Wealth from Wisdom

How to Be Successful in Retirement

February 23, 2019
Wealth from Wisdom
How to Be Successful in Retirement
Chapters
Wealth from Wisdom
How to Be Successful in Retirement
Feb 23, 2019
Carson Wealth
Show Notes Transcript

On this episode, Paul is joined by Erin Wood, Vice President of Wealth Planning at Carson Wealth. Tune in to hear what most people overlook in retirement, and how you can ensure you are successful in your retirement.



Speaker 1:
0:35
Okay, and here's the legal Mumbo jumbo, the opinions voiced and Wellframe wisdom with Rod Carson or 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. 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 Cwm LLC, an SEC registered investment advisor.
Speaker 2:
1:04
This dud 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 the 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 weld from wisdom with Carson wealth. Carson wealth is a Barron's hall of Fame Advisor and 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 Dell you've saved for retirement. Welcome to wealth from wisdom with Carson wealth. Could you retire a lot sooner than you actually think? The answer is yes. This is true for many of you listening to the show right now, and it could be even much easier than you actually think.
Speaker 2:
1:59
And he, welcome to wealth and wisdom on Paul West. It goes today is Aaron would or vice president of financial planning. Erin, welcome to the show. Thanks for having me again, Paul. Yeah, I mean, when we talk about retirement, I know we talk about this frequently on the show and hey, we're not trying to beat a dead horse. We're just trying to educate and I think there's so many interesting stats and things out there, like how many times you actually have to hear something for it actually to sink in, right? Well think about how many times we have to tell it. Yell at our kids constantly. A lot. Do they actually grasp it, understand it. And the same thing with us as humans. I mean, think about when you signed up, you know, with your employer and they talked with you about their, your 401k or they talked about your benefits or how many of you actually listened to what is your really your disability plan with them?
Speaker 2:
2:42
No clue. Most people, I would say 90% of people I have no idea, couldn't even answer if they even have disability or I would say most people assume they do, whether they have short term and long term and how much, and that's what tends to happen is, is people just float along in life and hope that everything works out. But there's a reason why successful people are even more successful when it comes to money. And now that they have to pinch every penny. But what they do is they pay attention, they look at the things that matter, um, and then they make sure that they actually execute and implement it. And I think a lot of times, and I think about analogies related to like professional sports franchises or any sports franchise is often the teams that pays attention to the details and then executes and implements their plan.
Speaker 2:
3:29
This is the most, most successful because people, in terms of talent, it's usually the same in people. We all have the chance to do 401k plants. We all have the chance to do spending plans while the chance to decide do we buy or rent a home, but how we make all of those decisions together. So Aaron, I think when we are on the show today, let's talk about what's standing between most people listening and that is living that life you've dreamed of versus letting it happen. You know? And I think it's like take the bull by the horns, take control of your life, take control of your destiny. So we really open minded to that. We want people to be open minded on today's show to figure out, it's not just, you know, really saving money or that you simply need to say money is what you're going to do with your money and how you approach it.
Speaker 2:
4:12
And Aaron actually earlier today and I was talking with a group of people, you were in the room and you know, I asked a question, I want our listeners to think about this. Think about the first go way back. Go back to your childhood and think about your first money memory. And I was asking people and for those of you listening, all right, do you got it? You know, when you're a child is your first money memory, your parents giving you money, was it you collecting it was your first babysitting, gave you your first lawn mowing or uh, picking corn or whatever it may have been? Was your memory positive or negative? Yeah. What about for you, Erin? Positive or negative? So mine, I would say was positive. A, it was definitely not a negative memory. I remember being little and paying for school lunch when you still had to bring money to school and he didn't just type a number in when he get to the counter.
