it often. What do you want to add to that?

Speaker5:
I like a lot of what you had to say. I think that, you know, those unforeseen challenges, whether it's, uh, you know, the market, whether it's market related or whether it's just life related. Uh, you know, we've been doing this long enough to know that everybody faces those. Um, you know, sometimes they're a little bit more unique to you, and sometimes it's just kind of what retirees face. Uh, so I think having peace in retirement and having somebody that you can partner with that can help you, whether it's by having a good plan in place. But the other thing I really like that you said is reviewing it every six months because life changes. Things change for you too. And, you know, one of the things that that I, that I always thought was interesting, um, you know, the Washington Post and a number of different outlets have talked about this. Uh, but the risk of stroke and heart attack among those who retire compared to people who, you know, who've been working. Uh, but I think like that risk goes up. Like I think, gosh, I think it's like 40% or something crazy. And it's strongest in the first year of retirement. That's kind of wild, you know? Um, so I did a little bit of digging and I'm interested to see what your thoughts are on this.

Speaker5:
But, you know, 1967, there were two psychiatrists, Thomas Holmes and Richard Ray. Um, and they put together, like the 43 most stressful life events that a person can experience, and each of the life events has a corresponding score right next to it. And the idea is you're supposed to mark any of those that are that have affected you, or maybe that you've experienced. And what they found was that actually, according to their list, retirement was the 10th most stressful life event in this list of 43. Like, why? Why does it have to be so stressful? You know, one of the things that we talk about is financial peace, peace and retirement. How can we create more peace? How can we put together a plan that that can actually, you know, that can weather the storms of life, however unpredictable they might be, and making sure that you partner with somebody that can help you navigate that. Um, it's just I don't know. What are your thoughts on that? Having retirement be the 10th most stressful life event?

Speaker3:
Man, I, I would I would guess that it's higher up the number ten. Uh, you know, when we meet with families, I would say if you just think about major life events like, let's think about what they are. One is when you get married, probably number two is when you have kids. And then the next biggest change is probably retirement. You go from spending 30, 35, 40 plus years. Or if you're like my grandfather, he worked 63 years, which is wild to now. All of a sudden, instead of adding money to retirement accounts, brokerage accounts, Roth accounts, increasing your Social Security benefit, increasing the pension. Now all of a sudden, your paycheck stops. This source you've gotten, whether you get paid weekly every two weeks, bi weekly, 26 times a year, or as commissions come in. And now all of a sudden, for the first time in your life, instead of adding money to your retirement nest egg, you're actually taking money out. Yeah. So I would say, you know, the families that we meet with, it's probably in the top 3 to 5, you know, outside of those that have had like a health scare, you know, something significant, which we've had in my family. But I guess I would say is that the change is significant and you want to do it right. You've worked too hard for too long to have stress retiring. It actually should be a celebration. You should be walking into, not the unknown, but you should be walking into the unknown because you have a written plan and you have a team of financial advisors, tax strategists, a Social security expert, a Medicare expert that's doing holistic planning to make sure that everything lines up for you.

Speaker3:
And a lot of our listeners know. But I'll just say this if you don't have a financial planning firm that does everything in a one stop shop, we call it holistic planning. That's something that you should consider, whether it's working with us or another firm that has everything in one place. Because one of the things that I've found is if you have a team of specialists that work under the same roof, you don't end up having to be that middle person talking, you know, to your tax person of what your advisor said or to your advisor, what your tax person said, or to your Medicare agent on what your advisor said fit as far as the budget. If all of those people can share your information and put together a plan for you, that's holistic, man. That's something that is worth taking a look at. So I just want to encourage people, if you've never had a second opinion from an office that does everything in one place, USA and I would love to walk through that with you to see if we can add value to you. We're not a fit for everybody and not everybody is a fit for us. But that complimentary analysis is a good way to see. Is there something that you're missing?

Speaker5:
So in preparation for the podcast, I actually talked to a few of our clients this week, and I had just had some questions for him that I thought were interesting. And, and I kind of what we're talking about now, like what what makes retirement successful for you? And, uh, I just want to hear your thoughts on what you have to say. So one person said, uh, you know, just because you're you accepted your company's buyout offer after 35 years, it doesn't mean you should stop using your skills and talents. And I know that you talk about this all the time, right? Making sure that retirement isn't necessarily the end of something that you've been doing for 35 years, but transition into something else and using those skills and talents and continuing to utilize those. I think that's key in retirement, too.

