Wealth from Wisdom

9 Hidden Risks that Threaten Your Retirement Today!

March 04, 2017
Wealth from Wisdom
9 Hidden Risks that Threaten Your Retirement Today!
Chapters
Wealth from Wisdom
9 Hidden Risks that Threaten Your Retirement Today!
Mar 04, 2017
Carson Wealth
Show Notes Transcript

Ron Carson and Co-Host Paul West, Managing Partner of Carson Wealth Management, discuss the 9 hidden risks that threaten your retirement today and how to avoid them. Get some helpful tips from advisors who are on your side when it comes to making sure you are on track to pursue your retirement goals.

Speaker 1:
0:00
Here's some legal Mumbo jumbo. The opinions voiced in welfare wisdom with Ron 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, I'll indices are unmanaged. I may not be invested into directly. Investment involves risk including possible loss of principle. No strategy is your success or protects from loss. Past 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, a terror advisor. Networks is under separate ownership from any other names.
Speaker 2:
0:30
Doesn't mark it 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 the skyrocketing cost of healthcare and retirement. Could now run 350,000 retirement. 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 Bear 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. Welcome. Come to wealth from wisdom radio. I'm here today with my cohost Paul West. Paul, welcome to the show. Hey, glad to be here. Ron. You know, we're here every week to talk about a lot of different things as it relates to your wealth making better decisions, really influencing behavior. I've been in the, I've been in the profession for 36 years and my look at why people are successful with their money.
Speaker 2:
1:31
It really comes down to behavior. And you know, there's two things buffet says it is Greer, it's fear and greed. And today we're going to talk about a lot of different risks that can really hamper your retirement. And risk means a lot of different things to a lot of different people. But most of the time risk is a mindset about, you know, the stock market or an investment risk. But in that's natural. I think a lot of people just, you know, they, they, they see, they see what's going on, they see the volatility and that really truly scares them. But there's so many other risks out there. They're truly hidden that actually have a much, much larger impact or more dangerous because it's like high blood pressure, you know, you don't know it's an issue until you die, die of maybe a heart attack or something that had caused from it.
Speaker 2:
2:17
And in a lot of times too, it's, we talk about, you never get, see hit by the bus you see coming directly at you. So if you're aware of it and everybody's talking about it, it's probably not a risk you're going to have to think about. Some of the things we're going to talk about today, um, are the stock market risk. You know, it is a real risk, I think, especially in today's environment. It bears talking about, we're talking about sitting on way too much cash. We're talking about interest rate risk, which we've talked about before on the show. Um, taxes, major risk, long longterm care risk. Um, I'm right now dealing with some of this, you know, with my own family and in potentially what the cost could be. Risk of chasing high yields are talking about some of the traps that suck people in risk of not having a plan or lack of any kind of integration where you're professionals are working together.
Speaker 2:
3:06
This is one of my favorite. This nest. Next risk is a know it all risk. You know, we talk about unconscious incompetence, you don't know, but you don't know. You don't know. Those are the worst risk of all. Right? You just, I'd rather be a conscious competent, at least I know I don't know anything about something. And then the ostrich risk is, you know, stick our head in the sand and I don't worry about any of that stuff. And, and uh, I want to remind all of our listeners, we have a cool websites, wealth from wisdom radio.com and if you want to find some great content or you want to connect with an advisor, we've got a lot of great white papers on there. Um, and Andrew who actually runs our show for us, I think we, did we even get the costs of the hidden costs?
Speaker 2:
3:47
Yeah, we got a great piece on there of all the hidden costs that you could be paying. We were talking about that a little bit today, but Paul has come back and talk about the stock market and investment risk. I mean, give some perspective here of history, history. Um, there is no guarantee of the future, but it does rhyme. And when I look at, you know, what happened in the market that I think people have to be aware of, what could the downside be? The market loss, 85% of its value between 1929 to 1932 lost over 50% of its value from 1972 to 1974 then crushed a bra crashed abruptly in 1987. I still remember that day. I remember what I was, I remember my reaction to it and then lost over 50% in 2000 2002 and again, in 2007 and 2009, we had a 50% loss.
Speaker 2:
4:36
And then we had a 20% loss in a less memorable, uh, August of 2011 only from people remember that it happened so quickly and things recovered. And we're sitting here today, the market is the third most expensive in history and there's a big debate. We've got new president, he's got a lot of things that he wants to do. Um, he believes he can get the economy growing faster. Again, some people believe that. Uh, but if that doesn't happen, there's definitely going to be some downside risk in the market here. Yeah. Around, I think it's just fascinating as we look at, people forget, I mean I just, I love to hear all those stats about when those happen and even as recently as six years ago, but everyone thinks or in this bull market, uh, and as we watch what happens as a trainee, I was talking with a potential client the other day and said, what's your expected return?