Speaker 2:
5:01
I remember coming every week with school money and buying our lunch ticket should ask you how much it costs then. So that way you can tell everybody how old you are based on him. Oh, so that I don't remember, but I know it was less than today. It was long ago enough that you forgot or about through there. Yeah, I mean I think for you that sounds like it was a positive memory. Brings back going to school, probably having fun. Tat Responsibility. Yes. All of those things. And I mean, I think back to, I mean I remember putting money into a piggy bank. I just remember like the power of and, and they didn't like what do you do? What do you transfer to your children and how do you pass those money memories onto them? And I think it's forgotten. And it'd be really interesting, Erin, in today's world, how good people are at spending with new digital currencies and digital transactions, and I'm going to call it the Venmo generation that is now coming out there and our producers gridding may makes
Speaker 3:
5:58
probably doing the same and that is hard. I mean my daughter's five, we talk about this ally in her idea is you, you just swipe a card or we go to the store and so with her we have, we do have a piggy bank where we give her money and we have her take money out and we have a little tiny ice cream shop on our little town and so she knows it costs a dollar for an ice cream code and she takes her dollar up to the counter to buy her own ice cream cone. Imagine though, I mean social now she's walking up and she sees a penny line of the ground. Do you think she'll pick it up or not? Oh, good question. On a penny, she definitely would have quarter. I'm not sure about a penny that actually, one of the interesting, if we did this
Speaker 2:
6:38
size with a secret haven camera, I want any of you listening today, would you pick up a penny or a nickel dime? I think most people would pick up a quarter and certainly I would say definitely a dollar a pill. But what would you do? And I think, I think back to my childhood, it didn't matter if you use a penny on the ground, you picked it up. Now it's like, oh, I don't want to pick it up. It's a dirty, it's, and it's not worth very much. Is it even worth my time to bend over, pick it up, and do that? And I'm not saying that to be, you know, agreed. You know, stern or, you know, arrogant. I'm just saying, it's like people don't even value that any more. And that's why I think it'll be fascinating to watch this Venmo generation come about. So I'll give you an example.
Speaker 2:
7:20
I have a teenage daughter. She likes to Babysit. How does she get paid now? Digitally? People send her Venmo payment. She doesn't get cash anymore. Uh, so then she has a choice. What does she do with that? Well first of all, her father and monitors that it might have something to do with the profession. We're all in here, Erin, but I make her take out almost all of it to help funnel it to her bank to make sure that she saves it versus spends it. But how easy would it be for them to spend it? Then I think about, you know, when she's really again in a few years older and old enough where she's going to have complete control, it's going to be harder and harder because what does it look like on your phone? Play money. It looks like a video game. It looks like an APP, not, yeah, it doesn't happen.
Speaker 2:
8:04
It is true. A good point. But I think, I think in watching people and how they actually save their money, but then what do they do with it? Cause it's pretty darn easy to transfer. It is. There is, you don't have to run to an ATM anymore. You don't have to worry about that. Um, I was joking about this the other day. I went on a golf trip with some friends the other day. And like when, when a lot of us go golfing, there's always some fun games that go along that may include money transferring hands based on the outcome that happened. But all in good fun. Yes. Never enough that it's going to destroy friendships. I tell that all the time, it's gotta be for fun, but you never want, I call it a four foot or that could destroy a friendship. That would be a bad game of golf.
Speaker 2:
8:43
That's a very bad game. But interesting like the take is how many of us were prepared with cash and how many were prepared with digital. Again, your stat is now changing, um, the complex of what's happening. So on today's show we want to talk about how do you take this money you've earned so hard through your lifetime and hopefully save both in cash in your bank or digitally. Again, like I have, I get money in my Venmo account. I'm moving into my bank account right away. So it's not just sitting there and I want to place it somewhere else. So let's talk about part number one here. How do you actually turn what you've saved into investments and have them actually become investment workhorses for you? Cause there's a, you know this, I would call it confusion and complexity that financial advisers, um, all they do is manage money.
Speaker 2:
9:35
Yeah. And Aaron, are you, you heard me earlier this week talked about, asked a question, what do you think a financial advisor does? And two people responded, do you remember what they said? Yes. Pick stocks and picking mutual funds. Pick stocks and picking me a fudge funds. What in the world? That's not what people do. Well actually, if that's all they do for you, a piece of Whoa, we do. Yeah. It's a middle piece. That's actually, I call it table stakes. If you're really, if that's all you need, then go do it on your own. Go Do, do to a do it yourself platform. Figuring out. But the reality is, and behavior shows us in Aaron, you're phenomenal at looking at like investor behavior. Yeah. I mean you were just sharing me like what's some of the studies or surveys that you've seen where people are managing their own investments and what truly happens to them? Yeah.
Speaker 3:
10:18
Hey, Don Hewitt did a fascinating one. Uh, there's lots of these out here. Um, vanguard did their advisor Alpha individuals can go look that up. Uh, but the Aon Hewitt one, I don't think it's as much press on it and it was a 10 year study where they looked at the five years before the recession and the five years during the recession. Um, to see how that affected a investor behavior when they were getting advice. And what they found is the individuals who are getting advice before the recession, we're doing about 1.8% better than their peers that weren't getting advice. But during the recession, that number went up to 4%. That is a huge amount. And that is not about just picking stocks and picking mutual funds, that's getting tax advice, that's getting insurance advice. It's getting help on a automated savings and employer benefits. There's so much more advice it needs to be given the just that small little table stakes part.