Speaker3:
Yeah. Well, I think yeah. Number two is determine what percentage of your income is going to come from a guaranteed source, you know. So let's say you and I, we have about 300 families that we serve between investments, insurance and tax strategies, Social Security, Medicare. And one of the things I've noticed is everybody always says, I wish I just would have saved a little more money. I mean, how often do we hear people say that it doesn't matter if they've got a half 1 million or 5 million or whatever the number is. Everybody wants more. But if you were to ask me, like, who are of our clients are the happiest or maybe the least concerned, it's those that have the most guaranteed income. Yeah. And it doesn't matter if that guaranteed income comes from a pension from their last job, or whether it comes from maybe the real estate properties that they have that bring in 1000 or 2000 or 5000 or 10,000 a month, or they have some sort of an annuity, whether it was a pension from work or a self-created pension, that they know whether the market's up 20% or down 20%, that paycheck is going to come every single month and they don't have to worry about is there enough money to meet the bills in retirement? So one of the things I would encourage you to take a look at is what percentage of your monthly expenses are covered by guaranteed income? You know, if you if your expenses are, you know, let's just say 7000 a month and you and your spouse have combined Social Security of 3500 a month, and maybe one of you has a pension of a thousand a month.

Speaker3:
So now 4500 of your 6000 or 7000 is covered by guaranteed income. Is that the right amount for you or. We have several clients that they want all of their guaranteed monthly expenses covered by fixed income, and then they use the money that's in the market for what we call is their fun money, whether it's a vacation or purchasing a new vehicle, maybe a little less fun, you know, adding a roof to the house. This week, let's say we've had five clients, families that we serve that have said to me we had to replace our furnace or the AC, and it cost 14,000 or 16,000, you know. So decide where do you pull your fixed monthly expenses and where do you pull your random distributions? And one of the things that I recommend is having a plan for each of those, not just the type of investment, but also how do you make sure that you pay the least amount of taxes when you have those big purchases? So I know I got to wait a little bit, but I get excited about these things. So, uh, what percentage of your income in retirement is covered by guaranteed sources? And what should the number be? That's a great discussion.

Speaker5:
I think people are really drawn towards having guaranteed income. And of course, you know, the more you can have from Social Security, your pension. Um. It's true. I mean, people who have a large guaranteed source of income, they're happier. They're more content. And I think that part of the reason is people just associate risk and uncertainty with the market. Now, they might be better served overall having maybe a larger percentage of their assets in the market. But we're talking about peace and retirement. I think that's why a lot of times when folks don't have a large pension to fall back on, or maybe their Social Security benefits aren't as high as they'd like them to be. I think that's why they pursue, you know, having a self pension, funding their own pension, you know, through the use of an annuity. And I think that's really attractive for a lot of people. I think that the downside really has been has been highlighted a little bit in the last couple of years during periods of high inflation, right? If you have a fixed, guaranteed source of income that isn't that isn't changing. That isn't increasing when inflation increases. Um, that could be a little bit challenging too, because you're losing purchasing power. So, you know, there are a number of annuities out there that have the ability to increase as inflation increases. And maybe that's a better fit for you if you're looking to fund a self pension.

Speaker3:
I think the other thing that's nice about the self pensions and again, they're not for everybody is one of the things that we find is a lot of the families that we serve is a married couple. And I don't know what it is, but it seems like just like in my household that we tend to attract our opposite. Uh, and what I found is we'll sit down with a couple and I'll say, hey, what would you guys say your risk tolerance has been? And how do you see that changing or not changing when you retire? And almost always, you know, one of them typically the husband, but not always will say I'm very comfortable with risk. I like having 70 or 80 or 80 or 90% stock, but a lot of the times one of them, typically it's the wife, but not always will say, man, I, I want safety, I want security, I want to know that no matter what happens in the market, that I don't have to go back to work. And so one of the things that's nice about creating those self pensions is that you can use a portion of your assets to satisfy the spouse that wants safety. They want to sleep better at night. They want to know that they don't have to go back to work. And then the majority of your assets, you're able to keep them at a higher risk so that both spouses feel like they're winning in their comfortability with risk.

