Why You Shouldn't Worry About Retirement

Speaker 1 (00:00):

We're gonna talk about specific things today, social security, the stock market, retirement in general, long-term care taxes. We're gonna talk about all that stuff. And really, should you worry about any of that stuff? Well, what we're gonna try and communicate today to you is, no, you shouldn't worry about it, because worrying by itself does nothing. If we just sat there and there's a lot we could worry about, and with your finances, with, with the world, with our lives, right? And we could just sit here and choose to worry, but worrying is not going to do anything for us. It's not gonna help us. So should you worry about any of this? No. What we're not saying is, well then just throw your hands up, put your head in the sand, whatever, choose whatever saying you want. We're not saying don't, don't look at it. Don't address the potential risk.

Speaker 1 (00:59):

That's not what we're saying at all. But worrying is just gonna make you miserable. You know, there, I could go back 10 years, mark. I mean, I'm sure you're the same. I could go back 10 years and when I got in the business, how many things the, you know, the, the financial media was telling us that we should worry about, and how many of those things actually happened? How many of those things, um, caused the market to go down, you know, temporarily, permanently. None of none of them have been permanent. The market's done, you know, it's, it's gone up, you know, from that time to now. But the truth is a very small percentage of the things that we, that we worry about actually happen. But nevertheless, people continue to worry. There's, I'm gonna throw some stats out here. And just in, in general, talking about retirement, if you can believe this, A new survey says 40%, nearly 40% of Americans actually fear retirement more than death. 41% of Americans say it's going to take a miracle to be ready for retirement.

Speaker 1 (02:09):

Another study, 87 peop 80, 87% of people fear not having enough income in retirement. The second biggest fear is losing health insurance. People worry about a lot of things. So I think what I hope that everyone gets outta this episode is that there are some things that, that we, that are concerns. There are some things that, that we maybe have to understand. There are, there's risk when it comes to some of these issues that we're gonna dive into today. But I really want to counsel the, the listeners out there that are struggling or that worry about things, because like we said, that's not gonna do anything for you. And if it, if we're about anything, the whole tagline of, of the retirement power hour is to help people invest wiser and retire better and retiring better. One of the things that means is retiring with less stress, retiring with a better quality of life. And Mark, we talk about all the time, retirement's not always about just having enough money, you know, and, and, and doing financial projections. It's about a lot more than that. Yeah.

Speaker 2 (03:17):

I would say 60 to 70% of the conversations that I have with people are not about money when it comes to retirement. You know, it's about lifestyle. It's about staying sharp mentally, staying sharp, physically. I mean, it doesn't do you a lot of good to have a couple million bucks at 65 and die at 67 'cause you're miserable, right? So having a successful retirement goes well beyond having finances. Now we know that to retire and shut off an income stream, you gotta have the money to do that. And we're gonna talk about some of those things today. But again, proper planning, um, giving you some ideas of what's out there, giving you some clarity. We'll help with all these things. We're not just sitting up here beating our chest saying, don't worry. We're gonna give you some things that Yeah. That, uh, you can think through. You know, it's not like you're my 8-year-old because I said, so don't worry. Right? We're gonna give you some reasons why you shouldn't today, and we're, we'll jump into those topics.

Speaker 1 (04:07):

Yeah. Don't <laugh>. Exactly. It's, it's, it's not like, take my word for it, right? Right. Yeah. So plan, but don't worry, I said at the end of the last show plan, but don't worry. So let's jump into the first one. So, should you worry about running out of money?

Speaker 2 (04:22):

That's probably the number one question for everybody that I face a new client that comes in and meets, I, I don't wanna run. Do I have enough to live the rest of my life? So that's probably the number one concern people have, and it's a very valid concern. Again, you're cutting off your income stream that you've done for 35 or 40 years, and now you're down to just basically social security at that point. So it's a valid, valid concern. So one way not to worry about it is, is sit down and create a plan. And a plan is, is is very intricate. It, there's a lot that goes into it. You know, how much do you have? How much do you need on a monthly basis? You need to sit down, spend some time going through your budget, um, and then, you know, not to sell us or somebody, but get a financial advisor. Get a counselor that can help you and coach you with your behavior through these types of things. And open your eyes to things maybe you're not aware of, because that, again, that sounding board will help reduce the anxiety. You're, you're not out on an island on your own.

Speaker 1 (05:21):

Yeah. There, and I've told people this too. I mean, I just had this conversation I think last week, but mm-hmm, <affirmative> say it all the time. There's always a way to make it work. If you, if you put a plan together, oh yeah, I can tell you how to make it work. Yep. It might not be the answer you want, but that's right. If you start with a plan, we can figure out how to make it work. And there, and commonly, there's a couple, just a couple things. There's, you know, a few different levers that you can adjust and you can make it work. Now, one of those is rate of return, but that's not really in our control. We have influence over that. But I can't just put in a financial plan or retirement plan that is, you know, coming up short, that's projected to come up short.

