Wealth from Wisdom

Is Higher Inflation Just Around the Corner?

March 11, 2017
Wealth from Wisdom
Is Higher Inflation Just Around the Corner?
Chapters
Wealth from Wisdom
Is Higher Inflation Just Around the Corner?
Mar 11, 2017
Carson Wealth
Show Notes Transcript

What is inflation? How will it impact you in retirement 10, 20, or 30 years down the road? Join your host Ron Carson and Mark Lookabill as they discuss how inflation can help or hurt your chances of retirement.

Speaker 1:
0:00
Here's some legal Mumbo jumbo, the opinions, voice and wealth and wisdom with Ron Carson and 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, I'll indices are unmanaged and may not be invested into directly. Investment involves risk including possible loss of principle. No strategy is your success or protects from loss. Has performance is no guarantee of future results. Securities offered through Satara advisor networks, LLC member fin Ra investment advisory services offered through Cwm LLC, a registered investment advisor. The terra advisor networks is under separate ownership from any other names.
Speaker 2:
0:31
Hit another all time. Records as much as $10 billion in social security benefits go unclaimed every single year. Reserve announced that they will raise interest rates by 203 the skyrocketing cost of healthcare and retirement could now run 350,000 today is a whole new ball game. It's loaded with challenges, obstacles, the trap doors that you can do this and we can be your guide. Welcome to wealth from wisdom with Barron's hall of Fame Advisor, Ron Carson. Straightforward and objective advice and how you could make your money go further in retirement. And now here's your host, Ron Carson. Hi, I'm Ron Carson and welcome to the wealth from wisdom radio. I'm here today with my cohost, Mark Lavelle. Glad to be here. Ron Mark is great to be back. You know, mark and I did a radio show for a long time and it's so great to be back on the airwaves again. Well, this week mark, we're to talk about inflation.
Speaker 2:
1:23
Do you know what the average inflation rate has been over the last 10 years? A 1.7% if you can believe, and I know when you even started interning at the firm, substantially higher than that. So a lot has changed in a short period of time. Absolutely. And I know we're going to talk about that today, just to give a little bit of historical perspective long time ago where we're at now and where we could potentially be done with it because it could be devastating. We were talking about what to do about it, how to think about it, but really let me ask you these questions. Have your health care premiums increased by only 1.7% mine sure haven't. I know even here at the firm, the Carson Group we've had in some years, healthcare premiums go up by 35 and 40% per year. I know my father, uh, is dealing with, you know, health care premiums going up substantially higher.
Speaker 2:
2:08
I mean costs and the way the government calculates this stuff is pretty interesting. And that's because core inflation, they don't account for everything. In fact, a lot of things people spend money on a retirement have increased dramatically more, a lot more than 1.7%. And if you think about planning for retirement charged, chances are you have a given a ton of thought to inflation. What kind of impact it can be. It may not even be on your radar. And that's a big mistake. If you don't account for inflation, you could end up not having nearly enough money and you could have to really pinch pennies. And that's no fun. As much as you get older, you would call them the golden years, cause you want to be able to do the things you want to be able to do and not have to worry about financial resources to do that when inflation rates have actually been at historical lows for a long time now.
Speaker 2:
2:57
Uh, but just this year we've seen already a surge in inflation. Matter of fact, the largest single monthly gain, uh, and more than four years happened in January of this year. And I think that's where it's starting to get people's attention more. It's, you know, we'll talk about it. The silent killer of inflation, the invisible impact. I think it's becoming more visible, uh, particularly for, for younger people. Uh, but he, to be able to understand the impact of that. And we do it all the time when we're putting plans together. I always say we're treating their financial plan like a business. You've got to account for those costs and we'll talk about some of the projections. But, uh, it's a challenge, big challenge. And it's a saying we have with implanting it really with everything we do here at the Carson grew up his plan for the worst hope for the best.
Speaker 2:
3:45
If you protect the downside, the upside will take care of itself. And that's especially true when it comes to thinking about planning. Even though you know the, the long term history, the 20 year average of inflation is 3.22%, 20 years, three point to substantially higher than what we had over the last 10 years. We as a rule use four and a half percent. Occasionally we use for, if the client says, hey, that's well above the average, we don't need to plan for that much, but a four and a half percent, we felt like we're being ultra conservative. Again, never had a client complain that they had more money than they thought and were upset about it. We want to keep the opposite, uh, from coming up. So today we're going to talk about the silent killer killer and the serious consequences and it will have on your buying power and some several strategies that you can use in order to protect yourself and making sure you can stretch your money out.