Speaker 2:
5:30
And he's like, oh, I can do just what the market does it mean I can do 10% plus. I said, well, where are you reading? What do you mean by the market? The market hasn't even done that. So there's, there's even a false perception out there. And what the market has done is the market, they're talking about the gold market, the diamond market, the oil market, the stock market, the cattle market, the soybean market. I mean I hear this, the market, I mean it's like, it's, there's, there's, there's hundreds of markets out there that you could invest in. And I think what we're hearing from a lot of people now
Speaker 3:
5:58
is, uh, the, the, the general market that people are going to used to be the Dow. But now I feel like everyone's talking about the s and p 500 that tends to be now the more traditional air quote markets that we're hearing from everyone. But what I love to ask people is when they think about risk, if they could define it, and one of the following forwards, how it, if I say the word risk, would they call it loss? Would you call it uncertainty? Would it be opportunity or thrill? Because you can look at it different ways. Risk can be scary to people. So that's why it's loss and the fear of losing and the fear of losing the market. We're just going mean, uncertain. I don't, I'm not sure what's going to happen. Risk can also mean, hey, I'm willing to take some risks because the opportunity you can take risk of as a thrill, maybe skydiving or something like that, that could be risk.
Speaker 3:
6:43
So it depends on how you look at it. But at the end of the day, I think just did that with a navy seal. Uh, my whole family did. So nothing I want to repeat and a, but if that's how people feel. How did you feel when you get to a market? I would, I'm a pilot, so I'd rather than flying the plane and jumping out of the plane, but, but I, but I was, I was out of control. I didn't feel comfortable. And I think a lot of people feel that way with their wealth. It's like, I know we should do, we're doing something. And I know I shouldn't be afraid, but when I jumped out of that plane, I was afraid. Yeah, he's, he's, I screamed like a girl, my kid said, so let me think about when people go to the go to major cities and you go to largest buildings there, whether it's Chicago or in New York, and you go to the top and you go to those observation towers.
Speaker 3:
7:26
What happens to most people? Your hands, right? Your palms get sweaty because you're nervous and it's not because you're up high, but you're, you're fearful of this risk of falling even though millions and millions of people have gone through the same thing that you have. You have the super high walls up there, but it's the risk in your mind if something bad happening. And it's no different than the market here today is. So you are not, I mean we're seeing across the country, so you know, Carson group and our alliance partners, we have 51 locations across the country. So we get a pretty good feel of attitudes around the country and what people are doing and the kind of quest we request we get coming in. And I would say that there's been a real shift in the of the more sophisticated, better investors are really looking for irreplaceable capital strategies.
Speaker 3:
8:13
It's like, you know, the market's expensive could go up further, but I really need to protect. My downside is you protect your downside, the upside will take care of itself. And you and I met with one of our recent clients in Nashville just a couple of nights ago and I thought his comment was really interesting. He just recently fired a bank in New York handling his money and he said, wow, can you fire me? We've made you a ton of money. And he goes, don't confuse a bull market with doing what you said you were going to do. He was looking for total transparency. He was looking for hedges within the strategies that would protect the downside, both of which he said they said they would do and they didn't do. And that's what attracted him to our process. It's like, you know, we have lots of different strategies. We want to make sure they all perform as expected.
Speaker 3:
8:58
But I'd say are most popular strategies today are these irreplaceable capital strategies that have a builtin hedge to protect the downside? Yeah, I mean, and if you think about investment risk and stock market risk, most people want to be, have some form of investment in the market, but then if you think about the pain that goes with loss, so think about this, if you lose 10% of the market to get back to where you were before, you got to grow by 11% if you go down by 20% you've got to now have a 25% return to get back to where you were before a 30% you need a 42% increase. If you go down 40% so similar around the 2008 right? You need a 67% return to get back to where you just were before. But imagine if you can help protect yourself and still have some market gains, but not fall like that.
Speaker 3:
9:48
And then if we're not, have to go through the pain of struggling back up the hill just to get back where you were before. That's a powerful tool that many people don't take advantage of. They don't. And it's, and it's, and it's because they're not working with their professionals enrolled heaven integrated expectation of what they should do. A guy that you and I both know, Joe Duran, large a advisory firm on the west coast, he was just, I was just reading an article, he made a quote this a couple of weeks ago. He said, the average advisor delivers no real value to the average investor. He says, a lot of advisors or advice is just useless. There are no better than the investors themselves. And I mean, and this is my profession. So it pains me to say that he's really right on there in that, you know, when we had a bowling ball going back to the client, we had it down in Nashville when the market was going up.