Speaker5:
And by the way, in terms of what it does for your portfolio, it's not only just, you know, making it so everybody gets, you know, everybody has a win win in that relationship. It actually, in many cases improves the overall integrity of that portfolio and its ability to perform over time.

Speaker3:
Yeah, absolutely. Uh, number three, prepare for financial risk and retirement. So we've kind of started this. But one of the things that I think is really important, and a lot of people have had this conversation with their advisor, but we've also found that many have not. You know, I know there's people listening, obviously, but if you're taking notes, one of the things I'd encourage you to write down, if you only write down one thing today is sequence of returns. You always say, why don't you talk a little bit about how sequence of returns can impact somebody in a nearing retirement?

Speaker5:
Yeah. So sequence risk, it's a it's an important thing to consider. And really a good way to look at it is, um, you know, if you're not making any distributions, if you're not drawing from your account, then it really doesn't. It kind of doesn't matter. It's only when you start taking distributions from your account. So imagine if the market if the market corrects. If the market retracts a little bit and you still have to take out distributions, um, because you have to pay for your groceries, your bills, your utilities, whatever that is. And now you're realizing those losses you're being forced to sell when the market is low because you don't have an option, right? Because you're taking 3000 or $5000 out every single month. And that's where sequence risk makes a difference, right? And really what it's referring to is imagine in the earlier years of your retirement, the market is doing great. But in the latter years the market starts to go down a little bit. And overall, if you measure your rate of return, let's assume it's just an average of 6% over all those years, let's say 20 years. And then if you were to look at it in reverse and say, well, imagine you still managed to have a 6% rate of return over a 20 year period.

Speaker5:
But the downturn happened in the earlier or the beginning stages of retirement. How much money would you have compared to the first person who had the downturn in the later years? And sequence risk shows us that having the downturn in the later years of retirement actually allows you to have a much larger portfolio size than somebody who experienced the downturn in the earlier years of retirement. And really, it's you know, we're not talking about timing the market, but more so timing Retirement. When do you have to start taking distributions from those accounts, and what other options do you have? Or are you going to be in a position where the market goes down that you have to pull from your stocks, bonds, your mutual funds, and you have to realize those losses because ultimately that can be devastating on your portfolio. And that's really what sequence risk is referring to. I know it's a little bit difficult to explain, but, um, you know, it's it's it's something that's worth looking into for sure.

Speaker3:
Well, I think, you know, just summarizing that is, uh, it's interesting because, you know, one of the things there's a there's a book, it's one of my favorite books. I read it when I was in high school and wrote it 3 or 4 times since. But it's called The Millionaire, The Millionaire Next Door, and it's written by Thomas J. Stanley. And they asked that he did this amazing study over several years, and they asked millionaires what they would say attributed to their success. And I'll never forget it, because they said, number one, the person that you marry, they said, number two, they said, was luck. And I was like, that is so irritating because it's not luck. It's hard work, it's diligence. It's all these things which are of course true. But at the end of the day, there is some luck. And so one of the things that we've seen, you know, in just the 12 years I've been in the financial industry, you've been in the industry for, what, ten of those years? You know, when we look at that, it's amazing how you could have two people that save the exact same amount of assets. They have the exact same amount of expenses, but one retires right before a bull market and one retires right before a bear market.

Speaker3:
And how significantly it impacts them just based on the economy at the time they retire. So one of the things that I would look at is if you're in a nearing retirement in 2024 and you look, you know, we had a bear market in 2022, but the market's basically back up and over where it was. What happens if we have a correction that does take 13 years to bounce back like it did after the financial crisis. How could that impact you? And in your printed retirement plan, do you have a scenario of here's what retirement looks like, here's where we pull money from if we have a bull market, but here's where we pull money from. If we have a bear market to not lock in so many losses. So if you've never had that run for you, and maybe you're with one of the several thousand advisors that has run the Monte Carlo, and they've said there's a 95% chance that you succeed, most people have had that done. Most people know they're never going to run out of money. But have you had something done where they show you what happens if you have a bear market at the beginning of your retirement? And that's something that we can help with.