Speaker 2:
11:12
I mean, that's fascinating to me. So what that's telling me is, is you perform before downturns in the market cycle, 1.8% better according to this Ayaan study and working with the professional. But it doubles in harder times. Yes. And that's fascinating. And I will give you an example. So talk about investments here. And I see this all the time. We see people bring in statements and we run it through a digital allocation tool for them. Why do we do that? Because when you go give your statement to another financial advisor, what are you immediately going to assume? Oh, they're gonna tell you what's wrong. They're going to tell you exactly what's wrong and they're going to sell you something. So you're going to have, I call it, um, you know, I guess, uh, here in Nebraska land for Nebraska book football, I call it throwing the bones where you cry.
Speaker 2:
11:56
So your arms, but people get defensive. They immediately feel like you're going to sell them something. So we thought of it's also purchase regret. I mean, this is something somebody purchased. And so if you come in and tell them they're wrong and they're instantly going to feel even worse because you're saying that their decisions were wrong. Yeah, you rock, you bought the wrong house, you bought the wrong car, you bought the wrong outfit, you bought the wrong Wifi router. Whatever it is is no one likes to be told they're wrong, that's for sure. So I mean, I imagine now you're able to come in and somebody shows you a digital allocation of what you actually invest, how much it can go up or go down. But it's just the numbers. It has nothing to do with personal bias. Aaron or Paul or any person around the country.
Speaker 2:
12:39
And that's the huge part. And what I'll tell you is what we see right now, investors are chasing yield is they say, oh, well I want to get as much yield as possible. So they're using a master limited partnerships, uh, some fixed income things that have huge yield. But what happens to those in downturns in the cycle? They go down. Yeah, they do and they go down immensely, which then reduces your risk. So if you want one of those complimentary digital allocations will just give you the numbers, what those look like. Give us a call. (888) 419-8513 that's (888) 419-8513 great way to look if your income plan is on the right path. Eight eight eight four nine 85 13 you're listening to wealth from wisdom though.
Speaker 4:
13:23
Do you own an annuity? Inflated fees and conditions could be costing you and arm and a leg get straight forward 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 long term 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 2:
14:57
Hey, welcome back to wealth for wisdom. I'm Paul West, joined by Aaron would today. Hey and we've been having some fun talking about really how to make sure you maximize not only your income and requirement, but just make it good decisions is that it was really complicated. Right?
Speaker 4:
15:12
You know the, the funny thing is it might not be Sisley, it might not be sexy, but it's the right thing to do.
Speaker 2:
15:17
Yeah. So I'm going to oversimplify every investment decision you ever made right here. Get ready for this. This is astounding info, but it may be the most important thing you hear all weekend. There are really only two risks when it comes to investing. Number one, the risk of not losing money so you could protect against that risk, right? Yep. Cash, short term investments. Um, hedged equity, irreplaceable capital. This is what a phrase we certainly like to use. Or the second risk is the risk of missing out on opportunities. Yes. Guess what? Can you have both? Oh, that's a teeter totter right there. They have to balance correctly. Yeah. Impossible. You can't have both that their fullest level. There's no way you can not get, take advantage of opportunities for growth and rate of return without having some form of risk of losing your capitol. Yeah, it's impossible.
Speaker 2:
16:15
So people have to understand that. And why do I say that is you have to be somewhere on a spectrum. I draw this line and imagine this on the lefthand side of the line is you're fully on one side of the risk. You're not going to lose money. So you have cash and you have all of these other things that may help. On the far end of the side is is like you have no concern about losing money because you want to make sure you don't miss out on making money. Yup. So now you can fit anywhere you want on the line and have some portion or iteration but you can't have both. And Erin, I'm going to tell you right now, here we are February, 2019 and consumers are confused by this and I just made it sound super simple or at least I hope it I did for our listeners.
Speaker 2:
16:59
So what's happened? 2018 third quarter, we had zero days in the market where it moved up 1% or down 1%, fourth quarter. Crazy craziness. Your seatbelt. We had a wild ride in the market on the downward side. Fear people got scared. I think your stats from last segment talking about how 1.8% better for people before downturns even double that afterwards. Then people wanted to pull out of the market, could figure out what to do, what does it look like? Um, should I sell, go to all cash, all those things. And now we're halfway through the year and actually is me halfway through the quarter. Market's done great. I want to see great, phenomenal. I mean it hits come flying out of the gate for people. So now it's everybody is saying is I want to take more risk. Oh, of course. Yeah, it's, so I gave it, I shared this with you and if your financial advisor isn't having this tough conversation with you, and I'll give you an example here.
Speaker 2:
17:59
Personally, I work with a family, Aaron. Um, they, they fall on that left side of the spectrum. They want downside protection. Okay. They're just, they don't like the wild rides of the market. So guess what? December they couldn't have been happier with us. We were well protected. Oh yeah. We'd go down to hardly at all. They're in a great spot, but now come 45, 50 days here under the year. They, uh, they're out for the year, but they're not up as much as the market. And so they asked me a question earlier this week of, well, hey, why aren't we advancing further? And I gave you the, I gave them the same answer I just shared here on the show. You can't have the best of both worlds. He didn't have to move, move down the spectrum to be more risky and be comfortable there and that that's what you want in the long haul.