Speaker 3:
10:35
Everybody thought I was in this, I was a beneficiary of this in the 80s. You know, I thought it was brilliant, but it was a bull market. Really. I was, I was totally, totally an unconscious incompetent. I didn't know what I was doing, but I didn't know. I didn't know. Then you get more sophisticated, you've put some years on and you're like, wow, I mean there is, especially since 2000 I'm really starting to show. And then the next generation of investor, by the way is I want to like you on a relationship with you. But if you're not adding value beyond a doubt, I'm going to fire you. And that's exactly what Joe is talking about here is it too many advisors are just guessing. Um, and why pay a fee to guess, right? It's not going to. So you know, in order to lower the risk, have an integrated plan, you have to make sure that your advisor is showing these influencing behavior.
Speaker 3:
11:21
There's outcomes based planning and they got an effective game plan that really covers all the risks that could potentially take you away from your standard of living, of which you've grown accustomed to. Yeah. And run. I would add though, I mean we see so many do it yourself first that are making every one of their own investment decisions. And most of them have said, hey, invest in an index, pay as low cost as possible, um, and then let it go. But the reality is what we see is when people do that, what happens? Emotion takes over. And so they make decisions based on what their
Speaker 2:
11:54
neighbor said or what they heard or what they read in the press. And so now they're making decisions that may or may not be in their best interest. And when I always talk about is when you're making those decisions, you got to guess right. Twice, right when to get in and when to get out. And that's hard to do. It is hard to do. When we, when we, um, let, let's go do this. I want to talk just a minute. We talked, we talked about a couple of weeks ago, but you know, setting up too much cash. I was just reading a report and now there's two risks here. Too much cash. You don't get the return, but also just the expense ratios that can be associated with some of these money market accounts. When we come back, we're going to talk about that. I'm going to share with you, um, a household name, a brand name that is charging up to 90% of the return or expenses.
Speaker 2:
12:41
Go to them and you get a little bit left for cash. It's not even close to being fair. One of the critical components Paul, of retirement planning and we see with our clients on is estate planning. It's big. I mean you talk about where you can really create a tremendous amount of value is having a well executed thought through estate plan. And if you think about the real priorities in your life, the stuff that really matters, it's our families. Um, you always imagine if I were to die tonight, you know, is everything in place a way I want it for my family. And the most important thing that we can do for our families is not only make sure we've done everything we can do to keep the taxes and the hassle at a minimum, but making sure everything is actually going to go exactly where we think it's going to go.
Speaker 2:
13:24
I've got a client right now, it's been in litigation for close to four years. I've got another client fighting with kids and kids are fine. It's a massive estate. It's you don't want your, your loved ones to go through that, so we would love to talk to you about it has report. It's called estate planning simplified. It's a short 10 page report. It's easy to read as jam packed full of actionable ideas and strategies you can use. The best news is it's absolutely 100% complimentary mean why? My reason for doing the show, we'd love to pick up new client if you like what we're talking about, but I want to inform people. I want you to make better decisions with your well. I want to move that when I, when I get to the end of my life, I want to move the needle and help more people have a positive retirement and wealth experience.
Speaker 2:
14:09
So if you've saved at least a hundred thousand for retirement and you're one of the first 10 callers, I'll give you this report. (800) 900-9825 eight four give us a call. Uh, it's (800) 998-2584 (800) 998-2584 we come back, we're going to talk about sitting on too much cash. I'm going to give you a name brand you hear of every day that took almost all your return is expenses for them. I want to talk about some of the real conflicts out there today. Questions you should be asking. I'm Ron Carson and you're with welcome was easier. Ambassador of climb. Now back to wealth from wisdom with Barron's hall of Fame Advisor, Ron Carson. Hi, I'm Ron Carson with my cohost Paul West. Welcome back to wealth from wisdom radio, which have been talking about risk and retirement planning. And so often people just think about the obsessed with the old, the market risk we're talking about. Yeah, there is some market risk out there sitting on too much cash.
Speaker 2:
15:14
In the last segment I said, you know, also paying attention to expenses. So Jp Morgan, uh, at a money market fund and it's gross yield was 52 basis points. The client got one basis point, they kept one, one, one one, they kept 0.01, one basis point nothing basically. And uh, and you know, others divvied up the rest, which is just wrong, right? You look at it and you go, where, how can you justify basically having a 99% expense? And there are other conflicts out there. The SCC, uh, too long ago find Merrill Lynch, there are two big fines. One was 350, 8 million, the other was 10 million. But in the one, it was the quote unquote, they said the sec, this is according to investment news had statements were cart regarding um, one of their structured notes and these things, if you own a structured note, I can almost guarantee you even your financial advisor doesn't understand all the additional expenses associated with it.
