Wealth from Wisdom

Understanding Your 401(k): Four Rules to Successfully Save for Retirement

September 07, 2019
Wealth from Wisdom
Understanding Your 401(k): Four Rules to Successfully Save for Retirement
Chapters
Wealth from Wisdom
Understanding Your 401(k): Four Rules to Successfully Save for Retirement
Sep 07, 2019
Carson Wealth
In this week’s episode of Wealth From Wisdom, Paul West and Scott Kubie discuss 401(k)s – and the four rules you can follow to help successfully save for retirement.
Show Notes Transcript

The 401(k) is the most popular retirement vehicle (outside of Social Security, of course) – and the number of 401(k) millionaires is at an all-time high. But a million dollars might not be enough for today’s retirement standards. 

How can you take your 401(k) to the next level and not only strive to reach that million-dollar mark – but actually meet your retirement needs?

In this week’s episode of Wealth From Wisdom, Paul West and Scott Kubie discuss 401(k)s – and the four rules you can follow to help successfully save for retirement. 





Speaker 1:
0:00
Okay, and here's the legal Mumbo jumbo. The opinions voiced in wealth from wisdom with Rod Carson are for general information only and are not intended to provide specific advice or recommendations for any individual to determine what is appropriate for you. Consult a qualified professional. All indices are unmanaged and may not be invested into directly. Investing involves risk including possible loss of principle. No strategy assures success or protects from loss. Past performance is no guarantee of future results. Advisory Services offered through CDW, m l L C and SEC registered investment advisor.
Speaker 2:
0:30
The stock market hit another all time. Records as much as $10 billion in social security benefits go unclaimed every single year. Federal Reserve announced that they will raise interest rates by 250 skyrocketing cost of healthcare and retirement could now run 350,000 words hard and save for retirement. That's great, but it's what you do with that money that really matters. Welcome to wealth from wisdom with Carson wealth. Carson wealth is a bear and hall of fame adviser at recognized by Forbes magazine as one of America's top wealth advisors, and they're right here in Omaha. This is where you can count on straightforward and objective advice that can help you make the most out of every dollar you've saved for retirement. Welcome to wealth from wisdom with Carson wealth. Everyone. Welcome. Welcome
Speaker 3:
1:14
to wealth and wisdom. This is Paul [inaudible]. Today I'm joined by my Coho, Scott Kooby, who's a senior investment strategist here at the Carson Group. Hey Scott, welcome to the show. Thanks Paul. Glad to be back. Yeah, I mean we have you come, what about every four to six weeks as a guest on the show whenever the market gets a little interesting, then if you call it that. So that's the way it works. Yeah, so sometimes we pull you out of hibernation is how [inaudible] that's all good. Somebody has got to step out when the markets are are a little more fun than normal and so yeah, that's me. I'm glad you're doing now in front of the cave recently. Been inside of it. Yeah, there's been a lot of, a lot of chat about it. Obviously with trade and Brexit and a number of big issues that are out there and Connie's slowing down.
Speaker 3:
1:53
It's been a lot more interesting of a market to invest in. I'd react in, I mean I think half the days in August we're a had moves of 1% or more. Uh, and that's, that's a pretty volatile month. That's way above average. Yeah. And well, and it's certainly way above average, but also if we put it in context to the rest of the year. And really if we look at probably since 2015 Scott really the volatility had been quite low. Even though it's funny, if we have one day where the market moves 2%, everyone thinks it's super volatile. And you know, and I was looking back at this that while we had obviously an above average of 1% moves, there were three, two and a half percent declines in August. That's actually a very high number. And so I, and of course, because everybody looks at Dow points instead of thinking in percentages because that, that was a lot higher than it used to be. Those are big numbers, bigger numbers, and we're anchored to wowed down 300, 400. It's a big, it's not that big of a day, but people start looking at, they see an 800 900 on there and they get more nervous from it. And so I think it's just a natural reaction to how we've anchored in what we expect to see as a big market move. And Yeah, we've had more of those recently.
Speaker 4:
3:00
Yes. I've got a question for you and not related to the markets or anything like that. So Scott, do you remember where was the last place you went out to eat? Oh, a Panera. Panera. Okay. Yes. So you went there, you probably remember exactly what you got. Yes. Yeah. Yeah. But you travel frequently for us of the Carson Group. So when you travel, what are you stuck doing for meals? Uh,
Speaker 3:
3:22
times, room service, sometimes. Whatever's the closest thing that's available. Sometimes the dreaded airport food.
Speaker 4:
3:28
Yeah. But you're always going somewhere. You're ordering from somewhere. You're not preparing your own meals. You're, but you probably is a time goes by, you forget about them. You usually only remember the bad experiences that, that that's, that's correct. A lot more than you do the good. And I think about that from food and we think about where do I want to go eat? Oh I, I want to go here, or gosh that was so good. Maybe I should just go back. Or you're like, oh I went to this place and it was terrible. So you're not going there for sure. And I bring this up is because the day most, most of us only remember our most recent experiences. And then after that the next experience remember is a bad one. And that's usually what happens. And so when I think about the market in West transpired, and if we look at, again, some of this volatility here in August, everyone feels that volatility is, you know, roaring back and all those things. And yes, August was definitely more volatile and we'll see what September holds here for us. But if we really look at it in the context of the last five years, it hasn't been. And so that's why I give the same analogy is going out to eat is I've gone to a lot of places out to eat, but I only remember where I went yesterday, last week, I don't remember. I went three months ago, six months ago, 18 months ago.