Speaker 2:
4:42
And before we get into that mark, we're talking about some of the things that we do here at the Carson grew up and planning what our clients can do is couple of things I want to, I want to direct your attention to go to the wealth, the wisdom radio website. We have a lot of great white papers on there. Um, and we're going to talk about some things today. You know, expenses being one of them that if you're paying attention, too expensive, that is one easy way to really combat inflation because it gives you more wealth to spend. Well, and we've viewed as crucial, uh, to longterm financial health, right? Is pay attention to it. You don't have to get lost or you know, in the weeds, but we do need a really good idea of the lifestyle that our clients have grown accustomed to.
Speaker 2:
5:23
Right. And we want to try and keep them there. Uh, you know, some people use it as a, Oh gosh, I'm afraid to know what that answer is. And we always say, well, wouldn't we rather know the answer now and be able to proactively do something about it as opposed to just hope. Uh, you know, I, I always say I'm not the budget ogre so I'm not going to be going in and say, hey, you need to cut, cut, cut, but we want a good idea of what that is and put proper inflation adjustments in there so we can make proactive planning decisions. Ron, you mentioned, you know, four and a half percent overall. We're going to talk today about some of those big chunks that we actually put higher inflation rates on education, health care. Cause we actually look at the actual thing that we're accumulating money for and assign a different inflation rate to it.
Speaker 2:
6:09
You're right. Weddings, there's another one they continue to go up. Like you said, tuition goes up, healthcare costs, you know, continued to spiral out of control. One mark. Let's get into what you'll, what, what can people do? You think about inflation. You know, some of the things that that won't happen. We've seen that easy money from central banks around the world is really stealing money from the elderly. And what's what's happened here is we meet them all the time. We have people that do not want to be invested in assets that fluctuate. It makes them very uncomfortable. Um, and, but the Fed has really forced the saver to get zero interest rates on what used to be safe. You know, whether it's short term treasuries are surfacy certificates of deposit money, market funds. And you know, while we've got a little uptick in interest rates here was so much of the sovereign debt around the world being a negative interest rates, um, it's really could be disastrous to see no return on cash, but inflation actually starting to pick up.
Speaker 2:
7:09
Well, and I think that there's the, the box that people have been been forced into. It's a, you know, a, for some people it's created risky behavior because they're sitting there saying, I can't sit on cash or I'm not comfortable sitting on cash earning virtually zero or zero. So they are going out searching for things that can provide that yield, provide that income to pay for those expenses. Uh, but, but in a lot of cases, they don't understand the risk that they're taking to get that type of of yield. The other alternative is, hey, as you mentioned, they're sitting there earning zero and now really starting to see costs go up and they're going back and looking at, I said, Gosh, I can't afford to live the lifestyle that I lived two or three years ago. Yeah. And that's why whoever you're working with a financial adviser, this is something you should be talked about all of the time and this is one of the component of components of a responsible wealth plan is where am I at?
Speaker 2:
8:05
Where do we think we would be? And do any adjustments actually need to be made as looking back at historical inflation rates in 1980 the inflation rate was 14.8% compare that to 2008 inflation was 0.09% matter of fact, government was very worried about inflation. Deflation. Deflation is horse and inflation. It's like when we need the Goldilocks, when he just a ride them out and the Fed like to have two, you know, 2% inflation would be would be perfect because things work properly. But let me give you some idea on how devastating 14.8% inflation would be over a 10 year time period. That would take $100,000 and reduce it to purchasing power of $25,152 over a year period. That kind of inflation would reduce purchasing power in 100,000 down to 6,236 now we don't expect to have that kind of inflation, but there's parts of the world, the experience, much higher inflation than that.
Speaker 2:
9:07
But let's compare almost no inflation. So if you had 0.09 for that same time period, 100,000 in 10 years, I have purchasing power 99,001 oh four and if we had uh, uh, over 20 year period, it'd be nine 98,217. So nothing, but it's going to be somewhere in between those two. Yeah. And we don't want to spend all day going into historical numbers. But yeah, if you take the whole decade of the eighties, inflation was north of seven, you know, it had big spike, you know, double digits at a time, but over a full decade averaged simple, average of seven, then you go, you know, the, or the 70s and then in the 80s, you're talking north of five and a half percent. So you could have a really long period of time. So think of someone newly retired, and then if you start seeing two decades of, you know, double or triple what we've experienced the last 10 years, devastating to an overall financial plan when we come back and the next side.
Speaker 2:
10:01
But one of the things I want to talk about is just how devastating things can happen when you reach for yield because purchasing power isn't there. And this is really a critical part of, of retirement planning. Also estate planning, this is a biggie that you know, people don't pay attention to inflation, they don't really pay close attention to a state planning. Um, and in your estate plan is really impacted by impacts of inflation. So if you're thinking about your real priorities in life, if stuff is really important to me, my kids, my family, I want to make sure that I really have the proper, not only over a wealth plan, but very specifically an estate plan. And is your state properly protected all the time? We see the little details aren't taken care of. They're not thought of. They spent all this time trying to get the highest return and they throw millions of dollars away.
