2021 EP0710 Planning Matter Radio - Hot Financial Topics !!!!!

We want you to plan for success. Welcome to Planning Matters Radio.

And welcome into the program. I am Peter Rishon, founder advisor at Rishon Planning. This is Planning Matters Radio. We talk about all different types of important financial topics, things that you need to know or consider or do in your planning in order to optimize your results. And we talk about the optimized retirement plan that we help to put together for our clients across North Carolina, Southern Wake County especially. We are located in Fuquay-Varina, but really all over with the ease and the convenience of technology. We have clients across the country at this point in time.

Some that have started here and moved away. Others that we have gotten as a result of referrals or clients that we currently serve recommending us to their friends or relatives in other areas. But if you've got questions or concerns, bottom line is that we are a resource here to help guide you in a positive financial direction and try to help you make informed and well thought through choices and decisions with your money. And so let's talk about how to get rich on planning.

You do need to have a plan in place and that's why we offer the optimized retirement plan. This really addresses kind of six things. First and foremost is an introduction. Who you are, who we are, a discussion of your goals and a snapshot of where you're at. That snapshot includes kind of five top financial categories or subjects. Your investments, your income, your taxes, your healthcare, your legacy.

And in each one of those there's many subcategories and topics that can be addressed, issues and questions that we will help you get answers and direction on. But that is the optimized retirement plan. And if you would like to get a plan for your financial future, pick up the phone and give us a call at any time. Or even if you have a quick financial money related question that's on your mind, we'd love to discuss it with you, help you get pointed in the right direction or at least more information to process to to make a good decision on your own. 919-300-5886 is our number. 919-300-5886 is where you can reach me, Peter Rishon at Rishon Planning. You can also find us online.

It looks like richonplanning.com. You can go and I would love for you to take the time. There's no cost.

There's no obligation. If you could do me a favor and go to the site, enter in your name, enter in your email address and I'll send you out a copy of my book, Understanding Your Investment Options. It's just a little bit more than 100 pages and each section, each chapter is anywhere from 5 to 10 pages and it explains the difference between bank accounts, checking, savings, money markets, different types of bonds, corporate bonds, municipal bonds, government bonds, mortgage backed security bonds.

How did those lead to the 08 financial crisis? Stocks versus mutual funds versus ETFs, gold, cryptocurrency, different types of insurance, different types of annuities and it rates each one as far as where it should be utilized in your portfolio. What are the pros, the cons, what are the benefits, the disadvantages?

Where is this an appropriate tool to be considered for utilization? I believe that it's a very helpful, informative, educational resource for you to get a surface level education about a number of different financial options. And the reason why it's important is because each tool, each place that we can put our money has specific things that it is designed to do and each dollar we want to be as efficient as possible but money is a terrible, terrible multitasker. At its core, at its base, money can do about four different things for us. It can be safe, it can be liquid, it can be an income producing tool or it can provide growth but it can't do really more than two of those simultaneously. So money in the bank is about safety and liquidity but you don't expect a whole lot of growth from it and if you try to take an income, a reasonable income from it, you're probably ending up taking out more than the growth and you will deplete the account value. Money in the market is about growth but you don't have safety. You have liquidity if you want to cash out of a fund or of a stock.

Within 24 to 48 hours you usually can do that but it does not have safety and again, if you try to take an income from a fluctuating source like what the market or equities in the market are, then it can result in a fluctuating amount of income or an unpredictable amount of income. CDs, annuities, bonds, real estate, those are all generally more conservative. They are about safety and they are about growth or income and you sort of decide which of those secondary goals is more important at the moment. You can let the money be reinvested and then it can be about growth or you can take the money out as a withdrawal and create an income from it but bottom line is each place, each different option that I describe in my book there, Understanding Your Investment Options, serves a different purpose in your portfolio and to varying degrees within even some specific options. I go over that in the book to give you a baseline understanding so that you can correlate your goals to the financial tools that you are using to achieve them.

