Wealth from Wisdom

If You’re Sitting on Cash … You’re 10X More Likely to Run Out of Money in Retirement!

February 25, 2017
Wealth from Wisdom
If You’re Sitting on Cash … You’re 10X More Likely to Run Out of Money in Retirement!
Chapters
Wealth from Wisdom
If You’re Sitting on Cash … You’re 10X More Likely to Run Out of Money in Retirement!
Feb 25, 2017
Carson Wealth
Show Notes Transcript

On week 2 of Wealth From Wisdom Radio Mark Lookabill returns to talk about the dangers of sitting on cash in retirement with our host Ron Carson. Did you know you are 10x more likely to run out of money in retirement if you are sitting on cash? Find out how to put your money to work for you rather than sitting on the sidelines.

Speaker 1:
0:00
Here's 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, I'll indices are unmanaged and they 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 registered investment advisors. The terra advisor networks is under separate ownership from any other names.
Speaker 2:
0:32
Billion dollars in social security benefits that they will raise. Interest rates, skyrocketing cost of healthcare and retirement couldn't. That was the person in the world is turned 117 years old. Planning for retirement today is a whole new ballgame. It's loaded with challenges, obstacles, and trap doors. 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 on how you could make your money go further and retirement. And now here's your host, Ron Carson. Hi, I'm one Carson with your cohost today, mark Brookeville bringing you well from wisdom radio. Great to be with you. Think about 2008 the stock market or race, $7 trillion in stock holder wealth. I'll never forget it. It was an uncomfortable or very scary time. And if you personally lost money in 2008 like so many did, you know exactly what it felt like.
Speaker 2:
1:31
If I like a sucker punch to the gut, especially for those who are ready, you're retired or nearing retirement. Mark, I know you and I both had a lot of clients that that we're glad they had a plan because all the uncertainty around the time wondering, you know, where are we on the edge of a cliff that we're going off? And many didn't know what was gonna happen. And many people simply just licked their wounds, stayed in the market. Others, you know, did absolutely the wrong thing. They had just gotten into the market. They got out of the market. It created a tremendous fear and you know, we have some of the lowest participation ever in the stock market because people really don't, don't trust it. And that's why a lot of high net worth investors have turned to cash or they did way back then as a place to protect, protect capital.
Speaker 2:
2:14
They want to be able to sleep better at night. But the fact is, and we've seen this time and time again, cash as an investment strategy is very dangerous. We do believe here at the Carson Group, cash is an asset class. It can be used tactically. But to sit there and get zero return and not have a game plan a really makes no sense. I will share a statistic with you. Out of USA Today, investors seeking safety and cash are 10 times more likely to run out of money in retirement. So it goes on to say if you're taking just a 4% withdrawal, you're not going to have enough enough money. On the other hand, if you use equities as part of your strategy, um, that reduces the risk down to about seven or 8% will actually run out of money. So if you're, if you're playing a safe, if you're sitting on the sidelines today cause it feel met, have missed party, um, you could, I think you're harming yourself and I think you're putting your ability to stay retired in a standard living.
Speaker 2:
3:05
You've grown accustom in grave danger. Couldn't agree more. Ron, you know, you said the keyword there plan, whether it's a financial plan, whether it's an investment strategy plan, cash can play an integral part of that. But you know, all the time when we're putting plans together, financial plans together, you start bringing in all the complexities. There are life events, inflation, you know, we show, as I say, the mountain chart. If you just sit on cash, particularly at the rates that we're going to talk about today. Yes. If you want to see ugliness and green charts turned to read charts. So positive to negative, just sitting cash for an extended period of time. And we'll talk about the behavior behind that causes people to do that. And that's just that on today's show we're going to give you some strategies on what you should be doing because sitting on cash is a bad idea.
Speaker 2:
3:52
Not having a plan what to do with that cash is a terrible idea. Uh, but at the same time you don't want to, you know, someone said to me, hey, getting my money back is better than getting part of my money back. So that's the fear a lot of people have. So we're gonna talk about, you know, how do you really minimize your risk? And let's just start with a lot of people are in bond funds, bond funds in general, bond mutual funds, um, have a lot of expenses. They have a lot of hidden fees that you're not aware of. A lot of times there's markup, there's dealer markups. And so we're not seeing bonds are bad. We're saying be careful because if you look at where interest rates are today, for example, from 1928 through the end of 2015 us treasury bills averaged, these are three month treasury is like the safest of safe.