Speaker 2:
16:19
I learned the hard way a few years ago. We did a $50 million note, uh, institutional level. And then after the pricing fell on the node, I actually hotter hired an outside forensic person to come in and tell me what they really charged and what I've had to threaten a lawsuit to get them to put the money back. A lot of advisors don't have the resources to do that. And here Merrill Lynch got caught. Um, and they, they were charging an additional one and a half percent per quarter that wasn't disclosed to anybody as 6% a year. I mean, so you think about JP Morgan and what they're charging you thinking about one in an additional one and a half percent per quarter. If that's not bad enough, they also got fine 300. And, uh, thinking of a 350, $8 million, Yep. $358 million, this was last year. And it was because they were basically taking cash from clients' accounts to cover, uh, some of their, you know, their shortfalls that they had. So if they would've failed during that time would have been massive. But it's skin understand the, there's a lot of risks out there and I think a lot of people gloss over. They don't ask who truly, who are my partners, um, is or conflicts. There's almost conflicts in anything. But are they disclosed? Do you feel that a Merrill Lynch in this case, obviously massive examples of where they were not putting the client's best interest first, JP Morgan not putting the clients interests first and, and that is a major
Speaker 3:
17:50
risk that no one really thinks about is how's that going to impact you can't afford those kinds of expenses fall? Well, I mean, Ron, I think a lot of people, I heard this the other day from someone saying, Hey, I really just, I blindly trust my advisor and that's good and bad. It's good. That means they trust them. It's bad is they don't understand everything. And I think there's a phrase we like to use that your advisors should be just as good about educating you about your investments as they are managing them. And it's so true because you need to understand everything that's getting involved. And I think that's why when people don't understand or they're fearful that maybe they're being charged from something, whether they are or aren't, that's why a lot of times they go to cash and sometimes I feel like when people go to cash and are sitting on the silence right now, one may be as concerned about the market, but two is they're paralyzed in terms of their thought process.
Speaker 3:
18:39
Where do I go next and who do I trust? Well, and I think every, every, every person out there should ask these basic questions. Like, is my team, my wealth management team making the complex simple? Are they straightforward in the fees that they're charging and not just the fees they're charging, but the costs. Everybody else has their hand in the till, right? What's the total cost of this thing? Because go back to JP Morgan. Um, the advisor can be charged in next to nothing, but if they're taking 99% of something, it doesn't do you any good, right? You're never going to get ahead. Is there an effective game plan, right? Have you integrated all the risks we've been talking about today to make sure that I have mitigated or balance those risks in a way that's appropriate for me and my family and then finally, am I getting advice on a common language?
Speaker 3:
19:26
Then I can understand if your advisors make the complex simple, you understand all the fees and costs, you have an effective game plan, you understand what the heck they're talking about. That is a successful relationship and you're not going to do the wrong thing at the wrong time. The risk always has been doing the wrong thing at the wrong time. People make really bad short term decisions cause they guess a lot and if you have an effective game plan and you have those components in place, you'll be very, very successful. And really all these risks can be managed as long as somebody understands how all the pieces of the puzzle fit together. Yeah. I was just speaking with an individual the other day, Ron, and they got an inheritance and so what do they do? They put it in their bank account and it just fit and been sitting in there and cash because they had no idea what to do with it and they were scared with what to do with it.
Speaker 3:
20:11
So as we sat there and talk through, they really didn't need the cash for and an income perspective. They're in retirement. Um, but they needed to do something with it. They couldn't just let it sit there. I mean, I think if we go look at inflation and where that potentially is going and where it is historically, you know, just below 3% if you go, if the, I told them, if you go put it in a, in a treasury inflation protected securities or tips, I mean that's that 0.92% right? So that's not going to do much for you. So we help them devise a bond ladder, helping them come up with an we can gauge and protect ourselves against interest rate risk. We help them put it into some irreplaceable capital because nervous. So sometimes
Speaker 2:
20:48
when we want to keep in cash, they're nervous. So having a sure loss for them of what that looked like was helpful. And then a small amount in some growth investments helped her see the longterm picture. And as we mapped it out over the next three years, five years, 10 years in 20 years helped relieve the concern of having all of that cash on the sidelines. It's really, you think about it, we're humans, it's about Maslow's hierarchy of needs. You know, the very, very thing that we want is security, you know, that feel that we're going to be able to take care of our physiological needs. And then we get to move on up the pyramid. And you know, you think about, you know, employment risk, longevity risk, death of a spouse, change in marital status, unforeseen needs of a family member, unexpected healthcare costs, change on housing needs, lack of available facilities for caregivers.
Speaker 2:
21:33
And we talked about the nine risk and the financials, right, the inflation interest rates, stock market. But then there's like the, you know, the, the conflict risk is out there. Public policy risks, you know, increase of entitlements are taxes and all that stuff. So it means that you can't just have a static relationship and plan, but as something that has to be continuously monitored and as your, as the environment changes and, or if your goals and objectives change or your risk appetite changes, you need to be effectively talking about. Thanks. Let's talk about another risk. You're Paul is the risk of chasing high yield. You know, one of our earlier shows I shared where a client, um, they're not a friend, a friend of ours, their father, not a client. We tried to get them as a client who was a do it yourself or he lost 100% of his, his entire, uh, retirement chasing yield, bought an energy, you know, went into energy stocks and then had fewer stocks.