And that's what the book is all about to give you a good understanding and if you would for me, again as a favor, I'd like to kind of test this thing out. Go to richonplanning.com, enter your name, enter your email address, we'll email you out a copy of that book. So richonplanning.com, Understanding Your Investment Options, it pops up right at the beginning of the site and then you can navigate lots of tools, budgeting charts and spreadsheets. There's a resource of the Countdown to Retirement, it's a handful of different reports that we have talked about over the weeks and months on this program, the seven biggest financial myths, the three biggest expenses in retirement, how to plan to control them, the six core issues that all plans should address, the five planning mistakes to avoid, the four approaches to long-term care, the two most important questions to answer and the number one determining factor for your retirement. All of those collectively we refer to as the Countdown to Retirement, you can request that on the website as well, richonplanning.com.

Today I want to talk about some hot button financial topics, hot topics in the financial world. Before we get into that again, all of these items that we talk about, you know, they're covered in the planning strategy session that we do offer and similar reviews, similar plans to what we have put together for our clients and radio show and podcast listeners and viewers. They can go upwards of a thousand to several thousands of dollars and I can charge for my time, I can charge for just putting a plan together and putting that in my client's hands.

I don't do it for radio show listeners, for anyone I'm put in touch with through the Dave Ramsey program, for anyone who tunes in for a podcast. Well, why would you not charge for something you can sometimes is the question because if I charged for the plan itself, do you think I would get more clients or less clients? If I charged for the plan upfront, do you think more people would take advantage of it or less? I can tell you that if I charged the planning fee that I can charge upfront, less people would take advantage of it and as a result, I would end up getting less clients. And when I do bring a client on board and we enter into that advisor-client relationship officially, I'm compensated by the ongoing planning that I am doing by managing the plan. So, we are compensated like any other advisor would be compensated for managing the plan on an ongoing basis but we make the plan itself available to you, no cost, no obligation. And what we find is that some people feel they're perfectly capable of going it alone but more often than not, the plan does show some measurable benefit and we end up talking about how to implement that plan together after we get to know one another. So, if you would like that optimized retirement plan, goes over your social security, how to maximize that, what are your optimal strategies there, how to make a good decision about when and how to take it, how to map out when and how to take income from other retirement accounts, kind of your order of operations of when to take dollars and withdrawals from certain accounts to optimize the rest of your financial, your investment, your tax situation, how to control those taxes and minimize the amount that you will pay in your tax liability over the course of your retirement lifetime, how to identify some of the strategies that will help you to address many of retirement's greatest risks, the market risk, the sequence of returns risk, longevity risk, healthcare risk, all of those are included in the optimized retirement plan and part of the follow-up discussion.

No cost, just give us a call, 919-300-5886, 919-300-5886 or once again, go to the website richonplanning.com, richonplanning.com. So we've been hearing a lot about this hot stock market and this has been kind of a hot topic for quite some time, I mean really since the great recession, since the housing market bubble that was 2007 through 2009, the market has been on a tear, the market has done fantastic. Just a couple of blips in the radar, 2015 was kind of a sideways to down year but it was short lived and the market bounced right back, 2018, toward the end of 2018, we had a pretty sharp decline in markets. They lost about 18% but again, by April or May of 2019, they had bounced right back, so a very short lived downturn, no true traditional market correction or bear market that has lasted anything more than about six months and even with COVID, which was a historic downturn in the market, the largest percentage of value lost in a very short period of time, it bounced right back.

We were about six weeks before the market came back to pre-COVID levels and the average investor had their value back within two to three months and then so long as you stayed invested, we're making profits through the duration of the year. So the market has been hot, all that to be said, it's been 13 years now where we have not truly had a bear market or a true market correction but think back over that time, there was a lot of money pumped into the economy. We had round one of QE, quantitative easing after the great recession, after the housing market collapsed, the government started buying their own bonds, the Fed started buying back bonds, that was known as quantitative easing. It essentially amounted to pumping a lot of money into the bond market, which by the way, the bond market actually dwarfs the stock market. The bond market is a much larger quantity of dollars than what the stock market represents and the Fed was buying US government bonds and treasuries at a huge rate, at a very high rate. They called it quantitative easing, it amounts to pumping more money into the market.

There was round two of QE, there was round three of QE, those tapered off a little bit but we kept printing money at our regular pace and then COVID came along and there were several rounds of COVID stimulus of the tune of multiple trillions of dollars. A lot of money has been pumped into the economy and where has that money gone? Well, a lot of it has gone back into the markets so supply and demand, Econ 101, when there's more dollars chasing a limited quantity of goods, prices go up.