Speaker 1 (06:07):

I can't just change the assumed rate of return from 5% to 12% just because I want to bridge the gap. It doesn't work that way. So there's things in our control and the, the levers that we can control might be how long you work. That's something you can control. Now, if you do a plan, and a lot of people are like this, I think they might be afraid of what the plan is going to say or what the projections are going to show. Well, it's, it's no different medically if I'm afraid to go to the doctor because I'm afraid to, to see what the blood test shows. Well, we know that the doctor's not gonna be able to help you. And if there's something wrong, wouldn't you rather know sooner than later? And again, some people are so afraid, obviously almost 40% of people are more afraid about retirement than death. So, uh, more people according to that statistic, are avoiding this, you know, getting this analysis done because they're, they probably have a good idea of what it's gonna show. But a lot of people that I've worked with have been surprised in that where those,

Speaker 2 (07:16):

I was just gonna, I was just gonna say, I would, would disagree with you on that. Those people aren't prepared. Be be just because the fact that most people that come in, you just said it there too, they are concerned, but they're overly concerned and a lot of times for no reason. Right. Right. They, they walk out like, holy cow, I am better off than I thought. And a lot of that comes with comparing yourself to your neighbor or your talking to your, your uncle or whatever, and getting some maybe information that doesn't apply to you, but Correct. I'd say those 40% are concern. I'd say a good chunk of them will be fine. You know? Exactly. Yeah. I see. Comes in a meeting, so I would, but the procrastination that takes place in, in, in financial planning along with just about everything and, and as a human, um, can really be a detriment to you. You know, sometimes we do have people that come in and it is, it is too late. Right? And then the only choice is to say, Hey, you're gonna have to keep working, or you're gonna have to spend less or spend less, or you have to die sooner. Right? So when we can't control, but the reality of it is, you catch me five years or 10 years before that, we can start molding and shaping some behaviors from a saving standpoint, reduce some spending standpoint, maybe paying off some debt that can really drastically change the situation.

Speaker 1 (08:29):

A hundred percent. Yeah. Two things you said there. Number one, I was saying you could work longer or you could spend less. That's a way, that's something very much in our control. Absolutely. How much we're gonna spend, everyone, you know, we need something to live, but I've met with enough clients where I've seen people make it work on not very much. And so we all have control over that. It might not be, again, the answer we want to hear, but we do have control. Another thing is, when we say how long you work, it doesn't mean working full-time. It might mean sure, making some part-time income, but, you know, work longer, spend less. We don't know how long you're gonna live. So that's not really in our control. We have to sort of plan for quote the worst. And then the last thing that you just said, mark, was it goes back to that medical example.

Speaker 1 (09:17):

Okay? And this is probably more re relevant to people listening. If, if someone had a, a, a bad medical condition, okay, like cancer, and they, but they're going and getting regular screenings and they catch it earlier, skin cancer, whatever. They get regular screenings and they catch it early and the doctor says, oh, well yeah, we'll just remove that and we'll see if it spread anywhere else. And then they find out, no, it didn't. We caught it early, we got it all out. You know, you're fine. Um, in the financial world, if you wait and wait and wait and wait to evaluate your situation, and there is something wrong, it's like waiting until that cancer's at stage four terminal before you do anything. And at that point there is, there's hardly anything you can do. Right? But if I have 20 years to retirement, 15 years, or excuse me, let's say you're at retirement, but, but you've got 20, 25 years to live, you know, to your life expecting again, we don't know how long you're gonna live.

Speaker 1 (10:28):

If it ever, if any, if the projections ever show that maybe you are short, maybe you thought you were fine, but you, but you are short, well then you can make that incremental change over those next 20 years. You can make incremental changes similar to when you're trying to save for retirement. When you start saving younger, you can just save a little bit, a little bit every year, you know, increase it a little bit every year. But if you wait till you're 50 and you wanna retire at 65 and you haven't saved anything, you're gonna have to save a ton. The the changes are gonna be enormous that are required. And often you can't even, you can't even do enough. And like I said, if you're, if you're retired and you're 80 years old and you've never done a plan and, and you got 50,000 left in the portfolio, there's just not a lot. There's not a lot that can be done at that point. And it might take a drastic change. Yep. Um, especially if you're only living on social security. But that is, that's one of the things to remember too. Should you worry about running outta money, mark? Well, if your portfolio goes to zero, are you ever, are most people ever really outta money?

Speaker 2 (11:38):

Well, absolutely not. I mean, right now, as, as, uh, stands, most Americans are getting between 20 and $40,000 a year in social security benefits, right? So, no, I have this conversation at times with people who their plan says they might run outta money in their late nineties or mid nineties. And yeah, that kind of gets you kinda, you know, milling not so great, but let's, let's be real, you know, when you get to your mid to late eighties, you've made it through life, you're not going a lot anyway. And if your portfolio assets, I say portfolio assets have been drawn down to zero, it's likely that you're still living in a home that's paid off. That's worth something. Right? Right. And you still have social security benefits coming in, and we have a number of, of our clients that are in their late eighties that have a hard time spending their social security on a monthly basis. Right. They just don't do a whole lot. So, um, still a significant benefit that, that people are able to get, that they don't have to draw down from the portfolio. So no, by any means, they're not outta money.

Speaker 1 (12:38):

Or they might have a pension, they might have absolutely, um, annuity income that's coming in that's guaranteed for life. So you always have those income streams coming in. You might only have Social security, but you might have others. But that's a good segue into our next question. Should you worry about Social Security <laugh>? Well, I'll throw out some information about that. And, and this is all accessible to, uh, to everybody. If you just go on and look at the most recent Social Security trustees report, what does it say? Because as we, as we talk about this, should you worry about all of these things? Well, we can first identify, is there any reason to worry? Some people are worried about things where there, there doesn't seem to be a lot of evidence to worry. Social security might be a little bit different. Social security is in a dire situation.

Speaker 1 (13:30):

It's 13 years away from insolvency according to the most recent trustees report. That means, and when you combine the reserve funds from the old age fund and the disability fund, it looks like those reserves would be exhausted by 2034 at that time. Um, that means there would be a 22% cut across the board and all social security benefits. So if no, and I, and this is a big if, if no changes are made to the system, and we've done prior, prior, uh, presentations on ways to fix social security, there's a lot of things that can be done. Lawmakers need to come together. But is this something that people should worry about? And how do you combat the fear of this?

