Preparing for Retirement in Very Uncertain Times

Episode 23: Audio automatically transcribed by Sonix

Episode 23: 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 say coots.

Speaker3:
All right. Hello. Hello from all things financial. My name is Ryan Moffat and with me is yellow say cuts. Uh, coming in uh, with episode 23. Uh, just keeps flying by l say, I know, I say that every single time. Wow. We're already on this episode. We're already on that episode. But episode 23. Uh, so we got a lot of great information today. Um, yellow. Say, uh, let's dive in. The number of things that we've got to talk about, especially with what's going on in the market right now, uh, is it's a pretty good sized list. So, uh, you know, before, before we dive into the meat and potatoes of it, I do want to do just a quick listener call out, of course. Uh, you know, we're here in Burnsville, Minnesota. So if you're listening locally, whether it's, you know, Burnsville, Lakeville, Savage, Bloomington, um, Eagan, Inver Grove, Rosemount, anywhere in the area kind of south of the river, so to speak. Uh, we'd love to meet with you. What we specialize in is retirement planning is a risk. Analysis is tax planning for your retirement. Uh, and coming up with a spend down plan. This is the area that we focus in most. It is our our niche. And we would love to meet with you. If you've not gone through any type of retirement planning, uh, or spend down plan. Et cetera. We'd love to meet with you. Uh, you can reach out to us. Our phone number is (612) 286-0580. You can email us, um, give us a call, and you'll probably get a hold of Love Jessica or Liza. They'd be happy to get you on our calendars. We'd be happy to go through that complimentary conversation, even if it's just a second opinion to say, hey, you know what? I'm in a good position or I'm pretty confident, but I want to just get an outside perspective. We always are big fans of outside perspectives and getting second opinions, and when it comes to your retirement, it's one of the biggest things that you want to get right in life, wouldn't you say? Yeah.

Speaker4:
Yeah. We spent a lot of time on last week's podcast talking about Piece of Mind and how important that is, and I think a lot of times that second opinion is exactly what what brings some peace into your retirement plan? Um, you're just getting a second set of eyes. You know, there's nothing wrong with that. Maybe you've been, um, maybe you had the same advisor for a very, very long time. And you're comfortable with that person. You trust that person. Um, I know sometimes people feel like they're. It's almost as if they're cheating on their advisor, uh, to get a second opinion. Yeah. We've even had some folks tell us that, you know, their advisors have encouraged them not to get a second opinion. Right? You know, I can't tell you how many times I've heard Trey mention this. Uh, getting a second opinion is fantastic. It's good for you. It's good for us. Uh, maybe you'll come back with some ideas. Maybe you'll challenge some of the things you're doing. If anything, you'll have a greater understanding as to why we're doing what we're doing. And occasionally, sometimes, you know, it's, you know, we don't have a monopoly on all the best ideas. So it's good to hear what others might have to say. And, uh, you know, I think it's good overall for everyone.

Speaker3:
Yeah. I mean, honestly, if someone's encouraging you not to get a second opinion seems a little bit red flag. Yeah.

Speaker4:
Get 2 or 3 second opinions.

Speaker3:
Maybe 2 or 3. Right. Uh, well, we'll talk about a number of things today. Uh, risk really is going to be a big part of our conversation, kind of segueing right off of last podcast talking about peace of mind. Um, but diving in, we're going to start with our quote of the week, like always, and this is a quote from Dave Ramsey. Many of you probably are familiar with Dave Ramsey. Maybe you've gone through his Financial Peace University or have gone through And worked on getting out of debt via the debt snowball. And I think a lot of what he has to say foundationally is really good stuff when you're learning to and you're structuring your personal finances and learning how to save, etc.. But his quote, I think is spot on because it says a good financial planner is going to do much more than simply pick your funds. And I think that's a huge component to it. Oftentimes people will think and they'll say, hey, well, I can pick this fund or I can pick that fund, or even Dave Ramsey says, hey, get a large cap and get a small cap and maybe an international and you should be in good shape. Well, you know, really what he's talking about there is you have limited options in your 401 K or your 403 B, and if you have limited options, you know, he wants to try and give you some general guidance.

Speaker3:
But I think ultimately when you look at it, uh, you know, hiring a professional to focus on these things daily, especially a team that focuses on your stage of life, you know we talk about stage of life and we talk about the transition from your work in Saviors into your preservation years. And hey, we're now in our go go years where we're going to have some fun. Um, and we went from, you know, five working days, one Saturday and a Sunday, and now we've got six Saturdays and a Sunday. So we're probably going to spend some of that money that we've worked so hard for and have trained ourselves not to touch. Um, but coming up with a plan with somebody who focuses on that time of life and that area specifically, and somebody who constructs portfolios and investments specifically to that time of life, really is where the value is. So Dave Ramsey says a good financial planner is going to do more than pick your funds.

Speaker4:
Hey, question for you. So do you think that and I know there's some stats that back this up one way or the other, but uh, when people retire initially, let's say, I don't know, the first year of retirement, are you spending more or are you spending less in that first year than what you typically spend?

Speaker3:
Yeah Absolutely more.