Speaker 2:
22:27
And then one was paying a really high yield. And it'll look too good to be true. If something looks really, there's something the market knows or understands and you really gotta be careful. There just are no free lunches out there and there's times when you can really do some real work. I remember during the financial crisis, you know, we bought and rehabbed a bunch of single family homes we understood were about 50 cents, 60 cents on the dollar of what it would cost to replace property at high yields coming in from rent. Okay, understood how we were getting that rent. But if you're just looking at a company, you understand what they're doing or how they're generating that yield, it can be a trap to have significant losses. So many of you out there, you've probably gone into your online account and you've gone in and done a search for what are the highest yielding securities out there.
Speaker 2:
23:13
And many of you have selected those. Ron and I was just having a conversation the other day. Somebody had done that and I'm like, Paul, the yield on this individual securities phenomenal. It's so good. I mean it was double digit. Guess what, it was down 25% last year and so they went and selected it based on the yield by just literally doing a search. That doesn't mean it's going to be the best investment for them and so a lot of us have to think about that yield. Yes, that's just one number. That doesn't mean it's got future growth appreciation to come along with it. Well, in the mid nineties there was a strategy that came out where people were buying government securities and then they were doing an option overlay and it looked like it was generating a really high yield. The problem is he's securities. We're getting called away and in some cases there was a much as a 50% decline in the principal and they went into thinking a government security and it was safe.
Speaker 2:
24:02
We also solved the adjustable rate securities funds do the same thing implode where they were built as money market alternatives, but whether you look at all the fees and the expenses and really the underlying risk, they were taking significant significant losses in some of those assets. So you really, really have to, there's a lot out there. Um, but coming back, make the complex simple, have an advice and common language and know your game plan and, and be able to be very transparent. Whoever you're working with, when all the fees and all the expenses. So you think about all the decisions Paul, that we make and the impact our life. Um, maybe, you know, it was a career choice or getting married or having kids starting a business. Even you joining us here at the firm, Major, major decisions. By the way, this is your, how many years have you been with here now?
Speaker 2:
24:48
Fifth year now? Is it, has it flown by or was gone extremely fat, a ton of fun. And the biggest question really is in front of your life. What is it in front of you? For many people it's finding the right team. We talked about all of these things. Each you have to really, you have to manage. And I just think the days are gone where you can have an advisors and one trick pony. I'm an advisor who's not looking at everything. Um, or an advisor who doesn't have enough resources but is trying to do everything. Because when all those things come together, it's a game changer. You're going to have confidence, you're going to do well with your wealth, and you're not going to sit back. You're not going to worry about it. You're gonna make, you're not going to make bad short term decisions.
Speaker 2:
25:26
I've been doing this for 36 years and we just, we've always stood for trust, transparency, accountability. We always say, you know what's in the client's best interests work back from that. A lot of people say that we do it, we demonstrate it. We have a client, bill of rights were consumer advocates. When we think about what we do and how we do it, so if you have an advisor now, you're not really sure if you're getting the whole picture or you're not sure about all of these risks. Are they really on top of him? Let us show you what Carson wealth and McCarson wealth difference. We can make a difference. I'm confident. I know you'd be pleased with the benefits and the results. If you'll let us give you a second opinion on what you're doing. Give me a call. 800 908 25 84 it will be a game changer if you're making better major decisions. (800) 998-2584 we come back, we're going to talk about some of the additional risks you should be paying attention to. I'm Ron Carson and you're listening to the wealth from wisdom radios. Yeah,
Speaker 4:
26:40
he's a published author and has been featured in Forbes News, the Wall Street Journal,
Speaker 5:
26:45
CNBC, and more now back to wealth from wisdom with Barron's hall of Fame Advisor, Ron Carson. Welcome back.
Speaker 2:
26:52
I'm Ron Carson and you're listening to wealth from wisdom radio. We've been talking about risk in retirement planning and the first thing that comes to most people's mind is the stock market, but we were talking about today, there's so many other faces that really in planning that impact your retirement and one of the big ones is, is you know the sequence of withdrawals that really makes a huge difference. In the way you pull money out. Of course there's taxes. He's Paul, I continue to be shocked at how many people really don't pay attention to how much taxes are, how inefficient or their investment decisions are. Um, there's health care risk and they go on and on and on. But one of the big ones that you really don't hear talked about a lot and we deal with all the time is the ostrich risk, right? It's the, it's the head in the sand. I'm going to do nothing and hope everything turns out okay. Risk.
Speaker 3:
27:40
Yeah. It's like hope when I pull up 10, 20 years later that everything looks great. Uh, and so I was talking with a family, Ron, and one of the interesting comments they said to me was, uh, we have been looking at our entire portfolio with benign neglect. And Benign, of course can mean heartless, but all of a sudden in his mind is he was looking at it and we were describing the risks. He said, I have no idea. I could wake up tomorrow. And he literally had his head in the sand with this. He hadn't even looked at his portfolio and like five plus years, um, it was with another advisor and he just pulled his head up and all of a sudden he said, wow, I've got a lot of compensations. Cause I know you looked at it, he didn't go in and look at it with this advisor.