Speaker 3:
4:41
With your clients, I know you will really emphasize behavioral finance cause they're really a lot of the times for investors, the biggest risk, especially as they start to accumulate higher levels of wealth, is that they do something react to something that will cause them to hurt themselves and hurt their longterm performance. And that can have way more effect than what actually goes in the market. And I think that behavioral aspects or behavioral finances, it's often termed as a really very probably more important in some ways than getting the stock to bond ratio, right?
Speaker 4:
5:07
Yeah, it does. I mean, and I think as how we react to everything and at a life event happen this week, I'm going to go down a rabbit hole here for a second from if you appease me, I as Scott said, we were, what's good Labor Day weekend we go down and uh, my son was that Monday evening says, Hey dad, we got a problem. Uh, the, the carpet's all squishy in the basement. Oh No, yes, no one knows, right? So, uh, there's a lot of water and um, you know, we had a backup and so that's a lot of fun. And so I hadn't, you know, had an experience like this long time. At one point we'd had water down there, but that was many, many years ago. I don't know. You go through that. Okay, what do I do next? It's 9:00 PM. So your odds of getting a hold of an insurance person is pretty slim.
Speaker 4:
5:52
It's a holiday weekend. So the odds of getting someone to come out and the, uh, clean up and drying process, uh, I, that the economic side of me said, well, I really don't want to call a 24 hour plumber and pay significantly high rates at that point, but what are you going to do at that standpoint and your stock? And so what am I, what am I doing? I'm going through back any recent experiences I have. And of course what crosses our mind is, okay, well who else has maybe experienced this recently that I can call to see what they did in their similar scenario? And I bring that up is because it's people apply that same philosophy, whether it's if you have water in your basement, whether it's going out to dinner, it's how you should invest in your market. And today we're going to talk about 401k rules.
Speaker 4:
6:44
And a lot of people take advice from your employee who sits next to you or is the one you go to lunch with or the one you go get a cocktail with doesn't mean they're the right one to give you advice because of how they approach it. I want to give all of you listeners advice and I thank my friend many, many years ago. So when you look at homeowners insurance and for a lot of us, what do you look at? Replacement value and just making sure if your house burnt down or something happened to it, you could get it replaced and you know, not have to pay anything besides your deductible. But a good friend of mine many years ago said, hey, make sure you put on an addendum or writer and pay a little bit more to get a sewer backup clause because most of insurance companies will not cover water coming back into the house.
Speaker 4:
7:34
And so, um, many years ago I added that to my policy. I see Scott's writing that down now. That's a good way of anybody else on the, a lot of wealth from wisdom here, Scott, is we want to share those things. So let me just share the story with you. So I added that. I pay an extra, I don't know what it is, Scott, 50 $60 a year. Not a lot, but a friend of mine who worked for insurance companies said, hey, make sure you add that. Cause if it ever happens, first of all, you're gonna be irritated. You got water in your basement in second. If we don't cover it, you're going to be doubly and triply irritated. So I add it. I'm, I'm talking to the insurance agent earlier this week explaining what happened. You know, what appears to be a sewer backup. Uh, and he looks at the policy and says, Oh, I'm sorry, uh, you're not covered.
Speaker 4:
8:23
And of course, uh, my initial reaction is, no, you're incorrect. It goes well, no. So the, our, our standard policy, you know, covers water, but not when it's forced from sewers coming back into the house and backing up and pushing out through drains. And so I'm telling you this, Scott, because I'm like, all right, what did I learn and how did I listen to good advice before? So what I tell the insurance agent this week, Hey, let's go look at my, I can't remember if it's called the addendum or the writer, and I said, I specifically have been paying for this for a long period of time, just in case this scenario ever happened. So he goes and looks and goes, oh, wait a minute. I do see that additional writer on here. Yup. I do see that. You have that backup. Okay, we will cover the entire thing.
Speaker 4:
9:14
Oh, that's awesome. Yeah. But Imagine Scott, if I wouldn't have done that, and I actually think about how many of you listening today maybe don't have that coverage. And again, it's $50 so maybe I've been paying for it for 15 years. So I've spent $750 for it. This one incident, not my fault, by the way. And most people would think insurance would cover that, but it doesn't. Now, some of your policies may, it depends on who your carrier is. But I wanted to at least inform our listeners based on my life experience over this last week cause I don't want you. So if you can shoot a note to your agent or shooting out to your advisor and ask them, is this covered or what level of water is covered? I know we're based here in Omaha, Nebraska. We have listeners across the country. We had an extremely wet spring and so a lot of people got runoff from downspouts and the things like that into their home.