Speaker4:
Yeah, well, I would think so too, because what I find is, you know, I spend more on the weekend for sure. And part of that is, you know, I'm at work Monday through Friday. So for those, you know, 8 to 10 hours per day that I can't spend any money, I feel like, you know, I make up for it on the weekend. I can only imagine in retirement how difficult it must be to restrain yourself when you know you're doing. I mean, you're doing leisure, right? You're you're just enjoying yourself. And I feel like for a lot of people, um, their budget prior to retirement, at least when you're doing some planning, sometimes that doesn't reflect the reality of what it's going to take to to stay disciplined in retirement.

Speaker3:
Right, right. Well, and I know you also say you're a bit of a do it yourselfer yard work, updates around the house, etc. and I'm the same way where it's like, great, I finally have a Saturday and Home Depot or Menards or whatever happens to to be closer on your name. Yeah, exactly. It's calling our name, so and it's a couple times a week. I don't know if it's two, three, two, three, you know, five times a week. Whatever it is, I'll. I'll have that exact conversation with someone and they'll even suggest that, hey, now, because he's retired or now because she's retiring, uh, you know, we'll finally get some of those projects done around the house. Or, uh, maybe it's not projects that have been pending, but it's things that you want to get done so that you're not dealing with them all into retirement. Many people like to get the big things done, the updates done, the you know, maybe let's finally put the the railing on the staircase or update the bathroom or replace the heater roof, whatever it is. Big small projects, because they don't want to be messing with it into their 70s or into their 80s, right? They want to do it now while they can, so that they don't have to worry about it down the road. And that's a big part of it.

Speaker4:
It's a bit of an illusion, I think, you know, getting to taking care of those big ticket items, because if anything, you know, home ownership has taught me that it never ends. There's no such thing as getting something out of the way. And, you know, setting yourself up for, you know a smooth cruise through retirement for the next 20 years. Projects are always popping up. It's a never ending stream of projects.

Speaker3:
They they absolutely are.

Speaker4:
I'm burnt out. Can you tell?

Speaker3:
I know you're absolutely right. And my wife and I were just talking about this actually just this morning, and we were talking about just some planning over the next, you know, six, eight weeks as we kind of enter the fall season here. And she said, well, I thought you were going to do blank. And I said, I haven't, I haven't locked that in yet because I'm a little overwhelmed with my list of projects that are still undone. There's still some yard stuff that needs to be done. Uh, you know, our dryer just went out earlier in the week, so of course, you know, now we've got to update the washer and dryer. And, you know, that, of course, means added components to it. So you're right, y'all. It does never stop.

Speaker4:
Now, are you somebody when you start a project, do you see it all the way through to the end? Or like when you're 8,090% done, you start to think about the next project and you just kind of move on without finishing. You ever done that?

Speaker3:
Man, that's a terrible question to ask. I have a lot of guilt about this, and I feel like I'm confessing my sins because when it gets to 80, 90%, I mean, you're.

Speaker4:
Basically done.

Speaker3:
Right? A lot. You know, when it's, uh. Uh, I do, I do the demolition, I do the major construction. I'll do the bulk of the work. But that last 5 to 10% oftentimes is is a, uh uh, I have to I have to be disciplined to get it done.

Speaker4:
I'm really good at the demolition. So I have a number of projects where I've. I've only done the demolition and I've never actually started it. But, you know, it's a work in progress.

Speaker3:
That's so funny. Well, we got rid of that tree, or we got rid of that, uh, that bathroom or those cabinets, and now it's just blank.

Speaker4:
Yeah, exactly. Well, uh, back to Dave Ramsey's quote. Uh, they don't.

Speaker3:
You know, I thought we were talking about do it yourselfer stuff today, but yes. Let's get back to Dave Ramsey's quote. He's right.

Speaker4:
Your your advisor needs to do more than just Just pick the funds. Yeah. You know, I think most people, when you consider the the management fee that you have to pay, I think on average most people probably paying somewhere around 1%. Uh, you know, that's a lot of money. That's a lot of money to give somebody if all they're doing is picking your funds. Um, so we'll talk about some of the other things that you might want to ask whenever you do get a second opinion, or even whenever you're talking to your advisor, if you come in for your annual or semi-annual, uh, in-person appointment with your advisor, we'll talk about some things that maybe you need to you need to ask just just for your own understanding. It's good to know what you're paying your advisor. And I'm always surprised, like, how often people have no idea what they're paying. They have no idea. They have no idea if they're working with a fiduciary, if they're working with a broker, if they're working, you know, there's there's a lot of questions that are good to, to ask. Um, and really, you know, it's not you know, we talk about fees a lot. Fees aren't the end all be all, um, risk. You know, it's important to manage risk. Diversification is really important. We'll talk about some of that too. But it's good to know exactly what you're paying for. And we'll talk about some of that here in just a moment.