Speaker5:
Yeah. And and I know there's always going to be a degree or an element of luck, but it doesn't mean that everyone's outcome is going to be the same or affected the same. Right? There's still a lot of decisions that can be made. And there's a lot of people who, even if even though they do retire when you know, when there's a bear market happening, maybe the early couple of years of retirement. There's a big difference, and there's a wide range of possibilities even within that scenario. And there's, you know, there's a lot of things you can do to help insulate yourself from some of the effects of a, of a bear market, too. And, and one of the, you know, one of the things that I would say is a lot of times when you sit down with an advisor, they may only have, even though even though they make themselves out to, to to have every tool available at their disposal, a lot of times, like they're only using one specific tool, right? So you want to make sure that that you're exposed to a broad range of investments and, and a broad range of opportunities for yourself to help make sure that you're insulated and protected from some of the downturns and some of the inevitable things that are going to happen throughout retirement.

Speaker3:
Yeah, I would say too, is as far as risk. You know, one of the things, one of the questions we get a lot is Trey, I or my spouse has a pension. They've worked for this company for 20 plus years, 30 years, 40 years. And we're really having a hard time deciding, do we take it where she gets 100% because she's likely to outlive me, but if something happens to her that we lose it all, you know, the benefit to that is that couple has more money in the go go years. At the beginning of retirement, when you're traveling more, you're repairing the house, you're upgrading your vehicles. Or do we take a reduction and we give half to the surviving spouse, or 75% or the biggest reduction? When I pass, my wife Stephanie, gets everything that I got because we took that big reduction. How do you make those decisions? You know, we a couple years ago we had a couple that we serve and he said, hey, I have this big pension, but I've beat cancer twice and I'm concerned about how I take it, because if I take it with a big reduction, uh, and I pass, we're going to get significantly less. And based on my past, even though things look good, it's likely that something happens. And so I said, well, have you looked at instead of taking a monthly paycheck from your company, have you looked at doing a self-created pension? And they basically said, well, what does that mean? And I said, well, right now, if you take a pension from your company, what they're going to do is they're going to go purchase an annuity. And what's interesting you'll say is a lot of people don't realize that their pension is an annuity that their company buys from an insurance company that is reinsured by a reinsurance company.

Speaker3:
And so what we did for this couple is we said, hey, you could actually take the lump sum of money, create your own pension, and if Bob dies, you don't lose any of that benefit. You keep it all because now you moved it from a pension that could disappear to a self-funded pension where you totally control the asset. Now, sometimes you'll give up a little monthly income in order to control the asset. But is it worth giving up a little bit of money to make sure that your spouse and your kids get all of the money that you've worked so hard for? And oftentimes the answer is yes. So one of the things I'd encourage you is if you have a pension or yourself or your your spouse has a pension and you've never looked at rolling that lump sum into something that gives you total control, one of the things we can do is help. See if that makes sense for you. You know, we have another gal, she said. Trey, she said, one of the things I've noticed is that a lot of my peers that are retiring, they're taking the lump sum because we're concerned about our industry and our company and wondering if it's even going to be here, you know? So that's another reason that may be worth looking at. Do we roll it or do we keep it there? And really, it's a math a math equation that we can help you figure out. So if you've got questions on that give us a call. Let's review it. We may have some solutions that you haven't seen before. Yellow saying you want to add.

Speaker5:
Uh, yeah I would say that's that's spot on. Explore all your options. Um, you know, I think the vast majority of people are probably better served at turning on the income from their pensions. But there are some outlying outliers there where there's some circumstances where, uh, like you said, uh, you know, if you're concerned about that pension going away and for you, it's not necessarily a matter of income, but being able to have that control where you can determine who ultimately gets the money that you have in your pension fund. Um, yeah. There's a number of different reasons, you know, where you might want to consider rolling that over. Um, whether it's to your traditional IRA and investing that in stocks, bonds and mutual funds or into, you know, a self pension where you potentially can get a higher or a larger amount of income or simply for that control.