Speaker 2:
18:49
What do you need to be comfortable with your risk and stay where you are? Yeah. And by the way, if your advisor starts moving you based on your opinion here, I'd fire them because I want, I want them to push back on me. The, I'm paying them money to give me advice. And so this is why it's a completely dangerous thing. So if you sold, if your advisor helps you sell out in December and now you're getting back in here in February, you just accelerated to problems. Yes. He did the opposite of everything. Yes. And that's why, and there's great statistics about all this where the average investor loses money because they make emotional based decisions and that's really what a good advisor should be doing is stopping you from making those two or three really stupid decisions that you're going to make it on your own.
Speaker 2:
19:35
Yeah. And stop listening to your friends. By the way, this drives me absolutely bonkers, Erin, because it happens all the time. Like you'll hear from a friend because you're at the coffee shop or you're out at a dinner or wherever you are and what happens? Somebody else had the but, oh man, I'm kicking butt this year. I'm up 15% 2019 yup. You Shrug your shoulders, get low, low, lower in your chair and like, Oh, I've only up eight or whatever. Who Cares? They didn't talk about how they did in the fourth quarter. And most of them are talking about something very speculative. And so let's be honest, you can hit something speculative and get good returns off of something by chance, but you can be right and still be stupid. And that is a really important thing to remember. And there's, it happens to, you hear someone say big decisions can make money.
Speaker 2:
20:24
Yeah. I mean, how many people did we hear a year ago speculating on bitcoin? But then that's crickets. Now when you hear from those people. So someone might have been right, but if they stayed in the whole ride, they were still stupid. But the difference is, is like if you take that longterm game plan with the stock market, with the stock market, again, I would say comparing it with the s and p 500 as our benchmark. If you hold for a long period of time, it can actually be very beneficial for you if you've, you fit correctly on that risk return premium. So I would say, Aaron, let's talk about generating income. I think that's important for people. So what's the right percentage of income that people should try to save? Oh,
Speaker 3:
21:07
it's interesting. There's lots of rules on how much people should say. You hear save 10% of your income, say 15% of your income saved, 20% of your income. All of those I think are hard things for people to hear. And when they try to imagine themselves doing that, it's even harder.
Speaker 2:
21:23
Yeah. And I think an interesting observation you had, you were sharing this with me because when you ask people to save 10% or 20% what do they do?
Speaker 3:
21:32
They tell you they can't. There's no extra money left. Yeah. So how can we reframe their thinking? Well, how do they really look at this? So I like to ask people if they could live off of 80% of their money. So if, if they were going income, if they were going to retire today, what percentage of their income could they live off of? And if they tell me they couldn't live off of 70% of their income or 80% of their income, well then really we should be able to save an appropriate amount. On the flip side of that,
Speaker 2:
21:58
I love it. So it's very simple sale. Let's use, let's use round numbers. So you're making $100,000 a year in your mind. If I asked you to save $20,000, you're going to look at me like I'm fricking crazy. Yup. However, if I say, Hey, can you live off of $80,000 if you guys are going to be, absolutely. Is it the same question though? Yeah, it is.
Speaker 3:
22:19
It is all about framing what we're, we're trying to accomplish an aim for. Yeah.
Speaker 2:
22:24
I mean, and, and I look at, uh, the people always have this misperception of what that is, how to approach it. I mean, what category or what area of people's finances. Again, I want to go and talk about another misperception here is social security. Aaron. Um, so many people have this feeling that either a file as early as possible or B was even more harmful, is listening to a friend on what they filed and then just making an assumption that they should do the same and this is a disaster because you, again, you may get lucky here. And what'd you say earlier? Even sometimes stupid decision, it's to turn out okay. But the problem is, is, is you may not, when I call optimize it for what's truly in your best benefit. Correct? Yeah. So I mean, you run the Financial Planning Department here for the Carson Group. What are some of the ways that, okay, let's just say this between 60 and 62 years old, what can I do right now to help me make a more educated decision there?
Speaker 3:
23:30
Absolutely. So one of the things I always encourage our clients to do is actually give us their statements. Uh, those should be coming in the mail once you're over 60. Uh, and we can go through and actually do the analysis on them. Uh, there are almost, I think is 2,700 ish, uh, laws or rules that go into the social security administration. So there, there's a huge book to try and navigate that, but we can go through and actually run the analysis for them and figure out not only what is it, is it best if you are a single individual, but what about the rules? If you're married or you've previously been married, the divorce rules, you're a widow, a, all of those have special rules to them and benefits that people can be taking advantage of.