That's how that works. Also, demographics of population, as more of the baby boomer generation has reached their peak earning years and is turning the corner trying to save as much as possible to prepare for retirement or even get into retirement, more of their personal dollars, investment dollars have gone into the market. So there's been this huge influx of buying in the market and that has really driven prices up for a number of years since the great recession pretty steadily. But do we expect this to continue over the next 10 years? Do we expect the next 10 years in the market to look like the last 10 years have looked? Well, if you go back historically over the last 100 years, there have been 14 different market downturns and we're not talking about 2% or 5% within a day or a week, we're talking about major bear markets, market corrections, market downturns to the tune of one every seven and a quarter years. About once every seven and a quarter years on average, the market has had a serious correction and drawdown. And on average over the last 100 years, those 14 different times where the market has corrected, the average drawdown has been just under 40%.

So we have not really seen one of those in the last 10 to 12, 13 years. Do we expect the next decade, given everything that we are seeing right now, inflation, the debt, the deficit skyrocketing, what we think may happen with taxes, do we see that the market will continue this historic rise that we've seen over the last 10 years? Or is there the possibility that things look a little bit more like the 10 years before that where there were two different downturns of 50% or more?

The dot-com bubble between 2000 and 2002, a three-year downturn where the markets lost about 50% and then again 2007, 2008, 2009, a downturn that stretched throughout over a three-year period and we lost about 50% of the value of the market in that time too. Now the value of the market, does that necessarily correlate to the value of your accounts? Well yes, if you're invested in the market, and if you are, what do you expect the next 10 years to look like?

It's been fantastic. People have been making money hand over fist in this hot stock market, but we do expect things to cool down and try to make sure that people are making well thought through and informed decisions about how much exposure we want to have to the market. So here's the thing, we cannot control, none of us as individuals can control what ultimately happens in the market, but we can control how much we are exposed to it. And that's part of the job of managing your money or part of the job that if you trust somebody to manage your money for you, your advisor, that relationship, part of the job that they should be doing for you is watching this and making sure that you remain in balance. So if we are flashing back 11 years to 2010, and let's say we're sort of toward the bottom of the market and things are beginning to recover and climb back, and we decide that hey, we are 10 years away, we're 15 years away from our intended retirement, whatever our timeline is.

I still have some time on my side. I can afford to be fairly aggressive. So let's set up a portfolio that is 60% equities and 40% fixed income. There's part of it that's a little bit more secure. It's not safe, but it's a little bit more secure. It's less aggressive. That is the fixed income or bond side.

And then there's a larger portion that is intended more for growth and is more aggressive. That's the equity side. That's my 60%.

And then we let the market work. Not only do we let the market work, but we can continue to contribute because we've got 10 to 15 years into our intended retirement date. So over the course of the next five years, as the market climbed from 2010 to 2015, that 60% became a larger portion of the portfolio. Now it's 70%. Now it's 75%. As we're adding more money to it, that side grows faster than the fixed income side. Now it's 80%.

It's 2020. Now we're 85% in equities and 15% in fixed income. We are a far, far cry away from the risk that we deemed appropriate 10 years earlier.

And now 10 years has gone by. We should actually be less aggressive, but our portfolio, because we have not been rebalancing on an ongoing basis, has skewed to become more aggressive. And that's what a lot of people are missing about the amount of risk that they are exposed to currently. And it doesn't say it in red on the top, in bold print on the top of your statements, that you are now exposed to 85% risk. That's actually 25% more than you thought was appropriate 10 years ago.

It doesn't say that. That's why having some kind of relationship with an advisor who's checking these things, who's monitoring it on an ongoing basis makes sense. Rebalancing is a fundamental key to investment success. Every quarter, you should be assessing your asset allocation and the mix of investments that you have. And if you decided that it should be 60-40 10 years ago, you should be balancing back to that 60-40 mix. And in fact, every year on that annual review, you should be assessing whether a 60-40 mix is still the most appropriate mix for you. Now, this is to say that if you decide that you only wanted a 60-40 mix, you may not get all of the upside of the market.