Speaker4:
But I wanted to touch on August 5th. I know a lot has changed since August 5th, but August 5th, you know, we saw our largest one day sell off. And like in two years since 2022. Um, and it was, you know, as a result of a number of things, the disappointing jobs report, fears of a recession. Um, but it was kind of a wake up call for some people. And I think that sometimes we're kind of lulled into this, I don't know, this, this feeling like the market can't ever go down. We feel like it's, you know, things are good and they're going to stay that way. It's not necessarily the case. You know, on August 5th the Dow dropped about 2.6% Nasdaq 3.4. Uh, S&P 3%. And there's you know, and a lot of you know, we saw a lot of um, we've reached a lot of new heights, right. The indices we've had record days, uh, for a lot of the major indices this year. And a lot of those were led by companies like Nvidia, Apple, um, you know, uh, other tech companies have really led the charge when it came to to some of the new heights that we reached with the S&P, the Dow, the Nasdaq. And, you know, really a lot of those companies were among the worst performers on Monday, August 5th. Right. You know I look at Nvidia, they dropped 6% Apple. And I know Apple. There's other circumstances I think like Warren Buffett he cut his stake in the company by about half.

Speaker4:
And I think that that also led to maybe an additional loss that day. But you know, it's important to make sure that, you know, it's you're looking at your portfolio, you're looking to see how well are you insulated. Because the correction we talked about this in the last podcast. Trey asked me, hey, do you think that like is the correction coming? Is it imminent? Is it, you know, something that we need to be concerned about? And the answer is yes. I don't know if it's going to happen this week, tomorrow, you know, next month, but it's going to happen at some point. And it's going to happen probably during your retirement more than once, right? Most of us will probably have to live through several corrections, you know, and and I think that, you know, in a week like August fifth, it wasn't just August 5th. Like a lot of those major indices posted their worst three day loss since 2022. Um, you know, so a lot of people are thinking, hey, the market's whistling past the graveyard. And, uh, you know, we need to do something. And everybody was, you know, you don't want to be in a place where you're vulnerable to a correction in a way that it takes you, you know, 5 to 10 years to recover. Um, you know, so that's something we're going to talk about as well.

Speaker3:
Yeah. Well, and and you had made the comment about it's possible that even in retirement, a person could see multiple downturns or, uh, you know, and I guess maybe, maybe expand on that a little bit for me because there are some older stats as far as, hey, on average, the, the, the market has a correction every, you know, seven years or so, which hasn't exactly been the case more recently in the past number of years. But maybe you could dive into that a little bit for our listeners. And you know, what do you mean how? How many recessions or how many downturns are we going to see?

Speaker4:
Well, it's difficult to predict. Like, anybody can open a textbook and you can look up the business cycle and you can see, hey, we have you know, this is where the expansion happens. This is the peak. This is how a recession looks. And we can typically expect that every seven years. But you know, how often does does that play out in reality? Uh, you know, so we we know about the lost decade where we had two corrections in a ten year period. Uh, you had the.com bubble, you had the 2008, um, you know, so there really, you know, it's not like it's it's cyclical to the point where you can actually like, you know, you can pencil it in your calendar, uh, you know, then we, you know, it's not like that. We have 13 years. We had a 13 year bull market, uh, following the lost decade. So it's, you know, it's it's a little bit more difficult than than, you know, than, uh, what the business cycle might, might show.

Speaker3:
Right, right. Well, I think what's important and what's good for people to know is, you know, because you say you and I and Trey and many others out there, you know, this is what we focus on and this is this is our career, right? It's it's our job to know these things. Uh, but I think what's good for people to understand and know is that, you know, these things do happen. And when you focus on the business cycle, it is there is an expectation of these things. Uh, not frequently, but there is an expectation. And the reason I wanted to communicate that is because I think it's important to tie this into the conversation of what your portfolio is today and what your risk level is today and what you're comfortable with. Because if you look and you know, there's a study out there, but if you look, the number one fear of retirees is running out of money, more so than death. More so than, you know, I'll make a joke here. Public speaking. Right? Uh, but the fear is of running out of money. And when you when you think about that and saying, okay, if I know that the market isn't going to go up every day of every year and that it's going to fluctuate and that it's going to be volatile, you know, especially in, in certain times of, um, climates.

Speaker3:
Right. An election year is always more volatile. Um, you know, what can we do and where do I stand right now? What conversations have my advisor and I had, or have I had any of these conversations with my advisor about my risk level? Um, one of the things that's, uh, we look at very frequently is just saying, hey, what what's a good gold standard? What are you comparing yourself to? And coming up with a plan kind of surrounding that. So, you know, asking yourself questions, saying, what is my risk level? Am I still comfortable with that? As I'm making this shift from my work and save years to my preservation and my spending years? Um, and if you don't know what that risk level is, if you can't tell me and say, hey, on my portfolio, I fall within this area, that's worth a conversation. It's worth looking more into, uh, whether it's with your advisor or with a retirement planning specialist firm like we are.