Speaker 4:
10:10
And again, there was um, debates, challenges, fights, arguments on what was covered and what wasn't. So have that conversation. A lot of people, and especially if you're not in a flood plain, could potentially qualify for very inexpensive flood insurance. And you're like, oh, I'll self-insure. I'm going to tell you if you're like me, it's Monday night Labor Day weekend. The last thing you want to be thinking about is self-insuring when you've got a bunch of water in your base. And the last thing you want to tell your wife is that you self-insured, even though your friend told you do, you should do that. That's not going to go over well, so one less meal at Panera or anywhere else could have taken care of it. So thanks for letting me go down that rabbit hole Scott. But I just important, I mean one of the things that we believe in and we've heard from a lot of our listeners is they want real world examples here on the show and how it can affect them.
Speaker 4:
11:04
If you have questions like that, you can see we can go down multiple lines from talking about the market to talking about insurance. I'm talking about health is if you want information, send us a note info@carsonwealth.com what we see a lot of people do is on your mobile device, on your iPhone, on your iPad or whatever you have, just go to Carson wealth.com easy button at the top of the screen, connect with us, hit connect, send us a note. You don't have to call anybody. We'll respond back and find a mutually convenient time for you is we see, we know a lot of you want to do it on your time. That makes it simple for you. But Scott, we've been talking about, um, you know, things that I want people to understand. So let's talk about understanding your 401k. And in today's show we want to talk about four rules to successfully save your retirement.
Speaker 4:
11:52
Because really for most people besides social security, your retirement plan is going to be your number one funding vehicle. That's how you're going to live. That's where you're going to get your money out of, to go to the grocery store. It's where you're going to get your money to go on your trips. So if you're not doing the right things today, and let's talk about number one here for a moment, and that is your company match. I mean for many people, if you're not at least at minimum hitting your company match, you're leaving free money on the table.
Speaker 3:
12:22
Yeah, it's the worst. I, I made that mistake one time. Did you? Yeah. Bad. Way back before I started investing and they had a really large match on it and uh, but I never thought I'd be there for five years cause it was going to vast. It vested 100% at the end of five years. So is that what we call cliff fast cliff testing? And I'm like, I never make it for five years. I stayed five years and three months. So a lot of people don't understand that, but hey, let's keep talking about that and we'll be back in a moment here on wealth from wisdom.
Speaker 2:
12:49
Do you own an annuity? Inflated fees and commissions could be costing you an arm and a leg. Get straightforward and objective advice from Carson wealth by calling (888) 419-8513 are you caring for an aging parent? Are you concerned about the skyrocketing cost of healthcare and longterm care or do you have questions about how to best manage an inheritance? We can help call Carson wealth today at (888) 419-8513 and now back to wealth from wisdom with Carson wealth.
Speaker 4:
13:19
Hey, welcome back to wealth from wisdom. This is Paul. My MCOs today is Scott Kooby. It's got, now you're talking about really those four important rules to successfully save for your retirement. And rule number one we've been talking about is understand your plan. But let's get back to where we were Scott, before our break talking about the company match. So right now if I put $20 on the table, um, and said, Scott, Hey, if you put 20 down, we'll invest that together. So basically I'm giving you a free $20.
Speaker 3:
13:47
I'll, I'll take that $20 anytime. Need in fact go ahead and get the billfold outlet. All right. No, no, no, you don't have to after the show.
Speaker 4:
13:54
Alright. So everybody would do it if they saw cash sitting on the table in a heartbeat. But it had been in the fact that they don't see it and the fact that it comes out of their paycheck or it's contributed via their paycheck into their retirement plan and they see it at their plan at fidelity or TD Ameritrade or wherever your 401k is held, they'd often don't take advantage of that. And I and I, I can't tell you it as long as you can afford to, but I would actually say the contrary, can you not afford to, I mean really is you look at it the end of the day, this is where I want some of you as listeners to be selfish and I want you to be selfish in, you better pay yourself because no one wants to again be in their eighties and have no money. People want to live a great life and so you, you have to contribute now and this amazing effect is called the compound effect of how your money grows is so material. I want you to be selfish to pay yourself. You may think, oh,
Speaker 3:
14:52
I want to buy my kids more things or I want to take care of my parents who need longterm care help. I agree. You need to do some of those things, but you better take care of yourself first or you're going to be in a terrible situation and that's such free money for you too. And you really, in a lot of ways from a governmental policy standpoint, there's a continued push for companies to drop pensions. This has been going on for decades now and push you to be more responsible for it. But the way they're going to help you is to provide that company match and to leave that money on the table is that the dumbest investment decided I was talking about the, for the break in the last segment, so as a hundred percent match up to 14% on this where I worked at before 14 because this is the darkness firms are like three to five, three to five.
Speaker 3:
15:37
This is the dark ages when nobody really knew how to set the policy of it. It had no vesting up until it was the cliff vesting. So five years, 100%, four years, 11 months and 30 days zero and the only investment option at the time, any guesses? Uh, let me see some mutual funds. CD CDs. Wow. Yes. And so it was a, so I, they were probably pain. They were paying better than they do now by a lie. If you're in the 80, Scott, I mean that would be sozan the 90s. It was 90s. Yeah. So it was not trying to overstate you. Ett whiz. I, you know, I had sets and now it's, it's the uh, the uh, the, so it was really an interesting decision because of all those things and I'm, I was just starting as an investor, like on my own at the time and I'm like, I could earn more money than this, but, but you can't make 100%.