And that's just how it works. I hear a lot of people say, well, you know, I want a good asset allocation, I want a good mix of investments and my goal is to beat the returns of the market. Well, if you've got a more conservative side to your portfolio, if you've got some bonds or bond funds or fixed income funds or bond mutual funds inside of your portfolio, you're not going to experience the full upside of the market as it's climbing. That's going to be part of your portfolio that is holding returns down. But during times where markets decline, that side of your portfolio theoretically should be holding steady better than the equities portion. So it should help to not lose as much as the broader market decline. That's if you have maintained a proper balance and if you have done that rebalancing. But as I said, you know, over the last decade as accounts have grown, as the market has done well, as people have contributed more, many people who began some time ago with an investment allocation that was appropriate are now exposed to a far greater degree of risk than they realized or than they were five years ago or ten years ago. And if we haven't experienced a big decline or downturn or bear market in quite some time and you are overexposed to risk, if we are thinking that this market can't carry on being red, white, hot forever, is this something that should be of concern and should be of alarm and should be paid attention to?

Absolutely yes. So that's one of the things that we do when we talk about one of the five topics that we help you address with that optimized retirement plan with your investments. How much risk are you truly exposed to? How much could you lose if we experience another decline? How much could you afford to lose and still be on track to achieving your retirement goals? How much are you paying in fees for the advice and the oversight that you're receiving and the investments that you hold in that portfolio? All of those things sort of go into the investments category of the optimized retirement plan.

All important things for you to know about and pay attention to. And if you'd like to take a look at even just that piece alone and do a portfolio comparison and analysis, we can show you how much risk you're taking. We can quantify that. We can show you the percentage of equities versus fixed income. We can show you what your holdings in your portfolio have done in previous downturns. We can show you how much you're paying in fees for your investments and the advice that you're receiving to hold them. All of those can be enlightening and they can make the difference in several tens or hundreds of thousands of dollars over the course of years. To know that information, to think through your decisions and to be well informed about how your money is positioned can make a significant difference, especially when you compound it with time.

If you'd like to see that, again, it's part of the optimized retirement plan. Pick up the phone. Give me a call.

Be happy to talk with you. Be happy to run that report and analysis. 919-300-5886.

919-300-5886. Another hot topic we're hearing a lot about, inflation. Now that's here. Is your plan designed to give you increasing income throughout retirement? Because I'll tell you, a lot of financial projections that I see not only depend on the market staying white hot and consistently producing 8%, 9%, 10% returns year after year without falter, but they also kind of project that income is going to remain about the same, that our need for income is not going to rise over time. And that's just not the reality of the real world and how things work. You and I and everyone listening and watching this podcast, we all know that inflation is a real factor. We're seeing it right now, but even in years where it has not been a high-level hot topic, inflation occurs.

It occurs slowly over time, so maybe it's a little less noticeable, but there are spikes where it occurs pretty rapidly. Over the last 60 years, the average rate of inflation has been about 3.7%. There's been plenty of time during that 60 years where it's been below that, but the spikes when it happens quickly bring that average up, and if we have just a 3% inflation, your need for income, your expenses, your bills will double in about 24 to 25 years. And maybe we can say, well, I'll have less activity in 24 or 25 years. I'll have some things paid off in 24 or 25 years. But if you think back to 24, 25, 30 years ago, what you were living on then is not what you are capable of living off of now. I remember getting my first job, and it gave me a lot of financial freedom that I had never had before. I was earning $4.15 an hour.

Well, today, I could not survive off that, needless to say. Ten years went by, and I needed to be making significantly more than that $4.15 an hour. And another ten years went by, and I needed to be making significantly more than that. Inflation is a real factor. We need to include that into your retirement plan. And if you've got a plan that does not include this, or if you're not sure if you can use your assets effectively to account for and address inflation into and throughout retirement, give me a call and let's run through that optimized retirement plan.

We can show you some strategies that can help you to address the potential risk of this silent thief, this de facto tax inflation. With all the quantitative easing, with all the stimulus, all the money that has been added to the economy, I saw a chart from the FRED, Federal Reserve Economic Data. It showed that 20%, right about 20% of all money in circulation right now, 20% of it was created within the last 12 months or since Corona and COVID started.