Speaker4:
Yeah. And the crazy thing is, you know, looking at from August 5th until today, the market's like almost fully recovered right fast. And you know it's it's crazy. You know on August 5th you get all the fear mongering. Um and then today everybody's talking about how, you know, the fears of recession are so overblown. Right. Um, so, you know, it's it's just depending on what's happening in the market today. And I think that that's kind of shortsighted, if that's all you're looking at. Yeah, I expect that there's going to be a lot of volatility. It's going to remain high probably for the rest of the year. Uh, you know, my my take on it is the economy. It is slowing a little bit. Um, and probably we're going to get a mix of conflicting economic data points over the next couple of months. Right. Whether it's the jobs report or whatever that is. And I think that that's going to continue to fuel this recessionary debate that we're having, whether or not, you know, the recession is imminent or when it's going to happen, I think that's going to be something that's top of mind probably for the rest of the year. You know, we do have the Jackson Hole Economic Symposium that's taking place, uh, tomorrow.

Speaker4:
Actually tomorrow. Yeah. Uh, the 22nd through the 24th. Um, and, you know, over nearly 50 years, that's been an important conference. And it's an economic event that brings in all types of academics, policymakers, and, and, uh, there's going to be a number of Federal Reserve officials that are going to be there. Um, you know, at the conference. And I think that, you know, it's kind of it's really important because you look at when, when if Jerome Powell even slightly indicates that there's not going to be a rate drop, or maybe he suggests that, you know, I mean, whatever he says, like the ripple effect is huge. Uh, you know, he doesn't even have to be, uh, you know, he doesn't have to be, uh, blunt about it. Like, he he can, you know, even if he just even if it's a small suggestion, I feel like the ripple effect in the market is huge. Um, if there's even a small degree of hesitancy in terms of, uh having a rate cut in September. I think that that's going to that could potentially set the market in a, in a spiral, a downward spiral.

Speaker3:
So let's dive into that for just a moment, because I think it is a really good conversation to have. And for those of you that are, uh, you know, more in tune with this, that are listening, um, than others, you kind of have an idea of what we're talking about. But for those of you that maybe don't quite, uh, grab what we're saying here is that the market does respond really, really quickly and, uh, it can respond to a large degree depending on what is suggested or depending on what's interpreted. Right. So, um, Jerome Powell, as he's speaking to the symposium, you know, if somebody gets a hint of I think this is what he's trying to communicate as opposed to what he's actually trying to communicate, different people's interpretation can impact that, right, LLC?

Speaker4:
Yeah. And, you know, I think everybody has their expectations set on at least a 50 basis point rate cut in September. Yeah. Um, but you look at like, certain economic indicators that come out like July's unemployment report, it was at 4.3% compared to 4.1% in June. And like you look at the effect that that had on the market. And, you know, really I think it's it's a really tough to strike the right balance if you're the Federal Reserve. Right. You're responsible for helping to cultivate sustainable economic growth, but also you have to do it without high inflation. And somehow you have to support full employment to the best of your abilities. So I think that, you know that the rate cut in September is pretty forthcoming. It probably if it doesn't happen, I mean, that could really introduce a tantrum effect in the market. Um, you know, but I think that I think that the rate cuts are probably going to happen. And really, there's a number of people who are suggesting that if they do happen, probably that, you know, the market hasn't even priced in some of the benefits or the impact fully. Right. Um, you know, maybe not after the first rate cut, but if we if we get a number of rate cuts, do you have to think that there's a lot of pent up demand maybe lurking beneath the surface? And that could actually that could actually improve some of the market conditions overall.

Speaker4:
Because, you know, I know even in real estate, we talked about this in the last, last podcast. You know, I think that a lot of sales, sales have gone down, pending sales have gone down. The number of of homes that are actually that are under contract have gone down here in Minnesota. I think it's in a I think it's more broadly than that. But part of that is like if you know that current rates are around 7% on a 30 year mortgage and you're anticipating that the fed is going to lower rates, why would you lock yourself into a 30 year mortgage today? If, you know, just a few short months, potentially rates could be substantially lower. So I think there could be a little bit of pent up demand that could actually improve conditions in the market if we do have a few substantial rate cuts. But obviously economic data should be what's what's driving that. And we'll see what happens.

Speaker3:
Yeah. No I agree. Well, and I think that's one of the, the big the big things that that's hot topic right now as far as they've been talking about rates all year and what it should be after all the rate hikes last year and we haven't seen a ton of change yet this year. But you know, we expect we expect some changes here coming through the fall. Um, I think a couple of things that are, you know, worth thinking about and talking through, as I had mentioned, you know, where is your risk level at? Yeah. And I think sometimes what we see, at least, you know, the people that we meet with is that they will have used their, you know, retirement calculator at their 401 K provider online. Or maybe they're talking with their broker, and their broker is using a monte Carlo simulation and saying, hey, you know, you've got a 75% chance of of likelihood that you'll succeed or a 81% chance, etc.. And I think one of the things that's worth knowing and understanding is saying, hey, I appreciate it, and it's good to know that an 81% chance of of success here. But, you know, I had a conversation recently and, you know, in that conversation, the person just kind of paused and said, I 81% feels good, but I actually don't know if it should feel good. I don't know what it's solve. I don't know what it means. What are we comparing this to? Right. And I think having some type of benchmark comparison of hey, where am I at today compared to something that I do know and understand and something that I am familiar with.