Speaker 2:
24:08
2,728 roles.
Speaker 3:
24:11
Thank you. 2,728 roles. That's a lot of rules. Yeah,
Speaker 2:
24:15
I'll have to follow it. And then that becomes complex. And what we see is with finances become complex for people. What do they do? They ignore him, ignore him, they run away, they hide, they avoid figuring out your favorite phrase there. But that's the reality of what happened. But I'm sure a number with you. So Erin, if I could tell you that I could essentially want to saying, he said, how about record? I could get you an 8% return in one year. How would you feel? Guaranteed. Absolutely. Yeah. Most people, I hate the word guaranteed cause I think insurance people overuse it depending on situation. Uh, so the federal government essentially guarantees you 8% they deal and your military is going to be like what the world are Aaron and Paul talking about today. Here. The reality is is though, if you reach full retirement age in your retirement at 67 now for most people, 66 and a half or something, but if you wait until age 70 you get an increase in your benefits of 8% for every year past your retirement.
Speaker 2:
25:18
Yeah. I don't know where you 24% so if the stock market be in the s and p 500 has earned 8% since it started, but you had to ride that roller coaster of the ups and downs, ups and downs in the last nine months here in the market. But you could earn the same return by just delaying your social security payment by one year. That's, that's potentially game changing. And I'm not saying for all people it's the right decision because if you need the money and you don't have other income sources or for retirement purposes, you need that, then hey, I get it. But if you don't, there's, there's, there's really very few places you can get essentially a risk for he based on the federal government and where they are. And you can argue with us whether or not whether a social security will be available.
Speaker 2:
26:05
My belief is they will fix this. They will figure out a way, um, and many other things to do. But if you've never ran a social security analysis or you want someone to do it, we're happy to do that for you at eight eight, eight 41985138884 one nine 85 13. If you'd rather, you can just email us a copy of your statement, send it to info@carsonwealth.com. We will then send you back a personalized statement on what the best things are for you to do it. info@carsoncarsonwealth.com. Or if you want phone numbers easier. (888) 419-8513 I just want to ask you, are you open minded to gain the analysis stuff? If you are, contact us, we'll help you out. Make it simple and easy for you to understand. You're listening to wealth for my stuff.
Speaker 4:
26:53
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 then you ever thought possible called Carson wealth. Just 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 (888) 419-8513 and now back to wealth from wisdom with Carson. Wealth A. For most people, taxes are going to be your biggest expense or terror. You know what? Let's just
Speaker 2:
28:25
I that though to actually taxes presents at your base expense. Right now you're working and I've talking about taxes on your IRA. Here's all security or 401k your investment income. You know, you all your retirement accounts. Really. So Uncle Sam is sitting there ready for you because guess what? They know they're going to get a bite at the apple to get more taxes from you. And there's taxes, taxes, taxes. Oh, by the way, it's February. So what's everybody doing? Getting ready to file tax returns, pay off. Paul West. Aaron would here with me on welfare wisdom. Actually you're getting ready to file your taxes here. I am. I just went through all of ours last weekend to figure out are we going to itemize this year? Are we going to take the standard deduction? Yeah. And we're going to do the standard deduction this year. It's a lot higher. As much as we've been educated people on the show, I was surprised.
Speaker 2:
29:14
We have, you know, real estate, we have education costs, we have children in daycare. Uh, even with all those things and a few of them that we don't get to claim because of income levels, we still are ending up in the standard deduction. Yeah. It's, uh, I think people are going to be surprised here like you are, they're a little bit like, uh, oh wow. If this introduction really is going to hit or um, do I, oh, maybe more than I anticipated or, uh, boy I love [inaudible] I love this home and I loved all these property taxes I was paying it and oh, there's a cap now. Yup. So I think there's a lot for people look at, so let's talk about taxes in this segment. Everybody's favorite topic. Everybody hates paying taxes. Um, but I look at it, there's taxes that are, you know, what I call below the line.
Speaker 2:
29:58
You figure out your techs do and then you can get credits based on what's there or you can get reductions to help lower your taxable income. And I think about the tax benefits versus deductions versus credit. And made me think, I mean there's a huge story going on right now and it's, it's partially driven by taxes here, but incentives and no bigger company than Amazon has been in the news recently. And we all talk about, I mean I love the Amazon experience. I was joking with my sub the other day, my older son that a movement, he had to get new shoes. So we go to shields here locally, we go get some new athletic shoes and they didn't have the size you want. So it was immediately he started walking out of the store. I'm like, where are you going? He's like, well, I'm just going to go order on my line, dad, we're done.