Speaker 2 (14:20):

Yeah. And, and not to be redundant, but if, if our clients are listening, they've heard us say this a lot of times, but I think it's important just to understand. 'cause it is a complex, it can be complex issue. And it's a very talked about issue. You know, you're two from social security comes from really two sources. It comes from that trust fund, right? They're pulling money outta the trust fund to give you some of your benefits. You're taking Social Security, but 78% of those benefits come from the younger class putting money in, you know, like Joe and I and everybody else that's not taking Social Security right now, that's making a paycheck, is paying social security tax. So getting back to Joe's, 22%, what Joe and I and a young generation that are putting into the system is supplying 78% of a retirees benefit.

Speaker 2 (15:04):

The other 22% comes from the trust fund. So, oh my God, social security's going bankrupt. We're not gonna get any money No. In 2034 if it becomes insolvent. No changes are made, the piggy bank's empty, right? But you're still gonna have the younger generation paying social security tax, so we can still maintain that 78% benefit or 78 cents on every dollar you're supposed to get. So yeah, that's not great. But it's not doomsday as it may be perceived in the media or other maybe other advisors trying to sell you something. But the reality of it is, if you wanna plan for these types of things with all of our clients, they know we take a 75% right, um, viewpoint on social security. So we take a 25% reduction in the planning. Yeah. Right?

Speaker 1 (15:47):

We can see it at, we view, we can look at it as a what if, what if, what if it gets cut by 75%? What if you get your full benefit? And I just started, I just started laughing when I, you know, hearing you talk about this, because every, I don't wanna say every, but many, many of the financial shows and things that are out there, all they're talking about is why you should worry about this, why you should worry about that. And that's the beauty of what we're doing is it's counterintuitive. This broadcast, this podcast, we designed it and I started this with our clients in mind, which is a total opposite. I don't want our clients to worry, you know, I'm not, and and again, like we said, we're not saying, ah, don't worry about it and just don't do anything. But people do that, like you said, to sell you a product or sell you on something, they want you to worry.

Speaker 1 (16:41):

'cause fear is a, is a motivator. Well, let, let fear motivate you to just again, take action and get a plan. And if social security is a concern, like you and I talked Mark many times, and what we do for clients, you can put that in your plan. We can plan for the worst case or a subpar scenario. So even on a cost of living adjustment, when I'm entering that into the, to a plan, even though historical inflation might have been 2.8, 2.7%, maybe we'll use 1%, maybe it's one and a half. You know, that's, that's just to hedge maybe, you know, if we're not getting the increases that, that we have received historically, those are ways starting the benefit at only 75% of what social security is telling you you're going to get. Those are things you can do. Can you change Social security?

Speaker 1 (17:38):

No. Um, you can raise your voice and do all that and talk to your politician. You're, you can't change social security single handedly. So should you worry about it? No, you shouldn't worry about it. You should plan, you should plan accordingly, the best you can and, and plan for the potential that it should or that it could get cut. And, and that might mean a number of different things. Everyone's in a different position. Hopefully you listen to this sooner than later, earlier on in your retirement journey, because then you'll have more options. But should you worry about it? No, not really. What are you gonna do? What, what's worrying gonna do? And, and there's not really much you can do to change that situation. Then we go into the stock market. Mark another one. Should you worry about the stock market?

Speaker 2 (18:29):

Well, it sure doesn't make a lot of sense because no <laugh>, nobody knows that thing's gonna do on a day-to-day basis. So again, another valid concern. But you know, I I, I'll use the analogy, if I was gonna go on a trip and I was gonna try to make it down to Carbondale in two hours, right? Well, if I'm concerned about traffic and worried about traffic and I leave two hours before the time I gotta be there, and if there's traffic, I'm gonna be late. Right? Well, if I'm worried about it, maybe I should leave two hours and 30 minutes prior that alleviate my concern. So planning and having, taking the approach of maybe a conservative look or maybe assuming that something might happen that you're worried for, we'll help you with that, with that ease. You know, it, it happens from time to time. I always know what's going on in the media. One 'cause I listen, but I know that the client questions, right? Right. Uh, what about inflation? What about social security? And it's very, very, um, uh, gratifying to be able to say, you know what, yeah, I know there's some concern about inflation right now, but we've accounted for that in your plan. I know there's concerns about social security right now. We've accounted for that in your plan. So if they do that, yeah, our clients are gonna make it. Right.

Speaker 1 (19:36):

The uh, so this was interesting. I looked up some stats on this as well. 72% of millennials worry about a stock market crash

Speaker 2 (19:48):

That's unbelievable

Speaker 1 (19:50):

Compared to only 56% of Gen Xers and 55% of baby boomers.

Speaker 2 (19:56):

So 72 out of every 100 millennials is day trading <laugh> <laugh>, right?

Speaker 1 (20:02):

That's, uh, that's amazing that that's a, that's a stat we just, we just pulled off of magnify money.com as a blog. 72% of millennials worrying about a crash, but over half, over half of it looks like just about every generation is worried about a stock market crash. Women, women tend to worry a bit more, uh, than than men. 63% of women versus 53% of men are, uh, worry about making a mistake. So it's not really the, you know, the stock market, but making a mistake with their investments. That's probably because men are overconfident and only 44% of women have investment accounts versus 60% of men, you know, with when it comes to investing in the stock market. And should you worry about the stock market? Well, there, of course there are volatile times in the market. If you don't have a plan and you don't have an investment strategy that has been thought out, I can see good reason to worry.