Speaker 2:
10:52
Uh, just because it was sloppy on the estate planning side. So if you don't have an estate plan or you just haven't looked at it in awhile, now's the time to do it. To take a look at everything. You don't want your estate, not only things not proper, uh, properly titled could end up in Probate for years. We've seen that happen with a number of our clients, all kinds of legal fees and you ain't even get double tax. We have an estate planning simplified guide. This is a short 10 page report. It's easy to read, easy to understand. It's jam packed of all kinds of actionable ideas and it's free. Give us a call. 188-FOUR-198Y-5, 13 with inflation rates at record low, could we be in for a dose of hyper inflation? The real answer coming up next and what you have to really be careful you don't do. I'm Ron Carson and we'll see you in a moment.
Speaker 3:
11:45
Saving for retirement. That's a great start. But now what? What are you going to do with the money? Find out now unwell from wisdom with Barron's
Speaker 2:
11:54
hall of Fame Advisor Rod Carson. Welcome back. I'm Ron Carson and thanks for joining us today on wealth from wisdom radio with my cohost mark lookup bill. Inflation rates have been historical lows for years. In fact, the average I, it's hard for me to even look at this and believe has been 1.7% but just recently we've had a surge in inflation and disorient for increase inflation, potentially hyperinflation. And because we have the central banks around the world printing money like crazy, we're going to, I still see a zero interest rates. And what kind of pressure could that put on you and also what are the serious consequences? It's like high blood pressure. It's a silent killer if you're not careful. Just what kind of impact action actually have. And some mark when we think about, you know, people reaching for yields, that reminds me, um, if interest rates were to go up and a lot of people in the 80s were reaching for, you know, they were buying bond funds, which are an issue.
Speaker 2:
12:50
You have a lot of pitfalls in themselves. They have a lot of additional expenses. You really don't have a bond. It's actually going to ever mature because they, there's continuous turnover there. But they reached before even individual Muni bonds. And if you had a 2030 year duration on all of a sudden interest rates skyrocketed, which they did, you know, those, those bonds collapsed and value. And now you could tell yourself, well, it doesn't matter, it's not going to hold it until maturity. But if you're looking at your statement and it's had a 20, 30% decline, that's mentally hard to get over when we talk about that all the time. The emotional part, the behavioral part is yeah, some people can for awhile convinced themselves, Oh, I'm just going to hold it to maturity and won't be an issue about the time that happens. And they see that statement that, you know, sticker shock.
Speaker 2:
13:33
Uh, then what happens? Their behavior changes and they start chasing something. So then it leads to the, you know, potential for a series of poor decisions. It does. Yes. So be careful, right, as necessarily, and especially today, people chasing yield, there's a lot of times there's a reason why you're getting a higher yield. Just understand what the downside risk is associated with that adjustable rate mortgages. And we saw collapses while they were being marketed, especially in the 90s as a money market alternative. Yes. And all of a sudden, you know, rates went up. They're supposed to be, uh, they're supposed to protect Nav again cause a mispricing maybe not owning the quality of the mortgage that they thought. Um, also had a design just because they were okay for a long time. When they, when they failed, they, they, the, they went down big, no different than the Mars municipal auction rate securities or some of these auction rate securities for decades.
Speaker 2:
14:29
There was no issue. Then all of a sudden there's an issue which puts a huge premium on, like I said, buffet says, if you don't know your diamonds, no, your jeweler, if you don't understand this stuff, make sure that you've got a competent advisor and a team that's really paying attention to this stuff. For you, it's critical that it happens and ask them, you know, what kind of inflation rate have you assumed for me? Is it, you know, 20 year average is 3.22%. I think maybe at least four. It'd be a little extra conservative. Four and a half percent. Yeah. Because you know what, if it ends up not being that, you know what, that's just, you know, that's extra, right. As opposed to, hey, we're just going to assume the longterm rate or what we've had the last 10 years and then be surprised inflation to the upside and then all of a sudden your money's not worth as much as it was, you know, now or 10 years ago.
Speaker 2:
15:16
So it's crucial to that. You know, we just had that conversation with clients that had come up from Houston, came into our offices and they're, you know, every, you know, every client we deal with is unique, but they are common in the fact that we're helping them go through, you know, it's the barbell that they're faced with. They have daughters that are both in college, so they feel the brunt of tuition inflation. So actually in their plan we have education expenses going up, not at four or four and a half, actually at 7% because we're saying, hey, this is real and it's right in front of them that are going through it right now. Two girls in school. And then they're also dealing with the other side of the bar bell, elderly parent rising healthcare costs and you know, how do they pay for that?