Speaker 2:
30:40
Well, isn't there another pair you want to try on here to just get it done today? Like, no, I'll just go over to her line, will go to Amazon and figure it out. They'll be here in two days. Yeah. And so that experience, so I mean, how about this story? Amazon, how much time, energy, effort, and just then just platelets call it cost. Did they spend investigating what cities to put in their second headquarters? Think about the money all of the cities spent on to build, most likely for them a tax incentive plan for guests. Who Wins there? You, Amazon and people. So Amazon on Valentine's Day. Does what pose out New York City. Bye Bye. Yep. Wow. The whole deal just fell apart. Yeah. So I'm thinking about this and it just, we saw phenomenal statistic. You've heard, you know Scott Kirby, our senior investment strategist had been on the show with me several times.
Speaker 2:
31:35
He showed a chart to me when this came out that I just, you know, first of all, I fell on the floor because of what's going to happen, but I'm not surprised. And that is the amount of speculation. Once Amazon announced their headquarters, how many people immediately went and tried to buy up as much real estate as possible in that area? Interesting. Yeah. Well why? Because there's going to be houses and employees and it makes sense. But I don't know that a w when it caught me that fast, it is phenomenal in that long island city area where it was going to be built. So now what's happening a week later, now that the deal's fallen apart, real estate values are going to crop. There's nothing being built. Everybody's trying to get out of their contracts. Wow, that is a mess. Well, here's what happened. And sometimes, by the way, I really personally believe real estate is, can be a eight great asset class.
Speaker 2:
32:32
However, people have a perception that it is a riskless asset. Now imagine you have a contract in New York and you had bought, uh, probably a condo for probably 50% more than it was valued at four months ago because of what happened. And now I'm not taking that back from original logo level. I wouldn't buy it there. Yeah. So now you're in a terrible scenario and situation. And this can happen to you by the way, because if you think about it, it's a hard asset or I call it a real asset that ultimately the price is driven upon. Aaron, if you own a commercial building here in Omaha, Nebraska, you could put it on the market, but you're only going to sell it if somebody who is a buyer B agrees to a price with you. Yeah. So even though you think the building is worth 5 million, and I think it's where three, we either don't budge or we'd meet somewhere in the middle.
Speaker 2:
33:29
Yeah. Based on what we think market demand is. But if you bought the building at 4 million and you think it's worth five and I think it's worth three, you're going to have a hard emotional time of selling it. Less than four. Yeah. Why? Cause I was, you actually lost money. Yeah. And I had my, my mindset on five. This is going to be a rough ride for all those people who bought into all these properties. But I think real estate overall, uh, is going to move into a riskier asset class here right now for people. Because Erin, a lot of people have made money. We are on know what we're calling is, is we look at this economic cycle. I would give you an analogy of a baseball game here. Like we've been growing since 2008, 2009. We all know that, but the end of the day is what goes up, must come down at some point.
Speaker 2:
34:20
And that's how economic cycles work. So I would share with you, I feel like we're the eighth inning of a baseball game right now. Things have gone well. We've done well the growth stage of this baseball game. Now we may only have one more and he left. I don't know, we could go to extra innings, but at some point there has to be some form of downturn of the economy. So now if I'm in the eighth inning and I'm plowing a lot of my money and do rental homes are single family homes or things like that, I just need to be mentally prepared that if I want to get out of them in three years, five years, seven years, the economic growth cycle may be over and I think be downturn and they could be in a situation that if you need to sell them, they will be at a loss.
Speaker 2:
35:03
Well, and this goes back to 2010, we went through a very similar situation where real estate had gotten out of control and people were underwater. I mean, yes, the housing market was falling apart and there is a bubble. But it wasn't that long ago that we were in a very similar situation where people were way upside down on mortgages and homes and um, and it cause bankruptcy for a lot of people for sure. And so I just want you to be cognitive. Then again, I believe in it. I recommend to a lot of our families to be invested in real estate. Uh, just be careful. It is not something that is, uh, is simple. And by the way, here's another line. And I thought this was a great line. I heard a couple of weeks ago, a legendary investor, Howard marks, runs oak tree, uh, you know, via great comp.
Speaker 2:
35:48
It's so true. Is No one wants to hear a story from a friend who they perceive is, I want to use his, his words here, Delmar. And then they are to hear about how they made more money than you did. Yeah. And I, this is so spot on why you don't want to hear that. Oh my gosh. So it's so it made that much money is that weren't a prop because what happens now you're making a behavioral based decision because you want to outperform someone who you think. So is that done at the same intellectual space as you or ego? I'd say both. I would too. Yeah. So just, I be careful. Real estate is one of those things that, uh, earlier this week for the first time, I've now heard of two different people that have, uh, become flippers and real estate that have now gone on the negative side.