Speaker 3:
16:27
No. And you can't make 100% risk free. There's no risk to that. There. You put that $20 down, they were going to give you that $20 right away. I ended up staying five years in three months and I started investing later on. But man, I left some serious match on the table because I left that off. Now the, now the magnitudes are not nearly as large from a percentage standpoint, but a 3% match on a Schick's percent contribution. You can do pretty well if you get, I mean it's not super, but man, that's not about to give up for an awful lot of impact on that. No. So a lot of times people just don't understand that. So if you started with a new employer and you just want some help, again, you'd go to our website, hit connect with an advisor, a, there's ability there for you.
Speaker 3:
17:08
Ask us that question, we're happy to answer it. Or a lot of people just share their enrollment form and we'll help look at it for them to give them fiduciary advice and what it looks like. So the second part, you're deciding as your match, but you're also deciding, should I invest in a Roth versus a traditional? Because now we're seeing more and more plans be advanced in the past, Scott, you and I know this, that all of the plans were essentially what we call traditional plans. You put it in, you don't pay ordinary income or taxes on it, and then later when you pull the money out, you've got to pay taxes on it. Meaning you're basically getting paid your income. So you've got the tax deferral upfront and you have to fax, defer it on your gains, but at the end of the day, you're still going to have to pay your taxes on it and
Speaker 4:
17:50
at ordinary income tax rates too as well. It's a very good point. Yup. Now many employers are offering Roth 401ks as an option. So this is a, a new, um, decision that people have to make. And so we already know, they struggle with how much should I pay for the match. Now they have to decide on traditional versus Roth where they probably don't even know enough. So hate to say it. This is when the default decision happens. This is when they asked their neighbor or someone else to say, what did you do? And they most likely follow that path.
Speaker 3:
18:20
I think that's right. Yeah. People are going to ask the so called expert over the cubicle wall or whatever that is. And a lot of times they get advice that's maybe okay for the person giving it the not okay for the person receiving it because their situation is different.
Speaker 4:
18:34
Yeah. And I'm going to challenge you, sir, right now, if your company and you and your HR department, the most likely, they're the person who's getting asked, what does everybody else do? How do they approach it? What do they do? And so actually if you think about it, if I'm an executive right now and I'm listening or I'm in my HR department, I ever responsibility for my company's retirement plan, you actually have responsibility there. The advice you're giving is important. So, so important to that individual and their family. Actually in the long run, probably even more important on the salary and bonus they make depending on their income level. So you gotta be smart about that and think through. And if you don't know enough, then again, reach out to a professional to help educate you further. The pros and cons. I'm not going to cover him on today's show because I don't want to bore you, but it is critical to advice. It's no different than if I'm in need. Um, if I've got a brake problems, well, I want to go to someone for my car that can help me fix the brakes. Or if I've got an alternative problem, I want to go to someone who knows that I don't want to go to someone who's just purely stuggle studied it on youtube or any other location. I need them to be an expert, not, I don't need them to be a Google search expert. I need them to be a real life
Speaker 3:
19:46
spurt. And I, I think that's so important. You know, and I, I think the Roth tool you mentioned it is really an interesting one because some people's tax rates are certainly lower as we've had tax cuts than they've been in the past. Depends on how that's gonna play versus their expectations in the future. Just a lot of dynamics. But I think it's a great tool and a great way to diversify your tax situation in retirement where you may have years where it's good to tap the Roth. You may have years where it's good to tap the traditional, just depending on your income levels. I think it's just a great tool for people to use.
Speaker 4:
20:15
Yeah. So you're listening today and you say, hey, Paul, I don't have a 401k. I've got a four oh three B or a simple or a separate another type of retirement plan. Well, again, end of the day, most people don't understand the differences. So 401k is what most people know because the biggest plan a four oh three B is another type of retirement plan, but it's used for schools, hospitals, and other types of entities. But there's other plans, there's a solo 401k, there's a set plan, there's a simple plan. There's several other those out there, and somebody has got to help educate you on that. But what if, what if you work for someone, Scott, who doesn't have a 401k? What if your employer doesn't have one?
Speaker 3:
20:56
Yeah, that's a tough situation, especially in today's world.
Speaker 4:
20:59
Yeah. So, well, you have to go down other pathways. I look at this as all erode, and you have a roadmap of your journey and it's not a straight road, right? Some of them curve. Some of them have dead ends and you've got to go right. So we got to come back. Some of them are hairpin turns like what's that great a highway in Custer state park. Oh, needles highway. Have you ever been up to needles highway and Custer state park? This is just this hairpin turns back and forth taking you through the state park. It's really neat. You'll have to go there sometime. Your hands getting sweaty, sweaty already the fear of heights is getting there. I, yeah, you know you don't, well maybe when can get to the top you'll see it. But that's what life is. Sometimes it's hairpin turn and sometimes you're doing those things.