Speaker 2:
4:36
3.49% were the yielding today, mark 0.5 3.5 30 so that means that the best you can do is 0.53 so don't get anchored to what happened in the past. US traits in your treasury bonds over that same time period. 1923 2015 average 5.23 what are they today? 2.45 so what's, what's the most someone can make over a 10 year period? You're going to make 2.5 guaranteed. Yes. Unless before, at any fees, taxes, Indian, she could make less if you need that money before, if you have just a uptick and interest rates, you have that decline. On the other hand, you a stock's average 11.41% now I would say if I'm going to have to pick, I'm going to go with stocks. They're fairly expensive in here. If I'm just going to buy something as a chance to give me a better return and others, other things that people can do.
Speaker 2:
5:28
And we're going to talk about some very specific strategies and one of them is go through and do individual bond ladder. So you have a bond that matures, it's laddered. So you can have a one year or two year, three year, four year five, you could do Muni, you can do it by this state you live in. And what's great about that is you can model it based on what your belief is or which are financial of life by visors. Belief is based on what interest rates are going to do because you could create a bond ladder that actually performs better with rates going. But you can also say, I just want to beat the cash or sitting in there and it's a way to take an intermediate step to do something. And that's a really good action to think about. And also you have to be very conscious of any fees, markups or anything that you're paying because if you're not getting that bigger yield, um, reducing that can really enhance your returns.
Speaker 2:
6:18
I couldn't agree more in terms of a, again, that's part of maybe a baby step or an initial step to eventually get a more rounded, more robust financial portfolio. If you're, you know, again, your behavior, people still hard to believe coming out of Oh eight, no nine, the people that have, you know, big chunks of cash to do on the sciences because they are fearful, they're emotional about what's going on out there in the world. And to be able to do that, again, take that initial step to get out of earning zero or less than zero, um, and take that intermediate step for a portion can get them headed on the right path. Well, and we, we've had a prospect of firm's been talking to um, uh, in the, in the Midwest and they sold out of the market at the low in January of 2008.
Speaker 2:
7:03
So it was the eye or not of nine. So it was literally the low of the market. They've been in cash, the corporate cash, he manages assets for his family and he's just terrified to do something. And for the last two years he's been talking, it's like, well, I just want to wait for a correction. The market will do whatever it needs to do to prove the largest number of people wrong in any given moment. It's a fact. I've been in this business for 36 years now. It's done it for 36 has done it way before I got is going to do it in the future. And going back to the Dalbar study, Dalbar looks at investor's behavior and he said, you know, most people don't even do the return of the stuff they own because they're out of it at the wrong time. And so having a game plan, you know, a bond ladder is a good way to say this is a piece of my portfolio.
Speaker 2:
7:51
Maybe have another portion of your portfolio that you can even write some covered calls to generate income against the portfolio. Very effective, especially in this kind of environment we're in today. And other strategies that say their market agnostic, we don't care whether the market goes up or goes down. We had a real estate strategy that we did that with it. You know, because of the rental income we rehabbed bank owned properties, um, clients that, you know, we don't, we didn't really care. It wasn't predicated on the market going up. So there's lots of lots of ways that you can win that aren't necessarily in about sitting in cash or just having it exposed to a big decline in the market cause a big draw down would be scary for a lot of people. Well I think that's one of the key takeaways is we don't have to be in a vacuum.
Speaker 2:
8:35
It doesn't have to be 100% here are 100% there, right? We can be in different parts and we can talk about personalizing that given what people's beliefs are. You know, it's a legitimate, if people are really truly emotional that, you know, sometimes the worst thing to do is force people to get too far outside their comfort zone. We can do is help proactively bring them along and say, hey, here's a, here's a way to whether it's covered calls, whether it's Muni Ladder, alternative type strategies, we can do this and help you along. I mean that's what a good mentor counselor trainer does. But be careful not to get sucked into the income trap like we talked about on our last show. Ya. How do you lose 100% of your money in a bull market from doing, you know, chasing income without really understanding what the underlying asset is that you own.
Speaker 2:
9:25
And so if something looks really way too good to be true that it's going to yield you, you know, eight, nine, 10%, there's something that you're not seeing or if the market is seeing. So you have to be careful for that. There's, you know, sometimes, occasionally when there's a lot of fear in the market, you can make some incredible investments. But if things had been stable to been here for a long time, you know, we haven't had a lot of fluctuation. We got a little bit of volatility last year. If it looks too good to be true, there's a good chance it is. So like, like a buffet says, if you don't know your diamonds, no your jeweler, if you don't know what you're owning, make sure you know the people that they've got the education and they've got a process. It's not prayer, but it's process.
Speaker 2:
10:08
It drives that. I'm thinking of other prospects that came to us that sole out the day after Trump was elected, thought this was going to be bad. You know, the market's actually run up on anticipation of tax cuts, you know, stimulus to the economy. Um, you know, there, whether regardless of your politics and all the market said, hey, we, there's at least a chance that things are going to be different here. So, you know, just a lot of dynamics, a lot of things moving different directions, but there's something our clients can do and this is really take action. You know, if, are you blindly trusting your financial adviser? I like what Reagan said, trust, but verify and make sure you're always asking those tough questions. So if you own stocks, bonds, mutual funds, um, really anything, there's could be a lot of hidden fees or could be backdoor payments, could be conflicts.