Speaker 2:
36:37
So once I start to see that trend, or that's my job, by the way, and yours too, here on welfare, wisdom is we want to tell you the real stories that are happening because people always tell you what they want you to hear. Oh, we're not going to tell you what you'd be, be here, how many people are going to go out and tell you, oh, I bought this condo and now it's worth half the value four months later. Yeah. By the way, I, yeah, there's a couple stakeholders here at the Carson Group, uh, people I know of, with clients that are in the process of buying halls. Have you ever heard anyone say they bought a home? It got a bad deal? No. Everybody, I know this is fascinating. I think my peers are fine to be happy with me telling you this. The quickly is like, hey, you bought a home with, oh yeah, but here's the deal.
Speaker 2:
37:18
I got almost a bought a home, but I'm happy there's always a but African. Yeah. All the things that go wrong. I have that movie money trap stuck in my head like, do you remember that? It's a hand with like Tom Payne in the house just kept falling apart. Yeah. So you don't have to rationalize your deal you got with people. If you find a home that is your home that you want it to be, that'd be happy with it. Make the decision. Don't feel like you've got to rationalize to other people why you got such a great deal. But the why as human behavior because we want to try to prove that we're smarter than everyone else. But really I want you to be smarter about taxes and how do you avoid them and what do you do if you want us to do a tax analysis for you, just give you where you are doing your 2018 taxes and what that looks like. (888) 419-8513 Aaron, I can't believe how many people over pay taxes every single year. That should do it, but they're blind. Don't blindly trust your tax situation. (888) 419-8513 you're listening to wealth from waist up. 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 (888) 419-8513
Speaker 4:
39:23
social security [inaudible]. 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. Let's talk about it. Not a four
Speaker 2:
39:38
letter word in your retirement. What do you think it careful. I'm worried about what four letter words. People are coming up for the children at home. These are terrible questions. Ask me. I'm going to be fine. So let's be careful of that. Error. Risk, risk, risk risk, not the board game. That is, by the way, if you've played that game and it's like one of the log is board games, you can play in amount of time. Agreed that and shoots and ladders seems too fast. You can get through that one quickly. Not In my house. I hit that stupid slide and go back to the beginning. Every time you need to fix your mouth to make sure you go past it. So just cheat. So I think about this, 99% of people we meet with Erin are taking more risk than they realize. It's just, it's, it's plated simple especially I think a little bit of belief of where we are, the economic cycle, the time we're in.
Speaker 2:
40:30
But people are take way more risk than they should. Hey appall west, I'm joined by Eric Woods. This is, well if it wins a welcome back today we've been talking about these steps you can take to retire sooner. And the last one we have to talk about is risk and really how to avoid risk. What to stay away from, how to be smart. You know, we were just done last segment talking about home remodel, lead costs. You know we were joking in between segments here about pool, you know that you put a pool in. Does that provide a economic benefit to the house? It makes my kids happy. It's definitely not an economic benefit to my house. That's an emotional benefit that by the way, I cannot stand. I just got to say this. I've been waiting for a long time. She was here. I just finally remembered it while I'm talking here.
Speaker 2:
41:14
I cannot stand that Northwestern mutual commercial with that teenage girl whining. So they billed her. So we pool dad, will you take me to Jessica's house? Dad, will you take me if you see that I have not. Now I'm going to have to look it up. Yeah, you have to look it up. Like kept whining to take two or friend Jessica's house until he built a pool at their house and I just think it just, if it was in the Superbowl was in earlier this year, the national championship game. It is. I think it was super, well, I definitely know earlier this year, national championship games and it was so funny to me because I'm like if a parent ever goes and built a pool just solely to stop the whining Saturn trouble. So you need on that. But it wasn't a good financial decision but it was the, it was the stop the whiny than I'm sure if my kids are listening, we joke about that commercial all the time cause we're like, we're never going to behave like Jessica and that there.
Speaker 2:
42:06
But let's talk about risk and risk and your retirement. So I mean, as we think about it, 2018 was actually the worst year you've seen in the market in 10 years. It seems like a lifetime ago. 2018 even though it was literally two months ago. Yeah, we saw the worst December since the Great Depression. Let me say that again. We had the worst December, just 60 days ago since the Great Depression, January, February of edit, a nice rebound. But what are you doing overall and what is your risk look like and how much are you really willing to take? And how comfortable are you with that? And so here's what I would say is everybody has different asset classes. You have cash, you have stocks, you have bonds, you have ETFs, you better not have mutual funds, costly hedge funds, not a fan of why most of them are laden with costs. Okay.