Speaker3:
Right. So we look at all the different industries out there, and you always hear about the Dow Jones 500, the Nasdaq, etc. and have you looked to see what your portfolio is risk and return wise compared to one of those indices as a standard, the S&P 500, for example, one of the most common out there, right. Top 500 companies. Have you looked to see hey the S&P 500 is a risk level X and I'm a risk level Y. So if the S&P drops XYZ points to the S&P drops ten points or five points or three points like it did earlier this month. What does that then look like for me in my portfolio? Because knowing your own personal risk versus reward tolerance really is an important key. And if you haven't gone through that with a fine tooth comb to really understand and really come up with and say, hey, how do I feel about this? And if my risk level where it's at today means that in a large economic downturn, I could lose 10% of my portfolio, 15% of my portfolio, whatever, whatever the number is, take that for what is the actual dollar amount that you'll lose, right? What is the dollar amount that you'll gain and you have to go through? Quite specifically, I would suggest to to come up with how do I feel about that? Because ultimately, you know, we can talk loosely about it and you know, but people oftentimes don't know what they're comparing it to two to say, am I doing well or not? And how should I think about this? At least that's what I hear. Oftentimes you'll say.

Speaker4:
Yeah, I want to circle back to the quote from Dave Ramsey. Yeah, we talked about, you know, your advisor should be doing more than simply picking the funds. So I want to talk about something that maybe isn't the most exciting thing, but I think it's an important thing to discuss. I think there's, um, we all kind of have an idea of what? Of what maybe it means, but maybe we don't fully understand or appreciate what's happening when your advisor rebalances your portfolio. Yeah. Why? There might be a need to rebalance your portfolio. And that's part of what you're paying your advisor to do.

Speaker3:
Great topic.

Speaker4:
Yeah. So I know like I said, it's not the most exciting thing, right. Uh, but it's an important thing because, you know, changes in the market and we're seeing a lot of changes in the market, right? We're living through a period of high volatility in the market. But volatility can cause your portfolio to drift from your target asset Allocation. And what do I mean by that. So like you know here at Guardian we basically have ten portfolios. Now we've we have a number of custom portfolios and customizations that we've made for any number of clients. But for the most part we've created ten portfolios. And they vary. They have varying levels of risk. Right. They represent certain levels of risk. And, you know, in the most simplistic way, you can basically define these portfolios as a split between equities and bonds. So for instance, our G 50 would have 50% in equities and 50% in bonds. But as like you know, the market performs in certain areas certain sectors they do well. The target asset allocation can change. So like for instance, if some assets perform well they become a larger part or a larger portion or percentage of your portfolio and then other assets or other positions that you might have. Maybe they perform poorly, or maybe they just simply don't grow at the same rate. What happens is those assets or those positions will shrink as a percentage of your total investment. So when a when a portfolio drifts away from the target asset allocation, what ends up happening? Like if you look at your portfolio on any given day and you look at what you have, you might look at that and say, hey, that's more risk than I would want, or that's more risk than when I initially communicated with you.

Speaker4:
When you guys came on board, you guys became my clients. You communicated to us that you wanted to be in the G 50 or the G 60, whatever. Portfolio. The Guardian 50, Guardian 60. Uh, the G stands for, uh, that's what you communicated to us. But based on conditions of the market, you're no longer in the G 50. You're no longer in the G 60. You're no longer as conservative as you hope to be. Or maybe you're more risky than you want to be, right? So rebalancing what you're doing is you're realigning your portfolio with your risk tolerance and overall investment strategy, where you initially wanted to have what was appropriate for you based on where you are, the assets that you have, how close you are to retirement, uh, what sources of income you have, whatever we have that conversation, and we initially determine the appropriate risk portfolio for your risk profile, right. Rebalancing allows us to return to that. So, you know, let's say you started out with with a mix of of, I don't know, 60, 40, 60% stocks, 40% bonds, you know, historically pretty common portfolio, attractive risk adjusted returns for the most part. Right. So imagine the market value of your stocks grows but your bonds don't. And over time you ended up with 70% of your portfolio in stocks and 30% in bonds. Well, to rebalance we would sell some of those stocks and we would buy more bonds, enough to bring the percentage back to 60 over 40. And I can't tell you how many times we talk about that.

Speaker4:
There's any number of studies that show that overall rebalancing has a positive effect on your portfolio. But, you know, just intuitively people look at that and they say, well, what do you mean? Why are you selling off the positions that have done so well? Like, we've had a number of people that have just called in, even in the last couple of weeks, like I, you know, I can name a number of people, a handful of them that have said, hey, like, what are you doing? That's the one position that's growing in my portfolio. And you just sold it to buy the one position that hasn't been growing in our in our portfolio. And, and I think that there's just I don't know if it's just a disconnect of what it means to rebalance or maybe just there isn't enough faith in that process where sometimes we're chasing certain returns or, you know, based on what's happening, happening in the market today, you see a lot of advisors that are they're chasing trends. And what we don't want to do is chase trends. We want to make sure that whenever you make a decision, whenever, especially like if you're in retirement or getting close to retirement, and you've made a decision and you've determined that, hey, based on what I have, based on my goals and objectives like this is the right, this is the most appropriate choice for me in terms of the split between equities and bonds. Uh, if we've determined that that our job is to course correct whenever our portfolios is misaligned. And I think it's important to consider that. Ryan, any thoughts there?