Speaker 2:
16:02
How do they cover those costs? Knowing that those costs, whether it's the insurance or the, you know, the, the actual health care, uh, you know, devices, the drugs, the visits, they're all escalating way more than low longterm interest rates. Yantra fade. Reflating getting older as expensive. I saw with my mother before she passed, my dad spending a ton on healthcare costs me at 52, I'm starting to spend more on health care costs. So it's something that you have to be aware of. And in some cases, even in my own case, insurance doesn't pay really for everything. You know, I think it's interesting to visit this concept that why is some inflation good? And write what you, I think that's a confusing concept for a lot of people, you know. So let's talk about the positive impacts of inflation. First of all, normally do get a rise in interest rates, not always, but normally get a rise in interest rates.
Speaker 2:
16:55
So you get better savings rates, um, cost less to travel abroad, right? So that's normally good because rising interest rates means a stronger currency, thereby the other currencies weaker. So your dollar goes further. Um, and you don't have to worry about deflation if you have inflation and deflationary spiral. What Japan, you know, think about this. Japan's Nikkei in December of [inaudible] 89 was it nearly 40,000. It's never even come close to getting back to where it was in 1989 lays, well, gentlemen, you want to talk about a bear market? That's a bear market and that's how devastating deflation can actually be. Higher wages, you know, people make more money, um, and you get cola increases on your social security. So that's some positive rate is really, really our whole system is structured to have some inflation, just not too much. And certainly deflation. Yeah, it's, it's, we want it to be just right.
Speaker 2:
17:52
Right. And when you're talking about those different positives and depends on what your own personal situation is, you know, you talk about rising wages, well, if you're an earner, absolutely. If you're a business owner and you're sitting there saying, boy, this is another variable that I'm really going to have to start paying attention to for my business, where maybe you didn't have to pay as much attention to that in the past. So it depends on, you know, what, what role you're in there. Um, and it also goes to the negative impacts of inflation. We certainly want the, you know, those negative impacts. Got To be aware of that. Uh, Ron, you mentioned deflation. You know, there's a fair amount of people in this world, younger people that haven't experienced that, right? Yeah. And so it's almost like they don't even know what we're talking about here.
Speaker 2:
18:38
That how bad deflation could be. Well, Gosh, I don't want inflation prices going down. That would be good. Right? The answer is just right. But you know, and, and that's what I think a lot of central banks are faced with, right, is, well, w w w were, they're more concerned in general, I believe with avoiding deflation. If inflation happens to a fair amount, they'll deal with that on, I'll say on the other side. Um, and then I think, and I think we're starting to see that in some areas, but it's just avoiding those deflationary effects. I agree. You know, I s many people know, I've been a pilot. I've learned to fly when I was 16 years old. So I fly myself pretty much everywhere. So I had to go to school and I was down getting a different planes. So I had to go to school for three weeks in January.
Speaker 2:
19:22
And my training partner, um, was from Argentina. His name's [inaudible] bro and Ella Hondura. We, I got to know him pretty good cause you're spending 10 hours a day for three weeks with somebody. And, and he said that he was for a reason. He was there. He was going into the type of plane I fly, which is sovereign plus. And I had to go to this training. He said he didn't want to leave as other job, but he had to because he had no, he had no increase in his salary for three years, but the inflation rate had averaged between 20 and 40% every year. And it was devastating. He couldn't support his wife, he couldn't support his daughter. And I guess that's a message out there for business owners. I get that there's, you know, the business needs to stay in business, but we also really have to be cognizant and aware of our stakeholders, our internal stakeholders, the people that you maybe as a business owner, I get it, that we're being pressured all the time, that man, make sure that you're taking care of those that are keeping the business going.
Speaker 2:
20:23
And, uh, it's just critical in order to have a healthy business and healthy culture. And, and I talk about this in my book, the sustainable edge. Um, I have, I have a book for business owners and really just for life, if you're interested in a complimentary copy, I'd love to give it to you as a New York Times bestseller and you give us a call at eight, eight, eight, four one nine 85, 13, or we're having this epic concert, um, here in Omaha, October 11th, three of Cole Swindell pay at play. We're going to have a great Textron aviation is going to have a lot of their planes up, uh, wheels up. It's going to have planes there were going to have quite the experience and give us a call at that eight, eight, eight, four one 985, 13. If you want to come to a home or to Omaha, if you're in the area or you want to be in the area, you're going to have just an incredible rock time.