Speaker 1 (21:06):

Because you don't know where you're at. Absolutely. You don't know where you're heading. You don't know what to expect. There's no rhyme or reason for how you're invested the way that you are. So I can see why people worry. I mean, if you put me in an environment where I don't know anything about that environment, I'm gonna, there's a lot of unknowns I'm gonna be, changes are, if if it's foreign to me and there's risk changes are I'm probably gonna be worried. Think back, I mean, even covid at the beginning of the pandemic, there were a lot more unknowns. Fear was probably at an all time high in recent history and a lot of people still are very worried. But with more information that's come out, the unknowns have have decreased over time. And I think the worry has gone down as well. So should you worry about Theto stock market? Well, you should understand, you know, the fundamentals of investing and that is the stock market is gonna go up and down. It fluctuates a lot. And our philosophy, which maybe we'll cover in an, on an entirely different podcast, but our philosophy is you only wanna invest in certain types of investments that are designed for the period of time that you're looking to invest for. So, you know, we talk about stocks, those are, we think, a great long-term investment. They're not a great short-term investment in my mind. In our mind. Yeah.

Speaker 2 (22:31):

Yeah. Like I, like I said earlier, it was kind of tongue in cheek, but if I was day trading or worried about what the market was gonna do tomorrow, I would be concerned about the market on a daily basis. Right? But as you're saying, Joe, we know that if you have a plan in place and you're investing money, and it's long term, 10 plus years, where you're not gonna touch this money, right? I don't get concerned about what the market's doing today, next month, next year. Now if I need money next month to live off of, or if I gonna put a down payment on the house in six months, or I'm planning on giving my kids money in the next six months, guess what? Yeah, then it, that money shouldn't be in stocks.

Speaker 1 (23:05):

It shouldn't be in stocks. Right? And then you wouldn't worry about it. Wouldn't worry. And I tell people all the time, you know, on the flip side, cash is cash a good investment. And when I bring people in the office and they, you know, sit across the table from me, I say, is cash a good investment? And a lot of people start to say, um, no, it's probably not. And I say, well no, it's, it's, it's not that it's a bad investment. It's a bad long-term investment. Yeah. It's a great short-term investment. That's right. If you put 10 grand in the bank and you're gonna need it in a month for a down payment or whatever, when you go back to get your 10 grand, are you upset whatsoever that it hasn't grown 10% in that month? No, absolutely not. No, no one thinks about that.

Speaker 1 (23:52):

They just, they're just happy that it's there. They're happy they could go get it without any hassle. They run up to the bank, they take it out. They're not worried about the growth of the money. And that is the definition of a short term bucket. <laugh>, short term money. Short term money, the focus is not growth. The focus is safety, accessibility, long-term money, long-term buckets. The focus is, is growth and safety is always a concern. But it's like we tell people, when you evaluate the investment, you should evaluate it over the period of time that you're investing for. So if I'm saying that stocks are a 10 plus year investment, why would I, why would I evaluate stocks on a one week timeframe, <laugh>, or a one month or a one quarter or a one year? We're saying no, they're not designed for that. So when you go to evaluate it, it should be the same.

Speaker 1 (24:47):

So should you worry about it? No, but you should make sure you have enough money in that first bucket. The short term, you know, we use the three bucketing strategy, the short term, the midterm, and the long term. If you have enough money in the right investments that are designed for the short term and enough that are designed for the midterm based on what you're gonna need, then you don't, you don't need to worry about that long term. And there is a little bit of faith here, faith, that, that people will continue to innovate and create products and services that other people will wanna buy. There's a little faith in the system of how we do things. You know, it's not saying we're not gonna have any, any dire situations, but it's just a little faith that in the long run, the market is gonna keep climbing the mountain that it, that it has been for the last a hundred plus years, right?

Speaker 1 (25:36):

And it's gonna keep going up despite these short-term blips that occur because we have, we have bad events like Covid, but then we have innovations that come out of it and, and, and businesses, you know, create things that other, other people want and need. And that's what the stock market really is. So there's, there's a, there's a faith in that, that that's gonna continue. Like I've told people, mark, if you know, we're, we're advisors, but we're also business owners. And if for some reason, um, something happened that we could not conduct business the way that you and I do, we're not just gonna crawl in bed and, you know, and cry and <laugh>, right? You gotta find a way. And, you know, then we'd have to pivot. We'd have to figure out a, a way to alter our service or come up with something new, or use our expertise or whatever to, to bring something to the table again that people would want need.

Speaker 1 (26:31):

And that's, that goes, I mean, look at Amazon, you know, Amazon, I can order a package. I mean the logistical uh, the logistical component of Amazon, the fact that I can order something and a lot of times it's next day, you know? But that people can do that on a mass scale. People are, people are smart, you know, people are, uh, they, they have initiative. They can figure stuff out. And I've got, it's not even having faith in the market when you say, I got faith in the market, you, it's just having faith in people. That's to figure out pro solutions to problems. And we're obviously big believers in that.

Speaker 2 (27:12):

But again, don't worry, don't worry about the market. Now, the reason you don't worry about the market 'cause you have a plan that's built for you, you know how much vol volatility. 'cause you will have volatility when you're in the stock market, right? You know how much you can handle. Um, but again, that plan, building that plan out for yourself will help you. Right? Not to worry when times say you could worry.

Speaker 1 (27:34):

And I had a, had a client the other day, and it was a, it was a great moment because we went over her and her husband's plan, and then we used the plan to, to figure out, and when we talk a little bit, I'm giving a, a preview of the buckets, but we used the plan to determine how much needs to go in the first bucket. Well, again, it depends on your plan. How much are you gonna need in the next 12 months? How much are you gonna need in the next two to nine years? That determines what goes in those first two buckets. And she said, well, now that I've seen this, it makes me wonder how could anyone ever figure out how their allocation should be set up if they haven't done the plan first. And I'm like, because

Speaker 2 (28:16):

Usually it's 'cause their plumber said they should be 60 40. Right?