Speaker3:
One of the last things I'll say before we move on is, you know, one of the biggest challenges that we have right now is inflation for people that are on fixed incomes. And so I had a question the other day that it was actually really good. It was from a couple that man they researched. What are the biggest challenges in retirement in 2024? And they said, hey, Trey, one of the things that we saw is that there are some companies that have self-funded pensions that actually have, you know, depending on the company, an inflation rider or a cost of living increase, some of them are set, some of them are based on the market. But one of the things that may be worth looking at is a self-funded pension that has the ability and and the potential to keep up with inflation instead of stay fixed. So if you are concerned about inflation and you're interested in learning about a self-funded pension that can potentially keep up with inflation, we'd love to have that discussion as well, for sure. Uh, should we jump into the next thing?

Speaker5:
Yeah, let's do it.

Speaker3:
How have election seasons impacted inflation? Is that what you have next? What do you have next?

Speaker5:
You know, I, I haven't really been looking at the notes, I don't know.

Speaker3:
All right. Well let's jump into that. So I actually think it's a fun discussion. So obviously we're coming into quite the election year. And one of the things, you know, one of the questions I got is, Trey, what do you foresee happening. You know, obviously we don't know who's going to get into office. We know that whoever gets into office has some big problems on their hands. You know, since 2020, we've doubled our debt in this country. We're at over 35 trillion right now. For every dollar you say that you and I and all of our listeners pay into taxes, 30% of every dollar goes to, uh, basically just just the interest on the 35 trillion according to Elon Musk. Uh, when I was reading his Twitter or X the other day. And so, you know, one of the things and you said, you talk about this all the time, but for those that are interested in the country's debt, they can go to US debt clock.org. And it actually gives you second by second updates on how much our debt is, how much that is per citizen, and how much debt we have per taxpayer. Uh, one of the interesting numbers I thought is that we have 104,000 and some change of debt per citizen, but 268,000 per taxpayer, which means over half of people are not paying taxes. Yeah.

Speaker5:
Well, I mean, that includes children too, right?

Speaker3:
So I think they should be paying their fair share.

Speaker5:
They need to we need to step it up and help us out. Uh, you know, on the topic of inflation, last week, I mentioned the Jackson Hole economic symposium. Uh, right. Where all the hundreds of economists, central bank officials, journalists, everybody around the world, they gather together to discuss, I don't know, all the most pressing economic issues. Um, so the Federal Reserve chairman, Jerome Powell, he had a speech which was, you know, very much anticipated and, uh, where he, you know, he's suggesting that we aren't going to cut interest rates from their 2023 year high. And really, the more interesting part was we're going to shift the focus from inflation to rising unemployment, right. If you remember the jobs data that came out, um, compared comparing July to June. Um, you know, we had a bit of a hiccup in the market. You know, August 5th being like, you know, the worst day in the market since the last two years, right? Since 2022. Uh, but one thing that I found interesting is, and I actually, I've kind of I've known this a little bit, but I didn't really dig into it much. But there's actually six different measures of unemployment. Six different measures. Um, and actually they're referred they go from uh, from U1 to U6. And whenever you hear like somebody on the news or somebody talking about unemployment and rates are at this level or that level, um, really, no one really goes into more detail than that. They don't tell you whether they're talking about U1, U2, U4, five, or six. And really, there's a big difference between those and a lot of the the pushback, um, from some of the economists that I follow is, hey, whenever they're reporting unemployment, they're not looking at people who are discouraged workers.

Speaker5:
And what do we mean by discouraged workers? These are people who are not part of the labor force. They want to be part of the labor force. They're available for work. They've looked for a job sometime in the last 12 months, but they're not counted as unemployed because they haven't searched for work in the last four weeks. Wow. Right. So there's a huge percentage of people that are underemployed, that want more employment, that are seeking employment. Or maybe they just think that, hey, like, you know, there isn't an opportunity for it. But if you if you consider u-6 right under utilization six. Right. The measure of employment that does look at discouraged workers. It's actually 7.8% in July and it's going up. So I thought it was interesting that Jerome Powell, that, uh, part of his speech, he talked about shifting the focus towards rising unemployment. Uh, you know, and I think that a lot of people kind of have the suspicion or the sense that unemployment is a lot higher than what many, many of the people are reporting. Um, you know, so I don't know. I thought that was an interesting development that took place. Um, but as far as inflation goes, you know, inflation is a topic that we've probably mentioned at least, at least a little bit, maybe in almost every podcast episode that we've had. Um, you know, one of the ways that we, we combat inflation is by raising our interest rates, right? We want to slow down the economy a little bit.