Speaker 4:
21:39
So if your employer doesn't have a 401k, you now need to look at Ira contributions and do you qualify for Roth contributions? Should you be making a deductible IRA contribution? Or should you be maybe making a non-deductible at least if you're not getting the tax benefit today, at least get the tax deferral benefit for your lifetime. I can't explain enough how important the, the, the power of compounding is. So simple story, right? If I have $100,000 and I made 5% I have $105,000 right now, I could spend that $5,000 or I can have that extra $5,000 earn an extra 5% next year. Right? So then it just adds and it keeps building on to itself there. So then I go from 5,000 to, what's the math there? An extra $250 so I go from a thousand 105,000 now to 110,000 to 50 and like that, it just keeps building and building and building where if you take the money out, you're probably going to go spend it on something.
Speaker 4:
22:51
I don't know what it's going to be going out to eat or going on a trip or uh, buying more clothing you probably don't need, but you want and figuring that out. And that's, that's why you have to have a retirement plan. I call it, it's the set it and forget it methodology. Right. You just said it, you, you, if you can figure it correctly here at the beginning or if you didn't, it's got, I love your transparency. So thanks for sharing your story. Have you made a mistake? You didn't set up an initial retirement plan correctly, but you made the change so that way you could maximize it for when you learned better information to help yourself personally.
Speaker 3:
23:29
Yeah. I, I think what you're saying is, is so important. I think going back to one of the points I think you made in the first thing, which was you gotta be selfish. You've got to get that money paid to yourself first and not necessarily to church today self, but your future self. One of the things we've seen is people are using these pictures that age them by 20 or something like
Speaker 4:
23:46
that, and they're really kind of cool to look at and see how you're going to look, or at least how the computer thinks she might look, but that it's that self that you've got a big take care of today. Otherwise the money's not going to be there. Yeah. Um, have you done one of those things where you're taking pictures of teachers too scared, too scared, too scared. You know, I've created an Avatar though, right? So are you of your own or how about a Bitmoji? Is that qualifying? No, our producers not agreement is telling us that we are not technologically savvy enough and I'm sure she'll, she'll, she'll show us later. So, so one of the things we talk about is this is one of what we call our seven secrets to accumulating your first million and then keeping it going to there. We created actually Scott a free guide to show people if you're interested in that and just go to Carson, wealth.com, forward slash million, that's Carson wealth.com, forward slash million.
Speaker 4:
24:36
You can download this no charge. It's got all the information in there. So little secrets and stories we shared with you about Roth versus traditional taking advantage of the company, match all those things. Play such a pivotal role in your success, um, for your life and your future self life. Whether it's 10 years, 20 years, 30 years from now. And even if you've gotten into retirement, there's great tidbits inside of this article for you that will help you make more informed and educated decisions. Hey, you've been listening to wealth from wisdom. I'm Paul West with Scott Kuby and we'll be back in a moment talking about how much risk should you be taking inside of your retirement
Speaker 2:
25:14
accounts. Any major decision in life is worth getting a second opinion and financial planning is no exception. Let's talk about how you could make your money go further in retirement than you ever thought possible. Call Carson wealth to schedule your free initial analysis now at (888) 419-8513 do you have a lot of assets but are short on cash? Learn how you could leverage your assets to free up cash with Carson wealth by calling eight eight (841) 900-8513 and now back to wealth from wisdom with Carson wealth.
Speaker 4:
25:47
Hey, this is Paul last year. Listen to wealth from wisdom. Just want to welcome you back. A cohost today is Scott Kooby, senior investment strategist here at the Carson Group. Scott, we've been sharing some stories about, uh, how to make smart decisions with your plan, how to accumulate your first million and then your next million. Uh, I shared a little story about, uh, some water in my basement and do you have a sewer backup addendums or writers or whatever they official insurance term. Is there a reach out to your agent if you haven't done that? But now let's talk in, excuse me, talk about one of the biggest mistakes we see people made is not truly understanding the amount of risk they take as Scott. Uh, you know, one of the things you do for us here at the Carson Group that I'm certainly very appreciative of and I believe you're passionate about it because you keep doing it again and again in is you every Monday morning provide what we call the macro thoughts of week and where you share, you know, really what transpired the next week, but what's happening this week and where are, where are, where is the Carson group on a macro level.
Speaker 4:
26:57
Um, and so just kind of walk me through what goes through your thought process as you're building out your macro thoughts here and looking at the world because you have a unique lens. So what happens today is most of our listeners, what do they know about the market? Well, it's whatever they saw on TV or whatever article they read. So it's a very selective and yet you have thousands of articles that you could potentially read. You have all of this technology can, that can analyze fed data, agricultural data, all of those things. But your job is to essentially assimilate all of that in form and render an opinion. So that's a complicated job to figure out how much data and information is important and real versus interesting but not important.
Speaker 3:
27:43
Yeah. And that I, that is one of the challenges, especially as the amount of information available, the number of blog writers and idea generators that are out there continues to grow. The amount of data that we have access to is absolutely huge. And so one of the key things I try to focus on is what is the big picture? What are the points that uh, are really moving the economy? We can get into all this housing start number or this durable goods number, but does there, is there an overall theme in a picture that we're seeing within the economy and right now there, there definitely is. What we're seeing is really two sides of a scale. I think one side of that is, is that the overall macro research or the overall a trade environment and also trade is very much related to manufacturing. You know, one of the examples I, some I'm feeling from somebody, I forget who, but pizza, pizza parlors in, in, uh, in council bluffs don't really compete with pizza partners in West Omaha.