Speaker3:
Well, I think one of my one of the things that kind of keeps popping up in mind here is that, you know, there's a difference in just kind of your traditional stockbroker versus somebody that does, you know, more on the planning side. And really one of the important things to know is that how you invest, what your portfolio is, and it really does circle around your risk tolerance. But understanding that everybody, everybody can understand that, hey, as I get older, as I get closer to retirement, as I'm in retirement, I should probably scale back my risk, but not fully understanding what that means or the mechanics of it. Right? Well, a big part of that is that, hey, if you're 30 years old, 40 years old, 50 years old, really all you need and, you know, I'll say you can chime in on this if you have additional thoughts, but really, all you need is you need that. Hey, my money's invested. It's growing. It's being managed. Whether it's in my 401 K or retirement plan or otherwise. And I keep contributing to it. Right. That's the big key for success. And any public figurehead, whether it's Suze Orman, Dave Ramsey, Tony Robbins talking about money or really any of these public speakers on finances will all say the same thing, and they'll give you tons of advice and tons of different ways to do it, all these different ways to budget.

Speaker3:
Et cetera. Et cetera. But ultimately, the discipline of saving and contributing is what gets you to the point where you have some of that success in retirement. So I think one of the big keys to to know and to understand is that what's tied to that idea of, hey, I got to scale back my risk a little bit because I'm nearing retirement or I just started retirement. It's a different way of investing. It's a different way to construct a portfolio. There's different ways to do it. You know, we're not focusing on these two single stocks. I'll just use these because you mentioned them earlier. Yeah I'll say I'm not going to focus just on Apple and Nvidia because they're huge growth and they've done me extremely well. We now need to focus on something that carries a lot less risk of volatility, which means different funds and In different ways to construct a portfolio. Does that does that, uh, line up with what you're saying?

Speaker4:
And I really like what you said about, you know, it kind of all starts with saving and contributing, right? Yeah. Um, you know, we're not spending a lot of time on that in, in this podcast, but we've certainly talked about contribution limits and a variety of different, um, types of I must have.

Speaker3:
Dave Ramsey on the line to say.

Speaker4:
But, you know, whether we're talking about IRAs 401, Sep, IRAs, solo four. I mean, we talked about different contribution limits and, and and it all starts with saving and investing and being disciplined. And, and hopefully you have something meaningful that can supplement some of the sources of income you might have in retirement, like pension income or Social Security income. And we know not everybody has pensions. And we've talked about creating a self pension for yourself. Right. A few more things I wanted to add to that. You know, I don't want to make it sound like it's just stocks and bonds, right. We have a number of clients that that use bond replacements. Right. What do we mean by that? Um, it just simply means that rather than having 50% of your portfolio, if you wanted a 50, 50, 50% in bonds, maybe part of that allocation that that traditionally represents bonds, you've used other investment vehicles to fill that, that that percentage of the pie, if you will. Right. And I know that, you know, we're not even just talking about replacements, but even within like within the equity holdings or stock holdings, like your asset allocation is probably, you know, on a more of a granular level. Um, you know, we're not just talking about stocks, we're talking about potentially, you know, large cap, mid-cap and emerging market stocks. And rebalancing isn't just necessarily correcting the shift between stocks and bonds, but it could also mean correcting the drift from targets within those subcategories that I just mentioned between large and mid-cap and emerging markets, for instance, you know, and by the way, if you're if you're talking to your financial advisor or if you're getting a second opinion or maybe you're shopping or looking for a financial advisor, one of the things I would ask is how do you rebalance? You know, it might just, you know, from what I outlined, it might seem very simple.

Speaker4:
Like, hey, you know, of course, bring the portfolio back to, you know, my risk profile that I initially, you know, that I initially said that I wanted to have. But there's a difference in how you rebalance as well. And the question to ask is, are you do you rebalance on a calendar based system or a trigger based system? And what do I mean by that? On a calendar based system. And a lot of advisors do this because it's easier. It's simple right. You can just simply say, hey, every June 30th we rebalance our portfolio. Or maybe you do a quarterly or maybe you do a semi-annual, whatever it is. You know, the pros there is, it's a lot easier to do that. It's simple to implement. We just have it scheduled. Right. The problem is between those intervals, your portfolio might be completely out of sync. And the changes that happen between those intervals, uh, you know, that isn't the best way to do it, because a lot can happen especially nowadays in this period of high volatility. Like we can have significant drifts between intervals.