Speaker 2:
10:54
The profession is still not cleaned it up the way it should. You know, there's a lot of crap we still see out there where people are getting paid. A lot of times advisors putting their clients in this stuff, don't even even know where it is. So it doesn't really matter if you a few hundred or few thousand bucks over 20, 30 years could add up to you being in a comfortable retirement or not. It should make you absolutely furious if that's the case. So you need to understand what you're paying in fees. We can give you an evaluation to tell you what you're paying. Also, are you curious to know how much risk you're taking? Understand your risk budget, what's a downside and there and how do you compare to your peers? I think it's interesting to know now you're doing to an index, but how you're doing versus other people so we can show you exactly what you're paying in fees.
Speaker 2:
11:41
If you bought a bond, was there a markup we can tell you that a lot of people get surprised. Yeah. What they've paid, you know, and this is where I want to say stop and won't say congratulations to you Ron. I know you just were named to the fiduciary when we talk about knowing what, how much you're paying and having a trusted advisor who sits on the same side of the table as you and is, uh, is good and wise counsel for you. I know you're a huge proponent of that and congratulations on that with John Bogle, founder of vanguard funds, and I am excited to, uh, to work with John to bring, to put the consumer's actress interest ahead of Wall Street. But if you want to know how you said relative to Wall Street, it's quick. It's easy, it won't cost you anything. Come in, give us a call at 809, nine eight two five, eight four. That's 809 908 two five eight four (800) 998-2584 today we're talking about sitting on cash. You might be 10 times more likely to run out of money if you're not careful. Coming up next, we're going to talk about additional options to put your money to work while minimizing your risk.
Speaker 3:
12:47
[inaudible]
Speaker 2:
12:58
easier. Ambassador of Kwan. Now back to wealth from wisdom with Barron's hall of Fame Advisor, Ron Carson.
Speaker 2:
13:11
Welcome back. I'm Ron Carson. Thanks for joining us today. Wealth from wisdom with my co mark. Look a bill. Here's a statistic that's going to shock you. It did me. I've been in the business for 36 years and it's still shocked me. In a recent USA Today article, investors, it said, investors sitting on cash or 10 times more likely to run out of money in retirement and mark, this is an interesting dilemma. People think they're playing it safe, but they're almost guaranteeing themselves not to be able to hit their goals. The Fed has definitely done that. They've pushed interest rates down with bailed the banks out with the costs of the taxpayer cost of the CD and the saver unfortunately. So it's caused them to just say I either take way too much risk or just sitting in cash and get nothing. So if you think about the math, and this really came out of a book, the Peter done done dead in mock retirement, he says you have a staggering 81% chance of running out of money when taking a 4% withdrawal from a portfolio made up of cash holdings during a 30 year retirement.
Speaker 2:
14:15
Now if that portfolio is 60% stocks, 40% bonds, by the way, I hate these traditional 60 40 70 30 I think that's a wrong way to invest. I think you need to look at your own personal situation, look at a lot of alternatives and aren't necessarily tied to the market going up. But anyway, if you have an 8% chance of running out of money so you dramatically enhance your, your chances. I would argue if you just, if you work with that, you know, a non correlated portfolio understanding what your downside as I am working with someone, tell you what's the appropriate amount you can take out. You know, you can really give yourself the ability to adjust continuously. Outcome based planning is really where it's at. And I know you, uh, you meet with clients all the time. What, what are you hearing from clients these days?
Speaker 2:
15:01
Well, a couple things is I've never experienced so many differing opinions, whether it's, oh my gosh, I want to participate in this rally too. I'm scared, nervous, terrified, whatever adjective you want to do because of events going on out there in the world. And so I think it's, it depending upon who you talk to them, what their viewpoint is. So again, it's trying to counsel, you know, have a plan, execute the plan. It doesn't have to be all in, you know, in cash. It doesn't have to be throw it all into the market. And hope it does well, there's alternatives, but you've got to have a game plan. Just had this conversation today with a new client who is going through the emotional aspect of her husband passing away. Okay. And you know, we start with outcome based planning and goals and our number one goal is to take care of her sons.
Speaker 2:
15:48
Right? Younger kids. Okay. But very quickly the conversation briefly comes to, well gosh, the life insurance proceeds, I'm going to get it's cash. What should I do? Should I just leave it in the bank? Oh Gosh, I heard the market's expensive until you have this conversation. And I, I said right away we're going to stop that conversation in terms of all the different, you know, rationales or, or reasons why you may decide to invest or not invest. It's let's get that plan put together and then let's focused on what those goals are, knowing that they're there. It can be all sorts of different components that we put in there. There's going to be some that she needs cash because you know, there's a state settlement, there's taxes, there's all sorts of things we're working through with her. Uh, but again, it's getting that glide path going, knowing that, hey, there's a series of decisions that we're going to help have to help her with.