Speaker 3:
28:22
There wasn't a regular interval that they, there was not. No. Okay. So I mean it was truly a situation and I think about, there's a lot of people that are experiencing that. Um, mark who's on the show last week with you and spend some time or a couple of weeks ago about talking about challenges and he was sharing a recent story with me that an individual, I'm looking to do some business with us and spend some time and help build a plan. And a fascinating phrase with me was, you know, he's ready to potentially start the process. But the fear of making a mistake in his planning has led him to do nothing. And that's so many people cause what are we more scared of doing the right thing or making a mistake were more fearful of failing. Right. Most of the time when people should paralyzed. Absolutely. And we have to help people out there.
Speaker 3:
29:09
It's okay to ask for help. I mean most people feel like it's not. And so what do they do? They avoid it. What most people do is couples listening today. If you go to dinner, do you go actually talk about your financials or your plan and what your returns are, your performance or hey we're going to make this investment or we're going to do this when you go to dinner. No, we don't talk about that. Most people will, if they do, someone's bragging about, well the one good thing that happened, right? Because it's caught. We call a cocktail chatter. Yeah. But not getting into the nitty gritty of, you know, cause it can be pretty boring, you know? Yeah. And so I mean, as we think about having your head in the sand, that's really relates to then the next risk. Ron is not having a plan at all.
Speaker 3:
29:50
And hoping you come out on the other side. Okay. And I know we talked a little bit earlier, you know, don't confuse a bull market with your performance. I, I really feel like here in 2017 that's what's happening with everyone. They feel like things are just motoring along. They're going to be okay, the market's always going to go up and we'll be fine. That may not be reality. We know. I mean we just given the stats and I just got to give them again because they're, I mean, think about the market does whatever it needs to do to prove the largest number of people wrong at any given moment from the market loss, 85% from 29 to 30 to 50% from 72 to 74 crash in 1987 as I was in the business in Los over 50% from 2000 to 2002 again from 2007 to 2009 and then 20% of the less memorable 2011 instance in about a 30 day span.
Speaker 3:
30:42
We haven't had any volatility really since 2000 we had last year. It looked like we're going to get a correction, maybe even a bear. We had an actual correction but onto a bear market. But people when they become complacent, they're not monitoring the risk budget or what is the downside risk? We had an advisor out in, I'm a west coast, you $30 million in just sitting. You didn't want to, didn't want to move them, pull them out of some funds because of of taxable gains. And we, we did an analysis of the $30 million and said, you realize he's a counselor down 37% during the last draw down in Tucson, 2007 to nine like no. Well you get that kind of draw down. I mean my gosh, you know, it makes no sense to make an investment decision based on just based, just based on the tax ramifications.
Speaker 3:
31:28
Now you're definitely a factor, but not just, and it shouldn't be the only factor. I mean, I think that's another thing when people don't have a plan at some point, if you don't pay the taxes on a capital gain or a longterm, especially long term capital gains, what are you going to do with it? I may at some point, you got to have a decision to get out of that position and what we've been helping a lot of people do is the analysis of, uh, where's your break even point on the capital gain you'd be paying versus the downside that would have to happen in the market. But again, at some point, even this individual sharing just a few minutes ago, they had his head in the sand, hadn't talked to his advisor in five years. He had significant capital gains, but he was willing to move out of them because he saw the risk of staying where he was was it wasn't growing phenomenally. He had gotten some nice gains because they'd been sitting there in a taxable account for years, but he'd rather have protection and somebody with a plan in place and pay some taxes, but then help him. Overall. He looked at it five years, 10 years down the road. He was much further along. Action Plan is be proactive. Do an assessment of what the risk of your overall portfolio is. How's it fit into all your goals and objectives. We can do that for you. Um, at Carson wealth, matter of fact, visit us@wealthfromwisdom.com. That's
Speaker 2:
32:40
wealth from wisdom radio.com. We have great content. We have a lot of white papers we've up produced. Um, or you can even connect with an advisor if you're like scratching your head going, you know, it might be nice just to get a second opinion on how much overall risk I'm taking with my portfolio. Now's a good time to do that with the market. You know where it's at today. You know that ostrich stuck in the sand. Reminds me of a lot of, you know, we've over the years worked a lot of people from Iran and we saved a lot of people from devastation, but there was a lot of their friends or peers that took the, I'm not going to call it necessarily head in the sand, but it just advocated as somebody else can lay. The CEO at the time was like, hey, don't worry.