Speaker4:
So I would say that if someone does a calendar based rebalancing, that wouldn't be my first choice. Right. And especially depending on how far apart those intervals are. The biggest problem with calendar based rebalancing is sometimes it's not appropriate. Sometimes you're doing it needlessly, but also you might be triggering unwanted taxable capital gains within your your after tax accounts. If you simply have it on a on a calendar schedule right. What we do at Guardian is trigger based rebalancing, right. We set up certain thresholds. And you can do this at, you know, at any interval or I'm sorry at any percentage. But for instance, let's say a specific asset class changes by more than 10% relative to its target allocation. Whatever you've determined. Right. That's when we would trigger a rebalance. So we're more trigger based. You have to have a significant amount of change within your portfolio. And we determine those limits. And we could change those limits, obviously based on what's appropriate for you. But that's what I would recommend if you're shopping for for someone to help you with your investments, whether it's a financial advisor, stockbroker, anybody, and you're asking them how they rebalance, I would encourage you to find somebody who does trigger based rebalancing. Enough on rebalancing. Like I said, not the most interesting topic, but an important one. And obviously it's more fun to talk about diversification in any number of other topics. But rebalancing is also very important.

Speaker3:
It you know, we find that a lot of the topics you will say are like, well, this might not be an exciting let's talk about taxes. Well, that might not be very exciting. Let's talk about, you know.

Speaker4:
As I said that I thought to myself, I'm like, I don't know. You know, if we had to pick which of the topics are really all that exciting, I don't know that any of them are.

Speaker3:
You know, the the interesting thing about it is that they may not be exciting, but they're the important details, you know, and, uh, for whatever reason, you and I and Trey and we love the non exciting topics for our careers. But, you know, these things do matter, and they make a big impact on people's retirement and their investments and their portfolios. But, you know, for our listeners, if you haven't heard from your advisor lately, especially, you know, upcoming on election. Et cetera. Um, or if you're nearing retirement and there's different terms for this. Et cetera. Some people call it the retirement red zone. Um, you know, I don't know. It sounds a little, um, you know, I don't know, cheeky to me, but I think the whole.

Speaker4:
I've called it that. Come on. Ryan.

Speaker5:
Settle down. Ryan. Oh.

Speaker3:
Come on. Well, so here, here's the thing is that, you know, it depends on. Hey, how close am I to retirement? How or how far am I into retirement? And there's not a right or wrong answer here because somebody might be out there saying, hey, I'm 53 years old. Um, it seems way too early for me. Et cetera. Uh, but, you know, it all depends on what your situation is. Uh, met with somebody here recently, and they're retiring right at 55. You came in at 54 years old because he's retiring early. He thought, hey, I've really got to look into these things. I'm retiring from my main career. I kind of feel like I should probably keep working. I haven't figured that part out yet, but I know that I need to do something right. So for a lot of people coming in, you know, two, three, five years before they think they might retire, absolutely appropriate even. Hey, I retired, you know, three years ago, I'm already on Social Security. I kind of feel like everything's already set. I've already moved my 401 K to an IRA. I feel like everything's kind of in place. Well, again, if you haven't gone through to say, hey, what's my what's my personal risk level? What's my reward level and what is that compare to? How does that look against a benchmark? If you haven't gone through those conversations specifically, I would encourage you to do so. I think it's an extremely important part of, um, managing your retirement plan, right. And obviously, you have a planner to help you manage the funds and help you manage when to pull from what account and your spend down plan, and working with you to say, hey, you know what, if the market does well your first year or two of retirement, that sets you up really well.

Speaker3:
But then how do we plan for if there if you're the market goes the other way your first year or two in retirement. Right. We need to be able to plan for the expected and the unexpected, which sounds kind of funny to say, but you need to have some contingency plans and know what you're comfortable with and saying, hey, if the market goes south, am I okay losing XYZ percentage or XYZ dollars out of my portfolio? And that's something that is a hard conversation to have. You know, we find that, um, you know, when the market's doing well or even just reasonable, right? If the market's doing reasonably well, people suddenly get really, really comfortable. And, uh, we'll ask them and say, hey, you know, what type of portfolio are you in? What's your risk tolerance? And they'll say, oh, I'm I'm aggressive. I'm I like to be aggressive. I let it ride, I, I get the gains. But like the moment that we get a downturn and, you know, somebody loses a good chunk of money, whether it's, you know, on a particular day or in a given week. Et cetera. Suddenly they're not quite as aggressive anymore. You know, we see that pretty frequently. I don't know if you still see that yellow say, but I know I do when talking with people. Uh, yeah.

Speaker4:
A couple more things I want to add to this real, real quick. Yeah. Um, I don't know if you remember back in 2008, uh, one of the, uh, the caption of the Star Tribune article, it said three out of five seniors are going back to work or staying in the workforce longer. Yeah. Um, you know, we talk a lot about the lost decade, but, like, what? What do we actually mean by that? You know, a real life example? Um, maybe not a great real life example, but more of a technical example. Uh, so the S&P 500 on January 1st, First 2000 and I could be off by just a little bit, but I know I was trading at around 1469, right? January 1st, 13 years later, the S&P 500 is trading at 1469 13 years where if you had simply left your money there from January 1st in the year 2000, all the way until 2013, where you wouldn't have had any kind of return on your investment 13 years. Right? So that's what we're talking about when we talk about the lost decade right now. Obviously, back then you were still working. You were taking advantage of the market being down, you were contributing when the market was down. And you've actually benefited greatly right from all the time that the market's recovered. Um, and, and that's, you know, that's just the way it works. But in retirement, when you're no longer contributing, you know, can you afford to to live through the lost decade, if you will.