Speaker 1 (28:20):

<laugh>, I'm like, you hit, you hit it on the head. I don't know. Right. You can't figure it out accurately. Yeah. You know, you use a rule of thumb or someone like you said, someone said something. Yeah. Yeah. Should you

Speaker 2 (28:29):

Worry? Sorry to all you plumbers out there, it was just a reference. <laugh>,

Speaker 1 (28:32):

Should you worry about the fear of government or, or politics or a certain political party? Yeah.

Speaker 2 (28:40):

You look at this question all, do you

Speaker 1 (28:43):

We get all, I mean, I would say not all the time, but get it a lot. Yeah, a lot. Yeah. You know, we haven't got it a lot lately because Sure. It's not a, we haven't been in an election year, which now we are in a midterm election year, right? And I'm sure we'll hear about this more and more and more over the coming months. And then 2024 is the next presidential election year. But we did a, a presentation on this and the, you can actually go back, um, and view that, but, uh, during the 2020 or right before the 2020 election, and should you worry about this, well, it, it's always about 50 50. Shocker, 50% of people are worried if this party gets in power. 50% of people are worried if that party gets in power. But if you just evaluate the stock market and you look and see how it's done over again, decades and decades and decades, you actually find that there's not a lot of difference.

Speaker 1 (29:41):

And the stock market really doesn't care who's in par, who's in power. They, they just really don't care, uh, the market about who, if the president's a Republican or a Democrat or the, or if it's a, uh, split Congress versus, you know, all democrat, all republican. There have been differences in returns, but for the most part, the market has done very well in all those environments. So in the, um, according to, uh, an article on Forbes, and this was done in, um, this article was published, I'll get a date for you. January of 2021. So according to this article, in 75 years since the end of World War ii, the Dow Jones has averaged about 8.3% per year. Since then Republicans have held the White House 53% of the time, 47% of the time for Democrats, Democrats have controlled the Senate and the House 63 and 68% of the time respectively.

Speaker 1 (30:39):

So control of the presidency, Senate and House has been a little bit more rare. But during this period, democrats had com, uh, complete control 28% of the time compared to 10% for Republicans. And again, you look at the returns, um, they, the average was 8.3% in the market over that period of time. The highest was when we had a split Congress. We got the best returns from 1946 to 2020, we got a 12.9%. So it would appear that the best returns come from a split Congress. But the worst, you know, the worst returns. When you had, um, a democratic Senate and Republican presidency, a Republican house, the market averaged 6.3%. When you had total democratic control, the market averaged 6.7% when you had a democratic house. But Republican, uh, Senate and presidency, the market average 7%. And, and all of the rest of the, the combinations just go up from there. So the average of all of that was 8.3%. So is that really, I mean, in our mind, in my mind I'm thinking, is that really a cause to worry about who's gonna get elected?

Speaker 2 (31:55):

I will say this, I will say most of the time I think people are concerned about events like this or political events. It's not because they think that if so-and-so gets elected, I'm gonna get an 8% rate, rate return. But if so-and-so got elected, I get 10% rate return. They're not fearful of getting a less return. They're fearful of the market going down, right? Yeah. They're fearful of somebody getting elected that they don't want to get elected with different values of how to run our government and the market's gonna go down. But I would revert back to this, if we're concerned about the market going down for a short period of time, the stock market, right? The equity market going down for a short period of time, we don't have a good planning long-term focused, because I don't care if you're 81 years old, you're in retirement, you need three grand a month if the person you want to get elected doesn't get elected and the stock market goes down like this. And you were planning on pulling money from your stocks that year anyway, <laugh> right? You, you were in the wrong, right?

Speaker 1 (32:52):

No, I saw articles like that in 2020 where the market went down and there were articles about, well, what are, what are retirees gonna do? The market's down? And I'm thinking, if a retiree is pulling from stocks and selling on a month, this was like a month in. Yeah. If they're selling from stocks for, for income, then again, that, that violates our, our philosophy and not protecting the short run and the mid, you know, the short term or the midterm. Yeah. Not a good, that's not a good plan.

Speaker 2 (33:23):

But again, if you're a market timing person, you're trying to make money in the market and that's what your job is, what would an election concern you? Yeah, it'd concern me too, if I was worried about what stocks are gonna do over the next three or four months. Right? But that's, you're living, you're gonna live a life of worry living that, that up and down, that type of volatility and the people we work with, the people that want the retirement planning and the people that need that type of planning aren't investing for a three month period of time, or six month or two year period of time. Yeah.

Speaker 1 (33:51):

Perspective is, is huge. Yes. And again, a lot of the things that we share, it's, it's a Google search away. You can go figure out like this Forbes article that talks about this. Anyone can go out and get this, you know, and, and look at this same data and we'll include it in the show notes, but anyone can go out and find this information. So there might be a slight nod to, to one party over the other. Of course when you, but, but it's very, very close. And when you say that, you know, you, you say that to a Republican, you say, well actually the market's done fine when Democrats have been in power. And they're like, no way. No way. That can't be, you know, you say it to a Democrat and they're like, you know, well ac actually, you know, when Republicans have been in power, the markets done fine. They're like, that's impossible. That can't be, we get just, we get too, too caught up in it. Absolutely. We get too caught up. And you made a great point, you know, off air. And that's, you know, Democrats and Republicans for the most part, I think, I think they kind of all want the market to, to do well.

Speaker 2 (34:55):

It doesn't benefit any of 'em for us to have a declining market for four years while they're in office, right. The way they go about it.

Speaker 1 (35:01):

Wouldn't, I wouldn't think so.