Speaker5:
Um, you know, it's when our economy is overheating a little bit, we need to slow it down. And raising rates is one of the ways we do that. And what happens when we raise interest rates? People spend less, companies spend less, earnings end up falling and stock prices could drop. Uh, you know, the opposite is true. When interest rates are low, people are more likely to go out and borrow. Uh, businesses are more likely to invest in whatever it is that they're investing in whatever product or service they're providing, whether it's research and development or, or maybe to expand their workforce because it's cheap to borrow money. Right. So it's important to look at, you know, inflation and see what the effect is. Um, you know, we're we're basically still at you know, I think inflation is around 3% now. So it's not quite at the 2%, uh, target rate that we keep talking about. And I think it's been around 3% for a while now. So, you know, there there's a little bit of pushback to Jerome Powell, uh, at the symposium last week because, you know, it was almost as if there was a bit of a victory lap happening when really inflation hasn't changed a whole lot. It's still at around 3%. Um, but yeah, I mean, we'll see what happens. You know, um, any thoughts from what some of our clients have said recently on inflation?

Speaker3:
Well, I think you might have the numbers, but it feels like it. We're starting to get it under control. You know, compared to 20, 20, 21 and 22. But it doesn't help the fact that, you know, groceries and a lot of these other items are up, what, 15 to 40%. And so I think one of the things that that we've had conversations specifically with, with people on is are the investments that you've always had that used to work, are they not working anymore? And so I think, you know, one of the things that you and I, I think we do really well, LSA not that we do a ton of things really well, but we do a few is we continue to look. That was a joke. You were supposed to laugh. Um, one of the things that we continue to do is we continue to look and say is the things or are the things that we've done in the past still working today? And there's a great quote. There's this book on leadership. I should know the name of the author, but it's on the the blacks, right? So it's like the number one rugby team in the world. And this book was written by one of the the coaches. And one of the things he said that I love for business people, or those of you that have a professional career, is that when you're at your best is the time to keep getting better.

Speaker3:
I think a lot of people, when things are working or things that have worked in the past, if things are good enough, people decide like, hey, let's not make any changes. Things are working. But what I've noticed is the best leaders, even when they're at their best, say, how can we get better? How do we keep changing? How do we keep improving? And I think it's similar to doing that with a retirement plan. You know, if the investments you have are efficient and they've been efficient in the past are the things you're using the stocks, the bonds, the CDs, the T-bills, the money market, the annuity that you bought. Are those things still functioning for you today in the way that they were designed to function when you purchased them five years ago, ten years ago, 15 years ago? So I would just encourage people, if inflation is a challenge for you and you're noticing that it's impacting your portfolio, even if it's worked in the past, don't get complacent. Give us a phone call. Let us do a complimentary analysis to say, is this still working? Or are there investments that are more efficient, that have less risk with the same or better return?

Speaker5:
Well, one of the one of the questions that that I get from time to time from clients is, why do we need to have a 2% rate of inflation? Why is that the target? Like why wouldn't it just be zero? Let's get rid of inflation entirely altogether, right? Um, and I think that, you know, it's it's a bit of a more complicated answer to that, but I think it's an important one to look at. Um, you know, it might seem like it's ideal, but actually the, the concern that a lot of economists have is if we enter a period of deflation, which actually isn't good for us either. So, you know, I know there's there's some polarizing opinions. And I've talked about Milton Friedman before. He kind of popularized the idea. He's from the Chicago School of Economics of having a 2% rate of inflation. And and I don't know if he coined the phrase, but it seems like it's attributed to him all the time where, you know, a 2% rate of inflation, that's what greases the wheels of the economy. But as Trey, as you mentioned, you know, even though maybe inflation is getting under control, it's at 3% roughly right now. You know, we're not going to go back to levels before the inflationary period that we've experienced. Like it's not going to go back down like groceries are still going to be up 15 to 20% or whatever that number is. And really, it kind of speaks to the problem with with this 2% rate of inflation, even if we did get it back down to 2%, like your purchasing power over the next ten years, if we get it, down to 2% is reduced by 20%.