Speaker 2:
33:20
Stocks, good companies, good. So people would have their, you know, their aesop have 401k, they have their pension, they have their health care, they have their job all dry driven by the success of Enron. When Enron went out of business, all of that disappeared. Oh, in a short period of time. And I, there's a gentleman that went to my church for years and um, I remember, you know, he'd came in, he had met with us several times and he just said, you know, when Enron gets here, I'm going to sell when it gets here, I'm gonna so it gets here himself. And every time we go higher, he would raise the limit. He had more money than he could ever spend. And he never pulled the trigger in. Ron went to zero. He lost his job, he lost everything. He came up to me in a couple of years after that and he goes, every time I see you, I think, man, I wish I would have followed the advice.
Speaker 2:
34:07
Protect the downside. The upside will take care of itself. Don't guess, don't stick your head in the sand and don't advocate you know to somebody else. Really important to do so. So think about your financial adviser or your blindly trusting them. Are they doing, if you knew how your advisor spent his time versus how you think he spends his time, would you be surprised? I bet you would also, if you own stock or bond mutual funds or a structured note or one of these index annuities, you could be shelling out thousands of dollars in hidden fees and backdoor payments and you wouldn't even really know about it. The Merrill Lynch example, I gave one and a half percent a year, 6% that wasn't disclosed. They got fined by the SEC. It's not just a little bit of money and over an extended time period. It could add up to the difference between a great retirement and not quite enough, and you should be furious about this.
Speaker 2:
35:02
I want us to help you to figure out are you paying fees that you don't need to pay or their expenses? Are you having in getting a proactive approach? Do you have an effective game plan? Are they making the complex simple? We can help. It's quick. It's simple. Won't cost you anything. Just give us a call for some objective, straightforward advice. (800) 988-2584 that's (800) 998-2584 one 809 925 84 so do you think Medicare will pick up the majority of your healthcare, medical expenses and retirement? Think again when we come back with the next segment, we're going to talk about skyrocketing healthcare costs. Posing a real threat for anyone retiring today. I'm Ron Carson and you're listening to wealth from wisdom radio.
Speaker 5:
36:00
He seemed good times and bad times and he's got the gray hair to prove it. You're listening to wealth from wisdom with Barron's hall of Fame Advisor. Ron Carson, welcome back on him,
Speaker 2:
36:10
Carson. And you're listening to wealth from wisdom radio right here with my cohost Paul West. What risks do you face and planned and when you plan for your retirement, most people just think about stock market risk. Paul, we've been talking about, you know, the stock market that's, you know, fear of losing volatility, but there's so many other risks out there of the risk of sitting on too much cash, interest rate risk, higher tax risk, risk of chasing high yields, which we covered. Not having a game plan, the ostrich head in the sand risk. But there's a couple of other risks we haven't. One is no at all. You know, when people don't know what they don't know, they have too much confidence. Um, and then long term care and rising healthcare costs in this long term care risk is a biggie. I mean, it is expensive.
Speaker 2:
36:57
Um, I know a lot of our clients have longterm care policies. We've always recommended longterm care insurance. And you know, my belief is insurance is either you, you can self insure or you don't self insure. And unless you have an enormous amount of wealth, I think it makes sense. I'd rather someone have longterm care insurance and never need it. It's like I'm glad you know, I, I'm sure my house against being burnt down and I don't hope it burns down to collecting insurance. Right. Uh, but if I need it, I'm really, really going to need it. And so these are the little things that when you're doing an effective wealth plan, working with your team here we have how many, I don't know how many attorneys CPA, CFP, CFA, but they all need to work together to make sure even something was a little as long term care. What's the most tax efficient way to pay for it? How should you pay for it? Should you do a lump psalms? You do it over time. What's the benefit you'd have? How do those benefits actually fit into other pieces of the puzzle? It takes some coordination, but really getting these risks, managing, getting them right, mean the difference between a great retirement and really having to worry all the way through retirement. Yeah,
Speaker 3:
38:03
I mean run a lot of the families look at longterm care as a, we're not going to need it or we're willing to take that risk. What I find fascinating is is the world keeps changing. I mean, I just think about it was buying a prescription for my son the other day and I went back in, it's always been 300 plus dollars a month and it went up to 700 and I was like, what? What happened? I mean, same thing and just, it just keeps changing. And so there's a lot of risks, but as we think about long term care, we keep all hearing about the rising healthcare costs and what's happening, what's going on. So most people are fearful of buying a longterm care policy because if they don't use it, they feel like they're throwing money away. But what they don't understand is the actually have a plan and you can map out what it's going to cost.
Speaker 3:
38:43
But also there's new solutions in the marketplace that are actually in the benefit of a client that if you don't use it, you can still get some benefit for your family in terms of a death benefit that goes along with you. But people don't understand that and haven't been educated yet. So it was part of a planning process. A good firm and a good advisor and a good planner is going to show you all those iteratives and help guide you on which one's the best for you. And I think insurance is one of those categories that most people are turned off by. I personally am cause I hate fighting with insurance companies to pay a legitimate claim that they should pay. But in a lot of times people shy away from it cause maybe it's, it's, it's over offered for everything. You know, insurance will solve everything, but insurance is a way of transferring risk responsibly and you just need to use it as an effective tool.