Speaker 2:
16:38
Is she comfortable with that after you had the conversation? Absolutely. And we're, you know, we've got a group in there, we've got the estate planning attorney, and it's just knowing again, that there's a team approach, there's planning involved and it's not just up to her to try and pick, you know, behind door number one, two or three and what and what I think so many investors miss as there's a major difference between pro permanent loss of capital and fluctuation. So if you have a well diversified portfolio, let's say it's the s and p 500 as an example, and all 500 companies go out of business and your portfolio goes to zero, I'm going to argue the money in your pockets, probably not worth anything. You have probably had a total meltdown of society right in the financial system. So it really is how much fluctuation can you stay at the temporary decline because Sunday's companies, some companies will go out of business a matter of fact, the half life of a company today, this comes from exponential organizations.
Speaker 2:
17:32
I'm a huge fan of peer Democritus and singularity university. Um, in 1984, the half life was 30 years in 2014, which was when the study was run. The half life is five years, six times. You know, think of that companies are becoming half as effective six times faster than what they were in 1984 and that was ending in 14. I'm going to argue with blockchain and some of the things happening, it's going to accelerate an accelerating pace. Um, you think about technology and the change that's taking place and the scariness of people have to deal with in companies. So I get it. The come coming to irrelevant, but that's why your diversity, because some are going to be beneficiaries and it's not a zero sum game. Our economy's growing. There's, there's plenty of ways you know to do well and I'm looking at, there was a real interesting study that was out.
Speaker 2:
18:26
It looked at 500 and flow of fluid, US investors, this study went from December to January, found that the average asset allocation to cash in 2016 it's 23% that's an increase from 15 2014 and 15 to 22% but here's a problem, mark, back so much of our careers, we had the, we had the luxury of cash being five six, seven 8% now it's basically zero if you're just sitting in cash. So a lot of times we come in and someone needs a four or five, six 7% return in order to hit their goals. And in the study they were at, people said they still expected and what that allocation to cash on average expected to earn a 7% return. Right? That's reasonable. They say they thought the group went on to say, you know that 7% every year, even with the 23% allocation to cash, and here's how the math works.
Speaker 2:
19:20
If you're going to get the seven guests, how much this 67% of your portfolio has to earn. Yeah, you're in the mid teens. Yes. Or 77% yeah, 14 to 15% right. So all of a sudden that's not, unless you're taking a lot of risk and a lot of volatility, that's nowhere close to being possible. So this comes back to working with it. We call it truth giving and truth receiving. So you should have a relationship with your financial adviser that you can ask any question you want. You have a right to know client bill of rights. What is it? Every farm should have one. If you're a firm, doesn't your word of the firm doesn't have a client bill of rights, why not? What do you stand for culturally? What do you do? Meaning you have a right to know what to do or you're working with a firm that puts the client's best interest of your own ahead of theirs.
Speaker 2:
20:12
And are they going to disclose what all the costs are? Because when we're dealing with the environment today, you have to plan. You have to have confidence in the team, but you have to understand is are you in a conflict conflicted model or not? There's train a broker and a fiduciary broker does not, was not. It was always a disclosed that they do not have to put your interests first, which people are blown away when they learn that fiduciary by law has to put the client's interest ahead. Once you get that sorted out, then all of a sudden I think you'll find yourself with a team that can do planning that can really help you be successful. What you said earlier, outcomes based plan. Well, and I think you mentioned the fiduciary. It's, it is still fascinating to me. I just had this conversation this morning with a friend of mine who's in our industry in financial services industry and he asked me point blank explained to me the difference between a broker and a fiduciary and what you are and I and deep, I know him on a personal level.
Speaker 2:
21:14
He's asking really because he's thinking about his mom's situation and then she works with, and I just, it just laid it out and I could see the light bulb and a little bit of concern go, go on, you know, in, in his eyes when we were having that conversation this morning. Crucial to know that it's absolutely crucial. So, you know, Bill of rights, what's the process? What's the ability to monitor it? We talked about bond ladders before. What are alternative asset classes? Some things we can do. So really, you know, think about, have a plan. Um, if you're, if you have kids, grandkids, start getting them started early. Um, if they're younger they can take more volatilities. Are Friend also tax advantages, tax deferred, tax free. Think about what you own in which account because you can do, generate a lot of tax alpha by just really paying attention to that.