Speaker 2 (35:02):

No. The way they go about it may not vibe with your personal preference, your political preference, but they think they're doing both parties what they need to do to drive our economy and drive markets. Yeah. That's, that's the reality. So Right. Just gotta, again, sometimes look at it from a big picture and not get so micro oriented on it. But, uh, for those, the people that that wanna worry, they'll just keep diving in and keep wanting to worry. We're just trying to give you ways to help you to not have to worry and to not live that life that we know is not enjoyable. And

Speaker 1 (35:34):

I haven't heard this from any other financial advisor, definitely no other show telling people. Don't worry. Again, we're not saying don't worry, don't, we're not saying don't do anything. Right. We're saying plan. Yep. But don't worry because your quality of life is just as or more important than how much money is showing on your statement, you know, at the end of the month. And we're just telling you why people, why there is a cause for concern, why some people, like in this case, mark, I would say there's, there's literally, there's no, there's no good reason to, to worry about this even from an, an analytical or a historical standpoint. It, it's a total myth that you should worry about this party or that party. Absolutely. There's literally no reason to worry. We don't think you should worry about any of this stuff. We think you should plan.

Speaker 1 (36:28):

There's no evidence that even suggests that you should worry some of this stuff. And like the stock market in the long run there, there's no evidence that suggests you should worry about the stock market whenever, you know, I tell people this, uh, this today is is February 7th, 2022. Um, I remember when I got into the business, the Dow Jones and, and of course all the media pundits saying that you should worry about, you know, the, the next big stock market crash. We were about, we were about four, four years after the, uh, global financial crisis. And I remember everyone saying how you should worry. I remember there was a gentleman, um, I don't remember who it was at this point, but he was, he was a voice of reason during that time. And he basically said, you know, we're gonna get to 20,000 in the market before we have another crash.

Speaker 1 (37:25):

Everyone else is saying we're gonna have a crash. Right? And he's saying, no, we're gonna get to 20,000 in, in the Dow Jones. Now the Dow Jones when I first started in the industry was around 12,600. And that was about 10 years ago. Yeah. Just over 10 years ago. You look today it's over 35,000. Yep. And that guy was right. The market didn't, didn't decline until it, it, it not only got to 20,000, it got far above 20,000 before it had the major decline of 2020. It was over 28,000 at that point. Yeah. So I would say that's not even a logical reason to worry. We know in the long run, in the, in the long run, you gotta gotta differentiate between the short run Absolutely. In the long run. So inflation, how should you worry about inflation in 2021? Uh, the numbers came out. Inflation reached a 39 year high and inflation was up nearly 7% in 2021. We haven't seen inflation like that obviously for a very long time in 39 years. But going back to to 1982, uh, the largest 12 month gain since June of 1982.

Speaker 2 (38:42):

Yeah, 82, 6 0.2%. 81 was 10.3 in 1980 was 13.5% inflation. So it's been a long time since we've been, I mean that's 13 point half. That's double where we are today. So, you know, I I I'm having conversations about inflation right now with people as well. And, um, it doesn't feel good to go spend more on gas and it doesn't feel good to go spend more at the grocery store. Um, are we gonna go through a long periods of this inflation? I don't know. Um,

Speaker 1 (39:13):

But you can't control

Speaker 2 (39:14):

It. Can't control it.

Speaker 1 (39:15):

So what do we, so what do you do?

Speaker 2 (39:17):

Yeah, well, can I, can I say it? You, you plan for it, right? You plan for it. Um, you know, the reality of it is the more inflation we have, the more people need to be able to deal with volatility. Right. You know, just last year cash, it becomes a major risk. You're sitting on cash all of last year and inflation was at 5.9%. Yeah. You, you lost a little bit of spending power. Right? Now, again, I'm not telling people to get outta cash. Your cash is at cash for a reason. But if you're sitting on cash for 10, 15 years and we have inflation running over three or 4%, that's a lot of money to lose the spending power on an annual basis now. Right? What's a great way to hedge inflation? Equities have always been, you know, the net return on, in, on the s and p 500 going way back, uh, to the 19, 2030s is like 8.3%. Right? Net inflation. So again, s and p just right around 12 inflation running right around three or four, 3.3 0.1, 3.2, 3.3, somewhere like that, you're just over 8%. So equities will hedge inflation.

Speaker 1 (40:26):

It's the best in, in our view, it's one of the best ways. Yep. And we don't, we don't know what inflation, what the effects of inflation or how quick it will come, how severe it will be. But what do we know? How do you combat it again, should you worry about it? No, we already know it's not gonna help. But what, but are there things you, you could do and, and this is an area where absolutely there are things you could do and one of those things, like you said, you can't leave enormous amounts of money in cash and think that you're gonna protect against inflation. You're not going to, it's a, it's a near guarantee. Especially with interest rates as low as they are, it's a guarantee that you're gonna lose money. Yep. So if you want to hedge inflation, you have to be, you have to set up your investments properly.

Speaker 1 (41:16):

And stocks are a great way, even in bonds, people think they know how to slice up stocks in a different categories, mark. But with bonds, it's like, aren't all bonds the same? A lot of people, you know, they just don't, they don't have as deep of an understanding. 'cause we're always talking about the stock market. But with bonds there, you, you need to slice up your bond portfolio as well. You need to have some that are gonna react better to inflation. You need to have some that will react better if we, if we see spikes in interest rates, you need to have some that will react better if we don't have inflation and interest rates stay low. Right. It's called diversification. Yep. You know, and we get it with stocks. People don't get it with bonds 'cause they don't know as much about bonds, but you have to have it with both.

Speaker 1 (42:00):

Yep. So you shouldn't worry. There are ways to combat it. They're pretty simple. And it's the things where if I said don't put all your eggs in one basket, don't you think Mark, everybody be like, yeah, I know, I know, I know, I know. Like, I get that you're not telling me anything new. But yet we, but we have people doing that. Not, not us, but we have people in the, in the, in, in society in the world doing that because they put, they put a bunch of money, all their money in cash in the bank. 'cause they're too afraid. They, they think they're protecting against their biggest risk, the stock market, but they're not protecting against what could be a big risk with inflation.