Speaker 2:
21:09
Or if you want a copy of the sustainable edge book, it's really the principles. You know, I built my business to Orlando, my college dorm room in 1983 the same principles that we've taught other business owners to really grow their business. You know, over the year that's eight, eight, eight, four one nine 85, 13. Let's talk about a few of the negative effects of inflation. Um, you know, the stuff just costs more, right? We just covered that. It really impacts of those making less money. A lot for businesses. Borrowing costs go up, you have some adjustable that all of a sudden you owe more money. Now this is specially true. We talked about the adjustable rate mortgages, the arms that are out there. We saw this in spades, right when we had, um, you know, these automatic Ninja loans are automatically resetting. Was it? Cause you know, inflation was necessarily hire a hoarding in response to inflation, right?
Speaker 2:
21:59
Because you know, you start hoarding resources and then erosion in this, a biggie erosion of purchasing power and longterm savings. You're sitting there, you're trying to be conservative, you're not getting much of return in bank cds, treasuries, and then all of a sudden you've got a massive impact. I remember when I was a kid watching a show is back only at three channels by the way, and they showed that the dollar eventually was going to be worth a dynamic kid that saving money in his piggy bank. And I was devastated by the idea that the money sitting in my p Bank can be worth a dime someday. Well, I guarantee you that piggy bank, while I was like eight years old is the more the dying today, right? Even shrunk more than that. You know, here we are, what you know, 40 40 some years later.
Speaker 2:
22:39
Well, and you talk about those negative effects and again, we can talk, we can educate, we can council people, but sometimes it's having that experience before they really understand it because the big issue, you know, when you talk about the adjustable rates, right? There's people trying to qualify for that first time home are there, they've got their quote unquote dream home. And I said, well Gosh, you know, I can get a better rate by doing adjustable rate because I'm never going to be there, right? I'm not going to be there five years from now or 10 years from now. You don't know that. You don't know that. And that's why it's so important, mark, to trust your financial advisor. Um, you know, right now if you're out there, you're listening. You don't stock bonds, mutual funds, you could be shelling out a lot of money in hidden fees and backdoor payments.
Speaker 2:
23:24
We see it all the time. It's a dirty secret about the profession. You need to understand where it's at. Especially with higher inflation, it could make a huge difference over 20, 30, 40 years. We're not talking about pennies here. We're talking about a lot of dollars are going to have a major, major impact. So if you want to know what you're really paying in fees, it's not that hard. Give us a call and we'll tell you about it. If you bought any bonds, have you wonder, is there a markup? We can run the queues up and tell you exactly what the markup was. Give us a call. It's quick. It's easy. (888) 419-8513 that's eight (884) 198-5131 a copy of the sustainable edge. You want us to come to our epic concert October level of Colson window. We'll see you then. We'll be back in just a moment.
Speaker 2:
24:08
He's a published author and has been featured in Forbes, investment news, the Wall Street Journal, CNBC, and more. Now back to wealth from wisdom with Veterans Hall of Fame Advisor, Ron Carson. Welcome back to wealth from wisdom radio. I'm Ron Carson here with my cohost Mark Warrenville and we're tired about inflation. We're looking at what's happened in the past. Inflation has almost been nonexistent 1.7% for the last 10 years, but we've had a surge so far this year. It's so, the big question is, are we in for just an increased level of inflation or hyper inflation? What if we get that and hit interest rates? Stay low at normally. Doesn't happen that way, but you know, we've never seen all the things that had been happening. I mean, I've been in this profession since 1983 has been crazy. You know, this stuff that we see happening. So we're going to really talk about ways that you can protect yourself.
Speaker 2:
25:00
Um, build it into the portfolio that if inflation does surge or is out of control, what are some things that we think would do fairly well in that environment? And Mark, one of our favorite sectors continues to be, we're bullish on, on energy last year. We continue to be bullish on energy in general. And uh, an energy is one of those things that has historically done well when inflation has been hired. Yeah. And you know, the key point here is there's not a playbook. You know, so many people wanted to just to open up to page 87 of the inflation playbook and say, okay, this is what I do. It's not that easy. Or everyone would do it. Right. But there are things you can do to help offset the, the effects of that in certainly energy being one of those, not just now, but you know, for an extended period of time we believe can do well in an inflationary environment.
Speaker 2:
25:47
I also believe that it's not going to be quite as simple as it was in the past. All sorts of different energy techniques, technology, advanced advancements within energy. So I think you've got to pay attention, you know, even within that sector how things play out. But certainly opportunity there. Yeah, and you know, another one that historically people have bought gold protect against inflation and gold really has it had the, you know, the flight to safety trait that it had in the past. People are questioning will it do well and inflation. Now you've got a competing thing called bitcoin. Which thing with air quotes, right? Yeah. I mean if people have to go on, what the heck is blockchain? By the way, blockchain is fascinating. I think it's going to be maybe as disruptive to our economy, um, as the Internet was. And it's true, there's winners and losers.