Speaker 2:
22:01
A lot of people throw a lot of return away because they're not paying attention to taxes. Taxes are a biggie. Well, I even see it when we bring in, you know, a new client on boards and we receive statements from where we were at before. It is, it blows me away that we'll get a trust account, a joint account, Roth Ira, you know, all these different accounts with different tax implications and rules and they're all invested in the same way. And that's just, to me, that's just people being lazy. Diversification. Yes. There's always three diversification and diversification, right? Yes. And it, so the other is you do need to have equity components of the portfolio and there's lots of different ways of doing that that aren't just, hey, hope in the market goes up. Hope is not a viable strategy. Dividends are great, especially increasing dividends, although many dividends stocks because they'd been run up because of low interest rates are really expensive here.
Speaker 2:
22:52
Be careful. Pay attention to costs. Also be smart about social security. The difference between your best option and your worst option we see can be several hundred thousand dollars. Work with your advisor to optimize that and also time it when you should take it relative to other assets that you have. And finally, keep learning. This is a continuous process B. Now the chapter stand, all the intricate details, but you know, understand your team. Understand that should be a communication strategy. And if not, think about hiring a new team. Well, and I think that's a crucial thing to, you know, be open to new ideas. It doesn't mean you have to embrace an execute all new ideas that come in front of us, but you know, the days of just sitting there and say, hey, and we hear it occasionally, right? Oh, I wish we just had the good old days. Right. And in some cases we, we really days, I miss him too.
Speaker 2:
23:43
Exactly. You know, so when people say, oh, I just want the good old days of five seconds or 5% cash, yeah, that's not there. So you've gotta be open and willing to do and execute it. And I see people come in and tell them, I'm not, I don't want much of a return. I just want 10% a year and it's like, okay, that's a little more than you think. But so that's really two questions every time mark, people want to know, you know, do I, have I saved enough? Can I maintain my standard of living truth, giving, truth, receiving? That's what we do. Nothing's as important as knowing the answers to that generating income. We have a five. We have a five point master plan. Um, this is all about doing everything, a holistic view of what you have and we're good at what we do. We'd love to help you. We'll give you a second opinion. Honest opinion. If your advisor is doing a great job, will tell you that we don't want anybody replace the relationship. Just for the sake of doing that. If you have at least a hundred thousand, be one of the first 10 callers to schedule your initial analysis at (800) 998-2584 that's (800) 998-2584. Are you afraid to invest your retirement? You know this USA Today, 10 times more likely to run out of money. There's a lot of options. We're going to continue to talk about it.
Speaker 3:
24:53
Uh, when we're back up to this message. Bye.
Speaker 2:
25:20
Saving for retirement is a great start, but now what? What are you going to do with the money? Find out now on wealth from wisdom with Barron's hall of Fame Advisor, Ron Carson. Welcome back. I'm Ron Carson and you're listening to wealth from wisdom nationwide with my co host. Look, lookup bill, and we're talking about really big mistakes people make with cash and also Greer greed and fear. You always hear about that. It was the two things that destroy wealth. So often people today, they're afraid of the market and you're not alone. We've seen so many people that got burned in that 2008 financial crisis, high net worth people said, that's not going to happen to me again. Yet they're, they're miserable again because they're watching the markets go up. They're not participating, they're not sure what they should do. So if you're retired, it really doesn't matter of you're tired near retiring.
Speaker 2:
26:13
If you have cash, it's dangerous just to sit into cash because you know you're going to get zero return. And if you're sitting around thinking there's going to be some big catastrophic event that may or may not happen, but have a game plan with your financial advisor, asking them what they would do and how they prepare for that. And there's times to take maybe more add more fluctuations or volatility to the portfolio and it makes sense. We do that with our clients all the time. But be careful they everything you're reading and you're hearing, I remember when I first got, I've been in the business since 1983 mark and I remember reading a book, it was called the Great Depression of 1990 and I read this and I was like, oh my gosh, I'm in the wrong business because the world's going to be coming to an end.
Speaker 2:
26:56
Talked about our data at the time and the Japanese selling the bond. And it was, I mean they just, I could see the story full out as like I haven't thought about should I even stay on this in this profession? And by the way, the Great Depression, if you're wondering, I'm 1990 never happened. It just hasn't happened. And, and you have to remember every day we have the world economy, it fluctuates, but generally it's a stair step. It's like a Yoyo going up a flight of stairs. If you think about that. So you're, if you're in cash, you're betting against capturing any of the general wealth creation that goes on every day through productivity, through things being made. The Pie is getting bigger. Yep. Well and I think that misery gets exponential at certain periods of time because of the world we live in. Vast majority of the world we live in where everything happens so much more quickly.