Speaker 2 (42:40):

So Yeah, if you went, if you went a year and were down 6% in the stock market, you wouldn't be real happy Well being in cash for a year that you didn't need to be within cash, you lost 6%. You know, the reality of it is everything has a balance. You know? Um, yeah. 6% inflation this year. But let's look at some of the positives, right? People got a 5.9% raise in social security. That's, that's a good thing. Right? Um, we look back to 2014 and 15 and inflation ran just at 1%, just over just 0.8%. Right? Right. So things tend to work themselves out. Um Right. You know, but it's all about your mindset. And not to get too philosophically, it's all about your mindset. You know, there, there isn't one silver bullet. You can't No. We're, you can't not worry about, you can't not deal with inflation.

Speaker 2 (43:30):

Right. Not be in the market. Right. Not cost of living adjustments being there, not worry about the bond environment. You can't not do it all. So, like Joe said, diversification, you have to, when you build your plan in a, in a, in a way that fits you. Yeah. Inflation's out there. But we got ways to hedge it. Yeah. Market volatility's out there, but we got ways to hedge that with cash. Yeah. You have to deal with interest rate environment and bond yields. But we got ways to hedge that. And again, I wish there was a silver bullet, we didn't have to, you know, deal, deal with any of this stuff. But unfortunately there's not. Right. And good diversification and problem solving will help you build a plan that you can mitigate some of those risks

Speaker 1 (44:07):

And planning. I'm gonna, and it's the same thing and I'll hit, I'll hit this one real quick, but should you worry about taxes? Should you worry about taxes? You know, assuming that means taxes going up. Well again, you can, it's not gonna do anything if you worry about it. Diversification is again, the best way to hedge the risk of taxes going up. We're in a relatively low tax environment today compared to historical tax rates. So, but, but again, we're not saying for everyone to go put all of your money in a Roth, you know, a Roth IRA or all your money in a 401k and just pay a bunch of tax now. 'cause again, it's a case by case thing. But diversification, if you had a blank slate, we'd love to see money in different types of, of taxable buckets. Roth traditional and then, you know, just a pure taxable bucket potentially because we just don't know.

Speaker 1 (45:06):

So having a little bit of a di diversification there, there, so there are things you could do even if you're retired and you can't contribute anymore because you don't, you're not making any income. You can do Roth conversions potentially. Mm-Hmm. <affirmative>. Which is something that we do look at with our clients to see if it makes sense. Some it makes more sense than others, but there, so there are things that you can do. So don't worry about it. You know, there just take, take action, take some steps, talk to someone that knows about this stuff and can help you. Long-term care. Should you worry about long-term care? Well, 62% of people said that they are moderately worried about it, uh, about not being able to pay for it. And the statistics show that there, that there is a, a cause to potentially have that as a concern because it is expensive.

Speaker 1 (45:59):

A fair amount of people will need long-term care in some form, whether it's assisted living or home care or nursing care. But the thing that, the thing that, you know, I want to point out is, again, we, we take action, you're not gonna be able to figure that out by yourself, but you need to at least start down that plan. I could sit here and I could worry about it and I could do nothing. Or I just start to figure out and ask myself some questions of how much is it gonna cost me? How long might I be in a, a long-term care facility? How much money would that require? And and we have a process of just showing that immediately to see what does the average long-term care stay do to your, to your financial life. Right. And some people, as you know, mark, we show them, well here's the average long-term, long-term care stay at the average age, the average duration, the average, uh, cost.

Speaker 1 (46:54):

And here's what it would do if you had to pay for it out of pocket. And some people, when they see the result, they feel like, oh I guess I don't have to worry about that. Right. Right. Planning and clarity. And when we say planning too, that it's the way you go about it, and obviously we're biased, but, you know, our financial planning software, it's visual. A lot of people are visual. So when you click the button, what if inflation happens? What if growth rates aren't as good? What if social security gets cut and you can click the button and then boom, you see what the result is. It, it will tell you right there, should I be concerned about this? And the beautiful thing is, a lot of times we click those buttons on those bad things and people, people are like, oh, well this really is not as big of a concern as I thought it would be.

Speaker 1 (47:42):

And other times we click other things and they're like, that's a bigger concern than I thought it would be. Yep, yep. But it's usually not the things they're worried about. It's right in, in my experience going through this, it's usually nothing or <laugh> or something like living expenses where, you know, just a little bit of a change in living expenses on a regular basis, something that's gonna be with you forever. It can make a, can make a big difference. Yep. Um, the last one, mark, should you worry about the fear of a purposeless retirement? Yeah. And this is really, not really not financial, but I'll let you, I'll let you explain this a little bit.

Speaker 2 (48:22):

So I would say, uh, is this a valid worry? Absolutely. It's, uh, it's something that should cross your mind. This is a conversation we have with everybody that's entering retirement and a lot of those who are in retirement. 'cause this is a big concern. Um, so many people get wrapped up in, do I have enough money and is my nest egg big enough? Am my money gonna last? But they don't put a lot of time and effort into planning for their, their livelihood, their mental wellbeing, their physical wellbeing. And we stress this and talk about this a ton. So with a plan, is there a reason to worry? No. If you're excited to wake up and do something every day that you're passionate about, what's there to worry about? Now the problem is I think a lot of people, they've been grinding, right? For 30, 35, 40 years working, doing the same thing.