Speaker 3:
28:35
And so you think about that as you start to extend that out. But manufacturers compete with everyone around the world because it's so much easier to export goods than it is services. So as we've seen these trade overall trade levels decline, we've seen tariffs start to rise up. That's put pressure on manufacturing at a time when I think manufacturing was slowing down already. And the combination of those two effects have really seen those parts of the economy weakened rather dramatically. On the other hand, the service has side of its doing, just continues to do fantastic. Jobs are plentiful, they're easy to get there actually more jobs available or at least there have been a lot of re most recent months compared to number of people that are unemployed. And since they've been doing those statistics and it's, it's a couple of decades back that's never happened before. So this is a great time to look for a job. But what we're seeing is the overall growth, especially in those more manufacturing type areas related to trade have slowed down. And that is a major risk point
Speaker 4:
29:29
for us. Yeah, it is. Um, but I want to go back to a point pizza parlor. I haven't heard the phrase pizza parlor. [inaudible]
Speaker 3:
29:35
hey, you used avatar in the last segment so I can use your Keats was, sorry. I see all it's, it's a, it's a, yeah, it's a different, it's a peace experience. Pizza experience. It's, it's fine. Pizza shop, pizza parlor, pizza place, whatever you want to use. So,
Speaker 4:
29:50
so Scott, I mean is, is I look at this and I look at the world and I, I couldn't agree more. I mean, manufacturing competes with everyone. Um, and we're in the process of building a new building. And it's been interesting for me, Scott, to watch this. I mean we're building out in the new, you know, West farm development out here, 140 fourth and dodge in Omaha. I know all of our national listeners don't understand that, but the amount of bids and information coming in is not just local, it's regional and some national, and I share this. So where we are as a financial planning company, and I know I do this show because I want to educate everyone, I guess frequently. You know, how many of your clients are local versus national? And so I'm just thinking back to this week, um, I've definitely done more meetings via zoom and Webinar with national based clients than I have even necessarily with local. And I share that with you because the world is a competitive world out there. And as long as you can provide value. So back to your manufacturing things. So I may be a furniture manufacturer in Kentucky, but I'm competing all across the United States. I'm not competing just to [inaudible]
Speaker 3:
31:03
Kentucky, you know, and coming from Nebraska, I headed an opportunity to, uh, probably 10 years ago to tour a manufacturing site. They [inaudible] up in a small town, maybe about a hundred miles from here, so maybe 50. But they, uh, they manufacture fire engines. Okay. And there just aren't that many places. That manufacturer manufacturer is the first one I've heard of. It's a tiny town, but that's the business that they're in and they compete all over the United States, if not the globe on that. And that's one of those theories where if that started, that business starts to slow down. It directly affects that small town in every service for a minute. And I think that's what we have to pay attention. It may be really great for the services industry right now because everybody's fully employed, they're doing really well. But if manufacturing slows down the jobs that are done to support those manufacturers, they start to see some declines. They might sort of see them layoffs and that's what we're paying a lot of attention to. Hasn't started yet. But that's something we're definitely seen as a major risk.
Speaker 4:
32:00
So speaking of declines and layoffs, um, I heard someone say to me the other day, it was interesting, they said you better not say the r word. Our words did for recession.
Speaker 3:
32:12
Oh, that's good. I was trying to see what the thing about the prohibited words were on the show and I don't know any with our, okay. Needs
Speaker 4:
32:18
a fine Scott. Okay. Alright. So he want me to say the r word and the r word being recession. But of course that words coming out a little bit more and more based on what you just shared with manufacturing potential data and what happens. But the real reason or I would say not the real, the number one reason we're hearing more and more about this is this yield curve inversion. So for those of you that are, it's interesting is that, um, shorter term, um, bonds are actually in the yield on these bonds is paying less than super short. So it's, it's really interesting that the reality is, is the longer you loan people money, the more you should get paid. And that would make sense.
Speaker 3:
33:02
Well, it does because you give up opportunities. You know, if I'm loaning you money for a week, well I'm not giving up many opportunities because of the whatever comes along in the week. If it's a decent sum of money, I, you know, I delay buying something I might buy for a week. That's not that big of deal. But if I'm loaning money to you for three years or five years, I've, I've, there's a lot of things that could happen and there's some greater risks you won't pay me back as well because more things could happen in your life. So we would expect some torpor premiums. So when the yields are actually lower, that's definitely an aberration. And it changes a lot of things within the economy.