Speaker 2:
43:00
With alternative investments and I mean those specialized that they need to be more of direct type investments. Again, go to an Ra. An Ra is a registered investment advisor who has a fiduciary responsibility to put your interest above theirs and they're going to help build the right asset allocation. Diversification plan for you that green hands down. And what they're gonna do is they're going to shift you from aggressive to defensive based on what you need to do and ultimately what risk needs to look like in your portfolio. You know earlier you were talking about where people fall on the spectrum of breast cash versus equities. And one of the things that is typical on a market is that there's draw down every year. Every year the market goes up and down and we know that. But there was a pretty long study where they took a rolling 20 years and looked at the different asset classes and we talked about framing earlier.
Speaker 2:
43:55
So if you say that over that 20 year rolling period, that one asset outperformed every single year and on average made 7.4%. The other asset, uh, lost in comparison every single year and all I made 1.4% now rolling 20 year period. Which one, which one is the more risky asset and what do you think [inaudible] going to answer that? People will say the 1.4 right, but it's not that 7.4 is stocks and the 1.4 is bonds. Uh, so having that diversification of both is what gives you that stability. But again, it's the perception. Uh, how would, how did we frame
Speaker 3:
44:32
it and people will go, oh, the 1.4 is risky. No, really the 1.4 was the safer way. The other one had much more volatility involved.
Speaker 2:
44:39
Yeah. It's, I want to go with one of my biggest mis conceived or preconceived notions that people have a financial adviser and that is that they know how to time the market and that they know how to be more aggressive or more defensive and they're going to make market calls.
Speaker 3:
45:00
Well yeah, we all went to wizard school, right? We get that crystal ball. We all could see in the future all features here.
Speaker 2:
45:06
The reality is is time in the market will always outperform timing the market. Absolutely. Hands down. And they showed that your time in the market is over 90% of your return versus trying to time the market of guessing, right? That December 24th, 2018 would be the down part and now you know here at February we're having some uptime. Yeah. So it's impossible. What you can't see is people that keep you focused on the right amount of diversification for your personalized game plan. And I can't say that enough because people chase returns all day long need. Here's the reality. So Aaron, you and I work for a top 10 berets from, we were in Forbes or the number one ranked adviser in Nebraska, top 10 in the United States. So you know something that shows that we're doing some things pretty right here, but here's, I'm going to share this secret with the public.
Speaker 2:
46:06
Guess what? When we make market based decisions were never 100% sure. No, we can't be impossible. It is impossible. You can never be absolutely 100% sure. Here's what we can do. We can take all of our knowledge in all of our experience and behaviourally coach you and build an asset allocation that will give you the highest likelihood and probability for success. I can't insure it. I certainly can't use the g word of guarantee. What I can't do though is make sure with as much certainty as we possibly can get to without being in a hundred that I know in my heart and by being a fiduciary that you are absolutely going down the right pathway and I think that's what people should be looking for. No one wants to be in a scenario where they're feeling like they're getting sold something. I want to leave a situation where I know Erin's got my back.
Speaker 2:
47:06
Oh yes, Aaron's doing what she needs to do. Errands, rebalancing my portfolio is appropriate. Aaron's looking at my tax situation and again, I'm a go back to taxes for one quick moment here. So here, here's something I would share with you. For our listeners, you should look at deferring taxes as much as you can when you're in a high tax rate. So really if you get into the 30% you'd need it as much tax deferral. Well, you should take taxes if you're that 10% bracket up to probably what the 24 yeah, those are good times for you to take taxes, but people don't, they just take it, I'm 62 or 65 or I'm 70 and they make decisions based on timing rather than that overall game plan. Yup. Well and looking at the future of taxes, I don't know where taxes are going to go, neither, neither do you, but I guarantee, again, I'm going to use that word that they're probably not going down.
Speaker 2:
47:55
Uh, thanksgiving. More expensive. There's inflation and so our tax bills continue to get larger, not smaller. Yeah. And so here's what I've asked her listeners. Aaron is like, are you truly openminded? Hmm? Most people are. And so if you are, and you want someone to look at your asset allocation diversification with an open mind to give you help and guidance, give us a call. Eight eight eight four one nine 85, 13 at Minerva, you're going to find out you're absolutely on the right path at Maxwell. You're going to make the changes to give you more financial stability and comfort that you've ever had before. (888) 419-8513 that's (888) 419-8513 you've been listening to wealth from waist up,
Speaker 4:
48:39
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:
48:53
Okay. And here's the legal Mumbo jumbo. The opinions voiced and wealth from wisdom with Rod Carson or 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. I may not be invested into directly. Investing involves risk, including possible loss of principle. No strategy assure success or protects from loss. Past performance is no guarantee of future results. Advisory Services offered through Cwm LLC, an SEC registered investment advisor.
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