Speaker 2 (49:14):

And now they, they're concerned about, well now what am I gonna do again, very valid. So I would tell you, you should create a plan. Take some time, sit down, think, ponder what is important to you. Find those most important things in your life, whether it's your family, whether it's your health, um, whether it's traveling, whether it's your charity, whether it's your church. And create a plan to fulfill a purpose in that area of your life. You know, Joe and I were talking again offline today and you know, health is important to me, but you know what? Probably not number one on my list when I have five kids at home and a business to run and clients to see. So I do make a point to workout, but I don't schedule my life around my workouts. I schedule right, my workouts around everything else.

Speaker 2 (50:02):

Well, if I was entering retirement tomorrow, my kids were outta the house and I wasn't working and I wasn't running a business, I wasn't reporting to clients. Gosh, at 66, 67 years old, health's pretty important. 'cause I wanna live a long time. That probably the first thing I scheduled every day. And then second would be, you know, the church I'm at or the community group I'm a part of. And I think it's just very important to create a plan in that area. Sit down, think about it, and then just make sure that you're doing those things. And if you have those things, do you need to be worried about your fulfillment? No. Because you will be fulfilling the things you need to do and want to do in your retirement. You'll really enjoy it. Right. Without a plan. Sure. Be easy to sleep till 10 o'clock every day. Wake up, turn on the news, put some bad information in. Oh man. Be worried about your money. <laugh> Right. Worried about your health and go to bed. I, that, that seems miserable to, to me. Right? And I think most people, so just create a plan and there's no need to worry about it. 'cause you'll have a purpose.

Speaker 1 (50:55):

It's easier. And I, I get that. It's easier said than done, but as I say to a lot of clients, take all the worry and stress you have and multiply it by 350, you know, or whatever. Yeah. That's, that's not an exact number of how many clients that we have, but Right. And that changes obviously all the time. But that's kind of how we feel because we're responsible for, you know, a few hundred households and it's typically they're life savings and absolutely. It's typically, you know what I'll call normal people that have just done a very good job saving. And even a gentleman I just talked to, he said, well if something happens to the first, you know, the first 800,000, what happens? You know, where's the next 800,000 gonna come from when I'm already retired? <laugh>, you know, and I'm not working anymore. His point was, this is all I got.

Speaker 1 (51:41):

Yep. And that's true. And so we get that. Um, we totally get that. And but you could worry, you could choose to worry about a, a never ending list of things. Oh yeah. And so this, again, I know we can, we could say it, we can say it, we can say it. And we're not licensed counselors or psychologists, so there's probably a better way to go about doing this. 'cause we say it a hundred times, it might not, that might not be the best approach. But we're here to tell you, as people that do the planning that, that work with people every day, um, you, you just do what you can do. You control what you can control, and then you put it to rest and you just live your life. And there's gotta be a little discipline. There's gotta be a little, little internal fortitude to, to say, Hey, I might need to adjust.

Speaker 1 (52:28):

But whatever happens, I think is within the realm of, I'll be fine. As I said last, on the last show, uh, there's projections, predictions about 2022, but I'm predicting that regardless of what happens, good or bad, most of us are gonna get through the year. Most of us are gonna be just fine. You know, most of us out there that are worried about financial things, most of us are, are gonna be just fine. Yep. You know, and a lot of the things we're worried about are probably not gonna happen. They're probably not gonna happen to the extent that we think they're gonna happen or affect us. So as my, as they've said in football, uh, I don't fully, well, maybe if you're coming from a farm background, you'll get this one. But, you know, we'd practice in football three days, I think basically three days in a walkthrough.

Speaker 1 (53:17):

And when you got to the walkthrough, my coach used to say, well, it's, it's Thursday, Thursday's over Friday. You just, you're just doing the walkthrough when Thursday gets over the ha's in the barn. And that just basically meant we've prepared. There's nothing else. We, we have no more practice time. The preparation is done and whatever happens is gonna happen during the game. Right? Yep. Basically, you know, that's speaking of preparation, but it's kind of also speaking about your mentality. And should you worry, there's no reason worrying. It is what it is, you know, ha's in the barn, and you go and do your financial plan, you get everything in there. You, you address all the risks and concerns and make the best decision with, you know, maybe with the help of an advisor. And you know what? The haze in the barn, there's not from there.

Speaker 1 (54:05):

You just wake up every day. Choose to have a great day, <laugh>, and roll with the punches because at least you know you've done all you can do. Mm-Hmm. <affirmative>, you've done everything prudent to address things so. Well, this was a good topic, Mar, I appreciate, uh, appreciate you coming on talking with me about this and always good to get, you know, get your input on, on topics like these when we're talking about retirement. 'cause you deal with a lot of people in this phase and so do I. Absolutely. Any, any final, any final, uh, parting words of

Speaker 2 (54:41):

Advice? Yep. I think, uh, a thing that I've always known and I, when I think about people, if you're worrying, that means you do care, right? You do care. Uh, I think the fault is to not do anything about it and continue to worry. So if it's a concern, yours right now, it means you're alert, your eyes are open, you want to prepare yourself, you wanna protect you and your family, that's good. But to continue to worry and continue to have that concern for a long period of time, I'd caution you on that. I'd caution you on that and I'd, I'd advise you to get some, get some help and sit down and create a plan.

Speaker 1 (55:11):

Yeah. Good advice. Well, everybody with that, this is the end of episode two, believe it or not. So we're, we're on a roll here. Hopefully you're enjoying our topic so far. We're gonna continue talking about things to help people help you invest wiser, retire better. We'll be back, uh, shortly. One to two episodes a month is our goal. We're figuring this out on the fly. But send us in, send us an email, send us some information. If you have suggestions, you can, uh, go to, uh, our website, which is www.carsonallaria.com. Get more information about us and connect with us if there's anything that we can help you with. But if not, continue to stay tuned, share, follow all that good stuff. And we will talk with all of you on the next show. Take care. We'll talk to you soon.