That's a lot, one fifth of the money in circulation has been created, digitized or printed, whatever you want to call it, since the start of Coronavirus. That's a lot of watering down of the power, the purchasing power of the dollars that were there previously. So are we going to see a one fifth decrease in the power of the dollar? Maybe not exactly correlated, but I am convinced that this inflation, it's more than just a supply chain glut or a problem. It is here to stay and it's because we've put a whole lot more money in circulation. It's a de facto tax on the dollars that you had prior to them creating 20% more dollars. You have less power with the dollars that you have now and that's going to continue.

That's how inflation works. The other side of that, we have low interest rates, another hot button financial topic. Now I had somebody on a chat room talking about, it's a Facebook group, talking about where can I get safe rates of return that are better than.01% and everybody suggested buy mutual funds, buy stocks, invest in the market just to get a good index fund.

My comment was, hey, y'all missed the word safe. This person does not want to take risk with their money. There are some other alternatives. Now in a bank right now you're seeing.01%, maybe a half of a percent if you're lucky. Even a two or a three or a five year CD isn't paying 1%, but there are places that are.

There are safe alternatives. Three year, five year, I can get you in the range of two, two and a half, 3% over that period of time. Walk away with the funds at the end of that period of time.

Go do something else with your money. Maybe, hopefully, rates have improved by the end of that three or five year period. But if you're looking for safe alternatives to this low interest rate environment and the almost insulting rates of interest that banks are offering. If you're willing to dedicate, again, you've got to make a trade.

Money can only do certain things. And if you are willing to trade a portion of liquidity for a period of time, maybe three or four or five years, then you can get a more advantageous rate, a little bit higher rate in the twos, maybe low threes. So if you'd like to find out about that or if you'd like to talk about the investment side of things and you're willing to take some risk, we could probably shoot for even on a conservative estimate rates that are a little higher than that. But give me a call. We can compare to your goals and what you currently own and see if there's something that makes sense to you.

Nine one nine three zero zero five eight eight six. We can talk over crypto currencies. There is access to crypto currencies within an institutional investment portfolio and platform. I know a lot of people are very interested in how do I get going with crypto currencies, but maybe don't have the knowledge to take that that task on and to learn everything enough to be comfortable with that. There are ways to do that.

I don't recommend that you do that with a large percentage. I view crypto currencies as kind of an insurance policy against other other types of asset classes and even maybe the value of the dollar collapsing. But that's that is one of the reasons why you would consider crypto currencies or gold or anything like that as part of your portfolio. My question with gold is if I hear these radio commercials and they're so certain that the the the end is imminent, the the the sky is falling, the dollar is going to collapse. And that's why I need to buy gold. My question has always been, well, if you've got the gold and you're so sure that you're trying to convince me that dollars are going to be losing value, why are you willing to give me your gold and you want to take my dollars for them?

It's because there's a cost, there's a transaction fee, there's a commission to be made when when you buy or sell gold on either side of that. So, you know, these are things that you need to consider in your total planning. We try to pull them together for our clients. We look at income, we look at investments, we look at taxes, we look at health care, we look at legacy. We talk about these hot button financial topics, sequence of return risk.

You're shifting retirement timeline, taxes, cybersecurity, hacking, all of those things. They they go into how we position our clients portfolios and how we design the plans. And if you'd like to see an optimized retirement plan, what it would mean for your situation, pick up the phone. Give me a call.

Nine one nine three zero zero five eight eight six nine one nine three zero zero five eight eight six. Be happy to talk it through with you. You can request a copy of my book, Understanding Your Investment Options.

Please do go to rich on planning dot com. Enter in your information there and we'll be sure to get you out a digital copy and get in touch. Leave your contact information if you would like a physical copy.

We'll get that in your hands as well. Look, anything that we can do to help you make the most of your money and get you on a path to make all the best of your future financial success, we aim to do that. We are here to help and assist. We are here to educate and help you make more informed, better decisions. Feel free to be in touch. Nine one nine three zero zero five eight eight six nine one nine three zero zero five eight eight six. Thank you for tuning in to Planning Matters Radio.

Let's get rich on planning. Take care. That's it for this week's show. We'll see you next time.