Speaker 2:
27:47
You know, with Twitter in 24 hour news feeds the rationale or, or the, the rationale that we give to sit in cash and be fearful that you could wake up every morning and point to something. Yes. And I think that's just front and center. It hits us in the face. So again, it's very difficult to remove that emotion for a lot of people. And a few will be read and stuff. I mean Barron's roundtable every year. I love Barron's, by the way. I mean I think they're one of the best publications out there though, the gold standard. But they do a round table where they ask the best minds to make predictions about markets, interest rates, things in general, the economy and they get a wrong every year and if the brightest minds can't get it right, and the point is that what you're probably not going to be right ever over the short term.
Speaker 2:
28:34
What you have to get right though and where you can start to get some decent, pretty good returns. I believe if you take a little longer term time view, a minimum five years, five to sevens, perfect tens awesome. And we've seen people of modest means you don't sit in cash use as an asset class, but do things that are comfortable for you. Going back to the Dalbar study, people normally don't get close to the return. Going back to Fidelity Magellan, Peter Lynch are in the fund. Um, there was an appoint one of the biggest bull markets in history, the most successful mutual fund in history. But there was a point, a study was done that 87% of the people that own Magellan actually had a net loss. Yes. Because very few people ever held it long enough to make any money with it. They did the opposite of the old axiom instead of, you know, buy low, sell high, did the opposite.
Speaker 2:
29:22
They bought high on a suggestion or reading something and then as soon as something in the short run when against it, it's, Oh, I made a mistake. Blow out. Now they're forced to make a second decision. What do I do with that cash? You know, Ron, you mentioned, you know, the fear and greed being those two things. You know, I had a meeting with, uh, individual family who, uh, the primary breadwinner is going to retire here pretty soon. And so for a portion of their assets, he's nervous about retirement. So I talk about, you know, this is where the art and science have to come together. The art is what we're helping them through. Really. I'd edit at a, you know, a human level and what we need to do to help take care of their family. The science is the numbers and all those things.
Speaker 2:
30:04
And so there's a little bit of that fear of, Oh gosh, I don't want to expose a big chunk of my capital that I've worked for the last 38 years to generate. I don't want to see that go down a big amount because just purely from timing. So we have to help people through that. But fear and greed, I think there's a third factor. And we address that with this individual because he's still relatively young. And so when we put what is relative young, he's 64 okay, okay. So when think of it as being really young, well, I mean, you know, again, compared to, you know, some people you may be talking to you, but so 64 when we go and put our plan together, we're using expected mortality. We don't know those things. Right. He laughed. His wife laughed when we showed up on the screen.
Speaker 2:
30:46
95 yes. But the laughter very quickly went away because that third fear, greed, longevity, you know when you're sitting there thinking about, okay, how am I going to make these assets and all these other benefits that the has last 30 potentially 30 years or maybe even longer, is a whole nother segment that we have to take into account. And so it was, it's fascinating as we sit, sit with those individuals to help them craft not only a plan, but exposure to, you know, all these different asset classes or strategies to help them achieve their goals. When you bring up another great point, mark, if you are so afraid of having any decline, you're guaranteeing yourself a loss because markets do fluctuate, great companies go down. Sometimes they're the best buy in the world. You need to understand why. So if you, if you're like, you're so skittish and you're going into it and you're afraid you don't have confidence in your team, that's really big because it's like being a, I'm a pilot, right?
Speaker 2:
31:41
I fly, I've been flying for years. And you know the last thing that even when it's rough or whatever, you've got to be confident and otherwise your passengers aren't going to be confident. If a pilots up there going, oh my gosh, this a scaring the daylights out of me. I mean the passengers are going to, they're not going to have a lot of confidence, right? You gotta have confidence and you have to have stand some fluctuation. I love Buffet's quote. Buffett says our capital markets are very efficient. What they do is they relocate wealth from the patient, from the inpatient to the patient, from the inpatient to the patient. It happens all the time. I would like to Redo that a little bit and say our capital markets relocate wealth from those that don't have a plan to those that do have a plan, so you're not reacting in the short term movements.
Speaker 2:
32:31
You're not making a random series of decisions. It's thought through based on your unique circumstances and sitting in cash and getting zero return. It's just a terrible thing to do and unless you need that for something specific in the next six to 12 months, if you go on beyond 12 months, do a short term bond ladder. There's some other things you can do to generate some income. Yeah, and again, so when you talk about going through that plan, I even talk about it, whether it's the financial plan or whether it's the investment manager. Okay. You know, if someone's doing active management, a good manager still has a process and discipline. They have their own plan. They're executing. As we talk about frequently with clients is, you know, none of us should wake up today when it comes to particularly our finances, our health, those really important things and say, okay, well now what should I do today?