Speaker 4:
33:34
Yeah. Well, I mean, it's news and so, and it's noise I'll say about there. So if you watch the news or hear the news, they may have talked about the interest rate yield curve inversion and they also, many people will say that that is a sign that our re recession is pending or in in the, I'm going to call it on the horizon
Speaker 3:
33:57
on the horizon because either usually those inversions have happened about on average about 18 months before the r word. The recession has a
Speaker 4:
34:06
18 months. That's interesting. It's so it's not a lot of people say, oh this is, this is
Speaker 3:
34:10
overnight or in the next 30 days tends to vary for quite a bit and the ranges are quite large. One was, it was almost, you know, and some of them were up around the two year period. Some of them are down a year or less. And so that's one of the things as you look at the indicator, if it's something predicts a recession two years from now, is that a prediction or, or what? And I think that's one of the things that we wrestle with. What we tend to generally take it out is that the yield curve is an indication. It's a way to say, how's the economy going? Well, there's some things in here that are clearly slowing down and the yield curve is a reflection or an indicator of that slowness. We don't know what's slowing us up on what we're trying to drive. And as far as the traffic in front of us, we don't know the cause of it, but we know that something is likely slowing down up there because we're backed up as well.
Speaker 4:
34:52
Yeah. So our job is to help provide information. For those of you listening, you get a lot of noise. So let's just use this, that if the average has been 18 months when these yield curve and curve inversions happen, that some form of recession starts, but you don't know what's going to happen to me. We're also running in historic bull market since 2009 so we're way past normal times when we've had these downturn. So we can continue on for three, five more years. We don't know. I will tell you, you have to be smart of having what's called irreplaceable capital items that have downside protection for you. Uh, if you want more information on that, you can send us a note info@carsonwealth.com or if you just want to go our website, simple Carson wealth.com or just Google it, Carson wealth, uh, you'll find us and there's an easy button on there for you to click connect with us and send us a question. We'll help you out. Hey, we're going to be back in a moment on wealth from wisdom.
Speaker 2:
35:50
Have you ever wondered how do other people get away with paying fewer taxes than everyone else? Learn how you could save thousands of dollars in taxes by calling Carson wealth at eight, eight, eight, four one nine 85, 13. Social Security risk, taxes and healthcare. This is where you can count on straightforward and objective advice on the biggest challenges with investing for retirement. And now back to wealth from wisdom with Carson wealth.
Speaker 4:
36:18
Hey, welcome back to wealth from wisdom. This is Paul, last co-host today, Scott Gooby. Scott, we've been talking about, uh, you know, looking at your 401k, really looking at retirement plan. Uh, we just talked about the yield curve and are we 18 months away from recession and that, uh, but the reality is is I should be looking at way longer on the horizon than 18 months. I should be looking at three years, five years, 10 years, 20 years, or even maybe 40 years out if that's what my life looks like. But let's talk about, here's one of the most frequently questions we get asked at Carson, hey, how much should I allocate to stocks versus bonds? Wow. Talk about a very broad question to ask people. And we know there's a lot of, you know, follow up questions that go with that. But I mean, Scott, you've been working in this field for a while as I have. I would say this is one of the most frequently asked questions we get is people say, hey, how much stocks versus bonds? And they expect me to look right at them and say, you know what, Scott, you should be in a 70 30 portfolio
Speaker 3:
37:22
with, with no other context. Yes. Yeah, yeah. Just tell me the answer before I give you any of the factors that might influence.
Speaker 4:
37:28
That's it. Yeah, it's, it's, it's amazing to me. I mean, we brought on a new family. I was talking to, uh, in the last week and we were providing some recommendations, but this was looking at their financial plan. This was looking at all of their things and it was actually a little bit more in growth mode than they were maybe expecting. And so they said, well, my prior advisor said I have to be about 40% stocks, 60% bonds based on my age. But the reality is, is that didn't make sense for them on what their objectives were and what their goals were and how to personalize it.
Speaker 3:
38:06
Hey, how old are you? Okay, here's the answer. What now? What are your goals now? What's your situation now? Where do your dreams now? What Situ? What do you want to do with your kids, your overall life plan? It's, let's just go ahead and lump you in with everybody else's retiring within a five or 10 year period and call it good. Yeah, that's a terrible level of service. Maybe it works when you're 25, but by this, as you get older I think you're, you're really missing out on a plan that's going to help you get done what you want to get.
Speaker 4:
38:34
Yeah. And I'm okay with,
Speaker 3:
38:36
um, I like what fidelity and vanguard and these other retirement plans are doing is putting together age based retirement funds. So they really are creating that, set it and forget it mentality is as you're younger, um, hey we're going to be as aggressive as possible but a lot of them, I even look, I participate again for my uh, three teenage children is we have five 29 plans. So of course I use the nest program here in Nebraska Cause it's our best program. Um, I obviously want any state tax benefit. They can get the gums with it, but I like, I'm in the age based programs but then I can choose between age based conservative, moderate. I think growth and aggressive are the four categories. So I can have it altered. But if I want to turn the dial up on risk, I have the ability to do that.