Speaker 2:
26:35
But you know, if you're, if you're out there, and I'm surprised by how many people I take, informal surveys now now may have a bit Kilcoyne account. Quite a few people do. I was on a hike this week with us, six guys and my daughter out in Vegas and there was, um, an of the, of the, the five other guys or where there and including myself, three of them actually had bitcoin from counts. So interesting. And I think you're gonna hear a lot more about this, this, you know, the cyber currency that that is out there and people are actually transaction trades with it. Um, the other thing has to be careful about those. So even if you like energy, how do you play energy, right? Do you buy the socks? You just, by his trade energy, you buy an ETF or something like that that invests in it.
Speaker 2:
27:17
So I guess the, the vessel isn't as critical as how does it fit into your overall plan? Yes. Making sure you understand your overall plan. Absolutely. You know, another area that we like it that could benefit from that. We talked about the negative effect of rising healthcare costs. There could be opportunity within the healthcare industry to take advantage or ride the coattails of a company that, that sees those costs escalating and that's how they are. Make that make their money. You can ride those coattails and be a part of it, but again, I think it's crucial. Again, you said it the best, not necessarily the vessel, but understand how these bits and pieces fit within your overall plan. And the reason you need to be somewhat cognizant of the fact that I'm just not going to throw it into a stock. So say energy stocks, because historically when inflation gets above 4% multiples on the market can tract, and that simply means the stock market's going to go down in value.
Speaker 2:
28:11
So the market will tolerate like some inflation. It doesn't like to just like the fat doesn't like too much inflation. Again, not too much, not too little. We just gotta be just right that CPI over for historical leads to multiple contraction. We don't need to get into all the finance of it but it's something to be aware of that you know can really have a negative effect on the stock market. If we get, if we get prices, you know going up precipitously, you know getting north of that 4% so it's be something again to be educated on and be aware of that it can occur. Mark, I want to invite people to go to our website and matter of fact if you enjoy the radio show we have, this is our fourth episode or fifth episode or six episode, I'm losing track cause I'm not, I'm not sure when they actually get posted on there but you can listen to past episodes.
Speaker 2:
28:58
You can turn someone on to wealth from wisdom radio and watch to have a podcast series where we can actually automatically get it delivered. We have some great white papers on there and the one is a true cost of investing in or some great fees, fees, great fees, great stats research, Wallstreet Journal did on it and we really just talk about the things that you need to be conscious of because they can make a big, big difference in, it's one of those ways you can truly combat inflation. So go to wealth from wisdom radio. Uh, we've got white papers and we have past episodes on there as well. And I think today more than ever, mark people are making decisions based on emotions again and it's not a thoughtful process. And I, as I travel around the speaking to financial advisors, I'm really advising them to make sure their clients are taken on the appropriate amount of risk.
Speaker 2:
29:49
What's your risk budget? We ask that all the time because what's going to drive success? It's not the vessel, it's investors' behavior. How you react to the stuff that you own. If you look at the Dalbar studies out there, people rarely even come close to experiencing what they actually own. Cause he never owned it at the right time because there were emotional about it and they make really poor short term decisions. You know, we talk about that frequently. Again, trying to take the emotion out of the investing part and, and it, it's still amazing the amount of people out there that will spend hours and hours, you know, try and dissect, you know, as an amateur dissect, you know, what should I invest in. But they'll spend virtually no time in, in regards to, you know, putting together and maintaining their overall wealth plan there. But you know, financial plan, the amount of people that don't know how much you know they need to live on, you know that they just use round numbers.
Speaker 2:
30:44
Whether it's, oh I can live on 30,000 or 50,000 or a hundred, whatever that number is. You know that they haven't taken the time to do that. But they'll spend hours trying to figure out the next great stock that they want to own for their portfolio. Where if they focus their attention on the plan part as you mentioned, you know, focus on the downside. The upside will largely take care of itself. Yeah, and planning is not sexy, but it's where all the value is created. I look over my career 36 years and people that have done incredibly well have been those that just had a plan and let the plan actually operate for them. For those golfers out there, you know, if you forced the golf swing, what kind of results do you get if you just let it happen and your rhythmic about it?
Speaker 2:
31:24
Sometimes less is more and it definitely oversteering a portfolio's been many studies out there, TD, fidelity of Donald where they show that they look at stocks that were sold in a given year on average versus those that were bought and typically the socks that were sold in the same accounts went up by quite a bit more than the new, whatever they bought in the account. Again, making it doesn't account for the friction costs that were associated with that trait will end. You mentioned, you know how, you know, that's, that's the boring part. But you know, I talk about it with, with, uh, with my kids or our 10 year old in our eight year old, you know, when they're watching sports or watching soccer or basketball or volleyball, they see the amazing place at the athletes yet, and you know, as their dad and, and as their mom does, we try and say, you know, there's a lot of work that you don't see that allows them the opportunity to even do something like that.