Speaker 2:
33:23
And just reinvented every day. Yes. You know, it's executing little bit day by day knowing this is the goal. We want to ask your financial advisor, what's her day look like? How much time are they spending on research? Are they relying on others? If there's a middle man involved, do you need to really need to have a middleman? And have that expense. Make the complex simple. That's what your financial advisers to do. Straight forward fees and effective game plan and really advice and a common language and that's what we'd love to do. You know, evaluate the relationship that you have. If you have stocks, bonds, mutual funds, if you have structured notes, all of that stuff BDCs and read some things. Let us tell you exactly what you're paying because there could be a lot of additional fees or could be conflicts built into it.
Speaker 2:
34:07
And you know this money, whether it's a hundreds or thousands of dollars over 20 years, makes a huge difference. Could be the Durrells tween retirement comfortably and not, and it should make you furious. Also, come in and let us share with you our client bill of rights, what you get and what you should expect where fiduciary, we put your clients ahead of our head of our own. It's quick, it's easy, it doesn't cost you anything to have this evaluation and it's very, very straight forward. Give us a call. (800) 998-2584 that's (800) 998-2584 (800) 998-2584. You won't be disappointed. Meet the team, even of our CCO or a chief comfort officer, which is a beautiful black lab.
Speaker 4:
34:57
He's a published author and he's been featured in Forbes investment views, the Wall Street Journal, CNBC, and more. Now, back to wealth from wisdom with Barron's hall of Fame Advisor, Ron Carson. Welcome back. I'm Ron Carson. You're listening to wealth from, yeah, from
Speaker 2:
35:11
wisdom nationwide and with my cohost mark. Look a bill, and we're just talking about cash, talking about that, you know, the financial crisis. You're back in Oh eight mark. Oh, he does seem like yesterday, but it was quite a while ago. It'll raise $7 trillion a sock holder, a wealth scared the daylights out of people. I think about my own perspective. I mean, I lived through the 87 crash, the meltdown in 2000 we had a couple of, you know, notable things, but that one was like, man, I mean, we had interest rates were negative. Um, I remember I had a client, one to buy a bunch of treasuries and the yield was a negative yield about fell over. And so you know, it just permanently scared people to make then another bad decision. So they bailed out and then they've been sitting in cash, many of them since 2008.
Speaker 2:
36:00
So we're going to talk about what are some of the things that you could be doing in order not to sit in cash and what and what should you be looking at? I mean one of the things is people bypass performance. Right now, three month treasury bill is yielding what point? Three months, nothing. Point five three. And he had the historical average is three 49 to 10 years. What two four five 2.4 historically it's five 23. So if you're don't buy bond funds, you know, cause you're buying bonds or new money's coming in all the time or is it a lot of fees and expenses associated with that? Instead do a bond ladder. If you're sitting in cash, there's something you can do. More importantly though, have a strategy that's based on what it is you're trying to accomplish. Vanguard did a study, financial engines did a study and we see it all the time.
Speaker 2:
36:47
Having outcome based planning with an effective team can literally add another 2.9% net of fees according to these studies. And we've seen it. And that is where cash can be used as a short term asset class or if you're gonna need to spend money. But that's it. If you're sitting in it for a long time, you're getting zero returning actually going backwards because you do have some modest inflation here. Absolutely. So you've got to take all those factors into account with the strategy of the game plan you have. And I distinctly remember that day, you know, you talked about, you know, when people get panicked, you know, oh just let me buy a t bill. And it's a negative. I mean you think about that when we experienced that. I mean there's still parts of the world that are currently experiencing that. Yes. In terms of, Hey, I'm willing to give you, you know, 100 of whatever my currency is and you will pay me 99 back in the future and we're supposed to feel good about that.
Speaker 2:
37:39
We some years that we still have a third of the four ESOL dead or on the world is a negative yields today. Yeah. So again, there's the reaction, there's the emotional, there's the gut reaction to whatever catalyst is going on out there in the world. Got To get back to the, to the game plan, recognizing that what's in the past is it in the past we, we've got to focus on what we can do going forward. Yeah. So investors all the time, they're faced with a certainty of not hitting their goals or the possibility of working with someone to say, okay, I can make, I can make this work. I want to have an effective game plan. I always say, if you, if you know what your downside is and you protect it, the upside takes care of itself. I don't think I've ever had a client 36 years came in and said, Ron, I don't to say I made more than I thought.
Speaker 2:
38:19
And I'll like it. That runs a habit. It's when you make less than what you expect. So if you can effectively build a portfolio of a lot of different strategies and say there's, what's my, what's my capitulation point? And as long as you build a portfolio that's designed not to have happen, there's no guarantees. But there's a lot of things you can do to get really, I believe some, some, some high probability around that the upside will take care of itself. So really focus on the downside. Always ask, be a truth, truths receiver and truth giver. Meaning, share what your circumstances are, how you're feeling, what your emotions are, what you expect from your financial team. At the same time, the same, the same holds true as being able to share. Having a totally transparent relationship allows you to have confidence, put that cash to work well and to that, that transparent open communication, you know, a congratulations to you being added to the Institute for, uh, for fiduciary standard.