Speaker 3:
39:24
So at minimum, if you don't know very much or your internal HR department doesn't assist, or if you don't have a financial planner or advisor who comes in and instructs you or that you can contact, I had minimum would recommend that you think about an age based approach because at least that somebody put some form of logic into that versus you just randomly picking pause and make sure that you stay diversified as well, which becomes very, very crucial because they are using multiple asset classes over the long run, generally produces about the same return or better with a lot less risk as well, and makes that ride a lot
Speaker 4:
39:59
easier for you. So here's the number one mistake I see people make and I hope you're listening. So here's what happens. People do that and then guess what? It's not gonna maybe outperform some of the other individual choices. All right? So it's not going to perform picking other ETFs or vehicles inside of there. So you go look at the performance, you're like, well, shoot, my age base growth did not do as well as the s and p 500
Speaker 3:
40:27
especially in this period of time where the u s has been the absolute best market. That isn't always the case. It just seems, you know, we talk about recency in the first segment is the most recent place I ate was Pinera. The most recent experience I have is the u s seems to outperform international markets. That won't always be the case. And these more diversified age-based options are going to include some international stocks at us at a very reasonable percentage. But yeah, if the U s market outperforms international, they're probably going to lag by a little bit. Doesn't make a mean that they weren't the best choice.
Speaker 4:
40:57
Yeah, and, and, and disturbs me and it scares me and I hopefully people will listen. This is again why we do this show is we want to educate families across the country. If you go in there and make this change, you're double hurting yourself. Because, and we've seen this over time, we've seen all of the charts. Scott, what does well for a period of time tends to move into lower performers and the next series of years, not necessarily, it doesn't always happen that way. But let's say you've been in there and you're like, you know what, international hasn't been great for me, so I'm going to get out of that and flood more us now. What now? What if international kicks bought the next two years? Then you just, you just doubled
Speaker 3:
41:40
compound and will and when do you make that change? Just when the pain gets to be enough that you feel like you should trigger and take action. And guess what's about to happen when you get to that point is, is that it's, that's very likely or it could be one of those times that turn. And if you do, you have a lot of regret from that. And so I, that's a decision that can be very damaging. Yeah, it is. I mean, it's,
Speaker 4:
42:01
um, so when you log in, my recommendation is when you log in, look at the value, great. Look at the value, confirm that your investment approach is appropriate. If you just don't know enough, take a screenshot of it, give it to an advisor, share it with someone who's a trusted professional shoot. You can go to Carson wealth.com and share that information with us and we'll give you advice. Remember, we are a fiduciary, so we're going to provide you our legal and ethical best opinion for your best interest. We're not trying to sell you and get you to put it into a commission or annuity or other junk
Speaker 3:
42:36
that's out there. And then one of the other things is don't look too often. I was talking to a neighbor of mine and he, you know, one of things about August, we had a lot of volatility. We talked about that in the first segment, but in the end the mark was down a, you know, around 2% the s and P was, it wasn't all that volatile month. If you only looked on a monthly basis. My neighbors look at a lot more often. What's he ended up doing? He's pulling half of his money out to cash that he's going to leave in cash for 30 days because he's getting nervous just because he looks more often than he ought to. And I think that's one of the key behaviors that when you put this money in, the less often you look probably in a lot of cases, the happier going to be. And to look at it with somebody who's knowledgeable about it can even make that even a better experience for you.
Speaker 4:
43:19
Yeah. So here I am, Scott. I, I'm a financial professional. I'm a certified financial planner. I'm in my forties and I look at mine about once a quarter and it's really just to make sure, I just want to check in and see, but I don't go look at it every day. I don't have a desire to, and yet I am absolutely in tune with what's going on. But what, what you're saying is so right. If I log in, all I'm going to do is start thinking about it more. I know I put the right plan together. So if my financial plan told me how to allocate it, why would I adjust something without then readjusting my plan first?
Speaker 3:
43:56
Right. I, I tracked my monthly, there's, I never go in other than check with a monthly balance and just make sure that my data's matching up. Yeah, no benefit to them.
Speaker 4:
44:04
And I know a lot of people log in cause they just want to make sure something negative didn't happen. I mean negative and did I lose money, did someone steal money, did all of those things. And I get the fear concern. But also if again, if you work with trusted professionals like Carson, we have monitoring reports. So we know if there is a significant change in value both on the upside but also on the downside. So we're able to see that and help you really if there is some form of oddity, get it corrected and get it handled. Now, I mean there's a lot of information we've been sharing with people today. I hope your learning is don't take a broad thought process at the end of the day. And I've shared this story. Each one of us on our fingers has a unique identifier called our fingerprint. That's how you know what we're, we register with the police. FBI who, how we register the gunner, agency G. That's how I get on my phone, right? So we're unique, we're different. We can't take advice from everyone else. You gotta figure out what's best for you. If you want information info@carsonwealth.com or just go to our website, connect with us there. Hey Scott, I appreciate you being on today's show. This is Paul West. You've been listening to wealth from wisdom
Speaker 2:
45:20
risk, social security, income taxes, estate planning. Every week we talk about how to make your money go further in retirement right here on wealth from wisdom with Barron's hall of Fame Advisor Ron Carson.
Speaker 1:
45:33
Okay. And here's the legal Mumbo jumbo. The opinions voiced in wealth from wisdom with Ron Carson are for general information only and are not intended to provide specific advice or recommendations for any individual to determine what is appropriate for you. Consulted, qualified professional. All indices are unmanaged. I may not be invested into directly. Investing involves risk, including possible loss of principle. No strategy assures success or protects from loss. Past performance is no guarantee of future results. Advisory services offered through CW m L L C an SEC registered investment advisor.
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