Speaker 2:
32:13
Well, it's The da Vinci principle, you know, Davinci was in Vienna and he was having a cup of coffee and someone walks in and says, my Gosh, you're, you're, uh, your, um, uh, Divinci and Leonardo Davinci? And he says, yeah. And he says, well, sketch me something. So he sketches him something and he hands it to him and he goes, well, I, I want to pay you. And he goes, no, just leave me alone. Let me join my coffee because I insist on paying you. And divinci says, a lot would be $10,000. I said $10,000 and Divinci says, it took me a lifetime to get to that $10,000. Like you said, it looks easy. Um, do you have a dementia kind of team that you're working with? Are these are people that have the experience that can really help you hit your goals and objectives? You have the right to know what's the experience have they put all the time and the effort or they have processes in place to make sure they're monitoring all the stuff that you really need to be, be aware of.
Speaker 2:
33:06
Today we've been talking about inflation and it kind of impacts that it makes. Um, and just thinking about different decisions, how things could've turned out different for you. If you would have made different decisions in the past. What's the biggest decision you can make now that's right in front of you? Me and many people find, you know, having a good wealth team is really all about, you know, getting the right team in place, sharing your goals and objectives. Don't look for a one trick pony. We're not an environment where that can work. I don't believe anymore. Um, have a team that's really, really looking at everything and I mean everything, you know, we talked about taxes, mark, we talk income, social security, estate planning, investments, risk management, fees, costs, et cetera. Everything. I've been doing this for 36 years. We say we stand for trust, transparency and accountability. Um, and we've got a whole guide and a whole way of sitting down to see if we can add value. If we can't, we're going to ask politely, ask to be up. Be Your partner in this. If not, we'll tell you stay fee adviser your APP, but get a second opinion. Give us a call. One eight (841) 900-8513 that's 1884198530.
Speaker 4:
34:14
Is it possible you could pay fewer taxes in retirement and keep this money for yourself? You could learn right here and right now, unwell from wisdom with Barron's hall of Fame Advisor Ron Carson. Welcome back to wealth from wisdom radio. I'm Ron Carson
Speaker 2:
34:30
here with my cohost mark lookup. Bill, we've been talking about the, the, the past and inflation. It. Just imagine if you were retired for 10 plus years now and everything was just going along really smoothly, but something's wrong. You can no longer afford all the things you used to be able to afford a mark. I remember back in the day, I mean I was coming into the business in 1983 and I remember talking to people that were just even with higher interest rates that were just devastated by the fact that their standard of living had really declined. And this is what we call inflation. Uh, the reason why inflation has been labeled the silent killers because it just sneaks up on you slowly and it's an erosion that happens little by little every year and then all of a sudden by the time you know it's an issue, it's almost too late.
Speaker 2:
35:18
And you know, we've talked a lot about this on today's show. I'm just, the things that can be done to things to be careful about like, you know, not reaching too far for yield, even have a interest rate shock to the upside. Those bonds can get hit hard, watch out for arms. Cause you know, historically they should adjust. But we've had downward revisions massively and sometimes prices. We love energy in here. I mean just from a fundamental standpoint, pretty decent way to we think get a total return hedge against inflation. You've talked about healthcare costs, but what's a big one? What's the one big thing all of our, all of our listeners can do to make sure that they're not surprised by inflation? Well, again, it's going back to looking at that plan, knowing how much it costs for them to maintain the lifestyle they've grown accustomed to and then properly, you know, looking forward and putting, okay, what do we anticipate that inflation to be?
Speaker 2:
36:12
And not just saying, you know, do it's simple. Do It on a historical, you know, 20 or 50 or basis. Look at, Okay Gosh, I'm getting older. You know, we've talked about we're all getting older, but you know, once you start experiencing, you know, increased medical costs, let's put an appropriate number, inflation number on, you know, healthcare costs we put in seven dramatically higher than what's being reported now. If you have like myself, young kids that are, you know, 10 years away from going to college, I've got a factor in, you know, what it costs to go to college now is much less than what it's going to be 10 15 years from now. We have that budgeted in at a 7% inflation rate. So you've got to look at, you know, your overall plan and then different components within there to properly account for it.
Speaker 2:
37:01
Just like within the portfolio, have different pieces of the portfolio that can help potentially offset some of those rising costs. I just think about weddings. I think when Jeannie and I got married in 1986 versus my daughter had a wedding two years ago, um, I'd love to know the inflation rate between what my parents spent, you know, for our wedding. Here's what Jimmy and I had to spend for Chelsea's wedding. And, uh, that's what I would call an inflation. You know, it was, it really had a big impact, you know. So you think about the 20 year average, it's 3.22%. Um, and planning here, generally speaking, we're using a much higher rate, four and a half percent. But you make good point being surgical and saying, you know, especially if you know, hey, I've got six daughters and I'm going to pay for all their weddings.