Speaker4:
You know, and you know, as Ryan, as you mentioned, you know, one of the first things that we often encourage people to do is make sure you're actually contributing, make sure you're saving for retirement, Right. But once you've done that, you know, there's a couple of things that you need to do now. You know, we have a number of of clients and people that we run into where they've been through 2001. They've been through oh eight. They, you know, Covid, right. In 2020 when the market dipped, they've been through those those types of recessions, those types of downturns when the market retracts. They've been through that. And they're not interested in any risk at all whatsoever. And then we have a number of clients. Um, typically these are people who maybe they're fixed or guaranteed sources of income between their pension and their Social Security. Maybe that covers all their needs. Right. And they're a little bit more aggressive in terms of risk. They have it all in red, right. Um, so there's there's a variety of different, different personalities, different goals, different needs in retirement. My biggest encouragement to you is find somebody who can help you determine the appropriate risk tolerance for you, the risk profile for you. Find somebody who can listen to what your needs, what your goals and objectives are in retirement.

Speaker3:
Totally agree.

Speaker4:
And somebody who could put together a solution that matches that. Right. Because there is a solution that matches you. Specifically, there is no one glove fits all. And sometimes you find that, you know, there's any number of you know, I don't want to mention any companies or any advisors specifically, but like, there is no one glove fits all and you can't give everybody the same cookie cutter solution, right? We're all different. We all have different needs. Not only do we all have different needs and objectives like, you know, we just some of us have different preferences and you need to make sure that whoever is looking out for you, whoever's helping to manage your specific investments, that they're taking the time to get to know you, and that the solution that they put together matches those preferences, those needs, those objectives in retirement, especially as like, you know, if we, you know, we're going to inevitably have another correction, we're going to. Right. And the difference is you might be a lot closer to retirement, or maybe you're already in retirement. And that's when, you know, that makes all the difference, where you can't contribute during those downturns to take advantage of them Yeah.

Speaker3:
No, I totally agree, Alice. And as we as we wrap things up here, I just want to encourage you, if you are listening and whether this is your first episode or if you listen to all 23 episodes. Now, uh, we're happy to dive in with you, and we're happy to take a look at your plan, whether it's a second opinion, whether it's a third opinion, or whether it's your first opinion. You know, a lot of you out there, maybe you're just trying to figure out, hey, what are my next steps and what should I do? What should I be planning for retirement? I think one of the big keys is always looking ahead to the future. And I don't mean future as in what's happening at the end of this year or next year, etc. but what are the things I can do today that can impact me in five and ten plus years? Right. Because ultimately that's what got you to the point you're at today. The decisions that you made financially 20 years ago, 25 years ago that, hey, I should probably contribute to my savings account, I should make sure I'm invested, etc. those decisions got you to where you are today and stewarding that well should absolutely be a priority, so we're happy to dive in with you. Um, if you do want to go through a risk analysis with us, uh, you know, you can give us a call. Our phone number is (612) 286-0580. You can email us. It's our first name at G. Wealth.com. The letter G, the word wealth.com. So Ryan at G. Wealth.com, LLC or Trey at G. Wealth.com. Uh, we're happy to dive in with you and have a conversation. It's complimentary to, uh, have that conversation as a podcast listener. And we would be, uh, you know, we would be happy to go and look at that and say, hey, where do you land compared to some of these benchmarks? And, you know, what does your situation look like? Et cetera. So with that, as we're getting ready to close here, yellow, say any final thoughts or tips?

Speaker4:
Yeah. Um, so we've actually we've had a number of listeners who have reached out to us, not necessarily for uh, a second opinion. Of course we had those as well, but this is actually interesting where a number of people have had some topical requests. They want us to go over a specific topic. And, you know, obviously we're a little bit all across the board sometimes, you know, I don't know if it's just the our inability to keep, you know, focus and stay on track, all the.

Speaker3:
Fun topics, right, topics.

Speaker5:
But we do have a.

Speaker4:
Number of requests that I just want to let you know that if you are listening, we are planning to get to those and, uh, possibly some of them, we've, we've some of the requests that we've had, we've already covered those topics. So if you're if you're looking for information on a specific topic, uh, I'd be happy to just to forward whatever podcast that addresses those topics. That way we can get the information to you. And also, um, you know, I would say if you have any requests, keep them coming. Uh, we'll get to it. We're going to be doing this for a long time, and we want to make sure that we give valuable information in any area that you have an interest in.

Speaker5:
So yeah.

Speaker3:
Perfect. All right. Well, as we wrap up, uh, go out and have a great day today. If you want to schedule a complimentary risk assessment or any of the other topics that we've looked at, right. Uh, risk was a big topic for today, but really we're talking about all the different things. Um, at any of our episodes, we're happy to reach out or we're happy to have you reach out and discuss with us. So (612) 286-0580. You can listen to us anywhere podcasts are available. You can check us out on our YouTube channel as well. Uh, but we thank you for listening and tune in next time. Have a great day.

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.

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