Speaker 3:
39:31
And being able to do that health care risk to the other side of it, we see it here with all of our stakeholders of the Carson group. Um, and we let them choose. You know, we provide coverage but in some cases people are there are healthy. You'll manage that risk. It may be you want to have a higher deductible, you fund a health savings account, you know, with pretax dollars. Uh, if you're unhealthy and you've got a lot of expenses, you probably don't want to do that. Especially if you have the luxury of a group policy where they're underwriting it on the group and not individually pay attention to those things. We Ha we held last fall when it was filing season for Medicare and selecting your plan. Um, we held a couple of workshops here on and it amazed me how many people came in and needed help going through that process because it is complicated.
Speaker 3:
40:16
And what was more important though is don't listen to your neighbor. I chose plan x or Y or B or c. You need to choose the plan that's best for you. Boy, you hit the nail on the head. I mean, we'll do some more of these in 2017 so you can go to Carson, wealth.com also visit our wealth from wisdom radio.com we have great content. We put, we have the same white papers on the Carson group site, but go here, uh, you can meet with an advisor, you can just download some of this great content we put out there. Um, but social security is a biggie. And the difference between the best decision in the worst decision can be massive, right? It can be several hundred thousand dollars in benefit. And that's just a risk of not having a plan, not having that plan integrated, not having everybody work with one another, you know? Right now's not the time to do tax planning for 2016 right? Time doughnut was last year. You'll thinking about, you know, how we manage these risks. Earlier, we were talking about risk of understanding who your partners are, assigning about Merrill Lynch charging an additional one and a half percent per quarter that was undisclosed to those investing in it. Um, and the sec find them, they find them and that was $10 million penalty. They find them in a $358 million penalty for, um, they had taken 58 billion per day of customer securities, um, in, in subject to a general lean
Speaker 2:
41:34
by it's clearing bank. And this was a, been a massive shortfall that they had exposed their clients to from 2009 through 2015, three to $58 million. I mean, that's a fight. It's like why I don't for the life of me. Why do people do business with people that do business that way? Jp Morgan, um, money market fund, it was yielding 52. They had 51 basis points. They took the Glyco one basis point and you, these are conflicts. These are, these are hurdles, these are barriers that are not, those organizations are, and those cases, it's blatant. They're not putting your interests ahead of their own. So in order to eliminate risk, find a team that's putting, that has the resources that has the, the, the, the client bill of rights demand to see every firm out there should have a printed either code of ethics, client bill of rights that ever all of their internal stakeholders are following a, because if you start with that and work backwards, you can be really successful because everybody's pulling in your direction.
Speaker 2:
42:36
They're sitting on the same side of the table as you to make sure you're making the best decisions possible. I mean, we like to use the F word, right? Fiduciary. Yes. Not only do we believe in fiduciary is, is the legal and ethical standard round, but we've always said from a business perspective, and we have both operated like this rider careers. If we always do what's best for our clients, everything's always going to work out. They're going to be happy, we're going to be happy. But there's many people that don't operate in that capacity and make sure you ask the fiduciary word when you're talking with your advisor. Do Sherry, it's all about being a fiduciary by law, putting the client's interests ahead of your own. So Paul, if you think about all the financial decisions and really just all the decisions and we've, we've made, if you could go back over the last 10 years, would you change any of those?
Speaker 2:
43:20
And we all would love what the information we have today can change those decisions. I can pretty much guarantee most of our listeners would really make some very different financial decisions. You know, and they say it takes, and I, and I do believe this 10,000 hours to become an expert at anything. And people listening, it was like, I don't have 10,000 hours to become a financial expert. Well, the great news is you don't have to, you know, we have about 114 stakeholders here at the Carson group. Um, our partners across the country, 51 locations, we are really good at what we do. We're competent. Um, we're, we're, we're always looking and learning and Kai's on how do we continuously get better? If you have, if you have a retirement, if you have a decision, if you have an inheritance, if you're thinking about the future, you just need a plan. Give us a call at 800 (998) 258-4800 (900) 900-2584 809 900820580 four we can make a difference. Today's the first day of the rest of your life. Let's make the most of it so when you get to the end of the retirement, you're saying, I glad I did. It's not that I wish I had. I'm Ron Carson and I'm Paul West and you're listening to
Speaker 5:
44:32
wealth from was in radio and we'll see you next week. 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 Harrison,
Speaker 1:
44:48
some legal Mumbo jumbo, the opinions voiced and wealth and wisdom with Ron Carson and for general information only and 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. Investment involves risk, including possible loss of principle. No strategy is your success or protects from loss. Past 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. It's a terror advisor. Networks is under separate ownership from any other named entity.