Speaker 2:
37:49
Boom, boom, boom. Or if I have, you know, four kids and I want them all to go to private schools and these are the kinds of schools would be very, very intentional about the planning that you're doing. Also look at, you know, every time, three or four year, I'm not suggesting you rerun your financial plan every year, three or four years go by all of a sudden the past is bedrock. You can look at what was the actual experience with everything including inflation. And then you make, do you need to make adjustments? You need to, if some, a higher one because, or where your returns, not what they expected. A lot of things you can do, we talked about today is paying attention to costs. We have a great white paper on the wealth from wisdom radio website. Visit it if you want past, uh, uh, radio shows as well.
Speaker 2:
38:32
But, you know, going in there and looking at, you know, how you can, how you can pay attention to the expenses that can also be a protector. Well, and I think that's a crucial component. You know, when we have clients come in, I mentioned, you know, clients that were in town here just last week. Yeah. We can spend time looking at the past, but it's, you know, let's look at what's going on right now and what we need to do going forward. Do we need to change or update anything? Do we need to improve anything? You know, I equate it to, it's like going to my doctor, right? Yeah. He's got my old in my whole medical record there, but I don't want to spend a bunch of time talking about what I weighed and what my BP was, you know, last year or three or five or 10 years ago.
Speaker 2:
39:13
I want an assessment now and then, okay, doc, is there anything we need to be doing proac proactively going forward? And I equate it, it's, it's, it's really the same exercise of assessing where we're at now, making sure those goals are aligned and then what do we need to do to proactively get there? Yeah. Ounce of prevention is worth a pound of cure and so many things, but really when it comes to being intentional about your wealth, the planning that you put into that is really critical. I was on this hike with these guys, or these are all financial advisors, and one of them said, yeah, you know, the financial plan is, is out of date. The psychotic client walks out of the office and that's not true. It's not until the next day then it's not a daycare. Let's at least say that it's current for the day that they were actually there.
Speaker 2:
39:57
But you know, all kidding aside, it's a continuous process. It's the planning processes and valuable, but things need to be adjusted for goals and objective change, risk tolerance levels change, the market changes available, ways of accomplishing goals, change resources that your financial team might have change. So continuously looking at it and monitoring it are really, really, really important. It doesn't matter if you've saved, you know, $100,000 or even a hundred million dollars, the foundation of your retirement, um, really starts with social security benefits. And I continue to be, be surprised at the Delta mark between making the best and the worst decision even among our wealthiest clients, what it can, what it can mean. And you know, you've put a lot of money into social security over the years and if you add that up over to 40 to 50 years, um, it could make your 401k contributions literally look like a chump change.
Speaker 2:
40:58
So when you're claiming social security benefits, it's, there's all kinds of variables and you really need to work with a team that can optimize your benefit because there's a lot of trap doors there. One little mistake could easily cost you a lot of money, you know, up to hundreds of thousands of dollars. We've got a report, I love to give it to you. It's called the latest social security report. It's a 60 page reports full of actionable ideas on how to optimize your social security benefits, how to reduce your taxes on the benefits. And to learn if you're eligible to put even more money into your pocket every year and really take advantage of the legal options. Some, the, I'm going to call it gaming, this social security actually allows for, and it doesn't cost you anything. Plus today we've talked about, um, our New York Times best seller, sustainable agile love to give you a copy or if you want to indicate your interest to join us for the Cole Swindell concert October 11th, give us a call at eight eight, eight four one nine 85 13.
Speaker 2:
41:54
That's 188-EIGHT-4198Y five, 13. We have all kinds of, you know, information that we can share with you. If you're interested in getting a second opinion on what we're doing, we'd love to give that to you as well. Today's the first day of the rest of your life for all of us. We can't change anything that's happened in the past, but we can be proactive. We can be, we can design the future with the way we want it. I'm no different than healthcare when it comes to your wealth. You need be an advocate. You need to take control. If you want. Where Barron's hall of fame team. Um, and we're, we're, we're, we're competitive. I believe we're really good at what we're doing and we'd love to give you a second opinion at eight eight, eight four one nine 85, 13 till next week. I'm Ron Carson. I'm mark look of l and you've been listening to wealth from wisdom.
Speaker 5:
42:50
He's scanning through the stages of Sam in the back seat. Nowhere to go. Nowhere on top back rolling the Jack bed. There's a chance Kiki tangled up for it on easy. Now Dawn's man, let's get the loan is
Speaker 6:
43:30
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:
43:44
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