Speaker5:
So if you're someone who's more inclined to save, um, you know, that doesn't bode well for you. So, you know, there's there's an argument to be had both ways there. You know, I understand that, you know, the concern with deflation and how that could impact what we're doing. You know, of course, deflation is, you know, it's a sign of a weakening economy. And, you know, it actually leads to lower consumer spending, which is, you know, you think about it, it's like, hey, if inflation isn't causing prices to go up, why wouldn't we just spend more money? That's fantastic. But actually it's, you know, the opposite ends up happening because, you know, companies respond to falling prices by slowing down their production. They might lay off their workers. They might, you know, they might do salary reductions because the products and services that they're selling, like if if the prices are going down, then maybe they're not quite as profitable. So that actually ends up leading to less consumer spending than what maybe you would normally think. So you know, I understand that, you know, we want to for sure we want to avoid deflation. And, you know, I guess people a lot smarter than us have determined that, you know, a 2% rate of inflation is is that sweet spot?

Speaker3:
Yeah. Well, I think we're at that study that they've talked about 2% knowing that it's not probably ever likely. It really should be the goal. The goal should be three, you know. So well let's start wrapping things up because I think we've we've talked a lot about a lot of great things today. But if you're listening, one, thank you for joining our episode number 24. We've got 23 other episodes that I think are fantastic. And encourage you to jump in. I think episode number 19 is a unique one. It's where you say, and I don't talk about retirement planning, but we talk about the seven kind of key life lessons that we've learned in seven years of building our financial firm. What I like about that is if you're still building your career, or maybe you started a business or you've been in business, there may be some things that you can pick up that would help you in your work life. Or maybe you have kids or grandkids that are starting to build their business or build their career that that could benefit them. So check out episode number 19, where I talk about kind of seven key life lessons in our business. And then I'll wrap up with this.

Speaker3:
I hand it off to you, Elissa, to close. You know, one of the things that we love is we have two offices. We have an office in Burnsville and Saint Louis Park. So if you're in the Twin Cities here in Minnesota, you're likely within a 25 minute drive of either of those offices. And if you are and you have a great relationship with your tax preparer or your financial advisor, but you've never had a second opinion, and you want to sit down with somebody or a couple of people really, just to give you a second opinion that aren't scared to say, hey, your guy is doing a great job in these areas, but here are some things that could potentially be improved. We'd love an opportunity to earn your business and add value to what you've worked so hard for. You can reach us on our phone number that'll be below and or email address for that complimentary analysis, and we'd love to do that at no charge, because one of the things that we look for is, can we improve what you have, or are you are you already doing it all? You tell us anything you want to say to close it up today.

Speaker5:
The last thing I'll add is, you know, these these episodes, they're they're a bit of a time commitment, right? They're 40 minutes long. Certainly. You don't have to listen to the whole thing. Uh, but one thing that I would encourage you, especially if you don't have the time to listen to a 40 minute podcast episode. We have a number of short clips on YouTube. They're, you know, 2 to 3, 4 or 5 minutes long sometimes where we have some of the topics that that we just discussed, you know, throughout the a podcast where we just kind of split it up into small segments that are easy to digest, easy to listen to. And I think they're, you know, some of our more critical topics and points that we'd love to discuss often. And I think it's it's a great place to start. Yeah.

Speaker3:
Thank you for joining. We hope you have a great day and we look forward to meeting with you.

Speaker2:
Thanks for listening to all things financial. You deserve to work with retirement planning specialists who care about your money, and take a unique approach to your financial and retirement needs. Visit all things financial.com and set an appointment today.

Speaker1:
Fixed annuities, including multiyear guaranteed rate annuities, are not designed for short term investments and may be subject to restrictions, fees and surrender charges as described in the annuity contract. Guarantees are backed by the financial strength and claims paying ability of the issuer.

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