Speaker 2:
39:16
Yes. Working with John Bogle. I mean, tell me how excited you are to work with one of the, the icons within our industry. And Mark. Thank you. John Bogle is one of my heroes. He's done so much for the profession. Um, you really look at vanguard and fidelity, some of the trusted band brands out there, great leadership. You know, the Abigail Johnson, Ned Johnson family on the fidelity side. A great to be partnered with them. Um, and we're just, you know, we have an opportunity here that we're get we're going to, for the first time, investors have as much information as the people pushing product and they have a, we want to be an advocate for them. We want to encourage more advisors to be true. Fiduciary is to put their client's interests ahead of their own. And I, and I also love, I recommend or readers, John Bogle has a book called enough.
Speaker 2:
40:02
Uh, one of the best reads out there is one of my favorite books and Tuesdays with Morrie would be another one of my favorites and employee and Hill's think and grow rich. I'll put them all out there. I actually have four books as well. If you're interested, you can go to Amazon. Um, the sustainable edge if you want to get some, some, you know, I wrote avalanche, both those are New York Times best sellers. Um, if you'd like a copy, let us know. We'd be more than happy to send you on. But it's the philosophy, philosophy and culture by which, you know, we are from consults with, you know, nearly 5,000 advisors around the country for best practices. And in John Bogle and I and the Institute for the fiduciary standard, we're going to work with them to move them, you know, because many of them want to do the best they can to serve clients.
Speaker 2:
40:44
Um, they just don't know what the best practices are. So we're going to leave the charge on that. So you know, going back and talking about cash mark, you know we're zero interest rates getting returns, alternative asset classes. If you the the USA Today at with us all start in 81% chance of running out of money if you're sitting in cash. It's just a bad choice. But also even a worse choice is putting that cash to work, not willing to accept any fluctuation and bailing out when the portfolio's down six or seven or 8%. Cause if you go back into cash and you're getting no return and to take 10 years to even make back a modest loss. So you have to understand what your level of fluctuation is you're comfortable with. Well again you make that and we continue to talk about it is you know, you go to cash, you're forcing yourself to make two decisions.
Speaker 2:
41:30
Number one is to go there. Number two is when he get back in and you know, you get reminded of this, I keep and save articles and sometimes go back and read and came across one here just from this past July. So think back, okay, seven bonds. People are nervous about who's going to be July, July of 16, July of 16, you know, who's going to be president, what's going to happen? You know, all those emotions going on. So you know, just use those numbers. Uh, the s and P has a broad gauge at 2070. Okay, we fast forward. Now we know what's occurred, right? We're in March of [inaudible] 17 s and p's at 2150, you've had a 13% move to the upside. And again, so those people that get concerned about things and point to because this happened or this potentially happens, they've missed out. And again, now it's okay, when do I go now the, I mean those, some of those people are literally hoping for something bad.
Speaker 2:
42:27
No, we sell all the time. They're waiting and you know, and that brings me go back over the last 10 years. If you could make and change a lot of the decisions you made as it related to how you manage your wealth and your money, I bet you'd almost change every single one of them. And you want to get to the end of your life. And say, I'm glad I did. Not that I wish I had. Have an effective game plan. Your money is a tool to help you get what you want out of your life. It shouldn't be your life. You shouldn't be worrying about it. You shouldn't be thinking about it all the time. That's not healthy. That takes away. We're all about true wealth. All the we have that money can't buy and death can't take away so you know they say it takes 10,000 hours.
Speaker 2:
43:02
I calculate I have like 184,000 hours to become an expert in anything. I've been doing this since 1983 and if you don't have the training to make the best decisions you can for all aspects of your financial life. I'm really rely on experts. I believe we're as good as anybody at what we do. We're one of two of Barrows Hall of fame teams that have been in there and been in there since inception. Barron's I think is the gold standard when it comes to financial advice. I'm also in the Forbes on honor roll, so we've got a five point master plan that will help you taxes, social security, risk management, protect the downside and really outcomes based planning come in. There's no cost, there's no obligation. We will do that for you and I know you'll feel comfortable. You'll love the stakeholders, the people that we have here because we do care and we're good at what we do. If you have at least a hundred thousand dollars give us a call to schedule your one on one analysis at (800) 998-2584 that's (800) 998-2584 (800) 998-2584 mark, thank you for being on the show today. I had to be here. Wealth from wisdom nationwide. I'm Ron Carson. Talk to you next week.
Speaker 5:
44:18
Risks, 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, heres some legal
Speaker 1:
44:32
Mumbo jumbo. The opinions voiced in 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 is a tear advisor. Networks is under separate ownership from any other named entity.